Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-28
BANKS ARE AIDED
BY MELLON ORDER
Reduction in Federal Interest
Rates Means SAVING
of Millions.
BY C. B. uPHAM.

Those banks in which the Federal
Treasury keeps its current funds ON de-
post today stand to gain materially
through the action Of Secretary Mellon
IN reducing the rate Of interest which
they must pay to the Government from
l per cent per annum to one-half Of
per cent.
During the fiscal year 1880 the Govern
ment received interest from its special
repositories in total amount Of So
100000. At that time the rate OF In
terest was per cent. The maintenance
OF the newly established rate during
the fiscal year 1892 will mean a saving
Of nearly $4,000, 900 in interest charges
to the banks concerned, not to be dis
regarded IN these days Of reduced bank
earnings.
Other Reductions.
This action by the Treasury Depart
ment is IN line with the general trend
OF interest rates. Following the recent
reduction in the rediscount rate OF the
Federal Reserve Bank Of New York the
clearing house banks Of that city re-
duced correspondingly, as Is their GUS
tom, the interest paid on balances car
ried with them. Several Of the banks
IN and outside Of New York have an
nounced reductions on savings and
thrift accounts. Savings banks. with
their high rates. are expected to an
nounce further reductions.
Interest on deposits is one Of the Inn
portant items in bank costs and one
which has not been as flexible in the
past as many bankers have wished
There has been tendency for interest
on deposits to remain stationary even
when interest received by the banks
on loans and discounts fell of sharply.
Bankers are beginning to recognize,
however, that the price paid for the
money they attract as deposits should
be more nearly in line with the price
they get from loans.
The rate Of interest on funds of the
Federal Treasury Is fixed by admins
trative ruling Of the Secretary. but In
many Of the States the rate on State
and local government funds is fixed by
statute and much more difficulty Is
experienced in enecting changes as con-
dtnons change. For that reason many
banks are refusing to qualify as de-
positories for the monies Of States,
counties and other local units Of the.
government. The Federal Reserve
agent OF the Dallas Reserve Bank few
Gays ago. In discussing public funds as
sank deposits, stated that many bankers
believed they should command only q
nominal rate Of interest, and be invested
IN the most liquid securities, being
treated practically 90 demand deposits.
Was Wartime Measure.
The special depository system of the
Federal Treasury was adopted as q war
time measure. The number Of depoeiss
tories and the balances held by them
has had downward trend since the
war period. The last report of the Sec
rotary Of the Treasury showed 1904
banks as special repositories. 833 Of
which held deposits. In addition Ia
the special repositories there are gem
eral and limited repositories. which also
VIII save by the new regulation.
From the time that the interest re-
quirement became effective, June al.
1913, to June 80, 1880, banks paid inter-
est to the Government in total amount
Of $40, 467, 580.83
Copyright, 1872