Rock Island Argus., 1913-10-10
EASIER CREDIT FOR THE FARMER.


vide easier credit for farmers, is made
in ignorance of the facts. While the
bill does not go as far in the direction
of solving the problem of rural credits
as some would have it go, the reason
is not Discrimination on the part Of
the administration to approach this
problem, but to approach it In the cur
rency bill. The administration plans,
as one reform to be undertaken at a
regular session Of congress, the mat
ter of rural credits, In the study of
which a commission is now engaged
and soon will report. President Will
son and the democratic majority be-
lieve in doing one thing at a time,
and doing that well.
Precisely as the needs of business
commercial, industrial and fiscal will
be served by the new bill, so will the
needs of agriculture be met. Section
IA of the measure provides for the
rediscounting Of paper possessing a
maturity of not more than 80 days
in one case and in another case paper
possessing a maturity of not more
than 120 days. In the same section
provision is made for the making of
acceptances by national banks (or
such other banks as become stock
holders in federal reserve banks) and
the rediscounting of these acceptances
| by federal reserve banks.
The criticism of the measure is that
the farmer doesn't borrow on 90-day
or 129day paper, that his loans have
longer duration, and that consequent
ly the banker is not positioned to loan
to him under the bill since the banker
can rediscount no paper possessing a
maturity of more than 120 days, with
federal reserve banks. In his address
to the house presenting the major
ity report on the currency bill, Chair.
man Glass took cognizance of this crit.
icism, saying:
There has been a great deal
of Misrepresentation in many quar-
ters with reference to the meaning
of the 90-day provision in this par
agraph. The claim has constant
ly been made that this 90-day pro-
vision would be of no service
whatever to the farmer, because
the farmer never bothers with SO
short a loan as 80 days. This, Of
course, is an entire misapprehen-
, sion of the whole situation. The
! terms of the bill do not provide
, that 1t shall not be discounted un-
I'll 1t is within 80 days Of matur-
ity. In other words, the bill en-
ables the banker who holds the
farmers paper to shorten the life
|, OF the farmers paper by 80 days
and to that extent get new funds
with which to aid the farmer. Now,
just what does this mean? Sup
pose that the loans Of a farming
a community made by national
/, banks will average 90 days, with
!, a renewal for 30 days, or six
months in all. II is evident that
a bank which has loaned, let US
say $4,000. for four months
would be able TO present this
paper a. the end of the first 80
D days OF the life Of the loan and to
:. get rediscount for the remain.
ing 80 days. That is to say. II
would be able TO draw back the
amount of the farmers credit at
g the end of the first 80 days and
d to relend that sum to other people.
; When the time same for renewal
, the bank would, of course, have to
- be in position to pay its loan or
9 rediscount to the federal reserve
,r bank If 1t extended the farmers
II accommodation for another 90
:, days out OF new funds that have
IL come in meanwhile: but it could
again rediscount at the end of
es another 3e-day period. In other
I'd words, If the community were do.
ing Its banking upon a four
~ months period OF credit, the bank
- would be able TO shorten this
In practice to a 30 day period of
credit It. is entirely conceivable
~ that by this process it should prae.
ueally treble the amount Of bank.
- Ing capital which II could, If neces-
"a sary, Place at the disposal of the
~ community.
p NOW, let us suppose that the
- country bank, as is no doubt fire.
quently the case, does not have a
- steady run OF loans such as would
nc justify the use Of the method lust
De described. Let us suppose instead
OF OF that that the demand for loans
is likely TO be punched" in the
late spring and then to slacken
IN so that the funds OF the banks
are tied up on, let us say. sf1
Eat months paper. Under the 120-day
Is provision OF this bill such banks
to would be able TO take six months
ON paper as soon as 1t was tvso
months old TO q federal resery.
eat bank and rediscount It. In othe,
ted words, funds that would ordinar
ing lily have been tied up for foul
ich months longer viii now be actual
ish ly available 70 meet such addition
no a. demands as may come TO III,
in bank in the course Of the summe,
!. and early autumn. Here. again
the u is evident that the loan periot
are being practically cut down by two
the thirds the loaning power OF tn,
sits bank Is trebled. assuming that
by is able 70 obtain from the federa
ros- reserve bank the rediscounts 70
to which II has the basis IN the sAan