502 IOWA DEPARTMENT OF AGRICULTURE 



bers of the landschafts, who know the land and what its annual pro- 

 duction is. If any further doubt exists that the land is of suflEicient 

 value for security of the loan desired, one of the head officers of the 

 landschafts investigates the land also. 



If the land is of sufficient value, the application is approved, "A" 

 executes and delivers to the landschaft his first mortgage on the land 

 for $5,000 bearing interest, let us say, at the rate of 5 per cent and 

 receiving therefor bonds of the landschaft for $5,000 bearing interest 

 at the rate of 4 per cent. Note the difference in the rate. The bond 

 bears 4 per cent while "A's" mortgage bears 5 per cent, the difference 

 being 1 per cent. 



This 1 per cent, except a small part set aside to pay expenses and 

 for surplus, is placed in a sinking fund, to be used to buy bonds of thie 

 association for "A's" benefit, virtually cancelling that much of his in- 

 debtedness annually. "A" still continues to pay at the rate of 5 per cent 

 on his mortgage, even though the principal is annually reduced. You 

 will readily see that a smaller part of the payment each year is required 

 to pay his interest, so a greater part of it is paid on his principal. If 

 "A" never pays more than the 5 per cent annually called for in the mort- 

 gage, his debt will in the coursie of time be extinguished. 



I have said in this example that a small part of the 1 per cent is laid 

 aside for the payment of expenses, and so forth. In most of the lands- 

 chaften, this item is not over one-tenth per cent and in the older associa- 

 tions nothing is kept for that purpose, as the interest on the large ac- 

 cumulated surplus more than pays all expenses. 



KEADY SALE FOU THE BONDS. 



There is a ready sale for the bonds and they are quoted daily in the 

 principal bourses of the states in which they are issued. They are legal 

 investments for trustee funds and savings banks. In Germany, the law 

 says that widows' and orphans' funds may be only invested in govern- 

 ment bonds and land bonds. For a long period of years, landschaft 

 bonds have maintained a market price very nearly as high as Imperial 

 government bonds and at about the sarhe price as provincial bonds. They 

 are higher than industrial bonds bearing the same rate of interest. 



The rates of interest of course conform to general market conditions 

 for money. At the end of the thirties, 3^^ per cent bonds predominated. 

 Later there was an upward tendency, which culminated in the seventies 

 in an issue of 5 per cent bonds, but these together with those of 4% 

 per cent were not long in circulation. Until the middle of the eighties, 

 4 per cent bonds predominated; their place was taken by those of 3i/4 

 per cent, and at about 1895, 3^^ per cent bonds were largely in circula- 

 tion. In 1897, only about 3 per cent of the bonds in circulation were of 

 4 per cent or over. Since that time there has been a slow but almost 

 constant rise in rates. The average interest borne by all bonds of these 

 institutions in 1900 was 3.42 per cent and in 1909, 3.49 per cent. 



I have no amortization tables of the landschaft but have one of the 

 Credit Foncier of France, which is similar. According to this table, at 

 an interest rate of 4.3 per cent on the bonds payable semi-annually, a 

 rate of about TY2 per cent on the mortgage will retire the loan in twenty 



