The Birmingham age-herald., 1916-07-16

US Ndiuef anu ~ per C6ill OI the lnSuT- ance value of the Improvements. The Farm Loan association subscribes to the stock of the farm loan bank in the sum of per cent of the loan sought Each member of the association subscribes to the stock of the association and the as sociation in turn subscrbes to the stock of the bank. When the loan is paid, the association is paid par value for it's stock and the association pays each of it's mem- bers par value for his stock in the as sociation.
 MIR. MOSS ILLUSTRATES
 MT. Moss of Indiana makes the follow ing simple Illustration: Every borrower when he makes application for his loan, agrees to subscribe to the stock of the loan association to the amount of 5 per cent of his loan. The local association, when it forwards it's members application for a loan to the loan bank agrees to subscribe like amount to the stock Of the land bank. Thus if Mr. Jones makes application for loan of $l0O0 the trans action which results is as follows Mir. Jcnes executes his mortgage for sl03O, and the loan association forwards it to the land bank. The land bank issues to the local association $50 in par value of stock in the land bank. and transmits S950 in current funds. The local asso- citation likewise issues to MT Jones 50 of stock in the association and turns over to him the $950 received from the farm loan bank.
 The association must pay to Jones div idends on $50 stock issued to him and in turn receives dividends on $50 of stock which it holds in the land bank The land bank has issued bonds to the amount of 5000 which it has sold to the public It pays interest to it's bondholders on this amount and receives interest from Mir. Jones on the face of his mortgage. which is $1000. The land bank also has $50 in cash which it deducted from the face of the loan to pay for the stock issued to the local association when it received Jones application. This sum of $50 is in vested. and its income helps to pay the dividends on the corresponding shares of stock. When MT. Jones debt is paid in full the land bank cancels the stock of $50 held by the association paving the association its par value; likewise the as- sociation cancels it's stock issued to MT. Jones and pays him the $50 par value MT. Jones is no longer a borrower in the system; he is no longer stockholder.
 He does not now help to create any busi- ness for the system and he is not en- titled to share longer in it's dividend distributions. I trust this illustra ton will make it perfectly plain that this system Is purely mutual and cooperative: that 1t is owned solely by the borrowers: and that every cent of its earnings which are distributed as dividends are paid directly to the borrowers In proportion that their loans bear to the whole volume of loans granted by the land bank"
 PAYMENT OF INTEREST
 As stated, the farm loan banks are authorized to sell their stock. It is nat ural that they will sell stockton which they must pay dividends or interest," at as low rate of interest as they DOS. sibly can. The law stipulates that thA banks cannot charge interest on money loaned farmers at rate higher than that borne by their stock coupons-plus one per cent to cover administrative charges. Ana thus 1t will be seen that these banks Will lend money to farmers at only one per cent greater interest than that paid by them for the money they obtain
 It is generally estimated that the inter- est charges will be no greater-in the begihing-than six per cent It is an- ticipated that after the system gets into smooth working order, the interest rate throughout the 12 districts will be iden- tical and no greater than four per cent MT. Oliver, of the Sixth Alabama dis trict, states that in Germany farmers, as result of similar legislation can secure money as cheaply as the govern ment. He believes that the same ideal conditions in the United States will even- tually prevail.
 UNCLE SAM'S PART
 The government of the United States advances, as told above, s750D00 or nec- essary fractional part thereof, for the capitalization of each of the banks In addition the law authorizes the secretary of the treasury to deposit in these banks the sum of $6,00Q00o without interest in order that dividends may always be promptly met In addition, the govern ment pays all costs Incidental to control and reSula tion through the central board to have headquarters at Washington
 The cooperative spirit of the govern ment is further exemplified in the provis- ion of the law that as soon as stock in the loan banks to the sum of $1O0,O0O is subscribed by farmers, the farmers, as members of the loan corpora tions, may elect six of the nine members of the board of directors, and thus run the bank themselves There is another provision whereby the government may be repaid its initial investment on this initial in- vestmen, no interest is charged or divi- dends exacted-and the farmers, in every sense of the word. may own completely the institution Of course, time will be required before the profits of one of these banks will be ample to refund the gov ernment in the sum of s75o,OOo.
 MEETING THE LOANS
 Amortization payments will wipe out each indebtedness. The amortization system is one whereby a borrower pays annually the interest and a certain frac- tion of the principal each year. If MT. Jones, under present conditions, borrows 5000 for 20 years at six per cent he would pay at the end of 20 years Sl2OO and still owe the principal, or s10OO Un- der the amortization system al tha con clusion of the 20 years. he would owe nothing. The following table illustrates the maner in which year by year bor- rower under the new legislation would meet a loan of $1000 for 20 years bearing an interest rate of six per cent:
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