the; organization of finance in forest industry 239 



SAVINGS to be made BY ORGANIZATION OF CREDIT, NOT BY FEDERAL 



SUBSIDY 



Briefly, then, a Federal Forest Loan Board is needed to organize the 

 credit resources of forest industry to secure cheaper capital. We may 

 pause here to pay our respects to those financial interests which profit 

 by abnormal interest rates and financial chaos. These heretofore privi- 

 leged interests have charged in connection with the Federal Farm Loan 

 Board that the scheme constituted a paternalistic subsidy to the farmer. 

 Similar charges may be expected in connection with a Federal Forest 

 Loan Board. This occasion is therefore taken to repudiate any such 

 charges. Neither the Federal farm-loan policy nor the proposed forest- 

 loan policy involve paternalism or subsidy to the industries involved. 

 These policies should be taken squarely at face value. Through them 

 the Government does for these industries zchat it should stand in posi- 

 tion to do for any Jiecessary i)idustry, namely, assist in the creation of 

 financial institutions suited to the specific needs of each industry and 

 operated by men with knozvledge of those specific needs. Some capital 

 may properly be advanced temporarily by the Government, as in the 

 case of formation of the farm-loan banks, which had small advances 

 for purposes of organization. On account of the war some farm-loan 

 bonds were also taken by the Treasury'. Farm loan 45^2 per cent bonds 

 are now selling at a premium on their own merits, and some of the 

 banks are now ready to return money advanced for their stocks by the 

 Government. The advance of Government funds is only temporary 

 and is beside the real purpose of the farm-loan act, the main purpose 

 of which is to organize farm credit. 



SCOPE OF LOAN POLICY 



Although the Federal Farm Loan Board serves as an example of 

 what is needed in forest industry, it cannot be said to fully meet the 

 requirements, the main defect being overconservatism in its loan policy, 

 which may. however, be pardoned during the early period of develop- 

 ment, though there is extreme danger that this policy will become fixed. 

 The valid objection to overconservatism becomes clear when we reflect 

 that the products of industry required by society cannot be secured in 

 adequate amount zcithout taking risks in industry. This being true, it 

 is a.viomatic tliat the obligation rests on society to create financial insti- 

 tutions capable of absorbing an adequate portion of the risk instead of 



