The New York herald., 1920-01-25
~ LEO DAY wooDwoRTH.

The function of the savings bank in the
understood and of late has been much ex-
aggerated. Under the guse Of discus
sion OF housing" attacks have been made
upon savings banks and savings bankers
by persons who are in fact enemies Of our
present system of property ownership and
mortgage finapce. and who will be salts
1ield with nothing less than land nationali-
zation.
1t, therefore, seems desirable to indicate
tho actual place of the savings bank ir
the field OF mortgage finance. To do this,
we will first Indicate the nature and busi-
ness Of the savings bank: second. the ma.
ture Of fund which is invested in mortgage
securities; and, third. the general relation
of the managers of that fund to the public
Original Function.
First.-Originally the mutual savings
hank was intended to supply a service TO
I The laboring classes or to persons of small
means which was not afforded by the
wild cat" bankers OF n hundred years
, ago. The underlying principle that safety
is more important than dividend rate is
element of charity or philanthrophy has
steadily diminished until today it is real
,zed that these banks mist conform to the
Jules of business practh'e. must conduct
their affairs in open competition with a
variety of other institui ions which are
managed with all the ability and incentive
of private initiative, and whose managers
are selected because of prof sssional ability
s.s bank executives rather than because OF
high community standing.
Ouite regardless of any phraseology
which may be used in the State Bank law
or in the rules and regulations printed IN
The pass books. the deposits in a savings
bank are in fact assumed to be withdraw
able upon demand. Also. they are ex-
nected TO draw fixed rate of interest
rrhe exceptions to this rule may be re-
garded as proving the extent to which
any institution is "old fashioned" The
average deposit in the mutual savings
banks OF the country is about $500. The
C25 institutions OF that type, both large
and small, hold about 5000, 100000.
Second-Points which the savings banker
will consider when investing his resources
with a view to paying expenses. conserv-
ing his principal and earning a profit for
depositors may be grouped under several
heads.
fa) safety Of principal must be insured.
The savings bank has no reserve OF per-
SOnal llaDlllty iOT lOSStS. hSo pVoieioh &c
more nearly that OF trustee. of moral
rather than of legal obligation. TO restore
the precise funds with which he has been
entrusted.
~, The interest Yield must be sufficient
TO sustain the bank as n going institution
at tho dividend ratio which 1t Is accus-
toned 10 pay. 1t must also mako possible
a sufficient increment in the guaranty
fund TO meet any increases in deposits.
Nature of Deposits.
(c) Tho nsturiiy OF investments Is an
important factor in savings banking. On
the ono hand, the banker knows that a
reasonably definite proportion of his total
deposits will remain with the bank for
n considerable period. Those funds can
he invested in long term securities, which
,Ssu he worth par at maturity and which
Of all times will afford fufl protection for
IN, banks investments and also yield a re-
t,r, which will be adequate 10 meet all
;rterest charges. The mortgage on real
estate meets this requirement especially
veil as there is the widest possible
variety of such loans which may be con-
sidered.
ID, In view of the responsibilities and
liabilities assumed by tho savings banker
Z, Is not surprising that he should look
for that form OF investment which he can
acquire with tho greatest amount OF per-
,onal satisfaction. Tho individual mort
cage, or q participation therein which IS
safegiarded by a responsible trustee,
meets this requirement better than any
other security. AS n general rule, the
property, the markst value Of which and