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Owing to this lack of supervision, it is also extremely difficult to gather any information, except that of the most general character, regarding those banks that still do a savings business. There are in Illinois some twenty institutions that still are nominally savings banks. After diligent inquiry to get the names of all such in the State, twenty-four circular letters and blanks to be filled out were sent, asking for information. From only four were reports received that were at all satisfactory: the others either made no reply or else contented themselves with saying that they were not "regular" savings institutions, but did a general banking business. One bank "reports its condition and business only to the clearinghouse." As not enough reports have been received to make a satisfactory generalization, no report on the banks as a whole can be made. The reports of two banks, the Dime Savings Bank, Chicago, and the Illinois Trust and Savings Bank, are given, that special features may be noted. The Dime Savings Bank is peculiar, in this State,- in that it does no commercial banking; nearly all the so-called savings banks differing from other banks mainly in this respect, that they pay interest on small deposits. A very few others do no commercial banking. The Illinois Trust and Savings is the only bank in the State, it is believed, that is under State supervision. This bank has been organized under the law of June 15, 1887, entitled "An Act to provide for and regulate the administrations of trusts by Trust Companies," and, on account of its acceptance of trust funds, is made subject to examination by the State Auditor, and reports its condition to him annually, and at other times when desired by him. To strengthen its credit as a Trust Company, it regularly provides for an examination of its accounts and securities by the National Bank Examiner.
The Farmers' Trust Company of Chicago, by its sale of "Savings Bonds" for amounts as low as one dollar, provides a secure substitute for a savings bank, and one that is highly commendable for purposes of investment of small sums. Sums less than $25 payable in five years draw 5 per cent. interest; over $25, 6 per cent. Call bonds draw 4 per cent. All bonds for $25 or over are secured by mortgages on land worth at least two and one-half times the mortgages. The mortgages are deposited with the Merchants' Loan and Trust Company, Trustee, which holds them for the sole purpose of securing the payment of the principal and interest of the bonds, with full power, in case of default, to collect or sell the same, and with the proceeds to redeem the bonds.
It is difficult to estimate, with any degree of accuracy, the amount of money-savings deposited in the savings banks of the State; but it is probable that $18,000,000 is a large estimate. A detailed table, found in the Report of the Comptroller of the Currency for 1887, shows the condition, on June 30, 1887, of five banks doing a savings business in Chicago, and doubtless includes by far the largest proportion of such business done in Chicago. The table is compiled from unofficial sources. (See Report of Comptroller, 1887, p. 278.)
The outlook in Illinois as regards savings banks for the future is, however, much better than would appear from the showing given above. Soon after the failure of the banks in 1877, steps were taken toward the adoption of a savings-bank law similar to that of New York. A bill drawn by William Kelsey Reed, Jr., Treasurer of the Dime Savings Bank of Chicago, was finally, in 1881, introduced to the Illinois legislature by Senator Rice (Chicago Tribune, May 7, 1887). The bill was thought by some too voluminous; and, as it seemed best to have the subject well considered and understood beforehand, its passage was not urged. In 1883, the same bill, perhaps slightly modified, was unanimously recommended for passage by both the Senate and the House Committees on Banks and Banking; but so much time was consumed by the High License Liquor Bill that this bill was not reached before adjournment. Again, in 1885, though again recommended by both committees, its passage was hindered and prevented by the Senatorial contest of that year. Finally, in 1887, May 6, the bill was passed, and went into effect July 1, 1887. The end of the difficulty was not yet, however; for by many, including Governor Oglesby, who on that account refused to sign it, the bill was considered unconstitutional. The Constitution of 1870 prohibits the creation of a State Bank, and also requires all acts granting banking powers to corporations to be submitted to the people. The promoters of this law claim that this "Act to provide for the organization of Savings Societies or Institutions for Savings, for their supervision and for the administration of their affairs," and which expressly forbids such institutions "to transact any banking business, whether of issue, deposit, or discount," does not grant such banking powers; and that, in consequence, its submission to the people was not necessary.
The doubt regarding the constitutionality of the law has prevented, naturally, the organization of savings societies under its
provisions. One organization, the Chicago Society for Savings, has been formed to test the law; and the test case is now before the Supreme Court of the State. A decision is expected at the fall term of the court, September, 1888. As has been said, the law is founded upon the New York law, and in most particulars follows it closely; but one point of difference regarding investments should be noted. Somewhat more freedom is allowed the trustee. Besides the investments allowed in New York, money may be invested "in the stock or bonds of any city or county in the New England States, or in the States of New York, New Jersey, Pennsylvania, Ohio, Indiana, Michigan, Iowa, Missouri, Kansas, Nebraska, Wisconsin, or Minnesota, issued pursuant to the authority of any law of such States, provided the entire bonded indebtedness of such city or county shall not exceed 5 per cent. of the assessed value of the taxable property therein, as shown by the last assessment preceding the investment; in the mortgage bonds of any railroad company of approved credit, located in any of the States aforesaid, which has paid dividends of not less than 5 per cent. per year regularly on its entire capital stock for not less than five consecutive years next preceding each investment, and which are a first lien upon the railroad, pledged to secure the same; or in the consolidated mortgage bonds of any railroad company chartered by the State, authorized to be issued to retire the entire bonded debt of such company; or in the collateral trust bonds of any railroad company chartered in this State, where the underlying bonds pledged to secure them are a first lien upon the property mortgaged, provided that said company has paid dividends as aforesaid, and provided, further, that no savings corporations shall hold more than 10 per cent. of its funds in the bonds of any one railroad company, nor more than 25 per cent. of its funds shall be invested in railroad securities; in bonds or notes and mortgages on unencumbered real estate located in any of the States aforesaid, worth at least twice the amount loaned thereon, but not to exceed 60 per cent. of its funds shall be so loaned or invested, nor shall more than 30 per cent. of the whole amount of its funds be so invested in real estate outside of the State of Illinois; but, in case the loan is on unimproved or unproductive real estate, the amount loaned thereon shall not exceed one-third of its actual value; and no investment in any bond or mortgage shall be made except upon a committee's report, charged with investigating the same, who shall certify to the value of the property
mortgaged or to be mortgaged, according to their best judgment, and such report shall be filed and preserved among the records of the institution."
Taken as a whole, the law is undoubtedly a good one, embodying the best features of the laws of the Eastern States; and, if its constitutionality were affirmed, it is to be expected that there will be a rapid development of the savings banks in Illinois.*
PART II-BUILDING AND LOAN ASSOCIATIONS.
From an article in the American Building Association News for April, 1886, we learn that the first building association in Illinois or the West was the Chicago Building Association, organized in 1849. From an association in Beverly, Mass., a plan of organization and management was secured, and with this as a model they conducted this association for some two years without a charter. At length, Feb. 1, 1851, a charter was granted by special act of the legislature, and the previous acts and securities of the association were legalized. A second association was organized at Jerseyville, Ill., in 1852, another in Chicago in 1857; and from that time on the number increased with great rapidity. Many associations were granted charters by special acts of the legislature before 1869, when the first general law in Illinois for the government of building associations was enacted. The purpose of building associations and the methods of conducting the business in 1869, if one may judge from the law, were materially different from those of the present. We read that a number of persons may form themselves into an incorporated company for the purpose of accumulating a fund for the purchase of real estate in large tracts, the paying of encumbrances thereon, the improvement thereof into lots and parcels suitable for homesteads, and the distribution of such lots or parcels among the shareholders, or to aid its shareholders in
*It will be seen by this paragraph in the Chicago News that the decision regarding this law is unfavorable: "Springfield, Ill., Sept. 27, 1888.- Among the decisions filed in the Supreme Court to-day was one declaring unconstitutional the savings-bank law passed by the last legislature. The court seems to look upon it as an attempt made to disguise under a great many words an unconstitutional measure. If any sort of a banking law is to be adopted in this State it must be first submitted to a vote of the people and be ratified by a majority vote at a general election." It is understood that this same bill, with a provision for its submission to a vote of the people, will be presented to the legislature again at its coming session. It seems probable that it will be passed; and there is good reason for the belief that the people also would favor it, if the question be properly presented to them before election. It is of interest to note that the Supreme Court considers Savings Societies as essentially banks, even though their aims and methods are so different from those of ordinary banks.
acquiring real estate, making improvements thereon, and removing encumbrances therefrom. The time of the existence of such corporations was limited to ten years. Loans were made to their own members, or money not needed for immediate use might be loaned to others. Yearly statements of the condition of the association were to be published.
In 1872, a law founded on the Pennsylvania law, and substantially a transcript of it, was passed to supersede the law of 1869. Two years later, it was repealed,* at the instance of the savings banks, if one is to credit the belief of leading building association men. In 1879, the present law, substantially that of 1872, was enacted; but in the interim some associations had been started with charters issued before the repeal of the former act, many having been issued at that time to speculators. In the year 1880, a member of a building association at Monticello refused to pay his loan, charging that the transaction on the part of the association was usurious, and that the act under which the association was founded —that of 1872 was unconstitutional. The section of the law objected to was the following: "Corporations organized under this act, being of the nature of co-operative associations, therefore no premiums, fines, nor interest on such premiums that may accrue to the said corporation, according to the provisions of this act, shall be deemed usurious, and the same may be collected as other debts of like amount may be collected by law in this State." In the lower court, this objection to the law was sustained, and the act declared unconstitutional. The association appealed to the Supreme Court, where the decision was affirmed. Though at that time only some twenty associations were doing business in the State, yet the new law of 1879 had made the outlook for associations very promising, and "the associations then existing saw the necessity of protection. By hurried correspondence, a meeting was called. Fourteen associations met and formed a union, procured legal talent, and, by hard work and a proper showing before the Supreme Court, were granted a rehearing of the case, and finally succeeded in getting the former decision reversed." The opinion, filed Sept. 30, 1881, takes the ground that "a loan made by a member of a Building Association, according to the rules of the association where the member desiring to raise money bids as a
* Argument of H. V. Freeman, in support of petition for rehearing of Holmes and Monticello Building Association vs. Smythe, p. 18. "The savings banks of this State are currently reported to have procured the repeal of our law of 1872." So also others in conversation.
↑ Circular letter of president of Building Association League, May 15, 1885.