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About The Daily bulletin. (Bend, Or.) 1916-1917 | View Entire Issue (Dec. 6, 1916)
lAGK 4 T1IK 1JKXD Ml'M-Km. BKXO, ORK., WKDNKSO.W, DKCKMHKH 0, ltlfl. The Rural Credits and Federal Reserve Laws At the moot lug of the farmers of this soot Ion held reeeully to discuss the state and Federal Kurnl Credits Haws, C. S. Hudson, president of the ."First National Bank, ot Bond, read a paper in which he discussed the two measures and also tho Federal -Reserve law. Mr. Hudson's paper Jullows: Mr. Hudson's Paper I assume that you are all more or less familiar with the Rural Cred its laws, recently passed; also with the Federal Reserve law, but as both of these laws are of equal importance lo farmers and bankers, I thought vou might be interested in knowing how the same were regarded by one if your home bankers. 1 regard these measures as the two greatest pieces of constructive legis lation that have been passed in the I'nlted States in the last fifty years. They effect the very heart of our agricultural and financial prosperity. The prosperity ot the United States depends on the prosperity of the farmer. The farmer and commercial Inter ests in turn depend on the stability ot our financial interests. The failure of either rocks the boat of prosperity and frequently wrecks the same. Fetlereal Iteserve I.iiw. I do not believe that it is possible to have a financial panic in the I'nlted States in the future, unless caused by protracted hard times, due 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 Re serve law and its workings. The law was passed in 1913, and is therefore three years old. Like all new legislation it has been se verely criticised by its opponents, but after three years' trial, with sev eral amendments in the interim, it has been found, although not per fect, workable, and to haye the con fidence of the people and foreign nations. The financial system of the I'nited States has been regarded as the least efficient In the civilized world. The panics that have resulted by reason of this Inefficiency have caused un told losses ot money, property and lives, in the past. The greatest loss, however, has been in the confidence in our banks. This lack of confidence has caused hundreds of millions of dollars to be withheld from circulation, which Jn turn has retarded development. in all lines, to the detriment ot the v. hole nation. How Panics Kffect Banks. I want to illustrate to you how panics effect banks, and therefore he people as a whole: Under the old law, each bank was a separate unit, doing business in dependently. You farmers deposit ed your money with us. We loaned out a certain per centage of these -deposits; retained a certain percent sage in our vaults and carried the 'balance with our correspondent or 'city banks in Portland, New York, or wherever these accounts were maintained. ' Under prosperous conditions we extended our loans as far as we could consistently, in order to make money for our stockholders; as long as times were prosperous and you did not want your money, this was a proper procedure. We will assume that another panic uch as we experienced in 1907 takes place. At the first sign of trouble all well-regulated banks begin to strengthen their reserves. That is. convert their deposits into cash. This is accomplished ny caning in tncirent to the whole nation. I think loaiiB, selling their securities,, etc. I Country banks call on their city cor-;eflial to the western states, respondents to ship them gold orj The average rate In Oregon on currency, to meet the demands of farm loans Is 8 per cent; rates in their depositors. These demands come to the city thanks from thousands of their coun-jthat try bank customers. To meet these demands they in turn must call in their loans; the result is that inter est rates in the money centers ad vance to 10, 20, GO and even 100 per cent. Banks that cannot collect fail, and thousands are ruined. This was the condition three years -ago, but today is a thing ot the past, and I sincerely believe impossible in 'the future. My reason for this state ment is that the National banks of the United 8tates are now working 'together under the Federal Reserve law, backed up by tho government. 'I - want to Illustrate this to you brlofly, and nsk your earnest con sideration, as it effects you vitally. Instead of each bank working In dependently, trying to strengthen it self at the expense of tho other, re sulting In the sure downfall of the 'weakest, and sometimes .the strong est, the National banks are now vorking us a unit, backed bv the sovornmeiit of the United States and j 'with almost unlimited resources. We wilt assume, for the purpose -ot argument, that we have another panic such as we experienced In 1907.1 impossible for farmers to purchase In order to bring tho Illustration j lands In some sections of Oregon home to you, wo will a-isunin that j under present conditions, pay for tho you people are doing business with same under the terms of the cam the First National Bank, of Bend; nan In disposing fit them, or borrow that you desire the money you have the money at 8 por cent or, 10 per on dopoBlt with ub. While we now J cent, buy the'lund, clear It, make the Jiave deposits of over $6u"0JOO, and M(icn1'!r?dt'e' "1t'vly '?00'("'oSot thi8 in our vaults und with our city cor respondents; while our legal reserve is nearly 4 5 per cent, and we are only required by law to maintain 12 per cent; If all of you desired the ftloo.OOO that you have on deposit, and we only had $.100,000, we could not pay you. Wo would have two remedies: Vo could ask our city correspondents to lend us the money. They could do this or not, as they saw fit. It they did not. under the Federal Reserve law wo could send the notes you fanners owe us to the Federal Re serve bank for this district, located in San Francisco. California, and they would in turn send ns the cur rency for these notes, or deposit the same to our credit In any National bank we might designate. Should the demand for currency on the San Francisco bunk bo so great that they could not supply tho same, they in turn would have two remedies: Vndor the Federal Re serve law, we nave 12 districts in the I'nited States with a branch bank located In each; governed by the Fed eral Reserve board, located in Wash ington, r. C. The law provides that one district bank may borrow from another. It might occur that San Francisco had a large demand tor money to move their fruit crop, or for other reasons: at the same time Minneapolis, or Richmond, Virginia, might huve a large amount of surplus cash. If this was so, San Francisco could borrow from either of these district banks. Should a panic occur and a united demand was made throughout the I'nited States at the same time these hanks have authority under the law. and the supervision ot the government of the I'nited States, to issue currency, against tho notes of you furmers, called Federal Reserve notes, which are also backed up by a reserve of 40 per cent In gold. This reserve in gold may he waived or suspended. Therefore In times of panic the Federal Reserve banks have the right to Issue currency in almost unlimited amounts. This currency is put out with a tax on the same, that will cause it to be retired as soon as normal times are restored. This currency is now printed. In the hands of the different Federal Re serve banks, and ready for issuance. if required. Every National bank must belong to the Federal Reserve system, and private or Slate banks may. If they submit to the same rigid rules and examinations, by the government and Federal Reserve authorities, imposed on National banks. For these reasons. I believe that panics in the United States are a thing ot the past; that the United States has a safe, sane banking law, based on similar laws in force in foreign countries for centuries. Kurnl Credits 1-otvs. We have had printed and delivered to you a little booklet, giving in full both the State and Federal Rural Credits laws. While, personally. I should prefer that we had only the Federal law, and gave it our full support and co operation, both laws have their ad vantages and disadvantages. While tunc will not permit, and I have not sufficiently studied these laws, and the different systems in force in other countries, to go into a detailed discussion of the same, there are a few points that have occurred to me to which I desire lo direct your attention. We should not expect too much from either measure too soon. I feel, however, that these laws will eventually prove of incalculable ben- that they will prove especially ben- some of the eastern states are as low , as 4 per cent. This is due to the fact Oregon is so far removed from the capital available for farm loans, Most of this money, coming from the New England states. Scotland and other foreign countries. The distance causes the loan companies to assume, erroneously, that the risk Is greater, and therefore the rate must be in creased. As a matter of fact, Ore gon farm loaiiB are Just as safe as any in the United States, If wisely made. The Rural Credits laws will elim inate distance, and Oregon should receive the same rate as New York or Illinois. It is estimated that there are 35 million dollars loaned on Oregon farms, at an average rate of 8 per cents. If the Rural Credits laws re duce this rate to 5 per cent, It will save the farmers of Oregon over a million dollars In interest annually. This saving In Itself Justifies the en- jactment and support of either of the bills. The greatest benefit that we are to receive, however, In my Judgment, Is the length of time for which those loans may be procured. It Is almost necessary Improvements, and meet lhC raortgagV-.fj Mch ordinarily ma- turoa lu tivo years. At that time the farmer Is just commencing to receive the benefit ot his labor, and la con fronted with4 the payment ot tho principal ot tho loan. Under these conditions the farmer Is reluctant to go Into debt, und wise ly so. There are muny unscrupulous loan agents, who exact bonuses, and got unreasonable fees In connection with loans; each company hits a dif ferent kind of contract. innrtKUKo or agreement, all of which deters the ordinary farmer from taking out a loan, no matter how badly he may need the same. If he docs not take out tho loan through u responsible company and agent, he Is constantly worrying over the fact that he has to meet the high interest, and make payment ot the principal in five yours. I do not wish you to assume that I tnku tho position thut good loans ul reasonable Interest, by perfectly legitimate companies and agents can not be secured, becuuse they have aided materially In the advancement und development of Oregon, uml es pecially this Central Oregon country, but us In nil linos, '.here are un scrupulous agents, who reflect on the responsible ours. Under the new laws, the farmer will ileal with the stute and govern ment. Fear of not securing a square deul will be allayed, und he will re ceive Instead of five years' time, any number of years he may select, up to 30, under tho stute law, hud 40 under tho Federal. .Amort hutt Inn I'lnn Under either law these loans must be paid buck under what is known as the amortization plun; which pro vides for payment of part of the principal. In addition to tho interest, ench year. At the end of the period for which the farmer selected the louu. both interest and principal huve been discharged. You will note, by turning to the first page on tho cover of the hook on Rural Credits which you have, that we huve prepared a table show ing a loan of $1000. and the pay ments necessary lo retire the sumo. If you borrowed $1000 for five years, you would have to pay. in addition to your Interest charges of 4 to b per cent. $200 per year, If tho loan was taken out for five years. If for 40 yours, your annual Installment would he $25 anil interest. You may select the lime, and know definitely lu advance Jusl whut your total payments will amount to an nually. Another ndvnntage will be the large amount of new laud thul will be reduced to cultivation under this system, that it would have been un profitable to reclaim under previous conditions. It Is estimated that Ore gon has at least 20 million ueres of desirable land, that will be brought to a high suite of cultivation under these laws. This means more popu lation, more taxable properly and a consequent reduction in the tax rate; better transportation facilities and better markets for our products. One ot the greatest benefits of these laws Is the fail that they will to an extent classify the lands of our state. A minimum value will bo placed on every farm on which the slate or government makes a loan. If a loan is made of $20 per acre, it will be notice to purchasers, or the world, that the State of Ore gon or government of the United Slates values that land at at least $40, for agrlciiKural purposes. This will have a tendency to establish a sale price, not at that figure, but a higher figure, because cither the slate or government will make a con servative appraisement. A minimum value will, however, be established by a reliable authority. Comparison of l,tiHM I want to say Just a few words of comparison of the two laws. Under either law, the mortgages which arc given by you farmers are held in trust, and Farm Loan bonds issued against the same, which are to be sold. Under the state law It is pos sible at this time to issue approxi mately 18 million dollars of these bonds, or 2 per cent of our assessed valuation. The state guarantees tiiese bonds, and as a eiti.en of Ore gon, you in turn are liable for their payment. Any direct liability Is, probably, remote, but nevertheless exists, and is therefore objection able. Under the Federal law you do not assume this liability. The Federal law provides thut you may borrow 00 per cent of the value of your land and, in addition thereto, 20 per cent of the value of your Improvements. The state law limits you to CO per cent of the value of the land.' A mlplmutn sum of $100 may be borrowed under the Federal law, and a maximum sum of $10,000. ' The state law provides a minimum loan ot $200 ami maximum loan of $0,000, with a provision, or restric tion, to the effect that any loan shall not exceed $50 per acre. In case a man had five or ten acres, worth $500 per acre, with Improvements thereon worth $5,000, ho would be limited to a loan of $50 per acre, or $250 in one case, and $500 lu the other. This seems rather objection nblo, as compared with the Federal law, which places no per ncre limit on the size of the loan. Interest Rates The state law provides for a min imum rate of 6 per cent, which may be increased, owing to tho price for which the bonds sell. This rate can not bo revised or reduced. Tho Fed eral ' lnw provides Hint the .'rate charged for loaiiB shall not exceoil 1 per eenfaboyo the price 'ufc' which, the bonds' sell, ' As these bonds Dear" 4 per rent Interest, and am unit-taxable It Is safe to nay they will sell readily at pur. This would menu rule to the farmer of 5 per cent, Hhould tho expenses of operating the Fed eral t.und bunks be loss than this difference of I per Cent, tho residue. If any.' will bo returned to I ho far mers, who are stockholders, In the shape of dividends on their stock. Under tho stale law, any residue re verts lo the state, mid Is placed in what Is known as an Irreducible "Ku rnl Credits Reserve Fund," and Is bunded down to posterity. Remote Districts It Is urgucd. und probubly rightly, that many people who live In remote districts, whore It Is not feasible or possible lo form Farm l.oun ussoclu tions, us required under the Federal law, requiring lit least $20,000 III loans before uu association may bo formed, will bo unable to secure money under the Federal system, but can do so under that of the state. That under tho state law, you will bo doing business closer lit homo und with lohs delay. Under Hie Federal bill, tho far mers, who lire borrowers, conduct the business ot tho organizations. Under the state bill, you will nego tiate your loans through the Hutu l.und Hoard. There scouts lo be advantage und disadvantage to both bills, und I think time alone will toll which sys tem is the more feuslblu and lo your advantage. I earnestly recommend thai eaeh of you fumlllurUc yourself w ith these measures anil bo prepared lo lake advantage of them ul Hie earliest opportunity. Tho more outside capital wn can bring into the State of Oregon, and especially Central Oregon, whore ll is so badly needed (or development purposes, the more prosperous wo all will be; interest rates lu all lines will decline. Tho production of livestock will Increase In quantity, due to more fa vorable conditions, and decrease lu cost of production for the sumo rea son. All of this will tend lo make you farmers mom prosperous, and you will In turn contribute to the prosperity of the country und towns. SOIMIIK SMITH DIES Sophie Marie, tho three and a half year old diiiightor of Mr. und Mrs:' Cole E. Smith, died yesterday after-1 noon of pneumonia, from which shnj had been suffering for the pus! two weeks. Tho body was taken by the: parents last night to llartllne. Wash-1 Ington, for burial. Except for nn adp!cd daughter the little girl who died was her parent's only child. Subscribe Now For B THF. n All Y RI II I FTlKl II . ll ... Central Uregon s Best Uaily Newspaper lii . The News of the World I I By United Press Service 11 FOREST SERVICE TESTS NEW SHOVEL FOR FIRE FIGHTING Tool U Tko-Iouu Affair Handle Is In yo-linli l.rnKihs Ciiii Ho Assembled (.liilokly. District Forester li go II. Cecil. of, I'oiilund, In having u number of luko-down hhovols mailii locally, to ho lesled by llm pull'olmeii III dif ferent purls of the district and II found suitable to hit mail" I'a'i ' the forest service simulant fire fighting equipment. The model was niudo and furnished by Deputy For est Supervisor llarrln, of Tacoiuii. who irled It out with uilisiiiiiory re suits on tho Rainier uatlouul forest. Wushiiigtnn, dining the last fire sea son. ' , ' The model Is made from regular round point, long handle Irrigating shovel. The hanillii Is removed from the socket and cut lu 2(Mnoti length, which ure Joined by u live Inch stool ferritin when the tool Is put together. Tho shovel bludo forms third sec llou. Spring fasteners, like those used on automobile shovels, link the Ihreo sections together. The tool Is 51 Inches long when useiibled. POTATO (JRIlWEItS MEET A most successful luccllnK of the Deschutes Valley I'niuin lirowom' Association was held ul tho county agriculturalist's office at Redmond on Saturday, over thirty being pres ent. It was voted lo order Monnlled sacks lii which lo ship tho product of the association, and nl.io lo pro cure "mugging" labels to be placed lu the ends of the sacks uml explain I ho grudes und guarantee of the con tents. J. I.. HlbHon was iiolntei ns tbu representative of tho Busmin Hon lo the county ugrirtillurul coun cil. The next pool of potatoes will be offered for snle on December 111. M'E.tkH HOORH The members of the audience that heard Miss Mary Richardson, of Spo- j kuue, speak at the council room on Friday, on tho subject of "Knitters.! Mothers und Hooks." were cnlhtisl-' untie over her lulilr.-ns. It wu! through books. Miss Ith ttunlsmi ex plained, thai purenis could find lhe way to clvllliv the young savages i that children were until their early j years were passed. She presi-rlbeil the best books for different ages. ; pointing out the wuy lu which they j aided ihu menial growth of the child. I To lllustrmtlrcjulk. a rollociUn ul eiiiiuren s nouss was on omiiiiiuoii. KIINKI.NK IS ( AVDIIATK " ChurlM. W, Krsklnn. deputy ,!,,,,,,' iitlorney und manager of , m Cominorclal dub, iiniiounces dial ,.. Is candidate fur j, p0Noi, of (u' nndur clerk for tho coming ,, of Ihu Oregon legislature. Ml. Ersklno .has utteuded Hirer, sosoj) , of the leglMuiur... Moling " 'lorloul cupuclilcs, At th.) sos.lo,, two yours uko h calendar clem. MARTIN TO Mn,:r MUI.; Max Martin, of i,. ,.,. ,., "' 1,1 K- r. of Huu.lpnlnl, ! maun, torinor light K,l ,.,,lo,i wrestler of , t,,Uu states, ul III.. Hippodrome, In lleud. December . under the nusploc, of the lleml Ath letic club. REST ItlHIM PROVIDED CI... ll... I , . . f. , v ..,.- ,,i , winuierciai eitin room und Its occiiiiuttry us it ennr,' " ........ ........ ., in., i,i roun: hitherto maintained In the rear, tan council bus granted permission for tho use of Hie council room as n lost room. CAB SHORTAGE FELT KEENLY BY LOCAL LUMBER COMPANIES Shipments to Castcrn I'liinla Helii' Up on Account of the Nrwrcll)' of I mill-in 'roM-cU Durk. The most perplexing problem fac ing the local lumber companies at pnsi-nt, (or Ilia solution if which thorn i utile Imniedlatn hope, Is the nhoitaK" of freight rant. With liiri;. orders lo eastern points on their books, the lumber companlct ure almost Incapable of fllllnit them and slock Is belt g stored In dry she,!, awaiting B betterment of the sltuu- , Hon. Tho railroad companies are able to furnish scarcely 25 per Cenl of the cms iioceary for llto local coin- panics to mi iln-ir orders, nitd no lll-flllllll III,,, U IfU-M,. U l,M ll. .11 I.. l' ......., ,,; lllfj'l llll'IIH III, As soon ns Iho now dcimirraj" regulation being prepared by several railroad companies Is tiindn efferkve, under which eiira charges will Im mailt- innilc' Jir ifi'i? of mrsjuoro Qinp a .ertuij f pif'"! of HmorSti(f,H h,"- that "fi'f'i ., getieruVvtiiuv 71,,, i vail. 1,1,-. 'if J A , ; , Tr-Tpa-r-m . r -Ejl - i- ' ' '