New-York tribune., 1910-12-09
QUOTES SAVINGS BANK LAW
John Harsen Rhoades Replies to
Col. Charles q. Sprague.

Dime Savings INSTITUTION entitled Savings
Bank Surplus dated December D. appear
from Colonel Sprague's statement Oh lhe
law to the law itself.
Section 20 of the old banking law. as
amended by Chapter sos of the Laws or l'o''
provided that savings banks should make
reports to the Superintendent OF BANKS
stating among other things:
The cost. par value and estimated mar
ket value of all stock investments; oe7i7
mating each particular kind OF STOCK.
Section q of the present banking Jaw
which is the re-enactment of Chapter 10
of the Laws OF 1908. provides that saViiiSs
banks shall report to the Superintendent u
Banks. stating among other thinsS'
The original cost. date of purchase. ua,r nsr
of maturity stated rate or lntereHl, I'll
qa1,Ie and estimated investment value OF al
stock or bond investments, qesi97 s.S
each particular kind of stock OF oontt ~ etoct
The estimate of investment value % a. = b,r
and bond investments snail oe HieuO
each savings bank in the manu- ,appira
scribed by the SuperlntensaelHb. s lban u he esti-
rnatad at a higher price or value fhan ltS
investment value by aTnortizatoh' d. -
Vided in Section Loo
Section 125 of the old banking law "ii'1i'
was Charter $50 of the laws OF lo5-' i'0
vided that the trustees OF every sd me
bank shall regulate the rate or lhteres' ~
TO exceed per cent per ahf'ulh III
manner that depositors shall recei'e d.
nearly as may bc all the profits OIL sucu o0'
poration after deducting necessary expenses expenses
and reserving such amounts as the trustees
NAV deem expedieut as a surplus IuIlo Aoi
the security of the depositors which TO 'he
or,,o,,,+ of IA per cent of it's deposits, the
trustees may gradually accumulate or hold
loss III rs
,,,sjnos. from the depreciation in securlues
or otherwise.
This ee,.4iDn is now section 1J3 OF the pres
ont banking law. and was amended DV
cbanter 124 Of the laws of 1868 SO as 70
/ nroz.ide that the trustees of every savings
hank shall regulate the rate OF interest
not 10 exceed > per cent per annum upon
deDoSi+s in such manner that deposltoFs
shall receive as nearly as may be ali 1he
profits of such corporation after deductlhs
necessary expenses and providing In
manner approved by the superintendent OF
Banks for tlte amortization or gradual eA-
tinction of premiums or discounts on All
eacuritias owned hv such corporation. so
as to bring them to par at maturity, ana re-
serving such amount as the trustees may
deem expedient as Il surplus fund Tor the
security of the depositors, which to the
amount of l. per cent Of its deposits, the
trustees of any such corporation may grad
uaiIy accumulate or hold TO meet any con
tingencies or loss in its business from the
danreciation of securities otherwise
Both section 123 of the old law and section
153 of the present law provide that the
trustees of any savings bank whose surplus
amounts to Is per cent of its deposits at
least once in three years shall divide equi-
.tab1v the accumulation beyond such author
ized surplus as an extra dividend to de-
posftors in excess cf The regular dividends
authorized
Note that the sections next In order, 724
of the old banking law and ia of the new
law read:
Per centum Of sT1rpus-How determined.
In determining the per centum OF surplus
held by anv savings bank ITS interest," pay
ing stocks and bonds shall not be estimated
above their par value or above their mar
ket value If below par
This section merely prescribes the method
for estimating surplus in order 10 ascertain
whether a savings bank has Il surplus
which EQUALS or exceeds the maximum al
lowed bv law 1t would have been less
ambiguous if this section had read- Per
centlfm of maximum surplus. How deter
mined etc.
There is no other provision in the stat
utes in regard 10 a surplus, except that
oy section 15S of the present law or section
122 of the old law the trustees are per
mitted TO reserve such d surplus as they
NAV deem expedient, not exceeding the
legal limit For all other purposes the
condition Of q savings bank including the
amount of it's surplus would be determined
from the report OF that bank TO the Super
intendent of Banks. made as provided in
section q of the present law or section 20
of the old law As the old law provided
that this report should contain the cost,
par value and estimated market value of all
stock investments the condition of the bank
was required TO be shown upon a basis of
market values Under the present law
this requirement has been changed and the
condition of the bank Is now required to
be shown upon the basis of amortized
values Thus the old law requiring a re-
port based upon market values was abro-
gated by the present law, which requires
the report TO be based upon amortization
values
Fortunately q superintendent under the
general banking law of the state has the
right TO demand a report based upon mar
ket values Mr.. Cheney has avaiIed him
self of this right. as did even Mr. Clark
Williams before him.
Colonel Sprague has evidently confused
that section Of the law referring to the
specific method by which the surplus must
be computed for the purpose OF determin-
ing whether the maximum has been
reached with that section which pre-
scribes how the condition of the bank shall
be determined at seult-annuaI periods II
the condition Of a savings bank is based
upon market values, the surplus If any IS
necessarily involved in and deduced from
that condition and accordingly is neces-
sari1y based upon market values
For the purpose Of determining income
the new amortization law is excellent: for
the purpose Of determining solvency it is
preposterous.
If our savings banks are TO be considered
investment institutions, and deposits other
than cash liability, payable upon at least
reasonable demand, and If solvency Is TO
be determined by appraising securities not
at market but at investment vaIues-which
TO all iutents and purposes means at cost
Woe to the day of reckoningi
JOHN HARSEN RHOADES.
New York. Dec. T. 1910.
A STREET CLEANING HINT