The Yale expositor., 1917-03-08


Farm lands have always been re,
gardedp as the safest security in the
world. BW loans made against farm
lands have generally exacted a higher
interest rate than loans on other good
security.
There nre several reasons for this.
Such loans are not readily transfer
able, |. e., marketable. Farm loans
are usually desired for long periods.
A loan for less than five years is usu-
ally of little value to the farmer. II
the loan is made for the purpose of
buying land the farmers chance to
pay it off is to make the money out
of the land. It is against reason to
expect that land will pay for itself
in five years.
Well-managed commercial banks
cannot make q business of lending
money or~farms and carrying the loans
themselves. 1t is not good banking.
1t ties up their funds in permanent
investments and if persisted in con-
tinually would ruin any bank. This
|
for farm loans, and partially accounts
for high interest rates on them.
Provides Needed Agency.
The farm lands of the United States
constitute a great mass of valuable
assets against which money ought TO
be borrowed at fair rates of interest.
But it has been a chaotic mass Of
value. No agency has ever undertake
en- to assemble this mass of assets into
negotiable form so that it could be
readily handled as a marketable Sc
curity.
Now the government steps in and
provides this agency. 1t says to the
! farmer who wants TO use his land as
security:
you join n national farm loan as
sociation and contribute your mort
gage to a great federal land bark pool
of mortgages. We have provided the
machinery for this purpose and adopt
ed rules for its operation so that the
interest Of all will be safeguarded.
When your mortgages are massed to-
/
these mortgages and issue bonds
against them; sell the bonds to inves-
tors, and re-lend the money to farm
ers. The pooled mortgages of the
farmers of the United States will be
security for every bond. The high
character of this security means that
people who have money to invest will
jump at the chance to put their saw
ings up against your security at a
low rate of interest. We will let you
have this money at actual cost to us,
plus not to exceed 1 per cent to cover
the cost of operating this money-as-
sembling and money-lending ma
chinery."
Attractive to the Investor.
Then Uncle Sam turns to the in
vestor and says:
'We have enabled the farmers Of
the United States to give us their
massed mortgages. We are Offering
you bonds which are in reality first
mortgages against the farms of all
who join this pool. 1t is the best Sc
curity in the world, because every dol
lar q farmer borrows is represented
by 50 worth of land plus the stock
each farmer has purchased in his local
association. TO make these bonds even
more attractive, so as to eventually
give the farmer lower interest rate,
we have exempted them from all forms
of taxation. Even Uncle Sam will not
collect any tax from them, nor from
the income upon them. No state or
municipality may tax them. We have
made these bonds in small denomina-
tions from $25 upward so their pur-
chase will be easy among people with
small savings, and we will have the
bonds printed and engraved by the
government bureau of engraving and
printing to protect them against coun-
terfeiting, and the United States Sc
cret service will watch over them"
So the farm loan act, in addition
to providing money for land purchase
and farm development, provides new
form of security which ought to be-.
come one Of the most popular In exist.
ence, because 1t is based on the land
values Of the entire country.