Gloucester County Democrat. (Woodbury, N.J.) 1878-1932, 1903-01-29
WANTS STATE B. 81. SOCIETIES
PROHIBITED.
rhs oonmissIonsr Approves Of ''I0eal..D

The Commissioner Approves Of Locals"
The enactment of law prohibiting tn
formation of building and loan association
of classes known as state" or national
is recommended by the banking and insul
ance commissioner in his annual report t
the governor.
Past experience, and particularly tn
conditions brought to light by the inves
LEGATIONS of the past twelve months, hav
convinced the department that this elias
of associations is menace to the public.
Discussing generally the conditions o
building and loan associations in tie stat
the report says -
Regarding investments, the law SHOULD
absolutely prohibit loans on second mort
gage security, except, perhaps, in cas-
where the first mortgage is held by tn
association, and restrict the investment o
surplus moneys to such securities as saving
banks are permitted by law to hold. TIT
purchase of real estate for investmen
should be prohibited. Expenses of manage
ment should be limited and paid from
earnings, and in no event out OF the stocl
subscriptions.
''It has been eonclusively demonstrated
by experience that the associations which
give the best results to their members art
those that confine their operations to {
limited territory and do not employ paiG
agents to solicit business or maintain ex
pensive establishments and corps of higf
salaried officials, but, on the contrary, art
conducted with the least possible expense
and solely in the interest of their share
holders, as the law contemplates. Refer
ence is made to the class of associations
termed slocals. Whatever may be said
in favor of the class known as state Oh
national, it must be admitted that a very
large proportion Of them have signally
failed to fulfill the purpose of the law and
have caused great disappointment and loss
to those who have been induced to purchase
their shares.
ttThe conclusion is, therefore, inevitable
that their system is radically wrong, and,
this being true, the question arises, why
permit their continuance? After full con-
sideration of the subject, would earnestly
recommend an amendment to the law pro-
hibiting the formation of any more institu-
lions of this class
374 IN THE STATE.
There are now 374 building and loan
associations in the State, % having been
incorporated during the year and IS having
discontinued business voluntarily or other
wise.
Five associations were placed in the
hands of receivers during the year covered
by the report, and all were of the class
known as 'staten institutions. They were
the Commercial Building and Loan Associa-
ton of Newark, Republic Savings and
Loan Association of Newark, Washington
Cooperative bank of Newark, Mercantile
Cooperative bank Of Jersey City, CONNER
cial Dime Building and Loan Association OF
Paterson.
The statistical information in the report
shows that the gross assets of the "locaP'
associations aggregate $48, 480, 377, an in
crease for the year of 81, $50, 926. The
total Of the subscriptions paid on the shares
in force is $36, SIS, $50, an increase OF
81, $50, 474. Profits, apportioned and I'M
apportioned, amount to 8,877, 081, being
an increase of 1927, 1892. Other liabilities,
consisting mainly of borrowed money and
unpaid matured shares and balances due
on loans, aggregate So, 034, Ut, the increase
being 1903, 40. The total net assets or net
worth of the associations, being the stock
subscriptions paid, plus profits or surplus,
amount to $45, AS, $50, which is a gain OF
81, ST., 806.
The real estate owned, of which more
than 10 per cent. is sold under contract,
shows total Of 81, 1876, 423 being Al per
cent. of the gross assets. The number of
foreclosures is reported at 159, as against
266 in the year before. There was a gain
in membership of 1924, or nearly 6 per
cent, the total membership being 106, 624.
The ratio of borrowing members is 81 per
cent.
Some 294, or Sc per cent. of the associa-
tions, are conducted upon the serial plan;
thirty-eight upon the permanent or per-
petual plan; one has both plans in use and
eight are terminating associations. The
gross premium plan is followed by 1877
associations, or 55 per cent. of the total
In 127 the installment premium plan is in
use; nine have both plans, and eighteen
have no premium plans.
Commenting upon the conditions in some
of the institutions, the report says -
'sThe American Savings and Loan COM
pany of Trenton, state association, with
a large membership, has ceased taking new
members, and is in process of being wound
up, as the result of complications growing
out of the costly expense fund system and
the mistake made by the managers in fail
ing to take into consideration that the sys-
tenn was at variance with the statute Of
1899, precluding deductions for expenses
from payments on stock thereafter issued.
1.-THE New Jersey Building Loan and
Investment company of Trenton, one of
the largest of the state associations, was
found to have sustained very material losses
on its mortgage investments, and the values
of the shares have had to be reduced
accordingly. These losses, and the inability
of the association, because Of the lack of
profits, to return to members on with
drawal the portions of their stock pay
ments, which have been used for expenses,
have naturally had the effect of creating
considerable dissatisfaction, and it is not
unlikely that the association may go out Of
business. No new members are now being
accepted"