The postal savings system aims to encourage thrift by offering a secure depository for savers through the mechanism of the government post office. This was the subject of active discussion following the close of the Civil War, and met with considerable opposition. Proponents of postal savings believed that the government post-office stations would become feeders of the banks by directing public attention to the importance of thrift. They also claimed that it would attract funds ordinarily hoarded by immigrants and others through mistrust of privately owned banks. This contention received added strength in 1907, when the panic caused heavy withdrawal of savings deposits.

Finally, in 1910 Congress passed the Postal Savings Act. It provides for a board of trustees consisting of three Cabinet officers (the Postmaster-General, Attorney-General, and the Secretary of the Treasury). They are empowered to designate post offices as depositories of savings, and in general to administer the system. The Act regulates deposits rather narrowly. They are to be received from individuals alone, and only one account can be held by a person at any time. At first the balance was limited to $500, but later the maximum was raised to $2,500. A saver receives not the usual pass book, but a certificate of deposit, which is nontransferable and nonnegotiable. The interest rate on all deposits was fixed at 2 per cent, thus differing from the principle of savings banking, which varies the rate according to earnings. These savings funds are invested in United States government securities or redeposited in state or national banks paying 2 1/4 per cent on such daily balances and offering satisfactory municipal or other public bonds as security.

In general, the total postal savings deposits have declined and many of the offices have been discontinued. One cause has undoubtedly been the low rate of 2 per-cent, which has not appealed to savers in a period of rapidly rising interest rates and high yielding government war bonds. The lack of progress of the postal savings system may be attributed to the increased facilities offered by the growing number of savings departments in national banks.

Postal savings banks have been established in England, France, Italy, and in about forty other countries. Elsewhere in Europe public banks have been conducted by municipalities. In Germany, where no postal savings system exists, banks for savings are operated by almost all the large cities. Local governments have not entered the field of banking in the United States, where a more restricted theory regarding the function of the municipality is held.

Having studied the various forms of private and public savings institutions, it is evident that not all of them are adapted to the economic conditions existing in the United States. Public savings banks, whether federal or local, have made little or no progress. Nor have all privately owned savings institutions flourished, for no rapid advancement has been made either by the co-operative associations or by the stock savings banks accepting only savings deposits. Progress has been shown only by stock banks holding both commercial and savings accounts, and nonstock or mutual banks receiving only savings deposits. While the changing economic conditions since 1914 have affected the amount of these savings deposits, they were considerably augmented during the wave of prosperity in 1919, and they were not impaired by the depression in 1920 and 1921. However, savings institutions to-day face certain problems which will be briefly considered.