New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1908-01-02

for savings banks though In times OF Us, stress e
sort to the expedient of requiring notice OF pro-
posed withdrawal by depostGr erv to the savings
banks to purchase certain securities therein Pre
non The part of the savings bank sell There is
direct provision, however peritt1S st ine view
to securing cash is clear that under certain CON
dtions prudent gnd renre the application
of the assets to purposes of loan rather than
fher pracee which should be INDUCED in
without limitations l therefore ORE &c hunothecate
their securities for such length of time and upon
such terms as the Superintendent of Banks may
III The law Provides that the directors of banks and
ing the faithful performance of their duties. and
this applies to their reelection There Is no pro
trustees of sayings banks except those who exc
cute the certificate of association trs 20 Of
savings banks be obliged to execute such an oath
on becoming trustees or ON reelection.
PROPER METHOD OF vALUING SECURITIES.
The present requirement of the statute pertain
bank shall report the Estimated Market value
of its stock Investments and the established prac
tice is to apply this same rule to all the invest
ments of financial institutions, and to base tnelI
values should be adhered to in the valuation OF
investment and not having fixed GATE ol
maturity. 80, ,,..to, of tb.
stance to such fixed investments as the law pre-.
capital of trust companies. nrico Of
The violent fluctuations in the market price di OF
securities during the last year have aroused us
cussion of the subject of the proper metno o OF
espeoa9 as sht to Securities
ton is of particular importance in the case on say
in the fixed term securities. .,,,u o,,..u
Basing profits losses IN securities of this class
upon the fiuctuaton of market values is unsouhd
and contrary certain well established principles
OF asses is npon the theory Of presently
convertible cash value The security is not aceuay
As matter of principle there is no actual profit
again converted into cash The marking down of
the value of securities a precautionary measure
APPLIES with least force to savings bank securities
because of their peculiar safety and character
AMORTIZATION.
Bonds secured by mortgage on real estate are
ceived thereon being the full earning of the Sc
curty. Other securities usually purchased at
maturity the nominal rate of interest is not the
Ss etaai nerree ba for n Computing income The
true rule lies between the two; Taking the Pur1
rate per centum of interest of such security, ref
to the standard tables Of bond xaluss Wl
rate gives the actual ayerage income OF the se
premium or discount for each remaining year of
the term of the security.
If the original cost is carried book value at the
time of purchase and the plan Of amortization is
followed it results in ma Dramatically r exact e. sfa
curty will be at the book value being changed
ing the entire discount. either at the time of pur-
profit the operations OF the year in which tla
eny upon the or ground that BECAUSE Of Of
substantial amounts of securities each year; the
average is equivalent to amortization; This is. of
to be unequal because of the variations in market
In the case of savings banks paying interest semi
annually the amortization should be made on that
basis. The original book value should be the cost
price less accrued interest thus placing the security
There should also be opened an investment re-
M book %ss of the s
against possible loss This per mould de-
vesments and management
One objection made to amortization on. as basis
seryatye investor who has purchased at low prices
the same security at higher price to carry it at
greater book value than the former.
OBJECTIONS ANSWERED.
There two answers at Least to this objection
the Superintendent, under the additional powers
suggested could compel sufficient inyestment re-
too the investor being as anxious to produce a,
realize that the higher the purchase price the less
/ believe that the plan above outlined may be
safely applied to the earnings and assets of savings
capital investment account of trust companies.
When we consider that appToGXimately s629 600 oOS
trust companies fail within the application Of these
jet becomes apparent Savings bank legislation
has properly been held within the most conserva-
the Uniform valuation Of these securities by leg
,slati?n would be further evidence Of
tory provision be made for the valuation of the
ments of trust companies by amortization and
that the profits and losses thereon be calculated
APPLICATION OF THE PRINCIPLE GENER-
ALLY.
The principle of amortization, to take profits
losses only they actually made-to disregard
tended to the entire valuation of securities and
innate Of earnings The application Of the principle
eurties at the amortzed value and other secuIi,
act aally sold, when the profit loss would be
For the purpose of adjusting the value of stocks
etc. to current prices an appreciation anu de
probation account would be required, to which
Should be carried SO often as the securities were
listed ard appraised. the variations between book
ry eliminating fr.'. consideration in estimating
the actual surplus apparent gain in apprecia:
ton dcpreci ,,ccount for the purposes of
declaring DIVIDEND q making loans or investments
'e rpu WGu @ oss in the Same a
count deduction from surplus on book values.
Objection may be made that evasion is easy by
book value and Immediately repurchasing the same
security. The answer to this is that the sale is
ha obcf sought t to PREM be- any n
%o go sod to e eG @ G
and the remedy appropriate to the condition ap-
books the same security at higher price AMI in
case of depreciation it would be compelled to make
ciation' account, besides reducing the net income
the book value
ASSOCIATION OF BANKING POWER.
have previously referred to the advantage Of
association of the banking power in the city of
portance of such association. This matter may not
properly fall within the scope of legislative enact
ment.-
cannot urge too strGngy hGweyer that in the
impossible,