Native Capital by Anne G. Hanley

Author:Anne G. Hanley [Hanley, Anne G.]
Language: eng
Format: epub
Tags: Nonfiction, History, Americas, South America
ISBN: 9780804788199
Publisher: Stanford University Press
Published: 2005-09-30T04:00:00+00:00

TABLE 5.5

Volume of Mortgage Loans Outstanding, 1890–1905 (nominal mil-réis, percent of total assets)

SOURCES: Bank balance sheets, Correio Paulistano, Diário Popular, and O Estado de São Paulo, various years.

Even some of São Paulo’s commercial banks engaged in mortgage lending. There was no legal prohibition against such lending, since these banks did not issue the mortgage-backed notes to fund their mortgage loans, but long-term loans would be inherently risky for commercial banks because their available funds were all from short-term sources. This imbalance between sources of funds (primarily demand deposits) and uses (the terms of loans) suggests that these mortgages had to have been of the short-term variety. We have no way of determining this, as the banks’ balance sheets refer simply to “rural mortgages” or “urban mortgages.” We can tell, however, that several commercial banks listed rural and urban mortgages among their assets. As Table 5.5 shows, for some of these banks these loans were a significant portion of their assets, putting to shame the meager lending practices of the universal bank, Banco de Santos. (See Chapter 6 for more on these banks and their activities.)

The volume of mortgage lending at the large mortgage banks fell off precipitously after the turn of the century. As Table 5.2 demonstrated, with the exception of the Banco de Crédito Real, mortgage banking never monopolized the operations of any bank. The Banco União de São Paulo did grow the percentage of its assets dedicated to the mortgage business over time, but it was getting out of the business altogether by 1904. The number of banks offering mortgage loans and the value of loans outstanding fell by half from 1900 to 1905.80 Worse yet, the largest of these two banks, the Banco de Crédito Real, accounted for almost all of that mortgage credit and it closed its doors by the end of 1905.

Reports of the Banco de Crédito Real’s failure spoke of disarray of the bank, and hence of agricultural credit, in the last months of 1905.81 It seems that a series of bad loans over the years had caused the bank to come into possession of a number of plantations. One report listed seventeen separate plantations under the ownership of the Banco de Crédito Real, and another mentioned fifty rural properties under the direction of the bank.82 Rather than just lend to agriculture, then, the bank ended up in a management role. An assessment by the provisional administration overseeing the bank’s liquidation points to the difficult state of agriculture, which was suffering from extraordinarily high coffee production and sinking international prices, but it lays blame as well on the “lack of care in assessing the proposals for mortgage loans; the lack of scruples in the respective valuations, which were generally exaggerated; and the ease with which the bank allowed great sums to leak out of the commercial and special portfolios.”83

The problems identified by the liquidation administrators in January 1906 were clearly evident in October 1905. The bank had fallen seriously behind in its payments to

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.