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

Of whose reverberations viii 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 scattering in Localities
where these concerns have been operat-
ing.
Governor Markham yesterday received
from Bank Commissioners A. Gerber
ding, w. II. knight and c. II. Duns-
moor, 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-
quested ga thorough investigation re-
garding the. purposes and practices of the
associations working under what is
known as the National plan
1t being impracJicable to make thor
ough investigation, which might imply
personal examination, the Commission
ars 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 1und.
The holders Of the shares Of the capital
stock, which is 500. 600, are alone liable
or the debts of the corporation, while the
holders of the shares of the investment
und, which is $4,000, 600, are held harm
ess of all liability. 1t charges
81 per share entrance fee, and 60 cents per
month stock dues, from which eight
cents are deducted for expense. A MEM
Der holding such installment shares can
not withdraw until after year, and then
ne is only entitled to % cents, out of the
80 cents he paid in. Therefore member
owning say ten shares of stock, after hay
lng paid $40 entrance fee and ST per month
stock dues. amounting in all TO So, would
receive, if he withdrew at the end of the
year, only SCI 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 Il
treat advantage to the company and q
disadvantage to the customer; but not
outstanding this the company promises
extraordinary returns TO the investor, and
where these promises are made by men
If high integrity and financial ability, it
would seem that the expectations OF
shareholders should be fully realized.
PACIFIC COAST SAVINGS SOCIETY.
It is difficult to classify this association,
is it claims to be different from a ma
ional, although it has some of the ma
5ional methods. 1t has many features
peculiar to itself, and also some of the ell
,ments of a savings bank.
The report goes on TO say that it has
seen in existence about year, and $4,000
shares have been sold, upon which an en-
rance fee of 81 per share would represent
an income of $50, 900, the ma or 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 CAL
ifornia for the acts of the corporation, and
t 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 a large business all over the
coast, and is apparently in very flour
,shing condition. A statement of the liza
DilitieS and assets is given. These fig
ares may be misleading, for the reasons
hat they are tax en- from two sets of books
and represent only the cash transactions.
he OK kJGuSGS. DIS SHOWn III
The statement, were Sl9,66l 81, and If the
expense fund received SIS, 600 (or for fear
Of overestimating we viii call it $40, 000),
here still remains say 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-
ion, reserve fund of not to exceed %
Der cent. of the profits earned is provided
Rand doubtless the above deficiency be-
ongs to the reserve fund; but in the state
snent of assets and liabilities there is no
reserve fund, although in an advertise
ment of recent date the reserve fund is
stated at SO, 94l u.
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-
lion, and yet act in full accordance with
she bylaws.
The conclusions arrived at are that
his company is undoubtedly bonanza
20 the managers, and whether ii will
prove a source of profit to the sharehold-
s9rs-those who month by month deposit
heir savings depends entirely upon how
good the loans are and how long the
Board of Directors remains as it is. The
company uses the sign, Savings Bank
and this is to be deprecated, as mislead-
ing and illegitimate, for it is in no sense a
:aYings 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"
CONTINENTAL BUILDING AND LOAN AS
ISOLATION OF SAN FRANCISCO.
A statement is given showing the work.
tngs OF the institution and. the report has
these comments: "Thus It appears that
9he assets do not equal the Liabilities by
$40 50, assuming that the loans are all
good; but, should any prove doubtful or
Dad, there would be still greater def
cheney. The expenses exceed the earn
ings by s., 255, and yet the shareholders
are promised profit equal to their in
yeStment in nine years. The cost of do
ing S4I 900 of business has been in one
year $500, or say Is per cent, which ap-
pears to be unreasonable, and the ques-
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
the income? 1t is claimed that there is
large profit in the lapsing membership,
ana IN Sundry other items, but these are
certainly not enough TO overcome the
large deficit here shown. All particle
pants III these associations are sharehold-
ers, ana as such are liable for the debts of
The concern, and it is their business to
know lis affairs; but the great majority
know only what has been told them by
3uterprlslng agents, who, IN their laud-
2Die EFFORTS 10 earn commissions, are per-
haps careless as TO what facts or fiction