St. Tammany farmer. [volume] (Covington, La.) 1874-current, 1917-02-03
RIM LOAN AS
APPLIED, ETC.
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ID to twenty times the capital stock
of the banks. The lending CAPACITY
of these banks is automatically in
creased by requiring the farm loan
associations to reinvest in the capital
tai stock of the banks one-twentieth
of the amount their members Dor
row. Thus the capital stock OF the
banks increases in the same ratio
as their LOANS. The banks acquire
additional money for lending by sell
ing their own bonds to investors.
When a bank lends money and
takes first mortgages on farms in
exchange it issues bonds against
these mortgages and sells the bonds
to produce more money to lend
The bonds issued by one bank are
secured by the assets of all the
banks operating under this system,
and the rate of interest on the bonds
is adjusted by supply and demand.
The rate of interest charged to mem
bers of farm loan associations Tor
money which they borrow from the
banks, cannot exceed by more than
l Der cent the rate Of interest paid
on the bonds. This margin is pro-
yided to pay the cost OF operating
the banks. So, If the bonds sell at
4 per cent and the cost OF operating
is / per cent, the interest rate to the
farmer-borrowers will be per cent.
If the cost is held down to one-half
of one per cent, the interest rate to
the farmers would be IL per cent.
So, briefly, the members OF the as
sociations Of farmers borrow from
the banks; the banks isuse bonds
against the farm mortgages and Dor
row money FROM investors; the
farmers invest an amount equal to
one-twentieth of the amount they
borrow, in order to provide an In
creasing capital for the banks, and
the whole process is done under
governmental supervision and With
out profit to any individual.
ARTICLE II.
Only farmers or prospective farm
ers who wish to borrow money may
ioin the national farm loan associa-
tions under the federal farm loan
act. 1t takes ten or more to make
up one of these associations. II
farmer wishes to borrow he should
find out if such an association has
been formed in his community. Il
it has, he should make application tt
the secretary-treasurer for member
ship If no association mas peer
formed, he should attempt to get ten
or more farmers who wish to borrow
to meet for the purpose OF organlz'
ing.
The process of organization is very
simple. One of the members should
write to the Federal Farm Loan
Board, Washington, D. c., for blan'
articles of association When they
have been received a meeting of the
prospective borrowers should be
called and these articles OF associa-
ton should be adopted. signed. and
acknowledged by each member.
Each member will indicate the
amount he wishe 5IQ borrow and the
value and description of the land he
wishes to use as SECURITY.
directors. and these directors then
elect a president, a vtce-president.
secretary-treasurer. and loan COM
mittee of three members.
This is as far as the association
can go until after the federal land
bank of that district is established.
Then, upon application, the federal
land bank will furnish the local as
ISOLATION with a blank application for
charter, which should be filled out
and filed with the federal land bank,
along with the articles OF association.
These documents should be ac-
companied by a written, unanimous
report of the loan committee plac-
ing a valuation on the lands of the
members.
Then the appraiser of the federal
land bank will come to inspect the
lands of the members and O. X. or
reject the valuation prepared by the
loan committee.
No one farmer may borrow more
than $4,000 nor less than 800.
No national farm loan association
may start with less than $4,000 of
loans.
Each member Joining the local as
ISOLATION must buy. stock In the as
ISOLATION equal to per cent of the
amount he borrows. If he borrows
$1,000 he will get $3.50 in cash and
a certificate Of stock for $50. Or he
may make his loan $1,000 and thus
have a net loan Of $1,000, taking as
long a time to repay the $50 invest
ed in stock as on the thousand Dor
rowed. This investment is for the
purpose of providing the increasing
capital stock of the federal land
bank, and the local association in
vests it in the land bank stock. The
borrower will get his money back
when he pays off his mortgage, and
will get what dividends it earns
while it is invested
Now, what Is the object Of re-
quiring the borrowers to thus group
themselves into loan associations.
Primarily that the loan associa-
lions may eventually own the fed
eral land banks. %
This is a cooperative banking sys-
tenn, and the machinery must be pro-
vided for the government of the
banks. Each of the local loan asso-
Citations has a vote in the election OF
the directors in one of the federal
land banks. The loan committee,
provided by the local association, is
the agency for the valuation of the
lands. The board of directors of
the local association admits or re-
jects new members, according to
their wishes. But most important
OF all. since the system is co-opera-
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