Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-04-26
TWO FARM LOAN BANKING
SYSTEMS ARE EXPLAINED
Local Banker Sheds Light on
FinanCiering Methods in
Rural Sections.
Land and Joint Stock Con-
Germs Handle Huge Sums
Every Year.
ny I. A. FLEMING.

II there is any subject concerningf
which there Is general ignorance among
laymen and anything but clear expla-
nation from those who should be in
position to disseminate accurate facts,
II is the mystery of Federal Farm Loan
Banks and Joint Stock Land Banks.
They have been in operation since 1916.
AS a rule any one called upon for in
formation on either of these systems,
refers the questioner to a banker or
lawyer for an answer, with the chances
favoring a not very lucid reply.
Z. j. McQuade, president OF the Lib
erty National Bank, has made close
aCudy of both kinds of banks, using his
own methods of research as banker
ard a lawyer, also with the aid OF the
Treasury Department.
How Two Systems Operate.
This study by Mr.. McQuade might
well be filed away for reference for pos
sible need in the future:
The Federal farm loan act, which was
approved July IT, 1915, provided for the
establishment of two systems of farm
1nol tgage banks, the Federal Land
The act was designed, according to the
pre- amble, ito provide capital for agri-
cultural development, to create stand
ard forms Of investment based upon
fam mortgage, to equalize rates of in
tcrest upon farm loans, to furnish a
market for United States bonds. to Gre
ate Government depositaries and fnan-
cial agents for the United States, and
for other purposes"
The land banks organized and oper-
stlnG under the provisions of the act,
ana the national farm loan associations
through which loans Of the Federal land
ranks are made, are chartered by the
Federal Farm Loan Board. The board
has general supervision of the Federal
Farm Loan Bureau, a bureau in the De-
partment OF the Treasury charged with
also has broad supervisory authority
ara regulatory powers. The banks and
associations of the system are examined
~ land bank examiners appointed by
The Federal Farm Loan Board.
The IL Federal land banks are CO.
operative institutions. Practically all
OF their capital stock is owned by
national farm loan associations. whose
membership Is restricted to borrowers
from the Federal land banks. The
board OF directors Of each bank consists
OF seven members; three are elected
by the national farm loan associations.
:hree are appointed by the Federal Farm
Loan Board to represent the public
interest and the seventh is selected by
the Farm Loan Board from the three
nominees receiving the largest number
of votes from associations.
Time Limit on Loans.
The business of a Federal land bank
is restricted to making amortization
loans, secured by first mortgages on
farm land. These loans may be made for
periods of to 40 years, repayable in
annual or semi-annual inStallmentS of
i1f tn
a loan be made in excess of so per cent
Of the appraised value of the land and
20 per cent of the appraised value of
the permanent insured, improvements
thereon. Appraisal is made in each in
stance by land bank appraiser who, by
law, Is public official and who is
appointed by the Federal Farm Loan
Board and assigned to the Federal land
bank district in which the applicant
resides.
No loan may be made by a Federal
land bank to any person who is not at
the time or shortly to become engaged
in the cultivation of the farm mort
gagged. Loans by Federal land banks
may not exceed $25, 900 to any one per-
son and may be made only for the
following purposes: (a) To provide for
the purchase of land for agricultural
uses; (b) to provide for the purchase
necessary for the proper and reasonable
operation of the mortgaged farm. the
term equipment" to be defined by the
Federal Farm Loan Board; Co to pro-
vide buildings and for the improvement
Of farm lands. the term improvement
to be defined by the Federal Farm Loan
Board, and Cd to hquidate indebted
ness of the owner of the land mort
gagged, incurred for agricultural pur-
poses or incurred prior to January
l, 1922.
Land Bank Loan Methods.
All loans now made by Federal land
banks in the continental United States
are made through national farm loan
associations. Application for loan is
made to the association. which investi-
gates the security offered and the credit
standing of the applicant. If the appli-
cation is approved by the association:
it is transmitted to the Federal land
bank, which, If the application seems
satisfactory, refers the matter to
land bank appraiser. Upon favorable
NATIIQAI GAG lines