The Washington herald., 1921-06-20
Ararian Credit.

the bankers OF the East have agreed to provide
S25ooo,ooo for personal loans to farmers and
the bankers of the West are to add another Szs,-
100000 to the pool This total will be loaned on
not to exceed six months paper at commercial rates.
But the notes will be renewable The Secretary
and the bankers who have promptly responded
to his appeal entitled to the most sincere COM
mendation.
1t will meet the present emergency, but the plan
IN ITSELF and the tact that it came emergency
agency, shows its temporary character. 1t is a
concession. 1t meets immediate demand, proving
its urgency. As Representative Black says in an
interview elsewhere in this issue Of The Herald it
rs graphic illustration of the needs of some per-
manent credit facility to afford producers long term
credit, not concession but in regular business
process
Such credit is planned in the McFadden- Kenyon
bill Hhseh adapts to the United States, the European
system OF agrarian long term credits. With the
purpose and the general plan OF this BILL The Her
aid is in hearty accord AS to its details they can
be Left quite safely those members who are famil-
lar with finance. To some of the provisions we can
not agree. But the plan in general is excellent.
One very desirable feature is the absence of
government regulation and responsibility. Manage
ment and responsibility will rest wholly with the
farm organizations; only initial capital must in some
way be provided. How this shall be done may be
the one chief obstable. But it will not prove un-
solvable if that provided in the bill meets
serious objection
r The system includes two corporations or socie-
ties formed OF farmers. The organization will con-
sst of local groups of farmers, all stockholders in
the credit society," who will chose their group drec-
tors to pass upon and approve or reject or modify
applications for loans These groups will be classed
as loans will be graded according to the liability.
There will also be central bank in each State.
But in addition to this, every subject of loan
will be insured to the full amount OF the loan. Pro-
vision issmade that both the loan and the insurance
shall be at low rate. The machinery for this is
simple and inexpensive. The organizations are mu-
tual and there is to gain any added profit
above the legitimate charge of doing business or to
profit through accumulated surplus.
To The Herald the most praiseworthy feature
is that all loans to be for production; nothing
will be provided for consumption. Anything a
farmer may need. anything he should have which
will increase his productive capacity, whether cattle
other animals. machinery dynamite for clearing
or other like agency. The principle under this is
correct, that there can be such thing as imitation
OF credit where it is based wholly on production,
and. in the of the farmer, on the increase of
actual wealth Such credit extended in this way is
perfectly sound Increased production will in itself
pay the loan and there is the added security of in
surance.
Deposit banks cannot handle such loans They
are not organized for this purpose. They cannot
handle the great volume OF long term paper They
must have liquid their capital is based upon
deposit trust funds. Moreover, before the COM
ing OF the Federal Reserve banks there was a per-
sonal relation between the farmers and their local
banks. The banks felt and showed, personal in
terest in the farmers of the community and their
welfare. They had in turn quite similar relation
with their central correspondent banks, who felt a
ike personal obligation take their surplus paper.
Except in times OF marked depression, the local
banker used his own judgment as to the credit
extended the farmers and the city bankers re-
sponded in kind.
The Federal Reserve system has replaced this
personal relation, this feeling of personal obiga-
ton and responsibility with formula which puts in
its place percentage. 1t is banking by rule. 1t
nys what the bankers may and may not do. 1t
has entirely eliminated the personal element and
the personal relation, while far as the farmer is
concerned, it has not helped him in time of de-
preston. He get accommodation when
in greatest need when there is marked financial
stringency now than then. He is in fact worse off
than before.
What he must have is financing or credit sys-
TEN of-his This the Federal Reserve may have
broadened for others, but not for him. 1t is this
the McFadden- Kenyon bill plans to provide 1t
should have the attention of Congress without fur
ther delays. Together with the changes asked in
the land bank law, it will permanently take care of
the farmers financial needs. 1t will do more than
any other agency to combat the unrest and growth
of rsdicslism among the farmers while placing the
national basic industry in position both of assured
solvency and safe expansion .-
Senator Frances outing should be yery