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:
“To speak impartially, the best men that I know are not serene, a world in themselves. For the most part, they dwell in forms, and flatter and study effect only more finely than the rest.”
—Henry David Thoreau (1817–1862)
“Whenever any form of government shall become destructive of these ends, it is the right of the people to alter or to abolish it, & to institute new government, laying it’s foundation on such principles & organising it’s powers in such form, as to them shall seem most likely to effect their safety & happiness.”
—Thomas Jefferson (1743–1826)
“Our rural village life was a purifying, uplifting influence that fortified us against the later impacts of urbanization; Church and State, because they were separated and friendly, had spiritual and ethical standards that were mutually enriching; freedom and discipline, individualism and collectivity, nature and nurture in their interaction promised an ever stronger democracy. I have no illusions that those simpler, happier days can be resurrected.”
—Agnes E. Meyer (1887–1970)
“A good farmer is nothing more nor less than a handy man with a sense of humus.”
—E.B. (Elwyn Brooks)