Rural Credit 293 



a member in exchange for his mortgage. It gave him a 

 bond which simply contained a promise to pay in the 

 event the interest and principal could not be collected 

 from the debtor. The bond was of the exact size of the 

 mortgage, primarily secured by it, and made payable to 

 bearer on a few months' notice. In case of default the 

 holder had to resort to foreclosure proceedings, so the 

 bonds had only a limited circulation, and were often sold 

 below par. This was but a slight advance on private 

 money lending. Later the associations undertook to 

 collect the interest and principal. Finally they assumed 

 direct responsibility, and began to give cash to members 

 for their mortgages, raising funds for this purpose by issu- 

 ing and selling bonds of even denominations for large and 

 small amounts. The practice of requiring mortgages to 

 be paid in lump was abolished, and in place thereof the 

 loans were made repayable by annual installments run- 

 ning through a long period of years, and the installments 

 were set aside for redeeming the bonds. These steps 

 brought about a complete revolution in land credit, and 

 marked the beginning of the land-mortgage business as 

 it is known to-day. The whole theory of the organization 

 of land credit is based upon this debenture bond and sys- 

 tem of amortization and sinking funds devised and intro- 

 duced by the Landschaften. One without the other two 

 is useless. The three must be combined, and also coupled 

 with strong management under wise laws in order to 

 attract a steady flow of cheap money to agriculture. It 

 is remarkable that this truth has never been realized or 

 applied to the United States for farm-mortgage loans. In 

 spite of the example of practically every nation in Europe 



