The San Francisco call., 1897-06-25
AN AMERICAN CREDIT FoNCIBR

Statesmen and fnanciers are at present
discussing the plan outlined by John R.
Dos Passos, an eminent New York law
yer for an American Credit Foncier. The
purpose of the proposed organization is TO
take the income-paying farms and other
real estate of the country and make them
basis OF credit by issuing against them
at low rate of interest bonds which can
be negotiated with the same ease as Gov
eminent or other frst-class mortgage
bonds on ali the exchanges of the country
In offering synopsis of his scheme Mr.
Dos Passos denies that it will open the
door TO wholesale and proiigate indebted
ness. He shows that the existing mort
gage Indebtedness on farms in 1890 was
81, 209, lz5 431, and that this has increased
until now 1t reaches almost IS. .0O0. .OO0, ,0OO
THE funding of this vast Indebtedness
at a rate of Interest of about l. 90 per an
mum and making the principal payable in
seVenty-hve years" says the author of the
plan, 'is task of itself which will occupy
the company in question without regard
to other business, and it will save TO the
farmers millions and millions OF interest
The effect of funding this debt will be to
put into circulation a large amount of
money which is now locked up in these
mortgages and which is practically dead.
To put This vast fund afoat helps lenders
and borrowers alike"
1t is proposed to form a great loan and
mortgage company, under supervision of
the Government of the United States, with
an authorized capital stock of $100 600. COO
The main business and the main source of
the profits of the company will be found
in the development of its mortgage loan
and bond operations. The public is TO be
asked TO subscribe for the capital stock.
tho denomination of the shares of the
com pany to be of $40, and no one person
being allowed to subscribe for more than
500 shares. The loans are never to exceed
one-half the actual cash value of the prop
erty offered for security, and each one dol
lar of the bonds of the company will be
thus secured by real estate of the actua,
cash value of 81, while the capital stock.
surpluses, etc., will be additional guar
antee.
In connection with these loans it is pro-
posed to introduce into this country the
amortization" or sinking fund principle
which has baen so successfully followed
In Germany ana France.
The amortization" or sinking fund. ac-
cording 10 Mr.. Dos Pasos is simply this:
That the borrower is never called upon,
unless it is agreeable to him, to pay the
principal OF his loan, as a whole, at any
one time, but by paying a small sum each
year in addition to his interest he estab-
fishes fund which ultimately wipes out
the principal and satisfies the debt.
The mechanism Of the amortization
principle is simple: "At the end of each
year portion of the annuity is applied to
the amortization or sinking fund, re-
ducing the original debt the same amount.
the interest decreasing IN the same pro-
portion as the debt is reduced but. as
the annuity remains always the same. the
result is that the fraction of the annuity
necessary to the payment of the interest
while decreasing, Leaves larger sum ap-
plicable to the 'amortization,' or repay
ment of the borrowed capital, and the
progression, slow in the beginning, in
creases from year to year, and ACQUIRES
great rapidity when nearing the limit of
the fixed period" This is called the
salient or vital principle of the plan.
The system, in one form or another. is
in vogue in nearly every country in
Europe. The Credit Foncier of France is
the most conspicuous example. It's as.
sets are over 5000, COO 600 francs, and its
bonds, bearing interest at per cent, sell
at about 105, while the French Govern
ment's bonds range around 10l%
The Credit Foncier plan is strictly non
partisan i'll its scope and character, and,
Mr.. Dos Passos declares, its establishment
is equally necessity whether the gold
standard be maintained or bimetaIlism be
introduced.
The astonishing success and the popu-
iarity OF the French system is the strong
est argument in favor of the plan, which
is certainly worthy of the serious consid-
Grafton of the American people.