It is therefore necessary for a savings bank to place some of its funds in a form which possesses both stability of value and marketability. A checking account may be maintained with a commercial bank, which must repay part or even the full amount on demand, but such funds yield only a small rate of interest. In order to secure a satisfactory yield and at the same time retain the necessary liquidity for their holdings, savings banks are usually permitted to invest in obligations with short maturities. In New York State, loans may be made on a demand promissory note signed by a borrower, who hypothecates such securities as the savings bank itself is permitted to purchase, but the loan in any case must not exceed 90 per cent of the market value of this collateral. Savings banks are thus able indirectly to lend in the call-money market at a satisfactory rate through a commercial bank which directly places the funds and in return gives its demand note secured by Liberty Bonds. A savings bank may also lend on a ninety-day promissory note of a borrower who pledges as collateral either a pass book of another savings bank or a class of mortgage in which the bank itself may invest. The loan must not exceed 90 per cent of the amount entered on the pass book, or 75 per cent of the value of the mortgage.

A greater liquidity has been added to the assets of savings banks by the passing of state laws which permit the purchase of bankers' acceptances. These must be of a kind eligible for purchase in the open market by a Federal Reserve bank, and thus a savings bank may count such holdings as a secondary reserve which can be readily converted into cash.

The investments of savings banks have varied in their distribution during the past decade. Notwithstanding the urgent need of additional buildings to meet the housing problem in the large cities, the proportion of loans made on mortgages has declined, because the rate of interest on such loans has been limited to 6 per cent by the state laws against usury. Railroad, municipal, and state bonds have lost favor, for until recently their yield has been comparatively low. Savings banks have transferred their funds largely from these securities to Liberty Bonds, Victory Notes, and certificates of indebtedness, which have yielded a greater return and which at the same time have furnished the highest possible security. Acceptances bearing a satisfactory return and offering a quick salability have also attracted no inconsiderable amount of savings-bank funds.