CHAPTER XXXIII 



BENEFITS OF THE FEDEEAL FARM LOAX SYSTEM 

 By James B. Norman, M.A.^ 



The Federal Farm Loan Act went into effect on July 17, 1916, 

 the day it was signed by the President. The primary object of 

 the law was to provide capital for agricultural development. This 

 money was to be loaned to farmers for productive purposes at 

 a low and uniform rate of interest. In order to make these loans 

 two kinds of land banks were authorized. One is known as 

 Federal land banks and the other as Joint Stock land banks. 

 These banks make first mortgage loans on farms in all parts of 

 the United States. 



Improvement of farm mortgage conditions. — One of the first 

 benefits derived from this Act is the improvement of the terms 

 and conditions of loans. Before the Act was passed farmers 

 had great difficulty in procuring credit except under very harsh 

 terms and conditions. "WHien a farmer mortgaged his farm, it 

 was usually at a high rate of interest, with commission charges 

 of at least one or two per cent, the mortgage was generally made 

 to run not longer than five years, and it was expected that the 

 mortgage would be paid in full when due. 



These were burdensome and dangerous conditions. The 

 farmer had to struggle hard during the period of his loan to pay 

 the interest on his debt and keep his household running. If he 

 were unable to pay off his mortgage when it became due and he 

 was fortunate enough to get it renewed, it was only by the pay- 

 ment of an additional commission which increased his burden. 

 But if he had fallen into the hands of a modern Shylock, he was 

 under constant dread of losing his farm and all he possessed. 

 In those days borrowing money on mortgage by the farmer was 

 a gamble with financial slavery or bankruptcy and A\dth the 

 prospect that the farmer would play a losing game. 



All these conditions have been changed by the new Federal 

 farm loan system. The interest rate cannot exceed six per cent 

 and is uniform all over the United States ; the farmer who bor- 

 rows has no commission to pay; the charges for appraising a 



' Assistant Secretary, Federal Farm Loan Board. 



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