New-York tribune., 1920-09-12

eating up the principal of original bond
investment more than ten times.
think it is only fair when considering
the loss in selling a bond to consider
also the loss in carrying it to maturity,
for the reverse of this table shows
that it will cost q bank more than
100000 to carry 100000 3R per
cent bonds for eighty five years, when
the overhead charges are 1a per cent.
"Our losses from mortgage invest
ments in the last twenty-five years
have been practically negligible on in
vestments of some S1O,OOO,OO0, while
our losses and shrinkage on bond
transactions covering some $5,000000
would have been a very serious matter
had they not been compensated by the
earning of our mortgages, and doubly
serious had we not shifted our invest
ments from bonds to mortgages as we
have. The earnings of our mortgages
have been the mainstay of the bank,
and many times the earnings of our
bonds.
Opposed to Amortization
1--WE have never established any sys-
tenn of what is called amortization of
mortgages. We feel that it would be
poor economy when the security is
ample and the mortgagor does not de-
receive, to call for payment We also
feel that to depend on regular amort-
lied payments would tend to diminish
the careful oversight which should al
ways accompany a mortgage invest
ment. Our local mortgages are as a
rule made for maturities of one year,
with the understanding from long es-
tablished usage, that they can run
along indefinitely, subject to revision
as to rates of interest and calls for
| payments on principal, in part or en-
tire, as our examinations may deter
mine. Some of our mortgages have
been running now for more than fifty
years.
GAS a rule, high interest rates and
risk of loss go hand in hand, but when
we remember that no profit is made be-
low a IL per cent and that about three
times as much is made on a per cent
loan as on 5 per cent loan, we can
see the Importance of getting them at
per cent and getting them right.
my desire for some years has been
to acquire an income from mortgages
that would pay the entire interest to
our depositors, and we have just about
reached that point at the present time.
"Now, what about the future and the
longtime bond? The decline in bond
'oioCS QdS hepI Slep VIII Lne expense
of living, and there would seem to be
no relief in sight until people are
forced out of the cities and back to the
land to become producers instead Of
consumers.
"The increased production of gold
which became pronounced some twenty
years ago was the first word Of warn
ing that we had, and was, undoubtedly,
the foundation for the increased values
which became apparent at about that
time, and for a corresponding decline
in bond investments. The peak of this
was picked up at the beginning of the
world war in 1914 and followed, as it
has been, by such destruction of life
and property as the world has never
known, together with the enormous is
sues of currency by the various coun-
tries involved, has produced an era of
imitation which will require cool heads
and careful manipulation to avoid
something much worse than we have
ever had to contend with.
Long-Term Bonds Not for Banks
''I never felt that the longtime bond
was proper investment for savings
bank-that is, anything longer than a
gcneration--say twenty to twenty-five
years; and | was strongly Impressed
quite recently. when an official of one
or the largest trust companies in New
York told me that they had in recent
years so revised their Investments that
they chad no maturities beyond fifteen
years. Who knows what 10 going to
happen In ono hundred years, or fifty