F" HG iiliiilllililiilliiil lull nil Mill Hill liliililii B M bbl 2MM !MM 1^ /^IjW. MORSI5TLAN OF INDUSTRIAL LOANS AND INVESTMENTS THE MORRIS PLAN W- MM THE KUHN-LOEB BUILDING, 52 WILLIAM STREET, NEW YORK The Sixth Floor is the home office of the Industrial Finance Corporation and The Morris Plan Company of New York A THE MORRIS PLAN OF INDUSTRIAL LOANS AND INVEST M E N T S ' J'S not commercial credit ■^ based primarily upon money or property?''^ asked counsel to the Pujo Commit- tee of the late J. Pierpont Morgan. And Mr. Morgan answered: "" No sir; the first thing is character." OWNHI) AND DKVKLOI'KD BY INDUSTRIAL FINANCE CORPORATION 52 William Street, New "^'ork, N. Y. Copyright 1914 Industrial Finan'ce Corporation AU rights rfserrrd Copyright igts Isdi'strial Finam k Corporation All rights resfrred First edition. December. 1014. 5.000 copies Second edition. August, fjis. s.ooo copies ^ I Officers and Directors -^|V^ of the /.^ INDUSTRIAL FINANCE CORPORATION Officers Clark Williams President Arthur J. Morris Vice-President and General Counsel Raymond Du Pay Vice-President Stephen C. Millett Vice-President Charles H. Sabin Treasurer Joseph B. Gilder Secretary Fairfax C. Christian Assistant Treasurer Theodore M. Stevens Assistant Secretary Charles H. Sabin Chairman Executive Committee Herbert L. Satterlee Chairman Legal Advisory Board Morris, Garnett & Gotten Attorneys Directors Alabama New York. (Continued) Robert Jemison, Birmingham *Ed\vin O. Holter, New York „ Sam A. Lewisohn, New York California j^j^^^ ^ MacArthur, New York William H. Workman, Jr. Stephen C. Millett, New York Los Angeles *Arthur J. Morris, New York ^'r^T r.T. AT^r. *Charles H. Sabin, New York COLORADO *TT7II , ,^ 1 TVT 17 1 „ p „ , T-. *Willard Straight, New York E. S Kassler, Denver ^^^^^ r y^^^.^^^ New York Gordon Jones, Denver ^^^j^^^ Turnbull, New York Connecticut *Clark Williams, New York Louis R. Cheney, Hartford North Carolina Richard J. Goodman, Hartford Julian S. Carr, Durham Delaware '*! y Penj>i§y;.>ania ' Coleman du Pont, Wilmington' '. . '■,*J(7h>'- Marile, Jeddo r'c^nr-T. ' Louis J. "Kolb, Philadelphia LiEORGIA ••! .;«..••. -'^ ».. , . ^ ■ , ^ Hollins N. Randolph, Alt^hli'' ^ >• -../Tfir^EssBE ] W. Woods White, Atlanta J AlFeh amifh, Knoxville . . R. O. Johnston, Memphis Maryland Richard C. Plater, Nashville Redmond C. Stewart, Baltimore Virginia Massachusetts H. T. Campbell, Norfolk Joseph Shattuck, Springfield J- H. Cofer, Norfolk », *Raymond Du Puy, Norfolk Missouri j ^ Garnett, Norfolk A. L. Shapleigh, St. Louis H. M. Kerr, Norfolk New York Fergus Reid, Norfolk Newcomb Carlton, New York T. S. Southgate, Norfolk Preston S. Gotten, New ^'ork District of Columbia *W. R. Craig, New York Frank S. Bright, Washington *Arthur Hagen, New York H. D. Johnson, Washington *Member Executive Committee. TABLE of CONTENTS Page OHicers and Directors ot the Industrial Finance Corporation . 4 Brief Statement of The Morris Plan 7 Purposes of the Industrial Finance Corporation . . . . 12 Foreign Industrial Banking Systems 13 Conditions in America 16 The Loanshark Kvil 18 Mistaken Charity 19 History of The Morris Plan 21 The Pioneer Companies: Norfolk, Va 23 Atlanta, Ga 25 Baltimore, Md 27 W'flshington, D. C 29 General Development 30 List of Companies Operating The Morris Plan . . . 31 The Industrial Finance Corporation 31 Possible Development Proposed by the Industrial Finance Corporation 35 Industrial Insurance 35 Rediscounting Arrangements 35 Investments in Small Denominations 36 How Companies Are Organized 36 Equipment Provided 40 Earnings 40 How Loans Are Made . . . .•..*' 42 Additional Resources: Paid-up ("Class B") Certificates of Iiiyestment ... 45 Instalment ("Class C") Certificates of Investment . 45 Losses 4^ From the Borrower's Viewpoint 49 What the Borrower Pays 51 Features that Attract the Conservative Investor 56 The Morris Plan Company of New ^'ork 59 Reports and Resolutions of Public Bodies 66 Striking Commendations by the Press 66 Direct Testimony 71 Directors of Morris Plan Companies 72 332672 ,^lt) THE xMORRIS PLAN OF INDUSTRIAL LOANS AND INVESTMENTS OURTEEN years ago Arthur J. Morris, of Norfolk, Va., appreciating tlie lack of banking facilities in this country, for persons of moderate means, determined to devise a plan to meet this economic need. In Europe industrial banking had been in successful operation for half a century. The Bank of France in 1913 discounted 30,041,247 loans amounting to ^4,001,410,800. Of these loans over half were for sums less than ^20. Six hundred and ninety People's Banks in Italy in 1908 discounted over 2,500,- 000 bills of an aggregate value ot about $329,212,000. In Germany, in 191 2, the combined business of the per- sonal credit societies and industrial banks and personal cooperative credit societies approached $5,000,000,000. Mr. Morris availed of European experience, adapted certain features of foreign systems to existing conditions in the United States, and developed a plan based upon the banking principles of this country. The theoretical plan, having been perfected, was first applied in actual practice in Norfolk, Va., in 19 10, where a c()mi)any was formed with a capital of $20,000. The success of this operation led to the organization of companies to operate The Morris Plan in Atlanta, Ga., Washington, 7 D. C, Baltimore, Md., St. Louis, Mo., Philadelphia, Pa., Denver, Colo., Columbia, S. C, Charleston, S. C, Lynchburg, Va., Richmond, Va., Memphis, Tenn., Springfield, Mass., Portsmouth, Va., and more recently Nashville, Tenn. On October 31, 1914, they had made 49,500 loans aggregating ^6,100,000, the average loan amounting to ^123. A natural evolution brought about the organization of the Industrial Finance Cor- poration, national in scope, to undertake the broader development of this system of industrial finance throughout the country, on a business basis, with authorized capital of ^7,000,000, of which ^1,500,000 has been subscribed. The Corporation owns stock in the various operating companies, averaging twenty per cent, of their capital. On its organization the Corporation became the owner of The Morris Plan and all copyrighted expressions necessary to its operation. Its business is to assist in the organization of, to install, and to exercise a coopera- tive supervision over, the different companies which may be formed to operate The Morris Plan, with the purpose of preserving the integrity of the system for the benefit of all. It sells the right to operate The Morris Plan, charges a fee for organization and instal- lation of companies and for the instruction of the man- aging force in the operation of the plan, and becomes a minority stockholder in each corporation organized under its auspices. A concrete example of the operation of The Morris Plan follows: A salaried employee faces an immediate need for $100 cash — due, perhaps, to a birth, illness, or death in his family. He applies for a loan at several banks of discount and is naturally told by the officers of each that they are not engaged in the small loan business. They note that he is not a depositor and know full well that his financial condition will j)rohahly not he improved sufficiently in three or six months to warrant the i)ayment ot his note at maturity. This refusal of accommodation does not tend to improve his j^eace of mind or the (juality of his citizenship. He cannot borrow at a savings bank. Usually he ap- proaches a friend and enters into an unbusinesslike arranuement, or he aj^plies to a "loanshark" with the inevitable result. It he makes his needs known to a Morris Plan insti- tution, he is told by the Manager that he is welcome, and that he need not feel beholden to the company, because it is its business to afford him the accommoda- tion he seeks. The applicant finds his good character to be an asset, since The Morris Plan operates on the principle that "character is the basis of credit." He makes formal application for a loan of )5ioo and secures two endorsers of good character on his note. When his application is investigated, he is found to have a fixed income, enabling him to pay therefrom, in easy instalments, his obligation when due. He and his endorsers sign a note for $ioo. He receives that amount, less the legal rate of interest for one year. Just as the borrower of ^looooo at a commercial bank is re(iuired to maintain a balance of from ^20,000 to ^25,000 on deposit, without interest, during the term of the dis- count, so the borrower on The Morris Plan is required to make weekly payments in the purchase of a certifi- cate, which may, at his option, operate to licjuidate his liability to the company. At the end of fifty weeks these payments aggregate the amount of the loan. His note tails due two weeks later and his accumulated funds may be applied to its payment. Clear of debt, 9 he leaves the institution a self-respecting citizen. It has become his bank. During the operation he has realized how easily he laid aside $2 a week, so that frequently he continues these payments, which may be applied to the purchase of an investment certificate issued by the company. On this certificate, which, when paid up, bears interest at five per cent., he may borrow without endorsement. By these operations he has learned thrift, and probably for the first time has become a property holder. The variations of The Morris Plan render it appli- cable to almost all conditions. It results, as has been demonstrated, in large commercial advantage to any community. It has been used practically as a collec- tion agent, the creditors becoming endorsers in effecting payment of a debt which could not otherwise be met. It is of economic value to large corporations, the effi- ciency of whose employees has been impaired by the burden of debt. It enables insurance premiums, taxes, and other fixed requirements to be met with ease. It is a great relief to commercial banks, enabling them to meet the needs of many worthy applicants for small loans, by referring them to a reputable institution espe- cially designed for the purpose. It results in the contentment of an hitherto dissatisfied element in the community. The patron of The Morris Plan company is not a recipient of charity. He has the satisfaction of know- ing that his transactions are on a strictly business basis, entailing no loss of self-respect. The Morris Plan helps people to help themselves. It may also be observed that on The Morris Plan the borrower gives no chattel mortgage on household effects. He secures his money, moreover, at a rate lower than the minimum chattel-loan companies charge. A Morris Plan company makes no investments except in loans. Its profits are made by loaning its capital at the legal rate of interest, reloaning the aggre- gate funds resulting from interest paid in advance on loans, and weekly jiayments on, and proceeds from the sale of. investment certificates. Operating with maxi- mum efficiency, a com{)any when well established should loan every year two and one-half times the amount of its capital and of such funds as result from the sale of investment certificates, at a cost of operation not to exceed three per cent, of the loans made. It should earn, after deducting operating expense, ten per cent, on these resources consisting of capital and proceeds from the sale of investment certificates. The interest paid on these certificates should be deducted from the in- come resulting from loaning the proceeds of their sale. PROFITS AND LOSSES Twenty-two comj)anies operating The Morris Plan on May 31, 1915, had made 70,677 loans, averaging $124.20 and aggregating $8,778,262.* The number of loans outstanding on April 30, 1915, was 28,457, the total amount of money on loan at that date was $3,575,305, and the average amount of money per loan was $125.64. The net profits of the companies operating during the first eight months of the calendar year 1914 were at the rate of 7.8 j)er cent, on the caj)ital employed. These profits do not include unearned discounts. 1 hey record the success of new companies, a number of which had been in operation only a little more than one year. •May earnings of three companies estimated. 1 1 PURPOSES OF THE INDUSTRIAL FINANCE CORPORATION AS STATED IN ITS CERTIFICATE OF INCORPORATION A new development in American finance may be said to have begun with the incorporation in Virginia, on February i6, 1914, of the Industrial Finance Corpora- tion. The purpose for which this Corporation was organized is to further, throughout the Union, the organization of local companies to operate The Morris Plan, in order: To provide for the worthy wage-earner, where the need of the loan is apparent, opportunity for borrowing small sums of money without the necessity of submitting to the extortion of unscrupulous money-lenders, but at rates which are reasonable to the borrower and yet fairly remu- nerative to capital; To enable the wage-earner to secure such moneys largely upon the faith of endorsements and guarantees, and with- out the often embarrassing and burdensome requirements of a pledge of chattels as collateral security for repayment; and also, To provide opportunity for the systematic investment of small savings, bearing a higher rate of interest than is now feasible, and affording a basis for the securing of credit, and thus to encourage thrift. In the judgment of those responsible for the organi- zation of this Corporation the accomplishment of these purposes will incidentally put an end to much dissatis- faction concerning financial and industrial conditions, with its resultant agitation, and foster a more intelligent understanding between Capital and Labor. The operation of The Morris Plan results in wide extension of borrowing facilities to people of small means, and a similar extension of facilities for the investment of small funds that will insure a remunerative return. It reaches a field hitherto untouched by financial institutions. ENTRANCE H AI L— I NDl'STRI AI, FINANCE CORPORATION Although the Industrial Finance Corporation is a new organization, created for the purpose of the national development of these facilities, The Morris Plan is not new. It had its beginning fourteen years ago and has been in successful ojjeration for nearly five years. Some of the ablest financiers of America have approved it; in its operation it has jiroved a godsend to thousands, and its extension will decidedly ameliorate the financial condition ot numberless wage-earners, salaried employees, small merchants, and other people whose borrowing needs are as valid as those of their more prosperou-. neighbors. FOREIGN INDUSTRIAL BANKING SYSTEMS Sixty-five years ago, whether in Europe or America, the man without money was without credit. Now, the honest and industrious Eurojiean of small means >3 to whom credit, convertible into cash, is inaccessible is the exception. For this radical improvement in his condition he is indebted primarily to the German publicist, Herman Schulze of Delitzsch, Saxony, whose writings, speeches, and practical activities made him the pioneer in the movement for popular banking in industrial communities that has had such an amazing growth in the German Empire and elsewhere. GERMANY Germany may be regarded as the home of industrial banking. One thousand and fifty-one of the Schulze- Delitzsch banks in Germany in the year 1910 loaned ^1,106,165,207. This does not include any of the banks of the Raiffeisen system, which are altogether coopera- tive and which make loans, not only on personal credit, but on land mortgage as well. Of the Raiffeisen banks there were 14,993 on January i, 1910. The loans by those institutions outstanding on that date amounted to ^452,749,961. The United States Commission which recently made an investigation of rural credits in Europe estimates the number of Schulze-Delitzsch and other cooperative banks in Germany to be 17,000, doing a total business of nearly ^5,000,000,000 a year. ITALY In Italy in 1908, 690 institutions known as People's Banks had outstanding loans amounting to ^170,091,- 946. During the year they had discounted over 2,500,- 000 bills of an aggregate value of about ^3 29,2 1 2,000, and they held investments in Government and other securi- ties to the extent of ^114,152,800. Losses are infini- tesimal. The proportion of loss in the People's Bank of Bologna is about one one-hundredth of one per cent. 14 FRANCE In France the small loans of the Bank of France made annually amount to hundreds of millions. Out of 9,056,424 loans made by the Bank in Paris in 1913, over half were for sums less than ^20, and nearly one- third were for amounts less than $10. Other European countries have provided similar facilities for their small borrowers and savers. I'he only important countries in which no concerted efforts had been made to develop a system of industrial finance based upon personal credit, prior to the advent of The Morris Plan, were the United States and England. The figures quoted above give one an idea ot what it means to the small but self-respecting shop-keeper, the man or woman on limited salary, the trusted clerk, the me- chanic, the laborer, or the domestic servant, to have DIRECTORS ROOM — INDlSTRIAt FINANCE (. ORfOKATION IS access to loanable funds, when it is necessary to borrow, on terms as reasonable as those on which the merchant or man of property borrows at a commercial bank or trust company. CONDITIONS IN AMERICA Here in America we have been too busy with big things to pay much heed to the individually small ones. Our institutions, fully occupied in financing the develop- ment of larger enterprises, have overlooked the fact that their resources might be loaned in small units quite as profitably as in large ones, and even more safely. It is difficult at first fully to appreciate the possibilities of this development, and it is largely by comprehending Europe's experience and analyzing the humanitarian and financial results already secured in this country that one can reach a true realization of the import of this national undertaking. Not until twenty years ago could an American of small means, without banking connections, borrow money at reasonable rates. Since then, if he happened to live in New York City, he has been able to obtain financial assistance from The Provident Loan Society, which was founded for the purpose of lending money on pawns. By pledging a watch, a ring, a piece of silverware, or other article of value, he could procure a small loan to tide him over an emergency, at the rate of one per cent, a month. Before this Society entered the field, the victim of circumstances, who was com- pelled to pawn his treasure, had to pay a very high rate of interest, and not infrequently lost the article pledged when sold at auction because of his inability to redeem it. The success of The Provident Loan Society shows how great was the need of the relief it has aff^orded. i6 Its loans, averaging less than ^^33. 50, in the year 1914 reached nearly ^I9,cxdo,ooo. The fact that it pays interest at six per cent, on its certificates of inilchtedness and has accumulated a large surplus is substantial evi- dence of what can be done in the field of sociological effort, if developed on a sound foundation and con- ducted on a strictly business basis. The work of The Provident Loan Society of New ^'ork has been sui)plemented by that of various chattel loan societies, which, as their name indicates, make loans on household efi^ects and security of the same general character. The operations of these societies are either wholly or semi-philanthropic, their interest charges ranging from two per cent, to three per cent, a month. Undoubtedly they have accomplished much, but the volume of their business is limited, and it is believed they do not touch the larger field where usury continues to thrive. NOTE .Morris Bank of Nashville 5 Namivilii , Tkk.x . wr«k, altrr •latf , Itir v«lac r«mt-«tl. «r, ihr itfKlcr»icDr |irnnit*u* to pa\ lu thr urdrr f>l Ik* MliRRIS HANK OK N'ASIIVII.I.K. >l it. offin in Ihc Cilr •>! Na.hvillr. thr onni nl l)nUar» (5 ), in Kuld .-oin ul Ihr I'nilcd Slalr., (iiivinc(lcpo«itrd hrrrwith •. r..ll»rf4l .r.:I> l.:.)«lin,ni (Mi., v' ' |,.>^.l.nrni tVfiil,. air .,1 ^,.> ll>nl \.. ni..l ■•lUNATI^IIK^ ADItRlfhSHS Trff^i. ^rAr;r^." 17 Illustration used in article appearing in The American Magazine of February, 1914, entitled "A Poor Man's Bank — How Atlanta Is Fighting the Loan Sharks by Lending Money on the Security of Labor" THE LOANSHARK EVIL The borrower who needed more than a few dollars, but was without banking facilities, and yet whose status was above that of the average pawn customer, usually had recourse to purely commercial money-lenders, who exacted a mortgage on household goods or an assign- ment of salary. People offering these avenues of credit depend more upon threats of exposure than upon legal security and their usurious devices for personal profit result in the accumulation of expenses equivalent to an interest charge varying from 40 to 500 per cent, per annum. These individuals, plying their nefarious calling either as persons or corporations, are popularly known as loansharks. Fifteen years ago the light of publicity had not fallen on the loanshark evil. To-day as a result of the continuous efforts of the press, it has become a subject of general knowledge and interest. The leading news- papers of the country have brouj^ht vividly before the thoughtful and considerate the injurious effects of the loanshark's operations. The works of Henry W. Wolff, of London, England, entitled "People's Banks," "Cooperative Credit Socie- ties," and "Village l^anks," teeming with facts and statistics concerning this imjx)rtant subject, show how Europe has solved the problem. A similar solution is as necessary in America to-day as it was in Europe over half a century ago. Though the exactions of the loanshark are deplor- able, and his practices are the subject of legislative prohibition, yet he is a necessary evil in any community where no [proper substitute exists. The savings bank is invaluable, fostering thrift and conserving its fruits, but its patrons, wanting cash for legitimate use, can obtain relief only by withdrawing their dej)osits, in whole or in part, thereby sacrificing interest and parting with the result of years of self-denial. More often it happens that those whose immediate need is great, have no savings account to \\ithdraw. MISTAKEN CHARITY It is futile to maintain that any financial institution should be conducted as a charity. It is unfair that any one who has an economic need ot money, and can furnish safe security therefor, should be made to feel that he is an object of charity or the favored protege of an institution whose avowed pur|)ose "rings with the chime of charity," and which is heralded as a further example of what the rich are gratuitously giving to the poor. The majority of small borrowers and small investors should not, and will not, be jilaccd in this category. 19 CONFERENCE ROOM— INDUSTRIAL FINANCE CORPORATION In which are displayed photographs of officers and offices of the companies operating The Morris Plan There are many who hold that poverty should be subsidized, and that the only way to aid the needy is to give them something. Yet, with industrial classes as competent and as productive as ours, and with a demand for labor that grows greater and greater every year, to say nothing of the many immunities with which these classes are favored, no greater mistake could be made than to maintain that industrial problems can be solved by this pauperizing policy. What is needed in this country is not the subsidizing of individuals, but the recognition of industry as a basis of credit. This should take the form of affording the industrial classes proper opportunities to help them- selves. Helping people to help themselves is scientific philanthropy. Helping people without giving them a chance to help themselves is unscientific charity. In order to help himself in time of need, a man's first requirement is an institution where financial assistance can be obtained on conditions requiring no sacrifice of self-respect — an institution conducted on safe and sound business principles, which make labor an asset and capi- talize character, industry, and frugality. The Morris Plan provides such an institution. HISTORY OF THE MORRIS PLAN Over fourteen years ago Arthur J. Morris, of the law firm of Morris, Garnett & Gotten, of Norfolk, Va., became impressed with the fact that persons of small means in Anfierica — the artisan, the laborer, and the clerk, constituting three-fourths of the entire popula- tion — although able to secure credit in merchandise on satisfactory terms, were almost entirely unable to pro- cure credit in money except from usurious money- lenders. Mr. Morris determined to devise a plan that would meet this economic need. During several years spent in study and research it became evident that the United States, usually so advanced in business, was behind the nations of continental Europe in developing the field of industrial finance. European example and experience furnished an excellent basis for a system of industrial loans and investments that would supply American needs. The Morris Plan is an adaptation of the details of the different foreign systems to the fundamental prin- ciples of American banking. On the completion of the plan it was determined to answer once and for all certain questions relating to its adaptability before its general development should be undertaken. These questions were as follows: NORFOLK COMPANY S OFFICE Can a financial institution loan safely on character supported by earning power? Can such an institution determine, with reasonable safety and accuracy, the amount it should loan by relying largely upon the applicant's annual income? Can the company's favorable decision on the two foregoing questions be underwritten by two endorsers satisfactory to the loaning company, and can the bor- rower obtain the signatures of such endorsers? If these principles can be satisfactorily determined, is there a need for such a business? If so, is it sufficiently profitable to justify the invest- ment of capital for its development? Since these questions could be solved only by actual practice, it was determined to organize the Fidelity Savings & Trust Company, of Norfolk, to demonstrate the feasibility of the plan. THE PIONEER MORRIS PLAN COMPANIES NORKOLK This Company began business in March, 1910, with a paid in capital of ^20,000. It loaned, the first year, ^45,400 in amounts averaging $140 each. At the end of the second year it had loaned over $130,000 and had paid its first dividend of six per cent., after setting aside a surplus. It has paid three annual dividends of six per cent., that for the year 191 3 being at the rate of six per cent, on its book value, which amounted to nine per cent, on its capital, as it had accumulated a surplus of fifty per cent. On January i, 1914, its capital was doubled, and the new issue of stock was immediately subscribed for, without public offering, at the rate of $150 per share. The company's stock has since sold as high as $180 per share, and there has been a contin- uous increase in volume of business and earning power. From its organization to June 30, 191 5, this Com- pany had made 7,122 loans amounting in the aggre- gate to $915,390. *3 W. WOODS WHITE PRESIDENT OF THE ATLANTA COMPANY Pioneer student and antagonist of the Loanshark Evil in America, who has demonstrated The Morris Plan as an effective remedv 24 ATLANTA Before it had been in operation for a whole year at Norfolk, The Morris Plan was presented to Mr. \V. Woods White, of Atlanta, Ga., who had been fighting the loansharks for twenty years and had made a careful study of every remedy for this evil. He at once realized its value. The Atlanta Loan and Saving Company, organized with a capital of ^50,000, began business in June, 191 1. In November of the same year the capital was increased to ^75,000. The report of Mr. White, the President of the Company, at the end of its first year is replete with human interest: During our first year we made 1,155 loans amounting to $149,057. [A list of the occupations represented by these borrowers is given in the report.] During the year we have received 1,767 applications for loans amounting to ^^229,776. We have had to decline a number of our loans because we did not regard them as within the scope of our business, belonging, as we thought, to regular com- mercial institutions. We have taken up 1,150 loans made by "money-sharks" during the year, with interest charges ranging from five per cent, to twenty-five per cent, per month. Saving in interest charges to the borrowers, on the basis of our trans- actions, reaches approximately the astonishing figure of f>js,,ooo. In other words, our borrowers would have paid }^75,ooo interest during the year and at the end of the vear would have owed the principal. Again, 5^75,000 would have been taken from our borrowers and put into the pockets of the money-sharks. . . . We do not hesitate to say that better citizens have been made out of hundreds of them because of their contact with our bank. We make this statement upon the strength of hundreds of letters we have received from our borrowers and upon the personal testimony of nKin\' of rhem to the t)Hicers and others connected with our bank. Referring to the borrowers, Mr. White states: They do not want charity, nor do they need charity. They want only a decent chance to conduct their small business on a living scale. Ibis they are entitled to . Our Company seeks to supplant the money-shark and place men whose service and skill make values, upon something like terms of equality with more favored mem- bers of society, and I am glad to say that in Atlanta the intelligence and conscience of its citizens have determined that the inequalities which have heretofore ex- isted shall no longer exist; that the cruelties and inhumani- ties growing out of our neglect, and their needs, shall cease. In addition to accomplishing remarkable sociological results, the Atlanta Company paid a dividend of six per cent, on the par value of its capital stock at the end of the first year, and laid aside a small surplus. During its second year the Company increased its surplus substantially, besides paying a second dividend of six per cent. At the end of its third and fourth years the Company had still further increased its volume of business and its earning capacity, and paid dividends of seven per cent., besides adding to its surplus, which is now ^10,000. The Company continues to show a steady increase both in volume of business and earning power. From its organization to June 30, 1915, it had made 6,362 loans amounting in the aggregate to ^803,353. ATLANTA COMPANY S OFFICE 26 BALTIMORE COMPANY S OFFICE BALTIMORE Subsequent to its success in Atlanta, The Morris Plan was presented to some of the leading bankers of Baltimore. On their favorable report, investigation was made by leading business men of that city, and in February, 191 2, The Mutual Loan Company was organ- ized. Its authorized capital was fixed at $200,000, of which )^ioo,ooo was offered for sale and oversubscribed. Mr. C. I. T. (lould, the President, in his first annual report, covering eleven months of operation, states: The test of the plan having proved satisfactory, we are now in a position to expand and canvass the city for busi- ness, of which there is an immense voUime awaiting us. Has it proven helpfid? Our experience during the past year has more than convinced us of the abso- lute necessity of some such institution as this. ... lo many [borrowers] the Mutual Loan Company has been a blessing, and we could cite many instances in which our customers have told us of the benefit it has conferred upon 27 them. Many have expressed the deepest gratitude for the assistance we have been able to render them in time of stress and necessity, when the weekly income needed to be replenished. At the end of the first eleven months, loans aggregat- ing ^316,000 had been made, and after the usual deduc- tions and setting aside a reserve of ^1,000, there was a net earned surplus of ^5,899.29. From its organization to June 30, 1915, the Company had made 7,105 loans amounting in the aggregate to ^1,145,050. BALTIMORE COMPANY S OFFICE 28 WASHINGTON COMPANYS OFFICE WASHINGTON Following; the successful experience in Baltimore, it was determined to establish a Morris Plan company at Washington, 1). C. Mr. Frank S. Bright, an attorney of that city, was the pioneer in this movement. The Fidelity Savings Company, Inc., was organized under the supervision of the Comptroller of the Currency, who had approved the plan of organization. The institution opened for business in July, 191 2. Its suc- cess merely repeats that of its predecessors. In May, 1914, after less than twenty-four months' operation, the Company had made 4,206 loans amounting to $631,925, averaging about $151 each. The Company paid its first dividend in January, 1914, and had accu- mulated a surplus of ^^10,419. 92, after having charged oft $^,000, OT one-half of its organization expense. Its 29 losses from bad debts have not exceeded ^60. Its stock has sold in the local market at ^140 per share. From its organization to June 30, 1915, it had made 8,251 loans amounting in the aggregate to ^1,197,150. GENERAL DEVELOPMENT OF THE MORRIS PLAN The success of these pioneer companies in Norfolk, Atlanta, Baltimore, and Washington had attracted wide attention. A Morris Plan institution seemed to have be- come a municipal necessity, and requests for the organi- zation of such companies were frequently received. A corporation was organized in July, 1912, for this purpose, known as the Fidelity Corporation of America. In less than two years after it began business, Morris Plan com- panies were organized in ten additional cities. To-day the plan is being operated by the following organizations: WASHINGTON COMPANY S OFFICE 30 City Name of Company Date of U|)ening Norfolk. \. I. Fidelity Savings & Trust March 23, 1910 Company Atlanta, Cia. Atlanta Loan anil Saving jiau- 19, 191 1 Company Haitiniorf, Md. Mutual Loan Company Kt'lMiiary I, 191 2 \\ ashington, 1). C. Fidelity Savings Company, July 10. 191 2 Inc. Richmond, \'a. Fidelity Loan and Savings November 4, 191 2 Company St. Louis, Mo. Industrial Loan Company January 2, 1913 Memphis, Tenn. Industrial Bank and Frust February i, 1913 Company Charlfston. S. C. Charleston Fidelity Corpo- March 4. 1913 ration Columbia, S. C. The Homestead Bank April 2,1913 Springfield, Mass. Industrial Loan Company May I, 1913 of Springfield Denver. CoK). Economic Loan and Invest- Mav 14, 191 1 ment Company Philadelphia, Pa. Pennsylvania Loan Juneg, 1913 Company Lynchburg, \ a. Citizens Savings and Loan July 22, 1913 Corporation Portsmouth, \'a. Industrial Loan Corporation April i, 1914 Nashville, Tenn. Morris Bank of Nashville August 25, 1914 Ntw Ha\«.n. Conn. New Haven Morris Plan DLCtinlKr I>^. i(;i4 Company Nfu ^ i>rk City The Morris Plan Compan\ December ^ i, 1914 of New York South Bend, Ind. The Morris Plan Company January 20, 1915 of South Bend Hartford, Conn. Fhe Hartford .Morris Plan March 11. I<;i5 Company Bridgeport, Conn. Ihc Bridgeport Morris Plan April 19, 1915 Company Salisbury, N. C. Salisbury Morris Plan May 3,1915 Company Worcester, .Mass. The Worcester .Morris Plan .Ma\ 24. 1915 Company Springfield, Ohio Fht- Springfield Morris Plan June 5, 1915 Company ; I By May 31, 1915, twenty-two companies operating The Morris Plan had loaned in the aggregate ^8,778,262 to 70,677 borrowers. THE INDUSTRIAL FINANCE CORPORATION The Morris Plan became a reality with the opening of the Fidelity Savings & Trust Company, of Norfolk. Early scepticism soon gave way to conviction; predic- tion became demonstration. Opinions as to what could or could not be done were replaced by the testimony of actual accomplishment. The plan stood every test, and the results accomplished justified the claims of those who had believed in it from the first. At the same time this experience taught many things. It became apparent, in time, that in following the principles of industrial banking abroad, all institutions operating The Morris Plan, in order to insure their maximum efficiency, should have opportunity to enjoy the cooperation and assistance of a strong central organization, national in scope, that would standardize every detail of their operations; an organization that would not seek to control an individual company, but would cooperate with it in order to insure its maximum success through its own local management. It seemed desirable, also, that such a central institu- tion should have a substantial financial interest in each company, which would justify and perpetuate this cooperative assistance, preserve the integrity of the system, and improve the operation of the plan. It seemed wise that the national organization should become a clearing-house through which the results of the experience of each company could be made known to the others for the benefit of all, and act as an adjuster of balances in order that the surplus funds of 32 RICHMOND company's OFFICE local companies might be economically cared for and loaned to other Morris Plan companies, an equi- librium being thereby maintained between supply and demand for money. It seemed essential that such a corporation should be conducted upon business principles and not as a philanthropy, for thereby it was believed that its successful operations, involving vested interests, would be more secure and their results permanent. These were the considerations that led to the forma- tion of the Industrial Finance Corporation, which was chartered under the laws of the State of \^irginia, with authorized preferred stock of ^^5,000,000 and authorized common stock of ^2,000,000. It began business on June I, i(;i4, in its general offices in New York City, with ^i,ooo,cxx) of preferred and ^^500,000 of common stock subscribed. A portion of this stock was under- written without expense to the Corporation or profit to the underwriters, and is reserved for those who may become interested in the organization of local Morris Plan companies, or who desire to aid in the development of this plan of industrial finance. The names of its officers and directors appear at the beginning of this pamphlet. Its first act was to acquire the assets of the Fidelity Corporation of America, which included all the proprietary rights to The Morris Plan, all copyrights covering every expression and form used by it, also its contracts with, and minority interests in, the companies then operating the business. The Cor- poration will continue to assist in the organization of companies in all important cities of the country, and to provide part of the capital necessary for this purpose. ST. LOLIS COMPANY S OFFICE 34 POSSIBLE DEVELOPMENT OF THE MORRIS PLAN PROPOSED BY THE INDI'SIRI \1. FINANCE CORPORATION INDUSTRIAL INSURANCE Experience has shown hii^c jxjssihihties lor the (k'NcIopineiit of industrial insurance in connection with the operation ot The Morris Phin. The expense of such husiness results largely from the cost ot placing the insurance and the collection of premiums. This cost can be greatly reduced by the system under develop- ment. It is believed that a plan may be devised for the insurance of borrowers which w ill result in large benefit to the patrons of Morris Plan institutions and in i)rofit to all in interest. A small addition, for insurance, to the weekly instal- ment payments made by borrowers will secure to the patron of the institution the satisfaction of knowing that his co-maker w ill not be called ui)on to pay his debt, and that his family may have something to fall back upon, in the event of his death. R K D I SCUU N 1 1 NC; A R R ANCj KM ENTS To secure an equilibrium between supply and demand for money in different local companies, the Corporation further contemplates the perfecting of an arrangement by which Morris Plan companies needing funds, {lend- ing the sale of additional stock or certificates ot invest- ment, may be accommodated temporarily, and other companies having surplus funds may be enabled to loan them temporarily, on terms and under conditions satis- factory to both borrowing and loaning companies, with the purpo'^e of furthering the development ot '1 he Morris Plan in accordance with the needs of the pubhc for loans and investments in every locality. INVESTMENTS IN SMALL DENOMINATIONS When the system of Morris Plan companies has been sufficiently extended to warrant it, the Industrial Finance Corporation will consider the development in this coun- try of the field of small investments, which has been cultivated abroad with such a remarkable effect upon economic conditions. In those communities where industrial banks have encouraged frugality and saving, and have offered reasonable and economic credit facili- ties, the results have been remarkable. In France, for example, habits of frugality and thrift have developed as nowhere else. Public securities in great volum.e have been sold to small French investors, who, as one expert on the subject has expressed it, are as familiar with the quality and safety of bonds which they buy in denominations as small as ^lo, as they are with the price and fashion of shoes. When our people have been educated to save their money, and have learned how their earning capacity may be capitalized, why should not American wage- earners be as thrifty as the French and, like them, habitual investors in public securities issued in small denominations? HOW MORRIS PLAN COMPANIES ARE ORGANIZED The Industrial Finance Corporation is prepared to assist in the organization of Morris Plan companies throughout the United States where the size and char- acter of the community call for the facilities they afford. Usually the initiative in the organization of a company to operate The Morris Plan has come from citizens of 36 I . 1 ciUS edMl' ANY S (>l HCI, the community who are famiHar with the success of one or more of the existing companies. Inquiry is made of the Industrial Finance Corporation, and, uj^on the sug- gested locaHty commending itself to the judgment of the Corporation's officers, a careful survey is made to determine the opportunity for the successful develop- ment of the Plan. The Corporation then invites the cooperation of those of the highest type of citizenship, and when suffi- cient interest has been awakened to warrant further procedure a meeting is called at which officers of the Corporation present The Morris Plan in detail and out- line the course to be adopted in the organization of a local company. A committee on organization is formed which, alter any further investigation its members may see fit to make, undertakes the formalitiesof organization 37 RECEIPT FOR PAYMENT OF STOCK SUBSCRIPTION, SHOWING CHARACTER OF EQUIPMENT PROVIDED BY THE INDUSTRIAL FINANCE CORPORATION in cooperation with the representatives of the Corpora- tion, under the terms of a prehminary contract. This in time is followed by the execution of an operating contract, when the company comes into corporate existence. The amount of capital, proportionate to the size of the community, is agreed upon and the committee cooperates with the representatives of the Corporation in securing subscriptions to the stock of The Morris Plan company. This stock is sold to subscribers at not less than ten per cent, above par, payments to be called for as needed. The Corporation becomes a sub- scriber for this stock on the same terms as are ottered to other subscribers. 38 The Corporation's representatives assist in choosing a proper site, aid local counsel in obtaining a charter tor the company and, if desired, assist in choosing proper officers. The Corporation then provides a full equip- ment for the operation of The Morris Plan, and when the company is ready for business the Corj^oration's representatives install the system, superintend its inauguration, and instruct the officers and employees in the operation of The Morris Plan, ope!i the books and direct the pro{)er method of making loans, and generally supervise the business of the company for a period of two weeks, or longer if necessary. All the expenses of organization of every nature are borne by the Industrial Finance Corporation. At the first meeting of the Board of Directors of the new company an operating contract is entered into, which outlines and determines the relation of the new company to the Industrial Finance Corporation and provides for the payment of the organization fee. <[a|>tlal i^larl. fHorris ^llauU iif ^'asbuUlr "7 i ^ 'L — STANDARD STOCK CKRTIFICATE, SHOWING CHARACTKR OF EQLIPMENT PROVIDED BY THE INDUSTRIAL FINANCE CORPORATION 39 ITEMS OF EQUIPMENT PROVIDED BY THE INDUSTRIAL FINANCE CORPORATION "B" De Rules and Regulations for Operation of Morris Plan Suggested By-Laws Detailed Explanation of Accounting System Data for Local Press Manila Covers for Pass-Books Cash Book Journal Loan Register General Ledger Certificate "B" Ledger and Transfer Book Expense Distribution Book Trial Balance Book Indexed Minute Book Book of Receipts for Payment of Stock Subscriptions Form of Stock Subscription Call Book of Capital Stock Certificates Stock Ledger and Transfer Book Instalment "C" Certificate Pass-Book Certificate Ledger Cards Instalment "C" Certificate-assigned Pass-Book Certificate Ledger Cards Loose Leaf Scrap-Books Daily Cash Blotters Binder for Daily Cash Blotters Application Blanks Binders for Application Blanks Notes Co-makers' Signature Forms Approved Application Forms Rejected Application Forms Other forms for increased efficiency panies are being devised from time to Finance Corporation. EARNINGS ON THE MORRIS PLAN A Morris Plan company declares dividends on a book value computed by adding to the par value of the capital stock the surplus laid aside from earnings. A cash divi- dend not exceeding six per cent, per annum is paid on this book value annually or semi-annually. The book value should constantly increase and the return to the stockholders, based upon this increment, should result in increasing cash dividends. 40 Form Transmitting Note Counter Checks Delinquent Notices for Makers Delinquent Notices for Co-makers Folders Descriptive of Morris Plan Directors' Meeting Notices Blanks for Assignment of Certificates Small Envelopes Small Return Envelopes Large Envelopes Large Return Envelopes Letterheads Liability Index Cards Weekly Report Forms Monthly Report Forms Receipts and Disbursements Resources and Liabilities Customers' Index Cards Liability Record Card Guides Seal and Press Rubber Stamp Seal Class "B" Certificates — Four nominations Set Numbering Machines with Day Affix Numbering Machine Ledger Dater Line Dater Paid and Date Stamp Ink Pads Stamp Pad Ink Self-Inking Steel Dater Check Spindle Morris Plan Gummed Labels and convenience of operating com- time bv the staff of th*^ Industrial CHARI.KSTON COMPANY S OFFICE The earnings of a Morris Plan company are derived from the interest charged borrowers in the loaning of its capital and other resources obtained from the sale of investment certificates, and the method by which its resources are being constantly turned over through a compounding process. These earnings have been satis- factory because of the practice of reloaning the bor- rowers' weekly jxiyments on instalment certiticates purchased and pledged as collateral, and likewise reloan- 41 ing the interest that is deducted in advance on each loan. This will be made apparent by the following description of how loans are made. HOW LOANS ARE MADE A ^loo loan, for example, is made as follows: The borrower gives his note with two co-makers for ^loo, due one year after date, and pays interest at the legal rate in advance — say $6. By some companies a fee of $2 is charged to cover the actual cost of investigating his application and the standing of his co-makers. He then agrees to purchase, at the rate of $2 per week for fifty weeks, a "Class C" Instalment Investment Certificate. This certificate, which bears no interest when hypothecated, is assigned as collateral for the loan. At the end of fifty weeks the borrower has paid ^100 on this certificate. Two weeks later his note falls due. He can then withdraw the ^100 paid on the certificate and pay the note, thus closing the transaction. He also has two other options hereinafter explained. From the foregoing description of how loans are made, it will be seen that each w^ek the Morris Plan company receives from borrowers, by payments on "Class C" Investment Certificates, purchased and pledged as collateral, an amount equal to two per cent, of outstanding loans. Therefore, in addition to loaning the amount of its capital at six per cent, the company reloans two per cent, of each loan each week. It also reloans the aggregate amount of interest deducted in advance. This process enables the company to earn a gross profit on each dollar of capital at the rate of 13 to 14 per cent., according to the activity with which its funds are turned over. 42 I At Alit-illl -1 ; a;::;H: ". j j 5. :dK -■' =1-1- ' 'li^ia; -isiia; '111 |gvljii>lllii!^lji. < H < — u ■(A O - Z O !- H 2 z = X _ * c w en Z < .- u c - I a. m 43 44 ADUlilONAL RLSULRCES PAID-UP ("CLASS B") INVESTMENT CERTIFICATES Resources in addition to the capital of the company are provided by the sale of "Class B" Investment Certificates. These certificates bear interest at the rate of five per cent, per annum, evidenced by semi- annual coupons. They are issued in denominations of ^^50, i^ioo, i$500, and $i,cxdo, and are sold for cash. These certificates are attractive to small investors and find a ready sale. In this way additional resources are secured on which the company is able to earn a very satisfactory profit, after paying interest on its certifi- cates. These paid-up certificates may be cashed at any time by the holder thereof on thirty days' notice to the institution. The company may also redeem these certificates upon thirty days' notice to the holder, and reserves the right, if the Board of Directors deems it necessary, to limit the number and amount of with- drawals in any one month in conformity with the receipts of the company. These conditions are expressed on the face of the certificate. A " Class B " Certificate can also be used as collateral for a loan to the extent of its face value without the need of other security or endorsement. Applications for loans with these certificates offered as collateral are given priority over all others. Their general ownership is, therefore, a desired evolution of the plan. INSTAL.MKN r ("CLASS C") INVESTMENT CERTIFICATES Additional resources are also secured from the sale of "Class C" Investment Certificates on the instalment [)lan. Certificates of this class provide a systematic investment for those who have not the funds with which 45 to purchase paid-up certificates of "Class B." These certificates, known as "Class C, " are issued in units of $50 and are paid for at the rate of ^i per week for fifty weeks. When not hypothecated they bear interest, after twenty-five payments have been made, at the rate of four per cent, on the average amount paid in, leaving a substantial profit to the company from the loaning of these funds. As a source of earnings, the funds obtained from the sale of "Class B" and "Class C" certificates bear a relation to a Morris Plan institution and its capital similar to that which deposits bear to a bank. Morris Plan companies, however, do not receive deposits and none of their funds are subject to check. REGARDING LOSSES Not the least surprising feature of The Morris Plan is the safety of the capital employed, as demonstrated by actual experience. These funds are loaned on good three-name notes, secured by the earning capacity of their makers and by collateral that is growing better at the rate of two per cent, a week. Three men, whose integrity is carefully investigated, are makers on each note. Their ability to meet their obligations is first determined by a developed system of inquiry, the results of which are passed upon by the discount committee, appointed from the Board of Directors, together with the local cashier, under whose supervision the investiga- tion has been completed, and whose recommendations thereon are made to the discount committee. Should the maker default, through death or otherwise, there remain two persons of character and earning power who can divide the liability and liquidate the loan on easy terms. 46 CHARLESTON COMPANY S OFFICE 1 wenty-two companies operating The Morris Plan on May 31, 191 5, had made 70,677 loans, averaging $124.20 and aggregating $8,778,262. The total number of loans outstanding on April 30, 191 5, was 28,457, the total amount of money on loan at that date was $3,575,305, and the average amount |)er loan was $125.64. It has been clearly demonstrated that under normal conditions of jiatron- age and management the average of loss should in no case exceed one-quarter of one per cent. This experi- ence sufficiently demonstrates the exceptional safety of the plan. The small list of doubtful accounts at most of the institutions shows that if the same care and attention are given to loans made to the industrial classes as are observed in ordinary commercial loans, the borrowers 47 will promptly meet their obligations. This conclusion is confirmed by over fifty years of experience in Europe, where the losses in similar institutions are so small as to be negligible. A United States Government commission has found that: With equal prudence and intelligence on the part of the lender, loans to the industrious and economical poor are as safe as those made to any class whatever of the rich. The Morris Plan company at Washington, D. C, for instance, which loaned during its first two years about ^750,000 to 4,000 borrowers, sustained but one loss, amounting to only ^60. COLUMBIA COMPANY S OFFICE SPRINGFIELD, MASS., COMPANY S OFFICE FROM THE BORROWER'S VIEWPOINT From the foregoing it will be seen that a Morris Plan company furnishes the small borrower with an institu- tion from which he can secure reasonable credit in time of need. He is allowed to create on easy terms an asset with which he can licjuidate his loan, and is not required to furnish chattel mortgages or pawns. He can obtain credit even if he is a day laborer, provided he produces two of his fellow-workmen to vouch for his integrity and his earning power by becoming co-makers on his note. Should he owe the grocer ^25, the doctor ^25, the undertaker ^^25, and some other creditor ^^25, the Morris Plan company will accept the endorsement of the grocer, the doctor, the undertaker, and the other creditor, limit 49 the liability of each to the amount he receives, and mail each creditor a check for the amount of his bill. The borrower is thus relieved of the worry of debts which he cannot pay, and is placed in a position where he can liquidate his indebtedness conveniently by small weekly payments consistent with his income. He is also encouraged to save by the last two of the following three options that are given him at the time the note evidencing his loan matures. I. Take a ^50 loan as an example: When his note becomes due he can withdraw the ^50 paid on the "Class C" Certificate, pay his note, and close the transaction. II. He also has the option of paying his loan from out- side sources, and converting his "Class C" Certificate into an interest-bearing ("Class B") Certificate. Sometimes he carries twice as many "C" Certificates as his loan requires, so that at maturity he may not only pay the note but also acquire interest-bearing " B " Certificates. III. Or, if he has not the extra funds, he may convert his "Class C" Certificate, now paid up, into an interest- bearing ("Class B") Certificate, use it as security for a new loan of ^50, and pay his old note with the ^50 obtained by the new loan. He needs no endorsers for his second loan, as the "B" Certificate is sufficient security. When he takes out this second or new loan, the borrower subscribes for another "Class C" Instalment Certificate, just as he did in making his first loan. He so pays $1 a week on this new certituate and at the end ot the second fifty weeks he withdraws the ^^50 paid and cancels the note. This cancellation releases his "B" Certificate from hypothecation, and he becomes the owner of a paid-iij) ("Class B") Investment Certificate worth ^50 plus $2.^0 interest. He will have started out with a liability and finished with an asset. He can borrow on this asset at any time up to its full face value without furnishing endorsers or other security. Necessity begot a habit of weekly saving which led on to thrift. WHAT THE BORROWER PAYS It has frequently been asked what the borrower pays for loans on The Morris Plan. In determining this question a distinction should be made between w hat the borrower pays as an outlay for the money received, and what it costs him by combining what he actually pays with the interest he might receive on his weekly payments if invested. Likewise, a distinction should be drawn between the interest charged tor the use of the money, and the amount of credit extended. When ^100 is loaned to a borrower on The Morris Plan, $6 interest, or the legal rate, is deducted in advance This is the interest that he pays. He does not receive, however, interest on his weekly payments, which, if comj)uted at the rate allowed by savings banks (four per cent.), would amount to $2. If the interest, not received on the weekly payments, be computed at a six per cent, rate, which is more than any savings bank or other institution would allow, it would be $3. He likewise does not receive interest for one year on the discount deducted in advance, which in this instance would be six per cent, on $6 for one year, or 36 cents. 5« SPRINGFIELD, MASS., COMPANY S OFFICE Therefore, he pays $6, and does not receive (at the four per cent, calculation) ^2.24, or (at the six per cent, calculation) ^3.36. But it has been suggested that if a man borrows $100 and six per cent, interest is deducted in advance, and he receives ^94 and pays $2 per week, he only has the use of ^47 for the average period of one year, and that if the use of ^47 for this period costs the borrower ^6, he is paying an interest rate in excess of thirteen per cent, per annum. It is submitted, however, that the borrower under The Morris Plan does not pay thirteen per cent. The suggestion that he does results from a confusion of thought and the failure to distinguish between the average amount of money the borrower has the use of for one year and the amount of credit extended to the borrower. 52 The toregoing statement is comj)uted on the assump- tion that the borrower has the use o( ^j^j for the average period ot one year; hut it the borrower who receives a ^loo loan from a Morris Phin institution should die one day after the loan is made, his co-makers would be resj)onsible, not for ^^47, but for i^ioo. Forty-seven dollars may represent the average amount the borrower has the use of for one year, but ;^ioo represents the amount of credit extended. The cost of the loan, there- fore, is synonymous with the cost of the credit extended, and the inquiry should not be what it costs for the use of $47 for the average period of one year, but what it LYNCHBURG COMPANY S OFFICE 53 LYNCHBURG COMPANY S OFFICE costs to obtain credit for ^loo. On this basis the cost has been explained above. The discussion becomes merely academic when the subject is considered from the broad viewpoint of accom- modation afforded, and the character of the small loan business. To determine the rate of interest he pays on his loan of $100,000, the merchant seldom computes interest at six per cent, on his cash balance maintained to justify the credit. These figures do not take into consideration the inves- tigating fee, which covers the actual cost of investigation, and which corresponds to the charge made by trust com- panies for investigating the value and title of real estate or other collateral offered as security for a loan. No fee exceeding $1 for each $50 loaned and no fee exceeding $s in all is charged; and no fee is received unless the loan is made, the company assuming the risk and expense of in- vestigating those loans which are not granted. 54 As to tlic rate tor small loans which "independent commercial agencies" may reasonably charge, Mr. John M. Glenn, General Director of the Russell Sage Foun- dation, declares that, owing to the relative costliness of the necessary investigation, "such agencies must charge from twice to four times the ordinary commer- cial rates for loans. " NASHVILLE COMPANY S OFFICE 55 FEATURES OF MORRIS PLAN INSTITUTIONS THAT ATTRACT THE CONSERVATIVE INVESTOR First: Morris Plan loan and investment companies, operating independently throughout the country, enter upon a virgin field. Their loans are made to an army of industrial workers at present without credit facilities. The result is that this business to-day is virtually with- out competition, save from the loanshark — a pest which the whole country is interested in suppressing. No expensive advertising is required and the business comes to the bank unsolicited, whereas other financial institutions must engage in keen competition with progressive rivals. Second: The cost of establishing a Morris Plan company is almost nominal, as the institution is not burdened with the outlay usually incident to the estab- lishment of a new business, whether financial or mercan- tile. It does not require the usual expenditure of capital for expensive buildings, handsome office furniture and fixtures, or heavy stocks of merchandise. Third: A Morris Plan institution is free from the heavy operating expenses incident to so many lines of business. It is without varied departments, and con- fines its operations to a single line of business that is handled by a few officers and clerks. It requires no large-salaried executives or other highly paid officers. With $100,000 capital it can operate successfully, as demonstrated by experience, at an annual expense not exceeding three per cent, of its gross business. Fourth: Morris Plan institutions invest all their funds in loans that are becoming more secure each week at the rate of two per cent, of the amount loaned. They take no risks incident to investment in securities or real s6 estate. They have no occasion to carry large sums of idle money, as other financial institutions do, and are not forced to loan their funds at low rates, on call. Fifth: Morris Plan institutions, being in no man- ner speculative, forego the probability of profit rather than incur the possibility of loss. They avoid the accumulation of idle funds by inserting in their invest- ment certificates the right to redeem them from the hands of the holders on thirty days' notice, so that a balance may be kept between the demands for loans and the funds on hand. Sixth: Having no deposits, they are "run j^roof. " Seventh: They are operated on the principle that "character is the basis of credit"; that if a man be of good character and can find two persons of equally good character to endorse his note, he is entitled to credit, based upon his earning capacity, as clearly as is the more jirosperous business man, the discounting of whose paper has brought prosperity to many of our great financial institutions. Eighth: Usually when the man of means gives aid to the less fortunate, there is little likelihood of the return of his funds. The purchaser of the capital stock or the certificates of investment of a Morris Plan company not only contributes to the relief successively of hundreds of worthy self-respecting citizens on a scientific business basis, and stimulates ai)preciation of character as essential to credit, but also secures an investment from which satisfactory return on cajiital is assured. The development of The Morris IMan of industrial loans and investments is one of the most important economic and industrial movements that have been organized in this country for years. The Plan has been S7 most highly commended by the daily, weekly, and monthly press of the United States, as well as by a lead- ing English newspaper. Some of the foremost men in the country have investigated it and are giving financial and moral support to the effort to make it a nation- wide success. Important men in all parts of the United States have become interested in the movement, and are Directors of the Industrial Finance Corporation or of local Morris Plan companies. No enterprise of recent date has a more valid reason for its existence, or promises larger benefit to the great body of the Ameri- can people. Although founded on business principles. The Morris Plan produces an important sociological result. By extending credit in timeof need to people of small means, it lightens many a burden. By converting thousands of borrowers into property-holders, and by encouraging thrift, it exerts a material influence on the good citizen- ship of a community. The nation-wide extension of the Plan cannot fail to lessen current dissatisfaction with existing conditions and to quiet appreciably social unrest. The Morris Plan, wherever operated, promotes a better understanding between Labor and Capital. It is a business foundation deserving the coopera- tion and support of thoughtful citizens. S8 PUBLIC LOBBY THE MORRIS PLAN COMPANY OF NEW YORK THE MORRIS PLAN COMPANY OF NEW YORK From the moment Ihe Morris Plan was first put into operation, it was recognized that the greatest service it could render, and the severest test it could be put to. would be experienced when it was applied in the city of New York. This was the goal its originator had in view from the first. But it was nearly five years from the day the Norfolk Company began busi- ness when The Morris Plan Company of New York, on December 31, 1914, opened its doors to the hundreds of applicants whose inquiries had been |)ouring iti during the period of its formation. Stimulated by unsolicited newspaj)er notices (un- sought, because it was foreseen that no advertisement was needed to bring to its doors as man\ borrowers as it could care for at the start), the noii-nionied but 59 credit-worthy class came in great numbers to No. 52 William Street, where the local company had sublet a part of the premises of the national Corporation. A few days sufficed to show the inadequacy of its quar- ters;and within a fortnight of its opening itwas necessary to establish an application bureau at No. 37 Liberty Street, to handle the crowds of would-be borrowers. Up to June 30, 1915, seven thousand applications for loans had been considered and 2,444 loans actually made, aggregating ^296,315 and averaging $121.24. To do this volume of business on a subscribed capital of only $100,000 and a surplus of $10,000, the Company sold $24,000 of its full-paid five per cent. (Class "B") investment certificates and $11,650 of its instalment (Class "C") certificates and borrowed $85,000 at current rates of interest. Its authorized capital will eventually INTERIOR OFFICE THE MORRIS PLAN COMPANY OF NEW YORK 60 be increased to )^i,ooo,ooo, and steps are being taken to obtain subscriptions for the full amount. Even with this sum in hand, it will be possible to care for only a part of the small-loan business of New York. The demand for such loans, on The Morris Plan, would seem, indeed, to be virtually unlimited. By far the greater part of it is wholly legitimate, and the local company has received many proofs of the sociological value of the service rendered to its patrons, not only by lending money on fair terms, but by securing the can- cellation or reduction of the claims of money-lenders who have transgressed the law. A very large number of the loans thus far made have been of a remedial character. This may be seen by reading the statistics of the Company's business presented on page 63. And there may be seen, also, the extent to which the service of the Com[)any has been sought by emj)loyees of the City, the County, the State and the National Government, as well as by t(Mlers of the purely industrial class. Among the stockholders and directors of The Morris Plan Company of New York are many of the most representative business men of the city, who serve in the same spirit (as President Towne has expressed it) in which they would serve on the directorate of a savings-bank. The Officers and Directors are as follows: OFFICKRS Henry R. Iowne President Herbert L. Satterlee Vice-President Clark Wu-LIams X'ice- President Charles H. Sabin Treasurer Wallace D. McLean (icncral Manager B. F. Boos Assistant Secretary 61 DIRECTORS Frederic W. Allen, Messrs. Lee, Higginson & Co.; Director, Mechanics & Metals National Bank. William D. Baldwin, President, Otis Elevator Co. George F. Canfield, Messrs. Satterlee, Canfield & Stone; Vice- President State Charities Aid Association. Thomas Cochran, President, Liberty National Bank; Director, Astor Trust Co. Raymond Du Puy, President, Virginian Railway Company. Lewis B. Gawtry, Vice-President, Consolidated Gas Company of New York. Thomas H. Gillespie, Vice-President and Director, T. A. Gillespie Co. Richard T. H. Halsey, Chairman Finance Committee, New York Stock Exchange. Edwin O. Holter, Messrs. Holter, Ingalls & Guthrie, Attorneys. Sam a. Lewisohn, Messrs. Adolph Lewisohn & Sons. John R. MacArthur, Messrs. MacArthur Brothers, General Contractors. John Markle, President, G. B. Markle Co., Anthracite Coal Operators. Arthur J. Morris, Messrs. Morris, Garnett & Gotten, Originator of The Morris Plan. Jason A. Neilson, with Messrs. Brown Brothers & Company; ex-President, N. Y. Chapter American Institute of Banking. James E. Russell, Dean of Teachers' College, New York. Charles H. Sabin, President, Guaranty Trust Company of New York. Theodore P. Shonts, President, Interborough Rapid Transit Company. Willard Straight, Banker; President, American Asiatic Asso- ciation. Lionel Sutro, Treasurer and Director, Cathedral Realty Co. Henry R. Towne (President), Chairman, Yale & Towne Mfg. Co.; ex-President, Merchants Association; Director, Federal Reserve Bank, New York District. Guy E. Tripp, Chairman Board of Directors, Westinghouse Electric & Manufacturing Co. William Turnbull, Retired Banker. Malcolm D. Whitman, William Whitman Co., Inc. Arthur Williams, General Inspector, New York Edison Com- pany. Clark Williams (Vice-President), ex-Superintendent of Banks and ex-Comptroller of the State of New York. Charles T. Wills, Builder; Director, Garfield National Bank. 62 STATISTICS OF THE MORRIS PLAN COMPANY OF NEW YORK FROM THE OPENING D.\\\ DECEMBER 31, IV14, TO rHE CLOSE OF JiUSINESS ON JUNE 30, 191 5 Jan.-Feb. | Mch.-Apl. Total Amount loaned )?6i,78o ^^111,300 {^123, 235 $296,315 Borrowers 509 919 1,016 2,444 Average $121.38 $121.25 $121.29 $121.24 On July I there were but twenty-five weekly payments delin- quent for more than one week. All Loans Made hy Fhe Morris Plan Company of New York to June 30, 191 5: Sieof Loan Number of Loans Aggregate Amount Size of Loan $200 Number of Loans AggrcKatc Amount $2,CXX) I $2,000 242 $48,400 1,400 I 1,400 175 4 700 1,000 5 5,000 150 243 36,450 750 I 750 125 22 2,750 700 1 700 100 1.037 103,700 600 6 3,600 80 2 ito 525 I 525 75 66 4.950 500 25 12,500 60 3 180 450 I 450 50 631 31.550 400 16 6,400 3!i I 35 350 7 2,450 30 3 90 300 70 21,000 25 14 350 250 40 10,000 , 225 1 — 225 1 1 _2'444 $296,315 BORROWERS Men WOmen Average weekly income. Married Single L'naccounred for Supporting children Numher of children Supporting others Number of others Real-estate owners Jan.-Feb. Mch.-Apl. May-June 1 476 870 1 976 33 49 40 $27.10 $24.64 $25.80 396 663 756 ' 113 256 251 329 H32 382 426 84 549 1,526 (>04 674 116 9 616 1.574 685 776 159 Tot.il 2,322 122 $25.83 1,815 620 9 1,494 3^')32 1 ,67 1 1,876 359 63 REASONS FOR BORROWING Repay loansharks Repay loans on pawns and chattels Miscellaneous debts Illness and births Deaths Household expenses Tuition Begin business Business expansion Purchase of home Mortgage and interest Taxes Rent Insurance premiums Begin housekeeping Wedding Help relatives Miscellaneous Jan.-Feb. Mch.-Apl. May-June 70 20 [86 95 15 24 8 3 49 4 14 13 8 9 4 2 5 9 73 29 255 116 13 48 25 15 160 9 16 25 10 II 6 6 26 64 29 23 229 198 31 49 22 17 163 8 30 36 10 23 5 8 30 97 Total 172 72 670 409 59 121 55 35 372 21 60 74 28 43 15 16 61 170 CLASSIFICATION ACCORDING TO EMPLOYMENT Jan.-Feb. Mch.-Apl. May-June Total U. S. Government New York City New York County New York State Manufacturing Mercantile Financial Insurance Newspapers Railroads Steamship companies. . . . Express Telegraph and telephone . Oil companies Real-estate Contracting and building. Warehousing Grocery Tailoring Printing and publishing.. 78 155 4 3 32 88 19 27 25 13 2 no 193 7 7 118 109 36 23 51 24 5 7 II 3 5 5 2 13 22 19 165 205 10 7 96 92 28 25 70 33 4 4 13 4 12 18 8 19 18 33 353 553 21 17 246 289 83 75 146 70 II 19 32 9 22 31 II 32 40 52 64 CLASSIFICATION ACCORDING TO EMPLOYMENT— Con/in«^