While the Jewish Agricultural and Industrial Aid Society had long realized the need of short-time personal credit by the American farmer, it was not until 1909 that we were prepared to attack the problem in earnest. But the work has progressed with great rapidity, and we have today 17 thriving credit unions-the first and so far the only co-operative credit banks on American soil. Eight of them are in New York, five in New Jersey, and four in Connecticut. Three were organized in 1911, five more in 1912, and nine more this year. The eight credit unions doing business last year reported on December 31 a total membership of 251. Their outstanding shares ($5 each) were 865. They had been in operation for a period averaging 13 months, during which time they made 411 loans, aggregating $28,140, nearly seven times their share capital. Their net profits for this period amounted to $545.48, or at the rate of about 12 per cent per annum on that capital.

One of the most marked benefits resulting from these credit unions is the virtual stamping out of usury in the communities in which they exist. The farmer, finding no difficulty in obtaining a moderate loan for productive purposes quickly and cheaply, no longer has to depend upon the generosity of his neighbors, the forbearance of the local storekeeper, or the cupidity of the usurer.

Not the least important is the moral and educational value of these credit unions. They teach their members business methods and self-government. They imbue them with self-reliance and selfrespect. They endow them with a high sense of mutual responsibility, stimulate them to further efforts in the direction of co-operation and mutual self-help, and make them better farmers and better citizens.

184. THE ARGUMENT FOR DIRECT GOVERNMENT LOANS TO FARMERS'

BY E. R. BATHRICK

The argument for direct loans to farmers by the government is based upon two fundamental propositions:

First, the conservation of agriculture, and, as a legitimate corollary, the perpetuation of the food supply, is a vitally important national policy, and so considered by all nations. I think we can agree on that.

I

Adapted from Testimony at Joint Hearings before the Subcommittee on Banking and Currency, 63d Cong., 2d sess., 1914, pp. 865-86.

Second, this important national policy, so vital to all our people, should not be relegated to a few private people for exploitation and profit.

This much being agreed upon, I contend that the safest and best way to carry out this policy for and on behalf of the people of the Nation is for the Nation to do it itself. Private persons do not act with patriotic deference to public needs in the conduct of business where their investments and livelihood are at stake. No exigency could be greater than the failure of agriculture, and no greater danger to the existence of government could arise than a short food supply. No tenet of free government can quiet a hungry people, and, in the face of such a contingency, the true government philosophies would avail nothing. We do not stand close to such a condition now, but we face the steadily rising price of food, whereby many of our people are confined to a pitiful selection of edibles. The condition as it applies to production and consumption of food is bad enough, and we shall not fulfil our best functions as legislators if we fail to choose the speediest and most efficacious remedy. Every leading nation on earth is lending money procured by the sale of its bonds, or appropriations from its tax funds to farmers, either directly to the borrower or through mutual credit associations. Many of the nations, either by Federal Government or by provincial or State government, are guaranteeing bonds or debentures issued against farm mortgages. From my research of authentic public documents and official reports I have compiled a total of expenditures of this character wherein the "faith and credit" of these governments were pledged to the extent of nearly $5,000,000,000.

My proposition is that the Government borrow money at not to exceed 3 per cent and lend it to farmers direct or through farmers' farm-credit associations, and not through capitalists' farm-credit associations. I would not ask a law preventing anybody from lending money to the farmers. I do not desire to confine lending to farmers; but if we will pass a bill which is a combination of farmers' self-help and Government aid, the capitalist lender will follow our terms and interest rates without any law made for him at all. It is the experience all over the world that joint-stock mortgage banks will go into the business at the lower rate. With organizations made up of farmers the Government can encourage self-help and co-operation among farmers. But the capitalists can help themselves, and in a farm-credit, bill it is not the province of Government to encourage

capitalists and assist them to make money out of agriculture. By my bill we could force or rather assist the farmers in helping themselves on both long- and short-time credit.

We would have mutual organizations for the purpose of carrying out the national policy, but when you have an organization that is gotten together solely for the purpose of making profits for city investors we can neither carry out the national policy nor have warrant for doing anything for that kind of an institution.

We would not lend on every application. We would only lend upon those who are willing to comply with our regulations respecting the use of the money for agricultural purposes and for the purpose in other ways to carry out the national policy. We, as a Government, would not go into the loaning business to make money, although it would be very profitable to all the people. It is the history of all countries that if we were to do this thing that I ask to be done, in the way I propose, joint-stock companies would, without our intervention and without any law of our making, follow our rates of interest, and the whole mortgage problem would soon be solved. If we were to stop, the rates would immediately rise, but we should need only to keep the Government plan alive to hold rates steady all over the country.

Government loans would make a profit in two ways for all the people. One way would be a cash profit from the margin on loans. This cash profit would be sufficient annually without taxing the people a penny to pay the entire cost of maintaining and constructing good roads under the Shackleford good-roads bill, that is, $25,000,000. The other profit would be also for all the people and expressed in a widespread beneficence affecting not only agriculture but everybody in the city as well. It would be giving these profits first hand and direct by the quickest and best way it can be done and not by the slow indirection of relegating our great national policy to the mercies of profit-seeking banks.

The bank plan will make a profit for a few people, mostly for those who have been lending money to farmers at high rates and who have created these very conditions we are trying now to cure.

B. Long-Time Investment Credit

185. FARM MORTGAGE CREDIT IN THE UNITED STATES1

By C. W. THOMPSON

During the past two years the Department of Agriculture has been making a special study of rural credits in the United States. Information has been obtained bearing on both the conditions and the facilities for supplying farm loans in the different states. I shall endeavor to indicate briefly some of the results of this study with special reference to farm mortgage credit.

The average cost of farm mortgage loans, for interest and commission together, as indicated by a recent inquiry made by the Office of Market and Rural Organization, ranges from about 5 per cent in New York, where commissions are seldom charged, to 10 per cent in Montana, where the commission amounts to about 1 per cent, with 8 per cent interest. In Iowa, where the farm mortgage loan business is pretty well standardized, the average cost for interest and commission together is 5.9 per cent, comprising 5.6 per cent for interest and a commission paid once for all in advance. In Missouri the average cost for these two items is 6.8, comprising 6. 2 per cent for interest and 0.6 per cent for commission. In Texas the average cost for interest plus commission is 9 per cent, with a little more than per cent going for commission; and in Alabama interest and commission together average nearly 9 per cent, of which per cent is for commission.

In the State of Iowa there is relatively little variation from the average rate, 6 per cent, the lowest figure reported from any locality being 5 per cent interest with no commission charged, and the highest figure, for interest plus commission, about 8 per cent. From Texas, on the other hand, with an average of 9 per cent, we have reports from different localities giving the prevailing cost for interest plus commission as low as 7 per cent and as high as 13 per cent; and from Alabama, with an average of 9 per cent, reports ranging from 7 to 15 per cent. In general, the lowest charges both for interest and commission are found in the more developed agricultural sections of the East and Middle West. The extreme figures apply in the South and the Rocky Mountain states.

Adapted from an address before Farm Mortgage Bankers' Association, St. Louis, 1915, published in United States Investor, XXVI (1915), 1994–95.

The most common term for farm mortgages throughout the corn belt is five years, with a good many loans made for three years and some for as long a time as ten years. In the South the greater part of the farm mortgage loans made by banks from their own funds are made for one year or less; loans made by insurance companies and mortgage companies in the South, however, usually run for a longer period from three to ten years. In the Rocky Mountain and Pacific states farm mortgage loans appear to be made rather more often for a term of three years or over than for a shorter period, but the banks at least make a considerable portion of their loans of farm mortgage security for a period of one year or less.

The great majority of the banks making farm mortgage loans for a term of three years or over give the borrower the privilege of paying any part of the principal (in even hundreds) at any time or on any interest date. Some banks, however, lend at a lower rate of interest where the contract does not carry the prepayment privilege. Most of the banks, both in the South and in the West, which make farm mortgage loans for one year or less report that they usually renew satisfactory loans when desired; some of them require the payment of a part of the principal, but the majority seem to be willing to renew the whole amount so long as the security is good.

A general survey of conditions in the country as a whole would seem to indicate that charges for interest and commissions are needlessly and unreasonably high in many localities. Farmers in these localities are clearly in need of better access to the open investment market. Such access would not only afford more reasonable rates but would also enable the farmer to obtain mortgage loans for longer periods than is ordinarily possible at the present time.

Farm mortgage loans are obtained, in general, from four important sources, namely, banks, life insurance companies, mortgage or loan companies, and private individuals. A word may be said with regard to the relative importance of these agencies.

From reports furnished by the twenty-seven life insurance companies in the United States having assets above $20,000,000 and twothirds of the smaller companies we have computed the amount of farm mortgages held by these companies in each state, the total for all states being $660,000,000. We have also estimated the amount of farm mortgages held by banks (including trust companies), and, on the basis of the thirteenth census figures, the total amount of farm mortgage loans outstanding in each state.