the act of 1874, the Liberator, which had in fact long ceased to do any genuine building society business, hastened the crisis.
This society had drawn funds to the amount of more than a million sterling from provident people in The "Liberator." all classes of the population and all parts of the country by specious representations, and had applied those funds not to the legitimate purpose of a building society, but to the support of other undertakings in which the same persons were concerned who were the active managers of the society. The consequence was that the whole group of concerns became insolvent (Oct. 1892), and the Liberator depositors and shareholders were defrauded of every penny of their investments. Many of them suffered great distress from the loss of their savings, and some were absolutely ruined. The result was to weaken confidence in building societies generally, and this was very marked in the rapid decline of the amount of the capital of the incorporated building societies. From its highest point (nearly 54 millions) reached in 1887, it fell to below 43 millions in 1895. On some societies, which had adopted the deposit system, a run was made, and several were unable to stand it. The Birkbeck Society was for two days besieged by an anxious crowd of depositors clamouring to withdraw their money; but luckily for that society, and for the building societies generally, a very large portion of its funds was invested in easily convertible securities, and it was enabled by that means to get sufficient assistance from the Bank of England to pay without a moment's hesitation every depositor who asked for his money. Its credit was so firmly established by this means that many persons sought to pay money in. Had this very large society succumbed, the results would have been disastrous to the whole body of building societies. As the case stood, the energetic means it adopted to save its own credit reacted in favour of the societies generally.
The Liberator disaster convinced everybody that something must be done towards avoiding such calamities in the future. The government of the day brought in a bill for that purpose, and several private members also prepared measures—most of them more stringent than the government bill. All the bills were referred to a select committee, of which Mr Herbert Gladstone was the chairman. As the result of the deliberations of the committee, the Building Societies Act of 1894 was passed. Meanwhile the Rt. Hon. W.L. Jackson (afterwards Lord Allerton), a member of the committee, moved for an address to the crown for a return of the property held in possession by building societies. This was the first time such a return had been called for, and the managers of the societies much resented it; there were no means of enforcing the return, and the consequence was that many large societies failed to make it, notwithstanding frequent applications by the registrar. The act provided that henceforth all incorporated societies should furnish returns in a prescribed form, including schedules showing respectively the mortgages for amounts exceeding £5000; the properties of which the societies had taken possession for more than twelve months through default of the mortgagors; and the mortgages which were more than twelve months in arrear of repayment subscription. The act did not come into operation till the 1st of January 1895, and the first complete return under it was not due till 1896, when it appeared that the properties in possession at the time of Mr Jackson's return must have been counted for at least seven and a half millions in the assets of the societies. In a few years after the passing of the act the societies reduced their properties in possession from 14% of the whole of the mortgages to 5%, or, in other words, reduced them to one-third of the original amount, from 7½ millions to 2½ millions. Though this operation must have been attended with some sacrifice in many societies, upon the whole the balance of profit has increased rather than diminished. Thus this provision of the act, though it greatly alarmed the managers of societies, was really a blessing in disguise. The act also gave power to the registrar, upon the application of ten members, to order an inspection of the books of a society, but it did not confer upon individual members the right to inspect the books, which would have been more effective. It empowered the registrar, upon the application of one-fifth of the members, to order an inspection upon oath into the affairs of a society, or to investigate its affairs with a view to dissolution, and even in certain cases to proceed without an application from members. It gave him ample powers to deal with a society which upon such investigation proved to be insolvent, and these were exercised so as to procure the cheap and speedy dissolution of such societies. It also prohibited the future establishment of societies making advances by ballot, or dependent on any chance or lot, and provided an easy method by which existing societies could discontinue the practice of balloting. This method has been adopted in a few instances only. The act, or the circumstances which led to it, has greatly diminished the number of new societies applying for registry.
The statistics of building societies belonging to all the three classes mentioned show that there were on the 31st of December 1904, 2118 societies in existence in the United Kingdom. Of these, 2075, having 609,785 members, made returns. Their gross receipts for the financial year were £38,729,009, and the amount advanced on mortgage during the year was £9,589,864. The capital belonging to their members was £39,408,430, and the undivided balance of profit £4,004,547. Their liabilities to depositors and other creditors were £24,838,290. To meet this they had mortgages on which £53,196,112 was due, but of this £2,443,255 was on properties which had been in possession more than a year, and £222,444 on mortgages which had fallen into arrear more than a year. Their other assets were £14,952,485, and certain societies showed a deficit balance which in the aggregate was £102,670. As compared with 1895, when first returns were obtained from unincorporated societies, these figures show an increase in income of 30%, in assets of 23%, and in profit balances of 46%, and a diminution of the properties in possession and mortgages in arrear of 14% in the nine years. The total assets and income are more than three times the amount of the conjectural estimate made for 1870 by the royal commission. It is not too much to say that a quarter of a million persons have been enabled by means of building societies to become the proprietors of their own homes.
In recent years, several rivals to building societies have sprung up. Friendly societies have largely taken to investing their surplus funds in loans to members on the building society principle. Industrial and provident land and building societies have been formed. The legislature has authorized local authorities to lend money to the working classes to enable them to buy their dwelling-houses. Bond and investment companies have been formed under the Companies Acts, and are under no restriction as to balloting for appropriation. All these have not yet had any perceptible effect in checking the growth of the building society movement, and it is not thought that they will permanently do so.
British Colonies.—In several of the British colonies, legislation similar to that of the mother country has been adopted. In Victoria, Australia, a crisis occurred, in which many building societies suffered severely. In the other Australian colonies the building society movement has made progress, but not to a very large extent. In the Dominion of Canada these societies are sometimes called "loan companies" and are not restricted in their investments to loans on real estates, but about 90% of their advances are on that security. At the close of the year 1904 their liabilities to stockholders exceeded £13,000,000, and to the public £21,000,000. The uncalled capital was £5,000,000. The balance of current loans was £28,000,000, and the property owned by the societies exceeded £7,000,000.
Belgium, &c.—In Belgium, the Government Savings Bank has power to make advances of money to societies of credit or of construction to enable their members to become owners of dwelling-houses. The advance is made to the society at 3 or sometimes at 2½% interest, and the borrower pays 4%. In the great majority of cases the borrower effects an insurance with the savings bank so that his repayments terminate at his death. On the 31st of December 1903 nearly 25,000 advances were in course of repayment. In Germany, building societies are recognized as a form of societies for self-help, but are not many in number, being overshadowed by the great organization of credit societies founded by Schulze-Delitzsch. In other countries there has been no special legislation for building societies similar to that of the United Kingdom, and though societies with the same special object probably exist, separate information with regard to them is not available.
(E. W. B.)
United States.—"Building and loan association" is a general term applied in the United States to such institutions as mutual loan associations, homestead aid associations, savings fund and loan associations, co-operative banks, co-operative savings and loan associations, &c. They are private corporations, for the accumulation of savings, and for the loaning of money to build homes. The first association of this kind in the United States of which there is any record was organized at Frankford, a suburb