Daily capital journal. (Salem, Oregon) 1903-1919, 1916-10-14
Indiana Representative Tells
All About Rural Credit LatU

bonds This prediction is fully hornc
out in the world 5 history and will lie
verified here us well as in Germany,
France, and other European countries,
where rural-credit banking has long
organized.
Low Interest, Long Time
! Now, what does this mean to the
actual borrower. Well, it means money
at a rate not exceeding per cent, with
4 no commissions or renewal fees. The
! cost of operating the system will soon
drop to three-fourths per cent as the
operating cost will tend to decrease !,
as the volume of business increases. Tie
interest rate on the mortgage can never
be higher than per cent above the in
terest rate in the farnl-loan bond, as
the law fixes per cent as tho highest
margin which can be charged as operaf-
ing expenses Ii that margin is charged
and the expenses and reserves do not
consume it all, the balance must be pro-
rated as dividends to the borrowers.
The loans must always be given at ac-
tual cost. The law sets no limit to the
amount of bonds which may be issued
except that loans must be made to farm
ers in an amount equal to the issue of
bonds.
The method of securing loans is very
simple. The farmer applies to the land
bank through his local association for Il
loan and gives his note with q mortgage
as security. The bank files the mort
gage with the government and sells
bond ON the market. The capitalist
buys the bond and the farmer gets the
money. These operations will continue
as long as any farmer desires to secure
a loan. Every dollar invested in farm
loan bonds must be loaned to some-far-
mer to improve his farm, to operate il,
or to purchase land to farm. No person
can borrow dollar from a Federal
land bank except he personally oper-
ates or shortly intends to operate tho
mortgaged farm. No speculator can
get II dollar under any circumstances.
No man can borrow more than $4,000
at any one time. Thus the benefits of
the law will 80 wholly to those who
own or may purchase farms and opeF-
ate them personally and who desires only
la moderate-sized loan; and the law
makes ample provision to supply every
farmer in the United States who may
come within these limits and who may
desire to avail himself of its benefits.
1t plays no favorites.
Five to Forty Years.
! Any loan may he made for period
not less than five years nor more than
forty years, and may be repaid in whole
or in part, any time after the loan has
run five years. No man need fear
foreclosure if he makes his annual or
semi-annual payment, aud he will never
have any renewal fees to pay. | shall
only point out one further feature of
large advantage to the borrower in this
law, and that is the instalment plan
of repayment, commonly called amor
tization. | can hest illustrate this by
taking the state of Indiana as an exam
pie, The mortgage indebtedness
of Indiana is about Sl32, 100000 and the
average rate of interest is 6.2 per cent.
This means that the farmers in Indiana
are paying an average of $62 interest
every year on every thousand dollars
Iof their mortgaged debt without re-
ducing the principal at all.
i The land banks under the rural.credit
law will make loans which are to be re-
paid in annual or semi-annual install
ments. j will assume that the first
loans will be made in our land district
at per cent. The annual interest
charge on $1,000 at } per cent is $50. IL
farmer who is now in debt were to
borrow money from ruralcredt bank
at 3 per cent and would agree to pay an
annual installment of $60.43. which is
less than the average amount he now
pays in our state for interest alone, and
would make this payment for 80 years
he would discharge his debt in full. He
will thus have repaid debt OF $1,000
with $315.iS. This is what the new law
will actually offer to Indiana farmers
IL means such reduction in interest
rates that farmer can actually pay
principal and interest of his debt with
less money than he is now paying for
interest alone.
First Law for Farmers.
II is the first banking law to be en-
acted by the congress of the United
states dedicated exclusively TO the IN
terest of farm borrowers. 1t makes
farmers u preferred class of borrowers
and viii give them money for produc-
tive purposes at lower rate of inter
est than any other class Of borrowers
can secure it. Thus the democratic par-
lty has redeemed its promise to enact
n rural-credit law which will place far
mer's credit ON Il par with that Of tho
merchant and the business man. Speil-
ker CLARK has said publicly that the
rural-credits law is one OF the three
greatest laws passed during this admiic
istration.
| am proud of this record; am proud
Of the part ] have been permitted to
take in the enactment of this law; and
] am proud of my party, it has fought
a good fight and has kept faith with
the farmers of the nation.