The Washington times., 1923-09-17
FARMER LOANS
BY j. S. HURTS
BANKERS
Wall Street Formerly Could
Decide Rate Of interest It :.
Wanted to Get.
BY w. 8. COUSINS.

by w. y. COUSINS.
Copyright 1929, Cosmopolitan Newp
Service)
NEW YORK, Sept. 17.-The Fed
eral intermediate banks, the latest
link in the Governments chain of
farmers financing agencies, are
cutting deep into the profits of
the private bankers. and bid fair
to revolutionize the methods of
financing farm operations in this
country. The first blow has fallen
on the bankers acceptance sys-
tenn, a plan which was laboriously
built up to- naodernize banking
methods in this country, but which
has been steadily losing ground.
Wall street bankers freely ad-
NIT they were caught unawares in
the swift passage OF the agricul-
tural credit act In March of this
year, creating q Government credit
organization and operated by Treas
ury funds, and offering to farmers
the same, or better, lending &C
commodations at much lower rates
than the bankers have been exact.
ing. AS q result, the latter stand
to lose the cream of the business
that has been coming indirectly
from the crop-growing sections.
Formerly at Mercy.
In practical operation, AZ de.
scribed in detail by an officer OF
one of Wall Streets big discount.
ing houses, the new plan works
somewhat as follows: A representa-
tive Of a cooperative farming OF
marketing organization comes to
New York to negotiate for credit
of s5,OoO,OOO to s2O.OO0.OO0 for the
marketing Of e. specific crop.
Heretofore he had to accept the
"going rate for money, In COM
petition with other lines Of bust
ness whose needs might be great
The greater the demand for money
the higher the rate. Now he has
the, Governments new banks be
hind him, q low rate up his
sleeve and the assurance that
Wall Street viii mark down its
rates or lose the business.
The last decade has furnished an
evolution in banking
methods and facilities. Fifteen
wears ago an interior banking sec.
ton, catering largely to a farming
community, could receive aid from
New York only by the shipment Of
actual currency, process which re-
ouired five days at the least. To
(iay. through the operation Of the
Federal reserve system, telegraphic
transfei Of FUNDS can be effected
in less than an hour.
Though the Federal reserve sys
tenn was an important step forward
in the process of agriculture
financing, 1t fell so far short OF
requirements that supplementary
agencies were brought into being
and it is here that the transporta
ton from private to Government
control became increasingly appar
ent.
Helps Buy Land.
The Federal reserve system wal
supported entirely by private cap
ital, the national banks being com
PEELED to subscribe to its capita,
stock, but permitted to share
with the Government in the aetna
direction of the system. The Fed
eral farm loan banks, the mex
step in the process, is an agency
designed to help the farmers buy
farm land, or satisfy existing mort
cages on their present acreage; i'll
capital can be subscribed to by thu
Government, by corporations or by
individuals. though the Govern
ment's portion is to be graduafis
retired. The FederaI intermediate
banks, the capital OF which mus
be subscribed for and held excli1
sively by the Government, was de
signed to finance the actual raising
and marketing OF farmers prod
ucts, on short term notes. Through
the issuance of debentures, which
have thus far proved to be popu
lar with investors, these farm fl
nancing agencies are self-perpetuat
ing, and there is no practical lirni
to the scope of their operations.
Wall Streets principal grievance
against the new banks is that they
perform no function that could no,
be taken care of by existing insti
tutions Granted that the Cove
eminent is justified in embarline
in the banking business" said one
banker in discussing this subject
''it should aim to furnish some
form of service which existing
banking institutions cannot provide
and should not compete with them
in the discounting Of commercial
paper, whether Of agricultural
origin or not.
The trouble with most farming
communities is that there is toe
little actual capital invested in the
business, and farmers are there
fore obliged to make .six.months
notes on collateral that cannot be
realized on for year, and, in the
case of stock raising, for three
years"
The farm loan agencies have
been boon to the farmers in re
lieving them Of the constant dread
of foreclosure of their mortgages
on maturity. The renewing o.
mortgages under the old system
was a perpetual nightmare to thu
farmers in some sections of tlit
country, involving in many cases
the payment of heavy fees anG
"A