Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1921-03-17
BOOSTING INTEREST RATE
Is A DANGEROUS BUSINESS
II Would Be Followed by the Calling Of
Every Second. Mortgage Loan and
the Burdenine Of Every Borrower
With Heavier Charges


With Heavier Charges
THE evident disposition in Harrisburg to
l. NEEDLE with the interest laws threatens
every householder whose real estate is mort
gagged. There are three separate bills await
ing action which either permit the lender to
demand any rate of interest he chooses or
permit him by contract to charge per
cent, or advance the legal rate . per cent
over the present figure.
The ordinary citizen will not be seriously
affected by one bill. 1t allows corporations
to go into the open market and get money
on it's bonds at whatever price Is necessary
to float the loan. And IL validates all loans
made at a higher amount than the present
legal rate of interest. This bill has been
passed by the Senate and is now in the
House committee on banks and banking.
Something can be said in defense Of the
Stadtlander bill, which keeps the lawful
rate of interest at 6 per cent but permits
an agreement in writing between the bor
rover and the lender for rate not in excess
of per cent. But it does not apply the
best remedy for existing ills. There are
business conditions under which it is some
times profitable for a man to pay 10 or -
or 20 per cent for a short time loan. The
New York law Is admirably adapted to meet
such conditions. 1t provides a legal rate
of 9 per cent for ordinary loans, but 1t per-
mits the borrower to charge any rate the
market will sustain on loans of $4,000 and
upward when made on collateral security.
When money is scarce this law draws to
New York the capital needed to keep bust
ness moving. It drains the resources of
other cities in states in which there is no
such liberal and intelligent arrangement for
enabling a man in financial straits to get
the money he needs to tide him over his
troubles. Every big business man in this
city has suffered from its workings, for
Philadelphia money sometimes flows to New
York at just the times when it is most
needed here.
But the Stadtlander bill comes far short
Of meeting the needs of the situation. 1t
really opens the way for the money lender
to demand 8 per cent from the ordinary bor-
rover without giving the leeway to big
business that IL needs. The bill was laid
over by the House committee on banks and
banking on Tuesday night in order to permit
q similar bill to be introduced in the Senate
and once more test public sentiment on It.
There are two bills in the House un-
eQuivocally increasing the legal rate of in
terest to s per cent for which not good
word can be said. II the people of the state
can be aroused so as to understand their
significance they will make such vigorous
protest that the bills will remain where they
are. for the banking committee will not dare
challenge the resentment which would fol-
low a favorable report on either Of them.
If the Legislature should unquaifedly
raise the legal rate of interest to per
cent every per cent second mortgage on
real estate would be called on the day it
was due. and it would not be renewed save
at the new rate OF interest. There are
thousands of men in this city who have
bought homes on which they have been com
PEELED to put a second mortgage. They are
paying that mortgage as fast as they are
able. but a great proportion of them find it
necessary to renew the loan. They would
find il impossible to get money anywhere
save at per cent If the bill should be
passed.
And the more fortunate householders
whose property is encountered only by
first mortgage would find themselves in
similar straits Hundreds if not thousands
of such mortgages are allowed TO run on
from year to year after the term fixed in
them has expired. The lender Is satisfied
with his investment and he prefers to allow
the money TO stay whtre 1t is under the
original agreement. He knows that he can
demand payment at his discretion and Is
content with the security.
But as soon as the legal rate of interest
was raised to s per cent every lender who
call it and demand n new contract at
| higher rate. In the present state of the
money market he would demand the full
amount which the law allowed.
Under these circumstances a man with
! $1,000 house on which there was a $4,000
| mortgage would find his interest bill in
! rreased from $50 n year to S240. or S5 a
month. He is already feeling the burden
OF an increase in the assessed value of his
| proycrty with the corresponding increase
! in the amount Of his tax bills. As soon rs
! he discovers that there is danger OF the
Legislature passing law which will in
crease the carrying charges OF MS property
he will make his objection Known IN most
Cnphatic terms.
But the man who owns the house he lives
in is not the only man who would suffer.
Every man who pays rent for house or an
aDartment or an office would feel the effect
/ Of rhe increased price of money. The land
! lord in every instance would pass on the
extra charge to his tenant and many would
| double or treble it every time, just as some
| landlords who have been compelled to pay
higher taxes have been collecting two or
! three times the amount from their tenants.
But it may be argued that there can be
| no relief for the tenants now suffering from
/ mousse NnOTlube' ." i'HB a. O"'iHS'" ""'
il impossible TO get money at the present
rate of interest. II that be so. then the
present conditions must be endured until
| they are cured by the slow return to normal
conditions That would be much better
than to attempt TO ease the situation by
putting up new houses with per cent
| money Such property would lie idle be-
cause the average man cannot afford to rent
or own n house built on such extravagant
! tern,s The builders would soon discover
this fact and would be likely to lose all the
capital of their own that they had put into
their operations.
The housing shortage cannot be relieved
In any such way. Normal conditions are
bound TO return in the course Of time. A
real estate mortgage is not a speculative
security. Money lent on Philadelphia prop