The Washington times., 1925-07-24
BONDS Of FARM
LOANS CITED
FOR SAFETY
Underlying Collateral Repre-
sents Mortgages on Land
Double in Value
b. RICHARD HATTON

| When it is stated that farming
is the greatest industry in the
United States, it will not be hard to
sAalize the Importance OF such in
situations as the Federal Land
Banks and the Joint Stock Land
Banks.
From the beginning Of history,
agriculture has been the foundation
OF the worlds business. Agriculture
cannot go into bankruptcy, the
world must have food and clothing.
and must. Of necessity, pay thu
farmer a living wage.
The value of all farm property
in the United States, according to
the last census, was SIS, 00O, 900 900.
The total farm Indebtedness was es-
timated at only $4,000, 000, 900, or
about IL per cent Of the physical
valuation Of the farms.
In order to provide funds for
this great national industry Con-
gress inaugurated the system which
includes the Federal Land Banks,
the Joint Stock Land Banks and
the intermediate Credit Banks. The
system has undoubtedly come to
stay and it may become, in time,
the largest financial institution in
the United States.
Safety of Investment
1t seems that the safety Of invest
Ament in the bonds of these banks is
assured for whether there is any
obligation implied or real, on the
part Of the Government, neverthe-
less the securities which the Gov
er1ment has sponsored appear to be
adequately protected not only by
the safeguards which govern their
issuance but by the fact that the
underlying collateral represents
appraised and officially approved
which have beer pledged by the
owners who produce the nations
crops.
a Federal land bank cannot issue
bords in excess Of twenty times its
capital and surplus; a joint stock
land bank cannot issue bonds mex
cess Of fifteen times its capital and
surplus.
Federal land banks can loan up
20 SIS, 900 TO single borrower and
joint stock land banks up to $50, 900,
but in the latter Ease no loan can
be made. to a borrower who has al.
ready obtained a. maximum loan
through the Federal land bank
system The law forbids loans in
excess of so per cent of the ap-
praised value of the land and 20
per cent of the value of the insured
improvements, anN the bonds are
Gold to the public with the assur-
knce that these limits have not been
exceeded. Government authorities
pass upon the security and satisfy
themselves that every 81 loaned is
secured by at least 81 worth OF
hlId.
Semi-annual Payments.
The law provides for the retire
ment OF principal and interest by
eemi-annual payments upon all mort
cages which underlie the bonds.
mortgages does not reduce the lien
on the property which the mort
cages represent. All the property
under the mortgage continues to be
encountered until the mortgage is
fully redeemed. AS the bank re-
ceives each instalment payment.
the law requires that additional new
mortgages on other property equal
TO the amount Of those instalment
payments shall be pledged. The
new mortgages also represent adj |
ditional collateral value so that the
total property value or security |
underlying the bonds is gradually |
increased as the original loan. under
the mortgages are gradually re.
duced.
Thus it is manifest that as the |
aRe of the bonds increases. the
smount Of collateral securing them |
also increases. A bank must at all |
times keep its bonds secured by |
mortgages of a face value of 100 |
Der cent of the amount of bonds for |
which the mortgages are pledged |
ond the lien on all the property, |
which all the mortgages represent. |
remains unaltered regardless Of the J