Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1919-09-05

N. ~NN
says in relation to comparative rates of interest charged:
Careful investigation shows :nat in localities where
Of the land bank loans are made the benef,
to the borrower is less than half of 1 per cent. In Iowa,
where loans are now being made by federal land banks
to the extent OF a million and a half a month, the cur
rent commercial rate for over Is years has been S IL to
s per cent. Federal land banks are loan1ng at S 1-2 per
cent and joint-stock land banks are loaning at 6 per cent,
III other sure-crop states, where over two-thirds of the
food crops Of this country are raised, conditions are the
same. Less than one-sixth of the tax exemption benefit
to the borrower, while the deficit in the national
treasury must be made up by the taxpayers at large at a
net loss to the nation of over five-sixths.
"A loan of $4,000 was recently made to one man
on land in harrington Township, Cook county, ILL.,, at 6
per cent by a joint-stock land bank. The rate is not low
though private investors would probably have insisted on
a more conservative loan. On this one loan the national
treasury would lose annually $3.50 If the bonds were
held by a person receiving an income Of 100000. I
THE original purposes of the law are now defeated by
the effects Of increased income taxes and by the present
Of its administration. Instead of being a special
aid to farmers of small means, it is largely used to fl
nance wen-to-do real estate owners who are not suitable
subjects for charitable aid at government expense. 1t
also enables the wealthy to dodge tax burdens which then
fall on the less fortunate"
It appears. therefore, that in the vast majority the
saving to the borrower by reason Of the existence of the
banks il negligible. On the other hand, the income
derived from private loans is taxable, and the tax pay
ments thus derived tend to lower the taxes which all per-
borrowers included, must pay. Wherever this in
come is transferred to non-taxabie form additional tax
es to a corresponding amount must be paid by the general
A further unsatisfactory result of the present plan is
it tends to lower the price Of Liberty Bonds in the
All but two issues Of these bonds are subject to
and the land bank bonds therefore present
the more desirable form Of investment. The small holder
Of Liberty Bonds who needs to realize on his investment
finds that his bonds are not marketable at par largely
for the reason that the income derived from land bank
bonds is exempt.
Concluding his argument, Mr.. McFadden said:
The farmers of this country are sincere patriots.
They do not ask to be aided by accepting a very small
OF a tax-emption bonus donated to tax-dodsing mil
In this respect 1 know they are in accord with
the utterance of President Wilson in his first annual mes
when he said:
The farmers. Of course. ask and should be given
no special privilege, such as extending to them the
credit Of the government itself. What they need and
should obtain is legislation which will make their
own abundant and substantial credit resources avail
able as a foundation for joint concerted local action
in their own behalf in getting the capital they must
II voted for this bill in tn. vain hope that the law
would benefit the small farmer and aid the man Of mod
crate means to buy a farm Of his own.
II then feared and predicted that the Law wou,d b.
used to finance wealthy landowner and large real estate
I did not expect to see the struggling appli-
cant for a 800 or $500 or $500 loan neglected in order
that the proceeds Of Liberty Bonds could be loaned to tn.
rich farmer, who. by putting part of his property in hi.
wife's name, might borrow $40, 900. while many deserving
applicants for small loans Of $500 each might wait in vain
for help. It is no secret that large loans are more
profitable for the federal land banks and therefore the
tendency is to give the cold shoulder to the smau bor-
rover.
mi. Speaker. I am discussing this subject =. q buud-
ness man. It is not a political question. The l.reea
percentage OF big loans in excess Of the legal limit Of
$4,000 will be found in northern Republican states IKE
Illinois, Iowa and Minnesota. The greatest numbar Of
complaints because Of neglect Of the small borrower come
from southern Democratic states. Ny objections to this
wrong. scientifically wrong.
When the law was enacted in 1915 NO one could
foresee the war and its burden Of debt and heavy taxes.
Had the present income tax law been. in effect in 1915 the
tax-exsmption section Of the federal farm loan act would
never have passed congress. When 1 voted for th,s. law
I ID not expect 70 see the time come when 1t could be
used to enable rich, tpdividuals and great corporations 10
evade war taxes BY converting taxable assets into federai
land hank tax-free bonds
whatevsr arrangement nay be made to cover the
situation. the man who has once besn president 81 -.
Unitsd states should ~ able thereafter "a. choose. Ri ovr
snssnss q ~ without haytng Is asoivsA stbs problem q
ssasaAs 4 gavtns fsrs hfassssf orsdcssnt proyAaoa sfer NJ