282 Cooperation in Agriculture 



The average farmer who depends on store credit would 

 save money if he would borrow at a bank on such security 

 as he could offer and pay cash for the supplies which he 

 purchases. 



Bank Credit 



Bank credit has been extended less to agriculture than 

 to almost any other class of business, because land is not 

 available as security for short-term loans. Yet it is the 

 most common form of credit in American agriculture, 

 probably more than half the credit of the American 

 farmer being obtained from this source. Under the 

 national bank law, which has not been revised for fifty 

 years, money cannot be loaned on farm lands as security. 

 The theory of the law is that a mortgage on real estate 

 cannot be quickly liquidated to protect the bank in 

 case of an emergency, while personal securities of different 

 kinds which the bank is permitted to accept can be quickly 

 converted into money, a protection that was considered 

 necessary when the banking system was enacted, because 

 the obligations of the bank are largely payable on demand. 

 The resources of the national banks must be kept in a 

 fluid condition, and their funds can only be invested in 

 short-term, commercial paper. The need of a more 

 elastic rural credit system is recognized by the monetary 

 commission appointed by President Taft to revise the 

 national banking system, and an amendment to the na- 

 tional bank act has been recommended providing that 

 thirty per cent of time deposits may be loaned upon im- 

 proved and unencumbered real estate, the loans not to 

 exceed fifty per cent of the value of the property which 

 shall be situated in the territory near the bank. 



