Milford chronicle., 1953-10-23
Federal Reserve Bank Of Philadelphia
Discusses ':MutuQI Savings Banking"

| Mutual savings banks in the
| United States have assets of about
$26.5 billion, and the banks serve
/ 20 million depOsitOrs. These fig
ures indicate that mutual savings
banking is big business and that
the industry is still performing it's
! original function of meeting some
/ specific needs of many small saw
ers, according to an article entitled
Mutual Savings Banking" in the
October Business Review" of the
Federal Reserve Bank of Philadel-
phia.
The first mutual savings bank
! to begin operation in the United
! States was established in Philadel-
phia in 1916, to serve "tradesmen,
mechanics, labOrers. servants. and
others .. e." Mutual savings banks
accept deposits and extend credit.
Although the deposit may be with
/ drawn by the owner, it may not
be transferred by means of checks
and is not therefore a means Of pay
ment. Like savings and loan assO-
Citations, mutual savings banks pro
rate earnings among the people
who turn over their savings to
them, but the savers are not sharN-
holders. Like most other financial
/ institutions, mutual savings banks
are run by boards of directors
! Tor trustees) that have the power
to select the operating officers .4ad
prescribe general pOlicy-but the
boards are not selected by the de-
pOsitOrs and are, in effect, self
perpetuating groups.
Deposit accounts in mutual saw
ings banks are small, and interest
payments are moderate in amount
Most deposits are insured. AS of
the end of last year, 493 (93 per
cent? of the 529 mutual savings
banks, holding 976 per cent of all
deposits, participated in some sort
of deposit insurance plan.
The nature of mutual savings
bank deposits, originating as they
do with small investors, makes it
important that safety be the pri-
mary consideration in investment
policy. In nearly all of the II
states in which mutual savings
banks operate, therefore, invest
ments are selected from lists set
up by either the legislature or a
supervisory authority.
Though safety comes first, mu-
tual savings banks must also strive
to make profitable investments; {;
otherwise they will face the grad
ual loss of funds to competing fl
hanclal institutions. The drive for
earnings is reflected in the large
percentage of mortgages held.
Mutual savings banks are found
in only II of the 48 states; in fact.
81 per cent Of the assets is con-
centrated in only four states-New
York, Massachusetts, Connecticut,
and Pennsylvania.
In the 1930's, mutual savings
! banks had a distinct competitive
advantage because of their long
record of safety. Today, the safety
of the savers funds is assured in
most commercial banks and most
savings and loan associations
through the operation of the Fed
erai Deposit Insurance Corporation
and the Federal Savings and Loan
Insurance Corporation Mutual
savings banks have thus lost an
important competitive advantage.
After 1877 years of successful
operations. mutual savings banks
are now old and respected institu-
tiOns The country's 528 mutual
savings banks perform valuable
economic functions in stimulating
the habit of thrift and in channel.
ing the savings of the public into
productive uses. The success with
which competition will be met de.
pends, as always, primarily on the
people who make up mutual saw.