value thereof, in addition to the amount paid in and represented by their shares."

For instance, suppose you hold 10 shares. amounting to $50. If the association got into financial difficulties, you might lose some part or all of the $50 you paid in for your shares. If all the land of the members were washed away or blew up, and all the members failed to meet their payments—which is all quite unthinkable—you might be called upon for as much as $50 more. But you could not be assessed one penny in excess of $100, or double the amount you originally put in for shares. This is the same double liability that inheres to shares of national banks under the national banking act.

It should be almost impossible, under the strict supervision which the new system provides, for any national farm loan association to get so deeply involved as to cost the shareholders any part of the money they paid in for shares. Other than as above explained, there is no liability upon the part of the member in any way, shape or manner.

Remoteness of Possible Loss. It may be further pointed out to the borrowing farmer:

Even if some misfortune of nature or man did befall the national farm loan association of which you are a member, to make up for which it took some part or all of the $50 you paid in originally for your shares, or may even have called upon you for some part or all of $50 more, your liability is strictly limited thereto. For in the event of such misfortune, your own farm, even though mortgaged to the association, is not further involved in any way.

In the instance cited, you paid $50 for 10 shares because you wanted to borrow $1,000 on a long-time mortgage on your farm worth $2,000 or more. Now if some calamity killed all the other members and even washed away their land, but left you alive and your property intact, even in that almost unimaginable event, you could be called to pay up only $50 more than the $50 you paid in originally for your shares. In other words, even in such a case, your liability is strictly limited to $100.

Now, suppose that at the time this quite impossible calamity occurred, there was balance due from you of $500 on your mortgage. The mortgage, though indorsed by your local association, is in fact held by the

federal land bank, to which you must continue to pay the installments as they come due under the contract. As long as you do that, your mortgage can never be called or foreclosed. And no matter what happens to other members or to their property, your farm, your home, all the real estate covered by your mortgage, is free from any liability whatever to the other members or to the holders of securities for which the various mortgages are held as collateral by the federal land bank. The extra $50 on your shares measures the utmost limit of your liability, except the balance owned by yourself upon your own note and mortgage.

Protecting the Investor. On the other hand, experience having shown that a first mortgage on improved farms is so safe, the investor in bonds secured by such mortgages is still further insured upon their principal and income, by reason of the fact that the national farm loan association of which you are a member has indorsed your note and mortgage, thus guaranteeing your debt to the extent of the entire paid in capital stock of the association, plus as much more for which you and each of the other members are bound pro rata

as above stated-but individually and each for himself.

Protection to Lenders. Thus, while each farmer who is a member of the local branch has his liability thereto strictly limited as above described, yet at the same time, the investor has the further insurance of the local association's backing, as well as the guarantee of the land bank. And the latter is still further insured by the joint liability of all twelve federal land banks.

In this simple but efficient way, each farmer's liability is strictly limited, yet each investor's security is absolutely insured beyond a peradventure.

CHAPTER FOUR

NATIONAL FARM LOAN ASSOCIATIONS

NE

EXT to the individual farm and farmer, the federal farm loan system is based fundamentally upon local units composed of ten or more farmer borrowers. The act authorizes such farmers to organize their own club through which to borrow money at reasonable rates on long-time and easy terms of repayment upon the security of first farm mortgages.

Such a club the act denominates a "national farm loan association." In common language, it will be called a "local association," or still more briefly, a "local" of the federal land bank of which it is a member.

How Composed. Any farm loan association, to quote the statute, "may be organized by persons desiring to borrow money on farm mortgage security under the terms of this act."

"Ten or more natural persons who are the owners, or are about to become owners, of farm land qualified as security for a mortgage