244 RURAL RECONSTRUCTION 



Loan Bank which actually grants the loan and finds the money, 

 and it is also the Farm Loan Bank which controls the application 

 given to the loan, seeing that the money goes to the purpose 

 agreed upon. 



The loan being made grantable in cash, not in bonds, a considerable 

 sum of cash is required to complete the transaction, which cash the 

 Treasury is instructed to provide, as it may be called for, receiving 

 no interest upon it. The United States funds so employed in 

 farm loan business last year amounted to nine million dollars 

 [$750,000 for each bank]. The bonds are issued by the Farm Loan 

 Bank in an exact proportion to the mortgages outstanding — never 

 more — in series of $50,000 — and are eventually called in in the same 

 way — unless they are previously bought in. They are purposely 

 issued in denominations ranging from $1,000 down to $25, in order 

 that they may be within reach of all classes of buyers — just as 

 Horace Say looked for the effect of the Credit fonder business to 

 be the promotion of thrift among small folk. The bonds are 

 exempt from taxes of all kinds — local, municipal, State and federal 

 — and yield 6 per cent, interest. 



The object of the appointment of " agents " — consisting of State 

 (not national) banks, mortgage institutions and the like — avowedly 

 is, as already explained, to place facilities for raising mortgage loans 

 under the scheme within the reach of farmers everywhere, covering 

 the entire territory with accessible offices. They place applicants 

 in communication with Farm Loan Bank of the district, which for 

 such cases operates directly in the place of an " association " inter- 

 vening, and their functions suggest themselves plainly by the 

 object indicated. 



The Joint Stock Farm Loan Banks stand on a different footing. 

 The educational practice already referred to falls mainly to their 

 lot, should they take a high view of their duties. But economically 

 they are formed to earn a profit for themselves. The power given 

 them to pool the security taken by them, pledging it collectively, 

 and of issuing bonds — tax free once more — place them, as Mr. 

 Morman has pointed out, in a peculiarly favourable position for 

 doing business. They need to be chartered like the " associations," 

 but, like them also, are subject to the authority of the Farm Loan 

 Board, which decrees what business they may engage in and what 

 not. Thus it has limited their power to grant mortgages, which 

 the Act itself leaves unrestricted, to in any case a maximum of 

 $50,000 to any one borrower, and to not more than 15 per cent, of 

 its capital stock. In other respects it leaves them unhampered, but 



