The Washington times. (Washington, D.C.) 1894-1895, 1894-09-30

lubIS dIb d uuLbcI vi SO-CdilGu
loan, and investment associations doing bust
ness in the District of Columbia whose meth
! DDS are open to serious question in several
important particulars of vital Importance to
! investors.
Pretending TO conduct the legitimate and
honorable business of familiar old-line build
! ing and loan associations these so called in
yestment concerns practice methods which,
| though sanctioned by their constitutions, by
laws rules, and contracts, fall little short OF
apparently legalized robbery. BY means OF
misleading advertising circulars distributed
! through INSCRIPTIONS agents, whose false
| representations are collusively and decep-
! lively repudiated in advance by the manage
ment, these investment companies gather in
| the small savings of credulous. ignorant, and
! illiterate people, who usually discover in the
! end that they have invested their saved up
| earnings to wolves in sleeps clothing.
! Wage-earners are induced to believe that
| their investments will be available for use al
any time, only to find that the rules of the in
| vestment concern forbid withdrawal until the
! lapse of considerable period or under oner-
! Gus and disadvantageous conditions, entail
| ing serious financial loss. Others are told
| that in time of sickness they will be able to
/ borrow money from the investment concern
| on individual security, but on doing so are
| compelled to pay exorbitant rates of interest.
| and in the end lose their entire holdings If
misfortune should compel suspension of
payments and lapse of the contract. In some
! instances investors DESTROYS of Withdrawing
their funds have been mulcted of outrageous
sums in fines amounting to a large portion of
! their total holdings.
In short, the small investor who for any
reason is forced to withdraw from these con-
| Germs is practically swindled out of his saw
| ings. If he objects TO the sYindling opera
| ton he Is referred to some obscure clause in
| the constitution, or rules. or contract, by the
terms OF which he finds that he has virtually
thrown his money away. He is told that the
! terms OF the contract, under which he in
vested, forbid the return of his money, and
| provide in so many words for its forfeiture 10
| the faithiess custodian of his funds. II he is
an ignorant person. this is probably the first
he has heard of this Claude Duval method
of Selling his property: if he is reasonably in
telligent he will be informed that he went
into the scheme with his eyes open and has
no reason to complain. But in either case if
be raises n row he may be able to compromise
on 20 cents to so cents on she dollar. This is
the way the loan and investment business is
| conducted by half dozen or more concerns
| in the District.
VERY EXPENSIVE EXPENSES.
A description of the methods of typical
investment association will show clearly the
sw1ndling character of their operations. Most
of them are organized on what is called the
national plan and do business in several
States. This plan is an expensive one. 1t
requires a large force of clerks. agents and
! collectors. and necessitateS a formidable ex-
/ pense account. 1t would surprise most in
vestors to know how much of their weekly or
/ !,
| penSe fund. where the money loses its profit
earning capacity; for in a building and loan
association the profits TO stockholders depend
almost wholly upon the immediate conversion
Of the deposits into Understanding loans
In an investment concern, conducted on the
national plan, however. from % to so per
cent of the total amount of deposits Is regu-
larry set aside for the expense fund.
For example. in one concern 20 per cent
of the monthly dues. together with the whole
amount of the first months dues. goes
directly and constantly into the expense
fund. An investor buys ten shares of stock,
on which he pays 81 per month dues per
share. HIS payments aggregate SO per
month. The first months dues go into the
| expense fund, and . per month of the dues
payable after that
Let us see where he stands should he with
draw at the end of six months. He must
first give thirty days notice in writing ''when
he will receive the amount to his credit,
together with 70 per cent of such earnings as
may be apportioned to his shares, less the
amount of all arrearages thereon, and a with
drawal fee of 81 per share"
He finds that he has paid into the concern
$50 in monthly dues. Of this amount so
has been allotted to the expense fund, leaving
! but $40 ''to his credit in the loan fund plus
IS per cent. of the earnings of his payments
for six months. The earnings, of course,
0 -.
hnqulshing 81 per share as a withdrawal fee,
the investor finds that trife more than $50
are due him, his loss being nearly one-half
his investment. For the investment concern
does not place to an investors credit the
whole of his monthly dues, but only the por-
ton left after deducting the expense fund.
This remainder constitutes the loan fund, or
the earning capital of the institution.
In other words. OF any given sum intrusted
to such an institution for investment, 25 per
cent.is used for expenses, and but IS per cent
or less is actually invested.
sKILLFULLY woRDED TRICKERY.
In another concern, which operates largely
among the poor and ignorant classes. the ex-
penses are limited" to 81 per cent per an
mum of the par value of shares. together with
the whole of the first months dues. AS the
par value of shares in this concern is 5000
81 per cent. amounts to $3.50 per ahnum or
exactly one-half of the dues paid during one
year, at the rate of 25 cents weekly. That is
to say, of every dollar invested in this con-
Germ SO cents goes TO the expense fund. and 10
cents OF that is paid in commissions to agents
and collectors. An investor who had ten
shares Of stock would at tho end of a year
find but $50 to his credit In the loan fund
after having invested $780, At the end of
two years he would have invested $3.50, of
OF which $40 would have been allotted to the
expense fund.- leaving but $3.50 to his credit
plus such earnings as might have accrued:
yet this concern promises at the end of two
years to repay to withdrawing stakeholder
the full amount of his investment, less the
first months dues, together with per cent.
interest thereon.
1t is evident that S120 raid in monthly
dues during two years cannot earn $40 in
that time. How. then, can this promise
be performed, if performance is intended at
all? Whence comes the fund from which
such repayments are to be made?
The reply is that the investment concern
depends more largely for its profits upon
fines forfeitures, and lapses than upon the
legitimate investment of its money In other