SAVINGS BANKS
[93]The savings bank works with those unacquainted with the ways of
business and who could not single handed take good care of their money,
or invest it safely or profitably. The bank of discount is generally
managed by business men versed in the ways of business, acquainted with
monetary affairs, and able to conduct financial operations with
intelligence. They combine their _capital_ in order to make it
effective; the savings bank combines _savings_ in order to make them
_capital_, and as such to acquire a power impossible to the scattered
savings.
The savings bank is for the saver; its funds are invested permanently,
while the business bank opens its doors to business men and loans rather
than invests its funds, and for a short time only. The latter deals with
borrowers rather than savers, and serves for hire. The one serves best
by keeping--the other by lending. One _aims_ at profit, while the other
_never_ makes (or should make) profit an end. The savings bank is the
receiving reservoir for the little springs, the bank of discount is the
distributing reservoir for accumulated capital.
We must get the last idea clearly in mind or we get a misconception of
the savings bank. However much the element of interest may figure in the
management, and whether we pay depositors 4 per cent. or 3 per cent., or
no interest at all, the accumulation of interest is not to be compared
in importance with the _accumulation of principal_.
No man ever acquired riches at 4 per cent. In fact, 4 per cent. upon
small deposits is so trifling a matter that it may be ignored in
considering the greater value of the increase of capital. However
desirable the accumulation of interest may be (and this in the course
of years is considerable), the chief end and aim of the savings bank
should be the _accumulation of principal_.
CLASSIFICATION OF SAVINGS BANKS
We may roughly classify savings institutions into: First, mutual
(trustee), or philanthropic; second, stock (including "savings and trust
companies"); third, co-operative, or democratic, as exemplified in the
co-operative banks of Europe. The first are usually managed by a
self-perpetuating body of trustees, who do not share the earnings; the
second are managed by the directors elected by the stockholders; the
third are managed by officials elected by the members.
A second classification may be made into public and private
institutions; the first includes the postal and municipal banks; the
private embraces the mutual, stock, and co-operative. A third
classification may still be made into the "unit" and the chain system.
In the unit system the bank is an independent entity and has no
connection (aside from a managerial standpoint) with any other bank. The
banks of the United States are all, excepting the Postal Savings Banks
and a few branch savings banks, of this character. In the second, the
bank is but a part of a chain, as in the postal system, the municipal
banks of Germany, and the co-operative credit banks of Europe. We shall
briefly review each system.
TRUSTEE SAVINGS BANKS
The _original_ savings bank is the trustee bank. As Hamilton says, "It
stands for the attempt on the part of the well-to-do to improve the
condition of the poorer classes, and involves a self-sacrificing service
on the part of a few in the interest of the many." While many of the
early savings banks partook of this character, others were organised
from purely selfish motives and were characterised by bad management and
bad faith from the start. A study of savings bank frauds will amply bear
out this statement.
The "spirit of commercialism" hereafter spoken of has invaded the
domain of the mutual savings bank and it cannot in truth be said that
some of the newer banks were organised from any spirit of philanthropy,
although the management as a whole may be above suspicion and honorable
in the highest degree.
But, however this may be, the mutual savings bank is a product of the
East and promises to remain so in spite of the fact that some of the
Western states have very good, if not excellent, savings bank laws.
The distinguishing characteristic of the trustee savings bank is
_mutuality_. _All_ the earnings of the bank, less reasonable
administrative expenses and the apportionment to surplus or guaranty
fund, are divided among the depositors in the form of interest.
One or two features of the mutual bank may be mentioned. First, the
investments of such institutions are usually carefully restricted,
looking primarily to the element of safety; and as long as the trustees
keep their funds so invested they cannot be held, either in law or
morals, responsible for losses. Second, the predominancy of the mortgage
loan. The nature of the deposits being more or less permanent,
investments of a permanent character may be made without fear of a
sudden demand for their return on the part of depositors; and to
safeguard the banks from such unexpected calls, quite generally trustee
banks are permitted by law to require notice, the usual time being
either sixty or ninety days. The third distinguishing feature is the
self-perpetuation of the board of managers. No amount of money can _buy_
a man's way into a mutual savings bank. He cannot, as in stock concerns,
buy enough stock to _vote himself_ into office--he can only gain office
as the other men advocate his cause. And, on the contrary, he cannot be
voted _out_ of office. Only an act, such as bankruptcy (which voids his
office), can affect him, and, like a Supreme Court judge, he is
appointed during good behavior.
The greatest weakness of the trustee bank is this: Lacking the
"essential element" that prompts men to undertake such ventures
(profit), it does not appeal to the average man of means unless he is
sentimentally inclined; and not being indispensable to trade and
commerce, like a bank of discount, it does not come to be a commercial
necessity. Even in a great State like New York we find twenty-eight
counties with no savings banks. And in many of these counties there are
large and thriving towns and cities. Thus the city of Jamestown, with
over 30,000 population, has no savings banks; while Elmira, with over
35,000 population, has but one, and that with but half a million assets.
From the viewpoint of intensive results, as tested by the volume of
patronage accorded these institutions, a perusal of the statistics will
demonstrate that in some places the trustee bank has had a remarkable
record. For instance, in Maine, a sparsely-settled State, and largely of
a rural nature, we find one savings account to every 3 of the
population. More remarkable is Vermont, the "Green Mountain State,"
where natural conditions would seem to be much more hostile to such
development, we find 30 per cent. of the population having savings bank
accounts. New Hampshire has an account for every 2-1/2 of the
population, while Massachusetts heads the list, with seventy-five out of
every hundred. New York has one to every three.
"In seeking an explanation of this remarkable success of the trustee
system," says Hamilton, "we are reminded that New England is singularly
separate and distinct in its customs, habits and ideals from the rest of
the country. Notwithstanding the large foreign population, the dominant
type is more homogeneous and more Anglo-Saxon than it is in any other
section, and therefore fixed customs have been more rigid and
controlling. Among the ideals behind the customs and institutions must
be noted a stern, Puritanical sense of simple living, industry and
providence, and this spirit is so strong as to be well calculated to
give color and direction to the philanthropic impulse. There is also an
unusual amount of public spirit, of collective rather than a neighborly
character, as seen in the institution of the town meeting."
STOCK SAVINGS BANKS
The stock savings bank, where it is a savings bank, and not a bank of
discount under a savings title, differs in no essential degree from the
mutual institution. The mutual bank belongs to the depositors; the stock
bank to the stockholders. The mutual bank pays dividends to depositors
only; the stock bank pays dividends to both stockholders and depositors.
The stock bank does not pretend to be philanthropic in its management.
It is purely a business proposition, and where the investments are of
the accepted savings bank type, it can justly claim to be on a par with
its mutual friends, provided, of course, that it measures up to the
standard in its management.
As is implied in the term "stock," it issues capital shares and pays
dividends thereon. It has, therefore, the added protection of the
stockholder's liability, which, together with the accumulated surplus,
affords the element of strength so necessary in all financial concerns.
It usually pays the depositors a stipulated rate of interest, and the
profits beyond this belong to and are distributed to the stockholders as
dividends. The partnership idea is entirely lacking, and the depositors
get what they bargain for, while the surplus goes to those who invest,
not necessarily their savings, but their _capital_, and assume all risks
of the business. It could not in law or equity "scale down" its deposits
to make good any losses--a feature peculiar to the mutual institution.
In this respect one thing is certain: In so far as safety is concerned,
especially in a young bank, the stock bank with the stockholders'
liability is surely superior to the mutual, unless the trustees of the
latter are of such high order and of such financial worth as to be able
and _willing_ to assume the burden of any losses that may accrue until
the surplus or guaranty fund affords ample protection. This was the
trouble in the early days of the mutual savings banks in England.
GUARANTY SAVINGS BANKS
New Hampshire is the only state in which "guaranty savings banks" are
found. These are a combination of mutual and stock--a cross between the
two. They do not transact a commercial business, being strictly savings
banks in their functions, yet having "special deposits," which to all
intents and purposes are capital stock. "The guaranty savings bank
differs from the ordinary mutual savings bank in that it has capital
stock or _special deposits_, as they are called. It pays a certain
stipulated rate of interest to its _general_ depositors and _any surplus
of earnings above this dividend is available for dividends on the
capital stock or special deposits. These special deposits constitute a
guaranty fund for the general depositors, and the charter ordinarily
stipulates that the special deposits shall always equal 10 per cent. of
the deposits._"
Such institutions are savings banks in every sense of the word, but the
strictly mutual feature is lacking in the specialising of part of the
deposits and paying a higher rate of interest on these deposits. In New
York State savings banks cannot take a "special deposit," but in New
Hampshire, in return for the higher interest rate, the special
depositors assume all the risk of loss or depreciation, and, as in the
case of stock concerns, they would be the first to suffer in the event
of insolvency.
MUNICIPAL SAVINGS BANKS
This form of savings banks properly belongs to a strong class of
municipalities. They can only thrive in places where the local spirit is
strong, the local government pure, and where the local officials are
accustomed to wield a large measure of authority. Accordingly, they have
come into being and met with success in those countries where the early
history of the town made a large measure of local autonomy a necessity.
Towns of this class possess the public spirit and the intelligent
administration required for the success of such a public venture. They
also possess a fund of gratuitous public service among the citizens
which may be drawn upon when occasion requires.
Such banks are found in Austria, France, Italy, Denmark, Sweden, and
Japan. The best examples are to be found in Germany, where they have
been in operation for a long period of years. Savings institutions exist
here at present in great variety and number, including State or Province
Savings Banks, City Savings Banks, Township Savings Banks, County
Savings Banks, _Bezirk_ (District) Savings Banks, Private Savings Banks,
and Co-operative Savings Banks.
These banks have some 19,000,000 pass books out and their deposits
amount to 13,500,000,000 marks ($3,213,000,000). These deposits are
practically all guaranteed by the various municipalities of the Empire,
which condition forms a bulwark of confidence in the security of private
wealth and earnings that cannot be shaken by hard times, panics, bank
failures, etc.
PEOPLE'S BANKS
The co-operative banks of Europe, otherwise called "People's Banks," are
essentially savings banks, in that they depend for their working capital
upon the accumulated savings of their members. The aims of these banks
are first _economic_, to enable the economically weak to make themselves
financially strong by the power of combination; second, _moral_, to
bring the members together in a unity of interests and to develop
character by making thrift and good habits the groundwork of their
operations; third, educational, to train in business methods and in the
handling of money those whose scope has been narrow and whose
experiences have been few in this regard.
In the establishment of these banks, the cardinal rules have been:
Maximum of responsibility, minimum of risk, maximum of publicity. To
secure the maximum of responsibility, unlimited liability has been
accepted by the members in many cases; that is, each one pledging his
all for the good of all; and, second, to secure the minimum of risk,
character is made the basis of membership and good habits the prime
requisite for membership. No investments are made in speculative
enterprises, and the purposes for which the money is borrowed are
closely inquired into and due care taken that the funds shall be applied
for such purposes only. To secure the maximum of publicity the action of
the bank in all matters is given the widest publicity possible in order
that the work may have public inspection.
The result of these simple rules has been that the poor have proven as
good, if not better, creditors than the rich; for once losing credit
they can never regain it except by the slow process of years of good
behavior.
The great pioneers in the "People's Banks" were Raiffeisen and
Schulze-Delitzsch. They fully appreciated that any system that would
succeed must descend to the level of its beneficiaries and they have
admirably adapted the co-operative idea of banking.
THE LOCALIZATION OF SAVINGS BANKS IN THE UNITED STATES
The home of the mutual savings bank is in the East, where it began
operations in 1816, and may even be said to be in the Eastern States;
for west of Buffalo and south of Baltimore, we find only 21 savings
banks of the mutual character. Out of 647 savings banks of the mutual
type found in the United States, 593 are found in New England, New York,
and New Jersey; and over one-half, or 334, are found in the two States
of New York and Massachusetts. Maine, Vermont, Connecticut and New
Hampshire have 215, the total of which accounts for all but 100 of the
mutual savings banks in this country.
The dearth of savings banks in Pennsylvania is notable. It would seem
strange that in a state of such character, where the mutual savings bank
had its first test, and where in individual instances it has been
extremely popular and successful, the failure of such an institution has
been so pronounced; but Pennsylvania is the home of the building and
loan association (there are over 1,400 in operation), which seems in a
measure at least, to fulfill the same purpose. From a pamphlet issued by
the Dollar Savings Bank of Pittsburgh in 1905, the striking sentence is
gathered, that to-day at the end of half a century the Dollar Savings
Bank stands as the _only_ institution of its kind in Western
Pennsylvania.
As we go south and west the banks take on a more commercial aspect, and
the savings bank as we know it in the East is a rarity, and the word
"savings" in their title is a misnomer. This is particularly true of
Iowa, where we find practically all state banks using this word, and yet
very few of them are other than banks of discount. The reason for the
large number may be in the economic conditions of that State, and also
the fact that banks may organise with as low as $10,000 in capital,
making it possible to establish a bank in even the smallest place.
In Illinois, for instance, we find no distinctively savings banks, and
in a city like Chicago, where if the same success had attended the
savings banks as it has in New York, upwards of a billion dollars would
be on deposit, we find no strictly savings institution other than banks
of discount and trust companies operating savings departments.
The reasons for the absence of mutual savings banks in the West and
South lie, no doubt, as Hamilton suggests, in the fact that these
sections were not settled from religious, but commercial motives; and
the "spirit of New England" being lacking, the savings bank which
requires a peculiar spirit of philanthropy, and age, as well, has not
become a factor in the development of the country. In fact, the
eleemosynary institution, such as the college, the hospital, or the
savings bank, the former requiring endowments of money to become
successful, and the latter the endowment of gratuitous management to
become possible, is last to follow in the economic development of a
community. Another reason may be in the pre-ponderance of agriculture
among the employments, which does not, until the country becomes highly
prosperous, afford much in the way of idle funds which would go into the
savings banks. The mutual savings bank is a product of the East and
promises to remain so in spite of the fact that some of the Western
states have very good, if not excellent, savings banks laws.
The dearth of savings banks in the South is, no doubt, due to the
prostration following the Civil War, which left the country drained of
its resources; the general ignorance of banking functions, and the
improvidence of the Negro.
POSTAL SAVINGS BANKS
The postal savings bank is not a bank, or a banking system, so much as
it is an adjunct of the Government; for the fundamental idea is that
through the post office the Government holds itself out as willing to
accept the savings deposits of the people, invest them in its own
securities and become absolutely responsible for the safe return of the
funds when called for, with a nominal rate of interest. All the leading
countries of the world except Germany and Switzerland now operate the
postal savings banks. While the rules may differ in the details, the
general scheme is the same, and a review in brief of the system of Great
Britain will serve to illustrate the methods of operation of such an
institution.
The present system was established in England in 1861. The deposits, at
whatever office they may be made, can be withdrawn from any other office
which transacts a savings bank business. The accounts are kept in London
and all moneys are remitted to the headquarters, where it is handed over
to the Commissioners for the Reduction of the National Debt, who invest
the funds in public securities.
Deposits may be made as low as one shilling or multiples thereof, and
the limit of deposits for an individual is $150 during one year or $650
in all. Charitable societies may deposit without limit. For the benefit
of youthful depositors, who have not a shilling to deposit, cards are
issued upon which stamps are placed as purchased, and when filled
represent one shilling, and may be turned in as cash. School managers
are urged to bring this plan to the attention of the pupils, and it has
been productive of good results, over 5,000 schools having adopted this
system. The interest rate is fixed at 2-1/2 per cent. and never varies.
AMERICAN POSTAL SAVINGS BANKS
ARGUMENTS FOR AND AGAINST THE ESTABLISHMENT OF POSTAL SAVINGS BANKS IN
THE UNITED STATES.
[94]In spite of the numerous differences in the postal savings bank
system of the forty-odd countries possessing them, there are certain
fundamental features common to all. Whatever else a postal savings bank
may be, it is without exception an institution working principally
through the post offices, and its primary object is the encouragement of
thrift among the poorer classes by providing safe and convenient places
for the deposit of savings at a comparatively low rate of interest. In
the discussion of the postal savings bank proposition in this country,
no one questioned the desirability of encouraging habits of economy and
thrift on the part of the public, nor was there any question that
adequate savings bank facilities should be provided for this purpose;
the debate hinged very largely upon the question whether adequate
facilities of this character were not already provided by private
initiative.
The advocates of a postal savings bank claimed that adequate savings
facilities were not and could not be provided by private enterprise,
because of the expense of conducting savings banks in small communities,
and also in larger communities where the people were not yet educated to
the saving habit; and they pointed particularly to the lack of savings
facilities in the southern and western states....
... The country is not nearly so well provided with banks receiving
savings accounts as with post offices. In the United States there are
270 square miles of territory to each bank carrying savings accounts and
50 square miles to each post office; there is a population of 8,370 to
each such bank and of 1,542 to each post office; and there are 5.4 post
offices to each bank carrying savings accounts. A comparison of the
figures for the different sections and states shows that it is in the
southern, western, and Pacific states that savings bank facilities are
most lacking.... The New England, eastern, and middle western states are
much better provided with banking facilities than are the other
sections; but even in these states post office facilities are much more
ample than savings bank facilities....
An objection repeatedly urged against the establishment of a postal
savings bank was that it would prove a competitor to existing banks. The
fear of such competition appears to have been the chief cause of the
opposition of most members of the banking fraternity to all postal
savings banks proposals. Senator Cummins of Iowa said in the Senate:
The banks of the United States are opposed unanimously to
the institution of a postal savings system.... I venture the
assertion that during the nearly two years that I have been
a member of this body ... I have received the protests of
nearly every bank in my state against any such scheme, and
those protests have usually been accompanied by a very
large number of petitions, secured, I have no doubt, through
the industry and energy of the bank officers.
It was argued that postal savings banks would have an undue advantage
over private institutions because of the great confidence in the
Government entertained by working people; and it was asserted that funds
would be withdrawn from existing banks and deposited in the postal
savings banks.... In reply, the advocates of postal savings banks
claimed that existing banks had nothing to fear from governmental
competition; that they had the advantages of an established clientele,
higher interest rates, higher limits, if any, in the amounts that could
be kept on deposit, and of the close personal and advisory relation
which so often exists between a bank and its customers. They further
argued that postal savings banks would be a help rather than a hindrance
to other banks. They would educate the people to habits of thrift and
would draw money out of hoards; and the deposits which they received
would for the most part be transferred to other banks as soon as the
limit fixed for postal savings banks deposits should be reached, or even
before, as the depositor began to appreciate the safety of other banks
and the advantage of their higher rate of interest....
The immediate occasion of the last active movement for a postal savings
bank system in the United States was ... the losses and inconveniences
arising from bank failures and from the suspension of cash payments in
the panic of 1907. Naturally, therefore, the demand for great safety of
savings deposits played an important part in the discussion.
The advocates of postal savings banks cited figures showing the number
of national bank failures and the losses involved, and similar figures
for savings bank failures in certain states. They made much of the large
amounts involved and of the hardships in individual cases. On the other
hand, the opponents of the postal savings bank scheme quite generally
dealt with percentage figures rather than with absolute amounts and
showed that for recent years the average losses, in terms of percentage
of the amounts on deposit, were almost infinitesimal.
The figures cited for bank failures, so far as they relate to savings
deposits, are so incomplete as to be of doubtful value in measuring the
extent of the losses....
After all, such figures give us no adequate measure for losses of this
kind. "Among the experiences of working people none is more demoralizing
and few are more cruel than loss of savings through failure of banks or
absconding of individuals intrusted with funds." To such people there is
cold comfort in the assurance that the average loss of savings bank
depositors over a long period of years is but a fraction of a mill on a
dollar. The loss is theirs: it is not distributed among all depositors.
In urging that a postal savings bank would draw money from hoards into
circulation, the advocates of the scheme claimed also that such a bank
would keep in the United States money that would otherwise be sent
abroad by foreigners.... Much was made of the fact that every year many
millions of dollars in money orders payable to self are bought for
savings purposes.... In such cases the purchaser not only failed to
receive any interest on his savings but was required to pay the money
order fee. Many immigrants, moreover, distrust American banks, and,
being familiar with postal savings banks in their home countries and
having great confidence in government institutions, remit their savings
to these home banks. How extensively this is done we have no figures to
show....
THE MAIN FEATURES OF THE SYSTEM
[95]The Postal Savings Bank System of the United States, which began
operations January 3, 1911, by the opening of a postal savings bank in
each state, is under the control of a board of trustees, consisting of
the Postmaster-General, the Secretary of the Treasury, and the
Attorney-General.
Depositories for the receipt of such moneys are designated by the Board.
An initial appropriation of $100,000 was made to cover the cost of
putting the law in operation, which was supplemented by another
appropriation of $500,000 in the session of 1911.
Any person over ten years of age may deposit, but no person shall have
more than one postal savings bank account in his or her own right. Upon
making the first deposit, a _certificate of deposit_ is issued, which is
to be surrendered when paid, and cancelled; or in the event of making a
subsequent deposit is to be surrendered for one calling for a higher
amount. The lowest deposit permitted is one dollar, the limit being $100
in a calendar month; but to provide for small deposits, a postal savings
card is issued for ten cents, to which may be attached postal savings
stamps, which when filled will be accepted in lieu of one dollar.
The interest rate allowed is 2 per cent., credited once a year, and the
highest balance permitted is $500 to one person. Withdrawals may be made
on demand.
The funds so received are to be deposited in national and state banks at
2-1/4 per cent. interest. Five per cent. of these deposits may be
withdrawn and kept in the Treasury of the United States as reserve.
Before becoming a depository, the bank must furnish as security
government, state, or municipal bonds, the limit of deposits being an
amount equal to the paid-up capital and one-half the surplus.... Not
over 30 per cent. of the amount of such funds may be withdrawn by the
trustees for investment in United States bonds, and it is the intent of
the act that the residue of such funds amounting to 65 per cent., shall
remain on deposit in the banks in each state and territory willing to
receive the same under the terms of the act, but may be withdrawn for
investment in bonds under the direction of the President, "when in his
judgment, the general welfare and interests of the United States so
require." Provision is also made for the conversion of savings bank
deposits into United States bonds, at the request of depositors.
"POSTAL SAVINGS BEHIND THE SCENES"
Speech of Hon. Carter B. Keene, Director of the United
States Postal Savings System at the Banquet of the
Investment Bankers Association of America at Denver,
Colorado, Tuesday evening, September 21, 1915.
_Mr. Toastmaster and Gentlemen:_
I appreciate very highly your invitation to speak here to-night, also
the words of commendation from your presiding officer. I have often
wondered whether the fact that I am the only director of a big savings
institution has anything to do with the ability of that institution to
pay every depositor his money on demand. (Laughter and applause.)...
The toastmaster was wrong when he said that postal savings has nothing
to do with investment bankers. We have a great deal to do with them.
Indirectly, we are one of their best customers. More than ninety-four
million dollars in bonds are now with the Treasurer of the United States
as security for postal savings funds, and you gentlemen have largely
supplied the banks with these bonds. Sixteen million dollars are in
State and Territory bonds; city, town, and village bonds amount to
forty-six millions; county bonds nine; miscellaneous bonds ten; and
bonds of the United States Government and its dependencies thirteen....
Since I have been here this week I have heard billions and billions
talked about.... I can hardly comprehend what a million is. But I want
to tell you that in four and a half years the postal savings system of
the United States has become custodian of sixty-eight million dollars,
in cash, of the people's savings. Let me lay emphasis on the _cash_,
because big figures do not always mean cash. Sixty-five million dollars
of this money is on deposit in six thousand banks scattered throughout
the country. In other words, practically all of the money we have
collected has been released through the banks to channels of trade in
the very localities where it originated. I am sure you will agree with
me that this is a very creditable showing so far as dollars and cents
are concerned.
The Federal Reserve Act, which went into effect on the 16th of November
last, provided that postal savings funds should not be deposited in
non-member banks. The Attorney General for the United States has held
that the prohibition relates to funds received on and after November
16th. Therefore, postal savings on deposit in state institutions when
the act became effective have been allowed to remain, except as it has
been necessary to withdraw it to pay depositors.
The Post Office Department has made frequent investigations to determine
where postal savings deposits come from; with the invariable result that
they are found to come from chimney corners, mattresses, bootlegs,
etc., but until very recently no effort has been made to ascertain where
postal savings go when withdrawn. And this recent inquiry has been both
gratifying and entertaining. It was found that in a vast majority of
cases savings were withdrawn for very substantial reasons, prominent
among them being payments on homes and the launching of small business
enterprises. Occasionally a hospital bill was paid. Some depositors sent
money to the old country to bring over a parent or a brother; a wedding
trousseau here and there; and in Colorado we have record of a withdrawal
to buy an automobile. (Laughter.)
I am glad to say that there has been a very great change in the attitude
of the banks toward postal savings in the last few years. At the outset,
many bankers thought that postal savings was an unwarranted invasion of
the domain of private enterprise and that the service would prove a
severe drain on their established business. The opposite has been the
result. The tarnished coins and soiled currency that come into our
postal depositories represent hidden savings--money that is beyond the
reach of any corporate banking institution no matter how sound it may be
or how conservatively managed. This newly discovered money has been made
available for commercial purposes in the very cities and localities from
which it was withdrawn, so instead of being a drain on corporate banking
institutions postal savings has added to the deposits of some six
thousand banks more than sixty-five millions. The bankers now freely
admit that postal savings has been a help to them, and it is no uncommon
thing for banks, especially in the mining regions of the West, to urge
the Post Office Department to extend postal savings facilities in order
that more money may be made available for local uses.
Among our 540,000 depositors every nation on the face of the earth is
represented, also every conceivable occupation. The fisherman, the
miner, the shoemaker, the preacher, the bank teller, the butcher, the
baker, the candle-stick maker, all have accounts, but the great bulk of
our deposits come from the men and women who work with their hands for a
daily wage.
The foreign born are our most numerous and liberal patrons. An
interesting poll of depositors has just been made by the Post Office
Department and it was found that 59 per cent. of all postal savings
depositors were born outside the United States, while the American born
comprise 41 per cent. A still more surprising fact is that the foreign
born own 72 per cent. of all the deposits. The Russians lead with
$14,000,000 to their credit, or 20.7 per cent. Then follow the Italians
with $9,650,000, or 14.2 per cent.; natives of Great Britain and her
colonies with $6,000,000, or 8.8 per cent.; the Austrians with
$5,900,000, or 8.7 per cent.; Hungarians, $2,900,000, or 4.3 per cent.;
Germans, $2,800,000, or 4.1 per cent.; Swedes, $1,500,000, or 2.2 per
cent.; and Greeks, $1,200,000, or 1.8 per cent.
What a splendid vote of confidence on the part of our foreign-born
citizens in the good faith of the United States. And in these figures
also is a high testimonial to the industry and frugality of our newly
acquired citizens. That they should take most kindly to postal savings
is not remarkable when we consider that they were accustomed to a
similar service in their native countries....
Another thing that has induced foreigners to become postal savings
depositors is the disastrous experiences many of them have had with
so-called "private banks," usually operated by people of their own
tongue. It is difficult to conceive of a more heinous crime than some of
these so-called "bankers"--slick and persuasive--have committed in
alluring credulous, hard-working men and women, to entrust their humble
savings with them for the deliberate purpose of theft. I am glad to see
that prosecuting officers have recently been aroused to the "private
bank swindle" and that their promoters are getting the punishment they
deserve.
When Europe got on fire last year, our postal savings receipts began to
increase by leaps and bounds. During the fiscal year 1915, the deposits
jumped from $43,440,000 to $65,680,000 and more than 140,000 new
accounts were opened. The war still has an influence upon postal savings
deposits, but the more immediate cause of large deposits at this time is
the remarkable revival of commercial activities. Seven cities now have
more than a million dollars on deposit, namely. New York, Brooklyn,
Chicago, Boston, Detroit, San Francisco, and Portland, Oregon. Greater
New York, including Brooklyn and several other offices in the
municipality, now have over one-fourth of all the money in the Postal
Savings System. During the past fiscal year New York City gained 200 per
cent.; Bridgeport, Connecticut, 188 per cent.; Brooklyn, New York, 167
per cent.; Paterson, New Jersey, 162 per cent.; Jersey City, New Jersey,
122 per cent.; Detroit, Michigan, 112 per cent.; Newark, New Jersey, 100
per cent.; Akron, Ohio, 77 per cent.; Gary, Indiana, 66 per cent.;
Pueblo, Colorado, 52 per cent.
Now, my friends, I come to a point that I hope will make an impression
on your minds--a lasting impression--and that point is that the Postal
Savings System from the first has been seriously handicapped by
statutory restrictions on the amount that may be accepted. The law
permits the acceptance of only one hundred dollars a month and five
hundred dollars in all from a depositor. It has been shown that the
foreign born are the largest patrons of our savings service and if this
service is to reach its full measure of success we must recognize and
respect the habits of the foreigner, and one of his habits is to save
his money until he gets several hundred dollars together and then take
the entire amount to the post office, just as he did in the old country.
Because the postmaster cannot accept all that is offered, the intending
depositor very frequently goes away in resentment and disappointment
without depositing a dollar....
It is the testimony of postmasters from all over the country that they
are rejecting about as much money as they are taking in. The Postmaster
General last year recommended to Congress that one thousand dollars be
accepted with interest and that another thousand dollars be accepted
without interest, but for safekeeping. That was a practical and
reasonable recommendation--one which would meet all requirements in
ninety-five per cent. of the cases. Unfortunately the recommendation
failed.... The Postmaster General has indicated that he will repeat the
recommendation in his forthcoming annual report and I sincerely hope
that Congress will promptly recognize the urgent need of the
legislation. Millions of dollars, my friends, are spent every year by
uplift societies for the betterment of the foreigners. These foreigners,
these begrimed, hard-working foreigners, come to our post offices and
ask us to take their humble savings. How unfortunate that we cannot
accept what they offer, within reasonable bounds. What an effective
agency this would be in bettering in a most practical and permanent way
the conditions of the very people we want to Americanize as speedily as
possible.
... We have five hundred and forty thousand depositors in the United
States to-day and postal savings has a new and different story for each
of them. It is not always the big things in life that change or fix our
course. Can't you remember when a few dollars or the want of a few
dollars tipped you one way or the other in some important matter. Who
can estimate the happiness and prosperity that the starting of a postal
savings account may lead to. It is a step, and an important one, in the
right direction. Some one has well said that the immigrant who opens a
postal savings account steps unconsciously on a moving platform; one
thing leads to another, and his deposit might lead him into local
investment and investment into business and into citizenship.
There is a very interesting human-interest side to postal savings in
which every phase of good fortune and disaster is reflected. An aged
couple at Norfolk without the knowledge of each other had been carrying
$100 on their persons as a guaranty of respectable burial. They are now
postal savings depositors. Two sisters died in each other's arms in the
_Eastland_ disaster in Chicago a few weeks ago--two working girls--and
they had postal savings accounts for like amounts. Their savings went to
pay for their burial. One of Uncle Sam's bluejackets who went down on
the ill-fated submarine _F-4_ was the owner of a substantial postal
savings account. Gentlemen, the Postal Savings System means something
more than a cold array of assets and liabilities, a balance sheet. Way
off in an isolated spot in Russia a money order went not long ago to the
home of a humble peasant. That money order represented the savings of a
son who was drowned in the Susquehanna River. A few weeks back, a
thrifty Mexican girl withdrew her savings from the post office at San
Diego, California, to buy a trousseau. After the honeymoon she returned
to the office with her new husband and both opened postal savings
accounts.
Last year Leadville, Colorado, struck a thrift note that was new in this
country, so far as I know, and reference to it is particularly timely as
Christmas is approaching. A mining company in that city struck the note
and I hope it will be heard from one end of this country to the other.
It was this: Last December an officer of the company went to the post
office and opened a postal savings account for every employee--ninety in
all--as a Christmas present. He placed to the credit of each 2 per cent.
of what he had earned during the year. These Christmas remembrances
amounted to over fifteen hundred dollars. Out of the ninety employees
only five had previously opened postal savings accounts. Now, I count
that substantial charity; I call that well-directed charity. We have
kept track of these particular deposits and the workmen who get their
start through that Christmas bounty are adding to their savings weekly
by their own personal efforts. (Applause.)
Gentlemen, as a rule, we in official life swing back and forth in a
measured arc, and the little one can do is so small when compared with
the mass of Government activity that we feel insignificant and lost. But
I feel, my friends, that in the Postal Savings System my associates and
I are doing a positive good for humanity. I believe that we are making
people better and happier because postal savings points the way from the
sweat shop to the school--it stands for clean homes and empty alleys.
Each of you is a stockholder in the Postal Savings System and its
success is your success. Your dividends are in the better and happier
American citizenship which it encourages and promotes. (Applause.)
FOOTNOTES:
[93] Adapted from W. H. Kniffin, _The Savings Bank and Its Practical
Work_, pp. 54-75. The Bankers Publishing Company. New York, 1912.
[94] E. W. Kemmerer, _The United States Postal Savings Bank_, _Political
Science Quarterly_, Vol. XXVI, No. 3, September, 1911, pp. 465-77.
[95] W. H. Kniffin, _The Savings Bank and Its Practical Work_, pp. 75,
76. The Bankers Publishing Company, New York. 1912.