182 CREDIT 



The president appoints a board of four men, who, acting with 

 the Secretary of the Treasury, constitute the Federal Farm Loan 

 Board and exercise general supervision over the whole system. 



This Act also provides that after it has been in operation one 

 year and it appears that a community does not have and is not 

 likely to have a local loan association, then the district land bank 

 may appoint as agent a local bank. The local bank will then 

 undertake to act as intermediary between the borrowing farmer 

 and the land bank, receiving a commission of one-half of one per 

 cent on the loan. 



Joint Stock Land Banks. This act also provides that private 

 individuals may incorporate land banks, similar in general out- 

 lines to the District Land Banks, and that these joint stock land 

 banks may loan to farmers on first mortgage security, obtaining 

 the necessary funds by selling on the money market farm loan 

 bonds, tax free. In short, the joint stock land banks secure and 

 administer funds, in substantially the same method as the District 

 Land Banks. In loaning funds, however, they deal direct with the 

 individual farmer in their territory. Already the number of these 

 joint stock land banks exceeds the number of District Land Banks. 



Significance of Cheap Credit. The Farm Loan Act has had 

 two marked effects, namely, it has greatly reduced the interest* 

 rate on farm mortgages in all newer sections of the United States ; 

 it has introduced the long-time, amortization plan of repayment^ 

 The Act has been in operation too short a time to permit of exten- 

 sive criticism of it. Certain questions arise, however. The Act was 

 designed to help the needy farmer in particular. But who borrows 

 first the prosperous, shrewd farmer, who sees a chance to enlarge 

 his holdings and buy out his unprosperous neighbor by means of a 

 loan under this Act? Or is it the struggling farmer who is not 

 classed as a good manager? Since a loan is made only on the secur- 

 ity of a first mortgage on land, a landless man cannot borrow. He 

 must first secure title to the land in order to give a first mortgage. 



This Act makes the farm loan bonds tax free; it also declares 

 them to be " instrumentalities of the government" whatever that 

 may mean; it therefore confers special privileges on the borrowers. 

 From the social viewpoint the large and fundamental question 

 involved is this : Will not this law, by making borrowers a favored 

 class, in the end enable the already prosperous land owner to be 

 more prosperous and buy more land at the expense of the so-called 

 poor farmer? Poor men have poor ways, says the old proverb. 

 Probably no law can make them richer. 



