A NATIONAL PLAN FOR AMERICAN FORESTRY 1129 



through liquidating the stumpage pledged as security. A great deal 

 of the borrowed capital, although invested in permanent form, has 

 come from commercial banks. Since many of these loans lack liquid- 

 ity they are not altogether adapted to the requirements of commercial 

 banking. Interest rates for loans to be used in timber operations are 

 generally 6 or 7 percent plus financing charges. Since timber opera- 

 tions are often the leading enterprises in their communities they have 

 generally had access to bank credit, often on very easy terms. 



While borrowed capital has undoubtedly been costly in some 

 instances, the chief difficulties that arise from the present forms of 

 borrowing have to do with the frequent renewals, refinancing, and 

 general uncertainty with regard to permanence of the sources of 

 credit capital. 



Equally reliable information is not available for other regions. 

 Income statistics of the Bureau of Internal Revenue 2 show that during 

 the year 1929 corporations engaged in the lumber and woods-products 

 industries paid $18,049,813 and the pulp and paper industries 

 $17,260,075 in interest charges. These amounts were 1.56 percent of 

 the gross receipts of the lumber and woods-products corporations and 

 1.86 percent of the gross receipts of the pulp and paper industries, 

 respectively. In comparison, the average interest charge of all 

 manufacturing industries was 0.98 percent of gross receipts. The 

 greater part of the forest-products manufacturing is carried on by 

 corporations, but less than half the privately owned forests that are 

 still productive are owned by corporations. No data are available 

 on the credit capital used by individual owners of woodlands or of 

 small sawmill plants. 



It is known, however, that throughout the forested regions farm 

 woodlands form part of the security for farm-mortgage indebtedness. 

 The size of the interest bill for corporate forest industries taken 

 together with what is known of farm-mortgage practices in woodland 

 regions leaves little doubt that the total borrowed capital in the forest 

 industries, including forest land and timber holdings, in the United 

 States approaches $1,000,000,000. 



It is desirable to reiterate that this borrowing and the resulting 

 interest charges have been for manufacturing purposes rather than 

 for care and perpetuation of forest productivity. The latter purpose 

 is not adequately cared for in the present financial provisions within 

 the forest industries. 



ORGANIZED METHODS OF PROVIDING BASIC CAPITAL 



In the modern world individual dealings between borrowers and 

 lenders do not meet the needs of industry. Not only are the sums 

 commanded by individuals too small to meet requirements but the 

 undistributed risk to investors is too great. To provide for the flow 

 of capital to the points where it will have the greatest utility and be 

 invested with the least risk has become an institutional problem. 

 Institutional development to meet such needs is by no means complete 

 In late years a strong tendency has manifested itself toward the 

 development of lending institutions adapted to special requirements. 

 Many examples such as insurance companies, mutual-savings banks. 



? Statistics of Income for 1929, pp. 26-284, 



