petence, misrepresentation, graft, fraud or failure to meet just obligations.

Penalties. It will be observed that section 31 of this act, as reprinted complete in the Appendix to this work, provides penalties not exceeding $5,000 fine or one year's imprisonment, or both, for about any or all offenses that may be committed against the law. The secret service division may be employed to detect, arrest and deliver into custody anyone violating the statute.

Any attempt to impose upon the system, or to secure loans unfairly or issue bonds without adequate security, will be visited with condign punishment. The whole plan is admirably designed to guard against any form of abuse, and the penalty for violation is such as to deter evil doers.

Investors and Thrift. The principles epitomized in this chapter are enforced in order that the credit instruments resulting from the system may prove of the utmost attractiveness to investors. Indeed, the theory is that federal farm loan bonds in small denominations may become a wonderful incentive to thrift on the part of people whose little funds now "slip through their fingers," as well

as popular among the well-to-do, and as large investments for wealthy individuals, corporations and insurance companies.

What social and civic benefits may not be furthered when all the people actually own an interest in the ground that feeds them, by virtue of their investment in farm loan bonds!

Because some or all of these principles are relatively new in their application, the federal farm loan act also provides that existing banks under state law may act as agents for federal land banks by methods which seem to combine safety with practicability. For the same reason joint stock land banks may be incorporated under the federal farm loan act-one of its features for which much has been said for and against.

CHAPTER THREE

THE INDIVIDUAL FARMER'S PART

HE American farmer is extremely individualistic and independent. Only

TH

now does he begin to realize the power of joint action. Heretofore he has been slow to co-operate with his neighbors, partly because he was afraid of becoming mixed up in some personal liability for others' obligations.

Fear of Joint Liability. While comparatively few farmers keep books of account, nearly all farmers know at all times about where they stand financially. This is one reason why they shun anything in the nature of joint and several obligation for the debts of others. So many farmers have suffered loss by personal indorsements of others' paper, or by becoming personally responsible for the obligations of unincorporated effort, that now they dread anything of the kind, just as a burnt child dreads the fire.

Farmers' Integrity. Another reason for this conviction on the farmer's part, is that he has a very high sense of financial responsi

bility. In banker's parlance, he may be slow, but almost inevitably the farmer is good for anything he contracts for. Indeed, this is one secret of the present vast and constantly increasing agricultural trade. Because the responsible farmer has such a high sense of personal and financial integrity, is another reason why he is loath to incur anything in the nature of unlimited liability.

Many a farmer has joined with his neighbors in informal effort at buying together or selling together, only to find that some one member or a very few irresponsibles fail to carry their share, which he pays as a moral debt, though he has no legal obligation to do so.

This speaks well for the credit of the responsible farmer at the same time that it suggests business efficiency in dealing with the relatively few irresponsibles, and enforces the need of practical means of helping farmers to help themselves.

Brilliant Success of Co-operation. On the other hand, brilliant success has been achieved by farmers' elevators, co-operative creameries, mutual fire insurance companies and other co-operative enterprises in which each member's liability is strictly limited, yet

which enjoy all the benefits of associated effort through efficient management.

When farmers join in such an incorporation they know that their liability is strictly limited to the amount of money they pay for their shares. Each and all know that every member has paid in his money on the same basis. They realize that the success of such an incorporated corporation upon the co-operative plan depends upon the extent to which it is patronized by its members, as well as upon the business ability with which it is conducted.

Efficient Management. Recognition of these essentials inspires the confidence that breeds success. By starting on this basis and adhering to it, any form of associated effort rests on a firm foundation, for it cannot be reiterated too often that co-operation is "not a new plan of transacting business, but rather a different method of dividing the fruits of industry. The same principles that govern business success in acquiring profit on capital," apply to the acquirement of savings to cooperating creditors and to the insurance of fair returns to investors in federal farm loan bonds.