Bismarck daily tribune. [volume] (Bismarck, Dakota [N.D.]) 1881-1916, 1913-03-01

tions. are under the jurisdiction OF the
Minister Of Agriculture. In brief. these
1andschaften or Land Mortgage Associa-
| tions, are private concerns made up OF
farmers but under the supervision Of the
state government. z.
These associations have been organic
cd because Of the fact that by co-opcra-
tive methods they can borrow money in
the open market to better advantage.
The association issues bonds, In dcnom-
nations ranging from $50 to $1,000 at
3 to IT, per cent and running for a
long time. These bonds find n ready
market because they are secured not
only by mortgages on the property Of
the association but by a general reserve
fund as well, which each association Is
required TO maintain. In addition, the
association Is responsible for the pay
mcnt Of the bono when it natures and II
1t has not on hand sufficient funds to
meet the demand it can levy upon each
member Of the association up to 5 per
cent Of the amount Of money he has
borrowed from the association. This Is
the famous joint liability OF the Land
! schaften. But this liability is limited to
5 per cent of each members mortgage.
The total amount of the bonds Issued is
never allowed to exceed the security
available. that is land mortgages and
| reserve fund. ~
How They Loan Money.
The association now has q capital
wbirh IL Lnc lnrrnwnj of lou. ;ptarnrt
rates. The common people all over the
German Empire buy these bonds. Often
they sell better than Government bonds.
The association Is now ready and able
to loan money to. the, individual farmers
at following terms: Cd the amount loan.
ed to the armer is one-half to two
thirds Of the value OF his property, this
value being determined by the taxes he
pays and the market price OF the land;
GU the borrower must pay interest an
nually at an average rate of 3 IL to 1
per cent; CD the borrower is also re-
quircd to pay a slight amount into the
amortization fund for the purpose OF
taking w the entire loan when due. This
amount is about Is of one per cent; 60
the borrower also pays lilo of one per
cent for the general administrative OK
rcnscS of the company. lie has lbs
right to pay his loan in full at any time.
II he does SO before the loan is due The
association has 4 right to call IN bunGa
in equal amount, this being done by lot.
The idea is that the amount OF bonds
outstanding should always equal the
amount of the loans.
What They Have Done.
The Land Mortgage associations l'ato
succeeded in, reducing tho interest rale
for the small farmer. This has been
done. not. only by making loans TO him
at lower rates. hut also by forcing other
private financial institutions To. conc
down in their rates. The small farmer
has been given an incentive to max, in,-
rrovcments on his property and scicn-
tific intensive farming has been the
natural thing. The farmer has aeen
practically forced to be economical BY
having to a eacl, year a little on the
principaf of his loan. thus rendering the
borrower or his children free from mort
cages.
These associations have been doing
business Tor over 4 century and have
been very successful. They went through
several wars and crisis untouched. The
farmer has very rarely been called upon
to help pay another mans loan. They
have been unusually strong. The cost
OF running these associations has been
remarkably low. An observers and stu
dents have pronounced these Land Mort
gage associations a great success and
worthy Of imitation.
How VIII II Work Here.
There are some people who seem to
THINK that because the plan has succeed
ed in Europe, 1t cannot succeed here. On
the other hand, there are. those who 70
to the other extreme and say that what
has been tried in Europe will work here
equally well. The question is: Is there
anything peculiar about the German
method that will make ic impractical of
operation in this country? Two such
factors would appear at once; one is
that land values are more fixed there
than in a new country like North Da-
kota. An association would soon 10
bankrupt in this country, unless the dircc
tors were very conservative in loaning
money in newly settled communities.
Americans are natural rear estate boom
ers. y second factor is this-the ele-
mcnt of joint liability is UNI American.
Americans arc too ind%ivdualistic to bind
themselves to pay for anothcr's dcfalca-
ton or failure. In Germany where the,
population has been settled for many
generations. a man and his ancestors be-
fore him have an established reputation
for honesty and integrity, and his neigh
bors are willing to take a chance on his
hoesty. Out on a sparscly settled prairie.
men do not get well acquainted, or bN
the time they do 50 they are ready to
move to Canada or California.
Plan Can Be Modified.
This does not mean, however, that the
German Landsclaftcn is not adapted to
our conditions, but rather that the plan
must be modified to suit our peculiar
needs. The joint liability can be elimin-
ated and the sic Of the reserve fund in
creased, thus guaranteeing the payment
Of the bonds when they fall due. Ad-
m'nistrative expense probably will be
greater than in Germany where the head
officers serve for nominal salaries. This
means that rates Of interest would be
slightly higher, but the element Of cost
in the land mortgage business is small
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