A primary goal of farm organizations in the United States in the early 20th century was to create a government program for farm credit. Passed in 1916, the Federal Farm Loan Act opened the door to federal government support with a program of low-interest loans. Having been elected president in 1912 on the platform of the New Freedom, Woodrow Wilson sought to preserve political and economic liberty in the United States through various legislative and executive initiatives. In particular, Wilson opposed the consolidation and abuse of economic power that had increasingly occurred since the turn of the century. One of the main emphases of his administration was to prevent the further consolidation of economic power that curbed free competition and to increase the ability of individual producers and small businesses to compete.
Despite his focus on slowing the growth of economic power, Wilson remained fairly unreceptive to the demands of labor and of farm organizations during his first term. Both these groups had sought to protect the power of individuals against the consolidation of economic power by corporations. Despite his initial reluctance to directly aid unions and farmers, he relented on his opposition to profarm and pro-labor legislative initiatives as the 1916 election approached. Accordingly, President Wilson approved the Federal Farm Loan Act in 1916, which provided agriculture with the low-interest rural credit system long advocated by farmers and rural residents.
Although farmers had faced a shortage of capital, banking facilities, currency, and credit during the last two decades of the 19th century, the new century brought a wave of prosperity to rural areas of America that would last until shortly after the end of World War I. During this “Golden Age” of agriculture, farmers tended to spend their newfound prosperity on consumer goods to improve their standard of living. However, many farmers, having witnessed the economic difficulties of the late 19th century, were hesitant to invest in capital improvements, whether in expanding their landholdings or in purchasing new technologies. The farm advocates long had championed the need for low-interest loans to help promote and make affordable the capital improvements needed to expand individual farms.
The Federal Farm Loan Act created the mechanism to extend low-interest loans for periods of five to 40 years to farmers through the control of a Federal Farm Loan Board. The board was comprised of 12 Federal Land Banks that paralleled the Federal Reserve Banks. As part of Wilson’s New Freedom initiative, the Federal Farm Loan Act extended capital to farmers through a program that cut out private banks, which long had been viewed by farmers as outside institutions that easily exploited vulnerable farmers.
Further reading: David B. Danborn, Born in the Country: A History of Rural America (Baltimore: Johns Hopkins University Press, 1995).
—David R. Smith
World History
