7Q2 AGRICULTURAL ECONOMICS 



shall collect and transmit interest or other payments, receive funds 

 from the land bank and pay them over to borrowers, and assure 

 himself from time to time that the funds loaned through the associa- 

 tion are applied to the purposes set forth in the borrowers' applica- 

 tions. He need not be a shareholder in the association. 



The capital stock of the national farm loan associations shall be 

 divided into shares of a par value of $5 each. The total amount will 

 depend upon the volume of loans outstanding, since a" share of stock 

 is issued for each Sioo (or major portion thereof) extended as a loan, 

 ancTpaloToffat par and retired whenever the loan is paid in full. The 

 borrower is to be paid any dividends which may accrue on stock out- 

 standing. He may cast one vote for each share of stock which he 

 holds, except that no shareholder shall cast more than twenty votes. 

 Shareholders are "held individually responsible, equally and ratably, 

 and not one for another," for the debts and obligations of the associa- 

 tion, to double the amount of their stock holdings. This means that 

 they follow "American practice rather than the pattern of European 

 co-operative organizations. 



OPERATION OF THE SYSTEM 



Method of making loans. The farmer who desires to secure a loan 

 on his land has two courses open to him. He may borrow from a 

 joint stock land bank direct, as he would borrow from the ordinary 

 mortgage company. Or he may borrow from a federal land bank, 

 through a national farm loan association if one has been organized 

 in his community or if he can interest a sufficient number of other 

 borrowers to effect such organization. 1 He may be admitted to 

 membership "by a two-thirds vote of the directors upon subscribing for 

 one share of the capital stock of such association for each $100 of the 

 face of his proposed loan or any major fractional part thereof." This 

 stock subscription is supposed to be paid in cash upon the granting 

 of the loan, but the sum necessary to make this payment may be 

 borrowed by the prospective member from the federal land bank, this 

 sum to be added to the face of his loan and paid off in amortization 



1 It should be noted also that if, after the act has been in force one year, farm 

 loan Associations have not been formed and are not likely to be formed in any 

 locality because of peculiar local conditions, the- Kcdrral Farm Loan Board may 

 authorize some bank, trust company, mortgage company, or savings institution 

 to act as an agent of the federal land bank of the given district and make loans for 

 it in the locality not otherwise served. 



