is a needful' safeguard in times of commercial crises. This requirement of notice is greatly to the advantage of de positors collectively and thus of the community as a whole. It is not an undue limitation of the rights of the individual depositor. It is unfair for the individual, in a period of financial stress, to seek his own safety in a manner that is impossible for all, and thus to endanger the interests of all. The Federal Reserve Act, by making it possible for loans to be had at any time (through member banks) on good security, reduced the danger of runs on savings banks.
Savings banks are subject to the supervision and inspection of the banking departments in the several states, a fact that exerts a salutary effect, though not insuring absolutely against mistaken judgment or dishonesty on the part of the bank officials. The average losses to deposits in savings banks have been about one-fifth of 1 per cent of total deposits. It is highly desirable that a plan of insurance of deposits should be worked out which would make savings deposits absolutely safe. This measure is even more important than that repeatedly proposed by the Comptroller of the Cur rency to insure or guarantee all deposits of $5000 or less in national banks, the effect of which would be to bring from hiding-places many millions of dollars of hoarded money, largely prevent in the future runs on banks, and, more than anything else that could be done, unify and solidify the entire banking system. It would doubtless also greatly stimulate the saving habit among the people and increase the use made of the savings banks.
The depositors in savings banks have a direct legal claim on the bank as a corporation. The bank's only means of payment are its assets, consisting of claims upon the owners of such wealth as houses, factories, railroads, electric-light plants, good roads, and school buildings. Thus virtually the depositors have by their savings made possible the build ing and equipping of these actual forms of wealth, and have an equitable claim upon the usance of them, which claim is met by the payment of interest and dividends by the sav ings banks. Viewed in this way, the great social importance of the savings function appears, and the importance of de veloping the savings institutions.
§ 7. Postal savings plan. In many countries of the world the governments have not only authorized private, corporate, and trustee savings banks, but have provided public agencies where it is possible for the citizens to deposit small amounts.
Thus municipal, and what are called communal, savings banks are operated by many European cities; but the most effective and widely used agencies for the purpose are the national post-offices. Postal savings banks, or postal savings systems as divisions of the postal service, are now found in all the larger countries of the world, and in many smaller ones. The United States of America was almost the last civilized country to establish such a system, which was author ized by act of Congress in 1910, and went into operation in a few designated cities in January, 1911. The number of offices at which it was in operation was rapidly increased. and deposits began to flow in at the average rate of more than a million dollars a month, and then more rapidly until the war period. The maximum balance to the credit of de positors was attained in March, 1919, when it was $177,000, 000, from which point the withdrawals have pretty reg ularly exceeded the new deposits each month. This may be explained by the rise of the general interest rate, the opportunities for good investments of small sums in Liberty Bonds, and heavy withdrawals by immigrants for remittance to Europe.
The funds of the postal savings system are deposited in banks belonging to the Federal Reserve system, which must deposit with the Treasurer of the United States designated kinds of bonds (national, state, and municipal) as security. and pay interest at the rate of per cent on the amount of the deposits. The per cent difference between this rate and that paid to individuals goes far toward paying the expense of operating the system.
Provision is made for the issue, in exchange for certificates of postal savings, of bonds bearing interest at the rate of per cent. Postal savings bonds are exempt from all kinds of taxes, federal and local.
§ 8. Advantages and limitations of postal savings. As compared with ordinary savings banks the postal savings system has certain advantages.
(a) It protects the small depositors from the danger of dishonest private bankers who have preyed upon immigrants in the larger cities. To foreigners, accustomed to the postal savings plan in their home countries, it is especially useful.