The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1923-10-31
FINANCE
ABUSE RAPED
BY BANKERS
Committee Criticises Lending
of High Amounts on Inn
proved Property.
By Merryle Stanley Rukeyser.
(copyriEhted. 1928, by Star Co., Inc
and distributed by Cosmopolitan
News Service.)


copyrighted 1923. by Star Co. Inc.
and distributed by Cosmopolitan
News Service.)
The Investment Bankers Associa-
ton of America today at the third
days session OF it's twelfth annual
convention, struck sledge-hammer
blows at prevailing abuses in real
estate financing.
Since real estate bonds have in re-
cent years found exceptional popu-
'arity among small and unframed In
vestors, the attitude of the principal
ong-term money lenders of the ma
ion on this subject is Of far-reaching
Importance.
On the question of the practice of
ending more than the constitutional
go to sc 2-3 per cent of the value
of improved property, the committee
report says:
80 Per Cent Standard.
1.-THE great majority Of the COM
mittee therefore believes that so per
cent of the present cost should be
the standard, with go per cent as a
maximum"
It has been charged that some of
the newer lenders have frequently
been furnishing funds up to 80 per
cent and more of the appraised valu-
alton.
''In arriving at this conclusion, :"
says the committee, I'VE are not un-
mindful of the viewpoint of those
who maintain that with the appli-
cation of modern methods, rapid Sc
rial reductions in principal, periodi-
cal deposits of income, and with the
added watchfulness Of the invest
ment dealer, a higher percentage
may be loaned on first-class income
producing property with safety
This could only be countenanced,
however, If the investor is compen-
stated for the added hazard by way
of an interest return above the nor
NAL and knows what he is actually
getting as security.
Details Of Appraisal.
Attention is directed to the i'm
portance of setting forth in circulars
the details Of appraisal. It is con-
ceivable that many real estate mort
gage bonds are being offered today
which, in fact, encompass bonds, pre-.
ferred and common stock and found
ers' shares, all in one, without the
investor knowing what he Is really
getting. An honest set-up of new
building corporate enterprise which
suggests itself would be to base the
mortgage bond issue on 80 per cent
Of sound value, let the balance Of
the sound value be represented by
preferred stock, and let any capt..
talization of. superior earning power
be represented by common shares, of
no par value"
For seeing the possibility Of.
though not predicting, slump in
real estate values, the committee
warns against over expansion in real
estate securities.
On the question Of values, the COM
mittee said: when costs are high,
such costs must be substantially dis
counted for future safety"
Billion Losses Yearly.
A million ''gullible Americans"
yearly lose q billion dollars in
money and property in mail fraud
schemes, Horace J. Donnelly, as.
sistant solicitor Of the Postoffice
Department, declared at this morn.
ing's session..
He urged the organisation to co.
operate with the national vigilance
committee Of the Associated Adver.
tising Clubs Of the World and
better business bureaus throughout
the country in stamping out mail
swindlers.
Finds DupeS Willing.
cit is amazing" DonnelIy said,
that 50 many people in this en-.
lightened age are willing to he
duped, but their desire to. get
something for nothing, or q lot for
a little, seems to overcome all ef-
forts to protect them. So strong q
hold has the crook on his victim
in many cases that the Postoffice
Department 10 severely condemned
by the latter for putting the
swindler out Of business, the dupe
still believing that the false prom
ises of riches will be fulfilled
Describing the drive inaugurated>
by Postmaster General New aimed
particularly at oil stock promoters,
Donnelly said that fraud orders
have been issued against the names
of 1853 persons and concerns, of
which Ill were against oil stock
promoters.
I'm addition to these fraud Or
ders," he said. ''the department
has more than 400 criminal cases
against promoters at Fort Worth.
Tex, alone. More than 200 persons
have been indicted and arrested.