gages 75 per cent being in the form of first-class bonds. The bond investments appear as follows: United States loans, reg. 4 per cent..... Dist. Columbia, guaranteed by United States 3.65 per cent. Total United States bonds .... Pennsylvania State, reg. 3 and 4 per cent. $1,967,187.50 1,000,000.00 $2,967,187.50 $860,000.00 Pittsburg City, reg. 4, 5, 6, and 7 per cent.. 1,544,900.00 Baltimore, Md., reg.and comp. 4, 5, and 6 per ct. St. Paul, Minn., comp. 44, 6, and 7 per cent per cent Toledo, Ohio, comp. 41 per cent Woodbury, N. J., comp. 4 per cent. 60,000.00 330,000.00 56,878.60 34,500.00 170,000.00 70,000.00 55,000.00 203,000.00 New York City, reg. 34 per cent. Total city and State bonds. Bonds of counties and boroughs, 4 to 6 per cent. Total municipal and Government bonds First-class railway bonds..... Total...... 212,000.00 101,000.00 115,775.00 62,000.00 800,000.00 $8,095,328.60 549,000.00 $11,923,615.10 33,581,554.65 $45,505,169.75 Of the railway bonds, about one-fourth were held against the Pennsylvania Railroad, financially one of the strongest corporations in existence, and another one-fourth were held against the New York Central, the Erie, the Lehigh, and the Northern Pennsylvania Railroads. No shares of stock whatever were held. Nearly all of the bonds are what are known in the market as "gilt edge." The Nation's Bank of Savings had only about 3 per cent of its funds invested in bonds, and these were entirely local and industrial. It had 50 per cent of its assets invested in mortgages. It is to be presumed that these were also largely local and industrial. Fifty-four per cent as against 92 per cent in bonds and mortgages, and those Comparison of an inferior type in the general security marof methods. ket! About 10 per cent of its funds were "on deposit" in other banks, while 30 per cent were invested in commercial paper-short-time loans secured by collateral. The loans of this character made by the Philadelphia institution amounted to about one-tenth of 1 per cent. Whether this difference grows out of the joint-stock interest of its managers it will not be said, but certain it is that the Allegheny concern is quite as closely allied with the commercial interests as it is with the interests of the working man. The deposits that go to the savings bank are usually in the form of minor coins, silver, and what is generally considered "change." The collection of such Relations of savings-bank money gives the bank a double importance in to the money its relation to the money system of the counsystem. try. It reduces the amount of small change that the Government would otherwise be called on to furnish to the people. By providing a method for the safekeeping of funds, (1) it reduces the amount of money that would go into hoards, and thereby reduces the demand on the Government; (2) it indirectly sets up a chain of redemption through the Treasury. The savings-bank also has an important relation with the fiscal side of the Treasury. When an issue of bonds is offered for sale, these institutions are among the largest purchasers. They therefore facilitate the funding process of the Government. In 1899 the savings-banks had investments amounting to $137,000,000 in United States bonds. The total deposits of that year were $2,179,468,299. Their income amounted to over $5,000,000 per month, while cash on hand averaged about $100,000,000. These banks are therefore, under ordinary circumstances, in a position to absorb a large issue of public securities. Relation of savings-bank to other financial institutions. "run." The business relations of the savings institution to the commercial bank is largely represented by its "deposits" in those banks. There are times when withdrawals exceed deposits; in periods of panictimes when those having securities and other properties must realize on them at once in order to meet present credit obligations, when sales of securities are made at a sacrifice-many depositors of savings may find it to their interest to exchange their savings investments for the properties offered for sale; in times of depression also, when the laboring constituency of the savings institution is out of employ, large withdrawals may be necessary to meet living expenses. If, on such occasions, the savings institutions do not have a part of their investments in such form that they may be readily converted without loss, they may become embarrassed. Their constituency may become frightened and begin a Such occasions of emergency and adversity suggest to the savings manager the desirability of keeping a considerable part of the institution's funds "deposited" in one or more commercial banks at a low rate of interest. The percentage of funds "deposited" will vary with the circumstances of each institution. The commercial banks are always ready and willing to sell credit accounts--that is, to buy cash from the savings-banks with their own demand credit, and pay from 1 to 2 per cent for the time that payment is deferred. It is of advantage to the commercial bank to receive deposits from the savings-bank, because the money thus deposited strengthens their reserve, and enables them to exchange a larger amount of bank credit for loans. The low rate of interest paid by the commercial bank to savings institutions on deposits, however, makes it quite imperative that the savings-bank keep only such amount invested in this way as business safety requires. It sometimes happens that those who manage savings institutions have a personal interest in keeping deposits in other institutions. When this is the case they are wholly unfitted to remain in fiduciary relations to depositors. In some States, statutes have been passed regulating the qualifications of officers in savings institutions. Past experience has suggested the propriety of such laws. CHAPTER XI THE BUILDING LOAN ASSOCIATION LITTLE more than a quarter century had passed before the principle of saving was applied in a different way. The savings-bank gave to the wage-earner an opportunity to safely invest his surplus dimes and dollars until he wished to use his capital for industrial purposes or until he could employ them to greater advantage in an independent way. This gave the best of encouragement to saving and to the accumulation of funds for capital use. The Building Loan Association was an investing institution which advanced to the wage-earner funds for his immediate use on the security of his future savings. It has been noted that the savings-bank sells interest-bearing book-accounts to customers and then invests the funds deposited in "gilt-edge" securities of other concerns which bear a slightly higher rate of interest than the rate paid to depositors. The Building Loan Association receives a definite amount on deposit each month as a payment on stock held by members of the association; the company then invests the amounts received in loans to its members-the members having the profits from the loans applied to the balance due on stock. For example, an association is formed with a thousand members; each member takes one share, the par value of which is $100; he pays down $1, and agrees to pay $1 per month on the stock till, with the accumulated profits, the stock is paid for. This gives to the association an income from stock payments of $1,000 per month, which may be loaned |