The Northwestern Bank Failures and the Attack on Treasury Savings Certificates

Abandonment of the whole plan of distribution by the Treasury of savings certificates is threatened by the situation arising out of the failure of the western banks. The banks have blamed the sale of these certificates for withdrawal of deposits from their coffers, weakening their position and causing failure. Officials of the Treasury in charge of the sale of the securities charge a widespread conspiracy among the banks of the country to put an end to such competition for funds as is furnished by the certificates.

Suspension of Sales

Pressure by the Western banks has grown so strong that Secretary of the Treasury Mellon has ordered immediately suspended the sale of savings certificates in the following seventeen states: Arizona, North Dakota, South Dakota, Wisconsin, Montana, Minnesota, Idaho, Colorado, Utah, New Mexico, Texas, Iowa, Arkansas, Missouri, Kansas, Nebraska and Wyoming. In addition, the Secretary has ordered complete suspension of all sales campaigns, advertising, publicity and agency activity over the entire country. The War Savings Organization of the Treasury claims that the work of two years in building up an efficient distribution system has been destroyed by these suspensions.

Controversy of unusual heat is exercising fiscal officials at Washington. The conference of western bankers called by the President to meet Monday, February 4 is expected to bring the contest to a head, with two distinct camps among the federal officials, one group defending the Treasury savings certificates and the other aligning itself with the bankers. The situation may be further complicated by an effort to have the Federal Reserve Banks arrange to take over failing institutions. Determined opposition in the Board to such a move seems likely.

Treasury Savings Certificates

The Treasury issues, in addition to its ordinary Liberty bonds, notes and certificates of indebtedness, a series of savings certificates. These are sold in denominations of $25, $100 and $1000. The purchaser pays $20 for a $25 certificate and, upon maturity, the certificate is redeemed for $25. The others are sold for $80 and $800 respectfully. The 5 cent and $1 issues which were sold during the war no longer are issued. All issues run five years, interest at 4⅓ per cent being compounded semi-annually.

Three and one half million individual investors hold an aggregate of $376,000,000 in these certificates. To date, there has been no complaint from them and the Treasury claims that these people who, through this medium have cultivated thrift habits, will object to withdrawal of the facility.

Opposition to the sale of the certificates comes now almost exclusively