The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1924-10-13
LOAN ACT SAVES FARMERS $780, 1000 YEAR
BY CHARLES p. STEWART
NEA Service Writer

OcISlCC VLASCA
Washington, Oct. 13.-Up to IA per
cent was what the American farmer
used to pay on his mortgage-if he
had one, as about 100000 do.
The farmer did we'll if he kept his
interest paid up. 1t was seldom he
made any impression on the debt
itself. Once mortgaged, generally
he stayed mortgaged fos> the rest of
his life.
Today per cent is the maximum
interest rate. BY adding another l
per cent, in 33 years the farmer
clears off his mortgage.
In well-developed regions, like
Iowa, the old interest rate was about
Z per cent. In newer territory, like
Montana, Texas and the Pacific
states, it ran as high as IL per cent.
Besides, the farmer usually had to
pay bonus or commission to get
loan. This was 1, 2, sometimes s
and even 10 per cent.
Every time the farmer renewed
which ordinarily was every years
he had to pay a fresh bonus. 1t
was adding the interest and bonus
together that brought the total rate
up, in some places, to IA per cent
occasionally higher.
Naturally the difference between
the old and new rates is'no as great
in the older regions-where it al
ways was relatively low-as in the
newer ones. Nevertheless the aver
age difference for the whole country
is at least l per cent.
One per cent on 8 billions of dol
lars, which is the census bureaus
estimate Of Americas farm mort.
gage total, is 80 millions. The bonus
is abolished, too. That means about
20 millions more.
i Who Gets Credit?
One hundred millions annually is
| snug sum.
The authors Of the federal farm
loan act claim credit for this saving
to the American farmer.
Before the act was passed th'
farmer borrowed wherever he coult
generally either from some indi
vidual money lender or from hi
local bank, which, in turn, obtained
| the bulk of such funds from one o
the big insurance companies or som'
other institution with lots Of casl
to invest.
The act gave the farmer two nev
kinds of banks to borrow ~from-fed
! eral land banks and joint stock lam
banks.
Federal land banks are co-opera
| tive. Joint stock land banks max
loans direct.
How It's Done
Say q farmer wants to borrow
$1,000. He wants to wipe out th'
debt in 33 years. He applies to
federal or joint stock land bank.
The bank rate may be under 6 pc
cent if money is low. 1t cannot b.
above per cent anyway, under tn
law. The actual average is 1-2 pc
cent.
| But call it per cent-$60 yearl!
for the farmer to pay.
I To this add l per cent-$10-t
cancel the debt gradually. The 81
total is divided into semi-annua
sums of $35. With each such pay
ment the debt is reduced SIS. Th
bank pays the farmer interest o.
each $5-applies the interest, to
gether with the SIS, on the debt, tina
is to say.
Between the piling up of this iq
terest and the gradual reduction o
the debt, with the sixty-sixth pay
ment the obligation is canceled-th
farmer is debt free.
Who Holds Loans
To be sure, the federal and join
stock land banks have no monopol,
on the business of financing tn
American farmer. Loans to Ameri
cas- farm borrowers are held, il
round figures, as follows:
Insurance companies, $1,6OO,0OO,
900.
Savings, state and commercial
banks md trust companies, $1,500,
100000.
Federal and joint stock land banks
81, 1,5O0,O0O,0O0.
Charitable institutions, $750,000,
600.
Local individuals, $4,000, 100000.
Miscellaneous, 50,O00,000.
But here is what the federal an,
joint stock land banks have done
They have forced private concern
and individuals, who formerly de
manded higher rates from the farm
ers, to come to their terms.
The joint stock land banks in par
ticular have completed vigorousl
with those who formerly finance
the farmer. In order to place thei
money at all, these Individuals an
concerns have had to loan on a
favorable terms as the federal an
Joint stock land banks.
The federal farm loan system wa
adopted belatedly in the Unite
States. Europe had had it for
century and a half. Chile has ha
it for years. Even the Philippine
have had it since 1900.
| Here the law was passed in 1915
but it is only in the last six year
that the banks have been operatin
effectively.
n r