Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-06-12
REDUCED INTEREST
ON SAVINGS LOOMS
Movement for REIMBURSEMENT
of Rates Has Become
General.
BY CHARLES F. sPEARE.

Special Dispatch to The Star
NEW YORK, June 12.-After July
there will be comparatively few mutual
savings banks in the United States pay
ing over 3la per cent interest to their
depositors. A relatively small number
OF commercial banks will then be main
tanning the present 4 per cent rate on
thrift accounts.
The savings bank depositor faces a
reduction in the earnings on his capital
similar to that experienced by those
holders OF corporation stocks whose div
idends have been cut in the past year.
Started in New York.
The movement to lower the rate of
interest on savings or thrift deposits
started IN New York City last October.
when II OF the mutual savings banks
Whlch had been paying interest for
some years at the rate of Az per cent
cut this rate to per cent. Investiga-
tlon TO-DAY indicated that most of these
same banks will shortly announce that
aIter July their rate will again be re-
duced. this time to 3la per cent. A few
OF the mutual savings banks in ts,e
greater New York district have main
tanned the Az per cent rate I'D to the
present time. 1t is understood that they
Wnen
Cne larger number of banks reduce it
10 gig per cent.
WITHIN the last few days several large
country groups of banks in New Jersey
nave authorized a reduction in the in
terest on their thrift accounts. effective
aIter July !, TO 3 y per cent. The move
ment is quite general throughout New
YORK State and in PENNSYLVANIA. In
New England savings banks have been
hlDhpr hnp
OF the country. In some instances as
mucn as per cent has been allowed.
Inc dlfhculty in obtaining securities of
type htted to savings bank portfolio
ana yet yielding sufficient to Justify
the former high rates of interest on
deposits has led to the general move
menu Tor an adjustment in interest pay
ments
In other parts of the country there
mas been a full l per cent cut in the
interest rate, or from to per cent,
l ne per cent rate has been for a quar-
ter OF century the average recognized
as reasonable for the savings bank de-
posltor to expect. 1t was one that the
mutual savings bank could pay an; add
TO Its surplus and on which the COM
merclal bank could realize fair profit.
May Continue Rate.
Should there be no strengthening in
money rates at the end of the next
six months, it is not improbable that
savings bank interest may decline from
the proposed 312 per cent level to
per cent The type of securities which
banks feel compelled to buy today, in
order to obtain the greatest degree of
security, still yield less than the new
rate of 3l2 per cent on thrift accounts.
On the other hand some of the mutual
savings banks claim that the average of
their earnings, due to the high percent
age of their real estate mortgages. at
5 per cent and per cent, will permit
them to continue the 3la per cent rate
indefinitely.
Within the past month there has been
a decided falling of in the rate of
increase in savings bank deposits in the
New York district. Those who have
studied this situation have come to the
conclusion that the public is again buy
ing securities. There is no evidence OF
Withdrawals of deposits-simply dry
ing up of the depositing movement.
which gained such momentum last
Autumn and added several hundred mil
lion dollars to the resources of the
mutual banks here in a six-month
period.
with the savings bank rate Of inter-
est reduced to 80 per cent, it is reason
able to expect that certain number
of depositors will be dissatisfied with
the earnings of their capital and seek
investments giving them a higher re-
turn. 1t would not be difficult to obtain
from 414 to 434 per cent in the highest
grade railroad and public utility bonds
and in the choicest of the public utility
preferred stocks. A movement of funds
from the banks into securities of this
type is among the hopeful expectations
of the normal reinvestment period be-
tween the last week in June and the
second week IN July.
Copyright, 1917