PROCEEDINGS CORN BELT MEAT PRODUCERS' ASSN. 587 



first farm mortgage well worth the money and he wants to borrow $1,000 

 and puts up his note as security. If the bank has to rediscount that note 

 in order to make the loan, it cannot take it, because it is not subject to 

 rediscount. One of the main troubles of Iowa has been that some people 

 have thought that we can pay our indebtedness on quick assets. There is 

 another serious thing for Iowa farmers to think about. Iowa farm busi- 

 ness cannot be paid on quick assets. They tried to make us do it, and it 

 pretty nearly broke a lot of good Iowa farmers, and pretty nearly broke 

 a lot of good Iowa banks, and if that deflation had not been stopped I 

 don't know what might have happened. The farming business is so com- 

 plex, so diversified, it requires so much capital, that a man must borrow 

 more money to run that business on than he can pay by the sale of his 

 quick assets, and that is a rule of rediscount at the present time. 



Another thing that we have got to consider in these times. Iowa farm- 

 ers carry indebtedness entirely through commercial banks. There is no 

 other line of industry requiring a large amount of capital which does that. 

 In the last fourteen months, particularly, you have noticed in the papers a 

 large turning-over of manufacturers' and other lines of industrial paper 

 from the commercial banking field to the investment banking field. That 

 is something that we must give thought. You and I in this room are to- 

 gether, and the man who doesn't give thought to his business in a year or 

 two will drop by the wayside. For instance, you cannot do any good to the 

 Iowa farmer by loaning him money for fifteen, twenty, thirty or sixty days, 

 and the great majority, or the general average, rather, of notes in the 

 Chicago Federal Reserve Bank was for a period of eighteen days. That 

 is, they make a lower rate for notes maturing in fifteen days than for 

 thirty, etc., and the great mass of the paper was for the short term. But 

 the farmer has got to have longer than ninety-day paper; he has got to 

 have six-month paper and one-year paper. In the banking business, our 

 first obligation is to depositors. We must keep our loans in such shape 

 that we can pay as the depositor asks for it, and we cannot do that by 

 putting in a large volume of what we call frozen assets, and that is the 

 cause of our main trouble today — that the bankers of Iowa have in their 

 vaults a large amount of frozen assets. How did it accumulate? We have 

 been taking notes of Iowa farmers with large equities in their farms for 

 six months; we knew that they couldn't pay it in six months, and the 

 farmers knew they couldn't pay it in six months, and that has been going 

 on all over the state and there has been a large volume amounting to 

 hundreds of millions of dollars accumulated in Iowa banks. These frozen 

 assets cannot be realized on, and they have tied up the banks, and deposits 

 have been coming on. What has been the result? The majority of the 

 banks have had to borrow large amounts of money. They couldn't realize 

 on this class of paper. There ought to be a place to put that paper and 

 put it into an investment field where there is no demand to be met. I 

 think if you give this thought, you will see there is something to it. If 

 you give a note to a commercial bank, this bank must collect that note 

 when the demand is made for that money. This corporation will take a 

 large class of paper which should not be in a commercial bank and put it 

 into an investment banking field, and in this way take care of Iowa farm- 



