Evening journal., 1914-05-21
Banks and Farm Loans
From the New York Commercial.

As soon as the provisions of the new
currency bill are put In full operation
by the organization OF the Federal re-
serve system, work on which Is pro-
ceeding very fast, the farmers through
out the country viii find their credit
improved and the rate of interest they
are now compelled TO pay automati-
cally reduced. Under the new law all
national banks not located in reserve
cities are authorized 70 lend money on
farm mortgages to the extent of one
fourth Of their pad-up capital and sur
plus or 0ne-thid OF their time deposits.
Such loans 10 farmers must not exceed
80 per cent. of the actual value of the
property, must be- secured by first
mortgages on il and must mature with
IN five years. Apart from these restric-
tions national banks in all the smaller
towns and cities can extend credit to
the farming community either by lend
ing money ON mortgages such as de-
scribed, or they may lend 60 the far
mers as at present on ordinary notes
or drafts. Farm mortgages of the
prescribed character will hereafter form
part of the legal assets and reserve Of
such national banks, and wise manage
ment of the farm mortgage department
viii be profitable and will put it in the
power of the banks TO advance the in
terest of the communities in which they
are located TO a degree that they have
never been able to attain i'm the past.
The old national bank act made invest
ments in farm mortgages Illegal as far
as national banks We're concerned, and
it also handicapped the banks in dealing
in foreign exchange and in extending
commercial credit in many other in
stances. This country has thus labored
under handicaps that its rivals for
worldwide trade have escaped.
Every business man knows that the
welfare of the United States depends
chiefly upon the prosperity of its farm
ers When crops are good and prices
are rcmunerativo business is sure TO boz
prosperous and any little furry that
may be caused by stringency in the
money market or other temporary
causes soon passes over il the farmers
have money with which TO buy goods.
A farmer is like any other business
man. II lac is not fortunate enough to
possess ample means he must borrow
HNHNA ilNN tliit w tllNt 10 NuuNNt Ni-
operations and he will in that way re-
main ia the position of a debtor until
he has accumulated an actual surplus.
The higher the rate of interest he has
TO pay the longer it will take him to
get out of debt. When the farmer is
forced TO pay one per cent. a month
and even more, as is frequently the
case in the West and South, he has
that much less to spend for other things
or TO put in the savings bank.
National banks wn, hereafter be able
able to d the farmer a reasonable
amount ON his property and the secur-
ity the bank receives will be the best
that il is possible to have, though, OF
course, five-year mortgages are not
quick assets in the sense that third or
sixty day commercial paper il. Nation
al banks located in country towns will
probably find it to their advantage to
increase their capital so as to be in a
position TO take care of the farm mort
gage business which is sure to be offered
to them. Apart from the new business
which the banks will gain the simple
fact that they are in a position to lend
money ON long terms OF credit to far
Iaers will bring them in closer touch
with the rural population and will in
that way enable the business interests
of the whole country to become ac-
quainted quickly with the condition Of
crops, prospective supplies of live stock