The herald., 1897-07-15
OFFICE OF THE HERALD.
Los Angeles. July "A, 1897.

Los Angeles. July a. 1897.
The signs of business improvement are
expatiated upon by Henry Clews in his
latest circular to the following effect: On
all sides, these are the signs of COM
pleted readjustment to the new conditions
that have grown out of the protracted
chaos, and 1t Is therefore important to
ascertain just how we stand. in respect to
the investment interest, as compared with
i've years ago. Our railroad industry per-
haps affords the best means Of illustration.
Turning to the month of May, 1892, we find
that 142 roads showed a total of gross
earnings amounting to s2o4, 100000 For the
same month Of this year, 100 roads report
gross earnings aggregating $191, Ooo,0 600. This
shows a slight gain in the rate Of gross In
come, but not to an extent commensurate
with what would have been realized under
ordinarily prosperous conditions. As to
net earnings, we find that in April, 1892,
1877 roads showed SIS, 1913. 900, whilst for April
1897, the sum Of 900 was earned. net,
by 1874 roads. These figures show that the
status Of the business of the railroads falls
below that of five years ago; but less so
than might have been expected from the
severity Of the depression through which
the country has passed.
This attempt to get comfort out Of the
fact that railroad investment securities
have fallen in value is a peculiar form of
reasoning, and Mr.. Clews admits that very
large advances in prices must be made
to bring values up to the standard of five
years ago. Because there is large exist
- to- Ill ;,,f1
that things are going to be better. This ar
gument may give satisfaction to those who
desire to look through rose-eolored glasses,
but 1t can hardly be commended on the
score of its logical sense.
The fluctuations in the rate Of interest
demanded on real estate loans in San Fran
cisco are set out in the following extract
from the Real Estate Circular of that city
and the lesson drawn may be applied with
equal force to Los Angeles. The Circular
says:
During the years Of real estate booming
and credit auction sales-that is to say.
from May, 1882 until June, 1S90-our largest
savings bank granted loans in all sums.
large or small, at 6 per cent per year, 1t
of course paying the mortgage tax. The
other savings banks granted loans at the
same rate, but not in small sums. This
cheap money-say 1-3 per cent net. the
average to the borrower per year had
much to do with pushing real estate prices
up beyond reasonable rates. But when the
real estate boom began to slacken and a
tendency to fall in prices was revealed
in 1890. the price Of money was raised to
per cent, and kept at that price until
April, 1895, when the Hibernia Bank re-
duced the rate of interest to 61a per cent
on all loans; the other banks on the ma
jority of loans have since and are now
charging per cent.
1t must not, however, be forgotten that
taxes, in spite of falling prices and reduced
rents, were nearly always steadily ad-
vanced But these rates are now too high
in a time of the greatest industrial de-
preston in all lines of business-a time
of notorious reduction of real estate values,
of house and store vacancies and OF heavy
fall in rents. Surely, under these circum-
stances, the policy of the savings banks
in the rate of interest they charge should
not be one tending to still further re-
duction of real estate values and a lessen
ing of the demand for real estate. Bor-
rowers cannot now pay per cent or even
6h per cent year with safety. Eight per
cent in good times would have been a
lower rate measured by real estate values,
rents and then infrequent vacancies in
dwellings and stores, than per cent would
be now. What. object have the savings
banks now in keeping up rates? If they
could afford to lend at 6 per cent in lively
times, and very largely increase their de-
posts while doing SO, will they lose them
a,a1 hor "A 1xr
safe stock or bond paying per cent is not
an easy matter by any means?
Some one may think that the Circular Is
saying all this simply to lower the price
of money, and thereby boost the price and
demand for real estate, but we have no
such object. What is here said is said
solely through business sympathy with in
terest overloaded borrowers, and In the
belief that cheaper money would tend to
prevent a still further real estate fall. All
of US, and the savings banks certainly not
the least are interested in preventing that
+ + +
The supreme court of Ohio has declared
the Torrens system of recording land
titles as 1t applies to that state unconsti-
tutional.
Contracts between foreign building and
loan associations and residents of Ken
lucky are governed by the laws of that
state, which declare that all interest
charged by building and loan associations
In excess of 6 per cent is usury, and con-
tracts to pay attorneys fees in case of suit
to enforce the contract are void as against
public policy according to the decision of
the Kentucky court of appeals in the case
of Pryse VS.. Peoples Building and Loan
and Savings association.
y Y +
Investors are to be warned against plac-
ing too much reliance upon prices at which
securities are sold at auction. Sometimes
these are put up and bid in by the owners,
or their agents, merely to establish high
rating. OF course, no reputable auction
house will be party to any mock affair.
+ 4 =
The Chicago Railway Age says only 622
miles of track have been laid in the United
States during the first half of 1887. This
is less than the corresponding period of
any year since 1876, with the exception of
1894. In twenty-six states and territories
no track has been laid this year. Judging
from construction now under way the
total amount of track laid during the en-
tire year will be close to 1000 miles.