What Price Credit2

By Jach Dionne

What price credit?

No one seems to kngw.

I read, the other day, an address made by a well known Federal Reserve Bank officer, discussing this very subject. And while, he viewed with amazement, and likewise with something close akin to alarm, the present credit situation in the United Stateg he confessed that the changes have come so rapidly that only a seer could prognosticate what they eventually will mean, and he offered no opinion other than the personal opinion that the United States of America is "fairly well saturated with credit."

He said one thing that is very interesting, and very probably true:

"Credit is exactly like morphine; in the hands of those who understand its dangers as well as its benefits in the time of emergency, it is a most helpful and useful invention; but either credit or morphine used habitually leads inevitably to the gutter."

One phase of,modernized credit that he mentioned is one that the lumber and building industry is naturally interested in-the fulancing of buildings through "bonds" or "debentures." In the old days a big building was much like a little building, so far as its financing was concerned. They were built by men or groups of men who used their own money for the purpose, bought a site, and erected the structure.

Now comes the new sort of mortgage, split into hundreds and thousands oI parts, and sold to investors everywhere who have no direct interest whatever in the building, have never seen it and will never see it. They buy bonds for investment, and great buildings go up on every hand.

In the past two years I have seen a great hotel structure completed and placed in active operation, on which, from the best of authority I learn, only five thousand dollars cash was ever invested by the builder and promoter, and that was the first cash payment on the site. The building, firrriishings, etc., were all bought on long time part-payment credit.

This banker says, referring to such cases: "I do rlot say that these bonds may not represent in most cases, a solvent investment on the part of the purchaser, but it seems to me that these transactions must carry some overhead, that somehow, somewhere, a price is being put upon this thing above and beyond the actual cost of construction."

Like this banker, we all wo4der what it all means, and where it leads, but, like him, we don't know, having no experience in the world's history to go by.

But one thing every lumberman IS certain of, which is that without modern methods of financing buildings, the volume of lumber sold during the past few years would have been not over 75/o of. the volume that has developed.

And what would this industry have done on THAT basis?