Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1916-08-07
FARM LOAN ACT
IN OPERATION
IN SIX MONTHS
FARM LOAN BOARD NAMED
BY THE PRESIDENT AND
WORK OF ORGANIZING
SYSTEM TO BEGIN.


Washington, August 6.-After many
years Of investigation and debate TO
develop the best method Of providing
financial aid for the farmer at normal
interest rates and on long time, Con-
gress has passed a farm loan act,
President Wilson has named members
of the board which will administer its
provisions, and the work Of organizing
the vast new system is about to be-
gin.
Secretary McAdoo, ex-officio men,
Der of the farm loan board, which will
be at the head of the system, pre-
diets that it cannot be in operation fo:'
at least six months and probably loans
cannot be made tefore next spring.
In operation the sysetm to some ex-
tent will do for the farmer what the
federal reserve system does for the
business man. The farmer will be
given opportunity to secure money on
his most available commodity, his
land, just as the merchant and manu-
facturer has been enabled through the
federal reserve system to have his
paper, based on commercial transac-
tions, find a ready market.
The new scheme has many points of
resemblance to the federal reserve
system but in many essential features
it is entirely different. In no way will
the banks created under it do COM
mercial banking, and while it is pos
sible that in years to come they may
have funds to loan that will amount
to several hundred million dollars. It
is not believed probable that the sys-
tenn ever will have the resources Of the
reserve system.
The act provided for a division Of
continental United States into twelve
land bank districts, with a federal
land bank in each. The work Of
designating these districts and select
ing the centers at which the loan
banks are to be located will be the
first important duty of the farm loan
board and is expected to result in just
as many bitter contests as preceded
the announcement Of the lines Of the
twelve federal reserve districts and
the location Of federal reserve banks.
The only directory provision in the
farm loan act says that land banks
shall be located with particular refer
ence to the farm loan needs of the
country, so the board will have wide
discretion. Many applications from
cities. particularly in the Northwest
and southwest, already have been filed
in the treasury but the board will not
make public its conclusions until it
has travelled over the country and
held hearings in many states.
Each federal land bank must have a
minimum subscribed capital Of 100000
before it can start business. If within
80 days after books are opened for
these banks individuals or corpora
lions have not subscribed that amount
the secretary Of the treasury is d.
rected to subscribe for the United
States in the needed sums. Stock m
the banks may pay dividends when
earned. but the United States as a
stockholder cannot participate with
others.
The banks will not, except in spe-
cial cases, loan direct to farmers, but
through the agency Of national farm
loan associations, which may be or
ganized to any number in a land bank
district by any ten owners or pros
pective owners Of farm land who de-
sire to secure loans on farm property.
Applications for charters for these as
sociations must go up to the farm loan
board and may be refused by it. No
association will be chartered unless it
is shown that signing members desire
loans totaling at least $4,000.
In applying for membership in an
association, a farmer must take five
per cent Of the face value Of the de-
sired loan in stock of the association
Applications for loans are to be
passed upon by a loan committee Of
the farm loan association. Loans will
be made only on first mortgages or
farm property and the value Of the
land will be the main consideration.
The land will be subject to inspection
by an appraiser Of the farm loan
board. Loans will be made only for
purchase Of land, for its improvement
or for purchase Of live stock, equip
ment. fertilizers, or to provide build
ings on farm or to liquidate indebt-
edness. existing when the first as
ooSA1IiOA 10 IOIHleu III the county
where land is located. No loan will
be made OF more than $4,000 nor less
than 800. Interest will not be charged
greater than six per cent. The loan
itself will be reduced through an
amortization plan providing for re-
duction by annual or semi-annual
payments on the principal. No mort
gage shall run for more than 40 years
nor less than five, and there are the
necessary provisions in the law for
satisfaction of overdue interest or
amortization payments.
The money to be loaned will come
through the federal land banks, passed
to the hands Of the national farm loan
associations and to the farmer. The
capital stock Of the land banks will
rot give them much loaning power so
Congress increased that power greatly
by authorizing the banks to issue
farm loan bonds and sell them in the
open market The act provides that
when federal land bank has loaned
$4,000 to farmers it may issue a cor
responding amount Of farm loan
bonds, and that the total that may te
issued by any one bank on a minimum
capital Of s750.000, is to be 20 times
that capital. This would give each