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EDITOlt S NOTE: This is the second of two articles on the federal land banks, showing how farmers have been cheated out of promised control of them, and how the fed eral farm loan board is trying to destroy for all time the co-operative principle on which the banks were established* N THE last issue the Leader told the story of how the farmers have been prevented to date from controlling and managing the federal lahd banks, although the original law provided for such control. Congress, the political boards of directors of the land banks and the fed eral farm loan board, through a trick, have pre vented the original co-operative plan of organiza tion of the banks from being carried out. It should have been carried out long ago. Under the perma nent plan of organization for the banks, provided for in the law and constituting a pledge to and con tract with the farmers, the farmer, borrowers of the banks, long before this, should be in control, through their electing six of nine permanent di rectors for each bank. Instead, the banks are still run by "temporary" boards of five directors ap pointed by the federal farm loan board, which in turn is appointed by the president and takes its orders from the party in power. This withholding of farmer control of the banks is alleged to be illegal and unconstitutional, and a suit is now pending in the courts to determine the question, as we reported in the last issue. To pre vent a possible adverse decision in that suit, which would throw the present political management out of control, the federal farm loan board has come forward with FIVE RECOMMENDATIONS to congress. These recommendations, if carried out, will repeal the co-operative features of the orig inal law and place the banks under political instead of farmer control for all time. The recommenda tions area bare-faced attempt at bureaucratic ag grandizement, at the expense of farmer co-opera tion, that seem scarcely possible, although they are cold facts. Let us see how the farm loan board would per petuate the present power it has. This power it now has only because the board and congress have betrayed the farmers to date, by the trick which we explained last week. The recommen dations of the board are as follows: 1. That the executive management of the federal land banks be perma nently vested in the federal farm loan board. The original law provided that the executive management of each bank should be vested in nine direc tors, six of whom were to be elected by farmer borrowers of the banks. It is true that the federal board now exercises the power of executive man agement, under the temporary form of organization of the banks now exist ing. But the federal board to date has /been able to keep its dictatorship of the banks, to the exclusion of farmer management, only because of the trick put over on the farmers and explain ed in our last issue. The present recommendation of the board of course would put the banks PERMANENT LY in political control of the federal board, a control they have wrongfully' held to date only because of the be trayal of the farmers by the board and congress. WOULD WIPE OUT LOCAL ASSOCIATIONS 2. That the federal land banks be authorized to make loans direct to borrowers from now on. At present the farmer borrower joins a local co operative association before he gets his loan. He must buy stock in his local association, which in turn buys stock in the land bank in whose dis trict the local association is located. By cutting out the local co-operative association the federal board would of course cut out the machinery for the farmers electing their own directors of the banks, as promised in the orig inal law. vif How the Federal Farm Loan Board Proposes to Wipe Out the Original Splendid Provisions of the Federal Farm Loan Act 3. That existing local borrowers' associations, called the "federal farm loan associations," be liquidated and wiped out, their members becom ing direct borrowers of the banks, instead of bor rowing through the local associations. Besides accomplishing what recommendation No. 2 accom plishes, this and No. 2 together would destroy one of the chief securities for the federal land bank bonds. At present the borrowers of the banks are individually responsible for the loans made, and besides that they are JOINTLY RESPONSIBLE through the local associations. The members of the local co-operative associations are jointly responsi ble for the loan of any member. If you destroy this latter additional security for the bonds, through ^wiping out the local^ associations, you of course lessen the value and salability of the bonds. This undoubtedly would mean that the bonds would have to bear a higher rate of interest to make them readily salable. A higher rate of interest on the bonds would of course increase the interest rate charged farmer borrowers. 4. That the federal farm board be Empowered to remove secretary-treasurers of the local co-opera tive borrowers' associations. This of course would give the federal board power which they do not now have to dictate to and interfere with the affairs of the local associations. This recoYnmendation if adopt ed by congress, would give the federal board unwar ranted power over the local co-operative associations until such time as the local associations could be wiped out entirely under the other recommendations. 5. That a corporation, to be controlled by the presidents of the federal land banks and" the mem bers of the federal farm loan board, be created to manage, for all the banks, the business of buying and selling farm loan bonds, including the appor tionment of the proceeds from the .sale of bonds among the several land banks. Regarding this recommendation, Lester C. Manson, attorney for the national union formed by the local borrowers' associations, says: WHERE THE LIGHTNING STRUCK im&v. a Co-operative Loan System iA^Wa» —Drawn expressly for the Leader by J. M. Baer. PAGE SIX ti. H" 1 It was the intention of the fafm lokn act that the several land banks would each dispose of its own bonds, when and. where it could, and if a borrower elected, bonds should be delivered to him instead of cash. The law contemplated that when a bank had accumu lated mortgages amounting to 450,000 or more, it would issue and offer bonds for sale. If the sale of bonds did. not produce sufficient money, and a borrower elected, he could take bonds and sell them to his local bank, or to his friends and neighbors. Thus these bonds woqld always be available for sale, and money would keep coming into the system as fast as the market absorbed them. It is therefore plain that under the original law each land bank was to issue its own bonds, as the needs of the farmers for loans in its region demand ed. Under recommendation No. 5 this local self government of the banks would be wiped out. The floating of bonds and the apportionment of their proceeds to the various land banks would be dic tated by the new -subsidiary corporation proposed by and controlled by the federal board. In other words, a bureau in Washington, D. C., subject to political pull and log-rolling, would determine how much money each land bank would have to loan to the farmers. The right of the land bank in any district to determine this point for itself, in accord ance with conditions and demands of the farmers in its district, would be abrogated. Could bureaucratic aggrandizement and thirst for power, at the expense of co-operation and local self government, go further than these five recommen dations of the federal farm loan board go? FACTS SHOW MANAGEMENT HAS RETARDED GROWTH OF SYSTEM There is emphatic need for the federal land banks to .organize an efficient bond-selling agency of their own, to float the farm loan bonds. This would pre vent the banks being put in the power of the big financial interests and of the private bond sales agencies and brokers. Such an agency could dis pose of the bonds direct to the public, if necessary, even should a boycott against the bonds be organ ized by° the financial interests and private money lenders.^ But to organize a bond-selling corporation that would also control the amount of bonds any one of the 12 land banks could float, and thus control the amount of loans each of the banks could make, would be in direct conflict with the original self-government intention of the law On the point of the amount of bonds the land banks should float hinges another serious criticism of the pres ent management of the banks. Re member that the banks are now man aged by TEMPORARY boards of di rectors appointed by the federal board, and that the federal board cqntrols the whole system. The federal board has operated the banks on a very con servative and reactionary policy. From the start they have slowed down and putf brakes on the amount of loans that could be made to farm ers. The land tianks have made loans amounting to only from $400,000,000 to $600,000,000. The farm mortgage debt of the country is around $5,000, 000,000. The federal land banks, though doing business for four or five years, have made loans amounting to only 10 per cent of the total farm land mortgage debt. Ninety per cent of the farmers who have land loans are still in'the clutches of the private money lenders. The land banks have only scratched the surface of their possibilities. Why has not more pro gress been made in freeing farmers from the private money lending^ sys tem? Have the farmers failed to apply for land bank loans? No the land banks have rejected and are rejecting applications for hundreds of millions of dollars in loans. The banks haye approved loans for hundreds of mil lions Of dollars which have NOT YET BEEN MADE, held up from lack of money from bond sales. Could the necessary land bank bonds be sold? Yes these bonds fire one of the best, if not the best investment in the coun try today. They have certain tax free & I .3 -r ft Ti 1* t- :v.:\ •"i If V' -.-wi*1 •Hj