Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1918-01-04
INTEREST RATE INCREASED

m five ana Ohe-haiA pei Seh'' All
sorers understand that the banks
GRO not loaning government money,
hut are obliged to get money for the
farmers by selling Federal Farm
Dan bonds The government did
oavance to the banks, without inter
oct 100000 of the capital of the
nanks which the farmers now have
tho use of at five per cent interest.
put this 100000 was loaned to
tho farmers long ago, and now the
only way in which money can be
provided for loans to the farmers is
nv selling bonds to investors.
The law gives to the banks the
right to charge six per cent interest,
hut the Federal Farm Loan Board,
after looking the country over, de-
cided that Federal Farm Loan bonds
could be sold to investors at four
and one-half per cent. BY charging
the farmers five per cent the banks
would have one-half of one per cent
10 pay their expenses. Up to the first
of November these four and one-half
ner cent bonds were bought readily
I nv investors at a small premium, and
as a matter of fact about 5000 invest
ors did buy them and are now hold
ing them. The amount of money
raised by the sale of these bonds at
four and one-half per cent interest is
nearly $50 100000. The small pre-
MUM which the banks were able to
make on these bonds helped to som e
extent to pay the expenses of the
banks.
About November the Federal
1 Farm Loan Board and the banks
were unable to sell the four and one
half per cent bonds any longer at any
considerable premium. The war
emergency has called for such enor-
nous investments of money that in
terest rates have risen to borrowers
everywhere.
Federal Farm Loan Bonds are ex-
empt from taxation of all sorts, but
even tax-exempt bonds now have to
be sold at higher rate of interest
than the market called for three or
four months ago. The increase in
this interest rate has been from one
half of one per cent on the choicest
state and municipal bonds to rates
exceeding seven and eight per cent
for large industrial and transporta-
ton corporations. The farmers of
the United States are now borrowing
money at a lower rate of interest
| through the Federal Farm Loan sys-
tenn than any other class of borrow
ers in the country. This is the first
time in our history that the farmers
as a class have been able to do this,
but 1t is no longer possible for them
| to obtain quite as low rates as have
recently obtained.
The Farm Loan Board and the
Land Banks believe that it is infinite
/ ly better to advance the interest rate
to the farmer now than to fail to
meet the needs of the farmers by
sticking to an interest rate so low
that while it met the conditions of
six months ago, it does not meet the
conditions of today.
Through the Federal Farm Loan
/ System the farmers, as borrowers,
are the market for large sums of
4
nent investment basis, and they must
1 become used to the rise and fall of
money rates according to the fluctua-
lions of the market. 1t has been, is
now and always will be the desire of
the Farm Loan Board and the Off
GERS of the Federal Land Banks to
get money to the farmers of the
country at the lowest possible rate
and no effort will be spared to bring
mat condition about at all times. It
IS not possible, however to establish
or maintain a rate in defiance of
conditions existing in all the markets
Oh the world. 1t is hoped that it may
soon be possible to lower the loan
ing rate to five per cent, but whether
Ut not this can be done depends upon
conditions which are beyond the con-
troll of the banks or the Farm Loan
Board.
by establishing a difference of one
per cent between the rate paid on
the bonds and the rate charged by
the banks situation Is created
winch will enable the banks to adjust
Tue price of their bonds to the pre-
Vaiiing money rates.
Inc situation will be plain to every
'"'lher who remem bers, first, the
oanks must borrow the money before
'"ey can loan it to the farmers; sec
ohu' that money in the hands of in
festors has becoma On soaroa tbat