IQQ EXPERIMENT STATTOTT BECOBD. [Vol. 35 



Loans are to be made upon first mortgage security, for periods 

 of from five to forty years, with interest at not to exceed 6 per cent, 

 and with payments on the amortization plan. This provision is in- 

 tended not only to enable the farmer to secure loans conveniently 

 and at rates he can afford, but to protect him in these loans from 

 the necessity of heavy costs, bonuses, and commissions, and to extend 

 the period of payment over a long period of years without the neces- 

 sity of uncertain and costly renewals at stated periods. At the 

 same time, opportunity is given for payments, in addition to those 

 required, on installment dates after the expiration of five years, there- 

 by encouraging thrift and allowing the borrower to profit by favor- 

 able conditions. 



In order to obtain funds to make the loans, the Federal land banks, 

 upon the approval of the farm loan board, are empowered to issue 

 farm loan bonds based upon the mortgages obtained through the 

 farm loan associations. These bonds may be issued in denomina- 

 tions ranging from $25 to $1,000 and in series of at least $50,000, 

 and are to bear interest payable semi-annually at a rate not to exceed 

 5 per cent per annum. 



The farm loan associations are essentially mutual and cooperative, 

 each member being required to subscribe for stock to the extent of 

 5 per cent of his loan. This stock is held by the association as col- 

 lateral security until the payment of the loan, at which time it is 

 retired at par. In the meantime the borrower has received his pro- 

 portionate share of any dividends from the operations of the asso- 

 ciation. A similar arrangement is also required between the asso- 

 ciations and the Federal land banks. 



Shareholders in the associations are held individually responsible, 

 equally and ratably, but not for one another, for the liabilities of the 

 association to the extent of the par value of their stock, plus the 

 amount paid in and represented by their shares. It is, therefore, a 

 plan for limited liability of members as contrasted with the assump- 

 tion of unlimited liability which constitutes an essential feature of a 

 number of the European systems. 



Inasmuch as inability to organize farm loan associations might 

 work hardship upon individual borrowers, provision is also made 

 whereby, after the act has been in effect a year, the Federal land 

 banks may make loans through other channels. If no farm loan as- 

 sociation has been, or is likely to be, formed in a locality the land 

 bank may employ an incorporated bank, a trust company, a savings 

 institution, or a mortgage company as its agent in arranging the 

 loans and in collecting payments. The agent must endorse all loans 

 negotiated and may receive actual expenses and a commission not to 

 exceed 0.5 per cent per annum. The borrower in these cases sub- 



