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Excerpt from Oral History Interview with John Raymond Shute, June 25, 1982. Interview B-0054-1. Southern Oral History Program Collection (#4007) See Entire Interview >>

Farm finance in the late nineteenth-century South

Shute describes farm finance in the late nineteenth-century South. Most farmers avoided banks and took loans from storekeepers, who in turn took loans from banks. Farmers did so in part because banks charged higher interest than storekeepers, and in part because they felt more comfortable with face-to-face business.

Citing this Excerpt

Oral History Interview with John Raymond Shute, June 25, 1982. Interview B-0054-1. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.

Full Text of the Excerpt

You mentioned something that I want to find out a little more about, and that's financing, how that was done. JOHN RAYMOND SHUTE, Jr.: Nearly every stable had a bookkeeper, who was what we today probably would call a sharpie. I mean he handled all the business transactions. The salesman would sell the horse or the mule, usually. Say, for example, he was sold for three hundred dollars, but maybe the farmer didn't have but twenty-five dollars in cash. Then he would take a note for the difference. They'd work the interest out, and the method of payment. These payments, obviously, were not monthly payments, because the farmer's income is not monthly income; it's annual income. So these were usually arranged in terms of what he had planted and what today we'd call crop loans, like the Piedmont Production Credit and other agencies handle today. The livery stable quite often would take a mortgage, not only on the mule that it sold, but quite often on the crop, too. These notes sometimes would extend over a two- or three-year period. They'd work all that out with the farmer, and then he would give his note. And, oddly enough, in those days credit was not very risky. The old saying that "A man's word is his bond" was more truth than poetry. And when a man shook hands with you and promised to do something, the chances were about ninety-nine to one that he'd do it if it was humanly possible to do it. And if it wasn't, he'd go to you like a man and tell you why he couldn't do it. So business was based upon that, and there wasn't too much loss on credit. There was some, of course, because some people just naturally couldn't operate their farms in a businesslike way and would go broke, and there was nothing that could be done about it. So in those cases, there would be a loss involved, as a rule; sometimes there wouldn't be. Not only that, but there would be crop failures. I mean, after all, we didn't have a very highly developed agricultural setup in these counties back then. In this county, for instance, the primary crops were cotton and corn. You had to have the corn to feed the mules to raise the cotton. That was about the cycle that was operated.
Did financing ... JOHN RAYMOND SHUTE, Jr.: There was very little of it done at banks. The banks offered credit, and the more affluent farmers, the larger farmers, a lot of them would go to the bank and borrow the money because they found it was cheaper because they could get it at a lower rate of interest. But the banks primarily financed the stores, the merchants, who in turn extended credit to the farmers. That was the cycle.