Evening star., 1927-04-24
BY /. A. FLEMING.

AcF'adden bill, developed the fact. in
his recent address before the savings
bankers assembled in this city, that
for years national banks have been
operating and are today opera ing
savings departments without sanction
of the national banking act.
The Federal reserve act gave a sem
blance of countenance in that it rec
ogniZed and differentiated in the mat
ter Of reserves required, between time
and demand money, but 1t remained
for the McFadden act to give full al
thority to the national banks to do
a savings business. In several places
1t recognizes this right.
Controller Mcintosh has had the
matter of realty loan regulations un-
der consideration for some time, and
bankers anticipate rulings in the near
future, They are inclined to hope for
permission to consider all time money
as savings deposits in which case
they would he able to loan so per cent
of such funds for realty loans. This
would materially increase available
funds and remove any necessity Of eff
fort on the bankers lart to transfer
certificate and other tirss money to
the savings section.
Few Strictly Savings Banks.
There are few strictly savings
banks in Washington indeed 1t is
doubtful If any do q strictly savings
business, unless 1t is the Central Saw.
ings Bank.
Most of the local banks classified as
savings institutions do a commercial
business, and with national banks and
trust companies are not overlooking
any safe opportunity Of increasing
the profits of their shareholders.
There are many strictly savings
banks in New England. George o.
Watson, the able head of the Liberty
National Bank. used to dream over
and over Of the time when he would
start a savings bank without loans
other than on collateral security,
with a minimum of labor and a maxi
mum of return, but today he admits
that it cannot be done in this city,
that any one trying it will starve to
wealth.
Certificates of Deposit.
National banks issued certificates
Of deposit and do today on deposits
for longer than 80 days. usually
paying a little higher rate of inter
est than on savings. Most savings
banks pay on demand through the
teller's window, when the passbook'
Is presented at the same time as the
check. But the depositors recognize
the right of the savings banks to
demand 80 days notice of intent to
deposits-~in the event of
necessity--an eventuality not at all
likely for many years to come.
The savings department was a
recent development
indeed it is not much more than five
years since the. Riggs National Bank
and inaugurated it's
savings department
For years trust companies have
paid 2 per cent on checking accounts
and they also were late in establish
Ing departments for savings-in-
deed they are not all In line in this
matter yet,
Bankers Know Securities.
In his regulations for making of
real estate loans by national banks
upon which 1t Is understood the con-
-rolier Of the currency is now work
ing, he will particularize as to
bonds on apartment, hotel.
office and very large structures may
be purchased by banks. Mr.. Mckee,
IN discussing this matter said
The limitation that restricts n loan
to 80 per cent Of actual value and lin,
its the loan To 10 per cent Of capital
and surplus TO one borrower, with the
further proviso that the lending bank
must take all of the loan, would seem
to exclude such bonds from being CON
sidered as security for real estate
loans, and that the proper designa.
tiOn for them is investment securi-
ties, il they can qualify as such under
ha int 4af . xsyIaI InIy
Ter of the currency Is authorized to
give to investment securities which
a bank is permitted to buy and sell.
After real estate bonds of this kind
referred to have been sold by the un-
de1writers." continued Mr.. Mckee,
they have a very narrow market, If
they have any market at all. 1t is
TO list them on a stock ex-
change, and the only chance an in-
yestor has Of getting his money back
before maturity is through the will
ingness of the underwriting company
to buy them back at a discount.
They come under the head of securi-
ties that have to be forced on the peo-
pie by direct appeals through inten
sive selling campaigns.
Take Money Away
Many OF them are issued TO PRO-
mote speculative enterprises, and oft
en- they are traded for money before
the structures which are to secure
them have been started. Frequently
they are issued and sold upon the
strength Of blue prints and highly col
ored promises that fail to materialize.
Such bonds secured by structures in
large cities and sold throughout the
country have the effect of taking cap.
ital credit out of the community In
which it originated and thus depriv-
ing the very people who created it
of it's use for local improvements.
IF real estate bonds cannot qualify
as desirable rsal estate loans for a
bank, can they qualify as in.
yestment securities i'm which a ma
tional bank should be permitted to in
vest its funds? The essential feature
of an investment security for a ma
tional bank is its marketability. Can
1t be sold quickly and readily?
There is always volume of capital
credit seeking safe investments and
the owners thereof naturally turn to
a reliable stock exchange as an indi.
cation OF the marketability Of securi-
ties offered for sale. But a stock ex-
change is not always the only iudiea.
ton of marketability.
10 pe marketable Il security must
be of the class and type which will
spontaneously attract capital, so that
there will always be a demand among
investors for that type of security.
In short the investor seeks the invest.
ment security. The underwriters of
real estate bonds seek the investor"
Good Stuff Goes Easily.
1.-The essential features of an in.
vestment security" appear to be mar
the provision for the pay.
ment of interest at a reliable banking
house, the designation of a corporate
trustee and the evidence of success
full and profitable management of the
which issues the bonds
IF the corporation has been in ex.
istence for a number of years furnish.
inc q sarNicn for which there iS .