Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-08-24
BANKS COMPETING
WITH SECURITIES
Drain on Deposits Follows
Greater Participation of
Public in Market.
Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, August 24.-The COM
petition between the banks of the coun-
try and the market for securities is
indicated in the August bulletin Of the
Federal Reserve Board which gives fig
ures along the same lines recently pub
lished in the quarterly report OF the
controller of currency.
The drain on deposits has not only
been on the city institutions, but on their
country correspondents. Nor l. this I'M
tied to the national and State banks
and trust companies. 1t constitutes the
greatest problem in the affairs of the
savings banks.
Advance i'm Rates.
The first phase Of this came when
rates for call loans advanced to level
that made the average rate on demand
deposits appear unattractive to the In
dividual or corporation. Consequently,
money moved out of the banks In large
amounts and into the call loan market
where it supplied fuel for the specula-
ton that has grown into the greatest
proportions on record. Some effort was
made to check this by raising the in
terest rate on such deposits. This ad-
vance was SO small that it had little
effect.
The second phase is the one which
now worries bankers most and Is repre-
sented in the withdrawal Of amounts
ranging from $4,000 or $4,000 to SlO,-
600, for the purpose of buying secur-
tiles. Deposits of this amount are the
backbone of many Of the country banks,
and in the aggregate. represent about
their best earning asset. Hundreds OF
banks throughout the United States
have seen their deposits decrease this
year as the steady rise in stocks has
made their clients dissatisfied with the
small return which they were getting
on their money. A part of this will
probably come back to these institutions
when the stock market takes perma-
nent turn downward. but 1t is the feel
ing of bankers that the public has
been educated to investigating and will
not for a long time be satisfied with
simply receiving 2 per cent or 2i2 per
cent of his checking accounts. when 1t
can earn twice that amount and more
on a substantial character OF stocks or
bonds.
The position Of the savings banks
was indicated TODAY by the executive
head of one of the largest mutual asso-
Citations in the country. His statement
to the writer was to the effect that
Market competition both while prices
are advancing and when they are de-
clining. LAS soon as the Stock Market
gets on the first pages of the news
papers" he said. I'VE begin Immediately
to see a decline in deposits and have an
increase in injuries from orr depostor5
as to how they can make some easy
money"
Other Demands.
Then. when the market breaks. We get
the drain from another source, or from
those who are already in stocks and
are compelled to put up additional
money in order to protect their COM
mitments. third demand comes at
this time from the so-called bargain
hunters, who draw out their deposits
to buy stock which they think have
reached a reasonable level"
In the opinion of this savings bank
man the future savings bank deposit
will be built up out of the earnings of
the depositor plus the income from his
investments which is coming to be an
important contribution to savings de-
posts accounts.