and legislators has been diverted from the real and comprehensive purpose of the proposed legislation and from the true scope of the proposed bills. Because of this fact the people have not yet fully appreciated the problems which should be necessarily considered and settled and the public requirements which should be provided for in a bill actually reforming the banking system of the United States, and not legislating simply on a reform of our currency.

The Aldrich bill, introduced by the Republicans, and the Federal reserve act, introduced by the Democrats, in the present Congress, were and are both bills covering far more than a reform in our currency. Both of them are bills providing for a reform in our entire banking system, and not simply for a change in the kind, character, security for, and volume of our currency.

It is with the pending Federal reserve act as a measure for the reform of our entire national banking system, and not as a mere reform of our currency system, that I shall deal; and it is to the necessity for the consideration of the question of rural banking and agricultural requirements in any general plan for a national banking system that I shall direct your attention.

Now, if the Federal reserve act is an act to reform our banking system and to enable it to meet the needs of the people of this country, do you not agree with me that it should be so drawn and its provisions should be so broad that the banking facilities thereby afforded shall be adequate to meet the needs of substantially all of our population? If the proposed banking reform bill fails to provide adequately for the needs of a class of our people constituting in numbers about one-third of the whole, owning assets admittedly worth over forty billions of dollars, and contributing probably as much as all other classes combined to our annual wealth and income as a Nation, would you not agree that a most important aspect of this problem had been overlooked? Would you not agree that the banking reform bill must be changed and amplified so as to meet the farmers' requirements, or else that the problem will still be unsolved and that permanent improvement and relief can not be looked for under its provisions?

Suppose the pending bill made no provision, or absolutely inadequate provision, for banking facilities for the merchants of the country. Do you suppose, for an instant, that they would quietly consent to its passage until these provisions were supplied?

Suppose the banking requirements of the manufacturers were disregarded or only partly provided for. Would not the manufacturers raise a cry, and would they not appeal to the farmers and to all other citizens to oppose the passage of any bill that did not make adequate provision for the banking facilities which they must necessarily have for the successful operation of their business?

Now, I am a great believer in the justice of the homely saying that "what is sauce for the goose is sauce for the gander." I have my doubts about the physician who is unwilling to "take a dose of his own medicine"; and I think that in this particular case it is incumbent on all classes of our citizenship to observe the golden rule. If the farmers' banking needs are not provided for in the pending Federal reserve act, let merchants, manufacturers, and all other classes join with the farmers in protesting agaainst the passage of an act so obviously inadequate to meet the needs of our country. Let all of them insist that the provisions of the act and its scope be enlarged

so as to provide for the banking needs of the farmers, just as the farmers would be asked to oppose, and would oppose, the passage of a bill for banking reform which did not adequately provide for the banking needs of merchant and manufacturer.

That the proposed bill is a bill to reform our banking system as well as our currency will be shown later on in my address; and I will likewise attempt to show that, as a bill for banking reform, it fails to provide for the banking requirements of our rural population. But, as a necessary preliminary, we must first definitely understand and decide just what are these requirements of our farmers and just how they can be supplied.

This inevitably leads us to the consideration of the following three questions:

(1) What are the financial needs of the farmer?

How can these needs be supplied, and what additional machinery should be provided by legislation in order to supply them? (3) How are these needs provided for in the pending Federal reserve act?

In an address which I delivered before the North Carolina Bank. ers' Association on July 10, I have set out at some length, and in great detail, the financial requirements of the farmer. I have illustrated the distinction between his varied needs by a statement of the corresponding needs of the merchant, believing that a clear conception and understanding on this point will greatly aid in solving his difficulties.

The needs of our agricultural population, in a financial sense, can be embraced under three great heads:

First. The capital requirements of the farmer.

Second. His annually recurring financial needs, to enable him to make, harvest, store, and market his crop; and

Third. The need of business methods in handling his affairs. I have named these in the order of their importance, and I particularly wish to impress these three heads upon your attention.

First. By the capital requirements of the farmer I mean his need of substantial sums of money for long periods of time, or for permanent investment, to be used in part payment of his farm, in building necessary residences, barns, stables, dairies, and outhouses, in acquiring farm machinery and farm stock, and in otherwise equipping his plant (namely, the farm) with the tools and machinery necessary to its successful operation.

Second. By the annually recurring financial needs of the farmer I mean the cash or credit to enable him to meet the annually recurring expenses of preparing the ground, planting the seeds, working the crop, harvesting and storing the product, and finally marketing the same.

Third. By the need of business methods in handling his affairs I mean the keeping of proper books and accounts, so as to show the accurate results of his work; the ascertainment of the profit or loss on his various crops and operations; the separate maintenance of his capital account, so as to force him to keep up his land and to hold his capital investment unimpaired; the proper financing of his annual requirements, so that every borrowed dollar shall do a dollar's work, and so that his interest charges shall be kept down; and, generally, the handling of his affairs, so that he can always ascertain

the true condition of his business, and can always satisfy the banker that the business is profitable and worthy of credit, or that it is running at a loss and must be reformed or abandoned.

In the address above referred to I have illustrated the distinction between these three requirements of the farmer, by citing the case of the merchant, and by calling attention to the three similar requirements which confront him when he proposes to go into business.

The merchant proposing to go into the clothing business must first be provided with the capital to conduct that business. This capital he personally provides or obtains by taking in a partner, or by incorporating his company and selling stock in the corporation. The obtaining of this capital is a necessary prerequisite to his starting into business.

Likewise, the farmer who proposes to go into the farming business must first provide the necessary capital called for by that business, and needed for its successful and economical operation.

Having secured the capital for permanent investment in his business, the merchant is enabled to secure banking accommodation to meet the ordinary demands of that business without any particular difficulty. Having a capital investment of, say, $10,000, if he needs the money to discount his bills, he is easily able to secure from his bank loans running from 60 to 90 days, to provide these funds for such purposes, and he repays these loans with the proceeds of sale of the stock purchased with them. He pays for money for temporary needs only so long as the need exists.

It would be folly for the merchant who proposed to invest $10,000 in a business to provide not only the $10,000 so to be invested but an additional $10,000 to be held on check account, not drawing interest, for the purpose of being used once or twice during the year to meet such temporary requirements. It is far better for him to invest his additional $10,000 in some other business, or in some first-class security, or to deposit it at interest. He can easily secure banking accommodation, which will enable him to borrow for a short time the money to meet his temporary requirements. He can repay that money when the need for the same has passed, and can use his additional capital, properly invested, as security for such loans. Thereby the merchant insures that each dollar of his capital, whether it be invested in the business referred to or whether it be invested in outside securities or deposited at interest, is doing a dollar's work. By this means his small business of $10,000 is not charged with making an adequate return on a capital of $20,000. The money which is temporarily needed is provided for the time for which it is needed through his banking arrangements, and the minute that the need for the money ceases the charge for the same is ended.

Likewise, the farmer must have adequate banking facilities to enable him to meet his annually recurring or temporary needs. Like the merchant, the farmer can not charge his capital investment with the interest on an amount of money adequate to meet his temporary requirements during the year. He can not place an interest charge against the business which will run during the whole year when the money can be used in the business only for a part of the year. Like the merchant, the farmer must see that every dollar does a dol

lar's work; that every dollar is dynamic, and that none of his money is static.

Moreover, the merchant who is furnished with banking accommodations to meet his temporary needs is expected and required by his banker to keep proper books of account; to take inventories at stated intervals, and generally to so conduct his business that its condition can be shown at any given time. No banker would continue to lend money to any commercial business unless statements showing its condition were furnished, and no banker would consent to a continuance of banking credit unless the merchant provided him with the means of ascertaining whether the business was being run at a profit or a loss; whether the capital was being impaired; whether bad debts were being accumulated; and whether the merchant was deserving of further banking credit in the conduct of his operations.

Likewise, the farmer, if his capital requirements are furnished and if banking accommodations for his temporary needs are supplied, will be forced by the very banks who furnish these accommodations to keep the accounts of his business in such shape that the bank may be able to ascertain whether the business is being run at a profit or at a loss and whether it is worthy of continued credit and continued accommodation.

Having clearly distinguished these three great needs of the farmer, let us now consider the question of how the first, namely, his capital requirements, can be supplied. Until a solution of this problem can be arrived at it is useless to consider the other two needs, for we have seen that capital must be provided before any business can be successfully carried on.

The farmer has assets but no cash. His assets are represented by his land. When money is needed to put permanent improvements on this land, to properly equip it with stock, with farm machinery, with dairies, barns, and outhouses, he is absolutely without means of providing the necessary capital for these purposes unless it can be provided on the security of the one asset which he holds, namely, the land itself.

Under our national banking act the national banks are prohibited from lending any money on the security of real estate. The State banks have necessarily followed the lead of the national banks, and, as a rule, loans on farm lands can not be obtained from any of the banking institutions. The result has been that the farmer, in order to produce his capital requirements, has been compelled to borrow locally on his land at an excessive rate of interest for a short period of time. In consequence the land has been charged with an interest account greater than it could bear; the time within which the principal matured has been so short that there was absolutely no prospect of repaying the principal out of the profits derived from the operation of the farm; and the result has usually been that the farmer who borrowed money on his land for his capital requirements from an individual for a short time has ultimately lost his entire equity in the farm, because the principal of the indebtedness so created could only be repaid by a sale of the property itself.

It being admitted that the first need of the farmer is the provision of adequate capital, and it being admitted that the only asset which he possesses and which is available for raising this capital is his land, it necessarily follows that some method must be devised by which this

land can be used as a security for the borrowing of adequate sums of money to meet these requirements. This money, in order to meet his needs, must be provided at low rates of interest, for long periods of time, and under conditions which will allow the repayment of the loan in small annual amounts, derived and set aside from the annual profits of operation.

The farmer must be able to sell a long-term bond on his land bearing a reasonable rate of interest and containing a provision for the creation and maintenance of a sinking fund which will be adequate to retire it at maturity. Like the railroad, the farmer must be able to capitalize his future earnings and prospects; and, on the security of his land, to borrow the money needed for the permanent improvement of that land. Like the railroad, he must borrow on such terms and conditions and for such length of time that a portion of the increased earnings, resulting from the improvements so made, may be set aside each year, so as to create a fund which will pay back this money when the debt falls due.

I am convinced that the first need of the farmer is to provide money for his capital requirements. I am convinced that the only method of providing such money is by the use of his farm land as security. I am further convinced that in order to secure this money in such a way as to make it of value it must be obtained on longterm obligations, bearing a low rate of interest, containing an amortization or sinking fund provision, and so guaranteed and protected that it will be readily accepted as an investment security in all the money markets of the world. I am convinced that the farmers' present dead asset of real estate must be made "liquid "; and I see no other method of making it liquid.

If the farmer's capital requirements are met, and if his one asset of real estate is made liquid, then the furnishing of banking facilities to meet his temporary needs becomes a question comparatively easy of solution. And as soon as these banking facilities are accorded him the banks themselves will, for their own protection, require that he conduct his business in a proper manner and that proper accounts of his operations be kept and rendered to them from time to time.

Realizing that the problem immediately confronting us is the problem of creating long-term farm bonds bearing a low rate of interest, containing an amortization or sinking-fund provision, and so indorsed or guaranteed as to insure its becoming a first-class investment security, I have outlined and recommended, as a plan for accomplishing this purpose, as well as for providing the banking facilities to accommodate the farmers' annual requirements, the formation, under State charters and under State supervision, of local rural banks.

These local rural banks will serve as a means of collecting together the neighborhood funds for neighborhood purposes; they will be locally owned and locally managed; they will perform the necessary banking functions for the immediate neighborhood, and will be confined in their loans to a limited district; they will represent the combined activity and resources of the entire neighborhood, and they will possess one unusual and extraordinary power: These local banks, in addition to the ordinary banking functions which they will fulfill, will be allowed to use their credit, in the effort to aid the