South Bend news-times. (South Bend, Ind.) 1913-1938, 1917-12-24
PLAN CHANGES
IN FARM LAND
LOAN B ANKS
Federal Board Recommends to
Congress Removal of Pres
emf Restrictions to Enable
Banks to Enlarge Scope.

/ u the adl IN loan act QuQeF winch
many private farm mortgages
bankers may enter the government
/ system as joint stock land banks. At
the same time the board also gave
warning that it expects interests
( seeking TO break down the system
20 lie a suit soon 10 test the cOnsti-
I tutionaHty Of the act.
Amendments 10 the existing law
which will be specifically recon-
nended to congress in the boards
| forthcoming annual report, are:
To remove the present restriction
permitting a joint stock land bank
To do business only in the state
| y here il is situated and one contigu-
Gus state
To permit a bank 10 issue bonds
I to the amount of 20 times its cap
( tai stock. which must he $250.O00
or more. instead Of - times. as I'M
! Ger existing law:
Raise Interest Rate.
To raise from six TO six and a half
/ per cent the maximum interest rate
| which Joint stock land banks may
charge on loans To farmers.
All these amendments have been
sought by the farm mortgage bank
| ers' association, whose leaders pre-
| dicted that a large proportion of the
/ members would seek government
/ charters and operate under super
vision Of the farm loan board if the
notifications were made. Their
| plea 10 he allowed 10 use the name
/ national land bank instead of
I "ioint stock land bank" has not beer
received favorably by the board, for
/ GEAR Of confusing the private insti-
tuuons with the governments Il
! federal land banks.
; Joint stock land banks would still
! be compelled TO limit interest rates
I or. loans within one per cent more
| than the selling price of their bonds.
/ even though the maximum were
/ raised TO - per cent. They also
would have 10 compete with the fed
/ eral land banks new rate of II
/ per cent.
Advise Filing Suit.
/ In statement explaining the A.
nancial condition of the federal land
4 banks he farm loan board said:
I'VE are advised that the next
/ break down the system will be TO
/ institute a suit contesting the consti-
/ tutionality OF the farm loan act. The
/ purpose Of this suit will be 10 alarm
/ investors who have Rlready bought
/ bonds. and 10 dissuade others from
! 1uying them.
There is not the slightest reason
10 fear it, however. The system IS
! So strong and its administration is
| of such paramount Importance to
/ the agricultural department Of the
/ country that attacks on il are bound
to fail. 1t is only proper, however,
| that this warning should be given in
/ order that the farmers and all
/ friends Of the system should grasp
/ the sinister purpose that is behind
these attacks"
Banks SeIf-SuppOrting.
Recent charges that the federal
! land banks are not self-suppOrting,
based on the boards application TO
] congress for an appropriation Of
S1OO.OOO.OCO a year for this year and
next. with which the treasury might
absorb any farm loan bonds not sold
privately. were met by explanation
that the average impairment OF the
S75O.OO capital with which each
bank started six months ago. repre-
senting government stock subscrip-
tions. amounts 10 six per cent or
$4,000 each. This is more than
counterbalanced by farm loan assn-
/ Citations subscription TO additional
stock. amounting to more than ST.
I 500 600 or about S125.0O0 for each
| bank.
Actual capital Of all banks con-
| seQuently is about $1O.0O0,000. or
/ S1.0O0.000 more than their original
I capital. provided by the government.
Moreover. says the boards state
ment. the volume of loans to farm
ers is increasing so rapidly that
1 several of the more active banks,
1 if permitted 20 continue their pres
ent rate Of growth. will be able 10
/ begin the repayment Of the govern
ment subscriptions 20 their stock in
/ side of Is months"
Receive No Receipts.
For the last six months. says the
/ statement. the banks have paid out
money continuously with hardly a
/ dollar of receipts.
/ The banks assets not appearing
| on the books are the interest accrued
/ but not vet due on loans. and
/ charges for appraisement and distri
| button Of title. payable by borrowers
when their loans are closed. Banks
| have made appraisements and exam
/ nations Of title on more than $780,
/ GOO 600 Of which only $20.000.000
/ has been closed and fees are TO be
/ collected on the remaining S70.000,-
eco loans. approved but not closed.
/ Allowance for the fact that the
farm loan system has been in fun
\ operation for only six months must
be made. says the boards statement
J III adds.
The business Of the banks is SINH
lar TO that of a life insurance or
/ FIRE insurance company. which in
vests money TO get profitable bust
ness on its books. The cost OF get
ting this business has 10 be paid be-
fore the resulting profits begin to
\ come in To Judge Of the profitable
+ ness Of their business by operations
10 date is like asking a farmer who
took possession OF a farm in Octo-