This was an important piece of legislation because small farmers constituted the majority of households in America at that time. 

Wilson's New Freedom Reforms: Federal Farm Loan Act for kids
President Woodrow Wilson, like his predecessors Theodore Roosevelt and William Taft, was a firm supporter of the Progressive Movement and Progressive reforms. His New Freedom polices included the passing of the federal law known as the Federal Farm Loan Act in order to help struggling farmers and ranchers to compete against larger farming businesses.

Federal Farm Loan Act for kids: Background History
Credit from commercial banks was readily available for business and industry but credit was scarce and loans were short term, and at high interest rates for agriculture. Life was a continuous struggle for the small farmers who had made various efforts to ease their situation by the organization of the cooperative Granger Movement, the coalition of farming groups in the Farmers' Alliance, and formation of the Populist Party whose aims were to increase the political power of farmers and to work for government legislation in their interest.  All of these organizations had called for government regulation of currency and banking reform to assist them with the insufficient money supply. President Wilson was determined to give them the help that small farmers had requested for so long.

Federal Farm Loan Act for kids: The Country Life Commission and European Commissions
During the presidency of Theodore Roosevelt, the Country Life Commission and congressional committees had studied the problems facing rural farming families and concluded that more farming cooperatives should be developed together with a cooperative credit system for farmers. The recommendations of the Country Life Commission were investigated by both President William Taft and President Woodrow Wilson who sent commissioners to Europe to study cooperative land-mortgage banks and rural credit unions that promoted agriculture and rural development. The commissioners recommended that the US established a system of agricultural banks to provide both credit to meet the needs of American farmers. The German Landschaft system was especially mentioned in the recommendations. President Woodrow Wilson and Congress responded with the 1916 Federal Farm Loan Act.

Purpose of the Federal Farm Loan Act for kids: Why was the amendment to the law passed?
The purpose of the Federal Farm Loan Act was designed implement the recommendations of the farming commissions to help small farmers and ranchers by making it easier for farmers to secure loans, obtain credit, restore free enterprise and a competitive market for agriculture.

• The Federal Farm Loan Act of 1916 established a Federal Land Bank (FLB) in each of 12 districts across the country as indicated on the map

• Under the provisions of the Federal Farm Loan 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 loan was $10,000

  • Loans made though the Act were paid off over 5 - 40 years

• Hundreds of National Farm Loan Associations (NFLA's) were established to act as agents for the Federal Land Banks

• Part of each farmer’s loan bought stock in the association, making the individual farmers owners of the National Farm Loan Associations