it appears that national farm loan associations have not been formed and are not likely to be formed in any locality because of peculiar local conditions. Loans made through agents are subject to the same conditions and restrictions as if they were made through national farm loan associations; but no agent may be employed other than a duly incorporated bank, trust company, mortgage company or savings institution chartered by the state in which it has its principal office. Federal land banks may pay such agents the actual expenses connected with making loans; such expenses become part of the loan and are paid off in amortization payments. In addition, agents may be allowed a commission not to exceed one-half of one per cent per annum upon the unpaid principal of the loan. Such commission is to be deducted from dividends payable to the borrower on his stock in the federal land bank. Agents must indorse and become liable upon mortgages received from them and such mortgages may not exceed ten times the amount of the agent's capital and surplus. They may further be required to collect and remit payments on loans without charge. Whenever the district represented by any agent is adequately served by national farm loan associations no further loans may be negotiated therein by agents. Bonds of federal land banks. While the government does not guarantee the bonds of the federal land banks, they are issued under the supervision of the government and cannot be issued until the government authorities have passed upon the security and satisfied themselves that each dollar of bonds issued is secured by at least two dollars worth of land, and each bond contains on its face a certificate of its regularity signed by the Federal Farm Loan Commissioner, a government official. In addition they are secured by the 5 per cent stock owned by each farmer borrower, and held as collateral security by the local loan associations, and if that is not sufficient, there is the additional 5 per cent liability against each farmer stockholder; moreover, the local farm loan associations are required to indorse every loan made to its members by the federal land bank. The bonds are also backed by the resources of the 12 federal land banks now established in the United States. The wide distribution of the security, unaffected by local conditions in any part of the nation, contributes greatly to its value and stability; for, as a matter of fact, the farm loan bonds are backed by at least twice their face value, plus the indorsement of the national farm loan associations, plus the resources of the 12 federal land banks located throughout the country. Joint Stock Land Banks. Differentiated from federal land banks. The joint stock land banks are organized under section 16 of the federal farm loan act. These joint stock banks are private institutions intended for the investment of private capital, but they are supervised by the Federal Farm Loan Board and inspected by its examiners, and appraisals made by them in placing first mortgage loans are likewise under the control of the board. They have no connection with the federal land banks and are distinguished from them as being cooperative associations of lenders; whereas, the national farm loan associations and the federal land banks operate as cooperative associations of borrowers. The act provides that private individuals may organize joint stock land banks with capital stock of at least $250,000 each, and consisting of not less than 10 stockholders. One-half of the stock is to be paid up when the bank starts business, and the other half is subject to call. The shareholders are individually responsible, equally and ratably, and not one for another, to the extent of the par value of the stock owned by them and in addition to the amount paid in and represented by their shares. The joint stock bank has the right to issue bonds after its capital is fully paid up, just as the federal land banks do, but it may not issue bonds aggregating more than fifteen times the amount of its capital and surplus. Nothing but a first mortgage may be utilized as security for an issue of bonds. After the mortgage loans are made they are deposited with the registrar of the federal land bank district, who forwards them to the Federal Farm Loan Board at Washington for approval. When the loans have been approved the board issues joint stock land bank bonds to the bank which deposited the loans. The sale of these bonds furnishes additional capital for further loans. The joint stock bank may make mortgage loans at a rate of 1 per cent per annum above the rate which its last issue of bonds bears, but they are not permitted to charge over 6 per cent interest. Joint stock banks operate under the amortization plan, the same. as the federal land banks. Except as otherwise provided in the law, joint stock land banks have the same general powers and limitations as federal land banks, but they are specifically exempt from a number of provisions applicable to federal land banks. The main difference in the regulation and supervision of the two institutions arises from the fact that one is at cooperative association of borrowers and the other a cooperative association of lenders. Farm loans made by the joint stock land banks. The following tables show the loans made by joint stock land banks now operating under the federal act. The different banks are arranged in order according to priority of organization. This arrangement presents the chronological as well as the geographical development of the joint stock banks throughout the country. The joint stock banks may make loans on agricultural land only in the state in which they are located and one adjoining state. Statement showing total loans of joint stock loan banks to October 31, 1919, inclusive. [Banks are arranged chronologically according to priority of organization.] First Joint Stock Land Bank. Arkansas Joint Stock Land Bank. First Illinois-Missouri J. S. L. B.. Location. Sioux City, Iowa. . Charleston, W. Va.. .Indianapolis, Ind.. . Helena, Montana. States Total Loans Closed to Consolidated Statement of Condition of the Joint Stock Land Banks at the Close of Business October 31, 1919. Amortization Plan of the Federal System. Loans made by federal land banks or by joint stock land banks must be made on the amortization plan and no mortgage made on any other plan can be accepted as a basis for any issue of farm loan bonds. This process of paying off an indebtedness by installment payments of a fixed amount, which includes interest and a part of the principal, throughout a period of years, enables a farmer to take a large loan without undue risk. Under the federal plan of amortization a mortgage loan may run from 5 to 40 years at the option of the borrower. The payment of the interest rate and 1 per cent additional per year applied on the principal will wipe out the mortgage in about 36 years. This period may be shortened by making additional payments on the principal, from time to time, as the farmer may find it convenient. The amortization payments may be made annually or semiannually, but the semi-annual system has been adopted as the standard, as it is usually an easier method for a farmer operating a small farm. Thus, the semi-annual payment on a $1,000 mortgage for 36 years at 5 per cent would require a payment of $30 every 6 months. This payment would wipe out the mortgage and discharge it at the end of the thirty-six year period. The farmer always has the privilege of making additional payments after the mortgage has run for a period of 5 years. After that time he can wipe out his loan in whole or in part on any interest pay day. Amortization methods of the federal land banks and the joint stock land banks. The amortization methods of the land banks under the federal system have been standardized, so that it is very easy to make these payments to the land bank from which the loan has been taken. The following table shows the application of succeeding instalments in the payment of interest and principal until the entire indebtedness is amortized. [A loan of $1,000 at per cent interest repayable in 35 years as compared with a straight loan for the same amount and period of loan.] 35 installments, as agreed, paying both interest and principal.. $1,925 00 1,000 00 $2.925 00 2.272 50 $652 50 The following method of paying off ahead of time has recently been promulgated by the Federal Farm Loan Board. Its advantages are perfectly plain to any borrower. The regular amortization table |