The Glenwood post., 1917-03-03

been too high, ranging from per cent
per annum to per cent per month;
and because private money lending
agencies had not realized the reflex al-
vantages to themselves of long time,
amortized loan to the farmers.
The machinery provided in the appli-
cation of the farm loan act has three
main divisions:
First-The federal farm loan board
in Washington, D. c., composed of the
secretary of the treasury, William G.
McAdoo, chairman ex-officio; George
W. Norris, farm loan commissioner;
Herbert Quick, Capt. W. s. A. Smith
and Charles E. Lobdell.
Seccmi- The twelve federal loan
banks throughout the United States
Thir The nationa! fam loan assn
Citations, each composed Of ten or more
farmer bon overs, which associations Sc
cure lo::Es for their members from the
federal loan banks.
The federal farm loan board is in
charge of the entire system. It's first
important duty was to divide the coun-
| try into twelve bank districts and To-
cate one federal land bank in each. This
board also provides the banks with
temporary governing boards during the
process of growth. Later a system Of
cooperative elf-government will be in
augurated under which the associations
of farmers will direct these big finan-
cial institutions, under the supervision
of the federal loan board.
Each of the twelve federal land
banks starts business with paid-up
capital of $75o,000, subscribed by the
government, if private investors do not
subscribe it within 80 days after the
books are opened. These banks have
the right to lend to national farm loan
associations up to twenty times the cap
ital stock of the banks. The lending
capacity Of these banks is automatic
ally increased by requiring the farm
loan associations to reinvest in the cap
ital stock of the banks one-twentieth
of the amount their members borrow.
Thus the capital stock of the banks in
creases in the same ratio as their loans.
The banks acquire additional money
| g.. 1a-lin- Nv oa11spr fhoir hOOdS
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 adjust
ed by supply and demand The rate Of
interest charged to members Of farm
loan associations for money which they
, borrow from the banks, cannot exceed
by more than l per cent the rate OF in
terest paid on the bonds. This margin
is provided to pay the cost of operating
the banks. So, if the bonds sell at 4
per cent and the cost Of operating is
l 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 to the farm
ers would be Az per cent.
so, briefly, the members of the asso-
Citations of farmers borrow from the
banks; the banks issue bonds against
the farm mortgages and borrow money
from investors; the farmers invest al
amount equal to one-twentieth of tine
amount they borrow, in order to pro-
vide an increasing capital for the banks,
and the whole process is done under
governmental supervision and without
profit to any individual.-Frank R. Will
son, Federal Loan Bureau, Washington,
D. C.