The Online Library of Liberty

A project of Liberty Fund, Inc.

• A History of Banking In Great Britain;
• Chapter I.: Banking In England.
• Section I.: A Record of Beginnings.
• Section II.: Foundation of the Bank of England.
• Section III.: An Era of National Development.
• Section IV.: State of the Irish Currency.
• Section V.: Failure of Currency Reform—inflation and Reaction.
• Section VI.: The Committee On Banking of 1840.
• Section VII.: On the Bank Acts of 1844 and 1845.
• Section VIII.: Commercial Crises.
• Section IX.: Monetary Panics.
• Section X.: General Conclusion.
• Chapter II.: Banking In Scotland.
• Chapter III.: The Theory and Mechanism of Banking.
• Chapter IV.: Definitions of Economic Terms.
• Chapter V.: The Theory of Value.
• Section I.
• Section II.
• Section III.
• Chapter VI.: The Theory of Credit.
• Section I.
• Section II.
• Banking In Russia.
• Chapter I.: The Early Stages of Money and Credit.
• Section I.: Prefatory.
• Section II.: Introduction of Paper Money.
• Section III.: Financial Reconstruction Under Alexander II. And the Founding of the State Bank.
• Chapter II.: Methods and Operations of the State Bank.
• Chapter III.: Banking Vicissitudes From 1862 to 1875.
• Chapter IV.: The Eastern War Period.
• Chapter V.: Private Banks.
• Chapter VI.: The Bourse.
• Chapter VII.: The Precious Metals.
• Chapter VIII.: Foreign Exchanges.
• Chapter IX.: The Debt and Finances of Russia.
• History of Savings-banks In the United States.
• I.
• II.
• III.
• IV.
• V.

IV.

SPECIAL FORMS OF SAVINGS FUNDS.

In addition to the regularly incorporated savings-bank, two railroads have established savings funds. The Baltimore & Ohio Railroad Company has established a savings fund in order to afford to employees and their near relatives an opportunity to deposit savings and earn interest thereon, and to enable employees to borrow money at moderate rates of interest, and on easy terms of repayment, for the purpose of acquiring or improving a homestead, or freeing it from debt. The company guarantees the repayment of deposits and the payment of interest at the rate of at least four per cent. per annum, unless changed by notice. If the net earnings of the savings fund exceed the guaranteed interest, dividends may be declared, and, as a matter of fact, depositors have regularly received no less than five per cent. on their investments. During the year ending June 30, 1895, the interest paid to depositors reached 5½ per cent. The rules governing the savings fund give: (1) An employee of the company, his wife, child, father, or mother, or the beneficiary of any deceased member of the relief feature, the privilege of depositing with the company any sum of money not less than one dollar and not more than $100 in one day, for the repayment of which, with interest, the company becomes the guarantor. Any person ceasing to be employed by the company may continue a depositor if his balance is fifty dollars or more at the time of leaving. (2) Any adult employee of the company, who is a member of the relief feature and has been continuously in the service not less than a year, may borrow from the funds of the savings feature sums not less than $100, at the interest rate of six per cent. per annum, payable monthly. It is, however, provided that every borrower must carry life insurance in the relief department equal to the sum loaned him; or, if the regulations of the relief feature prevent this, the borrower must hold a policy of equal amount in some regular life insurance company. The only purpose for which money can be borrowed is for acquiring, improving or releasing a lien, upon a home situated, except in large cities, within a mile of the railroad company’s lines. No loan is paid directly to the borrower, but is applied to the payment of bills approved by him. The repayment of loans is provided for by deductions from the monthly wages of the borrower of $1.50 for each $100 of the debt. If the borrower leaves the service of the company he must make the monthly payments at his own risk.

The plan of the Pennsylvania Railroad Company’s savings fund differs from that of the Baltimore & Ohio in several particulars, the chief difference being that the Pennsylvania makes no provision for loaning money to employees. Deposits may be made of sums, in even dollars, not exceeding $100 a month. The privilege of depositing is limited to the period of employment in the service of the company. If a depositor’s connection with the company be severed, his accounts must be settled within thirty days. According to the report of June 30, 1894, the savings fund of the Baltimore & Ohio was in debt to 1825 depositors to the amount of $780,668.42. The outstanding loans to the employees were $667,334.75. The deposits during the year were $227,861.11; the amount loaned within the year, $206,081.56. From August 1, 1882, when the savings fund was inaugurated, to June 30, 1894, the total deposits amounted to $2,220,334.28, and the total sum loaned to employees equaled $1,526,842.35. The money thus loaned was used upon houses—in building 813, buying 714, improving 159, and releasing liens on 329. The report of the Pennsylvania Railroad Company, December 31, 1894, shows that 4112 employees of that road were depositors in its savings fund. The total amount of the fund on that date was $1,354,748.33, and of this sum $1,300.000 had been securely invested in four per cent. bonds of the Pennsylvania Company or its allied lines. The company established the fund December, 1887.

The Paymaster-General of the United States Army reports that the United States Army savings fund has about $1,017,000 on deposit at the present time. It is impracticable to give the actual number of men who deposited, as some would deposit small sums regularly every pay-day, while others would not deposit more than once or twice a year, or perhaps during their whole period of enlistment. The fund, he believes, tends to lessen desertion, and in its operations is conducive to better discipline. Four per cent. interest is guaranteed to the depositors.

The Penny Provident Fund of the State of New York has 50,359 depositors, with a total of $31,000 to their credit, an average of sixty-one cents to each depositor. Of these deposits about $25,000 are invested in securities paying nearly five per cent. per annum. The balance is deposited in trust companies at three per cent. interest. The fund has two hundred and ninety-six stations, and pays no interest to depositors. This fund being chiefly used by children, is of great value in inculcating lessons of thrift and self-restraint. Savings in them are frequently made for special purposes; to buy shoes, hats, or clothing, or books, but more often recently, to save five dollars with which to open an account in a savings-bank.

The school savings-banks in the United States, which are located in sixty-nine cities, towns, and villages in the States of New York, Pennsylvania, Massachusetts, Ohio, Vermont, Maine, Indiana, New Jersey, North Dakota, Colorado, Kansas, and Michigan, comprise 1204 constituent banks, and have deposits amounting to $100,837.82. The plan has been introduced into 290 schools, located in twelve States. Though these banks pay no interest to depositors, their salutary influence has been amply proved, teaching the children, as they do, the uses and value of money. The 25,972 depositors in these banks comprise nearly one-half of the number of pupils attending the schools where the banks are located. When the depositor’s balance amounts to a sufficient sum, an account for the pupil is opened in a neighboring bank.

BENEFICENT RESULTS OF SAVINGS-BANKS.

As before stated, the savings-banks in the State of New York are managed upon a system which illustrates the welding of business and philanthropy into a great financial bulwark for the protection of the poorer classes, and the security of the community at large. It is because of the excellence of this plan as well as its general use in other States that its details have been dwelt upon at length. Savings-banks are essentially the banks of the poor; they were established for the benefit of the plain people, and for the purpose of concentrating and utilizing for the general welfare the odds and ends of money which would otherwise remain hidden away unused at the bottom of a trunk or other hiding-place. They are managed by trustees without salary, who can have no interest in the profits of the business, and who administer their affairs with disinterestedness and remarkable ability, sustained in their work of benevolence by a unanimous public opinion. Their funds are wisely and safely invested, the net earnings being credited to the depositors, whose savings are thus augmented by compound interest. The proceeds of labor converted into active capital by depositors are made in this way to produce a revenue without impairing or endangering the original sum, and to go on increasing while the owner is engaged in the production of other surplus savings. The beneficial results of savings-banks are both individual and communal, as well as direct and indirect. The direct benefits both to the individual and to the community must be evident from what has already been said. Indirectly, savings-banks are a great factor in the moral as well as the material growth of the people. The man or woman with a bank account, however meager its proportions, is usually a good citizen. Especially in this country, where opportunities are more nearly than elsewhere equal for all, do savings-banks exert a certain moral influence. The cares which accompany their use sharpen the mental faculties and tend to increase the moral perception of the individual; education is encouraged; patriotism is promoted; family honor, as well as local pride, is engendered; commercial enterprise stimulated; and much which makes for higher spiritual life secured.

The statistics of the number of depositors and the amount of their savings in the regular savings-banks of the eleven States, in the Pennsylvania Railroad, the Baltimore & Ohio Railroad savings funds, in the United States Army fund, in the Penny Provident Fund of the State of New York, and in the school savings-banks in twelve States, was as follows: Deposits, $1,581,636,981; depositors, 4,381,401. These figures prove the steady growth in the past years of the savings-bank principle and practice. The exact percentage of growth in the regular savings-banks between the years 1880 and 1895 is shown by the following table, giving savings-banks statistics in the eleven States for these fourteen years: