The Colorado statesman., 1916-08-12
FARMER TO PROFIT
BY new LOAN ACT
Measure Designed to Give Him
Money on Long Time and
at Low Rate.
Big BANK SYSTEM CREATED
Borrowers to Form Local Associations
and Share in Earnings From the
Operation of the Plan.

Operation of the Plan.
The farmers of the United States
are to be the chief beneficiaries of the
Federal Farm Loan Act, through
which Uncle Sam is enabled, by
means of a rural credit system, to
at low rates of interest for the pur-
pose of buying and improving land.
This act, which Is now IL law, is
the result of years of agitation and
study. 1t is designed not only to
enable farmers to borrow money at a
low rate of interest but to make it
possible for them to secure these
loans for relatively long periods of
time and on such conditions that loans
can be repaid in annual or semiannual
nstallments which will be less in
many cases than the interest that
they are now required to pay on sim
liar loans.
To attain this object, two farm
mortgage systems are provided:
First, system operating through
joint-stock land banks.
To attract money to the farm loan
field, the act provides method where
by those who have money to lend can
find safe investments in the form of
debentures or bonds, of small and
large denominations, issued by the
banks and based on the security of
mortgages on farm lands.
These two systems are to be under
the general supervision of d Federal
Farm Loan board in the treasury de-
partment, composed of the secretary
of the treasury, as chairman ex-officio,
and four members appointed by the
president. This board has authority
TO appoint appraisers, examiners, and
registrars, who will be public officials
Federal Land Bank System.
Under the federal land bank system
the act provides for federal land
banks which make loans, for the first
II months, exclusively through local
national farm loan associations COM
posed of borrowers. These associa-
tions shall be shareholders in the
banks and in that way the members,
who are the borrowers, will share in
the profits of the bank The money
for the loans Is to come partly from
the capital of the banks and partly
from the sale by the banks of bonds
secured by first mortgages on farm
lands. The act defines strictly the
purposes for, and the conditions un-
der, which loans are to be made, and
requires that the rate of interest
charged shall not exceed 6 per cent
per annum.
The United States shall be divided
into II farm-loan districts, and fed
eral land bank with a subscribed cap
ital of not less than $750000, each
share So, shall be established in each
district. Each federal land bank may
establish branches in its district
Within 80 days after the capital stock
is offered for sale it may be purchased
at par by anyone. Thereafter, the
stock remaining unsold shall be
bought by the secretary of the treas
ury for the United States. 1t is pro-
vided, however, that the government
shall not receive any dividends on
Its stock. Ultimately, it is intended
that all the stock in the banks shall
be owned by the associations of bor-
rowers, and provision, therefore, is
made in the law for transferring the
original stock at par to these associ-
ations.
Farm Loan Associations.
The act provides for the creation
of local national farm loan associ-
ations through which it is contem-
plated that the federal land banks
shall make their loans. In the event
that local loan association is not
formed in any locality within year,
the Federal Farm Loan board may au-
thorize federal land bank to make
loans on farm land through approved
agents. Ten or more persons who
own and cultivate farm land qualified
rs security for mortgage loan under
the act, or who are about to own and
cultivate such land, may form such
nm association, provided the aggregate
of the loans desired by the member
ship is not less than $4,000. Each
member must take stock in his asso-
citation to an amount equivalent to 5
per cent of the amount he wishes to
borrow. This stock the association
holds in trust as security for the
members individual loan. The asso-
citation, in turn, when applying for
money from the bank, must subscribe
for stock in the bank to an amount
equivalent to per cent of the sum
1t wants to obtain for its members
This stock is held in trust by the
bank as security for the loans 1t
makes through the association. If a
prospective borrower has no money
with which to pay for his association
stock, he may borrow the price of that
stock as a part of the loan on his
farm land.
Under this plan, then, every borrow
er must be n stockholder in his local
association, and every association a