WHY THE SUDDEN CHANGE ON RURAL CREDITS.



There is no parallel in the history of the United States for such a sudden and complete change on a great national issue as occurred in connection with that of Rural Credits immediately after the close of the 1912 campaign.

It had been promoted from an unexpected source and conducted in the most vigorous manner for the two years preceding, each political party vying with the others in support and promises.

Europe was scoured for favorable campaign material by diplomatic and consular officials, individuals and commissions, all returning with the one story, that “there was millions in it,” not only for the farmers, but “the whole citizenship” of the United States.

The sleeping giant was aroused, and really thought there was something in it for the farmer.  It was strongly backed by the House of Morgan, and its three most important arms, the National Bankers’ Association, the Republican party and the Democratic party ;  and encouraged by every trust and special privileged business in the nation.  The farmer smiled.  For once he was IT.  It made no difference which party won ;  he won.

Immediately after election there was a complete somersault, and active opposition to any legislation, looking towards state aid of any kind developed.

What caused the change ?  What new light had been seen ?

Had the farmers’ organization protested against the duplicating of the European idea, that agriculture, being first in importance, should be made first in opportunity for development and production.

Who was alarmed ?  The business men were satisfied, and the farmers enthusiastic.  The official representatives of the men who control were all sure that

154 Why the Sudden Change ?

the “sturdy, self-reliant, independent American farmer” for whom they had apparently been working, would spurn and reject any attempt to place him “upon an equal footing with other business men and masters of enterprise,” such as our kinsmen and competitors in Europe had secured for themselves.

The non-partisan quartet sang the same song in perfect harmony, after election, and this was the burden of the song :

President Taft :  “We have come to look upon the American farmer of today as one of our most prosperous citizens.

“The proposal which I make is not to subsidize the American farmer.  Fortunately for this country, he does not need it, nor would he accept it.”

Ambassador Herrick :  “It is not conceivable that American farmers would accept such assistance from the government and thus become a privileged class supported in part by the rest of the people.  And to add to this wrong the new and more dangerous injustice of setting apart a class of people by itself to be pampered and spoon-fed with special privilege at public expense.”

President Wilson :  “The farmers, of course, ask, and should be given, no special privilege, such as extending to them the credit of the government itself.

“What they need and should obtain is legislation which will make their own abundant and substantial credit resources available as a foundation for joint, concerted, local action in their own behalf in getting the capital they must use.  It is to this we should now address ourselves.

* * * “The farmers, of course, ask, and should be given, no special privilege, such as extending to them the credit of the government itself.”

Secretary of Agriculture Houston, 1914 Year Book, p. 35, says :

“There seems to be no emergency which requires or justifies government assistance to the farmers di-


The Secretary Mistaken 155

rectly through the use of the government’s cash, or the government’s credit.

“The American farmer is sturdy, independent, and self-reliant.”

Note.—That is a significant official declaration of the representative of agriculture in the cabinet.  Just think of such a man being chosen over such men as Charles Barrett of Georgia, or Obadiah Gardner of Maine.

With all due deference to the distinguished quartet of official statesmen, and appreciating the exalted opinion they have expressed of the farmers as a class, the only one that prospers without state aid or protection.  The only one that would spurn the same aid and privileges as are enjoyed by other classes in our own country, and our competitors in foreign countries.

Placing the most charitable construction possible on their incomprehensible reasoning and policy, I must say that the gentlemen are mistaken.  They are not acquainted with the American farmer in need of a loan, or looking for a bargain.  Thousands of them are stockholders in national banks, now members of the Federal Reserve Association, and not one of them has spurned the special privilege of the use of the government’s cash and credit free.  We are mostly immigrants from, or descendants of immigrants from some European country.  The only difference is that poverty compelled the European farmer to wake up and shake off his partisan shackles, and become an active factor in legislation to secure equal treatment by his own government.

First.  In America, our farmers are as yet too prosperous—or think they are.

Second.  Industrious, sturdy and self-reliant they are, but they are not independent.  They are slaves of their political party organizations.  The average farmer prefers the taffy and fulsome compliments of the smooth tongued politician of his own party, to actual service of one who will not play the game of the machine at the sacrifice of principles.


156 Why the Sudden Change ?

The pledges have been made by all political parties having representatives in Congress, and by the President to “place the farmers upon an equal footing with other business men and masters of enterprise.”

Fail to do this and it is your fault.  Do it and if the American farmer spurns the opportunity, it will be his fault.  But what’s the use ?

The Rural Credit campaign had served its purpose :  The object of its promoters was to interest the farmers on a side issue ;  to keep his eyes glued on Europe, while they attended to the election of a President and a Congress that would enact the Federal Reserve law.  This accomplished they had no further use for Rural Credits, and the farmer.

In the foregoing quotations, I have condensed in as brief a space as possible, what I shall assume to be the present program, and future policy of the men who seek the control of all commerce and industry in the United States, through special privilege and class legislation.

This great triune is now, and has been, in control of federal legislation for the past fifty years, and is making rapid progress in developing the greatest conspiracy ever conceived by the brain of man.

It is composed of the autocratic House of Morgan, the legislative arms being the Democratic party and the Republican party, with the Progressive party thrown in as a decoy, so long as it is financed by Geo. W. Perkins of the House of Morgan and led by Theodore Roosevelt.

The twin political parties, or even the triplets, differing only on personalities, minor issues or non-essentials to distract attention from the main issue, but always uniting at the signal of the Sovereign.

If the National Bankers’ Association, and the Republican party believed the foregoing to be true, why did they make the campaign for Rural Credits for the benefit of the American farmer ?

What a pity that our national bankers, railroad companies, manufacturers and the many beneficiaries


“Natural Pilots” Desert Us 157

of special privileges who swarm over Washington, D.C. during each session of Congress, lobbying for more and more of the stuff that so sadly saps the independent manhood of the average American citizen.

The high-minded, independent, prosperous American farmer owes it to our country, and to his less fortunate, unfortunate fellow citizens, that the baneful, demoralizing influences of special privileges be repealed at the earliest opportunity, that they too may in time ascend the pedestal now occupied by the American farmer alone.

But Mr. Herrick’s interest in the protection of the American farmer from the baneful influences of special privilege in the way of state aid grows in intensity as his campaign advances.  At Kansas City, Mo., in addressing the State Bankers’ Association on May 25, 1915, he said :  “The movement (Rural Credits) bereft of guidance by its natural pilots (the American Bankers’ Association) and impelled too rapidly by overhasty enthusiasts, deviated from its true course of private enterprise and mutual self-help, and slanted off towards state aid and paternalism.”

Note.—Our “unnatural pilots” deserted the ship.

“The issue has been squarely drawn as to whether the cash and credit of the government shall be used in behalf of individuals in farm-mortgaging.  Its purpose is to manufacture fictive values, and to add to this wrong the new and more dangerous injustice of setting apart a class of people by itself to be pampered and spoon-fed with special privilege at public expense.”

Strange that in his long and successful public career, he never remonstrated against the danger of his friends, the manufacturers, suffering from spoon-feeding, but insisted on increasing the size of the spoon to that of a shovel.  Thoughtless statesman !

Nor of the “dangerous injustice” to the friends of his own class, the national bankers, in increasing the size of the vessel from a shovel to a scoop.  Unkind friend !


158 Why the Sudden Change ?

Once more the twins were as “two minds with but one single thought, two hearts that beat as one” or something to that effect, when the farmers’ interests were to be neglected, or sacrificed.

Page 20 :  “A development resting on state aid or charity could not permanently endure.  Such artificial stimulation violates fundamental principles, and should not be considered a moment for Americans, no matter how much it is resorted to in Europe.”

Oh, Myron ! Myron !  Such apostasy from Republican principles ;  and you from Ohio, and a candidate for President !  How could you ?

But the American Manufacturers’ Association do not seem to take your prophesy seriously.  Your “infant industries,” hoary with age, are organizing to secure more of the poison with which you have been feeding them so generously in the past, and your banker friends, who thought they had secured all they could use from the last Congress, are again asking for more charity and special favors.

In discussing the several propositions I shall assume, as I think the facts justify, that each proposition is approved by all three members of the triune.  But first please go back and read once more, substituting the national bankers for the farmers, and the business of banking for the business of agriculture.  Taffy and all, even if it strains a point.  Keep in mind President Wilson’s favorite maxim that “the farmer should be placed upon an equal footing with other business men and masters of enterprise as he should be.”  Also keep in mind that the chief business of Congress for many years has been the granting of special favors, privileges, public lands, cash taxed from the people, and as in the Federal Reserve bank law, the unlimited credit of the government, and several hundreds of millions of cash taxed from the people, in each and every case to some class, business or industry, organized for private profit, at public expense, and also protected from foreign competition.


Special Privilege for Bankers 159

The wrong, danger, and injustice of the system never dawned upon the distinguished quartet of official leaders, until a few non-official (politically) representatives of agriculture began to ask that agriculture be recognized both as a business and an industry, and placed upon a real “equal footing” with any other business or industry.

A number of propositions raised will be more fully discussed elsewhere, but I think it well to touch on a few at this point very briefly.

“The issue has been squarely raised as to whether the cash and credit of the government shall be used on behalf of individuals.”

I shall add to the above, “or combination of individuals.”

The Federal Reserve Bank law should be sufficient to illustrate the objection raised.  All of its capital to begin with was loaned by the federal government ;  they call it a deposit, with money, real money, coined gold, taxed from the people, and loaned without interest, to one business, organized for private profit, and profit only.

Is banking a business ?  Certainly.  Are the bankers a class ?  Certainly.  Are they organized for private profit ?  No question about that.  Are they “individuals”?  Yes, a combination of individuals.

Have they received any cash from the government to be used in their behalf ?  Yes, over $200,000,000 in gold, free of interest to start with, and as much more profits, as they may need, or think they need, on same terms.

Any other special favor on that line ?  Yes ;  the government has delegated to them its constitutional power to issue money, and in practice all the new currency of the future will be issued by them.

Any other privilege or power ?  A very important one, the power to fix the rate of interest that may be charged for the use of money.

But, how about the credit of the government ?  All currency issued by the Federal Reserve banks becomes


160 Why the Sudden Change ?

obligations of the government, without interest.  The whole credit of the government is given to them, freely, unlimited and uncontrolled.  Spoon-fed ?  No, scoop-fed.

Anything further ?  Yes ;  Federal Reserve banks, including the capital stock and surplus therein, and the income derived therefrom, shall be exempt from federal, state ;  and local taxation, except taxes upon real estate.  See Section Federal Reserve Act. Page 13, May, 1915, bulletin.

“A development resting on state aid or charity could not permanently endure.”

I think that is true, Mr. Herrick, of the kind of “state aid or charity” that we have been indulging in so freely in the past in aiding to build up private monopolies at public expense.  It has proven very profitable to the beneficiaries, financially, but utterly demoralizing as to moral character, and good citizenship.  They are never satisfied.

The infant industries, under protection, never grow up so that they can stand alone.

They always fight against any reduction, insisting that they could not continue their business without the state aid of protection.

Our public highways, privately owned and operated, even though they received state aid in cash bonuses, or public lands, or both, to several times the legitimate cost of building and equipping the road, are always begging for more power of taxation, to the extent of “all the traffic will bear.”  The national bankers, the largest beneficiaries, larger than all others combined, are never satisfied.  Every session of Congress finds new demands made upon them for more aid, and their demands are enforced, if necessary, by the club of threatened panic.

The greater the state aid, charity or subsidy, given to aid a private monopoly, the more insistent they are for more.  It becomes a mania with them, and the corruption of our political units, and gross violation of our laws follow.  No ;  that kind of state aid or char-


State Aid or Charity 161

ity, or subsidy, cannot permanently endure, and the revolt is now on against it.

State aid ;  that is, the use of the community credit to develop and operate public utilities, by the public, for the public benefit, without private profit, is the solid rock upon which to build to endure.

The same is true for the use of state credit for legitimate industrial development, where proper security is offered, and the borrowers pay for all of the expense of administration.  This is especially true of agriculture, which all agree offers the “best security in the world—productive land,” wheat, corn and cotton.







WHAT WAS PROMISED FOR RURAL CREDITS.



President Taft, as chief executive, and recognized head of the Republican party, in his enthusiastic campaign for Rural Credits in 1912 stated emphatically :  “That the American farmer was seriously handicapped by having to pay more than twice as much interest for the use of money as the European farmer, and that this discrimination was a serious loss to our whole citizenship.  That the American farmer paid much higher rates of interest than our industrial corporations, although the security offered was quite as sound.”

President Wilson is on record since his election as stating that the American farmer should be placed “upon an equal footing with other business men and masters of enterprise” in financial legislation.

He said in an authorized interview for the metropolitan press, August 18, 1913, which was prior to the presentation of the Federal Reserve bill :  “Special machinery and a DISTINCT SYSTEM OF BANKING must be provided for, if Rural Credits are to be successfully and adequately supplied.  Our farmers must have similar means afforded them of handling their financial needs easily and inexpensively.  They shall be furnished these facilities before their enterprises languish, and not afterward.  AND THEY WILL BE.  This is our next great task and duty.”

Both the Republican and Democratic parties recognized this gross discrimination against agriculture during the 1912 campaign, and in their platforms promised prompt relief if given the mandate.  In fact they apparently made it their paramount issue.

President Taft and President Wilson each earnestly urged non-partisan consideration of this vital, urgent legislation.

But for some reason for which no satisfactory explanation has as yet been given, unless you consider

Rural Credit Sidetracked 163

Mr. Herrick’s such.  It was sidetracked during the first Congress, and a joint non-partisan committee on Rural Credits appointed to prepare and present a bill at the opening of the first session of the present Congress.

Early in January they presented a unanimous report, and a bill.

They state several very important facts in the report ;  briefly stated, they are, p. 5 :  “The American farmer has the best security in the world—productive land.”

“In many parts of the country the farmer is charged extortionate and inexcusable rates of interest regardless of usury laws and a decent regard for human necessities.”

On page 6 we find what may be termed the object or text of the bill :

“He [the American farmer] desires the government to authorize a system of land banks which shall duplicate for him the facilities now commanded by men engaged in manufacturing, in transportation, and in commerce.”

Note.—A correct interpretation of the farmers’ rights.

“But your sub-committee is convinced that loans must be made available to farmers on long term mortgage security through some medium other than the commercial bank.”

From the foregoing we summarize a few facts that should be conceded without question :

First.  The American farmer is grossly discriminated against, both at home, and in competition with foreign farmers, in the rates of interest charged for the use of money or credit.

Second.  That the corporation, or corporations, to whom has been delegated, as public servants, the administration of this public utility, money, are “in many parts of the country charging the farmers extortionate and inexcusable rates of interest, in violation of usury laws and a decent regard for human necessities.”


164 What Was Promised

Note.—By a strange oversight, the committee omitted to make any recommendation for the punishment of these criminals, compensation to the victims, or forfeiture of their charters so as to prevent further “extortion by these lawless, inhuman oppressors of the farmers in many parts of the country.”  These are not my charges, but the official report of the joint committee, corroborated by the Comptroller of the Currency and the sworn statements of the officers of the national banks guilty of the offenses.  What they have done “in many parts of the country” they have the power to do in all parts.  They are no respector of classes or individuals.  What they are doing to the farmers, they may and will also do to every other class or profession in the nation.

Third.  Because of this lawless extortion, there is an urgent, immediate demand for such legislation as will not only “place the farmer upon an equal footing with other business men and masters of enterprise,” but that will also forever stop this unjust system of taxation upon the exchange of the products of labor of all classes and industries in the nation.

Fourth.  That a “distinct system of banking must be provided for” and “similar means afforded,” “which shall duplicate for him [the farmer] the facilities commanded by men engaged in manufacturing, in transportation, and in commerce.”

Fifth.  This cannot be done under the Federal Reserve law as controlled at present, nor under any system, dependent in any degree on the men who now control our financial system.

It is fair to assume that the impression made, and intended to be made, upon the public mind by the use of the terms :  “A distinct system of banking,” “other than the commercial bank,” "similar means afforded,” and “duplicate for him,” was that Rural Credits, as promised, was an investment system that would do for agriculture just what the commercial system was doing for other lines of business, and that to do so it


Complete Change of System 165

must be separate and distinct from, and independent of, the commercial system.

It cannot possibly serve that purpose and be dependent on, and pay tribute to, a commercial system wholly administered for private profit ;  and more especially when that commercial system says emphatically that “nothing but disaster could result from a confusion of an investment system with the commercial.”

In addition, all the foreign Rural Credit systems, so widely advertised, have been built up as separate and distinct systems.  They have grown up side by side with the commercial banks to the mutual benefit of both, and, with the postal savings banks, have been the real reasons why the European countries have been so free from panics, something our monetary commissions omitted to report.


A Complete Change of System.


The great difficulty with the true friends of Rural Credits, or an investment system, is, that they do not understand, or realize, that we have, by legislation, during the past eight years, laid the foundation for a complete change in our whole financial system, in accord with the plan of the House of Morgan, and that the change is rapidly developing.

The change is from money to credit, as I have clearly shown.

At present the system is that of lawful money, currency and credit.

The lawful money is being rapidly destroyed, or stored in the vaults of the men who control.  The currency is being rapidly contracted, and permanently withdrawn from circulation.  Then all that will be left is the credit of the national banks, and a limited amount of Federal Reserve bank notes for counter use.

All Rural Credit bills depending upon the sale of bonds for lawful money will prove an absolute waste of time and money ;  and just how they can hope to handle the credit of the national banking system in


166 What Was Promised    

competition with, or in opposition to, the system is beyond my comprehension.  No effort is being made to amend the Federal Reserve law to meet our needs, and none will be allowed by the men who now control both the Democratic and Republican parties.

The bill presented by the joint committee does not comply with the promises made by the dominant parties in any particular, nor was it intended to.

It does not comply with the report itself in any respect, but the very reverse in every essential, and in addition it sets the most dangerous of traps for the unsuspecting farmer to walk into.  It is a sham, a fraud, a trap.

Senator Hollis has announced it as the Administration bill, and as it had the approval of the republican members of the committee (I will deal with it more in detail elsewhere), it represented the official views of both political parties.  I think that they assume that the average farmer is more stupid than he really is.







WILL THE FEDERAL RESERVE LAW SOLVE THE AGRICULTURAL INVESTMENT PROBLEM ?



In urging the Federal Reserve Bill in his message to Congress, President Wilson said :  “The pending currency bill does the farmers a great service.  It puts them on an equal footing with other business men and masters of enterprise, as it should, and upon its passage they will find themselves quit of many of the difficulties which now hamper them in the field of credit.”

That is one of the clearest statements President Wilson has yet made officially.

Was he deceived as to the contents of the bill, or did he deliberately try to deceive the farmers of the nation ?

I am loth to believe the latter.  I would prefer to believe the former.  I will state the facts, and let the reader decide for himself.

In this connection what should be the meaning of “equal footing”?

The answer of the layman must be :  equal opportunity ;  equal service ;  equal facilities for credit ;  equal rates of interest, and terms to suit his special business.

What are we to understand by the term “other business men and masters of enterprise”?

I understand it to mean that agriculture is a business, and that the farmer should be the master of his own enterprise ;  that is, just as free to manage it in accord with his own ideas and plans as did the masters of any other business, or enterprise.

“They will find themselves quit of many of the difficulties which now hamper them in the field of credit.”

Nothing of that kind is as yet apparent.

I had heard Mr. Reynolds discuss and advocate the Aldrich plan before a state meeting of bankers.  There was not one sentence in his address that would indi-

168 Our Investment Problem

cate that any investment system was being considered in connection therewith.

I read his address before another state bankers meeting, printed and distributed by himself, or the National Bankers’ Association.

I read “The Aldrich Plan Interpreted” by Mr. Reynolds, and distributed “with the compliments of The Continental and Commercial National Bank of Chicago.”

I read the bill as prepared by the committee and introduced in Congress, and Senator Owen’s speech in introducing it.  It was a masterful and complete address.

In none of these did I see any foundation whatever for the President’s statement as quoted.

The President and his advisers had access to all this information, and it is very unfortunate, at least, that his cabinet officials should have permitted him to make such wholly unwarranted statements, with the apparent intent of deceiving our greatest industrial and business unit.  Indeed, Senator Owen made it very clear as to what the Federal Reserve law was to be in the following words :

“All of these considerations urge that the Federal Reserve banks should be banks for banks, bankers’ banks ;  and not a public bank competing with the banks for business.”

In fact, they were intended to be a perfect monopoly of the business of the nation, for the private profit of one business.


What the Farmer Needs.


It is admitted by every intelligent student of agriculture that what the farmer needs is an investment system, for long time loans for development and production, with small annual payments of principal, and at a rate of interest the industry can afford to pay.

No business can be successfully operated where they have to pay more interest for the use of money than the profits of the business warrant.


What The Farmer Needs 169

Agriculture does not pay more than two per cent on investment and labor, if figured as it should be, on the same basis as is other business.

In this, increase in land value should not be included, as profit on production, for it is not ;  that is a value created by the community apart from production ;  and allowance should also be made for loss of fertility.

If more than two per cent interest is charged, farm tenantry will continue to increase.  I know of what I write.

The national bankers are on record, times without number, against an investment system being forced on the commercial banking system.

When an effort was made to incorporate such an amendment in the Federal Reserve act, “Monetary Reform” protested vigorously, and declared emphatically that no such amendment would be permitted, saying that, “Nothing but disaster can result from the confusion of commercial with investment problems.”

They have the commercial banking system now, just about as planned by Mr. Warburg, and advocated by Mr. Reynolds.

Mr. Warburg so testified before the investigating committee, adding that whatever was lacking in the law could be provided by the Federal Reserve Board, which means that it will be just as the bankers wish.  The amendments the Board have suggested are in line with the policy outlined, and without any hint of provision for investments, such as was promised, and as is needed.

Speaking in a broad sense and from experience, and official data of 1913, 1914 and 1915, which I will later give you, I am thoroughly convinced of the following facts :

For investments we must have a system wholly free in every respect from the men who now control our financial system.

No matter what they may claim, the Federal Reserve law never was intended by its original promoters


170 Our Investment Problem

to serve the public.  It was intended to do just what it is accomplishing,—giving complete control to a few grasping extortioners, whose only aim is private profit.

That they cannot be compelled to serve the public under the present system.

That they will not permit the amendment of the law except as sanctioned by the National Bankers’ Association.


Report of Joint Committee on Rural Credits.


(The appended criticism of the joint committee bill as reported to Congress was published in a newspaper under date of February 3, 1916.)

The object of the bill is stated on page 5 :  “Modern farming requires capital in large amounts.  The American farmer has the best security in the world— productive land.  This bill enables the farmer to obtain capital for productive purposes, at low rates and for long terms, on the security of his farm.”

What might be termed the text of the bill we find on page 6 :  “He [the farmer] desires the government to authorize a system of land banks which shall duplicate for him the facilities commanded by men engaged in manufacturing, in transportation, and in commerce.”

The committee knew what was wanted and laid a splendid foundation.

In recommending the Federal Reserve law to Congress, President Wilson said :  “The pending currency bill does the farmers a great service.  It puts them on an equal footing with other business men and masters of enterprise as it should.”

But there was a superior power, sovereign in legislation which said not so ;  “Nothing but disaster can result from the confusion of commercial with investment banking problems.”  And before the bill was enacted into law, everything of that kind was eliminated.  President Wilson then promised that this would be taken up in a separate measure, and I as-


The Sham Duplicate Exposed 171

sume that the proposed bill is the administration measure providing for that “equal footing,” etc.

Does the bill, in whole or in part, redeem the platform promises of the dominant parties, in favor of rural credits, the implied pledge of President Taft, and the direct pledge of President Wilson ?

The American farmer for whom this bill was intended has the capital.

What he wants is a partial representative of that capital on “the best security in the world—productive land,” for the purposes of development and production ;  a duplicate of the system by which commerce and other industries can now borrow money on commercial paper.

There is an important fact that should have been considered, viz.:  An investment system can be administered for a mere fraction of the expense and risk of the commercial system ;  hence the report might well have said, instead of the very indefinite “low rate,” a lower rate of interest than for any other business or industry.  The saving in expense of administration should inure to the benefit of the patrons.


Is It a Duplicate ?


How far and in what does the proposed law duplicate the Federal Reserve law ?  First.  For the Federal Reserve Board they duplicate with a Federal Farm Loan Board.  A good start.  But that is the only duplicate I can find in the whole bill.

Second.  The capital to start with.  For the Federal Reserve bank as stated by Senator Owen in introducing the bill, Congressional Record, p. 6763 :  “We are proposing to put approximately $200,000,000 of government funds in the Federal Reserve banks.”  That was gold coin.  The banks were to subscribe six per cent of their capital, one-half to be paid in six months, which would amount to $53,000,000.  The government contributed four-fifths of the capital as a deposit, or loan, free of interest.  How is this duplicated for the Federal Land Loan Board ?  Section 6 provides that they may become depositaries of public


172 Our Investment Problem

money, etc., and the Secretary of the Treasury “shall require satisfactory security, by the deposit of United States bonds and otherwise.”

No security was required for the deposit of the $200,000,000 of gold with the federal reserve banks.  Not much of a duplicate.

Third.  No government funds deposited under the provisions of this section shall be invested in mortgage loans.  The security was to guarantee “the safe keeping and prompt payment of the public money deposited with them.”  What benefit would the deposit be unless they could use it ?  Now compare that with the use the Federal Reserve banks could make of the $200,000,000 loan or deposit.  They could issue and loan two and a half times the amount in Federal Reserve bank notes, or $500,000,000.  No sign of a duplicate there.

Fourth.  The government has delegated its sovereign power to coin (issue) money to the Federal Reserve banks without limit ;  but the Federal Farm Loan banks will have to depend on voluntary deposits, for which they will have to pay four per cent (later this feature was promptly eliminated after presentation), or on the sale of bonds bearing a rate of 5 per cent to secure “current funds” that have been issued out, loaned out, by the Federal Reserve system at an interest rate of 8 per cent to 10 per cent.  Instead of being a “duplicate” or “equal footing” it is gross discrimination against agriculture.

It is not at all in accord with the desire expressed by the committee as quoted.  To duplicate would be for the government to delegate exactly the same power and authority through the medium best suited to each system, and no true friend of agriculture can afford to accept of any less.

On page 6 the committee concedes that we must have “some medium other than the commercial banks.”  It should be wholly independent of them as well.  Indeed, as agriculture is our basic industry, it should have prior consideration.  We must first pro-


$100,000 Campaign Contribution 173

duce something before there is a necessity for a medium of exchange.

Our farmers are compelled to compete in the world’s markets, where the price is fixed by the uncontrolled law of supply and demand ;  with our competitors having cheaper land, the use of money or credit for less than half the rate of interest, and public transportation untaxed for private profit.

Unprotected from foreign competition in our own markets, discriminated against by legislation at every turn, and the prey of every protected and special privileged industrial and commercial trust, agriculture cannot pay more than two per cent for the use of money or credit, and stay the present rapid descent from farm ownership to tenantry, and the increased exodus from the farm to the city.


“A Low Rate of Interest.”


I do not see how money could be loaned for less than six or seven per cent under the proposed law.  Of course that is a low rate as compared with current rates as reported by the Comptroller of the currency.

But why pay any tribute to the commercial system ?  Why pay 6 per cent for the use of this public utility, when it can be provided for 2 per cent by an independent system.  The committee accepts of the principle of private monopoly by a special privileged class called bankers, and build their structure upon it by providing an entirely new and very expensive system of administration, with a vast army of unnecessary new officials.

It looks very much like a $100,000 campaign contribution to the Democratic party.

By adopting the system I have suggested of using our present political units, we reduce the expense to the minimum, and increase the security to the maximum.  For the Federal Reserve Board, duplicate, say, an Assistant Secretary of the Treasury, Interior and Agriculture, as an Investment Bank Board.  Duplicate the state unit for the Federal Reserve Bank, and the county unit for the member bank, and duplicate the power to issue Federal Reserve bank notes on the security of commercial paper by the power to issue


174 Our Investment Problem

Federal Investment bank notes on “the best security in the world—productive land.”  That is what I would call “duplicating.”

Federal Reserve bank notes are now obligations of the government for which the government receives no compensation.

The Federal Investment bank notes will be guaranteed by the several government units, for which they will be amply paid by the borrower.

So far as the state units are concerned, we have the system in successful operation in a number of states, in the loaning of our school funds.  Why duplicate these ?  The only additional help needed would be clerical.  Not much.

If Congress cannot do better than 6 or 7 per cent it is a waste of time to bother with it.  We can do better by state legislation, as South Dakota is now doing, thanks to the foresight of the good old Farmers’ Alliance.

We have now over $5,000,000 loaned on farm mortgages at 5 per cent, and over $6,000,000 on deferred payments at 6 per cent.  As fast as that is paid in it is reinvested at 5 per cent.  This has had a very important bearing on interest rates for all farm loan investments, as evidenced by the fact that we now have $27,000,000 of life insurance funds loaned at 5½ per cent.  We could do better, but unfortunately the United States constitution provides that no state shall make anything but gold and silver coin a legal tender for the payment of debt.

A serious defect in the bill is that the committee assumes that there is now and will be in the future an abundant supply of money for investment in farm mortgages.  They overlook the fact that we are rapidly developing a complete change in our whole financial system as advocated by the National Bankers’ Association, and provided for in the Federal Reserve law and other laws during the past five or six years.  The change is based on the theory that we do not need money for the transaction of business ;  just credit


A Dangerous Trap 175

and a checkbook.  We have already had a decided contraction of money both by increased demand and decreased supply, by retirement and decoinage.  This process will continue until the few men now in control will have completed their monopoly.  The lawful money remaining will be hoarded in their vaults, until drawn out by a premium.

They want to loan their credit instead of money.  “The school teacher, clerk, minister, and wage earner,” etc., will not be paid in money, but by a check against a credit.


A Dangerous Trap.


Section 12 provides that :  “Funds transmitted to farm loan associations by Federal Land banks to be loaned to its members, shall be, in current funds, or farm loan bonds.”

Section 26 provides :  “Whenever any farm loan bonds, or coupons, or interest payments of such bonds, are due under their terms, they shall be payable at the land bank by which they were issued, in gold or lawful money.”

Under our present laws “current funds” of the future will be Federal Reserve bank notes.  They are not “lawful money.”  At present and until retirement is complete, national bank notes are the same, as are also coin certificates.  Gold coin has practically disappeared from circulation the world over ;  but in no other nation are they decoining it as we are.  Why provide that the loan “shall be in current funds” which may or may not be “lawful money” and payment shall be made in “gold or lawful money.”

There is going to be a great shortage of legal tender money in circulation very soon.  Most of our farm mortgages are now payable “in gold coin of the present standard of weight and fineness.”  The same is true of the greater part of present obligations, estimated at all the way from $100,000,000,000 up.  Suppose the creditors demand payment as stipulated in the contract, where will they get the gold coin ?


176 Our Investment Problem

It is a dangerous trap to set for the farmer who borrows “current funds” and obligates himself to pay in “gold or lawful money.”

Having a monopoly of credit ;  and lawful money out of circulation, by hoarding and contraction, the problem of the man behind the counter will be not what can we afford to loan our credit for, but what can the prospective victim stand.

As an illustration of what men will do when given the power, take the case of that widow (report of the Comptroller of the Currency, p. 194, 1915).  The inhuman, ungodly monster behind the counter, sworn to obey the laws governing the public service corporation he represented, concluded that she could make that family of hers pay 120 per cent.  That was in October, 1914.  She paid it, and in November was again in need.  He tried 195 per cent and she paid it ;  in December 259 per cent ;  in March 426 per cent, 720 per cent, 1450 per cent and in April 2,000 per cent.  All of which she paid.  Can’t believe it ;  it is a sworn statement.  Would not believe the perjurer on oath ;  in this case it is taken from the record of the national bank.  What a shame to have it called a national bank.  Surely that must have been many years ago.  No ;  during 1914-1915, under what the committee refers to on page 6 as “the Federal Reserve Act, passed by the last Congress, placed the capstone on a superstructure for commercial credit.”  Has the outlaw been prosecuted ?  No.  Has the charter of the bank been cancelled ?  No.

Instead the council of the Federal Reserve Board has unanimously recommended that the office of the Comptroller of the Currency be abolished.

We are assured by the expert to the Senate committee on banking and currency.  that under the Federal Reserve Board “Thus intelligence and not automatism, will be the directing power.”

Intelligence combined with greed and endowed with unlimited power, is not a safe public service for the people.  The proposed bill does not remedy this fatal


Class Legislation Unnecessary 177

defect.  It confirms the power of issue, contraction and distribution of money and credit in the hands of this one business, organized for profit and profit only.

Class Legislation.


Another section provides :  “No such loan shall be made to any person who is not at the time, or shortly to become, engaged in the cultivation of the farm mortgaged.”

Limiting the loans to resident operative farmers is a weakness in that it makes it class legislation, and special privilege, and will be used by the opponents of state aid to defeat any measure worth while.

I believe that it was so intended by the practical politicians who started this superficial campaign for Rural Credits some five years ago to tide over an embarrassing political situation.  It was a bad case of “attention without intention”;  for as soon as the question was taken up seriously after the campaign it was intended to influence was over, these champions, under the leadership of Myron T. Herrick, made that very point the chief objection, against any form of state aid.

While I think it might be justified in the case of agriculture, it puts our friends on the defensive, always a weakness, and it is wholly unnecessary, and fundamentally wrong.  Every citizen desiring a home, and having the security to offer, should have exactly the same right to community credit.  Equal opportunity for all.  That’s all.


—H.L. Loucks,
Watertown, S.D.







THE RURAL CREDIT SYSTEM THAT WAS PROMISED.



(Article published in The Farmers’ Open Forum, Washington, D.C., of May, 1916.)

In this article I propose to limit myself to facts stated, and promises made by official representatives of the Republican and Democratic parties during the campaign of 1912 and since.

It was claimed and proven that the American farmer paid more than twice as much for the use of money or credit as did his European competitor, because of their state-aided Rural Credit systems ;  that on an average he paid more than twice as much as did commerce and industry at home ;  that in many parts of our own country he was charged extortionate and inexcusable rates, regardless of human needs and usury laws ;  that he had the best security in the world—productive land ;  that there was urgent and immediate need that these wrongs should be righted and the farmer placed upon an equal footing with any other business, or industry in the nation, in the interest of the whole people ;  that it must be separate and distinct from the commercial system, but a duplicate of it, so that the farmer might “command when he will” the use of money for his needs.  This, said President Wilson, “is our next great task and duty.”  All of the successful investment systems of the world are wholly independent of their commercial systems, and without exception state aided.

The farmers were interested and delighted with the prospect that they were at last to come into their own without an effort or a struggle on their part.

For one, I propose to hold both political parties to “a strict accountability” for the performance of their duty.

I have seen no attempt in any of the bills introduced to comply with the promises made.  In this

A Worthless Law 179

article I will discuss only a few fundamental principles that will apply to all Rural Credit bills alike.

It is to be regretted that the authors of the many bills presented do not recognize the vital fact that with the enactment of the Federal Reserve law, we have completely revolutionized our whole financial system, changing from a money system to a credit system.  That Congress has delegated its constitutional power to coin (issue) money and regulate the value thereof to one special business, the authors of the great change, to operate for their own private benefit and profit.

Quite naturally in practice they prefer to loan their own credit.

First.  I am opposed to any system based on the sale of bonds to secure money for farm mortgages.  It is not in any sense a “duplicate” of the Federal Reserve law for commerce.  Any system that has to depend upon the commercial system, cannot be independent of it, and the farmer cannot “command when he will.”  He must pay “all the traffic will stand.”  The men who control command.

Where can they get the money, or even the currency, in the near future ?  Our lawful money at present consists of coined silver dollars, and greenbacks, with exceptions, and gold.  We have ceased the coinage of silver dollars.

We are rapidly demonetizing gold coin by decoinage, and the balance is being hoarded.  Gold is practically out of circulation in the United States, and wholly so in the rest of the world.  Our currency is also being rapidly retired.  Since December 1st, 1914, our national bank notes have decreased by $358,472,598.

To still further aid in forcing their credit on the people, they hoard an enormous amount in their vaults in excess of legal reserves.  Money so hoarded is not in circulation.  December 31st, 1915, the national banks alone held $2,046,256,000, or $813,549,000 in excess of legal requirements.  To this we must add


180 The System That Was Promised

$600,000,000 held in other than national banks, and $345,260,000 held in the Federal Reserve banks, and $215,242,005 gold in federal treasury.

Total locked up in reserves, not available for investment in farm mortgage bonds at 4 percent, and the loanable funds in the banks are not available for similar investments, when they can loan for so much better rates.  How absurd then to try to build an investment system on such a basis.

A second objection to the Morgan as well as the Hollis-Moss bill is that the obligation is made payable in “gold or lawful money,” something the borrower will not receive.  He will borrow credit or currency.

Then why obligate him to pay in something for which he is very liable to have to pay a premium ?  It is a dangerous trap for the farmer.

But this is far too important a topic for the limited space of our medium, and yet so far reaching, that discussion must be forced in the open.  For this purpose I am preparing the manuscript, dealing with this vital question ;  for Rural Credits by itself, is as a drop in the bucket as compared with the whole problem of which it is a minor part.

I am just looking for a publisher who is not “afraid of the cars” and expect to have it out in time that there will be several copies in every congressional district before the November elections.

Second.  They all provide for an expensive army of new officials, wholly unnecessary, as we have in our several political units, as I have suggested, the machinery ready to hand, that can perform the service more efficiently for one-tenth of the proposed expense.  They all seem to place a limit for expense of administration of one per cent, but a mere glance over the machinery is sufficient to refute that.

Third.  Our need is as specifically promised, a separate, distinct, independent system with a delegated power to issue real money, a full legal tender for all debts, public and private, so that the borrower can pay his obligation in the same kind of money that he


A Worthless Law 181

borrows, and of which there can be no private monopoly, either of issue, or by hoarding or otherwise.  Issued on the best security in the world—productive land—and in such amount as may be needed, in the judgment of the user, for development and production.

That is the real issue, from which I will not be sidetracked, and upon which I am prepared to meet all comers.

Any bill lacking any one, or all, of these features will not redeem the promises made, or fulfill the hopes and expectations raised.

No representative of agriculture can afford to compromise on anything short of equal opportunity for all.







A PRACTICAL, INDEPENDENT INVESTMENT SYSTEM.



This chapter is intended to deal with that one phase only of the money problem called “Rural Credits,” as raised by practical politicians in distress, to tide over a presidential political emergency.

Any plan submitted, to comply with the promises made, must embrace the following points :

It must “duplicate” the commercial banking system, with an investment system.

It must “place agriculture upon an equal footing with any other business or industry in the nation.”

“If Rural Credits are to be successful, they must be adequately supplied, easily and inexpensively, before their enterprises languish.”

The “men in control must comply with the needs, and obey the laws.”

“Special machinery and a distinct system of banking must be provided for” wholly separated from, and independent of, our commercial system.

We cannot hope for, or expect, to amend the Federal Reserve bank law to meet these requirements for reasons already given ;  and even if we could, it would not be desirable, because an investment system providing for long time loans can be administered for a mere fraction of the commercial system.  Then why try to unite our inexpensive system with the more expensive one ?

So far as I have been able to learn, every one of the successful foreign systems has been separate from, and independent of, their commercial banks.

The Rural Credit propaganda thus far has been conducted by the practical politicians on a wrong principle.  To cater to the farmer vote, it asks for a special privilege and class legislation ;  and even though it might, and I believe could be justified in the case of agriculture, it is wholly unnecessary, injudicious, and

Simplicity, Efficiency, Security 183

a weakness, because a source of antagonism, and should be avoided.

I am neither a professional agriculturist nor a theorist.  My knowledge was gained by practical experience as an operative farmer and a student of farm economics, as the chosen representative of organized farmers.  After many years of patient investigation and study, with an open mind, and forming no conclusions until I had secured official reports from every available source, I have formulated a plan embracing the best of each as adapted to our own conditions.  I have submitted no new or revolutionary principle ;  just assembled together parts of systems now in successful operation in our own states and nation.  It is an American system, and America should now take the lead in the world’s financial affairs and methods.

It is strictly in line with the needs outlined, the principles enunciated, and the promises made by President Taft, President Wilson, the Republican and Democratic parties, and I think also of the Prohibition and Socialist parties, and the preamble of the unanimous report of the joint committee on Rural Credits submitted to Congress January 4th, 1916.  All of which would indicate that it must be a very conservative plan.  Now, mind you, I do not say in line with the wishes and practices of the aforementioned ;  just promises and reports.  It is so much easier to blend the promises of practical politicians to the farmer, rather than their performances, that I prefer to use the former as the basis for my claim.

For “the special machinery and distinct system of banking needed” I propose as a “duplicate” for the Federal Reserve Board, a Federal Investment Board.  I use the term investment in place of Rural Credits, because the loans, being based on land, every citizen having the security to offer should have the same opportunity to borrow for development and production as the farmer.  Money should be issued by the federal unit to every business or industry without private profit.


184 Independent Investment System

For simplicity, efficiency, security and that it may be administered at the minimum of expense, I propose to utilize our present political units and do away with the necessity of any expensive commissions and a wholly unnecessary army of new officeholders.  That is, I propose to “duplicate” the Federal Reserve Board with a Federal Investment Board, the Federal Reserve bank with a state unit, and the member bank with a county unit.

As the Federal Investment Board would at most have only 48 to 50 correspondents—state units—and would not need to pass on the individual securities, as these would have passed the scrutiny of the county, and state, just the securities offered by the state, the clerical duties would be comparatively small ;  I had thought it might be administered by a branch of the Treasury Department.

Or, perhaps it might be more satisfactory to have a board composed of three members, say an Assistant Secretary of the departments each of the Treasury, Interior and Agriculture, and a general superintendent selected by those three, with such clerical help as might be needed.

There would be no need of an army of registrars, examiners, appraisers, attorneys, special appraisers, experts, etc., as provided for by the joint committee.

All that will have been taken care of by the county unit in an efficient manner and at the minimum of expense.  I have made no provision anywhere for a single “lame duck,” or disappointed candidate.


Federal Investment Board.


That the Federal Investment Board might be able to “afford similar means” and “facilities for agricultural development and production” as the Federal Reserve Board does for “manufacturing, industry and commerce,” Congress should delegate to the Federal Investment Board the same power to issue money as it does to the Federal Reserve Board, or banks ;  provided, of course, that the security is as good.

We have the right to demand the same terms for development, production and distribution for agriculture as we concede to "manufacturing, transporta-


Free Money For One, Free For All 185

tion and commerce.”  Production comes first and causes the need for a medium of exchange and the means of transportation ;  then commerce to aid in the exchange.  If we are to have free money for any business, we should have free money for production.  That should be the KEYNOTE of this campaign.

The details of administration need not be many, as the board would be dealing with sovereign states, holding the securities, and guaranteeing the payment.  The state being responsible to the Federal Investment Board, should have the full supervision of the details in the respective states.

For reasons already given, the money issued should be lawful money ;  a full legal tender for all debts, public and private.

Instead of free money and currency, as is provided for the Federal Reserve banks, I propose that the Federal Investment Board should receive an annual tax, or interest, of one per cent per annum for all money issued.  This on the theory that those who use any public utility should pay all the expenses of administration, just as is the case with our postal system.  The expense of administration should not be more than one-eighth of one per cent.  All in excess of the expense should be placed in a reserve fund for insurance, or protection, against any possible loss, by any defaulting state, to allay the fears of those who have no faith in the future of our country.  But under the plan proposed, any loss is very improbable, as all the borrowers in the whole United States are piling up a reserve, or insurance fund for protection.

This reserve fund would not be private profit.  It would belong to the public, and after a safe reserve had been accumulated, the balance might be applied to provide for real public transportation on land and water, soon solving that problem, and saving millions and billions of dollars in cost of transportation, which would benefit both producers and consumers alike.

There could be no reasonable objection to the federal unit charging one per cent per annum, if charged


186 Independent Investment System

for all money issued, which, of course, would include the Federal Reserve bank currency as well.  It would prove to be a very equitable, efficient and economical system of taxation.

What I have proposed would not by any means be a full “duplicate” of what has been done for commerce through the Federal Reserve banks.

There has been entirely too much done for them—far more than should be done for any business, industry or class.

I do not ask that the federal government shall give to the Federal Investment Board a monopoly of the issue of money and currency as well as of bank credit.  Nor do I propose that the federal government shall loan one dollar of money collected from the people, by taxes or otherwise, nor does it propose that the government shall deposit with the board or states $200,000,000 of gold or any other sum, or to issue or purchase bonds, or make them fiscal agents, or confer any other favor, or special privilege.

All we ask is the means of co-operatively helping ourselves exchange the products of our labor at the minimum of expense, we paying all the expense connected therewith.

Nor do we ask for a division of that precious “money of the world,” GOLD, with them.  We do not need a gold base with such security as we offer, and conceded to be “the best security in the worldproductive land.”  As it is one of the functions of the commercial system to provide for foreign trade facilities, for which they claim they must have gold, we are willing that they shall have all of it so far as we are concerned.

The system we are advocating is for home development, home production, home use.  “SEE AMERICA FIRST.”  Be for America first.


Rates of Interest Compared.


The other outstanding fact is as to the rate of interest charged for the use of money for development and exchange.


Rates of Interest Compared 187

The comparison of rates of interest as between Europe and America is an interesting and valuable one ;  it comes under a different head, viz.:  that of competition in trade, which belongs to a different phase of the problem.  For the present it is as to the rate between agriculture and other European industries and commerce, in their respective countries.  Floating in the open markets the bonds based on farm mortgages sold at as low a rate of interest as did government bonds, and at a lower rate of interest than commercial paper.  In times of national trouble bonds fell, and investors hastened to invest in farm land mortgage bonds in preference, demonstrating very clearly that in Europe productive land was the very best security.

A third feature is that the farmers organized politically as a class.  In Germany where the movement originated they continue their political party, the Agrarian, and hold the balance of power, and thus secure that equal opportunity.  It may not be as sweet as our American political taffy, but it is much more nourishing.

In all the reports there is much made of their co-operation, but strangely this very important feature of co-operating at the ballot box is not mentioned.  Without that they would be just as helpless in Europe as they are in America.


Suggestions for State Administration.


For the several states I would recommend as a basis the system in successful operation in South Dakota since statehood for the investment of our school land funds.  A somewhat similar system is in force in Indiana, Iowa, Idaho, Minnesota, North Dakota, Oregon, Oklahoma, Texas and Utah.  Each state should be the best judge of the system best adapted for itself.  Mr. Thompson, a government official, testified that in all those states it had proven satisfactory.  I know that it has been eminently successful in South Dakota, where we now have over $11,000,000 invested.  Mr. Thompson reported that the losses had been insig-


188 Independent Investment System

nificant, and that they could all increase their loans very materially if they had the funds.  It has been a pronounced success.

Applicant and Security.


First.  The individual.  As the county would be responsible for the loan the applicant would have to satisfy the county board as to his personal character and the value of the property offered as security.  The person and the property would usually be known to some member of the board; if not, the cost of investigation would be nominal.


The County Unit.


Second.  The county board.  The clerical work for long time investments being very small, it could be done by one of the county officials in the court house.

Applications for loans should be submitted to the board at a regular meeting, and notice of same published in the official proceedings and investigation ordered, to be reported on at the next regular meeting.  All applications approved by the board to be forwarded to the state investment bank, or department, once each month, accompanied by a county bond for the amount applied for, the county retaining the mortgage security.  This would be a voluntary co-operation by the whole county and duplicate the Landschaft system, without any special organization.

The county will be protected against any probable loss by the charge of one-half of one per cent per annum annual interest ;  all in excess of the cost of administration to be placed in a reserve fund for that purpose.  This would in effect be an insurance policy paid for by all of the borrowers in the county.

I do not see how it is possible to improve on this plan of practical co-operation, and I have given many years of thought to the problem.  It is superior to the Landschaft in that co-operation is secured without coercion, and superior to any other plan offered, in simplicity, security, efficiency and economy.


The State Investment Plan 189

Third.  The state investment department.  In South Dakota it would be the Commissioner of School and Public Lands that would pass upon the application, and if approved pass on to the state.  For this they would receive one-half of one per cent annual interest ;  all in excess of expense to go into a reserve fund to protect the department against any probable loss from any county in the state ;  all of the counties participating (for that should be left optional) and all of the borrowers in the state uniting—co-operating—to insure the payment of any loss by any individual in any county in the state.


The State.


Fourth.  Once each month the state would send to the Federal Investment Board its bond, with application for a loan for the full amount of applications, and, if approved, the loans would be completed.

This reserve feature is borrowed from New Zealand and Australia, where in each of the political units it has been entirely successful for many years ;  each unit accumulating a large reserve fund.  This would make the total rate of interest two per cent.

Based on the experience of Europe and Australasia the total expense would be less than one per cent.  And there, they had to organize specially for the purpose.  Here we have the units already organized.

As with the federal unit, the surplus, or reserve fund, would not be private profit ;  it would belong to the public—the state and county.


Nothing New—Not Experimental.


There is nothing new or experimental in the plan, except the coupling up.  The system, except the delegated power to issue money, first adopted in our Federal Reserve law, has been in successful operation in some form in nearly all of the civilized countries of the world.

Apparently this will be a case where “the first shall be last.”


190 Independent Investment System

For the Federal Reserve Board I substitute a Federal Investment Board ;  for the Federal Reserve bank, a state unit ;  for the member bank, a county unit.  Could anything be more simple, or practical ?

In the ordinary sense and use of the term, this is neither using government credit, cash nor state aid.  It is practical self-help by co-operation.

When we pay full value for a service, we do not feel under any obligation to the servant.  In this case we start with the borrower ;  it is his credit we use ;  not the government’s.  He furnishes what is conceded to be “the best security in the world—productive land.”  He says to the county, of which he is a resident :  if you will endorse this obligation, I will pay you one-half of one per cent per annum, and you hold the security.  He is under no obligation, as he is paying amply for the service.  The county repeats this with the state, the borrower paying for the service, and this is again repeated with the Federal Investment Board.  It is not borrowing money from the government, taxed from the people ;  it is a new issue of money, real full legal tender money, based on actual wealth, and much better secured than are the new Federal Reserve bank notes now being issued by the Federal Reserve banks to commerce.

As this is intended for all who wish to become homeowners and have the security to offer, regardless of occupation, or calling, it is not a special privilege, or class legislation.


Comparison of Security.


Under the present commercial bank law, Federal Reserve bank notes, which is not money, just currency, will be issued to the full par value of commercial paper when endorsed by a member bank.

The Federal Investment Board notes will be secured, first by the borrower’s paper, secured by a mortgage on property worth twice the loan, backed by the total wealth and taxing power of a county, and reinforced by the wealth and taxing power of a state.


Gold Base Not Needed 191

Surely, infinitely better secured than are the Federal Reserve bank notes.

When guaranteed by the faith, credit and taxing power of the United States, and made a full legal tender for all debts, public and private, it will be the very best money ever issued by any nation.

In addition, each political unit will be deriving a revenue from the issue and use of these Federal Investment notes so long as they are in circulation, as compared with not one cent from the Federal Reserve bank notes.

I affirm that agriculture, unprotected and discriminated against as it is, and the prey of every favored special privileged and protected business or industry, cannot afford to pay more than two per cent per annum for the use of money or credit.

There should be no limit to the volume loaned, so long as the security was ample.  Demand for use is the true standard, and the man who has the security, and is willing to pay the rate of interest, should be the best judge of the need.  There is no sane man going to pay 2 per cent for the use of money one day longer than he thinks it profitable.  The longer he keeps it out the more revenue for the state and nation, and the less taxes for the people to pay.

Federal Investment notes do not need a gold base, and should be free from that flimsy fiction.  This would leave all the gold for our commercial bankers to aid them in their foreign trade, etc.

It would prove a very good test of merit in use, and of course it should be optional with the citizen whether he would prefer to use the Federal Reserve bank notes with the fictive or imaginary gold base at an interest rate of from 8, 10, 20, 100, 500 to 2,400 per cent per annum, rates actually charged during the year 1915, or the Federal Investment notes at an interest rate of from two to four per cent.

Those using the investment notes would be relieved of all fear of being called on to pay “in gold coin of the present standard, weight and fineness” with the


192 Independent Investment System

gold coin locked up in the vaults of the creditors.  It should prove a most happy solution of our great financial problem.  Those who believe that our monetary system should be administered by a favored monopoly for private profit, would patronize the present system, and those who believe that our medium of exchange should be a public utility and be administered without private profit, would patronize the new investment system.

I do not claim that my plan will solve our greatest problem, an adequate medium of exchange.  All I claim is that it would be an entering wedge, based on sound economic principles that will stand the test of criticism and demonstration, and open the way for an American system of finance that will free labor from the power of “money to oppress.”

It will enable us to use our own credit for development, improvement and production, as we may deem best, the only way to attain the best results.  No man can do his best unless he is free.  It is an old, old truism that “the borrower is servant to the lender.”

The security is the best in the world, and administration the least expensive, the American farmer will have the full advantage of our own great national resources, and will need no outside assistance, or paternalistic care.

It will give us the use of a medium of exchange at a less rate of interest or tax than that of any of our world-wide competitors, because our money will be free from any tax or tribute to private monopoly.  It will provide a medium of exchange, the best in the world, with the maximum of security, and at the minimum of expense.

It would be the capturing of the first trench of money monopoly, which, once gained, would never again be surrendered.

It is the only plan by which agriculture can be placed upon an equal footing with any other business: or industry.


Equal Opportunity for All 193

If we are to have free money for commerce, we must have free money for agriculture.

Let each system provide its own method of administration.

The true friends of agriculture cannot afford to compromise on that fundamental proposition.

All the American farmer needs is freedom in production and exchange.

Equal opportunity for all.  That’s all.







THE FARMERS’ RURAL CREDIT BETRAYAL.



The presidential campaign for 1916 is rapidly approaching, and as usual an attempt is being made to fool the farmer.  Well meaning representatives of agriculture, more loyal to their party than to their class, are at work preparing resolutions, and planks for insertion in the Republican and Democratic national platforms at the coming national conventions.  I have been requested to aid in such work, and have refused, for the very good reason that we had more than satisfactory pledges in both platforms in 1912 ;  Rural Credits, in fact, having been made apparently the paramount issue by both parties.

It was one of the greatest legislative campaigns ever inaugurated, and unique in that everybody was for “Rural Credits”—before election.

We had what was much stronger than a platform promise, we had the active support of President Taft and his whole official staff for more than a year before election.  It was “a ground hog case.”  The Republicans had got in bad with the farmers in their attempt to reduce the “high cost of living” by the reciprocity agreement with Canada, to sacrifice agriculture by admitting farm products free of duty.  They were in distress, and had to get busy to again hypnotize the rousing giant of agriculture.  The Department of State, under the able supervision of Ambassador Herrick, made a special effort to gather data from all sections of Europe, and glowing accounts were published by the government of what “Rural Credits” had done for the European farmers, as I have previously shown, and the same was published and scattered broadcast over the nation.  All this and more, President Taft and the Republican party would do for the farmer, if only given the chance.  There never can again be a stronger and more effective bid and promise made to place agriculture upon an equal

Performances Preferred 195

footing with other business industries, than was made by the Republican party preceding the 1912 election.

The Democratic party had caught on, and no doubt encouraged by the National Bankers’ Association, had promptly said “me too.”  I think that was when President Wilson formed the habit of “cribbing” Republican issues, when they looked good.  The Democrats if possible, became more enthusiastic than the Republicans, perhaps because of the fact as reported by the Comptroller of the Currency, that the Southern farmer was more cruelly oppressed by usury.

It is not a new, meaningless promise that we want now.  It is the fulfillment of past promises, solemnly made before election.  We have a right to hold both the Democratic and Republican parties responsible for promises made, and hopes kindled ;  and I, for one, refuse to accept any promises for the future, until they make good their past promises.

What is their record ?

What has ex-President Taft, Myron T. Herrick and the Republican party done to make good their promises ?  As a party, they have done absolutely nothing in Congress.  Ex-President Taft has been very active making addresses, all over the country, on every conceivable subject, whether posted on them or not, except this one paramount issue so near to his heart (?) in 1912 :  “Rural Credits for the American farmer.”

Myron T. Herrick, because of his great zeal for “Rural Credits” during 1912, had created a real interest amongst the farmers for Rural Credits.  In fact, he had exceeded the speed limit.  He had done his work so efficiently that the farmers began to think that it really meant something this time.  Indeed, we began to talk of Ambassador Herrick as the modern Moses to lead us into the promised land of prosperity ;  so much so that the bee began buzzing in his bonnet quite actively.

What has he done since the 1912 election for Rural Credits ?


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Mr. Herrick had a right to suppose that he would be highly rewarded for his splendid efforts trying to save the Republican party ;  and instead found that the result had been very annoying to the Sovereign House of Morgan, and that he must now reverse himself and take charge of the campaign against any form of Rural Credits, or any state aid whatever, and like the good practical politician that he is, or thought he was, he has done his best.  I will not say at the sacrifice of his principles, for I have grown to believe that the practical politician has none such.

So Mr. Herrick was compelled to take the stump to undo the mischief he had done, and has taken advantage of every opportunity since to serve his master, the House of Morgan.

In view of this official record of the Republican party since 1912, what a humiliating farce it would be for any representative of a farmer’s organization to ask the Republican party to adopt a Rural Credit plank in their 1916 platform.  They have made their record.  Will the farmers again forget, next November ?


The Democratic Twin Arm of the House of Morgan.


The Democratic party was successful at the polls.  How have they redeemed their campaign promises of 1912 ?

I am willing to concede that President Wilson believed that the Democratic party was solemnly pledged to give the farmers an adequate system of Rural Credits, “that would place the farmers upon an equal footing with other business men and masters of enterprise,” and that he clearly understood just what that meant.  Unlike ex-President Taft he came out openly and stated his position, soon after the revision of the tariff, in an authorized interview for the metropolitan newspapers, already quoted.

In his message to Congress in favor of the Federal Reserve bank law he said :  “The pending currency bill does the farmers a great service.  It puts them on an equal footing with other business men and masters


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of enterprise as it should, and upon its passage they will find themselves quit of many of the difficulties which now hamper them in the field of credit.”

How the President could have found that in the bill, even as introduced, is beyond my comprehension.  He must have taken Mr. Reynolds’ or Mr. Warburg’s word for it, or perhaps he was thinking of things hoped for in the future, and this is in accord with another statement of his to the effect that they could not take up Rural Credits in the pending bill but would do so in a separate measure.  And also in line with the closing sentence of the same paragraph in which he says :  “What they [the farmers] need and should obtain, is legislation which will make their own abundant and substantial credit resources available as a foundation for joint, concerted action in their behalf in getting the capital they must use.  It is to this we should now address ourselves.”

How has President Wilson and his party kept that platform and official promise ?  There was no bill presented by the administration during that session.  For some reason the President had received a new light, or was it as claimed by Herrick, p. ...., at any rate his ardor suddenly cooled.

In his December (1914) message he barely mentions the topic, giving his next paramount issue less than four lines.

In his December, 1915, message he discusses thirty-nine topics, and forgets all about Rural Credits.

In 1916 he tours the country to reverse himself on a new issue, and never mentions Rural Credits.

That is the official record of President Wilson on Rural Credits.

They claim that the Hollis-Moss bill, which Senator Hollis called the administration bill, complies with the promise.  If so, all the worse for the administration.

I exposed it in The Farmers’ Open Forum and it has not been answered, or refuted, and cannot be.  Not only does it not comply with the promises made, but aggravates the situation, by setting a most dangerous


198 The Farmers Betrayed

trap for the farmer borrowing bankers’ credit, and obliging him to pay in “gold coin of the present standard, weight and fineness.”  Why not permit him to pay in the same kind of currency he borrows ?

Well, that is the record of the party.  There are some good loyal men in the party, who have made a good fight, but the party lash has brought most of them to time.

There has been no satisfactory reason given by Democrats for this second gross betrayal of the farmers.  The first was in singling out agriculture as the only industry to be placed on the free list in the tariff revision ;  something the Republicans tried to do and failed, and now in the Federal Reserve law gave the bankers everything they asked for, and sacrificed the farmer.

But there has been an eloquent tribute paid to President Wilson and Secretary Houston by a no less distinguished person than ex-Ambassador Myron T. Herrick in his Kansas City address, as follows :  “I am a Republican, but I would be unfair if I did not express my profound respect for the intelligent and patriotic firmness by which President Wilson and Secretary Houston have held in check the agricultural enthusiasts on their side in Congress.  They had political reasons for quick action.  The President, like Mr. Taft, had officially promised to do something for the farmer, but since none of the many plans devised were satisfactory, he used his influence to postpone the matter so as to afford the country time for reflection.”

The foregoing compliment (?) is worthy of more than a passing notice.  Myron T. Herrick has been a prominent Republican for a good many years.  He has been Governor of the great state of Ohio, Ambassador to France, and a candidate for President.  A prominent banker, representing the new sovereign, and speaking with knowledge and authority, to a state bankers association, and wishing to impress them with his non-partisanship, he expresses “my profound respect” for our chief executive for violating a solemn


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party promise made before election, which secured him and his party many votes.  In addition, a personal official promise, made by himself after election.  What a low moral standard, or perhaps I should say highly immoral standard, for American politics !  That address was put in leaflet form, and scattered broadcast over the nation.

Don’t you think that it is about time to change the standard ?

It was “intelligent and patriotic firmness” to coerce the “agricultural enthusiasts on their side” who thought a political promise meant something.  Apparently, there was no coercion needed on the Republican side.  But then it was only an official promise to do SOMETHING for the farmer.  Everybody knows that it is a regular campaign joke to “buncoe the hayseeds,” which the farmer always forgives, or forgets.  Thoughtless citizen.  But the most significant sentence is right there in the middle.


They Had Political Reasons for Quick Action.


“They had political reasons for quick action,” and doubtless Myron winked the other eye, and the banker audience laughed.

What has President Wilson to say of the compliment (?) and what do the “independent” farmers think of the code of honor, or dishonor ?

What were the political reasons ?  And who held the big stick ?

The men who voted for President Wilson, of whom I am one, are entitled to know.

Surely there is a lesson in that episode that every farmer, laborer and independent business man and woman, and professionals should take to heart.

It did not take a long, hard-fought campaign to unite the two old parties in Congress, to ignore their party platforms, and official promises to the farmers of the nation.  Ex-President Taft and Myron T. Herrick herded them on one side, and President Wilson and Secretary Houston on the other, enthusiastically,


200 The Farmers Betrayed

and patriotically non-partisan.  Great is the political persuasive power of the House of Morgan.

Officially Promised Something For the Farmer.


“The President, like Mr. Taft, had promised to do something for the farmer.”

It would be well worth while to read over again just what was promised the farmer.  To the average, intelligent, thinking farmer it meant much more than a small reduction in the rate of interest for the few.  It meant equal footing for the industry as a whole.  It was the beginning of an era of justice too long delayed.  And it is tossed aside as :  Oh ! any old thing labelled agriculture.

Throw good “old dog Tray” a bone, it will interest him for a time.  It always has, and always will, so long as he recognizes a Master.

“The American farmer is sturdy, independent and self-reliant.  There seems no emergency which requires or justifies government assistance, through government cash, or credit.”

The way Europe was searched for information by the leaders of both parties, and the reports they made to their constituents, President Taft’s letter to the Governors, which was also widely distributed, and President Wilson’s interview of August 13th, 1913, all indicated a great emergency, and Secretary Houston gives a little cheap, very cheap, taffy.

If there is nothing “which requires or justifies government assistance, through government cash, or government credit,” then why the Department of Agriculture ?  The farmers would be millions and billions of dollars ahead if they could trade off the Department of Agriculture for a Federal Investment bank, such as I have suggested, that would do for agriculture just what the Federal Reserve bank was supposed to do for commerce.

I say “supposed” advisedly, because it was designed to do wholly for the House of Morgan.


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What nonsense to claim that agriculture is the only business, or industry, in the nation that would be demoralized by being placed upon an equal footing with any or all others.

If state aid is good for one, it should be good for all.

If bad for any, it should be removed from all.  Level up, or level down, that all may have equal opportunity.

The farmer who votes for President Wilson’s reelection after this sacrifice of agriculture by tariff revision and betrayal on Rural Credits will by his vote endorse both.  The same will be true of a vote for the Republican ticket, whether headed by a Hughes or a Roosevelt.  Better vote for what you want next time.