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Letter From Lawyer Describing Real Estate During the Great Depression
The following (courtesy of Tom at CometGold.com)
is an excerpt from letter written from a lawyer from Mason City, Iowa in the
Corn Belt, recounting the impact of the Great Depression of the 1930s on his
town. Foreclosures galore. Tom's Comment: "Anything sound familiar?" Just
substitute residential real estate for farm land, when reading the following:
“The boom period of the last years of the World War and the extremely
inflationary period of 1919 and 1920 were like the Mississippi Bubble and the
Tulip Craze in Holland in their effect upon the general public. Farm prices
shot sky high almost over night. The town barber and the small-town merchant
bought and sold options until every town square was a real estate exchange.
Bankers and lawyers, doctors and ministers left their offices and clients and
drove pell mell over the country to procure options and contracts upon this
farm and that, paying a few hundred dollars down and expecting to sell the
rights before the following March brought settlement day. Not to be in the
game marked one as an old fogy, while paper profits were pyramided and Cadillac
cars and pleasure trips to the cities took the place of Fords and Sunday afternoon
picnics. Everyone then maintained that there was only a little land as fertile
as the fields of Iowa, Illinois, and Minnesota, and everyone sought to get
his part before it was all gone. Like gold, it was limited in extent and of
great potential value. Prices skyrocketed from $100 to $250 and $400 per acre
without regard to the producing power of the land.”“During this
period insurance companies were bidding against one another for the privilege
of making loans on Iowa farms at $90 or $100 or $150 per acre. Prices of products
were soaring. Everyone was on the highroad not only to comfort, but to wealth
and luxury. Second, third, and fourth mortgages were considered just as good
as government bonds. Money was easy, and every bank was ready and anxious to
loan money to any Tom, Dick, or Harry on the possibility that he would make
enough in these trades to repay the loans almost before the day was over. Every
country bank and every county-seat town was a replica in miniature of brisk
day on the board of trade.”
“The drastic deflation of Iowa loans under the orders from the Federal
Reserve Board, upon which Smith Wildman Brookhart, depression Senator from Iowa,
poured forth his venom, definitely marked the downward turn in the mythical prosperity
of boom days. Despite our hopes for the better, conditions have grown steadily
worse.”
“During the year after the great debacle of 1929 the flood of foreclosure
actions did not reach any great peak, but in the years 1931 and 1932 the tidal
wave was upon us. Insurance companies and large investors had not as yet realized
(and in some instances do not yet realize) that, with the low price of farm commodities
and the gradual exhaustion of savings and reserves, the formerly safe and sane
investments in farm mortgages could not be worked out, taxes and interest could
not be paid, and liquidation could not be made. With an utter disregard of the
possibilities of payment or refinancing, the large loan companies plunged ahead
to make the Iowa farmer pay his loans in full or turn over the real estate to
the mortgage holder. Deficiency judgments and the resultant receivership were
the clubs they used to make the honest but indigent farm owners yield immediate
possession of the farms.”
“Men who had sunk every dollar they possessed in the purchase, upkeep,
and improvement of their home places were turned out with small amounts of personal
property as their only assets. Landowners who regarded farm land as the ultimate
in safety, after using their outside resources in vain attempts to hold their
lands, saw these assets go under the sheriff’s hammer on the courthouse
steps.”
“During the two-year period of 1931-32, in this formerly prosperous Iowa
county, twelve and a half per cent of farms went under the hammer, and almost
twenty-five per cent of the mortgaged farm real estate was foreclosed. And the
conditions in my home county have been substantially duplicated in every one
of the ninety-nine counties of Iowa and in those of the surrounding states.”
“We lawyers of the Corn Belt have had to develop a new type of practice,
for in pre-war days foreclosure litigation amounted to but a small part of the
general practice. In these years of the depression almost one-third of the cases
filed have to do with the situation. Our courts are clogged with such matters.”
“Gone, too, is that pride of ownership which made possible the development
of stock and dairy farms with their herds of fat cattle and hogs, their Jersey
cows, their well-kept groves and buildings which beautified and developed the
countryside. The former owners were willing to use a large part of receipts from
a farm’s income to increase its value and appearance but the present absentee
owner regards it only as a source of possible dividends.”
“From a lawyer’s point of view, one of the most serious effects of
the economics crisis lies in the rapid and permanent disintegration of established
estates throughout the Corn Belt. Families of moderate means as well as those
of considerable fortunes who have been clients of my particular office for three
to four generations in many instances have lost their savings, their investments,
and their homes; while their business, which for many years has been a continuous
source of income, has become merely an additional responsibility as we strive
to protect them from foreclosures, judicial receivership, deficiency judgments,
and probably bankruptcy.”
“The old maxim of three generations between shirt sleeves and shirt sleeves
is finding a new meaning out here in the Corn Belt, when return to very limited
means in a formerly prosperous population is the result not of high living and
spending, but of high taxes, high dollars, and radically reduced income from
the sale of basic products.”
“George Warner, aged seventy-four, who had for years operated one hundred
and sixty acres in the northeast corner of the county and in the early boom days
had purchased an additional quarter section, is typical of hundreds in the Corn
Belt. He had retired and with his wife was living comfortably in his square white
house in town a few blocks from my home. Sober, industrious, pillars of the church
and active in good works, he and his wife may well be considered typical retired
farmers. Their three boys wanted to get started in business after they were graduated
from high school, and George, to finance their endeavors, put a mortgage, reasonable
in amount, on his two places. Last fall a son out of a job brought his family
and came home to live with the old people. The tenants on the farms could not
pay their rent, and George could not pay interest and taxes. George’s land
was sold at tax sale and a foreclosure action was brought against the farms by
the insurance company which held the mortgage. I did the best I could for him
in the settlement, but to escape a deficiency judgment he surrendered the places
beginning in March 1st of this year, and a few days ago I saw a mortgage recorded
on his home in town. As he told me of it, the next day, tears came to his eyes
and his lips trembled and he and I both thought of the years he had spent in
building up the estate and making those acres bear fruit abundantly. Like another
Job, he murmured “The Lord gave and the Lord hath taken away”; but
I wondered if it was proper to place the responsibility for the breakdown of
a faulty human economic system on the shoulders of the Lord.”
“When my friend George passes over the Jordan and I have to turn over to
his wife the little that is left in accordance with the terms of his will drawn
in more prosperous days, I presume I shall send his widow a receipted bill for
services rendered during many years, and gaze again on the wreckage of a ruined
estate.”
“I have represented bankrupt farmers and holders of claims for rent, notes,
and mortgages against such farmers in dozens of bankruptcy hearings and court
actions, and the most discouraging, disheartening experiences of my legal life
have occurred when men of middle age, with families, go out of the bankruptcy
court with furniture, team of horses and wagon, and a little stock as all that
is left from twenty-five years of work, to try once more – not to build
an estate – for that is usually impossible – but to provide clothing
and food and shelter for the wife and children. And the powers that be seem to
demand that these not only accept this situation but shall like it.”
