Now, if we refer to the depositor's table of rates, we shall find that he has, for a ten years' term, paid to the society £78, and received back £100; thus receiving from the society £22 (the difference) for the use of the money, plus the interest added. On the other hand, a borrower of £100 for the same term pays back, beyond the capital sum of £100, as much as £40 2s. in interest. Thus there is a difference of £18 2s. between the interest received by the depositor and that paid by the borrower. This constitutes the gross gain of the society on these trans- actions, but out of it has to be paid the expenses of the office, salaries of officials, and a reserve provided for bad debts, &c.
The social and moral utility of societies estab- lished for the direct purpose of aiding a man to become proprietor of his dwelling-house is obvi- ous, and the above calculations seem to show that a society conducted on the plan represented would earn an ample margin of profit for all contingencies.
Doubtless the greater number of the existing building societies, including the one whose figures have been quoted, are conducted in a safe and legitimate manner, but there have been, and may still be, exceptions.
As an inducement to join a building society, people are told that they have to pay, on the instalment system, the same as though they paid the rent of a house, and in a few years will become the owner. A man who has paid for three or four years only what he would have paid for rent, would have very little hesitation in throwing up his contract with the society, if the locality became objectionable to him or the in- evitable repairs of a cheap house were more than he could bear. The money borrowed is lent chiefly upon the security of small suburban houses, a kind of property always in course of depreciation, and it may be that the society would have returned upon its hands a number of houses in a bad state of repair and in a dete- riorating locality. The instalments having ceased and the houses void, the property becomes a profitless burden upon the society and a probable ultimate loss. When "jerry" builders are large customers of a building society and have some influence, direct or indirect, with its Board of Directors, the evil is greatly aggravated. Whole streets are built with borrowed money, on specu- lation until, perhaps, there are twice as many houses as can possibly be let.
The society, to protect itself, is bound to con- tinue advancing until it is drawn completely into the net and finds itself encumbered with a lot of unsaleable and useless property. To stave off the evil day when all things must be disclosed to the trusting member, "financing" is restored to, money raised on direct deposit, and advances obtained from banks. The money thus raised tides the society over their difficulties for a time, but it may be that some rumour or report influ- ences members and depositors to withdraw their money, and eventually the coffers are empty and the end arrives.
Unhappily, in the collapse of more than one building society during the last few years there have been revealed frauds and dishonesty of the most flagrant character, and hundreds of trusting investors of the industrial classes have been ruined through the machinations of scoundrels, some of whom posed as philanthropists and ultra righteous members of society. To protect the interests of members and depositors, only men of unimpeachable character and business ability should be elected Directors of a building society, and the audit ought to be of the strictest char- acter. The balance-sheet should present details of the securities upon which the advances are made, and the auditors should certify that they have examined the deeds and identified them as representing the property described in the balance-sheet. Generally speaking, the auditors appointed by the members are not lawyers, and have not the necessary skill for verifying the documents relating to the property, indeed they are not expected to do so. One of the auditors should certainly be legally qualified to ascertain that the securities of the society do represent the properties set forth in the balance-sheet, and he should give a certificate to that effect. If this course were insisted upon, such scandals as have been brought to light could hardly be repeated, where one set of deeds was made to do duty for the assets of three distinct societies, each man- aged by the same Board of Directors; and the case in which the deeds of abandoned or destroyed property were palmed off upon the auditors to represent securities which had practically no existence. The industrial classes are less careful than those above them in seeing to the safety of their investments, and some legislation seems to be called for to prevent their hard-earned savings being frittered away by bad management or rank dishonesty.
CHAPTER XI. THE POST OFFICE SAVINGS BANK.
THIS institution offers a most admirable, con- venient, and secure depository for the savings of the industrial classes and of others. Its value to the thrifty and timid investor is incalculable, for here he may rest satisfied that he has abso- lute security, and the system is so hedged about with safeguards that it is difficult to discover any means by which loss can be sustained. The interest allowed is not high, but reasonable enough when the perfect security and the facili- ties offered are taken into consideration.
Money may be deposited by any person over seven years of age, and by anyone on behalf of children under seven. Also by married women, and with this advantage, that such deposits, unless and until the contrary is proved, are deemed to be the property of such married woman; moreover, the fact that any deposit is standing in the name of a married woman being prima facie evidence that she is entitled to draw the same without the consent of her husband.
Deposits may be made by two or more per- sons, provided no one of them has any other account in a Savings Bank, and by one person as trustee for another person. On opening an account a person has to sign a declaration to the effect that he takes no personal benefit from any other account in the Post Office Savings Bank or in a Trustee Savings Bank, and should this declaration not be true all sums so deposited will be liable to forfeiture.