I

IN the closing days of the Sixtyseventh Congress there emerged a composite rural credits bill which both houses passed and the President promptly signed. It gathered up the essentials in several bills and welded them into a single measure.

Farmers in financial straits who expected this act to give them direct relief will be disappointed. The farmer's big problem to-day is to secure a living price for what he grows. This act was not intended to raise the prices of farm products, and it will not do so. Neither was it intended to revolutionize the Nation's financial systems. It will, however, broaden the investing market for farm securities, and it may tend to keep down to reasonable rates interest charges. But the farmer will only feel this indirectly, if, indeed, he becomes conscious of the changes planned at all.

The new act came out of an indescribable confusion in Congress. It would seem that everybody was trying to solve the credit problem of the farmer. Two joint Congressional committees, two committees of the Senate and two of the House had wrestled with it. The Senate had already passed two bills and the House one. Fully a score of individual bills had been introduced, and there was little unison of thought. Economists differed, bankers differed, and farm leaders differed. Only two types of thinkers had definite plans to offer some Eastern bankers and the dyed-in-the-wool believers in COoperative credit. The outcome reflected in major part the thought of the bank

ers.

After the economic depression of 1920-1, during which it is estimated by some authorities that farmers lost a total of $32,000,000,000 in crop and property values, the farmers started out to secure legislation which would prevent a recurrence of a similar calamity. They demanded and secured the revival of the War Finance Corporation; they de manded and secured a position for a farmer on the Federal Reserve Board. Thus the new act marks but a stage in a long fight to put the farm borrower on a parity with the manufacturer and the merchant. It prolongs the life of the War Finance Corporation. It provides for the formation of a number of private banking institutions to lend money to live-stock producers. It loosens the flow of credits in the National banking system. And, finally, it establishes a chain of twelve new Gov. ernmental banks.

To know what these changes will do, it is necessary to have in mind farmers' credit needs and how the existing credit

JUDGE CHARLES E. LOBDELL, CHAIRMAN FEDERAL FARM LOAN BOARD, WHO HEADS

THE NEW RURAL CREDIT SYSTEM

agencies are serving agricultural bor

rowers.

WHY FARMERS BORROW MONEY The total volume of farmer borrowings is estimated at $12,000,000,000. About $7,000,000,000 is in land mortgages, $3,750,000,000 in bank loans to farmers on their personal or commodity security, and $1,250,000,000 in private loans.

The man seeking to buy a farm rarely can pay all cash. Sometimes his savings amount to only a small part of the principal. He needs long-time credit as an aid to whole purchase, and additional credit to stock and equip the land.

The farmer who owns his land may desire to make improvements of a permanent nature or to purchase live stock, farm machinery, and other money-turning materials.

The farmer also needs credit to finance the production of field and orchard crops or to fatten live stock.,

After getting their crops or live stock ready for market, farmers may also find it desirable to market gradually instead of dumping. This generally requires additional credit on the security of the products.

Farmers require a longer-time loan for production and for marketing than do manufacturers or merchants. The ninety-day and six-month paper, SO common to commerce, originated as the result of studies of the turnover of factories, the length of time it took sailing ships to make ocean voyages, and the

seasonal sales of merchants. The aver age farmer requires a production credit of from six to twelve months in field crops and from six months to three years in the production of live stock or orchard crops.

WHERE FARMERS BORROW MONEY

Until the birth of the Federal Farm Loan System seven years ago farmers were accustomed to borrowing money from about 33,000 incorporated agencies and an indeterminate number of individual lenders. Here was the way they did it:

(1) Land credit-from individuals, farm mortgage banks, State banks, and trust and insurance companies; loans secured by mortgages on the property.

(2) Commodity credit-from individuals, State and National banks; loans secured by warehouse receipts or bills of lading, proving the shipment of the products in commerce.

(3) Productive credit-from individuals, State and National banks, livestock loan companies; loans secured by chattel mortgages and liens on crops.

(4) Personal credit-from individuals, State and National banks; loans secured by note indorsed by one or more persons other than the borrower.

A NATIONAL LAND CREDIT SYSTEM

Since the principal features of the new act deal with modifications or extensions of the Federal Farm Loan System, a brief explanation of it is essential. Until seven years ago many abuses prevailed in the lending of money to farmers on the security of their land. They were forced to pay high interest rates, large bonuses for the privilege of securing or renewing of loans, and few loans were made for longer than five years. Popular reaction against such a condition led Congress in 1916 to pass the Federal Farm Loan Act, which established a National land credit system. This system is headed at Washington by the Federal Farm Loan Board. It is dual in character. One division is strictly co-operative. This division has twelve regional land banks. From the regional bank in his district the individual farmer may borrow in this way: He becomes a member of a farm loan association, or, if none exists in his locality, he may form one by getting nine other borrowers to join with him. Each borrower is required to take out stock in his regional land bank to the extent of five per cent of the value of his loan. This stock pays a dividend if the land bank earns a profit. The local associations perform many services and have a right to elect a part of the directors of the Federal land banks. Some

4,500 local farm loan associations have been formed after this manner, reaching into almost every community in the United States.

The other division allows persons who have capital to invest to organize jointstock land banks. These banks are placed under the supervision of the Board and make their loans direct to farmers. It is not required that a borrower shall take out any stock in one of these banks.

Neither the Federal nor the jointstock land banks are allowed to charge the borrower over 6 per cent interest. Both give him the benefit of the amortization plan of repayment. This divides the cumulative interest and the payments on principal into equal periodical installments running for as long as thirty-eight years. Both types of banks are allowed to sell long-time bonds, against the security of land mortgages which they hold. These bonds are exempt from taxation.

Since the first local farm loan association was formed in March, 1917, at Larned, Kansas, 471,852 persons have applied for loans through the local cooperative associations. The Federal land banks have actually lent to 232,543 persons amounts aggregating $684,407,289. The joint-stock land banks in this period received 65,460 applications for loans. They actually lent to 25,113 persons amounts aggregating $228,863,300. Thus 257,656 farmers have been helped with long-time loans amounting to $913,270,589.

In 1922 the twelve Federal land banks put on the market long-time bonds aggregating $208,163,600. To meet the requirements for the present year they will have to offer over $400,000,000 of bonds. These bonds are tax exempt, as are the bonds offered by the joint-stock land banks.

Very few farmers have failed to meet their obligations to the farm loan system. Since the beginning legal proceedings have been started in only 1,490 cases, and in only 336 cases have farmers completely failed and lost their land.

REORGANIZING THE LAND CREDIT SYSTEM

Around this National land credit system the new legislation was built in major part. The act added two additional members to the Federal Farm Loan Board. It provided for the permanent organization of the system by which the stockholding borrowers are to take over a part of the responsibility of managing the Federal land banks. Since its inauguration the Government has kept complete control over the system. The new act provides that each land bank shall have seven directors, three to be appointed by the Farm Loan Board and three to be elected by balloting arrangement from among the farm loan associations. The seventh director is to be balloted for by farm loan associations, and the Federal Board appoints him from among the three candidates receiving the highest number of votes.

Other changes include the increasing of the maximum individual loan by a Federal land bank from $10,000 to $25,000. The cost of operating the board itself is thrown upon the divisions of the Federal Farm Loan System.

NEW CHAIN OF GOVERNMENT BANKS The new law authorizes the creation of twelve Governmental Intermediate Credit Banks, but these banks will not be open to individual borrowers, nor will they receive deposits. They are rediscount banks; their job is to purchase notes and other bankable paper offered them by the existing banking institutions. They will also be allowed to make loans to co-operative marketing associations to aid the latter in the processing and storage of commodities. Each of the banks will start with a capital of $5,000,000. Each will be permitted to issue tax-free bonds or debentures in an amount equal to ten times the capital and surplus which accrues. This will give a credit pool of $660,000,000 to the farmers of the country. Each of the Government banks is authorized to purchase or rediscount agricultural paper of from six months' to three years' maturity. The directors of the Federal land banks will be the ex officio directors of the intermediate credit banks.

To tide over emergencies until the new system is established, Congress prolonged the active life of the War Finance Corporation to February 29, 1923. That body has rendered distinguished service in helping to tide over agriculture during the past two years. It was especially helpful to a group of commodity co-operative associations engaged in selling for their members cotton, tobacco, peanuts, and rice.

AGRICULTURAL CREDIT CORPORATIONS Congress also authorized the formation of a new system of agricultural credit corporations whose primary purpose is to make loans on live stock. These organizations are placed under the Comptroller of the Currency. They may be started anywhere by private individuals having an initial capital of $250,000. Banks that are members of the Federal Reserve System may subscribe for stock in them to the extent of six per cent of their capital and surplus. The act also authorizes the formation of a special series of milliondollar rediscount corporations to purchase the paper of the agricultural credit corporations.

WHAT THE NEW ACT WILL DO

The average farmer will scarcely realize that there has been any change in the credits structure. He will get his money in his accustomed way and will be faced with the usual difficulties incident to his personal worthwhileness.

The individual farmer will find that he can make a nine-month loan, where formerly he could only make a sixmonth loan, and after his products are raised he may store them in a licensed

warehouse, take his receipt to any bank, and borrow for three, six, and even nine months. But he will continue to pay the prevailing rate of interest charged in his community.

The tenant farmer, or the poor farmer whose land is already mortgaged to the hilt, will continue to pay high prices for loans. For the thought behind this credit act was not to give direct assistance to the farmer, but to make bankable notes and paper more fluid in character by widening the investment market.

There will be a distinct gain to agriculture from the passage of the act. Local banks need not be so loaded up as formerly, because they may sell their loans either to the Federal Reserve banks or to the new Governmental credit banks. Intelligent, independentminded farmers will learn enough about the new system to "talk up to and talk back at" their banker friends when the latter say they are already loaded down with agricultural loans.

Co-operative marketing associations are the particular gainers under the act. These organizations are now assured a permanent Governmental agency that will advance to them against their secured notes or warehouse receipts enough money to enable them both to process and to market the products of their members. A co-operative association is not limited in its dealings to a single bank. In co-operation with the Federal Farm Loan Board, it may arrange a pool among the various banks to secure loans running into the millions. Under the law, such an association may borrow up to seventy-five per cent of the market value of products stored by it. This type of competition may stimulate the commercial banks to friendlier working relations with sound co-operatives.

NEXT STEPS IN RURAL CREDITS While a greater fluidity in the circulation of sound agricultural securities is given by the new act, the end of rural credit legislation is not yet in sight. The personal credit requirements of the poor farmer and the tenant farmer should have attention. For them there can be created a system of co-operative personal credit societies such as prevail in many parts of Europe.

The future will also call for constructive action to stem the growth of tenancy in the United States. The National Land Credit System might easily be modified. Special authority might be given the Federal land banks to work in co-ordination with State-created land purchase boards. Their joint activities would have to do with purchasing land from landlords at a fair valuation and reselling it to would-be home owners on a longer period of time than is now provided for in the Farm Loan Act. The experience of the Irish Land Commission, the Australian Commonwealth's land settlement experiments, and the work of the California Land Settlement Board show that this type of State aid to land purchase is feasible.

A

BY DAVID MORTON

W

HOEVER has seen the island of Capri and by moonlight has visited the Vedder villa, Torre Quatro Venti, will find it impossible to forget. On that strangely unreal island where even nature seems to partake of the theatrical, where the drop-curtain seems never to fall, where one always awaits a dénouement-there even the moonlight has a curious mystery all its own. On such a night I first saw the villa Torre Quatro Venti.

From the house out through the peristyle, on towards the little court with the music of its fountain's drip, to the studio apart from the house, and on to the great moon-whitened space in front of the villa, one felt that Vedder and Capri combined had cast their spell. The effect was heightened by the situation on the side of the cliff, the sea visible through a cleft to the right and again to the left, and old Vesuvius brooding over all. Verily the four winds could blow about that tower high up where Vedder slept, and not affect the calm beauty of that moonlit scene.

Between this spot and Vedder there was a harmony that was lacking in his Roman home, though that too had its charm. In Rome he seemed to be merely staying, an observer, a worker who was always hoping, always doubting, always asking the unanswerable questions of life; but in Torre Quatro Venti he really lived a part of that strangely beautiful spot.

In Vedder there was a delightful mixture of the Oriental and Occidental that

BY LEILA USHER

showed in his villa and often in his art, and was surely one reason why he could illustrate Omar Khayyam's great poem in a way to make the whole world acknowledge him to be one of the great illustrators of the age.

It was this unusual quality in his work, born of a union of the spirit of the East and West, that drew me to his paintings when, as a young girl, I first saw illustrations of his work in the "Century Magazine"-"Questioning the Sphinx," "Weirdness," "The Lost Mind," some gnarled and wind-blown trees, and others as Vedderesque as these. Years after, in New York, when he was paying a visit to America, a friend asked if I would like to meet him. I replied that I would rather meet the artist Vedder than any other living man. It was arranged that I was to dine with him, so for the first time I came into contact with that brilliant mind. A personality so individual, an appearance so striking and unusual, a power of conversation so remarkable, it has never been my good fortune to see combined in any other person. His talk was like fireworks, a rush, a gleam, a sparkle, and combined with a marvelous power of suggestion which aroused thought in others. He loved to talk in pictures, and those pictures were unforgetable. He seemed to have no desire to be merely accurate to the fact as presented to the physical eye, but with Oriental relish he instantly went after the meaning of the fact.

His insight cut like a knife, and his tongue followed quick upon the heels

ELIHU VEDDER

of his thought, hitting a person or a thing as a shot hits a bull's-eye. Not that he dreamed of a hurt, or felt the personal matter of it; his mind was bent upon solving the problem; and, again like the Oriental, he was intensely positive. This naturally disconcerted precise and accurate persons, consequently such lost the whole inspiration of Vedder's mind.

Emerson has spoken of how grateful it is to find in a man or woman "a new emphasis all his own." This emphasis all his own Vedder surely had, for when a thing came out of the Vedder mint he had left his stamp indelibly upon it. James Russell Lowell recognized this fact when he first saw Vedder's pictures in the sixties, for he gave it as his opinion that here was an artist who had struck a new note in American art.

From the first his paintings were acknowledged to be strong and original, but the range and beauty of his art few people can know or appreciate until there is held a posthumous exhibition of his drawings, paintings, and sculpture. A great loan exhibition would bring together works from private collections all through the East, but even so, there would still be left his mural decorations in the library at Bowdoin College and in the Huntington house on Fifth Avenue, New York City, and those in the Congressional Library, besides many exquisite bits of sculpture which have never been cast in bronze. If such an exhibition were to be really complete