ASSOCIATION 81 



that these loans were secured by redried tobacco stored in bonded 

 warehouses. The loans obtained from the War Finance Corporation 

 and the proceeds from sales of green tobacco were used to retire 

 all the loans negotiated with the different commercial banks. This 

 corporation further agreed to take title to, and finance, such tobacco 

 as was not sold with reasonable dispatch. This undertaking was 

 of the utmost value to the association as it obviated the forced sale 

 of tobacco to secure ready funds. 



In the face of keen opposition, the association was able to build 

 up a satisfactory system of financing. During subsequent years, this 

 system was not departed from in any essential respect. After the 

 first year, the intermediate credit bank took the place of the War 

 Finance Corporation and financed the redried tobacco in much the 

 same manner. So great was the confidence created that at one time 

 practically all the advances o-f the association were financed by one 

 New York institution which loaned the association $5,000,000 at very 

 low rates of interest. The fact that the intermediate credit bank 

 agreed to take over and finance such tobacco as could not be disposed 

 of immediately gave all the banks a feeling of confidence that they 

 had a loan on a liquid commodity. Thereafter there was no difficulty 

 in obtaining all the money needed at reasonably low rates of 

 interest. 39 



During the first year the association advanced 40 per cent of the 

 value of the tobacco delivered. The initial advances were increased 

 to 50 per cent in 1923 and 1924, and to 65 per cent in 1925. Further 

 payments were made as rapidly as possible from the proceeds of sales. 

 Unfortunately, for reasons which will be explained later, a great deal 

 of time elapsed before tobacco in the different pools could be dis- 

 posed of and final payments made to members. 



COSTS OF OPERATION 



Operating, redrying, and other expenses of the association were 

 studied in a general way to ascertain whether the association's opera- 

 tions were carried on with reasonable economy. Owing to the fact 

 that tobacco in most of the pools had to be carried over from year 

 to year, it was necessary to introduce a system of " accumulating " 

 expense accounts where% the expenses incurred in each year in the 

 handling of the different pools were prorated to such pools. For 

 example the dark-fired pool of the 1922 crop was charged with a 

 proportionate part of the expenses incurred in 1922, 1923, 1924, and 

 1925. The great bulk of the expense in the handling of each pool 

 was incurred in the year the tobacco was delivered, and the prorated 

 expenses during subsequent years (except carrying charges) did not 

 greatly add to the original expenses. 



The accumulated expenses incurred in the operation of the various 

 departments of the association and in redrying and carrying the 

 tobacco in the various pools appear in Tables 49 to 53 in the ap- 



39 The agricultural investigation commission found that money had heen borrowed at 

 rates ranging from not over 6 per cent to as low as 2% per cent ; the average rate was 

 below 5 per cent. 



76534—29 6 



