Albuquerque morning journal., 1910-06-24
Farmers and Mortgage Bonds

Discussion has again arisen in some
! parts of the country regarding the de-
mand for more efficient instrumental
tiles to provide for loans upon farms
and other real estate secured by mort
cages. A disposition has appeared in
banking circles to broaden the scope
of the operation of national banks so
as TO permit them 90 loan q part of
their means upon such securities. The
chief element of safety of commercial
banks is that their means shall not be
tied up in securities not readily con-
vertible into liquid capital; and ii is
claimed that real estate and mortgages
are not properly classified as such
The argument against such policy is
in the opinion of many strengthened
by the fact that as has been cOnclu-
sively demonstrated in Europe and
elsewhere, instrumentalities, vastly
better adapted to conduct such busl-
ness can be provided by means of sep
arate corporations technically known
as mortgage banks.
From time to time articles have ap-
peared describing the system prevail
ing abroad and pointing out che tre-
mendous success which followed, not
only in the way of giving farmers and
blntI ldClHlleS LOT QtNtIpplltUA 1T
reasonable rates, but giving to the
capital invested very handsome re-
turns, larger, indeed. than are usually
obtainable upon investments of the
same character with respect to seeu-
rity. A bill was introduced in the
house of representatives, to authorize
the establishment Of such Institutions
under national supervision, but it re-
ceived no consideration. It was pro-
posed to permit the incorporation Of
such banks, under the direction of the
controller of the currency. with a cap
ital of not less than 100000, with au-
thority to establish branches; they to
make loans upon improved real estate
secured by first mortgages, based up
on so per cent valuation in the case
of country property. Upon these the
banks might issue mortgage and de-
benture bonds, but not to exceed
twenty times the amount of the capi-
tai
The usual procedure in Europe is to
have the bonds bear rate of interest
lower than that which is
the borrower on mortgage, a
reasonable margin to compensate for
the additional security that the banks
offer in the form of guarantee of
the principal and interest 1t is read
lily seen that with the expansion of (
business this margin becomes suffi- |
ciently large to afford substantial
profits for the capital invested, A
most useful provision is that by means
Of the addition of a small annual
charge against the mortgage, the bor- |
rover is enabled to repay the loan in |
the amoutn of the in |
stallments being regulated by the |
he term of the loan, adjusted to pro- |
vide a sinking fund which cancels !
he debt in the time fixed In Europe !
/ is customary to make these loans +
or terms of fifty years or more, so I
hat the borrower pays annually, or
;emi-annually, in addition to his in
crest, an amount so small as to make
he. total charge very much lower
han the usual interest charged upon
mortgage loans in our central states
The debentures of these mortgage
,anks are dealt in by bankers and
brokers' and upon exchanges, and are
faVorite form of investment gem
rally. 1t is surprising that this form
# relief for the farmer has never been
airly considered by our government;
IS success in European countries is
o striking. having been frequently
eported fully by the consuls of this
overnment that the omission to util-
ze ii must be attrobuted to prejudice,
or that plans of relief will be worked
ut eventually in this country is prob
bic. and the conditions are such that
Will be a boon IL the right kind of ,
guardianship can be thrown around
bonds and MORTGAGES