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TREASURY DEPARTMENT
FEDERAL FARM LOAN BUREAU

Circular No. 4

The

Federal Farm Loan Act




ISSUED BY THE

FEDERAL FARM LOAN BOARD

October 13, 1916

W
ASHINGTON
GOVERNMENT PRINTING OFFICE
1916

FEDERAL FARM LOAN BOARD.
WILLIAM G. McADOO, Chairman (ex officio).
GEORGE W. NORRIS, Farm Jjoan Commissioner.
CHARLES

'E .

LOBDELL.

W. S. A. SMITH.
HERBERT QUICK.
W. W . FLANNAGAN, Secretary.

N o t e . —This edition of the Federal Farm Loan Act is issued by the Federal Farm
Loan Board from its organization expense fund, in order to fneet the enormous
demand for information on the subject of rural credits which can not be met from
the authorized public document supply.
It is republished as Circular No. 4 of the farm-loan series. Not only this circular,
but all others issued by this Board, may be had free of charge by addressing the
Federal Farm Loan Bureau, Treasury Department, Washington, D. C.
ii

64744*—16




[ P u b l i c —No. 1 5 8 — 6 4 t h C o n g r e s s .]

[S. 298G.]
An Act To provide capital for agricultural development, to create
standard forms of investment based upon farm mortgage, to equalize rates oi interest
upon farm loans, to furnish, a market for United States bonds, to create Government
depositaries and financial agents for the United States, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Conqress assembled, That the short title

of this Act shall he “ The Federal Farm Loan Act.” Its administra­
tion shall be under the direction and control of the Federal Farm
Loan Board hereinafter created.
D E F IN IT IO N S .

S e c . 2 . That wherever the term “ first mortgage” is u sed in this
Act it shall be held to include such classes of first liens on farm lands
as shall be approved by the Federal Farm Loan Board, and the
credit instruments secured thereby. The term “ farm loan bonds”
shall be held to include all bonds secured bv collateral deposited with
a farm loan registrar under the terms of this Act; they shall be dis­
tinguished by tne addition of the words “ Federal,” or “ joint stock/’
astne case may be.

FEDERAL FARM LOAN BOARD.

Sec. 3. That there shall be established at the seat of government
in the Department of the Treasury a bureau charged with the execu­
tion of this Act and of all Acts amendatory thereof, to be known as
the Federal Farm Loan Bureau, under the general supervision of a
Federal Farm Loan Board.
Said Federal Farm Loan Board shall consist of five members,
including the Secretary of the Treasury, who shall be a member and
chairman ex officio, and four members to be appointed by the Presi­
dent of the United States, by and with the advice and consent of the
Senate. Of the four members to be appointed by the President, not
more than two shall be appointed from one political party, and all
four of said members shall be citizens of the United States and shall
devote their entire time to the business of the Federal Farm Loan
Board; they shall receive an annual salarv of $10,000 payable
monthly, together with actual necessary traveling expenses.
One of the members to be appointed by the President shall be desig­
nated by him to serve for two years, one for four years, one for six
years, and one for eight years, and thereafter eacK member so ap­
pointed shall serve for a term of eight years, unless sooner removed
ior cause by the President. One of the members shall be designated
by the President as the Farm Loan Commissioner, who shall oe the
active executive officer of said board. Each member of the Federal
Farm Loan Board shall within fifteen days after notice of his appoint*
ment take and subscribe to the oath of office.




2

(Pub. 158.]

The first meeting of the Federal Farm Loan Board shall be held in
Washington as soon as may be after the passage of this Act, at a
date ana placebo be.fixed by the Secretary of the Treasury.
No member of the Federal Farm Loan Board shall, during his con­
tinuance in office, be an officer or director of any other institution,
association, or partnership engaged in banking, or in the business of
making land mortgage loans or selling land mortgages. Before enter­
ing upon his duties as a member of the Federal Farm Loan Board
each member shall certify under oath to the President that he is
eligible under this section.
The President shall have the power, by and with the advice and
consent of the Senate, to fill any vacancy occurring in the member­
ship of the Federal Farm Loan Board; if such vacancy shall be filled
during the recess of the Senate a commission shall be granted which
shall expire at the end of the next session.
The Federal Farm Loan Board shall appoint a farm loan registrar
in each land bank district to receive applications for issues of farm
loan bonds and to perform such other services as are prescribed by
this Act. It shall also appoint one or more land bank appraisers for
each land bank district and as many land bank examiners as it shall
deem necessary. Farm loan registrars, land bank appraisers, and
land bank examiners appointed under thi3 section shall be public
officials and shall, during their continuance in office, have no connec­
tion with or interest in any other institution, association, or partner­
ship engaged in banking or in the business of making land mortgage
loans'or selling land mortgages: Provided, That this limitation shall
-not apply to persons employed by the board temporarily to do special
^work.
The salaries and expenses of the Federal Farm Loan Board, and
of farm loan registrars and examiners authorized under this section,
shall be paid by the United States. Land bank appraisers shall
receive such compensation as the Federal Farm Loan Board shall
fix, and shall be paid by the Federal land banks and the joint stock
land banks which they serve, in such proportion and in such manner
as the Federal Farm Loan Board shall order.
The Federal Farm Loan Board shall be authorized and empowered
to employ such attorneys, experts, assistants, clerks, laborers, and
other employees as it may deem necessary to conduct the business of
said board. All salaries and fees authorized in this section and not
otherwise provided for shall be fixed in advance by said board and
shall be paid in the same manner as the salaries of the Federal Farm
Loan Board. All such attorneys, experts, assistants, clerks, laborers,
and other employees, and all registrars, examiners, and appraisers
shall be appointed without regard to the provisions of the Act of
January sixteenth, eighteen hundred and eighty-three (volume
twenty-two, United States Statutes at Large, page four hundred and
three), and amendments thereto, or any nile or regulation made in
pursuance thereof: Provided, That nothing herein shall prevent the
President from placing said employees in the classified service.
Every Federal land bank shall semiannually submit to the Federal
Farm Loan Board a schedule showing the salaries or rates of compen­
sation paid to its officers and employees.
The Federal Farm Loan Board shall annually make a full report of
its operations to the Speaker of the House of Representatives, who
shall cause the same to be printed for the information of the Congress.



{P b 18
u 5.]

3

The Federal Farm Loan Board shall from time to time require
examinations and reports of condition of all land banks established
under the provisions of this Act and shall publish consolidated state­
ments of the results thereof. It shall cause to be made appraisals of
farm lands as provided by this Act, and shall prepare and publish
amortization tames which shall be used by national farm loan associa­
tions and land banks organized under this Act.
The Federal Farm Loan Board shall prescribe a form for the state­
ment of condition of national farm loan associations and land banks
under its supervision, which shall be filled out quarterly by each such
association or bank and transmitted to said board.
It shall be the duty of the Federal Farm Loan Board to prepare from
time to time bulletins setting forth the principal features of this Act
and through the Department of Agriculture or otherwise to distribute
the same, particularly to the press, to agricultural journals, and to
farmers’ organizations; to prepare and distribute in the same manner
circulars setting forth the principles and advantages of amortized farm
. loans and the protection afforded debtors under this Act, instructing
farmers how to organize and conduct farm loan associations, and
advising investors of the merits and advantages of farm loan bonds;
and to disseminate in its discretion information for the further instruc­
tion of farmers regarding the methods and principles of cooperative
credit and organization. Said board is hereby authorized to use a
reasonable portion of the organization fund provided in section thirtythree of this Act for the objects specified m this paragraph, and is
instructed to lay before the Congress at each session its recommenda­
tions for further appropriations to carry out said objects,
FEDERAL LAND BANKS.
Sec. 4. That as soon as practicable the Federal Farm Loan Board
shall divide the continental United States, excluding Alaska, into
twelve districts, which shall be known as Federal land Dank districts,
and may be designated by number. Said districts shall be appor­
tioned with due regard to the farm loan needs of the country, but no
such district shall contain a fractional part of any State. The bounda­
ries thereof may be readjusted from tune to time in the discretion of
said board.
The Federal Farm Loan Board shall establish in each Federal land
bank district a Federal land bank, with its principal office located in
such city within the district as said board shall designate. Each
Federal land bank shall include in its title the name of the city in
which it is located. Subject to the approval of the Federal Farm
Loan Board, any Federal land bank may establish branches within the
land bank district
Each Federal land bank shall be temporarily managed by five
directors appointed bv the Federal Farm Loan Board. Said directors
shall t>e citizens of the United States and residents of the district.
Thev shall each give a surety bond, the premium on which shtfH be
paid from the funds of the bank. They snail receive such compensa­
tion as the Federal Farm Loan Board shall fix. They shall choose
from their number, by majority vote, a president, a vice president, a




4

(Fro. it&i

secretanr and a treasurer. They are further authorized and em­
powered to employ such attorneys, experts, assistants, clerks,
laborers, and other employees as they may deem necessary, and to fix
their compensation, subject to the approval of the Federal Farm Loan
Board.
Said temporary directors shall, under their hands, forthwith make
an organization certificate, which shall specifically state:
First. The name assumed by such bank.
Second. The district within which its operations are to be carried
on, and the particular city in which its principal office is to be located.
Third. The amount of capital stock and the number of shares into
which the same is to be divided: Provided, That every Federal land
bank organized under this Act shall by its articles of association permit
an increase of its capital stock from time to time for the purpose of
providing for the issue of shares to national farm loan associations and
stockholders who may secure loans through agents of Federal land
banks in accordance with the provisions o f this Act.
Fourth. The fact that the certificate is made to enable such persons
to avail themselves of the advantages of this Act. The organization
certificate shall be acknowledged before a judge or clerk of some court
of record or notary public, and shall be, together with the acknowl­
edgment thereof, authenticated by the seal of such court or notary,
transmitted to the Farm Loan Commissioner, who shall record and
carefully preserve the same in his office, where it shall be at all times
open to public inspection.
The Federal Farm Loan Board is authorized to direct such changes
in or additions to any such organization certificate, not inconsistent
with this Act, as it may deem necessary or expedient.
Upon duly making and filing such organization certificate the bank
shall become, as from the date of the execution of its organization
certificate, a body corporate, and as such, and in the name designated
in the organization certificate, it shall hare power—
First. To adopt and use a corporate seal.
Second. To have succession until it is dissolved by Act of Congress
or under the provisions of this Act.
Third. To make contracts.
Fourth. To sue and be sued, complain, interplead, and defend, in
any court of law or equity, as fully as natural persons.
Fifth. To elect or appoint directors, and by its board of directors
to elect a president and a vice president, appoint a secretary and a
treasurer and other officers and employees, define their duties, require
bonds of them, and fix the penalty thereof; by action of its board of
directors dismiss such officers and employees, or any of them, at pleas­
ure and appoint others to fill their places.
Sixth. To prescribe, by its board of directors, subject to the super­
vision and regulation of the Federal Farm Loan Board, by-laws not
inconsistent with law, regulating the manner in which its stock shall
be transferred, its directors elected, its officers elected or appointed,
its property transferred, its general business conducted, and tne priv­
ileges granted to it by law exercised and enjoyed.
Seventh. To exercise, by its board of directors or duly authorized
officers or agents, subject to law, all such incidental powers as shall be
necessary to carry on the business herein described.




(P ro. 158.]

5

After the subscriptions to stock in any Federal land hank by
national farm loan associations, hereinafter authorized, shall have
reached the sum of $100,000, the officers and directors of said land
bank shall be chosen as herein provided and shall, upon becoming
duly qualified, take over the management of said land bank from the
temporary officers selected under this section.
The board of directors of every Federal land bank shall be selected
as hereinafter specified and shall consist of nine members, each hold­
ing office for three years. Six of said directors shall be known as local
directors, and shall be chosen by and be representative of national
farm loan associations; and the remaining three directors shall be
known as district directors,' and shall be appointed by the Federal
Farm Loan Board and represent the public interest. •
#At least two months before each election the Farm Loan Commis­
sioner shall notify each national farm loan association in writing that
such election is to be held, giving the number of directors to be elected
for its district, and requesting each association to nominate one can­
didate for each director to be elected. Within ten days of the receipt
of such notice each association shall forward its nominations to said
Farm Loan Commissioner. Said commissioner shall prepare a list of
candidates for local directors consisting of the twenty persons secur­
ing the highest number of votes from national farm loan associations
making such nominations.
' At least one month before said election said Farm Loan Commis­
sioner shall mail to each national farm loan association the list of
candidates. The directors of each national farm loan association shall
cast the vote of said association for as many candidates on said list
as there are vacancies to be filled, and shall forward said vote to the
Farm Loan Commissioner within ten days after said list of candidates
is received by them. The candidates receiving the highest number
of votes shall be elected as local directors. In case of a tie the Farm
Loan Commissioner shall determine the choice.
The Federal Farm Loan Board shall designate one of the district
directors to serve for three years and to act as chairman of the board
of directors. It shall designate one of said directors to serve for a
term of two years and one to serve for a term of one year. After the
first appointments each district director shall be appointed for a term
of three years.
At the first regular meeting of the board of directors of each Federal
land bank it shall be the duty of the local directors to designate two
of the local directors whose term of office shall expire in one year from
the date of such meeting, two whose term of oflice shall expire in two
years from said date, ana two whose term of office shall expire in three
rears from said date. ' Thereafter every local director of a Federal
and bank chosen as hereinbefore provided shall hold office for a term
of three years. Vacancies that may occur in the board of directors
shall be filled for the unexpired term in the manner provided for the
original selection of such directors.
Directors of Federal land banks shall have been for at least two
years residents of the district for which they are appointed or elected,
and at least cne district director shall be experienced in practical
fanning and actually engaged at the time of his appointment in farm­
ing operations within the district. No director of a Federal land bank
shall, during his continuance in office, act as an officer, director, or

J




6

[P t. iee.j
o

employee of any other institution, association, or partnership engaged
in banking or in the business of making or selling land mortgage loans.
Directors of Federal land,banks shall receive, in addition to any
compensation otherwise provided, a reasonable allowance for neces­
sary expenses in attending meetings bf their respective boards, to be
paid by the respective Federal land banks. Any compensation that
may be provided by boards of directors of Federal land banks for
directors, officers, or employees shall be subject to the approval of the
Federal Farm Loan Board.
CAPITAL STOCK OF FEDERAL LAND BANKS.

Sec. 5. Tlmt every Federal land bank shall have, before begin­
ning business, a subscribed capital of not less than $750,000. The
Federal Farm Loan Board is authorized to prescribe the times and
conditions of the payment of subscriptions to capital stock, to reject
any subscription in its discretion, ana to require subscribers to furnish
adequate security for the payment thereof.
The capital stock of each Federal land bank shall be divided into
shares of $5 each, and may be subscribed for and held by any indi­
vidual, firm, or corporation, or by the Government of any State or of
the United States.
Stock held by national farm loan associations shall not be trans­
ferred or hypothecated, and the certificates therefor shall so state.
Stock owned by-the Government of the United States in Federal
land banks shall receive no dividends, but all other stock shall share
in dividend distributions without preference. Each national farm
loan association and the Government of the United States shall be
entitled to one vote for each share of stock held by it in deciding
all auestions at meetings of shareholders, and no other shareholder
shall be permitted to vote. Stock owned by the United States shall
be voted by the Farm Loan Commissioner, as directed by the Federal
Farm Loan Board.
It shall be the duty of the Federal Farm Loan Board, as soon as
practicable after the passage of this Act, to open books of subscrip­
tion for the capital stock of a Federal land Dank in each Federal
land bank district. If within thirty days after the opening of said
books any part of the minimum capitalization of $750,000 herein
prescribed for Federal land banks shall remain unsubscribed, it shall
be the duty of the Secretary of the Treasury to subscribe the-balance
thereof on behalf of the United States, said subscription to be sub­
ject to call in whole or in part by. the board of directors of said land
bank upon thirty days’ notice with the approval of the Federal
Farm Loan Board; and the Secretary of the Treasury is hereby
authorized and directed to take out shares corresponding to the
unsubscribed balauce as called, and to pay foj the same out of any
moneys in the Treasury not otherwise appropriated. Thereafter no
stock shall be issued except as hereinafter provided.
After the subscriptions to capital stock by national farm loan
associations shall amount to $750,000 in any Federal land bank, said
bank shall apply semiannually to the payment and retirement of the
shares of stock which were issued to represent the subscriptions to the
original capital twenty-five per centum of all sums thereafter sub­




IPub. 188.]

7

scribed to capital stock until all such original capital stock is retired
at par.
At least twenty-five per centum of that part of the capital of any
Federal land bank for which stock is outstanding in the name of
national farm loan associations shall be held in quick assets, and
may consist of cash in the vaults of said land bank, or in deposits in
member banks of the Federal reserve system, or in readily marketable
securities which are approved under rules and regulations of the
Federal Farm Loan Board: Provided, That not less than five per
centum of such capital shall be invested in United States Govern*
ment bonds.
GOVERNMENT DEPOSITARIES.
S e c . 6. That all Federal land banks and joint stock la n d ba n k s
organized under this Act, when designated for that purpose b y the
Secretary of the Treasury, shall be depositaries of public money,
except receipts from customs, under such regulations as m a y b e
described by said Secretary; and they may also be employed as
inancial agents of the Government; ana they shall perform ail such
reasonable duties, as depositaries of public money and financial
agents of the Government, as may be required of them. And the
Secretary of the Treasury shall require of the Federal land banks
and joint stock land banks thus designated satisfactory security,
by the deposit of United States bonds or otherwise, for the safe­
keeping and prompt jpayment of the public money deposited with
them, and for the faithful performance of their duties as financial
agents of tho Government. No Government funds deposited under
the provisions of this section shall be invested in mortgage loans
or farm loan bonds./

}

NATIONAL FARM LOAN ASSOCIATIONS.
S e c . 7. That corporations, to be known as national farm loa n
associations, may be organized by persons desiring to borrow money
on farm mortgage security under the terms of. this Act. Such per­
sons shall enter into articles of association which shall specify in
general terms the object for which the association is formed and tho
territory within which its operations are to be carried on, and which
may contain any other provision, not inconsistent with law, which
the association may see nt to adopt for the regulation of its business
and the conduct of its affairs. Said articles shall bo signed by the
persons uniting to form the association, and a copy thereof shall be
forwarded to the Federal land b a n k for the district, to be filed and
preserved in its office.
Every national farm loan association shall elect, in the manner
prescribed for the election of directors of national banking associa­
tions, a board of not less than five directors, who shall hold office for
the same period as directors of national banking associations. It
shall be the duty of said board of directors to cheose in such manner
as they may prefer a secretary-treasurer, who shall receive such
compensation as said board of directors shall determine. The
board of directors shall elect a president, a vice president, and a loan
committee of three members.




8

p ro . in.)

Hie directors and all officers except the seeretary-treasurer shall
serve without compensation, unless tne payment of salaries to them
shall be approved by the Federal Farm Loan Board. All officers
and directors except the secrctary-treasurer shall, during their term
of office, be bona fide residents of the territory within which the
association is authorized to do business, and shall be shareholders
of the association.
It shall be the duty of the secretary-treasurer of every national
farm loan association to act as custodian of its funds and to deposit
the same in such bank as the board of directors may designate, to pay
over to borrowers all sums received for their account from the Federal
land bank upon first mortgage as in this Act prescribed, and to meet
all other obligations of the association, subject to the orders of the
board of directors and in accordance with the by-laws of the associa­
tion. It shall be the duty of the secretary-treasurer, acting under
the direction of the national farm loan association, to collect, receipt
for, and transmit to the Federal land bank payments of interest,
amortization installments, or principal arising out of loans made
through the association. He shall be the custodian of the securities,
records, papers, certificates of stock, and all documents relating to or
bearing upon the conduct of the affairs of the association. He shall
furnish a suitable surety bond to be prescribed and approved by the
Federal Farm Loan Board for the proper performance of the duties im­
posed upon him under this Act, which snail cover prompt collection
and transmission of funds. He shall make a quarterly report to the
Federal Farm Loan Board upon forms to be provided for that purpose.
Upon request from said board said secretary-treasurcr shall furnish
information regarding the condition of the national farm loan asso­
ciation for which he is acting, and he shall carry'out all duly author­
ized orders of said board. He shall assure himself from time to time
that the loans made through the national farm loan association of
which he is an officer are applied to the purposes set forth in the
application of the borrower as approved, arid shall forthwith report
to the land bank of the district any failure of any borrower to comply
with the terms of his application or mortgage. He shall also ascer­
tain and report to said bank the amount of any delinquent taxes on
land mortgaged to said bank and the name of the delinquent.
The reasonable expenses of the secretary-treasurcr, the loan com­
mittee, and other officers and agents of national farm loan associa­
tions, and the salary of the secretary-treasurer, shall be paid from the
general funds of the association, and the board of directors is author­
ized to set aside such sums as it shall deem requisite for that purpose
and for other expenses of said association. When no such funds are
available, the board of directors may levy an assessment on members
in proportion to the amount of stock held by each, which may be
repaid as soon as funds are available, or it may secure an advance
from the Federal land bank of the district, to be repaid with interest
at the rate of six per centum per annum, from dividends belonging
to said association. , Said Federal land bank is hereby authorized to
make such advance and to deduct such repayment.
Ten or more natural persons who are the owners, or about to
become the owners, of farm land qualified as security for a mortgage
loan under section twelve of this Act, may unite to form a national




(PVB. 158.]

9

farm loan association. They shall organize subject to the require­
ments and the conditions specified in this section and in section four
of thi9 Act, so far as the same may be applicable: Provided, That
the board of directors may consist of five members only, and instead
of a secretary and a treasurer there shall be a secretary-treasurer, who
need not be a shareholder of the association.
When the articles of association are forwarded to the Federal land
bank of the district as provided in this section, they shall be accom­
panied by the written report of the loan committee as required in
section ten of this Act, and by an affidavit stating that each of the
subscribers is the owner, or is about to become the owner, of farm
land qualified under section twelve of this Act as the basis of a mort­
gage loan; that the loan desired by each person is not more than
$10,000, nor less than $100, and that the aggregate of the desired
loans is not less than $20,000; that said affidavit is accompanied by
a subscription to stock in the Federal land bank equal .to five per
centum of the aggregate sum desired on mortgage loans; and that a
temporary organization of said association has been formed by the
election of a board of directors, a loan committee! and a secretarytreasurer who subscribes to said affidavit, giving his residence and
post office address.
Upon receipt of such articles of association, with the accompanying
affidavit and stock subscription, the directors of said Federal land
bank shall send an appraiser to investigate the solvency and character
of the applicants ana the value of theirlands, and shall then determine
whether m their judgment a charter should be granted to such asso­
ciation. They shall forward such articles of association and the
accompanying affidavit to the Federal Farm Loan Board with their
recommendation. If said recommendation is unfavorable, the charter
shall be refused.
If said recommendation is favorable, the Federal Farm Loan Board
shall thereupon grant a charter to the applicants therefor, designat­
ing the territory in which such association may make loans, and
shall forward said charter to said applicants through said Federal
land bank: Provided, That said Federal Farm Loan Board may for
good cause shown in any case refuse to grant a charter.
Upon receipt of its charter such national farm loan association
shall be authorized and empowered to receive from the Federal land
bank of the district sums to be loaned to its members under the terms
and conditions of this Act.
Whenever any national farm loan association shall desire to secure
for any member a loan on first mortgage from the Federal land bank
of its district it shall subscribe for capital stock of said land bank
to the amount of five per centum of such loan, such subscription to
be paid in cash upon the granting of the loan by said land bank.
Such capital stock shall be held by said land bank as collateral
security for the payment* of said loan, but said association shall be
paid any dividends accruing and payable on said capital stock whild
it is outstanding. Such stock may, m the discretion of the directors,
and with the approval of the Federal Farm Loan Board, be paid oft
at par and retired, and it shall be so paid off and retired upon full
payment of the mortgage loan. In such case the national farm loan
association shall pay on at par and retire the corresponding shares
of its stock which were issued when said land bank stock was issued.




10

[P B
U .ltt.1

The capital stock of a Federal land bank shall not be reduced to an
amount less than five per centum of the principal of the outstanding
farm loan bonds issued by it.
CAPITAL STOCK OF NATIONAL FARM LOAN ASSOCIATIONS.
S e c . 8. TTiat th e shares in n a tion a l fa rm lo a n a ssocia tion s sh all b e
o f th e p a r va lu e o f $5 each .

Every shareholder shall be entitled to one vote on each share of
stock held by him at all elections of directors and in deciding all
questions at meetings of shareholders: Provided, That the maximum
number of votes which may be cast by any one shareholder shall be
twenty.
No persons but borrowers on farm land mortgages shall be mem­
bers or shareholders of national farm loan associations. Any person
desiring to borrow on iarm land tnortgage through a national farm
loan association shall make application for membership and shall
subscribe for shares of stock in such farm loan association to an
amount equal to five per centum of the face of the desired loan, said
subscription to be paid in cash upon the granting of the loan. If the
application for membership i9 accepted and the loan is granted, tht
applicant shall, upon full payment therefor, become the owner of
one share of capital stock m said loan association for each $100 of
the face of his loan, or any major fractional part thereof. Said capital
stock shall be paid off at par and retired upon full payment of said
loan. Said capital stock shall be held by said association as collateral
security for the payment of said loan, but said borrower shall be
paid any dividends accruing and payable on said capital stock while
it is outstanding.
Every national farm loan association formed under this Act shall
by its articles of association provide for an increase of its capital
stock from time to time for the purpose of securing additional loans
for its members and providing lor the issue of shares to borrowers
in accordance with the provisions of this Act. Such increases shall
be included in the quarterly reports to the Federal Farm Loan Board.
NATIONAL FARM LOAN ASSOCIATIONS.— SPECIAL PROVISIONS.
S ec. 9 . That any person, whose application for membership is
accepted by a national farm loan association shall be entitled to
borrow money on farm land mortgage upon filing*his application in
accordance with section eight and otherwise complying with the
terms of this Act whenever the Federal land bank of the district has
funds available for that purpose, unless said land bank or the Federal
Farm Loan Board shall, in its discretion, otherwise determine.
Any person desiring to secure a loan through a national farm loan
association under the provisions of this Act may, at his option, borrow
from the Federal lana bank through such association tne sum neces­
sary to pay for shares of stock subscribed for by him in the national
farm loan association, such sum to be made a part of the face of the
loan and paid off in amortization payments: Provided, however, That
such addition to the loan shall not be permitted to increase said
loan above the limitation imposed in subsection fifth of section
twelve.




Cto. 1 8
P 5 .]

11

Subject to rules and regulations proscribed by the Federal Farm
Loan Board, any national farm loan association shall be entitled to
retain as a commission from each interest payment on any loan
indorsed by it an amount to be determined by said board not to
exceed one-eighth of one per centum semiannually upon the unpaid
rincipal of said loan, any amounts so retained as commissions to
e deducted from dividends payable to sucli farm loan association
bv the Federal land bank, and to make application to the land bank
of the district for loans not exceeding in the aggregate one-fourth of
its total stock holdings in said land bank. The Federal land banks
shall have power to make sucli loans to associations applying therefor
and to charge interest at a rate not exceeding six per centum per
annum.
Shareholders of every >national farm loan association shall be held
individually responsible, equally and ratably, and not one for an­
other, for all contracts, debts, and engagements of such association to
the extent of the amount of stock owned by them at the par value
thereof, in addition to the amount paid in and represented by their
shares.
After a charter has been granted to a national farm loan association,
any natural person who is the owner, or about to become the owner, of
farm land qualified under section twelve of this Act as the basis of a
mortgage loan, and who desires to borrow on a mortgage of such
farm land, may become a member of the association by a two-thirds
vote of the directors upon subscribing for one share of the capital
stock of such association for each $100 of the face of his proposed
loan or any major fractional part thereof. He shall at the same
time file with the seeretary-treasurer his application for a mortgage
loan, giving the particulars required by section twelve of this Act.

E

APPRAISAL.
S e c . 10. That whenever an application for a mortgage loan is
made to a national farm loan association, it shall be first referred to
the loan committee provided for in section seven of this Act. Said
loan committee shall examine the land which is offered as security for
the desired loan and shall make a detailed written report signed by
all three members, giving the appraisal of said land as determined
by them, and such other information as may be required by rules
and regulations to be prescribed by the Federal Farm Loan Board.
No loan shall be approved by the directors unless said loan committee
agrees upon a favorable report.
The written report of said loan committee shall be submitted to the
Federal land bans, together with the application for the loan, and tho
directors of sai 1land bank shall examine said written report when they
pass upon the loan application which it accompanies, but they shall
not be bound by said appraisal.
Before any mortgage loan is made by any Federal land bank, or
joint stock land bank, it shall refer the application and written report
of the loan committee to one or more oi the land bank appraisers
appointed under the authority of section three of this Act, and such
appraiser or appraisers shall investigate and make a written report
upon the land offered as security for said loan. No such loan shall
be made by said land bank unless said written report is favorable.




12

(Km. in.]

Forms for appraisal reports for farm loan associations and land
banks shall be prescribed dv the Federal Farm Loan Board.
Land bank appraisers shall make such examinations and appraisals
and conduct sucn investigations, concerning farm loan bonds and first
mortgages, as the Federal Farm Loan Board shall direct.
No borrower under this Act shall be eligible as an appraiser under
this section, but borrowers may act as members of a loan committee
in any case where they are not personally interested in the loan under
consideration. When any member of aloan committee or of a board
of directors is interested, directly or indirectly, in a loan, a majority
of the board of directors of any national farm loan association shall
appoint a substitute to act in his place in passing upon such loan.
POWERS OF NATIONAL FARM LOAN* ASSOCIATIONS.
S e c . 11. T h a t e v e ry n a tion a l fa rm lo a n a ssocia tion sh a ll h a v e
p o w e r:

First. To indorse, and thereby become liable for the payment of,
mortgages taken from its shareholders by the Federal land bank of
its district.
Second. To receive from the Federal land bank of its district funds
advanced by said land bank, and to deliver .said funds to its share­
holders on receipt of first mortgages qualified under section twelve of
this Act.
Third. To acquire and dispose of such property, real or personal, as
may be necessary or convenient for the transaction of its business.
Fourth. To issue certificates against deposits of current funds
bearing interest for not longer than one year at not to exceed -four per
centum per annum after six days from date, convertible into farm loan
bonds when presented at the Federal land bank of the district in the
amount of $25 or any multiple thereof. Such deposits, when received,
shall be forthwith transmitted to said land bank, and be invested by
it in the purchase of farm loan bonds issued by a Federal land bank or
in first mortgages as defined by this Act.
BESTRICTIONS ON LOANS BASED ON FIRST MORTGAGES.
S e c . 12. That no Federal land bank organized under this Act shall
make loans except upon the following terms and conditions:
First. Said loans snail be secured by duly recorded first mortgages
on farm land within the land bank distnct in which the bank is
situated.
Second. Every such mortgage shall contain an agreement providing
for the repayment of the loan on an amortization plan by means of a
fixed number of annual or semiannual installments sufficient to cover,
first, a charge on the loan, at a rate not exceeding the interest rate in
the last series of farm loan bonds issued by the land bank making the
loan; second, a charge for administration and profits at a rate not
exceeding one per centum per annum on the unpaid principal, said
two Tates combined constituting the interest rate on the mortgage;
and, third, such amounts to be applied on the principal as will extin­
guish the debt within an agreed period, not less than five years nor
more than forty years: Provided, That after five years from the date
upon which a loan is made additional payments in gams of $26 or any




[P b 1 8
u . 5 .]

13

multiple thereof for the reduction of the principal, or the payment of
the entire principal, may be made on anv regular installment date
under the rules and regulations of the federal Farm Loan Board:
And provided further, That before the first issue of farm loan bonds by
any land bank the interest rate on mortgages may be determined in
the discretion of said land bank subject to the provisions and limita­
tions of this Act.
Third. No loan on mortgage shall be made under this Act at a rate
of interest exceeding six per centum per annum, exclusive of amorti­
zation payments.
Fourth. Such loans may be made for the following purposes and for
no other:
(a) To provide for the purchase of land for agricultural uses.
(b) To provide for the purchase of equipment, fertilizers and live
stock necessary for the proper and reasonable operation of the mort­
gaged farm; tne term ‘ equipment” to be denned by the Federal
Farm Loan Board.
(c) To provide buildings and for the improvement of farm lands;
the term “ improvement” to be defined by the Federal Farm Loan
Board.
(d) To liquidate indebtedness of the owner of the land mortgaged,
existing at the time of the organization of the first national farm loan
association established in or for the county in which the land mort­
gaged is situated, or indebtedness subsequently incurred for purposes
mentioned in this section.
Fifth. No such loan shall exceed fifty per centum of the value of
the land mortgaged and twenty per centum of the value of the perma­
nent, insured improvements thereon, said value to be ascertained by
appraisal, as provided in section ten of this Act. In making said
appraisal the value of the land for agricultural purposes shall be the
basis of appraisal and the earning power of said land shall be a
principal factor.
A reappraisal may bo permitted at any time in the discretion of the
Federal land bank, and such additionalloan may be granted as such
reappraisal will warrant under the provisions of mis paragraph. ,
Whenever the amount of the loan applied for exceeds the amount
that may be loaned under the appraisal as herein limited, such loan
may bo granted to the amount pormitted under the terms of this
paragraph without requiring a new application or appraisal.
Sixth. No such loan shall bo made to any person wno is not at the
time, or shortly to become, engaged in the cultivation of the farm
mortgaged. In case of the sale of the mortgaged land, the Federal
land bank may permit said mortgage and the stock intorests of tho
vendor to be assumed by tho purchaser. In case of the death of tho
mortgagor, his heir or heirs, or his legal representative or representa­
tives, snail have the option, .within sixty days of such death, to
assume the mortgage and stock interests of the deceased.
Seventh. The amount of loans to any one borrower shall in no case
exceed a maximum of $10,000, nor shall any loan be for a less sum
than $100.
Eighth. Every applicant for a loan under the terms of this Act shall
make application on a form to be prescribed for that purpose bjr the
Federal Farm Loan Board, and such applicant shall state the objects




14

Pa K
v oU )

to which the proceeds of said loan are to be applied, and shall afford
such other information as may be required.
Ninth. Every borrower shall pay simple interest on defaulted pay­
ments at the rate of eight per centum per annum, and by express
covenant in his mortgage deed shall undertake to pay when due all
taxes, liens, judgments, or assessments which may be lawfully
assessed against the land mortgaged. Taxes, liens, 'judgments, or
assessments not paid when due, and paid by the mortgagee, shall
become a part of the mortgage debt and shall bear simple interest at
tho rate of eight per centum per annum. Every borrower shall under­
take to keep insured to tho satisfaction of the Federal Farm Loan
Board all buildings tho value of which was a factor in determining
the amount of tho 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 recon-*
struction of the buildings destroyed.
Tenth. Every borrower who snail be granted a loan under the pro­
visions of this Act shall enter into an agreemont. in form and under
conditions to be prescribed bv tho Fedoral Farm Loan Board, that if
tho 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 tho mortgagoe,
become duo 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 OP FEDERAL LAND BANKS.
S e c . 13. That every Federal land bank shall have p ow er, su b je ct
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 regis­
trar for the district, to be by him held as collateral security for farm
loan bonds, first mortgages upon farm land qualified under section
twelve 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




(PUB.U&1

15

sums payable under the terms, conditions, and covenants of the mort­
gages and of % bonds secured thereby.
he
Fourth. To acquire and dispose of—
(a) Such property, real or personal, as may be necessary or con­
venient 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 nola 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 bank 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
the Federal Farm Loan Board,
actual cost of appraisal and deo
tnd 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, m
which case said expenses shall be mado 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 twelve.
BESTRICTION8 ON FEDERAL LAND BANKS.

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 mortgage except tlirough national fann
loan associations as provided in section seven and section eight of
this Act, or through agents as provided in section fifteen.
Third. To accept any mortgages on real estate except first mort­
gages created subject to all limitations imposed by section twelve
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 mort­
gages when the principal remaining unpaid upon mortgages already
received from such association shall exceed twenty times the amount
of ite 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.




16

{F ro . 158.J

AGENTS OF FEDERAL LAND BANKS.

_
✓
Seo. 15. That whenever, after this Act shall have been in-effect
one year, it shall appear to the Federal Farm Loan Board that
national farm loan associations have not been formed, and are not
likely to be formed, in any locality, because of peculiar local con­
ditions, said board may, in its discretion, authorize Federal land
banks to make loans on farm lands through agents approved by
said board.
Such loans shall be subject to the same conditions and restrictions
as if the same were made through national farm loan associations,
and each borrower shall contribute five per centum of the amount of
his loan to the capital of the Federal land bank, and shall become the
owner of as much capital stock of the land bank as such contribution
shall warrant.
No agent other than a duly incorporated bank, trust company,
mortgage company, or savings institution, chartered by the State
in wmch it has its principal office, shall be employed under the pro­
visions of this section.
Federal land banks may pay to such agents the actual expense of
appraising the land offered as security for a loan, examining and Cer­
tifying the title thereof, and making, executing, and recording the
mortgage papers; and in addition may allow said agents not to exceed
one-half of one per centum per annum upon the unpaid principal
of said loan, such commission to be deducted from dividends payable
to the borrower on his stock in the Federal land bank.
Actual expenses paid to agents under the provisions of this section
shall be added to the face of the loan and paid off in amortization
payments subject to the limitations provided in subsection ninth
of section thirteen of this Act.
Said agents, when required by the Federal land banks, shall
collect and forward to such banks without charge all interest and .
amortization payments on loans indorsed by them.
Any agent negotiating any such loan shall indorse the same and
become Gable for the payment thereof, and for any default by the
mortgagor, on the same terms and under the same penalties as if the
loan had been originally made by said agent as principal and sold
by said agent to said land bank, but the aggregate of the unpaid prin­
cipal of mortgage loans received from any such agent shall not
exceed ten times its capital and surplus.
If at any time the district represented by any agent under the
provisions of this section shall, in the judgment of the Federal Farm
Loan Board, be adequately served by national farm loan associations,
no further loans shall be negotiated therein by agents under this
section.
JOINT STOCK LAND BANKS.
S e c . 16. That corporations, to be known as joint stock land banks,
for carrying on the business of lending on farm mortgage security
and issuing farm loan bonds, may be formed by any number of natural
persons not less than ten. They shall be organized subject to the
requirements and under the conditions set forth in section four of
this Act, so far as the same may be applicable: Provided, That the




fPOT, 168.]

17

board of directors of every joint stock land bank shall consist of
not less than five members.
Shareholders of every joint stock land bank organized under this
Act shall be held individually responsible, equally and ratably, and
not one for another, for all contracts, debts, and engagements of
such bank to the extent of the amount of stock owned by them at
the par value thereof, in addition to the amount paid in and repre­
sented by their shares.
Except as otherwise provided, joint stock land banks shall have the
powers of, and be subject to all the restrictions and conditions im­
posed on, Federal land banks by this Act, so far as such restrictions
and conditions are applicable: Provided, however, That the Govern­
ment of the United States shall not purchase or subscribe for any of
the capital stock of any such bank; and each shareholder of any such
bank shall have the same voting privileges as holders of shares in
national banking associations.
No joint stock land bank shall have power to issue or obligate ‘
itself for outstanding farm loan bonds in excess of fifteen times the
amount of its capital and surplus, or to receive deposits or to transact
any banking or other business not expressly authorized by the pro­
visions of this Act.
No joint stock land bank shall be authorized to do business until
capital stock to the amount of at least $250,000 has been subscribed,
one-half thereof paid in cash and the balance subject to call by the
board of directors, and a charter has been issued to it by the Federal
Farm Loan Board.

No joint stock land bank shall issue any bonds until after the
capital stock is entirely paid up.
Farm loan bonds issued by joint stock land banks shall be so
engraved as to be readily distinguished in form and color from farm
loan bonds issued by Federal land banks, and shall otherwise bear
such distinguishing marks as the Federal Farm Loan Board shall
direct.
Joint stock land banks shall not be subject to the' provisions of
subsection (b) of section seventeen of this Act as to interest rates on
mortgage loans or farm loan bonds, nor to the provisions of subsec­
tions first, fourth, sixth, seventh, and tenth of section twelve as to
restrictions on mortgage loans: Provided, however, That no loans
'"shall be made which are not secured by first mortgages on farm lands
within the State in which such joint stock land bank has its principal
office, or within some one State contiguous to such State. Such joint
stock land banks shall be subject to all other restrictions on mortgage
loans imposed on Federal land banks in section twelve of this Act.

Joint stock land banks shall in no case charge a rate of interest on
farm loans exceeding bv more than one per centum the rate of
intefest established for the last series of farm loan bonds issued by
them.
Joint stock land banks shall in no case demand or receive, under
any form or pretense, any commission or charge not specifically
authorized in this Act.
Each joint stock land bank organized under this Act shall have
authority to issue bonds based upon mortgages taken b y it in aoeorda n ce with the terms of this Act. Such bonds shall b e in form p re-




[P b. 18
u 5-1

18

scribed by the Federal Farm Loan Board, and it shall be stated in
such bonds that such bank is organized under section sixteen of this
Act, is under Federal supervision, and operates under the provisions
of this Acti
POW ERS

OF F E D E R A L

F AR M

LOAN

BOARD.

17. That the Federal Farm Loan Board shall have power—
(a) To organize and charter Federal land banks, and to charter
national farm loan associations and joint stock land banks subject
to the provisions of this Act, and in its discretion to authorize them
to increase their capital stock.
(b) To review and alter at its discretion the rate of interest to be
charged by Federal land banks for loans made by them under the
provisions of this Act, said rates to be uniform so far as practicable.
(c) To grant or refuse to Federal land banks, or joint stock land
banks, authority to make any specific issue of farm loan bonds.
(d) To make rules and regulations respecting the charges made to
borrowers on loans under this Act for expenses in appraisal, deter­
mination of title, and recording.
(e) To require reports and statements of condition and to make
examinations of all banks or associations doing business under the
provisions of this Act.
(f) To prescribe the form and terms of farm loan bonds, and the
form, terms, and penal sums of all surety bonds required under this
Act and of such other surety bonds as they shall deem necessary,
such surety bonds to cover financial loss as well as faithful perform­
ance of duty.
(g) To require Federal land banks to pay forthwith to any Federal
land bank their equitable proportion of any sums advanced by said
land bank to pay the coupons of any other land bank, basing said
required payments on the amount of farm loan bonds issued by each
land bank and actually outstanding at the time of such requirement.
(h) To suspend or to remove for cause any district director or any
registrar, appraiser, examiner, or other official appointed by said
board under authority of section three of this Act, the cause of such
suspension or removal to be communicated forthwith in writing by
the Federal Farm Loan Board to the person suspended or removed,
and in case of a district director to the proper Federal land bank.
(i) To exercise general supervisory authority over the Federal
land banks, the national farm loan associations, and the joint stock
land banks herein provided for.
(j) To exercise such incidental powers as shall be necessary or
requisite to fulfill its duties and carry out the purposes of this Act.
Sec.

APPLICATIONS FOR FARM LOAN BONDS.

Sec . 18. That any Federal land bank, or joint stock land bank,
which shall have voted to issue farm loan bonds under this Act, shall
make written application to the Federal Farm Loan Board, through
the farm loan registrar of the district, for approval of such issue.
With said application said land bank shall tender to said farm loan
registrar as collateral security first mortgages on farm lands qualified
under the provisions of section twelve, section fifteen, or section
sixteen of this Act, or United States Government bonds, not less in




(Pub. 186.]

19

aggregate amount than th* sum of the bonds proposed to be issued.
Said bank shall furnish with such mortgages a schedule containing a
description thereof and such further information as may be prescribed
by the Federal Farm Loan Board.
Upon receipt of such application said farm loan registrar shall
verify said schedule and shall transmit said application and said sched­
ule to the Federal Farm Loan Board, givingsuch further information
pertaining thereto as he may possess. _The Federal Farm Loan Board
shall forthwith cause to be made such investigation and appraisement
of the securities tendered as it shall deem wise, and it shall grant in
whole or in part, or reject entirely, such application.
The Federal Farm Lioan Board shall promptly transmit its decision
as to any issue of farm loan bonds to tho land Dank applying for the
same and to the farm loan registrar of the district. Said registrar
shall furnish, in writing, such information regarding any issue of
farm loan bonds as the r ederal Farm Loan Board may at any time
require.
No issue of farm loan bonds shall be authorized unless the Federal
Farm Loan Board shall approve such issue in writing.
• ISSUE OF FAEM LOAN BONDS.
S ec. 19. That whenever any farm loan registrar shall roceive from
the Federal Farm Loan Board notice that it has approved any issue
of farm loan bonds under the provisions of section eighteen he shall
forthwith take such steps as may be necessary, in accordance with
the provisions of this Act, to insure the prompt execution of said
bonds and the delivery of the same to the land bank applying therefor.
Whenever the Federal Farm Loan Board shall reject entirely any
application for an issue of farm loan bonds, the first mortgages and
bonds tendered to the farm loan registrar as collateral security there­
for shall be forthwith returned to said land bank by him.
Whenever the Federal Farm Loan Board shall approve an issue
of farm loan bonds, the farm loan registrar having the custody of the
first mortgages and bonds tendered as collateral security for such issue
of bonds shall retain in his custody those first mortgages and bonds
which are to be held as collateral security, and shall return to the bank
owning tho same any of said mortgages and bonds which are not to be
held by him as collateral security. The land bank which is to issue
said farm loan bonds shall transfer to said registrar, by assignment,
in trust, all first mortgages and bonds which are to be held Dy said
registrar as collateral security, said assignment providing for the
right of redemption at any time by payment as provided in this Act
and reserving the right oi substitution of other mortgages qualified
under sections twelve, fifteen, and sixteen of this Act. Said mort­
gages and bonds shall be deposited in such deposit vault or bank as
toe Federal Farm Loan Board shall approve, subject to the control
of said registrar and in his name as trustee for the bank issuing the
farm loan bonds and for the prospective holders of said farm loan
bonds.
N o m ortga g e sh all b e a ccep ted b y a fa rm lo a n reg istra r fro m a la n d
b a n k as p a rt o f an offerin g to secu re an issue o f fa rm lo a n b o n d s, eith e r
o rig in a lly o r b y su b stitu tion , e x ce p t first m ortga g es m a d e s u b je c t




20

{Pub. m j

to the conditions prescribed in said sections twelve, fifteen, and
sixteen.
It shall be the duty of each farm loan registrar to see that the farm
loan bonds delivered by him and outstanding do not exceed the
amount of collateral security pledged therefor. Such registrar may,
in his discretion, temporarily accept, in place of mortgages with­
drawn, United States Government Bonds or cash.
The Federal Farm Loan Board may, at any time, call upon any
land bank for additional security to protect the bonds issued by it.
FORM OF FARM LOAN BONDS.

Sec . 20. That bonds provided for in this Act shall be issued in
denominations of $25, $50, $100, $500, and $1,000; they shall run for
specified minimum and maximum periods, subject to payment and
retirement, at the option of the land bank, at any time after five
years from the date of their issue. They shall have interest coupons
attached, payable semiannually, and shall be issued in series oi not
less than $50,000, the amount and terms to be fixed by the Federal
Farm Loan Board. They shall bear a rate of interest not to exceed
five per centum per annum.
The Federal Farm Loan Board shall prescribe rules and regulations
conccming the circumstances and manner in which farm loan bonds
shall be paid and retired under the provisions of this Act.
Farm loan bonds shall be delivered through the registrar of the
district to the bank applying for the same.
In order to furnish farm loan bonds for delivery at the Federal
land banks and joint stock land banks, the Secretary of the Treasury
is hereby authorized to prepare suitable bonds in such form, subject
to the provisions of this Act, as the Federal Farm Loan Board may
approve, such bonds when prepared to be held in the Treasury subject
to delivery upon order of the Federal Farm Loan Board. The
engraved plates, dies, bed-pieces, and so forth, executed in connec­
tion therewith shall remain in the custody of the Secretary of the
Treasury. Any expenses incurred in the ^preparation, custody, and
delivery of such farm loan bonds shall bo paid by the Secretary of the
Treasury from any funds in the Treasury not otherwise appropri­
ated: Provided, however, That the Secretary shall be reimbursed for.
such expenditures by the Federal Farm Loan Board through assess*v
ment upon the farm land banks in proportion to the work executed.
They may be exchanged into registered bonds of any amount, and
reexchanged into coupon bonds, at the option of the holder, under
rules ana regulations to be prescribed by the Federal Farm Loan
Board.
SPECIAL PROVISIONS OF FARM LOAN BONDS.

S e c . 21. That each land bank shall be bound in all respects by the
acts of its officers in signing and issuing farm loan bonds, and by the
acts of the Federal Farm Loan Board in authorizing their issue.
Every Federal land bank issuing farm loan bonds shall be p ri­
marily liable therefor, and shall also b e liable, upon presentation of
farm loan bond coupons, for interest payments due u p on a n y fa rm
loan bonds issued by other Federal land banks and remaining unpaid
in consequence of the default of such other land banks; and e v e ry




JP T . 158.
XB

21

such bank shall likewise be liable for such portion of the principal
of farm loan bonds so issued as shall not be paid after the assets of
any such other land banks shall have been liquidated and distributed:
Provided, That such losses, if any, either of interest or of principal,
shall be assessed by the Federal Farm Loan Board against solvent
land banks liable therefor in proportion to the amount of farm loan
bonds which each may have outstanding at the time of such assess­
ment.
Every Federal land bank shall by appropriate action of its board
of directors, duly recorded in its minutes, obligate itself to become
liable on farm loan bonds as provided in this seetion.
Every farm loan bond issued by a Federal land bank shall be
signed by its president and attested by its secretary, and shall contain
in the face thereof a certificate signed by the Farm Loan Commis­
sioner to the effect that it is issued under the authority of the Federal
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
not taxable by National, State, municipal, or local authority; that
it is issued against collateral security 01 United States Government
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.
APPLICATION OF AMORTIZATION AND INTEREST PAYM ENTS.

Sec. 22. That whenever any Federal land bank, or joint stock
land bank, shall receive any interest, amortization or other payments
upon any first mortgage or bond pledged as collateral security for
the issue of farm loan bonds, it shall forthwith notify the farm loan
registrar of the items so received. Said, registrar shall forthwith
•cause such payment to be duly credited upon the mortgage entitled
to such credit. Whenever any such mortgage is paid in full, said
registrar shall cause the same to be canceled and delivered to the
proper land bank, which shall promptly satisfy and discharge the lien
of record and transmit such canceled mortgage to the original maker
thereof, or his heirs, administrators, executors, or -assigns.
Upon written application by any Federal land bank, or joint stock
land bank, to the farm loan registrar, it may be permitted, in the
discretion of said registrar, to withdraw any mortgages or bonds
pledged as collateral security under this Act, and to substitute therefor
other similar mortgages or United States Government bonds not less
in amount than the mortgages or bonds desired to be withdrawn.
Whenever any fann loan bonds, or coupons or interest payments of
such bonds, are due under their terms, they shall be payable at the
land bank by which they were issued, in gold or lawful money, and
upon payiflent shall be duly canceled by said bank. At the discretion
of the Federal Farm Loan Board, payment of any farm loan bond or
coupon or interest payment may, however, be authorized to be made
at any Federal land bank, any joint stock land bank, or any other
bank, under rules and regulations to be prescribed by the Federal
Farm Loan Board.
When any land bank shall surrender to the proper farm loan
registrar any farm loan bonds of any series, canceled or uncanceled,
said land b a n k shall be entitled to withdraw first mortgages an d b on d s




22

[P trB .u aj

pledged as collateral security for any of said series of farm loan bonds
to an amount equal to the farm loan bonds so surrendered, and it shall
be the duty of said registrar to permit and direct the delivery of such
mortgages and bonds to such land bank.
Interest payments on hypothecated first mortgages shall be at the
disposal of the land bank pledging the same, and shall be available
for the payment of coupons and the interest of farm loan bonds as
they become due.
Whenever any bond matures, or the interest on any registered bond
is due, or the coupon 011 any coupon bond matures, and the same shall
be presented for payment as provided in this Act, the full face value
thereof shall be paid to the holder.
Amortization and other payments on the principal of fitst mortgages
held by a farm loan registrar as collateral security for the issue of farm
loan bonds shall constitute a trust fund in the hands of the Federal
land bank or joint stock land bank receiving the same, and shall be
applied or employed as follows:
In the case of a Federal land bank—
(a) To pay off farm loan bonds issued by said bank as they mature.
(b) To purchase at or below par farm loan bonds issued by said
bank or by any other Federal land bank.
(c) To loan on first mortgages on farm lands within the land bank
district, qualified tinder this Act as collateral security for an issue of
farm loan bonds.
(d) To purchase United States Government bonds.
In the case of a joint stock land bank—
(a) To pay off farm loan bonds issued by said bank as theymature.
(b) To purchase at or below par farm loan bonds.
(c) To loan on first mortgages qualified under section sixteen of this
Act.
(d) To purchase United States Government bonds.
The farm loan bonds, first mortgages, United States Government
bonds, or cash constituting the trust fund aforesaid, shall be forth­
with deposited with the farm loan registrar as substituted collateral
security in place of the sums paid on the principal of indorsed mort­
gages held dv him in trust.
Every Federal land bank, or joint stock land bank, shall notify the
farm loan registrar of the disposition of all payments made on the
principal of mortgages held as collateral security for an issue of farm
loan bonds, and said registrar is authorized, at his discretion, to order
any of such payments, or the proceeds thereof, wherever deposited or
however invested, to be immediately transferred to his account as
trustee aforesaid.
RESERVES AND DIVIDENDS OF LAND BANES.
S e c . 2 3 . That every Federal land bank, and every joint stock land
bank, shall semiannually carry to reserve account twenty-five per
centum of its net earnings until said reserve account shall show a
credit balance equal to twenty per centum of the outstanding capital
stock of said land bank. Whenever said reserve.shall have Deem
impaired, said balance of twenty per centum shall be fully restored
before any dividends are paid. After said reserve has reached the
sum of twenty per centum of the outstanding capital stock, five per




(P ro. U&]

23

centum of the net earnings shall bo annually added thereto. For
the period of two years from the dute when any default occurs in tho
payment of the interest, amortization installments, or principal on
any first mortgage, by both mortgagor and indorser, the amount so
defaulted shall be carried to a suspense account, and at the end .of
the two-year period specified, unless collected, shall be debited to
reserve account.
After deducting the twenty-five per centum or the five per centum
hereinbefore directed to be deducted for credit to reserve account,
any Federal land bank or joint stock land bank may declare a divi­
dend to shareholders of the whole or any part of the balance of its
net earnings. The reserves of land banks shall be invested in accord­
ance with rules and regulations to be prescribed by the Federal Farm
Loan Board.
RESERVE AND DIVIDENDS OF NATIONAL FARM LOAN ASSOCIATIONS.
S e c . 24. That every national farm loan association shall, out of
its net earnings, semiannually carry to reserve account a sum not
less than ten per centum of such net earnings until said reserve
account shall show a credit balance equal to twenty per centum of
the outstanding capital stock of said association.
Whenever said reserve shall have been impaired, said credit balance
of twenty per centum shall be fully restored^ before ally dividends
are paid. After said reserve has reached said sum of twenty per
centum, two per centum of the net earnings shall be annually adaed
thereto.
After deducting the ten per centum or the two per centum herein­
before directed to be credited to reserve account, said association
may, at its discretion, declare a dividend to shareholders of the whole
or any part of the balance of said net earnings.
The reserves of farm loan associations shall be invested in accord­
ance with rules and regulations to be prescribed by the Federal Farm
Loan Board.
\
Whenever any farm loan association shall be voluntarily liquidated
a sum equal to its reserve account as herein required shall be paid to
and become the property of the Federal land bank in _Ich such loan
association may be a shareholder.

DEFAULTED LOANS.
S ec. 25. That if there shall be default under the terms of any
indorsed first mortgage held by a Federal land bank under the pro­
visions of this Act, me national farm loan association or agent through
which said mortgage was received by said Federal land bank shall be
notified of said aeiault. Said association or agent may thereupon be
required, within thirty days after such notice, to make good said
default, either by payment of the amount unpaid thereon in cash, or
by the substitution of an equal amount of farm loan bonds issued by
said land bank, with all unmatured coupons attached.




24

(P u b . 1 B
5U

EXEMPTION FROM TAXATION*
S e c . 26. That every Federal land bank and every national farm
loan association, including the capital and reserve or surplus therein
and the income derived therefrom, shall be exempt from Federal,
State, municipal, and local taxation, except taxes upon real estate
held, purchased, or taken by said bank or association under the pro­
visions of section eleven and section thirteen of this Act. First
mortgages executed to Federal land banks, or to joint stock land
banks, and farm loan bonds issued under the provisions of this Act,
shall be deemed and held to be instrumentalities of the Government
of the United States, and as such they and the income derived there­
from shall be exempt from Federal, State, municipal, and local
taxation.
Nothing herein shall prevent the shares in any joint stock land
bank from being included in the valuation of the personal property
of the owner or holder of such shares, in assessing taxes imposed byauthority of the State within which the bank is located; but such
assessment and taxation shall be in manner and subject to the con­
ditions and limitations contained in section fifty-two hundred and
nineteen of the Revised Statutes with reference to the shares of
, national banking associations.
Nothing herein shall be construed to exempt the real property of
Federal and. joint stock land banks and national farm loan associ­
ations from either State, county, or municipal taxes, to the same
extent, according to its value, as other real property is taxed.

INVESTMENT IN FARM LOAN BONDS.
S e o . 27. That farm loan bonds issued under the provisions of this
Act by Federal land banks or joint stock land banks shall be a lawful
investment for all fiduciary and trust funds, and may be accepted as
security for all public deposits.
Any member bank of the Federal Reserve System may buy and
sell farm loan bonds issued under the authority of this Act.
Any Federal reserve bank may buy and sell farm loan bonds issued
under this Act to the same extent and subject to the same limitations
placed upon the purchase and sale by said banks of State, county,
district, and municipal bonds under subsection (b) of section fourteen
of the Federal Reserve Act approved December twenty-third,
nineteen hundred and thirteen.

EXAMINATIONS.
S e c . 28. That the Federal Farm Loan Board shall appoint as many
land bank examiners as in its judgment may be required to make
careful examinations of the banks and associations permitted to do
business under this Act.
Said examiners shall be subject to the same requirements, respon­
sibilities and penalties as are applicable to national bank examiners
under the national bank Act, tne Federal Reserve Act and other
provisions of law. Whenever directed by the Federal Farm Loan
Board, said examiners shall examine the condition of any national
farm loan associa tion and report the same to the Farm Loan Com-




25

fPTB. 158.]

}

missioner. They shall examine and report the condition of every
Federal land bank and joint stock land bank at least twice each year.
Said examiners shall receive salaries to be fixed by the Federal
Farm Loan Board.
DISSOLUTION AND APPOINTMENT OF RECEIVERS.

Sec . 29. That upon receiving satisfactory evidence that any
national farm loan association has failed to meet its outstanding
obligations of any description the Federal Farm Loan Board may
forthwith declare such association insolvent and appoint a receiver
and require of him such bond and security as it deems proper: Pro­
vided, That no national farm loan association shall be declared
insolvent by said board until the total amount of defaults of current
interest and amortization installments on loans indorsed by national
farm loan associations shall amount to at least $150,000 in the
Federal land bank district, unless such association shall have been in
default for a period of two years. Such receiver, under the direction
of the Federal Farm Loan Board, shall take possession of the books,
records, and assets of every description of such association, collect
all debts, dues, and claims belonging to it, and, with the approval
of the Federal Farm Loan Board, or upon the order of a court of
record of competent jurisdiction, may sell or compound all bad or
doubtful debts, and, on a like approval or order, may sell all the real
and personal property of such association, on such terms as the
Federal Farm Loan Board or said court shall direct.
Such receiver shall pay over all money so collected to the Treasurer
of the United States, subject to the order of the Federal Farm Loan
Board, and also make report to said board of all his acts and pro­
ceedings. The Secretary of the Treasury shall have authority to
deposit at interest any money so received.
Upon default of any obligation, Federal land banks and joint
stock land banks may be declared insolvent and placed in the hands
of a receiver by the Federal Farm Loan Board, and proceedings shall
thereupon be had in accordance with the provisions of this section
regarding national farm loan associations.
If any national farm loan association shall be declared insolvent
and a receiver shall be appointed therefor by the Federal Farm Loan
Board, the stock held by it in the Federal land bank of its district
shall be canceled without impairment of its liability and all payments
on such stock, with accrued dividends, if any, since the date of the
last dividend shall be first applied to all debts of the insolvent farm
loan association to the Federal land bank and the balance, if any,
shall be paid to the receiver of said farm loan association: Provided,
That in estimating said debts contingent liabilities incurred by
national farm loan associations under the provisions of this Act on
account of default of principal or interest of indorsed mortgages
shall be estimated and included as a debt, and said contingent lia­
bilities shall be determined by agreement between the receiver and
the Federal land bank of the district, subject to the approval of the
Federal Farm Loan Board, and if said receiver and said land bank
can not agree, then by the decision of the Farm Loan Commissioner,
a n d th e amount thus ascertained shall be deducted in accordance




26

[F ro. 158.]

with the provisions of this section from the amount otherwise due
said national farm loan association for said canceled stock. When­
ever the capital stock of a Federal land bank shall be reduced, the
board of directors shall cause to be executed a certificate to the Federal
Farm Loan Board, showing such reduction of capital stock, and, if
said reduction shall be due to the insolvency of a national farm loan
association, the amount repaid to such association.
No national farm loan association, Federal land bank or joint
stock land bank shall go into voluntary liquidation without the writ­
ten consent of the Federal Farm Loan Board, bat national farm
loan associations may consolidate under rules and regulations pro­
mulgated by the Federal Farm Loan Board.
STATE LEGISLATION.

S e c . 30. That it shall be the duty of the Farm Loan Commissioner
to make examination of the laws of every State of the United States
and to inform the Federal Farm Loan Board as rapidly as may be
whether in his judgment the laws of each State relating to the con­
veying and recording of land titles, and the foreclosure of mortgages
or "other instruments securing loans, as well as providing homestead
and other exemptions and granting the power to waive such exemp­
tions as respects first mortgages, are such as to assure the holder
thereof adequate safeguards against loss in the event of default on
loans secured by any such mortgages.
Pending the making of such examination in the case of any State,
the Federal Farm Loan Board may declare first mortgages on farm
lands situated within such State ineligible as the basis for an issue of
farm loan bonds; and* if said examination shall show that the laws
of any such State afford insufficient protection to the holder of first
mortgages of the kinds provided in this Act, said Federal Farm Loan
Board may declare said first mortgages on land situated in such State
ineligible during the continuance of the laws in question. In making
his examination of the laws of the several States and forming his
conclusions thereon said Farm Loan Commissioner may call upon
the office of the Attorney General of the United States for any needed
legal advice or assistance, or may employ special counsel in any
State where he considers such action necessary.
At the request of the Executive of any State the Federal Farm
Loan Board shall prepare a statement setting forth in what respects
tho requirements of said board can not be complied with under the
existing laws of such State.

PENALTIES.
S e c . 31. That any applicant for a loan under this Act who shaU
knowingly make any false statement in his application for such loan,
and any member of a loan committee or any appraiser provided for
in this Act who shall willfully overvalue any land offetea as security
for loans under this Act, shall be punished by a fine of not exceeding
$5,000, or by imprisonment not exceeding one year, or both.. Any
examiner appointed under this Act who shall accept a loan or gratu­
ity from any land bank or national farm loan association examined
by him, or from any person connected with any such bank or asso-




(Pv».uu

27

ciation in any capacity, shall be punished by a fine of not exceeding
95,000, or by imprisonment not exceeding one year, or both, and
may be fined a further sum equal to the money so loaned or gratuity
given, and shall forever thereafter be disqualified from holding office
as an examiner under the provisions of this Act. No examiner, while
holding such office, shall perform any other service for compensation
for any bank or banking or loan association, or for any person con­
nected therewith in any capacity.
Any peraon who shall falsely make, forgo, or counterfeit, or cause
or procure to be falsely made, forged, or counterfeited, or willingly
aid or assist in falsely making, forging, or counterfeiting any bond,
coupon, or paper in imitation of, or purporting to be in imitation of,
the Donds or coupons issued by any land bank or national farm loan
association, now or hereafter authorized and acting under the laws
of the United States; or any person who shall pass, utter, or publish,
or attempt to pass, utter, or publish anv false, forged, or counterfeited
bond, coupon, or paper purporting to be issued by any such bank or
(association, knowing tho samo to be falsely made,"forged, or counter­
feited; or whoever snail falsely alter, or cause or procpve. to be falsely
altered, or shall willingly aid or assist in falsely altering any such
bond, coupon, or paper, or shall pass, utter, or publish as true any
falsely altered or spurious bond, coupon, or paper issued, or purport­
ing to have been issued, by any such bank or association, Knowing
the same to be falsely altered or spurious, shall be punished by a
fine of not exceeding $5,000 or by imprisonment not exceeding five
years, or both.
Other than the usual salary or director’s fee paid to any officer,
director, or employee of a national farm loan association, a Federal
land bank, or a joint stock land bank, and other than a reasonable
fee paid by such association or bank to any officer, director, attorney,
or employee for services rendered, no officer, director, attorney, or
employee of an association or bank organized under this Act shall be
a beneficiary of or receive, directly or indirectly, any fee, commission,
gift, or other consideration for or in connection with any transaction
or business of such association or bank. No land bank or national
farm loan association organized under this Act shall charge or receive
any fee, commission, bonus, gift, or other consideration not herein
specifically authorized. No examiner, public or private, shall disclose
the names of borrowers to other than the proper officers of a national
farm loan association or land bank without first having obtained exress permission in writing fronl the Farm Loan Commissioner or
*om tne board of directors of such association or bank, except when
ordered to do so by a court of competent jurisdiction or by direction
of the Congress of the United States, or of either House thereof, or
any committee of Congress or of either House duly authorized. Any
person violating any provision of this paragraph shall be punished
by a fine of not exceeding $5,000 or by imprisonment not exceeding
one year, or both.
Any person connected in any capacity with any national farm loan
association, Federal land bank, or joint stock land bank, who embez­
zles, abstracts, or willfully misapplies any moneys, funds, or credits
thereof, or who without authority from the directors draws any order,
assigns any note, bond, draft, mortgage, judgment, or decree thereof,
of who makes any false entry in any book, report, or statement oI

E




28

(? r o . m i

such association or land bank with intent in either case to defraud
such institution or any other company, body politic or corporate, or
any individual person, or to deceive any officer of a national farm
loan association or land bank or any agent appointed to examine into
the affairs of any such association or bank, and every person who
with like intent aids or abets any officer, clerk, or agent in any viola­
tion of this section, shall be punished by a fine of not exceeding
$5,000 or by imprisonment not exceeding five years, or both.
Any person who shall deceive, defraud, or impose upon, or who
shall attempt to deceive, defraud, or impose upon, any person, firm,
or corporation by making any false pretense or representation regard­
ing the character, issue, security, or terms of any farm loan bond, or
coupon, issued under the terms of this Act; or by falsely pretending
or representing that any farm loan bond, or coupon, issued under the
terms of this Act by one class of land banks is a farm loan bond, or
coupon, issued by another class of banks; or by falsely pretending or
representing that any farm loan bond, or coupon, issued under the
terms of this Act, or anything contained in said farm loan bond, orcoupon, is anything othor than, or different from, what it purports
to be on the face of said bond or coupon, shall be fined not exceeding
$500 or imprisoned not exceeding one year, or both.
The Secretary of the Treasury is hereby authorized to direct and
use the Secret Service Division of the Treasury Department to detect,
arrest? and deliver into custody of the United States marshal having
jurisdiction, any person or persons violating any of the provisions of
this section.
GOVERNMENT DEPOSITS.

Sec. 32. That the Secretary of the Treasury is authorized, in his
discretion, upon the request of the Federal Farm Loan Board, to
make deposits for the temporary use of any Federal land bank, out of
any money in the Treasury not otherwise appropriated. Such Federal
land bank shall issue to the Secretary of tne Treasury a certificate of
indebtedness for any such deposit, bearing a rate of interest not to
exceed the current rate charged for other Government deposits, to
be secured by farm loan bonds or other collateral, to the satisfaction
of the Secretary of the Treasury. Any such certificate shall be
redeemed and paid by such land bank at the discretion of the Secre­
tary of the Treasury. The aggregate of all sums so deposited b y the
Secretary of the Treasury shall not exceed the sum of $6,000,000 at
any one time.
ORGANIZATION EXPEN SES.

S e c . 33. That the sum of $100,000, or so much thereof as may be
necessary, is hereby appropriated, out of any money in the Treasury
not otherwise appropriated, to be expended under the direction of
the Federal Farm Loan Board, for the purpose of carrying into effect
the provisions of this Act, including the rent and equipment of neces­
sary offices.




29

[P ub. 168.1

L IM IT A T IO N

OF

COURT

D E C IS I O N 'S .

S e c . 34. That if any clause, sentence, paragraph, or part of this
Act shall for any reason he adjudged by any court of competent juris­
diction to be invalid, such judgment shall not affect, impair, or invali­
date the remainder of this Act, but shall be confined in its operation
to the clause, sentence, paragraph, or part thereof directly involved
in the controversy in which such judgment shall have been rendered.
R E P E A L IN G

CLAUSE.

S e c . 3 5 . That all Acts or parts of Acts inconsistent with this Act
are hereby repealed, and this Act shall take effect upon its passage.
The right to amend, alter, or repeal this Act is hereby expressly
reserved.
Approved, July 17, 1916.




o


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102