The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1896-12-08
False Accusations Made in Their
Behalf by Boston Herald.
New Hampshire Bankers Them
selves Managed the Alleged
swindling Loan Companies in tn
West-Used Their Depositors'
Money in q Most Careless
Not to Say a Crini-
nal Way.


this paper on the Goth, goes into the
causes of the failure of p savings
institutions in the state OF New Hamp-
shire and after stating some of the facts
in regard to these failures seeks TO lay
the responsibility for the failures to
western sharpers" as the Herald calls
the loan companies and their managers
That the Herald should be so short
sighted in attributing the dominating
cause of the suspension Of the banks
to western loan companies that were
mostly owned and oh1cered by eastern
people is strange, but when it comes to
the point of charging dishonesty TO the
transaction it is putting itself in the po-
siti0n of persons who dwell in glass
houses. An Investigation viii show that
so per cent of the stock of western loan
companies was owned by eastern men,
The large holding of the New Hamp-
meuts." as they are termed ia that COM
munity, only they are generally spoken
OF as unfortunate western investments.
is not a matter OF sudden growth but
the amount of New Hampshire money
that has been invested in the west has
Increased from year to year ever since
Austin C0rbin began his operations in
Iowa in the seventies
The laws of New Hampshire allowed
savings banks to invest their funds in
other states and at an early era in the
western mortgage business these banks
began to venture SnallaInOunIS in west
ern mortgages which gave annual re-
turns of u per cent at first which was
more than twice the amount that mon
ey loaned ON real estate at home would
bring. These high rates Of interest and
the universal success which attended
the early investments in western farm
mortgages was too great a temptation
for the thrifty New Englanders to with
stand
AS soon as there was any pronounced
maVemenr of money from the east TO-
ward the west for the purpose of in
lore
and brokers were among the first class
of people to notice the fact They knew
II the movement continued that the men
who made and negotiated the loans in
the west would make large sums of
money They imm ediately packed up
and came west. They organized loan
companies just as the Herald states
Dur eastern men We're the pioneers in
the incOrpOra ton feature. The officers
and managers in these companies were
eastern men who were known in the
money centers Of the east. New Hamp-
Snlr9 furnishing her quota. These loan
companies at first made enormous prof
its, several of the loan companies which
did business i'm Kansas and Topeka de-
clared and paid TO their stockholders
sernI-annual dividends of 20 and . per
cent The savings banks of New Hamp-
SHIRE were not content with investing
their depositOrs' money in western farm
loans The loan business paid more
than the loans themselves. The banks
invested their depositors' money ia
stock in western loan companies. The
banks would not invest their money in
loans negotiated by loan companies ina
which they were not stockholders. They
wanted to make money at both ends of
the Inc The men who came from the
east and organized loan companies
could negotiate the loans they made
much more readily than western men
because of their acquaintance with in
Nestors who trusted their judgment much
more readily than they did the judg-
ment of western men.
The average rate Of profit in the ne
gOtlatlOn OF a farm loan was 5 per cent
OF the money loaned; Of this per cent
was the western end of the profit ont
of which all the expense Of making the
loan came and per cent went to the
eastern man or company that sold the
loan 70 the eastern investor. The New
hampshire savings banks at first We're
satisfied with buying and selling west
ern mortgages, but when the business
began to grow the officers of these
banks and their friends and relatives
joined the exodus of brokers that left
the east and came west to go into the
loan business. All of these defunct
New Hampshire banks became large
holders in stock of western loan COM
panies. They bought loans of the
companies with their depositors' money
and received a greater rate of interest
for it than they could have obtained
by lOaning it at home, and whenever
they found a chance to sell a mortgage
to some eastern investor they promptly
sold it and received the usual > per
cent of the face Of the loan for the
transaction and Immediately reinvested
the money in another western mort
gage.
The fact that the New Hampshire
savings institutions dealt in western
mortgages was one of the important
Influences that caused the individuals
i'm the communities in which they did
business to invest in western mort
cages. All these investments were
made at q time when western invest
ments paid large returns The peO-
pie who lived in the west also made
money by borrowing money and in
vesting in property AT no time was
more than so per cent of the money i'm
vested by the New Hampshire saw
ings institutions placed in western in
stitutions At least so per cent of the
money which they loaned was loaned
to eastern manufacturing concerns and
on eastern real estate w hen the
general business depression came i'm
this country the eastern investments
were the first which failed to pay in
New Hampshire banks had 70 depend
on their western investments for money
to pay interest to their depositors and
dividends to their stockholders.
When the general depression came in
the business of the country the invest
ments of these banks, both in eastern
and western securities failed to bring
I'm any returns. Many Of the factories
III -NSw nam 9Sl4lt1 smut -C " II el--e- ~17
operatives who We're largely depositors
jim the savings Institutions We're either
thrown out of work or had to
work on less time and for less money
This being the case. the depositors of
these failed banks. instead of adding to
the amount of money on deposit. have
Withdrawn their earnings and the
banks have been unable to withstand
the strain. There has been a steady
withdrawal of deposits from these
banks during the past eighteen months,
probably helped along by news
paper articles like the one in The Her
aid, which have decried the western in
vestments; the depositors Of these in
stitutions. knowing that the assets
were invested to some extent in west
ern loans and securities, have, to pro-