Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1883-01-27
BUILDING ASSOCIATIONS.
The History OF Their Growth and
Progress in st. Paul and
Minnesota.
yALUABLEAIDS TO ADVANCEMENT
a Medium by Which Men Of Moderate
Means Can Secure Homes.
To Ito Editor of the Globe.

The ST. Paul Mutual Building Association
No. ].
Its first meeting was on the 18th OF Au-
gust. 1869. for the election of officers, When
r.. AT. Deane was elected president; j. L.
Toreoaurh, vice president; J. ". McClung,
secretary: Robert 4. Smith, treasurer; and
for directors Adam Morley, John Sum
mers. Charles Etheridge, Thomas Bower,
F. d. Atvater, Frenk Brewer, Thomas
Fitzpatrick and ". /. Mason.
lis capital was 100000, divided into
1000 sharss OF 5000 each, payable in
monthly iustaIlments of 81 per share.
Following this, other associations were Or
ranizea-the Worlingmen's in the spring
of 1870. the Homestead and West st. Paul
afterwards III 1874, and others up to
1852. There are about twenty in all in
this CITY. four or five in Minneapolis, one
in Saltwater. one in Hastings, one
IN ST. Cloud, Mankato, Faribault,
Red Wing, Winona, Duluth and Sank
Centre and Ortonville.
All these associations are working OF .he
Philadelphia plan-loaning money to their
members for about per cent. interest,
and whatever bonus is obtained in addi-
tion-the loans payable back in monthly
ihstalments for principal and interest.
WHAT Is \ BUILDING ASSOCIATION?
The association is composed of two
classes Of members:
LIST. Those who deposit monthly sums
and use il as Il savings bank.
"a. Those who use it as a bank Of accom-
mediation.
Loans are made for any and all purposes
andnot simply for building houses, tho,.ah
this was the primary object of the building
association.
WHAT IS THE BONUS AND INTEREST PAID?
It Is generally believed by the unbelieY-
ing outside world who reject the light of
these associations, and die in their
unbelisf as renters instead of owners of
their own homesteads, that borrowers in
these associations pay a larger interest
than they ought tc. As this is mistake
ii Is well to enlarge on this head and show
By an illustration that it is mistake.
A wants $3.50 on loan. The money is
taken in at the regular monthly meeting
and Is offered to the bidder who offers ths
largest bonus. The member who owns
one share of 5000 has the Same right to
bid rs the member who owns forty shares
or less. A bids $40 bonus for each 5000. He
being the highest bidder gets the money
He owns five shares. The $40 is deducted.
from The 5000 share and he receives a net
loan of $3.50 on the share. His five shares
give him $3.50. Or if the shares are $50
each. which is the case with most of the
associations, his bonus is $50 on the 500,
instead of so on 5000 and the net loan is
the same-6 per cent. interest on the gross
sum and 35 per cent. bonus.
Before borrowing he pays 81 per
share Of 5000 per month. After borrowing
he pays always double-$2 permonth on
each share or 81 principal and interest
monthly for a net cash loan of $130.
For his $3.50, he therefore pays $40 per
month.
HOW LONG DOES HE PAY ON TIE LOAN!
1t is safe to say at the rate associations
are now running he will pay nine years. 8
81 has been the rate heretofore. In Phil
adelphia, with lower bonuses-less than
one-half or e-third-the loans run ten
to twelve years. Now if he pays from the
very first month of his membership to the
last of nine years, what is he out for his
loan: so per month for los mo. $1,000.
Suppose he had borrowed at per cent.
$3.50, nine years, what is he out? $50 per
year, nine years, $46S for interest and
adding the principal, $3.50, is $1,11S. The
building association has cost him $1,000.
The s per cent. loans has cost him $1,118,
Or SIS more than the building association
loan with So per cent. bonus.
He has paid So per month of the principal
however, in the Building association loan
every month, and to make the cases pre-
cisely equal he should have credit for this.
He should have whatever interest he
would have received for this So per month,
and this should be added to the $1,000 the
loan has cost him.
What would he have received for this
s. per month? He could not have loaned
it for s per cent, forno one will borrow SIS
at this rate. lie might have deposited it
in savings bank and received 4 per cent,
the limit allowed by law-if the bank
didn't fail But would he have done so?
In 999 cases out of 1000 he would not.
1t would have gone every month for some
thing, and at the end Of nine years not a
dollar of it would have been left and moth
ing to show for it. But suppose he de-
posted it in savings bank and the bank
did not fail what wonld he have received?
Five dollars per month in los months
would be $40.
Four per cent. on $40 is S21.6 so per year.
The average time deposited is four years.
six months; $21.60 multiplied by four and
a half years, is $973S. Add this to the
$1,000 and we have S1,1773S, cost of
Building association; $1,11S cost Of 8 per
cent. loans, or $593S more.
This is about per cent. mora per an
mum, if the Savings bank is used for the
So, and don't fail, and if the depositors
don't fail to deposit. AS matter of fact,
ONE or the other always fails,and hence this
is hardly worth calculating. 1t is much
better to count this savings bank interest
nothing, and to place to the credit of the