PLEA 
 
 INCOKPOEATION 
 
 CO-OPERATIVE LOAN 
 
 AND 
 
 BUILDING ASSOCIATIONS 
 

 '.".■■i,':,-: ..‘ w> >■>?'-: 
 
 «r 
 
 UNIVERSITY OF ILLINOIS 
 
 
 LIBRARY 
 
 Class 
 
 Book Volume 
 
 
 
 Mrl0-20M 
 
 
 
V W) ; ■ 
 
 A PLEA 
 
 FOE THE INCOEPOEATION 
 
 OF 
 
 CO-OPERATIVE LOAN' 
 
 AND 
 
 BUILDING ASSOCIATIONS. 
 
 SUBMITTED TO THE 
 
 ■j; Soint .Special ILabor Committee of tlje iWassact)U5etts Eegislatuve, 
 
 JOSIAII QUINCY. 
 
 \ 
 
 BOSTON : 
 
 WRIGHT & POTTER, STATE PRINTERS, 
 79 Miek Street (corner of Federal). 
 
 1875. 
 
4 
 
 act of hoarding and accumulating in a mechanical sort of way ; gains 
 no knowledge that would enable him to manage for himself a large sum 
 of money; and, therefore, by keeping him in ignorance of the various 
 means of investment and accumulation, chains him to a life of mere 
 dependence on the skill and knowledge of others in the management of 
 his accumulated savings. 
 
 This system, therefore, while doing much positive good, does not act 
 in unison with the spirit of the present age to the fullest extent ; for 
 while it teaches the working classes to save, it goes no farther. Its 
 protege may, in the course of time, accumulate a considerable sum ; but 
 he knows not where to place it outside of the savings bank. He pos- 
 sesses no knowledge or experience, no confidence in his own judgment 
 or that of others, and even fails of confidence in the saving fund itself 
 at times, and adds his weight to a panic-stricken rush for his savings at 
 a time most unpropitious to both saving fund and depositor. How 
 many instances are there on record of ‘ runs ’ on the saving funds of 
 large cities, the result of an ignorant, senseless panic on the part of 
 depositors ? 
 
 The system regulating ^Building Associations in the State of Pennsyl- 
 vania has a tendency directly opposite to this system. 
 
 • 1st. In that it is perfectly democratic, admitting each individual cor- 
 porator or member to a full, free and unrestricted voice in the creation 
 and management of associations formed under it, and a constant over- 
 sight of its operations and affairs. 
 
 2d. In that it is entirely mutual and equal in distributing its benefits, 
 giving to all its members their equal portion of all its profits and gains. 
 
 3d. In that it is much more liberal in its return of profits and gains 
 than any other known plan of saving and accumulating from small sums 
 of money. Having — owing to its entirely mutual character — no pre- 
 ferred Class to share its profits, no heavy sinking-fund to create and 
 hold in reserve against contingencies hardly within the bounds of possi- 
 bility, and no necessity for expensive banking-houses and clerk hire ; and 
 
 4th. In that it is the only plan by which the working man can become 
 his own capitalist, and create a source of wealth from which he can 
 supply all reasonable demands, without the aid or interference of the 
 outside capitalist. In short that it is a system ‘ of the people, by the 
 people, and for the people.’ One that, with ordinary judgment, enter- 
 prise, and strict integrity brought to bear in its management, cannot 
 fail of permanent benefit and profitable results to any community or 
 body of people adopting it, and faithfully carrying out its principles.” 
 
 I have thus introduced to your notice a plan that is novel in 
 Massachusetts, but which has been productive of great good to 
 
5 
 
 the working men of other States. In the appendix to a little 
 pamphlet entitled “ Moderate Houses for Moderate Means,” I 
 mentioned the existence of a Building Association, managed by 
 E. M. Davis, Esq., in the neighborhood of Philadelphia. Shortly 
 afterward I received a letter from Edmund Wrigley, Esq., of 
 that city, of which the following is an extract : “ I do not know 
 whether you are aware that there are over five hundred such asso- 
 ciations in this city, with an aggregate invested capital of from 
 forty to fifty millions, and which is increasing at the rate of a 
 million of dollars a month from monthly payments, and that new 
 associations are constantly forming. We have reduced the sys- 
 tem, as it applies to saving money, to a very fine point.” The 
 sums mentioned were so large that I thought there must be an 
 error in the amounts. In reply, however, to my inquiry, Mr. 
 Wrigley says : “ The figures I liave sent you are not set down at 
 random. I have the names of* the" associations, and a large mass 
 of annual reports to verify my figures ; and, if you would visit our 
 city, I would show you what an immense field we have in small 
 houses, varying from four up to ten and twelve rooms, on lots from 
 12x40 to 20x100 and 50x200 in rural neighborhoods, that were 
 purchased with these monthly deposits and held as security for the 
 forty or fifty millions loans I mentioned in my last letter. This 
 form of association extends all through our State, and nearly 
 every village in New Jersey has one or more of them. They 
 prevail very largely throughout the Southern and Western 
 States, are quite numerous in Minnesota, Kansas, and Nebraska, 
 and the Territories. I state this from positive knowledge, having 
 been for several years in direct communication with most of them, 
 and in almost daily receipt of their several reports and annual 
 statements during my editorship of the ‘ Building Associations’ 
 Journal.’ 
 
 I believe the present great success of our associations is the 
 result, — 
 
 1. Of a comparatively small limit of shares in each association. 
 
 2. The restriction of all investments to real estate or the stock 
 of the particular association. 
 
 3. A restriction against receiving deposits except by way of 
 instalments on stock. 
 
By these means simplicity, security, and moderation are 
 attained, and the dangers of unwieldliness and complication, as 
 well as the sudden and unexpected accumulation of large and 
 unmanageable balances, or the equally sudden demands for the 
 same are avoided. Everything is as fixed, certain, and automatic 
 as a machine. Thus it is that our working men, with only 
 working-men’s experience, manage these associations so success- 
 fully. Long departure from these principles would result in the 
 downfall of the system, as the past in New York, New England, 
 and this city abundantly proves.” 
 
 I add another letter from F. M. Wood, Esq., who, it will be seen, 
 has had a great experience in such associations : — 
 
 Bespected F^dend : I observe, through the public press, that you 
 have generously offered to assist in the organization of Building Asso- 
 ciations in your State and city. I take the liberty of writing to you, — 
 my excuse being that, my having been for the last twenty-five years 
 identified with them in this city I feel a deep Interest in their promulga- 
 tion. Therefore, I wish you Godspeed in the good work ; for they 
 are the means of lifting the poor up to comfortable circumstances, and 
 often to a large competency. They encourage thrift, industry, habits 
 of economy and saving. In short, they help mankind to help them- 
 selves ; they make better citizens; they produce a revenue to the city 
 or State by the comfortable dwelling-houses they erect ; they produce 
 a sale of land, make work for the mechanics of all kinds, build up the 
 population, make a good police force, — because a man owning his own 
 house deprecates mobs and riots, that he knows will increase taxation. 
 In short, it has made Philadelphia what it is — a city of homes. 
 
 T have been a member for twenty-five years ; am a member of twelve 
 different associations. 1 send enclosed the report of one that is twenty- 
 two years old. We organized in 1852 with seventy-five shares; that is, 
 we received $75 a month. That series closed out in nine years and six 
 months. The second series in eight years and six months. The third 
 series in seven years and six months ; that is, the shares became worth 
 .$200 by paying in one dollar a month during that time. At the present 
 time we take in .$5,000 a month in this association. This association 
 has a capital of over .$320,000 at the present time. We have now nine 
 associations running, and in the whole nine we take over $30,000 a 
 month. Quite a jump, from $75 monthly to .$30,000 monthly. Yet 
 this, fabulous as it may appear, is the honest truth, as our books show. 
 We have a regular office, employ two clerks besides myself, I oversee- 
 ing all as secretary and manager, under the control of a Board of six- 
 
7 
 
 teen directors, who meet twice every month in the evening. This 
 Board consists of active merchants and mechanics, and retired men of 
 wealth, some of whom visit the office every day.” 
 
 To encourage the formation of such associations, charters are 
 granted on the application of ten persons to the Court of Common 
 Pleas. These charters are perpetual, with the right to issue 5,000 
 shares of $200 each. Women have the right to hold shares in 
 their own names, with power to transfer, sell, etc., independent of 
 their husbands, and the associations are exempt from taxation 
 and from the State law against usury. 
 
 After such facts and statements it is useless to make an argu- 
 ment in favor of institutions that have exerted such beneficial 
 effects on working men and working women in other States. All 
 that is necessary is to explain, in some degree, the mode of their 
 organization and the reasons for it, and here I have the advan- 
 tage of using the experience of others. Mr. Edmund Wrigley, 
 of Philadelphia, has published two small volumes, the one en- 
 titled, “ The Working-man’s Way to Wealth ; a practical treatise 
 ^ on Building Associations, what they are and how to use them.’ 
 The other, “ How to Manage Building Associations ; a directors’ 
 guide aud surveyors’ assistant, with forms for keeping the books 
 and accounts, together with rules, examples, aud explanations 
 illustrating the various plans of working.” * 
 
 Mr. Wrigley, through a philanthropic desire to extend the 
 benefits of such associations to the working men and women of 
 Massachusetts, has not only permitted me to make large extracts 
 from his book, but has drafted such a bill as his experience 
 suggests, which I now submit for such alterations and modifica- 
 tions as the wisdom of the legislature may think best. 
 
 The experience of working-men’s trains on the Eastern Rail- 
 road, where passengers are carried, morning and evening, a dis- 
 tance not exceeding nine miles for five cents, has proved, as by 
 the railroad commissioner’s report, a financial success. This will 
 induce other roads (as they are required by law) to do the same. 
 If, in addition to this, workingmen can, by co-operation, without 
 resort to capitalists, procure the means to erect their houses, it 
 
 * These can be obtained at the store of A. Williams & Co., 135 Washington Street. 
 
8 
 
 .'-T 
 
 will take them out of our crowded alleys and give them the in- 
 dependence of their own homes. 
 
 The rest of this argument will be taken from the books of Mr. 
 Wrigley. 
 
 By the laws of Pennsylvania, the Court of Common Pleas is 
 authorized, on the application of ten or more persons, to issue 
 permanent charters, giving associations the privilege of issuing 
 their stock in successive series : — 
 
 The total issue of stock is confined or limited to 5,000 shares, but in 
 place of disposing of the whole in one issue, all at one date, an asso- 
 ciation on starting, will sell or dispose of as many shares as is thought 
 advisable (say 500) during the first year, and these will run their course 
 to the final result ; and at the end of the first year the sum total of 
 dues and profits is divided by the total number of shares in this first 
 “series,” and their value is thus ascertained, whereupon a new or 
 second “series” of stock is issued, of as many shares as is thought 
 advisable to sell, and payments on this second series commence 
 only with their issue ; and these in turn run the same as the first series, 
 and at the end of the second year the sum total of dues and profits for 
 that year are divided by the total number of shares in both series, and 
 their value again ascertained. The stock in the first series will be 
 found to have a value of two years’ dues ($24 per share), to which is 
 added the profit made, during the two years, on each share ; while the 
 stock in the second series will be worth but the amount of one year’s 
 dues ($12 per share), and the one year’s profits ; and so on, each year 
 producing a new series of stock, the sum total formed by dues and 
 profits being divided at the end of each year by the total number of 
 shares of all the series then issued (excepting of course, such stock as 
 may have been withdrawn and returned to the association) . 
 
 By the time the eighth, ninth, or tenth series is issued, accordingly 
 as the association has been more or less successful in accumulating 
 profits, the first series will have reached its ultimate value, and the 
 stockholders in that series will receive $200 per share in cash, if they 
 have not borrowed, and those who have borrowed receive their mort- 
 gages receipted in full. So that from the first to the eighth or tenth 
 year, as the case may be, the permanent association issues a new series 
 of stock every year, and after the eighth or tenth year a series is can- 
 celled each year on reaching its ultimate value, and a new series is issued 
 to fill its place, to be cancelled again, in turn, eight or ten years later. The 
 process might be likened to a rod long enough to hold ten rings, on 
 which a ring is placed, representing the first series. At the end of the 
 
9 
 
 first year, another ring, representing the second series, is placed on 
 behind the first, which is slipped along to make room for the second. 
 At the end of the second year, a third ring is placed on the rod ; at the 
 end of the third year, a fourth ring: and so on for ten years. At the 
 end of the tenth year, the eleventh ring is put on, which pushes the first 
 ring (or series) off tlie farther end of the rod, it being capable of hold- 
 ing but ten rings ; and every subsequent year a ring is put on at one 
 end, and pushed off at the other end, representing the newest or last 
 series at one end, and the oldest or f ully worked out series at the other 
 end, and the intermediate rings those series gradually approaching the 
 ultimate value. 
 
 In the meantime, the law gives the power and right to associations 
 to issue new stock in the place of that cancelled by having reached 
 its ultimate value of $200 per share, or such as may have been 
 cancelled and returned by members who have withdrawn before the 
 final result is reached ; provided that the total number of shares, of all 
 series, shall not exceed 2,500 at any one time. Thus all cancelled shares 
 fall back again into the association, to be replaced by new issues of stock. 
 
 It will be seen that in the principle the association is permanent, and 
 it is only the membership} that terminates with the series of stock on 
 which that membership is claimed. 
 
 This serial issue of stock may be monthly, quarterly, half-yearly, or 
 yearly, as desired ; and the oftener they are issued, of course the 
 more readily a new member can enter, as he will have no back dues to 
 pay at all where the series is issued monthly, and but one year’s back 
 dues at most if the series is issued yearly. Thus, the door is always 
 held open for new members to enter and keep up the competition for 
 loans ; there is always a demand for the money, the premiums bid av- 
 erage a higher rate, and the different series reach their ultimate value 
 in a shorter period of time than in the terminating plan. 
 
 Neither is there the same trouble in paying off a series that is 
 worked out, where the issuing of series is not placed at periods too far 
 apart, but say monthly, quarterly, or half-yearly : for the amount of 
 money required to cash any one series is very small in proportion to 
 the par value of the entire capital stock ; and the payments that are 
 made in a lump by the terminating association, are thus scattered in small 
 amounts throughout the entire existence of the permanent association 
 after its first series becomes due. 
 
 The Time for Running Out, or Winding Up. 
 
 The period of time consumed by any one series of stock in reaching 
 its ultimate value of $200 per share, is regulated by the amount ot 
 profits, made each year. 
 
 2 
 
10 
 
 If no profit whatever was realized and the dues were paid monthly, 
 without lending them out to borrowers, of course it would take two 
 hundred months, or sixteen years and eight months to make up two 
 hundred dollars. But this would do no one any good beyond the mere 
 act of hoarding. 
 
 On th*e other hand, an association making an average annual profit 
 of six dollars and forty-six and two-thirteenths cents per share, will 
 close in ten years and ten months, as near as may be, viz : — 
 
 EXAMPLE NO. 1. 
 
 10 years’ and 10 months’ dues, at $1 per month, . . . $130 
 
 10 “ “ 10 “ profits, at $6.46 2 ^^, ... 70 
 
 Ultimate value of each share, $200 
 
 Which is equal to 10 per cent, per annum on the amount of cash 
 invested for the average time of its investment. 
 
 An association making an average annual profit of $8 on each share, 
 will close out in ten years exactly, as was previously stated, viz : — 
 
 EXAMPLE NO. 2. 
 
 10 years’ dues, at $12 per year, $120 
 
 10 years’ profits, at $8 per year, 80 
 
 Ultimate value per share, in 10 years $200 
 
 Which is equal to 13|^ per cent, per annum on the cash paid for the 
 averaged time. 
 
 Thirteen dollars annual profit >vill close out in eight years, viz : 
 
 EXAMPLE NO. 3. 
 
 8 years’ dues, at $12 per year, $ 96 
 
 8 years’ averaged profits, at $13, 104 
 
 Ultimate value of each share, $200 
 
 Which is equal to 27 per cent, per annum, on the cash paid, for 
 the averaged time each dollar was invested. 
 
 Thus, $200 will be realized under the Building Association, or 
 Mutual Plan, in from eight to eleven years, on sums of money paid or 
 saved, one dollar at a time month after month ; while, if the whole 
 sum of $130 (being the total sum paid on each share to a Building 
 Association running out in ten years and ten months) was deposited in 
 an ordinary savings fund, all in one amount, in place of in easy monthly 
 payments, it would take eleven years, at four per cent, interest to 
 reach $200. 
 
11 
 
 Building Associations. 
 
 Building associations may properly be called the “Mutual or Co- 
 operative System of Saving and Borrowing Money.” 
 
 A Building Association is composed entirely of one class of stock- 
 holders, and its assets or property is represented by stock. Its original 
 capital is derived from the munthly instalments or dues paid on account 
 of each share of stock by the holder thereof, and the chief sources of 
 profit on the investment in this stock, by means of which the association 
 is enabled to work out the ultimate value of $200 per share, in a given 
 number of years, is obtained from loaning the accumulated monthly 
 instalments of dues and profits to such of the stockholders only as may 
 under the rules borrow the same. 
 
 These chief sources of profit consist of two items r — 1st, The premium 
 deducted from the loan on taking it ; and 2d, the interest upon the 
 loan, which is paid monthly during its continuance. There are also 
 two minor sources of profit, to wit: 3d, Fines charged upon dues and 
 interest, when in arrears ; and, 4th, The profit on withdrawals of stock 
 before the ultimate result is reached. 
 
 These four items of profit which are largely increased by the mo7ithly i 
 compounding of interest upon them, as well as upon the monthly dues ; 
 are added together at the end of each year on settlement of the books ; 
 and, after deducting the year’s expenses, the total l)alance remaining is 
 divided by the number of sliares in the hands of stockholders. This 
 shows what the profit on each share has been for the year just closed ; 
 and this, added again to the dues paid in, and the profit made during 
 previous years, shows the actual value of each share of stock at the close 
 of any given year ; and this process is repeated at the close of each 
 year, until the accumulated dues and profits will divide to every share 
 the sum of $200. 
 
 The property or assets with which the association liquidates or pays 
 to each shareholder $200 for each share he holds, is composed of two 
 items, — First, the bonds and mortgages given by borrowers ; and sec- 
 ond, cash in hand at the time the final result is reached. The bonds 
 and mortgages are handed to the borrowers, receipted in full, and the 
 stockholder who has not borrowed is paid in cash, $200 for each share 
 of stock he owns. 
 
 This is a general explanation of the plan and its results. It is pro- 
 posed, in the following pages, to give a more minute and detailed rep- 
 resentation of the system, and to follow it step by step, pausing to 
 examine each separate part, that the process by which the final result is 
 attained may fully appear to view on a little study and examination. 
 
12 
 
 .STOCKHOLDERS. 
 
 Many persons join Building Associations with a view of continuing 
 their payments until their stock shall have reached the ultimate value of 
 •iB200 ; while others join with the especial view of borrowing. For the 
 purposes of explanation, we will divide these into two classes. 
 
 1st. The non-borrowing class, formed of those members who do 
 not avail themselves of the privilege of borrowing in advance the ulti- 
 mate value of their shares, but continue paying their monthly dues 
 until within from eight to eleven years, they are entitled to $200 per 
 share, and 
 
 2d. The borrowing class, composed of those members who avail 
 themselves from time to time of this privilege, and thus anticipate the 
 ultimate value of their stock, paying a premium for the present use of 
 it, as welLas the one dollar per share interest, in addition to the regular 
 monthly dues (as explained in the former chapter), until the ultimate, 
 result is reached and the loan is paid and cancelled by the value of the 
 stock. 
 
 By referring to the rule given in the previous chapter for the division 
 of profit, it will be recollected that these two classes share mutually in 
 this respect. They differ, however, in this, that while they both pay 
 their monthly dues, the borrower in addition to this, pays a premium 
 for his loan and one dollar extra (or in other words six per cent, inter- 
 est upon it) besides, and thus furnishes the chief sources of prfiot, 
 that enables the association in a greater or less time to reach the ultimate 
 result of $200 per share. 
 
 Leaving the consideration of the advantages to be derived from 
 borrowing under this plan let us consider those belonging to 
 
 The Non-Borrowing Member 
 
 First, with regard to whom somewhat remains to be said. Those who 
 have no present use for a large sum of money and are able to lay by 
 say from $1 to $15 per month, by paying it inonthl}'- for a period of 
 from eight to eleven years, realize on each share $200, and on fifteen 
 shares $.3,000. 
 
 Withdrawals of Stock. 
 
 There is one thing further to be noticed under the head of Non-bor- 
 rowing Stockholder, and that is the right to withdraw or cancel his 
 stock at any time, by giving thirty days notice to the Board of Direc- 
 
13 
 
 tors of his desire to do so. “ When he or she shall be entitled to receive 
 the amount paid in by him or her, and such portion of the profits as the 
 by-laws may determine, less all fines and other charges. Provided that 
 at no time shall more than one-half of the funds in the treasury be 
 applicable to the demands of withdrawing stockholders, without the 
 consent of the Board of Directors, and that no stockholder shall be 
 entitled to withdraw whose stock is held in pledge for security. Upon 
 the death of a stockholder, his or her legal representatives shall be 
 entitled to receive the full amount paid by him or her, and legal inte^rest 
 thereon, first deducting all charges that may be due on the stock. No 
 fines shall be charged upon a deceased member’s account from and after 
 his or her decease, unless the legal representative of such decedent 
 assume the future payment of the stock. 
 
 It is a popular error, that persons who join Building Associations 
 must when once they begin, keep on paying in until the end, or forfeit 
 and lose all the money paid. By the foregoing extract from the law it 
 will be seen that this is not the case, but that those who are unable or 
 unwilling to continue, are allowed to retire from the association, receiv- 
 ing all their money back (less any fine they may have incurred by neg- 
 lect to pay their monthly dues promptly), with a fair portion of the 
 profits. 
 
 This right to withdraw is a very proper and necessary feature in this 
 system, and it becomes more apparent when we consider the class of 
 persons intended to be benefited by it, and their liability from sickness 
 or loss of employment suddenly to be placed without the means of sup- 
 port. Instead of being compelled to seek a market for their stock and 
 sell it perhaps at a great sacrifice or hypothecate it to some devouring 
 money-lender at a high rate of interest, they are allowed to return their 
 stock to the association, the stock is cancelled and they receive the 
 money they paid in, “ with such portion of the profits as the by-laws 
 may determine.” — Not such portion as the directors may determine, 
 but the by-laws made by the stockholders themselves on forming the 
 association ; and subject to such fines and charges only as the same by- 
 laws impose for a neglect or failure to pay their dues promptly and 
 punctually, with the exception even in this latter case in favor of the 
 deceased members from the time of “ his or her decease.” 
 
 But there is another provision of the law of great importance to this 
 system, to wit: “ That at no time shall more than one-half the funds in 
 the treasury be applicable to the demands of the withdrawing stock- 
 holders, without the consent of the Board of Directors.” The Board of 
 Directors composed of men elected annually by the stockholders from 
 among themselves, and not from a preferred class of capitalists separated 
 from them by wealth, station and associations entirely different, and 
 
14 
 
 without any sympathies in common with them ; but composed of men 
 from the same shop and work-bench, from the same trade, occupation 
 and calling as themselves ; men who know their wants because they feel 
 those wants, who know their best interests, because they are common 
 to all. 
 
 There is but little danger therefore of a “ run” or universal demand by 
 all or a great majority of the stockholders for their money at one time ; 
 for in the first place they are required to give thirty days’ notice, and then 
 take their places in rotation on the list of withdrawing members, and await 
 their respective turns of being paid out of the fund appropriated to 
 their use, namely : “ one-half the funds in the treasury ” on each meet- 
 ing night. Time is thus given to the association to deliberately prepare 
 itself for any extraordinary or unusual demand, and protect those who 
 remain in the association, as well as those who wish to retire, from un- 
 necessary loss by hasty or precipitate action. For if there was no 
 check on the demands of withdrawing stockholders, and all the funds in 
 hand at any one time were liable to withdrawal and one-fourth of the stock- 
 holders of an association two years old and numbering one hundred 
 and fifty members, owning an average of ten shares each, desired to 
 withdraw, it would take about $10,000 to pay them off, and if all the re- 
 ceipts at a supposed average of $2,500 a month were appropriated to pay 
 them, it would take some four months to liquidate their claim, during 
 all which time the remaining members would be paying in their dues and 
 gaining no profit from making loans, for no loans could be made from 
 which the chief profit is derived. So the advantage is divided equally 
 between the stockholders wishing to remain, leaving half the funds to 
 loan and invest for their profit and accommodation, and those wishing 
 to withdraw having the other half appropriated to their wants. And 
 herein again appears the strictly mutual feature of the system. 
 
 The Portion of Profits Withdrawn. 
 
 The amount of profits a stockholder is allowed to withdraw along 
 with his dues, is regulated as previously stated by the by-laws, and varies 
 in different associations ; some allow six per cent, on the dues for the 
 averaged time they are held in the association, others one-eighth and 
 others again one-tenth of the profits for each year that has elapsed 
 since the stock was issued and the first payment made upon it. Let us 
 give some examples of the results of these rules at the different rates 
 of profit just mentioned, from calculations based on a supposed average 
 yearly profit of $6.46^2^ per share. 
 
15 
 
 When one-eighth of the profit per share is withdrawn with the dues 
 the account would stand thus per share : — 
 
 Five years’ monthly dues, at $12 per year, .... $60 00 
 Five-eighths of five years’ profits at $6 46y^3 per year, 20 15 
 
 Withdrawing value of each share, $80 15 
 
 When one-tenth of the profit, per share is allowed, thus : — 
 
 Five years’ monthly dues at $12 per year, .... $60 00 
 Five-tenths of five years’ profits at $6 per year, 16 15 
 
 Withdrawing value of each share, $76 15 
 
 When six per cent, simple interest, is paid for the average time each 
 dollar was deposited, thus : — 
 
 Five years’ monthly dues at $12 per year, .... $60 00 
 Five years’ interest for averaged time, at 6 per cent. int. 9 15 
 
 Withdrawing value of each share, $69 15 
 
 And when four per cent, interest is paid for the averaged time each 
 dollar was deposited (as most of the savings funds pay), supposing the 
 money to have been deposited in monthly sums. Thus : — 
 
 Five years’ monthly deposits, at $12 per year, . . . $60 00 
 
 Five years’ interest, for averaged time at 4 per cent. 6 00 
 
 Total value of deposit and interest, at end of 5yrs. $66 00 
 
 No other organized and carefully-guarded scheme or plan offers itself 
 to the working man by means of which he can save his money in small 
 amounts, and yet gain in considerably more than the average of cases 
 over the legal rate of simple interest. And yet this profit is not the 
 result of wild and reckless speculation, it is derived from safe and well- 
 considered investments, in reliable securities. This profit is paid by 
 men who in place of being oppressed by it, derive an equal and some- 
 times a greater advantag*? from the loan they pay for, than the non- 
 borrowing stockholder does, and who are not only glad of the chance to 
 borrow, but thankful for it also. 
 
 Besides the portion of the profits a withdrawing member takes with 
 him, there is also a profit that remains and is divided among the shares 
 of stock, owned by those who continue in membership, to wit : All of 
 
 the profit made over and above the portion of profits allowed a with- 
 drawing member. The remaining profit is left in the association to add 
 
16 
 
 to the profit accruing from “ premiums ” and “ interest ” on loans. For 
 the number of shares, by which the year’s profit will be divided, will be 
 lessened by the number of shares withdrawn during the year, and the 
 profit to those who remain will therefore be increased by the with- 
 drawals. This acts as an inducement or premium to members to stay 
 in and pay up steadily until the scheme is worked out, when they receive 
 their full share of all the profits, including that portion the withdrawing 
 members would have received had they also remained to the end. 
 
 BORROWING. 
 
 It has been shown that the chief or main capital of a Building Asso- 
 ciation is derived from the monthly dues paid on each share of stock ; 
 and that the sole mode of increasing it (with the exception of the 
 profit derived from fines, and that remaining from the withdrawals of 
 stock), is by means of loaning it to members who desire the use of it, 
 and can give the required security for the repayment of it in monthly 
 instalments ; and as was previously mentioned, from these loans the two 
 main items of profit are received, namely, •'^Premiums and Interest.” 
 
 The security required for loans is of two kinds, — one the stock of 
 the association, and the other real estate. 
 
 Loans Made on Stock. 
 
 Loans made for which the stock of the association is pledged alone 
 for its payment, are mostly for temporary use, to help the borrower over 
 some tight pinch in his affairs, to be repaid when he is again in funds ; 
 and the amount of money loaned in this way is never greater than the 
 withdrawing value of the stock offered as security. One owning five 
 shares of stock, five years old, on which $60 a share has been paid in 
 dues, and to which an aver;;ge profit of seven dollars a year, or $35, 
 has been added, making the stock worth $95 per share, could borrow 
 about $350 upon it, to start a little^ business with, or meet a sudden 
 demand for more money than his ordinary income will satisfy ; and 
 when he is in funds again, he can pay it off, and assume his original 
 position in the association ; or, on the other hand, he can keep the loan 
 until his five shares reach the ultimate value of $200 per share, when he 
 will find his loan paid off, and some $600 coming to him as the balance 
 due him on his stock, over and above what was advanced to him by way 
 of a loan. 
 
 Loans Made on Real Estate. 
 
 The legitimate object of the Building Association is apparent 
 throughout the whole system, and in every part of its structure ; that 
 
ii 
 
 object is exclusively to benefit that class of persons who may be desig- 
 nated under the general head of employes, embracing all persons 
 whose wages, salaries or incomes, are certain but limited, and who are 
 able to save but little out of their receipts, over and above the expenses 
 of living. The capitalist needs no such aid as this system offers, for he 
 is already in the position this system proposes to aid the man of no 
 capital in reaching. It is too slow a process for the man who designs to 
 live out of the proceeds arising from rapid turning of a large or small 
 capital. And yet of all known plans, it is the most rapid, sure; 
 and effectual one for the industrious man of very small means, or, in 
 fact no means at all, to accumulate a capital. 
 
 The object of this chapter is to show not only the manner of apply- 
 ing the privilege of borrowing to the purposes of saving, but to further 
 show that it is the only way in which persons under certain circum- 
 stances can possibly save and accumulate money. 
 
 The previous chapter explains the result of mere saving by depositing 
 monthly instalments in an association, by one who has no other expense 
 than that necessary to his own support, — persons who, having no fam- 
 ily to provide a home for, are not under the necessity of paying rent. 
 
 The following portion of this present chapter will show the peculiar 
 privileges held out to the working man of family by the Mutual System. 
 It will show him that without working one stroke harder than he has 
 ever worked before, if he is an ordinary sober and industrious man, 
 that without increasing his income from wages one cent a year more 
 than the usual average he has previously received from steady employ- 
 ment, he will be able to save, by borrowing from a Building Associ- 
 ation. 
 
 Rent Must be Paid. 
 
 Every man of family, no matter how limited his means, must provide 
 a home for his family ; and such a man, having the natural feelings of a 
 husband, father and good citizen, will labor very hard to keep that 
 home above him. For this home rent must be paid; and it is a well- 
 known fact that the class of houses usually occupied by working men, pays 
 a much larger percentage of rent on the capital invested in them than 
 the larger, more expensive and elegant residences of those in the en- 
 joyment of larger incomes than working men can command. 
 
 It is the case with a large majority of the working people of this, as 
 well as other countries, that they live from hand to mouth; in other 
 words, the end of every month and every year finds them — if, indeed, 
 with all their little debts paid, — with nothing laid by to meet the ordi- 
 nary contingencies of sickness, loss of employment, or the like ; and 
 
 8 
 
1 
 
 18 
 
 • 
 
 this though a man may be industrious, sober, healthy, frugal, constantly 
 employed, and punctually paid for his labor. The size of his family, 
 the smallness of his wages, or some other cause other than tippling and 
 dissipation (for there is little hope of the drinking man saving himself, 
 let alone his money), keeps him always at the extremity of spending 
 his last cent. He never seems to get ahead ; he is constantly in the 
 drag. If he gets a 'dollar in advance to-day, some unexpected necessity 
 puts him a dollar behind to-morrow. There is one item, however, he 
 always manages, by the utmost effort, to keep paid up with a tolerable 
 degree of promptness, — this item is rent. To keep a home for his wife 
 and little ones, everything else must give way. Little luxuries, little 
 comforts, even necessaries, must stand aside, to enable him to meet the 
 demand of his landlord for his rent. 
 
 The Money Paid for Rent will buy a House. 
 
 If, then, the closely-driven man will labor so hard, and suffer so much 
 to meet the landlord’s claims, would he not work harder, and suffer 
 more, to meet his payments if he himself were the landlord, and the 
 money he paid was not departing to return no more, and without leaving 
 him an equivalent for it, but was gradually buying his house and paying 
 for it? Would he not work with greater satisfaction, being able all the 
 while to count the day when, with but ordinary success, he would own 
 his home, in a great part free from debt? There can be but one 
 answer to these questions. 
 
 It is chiefly owing to this mutual system of building associations that 
 thousands of working men in the city of Philadelphia alone (not to 
 mention other parts of the State of Pennsylvania), to-day own and 
 occupy their own houses, and possess others besides, from which 
 they receive handsome little incomes in rents. Nnmerous instances 
 can be pointed out, of mechanics and laboring men who have worked 
 all their lives at their callings as journeymen and day laborers, 
 and raised large families of children, and who are to-day worth from 
 $10,0U0 to $20,000, all made and saved through Building Associntions. 
 The course is clear and certain. “ What man has done, man can do 
 again.” Keep in mind the words of the wise man, “ If any one tells 
 you that the working man can become rich otherwise than by labor and 
 saving, do not listen to him, he is a poisoner.” 
 
 How It Can Be Done. 
 
 A tenant, renting a house at $15 per month, will pay to his landlord 
 $180 per year, or $1,800 in ten years, while the same money, pajd to a 
 
19 
 
 Building Association, will buy the same house (or at least a greater part 
 of it), within a period of from eight to ten years. Now, if a hard- 
 pressed working man can save nothing more than this item of rent out 
 of the entire proceeds of his labor, is it not better to do so than not to 
 attempt to save at all? Is it not better than to absolutely throw it 
 away forever, by paying it as rent? But let us examine this matter a 
 little more closely. 
 
 A house renting for $15 per month, such as is usually occupied by 
 working men, will sell for about $1,500. Nearly all the houses in the 
 city of Philadelphia, both large and small, have an incumbrance upon 
 them, either a ground rent or mortgage, of at least one-third their 
 value. One reason for this exists in the fact that buyers prefer to pur- 
 chase subject to an encumbrance ; firstly, because it takes less ready 
 cash to make the purchase, and secondly, because if the house is rented, 
 it pays the purchaser a better per centage on the investment than if 
 purchased clear of all incumbrances by an outlay of the entire cash 
 value of the house. For, if one purchase an unincumbered house at 
 $1,500, renting for $180 per year, this would give him just twelve per 
 cent, on the investment of $1,500; while if he purchased for $1,000 
 cash, subject to a ground rent of $30, or a mortgage of $500, the yearly 
 interest of which would be $30, he would realize fifteen per cent, on the 
 $1,000 invested, after deducting the interest on the incumbrance, in 
 place of twelve per cent, if he purchased clear, — just $30 a year in favor 
 of an incumbered property. Now, to proceed with the illustration : take, 
 for example, a dwelling that can be purchased for $1,500, subject to a 
 ground rent of $30 per year (the principal of which would be just $500), 
 or a mortgage of $500, the interest of which would be the same as the 
 ground rent ($30). The price being $1,500, and the incumbrance $500, 
 of course it would take $1,000 cash to pay for it. By means of the 
 Building Association, the purchase-money can be raised, thus: the 
 purchaser, if not already a member, owning stock, subscribes to a suffi- 
 cient number of shares to enable him to make up the sum of money 
 necessary to complete the purchase, after deducting the premium 
 he bids for it. If he has been a frugal man before this, he may have 
 accumulated a little money by saving. It is not often an association 
 will loan one enough to pay down the entire cash required ; they require 
 a slight margin above their loan, as an earnest of good faith and inten- 
 tion on the part of the borrower, to perform his part of the bargain. 
 This margin is necessary for the borrower to make up himself ; though, 
 it might be observed here, that even this rule is sometimes relaxed, 
 when the borrower is evidently getting a bargain, and is well known as 
 an honest, industrious, sober and capable workman, through a kindly 
 
20 
 
 feeling on the part ■’of his fellow-members, to give him the benefit of 
 every advantage consistent with safety to the association. 
 
 The amount of money realized in actual cash will, of course, be reg- 
 ulated by the premium bid for the money at the auction sale of it at the 
 meeting. If he borrows upon six shares, he will be entitled to a loan 
 of $1,200, with the premium off. If the premium should reach twenty- 
 five per cent., or a total of $300, he would realize $900, or $100 short 
 of the price of his house. If he bids thirty per cent., and the loan is 
 granted him at that premium, he will realize $840, or $160 short of the 
 priee of his house ; and so on. So that whatever is the amount of 
 difference between the sum thus realized from the loan and the purchase- 
 money of the house, this difference must be made up out of the bor- 
 rower’s own pocket, in some way. 
 
 We will suppose, however, that one is able to get his loan at twenty- 
 five per cent, premium off. There would therefore be deducted from 
 the par value of each share $50, leaving $150, or $900 on six shares. 
 To this he adds his own $100, and pays for the house, secures the asso- 
 ciation’s loan by a mortgage on the house for $1,200 (subject to the 
 prior incumbrance), to secure his future monthly payment of $12 each, 
 or $2 per share, becomes the owner of his former tenement, and his 
 own landlord ; and as such let us see how his yearly account would 
 
 stand : — 
 
 Yearly ground rent or interest, $ 30 00 
 
 Taxes, etc., (about), 20 00 
 
 Yearly total of monthly dues and interest to the 
 
 association, at $12, 144 00 
 
 Yearly interest on $100 advanced by himself, . . 6 00 
 
 Total yearly expenses as owner, $200 00 
 
 Former rent as tenant, 180 00 
 
 Yearly difference between -his two positions, . . . $ 20 00 
 
 So that the house actually costs him, to clear it of the association’s 
 mortgage, just $300 more in ten years than he would pay as tenant. 
 
 By this illustration it is shown that by paying $20 more per year for 
 from eight to eleven years, as purchaser, than was paid as tenant, he 
 becomes the owner of the house, with money that was formerly sunk 
 forever in paying rent. 
 
 The foregoing example supposes the case of a closely-driven working 
 man of industry and energy. Those who can earn better wages can 
 form an example to suit their several cases, using the foregoing figures 
 and those that follow, as a starting point on which to base their calcu- 
 lations for a larger operation. 
 
21 
 
 But let us follow this closely- driven working man still further. In 
 from eight to ten years, as shown in a former chapter, these monthly 
 payments of $12 to the association cease, the loan is cancelled and 
 satisfied by the value of the stock upon which the loan was made. The 
 borrower is therefore owner of the house, clear of that debt. He now 
 has $144 a year free from any imperative demand. He has learned 
 the art of saving ; it is now no trouble to do so. He is able to take 
 twelve shares in the association and pay the dues with his now released 
 $12 a month ; and thus become one of the non-borrowing class of 
 stockholders previously mentioned, and in eight or ten years he has 
 $2,400 in cash. In the meantime, his little property has increased in 
 value, probably to $2,000, by reason of surrounding improvements 
 and advanced prices. 
 
 Or, to take another view of it, let us suppose that in place of becom- 
 ing a non-borrowing stockholder, he again becomes a borrower. 
 Seeing a house similar to the one he owns, in price, size, etc., he buys it, 
 borrows the money in the same' way, and rents it to some industrious 
 working man, who will not believe that a Building Association is 
 anything but a snare and a humbug, and therefore persists in being a 
 tenant all his days. To simplify the illustration, suppose he rents it 
 for $15 per month, or $180 a year. It will therefore be but $20 a year 
 short of the annual sum necessary to keep the interest, dues, and taxes 
 paid up, and this difference can be supplied from his $144, now free. 
 This operation can be repeated as often as his thrift, energy, and en- 
 terprise, patience, and perseverance will enable him to see the propitious 
 moment, and seize the opportunity. There is no saying to what degree 
 of ultimate success such a course, faithfully and persistently carried 
 out on the part of any future operator, would finally lead to ; but we 
 can point to many hundreds of working men, as living examples of the 
 truth of all that is figured in the foregoing imaginary case. And lest 
 it might be inferred that these examples are overdrawn by too zealous 
 an advocate of the system, it may be well to state that there are numerous 
 instances on record, where purchases have thus been made with money 
 borrowed as shown above, the rent from which not only kept the dues, 
 interest, taxes and all other expenses fully paid up, but in addition re- 
 turned the owner a considerable sum as a clear yearly profit during 
 the entire running of the loan ; resulting, in effect, in the owner actually 
 getting his house clear on the running out of the stock, it having been 
 paid for by the tenant, with his rent, and leaving him considerable 
 cash besides. And all this without in the least infringing upon the 
 rights and interests of the particular association, or any single member 
 of it. 
 
22 
 
 Paying Off a Loan or Returning the Borrowed Money 
 Before the Ultimate Result is Reached. 
 
 As has been shown, a member who has not borrowed can withdraw at 
 any time by giving thirty days’ notice, subject to the proviso restrict- 
 ing one-half of the funds in the treasury, to that purpose. So also can 
 a member who has borrowed, to use the language of the law, Repay 
 his loan at any time ” (without any special notice), “ and in case of the 
 repayment thereof before the expiration of the eighth year after the 
 organization of the corporation, there shall be refunded to such bor- 
 rower one-eighth of the premium paid, for every year of the said eight 
 years then unexpired.” 
 
 Under this rule, first the dues will be refunded to the stockholder, 
 with the proportion of profits allowed according to the by-laws of the 
 particular association he may be connected with, as was hereinbefore 
 explained under the head of “ withdrawals.” Secondly. There will be 
 refunded to him one-cighth of the premium he paid on taking his loan 
 for each of the “ eight }^ears then unexpired,” since the organization of 
 the association, or the issue of the particular series of stock on which 
 the loan was made. The sum ascertained to be the total amount of dues 
 and profits the stockholder is entith'd to, and the sum ascertained to be 
 to the total amount of premium to be returned to him, are then added 
 together, and the sum thus obtained will be deducted from the amount 
 of the whole face of the loan, and the balance remaining will show the 
 amount of cash required to pay off the loan. For instance, suppose one 
 had borrowed the sum of $1,000, on five shares of stock, at 25 per cent, 
 premium off, and the series of stock on which the loan had been made 
 was four years old at the time of withdrawing it, to aid in paying off the 
 loan. If the association allowed one-tenth of the profits on withdraw- 
 ing, he would be entitled to four years’ dues and one-tenth of the profits 
 for each of the four years past. Supposing the yearly profits to have 
 been at the average rate of $6.46 per share, his dues would stand as 
 
 follows : — 
 
 Four years’ dues on each share at $12 per year, . . $18 00 
 
 Four-tenths of four years’ profits, at $6.46 per year, . 10 32 
 
 Withdrawing value of each share, $58 32 
 
 Multiplied by five shares, 5 
 
 $291 60 
 
 In the second place, having paid twenty-five per cent, premium for 
 the loan of $1,000, or $250 off, there would be deducted from this pre- 
 
23 
 
 mium, one-eighth of it for each of the eight years yet unexpired. In 
 this case (the loan being four years old) there would be four years 
 unexpired, which would make four-eighths or one-half of the premium 
 to be deducted, leaving $125 to add to the dues and profits returned, 
 making together the sum of $416.60, which, deducted from the sum of 
 $1,000, leaves $583.40 cash necessary to pay off the loan, viz : — 
 
 Five shares, dues and profits returned, .... $291 60 
 
 Four-eighths or one-half of $250 returned, . . . 125 00 
 
 Cash necessary to pay off loan, 583 40 
 
 Full ammunt of original loan, $1,000 00 
 
 The foregoing statement is intended to show the operation of the rule 
 for paying off loans at any time before the regular closing out or wind- 
 ing up of the series of stock on which the loan was originally obtained ; 
 or, in other words, before its ultimate value of $200 per share is 
 reached. It will be ascertained, by calculation, that in most cases in 
 repaying loans in this way, the borrower will pay at the rate of more 
 than six per cent, interest on the actual cash received by him for the 
 time it is employed. The practice of thus paying off loans is not en- 
 couraged by the policy of the “ Mutual System,” it is by stayiug in and 
 holding on to the loan and working through the series until the ultima|;e 
 value of $200 is reached, that the profits and losses are equalized, and 
 the advantages gained, wliic,h reduce the premium, and interest paid on 
 a loan, to an equality with a transaction made in the ordinary way at 
 six per cent, interest. 
 
 It must be kept in view that this “ Mutual System,” was originated 
 by working men for the benefit of working men, to enable them to save 
 in small sums as their wages are received. So that while they invest 
 these small sums, they can at once begin to receive the benefit of an 
 equal portion of all the profits on the sum invested, by lending it to 
 their fellow-members, and not have to await the slow and profitless pro- 
 cess of accumulating a large sutn before finding an investment for it. 
 It is a system requiring a certain period of time, certain combinations, 
 and the united and harmonious action of its members to work out its 
 results, and it is very apparent that to withdraw one’s money or pay 
 back a loan before the ultimate results are attained in a certain measure, 
 disturbs the even flow of the scheme, and therefore it is not desired, and 
 is required to be paid for as a privilege, by the withdrawing stockholder 
 and repaying borrower. And a borrower seldom repays a loan before 
 it runs out its full course, unless circumstances warrant it ; such as the 
 sale of his house at an advance over what he paid for it, sufficient to 
 pay him well for the loss on his loan, or the near approach of the final 
 
24 
 
 payments reduce the balance due to a mere nominal sum, that is of little 
 moment compared to the satisfaction of wiping out the debt at once, and 
 thus anticipating by some months, perhaps, the last payment of the 
 monthly dues and interest. 
 
 Premiums. 
 
 The premium is a bonus charged to a stockholder wishing to borrow, 
 for the privilege of anticipating the ultimate value of his stock, by 
 obtaining the immediate use of the money his stock will be worth at 
 the winding-up, namely $200 per share. He is thus enabled to buy a 
 house and pay for it at once, with the borrowed money, and enter right 
 into the ownership and occupancy of it, in place of waiting eight or ten 
 years for his money to reach an amount sufficient to entitle him to do 
 so, and in addition be paying rent for the house he occupies until that 
 result is reached. The obligation he gives to the association is nom- 
 inally for the repayment of the loan, but particularly for the payment 
 of the monthly dues on the stock and legal interest on the loan until 
 the association is able to divide to each share of stock held by the mem- 
 bers, the sum of $200, and when this result is reached, as the.associa- 
 tion would owe a borrower on five shares of stock $1,000, and the 
 borrower would also owe the association $1,000, one debt cancels the 
 other, and the loan is paid off, and the house that was held as security 
 for the loan, is released. 
 
 This premium, however, is a great stumbling-block in the way of 
 many to a clear view of the peculiar advantage contained in the “ Mu- 
 tual System.” “ The system may be good enough,” they say, “but we 
 cannot see how any one can borrow to advantage at such a heavy dis- 
 count.” Now it is not pretended that the higher the premium, the 
 greater is the advantage to the individual borrower ; there doubltess is 
 a limit beyond which it is not wise to go, and, as to that, every borrower 
 must judge for himself what that limit is, and regulate his bidding 
 accordingly. Let us compare the results of borrowing at both low and 
 high rates of premium. 
 
 It has been previously stated as a guiding rule that the time required 
 for a series of stock to run out, or reach its ultimate value of $200 per 
 share, is regulated by the amount of profit divided to each share of 
 stock at the end of each year. (See examples 1, 2 and 3, Chap. IV.) 
 That an association dividing $6.46j^3 per share each year will expire in 
 ten years and ten months ; one dividing $8 per share each year, will 
 run out in ten years ; and one dividing $13 per year will reach its ulti- 
 mate value in eight years. It is plainly shown, then, that the larger the 
 premium paid for loans, the larger the profit will be, and the * larger the 
 
25 
 
 profit, the sooner the stock will reach the ultimate value of $200. So 
 that when one loses by a high premium (when the premiums mostly 
 average a high figure, as where the stock is issued in series), he gains 
 by the less number of years he is required to pay dues and interest ; and 
 again, what he gains by a low premium (when premiums are always at a 
 low average, as in associations with but one issue of stock) he loses by 
 the greater number of years he is required to pay his dues and interest. 
 
 There is two years and ten months’ or thirty-four months’ difference 
 between the longest and shortest period given in this volume, for the 
 winding up or running out of a series of stock. So that a non-bor- 
 rowing stockholder would pay some $34 more dues and a borrower, 
 twice that sum in dues and interest on each share, during the running 
 of the longest period. For example, suppose one borrows from an 
 association that by reasons of its large premiums is able to wind up in 
 eight years, a loan on five shares of $1,000, at forty per cent, premium, 
 he would realize $600 in cash, and thereafter, pay ten dollars per month 
 dues and interest, or $120 per year for eight years, at the end of that 
 time he will have paid $960 : just $360 more than he received and the 
 debt is paid. If one borrows $600 in the regular way, at six per cent., 
 simple interest, for eight years, the interest for that time will amount 
 to $288, which, added to the loan, makes $888 principal and interest 
 against $960 paid in the same time to the Building Association, which 
 latter payment is only $9 a year, or seventy-two dollars in eight years 
 in excess of legal interest, a very small sum compared with the privi- 
 lege it aids one to obtain. Now suppose he were to borrow the same 
 amount ($1,000 on five shares) from an association which by reason of 
 its smaller profits, is unable to run out in less than ten years and ten 
 months, and were to pay only twenty per cent, premium, he would 
 therefore realize $800 in cash, with the premium off, and would of 
 course pay the same amount of dues and interest, $10 a month, or $120 
 a year, and in ten years and ten months he would pay just $1,300 or 
 $500 more than he received. Now let us apply the 6 per cent, rule to 
 this case also. If $800 were borrowed for ten years and ten months, at 
 six per cent, interest, the interest paid for the whole time would amount 
 to $520, making $1,320 principal and interest, or $20 more than would 
 be paid to the association in the same length of time, so that the loan , 
 from the association would be actually twenty dollars less than legal 
 interest for the time it is held. It will be seen from the foregoing 
 figures taken from examples of every-day occurrence, that the objection 
 to premiums, and the charge of oppressive usury, so often preferred 
 against this system, fade away into nothingness on examination, and 
 fair comparison, and even in cases where a loan results in the payment 
 of a sum slightly in excess of legal interest at the end of the transaction. 
 
 8 
 
26 
 
 this excess is a mere atom in comparison to the advantage gained by 
 the borrower, by means of which he gains a position to be reached by 
 the working man in no other way. 
 
 Paying Premiums in Monthly Instalments. 
 
 In some associations organized of late years, it is the rule not to 
 deduct the premium from the face of the loan, on paying the borrower 
 his money, but to require him to pay it in monthly instalments. In 
 some cases it is a premium charged on each share, and in others a per- 
 centage on the amount of money borrowed. 
 
 In the first instance, the premium charged is from fifty cents up to one 
 and two dollars per share as the competition is greater or less, and is 
 paid monthly during the running of the loan, in addition to the monthly 
 dues and interest of $1 per share each. 
 
 In the latter case the premium is a percentage on the amount bor- 
 rowed, and is divided up into monthly instalments, and is thus paid with 
 the dues and interest until the full amount of premium bid is finally 
 paid, when the monthly instalments of the premium cease and the dues 
 and interest continue until the winding up of the transaction. 
 
 This plan of paying premiums monthly, seems to meet with the oppo- 
 sition of many well versed in the theory and practice of the mutual 
 system. There is not room, however, within the limits of this work to 
 enter fully into its merits or discuss its objections. 
 
 It certainly has advantages and objections, as well as its advocates 
 and opponents. Its chief advantages seem to exist in the fact that it 
 gives the borrower all the money in hand at once. But at the same time 
 it increases his monthly payments by the addition of the monthly pro- 
 portion of the premium to the dues and interest paid monthly, and 
 thus, while he pays, in most cases under this plan, a much larger pre- 
 mium, he pays it in monthly instalments. 
 
 The chief objection urged against this plan seems to be, that it has a 
 tendency to induce wild and reckless bidding by the thoughtless and 
 those ignorant of its effect. The result is, that premiums under this 
 rule often reach rates as high as fifty and sixty per cent., making the 
 monthly payment a burden, not felt at first, perhaps, but which in time 
 becomes oppressive to the working man whose income is limited- 
 Though it is urged again, on the other hand, that where large premiums 
 are the rule, the association will terminate sooner by reason of its large 
 profits, and that while a borrower pays larger monthly instalments, he 
 really pays no more money in the end, owing to the sooner termination 
 of his payments, than he would under the rule that deducts the pre- 
 
27 
 
 * mium at once from the face of the loan on granting it. This theory is 
 correct, and a reference to examples No. 1, 2 and 3, will prove that the 
 time required in reaching the ultimate result is regulated entirely by 
 the amount of profits made during that time. But the practical effect of 
 this plan, it is thought, will be found to be more burdensome to the 
 borrower, than the old one ; it also multiplies and complicates the ac- 
 counts of the association, and is a departure from that simplicity so 
 necessary to the clear understanding and proper working of the mutual 
 system. However, it is a new idea, — at least in Pennsylvania, — and 
 should be fairly tested. 
 
 Discounts on Premiums. 
 
 A discount is allowed, or in other words, a deduction is made on the 
 premium bid for a loan under the following circumstances : — 
 
 Where a member has simply paid dues on a certain series of stock, 
 without borrowing for one or more years, and then borrows, an allow- 
 ance of ten per cent, is made upon the premium bid (the rate it is 
 believed most usual) for each year that has expired since the series of 
 stock on which he borrows was issued. 
 
 For instance, were he to borrow on a series of stock any time during 
 the running of the second year of its existence, say at thirty per cent, 
 he would be allowed a deduction at ten per cent, oflf the premium, thus 
 reducing the premium to twenty-seven per cent. If the stock is in its 
 third year, twenty per cent, will be deducted, reducing the premium to 
 twenty-four per cent. If it is in its sixth year, or fifty per cent, 
 will be deducted, reducing the premium to fifteen per cent. 
 
 This is manifestly a just and reasonable provision, as it would be 
 unfair to charge one as much premium for the use of money borrowed 
 in the second, third or fifth year of a series as is charged one borrowing 
 during the first year, and who would thus have the use of the money 
 during the entire running of the series. 
 
 Interest. 
 
 The interest charged on the loan is never more than the legal rate 
 (six per cent.), on the face of the loan, and in some associations inter, 
 est is only charged upon the amount of money received by the borrower 
 after the premium is deducted, and interest is calculated upon the 
 amount remaining due, monthly, thereafter. This last provision is 
 opposite in its results, upon the working out of the time of the pay- 
 ments, to that of paying the premium in instalments ; for it prolongs the 
 time of these payments, as it reduces the annual profit of the invest- 
 ment. For every month, as the payment of dues is made, and the 
 
28 
 
 amount still remaining due is thereby reduced, of course, the monthly 
 interest gradually grows less, there is consequently a less amount of 
 interest to be compounded. Therefore, what is gained by small pay- 
 ment is lost by the greater number of months’ payments, which must 
 continue to reach the final result. 
 
 It would seem then that the mode of deducting premiums on granting 
 the loans and charging interest on their full face, in addition to being 
 the simplest and least complicated way, more easily understood and 
 requiring less calculation to effect it, also seems to strike nearer the 
 happy medium, and divides and distributes the burden of repayment, 
 more equally as regards both time and money. 
 
 Note. — On the following pages will be found the annual statement 
 of an active and successful Building Association of several years standing, 
 issuing its stock in yearly series. A careful study of the various items 
 set forth in it will show the working out in every-day practice of the 
 Mutual system, as explained in the preceeding pages. The first series 
 is shown to have reached its “ ultimate value” of $200 per share, while 
 the ninth series is but one year old. 
 
 The object in giving this annual statement is to show that the calcu- 
 lations and illustrations hereinbefore given, are based on actual 
 experience, and not on vague theories. 
 
 Tenth Annual Statement of a Building Association. 
 Assets. 
 
 Balance of Loans (Bonds and Mortgages) 
 
 at last Report, $44,500 00 
 
 Loans made during the year, 40,200 00 
 
 84,700 00 
 
 Loans paid off during the year, 9,300 00 
 
 Present balance of Loans (Bonds and Mortgages), . . $75,400 00 
 
 Balance of Cash in the Treasury, 2,238 24 
 
 $77,638 24 
 
 \osses. 
 
 $319 10 
 17,681 54 
 
 Total Expenses, for the year, 
 
 Net Gain for the Year ending Jan. 31, . . 
 
 $18,000 64 
 
29 
 
 Amount paid in on Each Series, 
 
 Amount paid on Shares of the First Series, 
 
 
 
 
 
 $124 00 
 
 i( <( 
 
 Second 
 
 4 4 
 
 
 
 
 
 112 00 
 
 14 ii 
 
 Third 
 
 44 
 
 
 
 
 
 100 00 
 
 <4 44 
 
 Fourth 
 
 4 4 
 
 
 
 
 
 88 00 
 
 4 4 4 4 
 
 Fifth 
 
 4 4 
 
 
 
 
 
 64 00 
 
 4 4 4 4 
 
 Sixth 
 
 44 
 
 
 
 
 
 40 00 
 
 4 4 4 4 
 
 Seventh 
 
 44 
 
 
 
 
 
 36 00 
 
 4 4 4 4 
 
 Eighth 
 
 4 4 
 
 
 
 
 
 18 00 
 
 4 4 4 4 
 
 Ninth 
 
 44 
 
 
 
 
 
 12 00 
 
 Number of Shares in First 
 
 Series, . 
 
 
 
 
 
 
 15 
 
 “ “ Second 
 
 44 
 
 
 
 
 
 
 11 
 
 “ “ Third 
 
 44 
 
 
 
 
 
 
 2 
 
 “ “ Fourth 
 
 “ 
 
 
 
 
 
 
 40 
 
 “ “ ‘ Fifth 
 
 44 
 
 
 
 
 
 
 205 
 
 “ “ Sixth 
 
 44 
 
 
 , 
 
 
 
 
 88 
 
 “ “ Seventh 
 
 4 4 
 
 
 
 
 
 
 212 
 
 “ “ Eighth 
 
 “ 
 
 
 
 
 
 
 614 
 
 “ “ Ninth 
 
 4 4 
 
 
 
 
 
 
 527 
 
 1,714 
 
 Total value of Stock, of all series, . . 
 
 
 
 
 
 
 $77,723 84 
 
 Add dues paid in advance during the year. 
 
 • 
 
 • 
 
 • 
 
 • 
 
 167 69 
 $77,891 53 
 
 (In active Operation) for the Year ending January 31, 1869. 
 
 Liabilities . 
 
 Balance of Dues at last report, $40,663 26 
 
 Net gain on Stock at last report, 7,107 81 
 
 47,771 07 
 
 Dues paid in during the year 22,305 17 
 
 $59,464 70 
 492 00 
 17,681 54 
 
 70,076 24 
 
 Dues withdrawn during the year, 10,611 54 
 
 Total present balance of Dues 
 
 Total of Dues paid in advance . 
 
 Net Gain for the Year ending Jan. 31, ... . 
 
 $77,638 24 
 
30 
 
 Gains. 
 
 Profits on Withdrawals, $1,568 32 
 
 Interest on Loans, 3,666 00 
 
 Fines, 229 14 
 
 Premiums on Loans . . . 12,537 18 
 
 $18,000 64 
 
 Gain on each Series, and Full Value. 
 
 Gain in ten years and four months, $76 00 Full value, $200 00 
 
 nine “ “ 64 40 
 
 eight “ “ 53 58 
 
 seven “ “ 40 49 
 
 five “ “ 26 88 
 
 three “ “ 21 88 
 
 three “ “ 20 99 
 
 one year and six months, 13 61 
 
 one year, 10 31 
 
 176 40 
 153 58 
 128 49 
 90 88 
 61 88 
 56 99 
 31 61 
 22 31 
 
 Total value. 
 
 Profits not divided. 
 
 $3,000 00 
 1,940 40 
 307 16 
 5,139 60 
 18,630 40 
 5,445 44 
 12,081 83 
 19,408 54 
 11,757 37 
 
 Loans, 
 
 77,710 70 
 13 05 
 
 $77,723 84 
 
 6 
 
 22 
 
 46 
 
 56 
 
 84 ^ 
 
 146 
 
 877 
 
 Total Balance of Dues, $59,464 70 
 
 Net Gain, 17,681 54 
 
 Dues Unpaid during the year 745 29 
 
 $77,891 63 
 
31 
 
 Conclusion. 
 
 The rules for governing a Building Association, it will readily be 
 perceived, preserve strict equality. They are, in fact, perfectly 
 democratic ; and the benefits and results are as hereinbefore been 
 asserted, entirely mutual. There is no separate class, and no difference 
 in the advantages gained by one member over those acquired by any other 
 member. Under this system, the working man becomes his own capitalist, 
 combining the small means of many men into one large sum, which, by 
 rapid, profitable, and safe investment, returns a gain that under other 
 plans goes into the hands of the capitalist. It is the principle of co-oper- 
 ation applied to money. It is a people’s banking-system ; the money 
 forming its capital is furnished by the working man, who does not want 
 the immediate use of it, to the working man who wants the temporary use 
 of it, and is willing to pay a reasonable bonus for it, giving security 
 for its safe return. There is no place or occasion for the capitalist in 
 any part of the system ; for if a man of large means becomes a mem- 
 ber, taking a large number of shares, he can receive no more profit on 
 each share than the humblest member can. He enters on an equal 
 footing, and remains so throughout. It is plain that the scheme would 
 not work if the stock were held by a few. It requires a liberal number 
 of members, and the distribution of the stock in small amounts among 
 them . 
 
 It has been remarked that a Building Association is governed on 
 principles of strict equality. The stockholders elect their own officers, 
 choosing from among their numbers such as they desire shall be the 
 managers of their affairs, from time to time. The fourth section of 
 the Pensylvania Act of 1859 provides that “The numbers, titles, func- 
 tions, and compensation of the officers of any corporation created by this 
 Act, their terms of office, the time of their elections, as well as the qualifi- 
 cations of electors, and the ratio and manner of voting, and the 
 periodical meetings of the said corporation, shall be determined by the 
 by-laws.” Thus giving to the stockholders full control over their 
 officers, holding them in complete check the while, with the ability to 
 call them to account at any time. It only remains, therefore, for the 
 stockholder to exercise ordinary care and discretion in selecting honest 
 and capable men, and diligence in watching their management, to secure 
 one of the safest and most reliable means of investing his savings, as 
 well as the quickest and most desirable way of reaching the desired 
 result. 
 
32 
 
 The officers thus chosen conduct the affairs of the association during 
 the year, and report all their doings at the annual meeting of stockhold- 
 ers, with the amount of assets on hand, the profits and losses made 
 during the year, the money received from dues, interest, premiums and 
 fines, and the money paid out for loans, withdrawals of dues, and for 
 expenses ; all of which is carefully examined and verified by a commit- 
 tee, composed of stockholders who are not officers, and reported to the 
 stockholders’ meeting. The officers of the association who handle the 
 money, — the secretary and treasurer, — are required to give security 
 for its safe keeping, in an amount sufficient to cover what is likely to 
 be in their hands at any one time. Thus, all the parts of the system 
 are held in constant and complete chejsk. 
 
 Security is Constantly Increasing. 
 
 Another evidence of the peculiar strength of the system, and the 
 security of its loans, exists in the fact that the margin on its securities 
 — that is, the value of the property mortgaged, over and above the 
 loan upon it — is constantly increasing; for the payment of dues is, in 
 effect, a payment on account of the money borrowed, and by each 
 monthly payment of dues the amount of the various loans is decreased, 
 and the value of the securities, over and above the loan, correspondingly 
 increased. So that by this process the association is constantly strength- 
 ening itself ; and what was good security at first, thus becomes stronger 
 and better every month. The expenses of carrying on the work of a 
 Building Association, such as salaries, room-rent, stationery, and ad- 
 vertising, are comparatively light, — perhaps $400 per year would cover 
 all the items of the annual expense account of most associations. The 
 report of one association in Philadelphia, for the year ending January 
 31, with an issue of 1,714 shares, the total of nine series, shows 
 a net gain for the year, of $17,681.54, after deducting $319.10, for the 
 year’s expenses. 
 
 It will be noticed that in the example given in a former chapter, of 
 the manner of borrowing upon a house and lot, the greater part of 
 the money with which to pay for it, there was mention made of a prior 
 estate or incumbrance (a ground rent or mortgage, as the case may be), 
 which takes pecedence of the mortgage to the Building Association. It 
 has been found best for those purchasing a house through this means, 
 to allow such prior incumbrance to remain against the property, for 
 this reason, — if one were to purchase a house at $2,000, entirely clear 
 of all prior incumbrances, to raise enough money from the association 
 to pay for it, it would require a subscription to nearly double the number 
 of shares required to purchase one with a small incumbrance upon it, 
 
33 
 
 entailing upon the borrower the payment of nearly double the amount 
 of monthly dues and interest ; and this, the ordinary income of a work- 
 ing man would not admit of. For instance, to purchase a house clear 
 of incumbrances at $2,000, supposing one had $350 to piece out the 
 price of the house with, it would require $1,650 from the association to 
 make the price of the house in full. Now, to obtain that sum, supposing 
 we could obtain it at twenty-five per cent, premium otf, would require 
 
 him to take eleven shares, thus : — 
 
 11 shares, at $200 each, $2,220 
 
 25 per cent, premium off, 550 
 
 Net amount received from loan, $1,650 
 
 Add amount already in hand, 350 
 
 Price of house, $2,000 
 
 He would then have to pay yearly as follows : — 
 
 Monthly dues and interest, at $22 per month, for 1 year, $264 
 
 Yearly taxes (about), 40 
 
 Yearly interest on his own $350, 21 
 
 Yearly expenses, in place of rent, $326 
 
 If one is able, by reason of a sufficient income, to make payments as 
 heavy as this, it would be wise to purchase in this way, and borrow the 
 greater part of the price paid at once, for what is paid to the associa- 
 tion is saved, while the interest paid on a prior incumbrance is lost, as 
 it were, for it goes the same way that rent does, never to make any 
 return ; and when, at last, the loan is paid off, the house is clear, and 
 we have the sum of $264 above the two items of $40 and $21 per year, 
 free to do as we will with it. 
 
 But one is not always so fortunate as to get his money at 25 per cent., 
 but must pay more for it ; in which case his ready money must be cor- 
 respondingly increased to an amount sufficient to make up the differ- 
 ence between what his loan nets him, with the premium off, and the 
 price of his house. As was before remarked, this is difficult for most 
 working men to do ; and even if they could raise the ready money, 
 $325 per year is more than most working men are able to pay. Hence, 
 the slower and less pressing way of taking a house subject to an incum- 
 brance, and paying a smaller yearly sum, is more frequently adopted 
 than the mode last above mentioned. 
 
 It is but necessary to apply the changes, the foregoing figures, as well 
 as those scattered through the pages of this book are capable of, to the 
 circumstances of any individual desirous of enjoying the privileges of 
 this system,— multiplying them in proportion to his means of meeting 
 5 
 
34 
 
 the payments demanded, to enable any one to tell how far he can go, as 
 a borrowing or non-borrowing stockholder of a Building Association. 
 
 He will see how much a loan made at a certain premium off, will net 
 him ; consequently, how much his cash thus obtained falls short of the 
 price of the house he wishes to purchase, and therefore, how much he 
 will have to raise independently of the association ; and the number of 
 shares he is required to take to make up the desired sum. This will 
 show him what his monthly payments will be, at $2 per share ; and by 
 watching the average rate of profits reported every year, he can tell 
 what length of time it will in all probability take him to pay off his loan, 
 if he has one, or realize $200 for each share of stock in cash, if he is 
 not a borrower. 
 
 The object of this book, as its title indicates, is simply to present in 
 a familiar way before the working man and woman anxious for the in- 
 formation, the principal features of the mutual or co-operative system, 
 as applied to the purposes of saving, borrowing, and repaying borrowed 
 money, through the medium of Building Associations, working under 
 the Pennsylvania Act of 1859, and to show the peculiar advantages 
 derived from its use together wilh the reasons for them. 
 
 Although the system, as at present carried out, is to a certain extent 
 defective in some minor points and details, nothing more toward their 
 correction than a passing hint or suggestion is attempted. The explana- 
 tion of the system as at present carried out in daily practice being its 
 chief object, this book goes forth as an informer, and not as a reformer, 
 except in so far as the knowledge it imparts shall enable its readers to see, 
 upon a better understanding of the system, wherein the mischief lies, and 
 through this means enable them to apply the remedy. “ As yet, but a 
 few persons of sound mathematical knowledge or experience in calcula- 
 tions have given attention to the subject,” says a writer on the system 
 as practiced in England, “and societies hitherto formed (in England) 
 have been deprived of that basis of science and just reasoning which 
 alone can ensure the prosperity of this or any similar kind of specula- 
 tion.” These remarks apply with equal force to our American associa- 
 tions, and it would undoubtedly be of lasting benefit to the system and 
 all associations working under it, if a commission of scientific men, 
 competent in all respects to perform the duty, were employed, under 
 the auspices of the various associations, and at their joint expense, to 
 give the system a thorough examination and study in all its parts, 
 pick out such flaws as may exist in present practice, and, as it were, 
 remodel the system, and report upon a plan for universal adoption, 
 containing all the improved features that will best harmonize with each 
 other, and work out the best and most equitable results, at the same 
 
35 
 
 time aiming at the greatest simplicity ; so that thereafter one associ- 
 ation would be but a counterpart of another. A plan thus formed, 
 composed of all the best improvements on the system would be bereft 
 of all the various conflicting and confusing plans and so-called improve- 
 ments now so prevalent; and being the recommendation of men of 
 known scientific attainments, integrity, and social standing, it would 
 draw toward it the respectful attention and confidence of all classes, 
 and build up a system for universal adoption among the working 
 classes, that will spread and extend far in advance of the system as at 
 present working, and produce results that will only cease with time 
 itself. 
 
 Mr. Chairman : — 
 
 You will have seen that the interesting scheme of co-operation, 
 which the work of Mr. Wrigley has enabled me to lay so fully 
 before your committee, gives the working man the aid of credit 
 which he now finds so difficult to obtain. It pays directly to the 
 laborer a part of that surplus profit upon his production which 
 would otherwise swell the gains of the capitalist. And these 
 Building Associations are not only unassailable in theory, but 
 their benificence has been practically proved again and again. 
 I have just seen long streets of comfortable houses in Philadelphia, 
 that have been built by working men through their agency. It 
 is quite time that Massachusetts offered to her industrial classes 
 such an opportunity for successful combination. It will be an 
 important step towards the enlightened and perfected co-operation 
 by which men will one day solve those social problems that now 
 seem so perplexing.