MISCELLANEOUS NEWS 23 



3. — A BILL TO ESTABLISH A NATIONAL SYSTEM OF RURAL BANKS. — 



On August g, 1913, the Senator for Florida, the Hon. Duncan U. Fletcher, 

 introduced in the Senate of the United States, a Bill providing for the estab- 

 lishment of a complete system of co-operative rural banks. The Bill 

 was read, and referred to the Committee on Banking and Currency. Ad- 

 dressing the Senate on the same date, Mr Fletcher expounded the principles 

 which underlie the Bill, and an outline of his plan is printed separately as 

 a Senate Document (No. 15S). 



In brief, the author of the Bill contends : 



(i) that the present banking system, in which the ultimate reserves 

 are practically controlled by a small nrunber of banking institutions in 

 New York, is defective, serving the needs of the whole country badly in 

 times of stress, and serving the needs of agriculture worst of all ; 



(2) that no commercial system of banking can adequately meet the 

 needs of agriculture ; 



(3) that a system must be created whereb}" the capital and accumu- 

 lated savings of agriculture must be made available and reserved for meet- 

 ing the credit needs of those engaged in agriculture : 



(4) that progress in agriculture depends to-day vipon co-operation and 

 organization among farmers, and that all forms of agricultural co-operation 

 must be related to a co-operative system of rural credit ; 



(5) that, in view of the overwhelming interest of the country as a 

 whole in the prosperity of agriculture, the savings deposits in the post- 

 office, as well as other government funds, might profitably be lodged with 

 the rural banks, and used to meet the demand for agricultiiral credit ; 



(6) that, as the element of saving is prominent in any system of rural 

 credit, rural banks should enjoy the same exemption from taxation as sav- 

 ings and loan associations. 



The Bill proposes to establish three separate classes of institutions : 

 (i) Local Rural Banks ; (2) State National Rural Banks ; and (3) The Na- 

 tional Rural Bank of the United vStates. The Local Rural Banks would 

 be owned and operated by local farmers and might be founded with a min- 

 nimum capital of $ 2,000 in shares of a nominal value of S 10, sold at S 25 ; 

 their area of operations would be a small district, and the character of the 

 business they might transact is specified. The net earnings would be used 

 to pay 6 percent, on the invested capital and. after that, to create an addi- 

 tional capital fund. When the earned surplus was equal to twice the 

 amount originalh' invested, the stock would be bought in by the banks at 

 the price of issue, and the banks would become mutual banks without 

 capital stock, operating at net cost. In the case of the dissolution of a bank, 

 any existing surplus would be used for building or maintaining good roads 

 in the territory- served by the bank. 



The State National Rural Banks would be controlled entirely b}' the 

 Local Rural Banks in each State. They would act as clearing houses and 



