The Richmond Virginian. (Richmond, Va.) 1910-1920, 1914-10-18

casiorai exception to iris rule. Since
that time most OF the larger munich
pali.ies have spent large sums. and
most of 1t rather wisely. for the acqui-
sition or construction OF income-pro-
yducing properties. The result has
been that such expenditures have rep
resented no burden upon the taxpayer
from year to year, but rather have
tended TO bring IN an-actual net rev.
erue. This situation has been recog-
ri2ed in small degree in the savings
bank laws. where under certain con-
d.tions the proportion of Indebtedness
to taxable values allowed has been In
creased. / think 1t only fair to say
that these increases have been smaller
than might have been fully justified
by careful consideration OF the sub
scct as a whole.
Change Has Taken Place.
There has been one other note
worthy change throughout the country
CT, municipal Indebtedness which has
also received little general discussion.
although we know that most savin gs
hank officials are aware of the change
seiously given consideration to in in
the making of their investments i
refer to the more scientific regulations
in the creation OF municipal indebted
ness and the provisions for Its pay
ment 1t is not many decades ago
when the creation of a, municipal m
6ebtedness was accompanied by little
or no provisions for the payment of
the debt itself. Ii being deemed sur
ficIent that provision be made for the
interest. the principal being allowed
20 be refunded. This is decidedly the
exception now and these States which
have neglected to improve their laws
N this respect are today suffering
through the higher cost OF borrowed
money. A concrete case OF this lis
position TO pay off Indebtedness with
In a reasonable length of time In the
Massachusetts law. This requires the
issuance of serial bonds, the longest
maturity of which shall be within
the life Of the Improvement made with
the proceeds of the issue. A similar
law now applies 10 certain classes OF
municipalities in New York state. The
recent loan by New York city carried
with II a contractual relation with he
banks which made the loan. where n
large amount Of financing which would
year period will. instead. be made on
the basis of a serial loan not to ex-
coed fifteen years.
Corporate Securities.
We now come to corporate eecuri-
ties. the obligations OF railroad and
other public utility companies. The
ultimate security OF this group Is, as
you know, the earning power OF the
cb!iger corporations. OF this group
railroad bonds are the most largely
held by savings banks, and in view of
recept developments demand parttcu-
lar attention.
II Is current IMPRESSION that saw
ines bank holdings Of railroad bonds
are growing smaller. This impression
probably had II basis rather in the
recent unfavorable attitude towar d
railroad securities thar to the facts
If the case, Taking the figures of
the entire country. one finds that the
holdings of railroad bonds by savings
hanks have increased In the last four
years in the amount OF over $50, 000,-
Goo.
remarked before that savings bank
holdings. including their extension
holdings of railroad bonds. show an In
creasing shrinkage OF their, market
value, In New York State this shrink
age in value has amounted in the last
four years to s3s, 900. 900. The gem
erai causes are fairly obvious, think,
although one particular phase of the
situation as applied to railroad bonds
may be clarified by resume of the
history Of savings bank holdings OF
this class of security.
The admission In a large way OF
such securities to savings banks is com
paratively recent, 1t came in that era
Of seemingly great prosperity that fol
lowed the depression OF the first halt
g: the decade, 1890 TO 1900. The
pOriod was one when money was easy
md plentiful Beginning with the fal
of 1895 and continuing throughout
1897 and 1898. the entire security
market was strong and prices showed
steady advance.
Securities List Enlarged.
Co!ncident with this upward move
ment legislation became active in en-
larging the list of bonus available for
savings bank investment In New
Work State this admission to the
eligible list of savings bank Investment
cf the bonds of various important
Eastern commodities was followed as
IN agitation for the admission of Ger.
tain railroad bonds Admission OF
these bonds was urged by prominen,
sdFiliSS Ddih 1itHt VIM tiaDi1td Tia
The enormous increase in deposits and
the narrow field allowed for their in
Ycstment WAS rapidly forcing them in
- an embarrassing position. Accord.
irgly the legislature passed q bill in
the early part of 1898 admitting a
limited number of rails to the el!g BIZ
class. The list was enlarged later in
! 1898 and slight additional change.