Farm Credits

September 3, 1923
Entire Report
  1. Can the Farm Credit problem be solved by further legislation?

  2. For two decades the American farmer has complained that he has been inadequately served with credit facilities and Congress has sent special commissions abroad and had special commissions sit at home to study methods of increasing and avenues by which the farmer may borrow money.

  3. Enactment of the Federal Reserve Act provided a facility whereby merchants and manufacturers could contain credit running from 15 days to 90 days. Farmers were provided credit running to six months by this act, provided they could give the proper security.

  4. Later, Congress passed The Farm Loan Act which provided farmers with a means for obtaining, through a System of Governmental banks, first mortgage loans on their farm lands, running thirty years.

  5. These two acts provided a system of short time credits designed chiefly for mercantile turnovers and a system of long time credits to enable farmers to own farm lands.

  6. A need still was felt for a middle system. Six months is too short a period for a farmer to borrow, raise and market a crop and pay his loan. The money he obtains under the thirty-year farm mortgage is his capital. The farmer, even after passage of these two constructive acts, was found to need an intermediate credit facility by which he could obtain loans running from six to nine months to three years, this to be operating capital to extend over the full period required, on the one hand to plant, cultivate, harvest and. market a ground crop or to breed, raise and market live stock.

  7. This need was met by the passage last spring of the rural credits act creating two parallel systems of Intermediate Credit Banks, provided with Government capital, and National Agricultural Credit Corporations, to be provided with private capital. These institutions now are getting into operation.

  8. One major fact stands in relief in respect of all these systems. The borrower, be he merchant or farmer, must go first to bank. In the case of certain types of business under the newest system, he may go to a cooperative organization, but in any event he may not deal direct with the bank created by act of Congress. The vast majority of the borrowing is done through banks-chiefly national banks or State bank members of the Federal Reserve System. The bank has the deciding voice as to whether or not the applicant shall have his loan. If the banker does not believe the borrower's credit is good

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Farm Loans, Insurance, and Subsidies