SUBTREASURY LAND AND LOAN SYSTEM

The Subtreasury Land and Loan System was a plan advocated by the National Farmers' Alliance and Industrial Union and the People's party in the early 1890s. It proposed a federal solution to the problem of agricultural credit. Depressed staple prices and tight money had forced many farmers into debt. In order to secure the credit necessary to see them through the agricultural year, farmers had to execute liens on crops or land on most unfavorable terms. In 1889, Charles Macune of the Farmers' Alliance proposed that the federal government establish "subtreasury" offices and storage facilities in counties selling more than $500,000 worth of agricultural products annually. Farmers could deposit "imperishable" commodities—cotton, wheat, corn, oats, barley, rye, rice, tobacco, wool, or sugar—and in return be loaned government legal tender notes, at 1 percent interest, for up to 80 percent of their crops' value. The proposal was later amended to provide similar loans secured by land.

The system had several advantages. Farmers would be able to mortgage crops or land to the federal government at nominal interest rates rather than to profit-seeking individuals or companies. They could store their crops in government warehouses until supplies were low and prices high. Advocates argued that the legal tender notes would create a flexible monetary system responsive to the public's needs.

The Subtreasury idea helped prompt the formation of Populist parties, especially in the South. Through 1890, Southern Alliance members had generally renounced third-party efforts, preferring to work within the Democratic party. But with the major parties opposed to the plan, many of its advocates concluded that the Subtreasury plan could be won only through independent action. The plan was never enacted, however, though many of its elements appeared in later federal legislation.

See also Farmers' Alliance; Populism.