CHAPTER 11. GENERAL OBSERVATIONS AND AND STATISTICS APPERTAINING ΤΟ ALL CLASSES OF INSURANCE COMPANIES, BANKS AND TRUST COMPANIES. One of the chief causes leading to the housing shortage has been the withdrawal of funds of the Insurance Companies from the loan market with the notable exception of the Metropolitan Life Insurance Company which has for some years past been the main support of the loan market and the chief encouragement to building operations. These Companies have during the past five years and up to the end of 1920 withdrawn from the loan market the support that it had previously received from them. This change of policy was due in part to their patriotic assistance in purchasing great quantities of Government Bonds so as to assist in financing the needs of the war, for which they are entitled to unstinted commendation. It was, however, also due in great part to the inducements and temptations brought about by the high rates of interest that were obtainable on railroad and industrial bonds and notes and especially on new issues of those securities and tax exempt securities that were made from time to time. It will be seen from the data hereafter referred to that some of the great Life Insurance Companies - notably the Mutual Life actually reduced their loans on bond mortgages on real estate and the proportion of their constantly increasing assets in this class of security was steadily reduced by demanding payments on outstanding loans, thus adding to the demoralization and discouragements of the real estate mortgage market at the most critical time in its history, for which your Committee regards them as deserving of severe condemnation. The total investments of the Mutual Life in Real Estate Mortgages at the end of 1912 were $139,691,000. At the end of 1919 they were $100,754,000. For the year 1912 the investments of the Metropolitan Life Insurance Company in Real Estate Mortgages were $337,394,000. At the end of 1919 they were $741,387,000. Every one of the large New York life insurance companies other than the Mutual Life increased its loans during that period. For the purpose of determining upon the legislation that will be necessary in the way of readjusting and limiting the investments of Insurance Companies, your Committee caused an exhaustive and elaborate survey to be made of all the investment transactions of the principal Insurance Companies of all classes in the United States, covering a period of 14 years—from 1906 to 1919, both inclusive-year by year, and of the State Banks and Trust Companies, covering the same period. This was accomplished through expert accountants who spent upwards of one year in the investigation with the aid at times of as many as fifty or more assistant accountants. All the data upon which the conclusions of the accountants were based was secured from official sources, including the annual reports of the Superintendents of Insurance and of Banks respectively of the State of New York and the responses received to the questionnaires and supplementary letters sent by the Committee in the Autumn of 1920 to the Insurance Companies and the banking institutions doing business in the State of New York. The data compiled includes each of the years 1906-1919 (both inclusive). As much of this data was intended for use by the Committee at the end of 1920 and the early part of 1921 it was impossible to secure within the required time the results of the year 1920. Several of the exhibits were prepared by employees of the Insurance and Banking Departments of the State of New York working under the instructions of the accountants and all of them were revised by such accountants so as to reduce the possibility of errors to a minimum. It would have been impossible and prohibitive in the way of time and expense to have extended this investigation to every Insurance Company of every class doing business throughout the United States. It was accordingly decided to gather the data of all the Life Insurance Companies in New York and other States but as to the other classes of Insurance Companies to select only the most important ones. The following is a statement of the number of companies of each class doing business in the State of New York in relation to the number that were selected for the purpose of the statistics that are herewith submitted: The utmost that can be done in this Report without extending it to impossible lengths will be to summarize a few of the facts and figures that appear year by year and in great detail in some of these exhibits. Accompanying this report will be found an Intermediate Report by Messrs. Touche Niven & Co., the certified accountants in question, explaining in detail the manner in which the schedules were prepared, the sources from which the data was gathered and the system on which the exhibits have been compiled. Since this document has been prepared many other exhibits have, however, been added of which no such explanation has yet been furnished but which sufficiently indicate on their face all the facts required in connection with the study of those exhibits. Included among the exhibits is a series of three charts in which some of the important results reflected in the other exhibits are presented in graphic form to facilitate a comparison of the figures. There are also appendices consisting of official copies of questionnaires and letters of inquiry chronologically arranged that were sent to the various Insurance Companies, Banking Institutions and individuals for the purpose of obtaining such information as was required and which did not appear in the Annual Reports of the Superintendents of Insurance and Banking Departments. A study of these volumious exhibits with the explanatory notes accompanying them establishes the following facts: |