Real  Estate   Record





AND BUILDERS' GUIDE.





YoL. liX.<^^M





NEW YOEK, SATUEDAY, OCTOBEE 27, 1877.





No.  502.





Published Weekly by

%^t %ml €nhk %mxts %^^atmimx,

TERMS.

ONE YEAR, in advance....$10.00.

Communicafcions should be addressed to

C.  IV.  SWEET,

Nos. 345 AND 347 Broadway.





MORTGAGE LOANS BY INSTITUTIONS.
It requii-es no great stretch of memory to
recall the period Avhen our monied institutions
Avere the pride and glory of Ncav York, unrivalled
for soundness,, strength and prudent management.
There are types of this class stiU surviving in
representative institutions, such as the Mutual
Life, the Seaman's Savings, the Chemical Bank,
the Eagle Fu'e and kindred institutions. It is
foreign to our purpose to recount the deplorable
condition in Avhich the later groAvth of such insti¬
tutions has noAv f^len. Their several careers
threaten to become a lasting stigma upon our
city's fame. There are desponding people Avho
fancy that fatal bloAvs have been given to the
popularity and perpetuity of the Life Insurance
and Savings Bank systems—that the shock Avhich
public confidence has of late received is irremedi¬
able and may lead to the total disuse of these
principles of accumulation. We are not disposed
to take any share in these gloomy forebodings.
As every poison has its antidote, so even the
gravest calamities evoke their proper remedies.
Ifc is idle, in the midst of misfortunes, to seek out
noAV expedients for accomplishing a given result.
The principles of savings funds and life insurance
represent the most beneficent and practicable gen¬
eralizations of civilized life, and the administer¬
ing of these principles by corporations is the
most approved aud practical method. If other
agencies are resorted to, such as the adoption of
Postal Savings Banks, or any intrusion of the
governmental function in conserving the people's
earnings, new dangers would be presented, and a
new set of experimental methods be subjected to
trial. However we may vary the mechanism of
administration, the ultimate safeguards of all
such schemes must remain the same, to wit: the
infusion of common honesty and the application
of wise management. While we believe our
fiduciary institutions are now passing through a
severe and critical ordeal, we firmly believe, and
shall cling to the hope that thorough purification
will leave our best models unharmed and un¬
tainted, and, under fresh aims and impulses, that
these institutions will go forward in a renewed
career of usefulness and honor. It is certain that
aUsuch candidates for public confidence in the
future will be subjected to the most rigid scrutiny
on the parfc of the public, and vriU have to
undergo a degree of searching examinaiaon on
the part of the Sfcate .such as has been unknoAvn
in times past. . Thp comer-stone of public confi¬
dence must hereafter lae an honest, able and
thorough supervisiou of these affairs by the
public examiner. In the new era of public and
private policy which seems, to be dawning upon
us, we may expect the offices of Superintendent





of Banking and Insurance to be real and exacting
monitors over the custodians of the people's sav¬
ings. Having learned their past shortcomings
and derelictions, we will be better able to judge
of their future performances.

Corporate investments in personal securities is a
domain which we are compelled to leave entirely
uncriticised; but, in the nature of the case, these
securities should be of the highest order. The
work of the State Examiner ought to be simple
and easy in determining the value, merit and
authenticity of such investments. We can imag¬
ine, however, how easUy he may be baflrled in
scrutinizing the mortgage investments of these
corporations, where the instruments relating to
them disclose no other facts than the metes and
bounds of the property mortgaged and the sum
of the mortgage loan. The information by which
their true merits are to be tested lies wholly out¬
side the instrument itself, and calls for a Avide
range of information and a minute familiarity
with the current values of real estate. It is
plainly to be perceived that in this department
an opportunity is afforded for covering up gross
abuses of power, and a facility is ever present for
a vidde range of delusion with regard to intrinsic
mei-its and values. The value of properfcy is such
a • pui-ely abstract thing, in a measure so arbi¬
trary, notional and capricious, that the most
reckless lending pf money naight be plausibly
justified by a tolerably shrewd adjustment of
figures. Apart from reckless and injudicious
loans heretofore made, there are not. wanting
instances of actual official malfeasance wilfully
committed in the lending of corporate, funds.
Many of these cases have been paraded before the
public in the daily press, and have become notori¬
ous as examples of improper administration. A
familiar case is one where a prominent operator
purchased land for $35,000 and induced the seller
to convey it at; a fictitious purchase price of
$100,000, on the strength of which expressed
consideration a prominent institution was induced
to lend $70,000 on the property—^just double the
actual price paid. Upon the foreclosure of the
mortgage, which quickly ensued, the property
fell into the hands of the corporation, and the
bonds which accompanied the mortgage proved
to be worthless. The present value of the property
represents only a small fraction of the real pur¬
chase price. Another institution has appeared in
the courts a def endant in a suit brought to set
aside mortgages of a large amount, on the ground
of their being tainted with usury, the institution,
as it is alleged, having openly and without any
regard to legality or propriety deducted a bonus
of ten per cent, from the face of the mortgage, a
practice which, it is asserted, had long prevailed
in this institution in the matter of making loans.
The most flagrant case which these later tingies
have developed of the misuse of corporate fu^ds
is that of the North America Life. In connection
Avith a prominent uptoAvn builder this institution
became the projector and proprietor of vast
building schemes. A lar^e share of its assets
was invested in these ventures, which have
proved so disastrous that scarcely fifty per cent.
of the amount can now be realized, and the
income obtainable from the buildings hardly





exceeds two per cent. Only recently a case
occurred of the forcible ejection of a loan broker
from the office of an institution by one of its
leading officials, on the ground that the broker
had made corrupt proposals Avith reference to
the lending of money, showing the impression
which is abroad in the minds of some persons
th.at money can be obtained from institutions by
collusive and corrupt means. A vicious practice,
too, has prevailed in the lending of corporate
funds, of the employment by these institutions
of special brokerage firms, through which all or
nearly all of their loans are expected to pass and
be negotiated—a marked partiality being given
to the applications so presented. Doubtless
such an arrangement might be carried out
innocently and harmlessly, but it has an
unpleasant fiavor, and where the fact- is
knoAvn that such an arrangement exists, it will be
hard to convince the outside public that such
practice is entirely free from objectionable fea¬
tures. In the case of one particular institution
now in bankruptcy, the method x>f managing
their morgage loan business constitued a system
of extortion and oppression toAvards mortgagors
and aU applicants for funds. The full history of
this scandalous intrigue has never been fully given
to the public, though there are hundreds of citi¬
zens who, have suffered from the unlawful
exactions and disgraceful practices of this par¬
ticular ring of confederates. We shall forbear
further allusion to it at present, although the
time may come when a complete and authorita¬
tive exposure may help to purify the .fiduciary
atmosphere. Examples enough have been ad¬
duced, and there is no lack of others to prove
that there has been a degree of uuAvisdom, laxity
and downright criminality in the mortgage loans
of institutions which call for public reprehension
and tho initiation of measures calculated to pre¬
vent such transactions in future. In the aroused
state of the public mind, it is njt likely that any
-dereliction in the conduct of fiduciary institutions
will be tolerated hereafter, but that every check
and safeguard which can be thrown about the
actions of their managers Avill be approved and
welcomed by the public. The proposition is an
intolerable one which we have heard advanced
by some of these managers, that their institutions
should be permitted to take part in speculative
schemes calculated to uphold the interests and
values of real estate, such as rapid transit, bridge
and tunnel enterprises, and building loan affairs—
in fact, in any project calculated to inflate the
prices of New York property, holding that the
vital interests of these institutions were bound up
in the perpetuity of high rates for real estate.
Such ideas represent the wide departure of the
average financial manager from the strict line of
sound practice. The lesson, must be emphasized
and di'iven home to the corporate conscience to
recognize: the duty and obligation to husband
and presei"ve inviolably the great trusts com¬
mitted to corporate safe-keeping. Security, first,
last and always, should be the watchword of
these institutions..

Fortunately, the advantages-presented in our
city for obtaining safemortgages, leave nb excuse
to managers to wander from the beaten track of