February 25, 1899.





Record and Guide





321







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Pubtishsd every Saturday.
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Vol, LXIII.





FEBRUARY 25, 1899.





No. 1,615.





IF it were not that the whole huying movement in the Stock
Market waa so unprecedented and unusual, it might be pre¬
dicted from the movements of prices this \veek that a substantial
reaction was at hand. Such a change would not do any harm
inasmuch as it would prevent people from suppressing their
thinhing capacities altogether when operating in Wall Street
and running their operations entirely on enthusiasm. But the
market happens to l)e such an unusual one that the rules by
which it has been customary to judge the course of prices have
no application now. The circumstances show so clearly that the
country is entering on a new era, not merely of commercial pros¬
perity, but one of changed trading aud financial conditions, that
the majority ol' people, though they know they are in a good
place, do net know exactly where it is or what are its conditions
and limitations. The crowd was never more ready to follow lead¬
ers than it is to-day, and there need only be a report that
this or that industry is active, or this or that man a buyer and an
upward movement immediately appears in the direction indi¬
cated. These facts, as much as the changed pecuniary conditions
surrounding them, explain the sensational advances that have
been seen in industrial shares lately. The tendency to overdo
things was never more pronounced than it is to-day, and while
it exists without apparent limit, it is easy to keep up the huoy¬
ancy in the market. On the other side of the water, when the
stock market there resembles what it is here now, they have a
rather vulgar saying: "The public is on the feed," which, per¬
haps, pretty accurately describes the situation. It is the cus¬
tom to deny them nothing when the public is in this state, al¬
though the financial papers of the best class preach sermons
against stock gluttony. The feeders are those who know most
about corporate securities and the fed are those who know very
little, the ultimate consequences are bad for the latter, though
they may not appear very quickly. What is wanted, if the pub¬
lic will continue to buy, is that more discrimination should be
used.





RECENT events in France support the view that the dangers
to the Republic, of which so much has been made lately,
are largely imaginary aud due to sensational papers and a cheap
class of popularity mongers like Beaurepaire, rather than to any
dissatisfaction with the form of government among substantial
thinking people.    The death of the chief of the State and the in¬
stallation of his successor, could nowhere have caused less ex¬
citement than did the deatli of President Faure and the elec¬
tion of President Loubet,   This fact is a distinct gain to the gen¬
eral situation, especially as it appears that the new executive is
not afraid to strike.    Some natural satisfaction is expressed in
Britain over the improvement of the foreign trade returns for
January.    Both imports and exports increased   in   that   montli
compared with January, 1S98. The gain in the former was mostly
in articles of food, metals and textile materials.   The growth of
imports of corn is somewhat noticeable, being 4,088,400 cwts., as
compared with 3,572,400 cwts. for the month of last year, and
3,443,400 cwts. for tliat of the year before.    It would not be re¬
markable if the high prices of wheat during the Leiter boom in
that cereal   had turned people's attention to the cheaper and
equally wholesome food.    If this is so and it   continues  to   in¬
crease, it will have an important bearing on the price of corn
here.   This idea is supported by the fact that importations of the
meal as well as the grain are increasing.    The gain in exports
came principally from the items of coal and machinery.    One
feature of the bill to improve the position of the Reichsbank, now
under discussion in the German Reichstag, has aroused consid¬
erable opposition.   The object of this feature of the bill is, appa¬
rently, to ultimately make the Reichsbank the only bank of is¬
sue in the Empire by giving it special advantages tor the issue
of its notes, or, rather, by embarrassing issues by what may be
called State banks, by forbidding them from making discounts





below the Reichsbank rate. This policy is one successfully car¬
ried out in England, where the Bank of England is practically
the only bank of issue, and in France, where the Bank of Franee
occupies a similar position. This feature of the German bill has,
therefore, wholesome precedent to go upon, but it is none the
less bitterly opposed by the representatives of the nations whose
banks possess the privilege of making issues of notes, which are
locally esteemed, and a present convenience to the several busi¬
ness centers that they serve. If this opposition can be overcome,
the complete nationalization of the Reichsbank will serve a good
purpose. Anxiety in business circles in Vienna has been in¬
creased by the disclosures of mal-admiuistration, brought out by
a run on the Galician Savings Bank at Lemberg, which appears
to be a very important local institution. It is the usuai story of
a ruined bank—its resources loaned on unsatisfactory security
or no security at all to two or three individuals of speculative
tendencies. It is stated by competent authorities that though
Austria must suffer in credit by these exposures in Galicia, it has
always been painfully conscientious in the management and con¬
trol of its institutions of credit, and of savings banks especially.





TAXATION   OF   MORTG.«tGES.

■^*HE practice of assessing to the mortgagee a bond secured by
^ a mortgage on a landed estate, while at the same time
assessing,to the mortgagor the whole of the landed estate, had
its origin in a failure to distinguish betweeii wealth and property.
This confusion of ideas, common in popular speech, is not in¬
frequently met with in the works of the earlier writers on politi¬
cal economy. That it should have exercised an influence on
legislation is, therefore, not surprising. A landed estate is
wealth, that is, has value. It confers upon its possessor the
power of commanding, in eschange for itself, the labor, or the
products of labor, of others. The mortgage is property, or a
right to wealth. The amount of the property of the owner of the
estate is the value of the estate less the mortgage. There is but
one body of wealth. There are two properties, that of the
owner and that of the mortgagee. The wealth of the community
is the same whether the ownership of the estate be entire or
divided. Consequently, to assess the real estate to the mortgagor,
while at the same time assessing to the mortgagee the mortgage,
or, rather, the bond secured by the mortgage, results ia double
taxation. The double tax, if collected, is paid by the mortgagor.
No lender of money on real estate will consent to accept for the
use of his capital less than the current rate of economic interest,
plus a sum sufficient to cover insurance against loss of the prin¬
cipal, cost of examining title, etc, including taxes, if there be
any, for the simple reason that he can secure this return from
loans on other and competing securities.

By economic interest is here meant the amount obtainable for
the use of capital, where the obligations of the debtor in respect
of both interest and principal are certain of fulfilment, where the
evidence of the debt is exempt from taxation, where the title to
the security is immediately recognized without the expense of a
search, and where, incidentally, the evidence of the debt is read¬
ily exchangeable for cash in the open market. United States
government bonds roughly answer to this description. The
three-per-cents redeemable in 1918, selling at 107, command in¬
terest at the rate of about 2% per cent, per anuum. Let us assume
that 2y2 per cent, represents the current economic interest.
Loans can be had on real estate at 4 per cent, and even 3i/4 per
cent., although the prevailing rate is probably 4i^ per cent. Evi¬
dently the difference between 21/^ per cent, and, say, 4 per cent,
does not more than cover the elements of insurance, cost of ex¬
amination of title, loss of time involved in exchanging the mort¬
gage for cash in the market, and some limitation on the freedom
of movement of capital into real estate loans due to the deterrent
influence of the tax on those mouey lenders who are so situated
as not to be able to evade it. In other words, the interest rate
on real estate loans has been established without reference to the
local tax of 2 per cent, and upward, which has been possible only
because the majority of bonds secured by mortgages are either,
in effect, exempt from taxation or evade it. The heaviest lenders
on real estate are the savings banks, life insurance companies,
and co-operative loan associations, whose assets are exempt from
taxation under the following terms: Tbe deposits of any bank
for savings which are due depositors, the accumulations of any
domestic life insurance corporation held for the exclusive benefit
of the insured, other than real estate and stocks now liable for
tax, and the accumulations of any incorporated co-operative loan
association upon the shares cf such association held by any
person. Other heavy lenders, including fire insurance companies
and wealthy private individuals, evade the tax by creating arti¬
ficial debts, for as regards personal property, contrary to the case
in realty, it is the "equity" only which is taxed. In 1898 the as¬
sessed valuation of real estate in Manhattan and Bronx was up¬
wards of $1,856,000,000, while the assessed valuation of the per-





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