required, but the organization must file its written consent as a condition precedent to securing rediscount privileges.

The federal intermediate credit banks were to be examined and audited at least once a year by the Federal Farm Loan Board, which had to make the results public. Each bank had to make not less than three reports a year to the Board stating its resources and liabilities, and such special reports as the Board might require. Upon the request of any federal intermediate credit bank and with the approval of the Board the land bank appraisers were to investigate and report on the products covered by warehouse receipts or shipping documents and the live stock covered by mortgages, which had been given as security for notes or other obligations. Land bank examiners could investigate and report upon the condition of any organization, except national banks, to which any federal intermediate credit bank might be contemplating making a loan. In such cases the cost of the examinations was to be assessed against the bank, trust company, or other organizations investigated.

The Federal Farm Loan Board was authorized to make such rules and regulations as it might deem necessary for the efficient execution of the law.

Penalties were provided for false statements of fraudulent acts on the part of officers, agents, or employees of the banks or of persons doing business with the banks, for examiners who might accept loans or gratuities from organizations examined, and for counterfeiting the debentures or other obligations issued by the banks.

The Banks in Operation. Immediately after the passage of the Agricultural Credits Act the Board called a conference of the presidents of the twelve federal land banks and made arrangements for the establishment of the federal intermediate credit banks. No organization problems comparable to those which had delayed the initial operations of the mortgage credit system were encountered, and within a few months the intermediate credit banks were ready to function.

The Board, however, had to decide on certain policies which were included in its rules and regulations." Among the more important decisions were the following:

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(1) The term staple agricultural products was defined to mean grain, cotton, wool, tobacco, peanuts, broom corn, beans, rice, alfalfa and red-top clover seeds, hay, nuts, and canned fruits and vegetables; but until the special warehousing problems connected with nuts and canned fruits and vegetables should be solved no loans or advances could be made on them.

(2) Warehouse receipts were acceptable from any warehouse icensed an bonded under the Federal Warehouse Act or from any warehouse in a ate having laws and regulations which have been approved by the Board.

(3) A collateral agrement to provide additional security to preserve the necessary lation between market prices and loans was to accompany all loans against warehouse receipts c: upon live stock.

(4) Coöperative buying associations could not borrow directly from federal intermediate credit banks.

(5) The funds available for orderly marketing were not to be used for the speculative holding of farm products.

(6) No loans were to be made or paper acquired, at least temporarily, with a maturity longer than nine months from the date of the transaction:.

The Board also decided to call only a part of the $60,000,000 of capital available under the terms of the law and to issue some of the debenture bonds as soon as funds were needed. By doing this the mainder of the capital would serve as a reserve for future use and the public would become acquainted with the debentures, thus preparing a market for them in large amounts. Accordingly, only $20,000,000 of capital was used, each of the banks having $2,000,000, except those at Springfield, Baltimore, St. Louis, and Omaha, which had $100,000 each. An issue of debentures amounting to $30,500,000 was sold during the second half of the year 1923. These bonds had a maturity of six months and bore an interest rate of 4 per cent. Because of the limitations fixed by the law this determined the loaning and discount rate of the banks at 5 per cent and excluded from the privilege of being discounted with the banks all paper where the original borrower had been charged more than 7 per cent.

The operations of the federal intermediate credit banks up to December 31, 1923, consisted of direct loans amounting to $34,

697,347.82 and rediscounts of $9,410,972,15, leaving a total outstanding of $42,732,430.42 after deducting the repayments, which nad amounted to $1,375,889.55. The direct loans to coöperative marketing associations had been made on the following collateral:

The rediscounts which had formed an unexpectedly small proportion of the business of the banks had been made for the fol

The expenses of the federal intermediate credit banks were so smail, due to their connection with the federal land banks, tat their operatic..s up to December 31, 1923, when they had been in operation only about six months showed a net profit of $304,542.40. In accordance with the law, half of this profit was turned over to the United States government as a franchise tax.

The federal intermediate credit banks have been established so short a time that it is not yet possible to estimate their importance in the agricultural credit system of the country. Much will depend on how extensively the country banks avail themselves of the rediscount privilege offered them.

CHAPTER II

ACTIVITIES

The activities of the Federal Farm Loan Bureau fall into three groups. The first group includes those concerned with the formulation of policies for the credit systems under the control of the Federal Farm Loan Board. The second group of activities includes the supervision of the operations of the various organizations composing the credit systems to make sure that they are in accordance with the law and the policies adopted by the Board. The third group, which is of relatively minor importance, includes the collection and dissemination of information about the farm mortgage system and the intermediate credit system.

Formulation of Policies. Although the formulation of policies is the most important duty of the Federal Farm Loan Board, no description of the method in which the duty is performed can be given except to say that the decisions of the Board are made by a majority of its members. An attempt will be made, however, to indicate the most important subjects on which the Board has to determine policy. It will be seen that there are two kinds of problems presented to the Board for its decision. One type is of such a nature that once a policy is agreed upon there is little likelihood that the problem will again present itself. The other kind includes those problems which constantly recur and frequently under changing circumstances, so that policies on them have to be reviewed and altered.

The federal land banks present many problems, both of the recurring and non-recurring variety, for which the Board has to formulate policies. The division of the country into twelve land bank districts is an example of a case where once a policy is determined upon, the decision is practically final. It is true that the law says that the boundaries of the land bank districts "may be readjusted from time to time in the discretion of said board,"

but the possibility of such action on the part of the Board is negligible. Similarly, the selection of the twelve cities in which the federal land banks are located is almost certain to remain unchanged. The definitions of certain terms, such as "equipment," "improvements" and "actual farmer," which the law required the Board to establish, are likely to continue indefinitely in their present form, although in the first few years of its existence the Board had to revise its definitions on several occasions. Other policies embodied in the Rulings and Regulations of the Board, such as its rules governing the charges that can be made to borrowers, are subject to change, but the changes are in minor details and are a change in the application of policy rather than a change in policy.

Among the important recurring problems connected with the federal land banks which the Federal Farm Loan Board has to meet is the appointment of some of the directors of the banks. As pointed out above,' the Board appoints three of the seven directors of each of the federal land banks and selects a fourth from a list of three names submitted to it by the national farm loan associations of the land bank district in question. The periodical election of these directors necessitates a decision on the part of the Board as to the general policy it desires for the federal land banks.

Of perhaps greater importance in its effect upon the operations of the system, is the power of the Board to alter at its discretion the rate of interest to be charged by the federal land banks on their loans and to grant or refuse authority to any federal land bank to make any issue of farm loan bonds. The policy adopted on these two fundamental questions is of the greatest consequence to the operations of the system. So far the Board has in every case approved every issue of farm loan bonds for which proper security has been offered and the other formalities have been complied with. It was in this connection that the Board in 1919 adopted the policy of not allowing the federal land banks to loan more than $100 an acre, irrespective of the actual selling price, thus illustrating one way in which the system is controlled by the policymaking powers of the Board. In the case of the rate of interest to