7<>8 AGRICULTURAL ECONOMICS 



commission. Incidentally Oklahoma is a state that receives a very 

 high percentage of its loans from the outside. Our figures show that 

 two-fifths of the farm-mortgage capital in Oklahoma is obtained from 

 life insurance companies. On the other hand, if you take a state like 

 Alabama you will find that the total cost is 9.4 per cent, as against 

 8 .4, in Oklahoma, but the average annual commission is seven- tenths 

 of i per cent, and that the nominal charge is 8 . 7 per cent. Alabama 

 is a state which receives relatively little money from the outside; it 

 is dependent largely on what capital it has at home. 



(Selection 227 on p. 707) 



228. BANK RATES TO THE FARMER 1 

 BY JESSE E. POPE 



Holmes estimates that in 102 counties of Illinois 921 banks afford 

 two-thirds of all the personal credit obtained by farmers and that in 

 Vermont the farmers obtain 70 per cent of their credit from the banks, 

 while in the southern states of Virginia, Georgia, Arkansas, and 

 Mississippi they get from two-fifths to three-fifths of their credit from' 

 the banks. For the country as a whole, outside the South, he esti- 

 mates that from one-half to seven-tenths of the credit to farmers 

 comes from the banks. 



Contrary to a common opinion, banks are no respecters of per- 

 sons, and if the farmer pays more for his credit than other classes of 

 producers, it is because it is more expensive to loan to him. As a 

 rule this is the case. In the first place the credit required by the 

 farmer is very different from that required by the merchant. The 

 term is longer, renewals are more frequent, and partial payments are 

 unusual. While the moral risk is good, payments are slow, super- 

 vision is more difficult, and the average size of the loan is smaller. 

 Although the farmer's current account deposits have shown a decided 

 increase in the last twenty years, they are not of sufficient importance 

 to warrant the bank in loaning to him against his balance. 



Since the average farmer receives his income in lump sums and 

 at infrequent intervals, he makes savings deposits rather than cur- 

 rent account deposits. The merchant, on the contrary, receives his 

 income in daily increments, which he immediately puts at the dis- 

 posal of the banks through current account deposits. Since, there- 

 fore, as the banker would say, the merchant is borrowing his own 



1 Adapted from Quarterly Journal of Economics, XXVIII, 726-27. 



