59 ] THE INFLUENCE OF THE CREDIT SYSTEM $g 



banks usually on accommodation notes, and then the 

 farmer approaches the merchant with cash in hand, and 

 thus gets goods at the very lowest cash prices. The 

 rate of interest paid the bank is considerably less than 

 the rate arising from the difference between cash and 

 credit prices of goods. The difference between the bank 

 rate and the merchant rate does not necessarily indicate, 

 as a superficial view might suggest, an amount of extor- 

 tion practiced by the latter. This is true, because the 

 bank runs less risk than does the merchant, a fact arising 

 from two sources. Bank borrowing is itself a selective 

 process, only the more alert farmers making use of the 

 bank. In the second place, the generally alert farmer is 

 more alert about his bank obligations than about any 

 other. He knows there is to be no dillydallying in this 

 matter ; that the debt must be met on a certain day or 

 something very unpleasant will happen. Such knowl- 

 edge is a good thing — it acts as a spur to effort. 



As an index of the service which these banks are ren- 

 dering the farmers, as well as an index of the generally 

 improved condition of the land-owning farmers of the 

 state, it may be pointed out that perhaps between one- 

 half and three-fourths of the loans of the small town 

 banks are made to the farmers, and that about the same 

 percentage of the deposits is now to the credit of the 

 farmers. 1 



*Mr. W. S. Witham, who is president of nearly fifty of these country 

 banks in Georgia, addressed a letter on November 10, 1904, to the pres- 

 idents of the several southern State Bankers' Associations proposing a 

 plan by which the banks might in a concerted way enable the farmer to 

 hold and market his cotton advantageously. One paragraph in this 

 letter is interesting in this connection. He says: " The objection urged 

 is, a farmer cannot afford to hold his cotton and must sell to pay his 

 debts. In answer to this I will say that the farmer in the south is now 

 in better financial condition than ever before, and in the forty-eight 



