The Washington herald., 1921-09-26
RURAL CREDIT
BILL AROUSES
DEEP INTEREST
Hearings Show Contrast
With Methods in
Europe.
U. S. SYSTEM FAULTY
Napoleonic Principle of Non.
interference by Govern
ment Praised.
u. SYSTEM FAULTY

credit and multiple insurance bill
before the subcommittee of the
House Banking Committee, October
6.
The four days hearings on this
till Immediately preceding the re-
cent recess Of Congress have just
come from the public printer and
reveal some startling contrasts be-
tween the banking and credit sys-
TENS Of Europe and this country.
A cardinal principle of European
rural credit Is to limit 1t to prod
uction. MAT is. to limit credit to
the purchase of livestock. both for
breeding and work purposes. for
fertilizers. seeds, farm machinery
and the like. but none of the fund
may be used to buy something to
eat, to wear. or to have pleasure
with. 1t was contended that our
practice of selling "consumptive"
credit not only caused the periodi-
cal breaking down of our credit
system but II was the prime factor
in causing the enormous waste in
this country.
Influence of Napoleon.
. Probably the most important
fact developed at the hearings was
the influence exercised by Napoleon
on the credit systems OF Europe In
the creation Of the Bank of France
in 1900. For 200 years previous to
that event distrust had disgraced
in their relation to credit institu-
tions. Innumerable bureaus were
created to deal with all the bust.
ness and financial institutions of
France and such a thing as a free
and independent credit institution
did not exist In France until
Napoleon created this one.
The hearings show that Napoleon
accomplished this feat by incor-
porating these four essential pro-
visions in the banks charter:
First, he gave the bank ample au-
thority to do a banking business,
so as to prevent the necessity for
its running to the government for
additional authority to do that
business. Second. he created a
bank parliament" composed of re-
sponsible commercial men to legis-
late for the bank. Napoleon con-
| tended that as the prime object OF
the head of the credit system was
to serve commerce, the best way
| to accomplish such purpose was to
ccnfine the control to those who
are selfshly interested in serving
that interest. Third, he gave the
bank a twenty-year legislative re-
| spite, during which period the gov.
ernment parliament could not leg
| islate for il. And, fourth, he pro-
Vlded a system OF self-inspectior
for it. That bank is the sole
depositary for all government,
funds. yet the government exercises
no supervisory or regulatory pow
ers over It.
Government Keeps Hands on.
Another fact which was devel.
oped was that for forty years
from 1857 to 1Ss7-no Hesitation
was enacted by the government par
Lament for the Bank of France, "a
marvel in view of the fact that 4,
was one Of the eventful periods in
the history of France, a period in
which the government changed
from a monarchy to- republic and
experienced a disastrous war in
which she lost two of her fairest
provinces and paid a billion dollars
indemnity" That experience wa,
contrasted with the experiences in
this country where legislative
session rarely passes without the
enactment of numerous laws re.
stricting the activities of banks Al nd
| credit institutions of all sorts.
1t was pointed out how the in
fiuence Of that one free credit in
stitution wrought such a wonder
full change in the credit legislatio
on the continent during the nine.
teenth century. The salient prin-
ciples which Napoleon incorporated
In that banks charter were sixty
three years later applied to all the
credit institutions OF France, "thus
giving her the freest and soundest
credit institutions in the world
Even paternalistic Germany applied
those principles to her rural credi,
system. as also did other countries
on the continent, not one OF which
Is government inspected. It wa.
by granting them ample authority
to do banking business commen.
surate with the needs Of agricul.
ture and freeing them from the
bureauracy with which they wer,
formerly cursed that the power and
influence OF the lobby was de.
stroyed.
'The McFadden bill" says its au.
thor. "adapts, those principles to the
conditions in this country. It doe,
not attempt to place our farmers n
the expensive system Of deposi,
banking. but employs the bill Of
exchange instead, thus Eivinr q
longer time and a broader marke
for the sale Of farm credit pane,
than Is safe under deposit bank.
ing. In ordinary Agricultural pro,
duction the farmer needs from 81,
to nine months time. and in cattle
raising and other farm activities hi
needs from two to three years
which are too long periods for de.
posit banks to finance whose Dor.
rowed capital is payable princi.
~siiv IN sema~d"