450 ANNUAL REPORT OF THE Off. Doc 



The United States has not as yet passed through its speculative 

 period. In some sections of this country the value of land is rising 

 faster than the legal rate of interest. It is not the purpose of this 

 bill to help the si)eculator, but to assist the farmer to own an aver- 

 age sized farm and to improve and equip the same for productive 

 agricultural purposes. Therefore, loans are denied to any one who 

 will not actually cultivate the land he proposes to mortgage, and 

 who does not desire to use the money either to purchase a farm home, 

 to improve his land, to purchase live stock or to cultivate it. No per- 

 son is granted a loan less than one hundred dollars or more than $10,- 

 000. It is believed that these restrictions will not work actual hard- 

 ship on the great mass of farmers who will apply for loans; and on 

 the other hand that they will prove an effectual bar to speculation. 

 Thus the whole benefits of the bill will go towards the development 

 of our agriculture, to the building of new farm homes, and to the 

 founding of better flocks and herds. Loans are made for a period of 

 not less than five nor more than thirty-five years. These loans are 

 made re-payable in fixed semi-annual installments so that all pay- 

 ments are of equal size and include both interest and principal. 



This method of repayment is known as amortization. The reduc- 

 tion in the debt is computed according to the principles of compound 

 interest, so that the borrower not only reduces his debt in the amount 

 which he actually applies on the principal, but he also receives inter- 

 est upon interest. He is given every advantage of an investment in a 

 savings institution which is officered by competent and skilled finan- 

 ciers. It will thus be possible under the provisions of this bill to bor- 

 row money on mortgage security and repay it, principal and inter- 

 est, at a lower rate than farmers even in the most favored circum- 

 stances are now being charged interest alone. To illustrate this: 

 When I was in Europe, farmers were repaying their loans at an actual 

 rate of 4.85 per cent., which rate of payment included interest, prin- 

 cipal and administrative charges. This rate, at the expiration of the 

 period extinguished the debt. I will now make a confident prediction 

 that when this law goes into effect, and becomes fully established, 

 that the farmers of Pennsylvania will be able to borrow money under 

 its provisions at a rate of five per cent, which will extinguish interest 

 and period within the period of thirty-five years. The loans granted 

 are unrecalled by the bank and need never be renewed and cannot 

 be foreclosed if the contract payments are made. The borrower, how- 

 ever, is given the right to pay ofi' his loan in whole or in part at any 

 interest period. Thus, no borrower need be afraid to contract for a 

 long period of time because he can anticipate payment at the close 

 of any six months periods. This works no hardship upon the bank 

 because it can either loan the money to some other farmer, or can 

 sell in its bonds and pay them off. 



I have noticed recently in the public press certain prominent indi- 

 viduals, one of them a president of a life insurance company, at- 

 tacking the amortization feature of the bill and claiming that the 

 American farmer does not desire the privilege of long time loans. 

 This is but an indirect and insiduous attack upon all methods of rural 

 credit loans. The very strength of the system lies in the fact that the 

 farmer is given an unrecallable contract running over a long period 

 of time, reducible according to the earning power of compound inter- 



