The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1913-06-25

farmer needs money each year. Nine
months MORTGAGES even II the country
banks should jump at the opportunity
to take them. would not strike at the
roots of the evil.
Those who desire farm credit legisla-
ton as a part OF the Federal Reserve
act want the country banks TO be author
lied to make mortgage loans OF f1ve or
ten years, such paper to be eligible for
| sale to the Federal Reserve Banks and
for the issue either OF the Treasury
special note issue.
Short-tfme Notes.
Briefly, the situation which the far
mers have to meet is this. He must bor-
row his money on short time notes as
the result Of the provisions Of the ma
tional banking law. which prohibits loans
on real estate. He must borrow his
money early In the spring in. order to
plant and cultivate his crops. When har-
vesting time comes his notes have all
but reached maturity. The bankers are
hammering at him to meet his note.
Therefore as soon as his crop Is har-
vested he rushes II to market
The effect of hundreds OF thousands
Of farmers throwing their crops onto an
unprepared market at one season of the
year is that prices Immediately tumble.
Then the commission merchant and
warehouseman steps in, buys in the
crops at the lowest possible figure. and
holds them until the market is ready to
receive them. The farmer takes his de-
pleted fund. pays his banker the prin-
cipal and a good rate of interest and
keeps what is left.
But another element of cost also en-
tiers into the problem. Because Of this
sudden thrush of crops on him, the COM
mission merchant and warehouseman
finds that he has not sufficient accom-
modations for what he has bought.
Therefore, he uses freight cars and rail-
road terminals to store his goods until
he can find good market. For this
privilege he is able TO pay one dollar a
day per car. The plan works well for
him but II forces the railroads to main
tain an abnormally large supply of
freight cars the year around for use only
a few months each year. and then prin-
cipally as storehouses. In addition 1t
demands the maintenance of abnormally
large and expensive terminals, and all
such expenses come out of higher freight
rates.
Warehouses Are Suggested.
The farmer has only one alternative.
He can get his money for a longer
period of time by going to state or pri-
vate banks and plastering on mort
gage, upon which he pays from ten TO
twelve per cent. And even this is diff
cult because the banks have no clearing
house through which they can place
ca silly these mortgages with the investing
public.
The answer to the problem is widely
believed to be in community warehouses,
wherein farmers can hold their crops
until the market calls for them and will
pay a fair price. Obviously this would
be impossible II a large proportion Of the
agricultural population is facing the
of meeting note and has no
means to meet that note except by
realizing Immediately on his crops.
Sponsors for the plan TO be proposed
to the two banking and currency COM
mittees declare that their plan will fur
nish a ready market for farm mortgages, |
and will make them more easily acces- |
sible to the investing public and will. |
encourage the banks to buy |
them, in as much as they will thus be- |
come almost il not quite as liquid an
asset as any otner form of commercial |
paper. This will make IL possible for |
the farmer to get his money on longtime |
mortgages without paying the 10 and Il |
per cent he usually is forced to pay now. |
The supposition seems to be that much |
Of this money Immediately would be in |
vested in community warehouses through |
which the farmer would save to himself |
the profits which the warehouseman now |
extracts.
With a governmental commission now |
studying the question of rural credits |
in Europe. II is not considered probable |
that Congress will see fit to anticipate
heir report by enacting into legislation
l comprehensive plan at this session 1t
IS possible, however, in as much as the
President and his currency advisors saw
1t to include the provision for short-time
arm loans, they will agree to an extern
sion of this provision even though il may
a slight change in the plan
'or issuing Treasury notes.