Morning journal and courier. [volume] (New Haven [Conn.]) 1848-1894, 1892-01-12
COMMUNICATIONS.
Building and Loan Associatfo ms

To tho Editor Of the JOURNAL AND COURIER.
1t is natural and proper for those hav-
ing small and large sums to invest to ex-
ercise sufficient caution. But the plan
known as "the building and loan assooia-
ton" method is no novelty. The oriainsl
association of tho kind was formed in
Philadelphia more than a century ago, and
is still sound and prosperous. Thousands
of persons of limited means, who might
never otherwise have been able to secure
homes of their own, have by this means
been enabled to build. The same thing is
building and loan associations have been
proved to be among the most sound and
benefcent of all plans yet devised for the
advantage of small investors. Probably
there have been some mistakes made, and
occasional frauds and tricks, but no more
than in any other line Of business. The
plan itself is good.
But it should be known that there is a
great difference between the strictly local
association, whose main object is to aid
mechanics and others in building homes,
and the "nationsl" associations that are
intended to take the place of 'savings
banks" and which ought really to drop
the term building" from their names as
confusing and misleading. These are
properly cooperative banks. AS such
they have actually driven out from some
of our largest cities every competitor.
For instance, as the writer is as
sured on the best authority, there
is not to-day a single savings bank in
tho great and populous city of Chicago.
Cooperative banking has superseded that
old-fashioned institution, for the same
reason that the reaper, mower and thresher
have driven out the sickle, scythe and fail
The latter are good and safe; but the form
or are far better and equally safe. In the
savings bank funds are kept in reserve
(and idle of course) to meet the demands
of depositors, who also get fixed low rate
of interest, while the net gains go to the
bankers. In cooperative banking, cor
rectly managed, no funds are left idle, the
state secures the claims of investors, even
annually examining the affairs of the loan
associations, and guar anteeing that the
securities shall be at least sixty per cent.
in excess of liabilities, and then the net
gains are distributed pro rata among the
depositors. Thus the latter find it possi-
BILE to get very remunerativs returns,
which on tho old plan would all go to the
capitalists forming the banking company.
These remarks, however, apply only to the
building and loan associations working
under charters from the state of Minnesota;
the writer not claiming to be posted as to
similar associations in other states.
1t should be added that the writer
| is wholly disinterested, not having dol
lar invested in any savings bank or loan
association either; but having, for certain
reasons, had occasion to give the matter
his attention, and examining the features
i of r,ror,ofnanf 1nan aaanoiafinp
| from end to end and from top to bottom
The number of these concerns seems to
be excessive, and probably is 80 at present.
| But, as in other branches of business, the
stronger associations will in time sbsort
| the weaker ones; which will be to the ad.
vantage of depositors, because the run.
ming expenses will not be greatly in.
creased, and therefore there will be
more profits for distribution. During oul
| investigation we had occasion to ask one
of the most conservative business men oi
Minneapolis, and man who was opposed
to the national associations, the followins
question: Suppose the association to b,
run by men who were disposed to be al
tricky as possible within the limits of tn,
laws of Minnesota, what per centage woult
the small investors be likely to get not
withstandinga" His answer was: "Fron
six per cent. to fifteen per cent per an
mum" "And whyF' "Bscsuse the stat
guarantees the soundness of all the mort
cages, and forbids the managers to keel
any uninvested funds on hand"
+ In conclusion, let me say that although
frequently inquired of as to whether
would advise widows, orphans, mechanic
and others to invest in building and losl
} associations, my uniform reply is that
merely state the facts for public informs
ton, and have no advice to give to ind
viduals. Ny opinion. however, is that
! we'll managed building and loan sssocis
ton is as safe an institution as could b
: devised to meet the needs of those havin
small sums which they wish to deposit I
the best advantage. PROGRESS.