Farm credit in the South


Material Information

Farm credit in the South
Physical Description:
Mixed Material
Wickens, David L ( David Lawrence ), 1890-
United States -- Dept. of Agriculture
United States -- Bureau of Agricultural Economics
Bureau of Agricultural Economics ( Washington, D.C )
Publication Date:

Record Information

Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
aleph - 028445632
oclc - 81351066
System ID:

This item is only available as the following downloads:

Full Text
, I I I 1- I *

"- Buireau of Agricultural Economics .
I ~ ~ ; *.. :. ,


i By David L. Wickens, Agricultural Economist,
Division of A.Tricultural Fincncn

Address, 32nd Annual Convention of the Association of Southern
Agricultural Workers, Atlanta, GA., Febr. 4-6, 1031

One of the co-mronly cited evidences of the advanced state of
present day economy is the fact that the great part of business trans-
actions of all kinds is conducted by .neans of credit. In place of a
direct use of cash or trade we now increasingly employ proMises to pay
to accomplish the same ends. The use of credit has ,greatly exten-ed
the period within which transactions may be consun-nrted. Farms are
bought with the term of payments equal to the span of a generation,
and a-mortization loans are made with a term of years equ.l to a th-ird
of a century.

Basically the transaction has remained of the cane nature as
when a plow or a farm was bought for cash. The credit transaction,
however, depends upon the successful completion of a process yet to
be performed and therefore introduces various elements of chance which
may enter to interfere with carrying out the agreement as planned.

Therecognized advantages of the modern credit system have
sometimes obscured the dangers and limitations to which it is subject.
Perhaps because the use of credit appeared first in urban society
-and only later in agriculture, organization and development of far.-
credit has been slower than that of industry. Probably the long
period of an agricultural frontier, continuing through nostof the
country's history, retarded both the need and the appearance of a
nature credit structure for agriculture. Inconsequence, the ac-
quisition of credit experience by farmers has successively revealed
the need for more adequate and more refined facilities, and has like-
wise disclosed the need for observing certain cautions and safeguards.

Many of the danger points in fnrn credit usage appear both in
1 its short and long term aspects. Short tern difficulties are probnIly
more apparent, however, because of the frequent observation of the
day to day credit dealings with their many obvious abuses of eood
business practice. It -nay be observed, for exrT.pIc, t hat some penple
arrange for and use more credit than they need. Others un3cr the in-

ducement of credit or easy payments are persde. to proba arte -
cleo of questionable values, or to incur oblipoAe .1in excess of their
income. Very often the cost of such c re&it is so connected with the
price quotations of the goods that the purchasert is unaware of the
actual aunt paid for the credit service. This and other fault
credit usage is by no means confined to farers but it is common
enough in the country to constitute a part of the fasm credit problem.
Neither are farm credit difficulties found only in the South though
for the purposes of this discussion attention will be directed to
that area.

tOne of the moat pressing needs in farm credit is more disacrilu
nation by the borrower. This is particularly striking in the ca
of shnrt term credit in the South whore the Investigator f iAs fv*"'
quent illustration -of the need of a aore careful ant critical attitue
on the part of the individual farmer when making his credit arL4e8 '
.aents. For example, there are probably relatively few farmers who d.e
not know that t ime credit with merchants is generally several times
as expensive as cash credit. Yet one continually finds far.aers with
good bank standing who ere accustomed to obtaining substantial pa.ts
of their credit from merchants and dealers.

Not unusual is the Southern farmer who, having a.: fair amount of
property and who ordinarily uses credit does not mes any use of t .i:h
bank's facilities whatever, leeps his cash at how and has nver ba tr
any relations with the bank nor tried to establish such re 6tien0. iii
Meanwhile, he often continues to use merchant credit of ote0br Sbrms
more expensive than bank credit would be. It is obvious that so 1far :;
as this class of f ariers is concerned iproveant. in credit faoilitiqt
will render little or no aid. Meanwhile, their policy of aoCa"ptrouaa#
may prevent the appearance of a bank of the character desired. ioi

Another widespread need of better credit iusage is illustratied i|
by t he far-ner who borrows money orbuys goods on time bolat. does t n]
undertake to learn what Is the cost of the credit so obtained. !hisft
occurs mest commonly where flat rates are used. This practl es of at
flat rates is especially couamon to the Smuth. in 'iay other ar ea
it is unknown. But in the South it is widely wsed 1w both mrnhats ;
and banks. Under this a"nethod of charge, if the rate quoted is 6
per cent or per cent the farmr ua not ak wthetr it itm 6 or
per cent per annum or 6 or S per cent nf the principal, and i.l r ..
has shown that he very often does not know which rate is to be paid.
When a flat rate is charged of course the per an= cost is two to
four times the same figure on a per annum basis if the term runs only F
six months or three months. The general institution of flat charges,
especially when used. in connection with the purchase of goods,
obscures credit costs. The charge ade for emah of the consieSrations
involved in this type of transaction cannot be readily identlf'
that intelligent comparison with other credit costs becomesm i Wflteo
There is a great need to educate farmers to an appreciation of them
credit differences, .


Severe Loss Fron tJnLolluctLd Crcdit Arcour.ts

The high rates nf credit cost .,ft.,n "-u.,2 in the S-ith arL
conincnly looked upon as :&cavy expense t, t-h: borr'-rcr. '.c.s, .f
the unpaid balances on maITLny of the accounts -.vrL.ver t?;.c,.' sL.-Id
also be viewed as a great loss to the con..unity as a v-"lc. V rl.-'-s
studies have shown that a considerable part, iften ran.trr.jj fro:.
one-f'ourth to one-half, nf the cost of credit advances by nmercrnts
to far ners, or by farm o,-mcrs to thicir tenants represents allom7anr:c
for unpaid credit. Much J'f this loss is due to unr-isc advances fIr
unprofitable enterprise v'hich results in the annual simkir.nkg f tn.t
much capital. Nn area should allow itself the luxury of such vr.ste,
but the generally high credit cost in the South indicates: thIat
probably anre of this expensive practice is fru-nd there t -'.'.n else-

Losses from uncollected advances mTiy spring fr,m c -irclessness,
bad planning, neglect by the borrower, or from poor rnana.sement by
.the lender whereby por-r risks or unsound ventures are financed. This
present heavy loss could be ntterially reduced by a greater use nf
cash and less of time credit, and accumulnti,.n of I.t least small
reserves by the farmer in good years. This r'ould leae t o a greater
sense of individual resp.-nsibility. Important in .any program of
credit improvement must be the education of the f-rier in financial
management. This work .must be carried en not only by research and
instructional staffs, but also by extension and other aTricultural
workers with the aid of publications at their comTnand.

Long Term Credit Problems

Events of the past decade have compelled greater attention to
the long term aspects of the farm credit problem t ban at any time for
a generation. Both a maturingg foreign competition in agriculture,
and serious price changes enforce this view. A generally falling
price level has made more difficult the payment of obligations thn
would have been true with the same amount of farm products earlier
in the period. Prices nf crops and stock have fallen approximately
one-half since 1920 while land values have declined from 170 to
115 on a 1912-14 base of 100. On long term indebtedness or on
credit carried over froi cue year to the next this shrinkage of
dollar values has materially increased debt burdens while the slower
turn-over of the farm assets has made the problem particularly
difficult for the farmer to solve.

This is the third tine in a century that prices having risen
to extrene heights have subsequently declined to levels approaching
or actually lower than r.hen the sharp rise began. These price peaks
have sometimes been far enough apart that whole e.enerations have
escaped their more precipitate chan.;es. For the generations which
have experienced their rise and fall, however, the severity of
their action through expansion of dollar cbligati-ns followed by
contraction of debt paying porer has brought about the econcAlc
ruin of large numbers. The events since 1920 have provided .-mother


ouracin oz proz WLLA De upOfl IlOEO WBO B5a aG -sue JA w9U ox prcf ei
.1il not fall.
". -* :. i; "i[
Farm mortgage credit naturally involves mtore of the lbug term | I
haszrd' than do other kinds of borrowing. This form of credit was
slower to come into general use in tlhe South than In other psrti of
the country. Even yet a s-llqr percentage of Southern farm reqrt 1
this type of credit than do farzs in other major agricultural rqe.ions.
This ay be due in part to the caller number of voluntary Iraits.
of land rhich occur in the older South. Approximately 25 per ceot.
.more of the farms in that section pass by inheritance than-ln other
Sports of the coufttry. Ferer transfers result in fewer occasion r*- d
quiring large amoun-ts of credit such as are represented by the teal H
m ortg1ee.. Nerever, since 1910 the South haregUite reid the stotesot
growth in the -use bf mor tgages of any area, 150 per aent f reOam91-o
1920, 20 percent from-1920 to 1925, andv 1 per cent fro 1925 t 1)28.
" uring- the past year or two.. however, loans of Iuortat agoiise .:
have'declined in the South I. common with. .wet sections oftheb0uaM V i

SSince the adoption of the oderal Farm oan Act In 1 917P. the....

'~~~~.. ... .. !, ..... ., j ....
South has tleade relatively greater use rf loans tuner ait. prof3 ili
than has any other section. In view of thifact It is "t-h ..... I
surprising to find some comniwnities in the Sruth where Interest rutem 1I
on first mortgages range "from 5* perroent 10 or 12 per cent. H
Such cases are further evidence that one of the greatest neeta fWr
b better farmt'eredit" practice Is a mere alert.appreciat io .of CIS$*it
differences in rates and' tenms on-the part. of fartis thaes.

In view of the need of reorganization of aaby .s h 1 ". j .....
luch'M discussed in other sessit.e of this oolf.erence, lreiterwi i
dfi r'rtgage credit vould be ,mrranted for the purpose of .e.S. iH..
firms no* too smli for effective economic uimts. to sai.l
profitable use'of -machinery. and too awsall to p.NIlte aH ..eq ...
living standard. The marked decline In lanl p1-e e .... ......t...r
Justmeuitb In farmmunits more feasible now tha' 9as beea twrit '
years In the past. evertheleu :the nest for oauttoanbontinu : : :3fl i .
borrowing limit should be the aiunt that can be carried rsthk...
the awunt that can be obtained. 4 ,

Thar necessity. ^f taking a ong view of farm utortmpe credit
apjears when it i-s realized that the average So:ther fan onceW r.-
G&Cd letdins. under Aebt for a period of atppixtets y 25 pe 's..:
This fact cannot be lipreseed toe StWnflj7 e@n the tarw- "Rla
obf the mortgage umauslly. extends .o oly af few ear. I 'S:n
the land bank loans- -tortgoge tertm satuefy awnse ?WCto0.
ears. Nwrethelmse the debt gos on. Ussaly it ...V..4w.. b e

1 .. .... .

*.l 1

times, and I. .rsoney cornittins iapre.i t,-, oe u.Lf'asn: L l o,
date. there Is always cdifi':ilty. S' ch trobiiies nccr-,d C..'6 11 .
1920-21 a-.d I- 12c ./..e.. l.nC. boL-i' c:.L: n-t u-ell o1 c n.j I t "
WhichA rould Dermit pract cadl Xo':.! I- o.i "'n :. c rl-, 'U :'t4
of the loan fullIr. 31: "., r ate..cics -'i:- co-:. V.,:;', ,r r.. .. ; t-
able nurooses.

Farm, -e'r.,n Co.mi:i.-. ratl ::s i.. Crcil t

Ma.:y 'i te o-fase of tI.c :-r.. c--- ,'it -,nk lcn= are b.i
~aTO-l...s in f r..i a.... e..e s-t. T.::u: tc ....I sa o .:. ."- In:. to
faru.ers aDrpers to "oe a .-reLit prj'';'ii. e..ll .Joanu t.plcl' -i-
volve as muc_ 11ardli.w- c charges as ;, er loas. T'_.e rol ii'fic'tty
i:- most srV.c. cases. 1owovcr, lies -'ee -.r t..:,An .e credit .:-,cru.ti.-;
itself. Actually, ver: ofte- tl-is is ?. pro;lan i: f-r::. orr-&"zatir;.
' Tlie sc.le of farm operations often is so small ',at tLe far..erts
credit transactions, in common wivit- other "uji:necs, ru-c cf.-,.&'ctcs
at a disrdv-at.%e. The liificulty of th1e un.dersize f .-m is lis-1.l r to
resister i., nertEre creLit .diso. .o Lim.-d.ll .-)r ('t-:a.2e lon is likei:r
to oe unattr-.ctive to tLe most econo.aic '-.l sources of cr-.uit so tA.t
the final .3rran'emen.t is li.ccly to ou iv'.de hi'g-- r'oc. .1i rT'
of the credit problem, therefore, c:m. fiicd. its solution r.'i.. -y I': L
acquisition of .. larger mid iaore econio;.ic f.-.ra 'it. thle most vital rcqui ro_.ent of r.' .o3 rcccii mn-' m cc._,t
on the farnm, especi:ilLy v/enever thle r.atio -ji dcot to val'-:-V is ligh,
is concerned vith the relation of credit cost ..d tuL r:-tc of f.,rm
return. It is elemental th:.-t -in excess of cost over return irzt
tends to reduce the equity ,-nd eventu.?.lly to c.use loss cf the
property. Yet this f -.ct is very idely *-ignored anonr; farmers, 2.nd
recent years have produced m-ny tr.aic results in loss of f-.rns to
tLeir owners. The Sout.Ue.2.stern St-.tes ' -.'d. hi he:' rorcant 'c
of mortg.e:ed farms foreclosed than has ..y other .?Xrc. of sic.i-2r size.

Tha existence of an unprofit.-.ble r-.tio of e- peise to iucomo
-usu.lly C2.n be determined Wy a couin.yrizon o f 'r"w t'Z:,sc et''rn
ovor n short period of ye.%rs. An iif'nvorable trend should :..t be
allowed to riun a cor-iolute course e-.di. in t.e loss ox '.he f--rm. A
greater use of f?.r:a acc:unti:e- suf'icieatly dct.,-iled +o tcll :ho
farmer wa'.t rate of return he is .etti., on is n
necessary step bor the ?.tt-ilrnmont of im-proved f.-.T credit n"cticc
'n a lar:co no.irt of the fariLs in the South.

These cases illustrate the I'ccsdit" of testi;'i reposed c-edit
operations by thie criteria. of best f-ir,. ornctice in bothl its im-r.,di. .tc
course and long time trends. 7e tiho are J.:-tcrester i.-. f-.r;.-. credit
should keap closely in view the resrltr o- t.oe -ork o:' oLur c1llu. -ecs
in far.L man cement And o'f the techiz-'_. '7orkcrs w.LO .'rc .Jiftirt ott t0he
poor from the .best far.- pr'.ctices. 7'7: neud to r1cianI:d o'u-. :Flv1S t3 : t
nearly every credit trf..ns-ctlon is in reJ.-it' t'.he pI-ojcctio2 into t'..e
future of some pl-lnof i..rr. operations.

Th- credit risi: over 2 l.r-ro p.rt of the So:tt-. is :zc.toriplly


Increased by the continued rolianco upon M ingle mop. Stpportoru.,
of this one-crop policy b.sed thoir podaltion upon tho belief f'
that in the long run concentration upon the crop which could, be grow
best was the most profitable. The pist season, however, has. %ridn
demonstrated the necessity of at lest one important qualification of
sucL a program., namely, that t'_o one crop production plun mast bo
sufficiently profit.blo to provide .n adequate reserve of money and
supplies against occasional years when boc.uso of lack of rain fall or
other cause the crop income f-Als. This moase that production in -
many such areas must be reorganized on a moro extensive scale so that
by means of larger production of tIc s oe crop or by addition of other I
crops or livestock proC.uction, both gross and net farm income will be
increased.. There is continued operation of groat numbers of f'.rm
owners and tenants in the South at the vary mArgin of economic survival
even in nor.nal years. In b.-d yEars boc.use of no reserves the fate
operations are crippled.-and the farmor himself is reduced to want and
distress. This cannot be reconciled with good farm wmain.ement and.
therefore cannot form the basis of an adequate system of fr-m orodit
as long as this condition- continues. L.

Farm Credit end tho Country Btnka

The principals link w..Ich connects the frcmor with the outer
world of credit and finance Js the country bank. This rorains true
despite the fact that during the past decade, groat numbers of those
institutions havo proved to have.o boon not strongly enough ostabli.e .I
to withstand the stress in long credit experience and have failed. ,
These difficulties illustrate one of the most serious long timie tacufrot. l'
in the use of credit. The groat major ty of the banks operating ., .
the South in 1920 had beeoon formod during the long period of rising....
prices from 1896 to 1920. Those banks into existence and hWW:
their entire experience in a period in which the valus of the assets
on which they loaned money was generally groate or oach year than tbe .
year before. Bocauso of generally advancing prices from 1896 to 12O
the value of the farmer's products proved to be increasingly ample
means of payment. Moreover,. tLe lend itself, in. itich fam. the farmer
had throe quarters of his capital, annually increased in valu3O Oo041
readily be sold, and came to be viewed as acceptable security.. It wts.
the most common form of investment for surplus funds. Bank hbeA ltt13.I
difficulty with collections. Depositors acquired growing confidaM ..,
Loans were readily obtainable. .. :,

Events since 1920 have shown that this .set of conditions provldI"', i
an unsafe training for a generation of credit mangers in meeting the..
banking problems which appeared during the past docade, a period..t.
which values were declining and conditions wore generally rovare 4 :.:4:
The fact that approximaatoly 80 per cent of,-the banks kaye SuwvIt A,.;.,i
extraordinary strain of recent years is a tribute to the s fpaetyi
persistence of great nnumberse of bankers. ..

The fact remains, however, that the epidemic of bn tfai urmlil
has shown that tLe financial institutions of the country districts
were clearly unprepared to meet the stress to which their position

- 6 -

subject tht-.. As f r I 11
dListricts -..rly -!I 211 t me s m '-L 11 C. m i
occurred it .. s D ".' s"' .. o ^i *I u. -' ." .i "'i '.:. .. 1 , nor-rce of c.',,Jit "1: s b 0O. .. ; ,". '-. i t f t.
unlerst -- di '.etwuec orrouL r .. t.. : .* if,. ..
laz..4or's 3 o noscts .*-27u -"UL. a tioC!. ":' .-.. .. '.- ii.- -'-2 "' '-C t*"-
lout, ;'.d t .-n :.o oth11" rLodil: ,.v,'1 *;1. ,-' c for -i .o t o I ia :.
V\':%s to Uc 1o--..:-. -'o f2.ct -at ieO0 ur'.i'.: A -c...-I J-..Lr -" tIr.-
i.Adic.!tC. t.:--t tl" problz. is ;Qt to Lc "clv-.

T>.-r.r, c :. : i.o '0e %. si -s'sector: -t. ;'r .-' it t.." o
satisf-ctor;' so'st f-- 01 f r.:. cco:.o.. 1- t.c Sor:t *v'.t l *i t '. c '.ro
fscilitics av.i]..blo to th:e Y.' w. ic orovi idu-'u -to crc.'.it f':
%11'.l loeitl.. -tc :-.ucds a:.d a.. cafc ior t.c c.OpOLoit of z"-d.. -'.
fIcilitios co..ti;uc tr be' r.-cr-l1sc 01of crp :'" i :c
i. tc previous yc.r, or :'. run on ti'c *.X4'l -i r .yit'- -,
iand despite price clri.c:es. In otL'r vorl's, ti,. :;.c. cro''.it 3,;:tc. .:uzt
o0 of such. type nd. ._za.cet z-s to risc 'ovc te.e 1ocl
ani g-, rd ecouio..ic i : rs *>..ic. ..ivwe .r.;'tt .cc' t' ..E "
*-nd cap?.city of i-ost i'.Istitutions sorvi:.-- t'.c f-:r;c.r in tc pnt. -o
accolliplis-A t.-is p'Xrpoo it .-'-y C i'rn.:ited ttt t[ ro will .. .so '-.3-. to
0j set up ncw Criteria. of sfet.' for lo-:-s.

Because of the- li.itatioL-.s of local i..stit'u.tions 2.2. i.:tz:-
t'uptions i:n service, the -.r:..-Lrs of ;...:; co'.n-mi.itics -rve foL'o.d :..t..
selves effoctually cut off fro:-; contact ..ith' t-hc 0o.,., Ce:t'crs 0 tL-c
country for considerable periods. I-- t'-:.e f.lrc of .:ui;,' bn;k ix
recent years fr:-ers ".z-e been tc c..ief su'ferers. Tlhe fct t-L:.t
the btnk's failure may L.'a-'e been. partly iue to an overexte:.sion of
fI.rr credit, Las not softened t'-oe Llo.. to tle -.ric"ultur--'.l co...m..:ity
VL.en i:Aili-re cPzo. It is essc-.:.tia.l ti?.t t'.o :?rL-er s'--ould
have read, cot-ct -ith roscrv.irs of credit -t all ti:.cs.
The ki"2d of institution ,7hich is to replace t... local fIileI, b.:-1: is
th-erefore of prime interest to the c'sto.cor.

Far.r-ers S'-ould .Drs.nd 3Lttcr BanLis i:. Future

Gradu.lly tl-ese fsilod b-_:zs '-ill be roplzaced. Th-.e
should take some responsibility for seeing t':L-.e nLw banLi:-
iacilities offered hiLa do not contain the defects %L/icl. row.-ht -b'.out
or permitted tho downfall of t:hec old i--nstitutions. The r .oer ihas
nucL at st?o in this B matter. He m?.y not provide tL-.c princie-0.l c.pit .l
for t'.-e b=-_:, thoug'l r-a3ny f-_rers are substantially stockl-.olders in b.:-.L:.
Very often it will be the f.armer's dcoosits, honuvor, v..ic:- m-.:c it
possible for thu bn.-mk to operate, -.n. t'.L,- i.!tcrLst .,C p.G. s on lo-.zs
which uerz.its th"e u-.n. to ..--.e profit. These i..terLsts of i.cpsjitor
and borrower ziae the public respo.-:si'.lity of b-..2:s;.' reat.
If the t_-t file& is replaced by c._ot-hcr no stro:-,-.or 3n-I ro 0Ltter
r: .n.ned its custo--ers will p..tronize it vithL tt.o szc e a-z.r '-.s's -'.stdLe:
did the old o.Ae. If the size of t.-e cow _1unit; or the -.t-i.'c o t.o
business orE'.nization 2oes not rpernit -notn:cr nA .d .&oqu'to Lr.a2-. t,' be
forr:.ed the dc'ective ja;.": za coAtinue to -:o:opolize th-, field, '1ith
no good Ultornative available to the Unlike the- zctropolit-.n


centers t'ere often is no strong wb.-ai vithin convenient reach in tho
rural districts. The banks of tho future Could therefore be so or-
rnized as to porfora the services vwfUc theIr dlstoers myar rea-c-
ably demand of thom. It is unfortunate i=die viLen the eustmwse +
acco.odatio. must be 11.-itod by defective facilities. Exe bawk
should be made to fit' the f. .r- brsainess, not the f1rr business to fit
the ba k.

Proci:-ont ar-onp the rcquirocre:its for batter rras must b a ; not too irgeo a proportion of -asets should be placed in one '
community. TLe Southorn fcrzer ofte2 L3s boei; told thf't he should i ,J
diversify his production .nd ais assets. eo :.L-ve seen that the only
condition under iicX 2e =ay safely disregard that policy is by the
accumulatio:n of reserves. ore is even stronger reason tLat a bank
serving the farmiers should diversify its resources. For not only
,oos it linsve the responsibility of continuous service for a co+unity '
of people 't.4o zr.y become sufJoct to a coon. calaclty but It '4as the I
responsibility for keeping Intact the reserves which the fpnrr has. i *
provided against suc eamergencios. TIe nost opportuneo tino for, ta.e
farmer to interest kLaself in this matter is the present htile the il
otu.iadg situation is disorgi-ized, while the lessons of recent failure .
aro clearly in mind, and while t-ere is tine to apply constructive II
LOasurses *

Agricultural Credit Corporations i

Te-o Foderil Intersedl '.to credit ba:_nks werb designed to *upY.WeMtpa.
tue coctercial banks ten necessary by rediscounttf for Issig.ate..
classes of agencies. We appear to be still in the sta3e of nzperipiu't*,I
tion with' regard to deterzai:i' the place i.n a systS. of proedctio.
credit W.LicL is to be occupied by such agencies discounting with tw "mf
Federal i:.:ternediate credit ba-ks. In practice tLoee dikcomtutig .H- ve encountered a number of obstacles. V,.Xious reao tins,
h:ve been &iven in ezpl imation of the lihalted operations. thE.ii|,
are narrowness of the operAtin.g margin permitted, i n view of the Aika:::: ::H.
of tlio loans, especially in oze-ctop areas. TMeis in turn, it is claiati
has made private capital roluctant to enter the field, while farm er :i.
often aro un*Ulo to provide the capital. In otLer cases farmers
to hae been slow in assuziing tae itititvo in Undertak,:g org"huatl
of credit corporations. In socome cases, the recognition of the eis-.r....
char .cter of the situation ILich. has given rise to their formation d"t
loss has retarded action toward organization.. .;|

During 1930 the :aoveLunt toward cooperative enterprise aind thlli:::: .
utilization of Federal financing facilities received an unusual sti .sU ,
neverthelesss the suspension of over 1,300 banks during 1930 fmnd t.. .....iOiH
stantial reduction of the resources of LwaDy others, mostly in the eLk.
cultural areas, has been followed by the formation of only sixty .s$
cultural credit corporations, and 9 livestock loan association, *is:P.:..
would sea;. to indicLte that we liave not yet worked out any ready treas"a
ition metl-.od whereby the failure of established credit mgencleu i :
followed by the assumption of their responsibilities by agencies dA1O.t-
ing witL the interi-ediat. credit .ra:ue. : .
.4 + :i't::: m

Thec credit cororatl'" '-r..<; i ..%.'tir .' t c cr l .
i-ar.loting -LSSoci..tlioa c.i ors r..C .i .1 c so B .e v.' C %.1 'C ,- '-,y favor rJccessful oper.r.tic... ,oty. 0 .l a;..'v t.1.3 is ".c
opoortuaity of l.:i--,vi. field c.ean o .ervo t Ao i0 1 Io ; r
of i wving first access tn t'.o nrot.ct .2t tL.c ti...c :i .x *.i t F :'..r-
.:-.ore, the voluc-, of opor ;tio-s pojziciblc'-'4k such :-. .4
;.,v por._it a. : :dlim.-, co ot 'je-r unit lo..'ur tt. "*oUll n.s3llc : ." -r-
wi 'SO.

0- t'he ote..or ..:u.d ouo i s'.&vzL.t .Cs ... ?. iu't:'.t If t-t. l.']JH .s
are sc-tttered, cpecia] floul r'ipcrvi 'ors ."n c:tt. l .1 -',--it coct as
-reat as for ot'.cr credit coroor-'tio,.s. If ceCdit is 'm CLi 2 :. '_
...ent for ott -.Lnii-.4 z-...'-ers, ;'2.irs Ji- t Ais rcc )ct .av Lc offset b.
losses occasioned b, poorer ri&s-s.

Experience to .i.s Uocn th,'-t .,.'.enovcr tLce objectives of
larger ie.:-uorseip or cre?.ter volr-o of product. Livc :. ploycr, t'eo
inducoLeent of" credit sorvico to n :.:tonit not ;;-'.rrato t'.
inlividut-l clreo-it ris: thl rcsulti.-g con-couc-Aces .vu .AJId. 4o-tful
vc.lue. in t'.ig cise 210so clkz-I.r diuti:.ction is niccded .as to t:-c
li.-itations and leJiti:.ate functions of crcLiit. As log-- -s ndLvances
are made to suc-. individuals and in such .iozuntao as offer assurance nf
repayment they represent anticip-.Uons of future business co.zsu-i-.tions
of a self liquidating nature. The -ever credit extension eo::ceeds theso
conditions they beco.ze potenti?.1 sources of difficulty and loss for bot.
borrower and lender, :.and it L._atters not hat th.e lending agency -.y ;e,
whether individual, bq.nk, or cooperative, thle un-:ise nature of the
transaction will eventually assert itself as well as thle f .ct t'.t on
a long term basis sucl- credit operations c-.nnot 'be ctrriod on.


In co.iclusio:n, vie need to re-ind ourselves occasionally
tLere is no .:2gic in credit. is torrowod zust obe back ;iith
interest. The extension of the tor. of credit doos not chl'-.zo those
facts, though extension a--y even Lheigh.ten the -lifficulty of carryi:'c
out thelo credit contract. The experiences of the.c decade of de-
clining prices hias provided one of the :.zost forceful illustrations of
this fact in our history by .ringi.-.g -Rbout credit distress fat-.l to
uLuny- iidividu:.l fanr_ enterprises ui to farz. credit i.:.stitutions.

Basically, the enterprise o bc fin2z.-ced e';.ubodies th.e real
problem in f-.ra credit. The accurate calculation of the profit.hlo-
ness an.d feasibility of the uniort .i> is t'--.e first
of .ot.h borro-er g..'d lender. Accordingly, a? thcrowi:oi:: reorg.:iza-
Stion of t:.o fLr.. production unit ofton is of ;:rc.tcr i:_port.ncc tf.n
q additional credit on the oxistinz n.sls.
Inseparable froy. .Il credit operations is the 1.:-.llvi.u! ..'.o is
to use the 'orrov7e,. cipitr.l and be respo.nsible for t.e qu-lity of its
z- n2--ent. Great numbers of do '.ot tirurc closcly enough, or.


the cost of tLeir credit aund tLo altwls '....
csaputation of this oaWt otl S WaUt ......
sawings areo possible frtn .aootr ii bettt:4++
a practicable 4rw of" ee cffmliuu aw
fro= tieso naem "hIe been f owmd to
faer a =umal increase lu net worth. .

In order tVat the far.-or ma- lave ta noOessary l
ontblo LI.- to nenage his finoacos intolligently theoro itWi'.
rescarcw. in the credit bot'of reprosentatlvo loct .wrest sa:,
scoe. It Is not cnowgh t t sauc inquiries aoUn4 fil tb*1ii!
ao-uminta, coat, tora.tnd other prt..ary faets related to tbe tt
though tLose points must be deterinodA viitz prealsion al .MA
L-oaing. TVe Investigator must ?.Iso find out vy a riven le
is h1g, or low in cost, wvy =nd indor what conditions the 1..
credit may be expected to be scarce 6r eb.n#,. tq. fansil
to use less desirable foMe of credit
credit practices, and Juat hlt ZaO I
L-proveaent of the existing :onditlons. .-1i::::::'I '
: .:: .' ..: | s.
Ono of tbe o..0t vital probl-ea to b.hp j ..
next few years vill boe the ostiablish-ont 6
,hicL A7'2ll give continoiaOs service to .t.
fazner n a depoitqr, borrower af.tne
of 'AlIB "rsioM.e operations on-. the. tailM
articulate in'diMadi adequate fia.

7or the acccyCo ieant oftbq
in wriculturte should have a part.
a generation -to na"s iprqvTmo .t ..t..i..
and faz credit, .tailttt in ethe *.,
features should fo= *. a te opt "o::
nent program for the $out'eArn fat.rA. i


# # # #

- 10

'M .. .. .. ... .. 'Pi
... .. ..... .. i" :!" :.': .:
." ::i + ii++3p.+i:+!!!+: !: ..... + .... :+ ... i:~ i
11< .....:p+P ,+ + .......... ++ '+"++++++,':i i
E.4 ....:......I -

EE:~ ~ ~ ~ ~ ~~~~Y : ." E".EdiEiEE{ i::E: i:':E:" :.= .... .....
'4 Ji
.. ... ... .....
114 9 4. i P ... ... ... ..
... .. ... .
1]i I. t~ i.

..... .. ... .....

.. ". I" +.i .

Full Text
xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd

xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID EH9HCBTZZ_2UP7O0 INGEST_TIME 2014-04-21T23:39:26Z PACKAGE AA00017374_00001