Sunday dispatch. [volume] (New York [N.Y.]) 1845-1854, 1852-03-14
NEW YORK SUNDAY MORNING, MARCH IL, 1852.


pounded twelve times per anuum, upon every
dollar invested. Consequently, the lowest att
of profit upon each share must be per cent pei
annum, compounded monthly, from which are
to be deducted the current expenses 1t has
been seen that the monthly payment upon each
redeemed share is $7-therefore if the borrower
agrees to receive sum less than the ultimate
value of his share, and continues the same month
ly payment. he will evidently increase the ratio
of his payment. And this occurs after this man.
ner. When the funds of the Association reach
! $800-the ultimate value of one share-this sum
is equally the property Of every share in the So
ciety. The question then arises to whom shall
it be given. And this is decided in the follow
ing manner, The $500 is held up to competition
among the members, and he who bids highest
receives the loan.
The amount bid is called premium, and is
the grand source of profit to the Association
The premium is deducted from the amount bor-
rowed, and the redeemed share carries with it
the balance. These premiums now average
$400 per share, which, deducted from the amount
offered, $500, leaves $40O to the borrower. After
reflection it will at once appear that without
any premium the payment of $S4 per annum
upon $500 is lO4 per cent. Hence it follows tn It
by premium of $500 the payment will reach 2l
per cent, for it will be recollected the monthly
payments continue the same whatever the amount
loaned upon a share. Now this rate of payment
is iquidating every claim upon the borrower,
and when the Association terminates his pay
ments cease. The real amount of principal
which the borrower pays back is So per month,
or 4k per cent upon the $780, Now deducting
this from 81 per cent leaves l6a per cent profit
upon the amount loaned, hence at this rate of
premium we have clear profit upon every dol
lar invested of l64 per cent compounded II times
per annum, profit which must terminate the
Association in much less than years, and will
no doubt close it in years. Another method
of considering this subject is simply to trace the
profit derived from one share at a premium of
$40O. The $500 is offered for sale, and brings
$40O, which is a clear gain to the Association.
Without any more funds on hand another share
is sold at the same premium, and the $4O0 just
earned thus cancels another share. Hence $500
is bringing an interest of l6a per cent, and has
paid an ultimate debt of $1,000, for the two shares
thus redeemed receive nothing further from the
Association, and continue their payment of $47
words the capital has been doubled. 1t is plain,
then, that unredeemed shares may realize $500
in six years, Notwithstanding its apparent i'm
possibility in the view of some who have recently
attempted TO disprove it. To the investor
there exists the assurance of at least 6 per
cent, compounded IL times per annum, upon the
amount of his deposites, and there is no amount
of profit above this that may not De reached
That is, the lowest rate of profit will be higher
than the highest rate afforded by savings banks.
And the amount of profit that may be obtained
Is so large that to the unthinking it seems simply
a humbug.
Bat how is it with the borrower? How can lie
afford to pay such immense profits? 1t is not by
any means tho duty of the association to answer
this question 1t offers to every member money
at per cent. per annum, and leaves it With
themselves to say how much moro they will pay
for it, In many cases these premiums may be
rash, but before pronouucing every man who
pays them fool, letus see what may be inducing
causes First then, since NIL profits arc equally
divided among all the shares, he will receive his
proportion Of the amount he has contributed 1t
will be recolected that the proHtT Hre Ineasured
by the duration of the society. The sooner all
ravments Neasa tl.-.s @ sssllsaele VIII us % %
of profits, the sooner it will terminate. Now if
all the shares pay the same premium for money,
they all contribute equally to the total profit,
and if all share alike in the ultimate profits, they
can loose nothing. whatever amount they con
tribute If there be no other inducement how
ever, there should be great canton used for he
who pays the first high rate of premium may be
IL sr,.I Itro to1 10 nd b, mil toxzo
81 Der cent to pay for about I3 years, III which
case he would be the looser This possibility,
however, argues nothing against the theory Of
the Association. 1t is only an evidence that all
men are not prudent calcalators Bat there are
circumstances under which this premium would
be an evidence of prudence. 1t is not the amount
paid nor the amount received which gives char
acter to the transaction, but it is the ratio be
tween the two. If can use money 20 as to
make 1t produce % per cent, it would not be i'm
prudent to pay q per cent for it. If my land q.
lord charges ma 20 per cont in rent upon the
original value Of the house in which | am living.
without the chance of ever possessing IL, and with
the prospect of finally paying 30 per cent upon
its present value, it could not be called folly in
me to pay 2l per cent for l3yesrs to an Associa-
let its advance in value be what it might. There
are hundreds of causes which lead to these high
premiums, which will be best ascertained by at
tending some meeting and questioning the par
ties who pay them And some of these causes
are so efficient that even the strongest opponent
of these Associations would by them be induced
to become borrowers at even higher rates. But
even admitting that these premiums ought not
to be paid, all parties should be satisfied We
have seen that without premiums the rate ofpay-
ment will be lO4 per cent. This will require
about l3 years to complete the ultimate cspital
Therefore, by paying fair rent for 1S years, the
member will come into possession Of his house.
and the investor will receive 6 per cent COM
pounded u times per annum.
These thoughts upon the simple theory of the
Association, are hastily put together, and time
will not permit me at present to consider TIE Sc
curity to investors, and the numerous advantages
to all parties connected with them, which are pc
culiar to the principle upon which these corpora
tions are founded, and others that have been con-
| ferred upon them by law. They may be learned
| at the public meetings.
W. T. B. MILL1KEN.
AN ACT
| FOR THE rNooRPoRA ALTON or BUILDING, MUTUAL LOAN