A History Op the Postal Savings System in America
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72-15,289 SCHEWE, Donald Bruce, 194-3- A HISTORY OF THE POSTAL SAVINGS SYSTEM IN AMERICA, 1910-1970. The Ohio State University, Ph.D., 1971 History, modern University Microfilms, A XEROX Company, Ann Arbor, Michigan (§) Copyright by Donald Bruce Schewe 1972 THIS DISSERTATION HAS BEEN-MICROFILMED EXACTLY AS RECEIVED A HISTORY OP THE POSTAL SAVINGS SYSTEM IN AMERICA. 1910-1970 DISSERTATION Presented In Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University Donald Bruce Schewe, B.A., M.A. The Ohio State University 1971 Approved by Robert H. Bremner Professor Department of History PLEASE NOTE: Some pages have indistinct print. Filmed as received. University Microfilms, A Xerox Education Company Acknowledgment I should like to express my gratitude to the many librarians and researchers who aided me in assembling the material for this study, and to Dr. Robert H. Bremner, who guided the project from its inception. Dr. Brenner's patient guidance and inspiration aided immeasurably in the completion of this work. I should like to especially thank my wife, Cheri, for cheerfully enduring the time I spent on the dissertation. ii VITA October 28, 19^3 • , . B o m - Cleveland, Ohio 1964 ................ B,A., University of Nebraska, Lincoln, Nebraska 1966-1968 Teaching Assistant, Department of History, University of Nebraska, Lincoln, Nebraska 1968 ........ M.A., University of Nebraska, Lincoln, Nebraska 1968-1971 .......... Teaching Associate, Department of History, The Ohio State University, Coliimbus, Ohio PUBLICATIONS Assisted in compilation of Goldentree Bibliography of American Social History Since 1660 (New York: Aorleton- Century-Crofts, 1970). Research Assistant for Dr. Robert H. Bremner, Children and Youth in Americat A Documentary History (Cambridge, Mass,I Harvard University Press, 1970-) FIELDS OF STUDY American Social and Intellectual History. Professor Robert H. Bremner Late Nineteenth Century American History. Professor Francis P. Weisenburger Colonial and Revolutionary America. Professor Paul C. Bowers iii TABLE OF CONTENTS Page Acknowledgments. ii V i t a .......... iii List of Tables . List of Maps and Figures ........ Vi Chapter I. Thrift Movements and the Background of the Postal Savings Movement ......... 1 II. Postal Savings Proposals, 1873-1908 . 23 III. The Passage of the Postal Savings Bill. 55 IV. The System is Established .•••••.. 94 V. The System in the Twenties, the Depression and World War IX. ............ 140 VI. The Post War System 168 Appendix A. Postal Savings Bills Introduced in Congress 187 B. Votes on the Postal Savings Bill (S. 58?6). 201 C. Laws Relating to the Postal Savings System. 208 D. Summary of Postal Savings Business by Fiscal Years, 1911-196? . 222 Selected Bibliography. .................. 226 iv LIST OF TABLES Table Page 1. Number of Savings Banks, Number of Depositors, and the Average Amount Due each Depositor in the United States for Selected Years. ..... 8 2. Number of Failures, Liabilities, and Dividends Paid by National Banks. ................ 19 3, Number of Failures, Liabilities, and Dividends Paid by State and Private Banks ....... 20 4. Depositors in Postal Savings Banks by Country of Nativity ................ 122 5. Native American Depositors by Race, 1912. 123 6, The States Showing the Largest Deposits, September 30, 1915 .................... 124 7. Savings Facilities and Postal Savings, June 30, 1916 ........................ 128 8, Number and Percentage of Depositors by Age Group, June 30, 1912...................... 132 9. Bonds and Stamps Sold by the Postal Savings Division............ .. 162 LIST OP MAPS AND FIGURES Map Page 1. Proportion of Depositors to Total Population (by states}# 1916 ••••••••••••••• 126 2. Percent of Population Having Postal Savings Accountsf 1916. 12? 3. Average Deposits, 1916................... 131 Figure 1. Usage by Class of Office....................... 1?2 2. Postal Savings Depositors, 1911-196?.......... 173 3. Deposits in the Postal Savings System, 1911-1967................................. 174 vi Chapter I Thrift Movements and the Background of the Postal Savings Movement On June 25» 1910, President William Howard Taft signed the bill which created the American postal savings system. For sixty years thereafter, many jlmerlcsns of all ages deposited their money at the local post office. Immigrants, accustomed to postal savings systems In their native lands, used the system In preference to banks. In remote areas, or areas unservlced by local savings Insti tutions, the postmaster provided the only available banking facilities. Those who did net trust banks or bankers could deposit their money with the United States government and feel secure. Children comprised a large segment of the depositors, because the postal savings system provided for deposits of very small amounts of money which the young could more easily obtain than the larger amounts required by many banks. And the system was of direct benefit to the United States government. During World War I and World War II, deposits In the postal savings system were converted directly Into government bonds. The postal savings system was not an American 1 creation* Nor was it the only scheme undertaken between 1797 and 1910 to foster thrift and savings* Thrift was widely recognized as desirable, and numerous plans to encourage frugality and savings had been devised prior to the postal savings plan* Emphasis on savings was central to prevailing economic thought* The classical economists recognized savings, or capital accumulation, as the productive factor in the growth of a community or industry* When the division of labor has once been thoroughly introduced, the produce of the man®s own labor can supply but a very small part of his occasional wants* The far greater part of them are supplied by the produce of other men's labor, which he purchases with the produce, or, what is the same thing, with the price of the produce, of his own* But the purchase cannot be made till such time as the product of his own labor has not only been completed, but sold* A stock of goods of different kinds, therefore, must be stored up somewhere sufficient to maintain him, and to supply him with the materials and the tools of his work till such time, at least, as both these events can be brought about* * * As the accumulation of stock must, in the nature of things, be previous to the division of labor, so labor can be more and more sub divided in proportion as stock is previously more and more accumulated. The quantity of material which the same number of people can work up increases in a great proportion as labor comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a great degree of sim plicity, a variety of new machines come to be invented for facilitating and abridging those operations* As the division of labor advances, therefore, in order to give constant employ ment to an equal number of workmen, an equal stock of provisions and a greater stock of materials and tools than would have been necessary in a ruder state of things must be accumulated beforehand»^ Adam Smith was discussing the accumulation of goods. The same principle was applied to money. Enterprising entrepreneurs soon attempted to tap the savings resources of the masses, rather than relying on the resources of the wealthy. m e accumulation of savings not only provided the capital necessary for industrial expansion, but was looked upon by numerous conservatives as a palliative to many of the ills of society, m e man who saved some of his money not only practiced the virtues of frugality, industry, and prudence, but provided himself with a vested interest in the prevailing social order, and was correspondingly less apt to participate in or condone radical schemes. William Graham Sumner often told the following story* Some years ago I listened to an address by a social agitator who said* "I can get along with anybody in my audiences except these mean, stingy, little fellows who have saved up a few hundred dollars in the savings bank and then have borrowed enough more to build a little house of two tenements, one of which they rent. When I begin to talk about interest, and rent, and Henry George, they get up and go out by the whole seat-full at a time." m e statement was the most eloquent recognition I ever heard of the power and beneficence of capital. It has always remained in my memory as a confession by an opponent of the education ^Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. Introduction to Book Two. effected by savings and of the benefit conferred on society by savings b a n k s . 2 % e earliest institutions primarily for savings were philanthropic in nature, and designed more to promote thrift and frugality among the poor than to accumulate capital. Meliorative thrift plans were prevalent among conservatives and philanthropists whose prescription for poverty was self-help. Harder work and stricter economy was the answer to improvement of the lot of the poor, not higher wages.3 Jeremy Bentham»s essay, "Frugality Banks," published in 1797. was the English proposal of such an institution.^ In the early part of the nineteenth century in England, many parish ministers established banks for the poor, and received substantial philanthropic support for these banks. % e backers of these banks served as trustees and managed the accounts and investments. Founders of such banks made lavish claims about the benefits of their schemes, even going to far as to boast that poor banks would eventually render the parish pauper tai unnecessary. By 1817 the movement had grown sufficiently ^Albert Galloway Keller and Maurice B. Davie, eds.. Essays of William Graham Sumner. Vol. II, p. 14. ^Robert H. Bremner, From the Depths; The Discovery of Poverty in the United States, p.