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1857, when the depreciation of the paper currency got them into trouble, and the government had to come to their assistance by repaying a large amount previously borrowed.

In 1859 a commission was then appointed to study the question, and for three reasons it recommended the formation of mutual associations: first, because it was supposed there would be a good market for the bonds of such association; secondly, on account of the active control of their affairs by the borrowers, who would be mutually liable; and thirdly, because it was thought that between such associations, managed by the previous borrowers themselves, there would be no competition, and thus no temptation to make risky loans.*

Such mutual associations, similar to those of Germany, had long been successfully operating in the Baltic Provinces and in Poland. The credit associations of the nobility of Esthland and Liefland had been founded in 1802 and 1803 respectively, when the Czar loaned them several million roubles at three per cent with which to commence.†

Furthermore, in 1825 one had been founded in Poland with seat at Warschau, similar also to the German Provincial Associations, and this, as well as the preceding ones, is still in successful operation. The members are the proprietors of country estates and are all responsible for the bonds which are given to borrowers when loans are made. These bonds are redeemable in paper roubles, and, with the exception of one issue, of which there was in 1890 outstanding 37,628 roubles at four per cent, they draw five per cent interest. The total amount outstanding in 1890 at five per cent was 112,267,008 roubles.

The Credit Association of Kurland, with seat at Mitau, founded in 1832, also resembles the Prussian Provincial

L'Économiste russe, February 1, 1891.

+ Bergsoe, "En Creditfarening, etc.," (Copenhagen, 1835), p. 94. R. Zeulmann, "Das Landwirthschaftliche Kreditwesen," Berlin, 1866, p. 105.

1 W. Saling, Berliner Börsenjahrbuch for 1891. Cf. also ". Statistique du Credit a longue terme en Russie." St. Petersburg, 1894.

Associations. The members are mutually liable.

Loans are made of not more than one-half the value of the property. When either principal or interest is paid on any of the bonds of this, as also of the preceding association, a tax of five per cent of the amount paid is levied by the Russian government. This association had in 1890 outstanding at five per cent 17,982,700 roubles, and 2,044,000 roubles at four and one-half per cent.*

In addition to these four early mutual associations, a number of others were now, after 1857, founded throughout Russia, as follows: In St. Petersburg, in 1861; in Moscow, 1863; in Riga, 1866; another in Riga, 1869; in Reval, 1869; in Warschau, 1870; in Odessa, 1871; in Lodz, 1872; in Kurland, 1875; in Kronstadt, 1875; in Liefland, 1884; in Lubline, 1885; in Kief, 1885; in Kalich, 1886, and in Plotsk, 1887. All these credit associations are for owners of city properties, and are on the same plan as those of Germany and the earlier Russian ones above described.

The most important mutual mortgage concerns of Russia now founded were, however, the Kherson Provincial Bank of 1864, and the large Credit Association of St. Petersburg, founded in 1866.

The former lent fifty per cent of the value of the property, with sinking fund redemption of the loans, either in thirtyfour years eleven months, or in thirty-six years six months. The bank charged a commission of one-half per cent. Onehalf per cent of all loans was paid every year to the sinking fund and one-quarter per cent to the surplus funds. Both five per cent and five and one-half per cent bonds were issued. The outstanding loans of this bank grew rapidly,†

*W. Saling, Berliner Börsenjahrbuch for 1891. Cf. also "Statistique du Credit a longue terme en Russie," St. Petersburg, 1894. † 1865.

1870

1875

1880

1885

1890

1,833,000 Roubles. 14.531,500 43,065,500 48,872,000 57,635,000 66,864,500

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44

and in 1890 it had accumulated a surplus of 4,152,500 roubles. In 1868 the bonds had to be sacrificed by the borrowers at from seventy-two to seventy-seven per cent, but in 1890 the five and one-half per cent bonds were above par and the five per cent bonds, at ninety-nine per cent; it had then outstanding at five and one-half per cent 49,038,000 roubles, and at five per cent 17, 102,900 roubles.*

The Mutual Credit Association of 1866, of St. Petersburg, made loans to the owners of landed estates not exceeding one-half the valuation. The loans were redeemable by sinking fund in fifty-six and one-half years and were made in gold bonds of the association. A penalty of one per cent a month was charged for delays in payments due from borrowers. Absolute foreclosure, without redemption, took place after two months' default, and the association was obliged to sell within six months the property so obtained. The bonds were redeemable in the course of fifty-six and one-half years at 125 per cent by annual drawings.

The large scale on which this association was commenced made it an immediate success. The amount of outstanding loans rose quickly to over a hundred million roubles, and the five per cent bonds were sold by the Rothschilds and Bleichroeder in Berlin. The borrowers obtained ninety per cent of the face of the bonds.*

At first all interest and sinking fund installments were payable to the association in gold, but as paper money fell in value, this was found very difficult. In 1881-82 members had to pay as much as seven and eight-tenths roubles in paper for five roubles gold. In 1884 the government therefore came to the rescue of the association, agreeing to loan it 3,800,000 roubles, and the rates to be paid in paper for roubles in gold were now gradually reduced from eight roubles in 1884-85 to seven and one-half roubles in 1886-87; six and nine-tenths roubles in 1887-88, and seven roubles in 1888-89. Since 1880 loans have also been made in paper, • L'Économiste russe, Jan. 15, Feb. 1 and 15, 1891.

and bonds redeemable in paper have been issued, of which were outstanding in 1890 about thirty-six million roubles.*

Of every loan five per cent was retained by the association, and in this manner a capital was obtained; the government further contributing a fund of 5,000,000 roubles in interestbearing notes of the National Bank, the so-called "Aid Fund." The amount of loans was not to exceed ten times the total of these two funds. The "Aid Fund" at one time sustained a loss of 1,455,695 roubles by embezzlement. Up to 1887, loans of about 150,000,000 roubles had been made, most of the bonds being issued at five per cent. In 1887 a rather expensive but successful conversion took place, these bonds being exchanged for four and one-half per cent bonds redeemable at par instead of at 125 per cent. This absorbed the entire capital and surplus of the association, including the "Aid Fund." In June, 1890, the capital was 501,930 roubles, the special surplus fund, 1,925,642, and the general surplus fund, 1,054,802 roubles. †

The new four and one-half per cent bonds are redeemable in the course of fifty-six years, and can be tendered by borrowers in payment of loans. They are absolutely guaranteed by the government. In 1889 they were quoted in Berlin at ninety-nine and three-tenths per cent, and in 1890 at 101 per cent.

The mutual credit associations were thus established in Russia, and in fact, most of the city loans are now made by them, but owing to the difficulties due to the fall in the value of paper currency, which was felt by any association issuing gold bonds, it was in 1890 decided to have the large

*W. Saling, Berliner Börsenjahrbuch, 1891.

On July 1, 1890, the association had outstanding:

Long time loans in coin of.

In paper currency

Short time loans

It had outstanding:

Five per cent coin bonds

Five per cent currency bonds

101,025,324 Roubles.
36,623,300
7,404,846

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Four and one-half per cent coin bonds 94,417,100

....

(L'Économiste russe, as above.)

36,623,300

association of St. Petersburg amalgamated with the National Land Bank of the Nobility, a government bank, issuing five per cent bonds, which had been founded in 1886.

There are now two national mortgage banks in Russia, this one for the nobility, which has, aside from the loans of its special section, outstanding loans of 319,000,000 roubles, and another bank for the peasantry founded in 1883, which has loans outstanding of 49,000,000 roubles.

The former was by law of 1889 authorized to issue bonds with prizes, as is customary on the continent of Europe, where the lottery business is not regarded as in America, and in 1890 there were eighty millions of prize bonds outstanding at five per cent. This bank had in 1890 a surplus of 1,292,708 roubles.

The one for the peasantry had in 1891 a capital of 2,807,439 roubles, but had already then had to assume properties to the amount of six million roubles.* It seems, therefore, too early to pronounce the vast mortgage loan business done by the Russian government an unqualified success.

The private mortgage banks, however, make an excellent showing. These date from the period succeeding the payment of the French indemnity, and are doubtless to be attributed to the thrifty Germans, to whom Russia owes most of her commerce. That of Kharkow was founded in

Each of

1871 and nine others† immediately afterward. these banks is limited to a certain district in such a manner that only two banks can compete making loans at any one point.

They loan up to sixty per cent of the valuation, and can foreclose, without redemption, after three and one-half months' default, which the borrower, however, can avoid at any time before the sale by paying a penalty of one per cent. The interest is paid semi-annually, and loans are

• L'Économiste russe, Dec. 15, 1890.

+ Poltava, St. Petersburg, Moscow, Bessarabia-Tauria, Nijnii-NovgorodSamara, Kief, Vilna, Yaroslaw-Kostroma and Don. Furthermore, in 1873, that of Saratov-Simbirsk, now in liquidation.

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