Henry Clews.
Georgia Securities and New York Savings Banks.
The efforts that are being made to place Georgia securities in the savings banks of New York ought to be resisted for two very good reasons: First, such investment would be contrary to the law of the State; second, even if it were legal it would be imprudent and unsafe.
As to the authority of our savings banks to invest in these securities, it is understood that the opinion of the Attorney-General has been asked. On this point there is not much room for question. Savings banks are prohibited by law from investing in the stocks or bonds of any State that has within ten years defaulted in the payment of any part of the principal or interest of its debt. By a constitutional amendment adopted in 1877, Georgia ratified previous acts of the Legislature repudiating more than eight millions of its obligations. The excuse given for this proceeding was that the State’s obligations had not been lawfully contracted, and therefore were not binding. On this ground it is claimed that Georgia securities do not fall within the prohibition put by the law upon the savings banks of New York. There would be some force in this view if Georgia were sustained by any judicial decision holding the bonds invalid. But it took advantage of that principal which protects a State against suit by a citizen. It decided the question by its own arbitrary edict It gave its victimized creditors no voice in the matter. In the absence of judicial support or warrant, its action can be regarded only as a repudiation.
But if there were no legal obstacle in the way, prudence alone should deter any savings institution from investing in the bonds of a State that has so recently broken its faith and repudiated its obligations. The managers of a savings bank hold an exceptional trust. These institutions are the depositories of the earnings of the poor. The first consideration in their management is safety. With that end in view the law imposes the most stringent regulations on their supervision and the disposition of their funds. Their investments are properly restricted to the safest and most unquestionable securities. There is neither authority nor excuse for taking any risk. Let individuals, if they wish, invest in Georgia bonds. That is their own business. But the managers of a savings bank cannot run any such risk without failing in their duty to thousands of poor depositors.—N. Y. Herald, July 17, 1885.
The Attorney-General’s Decision.
The decision of the Attorney-General, as was expected, wisely prohibited the savings banks of this State from risking any of the hard earnings of their large number of depositors in such an uncertain security as Georgia bonds.
The Bank Superintendent, Willis S. Paine, referring in his report of March, 1886, to this decision, says: