The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1892-04-17

ing and loan associations for which there
is any demand. The conservative element
is strengthening and a disposition is mani
fest to discourage all new schemes. Not
withstanding this. there is scarcely a week
passes but that come new-fangled feature
Is brought ID. 1t would be unjust to char
a%cterize all OF these as pernicious. but none
should be accepted without careful exami-
nation, no matter how attractive they may
appear.
building and loan associatIons." re-
marked an attorney to the reporter, ARE
organized under a law which provides that
there shall be one kind of stock. and that
stock may be either paid up IN lnstallments
or 1t may be paid up IN full at any time
after the member subscribes for his stock.
This, you see, places oil stockholders on an
to the Indiana building and loan .associa-
tions as q preferred stockhOlder.' You'll
see presently what Pm coming to.
The building and loan association makes
on Its running stock for nom borrowing
stockholders usually from 10 to IL per cent.
This is done by turning the money over
rapidly and repeatedly and compromising
the interest. Members. of course. have O
right TO withdraw at any time. but when q
mans shares are paid out in full the asso-
citation keeps his money for him and con
tinues to invest it after making an arrange
ment with him as to terms. The ~associa-
tons agree to take money from psid-up
stockholders and pay them 8 per cent. in
terest. In that way the installment non
borrowing shareholders make q profit off
the paid-up stockholders. AS there Is a
great demand for money. more than can be
regularly supplied, the only way for the
association 10 raise money is TO reach
out for the non-borrower who wishes
to invest in shares. AS 1t is cheaper
for them TO get money upon paid-up shares
instead of upon installment shares, there is
a competition among association to place
paid-up stock with persons who have
money to lend. In order to induce this
class of investors to put their money In
Laid-up stock g plan has been invented
which has been given the name of guar
anteed dividend stock This plan Is for
the association to take the first mortgages
it receives from borrowing members and
deposit these in the hands of a trustee to
the amount of double the pald-up stock
issued. These mortgages are pied ged for
the payment of the dividend. the face
value of the paid-up shares. This Is. In
eaeSs,st E pledge 10 n, OF d TIVE asssts on OF st6 ses
to a favored class of shareholders. Such q
pledge of the assets Of a corporation is alb
s~olutely illegal. 1t has been condemned
by the courts in a numberOf cases. and the
courts have always held that dividends TO
shareholders can be paid only out of profits.
Unless profits are earned no dividends can
be paid. An agreement to pay a dividend
out of assets is contrary to public policy
and Is void. If too much fringe Is put up
on building and loan associations the next
Legislature will see to it that they don't
escape taxation"
ASSOCIATION NOTES.
The Atlas Savings Association. started
last July. has thus far loaned about $40. 900.
1t is now taking in about $1,000 a month.
The Star Building and Loan Association,
organized In 1881, has in the years of it's ex-
istence handled over 100000. A recent
report shows annual earnings Of Is per
cent.
The Homestead Building and Loan Asso-
citation has Just entered upon its third year.
Tho limit of stock is five hundred shares,
and there are now 37S paying shares. divid.
ed among sixty shareholders. The total
receipts from all sources for these two years
have been SG2,4 : 92. The ex penditures and
Withdrawals amount to 81. e52. %; interest,
S760.6G expense. S7SS.06; loans to stOckbold-
ers. SOS. COS: loans repaid. $50. 200; balance on
hand at close of second year, S307.97. From
the time of organization its money has been
loaned ahead. and the4ssOclstion has car.
ried from Sl,5o0 TO $4,000 in bank to secure
loans TO the ASSOCIATION.