The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1916-07-21
Purpose to Provide Agricultural
Prosperity by Federal Loans.
System Is Operated by Regional
and Joint Stock Banks.
PROVIDES SAFE INVESTMENTS
Those Who Have Money to
Lend Likewise Benefited.
Act Signed by President and
Became a Law Monday.

Washington, D. c., July 21.-The
federal farm loan act, popularity called
the rural credits law" was signed by
the president and became a law on
July II, 1916.
The primary purpose of this 2ct Is
to promote agricultural prosperity by
enabling farmers to borrow money on
farm mortgage security at a reason
able rate of interest and for relative
ly long periods of time. To attain
this object, two farm mortgage sys-
TENS are provided: First a system
operating through regional land
banks; and second, a system operating
through joint stock land banks.
To attract money to the farm loan
field, the act provides a method in the
form of debentures or bonds, of small
and large denominations. issued by the
banks and based on the security OF
mortgages on farm lands.
These two systems are to be under
the general supervision of a federal
farm loan board in the treasury de-
partment, composed of the secretary
of the treasury, as chairman eX OIL
clio and four members appointed by
the president. This board has author
ity to appoint appraisers, examiners
and registrars who Will be public OH
cials.
Under the federal land bank sys-
tenn the act provides for federal land
banks which make loans, for the first
twelve months. exclusively through
local national farm loan associations
composed of borrowers. These dssocl-
atfons shall be shareholders N the
banks and in that way the members,
who are the borrowers Will snare IN
the profits of the bank. The money
for the loans is to come partly from
the caDitaI. of the banks and lartly
from the sale by the banks of bonds
secured bv first mortgages on farm
lands. The act defines strictly tne
purposes for. and the conditions un-
der which loans are to be made. ana
requires that the rate Of interest
charged on farm loans shall not ex-
ceed 6 per cent per annum
Twelve Federal Land Banks.
The United States shall he divided
into twelve farm loan districts ana
federal land bank with subscribed
oanital stock of not less than $750.0oO,
each share SIS, shall be established IN
each district. Each federal land bank
NAV establish branches in its district.
Within thirty days after the capital
stock is offered for sale it may be p1lr-
chased at par by anyone. Thereafter.
the stock remaining unsold shall be
bought by the secretary of the treas
ury for the United States. II IS pro-
vided. however, that the government
shall not receive any dividends on its
stock Ultimately, it is intended that
all the stock in the banks snail ne
owned by the associations of borrow
ors and provision therefore is made IN
the law for transferring the original
stock at par to these associations
National Farm Loan Associations.
The act provides for the creation of
Local national farm loan associations
through which it is contemplated that
the federal land banks shall make
their loans. In the event that local
loan association is not formed in any
locality within a year, the federal
farm loan board may authorize fed
eraI land bank to make loans on farm
land through approved agents. Ten
or more persons who own and culti
vate farm land qualified as security
for mortgage loan under the act, or
who are about to own and cultivate
such land. may form such an associa-
ton, provided the aggregate of the
loans desired by the membership is
not less than $50, Each mem Der
must take stock in his association to
an amount equivalent to 5 per cent of
the amount he wishes to borrow. This
stock the association holds in trust as
security for the members individual
loan. The association. in turn. when
applying for money from the bank,
must subscribe for stock in the bank
to an amount equivalent to s per cent
Of the sum 1t wants to obtain for its
by the bank as security for the loans
it makes through the association. If
a prospective borrower has no money
with which to pay for his association
stock, he may borrow the price of that
stock as a part of the loan on his
farm land.
Under this plan. then. every bor-
rover must be a Stockholder in his
local association, and every associa-
ton stockholder in it's district bank
Each stockholder in an association is
liable for the acts of that association
up to twice the amount of his stock
How Loans Are Obtained.
a member of a national farm loan
association, before obtaining loan
must first fill out an application blank
supplied to the loan association by the
federal farm loan board. This appli-
cation blank and other necessary pa
pers will then be referred to a loan
committee of the association. which
must appraise the property offered as
security. Such application as is ap-
proved by the loan committee is then
forwarded to the federal land bank
and must be Investigated and report
ed on by a salaried appraiser of the
bank before the loan is granted This
appraiser is required to investigate the
solvency and character of the pros
pective borrower as we'll as the value
of his lind. When a loan is granted
, the amount s forwarded to the bor-
rover through the loan association.
Conditions Under Which Loans May
BE Obtained From Federal Land
Banks
s11E