1. How Savings Banks Are Created

The chief differences between banks of deposit and discount and savings banks have been already described. Many a savings bank is created by special legislative enactment on the application of the persons designated therein as trustees; and the life of such an institution is preserved by them through the election of others to till the vacancies of those who retire. Having no shareholders, this is the only way for such an institution to come into being and preserve itself, for in the beginning there are no depositors; and after deposits have once been made, they may be speedily withdrawn, so that under no conditions can depositors serve as a permanent basis of power. The only meetings ever held by them are on depressing occasions, like their bank's failure, when they are sometimes called together to take action for their common good.

2. Object

These institutions are intended as places for deposit by persons having small incomes, - the working classes. To this end some states have enacted laws pre venting depositors from putting or keeping in a savings bank more than a prescribed amount, in many cases $5,000. Persons of considerable means are often attracted toward these institutions by the security they afford, the regularity of their dividends, and the lower taxation to which they are often subjected. And they defeat the restriction above mentioned by depositing more than the. maximum amount in the names of other persons as trustees. Though this evasion has long been practiced, action against such depositors is rarely, if ever, taken.

3. Motives Of Trustees And Directors

The trustees and directors who serve are for the most part moved by philanthropic considerations. They receive no compensation, and in many cases devote much time to their self-imposed service. Nor do they organize the bank and act as managers with the view of obtaining loans, or of reaping in any other way a personal advantage. Of course, there are exceptions; what we have said correctly applies to most of them. Their service is disinterested.

4. Savings Banks Different From Banks Of Discount And Deposit

There are two or three radical differences between a savings bank and bank of discount and deposit that ought to be repeated. One of these is in the lending of money. The work of a savings bank is primarily that of investment. Depositors put their money in them, not only for safe-keeping, but to earn interest, and this is gained, not by making brief loans to merchants, manufacturers, speculators, and the like, but to individuals who wish to use it in paying for land or for houses built thereon, and do not intend to repay perhaps for several years. So long as the security is ample and the interest is promptly paid, a savings bank suffers a loan to run, for it is the very object of the institution to make permanent investments.

5. Small Deposits On Hand

A marked consequence of thus investing its money on long-time loans is, it does not profess to have only a very small sum on hand to answer the demands of depositors. If it were actually kept on hand, it would not be loaned, and no interest could be earned; on the other hand, if it is loaned, the bank can not have possession at the same time. A savings bank, therefore, deals with its depositors in a peculiar manner in the way of permitting them to withdraw their funds. Every bank has a graduated system of notices for the withdrawal of deposits above a small amount: the larger the amount required the longer must be the notice. It is true that a bank is not always governed thereby, ordinarily it will pay any amount desired by a depositor without exacting the notice of him; nevertheless, the system exists, and there are times, when depositors are frightened without cause and run to their bank and demand their deposits, that the wisdom of requiring notice of their withdrawal is manifest. Before the time has expired reason has regained control, and depositors never appear to demand their money.