The Portland daily press., 1883-10-24
Savings-Bank Investments

The committee which made report to
the recent convention of bankers in Louis
vile took high and safe ground in 1.-The gem
eralsprinciples it promulgated concerning the
character Of the investments savings insti-
tutions ought to be allowed to make. They
should be, the committee say, s'debarred
from those investments which couple risk
with profit. Safety is the first considera-
tion and profit is secondary. That is sound
doctrine, but it seems to us that the commit
mittee when they came to special enumer-
alton of the kinds of investments which sew
ings banks ought to be confined to did not
carefully regard the principle they had enun-
ciated. In some particulars their recon-
mendations, instead of being more eonser-
vative than the present practice, are more
liberal than anything at present allowed by
States which are thought to have a sound
system. This remark applies especially to
the fourth and sixth of the investments
sanctioned by the committee. The fourth
is the following:
Foarth-First mortgages on real estate, the
amount of the not to exceed ttco-thirds Of the
actual UaEae of such real estate but not over fifty
per cent of the deposits should be loaned in invest
ments Of this class.
No State in the Union which puts any re-
striction at all upon the amount which may
be loaned on any given piece of real estate
allows SO much as two-thirds of its actual
value. The law of Maine comes the nearest
to it, authorizing loans by first mortgage on
real estate not exceeding sirty per cent of
its actual value. Vermont authorizes such
loans not TO exceed three-fifths $50 percent J
OF the cash value Of improved property; bnt
not exceeding two-fifths of the cash value of
unimproved property. In Massachusetts
the law is not exceeding 60 per cent. of the
odIudtioR, the valuation for taxation being
the standard. In Connecticut, New York,
New Jersey, Ohio, Michigan, Indiana and
Minnesota the limit is fixed at cne half the
value. In Ohio this value must not include
the buildings, and in New York the limit on
unimproved property is 40 per cent, and in
New Jersey it 10 30 per cent. To US it seems
that the recommendation to extend the Inn
1t to two-thirds of the actual value festima-
ted by the trustees?) is in the direction of
greater risk and less security, and is
especially undesirable in the newer
States where there is much real
estate speculation and where values
4uctuate sharply. 1t is within the expert
once of savings banks in the long-settled
states that their real estate loans are the
most difficult to turn into cash when times
are bad and the need comes. They know
very well in many places that the ssactual
value" of real estate in the market shrunk
more than one-third in the last period of
general depression. 1t was difficult in some
Massachusetts towns and cities for bsnks to
make themselves whole on property on
which they had loaned only one half of the
assessors valuation
The other recommendation, regarding in
vestments, that seems to us questionable is
this
Ssetk-Stock of any National or State Bank, pro-
vided NO Savings Bank shall hold more than five
Per cent of the stock any such National or State
Bank.
One of the committee, Mr.. Hepburn of
New York, did not assent to this recommen-
sation, but subscribed to the following pro-
test:
disapprove the above recommendation don't
think 1t prudent or safe to allow savings banks to
invest in any security to which personal liability
attaches. In case savings banks are allowed to in
vest in discount bank stock they are liable TO lose
not only the entire investment butto suffer- in addi-
esn, an assessment equal to the amount of stock
held.
We are aware that in the New England
States such investments are allowed; but we
think that the policy of New York, New
Jersey and other States which do not allow
such investments, is more prudent and
more in accordance with the general princi-
pie announced by the committee.