Newspapers / The Carolina Union Farmer … / Jan. 23, 1913, edition 1 / Page 4
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Page Four THE CAROLINA UNION FARMER [Thursday, January 23, 1913. Land and Loan Associations. Jas. R. Young, Insurance Commissioner. (Concluded from last week.) Afterwards, in an address deliver ed before the North Carolina Build ing and Loan League at New Bern, June 20, 1911, I made the follow ing statement and appeal to the mem bers of the League: “So successful have our building and loan associations been in build ing up our cities and towns and in aiding those of our citizens desiring to own homes, that I would like to see the same benefits extended to our farmers. This can be done by organ izing among them ‘Land and Loan Associations,’ or, as they are called in Europe, ‘Land Banks.’ They are the application of the co-operative and other principles of building and loan associations to organizing and aiding our farmers. It can be easily done with few changes, as is shown by their phenomenal success in Ger many and France especially. They can be used to aid farmers in pur chasing and paying for their farms, or in furnishing the necessary ma chinery and supplies for running the farm. They will not only be a saving to this worthy class of our citizens, but will greatly aid in instilling into them habits of thrift, saving, econo my, and confidence. May I not ap peal to some of your veteran workers in this line to make an attempt in your county, and to prove yourself a public benefactor in your country dis tricts as you have in your cities? It is just as feasible and easy, though it may call for patience and an adapta tion of payments to the harvest or crop season of each section.’’ First, let us consider the principles, as well as the working, of building and loan associations, and then see how they can be adapted to the needs of our farmers and how well they may be utilized by them. Mr. D. A. Tompkins, of Charlotte, thus defines a building and loan as sociation and illustrates its working: “A building and loan association is an institution for aggregating and averaging the net results of labor and establishing it as a basis of credit. To illustrate its operations, assume that 600 people form an association. They may be machinists, bricklayers, merchants, clerks, telegraph opera tors, etc., all working people, and all having fair prospects of regular em ployment for wages or salaries. If each member pays $1 a month, these 500 people will save an aggregate of $500 a month. In twp months the association will have $1,000. This may be used to build a house for one of the members. The house is deeded to the member for whom it is built. The association retains a mortgage on it to insure payment of dues and interest until each other member in turn gets a house. This usually re quires a regular payment for about 6 and one-half years. The member moves into his new house. The rent formerly paid is now saved, to be ap plied as part of the dues and interest payable to the building and loan as sociation. In some cases, when rent is high, the rent alone will pay dues and interest. In such cases, the rent money literally buys a home. In all cases the rent money pays a large portion of the installments. At the worst, a very small additional outlay is required for a-home of compara tively high value.’’ You should find in a well organized and managed building and loan as sociation: (1) That it is local, confined to a community, if possible, where the people have a common feeling, train ing, and Interest. Then the associa tion gets an ideal economical man agement and gives its members their best training. (2) That the payments are suited to the income of its members, anc that they are prompt, regular, and rigidly enforced. (3) That the shares are put at $100 to $200, and the interest at the legal rate of 6 per cent. (4) That its loans are granted in the order of application for them, and without any discount or reduc tion of any kind. (5) That it is popularized to in vestors as well as to borrowers. Of course, its shares can be issued and run in series, as is generally practiced, or on the individual plan, designated as the Dayton (Ohio) plan. ^Maturing Shares. In the working of building and loan associations, 25 cents per week under the serial plan (the one in general use) should mature $100 in six and one-third years, or 330 weeks, by earning a rate of .0668524, prac tically 7 per cent which would ma ture In about 326 weeks. Twenty-five cents per week should mature $200 in eleven and one-half years, or 598 weeks, under the serial plan by earning .05875, while $1 monthly under this plan should ma ture $100 in seven years, or eighty- four months, by earning .054441. The Dayton plan, which treats each issue of stock as a separate series, has some advantages which I will not stop to enumerate here. Under this plan 25 cents per week should ma ture $100 in six and one-half years without any loans or fines by earning .0564416 per cent. Under this plan 25 cents per share per week is the regular payment, and covers, first, interest on loan; second, fines and fees; and the remainder is applied to stock, the maturity of which de pends on the amount loaned, rate, and fines. In order that you may get some idea of the maturing of shares by the payment of different amounts as in stallments, at different intervals, and with various earnings, as well as the length of time required for maturity, and thus understand how these asso ciations may be adapted to the use of the farmer, and what changes should be made in the methods now commonly used, I give you below dif ferent payments, rates, and dates of maturity, which approach possibly to what the farmer needs and can use: (a) At .0625 per cent, $13.60 per year paid in three monthly install ments of $4.60 each during the first, second, and third months of the year for six years would mature $100 in six years, seventeen weeks and three days. (b) At .06 per cent, $13.50 per year paid in three monthly install ments of $4.50 each during the first, second, and third months of the year for six years would mature $100 in six years, would mature $100 in six years, twenty-five weeks and five days. (c) At .0626 per cent, $12 per year paid in three monthly installments of $4 each during the first, second, and third months of the year for six years would mature $100 in eight years, forty-two wekes. (d) At .06 per cent, $12 per year paid in three monthly installments of $4 each during the first, second, and third months of the year for six years would mature $100 in nine years, two weeks and three days. (e) At .06 per cent, $10 per year paid in four monthly installments of $2.50 each during the first, second, third, and fourth months of the year for eight years would mature $100 in eight years, with $1.00 over. (f) At .06 per cent, $7.50 per year paid in three monthly installments of $2.60 each during the first, second, and third months of the year for ten years would mature $100 in ten years and seven weeks. By mak ing one payment of $7.50 at the be ginning of the year the time of ma turity would be^reduced to ten years and three weeks. Plans. Of course, a very important ques tion to be settled is the principles and plans upon which these associa tions are to be worked, and the con ditions to be attached to member ship and loans. I take it neither of the plans already described as in use in Europe would be received by you in its entirety, or would be accepted as workable by and neighborhood of farmers. The plans used by our building and loan associations would seem to be nearer what is desired, and can be improved by any desirable suggestion contained in the plans of European credit associations. No doubt we can agree that the. plan should be co-operative and mutual. The State can make the loans non- taxable, which would give an ad vantage of at least ,1 per cent in rate of loan. The capital should be fur nished by each member and the prof its go to each shareholder equally, whether a borrower or simply an in vesting shareholder. Of course, the time in which the stock should ma ture, its par value, and the amount and times of payment can be worked out for each county and neighbor hood. Economy. One element of the working of building and loan associations is their economy of management and the small expense at which they can be run. My report for the past year shows that the average expense ratio of white associations in North Caro lina is .0404 per cent. In these ex penses are included the items of sal aries, expenses of officers and direc tors, rent, legal fees, advertising and printing, taxes on association’s prop erty, and fees; and this expense ratio may be divided: for taxes, .012 per cent; for salaries, .015 per cent; and for miscellaneous items, .0142 per cent. The older and lafger an asso ciation, the lower naturally is its ex pense ratio, and it may thus be re duced to a minimum, which during the past year was less than a fifth of 1 per cent. Loans. The loans, of course, must be made absolutely safe, and while the condi tions attached to them may well ap proach some of those in use in Eu rope—certainly as'close as our Amer ican idea of freedom may allow— these, too, may vary to suit the ideas, conditions, and securities of the sev- seral sections. Certainly it would be ideal if loans were confined to those desired for some creative purposes; but I doubt whether this could be done until there had been built up n the neighborhood such .a pride in community excellence and economic sentiment as will not now be found in many places. The loans can be used to buy farms, to improve farms by necessary buildings, or increase in fertility, or in purchase of necessary improved stock and machinery, and in time could be made to take the place of purchases on time of those things necessary to run the farmer in mak ing his crop. However you and I may feel as we associate with friends and neighbors who conduct what is called “time business,” or those who feel that they cannot get along with out buying in this way, we must know that the progress of our State and the prosperity of its citizens call for the business to be done on a differ ent basis. The workings of these as sociations would be far different with our farmers from what they are with our city workmen and the European farmer if they did not produce such a sense of thrift and pride as would speedily improve the character and purposes for which loans were asked, and instill into them such a regard for economy as would forbid such reckless and promiscuous buying as we often see in the use of borrowed funds. State Aid. One of the difficulties that will lie in the way of these associations will be obtaining an adequate loan fund. It is here that the State might come to the aid of the associations if the following plan is thought to be feasi ble: The bonds or debentures of the as sociation might be turned over to the State and the State furnish from the sale of its 3or 4 per cent bonds the amount to be loaned. There would be a difference in interest of 2 per cent, and a $1,000 loan could be made to mature by the difference in interest alone in thirty-five years. A provision might be made by which a farmer, desiring to withdraw and pay up a $1,000 loan during this time, would be entitled to the following credits, provided it was agreed that he should have the benefit in the end of the difference in interest: At the At the At the At the At the At the At the end of end of end of end of end of end of end of 5 years. 10 years. 15 years. 20 years. 25 years. 30 years. 35 years. .$104.08 . 218.99 . 345.87 . 485.95 . 640.61 . 811.36 . 999.89 Of course, this addition would ma terially hasten the date of maturity of his stock, or state it in another way, if this credit from the addition al 2 per cent is added to the share holder’s other earnings in the associa tion, his stock would mature very much quicker, and thus liquidate his loan. Benefits. These associations among our far mers will prove of inestimable value, not only in building lip and improv ing our farms ,but in teaching our farmers, their wives and children, thrift, economy, and saving, as well as pride in their vocation, and self- reliance, so necessary and helpful in making a successful and prosperous people. There is no reason why these benefits should not also accrue to our tenant class, as well as laborers. They can easily be educated to take shares in these land and loan associations, and reap the full benefits from their workings. Who knows but there is hidden in these associations, proper ly directed by our intelligent Ameri can farmers, the solution of much of the trouble with our tenants and farm laborers? Laws Sufficient. In my opinion, no additional laws are necessary to make possible the organization and working of these “Land and Loan Associations” in our State. You will observe I call them “associations” and not “banks,” and insist that this is best. Their forma tion as banks would naturally call for a certain amount of competition and opposition from our bankers, and I mean no reflection on them in so stating my belief. With the name of “bank” they would say, and with force to the mind of the averarge far mer with money, that it was a dan gerous thing to trust bank manage ment to inexperienced men. As an association they would be like our building and loan associations, man aged by a board of directors, with the details left to a man honest and experienced in book-keeping. The charter could be secured as the char ters of building and loan associations
The Carolina Union Farmer (Charlotte, N.C.)
Standardized title groups preceding, succeeding, and alternate titles together.
Jan. 23, 1913, edition 1
4
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