SAVINGS BANKS. 



445 



acted a general law for the organization and super- 

 vision of savings banks. At that dale lucre was 

 probably nut more than 87, 000,000 on deposil with 

 all of these institutions in the United States. 

 From 1835 savings banks have occupied the pub- 

 lic attention to a greater or less degree and the sub- 

 ject has been a fruitful source of legislation ; the 

 earlier of which in most States embraced provisions 

 for the milking of reports to disclose the condition 

 of the banks in respect to resources and liabilities ; 

 such returns though imperfectly showing their con- 

 dition were the subject of criticism that resulted in 

 the enactment of laws designed to make them more 

 secure by limiting and restricting the scope of their 

 investments and methods of business. At later pe- 

 riods provisions were made for their supervision by- 

 designated State officials and examinations were pro- 

 vided for to ascertain whether investments had been 

 made in accordance with the requirements of law. 

 Though legislation was neither regular nor uni- 

 form, the more important subjects were embraced in 

 that of most States during the twenty years succeed- 

 ing the passage of the Massachusetts general law 

 in IS'U. The attention savings banks attracted as 

 affording desirable places of deposit for surplus 

 moneys, practically subject to repayment ou de- 

 mand, was the primary cause of their l>eing gene- 

 rally used by the public. So large patronage soon 

 lifted well-conducted banks located incitiesand popu- 

 lous centres of manufacture and trade out of their 

 previous semi-charitable conditions. The greater 

 demands made on the resources of the banks neces- 

 sitated the employment of competent salaried clerks 

 and managers and the extension of business hours, 

 a few hours of gratuitous service weekly being 

 insufficient for the transaction of their b'usinc-i-s. 

 The increased facilities afforded early met with 

 public favor and a phenomenally rapid develop- 

 ment followed. The growth of savings banks in 

 the United States for the past sixty years is shown 

 by decades in the following table: 



Prior to the year 1870 the estimated loss to de- 

 positors with savings banks throughout the United 

 States, by reason of failures, was but a small frac- 

 tion of a mill on the dollar of aggregate deposits 

 held by such institutions. During the seven succeed- 

 ing years, however, savings bank failures were of 

 common occurrence. In the State of New York 

 alone 29 of these banks failed, involving a loss to 

 depositors approximating 85,000,000. In the other 

 States failures were not so numerous, yet they were 

 comparatively frequent. The inherent weakness of 

 the unsound banks was soon developed by the sus- 

 pension of industries, the depression of trade, and 

 the depreciation of property and securities gene- 

 rally incident to the monetary panic of 1873, coupled 

 with unusually heavy withdrawal of deposits at so 

 critical a time. The conservatively managed solvent 

 banks were little affected by the strain that forced 

 many of the weak ones into liquidation. The failure 

 of one savings bank after another in rapid succes- 

 sion produced great excitement in the localities 

 affected and public attention was directed to the 

 dangers to arise from the reckless incorporation of 

 such institutions. In the year 1855 only 215 savings 

 banks were in existence throughout I he United States, 

 in 1875 the number had reached 771. Within that 

 period the war of the Rebellion occurred, producing 



conditions exceptionally favorable to such institu- 

 tions. The abundance of money and the activity of 

 every branch ol industry materially aided the rapid 

 accumulation of deposit.-. The .N atioual government 

 was then a large borrower aud its bonds were avail- 

 able for investment bv savings banks on the most 

 advantageous terms. Iu seconding the efforts of the 

 government in its struggle for existence, the cities, 

 counties and towns became borrowers of large sums 

 at. high rales of interest ; those securities ali-o were 

 generally taken by savings hank>. Sui h conditions 

 produced nil elements conducive to prosperity for 

 financial institutions: industries active in every 

 department, an abundant currency and facilities for 

 speedy and profitable investment. The seeming 

 prosperity created and promoted by the war did 

 not of course subside immediately on its termina- 

 tion, and the evil effects of the ill-advised multiplica- 

 tion of Divings banks were not made fully apparent 

 until the coming of the panic of 1873, when Lnance, 

 trade, commerce and industries all became unset- 

 tled and the manufacturing districts idle, making 

 necessary the withdrawal of savings wisely accumu- 

 lated for such a time of trial. The strong banks 

 withstood the depletion of their resources, while the 

 weak and unsound ones were swept away. 



In connection with past savings bank failures iu 

 the United States, it is a noteworthy fact that but 

 very few failures have been caused by the fraudu- 

 lent appropriation of deposits. For the most part 

 they have resulted from extravagance and a disre- 

 gard of the plainest principles of prudent business 

 management, as shown by injudicious loans and 

 investments; made sometimes under sanction of law 

 and sometimes without it, but usually with the pur- 

 pose in view of promoting the advantage of their 

 depositors, by securing for them higher rates of 

 interest than strictly first class loans aud invest- 

 ments would yield. 



The weaknesses in the system disclosed by the 

 crisis through which they passed have been provided 

 against for the future by remedial legislation. In 

 nearly all of the States laws have since been enacted 

 to provide more effectual safeguards for the protec- 

 tion of savings banks' depositors, and legislators have 

 responded to urgent demands for more stringent 

 and carefully considered laws for their government. 

 Many States have repealed the special laws under 

 which savings banks previously operated and made 

 provisions for their organization aud supervision by 

 general law. 



Owing to the numerous failures in New York the 

 Constitution of that State was amended by a vote of 

 the people in 1874, so as to require its legislature by 

 a general law to conform the charters of all savings 

 banks or institutions for savings to a uniformity of 

 powers, rights and liabilities, and require that banks 

 thereafter organized should conform to such general 

 law and amendments made thereto. The organiza- 

 tion of savings banks with capital stock was pro- 

 hibited and the power to pass special charters for 

 banking purposes was taken from the legislature. 

 Trustees of savings banks were prohibited from 

 having any interest, direct or indirect, in their 

 profits or from being interested in any loan or use of 

 any money or property of savings banks with which 

 they were connected. In obedience to the constitu- 

 tional mandate the legislature of 1875 repealed all 

 special privileges contained in savings bank charters 

 and enacted a stringent and very complete general 

 law for their management, many of the salient fea- 

 tures of which have since been engrafted into the 

 laws of other States. As the New York law con- 

 tains more features common to the laws of all States* 

 a synopsis of its provisions are given. 



* In moot of tlie Emitcm States savtnrs hanks are au- 

 thorized to Invest in bank ttouk, railroad, and corporation 



