Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1916-07-28
FARM LOAN ACT

/
rural credits law" was signed by
the president and became a law on
July II, 1916.
The primary purposes of this act
is TO promote agricultural prosper
ity by enabling farmers to borrow
money on farm mortgage security at
a reasonable rate of interest and for
relatively long periods of time To
attain this object, two farm-mortgage
systems are provided: CD a system
operating through regional land
banks; and (2) a system operating
through joint stock land banks,
TO attract money to the farm loan
field, the act provides a method
whereby 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 a federal
farm land 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, eX-
aminers. and registrars, who will be
public officials.
The Federal Land Bank System
Under the federal land bank sys-
TEN the act provides for federal land
banks which make loans, for the
first > months, exclusively through
local national farm loan associations
composed of borrowers. These asso-
Citations 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
under, which loans are to be made.
and requires that the rate of inter
est charged on farm loans shall not
exceed six per cent per annum.
Twelve Federal Land Banks
The United States shall be divided
into 2 farm loan districts and a fed
eral land bank with a subscribed
capital stock of not less than $780,
600, each share So. shall be estab-
lished 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 un-
sold shall be bought by the secretary
Of the treasury for the United States.
1t is provided, however, that the gov
eminent shall not receive any divi-
dends on its stock. Ultimately. it is
intended that all the stock in the
banks shall be owned by the associa-
tons of borrowers, and provision
therefore is made in the law for
transferring the original stock at par
to these associations
National Farm Loan Associations
The act provides for the creation
of local national farm loan associa-
tons through which il is contem-
plated that the federal land banks
shall make their loans. In the event
that local loan association is not
formed i'll any locality within a year,
the federal farm loan board may au-
thorize a federal land bank to make
loans on farm land through APP
proved agents. Ten or more persons
who own and cultivate farm land
qualified as security for mortgage
loan under the act, or who are about
10 own and cultivate such land, may
form such an association, provided
the aggregate of the loans desired by
the membership is not less than 500
600. Each member must take stock
IN his association to an amount
equivalent to five per cent of the
amount he wishes to borrow. This
stock the association holds in trust
as security for the members inli-
Vidual loan. The association, in
turn, when applying for money from
the bank, must subscribe for stock
in the bank to an amount equivalent
TO five per cent of the sum it wants
to obtain for its members. This
stock is held in trust by the bank
as security for the loans it makes
through the association. If a pros
pectiye borrower has no money with
which TO pay for his association stock
he may borrow the price OF that stock
as part Of the loan on his farm
land.