The herald., 1897-04-11
OFFICE OF THE HERALD.

Los Angeles, April TO- 1897.
Postal savings banks have been fire.
8 Qpently discussed in the newspapers OF
this country and of others. The general
Rome has been in favor of the adoption
of the scheme by the United States, the
conclusion being apparently drawn
from the success attained in foreign
countries. On the other hand, there ars
dindculties peculiar to the practical
4 working of the system here which make
1t something more than a question of
simply depositing money with the gov
ernment and receiving interest thereon,
which is the whole idea that some people
have about it.
We quote with pleasure some remarks
upon this important subject made by
Treasurer E. H. Moulton of the Farmers
and Mechanics bank of Minneapolis,
Mimi, which present the case in anotn
er aspect. He says:
"Granting for moment that there is
any real need for the postal savings
bank, / think can show you the plan is
not feasible. 1t is the favorite PROPOSE
tion that the deposits in the proposed
postal savings bank should be invested
in government bonds, thus making the
small inyestors-the common people OF
the country-the holders of the bonds.
That is the theory. Now let us look a.
the facts. The United States bonds now
aggregate about sS00,000000 OF these
the national banks hold, to secure their
circulation, about 100000, 600; the trust
companies and mutual savings banks
have about as much more. and there Is
about $100, 900 held abroad. 1t might
be possible to get hold of those held
abroad. but not very likely. This leaves
but 100000, 900 available to be bought up
and used as the investment of the funds
deposited in the postal savings banks
But at the present time the deposits
in savings banks-and I am speaking
only of mutual savings banks, organized
on the plan of ours-aggregate $780,
100000. I estimate that If the postal
savings bank system was started in this
country, the first years deposits would
much more than consume all the gov
ernment bonds available and that in
few years the aggregate deposits would
amount to O,O0O, 900. 1t is plain that
there would be no bonds to represent all
this money.
But if there were bonds, would the
people gain anything by the plan? At
present the savings banks are paying
depoeitors per cent interest on their
deposits. Government loans are made
at such rates, and the bonds are sold
at such a premium that deducting the
expenses of administration, the postal
savings system would not be able to pay |
/
a simple principle that man might as
well lose principle as interest. Now.
let us see what people would lose under
the proposed plan. At per cent the
savings banks of the country paid the
past year $4SOOO,OOO in interest to de-
positors; under the postal plan these
depositors would have received but
$24, 900, ,OO0 In other words. they would
have lost in one year s24OOO,OOo. This
is more than has ever been lost through |
the failure OF mutual banks in scores
OF years-more than has ever been lost
through the failure of mutual banks or
ganized under the New York law.
at Is customary to refer to the exam
pie of England and France as a rea-
son why we should adopt the postal |
savings bank system over here. The |
directly to this point. England and
France have what we have not-an i'm
mense public debt. England's debt is
81 900, ,O0O,O and Frances $1,000, ,OoO,-
900. You see that both these countries
which to make investments Of the pos
tai savings deposits. Why have not
Germany and Switzerland postal saw
IN h nj he
simple reason that they have not
sufficient amount of government Sc
curities in which to invest the deposits
Germany's bonded debt is but 5000, ,OOO,-
900, and Switzerland's practically moth
ing.
1T is proposed by some advocates of
the postal savings system that, after
the government bonds are all ex-
hausted, the managers of the postal
bank invest the deposits in stocks,
bonds. mortgages and other securities
But I submit that if this plan were
adopted the people would be no better
off than before 1t would simply trans
fer the responsibility of investing theiI
money from the hands of trained and
skilled f1nanciers, who make a business
of the work, to politicians or political
to have the same skill or judgment. II
would mean the extinction of local in
eerest and sympathy in the management
of savings banks and the substitution of
a government machine department. Peo-
pie are apt to forget that the borrowers
are just as important to a savings bank
rs the depositors or lenders, and that
well-managed savings bank looks as
carefully after the interests of one as the
other.
1T is argued, of course, that the de-
positors would have the security of the
government back of them, but believe
that, If the managers of the postal bank
were authorized to make general in
vestments. the stability of the govern
ment might even be endangered The
government would be as subject as pri-
vate individuals to the fluctuations of
the markets, and its risks would be so
enormous that circumstances might
easily be conceived under which the
government itself might be wrecked
"Of the alleged demand for postage
stamp system of deposits, l can only
say that do not believe that it exists.
In our bank we have advertised for
years that we would open deposits at
from 10 cents up, but we have had alb
Nolutely no response. Our working
people do not save in such small amounts
as the working classes across the ocean.
.. I.