Front Page Titles (by Subject) I. - A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.)
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I. - Editor of the Journal of Commerce and Commercial Bulletin, A History of Banking in all the Leading Nations, vol. 2 (Great Britain, Russian Empire, Savings-Banks in the U.S.) 
A History of Banking in all the Leading Nations; comprising the United States; Great Britain; Germany; Austro-Hungary; France; Italy; Belgium; Spain; Switzerland; Portugal; Roumania; Russia; Holland; The Scandinavian Nations; Canada; China; Japan; compiled by thirteen authors. Edited by the Editor of the Journal of Commerce and Commercial Bulletin. In Four Volumes. (New York: The Journal of Commerce and Commercial Bulletin, 1896). Vol. 2 A History of Banking in Great Britain, the Russian Empire, and Savings-Banks in the U.S.
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ORIGIN AND GROWTH OF SAVINGS-BANKS.
THE birth of the savings-bank idea must be credited to England, where, in 1797, the first publication on the subject was issued by Jeremy Bentham, in whose plans for the management of paupers was included a system of “frugality” banks. Mr. Bentham’s writings interested many philanthropic people, and in the later years of the last century and the early years of this, many well-intentioned plans were evolved in Great Britain, some of which seem queer in the light of the present, but all of which aimed to aid the poor to independence and self-respect. Among others who were interested in this evolution were Samuel Whitbread, Patrick Colgeshoun, Rev. Joseph Smith, Lady Isabella Douglas, and Mrs. Priscilla Wakefield. The latter was, in 1801, the superintendent of a “friendly society for the benefit of women and children,” which combined with it a bank for savings for their benefit. It was not until 1810 that Rev. Henry Duncan, who has been called the father of savings-banks, established at Ruthwell, Scotland, in his own parish, “a savings and friendly society.” It is true that Mr. Duncan’s effort resembled more nearly the modern savings-bank plan than anything which had been previously established, and the publication of his ideas and work stimulated an interest in savings institutions. When, in 1817, the first act of Parliament was passed which established the system in England and Ireland under Government control, there were seventy-eight private societies distributed through England, Ireland, and Wales which received and invested the savings of the laboring poor. In Scotland, where Rev. Mr. Duncan had worked so successfully as a pioneer, these savings institutions were not recognized by law until 1835. It is worthy of mention in passing, that the savings-bank theory was established in Switzerland, at Zurich, in 1805, and the first bank in France was opened at Paris in 1818.
To America belongs the honor of first incorporating and regulating by law a savings-bank. This bank was the Provident Institution for Savings, which was incorporated in Boston, December 13, 1816, the year before the British savings-banks were sanctioned by act of Parliament. The ideas and hopes which possessed the founders of the bank in Boston were well expressed in their appeal for recognition to the Legislature of Massachusetts, as follows: “It is not by the alms of the wealthy that the good of the lower class can be generally promoted. By such donations, encouragement is far oftener given to idleness and hypocrisy than aid to suffering worth. He is the most effective benefactor of the poor who encourages them in habits of industry, sobriety, and frugality.” Though this Boston bank was the first savings institution in the world regulated by law, it was not the earliest savings-bank in the United States, for in a previous month of the same year, 1816, a bank for savings opened its doors in Philadelphia. This latter society was not incorporated until February 15, 1819.
THE BASIC IDEA OF THE SAVINGS-BANK
In looking back, it seems strange that eighteen centuries of time were required before savings-banks came as a practical aid in solving the problem impressed on human intelligence by the words, “The poor you have always with you.” Charity had been taught and applied from the first, but the benefits which flow from the blending of business and benevolence in the savings-bank system were unknown prior to the opening of the present century. Speaking broadly, the history of the first savings-bank is the history of all. The basic idea was the desire to aid the poor in a practical way, and benevolent men associated themselves together in this effort to improve the condition of those who, under conditions then existing, were unable to help themselves. These men recognized the fact that pauperism and crime were allies; that public morals became more lax as poorhouses and workhouses increased. To help the poor individually would decrease the public tax burdens for their support. This was the end hoped for. It is probable that the men who in 1817 developed the savings-bank plan had no conception of the power they were generating. Even so late as 1834, when the Bowery Savings-Bank, the fourth in New York City to be incorporated, was established, so little was its use anticipated that the total amount of deposits allowed by its original charter was limited to $500,000. When it is said that to-day the deposits of this one bank exceed $55,000,000, and it has more than 112,000 open accounts, with assets at market value of $63,000,000, the contrast of the promise of ad 1834 with the realization of ad 1896 can readily be understood. Yet so simple was the theory of the founders, so full was it of a knowledge of human nature, that in the test of sixty-two years of actual practice it has suffered no essential change, only development and expansion, guided by the wisdom and safeguarded by the conscience of the men who have been identified with these institutions in later years. It may be said here that the general law of the State of New York differs in no essential particulars from the original charter granted to the Bowery Savings-Bank in 1834. The secret of the success of savings-banks is found in the truth that “self-preservation is the first law of nature.” They furnish the opportunity in business for the outworking of this law in the individual.
While savings-banks teach the poor lessons in thrift, they at the same time pay to the poor a premium for accepting the lessons. In efforts to elevate humanity, the hope of reward is a more salutary force than the fear of punishment. Every savings-bank is a monument to that enlightened self-interest which is the corner-stone of all progress—material, intellectual, and spiritual. It is worth noting that the inception of savings-banks occurred in that era in the last quarter of the eighteenth century when Europe and America were shaken by a Vesuvius of democracy. Out of the battle-fires kindled at Bunker Hill in 1775, and rekindled with fiercer flame on the other side of the Atlantic when, in 1789, the Bastile fell, the spirit of liberty and equality rose an inspiring sight, illuminating the political, social, and commercial world. For centuries the poor had been enslaved. The rich and powerful ruled the Church and State alike; the many were kept in serfdom that the few might luxuriate in wealth and power. A few years of appalling struggle changed all this. The declaration of independence in America, the eloquence of men like Chatham and Burke in England, and the teachings of Franklin impressed new ideas on Europe and America. Freedom came, greater responsibility for the individual, and with greater liberty, more self-respect. One method of expression of this sense of greater responsibility was found in the organization of savings-banks. They, in the financial world, reach down to the people as the ballot-box does in the political world. The ballot-box enables a man to assert himself in the politics of the nation, and savings-banks furnish him the opportunity of sharing in its prosperity. It was, therefore, natural that when equality came into political life, the savings-bank should quickly follow it in financial life, each in its own way tending to uplift the individual and strengthen the nation.
FAILURES OF OTHER PHILANTHROPIC SCHEMES.
The charitable spirit had been previously displayed in the colonial history of this country, and had found expression in efforts to fix by law the price of articles of necessity, and the wages of mechanics and laborers; but experience demonstrated that such regulations were detrimental to the interests of the people; afterward lotteries with charitable designs were legalized, as well as charitable societies for the protection and support of members who might be in need of assistance, by reason of sickness or accident, and for the relief of destitute widows and orphans of deceased members. In 1803 a petition was presented to the Legislature of the State of New York, praying that sundry persons might be incorporated into a society, with power to build workshops and purchase materials for the employment of the poor. The present political society of Tammany, or Columbian Order, in the city of New York, was incorporated in 1805 as a charitable institution, for the purpose of affording relief to the indigent and distressed members of the association, their widows and orphans, and others who might be found proper objects of its charity. Many benevolent and charitable societies were incorporated in the New England and Middle States in the next decade; some of them fulfilled the designs of their founders to a limited extent, but all failed to accomplish anything for the permanent well-being of those they intended to benefit. Instead of helping the beneficiaries so that at some time in the future they would take care of themselves, they ministered to present wants only, which were ever recurring but never fully satisfied; with every succeeding dispensation the receivers became more dependent, finally lost their own self-respect, and really became paupers. The disease had been aggravated by improper remedies. Experience demonstrated that, in most cases, temporary relief resulted in entire dependence, and the number of poor, instead of decreasing, steadily increased. As soon as it became known in a community that anything could be had without labor; that soup, fuel, clothing, or shelter could be had without cost, then the moral standard of the neighborhood was lowered, and all further efforts on the part of recipients to earn their own living were abandoned, not only for the part gratuitously offered, but all honest work was given up, and ingenious schemes were resorted to in order to obtain the greatest amount possible. Time and labor were wasted which, if they had been directed by honest efforts, would, in most cases, have comfortably supported the degraded persons and their families. Having learned this plain lesson taught by experience, a class of philanthropists resorted to the system of helping others to provide for themselves by teaching the poor to acquire habits of thrift in laying aside some part of their earnings in a time of prosperity, to provide for future wants in the days of adversity or old age.
In addition to the savings-banks opened in 1816 in Boston and Philadelphia, there were others in the United States prior to 1820. The Savings-Bank of Baltimore was incorporated in December, 1818; the Salem (Mass.) bank in the same year; the Bank for Savings in New York, March 26, 1819, and in the same year also, the Society for Savings in Hartford, Conn.; the Savings-Bank of Newport, R. I., and Providence (R. I.) Institution for Savings. All of these institutions are still in existence, and the latest annual reports show them to be in a flourishing and prosperous condition, the results of honesty and common sense in their management, which have characterized them from the beginning.
THE AIMS OF SAVINGS INSTITUTIONS.
The aims and objects of savings-banks do not seem to be well understood by the general public. Even among men of affairs the amount of misinformation regarding the savings-bank plan is remarkable. For example, in a recent magazine article a Western financier referred to the “owners of savings-banks”; and oftentimes when men are approached with an invitation to become trustees the question is asked, “How much stock will I have to buy in order to be elected a trustee?” or, “What pay do trustees receive for attendance at meetings?” It is such questions as these that cause one to welcome the opportunity of explaining the beneficent purposes and philanthropic operations of savings-banks. They are really institutions organized and managed for the purpose of aiding the people of the poorer classes, so called—those who have no knowledge of investments, or whose savings are so small that they cannot be invested, with profit, by the individual. The smallest sums are received. Savings-banks will open an account for a person with one dollar; some accept an account where the initial deposit is only ten cents. As a further inducement for the depositor to save, his money, when the amount to his credit aggregates five dollars, begins to draw interest. And these little savings which amount to the enormous sum hereinafter indicated, belonging to more than four million depositors, become great factors in the financial operations of the country. The different States and the various municipalities, when about to borrow money, send their prospectus to the savings-banks, and so high is the reputation of these institutions that the price the savings-banks will pay for the securities fixes in many instances their market price, or the rate at which money can be borrowed upon them.
Later in this article will be given a digest of the New York law governing savings-banks, as the best way of making entirely clear the operation of these institutions as they attain to perfection to-day.
In the old systems of public economy, mankind were divided into two classes—the capitalist and the laborer; but through the agency of savings-banks, in these later years, our political economy must be written anew, for behold, the laborers have become the capitalists in this new world! The millions of the earnings of the poor are loaned to the rich on bond and mortgage in this State. Is a local improvement projected, the savings-bank is the capitalist who advances money. Nor should we lose sight of the character in which savings-banks are thus revealed as a sort of co-operative union of the industrial classes. Their savings, aggregated as capital, minister to these public enterprises; but these public enterprises demand laborers for their prosecution, and thus return to labor in the form of wages what they have borrowed from it in the form of capital. The laborers get better wages for the facility with which, through savings-banks, the requisite capital can be procured, which is equivalent to having their capital returned to them in full, with extra dividends, by installments called wages, while at the same time they hold in their pass-book the original certificate which entitles them to have it again returned to them, with ordinary dividends called interest. What other capitalist is able to make so safe and at the same time so profitable an investment of his money? Other “unions” are formed as combinations of labor against capital, but here is a combination of labor and capital. The former seeks to control the price of labor by arbitrary dicta; the latter affects the price of labor favorably to the laborer through the operation of natural laws. The former has a fund which offers a premium to idleness by contributing to the support of a laborer while on a strike; the fund of the latter incites to industry by flowing into the channels of enterprise which demand labor for their prosecution.
In view of what the savings-bank system has done and of what it is today, it claims fair treatment and credit according to its performance. Because savings-banks hold hundreds of millions of money securely, because they help those who try to help themselves, because they are giving aid to thousands of men in business or owning houses partly paid for, because the system has been perfected by disciplinary experience and corrective legislation, and because it is rooted in many ways directly—and remotely, too—in the material and moral interests of the people, the savings-bank system deserves the considerate support and demands the patient and sympathetic attention of those who study economical and social problems with the purpose of promoting public welfare and of doing the greatest good to the greatest number.