Chapter Two: U.S. Mutual Savings Banks and the "Savings Bank Idea": The Virtue of Thrift as an Institutional Value (Sorcha Brophy-Warren)

In Ruthwell, Scotland, Reverend Henry Duncan established the "Savings and Friendly Society" as the first modern savings bank. Citizens were taught to practice thrift by not wasting money on either clothing or alcohol at the bank. Mutual savings banks were designed specifically to aid in the practice of saving. The very first U.S. mutual savings bank was the Provident Institution for Savings which resided in Boston. Mutual savings banks soon appeared in New York, Pennsylvania, Connecticut, Rhode Island, and Maryland. These banks exclusively protected deposits, made limited secure investments, and provided depositors with interest. They uplifted the poor and working classes by encouraging them to save rather than spend money. Aside from the upkeep, the profits belonged entirely to the depositors of the mutual savings banks. They were idealized to have the potential to bring virtue to society - this is in part due to the fact that they arose at a time when charitable organizations were also on the rise. Unlike charity, however, the mutual savings banks wanted to teach the poor to help themselves rather than to depend upon the help of others - they encouraged financial and personal independence through disciplined and hard-working lifestyles. These lifestyles also had to be thrifty. These things are all proponents of the idea of individualism, in which self-reliance and independence are virtues unto themselves. As the United States grew, the banking needs of Americans also grew. When the population became more spread out, people need savings and loan associations and stock savings banks. Mutual savings banks slowed their growth as commercials banks became more popular. However, they continued to grow and reached 637 banks with three billion dollars in deposits by 1910. Their success was attributed to the values associated with them: self-help, self-governance, fraternalism, mutualism, and patriotism. People who were burdens to the state and were not economic were considered to be immoral. The banks hoped to create stable and independent individual who would not rely upon the government; rather, they would rely upon themselves. Thrift was the only way for the mutual savings banks. Americans were taught thrift in literature, campaigns, and schools that were all funded and sponsored by the banks. Thrift almost took on a theological aspect. Today, however, American values have changed in a way that does not support the mutual savings banks. The bank failures of the Depression, new government regulations, competition from other banks, and the loss of the virtue of thrift eventually led to the demise of the mutual savings banks.