Daily capital journal. (Salem, Oregon) 1903-1919, 1916-12-23

cation, and through this stock owner.
ship the association may ultiamtely be-
come owners of the land banks.
| Instructions for the formation of loan
association issued by the Federal Farm
Loan Board contain this caution:
Now, let the farmer members un.
deiStand this, that the associations, and
not they, are the owners of the stock
in the Federal Land Bank, and this
plan is adopted that the associations
imay ultimately become the sole owners
of the Federal Land Banks. This stock
is held by the land bank as part secur-
ity for the loans granted to the asso
citation. This plan makes the borrow
ers indirectly part owners, of the land
banks with the Government from the
beginning, and through these cooper
ative organizations provides the meth
cd whereby they ultimately become the
exclusive owners.
Gradual withdrawal Provided.
"The profits of the land banks 90 to
the association. The stock held by the
Government draws no dividends, but
earnings viii be divided on the stock
owned by the associations. Thus all
profits of the land banks after the
Government has withdrawn its hold
ings of stock, will 90 to the associa-
tions, which will ultimately become the
owners of all the Federal Land Banks
in the United States.
"The law provides for the gradual
withdrawal of Government holdings in
the land banks, leaving the whole field
open to the farmers themselves through
their National farm loan associations.
The Importance of organizing these as.
sociations of borrowers, therefore, can.
not be unduly emphasized.
Each local association must perfect
a temporary organization and elect
board of directors, loan committee
and secretary-treasurer. The board
of directors shall consist Of not less
than five members and the loan com
mittee shall consist of three members.
The board of directors elects presi-
dent, vice-president, loan committee
and secretary treasurer s. All but the
lastnamed officer must be members of
the association and residents of the dis
triet.
1t is the theory of the law that loans
are to be made for the purchase of land
or for its permanent Improvement. A
farmer who already has mortgage on
his farm must pay off this lien first.
Any surplus left out of his loan from
the land bank may be applied to the
purchase o fertilizer, of livestock, to
the construction of barns or other
buildings which will permanently i'm
prove the farms value.
The farmer who has no mortgage on
his farm, and desires to borrow money
for improving it, may borrow for any
of the purposes indicated by giving
a first mortgage
The secretary treasurer, who need
not be a member of the association,
handles all its work. He keeps the
books and accounts; secures the loans
from the land banks, and pays them
over to the borrowers; handles the cor
respondence, and sees that each farm
er payst the required installments on his
debt every six months or once each
year.
If all the preliminary work of organ
,izing local loan associations is done
now, no time will be lost in beginning
business when the farm land banks are
located and organized.
Foundation Is Explained
These farm loan associations are the
foundation of the system. The Federal
Farm Loan Board is now engaged in
the task of establishing 12 land bank
districts and fixing the location of
bank for each district.
Each of these 10 banks will start
with capital of $750,00O, which is to
be increased by the further sale of
stock and the issue of bonds. Such
stock as is not taken within 80 days
after the subscription books are open
will be taken by tho Government The
Government 3 stock has the voting
power, but does not participate in the
dividends.
The banks increase their original
capital in this manner: After loaning
$4,000 and taking $4,000 Of first
mortgages, it issues its bonds for $780,
900 based on these mortgages as secur'
itv and thus has another $4,000 to-
loan. 1t is not to be supposed that.
these giltedged securities will sell below
par. Each bank is permitted to loan
E20 times its capital. As new loan as
sociations are formed this capital is
automatically increased. Thus, there
Is no limit to the banks ability TO
SERVE the needs of the farmers 80 long
as it can sell its bonds.
Promotion Charges Not Allowed.
On learning recently that promoters
were engaged in selling stock in land
banks, the Federal Farm Loan Board
ruled that no charter win be granted
any land bank which charges any ex-
pense for promotion. 1t was also de-
cided to defer the issue OF charters to
Joint stock land banks until the fed
eral land bnaks are organized. The
words Joint Stock Land Banks" shall
appear IN the name of every such insti-
tuition, and no other words except such
as are necessary to distinguish it from
other hanks operating in the same ter
ritory.
When a farm land bank is FIRST or
ganized. the federal farm loan board
nemes five directors to run il tempo
rarily. When farm loan associations