66 CANADA - CREDIT 



niitted a by-law to the electors and their majority has voted in favour of 

 it. The Act will then be brought into operation in this ^lunicipaHt3^ A 

 municipality by its approval of the by-law will guarantee the government 

 against loss on mortgages placed within it to the extent of 5 per cent, of 

 the money lent. This measure is intended to improve the security of the 

 bonds which will be issued, and it is not expected that there will be anj' 

 losses. 



When the by-law has been approved the municipal council will ap- 

 point a committee, either of its own members or others, to inspect farmers' 

 applications for loans and, at their discretion, to recommend them to the 

 board. 



The secretary-treasurer of the municipality will receive all apphcations 

 for loans as part of his regular duties and without extra payment from the 

 government, but there is nothing to prevent the municipality from arrang- 

 ing extra payment for him for this work. 



The proposal of the government is to raise the necessarj'^ mone}'' by 

 offering 5 per cent, bonds, on which both principal and interest will be guar- 

 anteed by the government, for sale throughout the province and in the 

 money markets of the world. It is expected that they will sell at par 

 at the present time and that the necessary money will therefore cost the 

 government about 5 per cent. The expense of administering the Act is 

 expected to be not quite i per cent., so that the total average cost of mort- 

 gages will be less than 6 per cent, on thirty j^ear loans. 



The government intends the Rural Credits Association never to be 

 commercialized. Tn future years all its capital stock and shares are to 

 be held by the government, or farmers who have borrowed from it on mort 

 gages, and who will have received 5 per cent, of their loans in shares. 



The shares are expected to pay a fairly good dividend, depending en- 

 tirely on the profits of the association. No dividends will be paid until 

 a reserve account, equal to 20 per cent, of the paid-up capital, has been 

 created. 



The profit in the conduct of the association is expected to come through 

 the cheapness of administration, and the margin which is provided by the 

 fact that the rate of interest on repayments is lower than that on the orig- 

 inal loan. 



To set the .scheme in operation in Manitoba the government will ar- 

 range to borrow from the banks at 5 per cent, the sum of $1,000,000 dol- 

 lars, and to subscribe for -Sioo.ooo stock in the association. When the 

 $1,000,000 has been lent on mortgages 5 per cent, of this sum, or $50,000, 

 will have been subscribed in stock by borrowers. The government will 

 then issue guaranteed 5 per cent, bonds, free from all local taxation, to the 

 maximum extent of $9,000,000. 



To keep down the cost of administration the government will pro\'ide 

 that the Land Titles Office make no charge for investigating titles and re- 

 gistering mortgages, placed by the Rural Credit's Association, bej^ond the 

 regular registration fees. The government in Manitoba will also provide 



