The Vermont watchman. [volume] (Montpelier, Vt.) 1883-1911, 1886-10-06

is probable; but the receiver can give
no assurance when the receivership
will be closed.
The inspector of finance believes that
many of the savings banks of Vermont
are returning to their depositors a larger
percentage of their earnings than is
consistent with conservative manage
ment, and he recommends limiting
dividends by law to four per cent per
annum until net reserve of at least
six per cent be accumulated. He dis
cusses this matter as follows:
The great underlying principle which
should, it seems to me, govern the manage
ment of trust funds-and savings deposits
are nothing more nor less than trust funds
is that safety should be the first and strong
est consideration actuating and governing
trustees. Savings banks were instituted for
the purpose of affording an absolutely safe
place for the deposit of the small earnings
of widows, minors and others who are not
sufficiently versed in matters of finance to
care for their own savings, and this pur-
pose is wclSedly perverted when trustees
become ambitious to build up great insttu-
tions by paying large dividends and thereby
attracting the capital of the wealthy
Strictly choice municipal bonds, a class
ofinvestments upon which our savings banks
have heretofore largely relied now rarely
pay more than eight per cent net, and many
of our savings bank managers have deemed
it wise to discard largely this class of secu-
rites and to correspondingly increase their
investments in western farm mortgages,
which pay much higher rate of interest.
submit that even if the increased risk at
tending these western investments is coun-
terbalanced by the exorbitant rate of inter-
est received, still prudence dictates that
ample provision be made for the possible
not to say probable-contngency of losses
resulting therefrom.
The chief reason urged by trustees who
advocate high dividends is that they believe
it to be their duty to divide to depositors
the actual earnings of each semi-annual
period, but in my judgment they are quite
as liable to wrong future depositors, who
may have to suffer the losses sustained when
these loans mature, as they are to wrong
present depositors by providing now for
losses growing out of loans which are at
present abnormally profitable, and of which
present depositors are reaping all the bene-
fits without incurring any of the risks which
experience teaches are the almost univer-
sal accompaniment of excessive rates of in
terest.
The inspector also directs attention
to the great increase in the loans on
western farm mortgages, and is of the
opinion that the limit should be re-
duced to forty per cent, as he thinks
the business is being overdone in this
line of securities. He states that some
of the choicest lines of securities now
obtainable are, under our present law,
proscribed:
For instance, investments in Ohio, Michi-
gan, Minnesota and Nebraska county or city
bonds are prohibited, however high the
financial credit or large the population
So, too, under the existing laws, more than
half the savings banks in Vermont are pro-
hibited from making loan of S20,0OO-
several of them could not loan S1O,OOO-on
pledge of United States bonds as collateral,
but the same banks may actually own twice
as much in Arizona bank stock, where, in
case of failure, they could lose not only
their entire investment, but could also be
assessed for as much more.
The report thus concludes: "The
limitations are of vital importance.
Unnecessary restrictions are not only
unjust to depositors, but are liable to
result in forcing trustees into an in
feror line of legal investments"