RURAL CREDITS 795 



tute other first mortgages or, temporarily, to substitute United States 

 government bonds or cash. 



Farm land bonds shall be issued in denominations of $25, $50, 

 $100, $500, and $1,000, and shall run for specified maximum and 

 minimum periods, subject to retirement at the option of the land 

 bank at any time after five years from the date of issue. They shall 

 bear interest coupons payable semi-annually, at a rate of interest not 

 greater than 5 per cent per annum. The bonds shall be prepared by 

 the Treasury Department, but their cost assessed upon the issuing 

 banks. Every federal land bank shall be liable for interest payments 

 upon any farm loan bonds of other federal land banks which have 

 defaulted in such payment, and in case either interest or principal 

 remains unpaid after the assets of a defaulting land bank have been 

 liquidated and distributed, such losses shall be assessed upon solvent 

 land banks in proportion to the farm loan bonds which each has out- 

 standing. These bonds are exempt from national, state, and local 

 taxes. 1 



Interest, amortization, or other payments received by federal or 

 joint stock land banks must be credited upon the mortgage held by the 

 farm loan registrar, each such payment being reported to the registrar 

 by the land bank. All such payments upon principal shall constitute 

 a trust fund in the hands of the land bank; they may be applied by a 

 federal land bank (a) to pay off their own farm loan bonds as they 

 mature, (b) to purchase at or below par farm loan bonds issued by 

 themselves or any other federal land bank, (c) to loan on first mort- 

 gages, (d) to purchase United States government bonds. Joint stock 

 land banks may make similar disposition of such payments, except 

 that in (b) they are free to purchase, at or below par, any farm land 

 bonds. The securities so purchased or the cash constituting a trust 

 fund for the ultimate redemption of mortgages must be deposited 

 with the farm loan registrar as substituted collateral for the payments 

 which have been made upon these mortgages. When they have been 

 paid in full, the registrar shall cancel and deliver them to the proper 

 land bank for delivery to the original maker or his representative. 



1 So too are the capital and surplus, or reserve, of federal land banks and farm 

 loan associations. The capital (but not the bonds) of joint stock land banks are 

 taxable. 



