Belding banner. (Belding, Mich.) 1889-1918, 1916-08-30
cided, in passing this new law, to
keen within sound principles.

cided, in passing this new law, 10
keep within sound principles.
The act divides the country up into
IL farm-loan districts. with a federal
land bank in each district. The gov
eminent will start these banks up by
advancing $4,000, 100000 in all to
them, without interest, but the design
is to have the borrowers themselves
own the banks eventually.
Loans will be made to farmers by
the banks through local farm-loan as
sociations. In any community 10
farmers who wish loans may organize
and secure a charter from the loan
bank in their district. They must
agree to borrow as much as 10000.
After a charter has been granted, any
person who wants to make a loan may
get money in any amount from 500
up to $4,000. Only first-mortgage
security will be accepted, but where
farmers already have mortgages on
their farms and are paying high in
terest on them, they can arrange a
loan through the farm bank at a
lower rate and pay off the first loan.
Interest rates are not fixed by the
law, as they will no doubt differ in
the different districts, but six per cent
is the highest rate that can be charg-
ed, and only such fees as are approx
ed by the federal farm-loan board
will be allowed. Each borrower has
to subscribe to stock in the loan as
ISOLATION to the extent of five per
cent of his loan. This insures that
the loans can never exceed 20 times
as much as the capital.
Thus five per cent Of the money
loaned comes from the borrowers. The
other 95 per cent has to come from
somewhere else. The plan is to have
the public furnish this capital. The
loan-banks are to issue bonds, in pop
ular denominations, so that the people
who have a little money to invest can
put it into these securities.
The bonds will pay one per cent
less interest than the borrowers have
to pay on their loans-this margin of
one per cent being allowed to cover
expense, etc. The bonds will be Sc
cured by first-mortgage loans which
are never to be more than 80 per cent
of the value Of the farms.
They will be free of taxation, and
thus they will offer a desirable invest
ment. Each bond will have the
backing of the entire loan-bank sys-
tenn, so that loss will be impossible
and the investment will be practically
as good as government bonds. 1t is
believed that thousands of people who
now hoard their cash or put it into
savings-bank at low rate will invest
in the farm-loan bonds.
In other words the object of the law
is to bring the small borrower and
the small lender together and make it
60 that they can do business together
on a safe and EASY system. The law
IS patterned after the laws that are in
force in Germany and other European
countries, where the system has been
perfected bv many years of use.
The chief advantage that the bor-
rover will have under this new svs-
tenn will be that he can take his time
and use his option about paving back
the loan. Farm loans now are usual
w made for a fixed period of five
wears. The entire loan then comes
due at once. and the borrower never
knows whether he can get it renew
ed or not. If he wants to pay it off
before maturity he has to pay bonus
for this privilege.
Under the new plan, he can pay the
whole loan in five years, or he can
take anywhere up to 40 years if he
wants to. But he is required to pay
something on the loan every year;
this. it has been found, is the most
satisfactory method, as it teaches
thrift.
This plan is known as "amortiza-
ton" Amortization loans have long
been used Europe but they have
been comparatively unknown in this
country. Concentration" in this sense
means simply the extinction of debt
by the payment of fixed instalment
each wear. so that at the end of the
AGREED perod the entire OBLIGATION is
wiped out. The general principle is
made use of nv our bnilding and loan
associations. but in those associations
the interest rates come too high for
universal farm-loan purposes.
The new law at the same time au-
thori7es ioint-stock land-banks, to