The Covington leader. (Covington, Tenn.) 18??-current, 1921-03-03

VI HNANAENt w Lac PNgAls A4NASkAa
must be either typewriter or written
on one side Of paper and must reach
us by Tuesday Of each week. Sig
nature Of writer must accompany the
article Editor Leader.
The Eight Per Cent. Interest Bill.
Gov. Tavlor's veto Of the per
cent. contract interest bill will cause
keen regret to many farmers and
landowners in this section Of the
state, who had hoped, through its
passage, b be able to secure long
time farm loans from the life I'M
surance companies with which to pay
existing debts and finance farming
operations the coming season. So
far a. this and the adjoining coun-
ties are concerned. this class Of busi-
ness ii practically at q standstill,
The one hope for its immediate re-
sumption on d scale adequate TO af-
ford substantial relief lay in the en-
actment Of the proposed law. The
maximum legal rate III Tennessee Isl
now lower than the prevailing
market price for money throughout
the country. To make loans in Ten
nessee, foreign companies must
either accept lower rate for their
funds than is offered them else
where, or violate our usnry law.
Most Of the large companies refuse
"a be d party To violating the inter-
est laws of any state, They will not
lend their funds for less than the
market rate for money. Conse
unently few, If any, longtime farm
loans are being made ii Tennessee.
iii times 0f financial stringency our
law hurts III another way. IL not
only keeps capital from coming into
the state, but drives out part of
that which Is already here. This Is
due to The fact that there Is always
considerable number Of capitalists
and money-Ienders who respect the
Law, though IL may be regarded asI
dead letter by the majority, and
these lend their money in other states
where they can yet the market rate
therefor without violating the law. If
4 majority Of the states prohibited
loans Iii excess Of SIX per cent. Ten
Tiessee would not be III such an I'M
fortunate situation, but 4 higher
rate Ii legal iii practically All the
states that adjoin Tennessee, and for
that matter HI 42 Of the states Of
the Union, and these contract states
81 times Of stress and strain have
much greater supply Of funds avail
able for loans than the very few
states that adhere to ain Anticipated
usnry law.
III the proposed law would have
resulted In any general Increase In
interest rates, either now ok when
conditions return to normal, there
would have been some Justification
tor the governors veto. But such ID
not the case The price Of money,
like that Of every other commodity,
ii governed by the law of supply
and demand, and d law legalizing B
contract rate of eight per cent. would
not prevent the making of six per
cent. loans in the future when tne
condition Of the money market JUS
titled that rate. The states that per-
nit contract rate in excess of SIX
per cent. have just as cheap inter-
est rates ais Tennessee. In fact,
Massachusetts, where any rate
agreed upon ID legal, has the cheap
est interest rates Of any state in
the Union. Certainly, the proposed
law would have no appreciate Ell
feet iii normal times upon the inter-
est rates charged on mortgage loans
bys the life insurance companies.
Thesa companies either lend for the
prevailing market rate or not at all.
This applies both I'd loans on city
prorertv and farm lands. 1 Their
rate Of interest has been no higher
ia A tlanta, where an eight per cent.
rate IL legal, than In Nashville, nor
iii Mississippi, where eight per cent
may be lawfully charged, than In
Tennessee Their interest rates are
neither dependent upon nor ma
tria'Iv influenced bv state statutes.
1t ii idle to say that the proposed
legislation Is In the interest of the
hani i. These Institutions can lend
all their funds at most any rate the
conscience Df their officials will
pery 1t there Ia charge, Our state
banKs paw little III 10 attention to
its nsury laws, and these make most
of TIE loans to farmers, the majority
Of the banks located III the small
towrs and rural communities being
state Institutions. Their AVERAGE
rate will considerably exceed six
per cent The comptroller Of the
currency has made repeated efforts
Cd have national banks In Tennessee
obey its usurv laws. but there are 20
mani ways in which the law can
BE evaded that his efforts have been
III vain, except al d means Of an
Yoyanee to the hanks. The proposed
law will not directly increase bank
earrings ard the only wav III which
they will profit by 1t is BY sharing
III the general iTnnrovement that
would result from bringing additional
capital into the state under the
operations Of the law. It is not
seIfishness, but recognition Of d very
pressing emergency and a very ef-
fective wav to relieve II that prompts
the banks III this matter.
Gov. Taylor's statement that the
banks have gotten rich BY lending
money at six per cent, shows lack
Of information in regard to pre-
vailing rates charged BY most banks
in the state. Had he stated that the
banks had gotten rich BIZ making
loans at eight and 10 per cent. he
would have been near the truth. The
fact is, that the proposed law, BY