Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1889-04-27
BUILDING SOCIETIES.
Practical Treatise on the Methods
These Associations.

n Practlcal Treatise on the Methods oil
These Associations.
Each member for each share of stock
of which he is the owner pays to the
association a stipulated sum-weekly,
semi-monthly or monthly. Each men,
ber's contribution is small, but when
all are put together they make a con-
siderable sum. This sum is immedi-
ately loaned to one or more of the
members who can give the required
security, and becomes productive at
once. The borrower, thenceforth, pays
not only the dues above referred to
but, in addition, interest and premium
on the money borrowed. Should any
shareholder fail to make his regular
payments at the appointed time he is
fined such sum as makes promptitudc
a profitable virtue.
The premium is one of the main
stays and at the same time one of the
dangers connected with the system.
When two or more persons desire
loan at the same time and there is not
money enough for all, the question
arises as to who shall get it. This is
usually settled by an open auction, in
which each would-be borrower has the
same chance. The member bidding
the highest premium secures the loan.
1t will be readily seen that if the Dor
rover in addition to the ordinary five
per cent, pays premium which makes
his loan cost him the equivalent of
eight, ten, twelve or even a higher per
cent. per annum, he is apt to get dis
couraged and cease paying and leave
the property on the hands of the asso-
citation. And since these associations
can not live without borrowing mem
bers, the whole affair will have to be
wound up.
Conservative associations discourage
high premiums preferring to make the
total cost of the loan about seven or
eight per cent.
The question naturally arises: Where
is the benefit to the bureau in paying
seven or eight per cent. in a building
association when on good security he
can get money from savings bank at
Eve per cent. A partial answer is
this: In an association he is permit
ted to pay on account of the principal
of his debt small sum-one dollar for
each 5000 of debt-each month. In
fact the very month he borrows he be-
gins to reduce his principal. Again,
savings banks will loan only fifty per
cent. of the value; these associa-
tons can and do loan seventy-tive,
eighty, and even ninety per cent.
of the value. This is safe under
this system because the principal
is constantly diminishing. Another
source of profit is fines for failures to
pay promptly. This is a feature that
may be. and in some instances, is very
much abused. The true function of a
fine is to make neglect costly, but not
to make misfortune almost criminal.
The idea underlying the whole system
is cooperation. Not combination of
part for benefit of that part, but all for
the benefit of all. Good authorities
place the range of fines at the rate Of
from two and one-half per cent. to
twenty per cent. per month, the out
side figure being allowed only under
exceptional conditions.
Still another source of profit arises
from Withdrawals; that is, members
leaving the association before the
shares have reached their full value.
Here again the practice is various.
Some associations pay back all the
principal paid in and all the profit
then lost with a mental reservation
they pay principal and affixed per cent.
of the profits. When the payments of
principal and the accumulation amount
to the paid up value of the stock, then
this paid up value is given back to each
member and that division of the asso-
citation is closed up.-C. F. Southland,
in n. Y. Star.