FARM CREDIT AND THE RATE OF INTEREST 179 



the banker had a way of viewing this investment and testing 

 its worth from time to time, he would be better off lending the 

 funds to farmers on long-time loans than lending to business 

 men on short-time loans. As it is now commonly operated, 

 the bank is too rarely a farmers' credit institution. 



With the growth of banks owned and controlled by farmers 

 and with the work of a few prominent men in educating the 

 bankers to the needs of the farmers, the situation is improving. 

 It is hoped that one effect of the federal reserve system will be 

 the possibility of more rediscounting on the part of banks in- 

 stead of such frequent repayment on the part of the borrower. 



The period of the loan should correspond to the farmer's 

 turnover, or, if the property is not turned over in the regular 

 order of affairs but held continually, then the term should be 

 such as will enable the farmer to gradually pay the debt out of 

 his earnings. The merchants' bank is not organized for this 

 latter function and cannot be depended upon. Some form of 

 land credit institution is needed for this purpose. 



While the bankers of some parts of the United States are 

 meeting the farmers' needs for short loans, there are other 

 localities where this need is not being so well cared for. This 

 is more particularly true of the South, where farmers quite 

 frequently ask for advances on which to live while making a 

 crop. It often happens that the banker is unwilling to lend 

 directly to the farmer, but lends to the merchant, who makes 

 advances to the farmer, often on ruinous terms. The bankers 

 are not solely responsible for this situation, as has been proved 

 by an experiment at Red Springs, Texas, located in a county 

 where it was said bankers do not lend money to farmers. At 

 Red Springs a cooperative credit association was organized in 

 which the farmers of a neighborhood combined their resources 

 as a basis of credit and borrowed money in $1000 lots and lent 

 it out among their members in smaller amounts as needed. 

 At first the bankers wanted nothing to do with this credit 

 association, but after a year's successful operation the banks 

 of the county seat were ready to advance the money needed 

 by the association. This is a commendable move on the part 



