FARM CREDIT AND THE RATE OF INTEREST 183 



within a very limited and well-defined field, so that the officials 

 are able to know the men and the land values throughout the 

 district. 



The effect of this credit system is shown by the fact that, in 

 1895, only 16.42 per cent of the farms in Germany were com- 

 posed entirely of leased land; and only 12.38 per cent of all 

 the land included in farms was leased land. Indeed, Germany 

 is a nation of landowning farmers, while in France 47.2 per 

 cent of the cultivated area is occupied by tenants, and in Eng- 

 land the landowning farmer is the exception. Practically all 

 the land of England is farmed by tenant farmers or hired 

 managers. 



In the last few years much has been done to bring about the 

 establishment of a better farm credit system in the United 

 States. This has resulted in the Federal Farm Loan Act of 

 1 91 5, which provides for the establishment of Federal Land 

 Banks which have for their purpose the lending of money to 

 farmers at a low rate of interest on mortgage security. 



The Federal Farm Loan Act provides for the division of the 

 United States into twelve districts and the establishment of one 

 Federal Land Bank in each district. The farmers normally 

 come in touch with the land banks through the National Farm 

 Loan Association. This association is a local institution made 

 up of ten or more farmers of a given district who wish to borrow 

 money on farm mortgages. Loans are limited to $10,000 for 

 each person. For each hundred dollars borrowed, the borrower 

 must subscribe for one five-dollar share of stock in the associa- 

 tion. This limits the actual amount one man can secure for 

 farm purposes to $9500. The amount of the loan is limited, 

 also, to 50 per cent of the value of the land plus 20 per cent of 

 the value of the buildings. The farm loan associations indorse 

 the mortgages and turn them over to the Federal Land Bank 

 of the district as security for the funds borrowed from that insti- 

 tution. In turn the Land Bank issues bonds which are sold to 

 raise the money which is lent to the association and in turn lent 

 to the farmer. It is stipulated in the law that every mortgage 

 " shall contain an agreement providing for the payment of the 



