The record-union. [volume] (Sacramento, Calif.) 1891-1903, 1892-02-26
DELJDED STOCKHOLDERS.
The Bank Commissioners Explode a
Financial Bombshell.
National Building and Loan Associa
tions Raked Fore and Aft-Illegit-
innate and Misleading Methods.

y
of whose reverberations will be heard
5or some time to come, from San Fran
cisco to San Diego. 1t was dropped into
the camp of the so-called National Build
ing and Loan Associations, and is calcu-
lated to cause a scattering i'll localities
where these concerns have been operat-
ing.
Governor Markham yesterday received
from Bank Commissioners A. Gerber
ding, w. II. Knight and c. Ill. Duns-
moor, a voluminous report concerning
these associations. The investigation by
The Commissioners was made at the re-
quest of the State League of Building and
loan Associations last October, while
the convention was being held in San
francisco. The resolution passed re-
auested ga thorough investigation re-
I:arding the. purposes and practices of the
associations working under what is
Known as the National plan.'"
1t being impracticable to make thor
ough investigation, which might imply
personal examination, the Commission
ors made their report upon figures sub
.nitted by the association. Concerning
he
CALIFORNIA GUARANTEE INVESTMENT
COMPANY.
The Bank Commissioners say it is
purely an investment company; that 1t
does not loan upon its capital stock, but
only upon shares Of its investment fund.
The holders Of the shares of the capital
stock, which is $500 900, are alone liable
or the debts of the corporation, while the
holders Of the shares of the investment
und, which is $4,000, 900, are held harm
ess of all liability. . . 1t charges
81 per share entrance fee, and 90 cents per
month stock dues, from which eight
cents are deducted for expense. y mem
Der holding such installment shares can
not withdraw until after a year, and then
ne is only entitled to % cents, out of the
30 cents he paid in. Therefore a member
owning say ten shares of stock, after hav-
ng paid $40 entrance fee and S. per month
stock dues, amounting in all TO So, would
'eceive, if he withdrew at the end Of the
year, only S62 40, a loss of nearly twenty
i've per cent. on his investment.
These facts pertain TO nearly all the Ma
ional Building and Loan Associations
under consideration, and appear to be
great advantage to the company and a
disadvantage to the customer; but not
outstanding this the company promises
extraordinary returns to the investor, and
where these promises are made by men
Of high integrity and financial ability, 1t
would seem that the expectations of
tsAelA CAlOlNiClS Sl1Ol4Ni VIC AlA4Ay lOdAiLSu-
PACIFIC COAST SAVINGS SOCIETY.
It is difficult to classify this association,
as it claims to be different from a ma
5ional, although it has some of the ma
-ional methods. 1t has many features
peculiar to itself, and also some of the ell
sments of a savings bank.
The report goes on to say that it has
3een in existence about year, and 10000
shares have been sold, upon which an en-
NJ oh x4ro11Id ont
an income of $50, 600, the major portion Of
which has probably been paid to agents.
It also receives deposits, subject to check,
and therein does both savings and COM
nercial banking business, which would
appear difficult to conduct in an enter
prise where all customers are promised
profits. All OF its customers are stock
holders, and liable under the laws Of Call
fornia for the acts of the corporation, and
It can be assumed that they are fully
aware of the nature of the business.
PACIFIC STATES SAVINGS, LOAN AND
BUILDING COMPANY.
This San Francisco company, the report
says, "does q large business all over the
coast, and is apparently in a very flour
.shing condition. A statement of the liza
oilitieS and assets is given. These fig
Ires may be misleading, for the reasons
hat they are taken from two sets of books
and represent only the cash transactions.
50 The expenses, as shown in
The statement, were Sl9,66l 81, and If the
expense fund received SIS, 900 Tor for fear
Of overestimating we Will call it $40 000)
here still remains say $40, 900 which has
oeen absorbed, but how or where Is not
shown by any Of the statements submit
Jed.
According to the articles of incorpora-
zion, reserve fund of not to exceed %
Der cent. of the profits earned is provided
4 Il lef1
tongs to the reserve fund; but in the state
snent of assets and liabilities there is no
reserve fund, although in an advertise
,nent of recent date the reserve fund is
stated at SIS, 94l II.
article XII. provides that the bylaws
may be amended by not less than three
members of the Board of Directors, and
The general tendency Of all the bylaws is
% deprive the members of all power and
concentrate all authority in the directors
This may be perfectly safe, so long as the
present management prevails. but it is
easy to contemplate a change wherein the
directory could wreck the entire institu-
ion, and yet act in full accordance with
.he bylaws.
The conclusions arrived at are that
his company is undoubtedly a bonanza
20 the managers, and whether it will
prove a source of profit to the sharehold-
.3rs-those who month by month deposit
gu6lF savings 6HtlIGlN upon now
good the loans are and how long the
Board Ct Directors remains as it u.s. The
company uses the sign, Savings Bank, ,
and this is to be deprecated, as mislead-
ing and Legitimate for it is in no sense a
saYings bank, but company in which all
members are stockholders and liable,
though in this case the extent of that LA
oility is entirely in the hands Of perpet-
ual Board of Directors"
s-ONTJNENTAT, parTTD TNC Avn To.N &c
ISOLATION OF SAN FRANCISCO.
a statement is given showing the work
4ngs OF the institution and the report has
these comments: .Thus It appears that
The assets do not equal the Liabilities by
S745 50, assuming that the loans are all
good; but, should any prove doubtful or
Dad, there would be a still greater def
ciency. The expenses exceed the earn
3ngs by s., 255, and yet the shareholders
are promised a profit equal to their in
vestment in nine years. The cost of do
ing 81, 900 of business has been in one
year $4,000, or say 10 per cent, which APP
pears to be unreasonable and the cues
ZION arises as to the ability of the mana
gers to fulfill their promises to the share
holders, where such large amount is
consumed in expenses. in this case being
nearly double the earnings.
How can the promises of large profits
De fulfilled when the outgo Is greater than
NC AA1SOulo! Ii is clalnl0Q iDdI tDeFS IS q
large profit in the lapsing membership,
ana In sundry other items. but these are
certainly not enough TO overcome the
large dehcit here shown. All particle
pants IL these associations are sharehold
ers, and as such are liable for the debts of
the concern, and it is their business to
know It's affairs; but the great majority
know only what has been told them by
9nterprlslng agents, who, in their laud-
able efforts to earn commissions, are per-
haas careless as to what facts or fiction