Endowment (finance)

“ Other efficient, but somewhat more costly, agencies for bringing together the owners of loanable capital and men wishing to use capital are savings-banks, building and loan associations, insurance companies issuing endowment policies, and mortgage-investment companies of many kinds. While on the one side of the bidding are thousands of lenders offering to exchange ready money for assured incomes, on the other are thousand of borrowers offering to exchange the promise of assured incomes for ready money. ”

“ It may be suggested that among other methods of putting the criticism of contemporary literature upon a better footing is one that might conceivably be made to pay its own expenses. There is so much room for endowments nowadays that where one can get at the purse of the general public one should certainly prefer it to that of the generous but overtaxed donor. The project would require a strong endowment, but that endowment might be of the nature of a guarantee fund, and might in the end return unimpaired to the lender. ”

“ Future Incomes More or Less Fixed usually Needed.—Recent writers have called attention to the fact that in many cases saving has the providing of a definite future income in view. The owner of a landed estate, who intends to leave it to a son, may try to provide from his rents an endowment which will save from want or from an unhappy approach to want his daughters and his younger sons. He might accomplish this, indeed, without any present saving by putting rent charges or mortgages upon his land, but that would trench on the income which his heir can derive from it. ”

“ The executive may begin building whenever they choose, and incur [Pg 235] debts, and mortgage both land and building as soon as they possess either. They can spend on bricks and mortar all the money they receive to the extent of £250,000, without putting by a penny towards the endowment fund. ”

“ That if the Entire Reserve is a greater sum than the single premium required to carry the full amount of insurance to the end of the Endowment term, the Excess shall be issued as a single premium to purchase a pure Endowment, payable at the end of the term, thus guaranteeing to the Policy-holder in every event the full value of his Reserve. ”

“ Thus, five hundred men properly managed, working industriously, and allowing one-fourth of their wages and their entire profits to accumulate, might be able in five years to own a plant of the actual value of $1,000,000, with the good-will of a business worth as much more, and thereafter the worker might receive full wages and an additional income from dividends, which, if placed in endowment insurance, or in similar safe investments, would enable him to retire, if he wish, in fifteen years with an assured competence. ”

“ In truth, the endowment ought to have been granted at the Post Office before any other insurance, and had it been practicable, it should even have had precedence over the establishment of Post Office Savings Banks.
When a person wishes to become an "endowment" member of the society, the agent gives him a blank declaration paper, which he fills up with his name, age, occupation, residence, and the amount for which he wishes to join, and further states in writing the amount of the monthly contribution (for which he refers to the society's tables) , to be paid for the same. ”

“ These recent additions to the endowment of the institution will enable the trustees to enlarge its usefulness in many ways, and especially (being no longer dependent for annual income upon rents) to utilize the whole of the building for educational purposes. Yet the total endowment will still be modest, as compared with that of many similar institutions of later origin. ”

“ In the bronze tablets recording respectively the declarations of estate-values in the communes of Ligures Baebiani (101 AD) and Veleia (103 AD) , made with the view of ascertaining the securities upon which the capital endowment was to be advanced, we have interesting details of this ingenious scheme for perpetuating charity. But neither these, nor some minor inscribed records of bequests, nor again the experience of Pliny the younger in a benefaction [1187] of the same kind, give us direct evidence on labour-questions. ”

“ The endowment of the corporation, was to be derived solely from the benefactions of those who might think proper to bestow them, and to this end the society was made capable to purchase and receive real estates, in fee, to a certain annual value, and also estates for life, and for years, and all manner of goods and chattels to any amount. ”

“ Not more than one-half the actual cash value of the land, without estimating improvements, must be loaned, or more than $10,000 to any one borrower, or more than $20 per acre in any case.
The celerity with which Congress, during the War of the Rebellion, created an effective system of revenue and finance, leads me to the conclusion that it will be equally apt in the creation of the necessary legal machinery to speedily effectuate a permanent and safe system for making loans to the people. ”

“ Here the loan is made on the basis of an anticipated income. Here again the anticipated income is made possible only by the loan; one of the values that enters into the exchange exists only because the exchange is possible. None the less, the credit rests on value. It is a right to an anticipated income. The man who has made the loan has his security in the value which he has lent, plus the present worth of the extra income which the new idea is expected to create. ”

“ The purchase money in every case has been advanced by the government, and is to be repaid by the purchaser in sixty-eight years with interest at three and one quarter per cent per annum. This sum represents two and one-half per cent interest upon bonds issued to raise the funds and three-fourths of one per cent for a sinking fund to meet the bonds at maturity. ”

“ If you prefer the one year loan I shall ask you to reduce your note to $5300 which makes the interest the regular 6%. I do not wish to make any money out of you, the principal things I have in view being to help you and at the same time to be well secured in my investments—this because my fortune is very limited and my time for acquiring wealth past. ”

“ The owner of a negotiable bond and of the investment which it represents, if not the lender, stands in the place of the lender. When, by the gift of the coupons, he has separated his right to interest payments from his investment and procured the payment of the interest to his donee, he has enjoyed the economic benefits of the income in the same manner and to the same extent as though the transfer were of earnings and in both cases the import of the statute is that the fruit is not to be attributed to a different tree from that on which it grew. ”

“ The lenders receive a certificate of indebtedness, and have the right to buy each year a quantity of my books at half the retail price. Thus, if you lend ten dollars, you can get $5 worth of books for $2.50. These books must be ordered in one shipment, so as to save handling costs; under the Loan Plan you may place one such half-price order every year. The saving takes the place of interest on your money; it amounts to 25% interest—a pretty good rate, but not so high as millions of poor farmers are having to pay to national banks all over the country—see my “Letters to Judd”! ”

“ Circumstances may arise, which may compel them to incur liabilities, which the fixed income of the Trust will never enable them to meet; because, in many cases, the endowers appropriate the income in such a way as to leave little or no margin for any extraordinary or unforeseen expenditure connected with the endowments, such as repairs of temples, payment of Government Revenue in cases when it is not realized from the Ryots in consequence of draught, inundation or other causes &c. ”

“ It must not be forgotten that what is really loaned is capital,—commodities in general,—not money; the money is only a medium for effecting the transfer, and a measure of the capital transferred. What should be returned, therefore, in repayment of a loan is the same amount of commodities in general that was borrowed,—the same value. ”

“ And the same must be said of the value at which they have reckoned the short annuity of a half per cent. for ten years annexed to the new 4 per cents. In forming the scheme for the last loan this annuity was, I have said, estimated at 81⁄10 years purchase, agreeably to its real value, supposing the payments yearly, the first payment to be made at the distance of a year, and money improved at 4 per cent. compound interest. But it has in general been sold at about 71⁄2 years purchase; which is less than its value, supposing money improved at 51⁄2 per cent. compound interest. ”

“ Keeping in mind the desirability of diversifying investments and admitting the attractiveness of investing in a class of property whose earnings are comparatively stable, it seems clear that public-utility bonds can not be dismissed without consideration. When a company is found whose property is substantially equal in real value to its bonded debt, whose allowance for depreciation is ample, whose franchises are satisfactory, whose earning capacity is large, and whose management is capable and upright, the investor is justified in giving careful consideration to its issues. ”

“ A widow, or a trustee, or other long-time investor, would prefer to buy bonds which guaranteed a regular yearly purchasing power over subsistence, rather than those which merely promised a given sum of money of uncertain value. ”

“ Under the operation of a shrinkage in the volume of money this enormous mass of borrowers, at the maturity of their respective debts, though nominally paying no more than the amount borrowed, with interest, are, in reality, in the amount of the principal alone, returning a percentage of value greater than they received—more than in equity they contracted to pay and oftentimes more, in substance, than they profited by the loan. ”

“ But on the other hand, if 4 per cent, bonds are selling at par and he chooses a 4 per cent, loan, he gets his $1,000 in cash for his Pfandbrief and pays $40 per year interest and gives his mortgage and note for $1,000. It is always regarded as the best policy for the borrower to choose the class of bonds selling nearest par, unless they are selling above par, in which case the farmer securing the loan gets a premium over and above the amount of his liability and it is to his advantage to take such loans. ”

“ I wouldn't sell it at any price, but I'm short of ready cash, and I'll pay eight per cent. interest and give the next dividend as a bonus, for a loan of seventy-five dollars for thirty days. I'm proud and particular about my business, and I dislike to ask my friends for the loan."
"Say," observed the farmer, dazzled at the sight of the pretty document, "you mean you'll give all that security and interest for a loan of seventy-five dollars?"
"To an honest man who won't run away with the security, yes." ”

“ A capital lent at interest may, in this manner, be considered as an assignment, from the lender to the borrower, of a certain considerable portion of the annual produce, upon condition that the borrower in return shall, during the continuation of the loan, annually assign to the lender a small portion, called the interest ”

“ For the purpose of discharging said indebtedness, he asked authority to make an additional loan in gold of a sum not exceeding $95,000, or its equivalent in paper currency of the United States, paying interest thereon at the rate of 9 per cent. per annum in gold. ”

“ The bondholder is interested in the absolute regularity of his interest, and in the security that lies behind the principal, and it is to-day the custom of banking houses to consider a bond well secured when, in a territory of reasonably rapid growth, the principal is earning say twice the interest on its bonds, and when the cost of reproduction is in excess of the amount of the bonds, provided that the property is in good physical condition. ”

“ One is the right to demand and receive at maturity the principal amount of the bond representing capital investment. The other is the right to demand and receive interim payments of interest on the investment in the amounts and on the dates specified by the coupons. ”

“ In a building and loan association the money is put up at auction, usually in open meeting on the night or at the time of the payment of dues. Those who wish to borrow bid a premium above the regular rate of interest charged, and the one who bids the highest premium is awarded the loan. The man who wishes to build his house, therefore, and desires to borrow $1,000, must have five shares of stock in his association, must bid the highest premium, and then the $1,000 will be loaned to him. ”

“ If debts are property, and rightful subjects for taxation, the sphere of the application of this principle should not be restricted to debts created by a mortgage, but should embrace every form of indebtedness created by the loan of capital—as promissory notes, book credits, and policies of life insurance—which are valuable to just the extent that they represent the indebtedness of the company issuing them to the holder of the policy. ”

“ The state had its Development Fund which made loans on mortgage at very low interest, generally 5 but sometimes 21⁄2 per cent., to small farmers, and the interest was applied to orphanages and the education of the poor. ”