The sun., 1909-05-28
is BANK INTEREST TOO HIGH?
SJPT. WILLIAMS ADDRESSES
SAVINGS BANKS MEN.

Does Not IAke the Invasion by Banks OF
Discount and Trust Companies-Dim
mutton OF Savings Bank surpiuses
Debt Limit Amendment Opposed.
Something Of surprise was sprung at
the annual meeting Of the Savings Banks
Association Of the State OF New York yes
terday when Clark Williams. State Super
intendent Of Banks. addressing the officers
Of savings banks from all over the State.
said that per cent was too high a rate OF
interest for some Of them to pay and prac-
,ica!ly told them TO look to the safety Of
their institutions first regardless Of the
rate their neighbors paid.
q consider 1t my most pressing duty.
said the Superintendent in the course Of
his remarks. not only about savings banks
but about trust companies and banks OF
discount. TO endeavor to effect general
reduction OF the rate OF interest in our
institutions throughout the State, not only
in the interest Of the corporations them
selves but in the interest OF those who
have entrusted their funds TO these deposit
tories for safe keeping"
MIR Williams g speech was not the only
one made in regard to the interest rate
subject necessarily uppermost at this
time with the savings bank mon because
Of the approaching interest date. Z. P.
Maynard. comptroller OF tho Brooklyn
savings banks. advised the bankers to
look to their surplus carefully, for that was
the keynote OF safety.
MIR. Williams. who spoke toward the
end of the meeting, which was held in the
Chamber Of Commerce. got hearty greet
ing from the 200 or more bankers who at
tended this years gathering Of the asso-
citation.
In beginning his remarks he had some
comment to make upon the failure Of the
Legislature to pass a law limiting the
number OF nonresident trustees in bank
TO two. a provision which was killed in the
Senate committee, although, as MIR. Will
Jams pointed out. the associations execu-
tive committee had asked for 1t.
Although We have met with some sue
GEES in the past. he went on to say. as
our experience with legislative methods
broaden l am convinced that | lack the
essential qualities Of good bill passer.'
In taking up the matter Of the interest
rate MIR. Williams complimented the
bankers by saying that the general oon-
sideration the subject had been receiving
was to him very striking evidence Of their
characteristic conservatism. He added:
A knowledge OF the general conditions
throughout the State oompels the con-
clusion that the greatest offence to eco
nomio principles and sound banking lies
in the payment Of high interest rates.
This evil results, as | have frequently
stated before, from improper competition
and an unreasonable desire for quantity
ra ther than quality. Gentlemen. deposits
are still a liability and should notbe reck-
lessly solicited or procured by the offerin G
ot high interest rates at the sacrifice Of
safety The practice OF this offence to
the principles of sound banking is in
dulged in by banks OF discount, State and
national, as we'll as by trust companies,
largely through the instrumentality Of
their so called interest departments.
The savings bank as we all know. is
. sem-philanthropic institution. 1t rs
created as the depository Of the savings
OF the provident poor. No one can
properly profit by its operation but the
depositors themselves. The restrictions
laid upon savings banks by the statutes
are such as to require the safest possible
investment. and the statutes also con-
template the largest possible return to
banking. So in the discussion OF the rate
savings banks should pay it is fair to keep
these fundamental facts in mind. But
what is the condition at the present time
regarding the savings banks in the State
Of New York? We find by comparison
Of deposits with the percentage of surplus
which our savings banks have laid away
from year to year most remarkable
Giminution.-
Mr. Williams went on to quote figures
10 show that the percentage had declined
from IL per cent. in 1890 to per cent last
year. Whatever might be the reason for
this, he said. with the falling rate of
interest on conservative investments,
this disregard Of surplus through the pay
ment Of high interest rates would
In time result disastrously for depostors.
Il am not impressed" he said. with
the argument that because certain banks
are paying I per cent. all should. nor
conversely because certain banks are
paying 81, per cent. all should, but | do
believe. gentlemen, that 40 far as the
savings banks are concerned the affairs
who are competent TO discharge the duties
imposed upon them by that trust. Con-
ditions in banks may differ, and it is for
the trustees of every savings bank to
Determine for Themselves the proper
rate cf interest to be paid depositors,
taking into Iteration. as they must,
tho absolute safety OF the principal and
the maintenance OF the proper surplus
reserve. to which the present depositor
may properly in part contribute for tho
benefit Of posterity.'
Mr. Williams said that in his opinion
the system Of interest departments in
national and State banks and trust COM
panies waA an improper incursion upon
the legitimate fold Of tho savings bank
and that II it continued it must be prop
erly controlled. There was no economic
analogy which justified them paying
per oent. because the savings bank
did, he said. -Four per oent. interest,"
said he, plus the expense account, plus
proper charge for tho reserve represents
a oost price for money which Ia difficult
TO cover Il conservative use is made Of
funds. A to tho interests OF the deposit
tor. his savings are not protected by
compulsory Investments in high grade
securities, and may be used In general
loans and discounts, and in time Of stress
there is no postponement Of deposi-
tors' demands for sixty days. Attack
may be made not only through the doors
Of these institutions but through their
clearings.
In concluding his remarks tho super
intendent prophesied that because Of
the conservatism OF the bankers there
would be a general reduction Of the in
terest rate.