-higher education, research and extension in agricultural science and practice (see Chapter X).

FINANCING FARM ENTERPRISES

California farming began with the handicap of very high interest rates on loans for undertakings and improvements in farming. There were the basic rates for far western loans, higher naturally as the State was the farther west and to these geographically normal rates was added the increment usually imposed on loans for mining. In this way 1 per cent a month seemed a very moderate figure and if it was doubled and compounded nobody was surprised. There were no usury laws; any interest agreed to was legal, and it is so to this day. As decades advanced, rates became lower but indisposition to country loans was more marked than at first, as the city banks grew larger and more metropolitanized and country bankers alone would take country chances and naturally exact full pay for their favors. No great change took place in the cost of farm financing until land development was taken up by competent persons who came to California with personal credit gained in their earlier commercial and professional lives and were able to deal with banks in

something like their accustomed ways. Also some advantage was gained by coöperative warehousing of grain, as noted in Chapter V. No marked change was realized in bringing farm producers nearer to a parity with dealers in commercial commodities in

interest rate making until the coöperative productselling agencies were organized by producers and officered by those who knew how to talk and act in the bankers' chosen way. During the last twenty years and increasing vastly in the last decade, organized growers of special products have been able to secure the capital needed for equipments and operations on terms and rates which have not encouraged them to make complaint. Their credit. has been good and their burdens considered fair.

However, this progress did not reach the individual farmers very widely and in the largely unorganized lines of general farming, dairying and stock-growing, money was rarely obtained except on terms which were too short and at rates altogether too long. Agitation for loans to all individual farmers of responsibility and good repute, on terms and at rates which would enable them to use money successfully, began very widely throughout the State early in this century and discussion and effort for organization and financing of a system of rural credits were particularly pointed in California. This need was impressed on the "Commission on Country Life" (appointed by President Roosevelt in 1908) and which submitted its report in 1909, in the following words:

1

"The American farmer has needed money less perhaps than land workers in some other countries,

1 L. H. Bailey, New York; Henry Wallace, Iowa; K. L. Butterfield, Massachusetts; Walter H. Page, New York; Gifford Pinchot, Pennsylvania; C. S. Barrett, Georgia; W. A. Beard, California.

but he could be greatly benefited by a different system of credit, particularly where the lien system is still in operation. It would be the purpose of such systems, aside from providing loans on the best terms and with the utmost freedom consistent with safety to keep as much as possible of the money in circulation in the open country where the values originate. The present banking systems tend to take the money out of the country and to loan it in town or to town-centered interests. . . . All unnecessary drain from the open country should be checked in order that the country may be allowed and encouraged to develop itself."

Following this declaration discussion of ways to provide rural credit continued in California as also in other states. The legislature of 1913 provided for two delegates to proceed with the American Rural Credit Commission authorized by the government (as suggested by the late David Lubin of Sacramento) to study European methods of providing loans to farmers. After the return and report of this commission, the legislature of 1915 created commission of "rural credit and land settlement," as considered in connection with the latter subject in Chapter IV.

In 1916 Congress passed an act organizing twelve district Federal Farm Loan Banks on the basis of National Farm Loan Associations, the latter being constituted of those who desired to make loans on the security of lands and farm buildings. The Eleventh District consists of California, Nevada,

1 Harris Weinstock and E. J. Wickson.

Utah and Arizona and the bank of the district is the Federal Land Bank of Berkeley, already mentioned as adjacent to San Francisco, where the Federal Reserve Bank of the district is located. The law also provides for organization of "joint stock land banks" of which one is in operation in California. The Federal Land Bank of Berkeley was organized in 1917 and continued to make loans as provided until arrested in its work in 1920 by unfavorable conditions following a suit in the supreme court of the United States against the constitutionality of the law under which it was proceeding. This suit was decided in favor of the law on February 28, 1921, and activity was resumed. The Federal Land Bank of Berkeley has, in 1921, 176 tributary National Farm Loan Associations of which 102 are in California. This bank has loaned to farmers through these associations $17,777,000 of which $10,894,300 is loaned in California, the 3246 borrowers thereof being located in practically all the agricultural counties of the State. Organized under the same federal law is the Joint Stock Land Bank of San Francisco which on March 31, 1921, had made loans to the amount of $1,848,700 to 128 borrowers.

The growing appreciation of the character of agricultural security for loans, the recognition of the relation of fair financing of farming to State development and the prosperity of all industrial activities and, finally, the operation of the national law in organizing rural credit and in securing capital for agricultural uses on terms suited to farmers' needs.

and at rates of interest more comparable with those at which capital for manufacturing and trade is supplied, have all profoundly influenced the attitude and practice of California money-lenders toward their farming clients. Farmers have always had the social good will and industrial esteem of all other Californians, as has been amply suggested in preceding chapters. To such consideration there has been added recently notably fairer business attitude and transaction.