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Real estate record and builders' guide: v. 20, no. 510: December 22, 1877

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Real Estate Recor AND BUILDERS^ GUIDE. Yol. XX. NEW YOEK, SATUEDAT, DECEMBEE 22, 1877. No. 510. Publislied Weekly by TERMS. ONE YEAR, in advance....$10.00. Communications should be addressed to C. MV. SWEET, Nos. 345 and 347 Broadway BANKS AND BUILDERS. Responsive to the universal shrinkage of val¬ ues, banks of discounfc and deposifc have lafcely underfcaken, volunfcarily, to relinquish their re¬ dundant and unprofitable capifcal, and in some cases to decUne business alfcogether. In this city, the pretext assigned for fchis course is fche specious one of desiring fco escape the burden of excessive taxation, although a little surprising that it is the only instance in the history of these insfcifcufcions ■where'-such complainfc has been urged, and fche prefcexfc must be aceepfced by fche pubUc with dis¬ crimination. Of the exisfcing-monefcary inflafcion, bank deposifcs and issues represenfc fche major share; and fche contraction of these already initiated may more properly be construed as necessary and indispensable sfceps in fche gravifcafcion of business infceresfcs fco the solid and rational basis of specie paymenfcs. Probably no financial or commercial interesfc of the counfcry has been so confcinuously and uniformly profifcable as fchafc of banking. The abiUfcy to afcfcraefc deposifcs of money, which in reaUfcy are caU loans by fche public, fco fchese in¬ stitutions, and fche power of relending fchese amounfcs afc maximum rafces of infceresfc afford fche nucleus and mafcerials of an immensely profifcable business. Conducfced wifch discretion and experience, no business can be .more exempt from ordinary hazai-ds. The sfcabUifcy and success of the gi-eafc majorifcy of banks, during the try¬ ing period of fche last few years, fully justifies this conclusion. Next to the railroad interests, whether above or below it poUtical economists must defcermine, no greafcer franchise can be granfced by the people than fche privilege of lend¬ ing fco the pubUc its own money at the highest rafces of interest. Ifc lies wifchin fche power of these institutions to cripple or foster business in¬ terests, according to the narrovsmess or breadth of the policy which governs them; and it is no hy¬ perbole of speech to say that fche welfare of the business community hangs upon the fiat of fche banks. The disposifcion fco consoUdafce and unify this giganfcic infceresfc has been too appai*ent of lafce years, and the force of fcheir united momen¬ tum was never more strikingly shown than in - then- determined action during the panic of 1873. Whafc further developments await the future uni¬ fied acfcion of fche banks, time -wLU disclose: but no more fitting or saUenfc theme of contempla¬ tion could engage the serious thought of com¬ mercial or financial philosophers. There are good reasons for beUeving thafc banking infceresfcs have parfcicipafced to some degree in the re¬ verses of the pasfc few^ years; and experienced men beUeve fchafc our greafc nafcional banking sys¬ tem, though sustained by the -vast accumulafcions of an earUer period, has been prejudiced if not impaired by indiscreet policies and inju^cioua uses of money. The coming five years, pregnanfc wifch fche issues of specie paymenfcs and the estab¬ lishment of a stable cm-rency, must subjecfc fchese insfcifcufcions fco a serious crucial test. How they will emerge from it will be the anxious problem of the future. Ifc is, however, reassuring fco the pubUc mind to find so many banks not only -wUling but able to withdraw from unprofitable fields of labor, and to TolunfcarUysm-render deposits and capital before the point of insolvency or impairment has been reached. Ifc indicafces fche exisfcence of a spirifc of conservatism in administration which augurs weU for general soundness. It cannot be denied that, so far as the banks of this city are con¬ cerned, a large proporfcion of fchem owe fcheir very existence, as weU as the profitable prosecu¬ tion of their business, to fcransacfcions growing oufc of stock speculation. The operation of lending money upon caU loans, as ifc is fcermed, or, in ofcher words, upon fche hypofchecafcion of sfcocks having a current and negofciable value on the Sfcock Exchange, has been so aUuring in fche pasfc as fco diverfc the inoney of fchese banks from legifci¬ mate mercantUe operafcions such as fche discounfc- ing of commercial paper fco fche more hazardous one of invoking the chances of fche sfcock inarket. The tempfcafcion fco this class of business is well nigh irresistible. The large sums of money caUed for by sfcock brokers and specula¬ tors have aflEorded a prompfc and ready oufclefc for fche sm'plus accumulafcions of banks, and the quick negofciabUifcy of fche securifcies pledged serves fco endow fchem wifch fche highesfc clemenfcs of popularity for banking purposes. But the risks incurred in this class of lending are aU but equivalent fco fchose of direcfc speculafcion in sfcocks, and doubfcless many a bank officer afc the present fcime is lamenfcing his foolhardiness in infcrusfcing corporafce funds upon securifcies so mercurial. Cerfcainly fche experience of the panic of 1873 and of subsequent years has created a disfcasfce on fche parfc of fche more prudent bank officers for indulging in this class of business. The specula¬ tion in stocks has shrunk to such a smaU volume and inoney on call in the streefc has ruled unfcU recenfcly at so low a rate as nofc only fco cur- fcaU fche opporfcimifcies for invesfcing bank funds in fchis manner, bufc fco whoUy fail fco offer a refcm-n, in the way of infceresfc, commensurafce wifch fche risks incurred. This movement on fche parfc of banks in reducing fcheu' capifcal is no doubfc cofcem- poraneous wifch an honesfc desire on their part fco secure a safer and more reUable line of business. There is reason fco beUeve that, dm-ing the pasfc fchree years, the banks have exfcended to the mercanfcile cbmmunifcy more Uberal assisfcance than had previously been fcheir wonfc. It is too much the case, parfcicularly with fche smaUer banks, fchafc fchey are run as pockefc institutions for the benefit of a Umited few, immediate friends of the du-ectors and the du-ecfcors themselves, whUe the oufcside business pubUc are allowed fco parfcicipate very sparsely in their advanfcages. Even among fche larger banks ifc is weU knovm that lending, Uke kissing, goes by favor; and fche power and influence of a, few leading names were aptly shown by the readiness wifch which GrUman secm-ed his loans upon fraudulent coUaterals. If a uni¬ form sysfcem of sfcricfc scrufciny and active vigi¬ lance was adopted by fche banks, insfcead of that of favoritism, the resulfc would be far befcfcer for the community and for the banks themselves. In advocating the claims of buUders, as a class, to the consideration of bank officials, we have no irrational scheme of bank expansion to propose; we design merely to champion the rights of a meritorious and indusfcrious class of business men who have herefcofore enjoyed lifcfcle or no accom- modafcion from fche banks, having scarcely known the benefits of bank credit. As a rule buUders have no recognized standing in bank parlors. Their occupation is so technical and in¬ volved, so subservient bo fche special sfcafcufces and laws govei-ning real esfcafce, and fcheir producfcs so sfcoUd, immovable and unnegofciable fchat they have never. been regarded as eUgible bank cus¬ tomers. This discrimination is founded largely upon ignorance, and is pei-petuated fchrough par- fcialifcy for ofcher and more responsive classes of dealers. There are buUders in the community, few in number fco be sure, bufc weU known, and of such high sfcanding that they are readUy able to command the benefits of ba,nk accommodation from certain insfcifcufcions. The Mechanics' and Traders', the Bowery, the Butchers' and Drovers, and fche BuU's Head Banks are the representative buUders' banks, and have no occasion fco re- grefc their experience wifch this class of business men. Bufc there is anofcher and large class, of buUders, who represent fche very besfc fcypes of thriffc and sfcabUifcy in their affairs, wno have capitalized their earnings in smaU estates, and are regu¬ larly prosecuting their caUing in the erection of buUdings. Such buUders are apt fco underesfci- mate fche impoi-fcance of a reserve of ready money, or of negofciable securifcies on which fchey can prompfcly effecfc a loan. Sfcarfcing fco build -wifch a certain modicum of capital theyare apt fco rely, when fchis is expended, upon fche proceeds of a permanenfc mortgage fco be negofciafced upon the property at the complefcion of ifcs improvement. Any sudden and unexpected demand afc a cerfcain sfcage of their work is pretfcy sure fco place them in an unpleasanfc predicamenfc. The abiUfcy to caU upon a bank for a temporary loan of a few thousand doUars would be an inestimable benefit to fchem. Bufc from this resource fchey are almost invariably shut off, eifcher fchrough lack of ac- quainfcance or experience, and are forced, in con¬ sequence, to contend with usurious lenders of money for even a slight accommodation. The bases on which we would m-ge fche claims of this class of builders for bank accommodation may be clearly and briefly stated. It is a com¬ mon circumstance for such men to own one or more pieces of property, free and clear from en¬ cumbrance, and it is a parfc of their business pol¬ icy to avoid entangling such property -with mort¬ gages. In such cases, ifc seems fco us, it would be consistent with both the interests of the bank and the poUcy of fche buUder to deUver to a bank officer a trust mortgage on such properfcy infcended to serve as coUafceral secm-ity for any temporary loan which the buUder may requu-e. This would indemnify the bank vrtth such security as they are seldom accustomed to receive, and would pro-