Lower coast gazette., 1913-06-07

rate paid on deposits and that paid by the
members on their loans would suffice to pay
for the expenses of operating the society and
to build up a reserve fund. Since the services
Of members of the bank would be given with
out charge and only one paid employee would
have to be retained, such a small margin OF
profit would probably prove ample. 1t the
deposits did not prove sufficient to meet the
demands of the farmers, loans could be sought
from the outside banks in the name of the So
ciety. Certainly the banks which would not
find the requests of the individual farmers
worth bothering about would gladly lend at
low rates to such an institution since it would
have the backing of an entire community of
farmers. The chances of loss to the farmers
who make themselves responsible would not be
great. No farmer would be admitted to mem
bership who was not known to be trustworthy.
Whenever a loan was granted the other farm
ers or their elected committee would have to
pass upon it and be convinced that the loan
would be safely invested. Lastly, as this socie-
ty would be lending exclusively or mainly to
farmers, the loans would be granted upon terms
satisfactory to farmers, an accommodation
which it is not always easy to secure from COM
mercial banks.
The value of the European institution is
that they are designed primarily for the bene-
fit of the farmers and the small borrower. The
rural banking societies of Europe are %controll-
ed by farmers and lend almost entirely to far
mers. Frequently the reason why a farmer in
the United States cannot get credit is only that
the banker cannot keep in close enough touch
with him. His credit may be perfectly good.
Even the banker would not doubt it. But the
banker can't maintain the intimate touch with
mis- affairs that he can with the merchant whom
he sees constantly. The merchant is listed
by mercantile agencies; he is doing business
with the banker practically all the time. More
over farmers require money for longer terms
than merchants and the banks do not like to
depart from their usual methods to ccommo
date them. The farmer is the outsider. The
banker doesn't know him; can't "get a line on
him" the way he can on the merchant. OF
course where there exists a bank with a board
of directors composed mainly of farmers
and doing business with the farmers con-
stantly, an entirely different situation is pre-
sented. But unfortunately such banks are not
within the reach of every farmer. And it is
the farmers who have not such banking ac-
commodations that need some such institutions
as the European cooperative banks.
AS an instance of the use to which such cred
it institutions could be placed, it might be worth
while to speak of a little enterprise in farmers
notes recently undertaken by a group of bank
ers. Farm implements are frequently sold for
part cash and the balance on the purchasers
note. Such notes bear a reasonable rate of in
terest. AS a result of this practice, the farm
implement manufacturers find a very consid-
cradle portion of their profits tied up in notes.
Collections have to be made and allowance for
hol po+oc II 1+o ro+bo, tbic rootbo1 of doipce
business is not very Satisfactory to the nipple
ment dealers and they would probably be very
glad to see their goods sold on a cash basis.
to get rid of these notes and realize cash on
their sales as quickly as possible. Last winter
a group of bankers purchased some $5,000,000
of such notes and deposited them in trust.
They we're guaranteed by the implement deal
ers and made a frst-class security. The bank
.ers then issued 5000, 900 of bonds based upon
these notes. The bonds were sold to bring their
purchasers from 5 IA to 6 per cent. It is rea-
sonable to suppose that the farmers notes drew
only 6 or 7 per cent, probably 6. Where, then,
did the bankers find their profit? The notes
had been bought at a discount. The nipple
ment dealers had charged the farmers more
for the machines than they would have had to-,
had they been sold for cash. If the farmers
who gave these notes had their own credit in
situations, they could have obtained the cash
for themselves at the six per cent asked by the
dealers, and could have bought the machines
at a cash figure. It is probable that if they had
a strong credit institution Of their own, they
could have secured the money at a lower rate
than the dealer allowed them on their note. AL
so if they had carried their cooperation beyond
the first stage Of banking and had organized
a cooperative buying society they might have
bought those machines at a dealers price or at
wholesale. The same thing would apply to ev-
erything purchased for the operation of the
farm. Everything would be bought at the very
best terms. The credit to make these purchases
would be extended easily and at reasonable rate.
These things make the difference between the
department store merchant and the little man.
The one buys in larger lots; he is able to watch
the market and buy, at the most favorable mo-
ment. He secures the credit to do this at the
lowest obtainable rates.
The task which the farmers would have to
accomplish to reap the benefits of such a credit
system is not inconsiderable. In the numerous
articles which have appeared in the daily press
regarding European credit systems the writer's
have generally confined themselves tn q state