crown CU Home > Libraries Home
[x] Close window

Columbia University Libraries Digital Collections: The Real Estate Record

Use your browser's Print function to print these pages.

Real estate record and builders' guide: v. 63, no. 1615: February 25, 1899

Real Estate Record page image for page ldpd_7031148_023_00000391

Text version:

Please note: this text may be incomplete. For more information about this OCR, view About OCR text.
February 25, 1899. Record and Guide 321 ESTABUSHED*^ 'BUsotess jub Ihemes or CejIo^ lKiaiPT« PRICE f^EH YEAR iU AOVANCi &i> DOLLAR!. Pubtishsd every Saturday. Telephone, Oosti-audt 1370. Commuu lea Ciena £hoiilil be addressed to C. W. SWEET, 14-16 Vesey Streei. /. 3. hLNDSEY, Business Manager. " Entered at the l^osi-OS ice al Ni^w Jurk, N. Y., us second-class -maUer," 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- 1