172 BANKING THEORIES IN UNITED STATES
occasional demands,”’! might well be acceptable with reference to
Great Britain; but the banks of this country, because of the
scarcity of capital, must also make more permanent advances.?
Nor is the making of accommodation loans, subject to repeated
renewal, dangerous, for the money is commonly advanced on an
endorsed note, and new signatures can be called for at each renewal,
 if the bank’s suspicions are roused. Loans to farmers are
no less proper than advances to merchants? In 1839 a committee
of the Indiana legislature pointed indignantly to the fact that the
farmers, representing three-quarters of the state’s population and
wealth, received but one-quarter of the total amount of bank accommodation
 in the State. The committee denied that bank
discounts are better suited to serve merchants than farmers,
arguing that the mercantile business concerns itself largely with
the importation of articles of extravagant consumption from outside
 the State, and, moreover, is so attractive, because of the
notion that it is “a mode of getting rich without labor,” that it
needs little bank encouragement. The farming industry, on the
other hand, ‘is the only one that can be uniformly relied on for
profit on the capital and labor employed, and benefits to the
State.” If the frequency of renewals of business paper be considered,
 the committee thought that repayment would be found
to be no more punctual than in the case of loans to farmers. ““Besides,
 the question is not whether the farmer shall have credit
from the bank, but whether he shall receive it directly from the
bank itself, and in amount; or whether he and his wife and daughters
 shall get it through the merchant, and in the shape of merchandise.””
 4
The fact that agriculture was so dominant an industry, particu-EYL



1 See Wealth of Nations, book II, chap. 2 (vol. i, p. 287).
2 Virginia, House of Delegates, Report on Banks (1816), Niles’ Register, ix, 160.
3 Ibid., ix, 161.
4 Indiana, Report of the Committee on the State Bank, in U. S. House of
Representatives, 26th Congress, 1st Session, Document 172, pp. 895-897. The
committee’s point is well taken, of course, that to the extent that traders relied upon
credits due from farmers for means of paying their bank loans, the merchants’ bills
were themselves likely to prove frozen assets. But the real question then became
whether the banks did not advance too much credit to the merchants rather than
whether thev advanced enough to the farmers.