The midland journal. (Rising Sun, Md.) 1885-1947, 1894-01-26
Government Banks.

apparently SOLID OASIS 10 Which none snouiu
object. Nevertheless, land has been found
the least desirable of all securities for COM
mercial loans, and the intelligence which
actual experience brings has caused banks
everywhere 10 refuse land security for COM
mercai loans. For longtime loans land is
probably the best which can be offered,
while for short-term loans it is among the
worst.
In practice bankers have discovered that
personal security is in every respect the
best. A moments reflection makes this
obvious. A borrower of money who has
built up a valuable commercial business
risks the loss of his business if he fails to
meet his notes when due. If absolute ruin
does not follow, injury to greater or less
extent is sure to be incurred. He cannot
borrow again so readily, nor obtain credit
with other business firms. A larger margin
Of security is required when be again asks
having to use less money than its demands
require. What Is called his credit is injured,
and that is nothing less than an injury to
his business, and loss of money by his
being placed in cramped circumstances.
This danger is a great stimulus to effort
and business man, trader, will make
almost any pecuniary sacrifice to meet his
obligations to bank promptly.
Loans based on land have none of these
spurs TO effort. A business depending on
the possession of land, such as farming, will
not ordinarily suffer much, if any, by default
of prompt payment. If the party in default
should prove obstinate in making payment
after protest, it requires quite good while
to recover by legal process out of the land.
In any case there is no destruction of bnsi-
ness follows. The debt can be cancelled at
the last hour hef,re sale, and the principal
proceed with his business without injury.
The new school which has lately appeared
among financial students have largely fav-
ored land as the primary security for the
loan of money by the government. A gov
eminent system of banking wonld require
two classes of securities. Real estate security
for long term loans on land, and personal
security for commercial loans. Our present
banking system is confined principally to
the latter class. Banks conducting dis
counting business, making loans for 80 to 80
days, require either personal security or
collsterals readily convertible into cash..
While our commercial banks could not
conduct business with real estate security
and long time loans, the government could
very readily manage such business, while at
the same time furnishing ample means for
strictly commercial business. For illustra-
ton There are $l2,OOO,O0O of mortgage
Indebtedness resting on the farm lands of
Mars land. The mortgage debt averaging
nearly 6 per cent interest per annum conld
be replaced with government mortgages
drawing one per cent, payable by intalments
in Is years., which would cost the mort
gageors but trifle more than what they pay
annually at present in interest alone, leaving
the principal untouched, and which is bring
ing the farms rapidly under the auctioneer's
hammer. The transfer of this debt from
private TO government ownership need moi
add one dollar to the volume of money in
circulation, the government bank giving
the mortgage credit on the books ofth bank
iah no .o,,ll
at once at his option. No capitalist could
afford to hold his money out of USE and as
soon as INVESTED it would flow into the banks
through the channel of trade as at present.
All money in use finds its way into the
banks Immediately.
1t would be the commercial loans which
would fill the channel of business bank full,
but never to overlooking. And from that
full stream all the money required to release
the farmers of the United States from their
mortgage bondage of four or more billions
of debt now weighing them down, could be
supplied without an additional dollar added
TO the circulation above commercial de-
mands. In the transfer of this enormous
debt from shylock to the government,
would require but the stroke of the pen in
each county, with steady flow Of the stream
of trade as undisturbed as the Arkansas
river pouring the tide Of the melting SHOWS
of the rocky mountains to the Mississippi,
without disturbing the placid flow of the
stream, which distributes its increasing
volume far and wide through the gravel
strata underlying the surface of the country.
So would the demands of trade spread The
financial river far and wide without prodnc-
ing a ripple on the surface, and the debt
crushed farmers would liquidate their
obligations by yearly inslalments ont of the
products of the farms, which is now taken
TO satisfy the Unsuitable hunger for usury of
the private mortgages.
With government banks taking the place
OF the present ones no sub-treasury would be
needed to supply the farmers means to hold
or move their crops. As mover of crops
the farmer would occupy the position of a
commercial man and would borrow on
personal security for a short period, and
when the crop was converted into money
the 80 or 60 day loan would be extinguished.
and if there was no demand for the surplus
money in the country banks it would be
transferred to other localities.
The old State banks used to follow this