MORAL LOSSES

Rotorua Morning Post, Volume 2, Issue 574, 4 July 1933, Page 6

MORAL LOSSES

financial crisis

TiENDENCY TO PROMOTE DISREGARD OF LEGAL OBLIGATIONS. A HEAVY RECKONINiG. - A striking summing -up of moral losses incurred! in the financial crisis is made by Herbert O. Frey in an article, "Mortgages and Morals," in the Trust Companies Magazine. Mr. Frey sees reasonabld prospect of early recovery of material values in real estate. The outlook is not gloomy. Butr he adds. "There is a matter that should occasion more concern than this. If the shrinkage in values has occasioned us worry, the loss of something far more difficult to restore, namely, morale, should occasion genuine alarm. There has been unquest'ion. ably an adverse change in the moral code in business relationships. This is a phase of the mortgage situation which has become serious. To those concerned chiefly with matters financial this phase of our present situation imay appear irrelevant. But the words of Francis P. Garven, of Yale University, are in point here: 'It is not the fair play taught in sports when leading bankers say that they are, responsible for nothing except money.' We should be interested in the moral issues of business, and we are. Here are some indications of the moral trend in our mortgage situation: Lowering of Ideal*. "There is a distinct lowering of moral ideals. Great pressure has , wrought this. We have always had evasion of obligations to a degree, but to-day this is not only intensified, but is lightiy treated and sometimes even condoned. Thenants treat leases as scraps of paper and have no regard for the sacredness of their written obligations. Mortgagors do not hesitate to withhold payments of interest and taxes in an effort to enforce concessions not always justified. "Financial institutions are confronted with a demand for paortgage money backed by excellent security, and are forced to decline because the needed funds cannot be obtained save by demanding payments from existlng bor. rowers whom they have no desire to embarrass. What is the result? The would-be borrower blames the banker for not being helpful. The beneficiary for whom the banker acts condemns the banker because of his lenient attitude towards the borrower. The mortgagor who is not px^essed for payment of principal adds his meed of censure because he has not received other concessions. No oae is ever wrong except the banker. He is never righ.t There is no fair p'lay in this attitude. Disappearance of Equities. "There is a distorted vision of morai rights. This is occasioned by the shrinkage or disappearance of equities. The owner whose property does not pay its way decides that the loss of both principal and interest should be borne equally by himself . and the holder of the first and second mortgages. There is in this attitude a forgetfulness of the order of things. The first mortgagee was given a prior claim t0 the security and its earnings when the debt was created. There was no question or misunderstanding about this originally. The second mortgagee came next in order. He ran a greater risk, and was compensated often by a higher rate of interest and sometimes by amortisation of principal. The moral distortion lies in the fact that when values were increasing and income substantial, the first mortgagee was never a partner in the profits, nor did he expect to be. We have learned only how to wm, but not how to lose. It is itrue that the pressure of adversity has never been so great as now, but the effect does not reflect great credit upon our educational methods of training in moral conduct. Borrower Against Lender. "There is the growth of enmity of borrower against lender, culmina.ting in vindictiveness which sweeps aside every cons'.deration of what is right and fair. The thing itself is not new, but has been unusual in our civilisation. It is the ultimate stage in the moral breakdown, and demands the consideration of thoughtful people. It exhibits itsself in studied effort to secure every advantage by financ'-ial default, subterfuge, bankruptcy, neglect of property, and often in wanton destruction. Vandalism is so rife that one is amazed that such conditions could obtain in a policed community. Such destruction of property is purely vindictive, and is not occasioned by the des'ire for loot. It is the expression of antipathy against the owner of tangible property. It is unreasoning, or its perpetrators would realise that their acts are driving potential investors in mortgages out of the market. This moral decadence represents by far the most serious loss the country has suffered +he last three and a half years. The much-maligned copy-book of school days, which extolled the homely virtues, might be good medicine to-day."