The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-02-01
BUILDING AND LOAN AGITATION.
Mr.. Morgan Tells Why the Expense
Fund should BE Abolished.

To the Editor OF the indianapolis Journal:
It is true that the building and loan laws
of Indiana are good. and the associations
as a whole are economically managed, as
stated in your editorial of the 29th but let
US look further into the subject. Your fig
ures were based on 49e associations, more
than 400 of which Rave no expense furi
but pay expenses from profits, like other
commercial and financial concerns. They
render statements to shareholders OF prof
its and expenses. and if the expense ap-
pears extravagant the managers will be
called to account. On the other hand about
forty associations in the State operate on
an expense fund basis and what for. pray
tell me? Is there one good reason for such
fund? There seems to be but one object,
and that to get large amount of money
from the shareholders into fund that does
not have to be accounted for. How many
associations make a statement to share
holders showing the amount received in the
expense fund.- and showing what has be-
come of it? The members have a right TO
know what becomes of all they pay in. II
the members of these expense-fund associa-
tons knew the enormous amounts collected
into this fund there would be revolution
without legislation, but they do not know.
True, reports are made to the State Auditor,
but few, II any, shareholders ever see such
tenn accumulates large amounts for which
no one is responsible. Now and then some
association will turn the small remains from
great boast about what it saved from
expenses. What farrell Paying dividends
with capitals The expense fund comes from
capital, and If any of 1t be saved II be-
longs in capital account, not profits.
Suppose you join an expense-fund associa-
share, pay twelve monthly payments at 70
cents; total-$9.40 the first year. What Is
1t worth? They have credited you with 60
has
500 to take care of $72O an everage time
of six months. 1t would take earning rate
capital. But they say wait. Wen, try it
another year. You add $780, making total
OF 7 rao and find to your credit $40 % It
cent. per annum to make your stock worth
what you have paid in the two years. But
what you u have ai invested ADD $40 more sss
making $3.50 and you have credit of
$780, and it will require an annual earning
of IL per cent. to restore your capital. Three
yea l. and nothing made About time me- t.
may be never when you get your capital
back with any actual earnings added to it.
The nuRIber of such associations probably
will not exceed forty in this State. but they
are bringing into disrepute the building and
loan system e by such , methods. The way to
No other business assesses capital to pay
expenses. That association which does not
make enough earnings to pay expenses has
right to exist. Every Individual. corpora
ton and association should keep it's ex-
penses within its earnings. If through dis
aSter it cannot, then it is time to assess
capital to pay the loss. To assess capital
one-sixth it is paid in and create a large
unprotected fund before expenses accrue is
only bid and temptation to extravaganza
to say the least.
1t has been said that associations cannot
organize and exist without an expense fund
Five-sixths of the Indiana associations have
been able to do a prosperous business with
out. You will excuse the reference to the
society / hold membership in If I do not
mention its name. 1t has done successful
business for ten years, handling more than
million dollars. 1t organized with mem
'bership fee of Is cents. 1t owns it's office
building and has as good banking room
as there is in the city. 1t pays directors
for attending meetings. 1t employs the best
of help, paying literally for it. 1t prints for
shareholders semi-annual reports, showing
receipts, disbursements, profits and ex-
penses. Its books audited twice a year
by experts 1t made gross profits of more
than $4,000 last year, and used less than
5000 of it for expenses set aside a rea-
sona'ble reserve for contingent losses, and
made a handsome divide for the sharehoId-
ers- It's loans are now made at per cent
interest, and no premium, the borrower par
ticipatng in profits. This association needs
no expense fund, does any other. The
usual rate would have given this association
an expense fund of 500 per month; last
year its actual expense, including taxes, was
$3.50. The expense fund must go.
J. r. MORGAN.
Kokouo, Ind. Jan. 81