I make this provision because no local association could carry all its losses, and yet it should be responsible for a sufficient amount of loss to impose a serious obligation upon the local association recommending the loan, and also a serious obligation upon the state institution for having finally approved and completed the loan.
Thirteenth: All the expenses of the state institution incurred by way of caring for the business of all the local associations should be paid by a percentage charge on all the business done in the state. This is desirable so that the mortgages shall go to the national organization, free and clear from any charges and obligations whatever.
Fourteenth: I would have a national organization which should fix the rate of interest to be paid by the borrowers, and the rate of interest of all the bonds and debentures sold. All bonds and debentures should be sold by the national organization, which should be under national supervision for the purpose of giving to the debentures the highest possible credit wherever they may be offered for sale.
Fifteenth: I think that one-half of all the capital of all the local associations in the United States should be transferred to the national organization, and be held and treated by it as if it were its own capital. And such capital shall be holden to the debenture holders as a guarantee, and for the purpose of securing the best possible credit for the national organization.
Sixteenth: The national organization, and all state associations, and all local associations, shall be under the supervision, and be examined by an auditor appointed by the President of the United States.
Seventeenth: To secure unqualified success for a Land Credit Bank in the United States, no business should be attempted until the capital paid in shall amount to at least $25,000,000; that is, until the national organization shall have a cash capital of its own of $12,500,000 in order that its debentures may bear the lowest possible rate of interest that a large capital with a national organization under national supervision will insure.
Eighteenth: The debentures of a national organization should be free of all taxes, local or national.
In general these are my recommendations, which I hope will be incorporated in the measure we are to prepare.
Mr. Merchant: Mr. Farmer, I notice that you propose to confine the loans to agricultural land. Don't you think that a good and equally helpful business could be carried on by loaning money on city and urban property?
Mr. Farmer: Possibly that is so, but I do not think so, and in any event, I never would combine these two classes of loans. If we are to have national Land Credit Banks doing a country and city or urban business, let them be kept entirely separate. The general business permitted and carried on by the Crédit Foncier is a just ground for severe criticism. It is permitted to take deposits. An American Land Credit Bank should have no such power. It should be confined, in my judgment, with extreme strictness to loaning money upon improved agricultural land. Mind you, I do not say that there should be no other Land Credit Bank to do some other kind of business. That is a matter for future and separate consideration.