MR. BANKER: Mr. Lawyer, in all that you have said you have only affirmed what I said in the outset; the banker is a shopkeeper, a trader exchanging his credit for money and debts.
The development of the banking business in the United States is most interesting, and its growth has been simply marvelous.
On Feb. 25, 1863, almost fifty years ago, when the National Banking System was inaugurated, there were in the eastern states, including New York, New Jersey and Pennsylvania, what are known as Mutual Savings Banks. These institutions are run solely for the benefit of the depositors. This is upon the theory that those using savings banks are the wards of the state. These Mutual Savings Banks have no capital and the trustees, or directors, serve without pay. There are today in the United States 650 of these Mutual Savings Banks, with deposits amounting to $3,608,000,000. Practically all of these Mutual Savings Banks are located in the east, there being only thirty-one west of Buffalo. These few got a start before the present conditions of banking grew up. Today it is quite impossible to start a Mutual Savings Bank anywhere, because the State Banks and Trust Companies are able to pay such high rates of interest, owing to the fact that they can conduct the Savings Bank business as a part of their regular commercial business, or as a part of their Trust Company business. That is, the Savings Bank business is incidental to their regular business, and requires no separate and special organization. If there are any extra charges they would be nominal at most. The savings business being conducted over the same counter, this particular branch of banking may be regarded as done at no cost to them. Under the circumstances it is very easy to see how the State Banks, and those banking institutions more recently organized, known as Trust Companies, have absorbed all the savings business where the Mutual Banks had not already been permanently established.
Another reason that has enabled them to do this is the fact that in most states there are no prescribed rules for the investment of savings bank deposits, and the banks are using the savings deposits for commercial purposes, and also in speculative ventures, particularly in the way of underwritings where the profits are much larger than could be realized from such funds if they were limited to investments of the highest order where, as you know, the rates of interest are comparatively much lower.