Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-08-03
SHARE ACCOUNTS
INSURANCE URGED
Plan, Endorsed by Loan
League, Up for Decision
of Companies.

Uy oV,OUU Ol1lICIS dIlu lCOtOlo va odf
1ngs, building and loan associations
throughout the country this year viii
be whether they plan to insure the
share accounts in their institutions
with the Federal Savings and Loan
Insurance Corporation.
This message will go to the execu-
tives in the field this week from Nor
ton Bodfish, executive vice president
of the United States Building and
Loan League, their national organiza-
ton. Writing in the July issue of the
leagues official publication, the Amer
lean Building Association News, Bod
fish sets forth the foremost advantages
Of insuring shares of each individual
investor up to $4,000.
Citing recent changes in the Federal
law so that the cost of the protection
Is now only one-eighth of l per cent
year on liabilities to insured share
holders, the league official says that
the plan has become a practical, work.
able means of redirecting the flow of
investments into the home mortgage
field. He calls it the express duty of
all financial institutions to get new
money from the public instead of
from the Public Treasury"
Cites Huge Deposits.
AN increase of 1900, 900, 900 in the
deposits of member banks of the Fed
eral Reserve System, exclusive of Gov
eminent deposits, took place in the
first IL months following the effectual
date Of deposit insurance" he pointed
out. 1T would have been thought i'm
possible a year before that for the
commercial banks to regain such a
measure of confidence from the public,
but with the aid of deposit insurance
they did it.
Building and loan associations en-
Joy today much higher general de-
gree of confidence than the banks did
on January /. 1884. Our institutions,
however, need to attract new money
in much greater volume than is now
on the horizon. The loan demand,
which will sweep up to our doors with
the beginning of the new era of home
construction already heralded by GER
tain developments, will place the as
sociations in greater need of resources
than has even been experienced be-
fore. Even the associations, therefore.
which today have idle funds unable to
find an outlet should give their thor
ough consideration to insuring shares
and getting themselves in a position
to attract new money whenever the
need appears.
Insurance Desired.
There seems to be little doubt that
the public favors Federal insurance OF
its deposits and investments. The ex-
perience of the banks, that of the saw
ings, building and loan associations
which have already been operating
with share insurance for five or six
months, and the reactions of the pub
lie expressed in a survey made by the
building and loan associations last
Fall, all point to the preference of in
VestorS for guarantee of solvency for
their capital even If returns have to
be slightly diminished to Offset the
cost of the insurance.
VAtAA q %4VOsOOObOUU al
Washington already established and
operating, the project for insuring
share accounts of savings, building and
loan associations is assured of success
1t will not accomplish its purpose,
however, unless a majority of the as
sociations take this step. The efficacy
of any kind of insurance project for
financial institutions lies in enrolling
all Of the institutions with sound prac-
tices and healthy financial condition "
Bodfish says that the plan for in
euring savings and loan shares was
developed by the leaders of the indus
try themselves, beginning with study
Of the question by the research organ
izations. the American Savings, Build
ing and Loan Institute in the Fall of
1888. In February, 1884, the Executive
Committee of the United States Build
ing and Loan League Endorsed such a
proposal and hearty support was given
by the building and loan interests to
the share insurance sections included
in the national housing act when Con-
gress was debating it last Spring.
Objections Removed
Under terms of the original law all
federally chartered associations were
required to insure their shares with
the newly established insurance cor
porations and all State-chartered in
situations were given the option of
tnsuring their shares if they so desired
In both cases the granting of the
insurance by the corporation depended
upon successful passing of a rigid
examination by the corporation.
Hesitation about share insurance de-
veloped on the part of the State-char-
tered institutions because it was felt
that the original premium of one
fourth of / per cent of the liabilities
of insured shareholders was extremely
high and because of other imperfec-
tons and technicalities of the law.
With the changes made in the law
by amending sections of the bill
signed by President Roosevelt on May
% this year, these difficulties are re-
moved and there should be an imme-
date rush of applications for share
insurance among the associations with