The postal savings banks were inaugurated in 1910 as a device to give greater security to small depositors and attract deposits from hoarding, particularly by the foreign and other elements of our population which tend to be suspicious of banks. The "control, supervision, and administration of the postal savings depository offices" and of the deposits received are conferred upon a board of trustees consisting of the Postmaster-General, the Secretary of the Treasury, and the Attorney-General, representing the administrative, financial, and legal aspects of the system.

Accounts may be opened by any person ten years of age or over, and deposits made in sums of $1 or multiples thereof. The amount which any depositor may deposit in his interest-bearing account is $2,500 and accumulated interest, and in his non-interest-bearing account, $1,000. The purpose of some of these restrictions is to keep these banks from competing with the state savings banks. Petty savings are encouraged by a scheme of postal savings stamps redeemable in sums of $1. Deposits may be withdrawn on demand and paid by postmasters out of their daily postal receipts and out of a small working balance carried by them in neighboring banks. If this emergency credit proves insufficient, the postmaster communicates with the board of trustees, who may defer payment until the necessary funds are on hand. The United States Treasury maintains for this purpose a 5 per cent cash reserve fund against all deposits. The system is highly decentralized, the local postmaster keeping the records of individual accounts, crediting deposits and debiting withdrawals.

The rate of interest is fixed by law at 2 per cent. This rate removes the system from competition with existing banks and makes it possible to loan out the funds at a profit, thereby making the system self-sustaining and a feeder of other banks. The funds are divided into three parts: (1) the 5 per cent reserve fund kept in the Treasury; (2) a sum, not exceeding 30 per cent, which may be invested by the trustees in bonds or other securities of the United States; and (3) the remainder, which is kept on deposit in solvent banks, state or national. The funds deposited in banks are to bear interest at 2 1/4 per cent, to be secured by qualified securities, and to be distributed among applicant banks of the same locality, if there are any, on the basis of their capital and surplus. Any depositor of postal savings funds may surrender his deposit, or part of it, in sums of $20, $40, $60, $80, $100, and multiples of $100, and receive in exchange 2 1/2 per cent United States bonds of these denominations, redeemable one year from date and payable in twenty years. The bonds may be issued only to refund other bonds, or when, according to law, the government wishes to issue bonds to replenish the Treasury.

On June 30, 1919, deposits reached $167,323,260, the number of depositors was 565,509, and the average principal per depositor $295.88. The postal savings funds were held by 5,211 banks, of which 3,239 were national banks, 1,161 state banks, 271 savings banks, 531 trust companies, and 9 private banks under state control. The board of trustees had invested $5,288,600 in postal savings bonds, purchasing them from the holders at par, and $23,965,300 in Liberty bonds, par value $25,000,000; they carried with the depository banks $135,732,031, and with the postmasters $282,490. The geographical distribution of postal savings deposits approximates closely to the distribution of the population, particularly of the foreign elements. The rank of the leading states, in million-dollar terms, is as follows: New York, 58.4; Pennsylvania, 20.7; Illinois, II.1; Ohio, 9.9; Michigan, 7.7;

Massachusetts, 6.4; Washington, 5.2; Connecticut, 4.4; California, 3.9. An annual statement of the Postmaster-General purports to show that the postal savings system is self-supporting, but the inadequacy of the accounting system of the post-office renders such statements mere guesses.

Postal savings have not developed in the United States to the extent the advocates of the system anticipated. Either the volume of funds hoarded was exaggerated, or else the savings system has not proved attractive enough to draw them forth. Other savings institutions with their wide-spread development, and quite recently war savings stamps and certificates, seem to absorb the bulk of the savings of the people.