BUYING FARMS WITH LA^^TD-BANK LOANS. 25 



desirable to restrict the benefits of such a system to those whom the 

 act was designed to serve. Not only should it be restricted to the 

 single jDurpose of buying farm land, but it should also be requisite 

 that the borrower establish the fact that he seeks the aid of the sys- 

 tem as a means of becoming an operating farm owner and for a 

 reasonably long time. It might also be possible to devise a method 

 of indirectly limiting the benefits of the S3^stem to men of small 

 capital. The SA^stem should not facilitate the acquisition of addi- 

 tional farms or even of additional land except when the latter repre- 

 sents a hona fide attempt to enlarge or round out a holding previ- 

 ously inadequate for economical operation. Proper administrative 

 safeguards should be provided to insure that the cost of the farm is 

 reasonable enough to justify the presumption of the buj^er's paying 

 out on the investment and also that the bu^'er has sufficient experience 

 and personal ability to justify his undertaking a farm enterprise. 

 Provision should be made to prevent the use of the system for specu- 

 lation. It seems probable that, thus restricted, the suggested pro- 

 visions would serve the purpose of promoting farm home ownership 

 on the part of those who would be prevented from attaining that 

 status under present conditions of land values and mortgage credit, 

 and without involving a heavy drain on the Nation's farm-credit 

 machinery. 



Such a system might be developed on thoroughly businesslike prin- 

 cij^les without committing the Nation to anything approaching a 

 class subsidy. It would probabh^ be possible to make such a system 

 pay its way without subjecting the Government to unreasonable 

 risks. Prevailing systems of first-mortgage loans, including the 

 Federal farm-loan sj^stem, are based on the theory that each indi- 

 vidual mortgage must be absolutely safe, so that in case of fore- 

 closure there will be no reasonable doubt that the value of the farm 

 will repay the debt. This policy is largely due to the practice of 

 reselling individual mortgages or blocks of mortgages or of assign- 

 ing them as security for bond issues. In fact, it is usuall}^ the intent 

 to avoid even the possibility of foreclosure, for most agencies lend- 

 ing on farm mortgages do not care to incur serious risk of having to 

 take over the ownership of the land. 



The conservative character of the Federal farm-loan sj-stem is 

 due to the fact that it is based on this principle ; a fact that renders 

 it useful as a general basis of long-time farm credit, but limits its use- 

 fulness as an agency to promote farm ownership among those seek- 

 ing to establish themselves in the land with limited capital. 



It would seem, however, that a system of second mortgages under 

 Government auspices might be developed on the insurance prin- 



