Evening star., 1923-10-31
BANKERS IN WARM
DEBATE ON REPORT
Continued from First Page.)


long been recognized by investors to
| mean "a first mortgage on both build
+. ing and land. the latter commonly
! known as fee. The use of this term
without qualification in connection
with the mortgage on a building
! erected upon leased grounds. or any
lack of rrankness or obscure refer
ence to this fact. Is misleading and
should not be countenanced."
; Mr.. Gottlieb in his minority report
declared the committee should not
! have declared itself at this time on
! subjects of dispute. II repeat here
what l said to the committee" said
Mr.. Gottlieb's report, that this at
| titude of hasty decisions and rules
| is the same basic underlying fault
of ill-considered legislation, about
/ which the whole association COM
| plains; namely, the feeling of legis-
latures that they must legislate vol
| uminously, however meager their in
vestigation and information may be
! upon the subjects involved"
! Trustees Are Debated.
/ Insistence upon independent cor
| porate trustees" said Mr.. Gottlieb,
| and the impounding Of constr uction
| and other funds may mean the arti-
ficial injection of trust companies and
! banks into business which may prop
erly be conducted Independently"
The majority report had insisted on
| the use of a corporate trustee. such
4 as modern trust company or ma
tional bank with trust powers, possibly
] supplemented with an individual CO.
\ trustee"
Concerning the percentage of loan
70 valuation, another disputed point.
the majority report said: Your COM
| mittee has given consideration to the
widespread discussion concerning a
more liberal allowance of loan to ap-
praisal than has obtained in the past.
! but is strongly inclined to the belief
| that in view of the fact of greatly
increased building and labor costs of
| recent years 1t would be most mad
visable to recommend departure
from the conservative rules which
have governed the investment of saw
| ings banks and trust funds in the
past and have been the practice by
conservative lenders of long expert
ence The great majority of the COM
mittee therefore believes that 90 per
cent of present costs should be the
standard. with so per cent as max
imum.'
Building Costs Uncertain
I Discussing the high level Of build
! ing costs, the committee would not
attempt to prophesy whether they
will remain where they are. advance
or recede; nor does it predict the du-
ration Of the present period of build
| ing activity"
SThere are, however" the report said.
"unmistakable signs that many cities
others have been overbuilt. 1t is
thought, therefore, that 1t is time 10
utter a word of caution to those VINO
have not been in the real estate Secur- :
| tiles business long enough to have lived
| through periods Of overeXpansion In this
| field.''
! Taking index numbers established by
the Aberthaw Company OF Boston as
| representative, the committee said the
table showed the peak in building costs
was reached in July 1920. when costs
were 265 per cent, as compared to the
1914 level. In the succeeding decline
| the low point was reached in the first
| four months of 1922. when the index
stood at 15Ik per cent-51k per cent
above 1914 and 11315 per cent below
| the peak. Within the year the increase
| in cost, according to this index, has
been no less than 80 per cent.
Rent Percentage Fixed.
The percentage of the average SAL
aried mans income proper to use for
rent was placed by the committee at
not to exceed % per cent of his total
| income. Rental returns of apartment
houses were said to yield from 10 per
cent to 25 per cent, with normal from
i12 to II per cent. Return on office
\
cent 20 4.86 per cent, indicating that,
/ contrary to the opinion held In some
quarters, there is no large fortune IN
the operation of office buildings on
the average.
The remainder of the report on real
estate securities on which the COM
mittee as whole was agreed re-
viewed the situation on agricuitural
paper. timber loans and legal phases.
Farmers are settling down 10 cul-
60 COM
mittee, "and correcting their financial
| mistakes of boom years. The result is
that the closing months of 1923 ma
the average farmer in an easier posi-
ton financially and thinking along
, sound practical lines.
Farmers Nearer Normal.
Real progress has been made toward
The restoration of normal equilibrium
of rural and urban prices, 1t was
said. "As result. bankers report
that the farmer is usually meeting
his obligations promptly. and farm
improvements are again peihs Hidoe
or contemplated.
Much of the farmers troubles in
the past was said, in the opinion OF
many men Of long experience in the
farm loan business, to have been
caused by "overfinancing:
Timber loans were said to be IN
the province of experts" with the
real basis for such loans, standing
merchantable timber, preferably
owned in fee simple" The happy
medium in conservative loans on tim
ber was said to be "a serial maturity
based on a curtailed or minimum ca
pacity" Development of timber pro-
motiveIy" was declared to be most
| hazardous"
Approve Rail Act.
Indorsing the transportation act of
1920 substantially as 1T now stands,
the committee on railroad securities
in its report declared that the present
law Leaves the position of the rail-
road industry materially better than
1t was before the passage or the act
and, as a matter of fact. better than
| 1t was during most of the early COM
petitive period, when there was no
effective rate legislation.'
The committee recommended the
work of the Railroad Labor Board and
| the Interstate Commerce Commission
! be carried on by one board. since the
| power of the Labor Board to make
on wages has an I'm :
portant bearing on the decisions OF
! the Interstate Commerce Commission
on passenger and freight rates
Fair Return Is Asked.
TT is probably clear" said the re-
port, that we may regard the courts
as committed to the recognition Of
the general principle that railroad
! property is entitled to earn "A fair
return on the actual value of that
part of the property devoted to public
/ use 1t is also quite clear that the
present determination Of actual in
vestment by the commission will be
! far out of date when it Is completed,
and that the decreased purchasing
power of the dollar since the war
| will result in this figure being a very
different thing from the cost Of
/ reproduction new. less depreciation"
| THE important gain to the holder
( of railroad securities, however, Is
| tha racnenitinn of the CON nSfifufiana l