The Emmett index. [volume] (Emmett, Idaho) 1893-1925, 1916-07-27
BIG COOPERATIVE IN
STITUTION
Rural Credits Act Revolution.
airy in It's Scope-A Brief
Synopsis.

While predictions as TO the effects
. Of the Hollis rural credit law signed
/ last week by President Wilson are
; premature, it is universally conced-
ed to be a remarkable piece Of con-
structive legislation and its effects
may be, as some who have studied
the bill believe, revolutionary.
If the new rural credit banks are
successful, then one of the most i'm
portant benefits likely to arise from
their success is intoxicating in Ameri-
can farmers the habit Of acting coop
eratively. For the rural credit banks
are cooperative institutions. Ten or
more farmers may organize local
farm loan association" which is the
nucleus of the system. Eventually the
farmers, who are borrowers, become
I the owners Of the capital Of the Fed
eral Land Banks, by virtue Of the pro-
vision of the act which requires every
local farm association TO subscribe to
the bank stock to the extent Of 3 per
cent Of every loan it obtains for its
members. If in this way farmers be-
come used to acting comparatively
they win be likely to do so in many
ways, which heretofore they have
failed TO do, mainly through lack Of
mutual confidence.
Under this act there are to be
twelve federal land banks, CORES
ponding, though not necessarily in
locality, with the twelve federal re-
serve banks, The new banks are not
to compete, however, with CONNER
cial banks, but are restricted to a
mortgage loan business, TO farm
loans exclusively, to loans not exceed /
ing so per cent of the appraised
value of the land, and TO loans not
exceeding $4,000.
First, capital at s. share must be
secured for these banks, at not less
than S750,O00 for each. If it is not
forthcoming-as it probably will not
be-then the federal government it
self puts up the capital aud takes
the stock. But as fast as loans are
made the government stock passes
into the hands of the rural associa-
tions of borrowers through the
per cent provision mentioned. So that
in any case where the capital is the
minimum, S75O,00O, as soon as Is
-, ,l1.o~- - foo,- 90 r,oI. -ba r-o-- f
ernment is entirely out of the owner
ship of the stock, and it has passed
into the hands of the borrowers from
the bank. The capital can never go
under per cent of the loans.
When a certain amount OF money
has been loaned on farm land the ;
local federal land bank sends the I
mortgages on to Washington, re-
questing the federal board of five !
members at the top of the whole syE
TEN to authorize the issue Of bonds {
to the face value of the loans, with {
coupons attached for the period of
the loan, and at no higher rate than {
) per cent. The loan may be amor {
TIED The bonds must be in denom-
nations of S25, $50, s1O0, $500 and
$1,000 and payable at any time after
) years at the banks option. 7
If the security is approved the
Federal board authorizes the issue ]
If a series of bonds, and such bonds
are thereupon printed by the L. S. \
government and returned to the
and bank, which then proceeds TO
dispose of them in the market An
nducement to the market to accept
hem at par is the obligation upon
he banks to pay the coupons when
ue, the banks guaranteeing payment
f both interest and principal. Hold
rs of these bonds need only send the
oupons TO the nearest land bank,
which must pay them
To fortify the security of the bank
. is provided in addition to inspec-
ion and appraisal first by the ex-
miner of the rural association and
hen by the examiners of the land l
ank and finally by the registrar Of -
he Federal land board, that the Sc =
lrity must be double the loan, that \,
ne money must be used either to
nrchase land or for improvements,
iat loans may be made only to oc-
lpying owners, and finally that the
iaking of any material false state
ent in the application is felony. 4
The rural associations may begin
ith as few as 10 would-5e borrow
5, but only one rural association
IN be organized in a locality. 1t Il
eets as its head or secretary-tr
lrer local business man, and five
reetors who appoint an examiner
The federal government first owns
ID from first to last controls the