Courier Democrat. (Langdon, N.D.) 1891-1920, 1916-08-03
THE RURAL CREDIT LAW"
Was ENACTED JULY II
A New Law Signed by President
Wilson Means Much to Farmers
Details of New Bill

larry calIed the rural credits law,
was signed by the president and be-
came a law on July IT, 1916. The
following explanation of the new law
has been made public by the depart
ment of agriculture:
The primary purpose of this act is
to promote agricultural prosperity by
enabling farmers to borrow money on
farm mortgage security at a reason
able rate of interest and for relative
]y long periods of time. To attain
this object, two farm mortgage sys-
tens are provided: A system operat-
ing through regional land banks, and
a system operating joint stock land
banks.
To attract money to the farm loan
field the act provides q method where
by those who have money to lend can
find safe investments in the form of
debentures on bonds, of small and
large denominations, issued by the
banks and based on the security of
mortgages on our farm lands.
These two systems are to be under
the general supervision of a federal
farm loan board in the treasury de-
partment, composed of the secretary
of the treasury, as chairman ex-offi-
clio, and four members appointed by
the president. This board has au-
thority to appoint appraisers, eSami-
ners and registrars, who will be pub
lie officials.
Under the federal land bank system
the act provides for federal land
banks which make loans, for the first
twelve months, exclusively through
local national farm loan associations
composed of borrowers. These asso-
Citations shall be share holders 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
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 interest
charged on farm loans shall not eX-
coed six per cent per annum.
The United States shall be divided
into twelve farm loan districts. and
a federal stock of not less than
$3.50, 600, each share S., shall be es-
tahlished in each district. Each fede-
raj land bank may establish branches
in its district. Within thirty days
after the capital stock is offered for
sale, it may be purchased at par by
any one. Thereafter, the stock re-
naming unsold shall be bought by the
secretary of treasury for the United
States. 1t is provided, 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 associa-
ton of borrowers, and provision there
fore is made in the law for transfer
ring the original stock at par to these
associations.
The act provides for the creation
of local national farm loan associa-
tions through which it is contemplate
ed that the federal land banks shall
make their loans. In the event that
a local loan association is not formed
in any locality within a year, the
federal farm loan board may authorize
a federal land bank to make loans on
farm land through approved agents.
Ten or more persons who W and
cultivate farm land qualified as
security for a mortgage loan under
the act, or who are about to W and
cultivate such land, may form such an
association, provided the aggregate
of the loans desired by the member
ship is not less than 500, 600.
Each member must take stock in
his association to an amount equiva-
lent to 5 per cen Of the amount he
wishes to borrow. This stock the
association holds in trust as security
for the members individual loan.
The association, in turn, when apply
ing for money from the bank, must
subscribe for stock in the bank to an
amount equivalent to 5 per cent of the
sum it wants to obtain for its men,
bers. This stock is held in trust by
the bank as security for the loans it
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 bor-
rover must be a stakeholder in his
local association, and every associa-
ton therefore becomes a stock