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POSTAL  SAVINGS

The  tendency  of  the  total  number  of  depository
banks  to  decline  is  due  to  a  number  of  causes
among  which  may  be  mentioned  :  (  1  )  the  plethora
of  moneyed  capital  during  the  past  two  years,
which  has  made  deposits  of  postal  savings  funds
unattractive  to  many  banks,  requiring  as  they  do
the  pledge  of  collateral  and  the  payment  of  2|
per  cent  interest  ;  (  2  )  the  discontinuance  of  postal
savings  banks  in  many  communities; 11  and  (3)
the  legislation  discriminating  against  banks  which
are  not  members  of  the  Federal  reserve  system
as  depositories.  This  last  item  calls  for  further
discussion.
The  Federal  Reserve  act,  as  originally  enacted,
contained  a  clause  to  the  effect  that  no  government ­
  funds  nor  postal  savings  funds  should  be
deposited  in  the  continental  United  States  in  any
bank  not  belonging  to  the  Federal  reserve  system. ­
 12  This  provision  was  construed  by  the  Attorney-General ­
  to  permit  the  continuance  in  nonmember
  banks  of  postal  savings  balances  already
on  deposit,  but  to  prevent  the  making  of  any  further ­
  deposits  in  such  banks. 13  The  discontinu-11
  Supra,  pp.  53-54.
12  Sec.  15  of  act.
13  Concerning  this  subject  the  Third  Assistant  Postmaster-General
  said  in  his  annual  report  for  1915  (p.  12):  “No
deposits  have  been  made  in  non-member  banks  since  November ­
  16,  1914,  the  day  the  [Federal  reserve]  system  went