Americus times-recorder. [volume] (Americus, Ga.) 1891-current, 1913-03-27
RURAL CREDIT SYSTEMS

An investigation of the agricultural
credit systems of Europe is to be
made by a commission appointed
Monday last by President Wilson con-
jointly with a similar body assembled
by the Southern Commercial Con-
gress at its meeting year ago. In
France the capital of the rural banks
is derived from subventions, the
money being loaned without interest
by the Government; and from these
institutions we have nothing to learn,
the subsidization of banks either by
the State or Federal governments be-
ing out of the question The most
promising field of inquiry is Germany
specifically the Kingdom of Prus-
STA, where the rural mortgage associ-
alton have been longest established
and most successfully operated, the
association of East Prussia having
been founded in 1888 among the
landed gentry of that province.
Though the plan was conceived 125
years ago, the period of the phenom-
email growth of these associations n
Prussia began in 1890 or Whereabouts.
The basis of credit is agricultural
land, although the central mortgage
association established at Berlin in
1873 holds Government funds for
which it pays per cent. interest,
while quite a considerable part of
the capital seeking investment
through these associations consists of
small savings deposits. The general
plan, however, is to loan money on
farm mortgages; but the method dir
fers from that with which we are ia
miliar in some important particulars.
The association takes the note of the
borrower, secured by mortgage up to
two-thirds the value of the land;
thereupon the association issues ne
gotiable bond of like amount, which is
secured not by particular mortgage,
but by all the mortgages of which it
is the holder-so all the property hy
pothecated in the locality where the
association operates becomes surety
for each loan. The result is that the
agricultural credit bonds are highly
esteemed investment securities, and
money is obtainable on them at very
low rates. or 4 per cent.
A further advantage to the borrow
err is that he can redeem at any time
he wants to- If interest rates decline
he can make a new mortgage and paw
off the old with the proceeds, the as
ISOLATION ealing in the bond for re-
demption. Or, if he wants to reduce
or cash in the loan because it has be-
come Improbable to carry it, he is at
liberty to do SO. The lender, on the
other hand, cannot call the loan until
at the end of the term of the mortg-
age, ordinarily period of so years. A
sinking fund for the amortization of
is part of the plan. Thus
4 borrower of $1,000 at per cent. will
pay $40 year interest, ga per cent.
% sinking fund account, and IA per
cent for expense of administration
The association has no stockholders
and no dividends to pay. At the end
# so years, therefore, the loan would
)e discharged by the annual payment
If ; per cent. of its face. When the
sinking fund payments amount to -
ser cent of the face of the loan new
mortgage will be taken by the associa-
ion, so the borrower can have the
Use in perpetuity of the full amount 7
'orowed at an annual cost of per
ent The total of agricultural credit
onds outstanding in Prussia is 81
00,000,0 900 marks. 1