1922 numerous rural credit bills were introduced into both houses of Congress. They ranged all the way from conservative bills, carefully worked out, to radical schemes for empowering the Treasury to make direct loans to the farmers. By and large, the most important of these bills may be classified into three general groups:

(1) Those that provided for the establishment of additional rural credit machinery around the Federal Farm Land Banks.

(2) Those that aimed to continue the War Finance Corporation in a modified form as a permanent rural credit institution.

(3) Those that amended the Federal Reserve Act so that the facilities of the Reserve Banks could be made more available to the farmers' local credit institutions.

During the third session of the 67th Congress, no definite action was taken upon any of these various bills. President Harding, in his message to Congress at the opening of the fourth session, stressed the need of passing some rural credits legislation before Congress adjourned. He did not, however, come out in favor of any one particular measure. During this session the controversy centered mainly around two bills the Lenroot-Anderson bill, which we have previously mentioned, and the Capper-McFadden

institution, only under another name, its director, Mr. Eugene Meyer, Jr., was positive that it was not suited at all for the purpose.

bill. The other bills which had been introduced into Congress gradually receded into the background, although parts of them were later included in the Agricultural Credits Act as finally passed.

III. RECOMMENDATIONS BASED UPON EXPERIENCE OF WAR FINANCE CORPORATION

The Capper-McFadden bill was drawn by Mr. Eugene Meyer, Jr., Managing Director of the War Finance Corporation, and was based upon the experience which he had in directing the agricultural credit activities of this organization. Mr. Meyer had come to the conclusion that the Federal Reserve system could be made to take care of all the credit needs of the farmer for both producing and marketing. In his opinion about the only type of farming operation that needed a special credit institution was the livestock industry. For this industry he provided for the organization of special credit institutions under the name of National Agricultural Credit Corporations.

Mr. Meyer insisted that if the Federal Reserve Act were amended so that the Reserve Banks could rediscount agricultural paper for nine months, and so that the small country banks with a capital of less than $25,000 could be permitted to join the Federal Reserve system, this would make possible adequate credit facilities for the farmer. He par

8 For statement of Mr. Meyer's position see Hearings before the House Committee on Banking and Currency, 67th Congress, Fourth Session, S4280 (HR13033), 1923, pp. 60-4.

ticularly stressed the importance of the country banks becoming members of the Federal Reserve system. In this way he expected that the facilities of the Reserve Banks would be placed more freely at the farmer's disposal. In order to provide adequate accommodation for the co-operative marketing of the farmer's products, he advocated that the paper of co-operative marketing associations be classified as agricultural and given all the privileges pertaining to that class. The Capper-McFadden bill incorporated these ideas. It asked for no funds from the United States Treasury nor did it seek the privilege of issuing tax-free securities.

In contrast to the Capper-McFadden bill, the Lenroot-Anderson bill was framed with the idea that the Federal Reserve system was inadequate to take care of the intermediate credit needs of the farmers. It aimed to create a separate and independent rediscount system for agriculture to be established in connection with, but independent of, the Federal Farm Land Banks. The initial capital for starting this system was to be provided from the United States Treasury, and the funds with which it was to finance its operation were to be provided through the sale of tax-free debentures. The essential difference between the two bills was that the CapperMcFadden bill aimed to liberalize and extend the powers of the Federal Reserve Banks and to strengthen and develop the existing country banks so that the whole banking system could be more

useful and better adapted to meet agricultural requirements. The Lenroot-Anderson bill, on the other hand, was framed with the idea that the Federal Reserve system was insufficient for this purpose and that the establishment of a separate banking system for the exclusive use of agriculture was necessary.

IV. DIFFERENCE OF OPINION ON MERITS OF BILLS

Both within and without Congress the widest difference of opinion was held as to the relative merits of these two measures. The Lenroot-Anderson bill received its greatest support from the agricultural sections of the mid-West, while the Capper-McFadden bill was strongly advocated by the spokesmen for the co-operative marketing associations and the livestock interests.

The co-operative marketing associations insisted that the present banking structure could be made to meet all their credit needs if only a few changes were made in our banking laws. The first thing that the co-operatives asked was that their paper be classified as agricultural and that it be given a ninemonths privilege of rediscount at the Federal Reserve Banks. The co-operatives insisted that they were not primarily mercantile organizations, but rather associations of farmers engaged in an essential agricultural occupation. From their point of view, credit advanced to enable farmers' co-operative

associations to process, store, and market agricultural products was credit used in an agricultural operation just as much as though it went to aid in the production of crops. Consequently, they insisted that their paper should be classified as agricultural paper.

The co-operative marketing associations did not ask for the establishment of special institutions, like Intermediate Credit Banks, to meet their credit needs. They took the position that if they had ready access to the sources of capital in our existing banks they could be adequately financed. The following quotation clearly expresses this point of view:

We do not, therefore, want any governmental bodies set up for the purpose of giving farmers access to government funds. We want the right to tap the present existing resources of the commercial money of the United States-to tap them in a way that will make them serve the farming interests. practically wholly on existing banks and the existing Federal Reserve system. We believe that the existing banks and the Federal Reserve system can be made to meet 100 per cent the needs of agriculture.

Our reliance is

The position of the co-operative marketing associations was essentially a conservative one. They did not ask for government-owned banks to be established to finance their undertakings. They thought that the provisions of the Capper bill would alter

9

Sapiro, Aaron, Hearings before the House Committee on Banking and Currency, Rural Credits, Part II, 67th Congress, Third and Fourth Sessions, S4280 (HR13033), 1923, pp. 279-85.