BULLETIN Agricultural and Mechanical College of Texas (In co-operation with the United States Department of Agriculture.) FEBRUARY, 1917 EXTENSION SERVICE No. B-34 Address CLARENCE OUSLEY Director of Extension Service, College Station, Texas. CON TEN TS Page BURDENSOME CREDIT C0NDITI0NS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. s WHAT TEXAS FARMERS PAY F0R CREDIT . . . . . . . . . . . . . . . . . . . . .. 5 FARMERS’ ESTIMATE 0F CREDIT PRICES . . . . . . . . . . . . . . . . . . . . .. 1s DIFFERENCE BETWEEN CASH AND CREDIT PRICES . . . . . . . . . . .. 7 ‘INFLUENCE 0F BANK LOANS ON CREDIT PRICES . . . . . . . . . . . . . . .. 9 0RIGIN 0F CR0P MORTGAGE CREDIT SYSTEM . . . . . . . . . . . . . . . . .. 10 INTEREST RATE 0N FARMING L0ANS . . . . . . . . . . . . . . . . . . . . . . . . . . .. 11 RIGHT AND WRCNG USE 0F CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 12 TENDENCY TOWARD RESTRICTION OF CREDIT . . . . . . . . . . . . . . . . .. 10' CASH PRICES AT CREDIT STCRES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 CREDIT SYSTEM AND COUNTRY STORES . . . . . . . . . . . . . . . . . . . . . . .. 17 SCALPING CREDIT ACCCUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1s INCOME 0F TEXAS FARMERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1s INFLUENCE 0F LANDLORDS 0N C0TT0N ACREAGE 0F TENANTS 2.2 TENANCY AND LIVESTOCK PR0DUCTI0N . . . . . . . . . . . . . . . . . . . . . . .. TENANCY AND FARM MACHINERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2:2 FARMERS’ PROTEST AGAINST USURIOUS INTEREST RATES.... s? FACTS AND C0NDITI0NS CONCERNING RURAL C0NDITI0NS IN TEXAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 24 NAvARRo C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25 SMITH C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .6 vAN zANDT C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 32 RAINS C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. s7 HUNT C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 51 ROCKWALL COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 51 MCLENNAN COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 52 HILL C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5s ELLIS COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6o TARRANT C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 63 WILBARGER COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 63 HARDEMAN C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 64 RANDALL C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 64 TAYLOR C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 64 WICHITA C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 65 CLAY COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. :0 HALL C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 70 HALE COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 72 RUNNELS C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 75 BROWN C0UNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. '27 COMANCHE COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7s SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 79 EDUCATICN AND LEGISLATICN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. s0 RECO-LNIRTENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Farming Credit in Texas. BURDENSOME CREDIT CONDITIONS. Texas debtor farmers have been paying to banks 10 to 40 per cent interest per annum, or to credit merchants 10 to 60 per cent above cash prices. This credit system, either as cause or effect, uniformly prevails with all-cotton farming, or all- wheat farming or any other form of one-crop farming. As shown in this bulletin reform may be accomplished by patient education, stimulated by constructive legislation, to the end that both debtor and creditor may understand their mutual interest in better farming and cheaper credit. Farm ownership in Texas is not increasing in proportion to the increase of rural population. With few exceptions both farm owners and tenants express the opinion that under present conditions the average man cannot aquire a farm by his own labor. In this state of mind few men will even undertake to acquire farms. The prospects of improvement under the Federal Farm Loan Bank and through other means are dis- cussed elsewhere in this bulletin. The observations herein recorded were made in 1915. Therefore, they do not reflect the acute distress caused by the outbreak of the European war in 1914, nor the condition of com- parative prosperity due to the war prices of 1916, but rather the conditions of average times. At any rate, the conditions and circumstances described are not new or abnormal; they are commonplace and have developed more or less cumulatively during the period of fifty years since the War Between the States; in fact they now represent more or less fixed habits of agriculture and credit. Habits, with a people as with individ- uals, are hard to break. It should be added that the counties in which records were taken were chosen for convenience as types representing aver- 3 age conditions in several more or less distinct sections of the State, Circumstances permitted more minute observations in some counties and neighborhoods than in others. There is no in~ tention to make invidious comparisons by exhibit or infer- ence. There is reason to believe that complete investigation of the State would reveal substantially similar conditions i11 all counties of each section. In the preparation of the bulletin it was deemed wise to present frankly the attitudes of the debtor and creditor classes in order that each may understand the viewpoint of the other. As might have been expected there is more or less prejudice, but prejudice is a factor to be reckoned with in any problem of public concern. The purpose of the bulletin is to reflect the actual credit facts without exaggeration or concealment. for only by knowing “the truth, the whole truth and nothing but the truth” can we form a just appraisement of a situation Which is a menace to the material prosperity and social health of the commonwealth. In this spirit these records and recommendations are sub- mitted to the thoughtful consideration of all citizens who be- lieve that the comfort, culture and contentment of producers are necessary for the maintenance of our free institutions. CLARENCE OUSLEY. What Texas Farmers Pay for Credit. By Walton Peteet. The price paid by the average Texas farmer for credit with which t0 grow a crop is almost unbelievably high. It varies from 10% t0 more than 60% according to the standing of the debtor, the system of farming, geo- praphical location and competition between lenders. It is highest in the small farm districts of East Texas and lowest in the cattle and wheat regions of West Texas. It varies widely, however, in each of these regions. The trucker and dairy farmer of East Texas pay less for credit than the all-cotton farmer, and the all-wheat farmer of the West pays more than the farmer-stockman of the same region. The maximum price is paid by the all-cotton tenant farmer who gives a mortgage on his livestock and growing crop for security and the minimum price is paid by the land owner who practices diversification and borrows from banks on his own unsecured note. Competition between banks and credit merchants and between cash stores and credit stores for the farmers’ business is a regulating factor of prime importance. To correctly understand what follows, an explanation of the method employed in collecting the data here presented and the bases of calculation used is necessary. The writer spent several months traveling through the counties named herein, and personally interviewed about 300 farmers, mer- chants and bankers. A special effort was made to ascertain the financial condition of the average farmer, and to that end the investigator stopped at farm houses at random as he traveled along the public highways. In those counties more intensively investigated, every section of the county was visited. In practically no instance was the name or condition of the farmer known in advance of a visit. No lists of leading farmers were ac- cepted from any source. To the contrary, every effort was made to “take them as they came” in order that an average of the conditions and opin- ions of those interviewed might be a true average of the entire community or region. From one to three hours were given to each interview and an effort was made to obtain not only the facts regarding each farmer’s business and financial condition, but his frank opinion of his own problems and his state of mind with reference to such matters as credit, tenancy, home-ac- quirement and the various agencies that are striving to improve rural conditions. ‘ In those counties where a special study of the crop mortgage credit system was made, farmers were asked the prices they paid for staple arti- cles of food and feed and these prices were compared with cash prices in the market towns. Each farmer was asked also to estimate the difference be< tween cash and credit prices in his community. It is a striking testimonial of the accuracy of farmers’ judgment that the difference between an average of such estimates and an average of actual cash and credit prices was so slight as to be negligible. Thus, an average of the estimates of 26 farmers 5 of Smith county was 57.1%, while actual cash and credit prices differed 55.3%, a variation between public opinion and fact of only 1.8%. In Rains county the variation was only .9 of one per cent and in Van Zandt county it was 1.1%. This demonstration of the accuracy of farmers’ estimates of the cost of credit confirms the experience of investigators of the Office of Farm Management of the U. S. Department of Agriculture, who have _ found the variation !between average estimates and actual records so small as to be negligible. FARMERS’ ESTIMATE OF CREDIT PRICES. An average of the estimates of some 300 farmers, merchants and bank- ers in the counties of Smith, Rains, Van Zandt, Navarro, Rockwall, McLen- nan, Bosque, Johnson, Hill, Ellis, Wichita, Hall, Taylor, Runnels, Brown and Comanche gives 29.7% as the difference between cash and credit prices of eleven staple articles of food and feed in these counties. The minimum was 11% in Rockwall county and the maximum 57.1% in Smith county. In some of the counties named the number of farmers interviewed was not large enough to fairly apply the law of average, but in the eleven counties named below the percentages given fairly represent the opinion of farm- ers on the cost of store credit obtained on crop and livestock mortgages: Smith 57.1% Rains 24.4% Van Zandt 21.6% Navarro .... ._ 19.9% Rockwall 11 % McLennan 11.2% Bosque y 16 % Hill 21.9% Ellis ...-26.8% Wichita .................................................. ._27 % Hall ........................................................ ..26.6% No claim is here made that these figures represent actual conditions in all cases, but they do truly reflect the current opinion of the farmers of those counties. Again it should be remembered that we are dealing with averages, which is the mean of maximum and minimum estimates. In the view of the writer it is almost, if not quite, as important to know what farmers believe credit costs them as it is to know what it really does cost. No attempt has been made to express the price paid for store credit in terms of interest on the amount of credit obtained. vSuch a compari son, unless account is taken of many complex modifying factors, would be unfair and misleading in so far as it might be taken as represent- ing an actual saving to the farmer who borrows money and buys at cash prices. That there is need for some such comparison is indicated by the observation of a Grand Saline banker that “a merchant can buy corn at $1.00 a bushel and sell it at $1.50, the 50c difference being his profit; if we (bankers) loan a man $1.00 and charge him 50c, we are guilty of usury.” 6 N0 effort was made t0 ascertain the exact period betweenthe purchase of and payment for supplies bought on credit, but the writer believes a fair average would be six months. If, then, the difference between cash and credit prices be reckoned as profit and computed as interest, the average rate paid in the fifteen counties named would be 59.14%. DIFFERENCE BETWEEN CASH AND CREDIT PRICES. The counties of Smith, Van Zandt and Rains were chosen for special study for the reason that they are fairly representative of that section of the State where the crop mortgage credit system is most extensive. Comparing the prices paid by 19 typical farmers of Smith county who traded on credit with cash prices in Tyler, it was found that the average price of eleven staple articles of food and feed was 55.3% higher than cash prices. The maximum credit price of these eleven articles was 89.6% higher than the cash price, and the minimum credit price Was 33.6% higher. The following talble exhibits the prices paid for the various articles by credit purchasers and the cash quotations in the Tyler market about the same date: » COMPARISON OF CASH AND CREDIT PRICES IN SMITH COUNTY. Credit Prices. FLOUR Sugar Bacon Lard Meal Clo? Corn Chops Maize Hay Molasses Record Low High Lbs. Per PerIO-lb. Per r r Chops Per Per No. Grade Grade For $1 Pound Tin Sack Busllel 100 lbs. l00lbs. Bale Gallon 8 8 $2.50 10 8 . 0 8.00 12 .17 1.758 $1.50 82.50 8 .50 7 2.50 8 .20 1.25 1.50 2.80 .80 (1).70 11 2.50 12 .18 1.10 1.25 2.50 12 2.50 12 .18 1.10 1.25 (2).80 14 2.50 11 .20 1.75 1.10 1.50 2.50 .50 (1).70 15 2.25 .55 18 2.50 10 .25 1.95 (1).85 17 2.25 12 .18 1.90 .85 1.85 .75 (1)55 18 2.25 10 .20 1.80 1.10 1.25 .90 (1).90 19 2.50 10 .20 1.80 1.10 1.85 .90 (1).90 24 1.50 27 2.50 _ 8.00 .20 2.00 1.50 1.50 2.75 .65 28 2.50 12 .20 1.50 1.85 2.80 2.50 .85 (2).75 29 2.50 10 .22 2.00 1.50 2.50 (1).75 80 2.50 12 1.75 1.00 1.25 2.25 (2).75 81 2.50 10 .20 1.00 1.85 2.50 2.25 (2).75 82 2.50 10 .20 2.00 1.25 1.85 (1)1.00 88 2.50 10 .20 1.85 2.50 Average 2.44 2.60 107.199 1.98 1.154 1.847 2.52 2.875 .70 (1)778 (2).80 Cash prices 1.70 1.90 14. .145 1.00 .75 .95 1.75 1.40 .40 (1).40 Credit ' (2)55 Excess % 48.5 80.8 21. 87. 98. 58.8 41.8 88.2 .75 (1)94.5 (2)29.0 (1) Corn Syrup. (2) Ribbon Cane Syrup. g 7 A study of this table reveals a wide variation in prices charged different individuals for the same article, due doubtless t0 the varying character and ability to pay of the purchaser. The credit system flourishes only in portions of Van Zandt county. There are no credit stores in the important market towns of Wills Point and Canton, those that formerly existed there having gone out of business with the advent of bank credit to farmers, which became available soon after the State banking system was established. Many farmers in this county, however, buy on credit at other market towns in the county where there are credit stores. The average price paid by credit buyers for eleven staple articles was 22.7% higher than cash prices in Wills Point. The maxi- mum credit price was 34% above cash prices, and the minimum was 16.3% higher. The following table exhibits the cash and credit quotations and percentages of difference: COMPARISON OF CASH AND CREDIT PRICES IN VAN ZANDT COUNTY. Credit Prices. FLOUR Sugar Bacon Lard Heal Corn Corn Chops Matze Hay Molasses Record Low High Lbs. Per Per Per Per r Chops Per Per No. Grade Grade For $1 Pound Pound Sack Bushel 100 lbs. l00lbs. Bale Gallon 38 $ $2.45 19 .17 (1).65 39 2.25 12 .16 .15 $ .90 $1.00 $1.90 $ .40 (l).70 40 2.25 12 .16 .16 .90 1.00 1.90 .40 (l).70 41 2.25 2.50 12 .16 .15 .90 1.00 2.00 .50 (l).70 42 2.50 12 .16 .16 .90 1.10 2.00 .45 (1).65 43 2.50 12 .16 .20 1.00 2.40 2.00 .50 53 2.50 12 .16 .17 .95 1.00 2.00 1.90 .50 (l).70 54 2.25 11 .17 .18 1.00 1.00 2.00 1.80 .45 (l).70 AVNCredit 2.25 2.40 11.5 .161 .167 .934 1.016 2.03 1.90 .457 (1)686 Cash Prices 2.00 2.10 14 .135 .125 .80 .95 1.75 1.35 .35 (1)50 Credit Excess % 12.5 14.3 21.8 19.3 33.6 16.7 6.9 16. 40.7 30.5(1)37.2 (1) Corn Syrup. The main market town of Rains county is Emory, the county seat. At the time this inquiry was made there was one small cash grocery store and one cash feed store in Emory, but the lbulk of the grocery and feed trade was done by credit merchants. The credit stores had a cash a11d a credit price, the latter being 10% to 15% higher than the former. In considering the prices quoted in the following table, it should be borne in mind that the credit prices were obtained by adding 10% to the cash prices of credit stores, which latter were invariably higher than prices at strictly cash stores. The following table presents the variation of cash and credit prices in this county: COMPARISON OF CASH AND CREDIT PRICES IN RAINS COUNTY. Credit Prices. FLOUR Sugar Bacon Lard Heal Corn Corn Chop: llaize Hay Molasses Record Low gll Lbs. Per PerlO-Ib. Per Per Per Chops Per t Per N0. Grade Grade For $1 Pound Tin Sack Bushel 100 lbs. 100 lbs. Bale Gallon 70 $ $2.50 12 .17 $2.00 .90 $1.10 $2.25 $2.00 .45 (1).70 71 =~ 2.50 12 .17 1.50 .90 1.15 2.00 .45 (1).65 72 2.50 2.75 11 .18 1.95 1.10 1.20 2.10 .55 (1).75 73 2.50 2.75 11 .18 1.90 1.00 1.20 2.20 .50 (1).70 74 2.20 2.50 11 .16 1.95 .95 1.20 (1).70 - 75 2.75 11 .175 1.90 1.10 1.95 1.80 (1).75 77 2.50 13 .175 1.65 1.00 2.20 1.65 (1).70 78 2.30 12 .175 1.40 1.10 1.17 1.95 .55 (1).70 79 2.50 11 1.00 1.20 1.65 (2).75 80 2.30 2.50 10 .165 1.55 1.10 2.00 (1).75 81 .175 1.80 82 2.50 11 .175 1.65 1.10 1.20 1.90 .50 (1).75 83 2.50 12 .175 1.75 1.00 2.00 .40 (1).70 85 2.20 12 .18 1.40 .95 1.17 2.20 1.65 (2).75 Average ____ .. 2.31 2.63 11.4.174 1.71 1.02 1.176 2.045 1.75.486(1).714 Cash Prices 1.85 2.00 14 .14 1.11) .85 1.00 1.85 1.35 .40 (1)55 Credit " Excess % 24.3 31.5 22.7 24.3 64.5 20 17.6 10.5 29.6 21.5 (1)298 Average of credit excess on eleven articles 26.9%. (1) Corn Syrup, (2) Ribbon -Cane Syrup. INFLUENCE OF BANK LOANS ON CREDIT PRICES The influence of the attitude of bankers on short time loans to farmers in these three counties is reflected in the volume of store credit and the range of credit prices Thus, in Smith county, where previous to 1916 comparatively few farmers obtained short time credit through banks. the volume of store credit was large and credit prices correspondingly high. In Rains county, the banks eagerly sought the farmers’ business and although interest rates on such loans were extremely high, more than half the short time farm credit of the county was obtained from banks, and credit prices were lower than in Smith county. In Van Zandt county, where the bankers, as a rule, loaned money to farmers more freely than in Smith county and at interest rates lower than in Rains, the volume of store credit was less and credit prices lower than in either Smith or Rains. An extensive inquiry in the north central tier of counties revealed the fact that in most communities lbank credit has almost entirely taken the place of store credit for farmers, although here and there throughout this 9 region an old and well established credit merchant continues to sell on “fall time” at prices ranging from 10% to 15% above cash prices. In the central tier, embracing the counties of Ellis, Hill and McLennan, the store credit system is slightly more extensive than in the northern tier, and credit prices are somewhat higher. In the Western and North-western regions of the State the credit sys- tems and the crop mortgage appeared to have been introduced along with the culture of cotton and farm tenancy, but is rapidly disappearing as a result of the competition of banks and cash stores. ORIGIN OF CROP MORTGAGE CREDIT SYSTEM. ‘The evils of the crop mortgage credit system are so obvious and well understood that they will be referred to here only as they affect the general prosperity of the" State and influence the trend of change in the financial methods of Texas farmers. Contrary to the general belief, it is the opinion of the writer that the credit system is a cause of one-crop farming rather than a result of it. That the general public, including many farmers, have regarded the credit system as the result of all-cotton, or one-crop, farming is shown by the many efforts to encourage crop diversification as a means of getting rid of the credit system. The fact that, prior to 1916, practically all credit mer- chants and bankers based credit exclusively on cotton, also gave support to the theory that the all-cotton system produced the credit system. The true reason why so many farmers plant ‘so much cotton and so little feed crops was given by a Hill county farmer. In his recital of his experiences as a farmer he said that when he began farming he owned a small farm free of debt and raised all the feed for his stock and practically all his table supplies. He continued to do so until he went into delbt for the purchase of additional land. With the certainty of having to pay a large note in the fall, he felt compelled to plant a larger acreage of cotton and necessarily a smaller acreage to food and feed crops. As the years passed he planted more and more cotton and less and less food and feed crops, in the belief that only by this method could he pay his debts. After several years of hard living an inheritance enabled him to pay his debts and immediately he returned to his former custom of raising his food and feed with cotton as his surplus crop. He prospered again, but later mis- fortune overtook him and he found himself in debt. Again he turned to cotton and neglected his other crops. In the end he lost his farm, rented landvfor a time, raised cotton, bought his food and feed and was. continually in debt. With money secured from other sources he finally paid his debts and bought another farm. At the time of this interview he was raising nearly all his food and feed and was beginning to prosper. His own judgment on his case is that the very means (all-cotton) he employed to pay his debts pre- vented him from doing so—that when he planted a large cotton crop to pay his debts he diminished his ability to pay by having to buy his food and feed supplies. 10 The opinion of this Hill county farmer was confirmed rby many other thoughtful and observant farmers. In answer to the question “Why don’t you raise all your food and feed except sugar, flour and coffee?” a Van Zandt county farmer answered: “Have to raise too much cotton to get credit,” and another replied: “Am in debt and must plant cotton to pay.” Instances could be multiplied to show that farmers themselves understand that the credit system is responsible for all-cotton farming, but those here given are believed to be sufficient. The importance of this conclusion lies in its suggestion that an im- proved system of short time credit will quickly terminate the all-cotton system and restore the practice of raising food and feed crops at ‘home. Two agencies are actively attaking the store credit system. These are banks and cash stores. While interest rates on short time bank loans v to farmers are excessively high, it is the general opinion of farmers that they can better afford to pay high interest rates than to continue to pay exorbitant credit prices. INTEREST RATES ON FARMING LOANS. Interest rates on bank loans for crop making purposes vary from 10% per annum to more than 60%. Minimum rates are on large loans to farmers of undoubted solvency. Maximum rates are paid by small farmers on loans of small amounts with short maturity. The general level of interest rates corresponds with the general level of credit prices to farmers, and is highest in districts of small farms in East Texas and lowest in the North Central tier of counties, where the store credit system has almost disappeared. There is a marked variation between the rates charged by small banks in country towns and large banks in more populous trading centers. Much difficulty was encountered in ascertaining from farmers the rate of interest charged on crop loans. In many instances they did not know the rate. In others they confused the discount rate with the rate per annum. ‘Thus. in a certain community where nbankers frankly admitted that they added 10% of the amount borrowed to the face of the note re- gardless of maturity, many farmers would say they were paying “ten percent.” i It is a noteworthy fact that as a general rule, in the strictly agricultural regions of the State the cost of bank loans for crop making purposes is not affected by the time for which the money is borrowed. In other words, a farmer who borrows $100 February 1, payable October 1, pays the same gross amount of interest as his neighbor who borrows a like amount March 1 or April 1. The current practice in all but a few sections is to add from 10% to 13% to the face of all notes having a maturity of more than three months, and in some counties this percentage is added to notes of 30 to 60 days maturity. A minor variation of this custom is to deduct 11 10% or more of the face of the note; thus, a borrower who executes a note for $1_00 will receive $90 in cash. I Many bankers frankly admitted that they charge usurious rates of interest, but justify their action by asserting that it is economy for farmers to pay high interest rates and buy supplies for cash rather than pay prices charged at credit stores. They further justify their rates by citing the fact that the small country banks do little or no commercial business, their deposits are small, and they have no opportunities for loan- ‘ing their funds between settlement time in the fall and borrowing time in the spring and summer. The cashier of a National bank of $25,000 capital and $27,000 surplus in a small town in East Texas thus justified his rate of 13% flat discount on farmers’ notes: “This bank charges 13% for farm loans, regardless of their maturity. A farmer who borrows $100 January 1, gives his note for $113 payable October 1, although we are Willing for him to pay at a later date, if he Wants to. The man who borrows later in the year pays the same. Small banks cannot afford to loan money to farmers at 10% per annum, and an attempt to. force them to do so will drive small country banks out of busi- ness and concentrate the banking business in the large cities, where the small farmer cannot get credit. Practically all the business of this bank and of other banks in towns of this size is with farmers. There is not enough commercial business in this town to support one bank (there are now two in the town.) The usual amount loaned to farmers is so small that 10% will not pay the expense of running the bank and leave anything for the stockholders. Another reason for higher rates is that when farmers come to borrow money early in the year they ask for less than they will require. We know they will need more later on and the banks are. com- pelled to keep that amount on hand for them when they do need it. lf farmers would borrow on the first of January all the money they will need during the year, we could afford to charge a lower rate of interest. But, instead of doing this, they will borrow a part only of what they will need and the remainder must be kept on hand by the bank in readiness for them later on. That is why banks charge the same for loans made in late spring and summer as fr?!" loans made early in the year.” The cashierof a State bank of $10,000 capital in a small inland village in East Texas, thus frankly avowed that he was charging more than the legal rate of interest: “This bank charges 10% for farm loans regardless of maturity. I know this is a violation of law, but I am not ashamed of it. I say publicly and boldly that our interest rates are unlawful Ibut the rates we charge are many times lower than the rates for credit charged by the merchants. If the legislature should penalize loaning at a higher rate than 10%, it would force the farmers back into the grip of credit merchants.” RIGHT AND WRONG USE OF CREDIT There is a sharp difference of opinion among bankers and credit merchants on the effect of bank loans to farmers for crop making purposes. Bankers claim that farmers can save money by paying usurious rates on v 12 loans and buying supplies at cash prices, while credit merchants affirm that bank loans have the effect of making farmers extravagant and reckless in their expenditures. Farmers, as a rule, believe they can save money by paying high interest rates and buying for cash. It is the observation of this writer that borrowing from banks is pre- ferable to buying on “fa1l time,” but it is true that in many instances farmers are tempted to make unnecessary purchases when they have the ready cash to do so, and, in consequence, must either borrow more money later in the season or apply to a merchant for credit. Cases of this kind are most often found among the class of farmers who have traded on credit and have rarely had a cash balance in their favor when their crops were sold in the fall. For this reason they are not experienced in handling money and having for many years denied themselves so many things, it is but natural that when they find themselves with a substantial balance in the bank they should spend some of it unwisely. FARMERS LEARN QUICKLY. It is significant that reports of the extravagant use of bank credit by farmers are most numerous in sections where interest rates are highest and the credit system is most extensive, and least numerous in sections where farmers have long enjoyed bank credit and interest rates are low- est. This would appear to indicate that when farmers who have been ac- customed to trading on credit first employ bank credit they are inclined to use it extravagantly, but after a few years they overcome this tendency. When banks began to make crop loans they inquired into the borrowers’ affairs only sufficiently to satisfy themselves that the loan was a safe one. Within recent years bankers are beginning to control the expenditure of borrowed funds to the extent of limiting the amount to be spent each month. In a general way, bankers are beginning to exercise supervision 0f their farmer customers’ operations after the manner of credit merchants, with this difference, that whereas merchants dictated even small details of farm management, bankers are dictating with respect to larger policies only. A notable instance of the unwise use of credit by a considerable group of farmers came under the writer’s observation in Rains county. When banks began to loan money to farmers in that county many farmers availed them- selves of this new form of credit, but, as a rule underestimated their re- quirements when making arrangements with banks early in the year. The result was that many found themselves out of money in midsummer, and when they could not get another loan from the banks turned to the credit merchants and gave second mortgages on their crops and livestock for sup- plies to finish the year. If crops and prices were good they were able to pay both the bank and the merchant. When they could not pay both, they paid the bank in full, as it had a first mortgage, and continued to trade on credit with the promise to the merchant to pay him when they got loans from the banks early in the next year. A credit merchant thus frankly explained the system: “Since the banks have been lending money direct to farmers we sell them on credit until the banks begin to make loans in the spring. When they can get a loan 13 they pay us and buy for cash until their money is gone and then we take a second mortgage and supply them for the balance of the crop year. Nearly all the mortgages taken by the merchants here are second mortgages, the banks having the first lien. When a farmer gets a loan at the bank early in the year he does not leave the “money in the bank, but puts it in his pocket and walks around and acts as if he was independent. He will come in here and walk around with a lordly air of independence which I recognize at once. When asked what he wants he will say he is just ‘looking around,’ but does not want to buy anything just then. I will take him by the arm and tell him I have something I want to show him and will wind up by sell- ing him $20 or $25 worth of things he does not need. When the time to begin work on his crop comes around he has spent all his money and comes to me for credit, and I take a second mortgage and let him have enough to get through on. If he cannot pay the bank and have enough left to pay us in the fall he will finish paying us with the proceeds of his next loan from the bank, so we get the bank’s money after all. If the banks stop loaning money to farmers it will give me and other credit merchants a chance to sell to all farmers at our own prices and we can exact from them anything we want.” ‘A Another credit merchant in that town said: “Farmers in this county who borrow money from Thanks have not prospered as much as those who deal exclusively with the merchants. We try to look after the interests of our customers and help them through the year. The banks loan them so much money, take a first mortgage on everything they have and turn them loose and will not help them out if they get in a tight place later on. If farmers were careful and frugal and knew how to take care of money it would probably be better for them to borrow from the banks, but very few of them know how to take care of money, they fritter it away early in the year and then must come to the merchant for credit to finish the year, as the banker will rarely help them. Until this year (1915) at least 75% of" mortgages taken by merchants in this county were second mortgages, banks having a first lien. This worked fairly well until last year (1914) when the farmers did not make enough to pay both the banks and the merchants. The banks, having a first mortgage, got it all and the merchants got nothing. The banks insisted on farmers selling their cotton when the ’ price was low, while merchants advised them to hold it. I have stood by and looked on while the banks compelled farmers to sell their cotton on which I held a second mortgage at 6c and 6 1-2c. This low price would yield enough to pay the ‘bank and I would get nothing; whereas, if the farmer had been permitted to hold his cotton, he would have got a price that would have enabled him to pay me something after paying his debt to the bank.” One result of the conditions described by this merchant was the filing of many suits against banks in that town for penalties under the usury statute. a full report of which appears elsewhere in this bulletin. While the conditions just described were not found to exist in the same degree in any other county, yet wherever banks loan money to farmers credit merchants either contend that it is injurious to farmers or go out of business. A member of one of the largest credit houses in Smith County said farmers who bought supplies on credit prospered more than those who borrowed from banks and bought for cash, because the credit merchants supervised the operations of their customers more closely than the banks did and checked their tendency to ibuy recklessly and extravagantly. He added that many ‘farmers prefer to buy on credit, rather than take care of what they make. _A credit merchant in Van Zandt county said: “In the past any farmer, no matter how poor or worthless, could get credit to grow a crop. The increase in the number of banks brought competition in lending money. ‘The banks preferred to loan $100 to each of ten farmers to loaning $1,000 to one merchant. For several years banks in this county have been making loans to farmers at from 10% to 15% discount regardless of maturity. This practice resulted in extravagance and over-buying by farmers. They would borrow from different banks and spend the money before time for selling crops and would come to the merchants for credit. It is better for the farmer to get his credit from merchants, because the latter compel economy, and, having no cash on hand, the, farmer cannot buy whenever he sees something he fancies.” Not all merchants entertain the views expressed above, as witness this statement by a credit merchant in Ellis County: “The banks are grad- ually putting credit merchants out of business and I am going on a cash basis this fall. The coming of so many cash stores is making it unpleasant for credit merchants who must have a cash and a credit price. We tried to meet the situation by having one price and adding 10% for fall credit. and we still say we do this, but we do not. We cannot sell on credit for cash prices plus 10%—we must have more. Jobbers are urging merchants to quit selling on fall time and are refusing credit to some who continue to do so. I believe it is better for a farmer to borrow ‘from banks and buy for cash.” A representative of another credit merchant in Ellis County said: “Credit business 0f merchants is declining as bank loans to farmers in- crease. Credit prices are from 10% to 15% higher than cash prices and to this is added 10% when payment is made in the fal1.” The president of a large bank in Waxahachie said: “Bank loans to farmers are increasing and store credit is passing in this county. Bank loans and cash stores are putting credit merchants out of ibusiness. Bank rates at 10% per annum, with a minimum charge of 25c for short time loans. Our farmers will not stand for higher rates.” The cashier of a bank in a small town in Tarrant county said: “Bank loans are rapidly taking the place of store credit in this county. Interest rate on crop loans is 10% per annum, which is as much as farmers will pay and is profitable to the bank.” The cashier of a bank in Hardeman county reports the result of bank 15 and mercantile competition there: “Some store credit here but it is rapidly disappearing. A very large credit house here went out of business last year and no other has taken its place.” The cashier of a National Bank in Wichita Falls reports: “Practically no store credit in this county now. Cash stores and banks have put an end to old-time credit system.” A Hall county credit merchant, after nearly 20 years of credit business, announced his intention of going out of business. He said: “The loaning of money to farmers by banks and the opening of cash stores are forcing credit merchants to go on a cash basis. When a farmer who buys on credit has cash to spend, he spends it at a cash store. Store credit costs farmers not less than 25% and sometimes more. Banks charge 10% to 15% discount for loans regardless of the time the money is used, farmers apparently not realizing that the rate is really 20% to 40% per annum.” The conditions and tendencies reported in the foregoing statements exist in greater or less degree in all sections of the State, credit prices being lowest where interest rates are lowest and bank loans are available to farmers. For further citations in support of this conclusion, reference is made to the section of this bulletin devoted to interviews with farmers, merchants and bankers. T-ENDENCY TOWARD RESTRICTION OF CREDIT. There is a marked tendency throughout the State toward a restriction of credit by both merchants and banks. Immediately following the begin- ning of the European war there was a complete denial of credit to farmers in some sections, and many farmers and their families endured very great hardships. With the return of normal business conditions there was a resumption of credit, but on a restricted scale. Many bankers are adopting the practice of merchants in giving careful attention to the uses made of credit and some are requiring an agreement from borrowers to spend each month a certain amount of the sum loaned. There is also a widespread tendency to deny credit to a large class of farmers who have been unsuccessful and have only a limited amount of livestock and farm implements. One result of this restricting of credit has been to compel many farmers to become wage laborers. It is the almost unanimous judgement of both |bankers and merchants that in the past it has been too easy for farmers to get credit to make crops and there is a general disposition to require something more than a team of horses and a promise to make a crop as security for credit. Farmers them- selves have observed this tendency and many of them reported cases where neighbors had been compelled to abandon farming on shares and accept work as farm laborers or move to town. A Rockwall county banker said: “Both banks and merchants are ex- ercising more care in extending credit and it is becoming more difficult for irresponsible farmers to get credit to make crops.” A Van Zandt county merchant reported: “In the past any farmer, no matter how poor or worthless, could get credit on which to make a crop. This year both banks and merchants are requiring security in all cases.. - 16 Many farmers have not been able to get credit and have been compelled to work as wage hands." IAnother banker in Van Zandt county extended many farm loans in 1914 but refused to make further advances to these delbtors, with the result that having no unmortgaged property to offer to other banks or to credit merchants they were not able to operate farms in 1915. a In former years it was the custom for landowners to buy on open account and only renters were required to give crop mortgages. This custom is changing in some sections of the State and owners as well as renters must now give mortgage security. Landowners are beginning to discriminate against old and unsuccess- ful farmers in renting land. One large landowner (No. 50) said: “I will not rent land to a man over 40 years old, because if he has reached that age without getting ahead he has missed the ball too often for me to send him to bat.” CASH PRICES AT CREDIT STORES. In comparing cash and credit prices it should be borne in mind that, as a general rule, cash prices at credit stores are higher than at strictly cash stores. In former years merchants openly announced two prices—- one for cash and the other for credit. the difference between them being arbitrary and variable. The advent of cash stores and bank credit made two prices undesirable and emfbarrassing and many credit merchants adopted the plan of adding a variable percentage to their cash prices when the account was to be paid in the fall. A credit merchant in Ellis county (No. 166) said: “We tried to meet the situation by having one price and adding 10% for fall credit, and we still say that we do this, but we do not do so—we cannot sell at cash prices plus 10%—we must have more.” Another credit merchant (No. 207) whose credit price is supposed to be his cash price plus 10%, said: “Store credit costs farmers not less than 25% and sometimes more.” A credit merchant in East Texas (No. 48) estimates that “on an average credit prices are 33 1-3 per cent higher than cash prices.” A comparison of cash prices charged by credit merchants and cash prices of cash merchants made in one East Texas county shows that the former is 9.7 per cent higher than the latter. CREDIT SYSTEM AND COUNTRY STORES. It is interesting to note that in a fewcommunities from which mercan- tile credit has disappeared country stores have reappeared and are pros- pering (No. 44.) The reason of this is obvious. When many of the farmers in a rural community are under a crop mortgage to a credit merchant in a large trading center they cannot patronize neighborhood cash stores and the latter cannot exist in such communities. On the other hand, whenmnost of the farmers are cash {buyers they will find it convenient to do some business with small country stores, even though they do most of their trad- ing in market towns. It will be interesting to observe the future of the 17 country store in Texas and note whether its reestablishment in a few communities from which the credit system has disappeared is a local or a general phenomenon. SCALPING CREDIT ACCOUNTS. An evil of the credit system which has been the cause of much ill feel- ing in some sections of the state is the custom of some merchants pay- ing a commission to landlords on sales of supplies to their tenants, the amount of the commission being, of course, added to the tenant's account. In some cases merchants give their customers orders on business men for the purchase of things not handled by the merchant, such as drugs, and exact a commission for such business (No. 21.) This custom arises out of the circumstance that credit buyers usually give merchants a first mortgage on their stock and crops and are, therefore, not able to give security for purchases made elsewhere. This situation is met by having the merchant make purchases and add them to his bill, thus bringing them under the protection of his mortgage lien. In some instances the landowner receives a commission from mer- chants on sales to his tenants, although it is gratifying to believe that the practice is not general over the state. FARM AND LABOR INCOME OF FARMERS. A special study was made of the financial operations of 32 farmers in Smith, Van Zandt and Rains counties. The forms used for this purpose were similar to the forms devised by the Office of Farm Management of the United States Department of Agriculture for ascertaining the farm in- come and labor income of farmers. In addition, other data on the subject of credit, land buying, gardening, home canning, etc., were collected. By “farm income” is meant the difference between total receipts from all sources and total expenses for all purposes. “Labor income” is “farm income” less 8% interest upon the capital invested in farming. The estimated value of labor contributed by members of the family was included in the list of expenses, but no charge was made for the labor of the operator. A Complete records were obtained from 18 farm owners, 9 share-renters, 3 cash renters and two half-renters. The counties named constitute a re- gion of small farms and it is the belief of the writer that the ratio 18-9-3-2 is about the ratio in which the four types of farming exist there. In considering the figures that follow it should be borne in mind that this data was collected in the spring_ and early summer of 1915 and covers the crop year 1914, which was probably the most disastrous ever known in Texas. An almost total failure of corn and other grain and forage crops in 1913 compelled farmers to grow the 1914 crop on high-priced feed. The condition following the outbreak of the European war lowered the price of cotton below the cost of production. These two circumstances made the year 1914 one of the most unprofitable in the history of Texas agriculture and explains in part the fact that 19 of the 32 farmers investi- 18 gated lost money on the year’s operations, and that only 5 of the 32 realized a profit on the year’s labor after deducting 8% interest on -the capital invested. The following table shows the average farm and labor income of 32 farmers in the three counties named, arranged by classes: AVERAGE FARM AND LABOR INCOME OF 32 TEXAS FARMERS IN SMITH, RAINS AND VAN ZANDT COUNTIES FOR THE YEAR 1914, ARRANGED BY CLASSES: FARM INCOME LABOR INCOME E AVERAGE AVERAGE a nus nnws m mom, vws umus m 6km, M 7 Q‘ No. Am. m. Amt. n» Amt. n». Amt. m. Amt. m. Amt. H!“ 10118118.. _ _ _ 2 1 $184 1 $279 2 " $47 1 $182 1 $303 2 —$60 Share Tenauts_ _ - 9 3 156 6 443 9 -—243 3 88 6 575 9 —-357 C3811 Tenants- -_ 3 2 149 1 487 3 -—63 1 160 2 287 3 —.1.38 owners . ._ - _ - _ 18 8 229 10 262 18 —44 1 387 17 425 1.8 —423 A1lTellflnlS_ _ - _ _ 14 6 159 8 256 14 -—158 5 129 9 454 14 ——242 All Farmers_ _ _ _ _ 32 14 202 18 259 32!; —87 6 181 26 465 32 -—354 It will be noted that while 14 of the 32 farmers had an average farm income of $202, and 18 had a minus farm income of $259, the average for the entire group was $87. While the average farm income of owners is larger than the average of tenants’ incomes, the labor income of owners is less for the reason that the capital investment of owners is much larger. The average receipts and expenditures and the average value of live- stock of these several classes of farmers are shown in the following table: Total Total Live Receipts Expenses Stock ‘Half tenants .............................. ._$307 $354 $000 Share tenants ............................ .. 528 771 706 “Cash tenants .............................. _. 405 468 391 Owners 550 594 611 All tenants .................................. .. 454 012‘ 492 All Farmers ................................ .- 514 601 566 It will be noted that while the average receipts of tenants were $96 less than the average receipts of owners, the average expenses of tenants were $18 more than the average expense of owners. This difference in expense accounts of these two classes is partially explained by the following table, which shows the average amount of hired labor and family lalbor employed by the several classes: 19 Average Average Hired Family Labor Labor* Half tenants 4.50 175.00 Share tenants ...................................... .. 53.00 162.00 Cash tenants ........................................ .. 12.00 61.00 Owners 42.00 113.00 All tenants .......................................... .- 33.00 136.00 All farmers 38.00 122.00 *Does not include labor of head of the family. Half-renters have the smallest hired labor expense, but the highest family labor expense, which supports the general belief that farmers with large families are preferred as half renters. Cash tenants had the smallest family labor account. Owners spent more for hired labor than tenants, but received less help from their families. In this connection it becomes interesting to know the ages of members of the different classes of farmers, the number in their families and the number who assist in farm work. This data is shown in the following table, the figures being averages for the several classes: Average No. in Under 16 No. who Work Age Family Years on Farm Half tenants ...................... ..57.5 6.5 5.. 5.5 Share tenants ...................... -.46. 5.1 1.5 3.8 Cash tenants ...................... .-36.6 4.3 2.3 1.6 Owners ........................ .. ........ "49. 5.4 2.1 2.8 All tenants .......................... ..45.5 5.2 2.3 3.5 All farmers .......................... ..47.6 5.3 2.2 3.1 The age of half tenants and the size of their families indicate that this class is composed largely of farmers too old to do much active farm work themselves, but who have large families and are therefore desired by land- owners who prefer the half-renter system of operating their farms. The small number of half-renters included in this summary gave no opportunity to apply the law of average to the young men who begin their farm careers as half renters. The figures given in the foregoing tasble indicate that farm owners have slightly larger families than renters, but that their families do less farm work than the families of renters, which facts suggests the play of economic pressure as a factor in determining the birthrate in the two groups. The cash tenant, who is usually more independent financially than. other renters, is also younger than other renters, the average age of those in- cluded in the summary being 36.6 years, compared with 46 years for share- tenants and 49 years for owners. The family of the share tenant is smaller than the families of any of the groups studied, andvfewer members of his family do farm work. This fact is explained, in part, by the showing that cash tenants, being more independent, plant less cotton than other renters. 20 CROP ACREAGE. The acreage planted to corn. cotton, oats and other crops by the several classes is shown in the following table: Ave. No. Ave.No. Ave. No. Ave. No. Ave.No. Acres Acres Acres Acres Acres in Crops Cotton Corn Oats Other Crops Half tenants .......................... ..42.5 37.0 4.5 . . . 1.0 Share tenants ...................... ..65.0 40.0 18.0 3.3 3.7 Cash tenants .......................... ..36.0 19.0 13.0 1.5 2.5 Owners .................................... ..40.5 15.6 17.0 1.4 6.5 All tenants .............................. -.53.1 34.2 14.1 2.2 2.6 All farmers .......................... ..45.4 23.0 15.0 1.6 5.8 Percentage Percentage Percentage Percentage of Crop of Crop of Crop of Crop Acreage Acreage Acreage Acreage in ' in Cotton in Corn in Oats Other Crops Half tenants .............................. ..87.0 10.6 . . 2.4 Share tenants .......................... ..61.5 27.7 5.1 5.8 Cash tenants .............................. -_52.8 36.1 4.1 7.0 Owners ...................... .; ................ ..3s.5 42.0 3.4 16.1 All tenants .................................. _.64.4 26.3 4.1 5.2 All farmers .............................. ..50.6 33.0 3.5 12.9 The foregoing figures support the opinion heretofore expressed that half renters are chosen because of their willingness and ability to raise cotton,_87% of the acreage farmed by them being devoted to that crop. The remaining 4.5% was planted to corn. The half-tenant is, in fact, merely a farm laborer who works for a conditional wage, towit: one half the crop raised by him. The landlord furnishes the land, seed, stock and implements and exercises authority in the selection of crops and methods of management and cultivation. According to the individual case. the status of a half-renter is a stepping-stone to a higher economic status for the energetic and ambitious young farmer without capital or a brief resting place in the descent from independence to dependence of the farmer who has failed and who ulti- mately becomes a wage laborer. Next to the half-tenant the share-tenant is most enslaved by cotton, that crop averaging 61.5% of the total crop acreage. The cash tenant, being slightly more independent than the share-tenant, planted only 52.8% of his crop acreage in cotton, while owners averaged only 38.5% in cotton. All tenants averaged 64.4% in cotton and all farmers (owners and tenants) averaged 50.6%. The figures presented above reveal a direct relationship between cotton acreage and diversification. The larger the acreage of cotton, the less acreage in such crops as peas, peanuts, sorghum; clover, vegetables, etc. 21 The half-tenant who planted 87% of his farm in cotton planted only 2.4% in miscellaneous crops, while the landowner who planted only 38.6% of his crop acreage in cotton, planted 16.1% of it in miscellaneous crops. The influence of tenancy as an obstacle to diversified farming is also exhibited in the foregoing table, which shows that all tenants planted 64.4’,’7@ in cotton and 5.2% in miscellaneous crops, while owners planted only 38.5975 in cotton and 16.1% in miscellaneous crops. INFLUENCE OF LANDLORDS ON COTTON ACREAGE OF TENANTS. More than one hundred tenant farmers were asked the question: “Does your landlord require you to plant more cotton than you want to plant?” Sixty per cent gave an affirmative answer and forty per cent replied in the negative. These answers and general observations made in the course of interviews with both landlords and tenants throughout the cotton grow- ing districts of the state lead the writer to the conclusion that while owners as a rule stipulate a larger acreage in cotton for their tenants than the latter would plant if they were owners, the tenants do not object very seriously to the requirement. Both owners and tenants have been under the spell of the all-cotton system and have regarded cotton as the only money crop. In East Texas where fruit and truck crops are extensively grown and where they are becoming money crops, landowners are less insistent on a large cotton acreage than they are in the blackland district of central and north ‘Texas, where substitutes for cotton as a money crop have not been so extensively introduced. This conclusion leads the writer to believe that when it can be demonstrated that other crops can be suc- cessfully substituted for cotton as a money crop opposition of landowners will not be difficult to overcome. This belief is strengthened by the readi- ness with which landlords in that section assented to the proposal that their tenants should raise food and feed crops in the trying times following one outbreak of the European war. It is obvious, however, that some changes must be made in the custo- mary system of land rental before diversified farming can be generally introduced in this rich section of Texas. A large number of land owners live in cities and towns and do not care to rent land for grain and forage crops on shares for the reason that they have no stock to consume their share of such crops, and as yet there is no stable cash market for them. In this section the practice of charging cash rent for land planted in grain and crops other than cotton is steadily increasing, but tenants, as a general rule, are not willing to take the entire risk of a crop failure, which accounts in a measure for the small acreage of grain and other diversified crops on rented farms. TENANCY AND LIVESTOCK PRODUCTION. The effect of tenancy on livestock production is strikingly shown in the following tabulation, which exhibits the number and value of the differ- ent kinds of livestock on the farms surveyed in Smith, Rains and Van Zandt counties, the figures given being averages for the classes named‘: 22 AVERAGE NUMBER AND VALUE OF LIVESTOCK ON 32 FARMS IN SMITH, VAN ZANDT AND RAINS COUNTIES, ARRANGED BY CLASSES: f; s» M E 3 3 '5 f z e a é é é s "3 E “f E "’. E ‘I E z E ° E m. E °. E o a o a c n: o a e m c a e ‘i o '3 Z > Z > Z > Z > Z > Z > Z > Z > Share Tenants- 2.4 s39 .s6|s22.10 .1 $9.00 1.4 $60 1.0 $154 0 $0“.s6$1s.00 2. l$e.s4 Cash Tenants- _ _ __ 1.61 56 .33 20.00 .. .00 1.3102 .66 130 .66 2 .66 15.00 .66 5.00 Owners _ _ _ . _ _ _ _ -_ 3.0 38 1.5 19.00 1.0 11.00 2.3105 1.7 99 1 42".9 15.00 4.1 6.11 Al] Tenants _ _ _ _ __ 2.2 43 .7 21.00 .5 9.00 1.4 72 .9 148 .2 62 .8 15.50 1.6 6.44 All 0wners__ . _ 1 _ . 2.7 40 1.26‘ 19.51“ .8710.66 2.0 96 1.5 108“.13 521187 15.48 3.3 6.16 NoPigs Value N" H233“: Value No. Turkeys Value No. Ducks Value llllgtvlelsxzlse Share Tenants_ 0. $0.00 40 .30 1.1 $.75 0 3.0 $391 Cash Tenants-.. 0. 0.00 38 .35 .0 .0 .0 .0 391 Owners _ _ _ _ . _ 2. 2.70 39 .33 .76 .94 .8 .30 593 All Tenants _ __ 0. .00 39 .32 .8 .75 .0 .0 391 All Farmers__ U 1.3 2.70 39 .321 .77 .87 .25 .30 527 It will be noted that the value of livestock on farms operated by own- ers is more than 50% greater than 0n farms operated by tenants, the value for share-tenants and cash tenants being the same. Reduced to an acreage basis the comparison becomes even more striking: Value of Livestock Per Acre of Crops Share tenants ................................ ..p....$ 6.01 Cash tenants ...................................... .. 10.86 Owners ................................................ .. 14.64 All tenants .......................................... .. 7.36 All farmers .......................................... .. 11.60 TENANCY AND FARM MACHINERY. The influence of tenancy on the efficiency of farm practice is further shown by the value of machinery on owned and rented farms. The follow- ing table shows the total value of farm implements and machinery on the several classes of farms-surveyed: 23 Total Value of Value of Imple- Implements and ments and lvIa- Machinery chinery Per Acre of Crops Share tenants ................................ ..$ 95.00 $1.46 Cash tenants .................................. .- 102.00 2.55 Owners 192.00 4.74 All tenants ...................................... .. 98.00 1.85 All farmers ...................................... .. 163.00 3.59 FACTS AND OPINIONS CONCERNING RURAL CONDITIONS IN TEXAS. While collecting the data presented in the foregoing pages the author asked each farmer interviewed a list of questions designed to develop his opinions and conclusions regarding a number of subjects related to farm practice and rural conditions. In addition the life history of typical indi- viduals who have changed their status from tenants to home owners and vice versa was recorded in narrative form with the view of disclosing if possible the extent to which such changes are the result of general or individual causes. The inquiry was extended to bankers and credit mer- chants and opinions and observations are given below. If, in the course of the interview, any statement was made which re- vealed unusual conditions or indicated the farmer’s mental attitude towards rural problems a record was made of it. I Below is presented a number of typical answers and interviews. The list of formal questions follow, the answers being indicated by a correspond- ing number: 1. Could you rent this farm on shares and earn enough to buy it at the present price? PO Does your landlord require more cotton than you want? 3. Does landlord furnish pasture for cattle? 4. Does landlord furnish pasture for-hogs? 5. Why don’t you raise all your food except flour, sugar and coffee‘? 6. If landlord objects to raising food crops, his reasons? 7. Rate of interest on crop loans? 8. Difference between cash and credit prices? 9. What do you consider a fair rental contract? 10. Do you wish to remain on a farm? 11. Would you go to city if offered a job? 12. Do you expect to buy a farm? 13. What size farm do you want? 14. Have you a definite plan for buying a farm? 15. Greatest difficulty to be overcome before buying a farm? 16. Cause of increase of tenancy? '17. What should be done to encourage home buying? 18.. Is co-operation feasible in your neighborhood? 19. Kind of co-operation suggested? 24 20. Are large tracts of land in your community being subdivided? 21. Does land produce as much as formerly, and why? 22. Has cost of cultivation increased, and Why? NAVARRO COUNTY. N0. 1. Age 55 married; has wife and six children; all work in field; 1. No. 2. Yes. 3. No. 4. No. 5. Landlord objects. 6. Land so high cannot afford any crop but cotton. 8. About same. 9. Third and fourth of crop with privilege to diversify. 10. Yes. 11. No. 12. Yes. 13. 50 acres. 14. No. 15. High price of land and high interest rates. 16. High price of land and oppression of land owners. 17. Loan money on long time at low rate of interest. 18. Yes. 19. (See note). 20. None to be divided. 21. No; planted too long to cotton. 22. Yes; more grass. . Note: This man is pure American stock; fairly intelligent; eager to prosper; feels his present condition keenly; wife faded and poorly clad; children do not attend school because father is not able to clothe them properly and buy books, also because their labor is needed on the farm; is in rather desperate frame of mind and thinks renters should organize and demand share rent and right to diversify crops; lost his team two years ago; last year went broke farming on halves and next year will work for wages; wants to move to South or East Texas in hope of getting fresh start and buying a farm. No. 2. Age 55; married; seven in family; rents on shares. 1. No. 2. Yes. 3. No. 4. No. 5. Have to pay money rent for land for that purpose and afraid to take chances._ 6. Land too high. 7. 10% flat discount. 8. 10%. 9. Third and fourth of crop. 10. Yes. 11. No. 12. Yes. 13. 100 acres. 14. Rent in cheap land district and save. 16. High price of land. 17. Cheaper interest rates. 18. Yes. 19. Combat high rent and get right to diversify. 20. None here. 21. No. 22. Yes. No. 143.—Renter, aged 30: Bought 100 acres of land 4 years ago; paid $75 per acre; $1500 cash, balance 5 years at 8% interest. Could not pay interest and sold place for same amount. No man can rent land and make enough farming to buy it. The high interest rate is a bar. The farm I am cultivating was bought by the present owner in 1905 for $45 per acre; it is now worth $150 pergacre. My landlord does not require more cotton than I want. but other landlords in this vicinity do. No. 144.-—Renter, aged 60: have occupied the farm I am now on 10 years; have bought only one load of corn in that time. There are 85 acres in this farm. My landlord does not require more cotton than I want to plant, but I know that many landlords in this county do make such re- quirements of tenants. This is especially true of landlords who live in town. The high price of land and a bad financial system are the chief causes of tenancy. As a remedy I believe We should encourage small farms, build more farm houses and have no crop larger than a farmer can make and harvest himself. No. 142.—Age 44; Renter: Borrows from bank on unsecured notes and buys for cash; bought on credit until two years ago but prices paid will 25 ruin us. Rents 66 acres on shares. N0 renters have 1bought land the last two or three years. Several who bought before that time have lost their homes. One man sold his home in the southern part of the county for $2500 and paid it on a farm near me two years ago, last fall (1914) he lost his farm and all he had paid on it. Every farmer in this neighborhood is in debt. Wants to remain on the farm and would not go to the city if offered a job but sees no hope of buying a home in high priced land sec- tion—may try where land is cheaper. Believes the high price of land and low price of farm products is responsible for increase of tenancy. SMITH COUNTY. No. 3. Age 60. Dairy farmer; owns farm; buys all supplies for cash; borrows from bank when necessary; had difficulty at first getting loans from banks on satisfactory terms; bankers wanted to deduct 10% from face of note regardless of maturity; refused to accept these terms and was told it was usual practice and only after several refusals was he able to borrow money at rate of 10% per annum. “The curse of this section,” he said “is the credit system. It is the worst form of graft I have ever known. I have neverbeen its victim but I have seen its blighting effects all albout me. Tenants and other farmers who are compelled to buy on credit are charged from 25% to 50% more than cash prices and 10% in addition. I know this to be true of my own knowledge. Recently I was in a credit store p on other business and asked for $1 worth of sugar and was given one $1 package and one 50c package put up for credit trade. The $1 package contained 10 pounds and the 50c package contained 5 pounds. Thus, I got half as much again as the credit customers of this store. I buy flour at $1.75 which is sold regularly to credit customers at $2.50. Other supplies are sold at like prices. As a rule banks will not loan money to tenants, thus compelling them to buy from credit merchants. ‘Cotton buyers will not buy cotton from tenants on same terms as from independent farmers. Before they will bid on cotton they first inquire who owns it and from whom the seller bought his supplies. If it develops that the seller owes a credit merchant the buyer will refuse to bid, compelling the farmer to sell to the credit merchant at his own price. Last fall I witnessed a transaction of this kind andknow that the tenant, whose cotton'was as good as mine, sold it for one-half cent a pound less than I received. “The power of the credit merchants is far-reaching and very few farmers are able to escape paying toll to them. High credit prices is the chief cause of increase of tenancy in this section. Few tenants ever get out of debt. The credit merchants own many farms, and practice a like system of robbery upon their tenants. A few years ago a man moved into this neighborhood with $3000 in cash. He bought a farm near mine from a credit merchant, paying $1400 cash and notes for the balance. He spent the remainder of his cash for a new house and other improvements. The poor crop and low prices in 1914 left him unable to pay the note due at that time. When he went to this credit merchant and asked for an exten- sion of time he was told that the best thing for him to do was ‘give it up 26 and let it go.’ Being unable to borrow money he was compelled to do so. This case is typical of many others in this county.” N0. 6.——Age 35; five in family; rents 60 acres, cash rent. 1. No. 3. Yes. 4. No. 5. Try to do so. 7. 10% for 6 1-2 months. 8. 300/2». 9. Third and fourth of crop. 10. Yes. 11. No. 12. Yes. 13. 50 acres. 14. Rent a farm and plant extra acreage to make first payment. 15. Bad health. 16. Credit system. 17. Abolish credit system. v Note. Offered to sell cotton seed for planting to neighbor at 50c per bushel. Having no money, this man bought seed from credit merchant in Tyler at $1.50 per bushel. No. 7.-—Age 49; number in family 4; rents 60 acres on shares. 1. No. 2. Yes. 3. No. 4. No. 5. Havent time. 6. Cotton only money crop. 8. 50%. 9. "Third and fourth of crop. 10. Yes. 11. No. 12. No. 14. No. 15. Credit system. 16. Farmers cannot prosper. 17. Don’t know. Note. Few renters expect to get out of debt. They are without hope. They do not pay more attention to crops because they know they will have no money at end of year, no matter how much they make. They are hope- lessly tied to the credit system and are disheartened and discouraged. No. 8.——Age 31; four in family; owns 93 acres; owes land note. 1. No. 5. Do so. 7. 10% flat discount. 8. 33 1-3%. 9. Third and fourth of crop 10. Yes 11. No. 16. Small farms do not enable fathers to provide farms for children and the latter are compelled to rent. 18.Yes. 19. Market- ing. a No. 9.—Age 49; 4 in family; rents 60 acres on shares. 1. No. 2. No. 3. Yes. 4. No. 5. Do so. 7. 10% per annum. 8. 50%. 9. Third and fourth of crop. 10. Yes. 11. No. 12. No. 13. Forty acres. 14. No. Can't make enough renting. 16. Immigration and high interest. 17. Reduce interest rates. No. 10.—Owner cash store in country village: “Credit system is ruin- ing farmers, they are bound hand and foot. Merchants will not permit them to get out of debt. My predecessor was a credit merchant and I worked for him. When a customer's crop was promising I was told to sell him anything he wanted and urge him to buy. If the customer was a good farmer special effort was made to bring him out in debt, so as to hold his trade next year. Most of the customers of this store were bought from credit merchants in Tyler by payment of their accounts and transfer of mortgages. All mortgages were made to cover crops for three years raised anywhere in Texas. Farmers who owe a merchant cannot get bids on their cotton Without consent of the merchant. When the buyer for a merchant puts his foot on the front wheel of a farmer’s wagon, it means to other buyers “This man owes us. don’t bid.” If this farmer insisted on other buyers looking at his cotton, they would ask him how much he had been offered and when told the buyers would tell him that that was about the top of the market and he had better take it.” No. 11.—Age 55; in family 5; own 100 acres. 1. Doubtful. 5. Do so. 7. 10% per annum. 8. 90%. 9. Third and fourth of crop. 16. Credit system. 17. Abolish credit system. 18. Doubtful. 20. No. 21. No, rich top soil washed off. 22. Yes. labor is high. v 27 Note: This family gets water from a spring 200 yards from the house. N0. 12.——Age 35; In family, 3; Rents 50 acres for cash. 1. No. 2. Yes. 3. Yes. 4. Yes, this year for first time. 5. D0 so. 7. 10% flat discount. 8. 75%. 9. Third and fourth of crop. 10. Yes. 11. No. 12. Yes. 13. 50 acres. 14. No, but will buy when can pay half cash. 15. Accumulating enough money to make first payment sufficiently large to save me from being eaten up by the interest on the balance. 16. Credit system and attempt to buy homes on short time credit. 17. Abolish credit system. 18. Doubtful. 20. No. 21. No, washed out. 22. Yes, bad seasons. Note:—Says banks are in league with credit merchants and advise farm- ers to buy on credit. Credit merchants buy customers from each other. Mortgages are made for three or four years in advance. Tenants cannot get competition in sale of cotton if they owe credit merchants. The latter have an understanding with other buyers and employ signals to keep them from bidding on their customer’s cotton. Scores of farmers in this county have bought farms and paid as much as one-half of the price and lost them through credit merchants taking teams and wagons under crop mortgage. Renters generally do not expect to get out of debt this year. "They are discouraged and disheartened. The credit system has been in existence many years and has ruined the farmers of this county. Renters do not plant winter pasture or improve their soil, because they do not know how long they will stay on the place. Land owners will not make long leases. No. 13.—Age 5+5; in family 5; Owns 110 acres, mortgaged. 1. No. man can do it anywhere in East Texas. 5. Cannot afford to buy fertilizer for old lands. 7. 10% for six months. 8. 75 to 100%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Advancing "land values and high cost of living. 17. Long time credit and low interest rates. Note: Says credit system has impoverished the farmers of Smith county and they are discouraged and hopeless. They see no way out of debt and will work only enough to get rations to live. No. 14.——Age 55; In family, 4;» Own 77 acres. 1. Yes. 5. Do so. 7. 10% flat discount. 8. 50%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system and lack of management by farmers. 17. Provide better system of credit. 18. Don't know. 19. Marketing. Notei-Says credit system is ruining the country. No. 15.—Age 51; In family 7; Own 60 acres. 1. No. 5. Do so. 7. 10% for ten months. 8. 50%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system. 17. Encourage cooperation. Note:—Credit system drove me from the farm nine years ago, causing me to lose my home and all stock and implements. Worked in city and saved money to buy place now owned. Since return to farm have traded on cash basis until this year. Within last two years four of my neighbors have deeded their farms to credit merchants to pay debts and left the county. Rode from Tyler recently with neighbor who buys on credit. Both had sacks of same kind of flour, he paid $2.25 and I paid $1.75; he paid 65c for a bale of hay that cost me 50c; 25c for a sweep that cost me 15c. N0. 16.-Age 48; In family 2; Own 168 acres. 28 1. N0. 7. 10% flat discount. 81 100%. 9. Third and fourth of crop. 16. Credit system and thriftlessness. Note:—Was grocery merchant and moved to farm for health. Farmers are robbed by credit merchants and commission men. Know personally that a commission firm in Tyler reported shipment of tomatoes a loss when they brought top prices. A neighbor received such a report from this firm at a time when he had in his possession a letter from consignee offering top prices for more. Credit system controls machinery of courts. -S‘till Leep up with grocery prices and know that credit prices are 100% above cost. Since I have been in the county at least 20 men have come in, bought land and have been cleaned out by credit merchants. No. 17 —Age 47; In family 7; cultivates 172 acres owned by relatives. 1. No. 8. 50%. 9. Third and fourth of crop. 10. Yes. 11. No. 12. No. 15. Can’t make enough. 16. Farmers cannot prosper 17. Reduce interest rate. I Note:—Know many farmers who bought farms within last three years, not one has made paymentj most of them have turned places back for balance due and become renters. No. 18.——Negro; Owns 100 acres; traded for fifty acres ten years ago and bought fifty acres for $6 an acre. Still owe $200 on second tract and see no way to pay it out. Short feed crops compel dealing with credit merchants and pay 80c to one dollar profit on each dollar's Jorth of sup- plies bought. “Credit system will probably cause me to lose my farm as I cannot pay debt at prices I must pay for supplies. For years credit mer- chants have insisted that customers plant so much cotton that they had no‘ time to raise corn and vegetables. This year (1915) they told us to plant. more corn but within last few weeks their riders have demanded that we. plow up corn and replant with cotton.” ‘ No. 19.—Negro; renter: Trade with credit merchant; give crop mort- gage on everything. Do not expect to pay out at the end of year. The only way negroes get out of power of credit merchants is to “walk out”-— and many of them do so and get along in a new place very well until they begin buying on credit and then they get tied again. If a negro makes a good crop the merchants tempts him to buy wagons and buggies on credit and sometimes will refuse to accept cash in order to keep him in bondage next year. They are now making negro customers plow up corn and plant. cotton. No. 21.—Proprietor of drug store: I was asked by a credit merchant to give him a discount on the drug bills of his customers who traded with me. When I refused he asked me to add 20% to the bills and pay the same over to him. I refused to do so and have made an effort to induce other" druggists here to discontinue the practice of paying credit merchants a commission on bills of their customers. No. 22.—Banker: Smith county farmers pay an average of 30% for credit to make a crop. Credit is impoverishing the people. See no relief" except through banks loaning money direct to farmers at reasonable rates of interest. _ ' No. 23.—Credit merchant, "Tyler, Texas. Credit system is a necessity 29 in East Texas, because of the system of farming and the type of farmers. Farmers who buy 0n credit prosper more than those who borrow from the banks and buy for cash, because credit merchants supervise the opera- tion of their customers more closely than banks do and check their tendency to buy recklessly and extravagantly. Many farmers prefer to buy on credit rather than take care of What they make. Credit obtained through mer- chants costs farmers 20%. Merchants base credit on cotton almost ex- clusively and must continue to do so. The credit system cannot be dis- pensed with in East Texas. Farmers are now practicing economy but one or several good crops would not put an end to buying on credit. Many farmers are dependent and thriftless and will buy anything they want regardless of value or price. A case in point: One of the best negro farmers in this county a few years ago owed this firm $400.00 but made a good crop and paid his debt in full. Being anxious to keep him as a customer I urged the negro to buy a buggy and turned him over to a salesman who took the negro into the vehicle department where many buggies were on exhibition. When he came to the first buggy in view (a black one) he said: ‘I will buy this one.’ Passing further down the line he saw a red buggy a.nd changed his mind and bought it without inquir- ing the price or examining the quality. This incident illustrates the lack of business sense of all negro and many White farmers in East Texas. Credit merchants of Tyler have for years tried to help their customers by inducing them to plant better seed and practice economy. No. 24.—School teacher. Most farmers in his district own farms but none have bought land in recent years and those owing notes have not been able to meet obligations for the last three or four years. Efforts of farmers to form selling associations has had to encounter open and secret opposition of commercial interests of Tyler, inspired by credit merchants and commission dealers. While the association was in existence it com- pelled merchants and commission men to pay farmers fair prices, but when the association died prices dropped and were much lower in Tyler than at Jacksonville and other points in this section. Farmers are in need of cooperation, but are discouraged and suspicious. The cause they have been dealt with dishonestly so often in the past by business men and their own ajents. No. 25.—Age 62; Owns 600 acres; former member of Texas legislature; Income from rental of farms, ten year average, $4 per acre; present value $25 per acre. Will gladly make long time leases but tenants will not contract to stay longerthan one year. Have much trouble in inducing tenants to plant food and feed crops. Compelled them to do so this year. They prefer to raise cotton and buy supplies on credit. Cost of credit is close to 100%. Credit system is more extensive now than ever before. Very few farmers are able to escape it. Have helped tenants who were “down and out,” but as soon as they began to buy on credit they lost all. No. 26.——Age 40; In family 9; Owns 56 acres. 1. No. 5. Do so. 7. 12% to 25% per annum. 8. 50% to 75 per cent. 9. Third and fourth of crop. 10. Yes. 11. No. 16. High cost of land. Can't 30 make enough from crops to pay for land. 17. Provide better prices for farm products. N0. 27.—Age 46; In family, 6; Owns 170 acres, mortgaged. _ 1. No. 5. D0 so. 7. 15% per annum. 8. 33 1-3%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system. 17. Provide better farm credit. 18. Yes. 19. Marketing. ' - * Note:—Buying on credit this year and fear will lose all. While in store yesterday a neighbor who buys for cash bought corn for 92 1-2c per bushel while I paid $1.35 plus 10% on credit; he bought meal for 75c for which I was charged $1.50. No. 30.—Age 40; In family, 5; Rents 85 acres for cash. 1. No. 2. No. 3. Yes. 4. No. 5. Raised cotton to get out of slavery-- instead it has enslaved me. 8. 45%. 10. Yes. 11. Yes. 12. No. 15. Large cash payment required, short time notes and high interest rates. 16. Credit system. 17. Forbid extortionate prices of credit merchants. 18. Doubtful, merchants successfully oppose cooperative buying and selling by farmers. Note:—Have been “running behind” about $250.00 each year for four years. Very few farmers will get'out of debt within the next five years. In the end we will have to fight for relief. No. 31.—Age 52; In family, 9; Owns 250 acres. 1. No. 8. 33 1-3%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system. 17. Limit prices of supplies bought on credit. 18. Yes. 19. Cooperation of farmers to escape from control of credit merchants. Note:—-The credit system has been here for a long time but only i11 recent years has it affected land owners. Owners as well as tenants must now give crop and stock mortgage for credit. Conditions are becoming worse and the people are desperate. a No. 32.—Age 69; 1n family, 3; Own 300 acres. 1. No. 5. Merchants require cotton so they can sell supplies. 16. nTGdit system; can’t make enough under this system to pay debts. 17. Abolish credit system. Note:——Credit merchants not only control crop operations of customers, .but their political actions as well. They dominate political affairs of this county. i p No. 33.—Age 37; In family, 6; Owns 100 acres, mortgaged. ‘ 1. No. 5. Do so. 8. 60%. 10. Yes. 11. No. 16. Credit system and high interest rates. 17. Reduce interest rates. No. 35.——Credit merchant, Tyler, Texas: “The credit system has been growing in Smith county for several years. Present conditions of farmers due in large measure to their extravagance. For years they have been buying beyond their means. Prior to the European war credit was too cheap and too easy to obtain and farmers bought too freely. Merchants have insisted upon cotton and their customers have neglected food and feed crops. More than 50% of supplies sold to farmers this year consist of feed and meat. All-cotton farming is not profitable and this year mer- chants are requiring farmers to plant feed crops. Credit prices are about 20% higher .than cash prices. It is better for farmers to buy from credit 31 merchants, than to borrow from banks and pay cash for supplies, because when they have the cash they will buy extravagantly and wastefully. VAN ZANDT COUNTY. N0. 37.——Credit merchant: Farmers of this county are in poor financial condition, due to cheapcredit extravagance. In recent years it has been so easy for farmers to get credit that they have bought food and feed supplies instead of raising them. The European war has only hastened the coming of a crisis which would have come even if there had been no war. In the past any farmer, no matter how poor or worthless, could get credit on which to make a crop. The increase in the number of banks brought competition in lending money. Banks preferred to loan $100.00 each to ten farmers to loaning $1,000.00 to one merchant. For several years banks in this county have made loans t0 farmers at from 10% to 15% flat discount, requiring only- the endorsement of a reputable neighbor. This practice resulted in extravagance and over-buying by farmers. They would borrow from different banks and spend the money before time for selling crops and would then come to the merchant for credit. It is better for farmers to get credit from merchants, because the latter compel economy, and having no cash on hand the farmer cannot buy whatever he sees and fancies. This year both banks and merchants are requiring security in all cases. Many farmers have not been able to get credit and have been com- pelled to work as wage hands. Eighty per cent of all charge accounts on my books are for feed, meat and molasses. "The price of goods sold on credit is about 20% above cash prices and varies according to the ability of the buyer to pay. No. 40.——Age 46; In family, 6; owns 170 acres, mortgaged. 1. Yes. 2. Yes, when I rented. 5. High price of cotton. 7. 30% per annum. 8. 15%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system. 17. Abolish credit system. No. 41—Age 60; In family, 5; Owns 200 acres. bought with money earned off the farm. 1. No. 5. Try to do so. 8. 10%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Credit system and high interest rate. 17. Reduce interest rate and regulate credit merchants. 18. Yes. 19. Marketing. No. 43.—Farms 80 acres owned by his family. 1. No. 2. No. 3. Yes. 4. Yes, fenced land himself. 5. Don’t know-- thought cotton best crop. 8. 40%. 9. Third and fourth of crop. 10. Yes. 11. No. 12. N6. 14. No. 15. Cannot get out of debt. 16. Low price of farm products and swindling of farmers by city men. 17. Don’t know. No. 44.——Manager cash store, Wills Point: Farmers in very straightened circumstances and buying very little and living very hard this year. The causes are the failure of feed crops and the low price of cotton last year. There are no credit merchants in Wills Point. There have not been for several years. Most farmers who require credit borrow from banks. The interest rates on farm loans is 10% flat discount. Before the war bank credit was easy to get and there was a tendency toward extravagance. The credit system flourished in this part of the county until 8 or 10 years ago. 32 Good crops and the advent of state banks enabled the farmers t0 become independent of credit merchants and the latter went out of business for lack of patronage. The passing of the credit system has benefitted farmers and improved business conditions in Wills Point. When the credit system flourished there were no country stores in the county. Now there are many such stores and all are doing a good business. a No. 45.—Credit merchant, Grand Saline: We are exercising more care in extending credit this year than in the past and as a result many farmers have been unable to make a crop. These belong to the thriftless class who did not respect their obligations. Credit restrictions in the future may re~ duce the number of farmers but will improve the class. Our practice is to find out how much credit will be necessary for a farmer and permit him to buy only so much a month. The cost of credit obtained from banks and credit merchants is about the same. Credit prices will average 10% to 12% above cash prices and are highest on feed stuffs and other things raised on farms. We have no general rule for fixing credit prices. Thus a pair of overalls the cash price of which is $1.00, sells for $1.10 on credit, while a pair of $3.50 shoes sells for $4.00 on credit and three boxes of soda or three cans of lye are sold for 25c cash or credit. Cotton is still the main basis of credit. If a farmer raises his feed it is safe to sell him as much as $5.00 an acre on his cotton crop. About 75% of our credit sales to farmers consists of feed, meat, molasses and other things that can be raised on any farm in this county. The high price of cotton and cheap credit is responsible in large measure for the failure of farmers to raise feed and food crops. The loaning of money to farmers by banks is good for some and bad for others. It tends to encourage extravagance and wastefulness. The increase in number of small banks and indiscriminate lending to farmers cause many of them to incur obligations which they can not possibly pay. This. taken with the failure to raise feed and food crops, brought about conditions that were bound to bring disaster, and the war only hastened, but is not solely responsible for, the hard times we are now experiencing. No. 46.—Bank Cashier, Grand Saline, Texas: With possible yields and best prices it will take three or four years for the farmers of this section to pay their debts. About a half million dollars of farm loans are carried by the banks and merchants of Grand Saline. This amount is about equally divided between banks and credit merchants. "This bank is not making any loans to farmers at this time. (June, 1915). We have no loanable funds, but if we had funds we would not make farm loans until we know what will be the outcome of the agitation and litigation over interest rates charged by banks on farm loans. In three suits filed by this bank to col- lect such loans the defendant pleaded usury and the bank lost all interest. Several suits to recover double the amount of usurious interest paid the last few years have been filed against another bank in this vicinity. I am told that in Rains county scores of such suits are being filed. Farmers will not let you treat them right. They will turn against their best friend. If this bank had a million dollars to loan it would not loan one dollar to “farmers at this time. The agitation and litigation over bank interest rates 33 was startedby the socialists and a few lawyers who wanted fees. While it is cheaper for farmers to borrow from banks and pay cash for supplies it is better for some of them to deal with credit merchants for the mer- chant will only let them buy so much each month, while if they borrow money for a season’s supply, they will spend it in a few months. Small banks can not afford to make farm loans at 10% per annum. A merchant can buy corn at $1.00 a bushel and sell it at $1.50, the 50c difference being his profit. If we loan a man $1.00 and charge him 50c we are guilty o1’ usury. No. 47.——Bank Cashier, Grand Saline, Texas: Financial condition of farmers in this section is very bad. Only a few will be able to get out of debt this fall. Phenomenal yields and good prices will not enable a majority to pay their debts. Banks here are not loaning much money to farmers this year (1915). Last year we made too many farm loans and a crop failure and the 10W price of cotton placed banks in a very embarrass- ing condition. Our necessities compelled us to collect very closely and we collected 40% or 50% of our outstanding loans. We renewed the loans we could not collect but have not made any new farm loans, for the reason that all of our funds available for this purpose were represented by renewals carried over from last year. The action of the banks compels farmers to resort to credit merchants for supplies. The condition of those farmers who owed the banks for 1914 loans has been very embarrassing. The banks could not make further loans to them and they had no unmortgaged property to pledge to merchants for supplies. "The result has been that many such farmers have been unable to make crops this year. Previous to this year, crop loans have been much sought after by banks for three reasons: First, the interest rate was attractive; Second, the amount of each loan was small; and Third, the money remained on deposit and was withdrawn slowly. Our experience last year, however, has taught us that such business is hazardous and we will not engage in it so extensively in the future. The socialistic element about here has organized a move- ment of protest against interest rates charged by banks and has caused several pleas of usury to be made in suits by banks, and in some few in- stances suits have been filed to collect usurious interest paid for several years past. This agitation has had the effect of causing banks to be more careful in making loans and will result in limiting farm loans to a few men of undoubted solvency and standing. The protesting class will find itself cut off from credit and compelled to rely on credit merchants who can charge prices to suit themselves. The customary rate of interest. on farm loans is 10% from time made until fall. We have been deluged with offers .by farmers to pay 25% and even 30% for loans until fall, the- applicants saying they could pay these rates and save money on purchases: of supplies at cash prices. ‘ No. 48.——Credit merchant, Grand Saline, Texas: The credit system is all wrong and I frankly tell the farmers so and urge them to raise food and feed supplies and quit buying on credit. They cannot pay credit prices- and prosper. Take for instance a sack of chops. The cash price is $1.80; 34 the credit price is $2.40, or 60c above not cost but cash price. Now 60c for the use of $1.80 for, say, four months figures up awfully high. Other credit prices are in proportion. On an average credit prices are more than 33 1-3% higherthan cash prices. More than 50% of our sales to farmers consists of feed, meat and other things that could be raised on the farm where they are consumed. The lending of money to farmers by banks is responsible in large measure for present conditions. A man will borrow - $200 or $300 from a bank early in the spring and immediately it begins to burn his pocket and he begins to spend it for things he does not need or could do without. The result is that he is out of money before his crop is made. When a merchant extends credit he arranges it on a monthly basis, and sees to it that the monthly allowance is not overdrawn. The only remedy I know for these conditions is for banks and merchants to exercise closer supervision and regulation over the affairs of their farmer custo- mers. Several years ago when I was losing heavily on farm accounts I went over my books and found that many customers were buying $50 or $75 worth of goods in January or February. I went over the list of articles bought and found that they included many things which the buyer did not need or could do without and I quit letting them buy such things. No. 49.——Bank Cashier, Canton, Texas: There are no credit merchants in Canton. They were here in other years, but were put out of business by the banks. When I came here to open a bank an extensive credit merchant of Wills Point who did much business in this vicinity said to me: “Well, you will put me out of business so far as the Canton territory is concerned.” This bank charges 10% flat discount for farm loans. I know this is a viola- tion of the law but I am not ashamed of it. I say publicly and boldly that our interest rates are unlawful, but rates we charge are many times lower than the rates for credit charged by merchants. If the legislature should penalize bankers for making loans at more than 10% per annum. they would force the farmers back into the grip of the credit merchants. At the rates we charge for money farmers can save many times the amount of interest by buying for cash. The A. and College is doing a splendid thing in making an investigation of the credit system and if the public knew its disastrous effects they would not sanction the efforts of socialists and other politicians to drive the banks out of the farm loan business by penal- izing them for loaning money at more than 10% per annum. No. 50.—Bank Cashier, Wills Point, Texas: The credit system will destroy any farmer who tries to farm under it. It flourished here until the banks began to lend money to farmers and then the credit merchants went out of business for lack of patronage. I own several farms operated by tenants on third and fourth plan. I will not rent land to a man over 40 years old because if he has reached that age without getting ahead he has missed the ball too often for me to send him to bat. An investiga- tion of the credit system by the A. and M. College will be of incalculable benefit to the business men as well as the farmers of Texas. No. 51.—Bank Cashier Wills Point Texas: Farmers are badly in debt 35 but are economising and living on less than ever before. Many were unable to pay their debts last fall but with good crops and fair prices they will get out of debt this fall (1915). The credit system flourished here until 5 01' 6 years ago when it was destroyed by the banks loaning money to farmers. The banks had much difficulty at first in inducing farmers to borrow money and buy supplies for cash. Now all farm credit here is obtained through banks. We regard farmers as our best customers. The interest rate is usually 10% from the time of the loan until fall. When we first began loaning to farmers we required personal endorsements, but now we take chattel, mortgages when possible. Bank loans encourage extravagance only in exceptional cases. We heartily endorse the A. and M. College plan of mak- ing food and feed crops and not cotton the basis of credit. We formerly based credit on cotton, but do not do so any more. The passing of the credit system has benefitted Wills Point greatly. It loses us some trade, but it is the kind we do not want. No. 52.—Bank President, Wills Point, Texas: The banks of Wills Point destroyed the credit system in this vicinity by loaning money to farmers for crop making purposes. The rate varies from 10% to 12%. and higher flat discount for small loans. For instance a farmer wants to borrow $15 to hire labor to chop cotton. At 10% the interest would amount to only 35c, which will not cover the cost of carrying the account through our books. We charge $1.00 for such a loan. Here is a note for $55 made today (June 7,1915) due October 1, 1915. We charged $5.00 for the loan. We find farmers are good security and do not hesitate to make loans to them. If the legislature should penalize banks for loaning money at a higher rate than 10% per annum, it would result in the return of the credit system. Normally farmers require credit for 80% of the cost of making their crop. No. 95.—First year on rented land. Been a wage hand heretofore. Married and now renting land on halves. Buy supplies on credit. Few of his neighbors borrow from banks, but great majority buy supplies from credit merchants. Very few of them expect to get out of debt this fall. l No. 55.——Age 55; Renter: 1. No. 2. No. 3. Yes. 4. No. 5. Drouth and the stock law. 7. 10% flat discount. 8. 10%. 9 Farmers should own land. 10. Yes. 11. No. 12. No. 15. High price of land and low price of farm products. 16. High price of land and credit system. 17. Adopt socialism. 18. No. Note:—Buys on credit and pays 10% more than cash prices. Says most tenants in his neighborhood look to socialist party for relief. Declined to give information about business because “it would do no good.” Says socialism is only relief for farmers. No. 54.—*Age 86; Retired farmer: - 1. No. 5. Not farming now; neighbors do not do so because they are wild about cotton. 8. 30%. 9. Third and fourth of crop. 16. High price of land, credit system and all-cotton farming. 17. Don’t know. 18. No. 20. None here. 21. No, seasons have changed. 22. No. Note:—Has lived in this section 50 years. Credit system been growing 36 worse for 35 years. and has impoverished farmers. Has never traded on credit but has observed its effect on neighbors. Has known many men to buy farms in the woods and work several years improving them and then lose them through the credit system. If the inquiry into the credit system now being made by the A. and M. College had been made 20 years ago Texas larmers would be in better condition today. N0. 53.—Age 50; Owns farm: 1. No. 5. No time after taking care of cotton crop, which is the only money crop. 8; 40%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. High price of land and credit system. 17. Provide cheaper credit. No‘. 56.——Age 47; Owns 80 acres: 1. No. 5. Plant so much cotton to pay debts have no time for other crops. 7. 30% to 35%. 8. 25%. 9. Third and fourth of crop. 10. Yes. 11. No. 16. Farmers sell homes to pay debts and cannot .buy again. 17 . Stop land owners from requiring renters to plant so much cotton. RAINS COUNTY. Author’s Note.——Since this investigation was made the agitation over usurious interest rates in Rains county has almost, if not entirely, subsided and normal conditions again prevail. No. 56—Age 47; Farmer: “Last fall (1914) I owed the bank two notes, one secured by an endorser and the other by pledge of personal property. On September 11, 1914, an agent of the bank came to me in the field and asked me to consolidate the two notes into one and secure it with a mortgage. At first I refused, saying I was not able to pay the debt at once. He told me that the bank would not expect me to pay at once; that I could have all the time I wanted——from one to five years if necessary; that all the bank wanted was to get the paper in shape for presenting it to the government to get emergency currency and that I could pay it as I was able. I consented and he filled out a note which I signed without reading, as I was at work in the field and did not have my glasses with me. I afterwards learned that the note, which was dated September ll, 1914, and was due October 1, 1914, included $84 interest for that period. On the first of November the bank made a written demand that I pay at once and threatened to close me out. I paid the note and felt so outraged over the treatment I had received that I went to a lawyer for advice and finally filed suit to recover penalty under the usr ‘aw. I feel that I was morally justified in doing this because the bank la not only charged rue an extortionate rate of interest but had deceived me into signing the note due in less than 30 days when they had promised to give me all the time necessary to pay it. “I am not advising other men to follow my example, but hundreds of them are going to do so. I have not talked with a farmer in months who has not told me that he was going to make a demand upon the banks for" the return of usurious interest this fall. Lots of them are going to settle their outstanding notes with their claims for‘ usurious interest paid 1n previous years. This will enable many of them to get out of debt who could not do so otherwise. My belief is that the movement against high 37 ‘ interest rates will continue. The end and aim of it is to get 10% money— that is 10% flat discount. Until the banks loan it that way the fight will go on and it will be extended to other places. Demands similar to the one I made are now being made in lSulphur Springs and other nearby towns. There is no organization to make this fight but every farmer feels the same way about it and an organization is not necessary. The banks have robbed and squeezed the people here as long as they can stand it, anal they are not going to stand it any longer. The average interest rate paid on farm loans in this county is 30% to 35%. Loans are usually made for a period of 5 to 6 months for which 15% discount is charged. The banks have been very severe in forcing collections and the farmers are very sore. I never buy on credit and do not know credit prices, but the other day I saw a man pay $2.20 plus 10% for a sack of chops which I can buy for cash for $1.85.‘ I suppose other credit prices are in proportion. “While my suit was pending an agent of the bank threatened me with prosecution if I did not withdraw it. He charged me with having given him a mortgage on property that was already mortgaged. At the time I gave the mortgage to the bank I told the bank's agent that there was a prior mortgage of $300.00 against the property, which I was going to pay off, and I did as promised, leaving the mortgage to the bank a first lien. l defied the bank to prosecute me and when they saw that I could not be bluffed they settled my suit. “The farmers of this county are in a bad financial condition, due to the robbery of the banks and a crop failure last year. Large crops of feed are going to be raised this year but only a few farms have cribs large enough to hold a year’s feed supply. The average rented farm in this county has neither a barn nor a shelter for livestock. The result will be that feed crops raised this year will go out of here in box cars and come back next year the same Way and be resold to the farmers to make next year’s crop. I am a native Texan and was raised in this county.” No. 57.—Bank Cashier, Emory, Texas: “Credit requirements for farmers this year (1915) are large, possibly larger than last year. About 33 13% of credit to farmers this year has been to buy feed, and about 15% to buy supplies that could have been raised at home. The average farmer does not make good use of his credit. This bank does not make new farm loans during the collection season inthe fall. Many farmers go to the merchants in November and D ber and tell them: “The banks will not begin making loans until J1. 1n" ry and I want a little credit until then; as soon as the bank opens up I will pay you.” The merchant will not only sell him all he wants to buy but will encourage him to buy things he will not need. When that farmer comes to the bank in January we discuss with him the amount of money he will need to make a crop and loan him that amount. The first thing he does is to pay the merchant and the result is he is out of money before the crop is made. If we will not loan him more money he will go to the merchant and give a second mortgage and the merchant will sell him to the limit of the probable value of his share of _the crop. Most of the mortgages held by merchants here are second mortgages, the 38 first lien being held by the banks. There is some little feeling among the credit merchants against the banks 0n that account. My advice to farmers is to get their credit exclusively from the banks or merchants and not from both. A “It has been my observation as merchant and banker that farmers un- derestimate their credit requirements at the beginning of the year. As avmerchant, my rule was that when a farmer said he needed $50 credit t0 make a crop not to let him have it unless he was a good risk for $150, because he would invariably want three times as much as he first asked for. As a banker, I have not applied that rule, but I am beginning to be- lieve it will be wise to do so in the future. The average farmer is neither industrious nor economical. “Last fall the — bank lost its head and began to force the collection of its farm loans in this county. It compelled the farmers to sell their cotton regardless of market conditions and also to sell their stock and ‘mplements. It foreclosed many loans and the severity of its actions aused much public resentment. In one case in which they were especially severe the debtor paid his note and sued for several hundred dollars pen- alty under the usury statute. The day before the trial the bank settled the suit by paying the claim and that set the county wild. There was much talk and a certain lawyer began to take claims against the Emory banks. At first we compromised. hoping thereby to. end the agitation, but instead the agitation increased and the people came in droves to demand the return of interest they had paid us. We quit compromising and will fight all suits. If these suits and demands continue banks will be forced out of the farm loan business and farmers will be compelled to get their credit through credit merchants. I do not think credit merchants are responsible for the agitation against banks. While most of the men who have made claims are socialists, the leaders of the socialist parties have repudiated their action and advised against destroying banks until some substitute is pro- vided. “I do not know what credit prices are, but farmers tell me that they can pay 25% interest for money and save money .by buying for cash. This bank charges 13% for farm loans regardless of maturity. A farmer who borrows $100 January 1st gives his note for $113 payable Oct 1, although we are willing for him to pay at a later date if he wants to. The man who borrows later in the year pays the same price. Small banks cannot afford to loan money to farmers at 10% per annum, and an attempt to force them to do so will drive small country banks out of business and concentrate the banking business in large cities where the small farmer cannot get credit. Practically all the business of this bank and of other banks in towns of this size is with farmers. There is not enough commercial busi- ness in this town to support one bank. Banks cannot afford to loan money to farmers at 10% per annum. In the first place, the amount loaned is so small that 10% will not cover the expense of running the bank and leave anything for the stockholders. Another reason is that when farmers come to borrow money early in the year they ask for less than they will 39 require. We know that they will need more later on, and are compelled to keep this amount on hand for them when they need it. If farmers would borrow on the first of January all the money they will need during the year we could afford to charge a lower rate of interest. ‘But instead of doing this they will borrow a part only of what they will need and the remainder must be kept on hand by the bank for them later on. This is why banks charge the same for loans made in late spring and summer as for loans made early in the year.” N0. 58.——Negro, Age 63; large land owner: Last fall (1914) I owed the bank two notes. I had 17 bales of cotton ginned and stored on my farm, but the price was so low that I wanted to hold for higher prices. I realized that if I sold at prices then being paid I would not have enough money to pay my debts and have anything left to live on through the winter. The bank wrote me a letter to come and pay my notes. I went to see the bank on a Friday and when they demanded at least a part of the debt I promised to come home and sell something and send them a payment. The next day. Saturday, I loaded seven bales of cotton on two wagons and went to Emory, my purpose being to sell the cotton and send the money to the bank. When I arrived at the public square at Emory an agent of the bank roughly demanded immediate payment. I went into a store to see about selling my cotton and when I came out the agent of the bank had unhitched the mules from the wagon and in less than half an hour he sold them for $225, although I had refused $350 for them and they were easily worth $400. The same day he went out to my farm and seized six head of cattle, in- cluding three fine milk cows, a two-year-old heifer and two two-year-old steers. He brought them to Emory and sold them the same day for $125, which was less than half their real value. I borrowed about $40 and paid the balance due on the notes to the bank and turned them over to a lawyer who sued the bank for usurious interest. An agent of the bank came to see me and tried to induce me to withdraw the suit. When I refused he threatened to put me in the penitentiary. As I had violated no law, I re- fused to talk compromise with him and he later settled with my lawyer for $200. The action of the bank “broke me up.” I was left with a large family without a milk cow and have been compelled to go in debt again for living expenses. I made $12 a bale on the cotton I held and if 1 had been permitted to hold it all for a short time I could have sold it for enough to-pay all I owed the bank and to support my family through the winter. No. 59.—Bank officer, Emory, Texas: The total volume of farm credit in this community is about equally divided between the banks and the merchants. Credit prices are from 35% to 60% above cash prices. Banks charge from 10% to 15% flat discount for farm loans. The rate varies according to the standing and ability of the borrower to pay. In the winter and spring we charge from 10% to 15% for loans maturing Oct 1. Along in the summer we charge only 10%. We collected about 20% of our farm loans last fall. The remainder were carried over and we have loaned mainly to these debtors this year, limiting loans almost entirely to amounts necessary to buy feed and groceries actually necessary to making crops. 40 The average farm loan this year (1915) is between $75 and $100. Last’ year the average was about $200. This spring and summer there has been a wide-spread movement in this section to sue banks for usurious interest. This bank has paid many such claims, compromised others, and now has several suits pending against it. The movement arose out of the severity of a bank located in a nearby "town in forcing collection from farmers in this vicinity last fall. That bank had much money loaned to farmers in this county and sent its agent here to enforce payment. It foreclosed many mortgages and livestock and farm implements on which they held mortgages were seized and sold for a ridiculous percentage of actual value. There was a strong revulsion of sentiment against that bank, which was later extended to other banks in some degree. When two suits to recover penalty under the usury statute were filed against this outside bank and were compromised by the bank, the news spread and other farmers began to make similar demands on the two banks here. One of the banks here compromised the first few claims, hoping thereby to end the matter. We did likewise, but instead of hushing the matter up, it advertised it, and for a while claimants for the return of interest were lined up at our bank like farmers at a mill. In self defense we decided to pay no more claims and will contest all suits. Much feeling has been aroused in this community. A certain preacher in the country near town preached a sermon against usury, upholding the action of the protestants. Articles for and against the suits have been printed in the local newspaper. While it happened that the first six men that collected money from us were socialists, the socialist leaders of the county have ridden over the county circulating a protest against the suits. If the agitation continues, and the banks lose the suits, the effect will be to put the banks out of the farm loan business. One result of this agitation Will be that those responsible for it will be the greatest sufferers. They will cut themselves off from credit at the bank and it is doubtful if merchants will care to extend credit to men who have violated theirlcontracts. For instance, a man who has received many favors from this bank has sued us for usurious interest on loans which enabled him to save his stock from seizure under a mortgage to another bank. Now, this man owes a note on his farm which falls due this fall. I represent the company that owns the note and if this man makes us pay him back the interest he has paid us I will get» his farm. A partial investigation has disclosed that at least ten of the parties who have made these demands on the bank owe debts on their farms and it is not likely that any of them will be given any extension when these debts come due. There is a perceptible movement of farmers from the black lands into this county to buy homes. Land has increased more than 50% in price in the last four years and is advancing. No. 61.——Attorney at Law, Emory, Texas: “The agitation and litigation over the practice of usury by banks in this and adjoining counties arose out of the action of the bank in exacting unconscionable interest from a farmer who paid the bank about $84.00 for a month’s extension of 41 a loan of about $300. He brought the notes to me and I advised him that he could collect double the amount of usurious interest paid. I filed suit for him for $310. A few days later I filed a similar suit for $300 for a negro who had been forced to sacrifice his property to pay his debt to this bank. Officers of the bank came to see me several times and tried to get me to dismiss the suits or compromise for a small sum. I refused. Later an agent for the bank came to Emory and publicly declared that he would send the two plaintiffs to the penitentiary, which threat was repeated to one of the plaintiffs in the presence of a prominent merchant of Emory. Later in my office he backed down on his threat and on the day the cases were set for trial the bank paid one plaintiff $250 and the other $200 in settlement of their suits. When this settlement became known there was much talk about it and I was deluged with cases of the same kind against banks at Emory and surrounding towns. ‘To date (June 11, 1915) I have filed 36 such cases and expect to file 50 0r 60 more before fall. “The farmers of Rains county borrow between $350,000 and $375,000 annually from the two banks of Emory. The usurious interest collected by one of these banks in the last two years will exceed $27,000. There are 1,322 poll tax payers in Rains county and about 2200 chattel mortgages on the records, practically all of which were given by farmers.” Note:—The following memoranda was obtained from copies of com- plaints prepared for filing in the Justice Court at Emory by the attorney quoted above. The names of borrower and lender are omitted and they are referred to by number. r 1. Note for $149.90;_Date Jan. 8, 1913; Due Oct. 1, 1913; paid Jan. 27, 1914; charged in face of note as interest, $20.00. 2. Note $132.60; Date April 29, 1912; interest included in note $17.50. When due paid $65 and balance merged into new note for $77.50, dated December 24, 1912; due October 1, 1913; charged as interest interest in note $7.50. 3. Note $311; date Jan. 14, 1913; Due October 1, 1913; paid Jan. 31, 1914; interest $36. 4. First note, $113; date Feb. 13, 1913; due Oct. 1, 1913; interest $13. Second note, $28.50; date May 30, 1913; due Oct. 1, 1913; paid September 11, 1913; interest $3.50. Note $170, date Jan. 23, 1914; Due Oct 1, 1914; paid Feb. 9, 1915; interest $20. _ 6. Note $170, date Jan. 13, 1914; Due Oct. 1, 1914; paid Nov. 2, 1914; interest on note $20.00. 7. First note. $141; date Jan. 18, 1913; Due Oct. 1, 1913; paid Oct '13, 1913, interest $16.00. Second note, $45.00; date May 19, 1913; Due Oct. 1, 1913; interest $5.00. Third note; $187.00; Date Jan. 5, 1914: Due Oct. 1, 1914; interest $21.00. Fourth note; $113.00, Date Feb. 14, 1914; Due Oct. 1, 1914; interest $13.00. Fifth note; $282; Date Jan. 25, 1914; Due Oct. 1, ‘1914; interest $37.00. 8. First Note: $49.90; Date April 1, 1913; Due Oct. 1, 1913; paid Nov. 6, 1913; interest $7.50. Second note: $375.20; Date April 17, 1913; 42 Pl Due Oct. 1. 1913; Paid Feb. 27, 1914; interest $35.20. Third note; $38.50; Date July 8, 1913; Due Oct. 1, 1913; Paid Oct. 4 1913; Inter- est $3.50. 9. First Note: $16.50; Date June 28, 1913; Due Oct. 1, 1913; paid Nov. 13, 1913; Interest $1.50. Second note: $16.00; Date July 31, 1913; Due Oct. 1, 1913; Paid Nov. 1, 1913; Interest $1.00. Third note: $113; Date Jan. 12, 1914; Due Oct. 1, 1914; Paid Jan. 6, 1915; Interest $13. Fourth note: $56.50; Date Jan. 3, 1914; Due Oct. 1,1914; Paid Jan. 31, 1915; interest $6.50. Fifth note: $23.00; Date March 16, 1914; Due Oct. 1. 1914; Paid Dec. 9, 1914; Interest $3.00. 10. First note: $113.00; Date Jan. 25, 1913; Paid Dec. 12, 1913; Inter- est $13.00. Second note, $56.50; Date May 17, 1913; Due Oct. 1, 1913; Paid Dec. 12, 1913; Interest $6.50. Third note: $28.00; Date June 13, 1914; Due Oct. 1, 1914; Interest $3.00. ‘Fourth note $113; Date Jan. 3, 1914; Due Oct. 1, 1914; Interest $13. Fifth note: $113; Date Feb. 21, 1914; Due Oct. 1, 1914; Interest $14.00. No. 62.—Credit Merchant, Emory: “The farmers of Rains county are backward and nonprogressive; they are indolent, thriftless and ignorant, There are some signs of improvement as the ‘nesters’ die off, but the change is very slow. Our firm was established as a cash house .but we soon found that we had to do a credit business. We had to deal with our farmer customers just as We do with children. When they come in for credit we have to decide for them how much they should have and then dole it out to them month by month. “Since the banks have been lending money direct to farmers, We sell to them on credit until the banks begin to make loans in the spring. When they get a loan they pay us and buy for cash until their money is gone and then we take a second mortgage and supply them for the balance of the year. Nearly all the mortgages taken by merchants here are second mortgages, the banks having first lien. “When a farmer gets a loan at the bank early in the year, he does not leave the money in the bank but ‘puts it in his pocket and Walks around and acts as if he were independent. He will come in here and walk around with a lordly air of independence which I recognize at once. When asked what he wants he will say that heis just looking around but does not want to ;buy anything just then. I Will take him by the arm and tell him I have something to show him and will Wind up by selling him $20 0r $25 worth of things that he does not need. When the time comes around to begin work on his crop he has spent all his money and comes to us for credit and I take a second mortgage and let him have enough to get through on. If he cannot pay the bank and have enough left to pay us in the fall, he will finish paying us with the proceeds of his next loan from the bank, so we get the bank’s money after all. - “We have only one price,-but we add 10% to all credit purchases. The loaning of money by banks has not hurt the credit business, which is larger in Emory today than it ever was. “I do not approve the suing of banks for usurious interest. It is being encouraged by a lot of men who know nothing about business. It cannot 43 fail to hurt the business ofthe town and county and, most of all, it will hurt the men who are engaged in it. Naturally no bank will ever loan money to a man who sued for the returns of usurious interest and I would not sell to such a man. I fear, however, that some merchants in Emory are laugh- ing up their sleeves and encouraging the bringing of such suits in the belief that if the banks are put out of the farm loan business it will help credit merchants. As a matter of fact, if the banks stop loaning money it would, give me and other merchants a chance to sell all farmers at our own prices and we could exact anything we wanted from them.” “No. 64.—Bank Cashier, Cumby, Texas: “The movement in Rains county to sue for the recovery of interest paid banks probably arose out of the cases of- and In these two cases both parties had deceived the bank by pledging stock that they did not own and one of the men had given us a mortgage on property which was also mortgaged to another bank. The loans were long past due and we insisted on settle- ment. The two debtors became offended and fell into the hands of a lawyer, who persuaded them to sue us for recovery of the statutory penalty for usury. We compromised these two cases, believing that to be the best and easiest way out. The attorney for the plaintiffs took the money ne collected from us and waiving it in his hands as he walked about the streets of Emory declared: ‘Boys this is usury money—it is easy to get.’ The re- sult was a general movement to demand that the banks return all interest paid on farm loans. “In the — case this bank did not charge $84 interest for 19 days, as has been persistently reported. The note had been past due for about a year and was in a very unsatisfactory shape. I went to the debtor and induced him to give us a new note, the one which we collected later. This new note included only past due interest and interest until maturity at the rate of 15% flat discount. “Small country banks cannot make farm loans at the rate of 10921 per annum. Such a rate will not pay operating expenses, much less divi- dends. There are now pending against this bank six suits for usury, in five of which we have defense. In the remaining case, we have not been able to find a defense. We are apprehensive that the movement to sue the banks will spread to other counties, although as yet we have had only one suit filed against us by a resident of any county except Rains. We fear the agitation will be taken up by the socialists and politicians and that there will be many such demands and suits this fall. No. 65.—Credit Merchant, Emory, Texas: “Rains county farmers are getting along this year (1915) on about one-half the credit they have required in other years. They are economizing and living as cheaply as possible. However, with normal yields and normal prices only a small percentage of them will .be able to get out of debt this year. “Bank credit has been ruinous to the farmers of this county. The banks have charged an average of 35% for money and no business on earth can pay that price for credit and live. I have onlyone price, but to that I add 10% for fall credit. 44 “The banks have oppressed the farmer. Last year when cotton was at it lowest point in October, they demanded that the farmers sell at once under threat of foreclosure. I know this to be true because scores of farmers showed me the notices they had received from the banks giving them three days to bring their cotton in and sell it under threat of fore- closure. At that time cotton was selling around 6c and merchants were urging the farmers to hold for higher prices. As a rule merchants help their customers hold their cotton until January when the price is much higher. “The feeling among the farmers toward the bank is very bitter. They have gone along for years paying 35% and as high as 40% interest to the banks without grumbling and when for the first time in years the farmer found himself with a short crop and a poor market, the bankers, instead of coming to his relief, tightened up and demanded immediate payment of his debts. The farmers felt that such a course on the part of the banks was ungrateful and extortionate and have come to hate the banks in con- sequence. To the many who have sought my advice about bringing penalty suits against the banks I have refused to give advice, but when the bank officials came to me and asked me to use my influence to quiet the agita- tion, I declined to do anything, because I could not conscientiously tell a man that it was right to charge 35% for the use of money. “The banks started a report that those who demanded the return of usurious interest would not be able to get credit either from banks or from merchants. Many farmers came to me to learn if the report was true and I told them that it was not. Bank officers then came to me and ,tried to persuade me that I should deny credit to these men, but I again refused. I will extend credit to any man who has the proper security and his contro- versy with the banks will not influence me in the slightest. My opinion is that the movement of protest will continue until the banks loan money at 10%.” No. 66.——-Bank Cashier, Point, Texas: “The movement in this county to sue banks for penalties under the usury statute arose out of the action of the bank in resorting to drastic measures to foreclose two mortgages. I very much fear that the movement will spread to other sections of the State and expect many demands to be made on banks this fall. A few demands have been made on bankshere, but all have come from residents of Rains county or from former residents of that county who have moved to adjoining counties. “Certain Hopkins county banks have been loaning money to farmers (mostly negroes) in the Lake Fork region of Rains county at from 30% to 50% and have been very severe in forcing collection. A man from that region came to me recently and told me that he had been charged $50 interest on a loan of $200 and that he was going to sue for recovery of usurious interest. The cashier of the bank from which he obtained the loan talked roughly to him about paying the note and made many threats. This man complained to me that he had been badly treated, but could not I 45 resent the insult of the bank officer except by filing suit and that he was going to do so. “This bank formerly charged 15% flat discount for farm loans but as we prospered we reduced the rates. We paid our stockholders 80% divi- dends in four years and I persuaded _t_hem to reduce the rate on farm loans to 10% and 12%% flat discount. This reduction has had a good effect and this bank has not had any demands made upon it for the return of interest.” “No. 67.—Credit merchant, Emory, Texas: “The farmers of Rains county are making this year’s crop (1915) on less credit than in any pre- vious year. About 50% of our accounts with farmers is for feed stuffs. A large acreage is planted in feed stuffs this year and if the yield is as large as conditions now indicate, the barns on very few farms will hold it. Very few rented farms have barns large enough to hold a year’s supply of feed. ~ . “Credit prices of most articles are 10% higher than cash prices. O11 a few articles the difference is greater, making an average of about 15% difference. ' “Until this year (1915) at least 75% of mortgages taken by merchants in this county were second mortgages, banks holding the first lien. This year merchants have insisted on having first mortgages where possible. The loaning of money to farmers by the banks has injured the borrowers. Having given a first mortgage to the bank early in the year, the farmer would run out of money before his crop was made and in only a few in- stances would the bank loan enough for him to finish the year. He would give the merchant a second mortgage for supplies -to enable him to finish his crop. This worked fairly {well until last year, (1914) when the farmer did not make enough to pay both the bank and the merchant. The banks having first mortgages, got it all and the merchants got nothing. The banks insisted on the farmers selling their cotton -when the price was low, while the merchant advised them to hold it. I have stood ;by and looked on while the banks compelled the farmers to sell cotton on which I held a second mortgage at 6c and 61/20. This low price would yield enough to pay the bank but I would get nothing; whereas, if the farmer had been permitted to hold the cotton he would have got a price that would have enabled him to pay me something after settling his debt to the bank. Farmers noted these things and feel very bitter toward the banks. “When the farmer owed the merchant only, we usually paid him a good price for his cotton, as it enabled us to collect our debt. Sometimes this difference in the price would amount to as much as $4 or $5 a bale more than the price paid for cotton on which banks held a first mortgage. Here again the farmers observed the difference in the treatment of them by merchants and the banks and they bitterly resented the action of the banks. “Farmers who borrow money from the banks at Emory have not prospered as much as those who deal exclusively with the merchants. We try to look after the interests of our customers and help them through 46 the year. The banks loan a certain amount of money, take a first mort- gage on everything they have and turn them loose and will not help them out if they get in a tight place later on. “If farmers were careful and frugal and knew how to take care of money it would probably be better for them t0 borrow from banks; but very few of them know how to take care of money. They fritter it away early in the year and must come to the merchants for credit to finish making their crop, as the banks will rarely help them out. “The movement to compel the banks to return usurious interest is deeply rooted in the resentment of farmers of the treatment they have received from the banks. Personally I would not encourage a man to de- mand the penalty under the usury law, but I certainly will not do anything to restrain him from doing so. It is his lawful right and the law is supposed to be just. The banks have brought this on themselves and they have no cause for complaint. They have grown rich and pursue a policy of wanting everything for themselves. “I was appealed to by the banks to help suppress this movement, but I declined to do anything. Next, I was urged to deny credit to anybody who demanded usurious interest from the banks but I declined to do so. “A man came to me today who had been denied further credit by a bank in Emory because he refused to sign a waiver to collect usurious interest. He went to the bank to get $15 to buy feed to finish making his crop. The cashier asked him to sign a release of his right to demand the return of usurious interest in a note which the bank now holds.‘ The man told the banker that he would not sign such a release, although he had no present intention of demanding the return of usurious interest. The banker refused to make the loan of $15 and now the man says he willxsue the bank for usury when he pays his note. The banks also assert that they do not collect past due interest on notes paid after the first of October but I have personal knowledge that they do collect such interest. No. 68.—Merchant, Emory, Texas: The farmers of Rains county are lazy and unreliable. Last year (1914) I had some money and decided to help the farmers out. I loaned it to farmers in small amounts, taking their notes without security. To this date, (June 1915) I have not collected one dollar on these loans. They are unsecured and I cannot force collec- tion. The farmers of this county do not know how to handle money. When they get a little cash they immediately proceed to spend it for things they do not need. No. 69.——Farmer; Age 60; In family, 2; rents 60 acres on halves: Fenced pasture at his own expense: Thinks interest rates charged by banks are too high but does not approve usury suits. No. 70.—Farmer, Age 30; In family, 3; rents 65 acres on shares: Does not approve usury suits but thinks agitation may continue. Not enough room in barn for year’s supply of feed.‘ No. 71.—Farmer, Age 54; In family, 7; owns 175 acres of land: Interest rates charged by banks is too high but does not approve suits for recovery of usury; believes protest will continue until banks charge legal rate. u 47 No. 72.-—Fa-rmer, Age 40; In family, 3; owns 80 acres: Does not ap- prove usury suits but think-s interest rate too high; believes agitation will tontinue. Very few neighbors have barn room sufficient to store feed crops. Does not grow food and feed crops because he is in debt and must plant cotton to pay. Believes the government should loan money at low interest and long time. N0. 74.—Farmer; Age 40; In family, 11; owns 80 acres: A real farmer does not need credit; he will always have money coming in. When I was in easy circumstances I raised my living on the farm; when I bought land and went in debt I turned to cotton and went broke. No. 79.—Negro, Age 6'5; Owns farm: Only a few negro farmers will get out of debt this year. The credit system is ruining them. The senti- ment among negroes is that they should not sue the banks for usury, but pay notes and quit borrowing, although it is cheaper to borrow money from banks and buy for cash than to trade on credit. No. 84.——Farmer, Age 27; first year on farm: Do not approve usury suits. I think a man should stand by his contracts. Majority of farmers disapprove suits and believe the movement will die. No barn on place. Does not know where will store feed crops. (This man was ploughing barefooted.) No. 85.—Farmer, Age 45; share renter: Cheaper to get credit from bank; agitation against bank interest not very strong; thinks it will con- tinue. Not many farmers will get out of debt this year. Is much troubled because has no barn room to store feed crop; high price of supplies and low price of farm products has caused many farm owners to sell homes to pay debts. No. 86.—Farmer, Age 30; Renter: Believe store credit cheaper than bank credit; thinks agitation against high interest will continue; no barn room to store feed. No. 87.——County Official of Rains county: “Financial condition of farmers in this county is very bad and has been growing worse for several years. The credit system has been growing and in recent years banks have been exacting very high rates of interest. It is cheaper for farmers in this county to get credit through merchants than through banks. Credit merchants charge 104% above cash prices while the average rate of interest on bank loans is 35% and in some cases it runs as high as 75% and even more. y“ ~~ Wt‘ ~ F's,‘ “The movement to sue banks for usurious interest arose out of the hard condition under which farmers suffered. Many of them were unable to get; money or credit and when an opportunity’ was presented to get back from the banks some of the high interest they had paid, they took ad- vantage of it. The banks have brought these conditions on themselves by oppressing the farmers. I believe some of the credit merchants are en- couraging the fight against the banks and I have heard some of them declare that they would not deny credit to a man because he had sued the banks for interest. . “The feeling in this community on the subject of these suits is intense. 48 . The banks are doing everything in their power to cut the movement down, but so far without success. I do not believe the agitation will die out soon, but expect a deluge of similar suits this fall when outstanding notes are paid. I believe it will be kept up until the banks are compelled toloan money at the rate of 10% per year. “Mr. Sisk, the County Demonstration Agent, is a very competent official and has done good work in the county, but he signed aprotest against these suits and has thereby incurred the ill will of many farmers and a majority of the members of the commissioners’ court. It is very probable that he will be put out of office by the commissioners at the meet- ing of the court to be held next Monday. He should have kept out of the controversy. (Note: Mr. Sisk was removed from office as predicted.) “There are many renters in this county but very few of them have bought farms in the last ten years. It is impossible for an average farmer to rent land on shares in this county and make enough to buy land at present prices. The interest rate on land loans is 10%.” No. 89.——Merchant, Emory, Texas: “The feeling among the farmers on the subject of interest charges by the banks here is very intense. I believe the fight will go on until the banks reduce their rates to 10%. Last fall the bankers seemed to have lost their heads entirely. While merchants were trying to save the situation by a policy of leniency toward their credit- ors, the banks were squeezing the people who owed them and compelling them to sell their crops and livestock at ruinous prices. Farmers who were in debt to the banks suffered severely and they are still feeling very bitter. “While I would not sue to‘ recover usury on a contract I had willingly entered into and would not do anything to stir up further strife, I cannot wholly blame some of the men who are making these demands on the bank. Everybody in the county is lining up on one side or the other of this fight and there is much bitterness and acrimony in the discussion of the matter." No. 92.»~Bank Cashier; Point, Texas: “The movement to sue for usurious interest originated as a protest against the severity of the National Bank in forcing collections in Rains county. I believe the move- ment will spread to other counties. Bankers here are still making farm loans, but are very nervous and apprehensive. A man came to me the other day and wanted to borow $5. I could not make the loan, as his. property was pledged to another bank for a previous loan. He said he had to have the money-that the bank which held a mortgage on his property would not make the loan and that he was going to place his claim for usurious interest in the hands of a lawyer. I argued the wrongfulness and ' bad policy of such a course and persuaded him to go again to the bank and try and get the loan: He followed my advice, the bank made the loan and I do not think he will sue. The i~— bank (the one referred to as having caused the suits to be filed) acted unfairly and unjustly in forcing collec- tions in Rains county.” No. 91.-——Bank Official; Emory, Texas: The agitation and litigation over usury threatens the existence of the two banks here and is spreading 49 t0 other nearby towns. It has appeared in Wills Point, Grand Saline, Alva, Cumby, lSulphur Springs, Point, Lone Oak, and other places. The men responsible for the agitation are irresponsible and without standing, but the menace to the bank is very great. If it goes much further it will destroy all country banks and leave farmers no other choice than to get their credit from merchants. The credit merchants of Emory are secretly encouraging the movement to sue the banks. I know of one bank that would have gone into liquidation if it could thereby have escaped liability under the usury statute. Small banks in ruralcommunities cannot afford to loan money at 10% per annum. Until two years ago the bank with which I an1 connected charged 15% flat discount. When we had built up a surplus of more than $25,000.00 we had more money to loan and reduced the rate to 13% discount. No. 90.-—Extracts from advertising which appeared in the Rains County Leader, published at Emory, Texas: “TO WHOM IT MAY CONCERN. Emory, Texas, May 15, 1915. Whereas, The report has gone forth that the Socialists of Rains county have been the instigators of a movement whereby banks are being charged and threatened with prosecution for a socalled violation of the Usury law, unless overcharged interest is refunded them; “And whereas, The report is false in fact and unwarranted, causing the Socialists party to appear in the light of a persecutor for the sake of a few paltry dollars, and are in favor and advocate the violation of con- tracts. ' “Therefore, Be it resolved by the undersigned representative socialists of Rains county that we hereby offer our protest against such charges and actions, and call upon all Socialists everywhere to stand firm for equity, justice and the golden rule.” sSigned by 14 men. “Point, Texas, May 22, 1915. Whereas, a movement has been started whereby the banks of Rains county are being charged and threatened with prosecution for violating the usury law and some of our citizens seem willing to sacrifice principle for the sake of a few paltry dollars, and whereas, such actions are wrong, compromising with evilprnisleading and unworthy our high moral standards of progressive citizenship, guaranteeing to all a square deal, therefore let no fair minded American citizen who has a true regard for equity, justice and the golden rule, put forth his hand or influence to violate his conscience and righteous obligation by demanding a portion of the spoils, but rather discountenance, discourage and abstain from such unrighteous practices. “Therefore, be it resolved by the undersigned citizens of Rains county that we hereby protest against such procedure and go on record as con- demning practices characteristic only of pessimistic, undesirable citizens, who exhibit a belief in destructive rather than constructive policies.” Signed by 49 men. 50 HUNT COUNTY. N0. 88.—Bank official; Caddo Mills, Texas: “Fifty per cent of our loans to farmers are to buy feed and meat. Collections were good last year (1914) and while we carried over some accounts, the amount was not larger than we wanted it to be. Practically all of our business was with farmers and we find it satisfactory. Considerable credit business is done here by merchants especially with renters and other farmers in the Eastern and Southern parts of the county. Credit prices are 10% to 12% higher than cash prices. The interest rate on farm loans is 10% flat dis- count until late in the summer.” ROCKWALL COU NTY. No. 93.—Bank Cashier; Chisholm, Texas: “Only a few farmers in.this vicinity are prospering.