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Second, Societies which found banks for receiving deposits and lending on short time loan to members, instances of this being the Schulze-Delitsch and Raiffeisen in Germany and the Desjardins banks in Quebec: this type will be considered with reference to the last instance.

Third, the direct state mortgage loans without any cooperative character at all, as in the Australian system.

THE GERMAN LANDSCHAFTEN."

The story of the work of the German Land Mortgage Credit Associations, commonly called Landschaften, since their founding by Frederick the Great in 1770 is an oft told tale. Designed to help the landowners of Prussia in the financial crisis which followed the Seven Years' War, these Associations at first were compulsorily imposed on all the landowners of the districts in which they were formed, although this compulsory character was modified somewhat later.

These institutions are not, in the ordinary sense, co-operative credit associations at all, that is to say in the sense that the Raiffeisen and Schulze-Delitsch systems are co-operative, seeing that they are non-profit-seeking, have no share capital and the accumulated assets are utilized not in lending, but in covering any deficit. These associations may therefore be regarded as very highly organized associations of borrowers, with collective guarantee, for obtaining capital from third persons; by issuing bonds secured by mortgages on the properties of all the members they create a security realisable at any time, and far superior therefore to a mere individual mortgage security."

As originally instituted, mortgage bonds were issued secured by mortgage upon specific property with the guarantee of the Associations to back them, but of late years this system

"The report of Mr. J. R .Cahill to the British Board of Agriculture, "An enquiry into Agricultural Credit and Agricultural Co-operation in Germany," issued as a Blue Book (cd. 6626), is by far the most thorough and exhaustive treatment of the subject in English. Mr. Henry Wolff's "People's Banks" is a mine of useful information. There are numerous descriptions of the system in economic literature.

"Cahill, op. cit., I.

has been changed, and now the bonds represent legal claims upon the Associations which are founded upon mortgage claims for similar amounts.

The system of working is a simple one. The individual borrower goes to the Landschaft officials who, after his land has been appraised,' give a bond in exchange for his mortgage; the borrower then sells the bond in the open market. The Landschaft pays the interest on its bonds itself, and looks to the borrower to pay a slightly higher rate interest and amortization to the Association direct. If the borrower fail to keep up his payments the Landschaft forecloses (having statutory powers to do so without recourse to a lawsuit), has the land sold to the highest bidder and returns to the borrower any balance left over after the debt and costs have been paid. All the Associations are supervised by the State, and rank as public corporations, their officers ranking as semi-state officials.

In order to obtain a wider market for the bonds of the Prussian provincial associations, eight of these in 1873 combined to form the Central Association, retaining however, the right to issue their own provincial bonds as well. It was thought that by obtaining a wider market outside of Germany if possible, the bonds would be less liable to fluctuations "as bad harvest and other possible evils are usually only local, and their occurrence, while it might affect seriously bonds of Provincial Associations, would not affect those resting upon a broader basis." But this Central Association has not met with any striking success and the value of the Central Association bonds does not stand higher than those of the Provincial Associations."

The business of an association is carried out under the supervision of (a) the Royal Commissioner (b) a Board of Directors, (c) the Council of Administration, (d) the General Assembly. The Royal Commissioner usually the Governor of

"Most of the Associations will lend up to 3 of the value of the land tax assessment, but a few only up to %, none less. Small holders can, however, get slightly better terms.

Cahill, op. cit., p. 4.

the Province is a state official nominated by the Government and is president of the whole Association.

The Board of Directors consists of a Director General, other members chosen to represent different districts, and other non-voting legal members called Syndics. The latter are permanent paid civil servants who conduct the whole business, arranging the legal formalities, adjusting claims, cancelling mortgages, &c. The other members are property owners within the district, and are unpaid. Besides the central Board of Directors, local directors are elected for the various divisions of the area of the Association. They are members of the valuation revision committee, and are charged with the duty of keeping a watch on the conduct of the mortgages in their vicinity which might in any way impair the value of the property mortgaged.

The Council of Administration is a body designed to stand between the Directorate and the General Assembly. As the latter does not meet regularly, the Council of Administration is intended to represent the general body of members and to exercise supervision over the Directorate. The Council meets once a year, and before it is laid a general report of the year's work by the Directorate, the valuations and loans made, the bonds issued, what properties have been compulsorily administered, and the general state of the funds; it also determines the rates at which bonds shall be issued within certain periods. Members are all mortgage debtors to the Association of at least $7,500 each."

The General Assembly is a body composed not of the entire body of members, but consists of the different Directors of the various districts, the officers of the association, and certain deputies chosen by all the members; but the personnel of the Assembly varies in different Associations. In the majority of cases the General Assembly does not meet annually but is called into session by the State Commissioner, the Council of Administration or the Directorate. Membership of the Landschaft is obtained when any individual becomes a mortgagor

"It is impossible to state one figure for all Germany: some of the associations elect members with a minimum indebtedness of $5,000, actual or potential. Cf. Cahill, op. cit., p. 7.

of the association and ceases when he has redeemed his mortgage. Some associations charge a small entrance fee, but it is not generally done.

A very small charge (varying from 14 to 1-12% of the amount of the loan) is usually charged for general administrative purposes. The Landschaften have no power to refuse loans to landowners who fulfil all the necessary requirements and whose properties are good for the money, or else the association must show good cause for their refusal. Amortisation of loans is not general, and various regulations exist in different Associations. In most cases the contributions towards redemption of the mortgage are not applied to the immediate reduction of the debt but are accumulated in a special sinking fund. In some associations, however, borrowers are allowed to withdraw their accumulated contributions or take out fresh mortgages.

Bonds have held a very strong position in the money market, and the majority are quoted at, from under one to about two per cent. lower than Government stock bearing the same rates of interest. Indeed it is interesting to note that in 1808, in Prussia's darkest hour, when the land lay crushed by Napoleon after the disaster of Auerstadt and Jena, while Prussian stock was quoted at 20 the bonds of the Silesian Association never fell below 50.

Mr. Cahill sums up the special merits of the Landschaften as follows:

1. Mobilization of Credit.

2. Non-liability to recall of loans.

3. Low rate of interest.

4. No possibility of the rate of interest being raised since the bonds are irredeemable by the holder.

5. Right to reduce the debt at borrower's convenience. 6. Low valuation charges.

7. Administration inexpensive and high qualifications for their work of the office holders.

Many of the Landschaften have instituted loan banks in connection with themselves, not only to carry on a general banking business, but also to grant advances to borrowers on the security of the bonds of their associations, and also finally to grant short term non-mortgage loans to members who

obtain from them more favorable terms than they can elsewhere. These banks have realized very considerable profits, and after appropriations to reserve have turned over to their respective associations substantial sums which are applied to the reduction of the mortgage indebtedness of members.

Besides their principal activities most of the Landschaften have established fire and life assurance societies, and one interesting movement in the East Prussia Association may be noted. Here an independent association has been set up to carry on all kinds of life insurance. Instead of paying to the sinking fund the payments were made into premiums on life insurance policies the value of which are to be devoted to paying off the mortgage at the death of the mortgagor, any profits of the subsidiary association being devoted to the benefit of the parent Landschaft for the removal of indebtedness of members.

In considering the feasibility of inaugurating in another land and under very different conditions an organization of a similar character, it would be well to keep the following points very carefully in view:

First, the old established and well developed character both of the associations and of the estates on which they grant their mortgages.

Second, they are completely under Government control and their officers are permanent civil servants, specialists in their own line and trained to their duties.

Third, the principle of amortisation is not at all one of their chief points.

THE CAISSES POPULAIRES OF QUEBEC.10

It is not in the older countries alone that we find successful efforts to supply cheap money to farmers and others who are willing to co-operate for the purpose of securing the benefits arising from community of interests, efforts and liabilities, but a most interesting and highly successful organization is being carried on in our very midst.

1oI am indebted to the courtesy of M. Desjardins for the verification of all details and statistics. The information given here may, therefore, be regarded as authoritative.

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