SOME ILLUSTRATIVE FACTS

were opened. Loans were again entering the state, andthe same cycle of history, as above described, was re-peated.

Lumbering communities often go through a somewhatsimilar cycle. The virgin forests when first attacked tendto increase rapidly the income streams of those whoexploit them; then comes a period of decrease. Thus inMichigan two or three decades ago the lumber companiesfound a profitable investment, and borrowed in orderto exploit the Michigan forests. After the exploitationwas complete and the forests had been (often unwisely)exhausted, those regions ceased to be a desirable placefor investment, and their owners came into the position,not of receiving, but of seeking investments.

After the trunk lines of railway were completed, con-necting the Mississippi Valley with the East, there arosea great demand for loans to exploit the rich farminglands in that section of the country. The rate of interestfrequently was 10 and 12 per cent and even higher. Dur-ing much of this time the Northwestern Mutual LifeInsurance Company up to 1880 made an average rate onall its mortgage loans, $10,000,000 in amount, of nearly10 per cent. Another striking proof of the demand forloans in the Middle West is shown in the experience ofthe New York and Connecticut life insurance companies.New York up to 1880 had a law prohibiting the life in-surance companies in that state from loaning on realestate outside of New York. Connecticut had no restric-tion in this regard, and her companies loaned extensivelyin the West. The result is seen in the rates of interestrealized on mortgage loans of companies in the two states.Taking the period 1860-1880 as a whole, the Connecticut companies realized 1.2 per cent more than did the New

[389]