THE IMPACT OF WAR 103 



than had been customary before its advent and with the longer period 

 for amortization of the loan. Life insurance companies also had an abun- 

 dance of money on hand for real estate loans. But the local small-town 

 bankers, many with huge surplus deposits that they were eager to put to 

 work, literally pressed money upon the not unwilling farmers and specula- 

 tors. New banks were established by men who knew next to nothing 

 about banking, often by retired farmers with their wartime profits as 

 capital. From 1914 to 1920 more than 1,700 new banks began operations 

 in eleven typical agricultural states. Often two or three banks appeared 

 where one would have been enough. 33 



With money from so many sources so easily obtainable, the farmers of 

 the boom-stricken area were tempted further and further into debt. Mort- 

 gages on farms in the western Middle West increased over 128 per cent 

 during the decade that ended with the year 1920. According to the United 

 States Department of Agriculture, in 1915 the banks of the country "had 

 outstanding to farmers, loans on personal and collateral security to the 

 amount of $1,609,970,000." By 1918 this figure had grown to $2,506,814,000, 

 and in 1920 to $3,869,891,000. Much farmer borrowing was for other pur- 

 poses than to buy land, although all such debts were an ultimate charge 

 on the land and what it could produce. Farmers who might have paid off 

 old debts when prices were good often borrowed money in order instead to 

 gain for themselves the living standards of city dwellers. More and more, 

 the farmers bought washing machines, electric sweepers, radios, and auto- 

 mobiles. They sent their children to college. They improved their houses 

 and built new ones. To the rural bankers, loans for all such items seemed 

 reasonable and the cash was in the till or could easily be obtained from 

 the Federal Reserve Banks. Few seemed to realize that a change in policy 

 on the part of the Federal Reserve System might easily dry up the farmers' 

 credit or to understand the problems inherent in such an eventuality. 34 



Both farmers and bankers should have known that the spending spree 

 could not last forever. The high valuations set on farm land were not in 



33. Ibid., pp. 25-26; Wallaces' Farmer, XLIV (May 16, 1919), p. 1064; Wood- 

 ruff, Farm Mortgage Loans, pp. 23-24. 



34. Statistical Abstract of the United States, 1923, p. 146; Black, Agricultural 

 Reform, p. 37; Woodruff, Farm Mortgage Loans, pp. 25-29; Baird and Benner, 

 Ten years of Federal Intermediate Credits, p. 25. 



