Evening star., 1933-08-27
Harsh Features Are Modified
and Government Gains
More Cooperation.
CONSUMERS RESISTANCE
TO NEW PRICES FEARED
Prospect Tends to Offset Increased
Employment and Favorable
Trade Reports.
BY CHARLES F. SPEARE.

NEW YORK, August 26-In another
week or two the country will have ar
rived at the appointed hour in its eco
nomic life when it may expect to realize
the benefits Of a four month effort at
industrial recovery.
AS this will coincide with the date
when business normally aWakens from
the Summers lethargy. it may be diff
cult to separate what is then a natural
degree of activity from what may be
created out Of the operations of the
recovery act and the expectations of
those who base their future commit
ments on a major imitation policy.
AS this critical period approaches
there Is more reconciliation between
those who are directing the Washing
ton program and those who have been
asked to adopt the various codes under
which it operates. There is less bluster
from the one and more accommodation
by the other. The harsh features of
the act are being modified. BY and
large, the public Is accepting it gener-
ously and has witnessed its benefits.
These are graphically indicated in the
increasing number of employed and in
the weekly addition to pay rolls.
Supplementary evidence of its value
Is currently given in the rising ratios
OF bank clearings, railroad earnings, re-
tail store sales, automobile output, elec.
trio power production, and, in some
sections OF the United States the best
figures of building contracts in several
years.
Retail Lines to Rise.
Against this are scattering returns
from industrial districts which en-
phasize the unfortunate effect on fac.
tory demand Of the recent rapid rise in
prices. This exposes one of the un-
known factors in the future of trade
this Autumn. Retailers have already
announced a substantial advance in
certain lines to take effect early next
month. Will the consumer then be
willing or able to meet this? Gen John
son this week stressed the danger of
excessive price increases, which would
onset the value of slowly improving
purchasing power and ditch the entire
recovery scheme.
Prhaps the most striking change of
attitude during the present month has
been toward price imitation that was
encouraged in July and in the numerous
warnings given to those who, In the
present extremity. would speculate and
prof1teer to the injury of the average
individual.
This gives hope to those who have
consistently believed that the situation
could be reclaimed by natural forces.
They insist that there are sufficient re-
sources at the command Of the Govern
nent and enough improvement in values
since March to permit a gradual re-
covery without resorting to mechanical
stimulus. The reluctance of the banks
to assist industry. either because of too
a Nf -
assets or a timidity caused by the March
scare, has suggested more aggressive
action by the Federal Reserve Board
and the Reconstruction Finance Cor
poration
Realty Loans Frozen.
In many cases the weak position Of
the banks today Is due to their real
estate holdings While they have had
the benefit of substantial appreciation
IN their portfolios Of corporation securi-
ties their loans on urban and farm
property have not improved to any
extent. Farm prices have helped a
little to ease the strain of debtors, per-
mitting tax payments and avoiding
threatened foreclosures In the cities
and suburban areas, however. real es-
tate Is unsaleable. Loans on it remain
frozen. This condition is one of the
greatest obstacles to recovery. It will be
dealt with patiently and In q spirit of
accommodation between the mortgage
and mortgagor
The demand for general moratorium
on mortgage foreclosures is not justi-
fed. Neither is there excuse for whole
sale waving Of contracts by CORPORA
tionS that have previously guaranteed
mortgage certificates. On many of their
mortgages taxes and interest have been
regularly paid during the last -four
years. A large proportion were made
on the basis Of one-half to two-thirds
the values Of 1927-z3. Consequently, a
fair equity remains even where ap-
praisals are brought down to current
worth.
AS the recovery in business expands,
the ability Of the property owner to
pay his taxes and interest also will in
crease. He can hardly be expected in
these times to cut down the amount of
his debt and should be relieved of such
obligation for period of several years.
His rate Of interest should be adjusted
to conform to the conditions prevailing
In commercial paper.
Recovery Of Values Seen.
Putting out Of consideration the bill
lions of dollars of real estate securities
that were fradulently issued and which
ultimately may not be worth over IS per
cent of their cost to the investor, 1t is
reasonably certain that the remainder
will work out at figure near that at
which they were originally appraised.
Therefore, this writer sees no excuse for
the current hysteria over real estate
and the extreme reorganization measures
that are being taken in the interest
Of the public" Nor Is there warrant
for the attitude of State and Federal
authorities in now denying
values to properties that they
admitted to the columns Of bank assets
on the 1927-28 basis less than q
year ago,
The real estate situation will be aided
by postponement for some years Of an
active building program. It will take
time for the empty houses, apartments.
hotels and stores to re-absorb those who
were compelled to abandon them.