American Falls press. [volume] (American Falls, Idaho) 1907-1937, 1914-04-09


he Seven Years War had reduced
the z tier part Of Prussia TO a pitt
able state OF deyastation. The own
ers Of large estates which had borne
the Drunt o. the war charges were
poverty stricken. Hence in 1863
Frederick II Issued a royal decree en-
abing these owners OF large Landed
estates 10 secure capital necessary to
revive their agricultural interests By
joining together In securing a coop
erative loan. While al first these
loans were granted 70 only the own
ers OF the large estate this system
was afterwards adapted so that the
smaller land owner could profit By IL
The owner who wishes to secure a
loan gives a mortgage to the associa-
ton. He is required 10 pay interest
at the rate Of from three and a half
10 four per cent. and may borrow up
70 two-thirds OF the value OF his
farm. This valuation is arrived at BY
c%spitalizing the income which he can
get on from il.
It is Characteristic Of European
finance that the farm values are fixed
largely by consideration OF the actual
earning capacity OF each farm. Appar-
emily the price which a neighboring
farm may bring has little 10 do with
the value which is placed upon any
particular farm. The theory is and
it seems to be sound that the value
Of the farm is not SO much where it
lies as it is what will it earn
When the association has a group
Of these mortgages It pledges them
by a trust deed, and issues a series
Of bonds secured by the pledge Of
the mortgages. These bonds are then
sold and usually bear an interest OF
from three TO three and one-half per
cent The association not only pledges
the association itself so that in a
sense every member OF the associa-
ton is back OF the bonds. These
bonds have always brought a good
price even in the most difficult times
financially.
The mortgage given by the land
owner is not due at the end OF a GER
tain number OF years. at which time
the entire principal must be paid as
- 1-- --4A ~ ADA AEdEE1s IL
stead they run for from twenty to
sixty years with an agreement incor-
porated into the mortgage that each
year the farmer shall pay a certain
sum OF money which shall include in
terest and a small installment upon
the principal. In this way the mort
gagor gradually pays OF his mortgage
paying little more than the amount
which would in America be required
as interest alone. The chief advantage
TO the farmer is in this fact that he
is allowed to pay on the loan BY max
ing small annual or semi-annual pay
ments. Other advantages are that he
will never have 10 renew the mort
gage which Will continue to run until
the payments have cleared the farm
OF the debt; he will never be com
PEELED TO pay any renewal commits
sion, and will never have to 90 10 the
expense OF bringing down his title or
having it examined every two years.
as IS done under our American sys
tenn.
Reiffeson and SchulzeDelitzsch.
The Reifeson and Sehulze-Delitzsct
banks are smaller community institu
tons. organized upon the cooperative
plan. and are not operated for profit
TO the investor. Reifeson banks CD
crate more particularly in the coun
try while the Schulze-Delitzsch banks
operate largely in urban communities
The Reineson is the most purely CO
operative While the Reineson bank:
loan money for a long period OF time
they do not generally loan for so Ions
a period OF time as do the Land
schaften- They receive deposits from
their members, paying them inleres
as do savings banks. The one a
Cassel, Germany. which can be takeI
as a fair representative OF its typ'
charges 6h per cen on short tins
loans. They pay a. per cent. on de
pOsits, which are left with them 70
an agreed long period OF time. an'
1 per cent on deposits left for
shorter time. 1t is found. however
that the rate OF interest varies in dill
ferent places. Since these banks mus
meet the competition OF the Join
stock and savings banks in each CON
munity. They generally are able u
compete successfully for the reason
their expenses are very light. thei'
officers usually serving without salar,
and since they do not wish 70 mak'
any large profits TO pay OF any in
vestors as do the other banks.
Go Slow.
The best rural credit system in IN.
world. il actually in operation woul,
not prove a cure-all for our presen
rural ailments. Il would not get yol
anywhere. The farmer who has ne
g0tiated a loan upon the nos favor
able terms has made no actual ad
] ance He is just where he vas be
/ fore. II I am running a lOsing bust
ness the more money l borrow hi