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Builling and loan associations have existed in this country since about 1840, although the first organization of the kind of which there is any record was organized at Frankford, a suburb of Philadelphia, January 3, 1831, under the title of the Oxford Provident Building Association (a); but the decade from 1840 to 1850 can be cousidered as being the real period for the permanent inception of such associations. It is not essential in this place to trace the history of the origin, growth, and spread of these associations, for such historical data have been given in the works cited. The chief purpose of the investigation was to ascertain the financial and economic conditions accompanying these associations, the magnitude of the business conducted, and such facts as would tend to enlighten the public on a unique private banking business, of which but little has been known beyond the mere knowledge of the existence of such institutions.

In this investigation the term building and loan association has been used in a general sense, although institutions eovered by the investigation and having like purposes, methods, and processes of business have various names-among others, mutual loan associations, homestead aid associations, savings fund and loan associations, cooperative banks, cooperative savings and loan associations, and other similar titles. The object of the building and loan association, using the term as stated to cover all kindred organizations, is to furnish a safe means for the accumulation of savings, accompanied with an opportunity to secure money at reasonable rates for the purpose of building homes. Mr. Charles N. Thompson, in his Treatise on Building Associations, gives a very excellent detinition of the organizations under consideration. He says:

The building association as now existing is a private corporation designed for the accumulation by the members of their money by periodical payments into its treasury, to be invested from time to time in loans to the members upon real estate for home purposes, the borrowing members paying interest and a premium as a preference in securing loans over other members, and continuing their fixed periodical instalments in addition, all of which payments, together with the non borrower's payments, including fines for failure to pay such fixed instalments, forfeitures for such continued failure of such payments, fees for transferring stock, membership fees required upon the entrance

a See How to Manage Building Associations, by Edmund Rigley, published in 1873; also, A Treatise on Cooperative Savings and Loan Associations, by Seymour Dexter, New York: D. Appleton & Co., 1891; and A Treatise on Building Associations, Adapted to the Use of Lawyers and Officers, by Charles N. Thompson, Chicago: Callaghan & Co., 1892.

of the member into the society, and such other revenues, go into the common fund until such time as that the instalment payments and profits aggregate the face value of all the shares in the association, when the assets, after payment of expenses and losses are prorated among all inembers, whicli, in legal effect, cancels the borrower's debt and gives the non-borrower the amount of his stock.

It is seen, therefore, that every member of a building and loan associ. ation must be a stockholder; but the difference between a stockholder in such an association and that in an ordinary corporation for usual business purposes lies in the fact that in the latter the member or stockholder buys his stock and pays for it at once, and usually is not called upon for any further payment. His profits, or the results of his investment in such stock, are derived through dividends, the value of the shares depending upon the successful operation of the business. They often go above par when the corporation is doing a profitable business, and the value often drops far below par when disasters come. In the building and loan association, on the contrary, the stockholder or member pays a stipulated minimum sum, say one dollar, when he takes his membership and buys a share of stock. He then continues to pay a like sum each month until the aggregate of sums paid, augmented by the profits, amounts to the maturing value of the stock, usually $200, and at this time the stockholder is entitled to the full maturing value of the share and surrenders the same. It is seen clearly, then, that the capital of a building and loan association consists of the combined savings of its members, paid to the association upon shares of stock, increased by the interest and premium which the association has received from loans made by it from the savings of its members thus paid to the association, and from all other sources of income. The amount of the capi. tal of the association, therefore, increases from month to month and from year to year (a). Shares are usually issued in series. When a second series is issued the issue of the stock of the prior series ceases. Profits are distributed and losses apportioned before a new series issues. The term during which a series is open for subscription differs, but it usually extends over three or six months and sometimes a year. Prior to the maturing of a share it has two values. One is called the holding or book value and the other the withdrawal value. The former is ascertained by adding all the dues that have been paid to the profits that have accrued; that is to say, the bolding value is the actual value of a share at any particular time. The withdrawal value, on the contrary, is that amount which an association is willing to pay to a shareholder who desires to sever his connection with the association prior to the date at which his share will mature. Every association has full regulations on all such matters, as well as on matters pertaining to expenses, notice of withdrawal, and all the methods and processes necessary for the safe conduct of the business. The purchase of a

a See A Treatise on Cooperative Savings and Loan Associations, by Seymour Dexter.

share binds the shareholder to the necessity of keeping up his dues, and thus secures to him not only all the benefits of a savings bank but the benefit of constantly accruing compounded interest. This accomplishes the first feature of the motive of a building and loan association. The second is that of enabling a man to borrow money for building purposes.

Ordinarily, a shareholder who desires to build a house and has secured a lot for that purpose may borrow money from the association of which he is a member. Suppose a man who has secured his lot wishes to borrow $1,000 for the erection of a house. He must be the holder of five shares in his association, each share having as its maturing value $200. His five shares, therefore, when matured, would be worth $1,000, the amount of money which he desires to borrow. The process by which le can borrow this money differs from that of borrowing money from savings and other moneyed institutions. In a building and loan association the money is put up at auction usually iu open meeting on the night or at the time of the payment of dues. Those who wish to borrow bid a premium above the regular rate of interest charged, and the one who bids the highest premium is awarded the loan. The man who wishes to build his house, therefore, and desires to borrow $1,000, must have five shares of stock in the association, must bid the highest premium, and then the $1,000 will be loaned him. To secure this $1,000 he gives the association a mortgage on his property and pledges his five shares of stock. To cancel this debt he is constantly paying his monthly or semi-monthly dues, until such time as the constant payment of dues, plus the accumulation of profits through compounded interest, matures the shares at $200 each. At this time, , then, le surrenders his shares and the debt upon his property is cancelled.

The question as to whether this method of obtaining money for the building of homes is more or less economical than that of obtaining it from the ordinary savings banks or through private money lenders will be taken up later on. What has been said is simply for the purpose of showing what a building and loan association is, and briefly how its business is conducted. It will be seen at once, from what has just been said, that investment in a building and loan association is as nearly absolutely safe as it can be, for the monthly dues and the accumulated profits, which give the active capital of the association, are loaned, or sold as it is termed by the association, as fast as they accumulate. They are immediately loaned upon real estate, or upon the stock of the association itself. The opportunities for einbezzlement, therefore, or for shrinkage of securities, are reduced to the minimum, and the almost absolute safety of the investment secured. This will appear more clearly in the analysis of the general tables.

The growth of these associations in the United States has been very rapid since 1840, and their accumulated assets have increased to an enormous amount. These private corporations, doing a semi-banking business, conducted by men not trained as bankers, offer a study in

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