The Washington times., 1912-04-21
IN LOCAL FINANCIAL CIRCLES
BY I. A. FLEMING.

What is the actual value of savings
accounts, per million dollarsP
The market value. II we are to con-
slider recent transactions. is said to be
about 10 per cent. or 100000. Opinions
OF experts are at as wide variance as
quotations on Wall Street in times Of
financial panic.
Very conservative estimates are
placed at $4,000 to s25,OOo and the more
liberal are willing to admit to $4,000
and from there all the way to the late st
quotations. 100000.
Savings depositors count the interest
as the primary consideration, save
when there Is danger to the principal
when cash is the only desideratum.
Savings accounts pay from to 3 per
cent, time deposits from 3 to 4 per cent.
1T may be disclosing state secrets, but
these figures do not tell the true story.
Interest Is paid on minimum monthly
balances. The bank therefore has the
use, free Of interest, of all sums that
may be withdrawn during a month up
to the time of withdrawal, amounting
in the aggregate to considerable sums
and reducing annual interest rates.
Brought down to hard tacks, 2 per cent
interest means close to 1.S per cent.
| Three per cent, according to some of
the savings banks. means 2.25 per cent
Aside from interest paid for the cool
| million of deposits, the returns there
from to the bank must be considered.
! Money is put out at varying rates of
| interest
A note is considered from various
| standpoints by the banker. First i'm
portance is attached TO good collateral;
the maker of the note is entitled to
consideration also.
On one name commercial paper the
name is 100 per cent Importance, plus
consideration for the value of his ac-
count with the bank, plus other con-
siderations also. Bankers protect them
selves in real estate loans.
Large deposits carry necessity of suf-
fcient earning power to make them
valuable. There are times when this
| onus is burdensome; when the de-
| mands for accommodations from the
right kind of borrowers is not sufficient
to enable the use of funds to advan-
tage, but the savings depositor must be
paid interest whether the interest is
earned or the money locked up, idle,
in strong boxes. Moreover, the banker
must be prepared to hand the cash over
the counter on demand save on time
deposits. and even these also in the
great majority of cases where interest
is then saved. He must therefore, aside
from certain wise reserves, be prepar-
ing when making loans to make the
| quick turn when necessary.
| Here is the way a conservative saw
| ingS bank figures returns: on deposits
with national banks per cent; In
trust companies 3 per cent, on short
term notes As per cent; on collateral
notes L. IS per cent; on real estate loans
4.96 plus the usual l per cent commits
and commissions, but the conservative
banker has a habit OF paying no atten-
tion to second trust notes as employ
ment for bank funds. A large busi-
| this city where the small payments on
houses are a factor, but the lenders are
usually not banks, although much oi
the money therefore come from banks
, but Is otherwise secured.
| Short-term notes and high-class mort
| gage bonds form a means OF employing
bank deposits to very large extent al
| this time. Some of the smaller banks
| claim to have no trouble in loaning
| funds up TO available supply at per
cent. but there comes a time when, II
deposits continually increase. when there
is danger of earning power beinG
impaired, in this excess of riches, where
safety is always considered.
If this million dollars deposit could al.
| ways De employed at D per cent, anu
| could be counted on to pay out 2.25 pei
cent, and there were no other considera'
tions, it would yield 2.75 per cent re-
turns, or S27,50O annually:
There are so many things to be con
sidered in estimating the actual value
| Of this account that IL is a complies
proposition. This extra million deposit
ed in a bank with other millions does
not, naturally. greatly increase the cos
| of operation, the big thing in the bank
ing business. Trust companies and ma
tional banks have to pay 6 per CEN
| tax on gross earnings, savings bank!
| per cent, after deducting interest. TIL,
earnings of this million would have t.
bear their share of this tax. Then agar
this million must be held to the eXten
| of a very large percentage for sew
| eral years before 1t will return it's cost
and thereafter ii makes quick returns
to the buyer, even though II cost th'
10 per cent. 1t takes much advertising
and energy to reach a million deposits
from fresh start, that is million tina
can be counted on to remain intact TO
time. Advertising Is necessary ant
expenses go on before profits begin jus
the same as afterward.
After all - said. considering all phase
of the question, the banking business Il
not a losing game.
Banking interests have made million
for men of courage and that prope
mixture of conservatism that dares anC
Yet surrounds itself with safeguards
Millions have been made for passiv,
have forgotten their investments Il