Le Nord : revue internationale des Pays de Nord - 01.06.1942, Page 157

THE DANISH CREDIT ASSOCIATIONS
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The joint liability is, of course, only suited to loans placed
within such cautious limits of security that the effective appli-
cation of the liability must appear a possibility so remote that
it is not likely to intimidate the mortgagees. The importance of
the joint liability ought thus never to go beyond its psychological
effects, in which respect it contributes to create confidence in the
power of the associations to meet their obligations. The decisive
security for the bondholders as well as for the mortgagee-mem-
bers is a sound level of lending. The task of maintaining this
level in the face of a rising real estate market, with the attending
criticism from borrowers and the corresponding laxity of valuers,
is by no means an easy one, and the observance of the law’s pro-
visions with regard to the limit of lending is anything but suf-
ficient for the simple reason that it cannot be presumed that
sufficient caution has been displayed on the valuation. Expe-
riences of the past rapid changes of market values and the long
terms of the loans must be constantly kept in mind when the
loans are calculated. When errors were made it was always on
this point. But the general enquiry which was made in connection
with the drafting of the law of 1936 proved, however, that in
all essential respects the task had been satisfactorily accomplished,
even during the inflation of the world war of 1914—18. In the
present war since 1939 the Problem has, of course, presented it-
self again. For owing to the shortage of commodities develop-
ments in Denmark have led to a surplus of liquid capital, a
result of which is that the price of real property has been raised
to an untenable level. By various measures the movement, how-
ever, has been kept under control, and there is hardly any doubt
that the associations, with the experiences from the last war fresh
in mind, will contrive to maintain the lending level.
The fixing of the rate of interest has always been a disputed
problem. The secondary mortgage associations are to some ex-
tent dependent on the credit associations, and the latter on the
market rate. But theories of the right rate of interest and of the
presumed influence of the rate of interest printed on the bonds
on the market rate have up to the present time determined the
interest policy of the associations; their freedom, however, is
limited by a rule of law providing that bonds issued at a higher
rate of interest than 5 per cent. may only be issued with the per-
mission of the Ministry of the Interior, and this permission would
at any rate only be conceivable — and desired — under totally