Omaha daily bee., 1898-07-28

o
safety.
That they are peculiarly adapted to meet
unexpected contingencies has been shown in
the manner in which they have stood the Sc
we're test Of the last Ave years OF business
panic and depression. The system has
shown more elasticity, better adaptability
and more reliable stability than any other
form of financial institution. Very few
banks, for instance, could have kept their
doors open in the face Of demands for the
immediate payment of 90 per cent OF their
deposits. But many building associations,
especially in the larger cities, had to meet
this condition, and yet they are still doing
business at the old stand.
II building and loan associations are to
occupy and hold the field for which they are
intended; il they are to continue as the
great cooperative saving and home-making
and home-conserving institutions of the
country, the very first essential Is the crea-
ton and maintenance of a proper reserve
fund.
The reserve fund is a part Of the regular
machinery Of the association, provided for
in the contract or agreement embraced in
the constitution and bylaws which all men,
bers have signed or agreed to by becoming
members. 1t is one of the inducements
which bring members into the association.
In the second place. the reserve fund has
protected the Withdrawing or maturing
shareholder during the period Of his men,
bership.. In case of loss 1t has reimbursed
him and at all times it has given protection
and permanency to the association. Finally,
IL losses occur after his membership ceases
they will probably arise from some mistake
or mismanagement which was committed
during his period of membership.
Opposition to the Plan.
The other side of this question was taken
by James Clarency of Philadelphia, who
said:
The stockholders Of building associations
are not as stockholders Of other corpora
tions, but are contributors, who agree to
pay SO much, and when that sum Is reached
there is a distribution. They are contrib
utors to a common fund. There is an
economic principle underlying building as
sociations which does not exist elsewhere,
and a reserve fund has no place in the as
ISOLATION. Reserve funds in other corpora
lions affect the market price of the stock
! wherever 1T Is offered for sale, while 1t
canno affect the value of stock in building
associations.
The creation Of a reserve fund will defer
the maturity of loans, which makes it a
hardship to the borrower, who Is looking
forward to the time when his loan will be
paid off, and the borrower must be pro-
tected, for it is upon him the associations
must depend. We cannot depend upon a
permanent fund in building associations and
the attempt to establish 1t is to get away
from the principle underlying the poor mans
cooperative work.
The building association Is an economic
organization and after long years expert
ence with them am prepared to say that
these local associations, managed by neigh
bors, have never been improved upon.
When there is a deficit in the security to
a loan it should be charged up on the books
and assets reduced that much. This re-
quires heroic action, as it will show a de-
crease in earnings for the quarter; but the
nnnlinQtinn of a ragnrya fnn6 10 nn1V getting
at it in another direction. The loss Is there
and cannot be escaped, whether 1t is bravely
met at once by charging it off the assets or
by covering it up by the use of the reserve
fund.
Michael ]. Brown Of Philadelphia read q
| paper not on the program which took issue
with the points advanced by Mr.. Clarency.
He said Mr.. Clarency's idea Of a reserve
fund was not like the reserve fund advo-
Gated in Pennsylvania. There is nothing new
in the reserve fund, he said, but there is
something new in having the fund handled
in the proper manner. Shares are never
worth the face value without a reserve fund
and that there is no such fund he felt to be
an evidence of bookkeeping. Advocates Of
the fund are trying to lead the associations
back into their old time paths of simplicity
Mr.. Hanchett of Michigan favored g re.
serve fund. He said a law providing for this
was passed by the Michigan legislature, but
the bill was vetoed by Governor Pingree
He said the member who contributes to the
reserve fund does so to protect his own in
%vestment. He thought the association
should be actuated in this matter just as al
individual lays aside a reserve fund TO
+ emergencies.
) E. E. Good of Wahoo, Neb. Judge Dexte
D OF New York, julius Stern of Chicago, Simp
a Cnn nnp1nn ~ rh,oa.a n Ilnnl-
, Massachusetts. C. f.. Bentley of Gran,
: Island, Mr.. Bailey Of Massachusetts an,
, Mr.. Wigbtman of Illinois, took part in dis
cussing the question, which has been a bon
Of contention in the management OF asso
Citations. After the discussion a motion pre-
vailed calling on the committee on resolu
! lions to report a resolution
, that associations In the league adopt the re
: serve fund system.
what They May Do.
9 Charles F. Bentley of Grand Island rea
= n paper on Fields OF Thought and Investi
cation for Building Association Men," il
the course of which he said:
For some inscrutable reason, the buildin
D association has often seemed to be a mys
ttly to that part CT the public which ha
! not been directly connected with II. TIL
> misconceptions of Its PURPOSES, of its limita
tons and OF Its needs have been great; an
not the smallest task of the active friend
OF the building association has been to re
! move erroneous ideas from the mind of tb
! public, and not only from the mind of tn
public-at-large, but from the minds of tn
: members OF legislative bodies that hav
made building association laws.
! The building association is a co-operativ
/ credit institution. This definition brings be
fore our mind, on the one hand, the field
occupied by other forms Of cooperative al
sociations, and, on the other hand, the field
. occupied by other forms OF credit institu
lions. From the very essence of our organ
~izations. we are closely allied with both til
one and the other. In common with othe
, credit institutions. the building associatio
gathers together accumulations Of capitt
that otherwise would lie unused and liner
and, massing them, directs their use 1
channels where they become a might
economic force.
: Many OF the questions upon whose corret
t solution the continued usefulness OF Ii
g building association has depended, ha,
b. been solved. There is much more of deta