The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1913-09-20
HOW CHICAGO BANKER TOOK HIGH FINANCE To THE
PEOPLE. THUS BALANCING The HIGH COST OF LIVING
(By Cameron Landon.)

Chicago. Sept. 2O.-The high cost
of living at last has been set to useful
work, it is diligently building skyscrap-
ers and apartment buildings. In Chi
cago the credit for a large part of the
years building, and the total will be
over 100000, 900, will be due to what
has been accomplished by Harvesting
the demand for higher income to bal
ance the high living costs. The tow
ering office buildings and part of the
acres of apartment buildings, including
some of the luxurious apartments, are
in fact monuments to what an idea
can do.
This is the explanation given: Dur
ing the years when the wildcatters
harvested three or four hundred mill
lion dollars annually the major factor
in the harvest was the cost of living
which created a need for higher rates
of income from savings and for
small amount form of investment such
as the wildcatters offered in profusion.
The fabulous rates and the size of the
shares Haunted by the wildcat promot-
erS combined to take savings away
from the public as easily as a bully
takes candy from his kid brother.
AS for bonds, they were infiexiblS
$1,000 and offered in blocks of S.
600. which was sum too great for
the man or woman who had saved
hundred or two. The small investor
saw little to help his income above the
needed more.
Finds Solution.
Then came the idea, the result Of
years of study of conditions and of
a solution. The altruism of a Chicago
banker, $. w. Straus. had taken a
practical turn, he had made a study Of
finance abroad as well as in the Unit
ed States and he proposed that bonds
of small denominations bearing per
cent. be issued, bonds secured by first
mortgage on improved city real estate
and maturing seriallY. Instead of MAX
ing the improVeme of city property
the business of rich men, he worked
out a way which the big sums for
mortgages by which skyscrapers and
apartment houses are financed could
be split up fine enough for small in
vestors to take part. That is how
the 'Straus' system of financing,
which has spread far beyond Chicago,
was originated. The first mortgage
real estate bond, which was a fraction
of a big mortgage of stable value, was
the result.
BY means of such bonds as these to-
day a large part of the urban build
ing operations in Chicago are carried
on. Here was a simple thing, though
a departure from custom, one that
serves to add improvements to city
at a rate far greater than before. 1t
was obvious that dividing up mort
gage into a series of bonds did not df-
m ortgage or of the individual bond
even if it was only for S100. By di- |
viding the loan into bonds which ma |
ture serially the safety was enhanced
and that discovery has caused the old |
plan of sinking funds to be aban- |
doned in large measure in the mid !
die west where interest rates rule |
high, and security must be double |
riveted. For as each series of bonds |
is retired. the margin of safety be- |
tween the loan and it's security is in
creased. There has been steadily in
proportion of the annual bond |
output in the serial form.
Millions Made Available.
With the advent of this small mort
gage bond the vast aggregate of in
1ividual savings was discovered.
Within a few years millions of dollars
were made available for city
building by its aid. During one month
IF 1912 the building permits issued in
alone were for structures hav-
ng street frontage of $1,000 feet
md involving the expenditure of $12,-
$4,000. In contrast to this record
or one month, was that of the cor
month of 1907, when the
buildings involved only 100000.