SECURITY FOR OUTLAY 243 



The " National Farm Loan Associations " are the professed 

 favourites of the authorities. Avowedly to favour them the Farm 

 Loan Board held back charters for Joint Stock Banks without legal 

 authority. They may be formed anywhere by not less than ten 

 persons combining and subscribing not less than $20,000 in share 

 capital. They must prove that they are bond fide farmers, well 

 conducted, skilful, having an independent income from their farm, etc. 

 If they can do this they receive a charter. However, one essential 

 condition is that they must all be borrowers. As soon as one man 

 has his loan cleared off he drops out automatically and ceases ipso 

 facto to be a member. But the " association " goes on until the last 

 is quit of his debt. And so long as a man is a borrower he has no 

 choice but must remain in the " association " and bear its respon- 

 sibility. There is no limit upwards as to the number of members, 

 and, of course, there are many enough " associations " with rolls 

 exceeding 200. The average number at present is 27£. The share 

 capital is formed by a deduction of 5 per cent, made from all loan 

 money granted — though interest at the rate of 5 per cent, has to be 

 paid on the full sum. That 5 per cent, is kept back, invested in 

 United States funds, being designed to some extent to serve as 

 security for the loan. The dividend accruing goes to the credit of 

 the several members, in proportion to their quotas. The current 

 management expenses are provided for, as a rule, by the levy of 

 | per cent, on the figure of the loan. The Farm Loan Bank— under 

 which such " association " acts, and from which it receives the 

 money which it disburses in loans, is required to allow defaulters 

 two years' grace before foreclosing. During those two years it is 

 the " association " which " carries " the defaulting member, the 

 " association " collectively being answerable to the Farm Loan 

 Bank for all loans granted to its members. Applications for loans 

 to be granted are made by members to their own " association/' 

 which has a special loan committee, consisting of three members, to 

 value the property intended to be pledged, make the necessary 

 inquiries respecting the propriety of the loan — the question of the 

 propriety of title, of the applicant having already been settled by 

 his election— and report to the " association." In the event of its 

 being one of the loan committee who applies — since by rule, as has 

 been shown, only borrowers are accepted as members — provision 

 is made for a substitute to act in his stead in that particular oaae. 

 The report so made is sent up to the Farm Loan Bank of the dis- 

 trict, which sends its own "appraiser" to check the valuation, 

 examine the title and institute its own inquiries. It is the Farm 



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