The first consideration in the management of the savings bank and the money in its care is safety. In most states, therefore, the law places rigid limitations upon the invest incuts of the bank. In a general way the investments of savings banks are confined to high grade bonds and first mortgages on real estate. In New York State, for example, loans upon real estate are limited to 50 per cent of the value of productive property and to 40 per cent in the of unproductive property. In recent years the laws of most states have been liberalized so as to permit savings banks to purchase railroad bonds, corporation bonds and stocks, bank stock, and even commercial paper. Quite generally savings banks make loans on personal security and in the South and West commercial paper is probably their prin cipal asset. Only in New York and Minnesota are savings banks forbidden to loan on personal security.1 The business of managing the investment of the funds is in the immediate charge of the trustees or directors. Generally in the larger banks there is a finance committee which determines what securities shall be purchased, and another committee to examine real estate and determine what applications for loans on real estate shall be granted.

Savings banks are organized under the laws of the particular states where located, sometimes in accordance with a general corporation law, sometimes by special act of the legislature, but generally according to the provisions of special banking laws. They are usually subject to the inspection and supervision of the state banking department. In most states the process of organizing a. savings bank is substantially similar to that of starting a commercial bank. In the New England and Eastern States where mutual savings banks mostly prevail, the regulation by the state is quite rigid, but in those states where stock savings banks are the usual type the laws are not so severe.

In recent years there has been a marked tendency toward the organization of savings departments by commercial banks and trust companies. The term "savings bank" as used in some of the states is misleading, as many so-called savings banks transact chiefly a commercial business. The advantage to a commercial bank of having a savings department through which large deposits of cash are drawn in is obvious. Generally the savings department is not separated from the other business of the bank except that the savings accounts are kept in a separate set of books and interest is credited to them at fixed periods. The funds are usually merged with the general funds of the bank and are used without distinction in making loans and discounts, purchasing commercial paper and other operations of commercial banking. Many believe that this practice which subjects savings deposits to the uses and risks of commercial banking is dangerous.

1 Kniffin: The Savings Bank and Its Practical Work, p. 83.