The News-Herald. [volume] (Hillsboro, Highland Co., Ohio) 1886-1973, 1913-01-16
Changes In Banking System.

Former Governor, Myron T. Her
rick had an excellent article in the
Enquirer of last Sunday on defects in
the banking system of this country,
especially as regards the needs of the
farmers. He explained the systems
used in Germany and advocated their
adoption in this country,
He says, Farmers need funds for
two general purposes: First for the
purchase of property and for its per-
manent improvement, and, second,
for operation-tha is the purchase of
live stock, implements, seed andlferti-
lizers and the harvesting of crops.
These two general divisions of agri-
cultural capital requirements should
be preserved in the nature of the loans
that are made to secure funds Each
of these two divisions can and should
support it's own credit"
He points out that our system of
banking is designed to serve the
needs Of commerde and is not fitted
to meet the needs of farmers as a
farmer in borrowing money for the
purchase of land or for its permanent
improvement should be allowed a
long time in which to pay it as the
farmers income from this source is
small.
In Germany by giving loans on farm
| rfv lOnn tiOao RI from IN
to so years. the rate Of interest on
such mortgages has been decreased
from IL to per cent. and foreclosures
and dispossessions are few. The aver
age length of time for such loan in
Germany is so years When the loan
Is made fixed amount is set that the
borrower shall pay each year, this
amount always being the same. This
is known as amortization. An exam
pie given by Mr.. Herrick is as follows:
"Thus suppose loan to be granted
at per cent. for 10 years. The an
nuity is 13 1868 a little over 49, per
cent; if the term be 20 years, the an
nuity is S.71S5, about 81 per cent; If
the term be SO years the annuity is
344i, little over 80 per cent. The |
longer the term, the smaller the an
nuity, so that in this last case, the
payment on the principal becomes
absolutely insignificant and hardly
distinguishable from the interest
rate"
He advises special institutions for |
the handling of this business and in |
Germany and France such institutions
have attracted plenty of money for
handling of the business.
For the purpose of raising money
for the operating expenses Of the
farm Gov. Herrick suggests the per-
sonal credit system. These are short
time loans and are handled by agri-
cultural banks. Germany has an
average of one such bank for every
1900 persons. AS he explains 1t it is
a cooperative plan. A dozen or more
men in community go together with
unlimited liability. Loans are only
made to people of the immediate vi
cinity. The borrower must show for
what purpose he wants the loan and
must have two of his neighbors as
guarantors and the loans are usually
made only until after the next harvest.
Thus the farmers are able to encour-
age each other, see that the money
is not misused and prevent improvi
dent borrowing.
Gov. Herrick says that If borrower
wilfully violates his contract he is
expelled from the society and becomes
an outcast in his community.
Both of these plans as outlined by
Gov. Herrick seems to be sensible
solutions of the financial pro lens of
farmers and we can see no reason why
we should not profit by the methods
of Europe and use the main principals
in this country and if possible i'm
prove upon them.
That the same banking system will
not meet the needs of commerce and
the farmer has been proved. The
merchant turns his money much
quicker than the farmer, therefore,
he borrows for shorter period. To
meet the needs of the merchant and
the demands of the depositor whose
funds must be subject to withdrawal
on demand the bank can not have
its assets on long time loans. We
have not seen any plans suggested
that seem to meet the needs of the
farmers as we'll as the methods sug-
gested In Gov. Herrick's article, and
they have the advantage of having
been tried and found practical.
If your children are subject to at