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About The Bend bulletin. (Bend, Or.) 1903-1931 | View Entire Issue (Dec. 6, 1916)
THE UKND HULLETI.V, BENI). OKK.. WEDNESDAY, DECEMBER 0, 1010.
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
.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 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
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
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
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
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
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,
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
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
Tho Rural Credits laws will ollm
luato dlstauco, and Oregon should
recolvo tlio samo rnto as Now York
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
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
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
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.
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
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.
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.
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
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
I oarncstly rqcommeiid that each
of you famlllarlzo yourself with thcs
measures and bo prepared to tako
advantago of them at tho earliest
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
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. '
Otheu like it. None Kcrpi Ut
ter. Sales lie doubled in pait
Phone Red 131
F. DEMENT 8b CO.
NEW PERKINS HOTEL
Fifth and Waihington Stirett
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
" ill ii
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.
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of satisfactory service) because its improvements
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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
and way points'
MAIL, FREIGHT, and
Pioneer Auto Stage and Truck Co.
SUCCESSORS TO WENANDY LIVERY CO.
von 8.u-: nv k. i mkjan
.i ...jfeimn-aw . . i,