may purchase a bond or debenture of questionable security. But a security with a low rate of interest can not be sold in large quantities unless it is regarded as absolutely safe. In establishing land-credit institutions for the United States, "safety first" would be an excellent motto. In another chapter there will be discussed some of the ways, means, and methods by which bonds and debentures may be made secure. In the inauguration of a new land-credit system in the United States, bonds and debentures must be made secure. The farmer possesses the land which in itself is absolute security for the money which will be loaned to him. That security must not be vitiated, impaired, or deteriorated by the corporation - whatever may be its title or name brought into existence by the national government to collect and market the security the farmer presents. The farmer not the land bank is most deeply and vitally interested in the safety of the mortgage bonds issued. It has been demonstrated by European experience that the principle of unlimited liability is not essential to the safety of land securities. For many reasons, this feature would be objectionable to American farmers. Being unnecessary, it should not be adopted in this country. In many of the European countries, the provincial, State or imperial governments guarantee the payment of the bonds or debentures issued by the public land-credit institutions. Such guaranty has not been extended to private, joint-stock, profit-sharing, land-mortgage institutions. Without discussing here the question of government aid, the Federal government, in assuming the responsibility of creating national land-credit institutions, must, above all things else, see to it that the bonds or debentures issued by these institutions shall be securities about the safety of which there can be and will be no question. It would be a great mistake to assume that any system of land credit which possessed the six fundamental features, enumerated above, would be satisfactory. Other things are essential, without which our land-credit system will be comparatively a failure. It is not the main object of this volume to discuss propositions upon which there is no controversy. Rather the chief purpose is to elucidate, if possible, those points upon which there is disagreement. The succeeding chapters will be devoted to the discussion of other features and principles which are essential to the success of our land-credit system. CHAPTER IV THE COMMISSION BILL, THE SUB-COMMITTEE BILL AND THE SENATE COMMITTEE BILL THE next step is to get a clear idea of the provisions in the three "officially endorsed" bills, viz.: First. The Commission Bill. The Sub-committee Bill. Third. The Senate Committee Bill. First. The Commission Bill 1. It provides for the creation of a bureau of farm land banks in the Department of the Treasury, for the appointment of Commissioner of Farm Land Banks, gives the Commissioner, under the direction of the Secretary of the Treasury, supervision over farm land banks, and prescribes the duties of the Commissioner. 2. It authorizes the establishment of national farm land banks, by ten or more persons, with capital stock of not less than $100,000. 3. The national farm land banks are authorized to make loans on first-mortgage security on farm lands within the States where they are located, limited to 50 per cent. of the value of the land, to run for not more than thirty-five years, to be paid in annual or semi-annual amortization payments, if loan extends over a period of five years, and provides that loans shall be made only to enable the borrower to complete the purchase price of the lands mortgaged, to improve and equip such lands for agricultural purposes, and to pay debts secured by mortgages or deeds of trust on such lands. 4. Every national land bank is authorized to issue and sell national land bank bonds, secured by first mortgages in an amount equal at least to the face value of the national land bank bonds, limited in amount to fifteen times the amount of its capital stock and surplus. 5. The rate of interest charged on farm loans shall not exceed the rate of interest paid by the bank on national land bank bonds by more than 1 per cent. annually. 6. The charges of administration imposed upon borrowers shall not exceed an annual charge of 1 per cent. per annum upon the amount unpaid on a loan. 7. Every national farm land bank, its capital stock, surplus, and the income derived therefrom, and all notes, mortgages, deeds of trust held, and all national land bank bonds issued by such bank, shall be exempt from Federal, State, and local taxation, except taxes upon real estate. 8. Provision is made for existing land-mortgage associations and corporations to become national farm land banks. 9. The national land bank bonds are made available as security for the deposit of postal savings funds, as legal investment for time deposits of national banking associations, and for funds in District of Columbia savings banks, for trust funds and estates under charge of or administered by United States Courts, and as security for loans from national banking associations to national farm land banks, or to individuals to an amount aggregating not over 25 per cent. of the capital and surplus or to one-third the time deposits of the national banking association making such loan. The Commissioner of Farm Land Banks, with the approval of the Secretary of the Treasury, may withhold certain of the foregoing privileges from the banks of any State until the State has complied with certain requirements. 10. Provision is made for the appointment of examiners of national farm land banks, and for close supervision over their business. 11. The directors are authorized to declare dividends without limit, except (1) that no dividend shall be declared which will impair the capital stock of a bank or reduce the amount of capital stock and surplus of a bank to less than one-fifteenth of its outstanding national land bank bonds, and (2) that no dividend in excess of 6 per cent. per annum shall be declared by any bank until it shall have accumulated a surplus of at least 15 per cent. of its authorized capital. Special provisions are made for cooperative national farm land banks. 12. Every national farm land bank is prohibited from establishing branch banks, but is authorized with the approval of the Commissioner, to employ and maintain agencies throughout the State in which it operates, and for the sale of its bonds or for trading in the same, and may maintain sales agents or agencies outside of the State in which it operates. Second. The Sub-committee Bill The provisions of the Sub-committee Bill may be summarized as follows: 1. The Federal Reserve Board is authorized to appoint a farm loan commissioner, and the Federal Reserve Board is given the supervisory power over the Commissioner and the system of land banks created by the bill. 2. The bill authorizes the incorporation of national farm loan associations, in a county or group of contiguous counties, prescribed by the Commissioner of Farm Loans, with capital stock of not less than $10,000, divided into shares of $25 each. 3. The national farm loan associations are authorized to make loans only to persons who are the owners of at least one share ($25) of the association's capital stock, and the stock owned by a borrower must be in amount not less than 5 per cent. of the amount of the loan; loans shall not be made to any person who is not at the time or shortly to |