New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-08-09
FARM LOAN BONDS
WILL BE TAX FREE
To Pay Attractive Rate of In
terest-Protected by First
Mortgages.

has passed a farm loan act, President
Wilson has named members OF the
hoard .,hich will administer its provis-
ions and the work of organizing the
vast new system is about to begin.
Secretary McAdOO. ex-ofhcio mem
hor ~ .he Farm Loan Board, which will
be at the head of the system, predicts
that it cannot be in operation for at
least six months, and probably loans
cannot be made before next spring.
In operation the system to some ex-
tent will do for the farmer what the
Federal Reserve system does for the
business man. The farmer will get an
opportunity 70 secure money on his
most available commodity, his land
lust as the merchant and manufacturer
have been enabled through the Federal
Reserve system to have their paper
based on commercial transactions find
ready market
The new scheme has many points OF
resemblance to the Federal Reserve
system, but in many essential features
il is entirely different. In no way Will
the banks created under it do CONNER
cial banking, and while it is possible
that in years TO come they may have
funds to loan that will amount to sew
eral hundred million dollars, it is not
believed probable that the system ever
will have the resources of the Reserve
system.
Twelve Banks to Operate.
The act provided for a division Of
continental United States into twelve
land bank districts, with Federal land
bank in each. The work of designating
these districts and selecting the centres
az which the loan banks are to be To-
Gated will je the first important duty
of the Farm Loan Board, and is expect
ed to result in just as many bitter con-
tests 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 partic-
ular reference to the form loan needs
"
wide discretion. Many applications
from cities, particularly in the North
west and Southwest, already have been
filed in the Treasury, but the board Will
not make public its conclusions until
II has travelled over the country and
held hearings in many states.
Each Federal land bank must have
minimum subscribed capital Of S750,O0O
before it can start business. If within
thirty days after books are opened Tor
subscriptions 70 the stock of any or
these banks individuals or corporations
have not subscribed that amount the
Secretary Of the Treasury is directed
70 subscribe for the United States IN
the needed sums
The banks will not, except in special
cases, loan direct to farmers, but
through the agency Of national farm
loan associations, which may be organ
lied TO any number in land bank dis
trict by any ten owners or prospective
owners of farm land who desire 70 Sc
cure loans on farm property. Applica-
tons for charter for these associations
must go up to the Farm Land Board and
may be refused by it. No association
will be chartered unless it is shown that
signing members desire loans total
ling at least $4,000. In applying for
membership in an association farmer
must take per cent of the face value
of the desired loan in stock Of the as
ISOLATION.
Loans on First Mortgages.
Applications for loans are to be
passed upon by loan committee of the
farm loan association. Loans will be
made only on first mortgages on farm
property and the value Of the land Will
be the main consideration. The land
will be subject to inspection by an APP
praiser Of the Farm Loan Board. Loans
will be made only for purchase of land,
for its improvement or for purchase of
livestock, equipment, fertilizers or 70
provide buildings on a farm, or TO liqui-
date Indebtedness existing when the
first association is formed in the county
where land is located. No loan will be
made of more than $4,000 nor less
than 500. Interest will not be charged
greater than per cent. The. loan it
self will be reduced through an amorti-
Ation plan providing for reduction by
Ynual or semi-annual payments on tn.
Arincipal. No mortgage shall run for
ore than forty years nor less than
I've, and there are the necessary pro-
Aisions in the law for satisfaction Of
Hverdue interest or amortization pay
vents.
The money TO be loaned will come
\hrough the Federal land banks, passed
Ia the hands of the National Farm
Loan Associations and TO the farmer.
The capital stock of the land banks will
not 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 a Federal
land bank has loaned $4,000 to farmers
il may issue a corresponding amount
of farm loan bonds, and that the total
that may be issued by any one bank on
a minimum capital of S750,000 is TO be
twenty times that capital. This would
give each bank S15,000,000 and the
whole system Sl60,000,000 TO loan on
first mortgages.
Good Interest on Bonds.
Farm loan bonds are TO be made at
tractive by payment of not more than
per cent interest, and provision that
they shall be exempt from Federal,
state or municipal taxation. They are
made legal investments for trust funds.
They are not to be obligations of the
limited States, but will have behind
them the first mortgages on farm
lands. These mortgages also are ex-
empt from taxation.
In case local conditions do not favor
organization of farm loan associations
land banks may be authorized by the
Farm Loan Board 10 make loans 10 farm
ers through agents il approves, such
as banks, trust or mortgage companies.
and the law permits establishment Of
Joint stock land banks to lend directly