Vermont phÅ“nix. [volume] (Brattleboro, Vt.) 1834-1955, 1896-09-18
Savings Banks.
why Some are strong ana others Veal

why some are strong ana Otners Nenk.
To the Editor Of the Vermont Phpnir:
The question is persistently asked in this
vicinity, and all along the border line be-
tween Vermont and New Hampshire, why
it is that the savings banks Of Vermont,
wi thout exception, have firmly withstood
the severe strain of the last few years of
financial distress and disaster, promptly
meeting all demands of depostors upon
them, and without exacting the legal pre-
notice of Withdrawals, and are now appar-
emily, and no doubt in fact, absolutely
sound to the core; while many of the saw
ings banks in our neighboring state of
New Hampshire, inhabited by people of
like origin and possessing the same habits
of industry, economy and thrift that char
acterize the citizens of Vermont, have
fallen out by the way, been legally enjoin-
ed from continuing their business, and are
now in process of liquidation?
The primal reason for all this is not far to
seek. 1t is clearly to be found mainly in the
widely different legal policy early adopted
grade and locality of securities in which
their respective banks might, or might not,
legally invest.
In New Hampshire, on the other hand,
almost no legal restraint or supervision
was imposed on the banks in their choice
of investments, with the natural and al
most inevitable consequence that the
banks, in their competitive struggle with
each other and with nearby banks in
other states, fell into the practice of in
vesting large amounts in wide range of
securities ordinarily regarded as extra haz-
ardous, tempted thereto, no doubt, by the
much higher rates of interest offered. So
long as business continued to boom this
class of investments paid interest promptly
and thus enabled the banks to make at
tractiye reports and big dividends, quite
overshadowing the humber results achiey-
ed by their legally restricted and ploddng
outside neighbors. But with the very be-
ginning of the financial storm, the makers
and vendors of many of these securities
promptly ran to cover, and thence forward
ceased to concern themselves about the
payment of either interest or principal.
hNA AAN tlOuDlt bcSdu
To illustrate: One of these banks, a
sample of many, now enjoined by legal au-
thorty, whose credit was high and whose
management was thought to be conserva-
tive beyond the average in the state, with
assets of over S2,5O0,O00, is shown by the
official report of the New Hampshire state
bank commissioners to the governor, made
in December, 1894, to have owned at that
time securities amonDtiuU in oil m uaarlv
100000, not one dollar of which could be
legally owned by Vermont savings banks.
Other banks show still larger percentage
of their assets to be in this kind of securi-
ties. Among the many kinds and classes
OF investments legally and largely held by
New Hampshire banks, which are forbidden
to Vermont banks, are these: All stocks
and bonds of railroad companies, all state,
county, city and town bonds issued in aid
of railroads, even when direct obligation
against the party issuing them, "Irrigating
Ditch" companies, "Creamery associa-
tions," Opera House, companies, ETC.,
etc. Vermont savings bank investments
are also carefully restricted to certain
states, cities and towns having a universally
recognized sound financial standing, while
New Hampshire banks have no such re-
strictons.
Vermont, on the other hand, wisely
adopted at the beginning, and has faith
fully preserved throughout her savings
bank legislation, a radically different policy
by placing and persistently maintaining
rigid restrictions on savings bank invest
ments, which have proved bulwark of
defence against temptation in time of pros
perity, and so a vital element of safety in
time of financial trouble. These restric-
tions absolutely forbid the investment of a
dollar of Vermont savings bank deposits
in securities like those mentioned above,
which were legal investments in New
Hampshire, and constitute at this time an
important percentage of the assets of many
savings banks in that state, and are no
doubt responsible, in very large degree, for
the recent misfortunes that have overtaken
them. The large accumulations of reserve
and surplus funds in Vermont savings
banks,-also the result of wise legal re-
quirements,-a important additional fac
tors of strength and safety.
While not claiming that Vermont legis-
lation touching savings banks has, at all
| times and in every particular, been alto
| gether wise, / am yet quite sure that, to
the restrictive legislation in question, and
to its educational influence in constantly
suggesting and enforcing the idea that
safety should predominant over all other
considerations in the management of saw
| ings bank trusts, Vermont is today in
debted, more than to all other causes COM
bined, for the satisfactory and sound con-
ditions of her savings banks.
| b. D, HARRIS.