New-York tribune., 1877-09-18
THE 1oyG LSLAND SWINGS BANK.

| touched, ana the current cApleSSioh u" VI"
subject is to the effect that while such an oc-
currence might not be surprising in New 0rk,
! it is quite out of character for their own good
city. Only few months ago they were point
ing with much satisfaction to the superior way
in which such things were managed ION the
"Hill,n as compared with the wicked metropo-
lis on the other side of the East River. The
occasion then, was the closing of the Park
Savings Bank, on the corner of Fulton
ave. and Oxford-st. The directors found that
the concern was losing money. SO they stop
ned receiving deposits and issued notice to
depositors requesting them to withdraw Their
funds. Every creditor of the bank was pad
dollar for dollar, with accumulated interest.
1t was highly honorable performance, and no
doubt was Il costly one to the directors, who de-
served something more than the thanks OF the
community. A young savings bank cannot be
wound up without loss, unless it may have
! had some exceptional good luck in trading III
securities, such as buying bonds and selling
them at a profit. The ordinary savings bank is,
strictly speaking, insOlyent an hour after It's
birth. The first blank book it purchases can
not be sold again at the same price after there
is a pen-scratch in it; the assets Of the bank
|
liabilities. The unfortunate Long Island Saw
! ings Bank was conducted for the first few years
OF its life, as if It's directors justly appreciated
this inevitable weakness. Its Office was mod
est one. hired at light rental. But, when
three or four years elapsed, these traditions OF
economy were thrown aside, and the bank made
its first great mistake.
The directors and officers were men of good
social standing, and some of them-as, for in
stance, the colonel of favOrite regiment-had
a wide personal popularity. Its title helped the
concern not a little in obtaining the favor OF
class of deposit0rs different from those of most
savings banks in the city: " Long Islanders"
patronized it more than the city people,
'Iong Islander being, in the Brooklyn YER
nacular person who hives outside the city
! limits. For so young a bank, the concern was
very prosperous. The directors decided to buy
an eligible lot near the City Hall, and erect
upon it a handsome bankng-house. The local
| Ity was the business centre OF brooklyn,
and not "A few practical men dreamed at that
time that Brooklyn was about to become
great emporium of business, instead OF city
of homes The banking house was built, cost
ing with the lot, $230,000. That and that
alone, has broken the back of the bank.
few figures will show how such an investment
must operate. Suppose a bank had 81 100000
on deposit invested so as to earn per cent,
and was paying per cent to its depositors.
In the four years of its existence it had
not accumulated any surplus worth nam
ing. It's entire resources would then be
$4,000 year, out of which it must
nav salaries, rental, and all other expenses.
al .l,,4ss nof itc al Itc
are invested in a banbing-house, leaving
$500, 900 that draws interest at Z per cent.
Its income is then $4,000, Its payments of
interest to deDositors remaining 100000 An
annual deficiency of $4,000, well as all
salaries and other expenses must then be met
from the rental CT the portions of the bank
ing-house which the bank does not
| cupy Manifestly, that would be a very
speculative and risky investment for poor peO-
ple's savings The Long Island concern had
for time much larger amount of de-
posts than in the supposed case; it reached
for while $3000,000. But the deposits
might be expected to fuctuate, and in last
years report they were stated at little over a
million dollars.
Having made this great blunder. the direc-
tors were afterward slow to perceive its bear
imgs. If the bank could have kept up its
maximum amount of deposits if all its in
| yestments except the banking house had paid
| seven per cent and If the rental from the
building had met reasonable expectation, the
concern might have been kept atioat with close
| economy. Two OF these expectations, accord
ing to the last annual report, were fulfilled; I;
| the interest on investments of q million was
over $4,000, and the rental collected was
over $1,000. But the most important one
was wanting; the deposits had fallen off
| immensely. The second great mistake of the
directors was in not closing their doors as soon
as there were signs of the withdrawal of de-
posits They now calculate their loss of assets
by depreciation of real estate at 800, 900,
more or less. This loss must be divided
! among $S00,000 of deposits, that the
! present depOsitors may get seven-eighths of
their money. If it had been divided among,
say, So, ,5OO,0 900 of deposits the loss to each
depositor would not have been much more
| than Der cent. Can there be any question as
TO which woud have been the better course ?
But it is now scarcely hoped that 80 per cent
Will be paid, and if it is, it will he by drib-
lets stretching through perhaps three or four
years.
In winding up such bank, it would be the
part of mercy to pay the small depostors-
say of 5000 or less-seventy-f per cent at
once, and let the larger depositors do the wait
ing. There are some of the latter that can
certainly afford to wait; as for instance, one
that is said to have $3S,000 to his credit
Such people have no proper business among
| In, IA hn