The Washington herald., 1921-08-29
Insurance of Rural Credits.


tive opposition. It should be dissected before it
becomes law. 1t should be put to every test of
debate. Only in this way its ultimate useful
ness and wisdom be determined. Many measure
has everything in its favor theoretically; in theory
it. is perfect. Yet in operation practically applied,
it.Hould be failure.
- The Herald has advocated the McFadden-
Kenyon rural credit and multiple insurance bill, in
this spirit. 1t should become law only when all
the objections to it have been threshed out and it
satisfies the practical judgment of practical men
who speak free from personal prejudice and in
sympathy with the basic principle and PURPOSES.
So-far one has found objection to the principle
and purpose. The need is admitted by everyone
and the object has universal approval.
The principal objection appears to be to the
multiple insurance feature Some fear it will bring
an insurance and financial octopus. 1t is not real
lied that its control will be thoroughly mutual and
democratic; that its power will be broadly held
by of all States held strictly responsible to the
whole body Of policy holders, and not in the hands
of few to be used financial engine. . 1t will
be, in fact, a counter balance to the combined
financial power of the present great centralized
insurance companies.
1t is of interest to examine just what is the
place of this agency in the scheme whole. 1t
will be impossible finance rural credits for pro-
ductive uses unless there is placed under them the
very best and most substantial security. Personal
credit at its best carries the commercial interest
rate and cannot pass current by easy transfer
from hand to hand. Chattel secured credit car
ries a still higher rate Farmers will not mutually
, guarantee the paper of their neighbors secured
by nothing better than what banks refuse, and
loan agents will accept only at the highest limit
OF rates.
. Neither would it be sound for the Federal
he for
bond issues No conservative legislator will vote
to put the government in the chatte loan business,
with no other security than the chattes, with per-
- sonal Endorsement. chattel loans cannot be
p handled on the basis as land loans, nor at
an equal percentage OF value, or price. No credit
expert would approve, for example, OF applying
the land bank plan to chattel credits. The farmer
could not get sufficient proportion of value Of
the chattel as loan; he could not get low inter-
est rate and would be ruined if he lost the chat
tefs which the loan covered.
The first purpose, then OF the insurance fea-
ture of this bill, is to put the security of in
surance policy back of the loan. II an animal
dies a machine burns or a crop fails the loss will
fall on the insurance company, not the bor-
rover nor the creditor. This will enable the bor-
rover to get the highest possible proportion Of
the value as loan and this at the lowest possible
interest rate.
More than this, the insurance company will
have great volume OF capital to invest in such
loans. There is other organization which has
anything comparable to the annual investment
fund OF great insurance company and any sys-
tenn OF rural productive credits will demand re-
course to large volume Of free capital. One COM
pany last year had SIIoooo,ooo of surplus for in
vestment. This is more than the profits of the
Federal reserve and more than the government
would ever provide. The insurance company then
becomes an acceptance house for these credits. 1t
Can take long time paper. 1t take this in
large volume at low rates. These loans, credits
would be, in sense, a side line of its insurance
business.
But it would not be the only one to deal in
such paper, nor the only one who could write such
insurance. All the farm mutual companies could
participate. So could other insurance companies,
So could individuals 1t is the belief that this bill
would create new business parallel to the ac-
eeptance houses Of Europe where like paper is the
most sought after of all credits and float at the
lowest rates, on the basis bills of exchange
The bill does not provide nor contemplate that
insurance company should take all the securi-
ties, nor major proportion OF them, which the
rural credit society takes from loans The loans
made by the society. The insurance companv
is obligated to take but limited portion They
will be sold the market the best possible adj
vantage. Any can buy them and the effort
viii be made to make them popular investment.
The original securities would be held in safety
vault. Representing them would be issued what
would practically pass bills Of exchange They
would go from hand to hand, would be good al
any bank and recognized, it is believed as the
poor mans interest-bearing investments as they
would create popular confidence as backed by in
surance. security familiar to everyone
Moreover, the insurance company would have
the machinery. the organization to at once 60 into
operation. This would not have to be built UP.
1t is here now. Its general agents are in all the
States and its local agents everywhere. Its
auditor would have key to the security vault
and his deputies would inspect the loans which it
insured. There may be some better system of
establishing, securing and providing national
system of rural credits. There may be radical
faults in this bill But in principle and burmese