3. Collects principal of matured investments. 4. Collects proceeds of coupons or dividends.

5. Prepares, and executes as agent, under power of attorney, all necessary declarations (certificates) of ownership required under the Federal Income Tax Law, to be presented in connection with the collection of coupons, interest on registered bonds, and dividends of foreign corporations.

6. Prepares for client's signature, return of annual income collected by it on securities deposited.

7. Buys, sells and receives or delivers securities for clients upon order.

8. Reports upon condition of investments when requested.

9. Watches for and endeavors to inform concerning: Called bonds,

Rights to convert bonds into stock,

Rights to subscribe to new issues of bonds and stock, Extraordinary, increased, reduced, and passed dividends,

Appointment of receivers,

Appointment of protective and reorganization committees,

Opportunities to sell bonds to sinking funds.

10. Pays instalments on subscriptions to new issues of stocks and bonds.

11. Undertakes the exemption of securities from the annual personal property tax in the state of New York under the provisions of the "Optional Mortgage Tax” and "Secured Debt Tax " laws.

12. Attends to the transfer of stocks and registered bonds for its clients and correspondents.

Individual firms and corporations may thus transfer to a bank just as much of the routine connected with the care of securities as they may wish.

CERTIFICATES OF DEPOSIT

39

38. Certificates of deposit. The simplest way of using a bank as a depositary for money is to buy what is known as a certificate of deposit. A large proportion of the bank deposits of individuals in the United States are of this character. The person who has no checking account, but who wishes to safeguard some money which he has re

on the return of this certificate properly indorsed, with interest at the rate of four per cent, per annum if left six months. Interest to cease at maturity.

No.

1234

NOT SUBJECT TO CHECK

Edward Windsor

Cashier

A time certificate of deposit. The deposit can be withdrawn at any time. No interest is earned unless it remains six months. This is one of many different kinds of certificates.

ceived, and which he is not yet ready to use, can take it to a bank and ask for a "demand certificate of deposit." This is the bank's receipt for the money and its promise to repay it. Nobody except the depositor, or his order, can collect it. The depositor can get the money any time he goes to the bank by indorsing the certificate and surrendering it (see 21-22). He can, if he wishes, sell the certificate to another. His indorsement is necessary. The holder can finally get cash from the bank, provided he is identified, and the certificate bears the correct indorsement of the original depositor; the bank having filed away upon a card the signature of the depositor, when the certificate was issued.

If the depositor wants his money to earn interest and at a higher rate than upon a demand deposit, which may

not earn any interest, he can secure a "time certificate of deposit" for three months, six months, or a year. A Cincinnati (any reserve city, see 231) national bank has to keep about $150 against a $1000 demand deposit, while if it is left for over thirty days the bank needs to have during the excess time prior to maturity only about $50 as legal reserve and till money. Because of the reserve requirement and the certainty of its use for a given period a bank pays from one to two per cent more on time deposits than on demand deposits. A bank is under no obligation to pay a six months' certificate until it is due. It is exactly like an individual's promissory note. The chances are that a bank will buy it back before maturity if the depositor waives the accrued interest. If the interest is large a better bargain can be had, because a bank is safe when it discounts its own note.

The depositor can obtain a certificate permitting him to withdraw his deposit on demand, but entitling it to earn interest if payment is not demanded for an agreed length of time. The rate of interest will be lower than upon a straight time certificate.

In all cases it is necessary that the certificate be surrendered to get the money. If it is lost, or destroyed, of course the bank's debt is not settled. However, it is unsafe for the bank to repay the amount unless the depositor gives an indemnity bond guaranteeing the bank against loss in case the certificate should turn up in the hands of a holder in due course (see 29).

The national farm loan associations established by the Federal farm loan act issue certificates of deposit running one year, or less, at not to exceed four per cent interest. These are convertible at the Federal land bank of the district into farm loan bonds of twenty-five dollar, or greater, denominations.

Post offices of the United States issue non-negotiable,

SAVINGS DEPOSITS

41

demand certificates of deposit which earn two per cent. interest, and are convertible into 21% U. S. bonds of denominations of twenty dollars and upwards, or into U. S. treasury certificates which earn four per cent compound interest for five years.

39. Savings deposits. - The principle underlying savings accounts is that a little shall be deposited regularly in order that these accumulations with interest compounded semi-annually or oftener may grow into a large amount. This feature would be attractive without any interest payments-safe-keeping is a valuable servicebut the interest makes the savings account appeal not only to the small saver, but to the investor who seeks income with no trouble and small risk. Money at 4% interest compounded semi-annually will double itself in 17 years. A monthly deposit of $10 throughout 10 years will amount to $1471.75. Nevertheless, the people of the United States, probably the most extravagant in the world, are poor An Australian business man who has just come to the United States expresses his amazement at the way we spend money. In Norway, Switzerland, Australia, and New Zealand over 500 persons per thousand population are savings bank depositors. In the United States 104 persons per thousand are depositors in regular savings banks. All of Western Europe, except Spain and Portugal, are ahead of the United States.2 Such figures are eloquent of the need and the opportunity of this country to become leaders in the trade markets of the world. Each depositor is encouraged to add to his account and he is penalized for every withdrawal, for the game is to accumulate. The rules governing accounts vary according to state laws and

savers.

2 Report of the Comptroller of the Currency, 1921, p. 185. To obtain a fair comparison of savings one should have statistics of the results of all savings plans, including life insurance, building and loan associations, and similar organizations.

bank regulations. In the following description Pittsburgh accounts will be understood.

40. Making the first deposit. — Anyone can open an account with a deposit of one dollar, or more (some banks will accept smaller amounts one dime and upwards), and one dollar, or more, can be added at any later time. There is no red tape as to introductions. The depositor appears at the savings account window and says, "I wish to open a savings account." He is asked to sign a signature card, naturally, as he usually signs his name, and state his address, his occupation, and possibly other information, including some of the following: date of birth, place of birth, father's name, mother's maiden name, married or single, spouse's name, and number of children. Banks to help in identifying a person who can't write may take note of facial characteristics. Many banks use fingerprints, or thumb-prints, as these never change from childhood to old age. An account of a married woman is in her own given name, as Mrs. Mary Lewis, rather than her husband's name or initials. When one person opens an account for another, the bank gets the depositor's signature and the other information it wants as quickly as possible. The signature on the signature card is usually beneath words accepting the bank's rules governing the deposit. The depositor, or the teller for him, makes out a deposit slip. This shows the name of the account to be credited and a list of the money deposited, any checks being put down separately. It is the bank's record of the deposit. The teller, or an assistant, writes the name of the depositor upon a pass, book, which is numbered the number of the account on the books of the bank, which number is always noted upon the deposit slip, and enters the amount of the deposit in the "deposited " column of the pass book.

41. The pass book - This is for the depositor to keep. It contains the rules governing the account. It is the