AGRICULTLTR.^L CREDIT AND CO-OPERATION IN EUROPE 87 



posed to any suggestion of monopoly or privilege. The exemption from 

 taxation accorded to the bonds is justified by the Commissioners on the 

 ground that any tax imposed would fall ultimately on the farmers who bor- 

 row from the banks and that such a result would amount to double tax- 

 ation of land, since land is already the object of taxation in the separate 

 States. The proposal to recognize the mortgage bonds as a medium for the 

 investment of postal savings deposits, trust funds and national bank dep- 

 osits is intended to raise the status of such bonds by making them easily 

 negotiable in a wide market. The legislation proposed would, it is hoped, 

 at once place the bonds of the mortgage banks on an equaUty with Muni- 

 cipal, State and Federal government bonds. 



With respect to the loans which the banks would be permitted to make 

 upon farm lands, the Bill la3''S down the following conditions : 



(i) that such loans be made for not more than 35 years ; (2) that all 

 fann-mortgage loans shall be on first mortgages only ; (3) that they shall 

 not exceed 50 per cent, of the value of improved farm lands or 40 per 

 cent, of other land ; (4) that every farm mortgage loan shall contain a man- 

 datory provision for the repayment of such loan by amortization ; (5) that 

 the borrower may repay the loan at an}^ interest period after five years. 



The value of any land or other real estate offered as security for a 

 mortgage loan would be determined for each bank by an Appraisement Com- 

 mittee consisting of three members of the Board of Directors. Each re- 

 port of the Appraisement Committeee must be signed by at least two of 

 the members, and must show the value at wliich the land in question is 

 assessed for taxation and such other information as is required by the 

 Directors of the bank or the Commissioner of Farm Land Banks. The ade- 

 quacy of these provisions has already been questioned, and it would evi- 

 dently be the duty of the Commissioner to issue stringent regulations with 

 respect to the methods of valuation before giving any bank the power to 

 issue bonds. 



The conditions upon which the banks would be permitted to issue 

 bonds are as follows : (i) the dift'erence between the rate of interest charg 

 ed for loans and the rate paid by the banks on the bonds issued, shall not 

 exceed i per cent ; (2) all bonds shall be payable on a date specified ; (3) 

 bonds shall be protected by the deposit of first mortgages of equal nominal 

 value, maturing not less than five years from date ; (4) the amortization 

 payments as made must be credited on the mortgages and the bonds issued 

 against such mortgages must be retired to that extent ; (5) the mortgages 

 held as security for bonds shall be in the joint possession of the bank and 

 of the special official known as the Federal Fiduciary Agent ; (6) no bond 

 shall be issued against any mortgage running for less than 5 years. 



In order to furnish the banks with the fluid working capital necessary 

 in any type of banking institution they would be authorized to accept depos- 

 its to the extent of 50 per cent, of their capital and surplus, and to do an 

 ordinary banking business (including the purchase and re-discounting of 

 commercial paper) within the limits set by the amount of such deposits. 

 The banks would also be free to invest not more than 50 per cent, of their 



