Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1885-12-05

loneous' - SHOWN ~ the experience Of the
car trust holders in the New York and New
England Railroad Company, and in the New
iof.' chicago and ST. Louis Railroad, known
=: the Nickel Plate" and others of like
KIND, In which cases the courts have not held
as vas expected. and losses have been en-
tailed and are likely to be entailed on the
holders of these bonds
One investment craze (if this term NAV be
used) seems to follow another, and now our
people are being offered. in large quantities,
the bonds OF water companies, located all
over the country, north, south, east and west.
The interest on these bonds in many cases is
represented to be guaranteed to the
company by contract for water
for the city or town wherein the
water company is located. If experience
Of our Maine investors in reference to con-
! tracts with cities like Evansville, Ind, il of
any value, then it can be readily seen that it
Is possible for cities to break and repudiate
these contracts, and the first ones to suffer
will be the bondholders, temporarily or per-
manently. These water companies seem to
be organized BY operators, who in many in
stances place upon the works built more
bonds than the entire cost of the works, and
then, by offering and selling these 6 per cent
| bonds at or below par to the investor, who il
greedy for high rate of interest, the opera
tors pocket at once q handsome profit, leav-
ing the bondholder the entire risk of the bus
mess. II the works are successful, the hold
er of the bonds does not secure the profit,
but the operator, who holds the stock of the
company, does. So it would seem that if
there is any loss, the bondholder must stand
it, and if there is any profit, the operator,
through the stock will get it.
No simple investigation by means of letter
writing will in many cases procure the evil
dence that investors should have to Judge of
the value of these securities, and, by q sus-
pension of judgement in relation to them for
while, our people will be safe and avoid
losses similar to those entailed through some
of the car trust investments.
Unless these securities are absolutely guar
anteed by city whose bonds are within our
statute regulating the investment of savings
bank deposits, and whose credit is above sus-
picion; or are issued by corporation engag-
ed in supplying water to some city or town
located within the borders of this State,
where reliable information regarding its af
fairs may be readily obtained, l would sug-
gest that savings bank managers delay the
purchase of these securities until the expert.
ence of years has shown either their desir.
ability or non -desirability as an investment
for trust funds.
The board of trustees of a savings bank il
its ultimate governing power. The statutes
of this State provide that the trustees shall
have the entire supervision and management
of the affairs of the institution; and they fur.
Their provide that they may receive such com
pensation for their services in making exami
nations as may be fixed by the corporation.
The statute thus contemplates that response
bilities and duties are attached to the position
of trustee.
Every member should be familiar with
the investment laws and with the current
transactions of the bank. Their meeting.
should be frequent and their examinations
thorough and exhaustive; they should take
nothing for granted, and incur no risks thai
can be avoided.
Investments and loans should be made on
ly by vote of the full board, for the determin
alton of five intelligent men is far safer than
the judgement of the most sagacious one
among them.
In declaring dividends, they should not be
influenced in the least by the action of the
management of any other savings bank ant
before they determine the rate, all assets
which stand upon the books at an excessive
value, should be charged down to their actua
worth; liberal reduction should be made ir
the premium accounts the full amount re.
quired by law should be carried to the re-
served fund; and then whatever profits re
main should be divided; but in no case
should the collection of unpaid interest be an
ticipated for the purpose of dividends.
The object of savings banks should never
be to pay large dividends, but to afford an op
portunity to people of small incomes to com
bine their savings in order that they may bt
invested so as to earn some IRterest and b,
available always, when the emergencies o
life necessitate its use.
FRED f. RICHARDS,
Bank Examiner.
Camden, Dec. l, 1886.