The Redwood gazette., 1936-02-27
A Reader Writes
WHAT FOR THE FARMER; AN
ADEQUATE INCOME OR A
SUBSISTENCE SUBSIDY?
By Glen Armitage

Since proposals for a solution
to the farm problem are again
open for debate l will attempt to
map a course, which, while al
ready part way paved, could be
widened and extended to point
that would give promise of a
permanent and satisfactory road
to agricultural restoration. l re-
fer to the Federal Land Bank.
In order that l may give the
reader a general idea of this
possible course it is necessary
that l make a comparison be-
tween the Federal Land Banks
and the Federal Reserve Banks.
Both are government sponsored
but privately owned institutions
and are, theoretically, semi-offi-
cially controlled by the govern
ment. Stock of the Land Bank is
owned by the farmers as is the
Reserve Bank stock owned by
the banks. Likewise they both
perform a related service-that
of getting money for borrowers.
But the method of securing
money for these borrowers is diff
ferent and this method is the gist
Of this article.
The Land Bank, in order to get
money to loan to farmer, must
issue and sell bonds to an invest
or. The money thus raised is
then loaned to farmers on land
and a mortgage on the land is
taken as security. The mortgage
payments then becomes the means
of paying interest on and retiring
Land Bank bonds.
The Federal Reserve Bank does
not loan money on note secured
by land. 1t loans money through
it's member banks on farmers
notes secured by chattel (person.
al property and to business ir
general on commercial paper. The
Reserve Bank does not get its
money through issuance of bonds
1t goes direct to the federal treas.
ury and gets currency (Federa
Reserve notes) from the govern
ment at printing cost. About
two thirds of the currency in cir.
culation is money secured from
the government by the Fedora
Reserve Banks. Boiled down this
means that banks have access to
a supply of non-interest bearing
currency which they can re-loar
and circulate or hold in reserve
while the interest bearing paper
is being held.
The eminent Senator, Garter
Glass, of Virginia, who was sec
retary of treasury during the
Wilson administration, is the
father of the Federal Reserve
Bank Act and he evidently had in
mind means of providing money
for banks with which to take
care of credit needs of their com.
munity or pay restless depositors
AS one would infer from the pre-
amble to the act it was supposed
to prevent depressions in that i
would function as above mention
ed. How well it succeeded we al
know and no one knows bette
than the farmer its failure in tha
capacity. On May IS, 1920 The
Federal Reserve board, whicl
dominates the policies of the /.
reserve banks, deliberately launch
ed a defiationary plan by stop
ping the flow of credit currenc.
into agricultural sections. Farm
prices were then excessively higl
and it was the boards opinion
that danger lurked ahead unles
action were taken to reduce com
modify prices. Within six month
every farmer who owed banl
was told to act. The result is
; sad page in the history of Ameri
can agriculture. AS a result o
this rash action, farmers wer
left without bank credit, countr.
banks were crippled and tn
ground work laid for a financia
carnage that devastated the who'll
agricultural community and final
ly the nation.
,, Once the farmers equity il
! chattels was wiped out there re
mained nothing on which to bas
; credit. The local bank could no
accept his note consequently tn
country banks had no farmer
notes they could discount with tn