2. Joint-Stock Savings Banks. In the West and South the dominant type of savings bank is the joint-stock bank, an institu tion which, like a commercial bank, is conducted for the profit of the shareholders. Deposits are received as in other savings banks, but instead of the depositors being paid a net return from the investments above expenses, they receive a definite rate of inter est as arranged at the time of making their deposits. The margin between the earnings of the investments and the interest paid on deposits constitutes the sum that covers expenses and profits to the stockholders. These net profits the shareholders divide on the basis of shares owned.
While joint-stock savings banks may contribute as much to the economic and social welfare as trustee savings banks, they are pure ly private business enterprises and not eleemosynary institutions. In the trustee savings bank the risk of high or low earnings and of loss of principal is borne by the depositor; in the joint-stock bank the shareholders assume these risks and guarantee the inter est and principal to the depositor. In the former the depositors, being creators of a trust, have the control; in the joint-stock bank they are simply creditors and have no voice in its management. The mutual type prevails in New England and the eastern states where the historical and social conditions are favorable to it, where the communities are old, sentiment strong, and a philan thropic and public-spirited attitude is prevalent; it is not adapted to the West, which is dominantly commercial, nor to the South still impoverished from the Rebellion and lacking on the whole a thrifty population. The trustee who starts a mutual bank gains no financial advantage from it; in fact, he assumes a large risk and responsibility to the community. He must be a man of highest type, holding the unswerving confidence of the depositors, not only as to personal character but also as to business capacity; he acts primarily from philanthropic motives, although some lawyers and other business men may promote mutual ,banks for the purpose of gaining clients.
3. Guaranty and Other Types of Savings Banks. New Hamp shire is unique in having a hybrid type of savings bank, combining the chief features of the two previously mentioned types. In stead of capital stock and shareholders, this type of savings bank has "special deposits" and "special depositors." It pays a cer
tain stipulated rate of interest to its general depositors, and any surplus earnings go to the special depositors. The special deposits constitute a guaranty fund for the general depositors and are limited to io per cent of the total deposits. Except for their name and the method of determining their amount, these special de posits have all the characteristics of the capital stock of joint stock banks.
There are many other kinds of savings banks which are too numerous to describe here; for instance, the municipal savings banks, school savings banks, postal savings banks, and various groups of co-operative credit institutions, such as building and loan associations, farmers' co-operative credit societies, and the new farm loan bank system. The co-operative credit institutions, while formed primarily to provide on their joint credit long-term credits on realty at lower rates than the co-operators could ob tain on their individual credit, tend to fulfil much the same social and economic ends as other savings banks.
Functions of Savings Banks The essential economic and social functions of savings banks are three in number, as follows: i. They assemble the capital of the community, conserve the idle wealth, and having aggregated it into sizable funds, loan it to business enterprisers.
2. They add to the peace and comfort and available consump tion of society by providing a safe outlet for the funds of those who have the will and capacity to save but do not have the ability either to use the funds industrially themselves or to invest them with safety and profit.
3. They promote thrift more than any other financial in stitution.
The prudent investment of interest and accumulated princi pal, which together constitute savings, lessens profligacy, pro vides against the adversities of old age and sickness, helps the thrifty to buy a home and to enjoy better living conditions, builds up independence and stability of character, and improves the social and political life of the community.
Functions of the Bond House and Investment Bank Whereas savings banks aim to assemble funds for the pur chase of investments, and whereas the bond houses or invest ment banks are concerned with the sale and distribution of securities, both promote investment from the opposite end.