The daily worker. [volume] (Chicago, Ill.) 1924-1958, 1927-02-10


tn bankruptcy.
Inactive Committee.
Admitting the danger, the leading
bond and mortgage houses last No
vember appointed committee, head
ed by Franklin d. Roosevelt, head of
the American Construction Council, to
draw up a plan for saner financing.
But the committee, after three
months, has just adjourned, without
recommending any effective action
and the danger OF a business crash to
the bond and mortgage holders per-
sists. In the following paragraphs
leading bond and mortgage authority
summarizes the issue for the Fed
Grated Press. For business reasons
at his request his name is deleted:
Protect Spectators.
''The Roosevelt committee is avoid
ing an encounter with the spectators
who keep building costs at an exorbi-
tsnt figure, maintain high rents and
furnish open shoppers with an excuse
for cutting the wages of building
craftsmen.
THE committee has adjourned
without agreeing on any drastic re-
forms, after six Of the largest bond
houses signed a stabilizing agreement
that vaguely outlines unethical prac-
tices, refers to sound appraisals,
maintaining liquid assets and other
matters Of internal routine of bond
house operation. The real question
of putting a stop to overcoming on
the basis of watered appraisals was
turned over to a subcommittee which
may bring in some proposals later.
Crisis Near.
ALARMS at the dangers in this wild
apartment house and hotel speculation
/ is being voiced by such financiers as
Walter Stabler, comptroller of Metro
poiitan Life Insurance CO., and s. w.
Strauss, head Of the nationally known
bond house Of that name. But other
authorities in the building industry
are pointing out that speculation is
nothing new. II is merely pyranaiding
to a crisis now. Much Of the build
ing boom of the last five years has
been due TO speculative operations
just as unsound as those now being,
inveighed against,
Use Others Money.
at has been common practice for
spectators to erect million dollar
projects without putting in any capt.
tai Of their own. The story Of how
the spectators procedure involves
the real estate bond houses and pro-
vides overnight riches to successful
promoters at the expense Of rent pay
ers is 2 story of get-rich-quick sys-
tenn using the billions Of dollars which
have been provided by small investors
IN real estate bonds.
THE methods Of the typical specu-
lator, it IS said, consists Of getting
control by option or purchase. of
plot Of ground An architect is en-
rloyed to draw plans for building
70 put on IL. An appraiser IS hired
to set valuation on the building, net
on basis Of actual cost but on basis
Of the amount Of rent that can be
2ouged out Of the renters when the
building actually is erected. The APP
praiser's job depends on making the
appraisal as high as possible and this
excessively high appraisal IS used in
negotiating a loan from a real estate
bond house. The bond house that
agrees to advance the largest amount
OF money on the project is given the
commission fer floating the loan and
collecting the savings Of the buyers
Of real estate bonds.
Tenants Pay Bills
"The joke on the rent payer lies
il, the fact that the amount Of the
loan secured by the Spectator is Of
ten greater than the actual cost Of
The land and>the building. In effect
the control of speculative structure,
.ogether with an equity that usually
amounts. 70 a third interest in the
building. is gotten by the SPECTATOR
without any risk to himself; oil be-
cause Of the docility Of the future
anonts who can be counted upon to
come across with the amount of rent
Shat is determined upon by the APP
prsiser.
"What financiers are really afraid
Of. il is claimed. is that the supply
6g doeile rent payers will not prove
lequal to the amount Of space provided
for occupancy. Once more buildings
are erected than there are tenants
wiling to pay the rate. the appraisals
win become worthless scraps Of pa
per. Il is feared, and the entire fl
rancial structure will tumble. wax.
ing the SPECTATORS from their dreams,
rulniug the bond houses, and the small
/ bond investors