The Oroville weekly gazette. [volume] (Oroville, Wash.) 1905-19??, 1913-01-24

the proportion of a farmers income
that can properly be attributed to this
sort of capital is so limited that it is
illogical and unreasonable to expect
the money so invested to be repaid ex-
cept after considerable period of
years. Our present commercial bank
ing system is designed to serve the
needs of commerce and industry and
is not fitted to make the longtime
loans that farmers should be able to
posts must be paid out on demand
must keep its assets liquid. 1t is clear,
| therefore, that such an institution can
not render any considerable service to
farmers by supplying them with long
| time funds.
| "The principal sources of real estate
| loans now open to American farmers
are the life insurance companies, local
savings banks and trust companies and
| brokers. 1t is reliably reported that
| thirteen of the larger life insurance
| companies on January l, 1912, had out
standing farm loans amounting to
| $439, O00, 900 Farm loans are also made
| by individual lenders, but the total
| from all of these sources is inadequate.
The failure to supply the demands of
great numbers of honest and capable
| farmers for mortgage loans is evidence
that something is wrong and that new
| financial machinery will have to be
| created, for the financial requirements
of farmers are increasing more rap
idly than those of any other class.
1.-The only logical and practical
method for a farmer to pay a loan Sc
cured by his land is by amortization
in other words, by small, partial pay
ments, regularly made. Amortization
is the dominant feature of the land
mortgage systems of all European ma
tons. The average length of the loan
there is about thirty years. and may
run for seventy-five years. The an
nual sum paid by the borrower is COM
posed of the interest, the pro rate of
the cost of business and an install
ment on the principal, and is called an
annuity. 1t remains level with the
tire term of the loan, but each year
the actual amount of interest decreas-
es and the amortization item increas-
es, so that, by the end of the term, the
debt is wiped out completely. The
percentage of capital to be repaid each
year under the amortization depends
upon the term of the loan, of course.
Thus, suppose loan to be granted
at 6 per cent. for ten years. The annui-
ty is 135S6S, little over 1917 per cent
if the term be twenty years, the annu-
ity is S.71S5, about 81 per cent; if the
term be fifty years the annuity is
6.3444, little over 6.33 per cent. The
longer the term, the smaller the annu-
ity, so that in the last case, the pay
ment on the principal becomes absO-
lutely insignificant and hardly distin-
guishable from the interest rate. 1t
starts at "a cents per 500, the first
year, and at the final year is $500, but
the annuity of 6.33 per cent. remains
the same for every year of the term.
"These figures point the way to the
correct method for the farm mortgage
business of the United States. Adopt
the amortization system, and there
will be few foreclosures and disposses-
sions. But amortization calls for spe-
cial institutions for it's full play. They
may be either associations of borrow
ers, like the famous Landschaften, or
joint stock companies, like the land
mortgage banks of Germany and the
Credit Foncier of France. On the basis
of the mortgages hat they hold, these
associations and companies issue and
sell debenture bonds which have
very wide and steady market. By the
sale of these debentures funds are
drawn to agriculture from the outside
investment market. European land
credit institutions, which have attract
ed money in abundance to real estate
OWHcIo III ONSI q CChIuly, HoNC INV
cred the interest rate to the present
minimum of per cent from maxi
mum of IL per cent. This was done
by creating safe, convenient, negoti-
able securities for the savings of all
sorts of people.
"In addition to funds for the pur-
chase of land and it's permanent i'm
provement, farmers need funds for OPP
Grating their property, and for this
purpose their personal credit should
be made available. AS in the case of
| mortgage loans, the facilities in this
| country for making negotiable the
personal credit of farmers are very in
adequate.
"The personal credit system for
| short-time loans, such as has become
the almost exclusive means Of discount
and deposit in agricultural Germany
| of which the Raiffeison banks are the
best known type-would require but
very few changes in order to adopt it
for uses of farmers in many parts of
| the United States AS these agricul-