Atlanta semi-weekly journal. (Atlanta, Ga.) 1898-1920, 1916-08-15
FARMING AND
CHEAPER FOOD RESULT
.OF FEDERAL LOAN ACT
"RuraI Credits" Places Farm
erS in Position to Borrow
Money on Easier Terms
Through Mortgages

WASHINGTON, Aug. 12.-For the first
time in our history the federal govern
ment has enacted a law for the purpose
of promoting the financing of the farm
ers. That law is now In effect. 1t is
called the federal farm loan act, and is
the result Of long agitation and for the
reform called by writer's and speakers
| rural credits"
The federal farm loan act deals with
the matter of putting farmers all over
the United States in position to borrow
money on easier terms when secured by
mortgages on their farms. 1t does not
deal with the business of loaning farm
ers money on their unsecured promis-
sorry notes. or on notes secured by
chattel mortgages Congress felt that
this should be later development
The federal farm loan act is simple in
principle and in purposes. The govern
ment and the laws trainers hope to put
the business Of farming on a more bust
ness-like basis, to the end that this ma
ton shall have more farming, and better
farming and therefore more food better
food, cheaper food, while the farmer
himself shall at the same time find his
business more profitable. There are no
opopsites in this statement. Both prop
| ositions are entirely feasible.
The problem before the trainers of tht
| bill was to draw law which would
work in America. The obstacles to a law
exactly like that of Germany, France or
Italy are partly legal and partly in the
fact that farmers in this country are not
/ situated economically or socially like
those of Europe. The bill was drawn
with an eye to the benefit of the farmers,
and with no other purpose. Once in a
while any knowledge, not even the fed
eral reserve act, was ever labored over
more unremittingly, more painstakingly.
/ Two commissions went to Europe to
| study the question before any bill was
drawn. The people of the United States
may have good or bad rural credit
act; but it is certain that 1t was honest
ly drawn. after long study on the par of
/ hundreds of able men, and when finally
passed was as good a bill as homes pur-
pose, great study and ability could make
it. 1t is probably imperfect however,
and will need amendment.
Under the federal farm loan act mort
cages will not be held by individuals at
all There will be twelve federal land
| banks, situated in different parts of the
country a good deal as the federal re-
serve banks are situated, and each of
these federal land banks will hold all
the mortgages issued in its one-twelfth
OF the United States. Each federal land
bank will issue land bonds secured by
/ the ASd6SS IL IHcSe ldnu
bonds will be in different denomina-
lions. some as low as $25, so that any
| person with savings amounting to that
sum or more may invest in land bonds
without having to wait until he can buy
| a whole mortgage.
| These land bonds will be safe. They
will not be taxable. They will be secur-
| ed in three ways. First, by the indorse-
] ment of the federal land bank which
issues them. handling one-twelfth of the
, United States. Second, by all the other
| eleven federal land banks. Third, by the
| national farm loan association which is
| sues them in the first place. and which
/ is a cooperative organization of borrow
ing farmers in the vicinity of the land
mortgaged. Fourth, by the land mort
| gagged, which must be worth at Jeast
twice as much as the face of the mort
i gage, according to the appraisement of
| the loan committee of the association
and government appraiser.
The guarantee of the local loan as
ISOLATION is backed by a per cent guar
/ anty fund. One loan out of 90 might
be a loss before this guaranty fund
/ would be used up. Altogether it looks
as If the land bonds would be consider
ed as good as government bonds-but,
! of course, the government does not
! guarantee them. The government, how
/ ever, does subscribe the stock of the
| federal land banks-the IL / mentioned
| provided that private capital does not
take the stock. They have $3.50, 900 cap
! ital each.
Ten or more farms may establish a
| national loan association and begin is
suing mortgages. 1t is a simple and
| easy thing, but under strict government
| supervision. All they need to do is to
meet, declare that they want to Dor
row on mortgage, and proceed. They
| will each have to buy IS of stock in
| the federal land bank of their region
| for every 500 borrowed, but they will
get this money back when they pay off
their mortgages, and in the meantime
| will get their dividends if the federal
land bank earns any, which it is eX-
pected to do.
In other words, instead of paying a
per cent commission for a loan as
| some now do, the borrower will pay
the same sum for stock which will
| probably earn dividends for him, and
| which he will get back when he pays
| off his debt.
| The mortgage Is not allowed to draw
| a higher rate Of interest than the legal
| rate Of the locality. 1t will draw as
| low rate as will be proven possible
by the sale of the land bonds. If in
vestcrs and savers think so we'll of the
land bonds that they are willing to buy
| lncil vi a DdSiS Oh per Ccils An6 IlOl u
! cages will not draw over D. They may
not draw as much as / per cent above
| the land bond rate. That depends on
experience. Anyhow the farmer will
get his money at actual cost to the
| great system of banks handling the
! business.
He cannot borrow over $4,000. If
he wants more than that he will have
! to borrow In some other way. This
federal farm loan act provides for fed
u eral joint-stock banks which can also
issue land bonds under government aus
| pices.
] 1T is thought by some that these banks
/ will be organized so promptly and 50
! rapidly that they will cover the field
/ and prevent the organization of very
many of the cooperative organizations
| of borrowers which l have described.
If so, perhaps it will be because the
! American farmer likes to deal with pri-
L. -.