of the funds must be available, at all times, for the payment of depositors.

The limit of $500 as the account of any one depositor does not, however, limit the possibility of utilizing the postal savings banks to any extent, for the law provides for the purchase, by depositors, of United States Postal Savings bonds, bearing 2 per cent interest and payable in twenty years. The provisions of the act with reference to these bonds are as follows:

SEC. 10. That any depositor in a postal savings depository may surrender his deposit or any part thereof, in sums of twenty dollars, forty dollars, sixty dollars, eighty dollars, one hundred dollars, and multiples. of one hundred dollars and five hundred dollars, and receive in lieu of such surrendered deposits, under such regulations as may be established by the board of trustees, the amount of the surrendered deposits in United States coupon or registered bonds of the denominations of twenty dollars, forty dollars, sixty dollars, eighty dollars, one hundred dollars, and five hundred dollars, which bonds shall bear interest at the rate of 2 per centum per annum, payable semiannually, and be redeemable at the pleasure of the United States after one year from the date of their issue and payable twenty years from such date, and both principal and interest shall be payable in United States gold coin of the present standard of value: Provided, That the bonds herein authorized shall be issued only (first) when there are outstanding bonds of the United States subject to call, in which case the proceeds of the bonds shall be applied to the redemption at par of outstanding bonds of the United States subject to call, and (second) at times when under authority of law other than that contained in this Act the Government desires to issue bonds for the purpose of replenishing the Treasury, in which case the issue of bonds under authority of this Act shall be in lieu of the issue of a like amount of bonds issuable under authority of law other than that contained in this Act. . . . . And provided further, That the bonds herein authorized shall be exempt from all taxes or duties of the United States as well as from taxation in any form by or under state, municipal, or local authority: And provided further, That no bonds authorized by this Act shall be receivable by the Treasurer of the United States as security for the issue of circulating notes by national banking associations.

209. SUCCESS OF THE POSTAL SAVINGS SYSTEM1

The fiscal year 1914 witnessed a steady, healthy, and substantial growth of the Postal Savings System. On June 30 the number of depositors was 388,511, and the amount on deposit to their credit

'Adapted from the Annual Report of the Postmaster General, 1914, pp. 27-29.

was $43,444,271, a gain for the year of 57,505 depositors and $9,625,401 in deposits. The average principal per depositor increased from $102 to $111.82. Savings facilities were available at 9,639 post-offices (of which 8,507 were of the presidential grade and 1,132 of the fourth class) and at 708 branches and stations, making a total of 10,347 depositories in operation.

The proponents of the system, among other arguments advanced in support of the enactment of the postal savings legislation, asserted that it would encourage among the people the formation of habits of economy and thrift. On June 30, 1911, six months after the system began operation, there were 11,918 depositors, and the average balance was $56.82. At the close of each six months' period thereafter substantial increases in the number of depositors and the average balance are shown, until, on June 30, 1914, there were 388,511 depositors, and the average balance was $111.82. These facts afford conclusive proof that the practical operations of postal savings in this country have amply fulfilled the predictions of its advocates.

The safety and security afforded by the postal savings depositories have been a source of strength and protection to our people in time of stress and the means of steadying financial conditions in the United States. Many foreign-born citizens who have patronized these institutions are resorting more freely to their use during the present European crisis and will doubtless continue to do so even in larger measure when normal business conditions shall have been restored.

Evidence is conclusive, however, that the postal savings facility would have served a greater usefulness and would have been the means of restoring a much larger amount of money to business uses were it not for the provisions of the law which limit the amount that may be accepted from a depositor to $100 in a calendar month and restrict his maximum deposit to $500. The inability of a prospective patron to deposit all his accumulated savings results in confusion of thought, which frequently leads to a refusal to deposit any part of them. Such funds invariably go back into hiding and disuse. The precautionary limitations of the law were no doubt inserted because the service was new in this country and, in a sense, experimental. While it is believed that the interest of the public will be best served by ultimately removing altogether the restrictions on the amount that may be accepted on deposit, it is manifest that this condition should be approached gradually and as experience in administering

the system indicates that additional steps may be taken toward the desired goal. It is recommended, therefore, that the provision in the postal savings act which limits the amount that may be accepted from a depositor in a calendar month to $100 be removed, and that the maximum balance which may be accepted be increased, under certain conditions, to $2,000, but limiting the amount on which interest shall be paid to $1,000.

210. THE FUTURE OF SAVINGS BANKS1

BY MILTON W. HARRISON

If space would allow, an interesting discussion may be had with relation to the future of savings banking in the United States. Such questions as: whether capitalized savings banks should establish branches and sub-branches on a large scale so as to make it possible for the wage-earner to more easily save his money; whether the Postal Savings System should be extended; the desirability of municipal savings banks for the sale of municipal bonds, thereby eliminating the middleman's profits and a consequent saving to the municipality; the question of the creation of Federal legislation and establishing savings departments for Federal banks, would certainly be both vital and timely.

Only a few months ago a plan for a municipal savings bank was offered by Adolph Lewisohn. The plan provided that the city establish offices of deposit, probably branches of the Bureau of City Treasury in the Department of Finance or of some similar bureau which might be created in that Department, for the purpose of receiving deposits from persons desiring to invest their savings in the city's credit; that depositors receive scrip or other evidence of the city's obligation to return the deposits; that the return of the deposits be secured either by the general credit of the city or by the pledge of city bonds with some board or other official agency duly authorized; that the city have the use of the funds on deposit for purposes for which it might use the proceeds of corporate stock or other city bonds; that the city pay from 23 per cent to 3 per cent (varying according to money market and other conditions) interest on deposits and redeem the scrip or repay the deposit on thirty or sixty days' notice, or on demand, the city in that case, however, reserving the right to 'Adapted from "Savings Banking in the United States," Journal of American Bankers' Association, VIII (1916), 734.

require such thirty or sixty days' notice; that depositors of $100 or more have the right to convert their scrip into city bonds issued directly to them.

211. LIFE INSURANCE COMPANIES AS INVESTMENT

INSTITUTIONS1

BY A. S. JOHNSON

From a financial point of view the life insurance company is a device for accumulating savings which shall be returned, not to the man who saves, but to his heirs at his demise. Some of the insured, it is true, die long before the sum of the premiums they have paid equals the sum that the insurance company has agreed to pay at their death. On the average, however, the insured live long enough so that their premiums, together with the earnings of the capital which those premiums form, are at least equal to the sums which the insurance company pays out in death claims.

It is obvious that in a country like the United States, where life insurance is exceedingly common, immense sums of money must be collected by the companies every year to be held as a reserve against death claims. As the business of life insurance is steadily growing, the funds accumulated by these companies are also increasing. The annual receipts of practically every important life insurance company exceed the annual disbursements. Accordingly, a life insurance company may invest its funds without much regard to the possibility of turning its investments into cash at short notice. It is important, however, that the business should be conducted in a conservative manner, since the failure of an insurance company would be a more widely felt calamity than the failure of almost any other business enterprise of equal magnitude. The loss would be borne in the end largely by the dependents of propertyless men.

The reserves of life insurance companies are largely invested in real estate mortgages, in state and municipal bonds, and in the bonds of railway, commercial, and industrial corporations. Stock investments have often been made by insurance companies, but the practice is now generally regarded with disfavor, since the values of stocks are likely to show a wide range of fluctuation.

Adapted from Introduction to Economics, pp. 320-21. (D. C. Heath & Co.,

212.

INVESTMENTS OF INSURANCE COMPANIES1

BY ROBERT LYNN COX

The table below is for all American companies whose figures were tabulated in the Insurance Year Book for their respective dates.

ASSETS OF AMERICAN LIFE INSURANCE COMPANIES

Some notable features in the above table attract the attention at once. First, and most important of all, is the fact that in ten years' time the assets of American companies have practically doubled in amount. Great as was this increase in the family-protection funds of the country, it only kept pace with the increase in national wealth, which also about doubled during the same period. The next striking fact is that investments in real estate mortgages are two and one-half times as large, increasing from $671,000,000 to $1,706,000,000. On examining the relations of the various classes of investments to each other, as given in the column showing the percentage of assets invested in the different kinds of securities, we find that during this period the companies' holdings in real estate have decreased more than onehalf in ratio to other securities, and have actually decreased in amount over $9,700,000. The percentage of investments in stocks is less than one-fourth what it was ten years ago and in actual amount is about $90,000,000 less. The percentage of collateral loans is less than onefourth what it was ten years ago and in actual amount over $22,000,ooo less. Cash on hand also has been reduced one-half in percentage and nearly $9,000,000 in amount. In short, the trend of the times has been to reduce investments in stocks, collateral loans, and real

'Adapted from Investment News, V, No. 2 (1916), 24.