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.
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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
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