The enterprise. [volume] (Harlem, Mont.) 1899-1926, 1915-10-21
THE FARM LOAN LAW.
By A. D. Stillman.

ny a. IL 0tk1kAAGbAs
The organized farmers of Mon
tana thru their state organization
last winter secured the passage of
the Farm Loan Law. They secured
tits passage thru reluctant senate
and thru the house whose speaker
was farme mortage broker and VINO
bitterly opposed the passage OF the
bill. In order to avoid creating
new office in an already office bur-
dened state, the law made the state
treasurer commissioner OF farm loan
and carried an ample appropriation
to enable him to put 1t In operation.
Thru the press of the state, without
compensation, advised the farmers
of the laws general features, leav-
ing to the state treasurer under his
salary the task of bringing the bond
to the attention of the investors so
that the money would be ready for
each series as they were offered.
Farmers needing money got busy
and made applications that were ap-
proved for several hundred thous-
and dollars. When about seven
months had expired and farmers
who had tied up their property were
ciamoring for their money, COM
menced to stir things up and found
khat the state treasurer was secre-
kary-treasurer of a private banking
Corporation dealing in farm mortga-
ges and selling six, seven and eight
per cent mortgage debentures In OPP
position to the five per cent bonds
Issued under the farm loan law.
I found that the state treasurer
had made no intelligent effort to
present to the investors the attrac-
tive features of the per cent farm
loan bonds. found that he had
published statements in one paper
in every county In the state, but
it was so vapid and colorless that
1t did not attract attention. and, II 1t
scarcely have caused the investor to
Investigate.
While the advertisements to sell
these bonds were confined to one
paper in each county, the state treas
urer, about the first of October,
published lengthy article in almost
every paper in the state, trying to
show why the law Is failure. The
entire failure, he claims, is because
the rate was per cent. It is pat
ent to everybody that competition
of per cent state bonds with Mr..
Rae's own per cent debentures
would not be nearly SO serious as
would the per cent bonds.
Upon Mr.. Rae's showing, as re-
Gently published, bond dealers and
brokers refused to handle these state
bonds because of the low rate of
interest. If the investor would be
satisfied with 5 per cent, the middle
man would want / per cent or more,
and this, of course, must be added by
way of additional interest to the
borrowers load. So they clamored
for 6 per cent or more.
1t was the intention of the legisla-
ture that the state treasurer as a
part return to the state for his sal
airy, would save to both the borrow
er and the investt the profits that
would otherwise. go to the middle
man.
Following are some of the reasons
why these state farm loan bonds can
be sold right here in the west with
out troubling Chicago or the Bank
ers or Big Insurance Companies.
/. The bonds net 5 per cent. and
are not subject to taxation in Mon.
tana. They are especially good for
residents of Montana.
2. The state has appropriated
and set aside $25,OOO.00 with which
to pay interest and each installment
of principal when due, whether the
farmer, whose land is mortgaged has
actually paid in the installment OF
not. This feature makes them better
than any state, county, city or schol1
district bond where payment when
due depends on whether the taxes
to pay them have actually been col.
lected. For these farm loan bonds
the money is already in the state
treasury to pay the interest and each
installment of principal when due
8. They are better than bonds
merely guaranteed by the state be
cause the state has done more by
actually setting aside cash in the
treasury that will prevent the posi-
bility of any default.
4. They are amortization bonds
The total payment required of the
borrower is per cent semi-annua1l.
OF the total annual payment of pei
cent, five per cent is for interest
two per cent is applied on the princi
pal and one per cent is to cover ex
penses of management. With thes'
payments the borrower pays off hi
entire debt in251 IL years. This makes
it easy for him to safeguard prop
erty and would make his bonds per
fect1y good, even though they wer
not fully safeguarded by the state.
S. The bonds are issued in de
nominations of $4,000 each. Thes
are large enough to satisfy the lar
gest investors. Each bond may b.
subdivided into units of $4,000 o
multiples thereof thereby bringin
them within the reach of small in
vestors.
6. The amortization plan of pay
ing off the principal insures the in
vestors against depreciation of Sc
curity, because while the acreage re
mains the same the debt burden O
the land has grown less with eacl
semi-annual payment.
Z. The bonds are worth NOR
&1,o~ voonov IN tho nocLot hooa ylo