faction of the Federal Farm Loan Board all buildings, the value ot which was a factor in determining the amount of the loan. Insurance shall be made payable to the mortgagee as its interest may appear at time of loss, and, at the option of the mortgagor and subject to general regulations of the Federal Farm Loan Board, sums so received may be used to pay for reconstruction of the buildings destroyed. "Tenth. Every borrower who shall be granted a loan under the provisions of this act shall enter into an agreement, in form and under conditions to be prescribed by the Federal Farm Loan Board, that if the whole or any portion of his loan shall be expended for purposes other than those specified in his original application, or if the borrower shall be in default in respect to any condition or covenant of the mortgage, the whole of said loan shall, at the option of the mortgagee, become due and payable forthwith: Provided, that the borrower may use part of said loan to pay for his stock in the farm loan association, and the land bank holding such mortgage may permit said loan to be used for any purpose specified in subsection fourth of this section. "Eleventh. That no loan or the mortgage securing the same shall be impaired or invalidated by reason of the exercise of any power by any federal land bank or national farm loan association in excess of the powers herein granted or any limitations thereon. "Funds transmitted to farm loan associations by Federal land banks to be loaned to its members shall be in current funds, or farm loan bonds, at the option of the borrower." Powers of federal land banks. The powers of federal land banks are summarized in Sec. 13 of the law as follows: "Sec. 13. That every federal land bank shall have power, subject to the limitations and requirements of this act "First. To issue, subject to the approval of the Federal Farm Loan Board, and to sell farm loan bonds of the kinds authorized in this act, to buy the same for its own account, and to retire the same at or before maturity. "Second. To invest such funds as may be in its possession in the purchase of qualified first mortgages on farm lands situated within the federal land bank district within which it is organized or for which it is acting. "Third. To receive and to deposit in trust with the farm loan registrar for the district, to be by him held as collateral security for farm loan bonds, first mortgages upon farm land qualified under section 12 of this act, and to empower national farm loan associations, or duly authorized agents, to collect and immediately pay over to said land banks the dues, interest, amortization installments and other sums payable under the terms, conditions, and covenants of the mortgages and of the bonds secured thereby. "Fourth. To acquire and dispose of "(a) Such property, real or personal, as may be necessary or convenient for the transaction of its business, which, however, may be in part leased to others for revenue purposes. "(b) Parcels of land acquired in satisfaction of debts or purchased at sales under judgments, decrees, or mortgages held by it. But no such bank shall hold title and possession of any real estate purchased or acquired to secure any debt due to it, for a longer period than five years, except with the special approval of the Federal Farm Loan Board in writing. "Fifth. To deposit its securities, and its current funds, subject to check, with any member of the Federal Reserve System, and to receive interest on the same as may be agreed. "Sixth. To accept deposits of securities or of current funds from national farm loan associations holding its shares, but to pay no interest on such deposits. "Seventh. To borrow money, to give security therefor, and to pay interest thereon. "Eighth. To buy and sell United States bonds. "Ninth. To charge applicants for loans and borrowers, under rules and regulations promulgated by the Federal Farm Loan Board, reasonable fees not exceeding the actual cost of appraisal and determination of title. Legal fees and recording charges imposed by law. in the State where the land to be mortgaged is located may also be included in the preliminary costs of negotiating mortgage loans. The borrower may pay such fees and charges or he may arrange with the federal land bank making the loan to advance the same, in which case said expenses shall be made a part of the face of the loan and paid off in amortization payments. Such addition to the loan shall not be permitted to increase said loan above the limitations provided in section 12." Restrictions on federal land banks. The following restrictions which the law places on federal land banks are definitely set forth in Sec. 14. "Sec. 14. That no federal land bank shall have power "First. To accept deposits of current funds payable upon demand except from its own stockholders, or to transact any banking or other business not expressly authorized by the provisions of this act "Second. To loan on first mortgages except through national farm. loan associations as provided in section 7 and section 8 of this act, or through agents as provided in section 15. "Third. To accept any mortgages on real estate except first mortgages created subject to all limitations imposed by section 12 of this act, and those taken as additional security for existing loans. "Fourth. To issue or obligate itself for outstanding farm loan bonds in excess of twenty times the amount of its capital and surplus, or to receive from any national farm loan association additional mortgages when the principal remaining unpaid upon mortgages already received from such association shall exceed twenty times the amount of its capital stock owned by such association. "Fifth. To demand or receive, under any form or pretense, any commission or charge not specifically authorized in this act." Agents of federal land banks. After the act has been in effect for a year federal land banks are authorized to make loans on farm lands through agents approved by the Federal Farm Loan Board whenever 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 a 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. Helena, Montana. Des Moines, Iowa. .Redwood Falls, Minn.. . San Antonio, Texas . San Francisco, Calif. La Fayette, Ind.. .Topeka, Kansas. . Champaign, Ills. States Total Loans Closed to |