Evening star., 1926-03-20
REAL ESTATE
BY KUiiER w. BABSON.

Fw people realize the tremendous
growth which Building and Loan AS
sociations have made during the past
20 years. In 1905 there were only
b.326 of these associations in existence,
having resources of but 646,1O0,0oo.
In 1925 the number had been increased
TO .844, with resources of S4,1o6'0oo.-
600. and this growth is still continuing
at a rapid rate.
Building and loan associations, CO.
operative banks. and similar institu-
tions have at the present time TWO
distinct advantages. First. theS are
operated very economically. THIS Is
especially true in places where tnere
is only one such association. and tnuS
they have not been driven Hv compe-
tition to expensive offi.e-, @igh-prlceu
EMPLOYEES, and other luXurieS, as nave
80 many of the commercial banks
Statistics show that their expenses
oer dollar Of resources are only ABOUT
one-half what a regular commerciai
bank with the same resources. Would
be obliged to pay. The second reason
for their success is that theV nave
commanded exceptionally good local
talent for their boards Of directors, men
who have been selected not because
of their wealth and reputation but
because of a genuine interest in help
ing their fellow men save money 10
build homes. These men feel that
the best way to make a good citizen is
to have a man own his own home.
as no man was ever known to hang
the red flag of anarchy over his own
hearthstone. :,
do not mean by this that the d.
rectors of these small institutions are
necessarily better than the directors OF
the commercial banks, but these build
ing and loan associations without cap
ftal stock have rot yet got the COM
mercial spirit and their directors serve
more with the spirit of the trustee or
q church, college. hospital, or library
Personally, l believe this is something
which will receive more and more con-
sideration in years to come. Men are
gradually learning that after one has
q reasonable amount of money any
more is only a care and source OF
danger to the children. On the other
hand, men know that loafing IS bad
and to avoid worrying about ones
self or avoid going to the devil they
must have something to do. Hence,
today you can get the finest talent to
serve on boards of charitable institu-
tions without pay-men that huge
salaries would not tempt. The direc-
tors of most cooperative banks and
mutual savings banks represent such
men-also many of the directors OF
commercial banks come in the same
class. The latter, however, are really
elected by the stockholders or because
they are stockholders rather than
from the purpose Of public service.
Personally l feel that in future years
It will be easier to get good men for
such trustees and that corporations
without capital stock will be organ
lied for many other purposes other
than those above mentioned.
How They Work.
Building and loan associations and
cooperative banks were really the
ortginators of banking on the install
ment plan: that Is. they were the first
to apply the installment buying prin-
ciple to banking and to building
home Their plan is to have a per-
son regularly pay into the bank the
same amount every week, from 81
upwards. OF course, if you enter on
the dollar.a- week basis you can pay
for five weeks in advance, paying IS
every five weeks; but you cannot pay
in 81 one week, SIS the next. and 81
the next, just as you feel like doing.
You definitely subscribe for one or
more shares, as they are called, which
YOU agree to pay for by bringing or
sending to the bank a definite sum
each week, this sum being based on
the number of shares for which you
have subscribed After the required
number Of payments you have full
paid share upon which you receive
a rate Of interest varying from to 8
per cent always. a rate higher than
commercial banks with capital stock
can afford to pay. Hence these banks
which we are discussing both encour-
age systematic saving and give de-
positors an exceptionally high rate Of
interest with absolute safety. On the
other hand, this kind of bank is bad
for women who are apt to suddenly
change their minds and want to use
the money for buying a fur coat In
stead Of building a home. 1t carries
practically no reserves and a depositor
10 not supposed to draw out his money
until his shares have matured. If
you want your money where you can
get 1t at any time or for any purpose
use a commercial bank; this is, a ma
tional bank, state bank, or trust COM
pany.
When a small depositor deposits
1n a commercial bank he must not
expect necessarily to borrow from that
bank; but it is understood with the
building and loan and cooperative
banks that every depositor has the
right to borrow to either build or buy
home. The money being put in by
the new depositor is always being
loaned to old depositors. Hence a
depositor is not only systema tically
saving money. on which he will get
good rate of interest, but he is auto
matically building up a credit which
will enable him to borrow in order
to build or buy a house. After bor-
rowing the money. the depositor con-
tinues his systematic deposits, which
go to reduce the loan. SO that finally
The home is owned free and clear.
did not refer to these banks in my
previous talk on bank accounts be-
cause | treated such bank accounts as
reserves or reservoirs to be drawn
upon In emergencies or to be used for
establishing commercial credit and for
becoming man of affairs. You can't
draw checks on a building and loan
or a cooperative bank, and they will
never loan you money to buy
merchandise or perform the other
innumerable services that q good
commercial bank will perform. Build
nd ho, MI ic<