The sun. [volume] (New York [N.Y.]) 1833-1916, 1909-06-13
CREDIT UNION BANKING
MASSACHUSETTS, RANKS HON.
ESTY WITH ASSETS.
Plan to Encourage Thrift by Borrowing
A System Similar to That Of the
Peoples Bank OF Europe-successful
abroad. but little Tried Here Yet.

BOsTON, Mass, June 12.-Most people
do not think OF borrowing as q form Of
thrift nor yet Of personal honesty as
collateral on which to raise a loan between
payda VS. or when there are no paydays.
Most people have little idea Of the BOO
nomic value that lies in saving money
so as TO be able to borrow 1t. Nor do
most people in this country recognize
the extent to which the elementary prin-
ciples of high finance. involving large
use Of personal credit, have penetrated
the humblest social strata in Europe.
Something similar to the system OF
~people's banks which in Europe has shown
the personal integrity Of the poor man
10 be one of the surest Of assets is what
Massac husetts hopes to create through
a credit union plan which has just been
authorized by the Legislature.
The credit union act which Gov.
Draper signed on May Fl permits seven
or more citizens Of the Commonwealth
TO get together and as a corporation to
do among themselves an elementary
banking business.
The credit union. constituted after the
legal formalities have been observed.
10 supposed to gather together a little
fund through the sale Of An unlimited
number Of shares OF capital stock to its
members. 1t may also receive savings
deposits, upon which a suitable rat Of
interest is paid.
From these two sources money is accu-
mulated that can be lent u to members
upon security that a bank Of discount
would be unable to approve. Practically
that means upon personal security. upon
smembee's note indorsed by one or more
OF his fellow members. Possession by any
OF the sureties Of real estate or other
negotiable property. although desirable.
10 not necessary.
Essentially 1t Is honesty that serves a.
collateral for the loan. The member il
supposed by the fact Of his having been
taken into the association after careful
scrutiny Of his record to be we'll inten-
toned. honest and accustomed to fulfil
his agreements. That reputation is q
condition Of his being allowed to make
capital Of his character.
There Is another condition that Is sig
nifcant. Whenever a member wants
money he has to explain why he wants IL.
A credit committee sits upon his applica-
ton and decides from its knowledge Of
the mans circumstances and tempera-
mept whether it will be for his permanent
good to have his request granted.
The credit committees function in fact
is TO discriminate between thriftiul and
wasteful borrowing. There are times
when a little working capital or q little
money TO tide over an emergency proves
the salvation Of the individual or the
family. To meet just such cases the credit
union holds its funds. 1t puts a limited
amount of bank credit at the disposal
Of persons who otherwise could
get it unless at the hands Of the gentry
who charge 10 per Q a month for
papers" and renewals
Not only the purpose Of the credit unions
loan but the in which the agree
ment is carried out must be sorutinized
by the credit committee. The loan must
be watched from the time it is made until
it is repaid. This watchfulness presup-
poses a comparatively small membership
so that every mans personal habits may
be known TO every other. In case q mem
Der does NOT live up to his agreement
lie lbdy NC buIIlIhdIty oApOtlCd.
The details Of the scheme were worked
out by Pierre Jay. Bank Commissioner
OF the State until April /. 1909. when he
resigned to become vic~e-president Of a
New York banking instituti IN. The
success abroad Of these voluntary
agencies for stimulation Of thrift through
the colleotion and loaning Of money
OF the Massachusetts, plan to believe
that it win work we'll in this country.
The credit unions and peoples banks
Of Germany, Austria. Italy. Denmark
and other European countries have q
r~smsIkable record for efficiency and
safety. There are to-day, about $4,000
q them. with 2 membership exceeding
upward OF a billion dollars.
The wealth which they have created
has come mostly from social strata
where saving was almost unknown a
generation or two ago. The percentage
Of Losses has been very small. In the
circumstances 1t is not strange that they
are in high favor with the banks OF dis
count, whose business they have largely
increased.
Despite the lifelong advocacy OF Henry
W. Wolf the credit union system has not
bean very successfully introduced into
Great Britain. Local obstacles are inter
posed and the disposition Of the English
people Is 10 depend upon snop cTcuit,
which usually conceals a usurious rate
q interest, rather than on bank credit
which with it's low interest charges is
much more economical.
Otherwise the plan has shown great
adaptability to varying national condi-
tons. 1t ID found in India and the West
Indies as well as in nearly every country
Of continental Europe. The cooperative
banking institutions are everywhere
pretty much alike.
They have as their general object the
accumulation Of savings among and the
extension Of credit to their members.
The fundamental principles common to
them all are that only honest Rnd indus
trious persons are admitted to member
ship; loans may be made to members only;
no loan shall be made unless the credit
committee approves the object for which
the money is to be used; the Use OF the
money for any other purpose renders the
borrower liable to expulsion from MEM
bership; at all meetings q member has
only one vote, irrespective Of the number
OF shares he or abe owns. Although new
10 the United states the credit union
principle is already established In North
America. The Dominion OF Canada has
been in advance Of Massachusetts, in per-
hitting incorporation Of these agencies OF
popular thrift with legislation passed at
ottawa last winter. Il