Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1920-01-31
Abe OF FINANCE
FARM LOAN BONDS
BY Harold +. Greene
Department Guaranty Trust Co of York

Through the federal falIl loan
act two desirable ends have been
sought for. and are in n far way 10
being obtained in large measure.
The first is that farmers have been
given an agency through which
they can obtain mortgage loans at
a fair rate of interest. The second
is that bonds of an unusually high
grade, exempt from taxation and
backed not alone by the security
of real property but also by the
United Safes government are con-
stantly being put upon the market
and offered to the average investor.
| The associations and banks issuing
the bonds are now owned jointly
by the government and individuals,
but means have been established
whereby they will ultimately be-
long almost entirely if not entirely
to the the farmers of the country
who will share in the banking
profits of the plan.
Tw" types Vt herds are provided
for by the terms of the act, and in
order that the distinction between
them may be understood it is nee
essary that the workings of the act
be explained.
Under its terms continental
United States, exclusive of Alaska,
is divided into twelve districts
which are not, however, co-eXten-
sive with the federal reserve dis
tricts-and in each district, a GER
tain city is appointed as farm loan
city. The law provides that in each
such city a federal land bank, with
minimum capitalization of $780,
900 be established The original
capital for establishing these banks
was provided by the national gov
eminent, but the governments
share will grow less as time goes
on, and the farmers themselves
take over the organization.
Local control of the farm loan
banks is obtained through associa-
tons known as Farm Loan associa-
tons, which are organized by the
farmers themselves for their own
benefit. For each one hundred
dollars borrowed, each borrower
must subscribe to five dollars
worth of stock in the association,
and on this stock there is double
liability, which affords added pro-
lection to the holders of farm loan
bonds, The association grants loans
only on first mortgages on i'm
proved land, and only to the extent
of fifty per cent of the value of the
land and twenty per cent of the
value of permanent provements.
Two appraiSements are made. Bor-
rowers, further, must pay each year
not only interest on the loan but
an additional sum sufficient TO
amortiZe the principal of the loan
in period between five and forty
years. This operation is very sim
liar to that of the ordinary build
ing and loan association familiar in
most American communities,
The farm loan association OBJ
tain their money from the federal
land banks by indorsing, guaran-
teeing and pledging these first
mortgages. or United States bonds,
with the banks. At the same time
they must subscribe to the stock
of the bank a sum equal to five per
cent of the amount of their bor-
rowings AS their borrowings in
crease they will of course have
greater control of the banks, Upon
these mortgages as basis, and
with the approval of the federal
farm loan board, the central gov
ernfng body of the whole system,
the federal farm loan banks may
issue bonds covering the amount of
their own lendings.
In the event that no farm loan
associations have been or are likely
to be organized in any given To-
cality, banks, trust companies saw
ings banks and mortgage compan-
les may act as agents for the fed
eral land bank of the district in
the role of intermediary between
prospective borrowers and the
bank In such cases the agent in
stead of the association indorses
and guarantees the mortgage,
There is a legal limit on the
amount of such Endorsements
which any institution may under
take.
Such is the organization behind
the farm loan bonds which are