Evening star., 1927-03-12
MEN AND MONEY
BY NJ. S. RUKEYSER.
copyright. 1927

If the savings banks started melon
cutting, the policy would be OF vast
interest to millions of depositors.
AS the country develops, an increas'
ing array of plebeians' banks-the
mutual savings banks-will develop
surpluses larger than safety demands.
The trustees of the on-profit-making
institutions will then be called upon
to make distributions. Automatic dls.
tribution after stated ratio is reacheo
is required in New York. for example.
but thus far none of the savings banks
in the State has reached the limit.
The question, however. has come up
as a practical puzzle in finance in the
State of Connecticut as the result OF
the proposed merger of two Bridge
port institutions-the Bridgeport Saw
ings Bank and the Peoples Saving
Bank. In order to prevent speculation
in savings account, the officials OF the
two banks have agreed on consolida-
ton as of December 13 last. Inas-
much as the banks have relatively un-
equal surpluses, the question of dis
tribution has arisen, and has been re-
ferred to the banking commissioner
for ruling.
Has Larger Surplus.
larger surplus In proportion to assets,
and proposes to distribute to present
depoSitors the excess over what is re-
quired to keep 1t on a parity with the
Bridgeport Savings Bank.
The Peoples Saving Bank is so
years old, and the question at issue is
whether old depositors shall share
more literally in the distribution of
surplus than new depositors. AS a
matter of abstract justice, the older
depositors are entitled to a larger
share. but to effect a distribution on
that basis would entail almost bound
less administrative difficulties. A dis
tribution, on a pro rata basis in ac-
cordance with the size of deposits is
the more feasible way, and that prece-
dent has been established in other
States. In Vermont, for example,
when the surplus fund reaches 16 per
cent of deposits, the excess must be
distributed among depositors in ac-
cOrdance with the size of their deposit
accounts. Those who opened accounts
within a year Of the distribution, how
ever, do not participate. Further to
simplify procedure the Vermont ruling
is that distributions shall be made in
proportion to the amount of interest
which the account has received during
the last three years. Other States
have followed the precedent of dis
tributing surplus in proportion to de-
posits. Although the banking law
does not specifically deal with this
question, Connecticut is likely to au-
thoriZe the same procedure, which
seems the most practical.
AS a matter of fact, however, this
system penalties the old depositor who
began to intrust funds to the bank
before it established itself on the pres
ent basis.
Is Investment Trust.
That result, however, seems inevi-
table on the basis of the present
system.
Stripped of technicalities, the mu-
tual savings bank is an investment
trust, which deals only in high-grade
securities. Depositors are in reality
owners of the entire fund. BY MAX
ing current deposits, newcomers are
in the position of being able to buy
shares in the fund at par, even
though the accumulation of a surplus
may, as matter of simple arithmetic,
make the liquidation value of the
shares far above par.
These matters are still OF relatively
academic interest, but the time is ap-
preaching when the shrewd individual
will pick savings banks in accordance
with their proximity to the point
where the surplus will be distributed.
The present ruling OF State banking
officials enables late comers to get in
on advantageous terms.
In international finance, current in
terest centers around French policy.
The newest gesture of France in
offering to make current payments to
Great Britain and the United States
against the war debt, even though
the formal agreements to fund these
obligations have not been adopted,
further heightened the prestige of the
present government of France.
Raymond Poincare's government
has undertaken informally to stabi-
lize the franc at double the rate at
which it sold last July before the
coalition was formed to save the
franc.
Kept Franc Stabilized.
For two and q half months, the
French government, in cooperation
with the Bank of France, has sue
ceeded in keeping the franc just below
cents.
Can it continue to do so?
David Friday, American economist,
EVERYMAN.S