Federal Farm Loan Act - Effect On The Rural Farmer

Effect On The Rural Farmer

The most visible component of the Act were the loans to individual farmers and their families. Under the act, farmers could borrow up to 50% of the value of their land and 20% of the value of their improvements. The minimum loan was $100 and the maximum was $10,000. Loans made though the Act were paid off through amortization over 5 to 40 years.

Borrowers also purchased shares of the National Farm Loan Association. This meant that it served as a cooperative agency that lent money from farmer to farmer. This was heavily influenced by a successful cooperative credit system in Germany called Landschaft.

The next most visible component of the Act were the mortgage-backed bonds that were issued. The rate of interest on the mortgages could be no more than 1 percent higher than the rate of interest on the bonds. This spread covered the issuers' administrative costs, but did not lead to a significant profit. In addition, the maximum rate of interest on the bonds was 6 percent, ensuring that borrowing costs for farmers was often much lower than before the Act was passed.

The act furthered Wilson's reputation against trusts and big business. By providing small farmers with competitive loans, they were now more able to compete with big business. As a result, the likelihood of agricultural monopolies decreased.

While Wilson's commission suggested that short-term credit also be incorporated in any nationalized credit system, the Act lacked this crucial component. Due to increased competition and the need for agriculture machinery, a system for short-term credit was incorporated into the current system in Agricultural Credits Act of 1923.

Sponsored by Senator Henry F. Hollis (D) of New Hampshire and Representative Asbury F. Lever (D) of South Carolina, it was a reintroduced version of the Hollis-Bulkley Act of 1914 that had not passed Congress due to Wilson's opposition.

Read more about this topic:  Federal Farm Loan Act

Famous quotes containing the words effect on, effect, rural and/or farmer:

    The use of symbols has a certain power of emancipation and exhilaration for all men. We seem to be touched by a wand, which makes us dance and run about happily, like children. We are like persons who come out of a cave or cellar into the open air. This is the effect on us of tropes, fables, oracles, and all poetic forms. Poets are thus liberating gods.
    Ralph Waldo Emerson (1803–1882)

    I guess what I’ve really discovered is the humanizing effect of children in my life—stretching me, humbling me. Maybe my thighs aren’t as thin as they used to be. Maybe my getaways aren’t as glamorous. Still I like the woman that motherhood has helped me to become.
    Susan Lapinski (20th century)

    Some bring a capon, some a rural cake,
    Some nuts, some apples; some that think they make
    The better cheeses bring ‘em, or else send
    By their ripe daughters, whom they would commend
    This way to husbands, and whose baskets bear
    An emblem of themselves in plum or pear.
    Ben Jonson (1572–1637)

    Well, farmers never have made money. I don’t believe we can do much about it. But of course we will have to seem to be doing something; do the best we can and without much hope. The life of the farmer has its compensations but it has always been one of hardship.
    Calvin Coolidge (1872–1933)