The first Loan & Fund Association in Massachusetts commenced business in 1852. In 1853 eight more began. An Act of the state legislature in 1854, which purpose was to recognize the existence of such "Mutual Loan and Fund Associations" and then to regulate that segment of the financial market, hastened the formation of another sixteen associations in that year. The aim of these associations was to finance home ownership for the working classes, who at that time had limited access to affordable sources of funds. Small membership groups were organized in order to accumulate a single fund and then such necessary amounts were lent to the original members, or to those who would later join the association. As only one class of shares was issued, those entering the association after the initial meeting were required to pay in as much per share as equaled the value of the original shares. This would permit the new members to be on an the same footing with the other members. Yet, because the value of the shares increased with time, this method of "catching up" effectively served as a barrier to the recruitment of additional members. The organizational structure of these loan funds was created through a voluntarily terminating association. In general terms, such an association was formed in the following manner. A contract was made between the association and its member by which money was to be invested in real estate. In essence, the contract was a subscription entitling the members to shares of capital stock in the association through which the association agreed to distribute earnings on a co-operative basis. The earnings consisted mainly of the interest paid by the borrowers and from the fines and penalties charged for delinquencies. The members met on a regular basis, all members having started to pool their 'savings' at the same time by making payments into the common fund. The members were thus purchasing shares on an "installment" basis. Their payment was $1.00 per month and each share had a stipulated ultimate value, usually in the amount of $200.00 per share. A member would subscribe to a certain amount of shares often equivalent to the anticipated amount of a loan. When the shares attained their matured value, the contract was voluntarily terminated and the assets of the association were divided among the members. The length of time to reach that ending varied depending on the rate of return of the funds used for the loans. When sufficient funds were raised, the money was made available for a loan through a 'bid process'. The money was offered for sale at a given rate of interest. If more than one member desired to 'buy' the money, an auction would ensue whereby the rate of interest increased incrementally until the money was 'sold. The difference between the base rate and the final rate was called a 'premium', which could be paid in a lump sum or on an installment basis. Borrowers would pay interest on their loans, usually upon the whole amount for the entire time, and would continue to make payments on their shares until the shares reached their maturity. At the maturity date the amount received would normally be applied to the repayment of the loan, thus, in effect, cancelling the loan's outstanding balance. This method differed from the typical direct reduction mortgage loan widely used today. The overriding problem with these associations was that after about five years the supply of capital had increased beyond the demand for it. By that time most of the members who desired a loan had achieved that objective; and those who wished to become members and borrowers could not on account of the onerous amount of back payments required to equalize a new share with an old one. Thus a liquidation plan was necessary by which savers; that is, non-borrowers; could exit the association, taking with them their portion of the accumulated capital and its earnings. In a little over 8 years the shares were expected to be redeemed, based on the compounding of interest at a rate of 6.00% per annum. However, rather than operating for the anticipated number of years, these associations were forced to liquidate their assets after only 5 or 6 years. In 1857 an amendment to the enabling legislation required that those associations which had incorporated to submit financial statements on an annual basis regarding the conduct and condition of their operations. From 1857 - 1866 the Massachusetts Insurance Commissioner published an annual report wherein comments were made about the general state of the industry and based on the responses to a questionnaire, an abstract of the financial health of those associations was produce. In reviewing the annual reports, these associations had officers comprising some combination of president, one or more vice-presidents, a treasurer, a secretary, a surveyor, an attorney (rare), as well as a board of directors. Also, the ultimate value of a share ranged from $100.00 to $800.00 While there had been 36 incorporated associations listed in the 1858 report, by the beginning of 1866, all but 3 had ceased to exist. Reasons for their demise were attributed to:
As a example of one of these Loan & Fund Associations, we can look to the GERMAN SAVINGS BANK which had been founded circa 1853 by a group of German immigrants living in Boston, who were members of Holy Trinity parish. Since no reports were ever filed with a regulatory body, it is most likely that this organization had never incorporated. All monies were provided by the "joint association of the privately established savings bank called the German Savings Bank". Loans were made at annual interest rate of 6.00%, subject to monthly payments in accordance with the by-laws of the association. In 1854 the officers were Egidius Gerhard (president), Joseph Jan. Ochs, Aloysius Ochs, Leopold Volk, John Ulrich, Francis I. Kraft, and Andrew Bauer, all of whom were from Boston. (A Massachusetts law permitted a charitable corporation to be formed by an agreement of a minimum number of 7 people. These 7 were early settlers in Boston and probably had become naturalized citizens by this time, a distinction not held by many of Holy Trinity's parishioners.) It would seem that the first loan was made in November of 1853 for $700.00. In a document from 1854 the above named officers were mentioned and the following were witnesses. Romanus Hartmann, Franz Adam Herr, Carl Merott (Meroth), Martin Keller, Aloys G. Lang, Florian Ochs, and Henry Muth.) As befitting an ill-managed association, the German Savings Bank was reorganized in 1855 and at the same time took a new name, the GERMAN LOAN & SAVINGS ASSOCIATION. As part of the that process, all of the existing loans needed to be re-written. In a typical fashion for these associations the members in 1855 agreed to cease operations effective in 1861, or after about 6 years of being in existence. The last loan made by this association was discharged in 1866. It appears that after its dissolution, another group of parishioners of Holy Trinity Church re-established the concept of a savings association with the creation in 1867 of the GERMAN LOAN & FUND ASSOCIATION. Its last loan was discharged in 1899. Many of the loan documents were signed by Karl Kraft and Anton Stocker, probably president and treasurer, respectively. A summary of the activities of these associations is available. In fact, these entities were private financial organizations whose main purposes served both the parishioners in addition to the parish. The properties which it helped finance were often dwelling houses but there were a few properties having a commercial or manufacturing use. It was noted that in many instances the loans made in the 1850's were for 2nd or even 3rd mortgages. One loan of historic importance involved a transaction in 1857 when the Trustees of the German Catholic School gained access to funds for the construction of a school house, which has been credited as having been the first parochial school in New England. It was not possible to determine the amount of its initial capitalization, the number of shares issued, nor the names of its original members. It was possible to learn the names of those members who were borrowers and one source did mention that that there had been 460 shares in force. The parish, itself, at one time may have held 30 shares alone. After the Panic of 1873 and the ensuing economic depression a need was evident for a means to encourage thrift and savings by wage earners. In 1877, following several unsuccessful attempts, the Massachusetts legislature enacted a law to create a "Co-operative Savings Fund & Loan Association", which name was changed in 1883 to "Co-operative Bank", and these organizations were directly related to the earlier Loan & Fund Associations. Given the drawbacks of the "terminating plan" of the earlier associations, these new co-operative ventures utilized a method known as a "serial plan". Rather than issuing a single group of shares, the serial association offered new groups or "series" of shares of its installment stock for sale to its members at periodic intervals. Under a "terminating plan" all of the members were on an equal footing regarding the book value of their shares. Whereas under a "serial plan" members holding shares in a particular series own shares of the same, but shares in other "series" have different values. In any case, the "ultimate value" will always be same. 
The co-operative banks were in sense like the associations which functioned
under a "terminating plan"; each series going through the process of staring
up, functioning to maturity, then disappearing as its assets were liquidated
and its earnings distributeded to the shareholders. The significant
difference is that the co-operative had the ability to issue an infinite
number of "series" of shares.
The "serial plan" was particularly suited in those locales where industrial development provided large numbers of people with assured, steady income as that allowed them to save systematically. Increased employment drove the demand for housing and the co-operative banks were able to put their funds to work in the form of real estate loans. However, at the maturity date of a "series" large sums of money were needed on hand for withdrawals. Although the 1877 legislation was intended to promote home ownership and to encourage savings, there were restrictions on the operations of the co-operative banks. Another justification for the legislation was to create more local lenders and in this regard a co-operative bank was intended to have only a single place of business in the community. Hence there were no branch banks. Yet the Germania Co-operative Bank evaded the spirit of the law by having had 2 locations at various times. Moreover, the co-operative banks were limited to making real estate loans for owner, occupied dwellings within the immediate area of their locations. Such loans were secured by a first mortgage. Other loans could be made by using the value of the "pledged" shares as collateral. However, for such personal loans. There was a minimum amount of $50.00 as well as a maximum amount of $5,000.00. The maximum number of shares which could be owned by a member was 25 with each share having had an ultimate value of $200.00, and the monthly dues were $1.00 per share. Co-operative banks were not allowed to raise more than $1,00,000.00 in capital and the original legislation envisioned that there would be very limited amounts of passive income, such as profits made on investments from, for example, municipal bonds. To reiterate, the purpose of these organizations was to lend to members for the purchase of their principle dwelling. A group belonging to the Holy Trinity Court of the Massachusetts Catholic Order of Foresters met at Casino Hall on August 1885 in order to discuss the formation of a Savings & Loan association. The following week, on August 25, 1888 a meeting was held for the entire parish and after further discussions the bank was organized on September 8, 1885. It was incorporated on October 3, 1885 and on October 20, 1885 the GERMANIA CO-OPERATIVE BANK commenced its operations. Unlike the previously mentioned financial organizations which had been directly affiliated with Holy Trinity parish, the co-operative bank was a publicly chartered entity and as such could not deny membership to anyone not a member of the parish, or even exclude non-Catholics from participation. One non-Catholic, who played a small role in the operations of the bank, was Charles V. Jaeger. He owned a small business at Roxbury Crossing which had been used to hold the monthly meetings. It was at those meetings where the members paid their dues, bid on funds, and elected the directors. Jaeger, also an agent for the Germania Fire Insurance Co. of New York, was mentioned in the co-operative bank's newspaper advertisements. Incidentally, his widow later managed the Germania Hotel, also at Roxbury Crossing. In Nopper's history3 of the parish it was written that the founding of the Germania Co-operative Bank had not been the first attempt to establish a savings bank for the German community. As will be remembered by the older members of the Holy Trinity parish, several tries had been made earlier for its beginning. Partly because of a faulty arrangement, partly because of insufficient business skills, and partly for personal reasons the project failed to develop; as a result the savings of hundreds had been wasted with the participants poorer than before. During the period 1877 - 1886 Massachusetts had experienced a weak real estate market at the beginning of that period and a boom at the end of that period. Since it retained its "German-ness" as well as its original character for only about 50 years, our research will end in the early 1930's. However, the bank continued operations until May 29, 1967 when it was absorbed into the Workingmen's Co-operative Bank. As the shareholders were the owners of the co-operative bank, elections were held to choose the directors, who would be responsible for appointing the officers and committee members. For an annual listing of the co-operative bank's officers, directors, and committee members, please see that report. 
During those 50 years the bank's membership grew rather well as did its loan
portfolio and although it was not, relative to its peers, one of the larger
co-operative banks; it was relatively large as a "second tier" institution.
The accompanying charts follow that progress. The "+" indicates the year in which a new president was appointed.) At the end of 1885 fiscal year 1,537 shares of Series 1 had been issued and soon thereafter another 463 shares from the same Series were issued, making a total of 1,600 shares. When the shares of Series 1 reached their ultimate value of $200.73 ($138.00 Dues Capital and $62.73 Profits Capital), there were only 67 shares which were redeemed at that time. It took 138 months in order for the Series 1 shares to reach maturity. In the 1885 fiscal the first loan was made and 7 shares had been pledged. It had involved an amount of $1,400.00 to John Jansen for his property in South Boston and the deed was recorded on December 7, 1885. 
Until 1914 virtually all of the bank's assets involved loans for real estate.
However, in that year, a bill was enacted into law which authorized
co-operative banks to allow shares to remain after maturity. That legislation
provided more competition for business previously directed towards the savings
banks. Now savers could more easily "roll over" their shares as a series
reached maturity and the co-operative banks would retain those funds, but in
the form of a slightly different obligation - certificates of
deposit.
From time to time the co-operative banks used provisions in the laws regulating them to force the retirement of shares. Sometimes there would be too much income from Capital Dues and not enough of the funds being invested. This unbalanced situation was remedied by the directors returning "unused" capital to the members. In order to make that distribution an equitable one, members were asked to voluntarily make their shares available for that purpose. If those shares exceeded the number to be disposed, then the exact shares would be determined by lot. If the number of shares tendered were less than the number desired, the balance was determined by lot from the remaining shares in the series. 
This ability to retire shares was attributed to the problem some of the
co-operative banks confronted regarding foreclosures. "This condition of
affairs has been brought about ... by a desire in the past to too greatly
extend the number and business of the banks, especially in the larger cities;
too many shares have been issued, and consequently more money has
been offered for sale than the demand of actual 'home seekers' has required,
and loans have been made to unreliable parties and upon undesirable property,
in order to keep the money of the bank employed.
"With reduced dividends, and consequent delay in the maturing of shares, inconvenience and disappointment must result to borrowers as well as to investors; but in the end the result ... will be to return the institutions to a better and more enduring foundation. To do this .. the officials (of some of the banks) ... must be content to see the limit of the business reduced; must cut down the issue of shares to such an amount only as may be required to meet the demands of actual 'home seekers'; must discontinue the loaning of money to speculative builders and on factories and similar risks, confining loans to property and borrowers well known in the vicinity of the bank's place of business; must dispose of such real estate as is now held, as rapidly as may be, without incurring too severe a loss."4 Those words were written in 1900 and were repeated in 1906. Although at that time foreclosures were not significant in Germania Co-operative Bank's operation, in some respects that alert could could reflect on what was occurring at the bank during the early 1900's. The above graph does illustrate a decline in the total shares from 1898 to about 1904 after an initial period of rapid growth.
1. "Germania". Volume __, No. __ 2. Chapter 454 of 1854 - The General Loan Fund Act 3. The parish history was published in 1894. 4. See "Report of the Bank Commissioners, Part II" (HG 2411 M42). 5. A Germania Co-operative Bank advertisement which was taken from the program of Holy Trinity Church's 1927 "Golden Jubilee" celebration.
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Die einzige deutsche Bank in Boston ... was how the Germania
Co-operative Bank proclaimed itself in a 1901 advertisement of a German
newspaper published in Boston.1
