Year: 1873




ings banks is of exceeding Importance to the
community at large, since the amount of de-
posits has attained such dimensions, and
nearly every citizen makes use of some bank
as depository of funds for himself, children
or wards. The Legislature should treat the
subject with very careful consideration, and
should be extremely cautious to do nothing
to weaken the sense of absolute security
which should be an essential element of the
very nature of these institutions. The prop
osition to abrogate the legislation of last win
ter limiting the yearly dividends to six per
cent. with special dividend of surplus once
in four years would be, we think, step in
the wrong direction. In the management of
trust funds security should always be pre-
ferred to large interest, and power to de-
clare an unlimited dividend is direct stimu-
lus to speculative spirit which is the great
peril of our banks. This has already been
illustrated in our own State by dividends of
seven and even eight per cent. made by coun-
try banks seeking to attract deposits and by
city banks melted by a competition for large
business. In order to pay such dividends and
meetthe current expenses of the bank they are
compelled to purchase Western bonds which
pay very high rates ofinterest, but which are of
very questionable soundness. Our banks in
Maine have now in their vaults hundreds of
Thousands of dollars of these western bonds
which they will insist aresgood ;''but our legis-
lators in considering the matter should remem
ber that large proportion OF these securities
differ from our eastern municipal bonds in
that the public property only-for instance
some dilapidated court house, Jail, city hall or
school house-makes the foundation securing
these bonds, while all the property public and
private in the town or city are liable to seiz.
ure in case of the non payment of our muni-
cipal bonds. 1t may be assumed with entire
confidence that six per cent per annum is as
much as any savings bank can safely under
take to earn for its customers after deducting
Office rent, salaries, taxes and the other ex-
penses ofdoing the business; and any bank
undertaking to do more does It at the expense
of security.


A vivid Illustration of the danger of stimu-
lating this speculative spirit is afforded by the
recent defalcation at Exeter, N. 81.
In that case the same person was cashier
of National Bank and treasurer of Savings
Bank. Ambitious for large dividends, which
could not be paid from an investment in New
England state, town or city bonds, he got in
ahabit of loaning the Savings Bank money
fo fIa Nat;o,,ol Rank 0o;no fo posfo,, x,;+I,
the joint funds and buying notes on the street
at high rates corresponding with their doubt
ful character. As might be inferred he drift
ed into other lines of speculation and the
usual result followed-the cashier and treasur-
er together with about $125,O of money dis
appeared the other day. s


In this State there are several Savings and
National Banks connected in precisely the
same way which of course helps more or less,
to foster this same spirit.


In fact, under the old unlimited dividend
system everything was tending toward most
appalling financial panic when the depositors
should come to a full appreciation of the fact
that the banks were taking risks with their
funds; and our bank managers would find it
difficult to realize ten cents in the dollar from
many Of their western high interest securities
to meet the crisis in case of ssrun'' on the
banks.


The limitation of the annual dividend to
six per cent. left the banks at liberty to con-
fne their investments to eastern securities
whose soundness is absolutely assured, and
which are readily convertible at all times into
cash to meet emergencies One step further
should be taken. 1t should be made
compulsory upon the banks to confine their
investment of deposits to New England secur-
tiles. This would operate favorably in sever
al ways beside the security afforded, which is
the paramount object 1t would practically
confne the investments to Maine securities
inasmuch as the other New England States
largely absorb their own indebtedness of all
kinds. Our money would be kept at home to
re-enter the channels of commerce instead of
being sent to the West and the value of our
securities of all kinds would be enhanced by
the large home demand.


We trust the Legislature will not remove
any existing safeguards from these institu-
tons but will rather see to it that these de-
postories of the hard earnings of the poor, of
the scanty pittance of widows and orphans
and the little savings of children shall be
more sedulously guarded against the tempta-
tions and allurements of speculation and the
dangerous disposition to prefer large interest
to perfect security. The State is the guar
n IN L. a.x:
representatives should be specially careful to
prevent danger in this direction from the
speculative spirit of the times. These de
posts are sacred and must be protected.