The advocates of this theory consider that they are acting on the safe side. They consider the premium as a loss, once for all; therefore, at a period of buying, they would cut down the dividend to depositors, perhaps to nothing, simply because the institution has been making favorable investments. On the other hand, in subsequent after years, they would treat the entire revenue from these bonds as all profit, and thus the depositors at this time would receive more than would be, on the other theory, the fair earnings of their money.

Another plan is to hold the stocks at the amount they cost. By this means the loss, instead of being thrown upon the year in which they were purchased, is thrown into the year during which they are sold or redeemed, and this is a still more dangerous way of looking at it. In the former plan the stocks, if worth above ar, as they usually are, are steadily undervalued, while in this methbd they are overvalued, in all probability, during most of the time they are held. In one case there is a fallacious calculation of current earnings; in the other case, there is a fallacious estimate of surplus in reserve. The true principle would seem to be that each ear or half year an equitable portion of the amount paid for premiums, or conversely, of the amount received for discount, should wiped out, so that the differences between par and market value would steadily and gradually disappear as the bond approached its maturity. Thus, the ten-per-cent. bond of which we spoke would be considered as earning, each year, the rate to which its cost price would be equivalent when averaged over the term—say four and a-half per cent. The remaining live and a-half per cent, should not be considered as earnings, but as an offset to the depreciation of bond, or a refunding to us of extra premium, which we paid for an abnormally high rate of interest, and while this is true in theory it can be empirically tested by the state of the market. It will be found that, making allowance for the shifting productiveness of money and some other disturbing element, such as public confidence, that the market price of a security will settle in about this manner: That each year there will be a depreciation, amounting approximately to the difference between the current rate of interest on that kind of securities and the revenue actually produced. We would therefore enunciate this formula for ascertaining the true earnings from stock investments. From the cash income (a) received subtract such part (b) of the premium, as will progressively consume the entire premium at the date of maturity. The difference is the current earnings (c).

Again, take the difference between the market value (d) at the beginning of the period, and the market value (e) at the close of the period. The difference between d and e is the gross depreciation (f), or the gross appreciation ( —f).

Combining b, taken negatively, with f, or —f, we have the incidental or speculative loss or gain {p, or —p).

p=+f - b.

-p= -f -b. Thus there will be four cases.

First.—A gross depreciation equal to the amount of premium written off. Here there is no loss nor gain.

Second.—A depreciation greater than the amount of premium written off. Here there is an incidental loss to be taken from the surplus.

Third.—A gross depreciation less than the amount of premium written off. In this case there is an incidental gain or a real appreciation.

Fourth.—An appreciation which, together with the premium written off, is always an incidental gain.

Our examination of the functions of a Savings bank brings us to the conclusion that it is simply a money making corporation—an association of small capitalists who combine for the purpose of having their small investments possess an earning power by aggregation. The officers and employees of the Savings bank are merely their agents in this. The entire resources of the bank, whether credited to deposits or to surplus, are the absolute property of depositors as an association. The trustees are a body whose constitution is somewhat anomalous, being the unpaid custodians of money not their own, but whose duties are assumed as a public burden and as a distinction. This latter peculiarity, the constitution of a board of trustees, which is independent of the real proprietors of the concern, seems to me the only point which gives a Savings bank, as now organized, a right to be called a benevolent institution. It is benevolent for the trustees to give their time and services without compensation in the management of the money of others. It is not benevolence, however, to invest a man's money and pay him over the proceeds. Although in practice, this plan of organization has worked better than the one where there is a body of stockholders whose capital is substituted for a surplus as guaranteed to depositors, yet it is by no means proved that the advantage would not be on the side of the latter form, whicli eliminates all pretence of benevolence, and makes the Savings bank what we believe it to be, a pure matter of business. Of the three forms of associated saving, viz., the mutual, which we have described at length, the stock, or business-like form, which we have just touched upon, and the governmental, which, of late years, is becoming the subject of experiment, time alone can decide which will survive as the fittest.