Perth Amboy evening news., 1921-07-18
Until a few days ago this figure was but

Until a few days ago this figure was but
$1,000 900.
banks to make loans to farmers throughout the
summer without the necessity of seeking TO sell
another issue of bonds when the market 1or
them is not at the best. 1t is believed mat by
October the Farm Loan Board can advan-
tageously sell another issue OF bonds, ana pro-
vide itself with additional funds for farmers.
The law requires that within fifteen days after
the sale of an issue of bonds that the deposits
made by the treasury in land banks be returned.
The system has grown SO tremendously since
it's inception that MEMBERS of the board estimate
that ten times as much money could be used
as even the tremendous amounts now handled.
Up until the last of May a resume SHOWS that
141, 900 farmers TIN oughout the United states
and that a total of 1854, 900, 900 had been loaned
10 them. On these loans the farmers have to
pay 6 per cent; interest at present. r.ru
To balance this huge loan the Federal farm
Loan Board has sold bonds amounting TO ABOUT
1925, 900, 900. The difference in the money
secured from the sale OF bonds and the actuai
cash lent to farmers was made up from the
slender capital on which the twelve land banks
started-s9, 900. O0O-and the profit on the
operations of the banks.
The feature which has tremendously popular
lied the farm loan system is the amortization
part Of it. which is obligatory upon all farmers
who borrow money from the banks. Thus, on
each / 1000 borrowed, the farmer must return
each year to the land bank from which ne got
it SOS. These payments, which apply alike on
principal and interest, in the course of thirty
three and one-third years pay on the whole
loan. T..
lie ldnu Odnho liaNo oSNh
their operations with the farmers that eacn
year it has been possible to pay a dlVldeno OF
6 per cent. to the National Farm Loan Associa-
ton. This association is made up of the farm
es who have borrowed money to carry on their
business, and this dividend on the capital STOCK
of the bank Is distributed among these men
as, in effect, a rebate on the interest they pay
The National Farm Loan Association is made
UP of nearly 1000 county farm loan organlza,
lions, and as there are but $500 agriculturaI
counties in the United States, there is an average
of considerably better than one organization "
each farming county.
Before the board was created there was d
great deal of criticism from members represent.
ing the more prosperous agricultural states tnat
the establishing of the loan system was lntenoed
almost solely for the poorer farmers OF the
south. This criticism was made at a time when
southern senator's and representatives headed
nearly every in congress-, ana was a
hard one to combat. The denials maze at tna'
time have been amply borne out by later ue-
velopments, however. The state of Iowa, 1or
instance, which saw little need of the Farm
Loan Board at that time. when ITS farmers c0e sx
per cent, is now the greatest patron OF the
Federal Land Bank, with the single exception
of Texas, which is a tremendously larger COM
monwealth.
The bonds sold to provide the funds to loan
are issued largely at the discretion OF the ooaru'
However, congress has retained certain powers.
one Of which is fixing the maximum interest,"
rate the bonds can bear. The present legal limit
is five per cent. Also, existing law limits the
difference between the bond interest rate and
the interest on loans as not more than one per
cent. Thus the limitation of the bonds TO an
interest rate Of five per cent. automatically pre-
vents the land banks from charging more IMAM
six per cent. on the loans to farmers. .--
At times when excellent bonds are pelns
foated which bear interest rates in some cases
as high as s per cent, at first glance IT wouio
appear impossible to sell farm loan BONDS IN
the open market. However, this obstacle Is
overcome by the provision of law making the
farm loan bonds free of Federal taxes of all
kinds, with tax the rb pos s"est,e ene Of tRe i mi sae lo
tax has been brought up, but not yet settieo.
AS it is a fundamental rule that states cannot
tax income derived from the obligations or the
Federal Government, the income to holders OF
the farm loan bonds is entirely free OF any
assessment.
basis, are making money. They are paying their
annual six per cent dividends. and are laying
by a little reserve each year, which can be com.
manded by the farmers in a pinch. me coss
of the board in Washington, which is composed
of four members with the addition or the secre-
tary of the treasury, who is ex-off1cio chairman
is in the neighborhood of 100000 yearly. For
some reason congress insists on paying the cost
of the board itself. despite the fact tnat the
members have asked that these expenses be
borne by the banks, so that the system would
be entirely self-supporting.
For fear that conditions might arise winch
would make the sale of bonds too difficult at
the present interest rate, there is some agltatlon
for increasing the limit of interest the bonds
may bear. There is a bill at present before
the banking and currency committee OF the
senate which, If passed by congress and ap.
proved by the president. would make the limit
on interest on the bonds five and one-half per
cent. This power vested in the board would
make it certain, advocates Of the bill claim, that
the market value of the bonds would always
be great enough to compete with other oner-
ings. and insure their speedy sale. A 1allnre
to sell bonds would result, they say, in tying
UP this system now working so smoothly.
The bonds issued have always been OF the
'ten-twenty-year' variety. That is. they are
r%edeemable at par by the land banks at the
end of twenty years. but with the option on
the part of the banks of calling the bends IN
at the end of ten weeks. This provision was
included so that the board could take advantage
of any conditions which might arise in the
financial world. without impairing the bonds
as permanent income producing investments OF
the safe and sane sort. |