Rensselaer Republican, Volume 27, Number 24, Rensselaer, Jasper County, 7 February 1895 — About Building And Loan Associations. [ARTICLE]

About Building And Loan Associations.

The strong" disposition evinced by the present State Legislature to change, amend or add to the laws relating to building and loan associations, may result in some very salutary legislation, arid again the resulting laws may be quite the reverse of salutary. Whatever changes are made should be with the view to make these institutions more effective in securing these two primary objects of their organization: Namely, assisting people of limited means to obtain homes of their own; and, second, affording a safe and convenient method for laying up small savings, for people who can not save in larger sums. The perversion of these institutions into instrumentalities for securing exorbitant prohts for investors, and for paying enormous salaries to officers, should be discouraged. Mislead by specious but fallacious chains of reasoning; and by delusive prospects of early paying out, borrowing stockholders often pay most exorbitant premiums, and entirely too high rates of interest. These borrowers, although they are paying back the principal

of their debt, every month or every week, in the form of regular dues, yet they get no reduction of their regular interest charge, as is the case in all other partial payment forms of paying debts. In most cases, too, a considerable portion of the money these borrowing stockholders are paying interest on, is actually their own money, paid into the association, in the form of dues, before they became borrowers. Owing to these facts, and often also to large premiums paid, it usually results that borrowers from building and .loan agsociations pay larger interest’lhan they would pay had they borrowed the same amount from almost any other source; and in the case of the national or state organizations, the enormous sums paid

-in salaries and other expenses make the matter still more unfavorable for the borrowers. The tacts that in the oidinary local association the non-borrowing stockholder usually gets from 12 to 20 per cent, profit on his investment, and in the national associations the officers all draw princely salaries,are conclusive proofs, without any figuring, that the borrowers usually pay too much for what they get. To remedy this injustice the law should limit the rate of interest paid by borrowers to not more than 6 per cent., and all premiums should be abolished and priority

of loans be based on priority of applications; or else the premiums should be limited to a very small figure. To that division of non-borrow-ing shareholders who go into building and loan associations because they furnish a good way in which to save up a little money, which would otherwise be spent, these suggested changes will not be objectionable, as they will add to rather than take from their safety as depositories of their savings; and still leave a chance for profits sufficiently large to satisfy any reasonable expectation. The other class of non-borrowters, the investors for profit, may not be so well pleased, but, generally speaking,'they are altogether too numerous in building and loan associations, anyhow, and a large diminution in their numbers would be a desirable result The “expense fund*’ in the large associations should by all means

be abolished; or greatly curtailed; and. the payment of immense salaries to officers should be prohibited. The interests of all classes of stockholders <!emandthtse changes. “

In the interest of both borrowing and non-borrowing stockholders, that senseless and mischievous clause in the existing law' which, requires associations to fix a time in their by-laws for the association, or for each series of it, to wind up r should be repealed. Many associations have become involved ininextricable confusion and disaster on account of this requirement. The proposition to limit the amolint loaned to borrowers to 60 per cent. of the value of the property offered as security, would practically destroy the usefulness of building and loan associations to that class to whom they are now most useful; namely those who are unable, by any dther means, to become possessors of homes of their own. Such a provision might further the ends of the money-making managers of the general associations, but in the case of the local associations it Fould be most in j u rious. The man with no capital but his hands would have no such chance, as now, to get a home through the building and loan associations. As the law now is, it is a common occurence for well managed local associations to advance so au industrious and reliable stockholder practically the whole amount required to build or buy a home. This is a very frequent experience with all local associations, and very seldom indeed, does any association suffer loss from the practice. A very important fact that should be borne in mind, in connection with this point, is that nearly all building and loan borrowers have been paying dues on their shares for from one month to several years, before they borrow on those shares, and the whole sum thus previously paid, is really so much of the debt paid -in advance, and is both a diminution of the amount risked by the association; and is also a powerful incentive to the borrower to continue the payments. Leave to the board of directors, in local associatio.s, the power to decide in each case as it arises how much they can safely lend to their stockholders.

The question of taxing building and loan stock is one that ought not to be difficult of solution. As all property ought to pay its full share of taxation, there is no good reason why money deposited in building and loan associations obould not be listed for taxes. In this respect, let the solvent building and loan association be looked Upon the same as a solvent bank; and each person be assessed the amount the association has in its care, belonging to him. The lawful withdrawal value at the time of assessment is]what each share should be assessed at. This, as the law now is, is all that has been paid in as dues, on such share, with 6 per cent, interest for the average time since it was paid. “Paid-up” shares should be assessed all that was paid for them, with G per cent. interest added. Shares that have been borrowed on should not be assessed, any more than should an overdrawn bauk account. Tq tax them would be equivalent to taxing a man for what he owed. The borrowers are are taxed already, in point of fact; either on the property in which they invested what they borrowed or on the money itself, if they still have it.

The mortgages which borrowing shareholders give to secure the regular payment of their duas and interest, until the association or series winds up, should not be taved, because the money which they actually represent will all, or practically all, be covered by the taxing of the shares. Moreover, the actual value of these mortgages is always indefinite, and constantly diminishing. And in no case are they worth what their faces seem to

call fpr. Thus a shareholder may borrow, say §I,OOO, on shares that have been running many years. He will execute hjs mortgage for 81,000, and perhaps before he has paid §SO the series will pay out and his mortgage will be released, without further payments.

It is an off day in the State Legislature when a new congressional apportionment bill is not introduced in one house or the other. One of the very latest of these puts Jfsper county in the 11th district; which is to be of the same counties as this present 10th district, with Starke county thrown in, for good count, or because no body else will have it Still another proposed measure puts Jasper in the 13th district, composed of Jasper, Newton, Pulaski, Starke, Lake, Porter, LaPort®, St. Joseph and Marshall.