COOPERATIVE LAND HANKS 463 



Each of them is made up of ten or more farmers, and 

 their affairs are managed by a secretary-treasurer. 



Let us take a concrete case to see how the Federal 

 Laud Bank System works. A farmer desires to borrow 

 money for farm purposes. He comes to the manager of 

 the local loan association and says that his land is worth, 

 let us say $1500, and the improvements on it, $500. The 

 manager states that if he finds the land and improvements 

 as claimed by the farmer and the farmer's title to the 

 property unquestioned, he can advance him $900 or 60 

 per cent of the value of the land and $100 or 20 per cent 

 of the value of the improvements, a total of 81000 in all. 

 But before advancing the money the farmer must join the 

 loan association, unless he is already a member, must take 

 5 per cent of his loan in stock, and must assume 10 per 

 cent of his loan as liability against the possible losses of 

 the other members. Thus the farmer really receives but 

 $950 on his property. The $50 worth of stock is to be 

 turned over by the local association to the district land 

 bank. When the loan is paid, the farmer is credited with 

 the value of this stock, which is then canceled. 



Farmers can also borrow on their crops and stock, and 

 the Federal Reserve Banks will rediscount farmers' notes 

 based on current farm operations. 



The debentures issued by the land banks pay 1 per cent 

 less interest than their underlying farm mortgages, and 

 the redemption of the debentures issued by any land bank 

 is guaranteed by the resources of all the land banks. 



Some advantages of the Cooperative Land Bank System 

 are : interest rates are reduced ; small annual payments 

 may be made on long term loans ; farm first mortgages 

 become bankable assets ; the federal government supervises 

 and secures money for the farmer at least cost ; there is also 

 economic and social cooperation among the farmers. 



