Stock Savings Banks
The stock savings bank, where it is a savings bank, and not a bank of discount under a savings title, differs in no essential degree from the mutual institution. The mutual bank belongs to the depositors; the stock bank to the stockholders. The mutual bank pays dividends to depositors only; the stock bank pays dividends to both stockholders and depositors. The stock bank does not pretend to be philanthropic in its management. It is purely a business proposition, and where the investments are of the accepted savings bank type, it can justly claim to be on a par with its mutual friends, provided, of course, that it measures up to the standard in its management.
As is implied in the term "stock," it issues capital shares and pays dividends thereon. It has, therefore, the added protection of the stockholder's liability, which, together with the accumulated surplus, affords the element of strength so necessary in all financial concerns. It usually pays the depositors a stipulated rate of interest, and the profits beyond this belong to and are distributed to the stockholders as dividends. The partnership idea is entirely lacking, and the depositors get what they bargain for, while the surplus goes to those who invest, not necessarily their savings, but their capital, and assume all risks of the business. It could not in law or equity "scale down" its deposits to make good any losses—a feature peculiar to the mutual institution.
In this respect one thing is certain: In so far as safety is concerned, especially in a young bank, the stock bank with the stockholders' liability is surely superior to the mutual, unless the trustees of the latter are of such high order and of such financial worth as to be able and willing to assume the burden of any losses that may accrue until the surplus or guaranty fund affords ample protection. This was the trouble in the early days of the mutual savings banks in England.