Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1920-06-11

4NAuO"o iIom J0e larger towns
the loans mad to pass through two
ana often five or six hands, every
one OF which took its toll OF commits
slons and expenses. There were also
IN the field mortgage brokerage con-
Germs that had large private Glen
tele, whose mortgages were handled
IN substantially the same manner
and the charge to the farmer was all
the traffic would bear and it is rea-
sonable to assume that this average
charge in the richest sections of the
country was at least two per cent
commission on the usual turn over
and this often amounted to four or
i've per cent-an income to the
brokers' and their agents of approx
mately $15,00O.000 to S25,OO0.O0O
annually. Naturally there had been
| strong companies built up in this
| business and such men do not give
up such enormous profits without a
fight and they are making a hard
fight. They are spending hundreds
! OF thousands of dollars and using
false and misleading statements and
all the political influence possible to
obtain with the help of the great in
surance companies, and it largely de-
ponds on you gentlemen as to wheth-
er or not they will be successful in
removing from the field the first
competition they have ever had.
In passing the Federal Farm Loan
Act, congress wisely made of it a
dual system-that is, they provided
for IL Federal Land Bank Districts,
each served by Federal Land Bank
which operates through local asso-
Citations. This is commonly referred
to as the cooperative system as each
farmer was required to purchase
stock in the parent bank to the ex-
tent of five per cent of his loan. The
initial capital was almost wholly sub
scribed for by the government in the
amount of $750,000 for each bank.
The law provides that when the sub
scriptions OF the farmers amount to
as much as the government subscrip-
ton there shall thereafter be paid
to the federal government one-fourth
of the amount subscribed by borrow
ers until the government capital is
wholly repaid. Simple calculation
shows that each Federal Land Bank
will have made 100000 of loans
before the government subscriptions
to capital stock will have been re-
turned In several of the districts,
there is not $75,000,000 of prime
farm mortgages, according to the
best statistics we have at hand.
Thus, the government will always
have some stock in these Federal
Land Banks. The borrowers of
federal Land Bank participate in the
earnings of the bank only to the ex-
tent of certain portion of the divi-
dends declared. According to the
law, one-fourth of all the earnings
must be passed to surplus until the
surplus equals 20 per cent of the
capital This is wise provision to
build up a reserve against bad and
doubtful loans, yet the law also pro-
vides that when a farmer pays his
loan that his stock shall be retired
at par. 1t is easily conceivable that,
If a man carries his loan with the
bank for 20 years and his stock may
have a book value of 1925 of $3.50
Fer share, yet the farmer does not
participate in this but only gets par
for his stock.
Loans are made only through a To-
cal association consisting of 10 or
more borrowers. The local associa-
ton is a formal corporation. 1t
must have it's secretary-treasurerand
other officers and must guarantee
each loan made to its members, col
lect the payments due on loans and
remit to the Federal Land Bank.
Thus a Federal Land Bank is re-
lieved of the collection trouble and
expense, for the members of the To-
cal assoc! alton must bear the expense
of supporting the association. The
local association must be supported
By the members and must build up
a reserve oc at least 10 per cent of
dividends received by it's members.
On earnings of eight per cent, after
reserves and expenses chargeable to
dividends under the Act are paid. the
farmer can only get dividend of
2 6 per cent on his stock.
Joint Stock Land Banks are oper-
ated under the same supervision as
Federal Land Banks so far as loan
iEg money is concerned. The law,