Little Falls herald. [volume] (Little Falls, Morrison County, Minn.) 1889-1950, 1916-11-10

There are to be twelve federal land
banks. One will probably be located in
Minnesota.
The original capital stock Of these
banks, out IF which they will make
their first loans to farmers will be
subscribed by the federal government.
The stock of each will be $750,OO0. .
Afterward, the principal source Of
money for loans to farmers will be
from the. sale Of debenture bonds.
Each bank will be allowed to issue
such bonds to the extent of twenty
times it's capital, but the bonds will
have to be covered dollar for dollar
by the pledge of first mortgages on
farms as collateral security.
Farmers desiring loans will not ap-
ply directly to federal land bauk,
but to local organization of farmers
known as federal loan association.
Such an association will have to in
clude at least ten farmers who desire
loans, but may, of course, include
many more.
T. Farmers to Control Banks
Each borrower must subscribe 70 the
stock Of the local farm loan associa-
ton to the amount Of five Der cent Of
his loan. The association in turn will
subscribe to an equal amount of the
stock of the federal land bank. As
soon as enough is thus subscribed, the
stock held by the federal government
will be retired. The local associations,
which the farmers control, will then
own and control the bank completely.
The farmer will be permitted to Dor
row the money necessary to pay fer
his stock in the local association, #
he desires. Thus the farmer who needs
a net loan of $1,000 and who does not
care to pay cash for his stock, Will
give his note and mortgage for 81 ,05O,
receiving $1,000 in cash and certif-
cate for ten shares 1880 worth of
stock.
This will not be the same as paying
commission of $50 for :hc loan, be-
cause the stock will be entitled 10
dividends, and is in fact likely to re-
ceive dividends. Still further its face
value will be repaid to the borrower
when he pays up his loan.- In other
words the man who borrows 81 $50 will
actually discharge his debt by paying
$1,000.
The local association will endorse
each mortgage taken through it. The
liability of the farmer, as stockhold-
er, however, will be limited to an ad-
ditional sum equal to the stock he
holds, and no more.
The purpose of the FIVE per cent sub
scription to the stock of the associa-
tion and the liability of the stockhold-
or, is to increase the security of the
bonds and thereby make them sell on
more favorable terms. It will give the
lender an oxtraSmargin Of safety and
thus enable borrowers to get lower
rate of interest.
- Interest Rate Limited
The law limits the rate of interest
which shall BE- paid on the bonds to
not more than per cent. It also pro.
'vides that the rate charged to farm.
j ers shall not exceed the rate on the
.ss debeatare by more than per cent in
other words, that it shall not be high
Ier than 8 per cent in any case.
Should the bank be able to borrow
money ON us bonds at less than per
cent md conduct its operations on
a maf4nfnKS expenses of less than
pof cent? Sko terest rate paid by the
farmer viii bel nat much reduced. Thus
,. If the bonds a, md sell at per cent
Ind operating 4 yDenses should be kept
one-half CT l lsr cent, the loans ia
farmers might, he made at AZ
vt. aE "A &
may be made mp to so pei
> value Of farm lands and %
the value of the buildings
ments on such land.
% Farmers Only
I'D ,ro1o on1u For srec;