The Birmingham age-herald., 1914-12-05
EXPLAINS EFFECT
 0F COTTON FUND
St. Louis Man Says Borrow CT Will Not Have to Pay
 Over 6 Per Cent

A. w. Douglas, vice president of the Simmons Hardware company of St. Louis, writes letter to The Age-Herald explain ing the Wade cotton loan fund plan and pointing out that borrowers from this fund do not pay more than per cent for the money they get. He writes:
 To the Editor of The Age-Herald:
 The cotton loan fund plan originated in a desire on the part of the St. Louis busi- ness men and bankers to afford prompt relief to the exceedingly serious situation in the south, situation with whose cause and with whose effect you are entirely fla miliar. The purpose of the fund was to provide a sufficiently large sum of naoney such as would create movement in cot ton, enable the domestic and foreign cot ton spinners to be sure of stable mar ket so that they might with safety make their purchases and which would also en- able the farmers to sell their product when otherwise there was absolutely no market for cotton, and when business in the south was at dead stand still.
 It was felt likewise that the success of this plan would make possible the open ing of the cotton exchange and also ere ate a sound, hopeful sentiment through the south that would result not only in moving cotton, but likewise in sustaining the price at some reasonable figure. All these things have come to pass within a very brief period. I am sure you will agree with me this is due largely to the successful formation of this cotton loan fund. I assure you most positively that it was the only workable plan that was proposed which 1t was possible to put into execution; 1t was either this plan or noth- ing.
 If you will analyze the plan carefully, you will find that the farmer pays only per cent interest, for his money, though he does for the time being deposit as a guarantee an amount equivalent to an additional 3 per cent. The purpose of this deposit is merely protection to investors in this fund, and it will earn per cent while lying in the guarantee fund. The best estimate Is at the most that not over one-eighth of 1 per cent of this de- posit will be needed to pay for the nat ural administration expenses of the fund, You must remember in this connection that all committees and all bankers serve without any compensation of any kind and furthermore that no bankers charge any commission for making these loans. After deductfng this one-eighth of per cent of the per cent so paid in by the borrower. the remainder is invested in participation receipts of the fund and thus it is ex- pected that per cent interest will be realized from this investment and there v1Af apprehend any particular loss in this con- nection. since all possible safeguards have been drawn around the plan, so that 1t seems quite likely that at the end of the time when the loan expires, that nearly all, and possibly all, of the deposit will be returned to the borrower.
 The situation then sinners down to the fact that the borrower will probably pay s per cent and no more for his money, and you are well enough acquainted with the facts to know that, under the conditions which probably would have prevailed had not this plan come into effect, the owners of the cotton could not have borrowed on the basis of cents per pound, could not have obtained a loan on as low basis as per cent interest, as the chances are they would have paid anywhere up tc double that rate. if indeed they could have | secured any loan at all. I don't think you | can do any better service for the success of this loan and for the benefit of the south generally than to assist in dissipat. ing any impression that the borrower pays more than per cent interest,
 1 The storage charges and interest are naturally borne by the borrower in an, case and are not incidental to this plan Very few of the owners of cotton havt storage facilities of their own, and fl order that the plan may be entirely sue cessful it is obvious that the borrowe
 cannot be permitted to store the cottor
 in his own warehouse in case he ha one. ..
 Already the result of the plan and th
 opening of the cotton exchange has beel
 to create market for cotton Cotton i
 being sent abroad and is being bough
 and moved in this country, and also tn price is distinctly higher than before thi plan went into operation. Whether tn
 market for cotton will continue to broader
 and strengthen and command a bette
 price, is of course largely a matter O
 opinion, but all indications point tha
 way. The borrower has the option b,
 giving 30 days notice. at any one of tn
 quarterly interest paying periods of talk
 ing up his loan and If cotton continues t
 advance. a great many will probably pa,
 of their loans. because they can sell tn
 cotton which they have stored at a sa tis
 factory figure.
 The southern banker is required to plac
 only 26 per cent of the loan, upon tn
 receipt of the certificates ''B" series [
 which he subscribes, because they can b
 utilized at 75 per cent of their face valu
 when offered through national currenc
 associations as security for emergsnc
 currency issued under the Aldrich-vree
 land act as amended. Under the rulin
 of the comptroller of currency, nations bank6 may carry them at fnca valua n