Telegram-herald., 1889-11-19
Building and Loan Associations.

We take the following extract from
the Nelrs Letter, San Francisco, for the
benefit of our readers, and ask them to
investigate:
"Recentlv we had occasion to criti-
cize the financial methods pursued by
certain organizations which have lately
appeared in our midst, and concerning
the single-mlndedness of whose profes-
siOns we entertained doubts which
found expression IN these columns.
Since then we have looked more thor
oughlv and carefully into the inner
workings of Building and Loan Asso-
ciatiOns,' as they are termed, and as
vet see no reason to alter the estimate
which we originally put upon them. 1t
does not seem reasonable, for instance.
that a business association. halllng, let
us saw. from the State of Minnesota, or
from Maine, should go 10 the trouble
and expense Of establishing agencies
bevOnd their borders, with the mere
object of assisting the innocent and
ignorant dcnizens of other States to
save their money. get rich and own a
house and lot, without any correspond
ING advantage to the said association.
Such exalted philanthropy Is rare-so
rare as to be ideal; and It is
TIE consideration of this feature
which prompts us to examine
with more than ordinary care, the
claims and pretentiOns Of these socie-
tics, and soc whether their pretentions
are. like their philanthropy; ideal.
Investors in such associations may,
for convenience, be divided into two
great classes-the borrowers and the
borrowers. 1t is the former class
which the association particularly de-
sires rs members, and the utmost care
has been taken. and the greatest in
genuitv exercised, to hedge the bOr-
rover round with such conditions. and
70 charge him such rates of interest as
viii. 10 saw the least. nullify the appa-
rent advantages held out to him as an
inducement 10 invest. The association,
IN fact. narrows itself down to bank
and not 70 an ordinary commercial
bank, charging reasonable interest upon
good security. but to a bank of usurv,
which not only demands security hv
first mortgage upon real estate, and
limits It's loan to an amount not OK
Ceeding forty per cent. of the cash
value Of said estate. but puts up the
money which IL has to lend at auction
10 the highest bidder. TINS enabling m
its words 'the association 20 get the
highest rate Of premium, and as the
usurv laws do not apply 70 building and
loan assoc atoms their funds can -
lent at anv rate Of interest which the
members NAV offer. Another rnle is
that all cash received = required 20 be
nr0mntlv loaned out and must not b.
allowed 70 accumulate Herein lie.
the kev-nofe Of tho whole husness
The bait held ont 20 the investor is the
h,rh rate Of interest which accrue,
% hm a. share holder 'By
taking advantage of premiums
saws the American Building and Loan
Ass0s alton. of Minneapolis, and by
c0mroundng interest monthly, we arc
able go make profit 20 our member.
equal t0 twice the ordinary rate 0f ln
terest' Again, 10 paws 25 per cent. or
vour money az an investment. bgt =.
an the money n the concern must be
loaned. and loaned % members only
and as the competitive bidding f0r
sach loans runs theIr prlce up to a very
hlzn premium. is ls very evident tha'
by iar the aI0rity of she members CA
such assoc. .at0ns are borrowers ane
that e s the r0n- borrowing sharenold
ers who become memb hers Tor the mere
purpose ~ investing their money in
high uterestocarng scheme who rear
the benefit
"ILe fact remains that where al tht
business of any ASSOCIATION ls stransscfet
within - 0wn limits. no member ca
get - nsf cent. interest 0n hs money
$40 less Some other member paws a 4.
aterest ior tie use of IT,