246 



CO- OPERATION". 



how a poor man who has not real estate can 

 borrow, even of a co-operative bank? The 

 answer is, if he wishes to buy an estate he can 

 borrow of the bank the greater part of the 

 needed purchase money, and give as security 

 therefor a mortgage of the property at the 

 time he receives his deed therefor. Of course 

 the bank can not furnish the whole amount of 

 the purchase-money. But if one has a very 

 little money and will subscribe to, say five 

 shares, he can borrow $1,000. A man can 

 thus build a house, mortgaging it as security 

 to the co-operative bank. The would-be bor- 

 rowers, as has been said, bid for the privilege. 

 Premiums range from five to fifty cents a 

 share, but rarely over twenty-five cents for 

 any length of time. The by-laws of the co- 

 operative banks usually require the successful 

 bidder for a loan to pay one month's interest 

 and premium immediately. If a loan is not 

 approved, a month's interest and premium are 

 forfeited. Successful bidders can always ob- 

 tain shares for their loan. If one borrow 

 $2,000 at fifteen cents premium a share (the 

 average amount now prevailing in Massachu- 

 setts), he is subject to three monthly charges: 

 First, a payment of ten dollars on his ten 

 shares, which he had first to take before bor- 

 rowing; second, a payment of one dollar and 

 a half as a premium; and, third, a payment 

 for interest, which, on $2.000, at 6 per cent, 

 (the usual rate), is $10. In all, then, he pays 

 $21.50 a month, until his shares mature in 

 about eleven years, when the bank will hold 

 his note for $2,000, and he will hold shares 

 worth $2,000. The two accounts are canceled, 

 and thus for a little more than the expense of 

 rent in the mean time a man finds himself 

 owner of a comfortable home. 



Any one with sufficient security which, be 

 it observed, most workmen have not might 

 borrow the $2,000 of a savings-bank, pay 6 

 per cent, interest, the usual charge on such 

 loans, or $1,320 during the eleven years, and 

 then pay the debt, making $3,320. The same 

 sum borrowed of a co-operative bank will in- 

 volve a payment during the one hundred and 

 thirty-two months, at $21.50 a month, of $2,- 

 835, besides the loss of, perhaps, $400 more in 

 compound interest to the close of the eleven 

 years on these payments. Two things are to 

 be said : First, it is not always necessary in 

 Massachusetts, where money is more plenty than 

 in the West, for one to pay a fifteen cent 

 premium for a very long time. Whenever the 

 borrower finds it possible to bid off $2,000 for 

 a lower premium, say five cents, he may do so, 

 and with this loan pay off his other, borrowed 

 at a higher rate, for one can repay his loan at 

 any time, retaining his shares or not, as he 

 chooses. The only charges are, that the bor- 

 rower must pay double interest and premium 

 for one month, and have a new mortgage 

 made and the old one discharged. In some 

 States, and occasionally in Massachusetts, the 

 loans are bid off at so high a premium that the 



actual payments, reckoning compound interest 

 on them, are more than would be necessary if 

 the money were borrowed from an ordinary 

 savings-bank. But it may still be said that, 

 human nature being as it is, scarcely one man 

 in a thousand will make provision by constant 

 voluntary monthly deposits in a savings-bank 

 to repay his $2,000 mortgage at the end of the 

 eleven years. This is the real justification for 

 the existence of the co-operative banks. Their 

 shareholders feel compelled to make their 

 regular monthly payments. Before the man 

 is aware of it, he has paid for his home and 

 acquired the valuable habit of saving. The 

 results are in every sense satisfactory, six to 

 seven per cent, dividends being generally made. 

 Again, these banks enable the depositors, who 

 are in most cases wage-earners, to use their 

 own deposits, whereas the money deposited in 

 the savings-banks in Massachusetts $300,000,- 

 000 in 1886 supplies the capital of the great 

 employers of industry, and thus does not so 

 directly promote the co-operative ideal a 

 larger share by the workmen in the profits of 

 industry. In addition to nearly all the advan- 

 tages of the justly famous postal savings-banks 

 of Europe, the co-operative banks give much 

 higher interest and keep the deposits for actual 

 use among the lenders of the immediate neigh- 

 borhood. By the Massachusetts law at least 

 twenty-five persons must be associated together 

 for organizing such a corporation, and no per- 

 son can hold more than twenty-five shares, of 

 the ultimate value of $200 each, in one cor- 

 poration. No member can have more than 

 one vote. A member may at any time, on 

 thirty days' notice, withdraw any shares not 

 pledged as security for loans, after paying any 

 fines that may be due. By so doing he loses 

 such portion of the profits as was previously 

 credited to the share, and must bear such a 

 proportion of any unadjusted loss as the by- 

 laws may determine. 



In most of the older building associations in 

 the Middle and Western States the premiums 

 are not paid monthly, but are deducted in a 

 lump sum from the face of the loan to the bor- 

 rower. For example, if a man, in order to 

 borrow $1,000, offers ten per cent, premium, 

 instead of receiving the $1,000 and paying 

 monthly ten per cent, in addition to the monthly 

 payments of one dollar a share, he will in many 

 banks receive $900, but must take five $200 

 shares as security on which five dollars a month 

 and interest on the $900 are paid. The Massa- 

 chusetts plan, often called the installment plan, 

 is now being adopted with increasing frequency 

 by the new companies, and is simpler, and, many 

 claim, more just to the borrower. Money is 

 worth more and premiums much higher in 

 Chicago and St. Paul than in Boston. Indeed, 

 they seem unreasonably high, bringing in from 

 fifteen to twenty per cent, profit to the deposi- 

 tors. 



In the fifty-one co-operative banks of Massa- 

 chusetts in 1887, the assets were $4,211,948 to 



