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TREASURY DEPARTMENT
FEDERAL FARM LOAN BOARD
Circular No. 6
Farm Loan
ISSUED BY THE
FEDERAL FARM LOAN BOARD
April 10, 1917
WASHINGTON
GOVERNMENT PRINTING OFFICE
1917


FEDERAL FARM LOAN BOARD.
WILLIAM G. McAIDOO, Secretary of the Treasury, Chairman.
GEORGE W. NORRIS, Farm, Loan Commissioner.
CELARLES E. LOBI) ELL. --
W. S. A. SMITH.
HERBERT QUICK.
W. W. FLANNAGAN, Secretary.
FARM LOAN BONDS.
The Federal Farm Loan Act of July 17, 1916, created a Bureau in
the Treasury Department, under the general supervision of a Fed-
eral Farm Loan Board, consisting of the Secretary of the Treasury,
as chairman, and four members appointed by the President. It
was made the duty of this Board to divide the continental United
States (exclusive of Alaska) into 12 districts and to organize in each
one of these districts a Federal land bank. Each one of these banks
is to start business with $750,000 capital, making the aggregate
capital of the 12 banks $9,000,000. The Secretary of the Treasury
was directed to subscribe, on behalf of the United States Govern-
ment, to any stock not otherwise subscribed for within 30 days of
the opening of the subscription books, and in pursuance of this
direction $8,879,905 has been subscribed on bº of the Govern-
ment.
These banks are authorized to make loans to farmers upon first
mortgages, and to pledge these mortgages as collateral security for
bonds to be sold to investors, the proceeds of the sale of these bonds
to be used in making additional mortgage loans.
The act “looks to the launching of a second national-bank sys-
tem. * * * to afford facilities to citizens engaged in the basic
industry of agriculture to secure credit with which successfully to
carry on their operations so essential to the general welfare and to
which the value of their property ought to entitle them.”
In response to numerous inquiries the following information has
been compiled in reference to the FARM LOAN BONDs to be issued
by the FEDERAL LAND BANKS under the provisions of the act.
These bonds will be issued in series of not less than $50,000 (prob-
ably not less than $250,000) each, as and when authorized and
approved by the Federal Farm Loan Board, after such investiga-
tion and appraisement as it shall deem wise. They will be the
obligations of the issuing bank.
$25, $50, $100, $500, and $1,000.
Coupon, may be exchanged into registered. Coupons payable at
any one of the 12 banks.
Twenty years, redeemable after 5 years at par.
Rate 4% per cent, payable semiannually.
Pledge of an sº of first mortgages on cultivated farms.
These mortgages are limited to 50 per cent of the value of the land
mortgaged and 20 per cent of the value of the permanent insured
improvements, as determined by two separate appraisements, of which
the second is to be made by an appraiser appointed by the Farm
Loan Board. The equality between the amount of bonds outstand-
ing and the amount of collateral pledged will always be maintained
by the redemption of bonds or the addition of collateral, but as
every loan will be made on the amortization plan, the principal of
each mortgage will be reduced annually, thus effecting a continuing
increase in the “equity” or difference between loans and land values.
91536—17 3
Denominations.
Form.
Term.
Interest.
Security.
Joint liability.
Certification.
Safeguards.
Legal investments.
4 IFARM LOAN BONDS.
Each mortgage is guaranteed by a “Farm Loan Association,” of
which the borrower is a member and stockholder. On this stock
there is a double liability. Each association is required to buy stock
in the bank to the amount of 5 per cent of the loans to its members,
and this stock is held by the bank as security on the association’s
guaranties. Each bank will start business with assets of $750,000,
derived from the sale of its capital stock. This stock will increase
with each loan made, to the amount of 5 per cent of such loan, until
it reaches $1,500,000, after which the repayment of the $750,000
originally subscribed will begin, such repayment being concluded
when the aggregate capital reaches $3,000,000. Twenty-five per
cent of the net earnings must be carried to reserve account until that
account shall equal 20 per cent of the Outstanding capital, and 5 per
cent thereafter. The total issue of bonds is limited to 20 times the
capital stock of the issuing bank.
he 12 Federal land banks are jointly liable for interest payments
upon the bonds issued by any one of their number, and for such
portion of the principal as shall not be paid after the assets of the
issuing bank have been liquidated and distributed
Each bond is to contain on its face a certificate, signed by the
farm loan commissioner, that it “is issued under the authority of
the farm-loan act, has the approval in form and issue of the Federal
Farm Loan Board, and is legal and regular in all respects; * * *
that it is issued against collateral security of United States Govern-
ment bonds, or indorsed first mortgages on farm lands, at least equal
in amount to the bonds issued; and that all Federal land banks are
liable for the payment of each bond.”
The bonds will be engraved at Washington, by the Bureau of
Engraving and Printing, and the use of the Secret Service is author-
ized to protect them from counterfeiting.
They are made lawful investments for all fiduciary and trust funds
and security for all public deposits under the jurisdiction and control
of the Federal Government. They are already legal investments
under the laws of some of the States, for the funds of savings banks,
insurance companies, guardians, and trustees, and legislation is
pending to make them legal in most of the other States.
.*** * They are acceptable at par to secure postal savings deposits.
positaries.
Banks.
Exemption from tax-
ation.
Federal supervision.
They may be bought and sold by any member bank of the Federal
Reserve System.
They are expressly declared to be ‘‘instrumentalities of the Govern-
ment of the United States,” and as such exempt, both as to principal
and the income derived therefrom, from Federal, State, municipal,
and local taxation. *
The registrars, appraisers, and examiners are appointed by the
Federal Farm Loan Board, and the operations of both the farm loan
associations and the Federal land banks will be at all times subject
to the examination and supervision of the Board.
O