Section 27 of the Federal Farm Loan Act of July 17, 1916 (Act), ch. 245, 39 Stat. 360, as amended January 18, 1918, ch. 9, 40 Stat. 431, provides that Farm Loan Bonds issued under the provisions of the Act by Federal Land Banks or Joint Stock Land Banks shall be a lawful investment for all fiduciary and trust funds, and may be accepted as security for all public deposits.
Appellant shareholder sought to enjoin appellee trust company from investing appellee's funds in farm loan bonds issued by federal land banks or joint stock land banks under the authority of the Federal Farm Loan Act of July 17, 1916, ch. 245, 39 Stat. 360, as amended January 18, 1918, ch. 9, 40 Stat. 431 (the Acts), on the ground that the Acts were unconstitutional exercises of Congressional authority. Appellant asserted that although appellee was authorized to buy, invest in, and sell government, state, and municipal bonds, appellee could not do the same in bonds, stocks, or securities not authorized to be issued by a valid law, or which were not investment securities. The district court held in appellee's favor. Appellant sought review of the decision. The Supreme Court of the United States affirmed the decision in favor of appellee.
Were appellee trust company’s investments in farm loan bonds issued by federal land banks or joint stock land banks unconstitutional?
The investing acts of appellee trust company were constitutional. The creation of the banks and the grant of authority to them to act for the government as depositories of public moneys and purchasers of government bonds brought the banks, including appellee, were within the creative power of Congress to facilitate the making of loans upon farm security at low rates of interest.