Postal Savings System: Background
History
A postal
savings bank and system was first recommended in 1871 by
the Postmaster General at the time, John A. J. Creswell
to emulate the postal savings system that had been set up
in Great Britain in 1861. The idea was constantly raised
then dropped by successive governments but the nationwide
financial
Panic of 1907,
and the subsequent bank runs, shook the public's trust of
private banks. This economic disaster provided the impetus
to open the debate again and President Roosevelt responded
by advocating a system to use post offices to fulfill the
needs of small savers and local communities. The idea was
well received (except by bankers) and led Congress to pass
the 1910 Postal Savings Depository
Act during the Taft administration.
Postal Savings System: What was the
purpose of the Postal Savings System?
The Postal
Savings Depository Act established the system to provide
"postal savings depositories for depositing savings at interest,
with the security of the Government for repayment thereof,
and for other purposes."
Postal Savings System: Why
was the Postal Savings System established?
The reasons
that the Postal Savings System was established during the
Taft administration were:
● To provide a safe and
convenient place for Americans to save their money,
instilling a sense of trust and security in savers as
it was backed by the government, not a private bank
● To
persuade people to place their money in a safe place,
rather than hiding it under their beds
● To encourage prudence
and thrift amongst American workers and their children
Postal Savings System:
Designed to appeal to Immigrants
The nation
had seen a massive rise in immigration. During the period
between 1901 and 1910, a total of 8,795,386 immigrants had
arrived in the United States. Many of the newcomers were
familiar with postal savings systems in their home
countries and politicians believed that they would be happy
to use a similar savings system in the United States. This
turned out to be true, as 60% of the initial depositors
were foreign born.
Postal
Savings System: The Banks
Many bankers
saw the Postal Savings System as competition but the government
responded to ensure the Postal Service System would pose
no competition for banks.
● The plan was to
introduce a limited number of depositories for a trial
period and extend the number over time to serve small,
rural communities where few, or no private banks, had
previously existed
● To further placate
the banking industry's concerns legislators built in
a cap on deposits and relatively low interest rates
Postal Savings System: Distribution
of Funds
The
1910 Postal Savings Depository law specified the distribution
of funds in the system:
● The law required
that the Department distributed deposits among a 5%
reserve in the U.S. Treasury with no more than 30% in
government bonds and securities
● The majority of
the funds were to be re-deposited with local banks where
it earned 2.5% interest
● ● The interest
charged to banks on re-deposits was to pay for the
operation of the system
● ● The re-deposits
gave the benefit of boosting the regional banks
with additional funds
Postal Savings System: Phased Implementation
The Postal
Savings System had to be self-sustaining. The government
planned to adopt a cautious approach when implementing the
plan and a phased system of implementation was therefore
established. The Post Office Department initiated
the system in a trial period at 46 depositories, opening
one in each state and territory on January 3, 1911. The
number gradually increased over time to a peak number of
12, 000 postal savings banks. The system reached its peak
in 1947 when it held almost $3.4 billion in deposits, with
more than 4 million depositors.
Postal Savings System: Administration
It was crucial
that the Postal Savings System was seen as readily available,
dependable and reliable. The administration of the system
was therefore headed by a board of trustees consisting of:
● The Postmaster
General (Frank H. Hitchcock - 1909 to1913)
● The Secretary
of the Treasury (Franklin MacVeagh -1909 to1913)
● The Attorney General
(George W. Wickersham -1909 to1913)
Postal Savings System: Deposit Limits
The phased
implementation of the Postal Savings System imposed deposit
limits:
● Only one account
was allowed per person and the age limit for opening
a Postal Savings account was ten years of age.
● In 1910 the maximum
deposit limit was $500
● It was raised
in 1916 to $1,000 for an interest-bearing balance account
plus $1000 non-interest earning balance
● In 1918 the deposit
limit was raised to $2,500
Postal Savings System: Proof of Deposits
The Postal
Savings System issued certificates of deposit in
denominations of $1, $2, $5, $10, $20, $50, and $100 and
paid 2% interest per year on deposits. The initial minimum
deposit was $1. The minimum deposit was later dropped to
under $1. The proof of these small deposits were postal
savings stamps that were initially in denominations of 10
cents, 25 cents and 50 cents. The savers would attach the
stamps to a savings card which could eventually be redeemed
in the form of a savings certificate or in cash.
Postal
Savings System for kids: Closure
The Postal
Savings System was closed by Congress in
1966. There were unclaimed deposits and
interest from over 600,000 totaling $60
million. All unclaimed money was
transferred to the U.S. Treasury and distributed
proportionally between the states. The statute
of limitations passed on July 13, 1984 established
that no claims for postal savings deposits
could be brought after July 13, 1985. The
Postal Savings System was popular with many
Americans and there are still calls today
for the system to be re-established.
Postal Savings
System - President William Taft Video
The article
on the Postal Savings System provides detailed
facts and a summary of one of the important
events during his presidential term in office.
The following William Taft video will give
you additional important facts and dates
about the political events experienced by
the 27th American President whose presidency
spanned from March 4, 1909 to March 4, 1913.
Postal Savings System
●
Interesting Facts
for kids, homework projects and schools
●
Summary of the
Postal Saving System in US history
●
Facts about the
law and reasons why the system was established
●
William Taft
Presidency from March 4, 1909 to March 4, 1913
●
Fast, fun facts
about the Postal Savings
Depository Act of 1910
●
Foreign & Domestic
policies of President William Taft
●
William Taft
Presidency and Postal Saving System for schools,
homework, kids and children
|