The Bamberg herald. [volume] (Bamberg, S.C.) 1891-1972, 1916-08-03
RURAL CREDIT ACT.
What the New Law Proposes to Do
and How 1t Proposes to DO 1t.

Many long and cOmpHcated eX-
plantations of the rural credits act
have been published. These have
wearied or confused the average
reader. On the other hand, most of
the brief descriptive references to the
act have been too general to give a
clear idea of the modus operandi.
What the ordinary citizen would
like to know is how the new farm
loan system is to work and how the
farmer is to secure access to it's bene-
fits. The main features and the prin-
ciple can be shown in few words
as follows:
Under the rural credit act the
country is divided into twelve dis
tricts, each of which has a federal
land bank. These banks, which back
each others loans, form the division
al links of a system which is CEN
trally supervised by federal farm
loan board of five members, appoint
ed by the president.
The government supplies $4,000
900 to start each of the twelve farm
land banks with s750,000 capital,
the money being returned to the gov
ernment as the banks become grad
ually the property of the farmers
themselves, as will be explained later
in this article.
The federal land banks lend
through local farm loan associations
in amounts from S100 to $4,000 on
approved farm lands estimated to be
worth twice the amount Of the loan.
These farm loan associations are real
ly banks, except that they cannot re-
ceive deposits. Neither can the fed
eral land banks.
It takes ten or more farmers in a
community to form a local assocla-
ton, and they must desire to borrow
at least $4,000 from the federal
land bank Of their district. If the
character of these men and the lands
they offer as security are approved
by the officers of the federal system,
a charter is issued to them.
After being chartered, each local
association can receive application
for loans from as many farmers in
the territory as have land to cover
the amount. To get the money, how
ever, each applicant must become a
member of the local association and
take stock in it to the extent of 3
per cent. of his borrowings. Similar
lv. the association itself must take
stock in the farm land bank of the
district to the extent of per cent. OF
the money loaned through the asso-
citation by the bank.
Thus it will be seen that the local
associations will gradually acquire
by the automatic operation of the
system, all of the stock of the twelve
district banks, and that the borrow
ers through the local associations will
in the same way acquire all of the
stock of the associations. In other
words, the borrower in a few years
will own the entire system, the gov
ernment being left with no function
except protective regulation.
Borrowers will be required to pay
a certain proportion of the principal
of their loans every year. This an
nual payment, constituting what is
called amortization will be small
er in proportion to the length of time
the loan is to run, which time is never
to be more than forty years nor less
than five.
The rate of interest is not to ex-
ceed 6 per cent. in any case, and is
never to be more than 1 per cent
more than the rate of interest car
ried by the last bond sold by the land
bank when the loan was made.
Additional capital necessary to op'
crate and expand the system is to be
obtained from the sale of bonds based
on the mortgages owned by the land
banks, all of these banks being joint
ly responsible for the bonds. Being
thus backed, these securities are ex'
pected to be in such demand as safe
investments that in a few years the
farmer with good land can get all the
capital the land justifies at 6 pei
aaa4 ar loec in onu nart of the COIN.