BANKS FOR COOPERATIVES

A central bank for cooperatives and 12 regional banks for cooperatives have been organized and chartered by the Governor of the Farm Credit Administration under the Farm Credit Act of 1933. The initial capital stock of the central bank for cooperatives, amounting to $50,000,000, was subscribed and paid for by the Governor of the Farm Credit Administration on behalf of the United States. The amount of the capital stock may be changed by the Governor as required to meet the credit needs of eligible borrowers.

The capital stock of each regional bank for cooperatives is such as the Governor determines is needed to meet the credit needs of borrowers in the district eligible to borrow under the act.

QUESTIONS AND ANSWERS

1. Q. What organizations under the Farm Credit Administration lend money to farmers' cooperatives?

A. Federal intermediate credit banks and banks for cooperatives. There are 13 of the latter banks provided for in the Farm Credit Act of 1933-a central bank for cooperatives at Washington, D.C., and 12 banks for cooperatives located in the 12 Federal land-bank cities.

2. Q. Is the system which involves the banks for cooperatives functioning so that local, as well as regional and national cooperatives, may now obtain loans?

A. Yes. The central bank for cooperatives makes loans to eligible borrowers serving more than one land-bank district, or seeking a line of credit in excess of $300,000. The regional banks for cooperatives make loans to eligible borrowers serving not more than one land-bank district and seeking a line of credit of not exceeding $300,000. With the approval of the cooperative bank commissioner, the regional banks may make loans to eligible borrowers serving not more than one land-bank district and seeking a line of credit not exceeding $500,000.

3. Q. What kind of loans are made to cooperative associations by these banks?

A. Three kinds; namely, physical facility loans, operating capital loans and effective merchandising loans.

Physical facility loans may be made for the construction or acquisition by purchase or lease (or for refinancing the cost of such construction or acquisition) of physical marketing facilities for preparing, handling, storing, processing, or merchandising agricultural commodities or their food products, but such loans may not be made to purchasing associations.

4. Q. For what period may loans be made?

A. The duration of any loan depends upon the circumstances surrounding the particular case. As a general rule, physical facility loans are repaid within a period of from 5 to 10 years and effective merchandising loans or operating loans are repaid within a period of 1 year, or at the end of the marketing season.

5. Q. Do the banks for cooperatives make loans to cooperative associations to enable them to make advances to their members at the time of delivery of agricultural commodities, taking as security for such loans a lien on the commodity?

A. No. Such loans are made by the Federal intermediate-credit banks.

6. Q. What rate of interest do the banks for cooperatives charge?

A. The present administrative order relating to interest fixes the rate on facility loans at 42 percent and on others at 4 percent. These rates are fixed from time to time in accordance with the statute, but may not be less than 3 percent or more than 6.

7. Q. Do borrowing cooperatives participate in the ownership and control of the banks so that they may help in determining the lending policies?

A. Yes. When a loan is granted by any of these banks, the borrowing cooperative association is required by law to purchase one share of stock, at a par value of not to exceed $100 for each $2,000 or fraction thereof of the amount of loan. When the loan is repaid, the stock held by the borrowing association is retired and canceled, and the bank pays the association for such stock at its fair book value not to exceed the purchase price.

8. Q. If the borrowing cooperative association does not have funds with which to subscribe and pay for stock in the cooperative bank, is there any provision whereby such association may borrow funds to pay for such stock?

A. Yes. The stock subscription may be included in the amount

9. Q. What is the source of the funds loaned by the banks for cooperatives?

A. Money from the revolving fund created under the Agricultural Marketing Act, formerly administered by the Federal Farm Board, is being used to supply the initial capital needed in establishing the banks for cooperatives. The amount of initial capital required by each regional bank for cooperatives depends upon the needs of the cooperatives it serves.

PRODUCTION CREDIT CORPORATIONS

AND ASSOCIATIONS

A permanent production credit system for agriculture, cooperative in form, that eventually may be owned, controlled, and operated by farmers has been organized in the 12 Federal land bank districts.

In each district production credit is being made available through the joint action of (1) local production credit associations; (2) the production credit corporation; and (3) the Federal intermediate credit bank.

QUESTIONS AND ANSWERS

1. Q. How is production credit being made available to farmers? A. Production credit is being made available to farmers through the combined action of local production credit associations, the production credit corporation, and the Federal intermediate credit bank in each land bank district.

2. Q. What is a production credit association?

A. A production credit association is an organization of farmer borrowers serving a local territory, generally consisting of several counties. It is cooperative in nature. Loans are made to farmers by endorsing their notes and discounting them with the Federal intermediate credit bank in the district.

3. Q. For what purposes may the farmer borrow?

A. He may borrow for general agricultural purposes, such as the producing and harvesting of crops; the breeding, raising, and fattening of livestock; and the production of poultry and livestock products.

4. Q. How is a production credit association organized?

A. The production credit corporation of the district helps organize associations and provides most of their capital. With the consent of the production credit corporation, 10 or more farmers eligible to borrow may organize to form an association. However, it is desirable that a larger number of farmers organize so that the entire territory and the various lines of agriculture and livestock production to be financed through the association will be represented.

In organizing an association, interested farmers should apply for information to the production credit corporation of their district.