962 READINGS IN RURAL ECONOMICS 



rescue by the establishment of special state-aided institutions. In 

 Germany these are the State and Provincial Banks, noted above. 

 In Denmark the constant complaint of the small landowners led 

 to the establishment of special institutions, the bonds of which 

 are guaranteed by the state. In France a recent law provides for 

 state loans to small farmers. 



The inability, however, of the debenture-bond system, even with 

 state aid, to meet the needs of the small farmer is illustrated by 

 the history of the German state and provincial institutions. They 

 have been excellently managed, and no pains have been spared 

 to win the support of the small farmers. But while numbers 

 of small farmers have been accommodated, the rigidity of the 

 system leads many to prefer to patronize the savings banks or 

 the private lenders, despite the greater risk of foreclosure. 



A further illustration of the inability of the debenture-bond 

 system to adjust itself to agricultural conditions is afforded by the 

 fact that in Germany during the past decade the greater part of 

 the new mortgage loans have been made, not by the debenture- 

 bond institutions, but by non-specialized agencies, although the 

 former have greatly increased the amount of their loans in other 

 directions. This situation calls for some explanation. In the first 

 place, with the increase of mortgage indebtedness in Germany 

 there has been an increase in the proportionate number of the 

 less desirable risks and also an increase in the percentage of mort- 

 gage indebtedness on the old risks, with a resulting decrease of 

 the margin of safety. Under such conditions amortization is nec- 

 essary as a means of security. But these very conditions make it 

 difficult to exact amortization. Even farmers favorably situated as 

 to debt find amortization payments burdensome. In Germany and 

 Denmark, where it was formerly the general custom to require 

 amortization of long-time loans, the amortization principle was 

 found to be unsuited to farming conditions ; and except in the 

 case of the German joint-stock banks, it has been practically aban- 

 doned save when amortization is needed to give added security. 

 It is perfectly evident that in the United States compulsory amor- 

 tization would debar from credit not only the farmers of the newer 

 regions where capital is scarce but also those farmers of the older 



