Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1922-11-11
JOHN W. SPECKMAN
On Building and Loan Societies and the
Building Situation

TTNHE financial condition Of the building
i ana loon societies Of the State has n
decided influence upon the building situa.
tiop, saws John W. Speckman. secretary OF
the Building Association League or Fenn-
sylvania. :,
."The primary purpose Of the league"
said Mr.. Speckmun, 'is to organize the
various societies OF the stare III oiuer J."
xuard against unfair legislation. and our
organization is IL member Of the United
States League. which is composed OF the
various state leagues all over the country.
Financing Private Homes
"Our association is doing all that II can
70 nssst in the financing OF the building OF
private homes, and this end or the WORK Is
now in better shape than 1t mas oeeh lor
several years. The situation, which was
most Unfortunate one, was caused by the
almost complete cessation OF phl'a'hg "ue
to the war.
"At that time. building Of hcmes having
pra ctically stopped completely. spectators
saw their opportunity to buy houses from
persons who were holding them Tor invest. i,
ment purposes and renting them. THESE
spectators would buy a property anu then
compel the tenant either to buy it from
them at a higher price or move IN thou.
sands Of cases the tenants would hid mem
selves IN II position where they couid not
get another house, and they were Obliged TO
buy in order to have some place to live.
what the spectators did In great
many cases was to procure first mortgage,
II possible. from an Individual. second
mortgage from a building and loan associa'
for whatever they could not raise on the
first and second. In most cases this third
mortgage represented their profit, and they
took chances on realizing on II.
How Funds Became Scarce
'"rhs strinReucy of funds in the building
and loan associations was due to the fact
that the trust companies, which up to the
time OF the war were always IN the market
for first mortgages. rs well ~ number OF
y.ry large trust estates, refused to take
mortgages. hts refusal was because they
were able to loan money ut very high rates
Of interest outside OF the state. Then
another reason entered into me transaction.
tees bought Liberty Bonds with the pro-
ceeds instead Of taking first mortgages. be-
cause the bonds were exempt from taxation.
This plan was also followed by a number
OF individuals OF great wealth who had been
in the habit Of taking first mortgages. aud
the result wa. to withdraw a huge amount
of money from the mortgage market and in
turn the purchasers Of houses were unable
10 finance their operations through the
financial agencies which only short time
before had been only too Klad To accept
mortgages as security for loans
'"This situation practically forced people
TO 20 to the building and loan associations
almost exclusively for the money which they
had to have to buy their homes. The funds
OF the associations were quickly used up by
the first borrowers, and all the money which
the association could borrow WAS also
speedily taken by home buyers.
The borrowing Capacity
'At the last session of the Legislature
un 1927 an effort was made to have the
narrowing capacity Of the building and loan
associat tiOns increased. At that time, under
the law, an association might borrow rs
ppr cent OF the withdrawal value Of its
stock. and the idea was 10 increase this
amount.
''This plan was opposed BY the league for
the reason that while We believe that the
building associations as a rule are managed
by honest business men who have been wisely
selected for this purpose, they are not fnsn-
ciers. Therefore We deemed 1t unwise to
allow the associations to pyramid their
assets by borrowing large amounts Of money
which might be called by the creditors
during 4 subsequent period of depression.
When this period came 1t was practically
certain that there would likewise be large
Withdrawals Of shares from the associations.
The double demand upon the resources OF
the associations readily might result in the
insolvency Of the organisation. or rather In
an inability to meet the claims upon Il. The
Bin was defeated by the Legislature upon
the reasons ven by tha j1esus: q
E 'T'he lssslss ~ 2nstfunsntal q