own choice, not less than five in number. The size of the loan granted to any one person and the purposes for which the loan may be made, are left to the discretion of the Joint Stock bank. The total amount of bonds that may be issued is restricted to fifteen times the amount of the capital stock of the issuing bank, as compared with twenty times in the case of the Federal Land banks. Like the Federal Farm Loan bonds, the Joint Stock Land bank bonds must be secured by first mortgages on land and improvements, the margin of security being identical in both types of bonds. The mortgages back of the Joint Stock Land bank bonds must be deposited in trust with the Federal Farm Loan Registrar; and the loans must be paid on the amortization plan. The main difference between the two types of securities lies in the fact that the Joint Stock Land bank bonds are an obligation only of the issuing institution, whereas the Federal Farm Loan bonds, as already seen, are the joint and several obligations of the twelve Federal Land banks. State governments have also been interested in rural credit legislation. During the past few years some fifteen states have enacted laws designed to improve agricultural credit facilities. In general, the state laws are designed to make available for agricultural purposes the cash and credit of the state through the creation of land banks, the stock of which is owned by loan associations. These loan associations, which are called by various names, are co-operative in their nature; they receive applications from their members for loans, grant the loans, execute the mortgages and deposit them with the land bank. The land bank deposits the collective mortgages with the state comptroller and issues against them bonds which bear a lower rate of interest than does the collateral. These bonds are legal as investments for savings banks and trust funds. As compared Incidentally, the bonds are engraved by the Treasury Department, as are the Farm Loan bonds; but they must be readily distinguishable in form and color from those issued by the Federal Land banks. with the Federal Farm Loan System, however, the significance of these state rural credit institutions is not great. The Federal Farm Loan System has had a substantial growth. On November 30, 1919, there were 3,890 associations in actual operation with an average number of members of 27. The total volume of loans was $282,007,781 giving an average per association of $72,495. The number of associations in 1920 has been declining, in part because there is already in excess of one for every county in the United States, and in part because there is a tendency toward consolidation of smaller associations. The attack that has been made in the courts upon the constitutionality of the rural-credit law has also deterred the formation of new loan associations. Although they have been in operation only about three years, the Federal Land banks have increased their capitalization from $9,000,000 to $20,000,000, and several of them have been able to pay dividends after meeting all expenses of organization and operation and setting aside substantial sums for the reserve accounts. It is interesting to observe, however, that during the first year of its history the Federal Farm Loan System experienced serious financial difficulties requiring government aid. The 4 per cent tax-exempt bonds could not be marketed, and, as a means of avoiding a financial collapse of the system, a request was made for a Congressional appropriation of $200,000,000, the plea being effectively made that agriculture would otherwise be seriously handicapped in its efforts to increase food production, so vitally necessary to the successful prosecution of the war. Somewhat reluctantly Congress authorized the appropriation; and under it the Secretary of the Treasury has purchased $136,000,000 of Farm Loan bonds from the Federal Land banks. There follows a consolidated financial statement of the assets and liabilities of the Federal Land banks at the close of business October 31, 1919. 1 See pp. 688-90. Amount of government stock retired to date Capital stock held by United States government $743,295.43 $8,892,130.00 626,321.00 October 31, 1919 $8,265,809.00 The following statement shows the amount of loans applied for and granted up to November 30, 1919, segregated by districts.' Numerous Joint Stock Land banks have been organized. Up to October 31, 1919, the number of Joint Stock Land banks * Annual Report of the Federal Farm Loan Board, January 5, 1920, p. 27. that had been organized. was twenty-six, with an aggregate capital stock of $7,812,050. Mortgage loans stood at $48,092,816 and investments in United States government bonds and securities at $8,486,879. The growth of the Joint Stock banks has not been as rapid as was anticipated. Of late, moreover, there has been a tendency toward consolidation of existing companies. IV. SIGNIFICANT RESULTS OF THE FEDERAL FARM LOAN SYSTEM The organization of the Federal Farm Loan System has accomplished three important results: first, it has equalized farm interest rates throughout the country; second, it has enabled the farmers as a whole to borrow at lower rates than would otherwise have been possible; and third, it has broadened the scope of the market for agricultural securities. The foregoing description of the system furnishes all of the information necessary for understanding how each of these results has been made possible. The equalization of interest rates has been accomplished by means of the provision which makes Federal Land bank bonds the obligation of all the Land banks, jointly and severally. It will be readily seen that so long as every bond is the obligation of all the banks, the investor, resident in a financial center, has no good reason for discriminating against the bonds of any district, however remote it may be; from his viewpoint, the bonds of each district are exactly as good as those of every other district. It should be noted, however, that this does not apply to the Joint Stock Land bank bonds; for they are the obligations of the issuing bank only. The lowering of farm interest rates has been made possible by means of the co-operative borrowing and the improved organization of credit information for which the system provides. Under the private mortgage system the primary reason for the high interest rates in remote agricultural regions is the lack of reliable information on the part of the lender as to the character of the borrower and the adequacy of the property offered as |