New-York tribune., 1909-12-15
INTEREST CUT WISE
RHOADES ON RATE.
Praises Sapings Banks for Re
ducing Interest.

Action by the trustees OF the BOwery and
the North River Savings banks on Monday
I'm reducing their interest rate from 20 ia
per cent created considerable discussion IN
financial circles yesterday. Similar action
had previously been taken by The Union
Square Savings Bank.
That the Bowery. which Is the largest
institution of it's kind in the state. should
take this step has led TO a discussion OF
the reasons for the action. and II Is thousnt
that other institutions may follow sui'-
IL has been generally understood IN
savings bank circles that the Dry DOCK
Savings Institution would reduce It's rats
TO 81 per cent at its meeting on TUESDAY
Other boards OF trustees seriously CONSIDER
ing the step are those OF the Manhattan
Savings Institution and the Italian Savings
Bank Of :he City OF New York
REDUCTION is SOUND BUSINESS
John Harsen Rhoades. whose father Vas
president OF the Greenwich Savings Bank Tor
years and who himself Is a trustee OF that
institution. believes that the reduction in
interest by savings banks Is essential 70
sound business methods. He has written
much on the subject. and recently puohshed
a pamphlet entitled safety OF Principal.
which he sent 20 the trustees OF savings
institutions throughout the state.
Mr.. Rhoades said 20 a Tribune reporter
yesterday:
'"The action OF the Bowery Savings Bank
in reducing It's rate OF interest on de-
posits TO 5is per cent is highly commend
able. especially so as this institution -
one OF the strongest in the state.
IF savings bank trustees would only re-
member that deposits are a liability and
resources are represented by the market
worth OF their assets. more of them would
see the necessity Of Immediately reducing
their rate OF interest TO 3ia per cent or
less.
FUNDAMENTAL LAW IGNORED.
Under a false conception OF Hberality
IN the matter OF dividends. a majority of
cur savings bank trustees have persistently
ignored the fundamental law OF banking
and OF business. namely. TO maintain a
proper excess Of resources over liabilities
and forget that they are turning income
into principal every six months faster at
per cent than at lesser Tatel, and thus
increasing deposits and SO liabilities, while
they are not ADDING TO their surplus suf-
hcientIy 20 Offset not only this automatic
increase IN deposits. but a possible shrink
age in the market value OF their assets.
No savings bank can afford 10 permit the
decrease in the percentage Of market sur
plus 10 deposits 20 continue indefinitely.
Such percentage Indicates the resourceful
strength of = savings institution in normal
times. In the crisis % panic market
values are unfair and the strength OF
savings institution az such a time Is
measured not by the market value of its
resources. but BY the effect Of the sixty
day notice and the amount OF cash in the
vaults Of the institution.
For two years 7 have been endeavorinS
10 persuade savings bank trustees OF the
necessity OF obeying this fundamental law
OF banking. In 1880 the stronger banks held
a surplus ranging from ~ 20 . per cent:
to-day the same banks are showing a sur
plus between and 10 per cent. I main
tain that a savings bank is not solely an
Investment institution; its trustees have re-
sponsibiIties other than the mere invest
raent OF funds. They must, TO the best OF
their knowledge and belief, keep the prin-
cipal Os each depositOr ar all times, save
perhaps in the crisis OF a panic. intact.
The fact that they are earning more
than per cent. and can add a substantial