Savings and loan association

“ Furthermore, building-association stock is not taxable in most States.
Individual and moneyed corporations are coming to consider the matter of loans, and means leading to their repayment, on the building-association plan. This will be brought about largely by the low price of money throughout the country at this time. Savings banks, mortgage companies, and life-insurance organizations are finding it difficult to loan their funds at a price that will pay their fixed obligations; hence, they are seeking means which will lead to a more profitable investment of their funds. ”

“ No less important than the level of interest rates paid on the debt is the distribution of its ownership. Of the total debt, more than half represents direct savings of individuals or investments of funds received from individual savings by life insurance companies, mutual savings banks, savings and loan associations, private or Government trust funds, and other agencies. ”

“ The time of the repayment of an [Pg 297] association loan is always present. The security afforded to building associations is much better than to savings banks and loan companies, even where the margin above the amount of loan is less because of this difference in plan of repayment. Again, the margin of security from the first is always sufficient to protect a mortgage and the payment of all foreclosure costs and charges. Furthermore, the rentals in case of foreclosure are, or should be, sufficient to pay all dues and other fixed charges. ”

“ The admirable process of small monthly payments not only educates the borrowers into habits of saving, but in a few years reduces the loan, so that the old-fashioned savings banks with their immense capital can take 125up at lower rates these loans, when they are reduced to the statute limit of 60 per cent of the value of the estate. ”

“ The fact that the debt is growing less, and, as well, the incentive to avoid small fines in case of failure to make payment, contribute to the value of the security. A loan on an ordinary basis, secured from a savings bank, insurance or trust company for a long period, is not thought of in this way. ”

“ Savings banks are unnecessary in communities where building associations are common. The savings bank will give place to the building association, for the reason that the latter affords greater security and more profit to the depositors at the same time that it affords greater conveniences to the borrowers. It is often asked by those not fully acquainted with building-association methods, “How is it that the association pays such large dividends, and the borrower such a small rate of interest? The profit is made by the loaning of money ”

“ The bank also receives jewelry, plate, diamonds, and other not bulky valuables on deposit for safe keeping, the owner being required to make only a nominal loan of one dollar upon them, in order to bring it into the books of the institution. It also takes on deposit, in trust, from the courts, all moneys in dispute, and the proceeds of unsettled estates, and receives one or two per cent, per annum for ensuring its safety. It is contemplated also to found a savings-bank feature of the institution, and by putting the money at interest, aid the depositors to increase their funds without risk. ”

“ Declarations of income were required from all persons having over $3,500, under heavy penalties for neglect, refusal or fraud in the matter. As to corporations, the same rate was levied on all interest on bonds and on all dividends and all surplus income above dividends, excepting premiums returned to policy holders by mutual life insurance companies, interest to depositors in savings banks, and dividends of building loan associations. ”

“ In 1970, 13.6 percent of the population's cash income was deposited in savings accounts, compared to 5.8 percent in 1960. More than 65 percent of the population's cash assets in 1970 were on deposit in savings accounts, as against 56.6 percent five years earlier. Under the economic plan for the 1971-75 period, savings deposits of the Savings and Loan Bank are scheduled to increase by 87 percent—the equivalent of an annual 13.4 percent growth rate. An important reason for the growth of savings has been a general shortage of consumer goods. ”

“ And this past week, I called on Congress to increase the maximum size of various SBA loans, so that more small business owners can set up shop and grow their operations. I also announced that we’ll be taking additional steps through our Financial Stability plan to make more credit available to the small local and community banks that so many small businesses depend on – the banks who know their borrowers, who gave them their first loan and watched them grow. ”

“ In the words of the president, the main desire of building loan associations should be "the encouragement of the habit of saving without irritating penalties and restrictions and with equitable provision for the mishaps possible to those undertaking a contract for specific saving extending over a long period of years." ”

“ In order to secure the realization of these conditions to as great an extent as possible, many agencies cooperate in all modern nations, among them savings institutions. Included among these are various forms of provident associations, sometimes independently organized and sometimes connected with other organizations, insurance associations of many kinds, building and loan societies, and savings banks.
The need for savings institutions varies greatly among the different nations and among different classes of people in the same nation. ”

“ The schedule of payments to the National Bank has been sufficiently stringent to induce the Savings and Loan Bank to mount special educational programs for attracting savings, particularly in rural areas, and to seek ways of stimulating cash collections from its other activities. To this end the bank is giving special attention to finding more effective means for identifying cash reserves held by the population. One avenue the bank has been exploring is to gain greater knowledge of the timing of income receipts and of the uses to which incomes are put. ”

“ In other words, it is an association composed of borrowers and lenders, and established for their mutual convenience. It gathers together the savings of the people, which, scattered and in small sums, could not be invested to advantage, and loans the money thus obtained on first mortgage security, and in sums to suit, to those who wish to build, to pay off mortgages, or for other purposes. ”

“ That money needs to go directly to the American people in the form of loans -- whether it's a student loan, or an auto loan, or a small business so that it can meet its payroll. That's what the financial stability package should do, and that's what he's asked his team to ensure that is put together so that the next money that's spent to stabilize our financial system is spent differently and more transparently than that first set of money was used for. ”

“ Indeed, until recently, the primary idea of a savings bank has been, that it is an institution in the hands of disinterested persons, the profits of which, after deducting the necessary expenses of conducting the business, inure wholly to the benefit of the depositors, in dividends, or in a reserved surplus for their greater security. ”

“ The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins.
You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll. ”

“ Such capital stock shall be held by said land bank as collateral security for the payment of said loan, but said association shall be paid any dividends accruing and payable on said capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Farm Credit Administration, be paid off at par and retired, and it shall be so paid off and retired upon full patment of the mortgage loan. ”

“ It can hardly be said that there is any profit in loaning money itself; for the interest obtained is generally no more than a fair price or equivalent for the crops, rents, or other incomes, which the property that might be purchased with the money, would yield. But in the loan of credit, there is an actual profit of the whole amount that is received as interest, after paying the trouble and risk of banking. ”

“ The members have to become jointly and severally responsible for the debts of the association, which borrows on this unlimited liability from the ordinary commercial bank, or, in some cases, from Government sources. After [Pg 104] the initial stage, when the institution becomes firmly established, it attracts local deposits, and thus the savings of the community, which are too often hoarded, are set free to fructify in the community. The procedure by which the money borrowed is lent to the members of the association is the essential feature of the scheme. ”

“ Purchase of minority interest in undercapitalized savings associations by other savings and loan holding companies allowed. TITLE VII — FEDERAL HOME LOAN BANK SYSTEM REFORMS Subtitle A — Federal Home Loan Bank Act Amendments Sec. ”

“ In proportion as the advantages of saving are reduced the inducements to save will be diminished, and then the available lending fund of the community will be lessened, so that fewer persons in need of temporary accommodation will be able to receive it. From another point of view, may it not be urged that if a man obtains the assistance of a loan he should be as willing to pay for it as he would be to pay for any other distinct advantage? ”

“ The ability of the farmer to give mortgage security to national banks in case of need would often prove a great help. Furthermore, now that a majority of our national banks have savings departments, and that savings deposits might wisely be made withdrawable subject to advance notice, it is not unreasonable that these banks should be permitted to invest at least a substantial part of their savings funds in the same kinds of mortgage securities that are open to the investment of funds of savings banks ”

“ In ad­dition to the normal growth of domestic savings flowing through such financial intermediaries as the commercial banks, the Government Service Insurance System, the Social Security System, the Postal Savings Bank and the private insurance companies, the program contemplates the estab­lishment of rural savings institutions and cooperative banks to encourage systematic savings out of current income in the farm areas. ”

“ As a result, just this year hundreds of thousands of Americans who were stuck in high-interest loans have been able to take advantage of historically low rates and are saving thousands of dollars every year. ”

“ 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”! ”

“ A law authorizing the government to guarantee a certain percentage of any loss which may be suffered by any private bank, insurance company or any other credit institution, on account of loans it may grant to private individuals for home construction, the amount of each loan not to exceed P10,000 for each individual borrower, and fixing the aggregate amount of the loans for which such guarantee may be given. ”

“ This institution is the friend and agent of the poor only. The rich are repelled, and those who have small deposits-less than $500-receive greater interest than those who have large ones-over $500. Indeed, banks would not, ordinarily, be permitted to perform the sorts of services which alone are performed by this institution. Public policy has not permitted the savings of the poor to be hazarded by the perils incident to commercial institutions and business. ”

“ Naturally the bonds are at a high premium. The Company and its liabilities can be taken over by the State at a year's notice, and the necessary funds for this purpose can be raised at 3 per cent. An offer was recently made to the Government to consolidate this and other liabilities, but the National Bank, which is another concession, has the monopoly of all State loan business, and this circumstance effectually disposed of the proposal. At 3 per cent. a saving of £160,000 per annum would be made in this monopoly in interest alone. ”

“ We are -- the plan evaluates the health and the condition of individual financial institutions, again, to understand what's needed, to understand their health, and to ultimately, again, restore that confidence. And primarily, first and foremost, there's a dramatic expansion that provides -- that will provide lending for the entities that we know need it most. We all hear horror stories about people with good credit that are looking for a student loan, or for an auto loan, or for a housing or commercial real estate loan that can't get access to that capital. ”

“ To the funds accumulated from initiation fees, membership dues and the sale of the associations' credit have been added, in constantly increasing amounts in recent years, the savings of the members themselves. Many societies have such an amount of funds intrusted to them in this way that they are not only entirely freed from the necessity of borrowing, but are obliged to seek opportunities for investment outside their own group. ”