Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-12-08

the product which will enable him to ex-
pand his acreage and better his methods
of cultivation and production. An easy
exchange between capital and farmers
with proper security has been established
in European countries, where the rate
of interest has been lowered so that the
farmer is practically on the same basis
of advantage in the borrowing of money
as the business man. If this can be
done abroad it can be done here, and II
abroad We find that government institu-
tons adapted to form the conduit pipe be-
tween capitalists and farmers are sue
cessfully operating, why should we not
adopt them here?"
While conditions in this country and in
Europe were somewhat different, the
President said, by modification Of the
European plan the idea could find O.
proper place In the United States.
Conditions in Europe.
bassador Herrick said:
agriculture requires two kinds Of cap
ital-One FOR the real estate and the other
for operations. The first represents the
buildings and pe-.aanent improvements
along with the !au. The second repre-
sents the livestock, implements, Tnachin-
cry, the seed, fertilizers and all that
goes to make production. Each can sup
port its own proper credit. But 1t Is all
important to carefully distinguish real
estate credit from agricultural credit.
, The land must not be confused with ag-
riculture itself.
Now. in the United States the land
mortgage business is not specialized ex-
cept in the cities, and never has an eff
fective attempt been made to adopt the
principle of amortization, without which
a land credit system remains an uncom-
pleted and fragile scaffold, endangering
the good name and. the public welfare Of
any country trusting upon 1t.
"A farmer should never be compelled
to pay back loan in lump or faster than
he can make its equivalent out of the
land. But the sinking of capital indef1-
nitely and receiving it back in driblets,
as required by the amortization process,
is a dangerous operation for commercial
and industrial banks and entirely out Of
the question for private money lenders.
Dominating Feature in Systems.
"Amortization, however, is the dominat-
ting feature of the land mortgage sys-
TENS of all European nations The aver
age length of a loan there is about thirty
years, and many run for seventy-five
years. The annual sum paid by the bor-
rover is composed of the interest rate.
pro rata Of the cost Of business, and an
!nstallment on the capital, and Is called
an annuity. 1t remains level. with the
same rate Of interest. through the en-
tire term of the loan. but each year the
actual amount of interest decreases and
the amortization items increase. SO that
by the end of the term the debt is COM
pletely wiped out.
lions with the exception of the German
land banks properly so called). can be
recommended as models in their entirety
for the United States. l am speaking
81
nearly all--have special privileges, with
the right. among other things, Of sum-
mary proceedings against debtors in de-
fault. which American farmers perhaps
would not tolerate. Lenders also might
not easily become accustomed to the form
of debentures or mortgage bonds issued
by these institutions. although in Eu-
rope they are the most popular invest
ments of the savings of the poor
so there is no land morteage sys-
tenn on the European continent which