Omaha daily bee., 1912-06-07
CAPITALIST HAS ADVANTAGE
Institutions Said to Be Drifting
Away from Original Purposes.
SPIRIT OF MUTUALITY ABSENT
Royse Declares that Courts Would
Protect Small Home Builder.
BLUE SKY LAWS ARE DESIRED
Nebraska Is One of Largest Centers
of Activity in the United states,
Assets Of Institutions Being
Twenty-Five Million.

Secretary L. Royse of the state bank
ing board yesterday afternoon attacked
the methods employed by some of the
building and loan associations in Ne
braska In a speech before the state con-
vention. He said, IN my opinion the
home builders of the state who are as
sisted by the associations are not receiv-
Ing an equitable advantage in mony
matters" ,.t+f.
Mr. Royse found fault with the majority
OF the associations because Of the fact
that larger per cent of interest is paid
on the paid up stock than on that which
is not paid. He argued that the small
investor OF few dollars should receive
as much interest as the man who invests
thousands. This system does not prevail
In most cases. He said In part: =
Experiment stage Passed.
The building and loan associations or
Nebraska have passed the experiment
stage, Ten years ago the assets Of these
companies we're but $4,O00OOO. Today as
sets are $25OO0.o00 or an increase Of
s. 000, 90 per annum. The building and loan
associations have taken their position
among the permanent financial insttu-
tions OF the state. @
However, these associations have aE-
rived at degree of maturity that re-
quires closer scrutiny Of the underly-
| ing principles of the business, the pur-
poses and the equities involved. than was
fair to hold when the association was
struggling for foothold.
THE fundamental principle underlying
| building and loan associations is the
encouragement Of homeb ullding and the
reason for their being Is that they open
the door Of opportunity to the homeless
to become home owners and any prac-
tice or other legal enactment that Ia
any way interferes with this fundamenS
tai purpose is at variance with the
correct puslding and loan idea. III
violation of Mutuality. Il.
The building and loan association also
has for fundamental principle the alb
solute mituality Of ali shareholders, and
any practice or any legal enactment at
variance with this principle violates the
purposes OF these associations.
| "A summary Of the reports of the as
sociations shows that approximately one
half OF all the took issued by associa-
lions of the state is fully paid for, or
paid mp or matured stock, disclosing the
fact that the so-called Investment public
| is attracted to these institutions by a
better rate Of interest than they can OBJ
| tain elsewhere. This shows conclusively
that the associations are drifting away
from the original purpose of their cre-
| alton. They should be brought back to
where they will beoperated along the
lines agreeable to the basic priciples that
brought them into existence, that Of
furnishing opportunity to the wage
Garner place for the small savings
OF the people, and in the interest OF the
homeb uilder. The high rate of interest
paid is attractive to the investment pub
lie and burdensome to the home builder.
AS a matter of fact, wherever build
ing and loan association agrees to pay
a fixed rate of interest 1t violates the
mutually that should exist among its
members, and should its earning power
fail to be equal to all shareholders the
courts IN my opinion Would quickly pro-
tect the installment shareholder by de-
priving the full paid shareholder of the
right to take rate higher than his un-
fortunate associate would obtain. In
other words the creation Of preferred
stock in building and loan association
would destroy its mutuality.
Remedies Are Suggested.
The remedies would suggest would
be: First, to place limit on the amount
Of full paid stock that could be issued
by an association to, a certain per cent
Of its total assets, say 20 per cent, which
is the amount fixed in some states This
would be a step towards conservatism;
second, to require that all contracts made
In the issuance Of full paid Ase>en sps-
officially provide that the rate agreed
upon not exceed the average dividend
paid by the association to all stock
holders.
In my opinion the home builders of
this state assisted by building and loan
associations are not receiving an equita-
BILE advantage now prevailing In money