No. 6. DEPARTMENT OF AGRICULTURE. 447 



1 have thus briefly referred to i)ersoii:il credits not only as an 

 answer to the criticism that nothinjj; is heinj:c attempted to improve 

 present conditions, but also to call your attention to the very broad 

 compiehensive legislation jnogi-am whicli is before Congress at this 

 very moment. 1 conlidently assert that these three measures, the 

 Grain Grades Act, the Wtuehouse F.ill, and the Mortgage Credit 

 plan, taken together, constitute the most imjjortant legislation affect- 

 ing agricultural interests that has been introduced in Congress for a 

 generation. 



I have spoken briefly of the purpose of rural credits and some of 

 the ditificulties to be overcome in framing legislation to meet our 

 conditions. The present bill, H. R. No. 6838, creates a national sys- 

 tem of mortgage banks to be operated by a federation of farm bor- 

 rowers, organized as a co-operative association. It also authorizes 

 a separate system of mortgage banks, organized as corporations and 

 controlled by private initiative. These two systems are separate and 

 distinct; nowise antagonistic but everywhere competitive. In prac- 

 ticalh' every other country of the world, mortgage banking has been 

 successfully organized under each of these plans. They bear the 

 same relation to each other as the mutual and old line insurance com- 

 panies. The provisions of the bill do not give any special advantage 

 to either plan but seek to permit their organization under the most 

 favorable conditions. The entire system is put under the control of 

 a Farm Loan Board, consisting of five persons appointed by the Presi- 

 dent and confirmed by the Senate. Not more than three members of 

 this Board may be chosen from any one political party. The members 

 are appointed for a term of ten years and are paid a salary of |10,000 

 per year. It is the purpose to secure high grade, competent men, 

 giving them ample power under long tenure and freeing them from 

 political control. This Board organizes the new banking system and 

 when once in operation, exercises supreme control over its functions. 

 This Board is given power to divide the United States into twelve 

 banking districts and to organize a land bank in each one of these 

 districts. It is the purpose of the bill, as the system grows, to in 

 crease the number of land banks, until ultimately it may be that there 

 will be a land bank authorized for every state in the Union. The 

 number twelve was chosen to correspond with the Federal Reserve 

 system, but ample provision has been made for the organization of 

 new districts, whenever, in the opinion of the farm Loan Board, such 

 action is necessary. These land banks must each have a subscribed 

 capital of at least |500,000 before they can' begin doing business. 

 This capital may be subscribed by individuals, corporations, muni- 

 cipalities, or the government of any State; but 'in case it is not sub- 

 scribed through these sources, then the Government of the United 

 States is obliged to make such subscriptions. 



At this point we reach the moot question of government aid. From 

 the very start I have been opposed, personally, to those extreme meas- 

 ures of government guarantee of the bonds or a direct loan to bor- 

 rowers by the government. It is practically impossible, however, to 

 found a co-operative system and put it into actual operation through- 

 out the nation unless some good angel will advance the initial capital. 

 If this capital is sought to be secured by the issuance of shares of 

 stock, either the holders of these shares must forego dividends or 



