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About The Bend bulletin. (Bend, Or.) 1903-1931 | View Entire Issue (Dec. 6, 1916)
N THE UKND HULLETI.V, BENI). OKK.. WEDNESDAY, DECEMBER 0, 1010. vagi: 10. THE u i D C I I I- V The Rural Credits and Federal Reserve Laws At tho meeting of tuo formers of 'this section held recently to discuss 'the stato and Federal llural CrcdltB Haws, 'C. S. Hudson, president of tho -First Nntlonal Hank, of Bend, read a papor In which ho dlscuRsod tho two measures and .also tho Federal llesorvo law. Mr. Hudson's paper ifolloWB! .Mr. Hudson' Phmt I assume that you aro all more or less familiar with tho llural Crt'd HUj laws, recently passed; also with .ho Federal Reserve law, hut as hoth f theso lawfl aro of cciial Importanco to farmers and hankers, I thought you mlBht he Interested In knowlnB iiow tho same woro regarded hy one of your homo hankers. 1 rocard theso measures ns tho two greatest plei'es of constructive legis lation that liavo heen passed In tho United States In tho last fifty years. They effect tho very heart of our nKrlcultural and financial prosperity. Tho prosperity of tho United States depends on tho prosperity of tho farmer. Tho farmer and commercial lntor-i-sts In turn depend on tho stahlllly it our financial Interests. Tho fiilluro of either rocks tho lioat of prosperity and frequently Avrccks tho same. I'Vilcicnl Itosorvi- I.nw. 1 do not bollevo that It Is possible to have a financial panic in tho United States In tho future, unless 'fiiiiBcil by protracted hard times, duo to repeated crop failures. In order to make this point clear to you It will bo necessary to give you a few facts as to the Federal Ito Hcrvo law and its workings. Tho law hih passed 111 litl.'I. and Is thorofoio three years old. Like nil now legislation It has been se verely criticised by Its opponents, but after three ears' trial, with sev eral amendments In tho Interim, It has been found, although not per fect, workable, nnd to havu tho con fidence of tho people ami foreign nations. Tho financial system of tho United SinteH baa been regarded as tho least wffliTlent In tho civilized world. The jianlcs that Imvo resulted hy reason of this Inefficiency Imvo cuiiHed un told losses of money, property and lives, In tho past, The gieatcst loss, however, has been in tho confidence In our hanks. 'This lack of confidence Iiiih uiuscd hundreds or millions of dollars to ho withheld from circulation, which In turn has retarded development, In all lines, to tho detriment of tho 'whole nation. How I 'iin les llffcct Hunks. 11 want to Illustrate to you how jpanlis effect banks, nuil therefore 'the peoplo as n whole: Under tho old law, each hank was u separate unit, doing business In dependently. You farmers deposit ed your money wllh us. Wo loaned out a certain per centago of these leposlts; retained a certain percent n ge In our vaults and carried tho balance with our correspondent or city banks In Portland, New York, or wherever those accounts weio maintained. Under prosperous conditions wo -Mended our loans as far as we could rouslsteutly, In order to inako money for our stockholders; as long as t limm woro prosperous mid you did not want your money, this hh u proper procedure. We will iiHSiimo that another panic xuch as wo experienced In 1007 takes place. At the first sign of double nil well-regulated bunks begin to strengthen their reserves. That Is, convert tholr deposits Into cash. This is accomplished by calling In tholr loans, selling their securities, etc. Country banks call on (heir city cor respondents to ship them gold or currency, to meet tho demands of their depositors. Theso demands come to tho city banks from thousands of their coun try bank customers. To meet theso demands they In turn must call In their loans; tho result Is that Inter est rates In the money centers ad vance to 10, 20, CO and even 100 per cent. Bonks that cannot collect fall, and thousands aro ruined. This was tho condition three years ago, but today Is a thing of tho past, and I sincerely bellovo Impossible in tho future. My reason for this state ment Is that the National banks of tho United States are now working together under tho Federal Hcscrvo law, hacked up by tho government. I "want to Illustrate this to you briefly, and ask jour earnest con sideration, as It effects you vitally. Instead of each bank working In dependently, trying to strengthen It self at tho expense of tho other, re sulting In the sure downfall of the weakest, and somotimes tho strong est, tho National banks nro now working as n unit, backed by tho government of tho United States nnd with utmost unlimited resources. Wo will assume, for tho purposo of argument, that wo liavo another panic such as wo experienced In 1007. In order to bring tho Illustration homo to you, wo will assume that you people aro doing business with thu First National Hank, of Doml; that you deslro tho money you liavo on deposit with us. While wo now have deposits of over $600,000, and aro carrying nearly $300,000 of this In our vaults and with our city cor respondents; while our legal icsorvo Is nearly -1l per cent, and wo aro only required hy law to maintain 12 per cent; If till of you desired tho $1100,000 that you have on deposit, and wo only had $300,000, wo could not pay you. Wo would hnvo two remedies: Wo could ask our city correspondents to lend us tho money. Thoy could do this or not, as thoy saw fit. If thoy did not, il ii dn i' tho Federal llesorvo law wo could solid thu .notes you farmers owe us to the Federal Ho servo bank for this district, located in San Francisco, California, nnd thoy would In turn scud us tho cur rency for theso notes, or deposit tho sumo to our credit In any Nntlonal bank wo might designate. Should tho demand for currency on tho San Francisco bank ho so great that thoy could not supply tho samo, they In turn would liavo two remedies: Under the Federal He servo law, wo liavo 12 districts In tho United States with u branch hank located In each; governed hy tho Fed eral Iteservo board, located In Wash ington, 1). C. The law provides that one district bank may borrow from another. It might occur that Snu Francisco had a largo demand for money to move their fruit crop, or for other reasons; lit the mime time Minneapolis, or ltlchiuoud, Virginia, might liavo u largo amount of surplus cash, If this was ho, Sail Francisco could borrow from either of these district hanks. Should n panic occur and a united demand was made throughout tlio United States at tho samo time fheso haukH have authority under tho law, mid tho supervision of the government of tho United States, to Issue currency, against tho notes of I you farmers, called Fedoral Resorvo notes, which aro also backed up by a resorvo of 40 per cont In gold. This resorvo lu gold may bo waived or suspended. Therefore In times of panic tho Fedoral Ilcservo banks havo tho right to Issuo currency In almost unlimited amounts. This currency Is put out with a tax on tho same, that will causo It to bo retlreu as soon as normal times aro restored. This currency Is now printed, In tho hands of tho different Federal Re serve banks, and ready for Issuance, If rcaulred. Evory National bank must belong to tho Federal Iteservo system, aim prlvato or Statu banks may, If thoy submit to tho samo rigid rules and examinations, hy tho government and Federal Reserve authorities, Imposed on National banks. For theso reasons, I bollevo that panics In the United States are a thing of tho pnst; that tho United Stntcs has a safe, sane banking law, based on similar laws in force In foreign countries for centuries. Rural Credits 1.iim. Wo liavo had printed and delivered to you a llttlo booklet, giving in full both tho State nnd Federal Rural Credits laws. While, personally, I should prefer that wo had only tho Federal law, and gave It our full support and co operation, both laws have their ad vantages and disadvantages. While timo will not permit, and I have not sufficiently studied these laws, and tho different-systems in forco In other countries, to go Into a detailed discussion of the Biimc, there aro a few points that havo occurred to mo to which I desire to direct your attention. Wo should not expect too much from either mcasuro too soon. I feel, howovor, that theso Inws will eventually prove of Incalculable ben efit to tlio whole nation. I think that they will provo especially hen cflclal to the western states. The average rate lu Oregon on farm loans Is 8 per cont; rates In soino of tho eastern states aro as low as -1 per cent. This Is duo to tho fact thut Oregon Is so far removed from the capital available for farm loans. Most of this money, coming from tho Now England states, Scotland and other foreign countries. The distance ciiubcs tlio loan companies to nssumo, erroneously, that the risk Is greater, and thereforo tho ruto must bo In creased. As a matter of fact, Ore gon farm loans nro just ns safe as any lu thu United States, it wisely mado. Tho Rural Credits laws will ollm luato dlstauco, and Oregon should recolvo tlio samo rnto as Now York or Illinois. It Is estimated that thoro aro 35 million dollars loaned on Oregon farms, ut an average rata of 8 per cents. If tho Rural Credits laws re duce this rate to ft per cont. It will savo tho farmers of Oregon ovor ft million dollars In Interest annually. This saving lu Itsolt Justifies tho en actment and support of either of thu bills. Tho greatest benefit that wo nro to receive, howovor, In my judgment, Is tho length of tlmo for which theso loans may be procured. It is almost Impossible for fanners to purchase lands in sumo sections of Oregon under present conditions, pay foil tho samo under the terms of tho com panies disposing of (hum, or borrow tho money at 8 per cunt or 10 per cont, buy tho land, clear It, make tho necessary Improvements, and meet tho mortgago, which ordinarily ma tures In five years. At that tlmo tho former is just commencing to recelvo tho benefit of his labor, and Is con fronted with tho payment of tho principal of tho loan. Under those conditions tho farmer is roluctant to go Into debt, and wise ly so. There aro many unscrupulous loan agents, who oxact bonuses, and get unreasonable fees In connection with loons; each company has a dif ferent kind of contract, mortgago or agreement, all of which detors tho ordinary farmer from taking out a loan, no matter how badly ho may need tho same. If he does not tako out tho loan through a responsible company and agent, ho Is constantly worrying over tho fact that ho has to meet the high Intel est, and make payment of, tho principal in five years. I do not wish you to assume that I tako tho position that good loans at reasonable Interest, by perfoctly legitimate companies and agents can not be secured, becauso they havo aided materially lu tho advancement and development of Oregon, and es pecially this Central Oregon country, hut as In all lines, thoro are un scrupulous agents, who reflect on tho responsible ones. Under tho now laws, tho farmer will deal with tho stato and govern ment. Fear of not securing u square deal will ho allayed, and ho wilt re ceive Instead of flvo years' timo, any number of years ho may select, up to 3G, under the stato law, and 40 under the Fedoral. Amortization I'lnii Under cither law theso loans must bo paid back under what is known ns tho amortization plan; which pro vides for paymont of part of tho principal, lu addition to tho interest, ench year. At tho ond of tho period for which tho farmer selected tho loan, both Intorcst and principal havo been discharged. You will note, by turning to tho first pngo on tho cover of tho book on Rural Credits which you havo, that wo havo prepared a tablo show lug a loan of $1000, and tho pay ments necessary to retire tho samo. If you borrowed $1000 for flvo years, you would havu to pay, In addition to your interest charges of 4 to C per cent, $200 per year, if tho loan was taken out for flvo years. If for 40 years, your annual Installment would ho $25 and Interest. You may select tho time, nnd know doflnltoly. In advance just what your total payments will amount to an nually. Another ndvantagb will bo tho large amount of now luud that will bo reduced to cultivation under this system, that It would havo been un profitable to reclaim under previous conditions. It is estimated that Ore gon has at least 20 million acres of deslrablo land, that will ho brought to a high stato of cultivation- under theso laws. This means more nonu lotion, moro taxable property nnd a consequent reduction In tho tax rate; better transportation . faculties nnd ltottor markets or our products, One oC tho greatest benefits of theso laws Is tho fact that thoy will to an extent classify tho lands of our state. A minimum vnluo wilt ho placed on overy farm on which tho statu or government makes a loan. If n loan Is mado of $20 p ncru, It will bo notice to purchasers. or tho world, that tho Stato of Ore gon or government of tho United , : States values that land at at least $40, for agricultural purposes. This will havo a tondoncy to establish a sale price, not at that figure, but a higher figure becauso olthor tho stato or government will mako a con servative appraisement. A minimum value will, howovor, bo established by a rcllablo authority. Comparison of Laws I want to say just a fow words of comparison of tho two laws. Under cither law, tho mortgages which aro given by you farmers aro held In trust, nnd Farm Loan bonds Issued against tho samo, which nro to bo sold. Undor tho stato law It Is pos sible at vthls tlmo to Issuo approxi mately 18 million dollars of theso bonds, or 2 per cent of our assessed valuation. Tho stato guarantees theso bonds, and as a citizen of Ore gon, you In turn aro llablo for tholr payment. y Any direct liability is, probably, remote, but noverthclosa oxlsts, and Is therefore objection able. Under tho Fcdcrnl law you do not assumo this liability. Tho Fedoral law provides that you may borrow CO per cent of tho value of your laud and, In addition thereto, 20 per cent of tho valuo of your improvements. Tho stato law limits you to CO per cent of tho valuo of tho land. A minimum sum of $100 may bo borrowed undor tho Federal law, and a maximum sum of $10,000. The stato law provides a minimum loan of $200 and maximum loan of $5,000, with a provision, or restric tion, to tho otfect that any loan shall not exceed $C0 per acre. In cose a man hod flvo or ton acres, worth $500 per aero, with Improvomonts thereon worth $5,000, ho would bo limited to n loan of $50 pur aero, or $250 In ono case, nnd $500 lu tho other. This seems rather objection able, as compared with tho Federal law, which places no per aero limit on tho size of tho loan. Interest Rates Tho stato law provides for a min imum rato of 5 per cent, which may bo Increased, owing to thu prico for which tho bonds soil. This rata can not bo revised or reduced. The Foil oral law provides that tho rato charged for loans shall not exceed 1 per cont above tho prico nt which tho bonds sell. As theso bonds hear 4 per cont Interest, and nro non-taxahlo It Is safe to say they will sell readily at par. This would menu a rato to tho farmer of 5 per cent. Should tho expenses of oporntlng tho Fcd ural Lund hanks, bo less than this dlfforcnco of 1 per cont, tho residue, If any, will bo returned to tho fur mois, who aro stockholders, In tho shape of dividends on tholr stock. Under tho statu law, any rcslduo re volts to tho stato, and is placed lu what is known as nu Irreducible "Ru ral Credits Resorvo Fund," and Is handed down to posterity. Remote Districts It Is argued, and probably rlghth that many peoplo who live in ,.. districts, whoro It Is not feaslblo o possiuio 10 iorra farm Loan nssocU. tlons, as required under the F...! law, requiring at least $20,000 u loans beforo an association may u formed, will bo unablo to secur, money undor tho Federal system, m can do so under that of tho ti. That under the statu law, you will b doing business closer at homo m with less delay. Undor tho Federal bill, tho tir. mors, who aro borrowors, conduct tho business of tho organization Undor tho stato bill, you will nego tiate your loans through tho Sut Land Board. Thero seems to bo advantage and disadvantage to both bills, and I think tlmo alone will tell whir), ... tern Is tho mora feaslblo and to your advantage. I oarncstly rqcommeiid that each of you famlllarlzo yourself with thcs measures and bo prepared to tako advantago of them at tho earliest opportunity. Tho moro outsldu capital no can bring Into tho Stato of Oregon, and especially Central Oregon, whore It Is so badly needed for development purposes, tho moro prosperous ( all will bo; interest rates lu all linn win dcciino. Tho production of livestock nln incrcaso In quantity, duo to more fa vorable conditions, and decrease la cost of production for tho samo rea son. All of this will tend to make you farmers moro prosperous, and you will In turn coutrlhuto to the prosporlty of tho country and towns. Our Jitney Offer This and r,c DON'T MISS THIS. Cut out thli slip, cncloso with (lvo cents to Foler & Co., 2835 Shallleld Ave., Chicago, 3 111., writing your namo and address VJ clearly. You will recolvo In return a trial package containing Foley's Honoy and Tar Compound for coughs, colds, nnd croup; Foley Kidney Pills, nnd Foloy Cathartic Tablets. Sold everywhere Adv. ' TRY OUR Pasteurized Milk Otheu like it. None Kcrpi Ut ter. Sales lie doubled in pait 30 days. CENTRAL OREGON FARMERS' CREAMERY Phone Red 131 ffs GROCERIES FRESH VEGETABLES DERRIES AND FRUITS BUILDERS' HARDWARE ond StfeSSH -(k. SI1ERWIN-WILUAMS PAINT F. DEMENT 8b CO. NEW PERKINS HOTEL Fifth and Waihington Stirett PORTLAND, OREGON Centrally Located The Hotel for YOU Special Summer Rates Room with bath privilege, single 75c up; double $ 1 .00 up. Room with private bath, single $1.50 '- up; double $2.00 up. Autobus meets trains. Union Depot cars pass our doors. From North Bank Depot S car transfer at 5th St. Bend Park Company 122 OREGON STREET Real Estate Insurance rpj " ill ii yWErl True Economy ... ' means the wis spending of one's money maklog every dollar do full duty and getting la return a article that will satisfy you la every way. The tnumfl WHITE, U a real bargain because it b soli at a popular price t because It gives you the kind of sewing you delight ini because It will turn out the work quickly and thoroughly and give you a life time of satisfactory service) because its improvements will enable you to do things which can't be dene on any other machine; because it will please you with it fin finish and beauty of its furniture. la short you will find the White reliable and v - ocwaotc iruin erry puuii ui view. Be sure to see the White dealer who will be glad to show you how good a machine the White k. If there is bo White dealer handy, write us direct for cat alogs. We do not sell to catalog houses. Vibrator aad Rotary Shuttle Machines. WHITE SEWING MACHINE CO. CLEVELAND, a Bend-Silver Lake and way points' MAIL, FREIGHT, and PASSENGER SERVICE Pioneer Auto Stage and Truck Co. SUCCESSORS TO WENANDY LIVERY CO. von 8.u-: nv k. i mkjan I 'MMssswi "i; .5J35. !H""WWSPPPP1 .i ...jfeimn-aw . . i,