482 THE HANDBOOK FOR PRACTICAL FARMERS 



A farmer who borrows through an agent or an association 

 pays five and one-half per cent interest, but he has to subscribe 

 for stock in the Federal land bank to the amount of five per cent 

 of his loan. It is expected, however, that this stock will draw 

 dividends at six per cent, or one-half per cent more than he pays 

 out as interest. This is the result of cooperation, for the national 

 farm loan associations and the Federal land banks form the 

 cooperative part of this system. Some of the Federal land banks 

 have already paid dividends to their stockholders, and others 

 will soon be in financial condition to do so. 



But a farmer who borrows of a joint-stock land bank pays six 

 per cent interest. He does not, however, have to subscribe for 

 stock, but receives the entire amount of his loan. On the whole, 

 therefore, the benefits derived from borrowing of either kind of 

 land bank are about the same, for both are under strict Govern- 

 ment supervision and make long-time loans, ranging from five 

 to forty years, on the amortization plan of repayment. Nearly 

 all the land banks now require an annual amortizement of about 

 one per cent of the loan, which will repay it in about thirty-five 

 years. 



Benefits to rural communities. — But the benefits of the Fed- 

 eral farm loan system are not confined to farmers. The Act 

 provides that loans may be expended for various productive 

 purposes, including the purchase of equipment, the making of 

 improvements, and the construction of buildings. This means, 

 as a rule, that every borrower has cash to expend at country 

 stores for lumber, cement, wire for fencing, tile for drainage, 

 lime, implements, machinery, improved seed, and a hundred 

 other things which a farmer needs to make his farm more pro- 

 ductive. In each case the country merchant has a larger volume 

 of business and gets paid in cash. Thus the farm loan act is 

 serving rural communities by sowing its benefits broadcast 

 among merchants and the social life of such communities has 

 risen thereby to a higher plane. 



And what is true of merchants is true also of rural bankers. 

 If a farmer spends his larger income at his country store, the 

 merchant has more business to transact at his local bank, and 

 the latter does a larger volume of business. If a farmer has a 

 surplus, he is able to run a savings or checking account at the 

 bank. These are results actually achieved by this system. Local 

 country banks are reaping the benefits not only when the funds 

 fif st reach the national farm loan associations, but also will con- 



