T

HE farmers of Europe are more highly organized to secure financial credit than are the farmers of the United States, and they get money at lower rates and for longer terms. The various governments have given cordial recognition to the farmers' organizations and in many ways have extended aid to the movement. As the coöperative credit associations have already spread over the Continent and are now being organized in Ireland, we may safely accept the universal testimony that these organizations sprung from the necessity for a better system of rural credit than the commercial banks offered.

Farm credit differs essentially from commercial credit. The period between the loan and repayment must be longer. The farmer cannot make his turn-over as quickly as can the merchant. In rural credit that properly serves productive agriculture the repayment of a loan should not be demanded until the maturity of the crop in which the borrowed capital is invested.

The essential problem in establishing such a system is to be found in the replacing of the money which is lent for these considerable periods. Of course a banking association must necessarily accept deposits in order to secure funds. This is true of the coöperative loan associations of Europe, and 90 per cent. of the money which they lend to their members is placed in their care by depositors. These deposits are accepted in the same way that similar transactions are conducted by American bankers. They can be withdrawn in the same manner that deposits can be with

drawn from American banks. When they lend this money to farmers they must have a way of replacing it if their depositors wish to withdraw. The European loan associations replace their capital by indorsing the farmers' notes and by rediscounting these notes to meet the demands of their depositors without compelling the repayment of loans made to their members. In this respect, the banking laws of European countries differ from our banking laws. For example, the Bank of France has the legal right to issue bank notes based upon commercial paper which bears three indorsements. In order to meet this legal requirement the farmers organized the small association composed of neighboring farmers. These small units were then grouped around a regional or central bank. The system was now complete because a chain was constructed to join the farm with the government bank. A farmer presents his promissory note to his association for discount. His neighbor acts as his security by indorsing this note. This is the first indorsement. The loan association then adds its indorsement and presents the note to the regional bank. This guarantee of the association is the second indorsement. It now only remains for the regional bank to add its indorsement and forward it to the Bank of France, which issues bank notes for it. The local loan association discounts the farmer's note, the regional bank rediscounts it, and the Bank of France rediscounts it again in the form of an issue of bank notes. The farmer gets his money at low rates for long periods and yet the

ultimate lender, the Bank of France, takes little risk, being protected by an original borrower and two indorsements. In this way, also, the depositor in an association is enabled to receive his money from the association before the loan is repaid by the farmer. In substance, this element is embodied in every system of rural credit in Europe. It is evident that it is the privilege of rediscount rather than the coöperative organization which is the foundation stone of this credit system. Coöperation is the method by which the special provisions of law are being utilized for farm purposes.

As our banking laws have not permitted the issue of currency against farmers' notes, no matter how many times indorsed, there will have to be modifications if we are to organize effective systems of rural credits after European models. But if these changes are made our existing banks can utilize these rediscount privileges as effectively as can coöperative associations. There are as many chartered banks in the United States per thousand population as there are in Germany, with its coöperative associations. At present, neither chartered banks nor coöperative associations in the United States can lend deposited funds and meet the demands for the return of these funds from any other source than repayment by the borrower. It is useless to argue whether banks or coöperative organizations are best adapted to advance credit to farmers until it is made possible for such business to be transacted successfully. The first requisite, and it is one on which all persons can unite, is a change in our banking system which will permit rediscounting of solvent loans. This power of rediscount should be placed under governmental control. I heartily indorse that portion of the pending currency bill which places the Secretary of Agriculture on the Federal Reserve Board. It is a great forward step in currency reform from the standpoint of agricultural credit and agricultural equality in the money markets of the United States.

Conceding that the proposed revision of our currency laws will give every proper facility for the organization of agricultural

A modern system of land credit is of greater importance Nation than an improved sy personal credits. Our farmers ar: an era of extraordinary expendr they keep abreast of the time. depleted fertility of our farms E restored; better roads are to b structed; the quality of our live st to be improved, and their numbers increased; better methods of the to be adopted; higher standards cultural education are to be ac and, finally, the young man is to couraged to acquire ownership of the he cultivates so as to avert the menace of landlordism. These e tures in the aggregate will amour stupendous sum and their repa should be distributed over a long of time. The rate of interest sho reduced to the level of other fina undertakings of like magnitude Europe, money is available for such poses at nearly as low rates as the got ments can borrow for national pur This is as it should be. In the sense, the rebuilding of agriculture permanent lines is a national expen as vital to the future supremacy of Nation as is the maintenance of our and navy.

European experience has conclus demonstrated that land mortgage can be sold in large volume at lowof interest. The proceeds of these bi can be lent to farmers on long payments at a low rate of interest, small payment on the principal ultimately will wipe out the debt France, the annual charge for such m including all principal, interest, and mission charges, is less than 5 per

perhaps this rate will be a fair average for the Continent. The Government lends money to farmers for special purposes at a lower rate, but I am speaking of the ordinary commercial rate for the repayment of a mortgage loan. I know that it is difficult for an American farmer to understand that a loan will be repaid in full by annual payments which are lower than our present interest charges alone; but it is a fact that can easily be demonstrated.

The usual method of negotiating these long-time mortgage credits is by fixing a rate of repayment which cannot be changed during the life of the loan. This rate of payment includes an allowance for current interest due on the loan, an amount to be kept by the bank for administration, and a certain sum to be credited on the principal. In the language of the bank, these are called "interest, administration, and amortization."

The standard length of time in Europe for a long-time loan is 54 years. For such a loan at the present time the rate is 4.85 per cent., divided as follows: interest, 4 per cent., administration, .35 per cent., and amortization (payment on principal) .50 per cent. This rate will pay both principal and interest and repay all charges due to the bank in 54 years. As this will seem almost incredible to some students, I will give a concrete illustration of how it works. It does not depend upon compound interest, but upon the fact that though the rate of yearly payment remains the same, the charge for interest and administration is constantly decreasing because they are computed on the principal sum which is constantly being repaid. Therefore, the proportion which is applied toward the repayment of the principal is always increasing.

For illustration: If the debt were $1,000, the debtor will pay $24.25 every six months. Of the first payment, $20 will go for interest, $1.75 belongs to the bank, and $2.50 is applied to the repayment of the principal. When the debt is half discharged, however, this distribution will be greatly changed. The borrower will pay $24.25 as usual; of this amount, only $10 will go for interest, 88 cents will be

retained by the bank, while $13.37 will be applied to the discharge of the principal. The final payment will be almost wholly devoted to the payment of principal as the first one went largely to the payment of interest. In this way, one half of 1 per cent. will repay the principal in 54 years, provided a constant payment is maintained on the principal for interest during the entire period. The manifest advantages are so great that we should press this matter most vigorously.

This system of making loans for agricultural purposes was first undertaken by coöperative mortgage associations in Germany. The joint stock banks, representing private capital, accepted this plan of transacting business as soon as it was demonstrated that farmers by coöperation could secure capital in the world's markets at fair terms. Both systems have been in successful operation for many years. The joint-stock banks have found land mortgage business profitable and safe from a banking standpoint. Here, again, is a question of policy presented to American bankers. Land mortgage bonds secured by mortgages payable on the amortization principle will be introduced into the United States. The future development of our Nation imperatively demands it. There are two models, each of which has been proved by years of successful experience. One is a bond issued against a first mortgage on real estate and guaranteed by an association of farmers who are the borrowers - the coöperative plan; the other is a bond issued on like security and guaranteed by a joint stock bank which is an association of lenders. Unless our existing banks adopt the latter method of financing the farmers of America, coöperative organizations among the borrowers will inevitably grow up because the principle of self-help will compel it.

I have discussed only the main principles involved. The question of personal credit falls within the domain of Federal legislation while that of land mortgage goes more directly to the state legislatures. And there will have to be many changes in many of our state laws before that business will be on a satisfactory basis.

O

F ALL Mr. Wilson's Cabinet ministers, Mr. McAdoo has the most immediate interest in the deliberations of the present Congress. In a sense he is its residuary legatee. The lawmakers are engaged in solving the two great problems which have distracted the Nation since the Civil War: the tariff and the currency. In doing this they are piling up work exclusively for the Treasury Department. Mr. McAdoo will have to enforce the new tariff law. He will have another task entirely novel to an American Secretary of the Treasury, at least in times of peace: the collection of an income tax. He will probably have to install a new national banking system. This boyishlooking Secretary may therefore find that the management of a great Nation's finances is as exciting a task as the construction of the Hudson River tunnels.

And Mr. McAdoo certainly looks rather young and inexperienced for gigantic responsibilities of this kind. According to the family record he is fifty years old; judging from external evidence he is about thirty-five. He is tall and slender, measuring easily six feet two; advancing years have not written their traces in any enlargement of girth; his figure is as lithe, as well held together, as erect and graceful as a girl's. The silken, dark brown hair has not even a touch of gray; the indentations in his face are not the wrinkles of years, but the natural corrugations he has carried from boyhood. One may easily believe, therefore, what is actually a fact, that Mr. McAdoo finds his new Washington duties altogether congenial. He is now just beginning to live, for in

sitting about a presidential table the Secretary is realizing his earliest aspirations. Corporations, railroads, tunnels, and metropolitan transit systems have been merely the interruptions of Mr. McAdoo's career; public life has always been its ultimate goal. As a child he had imagined himself as a Congressman or a Senator, a director of national policies, perhaps even a President-maker; the family traditions all naturally impelled him in this direction. In the North a college boy who entertains such ambitions usually says that he hopes "to enter politics." In the South a young man similarly inclined unblushingly announces that he "intends to become a statesman." There is a welldefined profession for those who combine the trade and a certain amount of legal practice: it is known as "law and statesmanship." That was the career which the youthful McAdoo had marked out for himself. For a number of years, in Chattanooga, Tenn., and in New York City, he actually did practise law; "statesmanship," however, circumstances compelled him to postpone. Now, at the age of fifty, he has really struck his stride.

Like four other members of Mr. Wilson's Cabinet, Mr. McAdoo is a Southerner. This renaissance of Southern activities has been generously hailed as a final bridging of the chasm of sectionalism. Perhaps more than any other member of the Cabinet does Mr. McAdoo emphasize this idea. Certainly no one has a keener reason for bitterness; probably no American family now in public life suffered more from the Civil War than Mr. McAdoo's. Marietta, Ga., where he was born in 1863. was directly in the line of Sherman's march.

to the sea. Sherman came through there characteristically "careless about fire," as Henry Grady said. After the Northern troops had left, the McAdoo homestead was a mass of smoking ruins, and the whole plantation was so devastated that the family never returned to it. Naturally, the present Secretary is too young to remember all this; his mother has told many times the story, however, how she took him, a baby three weeks old, in her arms and fled before the advancing Northern army. The family took root anew in Tennessee; Mr. McAdoo's father, formerly a lawyer, had to earn a precarious living teaching school; the young man himself, early in his 'teens, had to drop his education and go to work. The name of Sherman naturally aroused little enthusiasm in Mr. McAdoo's boyish mind, but it was not until he had assumed his present duties at Washington that he realized how completely all these early prepossessions had vanished. The first thing his eyes lighted on, when he glanced out of his office windows, was the splendid equestrian statue of General William T. Sherman in front of the Treas ury Building-erected by a grateful Nation for his success in destroying, among other numerous things, the McAdoo family fortunes. A few minutes afterward Mr. McAdoo wheeled thoughtlessly around in his chair; immediately back of his desk, looking benevolently down upon him, appeared the "oil painting" features of John Sherman, one of Mr. McAdoo's most illustrious predecessors in his present office. Throughout his entire four years, therefore, Mr. McAdoo will live in the closest association with the Sherman family. Apparent ly he finds this association no particular strain. In his New York office, two pictures long held the places of honor; one was that of Jefferson Davis, the other that of Abraham Lincoln. "Mr. Lincoln," as the Secretary calls him, has long been one of his favorite authors and a "statesman" who fulfilled his own boyhood ideal.

"But what would your father have said," remarked Mr. John Skelton Williams, another Southerner, who is Mr. McAdoo's first assistant - a man so much a Southerner that he says "kyar" for "car"-"if some one had told him

that when you grew up you would be serving the 'Northern nation' as Secretary of the Treasury with this enormous statue of General Sherman constantly before your eyes!"

This

That forgetting and readjustment to new and worthy loyalties come easily to Mr. McAdoo is not surprising to those who know him; for his predominant trait is lovableness. As head of the tunnel company in New York, Mr. McAdoo had several thousand men under his control; his ideas of discipline were especially vigorous; yet he never had the slightest trouble with his employees. It was not until Mr. McAdoo appeared that the captious New York traveling public ever entertained any sentiment but hatred for a transit "magnate"; yet everybody had a good word for Mr. McAdoo. Even when he increased his rate of fare from five to seven cents, his patrons seemed to enjoy paying the increased amount. general attitude of affection is not necessarily based upon any surface characteristics. Mr. McAdoo has certain traits that, in other people, might occasionally offend. He is quick-tempered; he will fly into anger at a clerk who makes a mistake in a public document, and reprimand him in words more forcible than polite. His quickness and incisiveness of speech at times amount almost to curtness; he finds no pleasure, one may be sure, in associating with fools. His whole public life has shown that he is aggressive and even pugnacious. He entered into the full enjoyment of battle in his struggle against the transit monopolists of New York; he has expressed himself with a painful and undiplomatic directness in his differences with the great men of Wall Street. He never makes the slightest attempt to cultivate popularity., He is the only man in the Cabinet against whom the Washington correspondents think that they have a well-founded grievance. They claim that he does not show them. proper consideration; that he gives them no news; that he apparently cares nothing for the right kind of publicity. To the average astute politician one of Mr. McAdoo's earliest orders in the Treasury Department would have seemed extremely