Real  Estate   Record





AND BUILDERS' GUIDE.





Vol. XXII.





NEW YOEK, SATÜEDAY, AUGUST 10, 187«.





No. 543.





Published Wgekly by

TERMS.
ONE YEAR, in advance....«10.00.
(^oninninicatioiis should be addressed to

C.  TV.  SWEET,
Nos. ;145 A.\D 347 Broadway





CALL LOANS.

The call loan is a form of transaction peculiar
to AA''all street, concerning w-hich the uniuitiated
maj- be ignorant. Its name convej's by implica-
tiou its character. There aro e.s.sential details
connected with it, which it maj- be worth while
to explain. As a rule, money is never loaned in
Wall street without security; aud these call loans
(litüer from time loaus in that the former may be
called in, or repayment of them demanded, with¬
out notice ; while in tbe latter case repayment
etiu only be demtindei at the expiration of the
speclfied time.

In the earlier history of AVall sti-eet, theso
loans were hedged about with manj- safeguards.
For instance, they were generally procured from
institutions, the strictness of whose rei]uirements
were readily complled with, in vie%v of the
assured .safety of the collateral security deposited
tigainst the loans. In addition to the pledged
security, a stock note was also given, which con-
Uined, besides its promi.ssory Obligation to
repay the monej- borrowed,' a clause authorizing
the holder of tbe security to realize upon it in
ease of default in fulfdmeut of the Obligation. A
l»ower of attorney usually accompanied tbe note
iittached to the certificate of stock or the bonds.
Oaution and prudence were then exercised in tbe
manipulation of these loans, well suited to tho
slow going and plodding times of a qunrter of a
eeutui'j' ago, and which are looked for in vain in
these more progressive days. Loans are now
ell'ected of thousands, hundreds of thousand.s, or
millions of dollars by tho mere deposit of collat¬
eral, with a memorandum accoinpanying the
security reciting, in the most casual manner, the
bare details of the transaction.

It will be seen that a large amount of mutual
confidence is necessary in such transactions.
Risks connected with them are reciprocal. The
lender relies upon the borrower for the genuine-
ness and authenticity of the collateral, while the
borrower is obliged to coufide in the lender for
the safety of the margin or excess of securitj'
over the loan. This margiii uuiy vary from ten to
twenty-five or even fortj' per cent. of the loan. The
largest margms usually attract timid lenders and
influence them to be conteuted with a low rate of
interest. Occasionally the lightning flashes with
sufilcient vividness into the dark recesses of AVall
street to reveal the hidden mysteriös whioh en-
velop some of these transactions, Lendere of
money at low rates of interest with large margins
of security, like the Netters, are able by simply
rehypothecating these securitiesto appropriate or
utilize a good share of the original margin.   A





few such transactions serve to show up with what
childHke confidence a va.st amount of business in
AA'all street is actually done, and point to tbe
readiness with which shrewd but re.spectablo
roguescan avnil themselves of oppoi-tunities of
defrauding credulous and confiding creditoi-s.

Tho peciiliarity of the modern method of deal¬
ing in call loans is the waiviag of the promissory
note. This custom grew out of the imposition of
a stamp tax on notes during the war. This tax
was an onerous e.xnctiou in AA^all street, owing to
the frequency with which the.se notes are
ehanged, and the large amounts of money which
they commonly represent. To avoid this taxa¬
tion and to simplify and expedite their business,
perhaps in exemplification also of the unbouuded
confidence wbich prevaiied in AA'all street during
the inflation era, tlie method was adopted of de-
postting with the lender the bare collaterals with
a simple memorandum.

As useful and economical as this .System may
have been üi the past, and upon a rising market,
it has little to recommend it in doubtful times
like these, and upon a failing market. The
method compels the lender to look exclusively to
the securities pledged, having no reclamatiou in
law upon the borrow-er if tbe securities fuil to
satisfy the loan. The law imposes an Obligation
upon tbe lender to keep himself whole out of the
securities pledged. Failing to do so, and when
the market price of the collateral Stocks, or
bonds, may decline below the amount of the loan,
the lender has the Option of selling them and re¬
alizing his loss, or of making them his own, tmd
holding them for a rise. This specious and allur-
ing form of transaction made, as it too often is,
amid the hiu-ry aud rush of A\''all street, has been
the Instrument of many and signal losses to men
who imagined they were possessed of all the con-
servatism retpiisite for the preservation of monej'.
Through sudden and rapid changes in nmrket
value, these collateral securities, so called, held
bj- institutions and individuals, have shrunk out
of all Proportion tothe amount loaned upon them.
Under the circumstances, including, perhaps,
failure of tho bon'ower, no redre.ss could be
sought, and no restitution will be made to the
lender.

AVe believe that loose and reckless methods of
conductbig busine-ss in AA^all street are graduallj-
undergoing reform, in response to tho more con¬
servative spirit of the times and the exactions of
those w'bo now have the handling of money. It
will be well for the whole Community when a more
cautious spirit pervades AVall street. There is no
detail of traiusacting business there that calls for
a more complete regeneration than this one of
call loans. The maimer in which securities have
been tossed around frora band to band, like so
many newspapers, and the carelessness and lack
of security which have marked the acceptances
of collaterals, have often involved capitalists in
unnecessai'y risks and fostered a reckless and de¬
moralizing spirit in the Operations of the street.

AA^hen rates of money were high, at 7 per cent.
or more, the call loan was a formidable compet-
itor of the mortgage loan, although dififering so
immeasm'ably in character and security. Now,
when the callloaninterest, even with wildcat col¬
laterals, is only a paltry percentage, the predom-
inant desire is to avoid these mercurial and im-





stablo Stock Exchange securities, and to iuve.st
money in good mortgages. Many who have
been in tho habit of cultiv.nting the call loan in
past yeai's give a preferenco to depositing their
monej- in tbe triist companies at the prevailing
low rate of interest, rather than incur the extra¬
ordinary hnzards of call loan securities for the
sake of an additional fraction of interest.

Before the final ciilmination of tho revolution,
which fiuancial and mercantile matters in this
countrj- are now undergoiug, we venture to as,sert
that investments will be esteemed and sought
after iu this order of precedeuce: Ist, prime
mortgages; 2d, goveniment Stocks: ;id, trust Com¬
pany; 4th, call loans, and .öth, miscellaneous se¬
curities.





COMBINATION AND COMPETITION.

For more than ii decade of j-ears the business of
this countrj- has been adjusted to the guuge of
organized and raniified monopolj-. Enclosed
within a Chinese wall of high protection, strength¬
ened within bj- the illusory support of an irre-
deemable paper currencj-, presitied over aud
fostered by a paternal government dealing out
subsidies and land grants with a bounteous band,
tho reaction and revulsioii through which w-e
have beeil slowly passiug during the past five
j-eai-s refiect, uiimistakablj% tho extreme arti-
ficialitj- and teusion that have pervaded our pre¬
vious business methcls.

The Potential example set bj- government in its
enormous system of centralized monopolies was
(.juicklj- copied by the miusses of the people, and
held to represent the true Standard of busines,s
precedure. Organized rings or combinatioiis
were set up in all branches of trade. From the
largest to the smallest, all schemes were formu-
lated under this great co-operative sj-stem, pri-
niarilj- inteiided to plunder the manj' for the
benefit of the few-. In all clo-sses of uiauufactu-
ring, through all the ramifications of mereantile
life, in all lintincial Operations, in politics, iu
all developments of labor the punuuount aim
was to elfect combinations designed to give one
interest or chuss prioritj-.Und superioritj' over
kindrcd interests.

The weakness and fidseness of this business pol¬
icy are now being demonstrated and uro likely to
be inipresscd with such poignant emphasis on our
people, that the verj^ nurne of ring or combina-
tion is destined to be one of the most odious in
the vocabidary.

It is diflicult to teil which is most to be won-
dered at, the simplicitj- or tho infatuation of the
advocates of this method of combination. A
bodj' of princip.als representing allied interests,
meet together and lay down certain inviolable
rules of business procedure, the principle one be¬
ing that the commoditj- in which they deal shall
be held at an arbitrary price. This fixed
price is in advance of the natural rate. For a
while all the participants in this combination are
happy in the consciousness of having suddenly
added to their wealth. The more sillj- and shal¬
low of them set to work immediately to adjust
their business and family expenditures to their
ideas of enlarged financial resources. Necessary
wants in the Community have to be supplied, and
the movement may bear the appearance of suc¬
cess, owing to the imperativeness of the demand