Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-13
SAVINGS INTEREST
TOO HIGH, IS CLAIM
Bankers Association CON-
mission Suggests Remedial
Action on Rates.
BY EDWARD c. STONE.


By EDWARD c. STONE.
A ma iority o. banks are paying more
for deposits than pr vail!ng money rates
justify, giving dapo7itors the benefit OF
an interest rate that is higher than the
return obtainable from safely invested
funds" it Is d clared in a study OF in
terest rates based on nationwide sur
vev issued today by the Bank Manage
ment Commission of the American
Bankers Association. While rates paid
on deposits should not be wholly con-
tingent on fluctuations in the money
market, yet the present wide discrepancy
between the price which bankrs pay
for funds and the price they receive for
them serves to emphasis the need Tor
remedial action, the report says.
On the basis of replies to question:
naires from over 400 banks in all sec
tions OF thu country. in addition to re-
ports from clearinghouse. State bankers
associations. the controller of the cur
rency, and State Bank Commissioners.
the commission finds "a decided trend
toward the REDUCTION of interest rates"
which. IL says, when handled in the
proper manner. will cause no material
decrease in volume of deposits" The
proper, or pr fcrroo method" 1t says.
Is concerted action coupled with both
corrective and constructive education
OF the banking public"
Regardless of the future ups and
downs Of money rates and bond prices,
banks, generally speaking. pay an un-
necessarily high rate for the savings
and surplus funds Of their communi-
ties, the report declares. Two years
ago a bank might have paid gen.
c1y- fO,. - ND c4i 10I
profit" but today the prevailing rate
on prime commercial paper is from
? to o. per cent prime 90-day &C
ceptanceS are quoted at less than !
per cent, call money is priced between
and 2 per cent the yield on Treasury
notes and certificates has shrunk to
six-tenths of l per cent and the same
trend. although less marked. has oc-
CURED in the rates which banks charge
customers for loans, it is pointed out.
Reasonable Profits Held Vital
eff the financial structure of the
Nation is to remain sound, banks must
preserve their strength and enc means
of accomplishing this is to earn a
reasonable profit" it goes on. Con
fronted by this obligation to their COM
munities and to themselves. banks have
reduced operating expenses to mimi
mum. have introduced efficient meth
every means to obtain sound invest
ment advice They have taken i'm
portant steps toward the elimination
Of free services. These changes have
helped the situation, but have not
checked the greatest of all drains on
banking revenues, the high cost OF
deposits.
1T has been estimated by competent
authorities that between 80 and As per
cent of the gross earnings of banks in
the United States is turned back to
depositors in the form of interest.
Moreover it is disclosed in survey
conducted not long ago under the
auspices Of the American Bankers AS
sociation that a major portion OF the
profits of banks are attributable, not
to their operation as banking institl-
tons. but to the investment OF stock
holders funds"
The report makes no effort to state
what rate of interest should be paid
on savings in different parts OF the
country. The Washington banks are
paving per cent on savings and
expect to maintain that figure.
Capital Traction Stock Higher.
Capital Traction SIS led trading on the
Washington Stock Exchange when the
weeks business opened today. Several
81 900 sales were recorded. the bonds
opening at 83l4 and closing at 83l2.
Washington Railway & Electric As
moved at oil. and there we're two 81 900
sales in Potomac Electric Power IS at
to4T. A baby Gas 6, series A, sold at
1ol7,
Capital Traction stock made a new
high on the present move today. The
stock sold in small lots. opening at
363s and closing at 81 for the first time
in several months.
washington Railway e. Electric pre-
terred came out at 90. and closed with
a 35-share sale at 997a. Three shares
of Riggs National Bank stock sold at
378
Lanston Monotype registered 8sla and
Nergenthaler Linotype changed hands
at 49,, In the unlisted department
81 900 National Press Building 5 i2s sold
at SIS.
Bank Report Grips Attention.
The statement published Yesterday
showing the aggregate deposits in all
the banks in Washington on June 80
aroused deep interest in local banking
circles The fact that the banks have
gained total of more than $4,000. 900
in deposits in the past II months
caused considerable surprise. While the
figures do not mean that there is any
business boom on at present. added
proof Is revealed that local bank vaults
are bullying with money. some banks
having more funds than they can put
tn work at any great advantage under
present interest rates.
In the last three months the National
Savings 81 Trust Co. recorded. the
largest gain in deposits of any bank
in the city-S625 .63897. The Columbia
National led the national bank division
with an increase Of 1852 1872 IS while
the Park Savings Bank stood at the
top of the savings bank group with a
gain OF 1892 .688.37.
Local bankers are not anxious for
deposits to pile up too fast. When bust
ness and trade pick up. much more
This will mean greater prosperity for
the city but will at the same time re-
duce total deposits
Active Market Held Likely.
Local traders in the Kew York stock
market are talking a !ct about the
usual Summer hull The Financial
World takes the view shat the market
may remain active throughout the Sum-
ner. for these reasons:
There ara so many outstanding fac
tors which are likely 20 make for action
that few observers are anticipating any
lessenng of interest or participation in
the ups and downs The majority of
opinion is readily sympa thetic with the
suggestion that the whole world indus
trially and financially. is on the road TO
recovery and that alone wiz keep tn.
public eye turned toward that which IS
regarded as GOOD barumrter--the rise
Or fall Of stocks ii wall Street.
THE Hoover proposal most certainly
bolStered business sentiment, II 1t dlu
not boost business itself. BUSINESS lead
ers assert that the benefits in broad
enine of domestic trade and restocking