abroad-emphasized the benefits that would accrue from a feasible adaptation of organized co-operative finance to long-term farm mortgage loans.

Federal Reserve Act. Meanwhile agitation became keen for the reform of the currency and of banking, and for the better mobilizing of commercial credits. The Aldrich plan to this end was repudiated by an indignant people, and the Federal Reserve Act became a national statute December 23, 1913. It includes many of the principles laid down in the author's work Co-operative Finance, published in October, 1912. Whether the Federal Reserve Act will suitably facilitate short-term or seasonal credits for agricultural purposes remains to be demonstrated.

Agitation for Farm Finance. The debate over currency reform was seized upon to accentuate the need of reform in farm mortgage banking, as presented in Co-operative Finance. Emphasis was also laid upon the need of more adequate co-operation among farmers in marketing their products, as well as in purchasing their supplies and mobilizing their real and personal credits.

American Commission. The methods by which all this had been accomplished in France, Germany and other foreign countries were brought to the attention of statesmen and politicians in addresses, books and pamphlets from numerous interested parties. By its resolution of March 4, 1913, Congress instructed the President to appoint an American Commission to investigate the rural credit system of other countries.

Its voluminous report in 1914 was worth the labor and money expended by the commission, as showing what not to do, and as indicating that the true remedy lay in better adapting American methods and American experience to American conditions.

Federal Farm Loan Act. Meanwhile the many rural credit bills which had been introduced in Congress, were referred to the Senate and House committees on banking. They reported separate bills, both of which were passed by the respective branches in the closing hours of the 63d Congress, March, 1915. The time being too short to harmonize the differences in the two drafts, the whole subject was then referred to a joint sub-committee for further consideration.

On May 3, 1916, the Senate passed, with only five dissenting votes, the new bill as reported from its banking committee. The House draft was passed in that body a few days later with only ten votes in the negative. The conferees reported in June the bill they had agreed upon, it was ratified promptly by Senate and House, by a practically unanimous vote, and by President Wilson's approving signature on July 17, 1916, became the Federal Farm Loan Act.

Purpose of the Act. It aims to provide a system that shall meet the needs which have been so fully revealed by these long years of discussion. These needs are epitomized earlier in this chapter.

The specific purposes of the Act are well set out in its title:

"A bill to provide capital for agricultural development, to create a standard form of investment based upon farm mortgage, to equalize rates of interest upon farm loans, to furnish a market for United States bonds, to provide for the investment of postal savings deposits, to create government depositaries and financial agents for the United States, and for other purposes."

A

CHAPTER TWO

PRINCIPLES OF THE NEW SYSTEM

LTHOUGH a first mortgage on a good

farm operated by a good farmer is unquestionably the best safe investment, heretofore it has been open to the following objections:

1. It is secured by a lien on a single farm, and thus the value of the mortgage, as well as the income from it, are governed by the conditions which may affect that particular farm and farmer from year to year.

2. Being written for a period of three to five years, or upon demand, such an investment may not be sold readily by the borrower or by the holder who wishes to realize upon it.

3. Unless some middleman is employed for the purpose, the holder of the mortgage may not receive the interest with desired regularity, for while the borrower is perfectly good, he may not always be prompt.

4. Usually the holder of such a mortgage does not care to have the principal reduced by small payments, even at regular intervals.

5. By this old method of investment in single mortgages, there is little incentive to thrift upon the part either of the borrower or the lender.

Objections Overcome. The federal farm loan act proposes to obviate all of the foregoing objections, to mobilize improved farm land as a basis of credit, and so to mobilize the credit instruments themselves that they shall be free not only from the objections cited, but from others which might be mentioned.

The object is to accomplish this by a method which shall encourage the borrower to get out of debt, prove more attractive to the investor, encourage thrift, foster the profitable investment of savings in farm development, and thus create a veritable "endless chain of prosperity." The economic methods required to accomplish these purposes, also will have farreaching social and civic influence by reason of the co-operative principles embodied in the

statute.

Co-operation Required. For farmers to unite in little local societies for the better marketing of their mortgage credits implies more of mutual confidence and less of mutual suspicion. Such union means united effort