Amarillo daily news. [volume] (Amarillo, Tex.) 19??-current, 1913-01-07
THE BANKS AND THE FARMER.

country and Europe. Myron ]. Hernok. American
ambassador to France asserts that agricultural de-
veloprnent in the United States has been needless
y hampered by high rate OF interes, and shor time
loans
His published comment is filled with meat for
general thought masticato After citing the
economic import. nee Of agriculture, and calling at
tention to an increase in the price OF products dur
ing the past ten years Of eighty seven per cent he
declares that the only remedy for further in
crease in the value OF food,,uffs is very increased
augmentation in production.
To bring about such an increase, he asserts.
there must be expended vast sum OF money
very much more than the farmers supply from
their own resources. and more than they can OBJ
tain from existing financial institutions
To quote further:
For the purpose of buying land and perma-
nently improving il farmers should be able to make
mortgage loans that have long time to run.
Money invested in land or permanent improve
ments becomes fixed capital and the production
10! farmers income that properly be attribut-
ed to this sort OF capital is limited that it is H.
logical and unreasonable to expect the money so
invested TO be repaid. except after a considerable
period Of years Our present commercial banking
system is designed to serve the needs of commerce
and industry and is not fitted to make the 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 compan-
les and brokers 1t is reliably reported that thir-
teen of the larger life insurance companies on Jan
uary t. 1912 had outstanding farm loans amount
ing to S439 900, 900 Farm loans are also made
by ydividual lenders but the total from all OF
these sources is inadequate The failure to supply
the demands OF great numbers of honest and cap
able farmers for mortgage loans is evidence that
something is wrong and tina, new financial machin-
cry will have to be created for the financial re-
quirements OF farmers are increasing more rapidly
than those of any other class
The only logical and practical method for
farmer to pay loan secured by his land is by
amortizaton--in other words, by small partial
payments regularly made Amortization is the
dominant feature OF the land mortgage systems of
all European nations. The average length OF the
loan there is about thirty years and may run for
seventy five years The annual sum paid by the
borrower is composed of the interest the pro rate
OF the cost OF business and an nstalment on the
principal. and is called an annuity. 1t remains lew
e with the rate OF interest through the entrd
term of the loan, but each year the actual amour,
OF interest decreases and the amortization item in
oreases. that by the end OF the term the debt
is wiped out completely. The percentage of cap
ital to be repaid each year under the amortization
depends upon the term OF the loan OF course
The personal credit system for short time loans
such has become the almost exclusive means OF
discount and deposit in agricultural Germany-of
which the RiaDeisen banks are the best known
ype-would require but very few changes in or
der to adapt It for OF farmers in many parts
OF the United States AS these agricultural banks
are simply operative societies. the credit of each
Is established upon the solidarity of its members
his sohditary may render the members indvid
ually liable with or without limit for all the debts
OF their association, according to the laws or the ar
hoes OF agreement under which it is formed The
tendency is toward unlimited liability. for it in
spires confidence and expands the borrowing pow
'er on the combined responsibility of the adherng
members The loans of these co operative soce-
ties are secured, not by mortgages but by the per
sonal obligation of the borrowers usually guaran-
teed by two associate members The affairs of a
few cooperative credit societies have been wound
up, but no failure has ever occasoned loss to de
postors or creditors or burdensome assessment
on members Their sody is so widely recogniz.
ed in Germany that in panics deposits withdrawn
from other banks have been offered to these so
cietes
The foreign mortgage loan societies and com
panies and the agricultural credit societies involve
on financial principles that are not familiar in the