Mutual Savings Banks
The era of 1819 to 1860 was considered the beginning of the savings bank movement in Maine. The idea of a savings bank (or friendly society) was first developed by the Swiss in the late 1700s, and was brought to this country via England and Scotland in the 1800s. James Savage is one of those credited with introducing this movement to the United States. He obtained this idea from plans for a London institution that hung over a fireplace in Gardiner, Maine. The time was right in Maine for mutual (“mutually beneficial”) savings banks that began primarily for wage-earners and seamen. They also created a savings outlet for people outside of mainstream business, such as women. The first savings bank was established in Maine in 1819: "The Institution for Savings for the Town of Portland and Vicinity", which lasted until 1843. A total of 25 savings banks were incorporated in Maine between 1820 and 1860. In 1859, Maine savings banks reached $1 million in deposits.
Until 1860, federal law prohibited commercial banks from accepting savings deposits. Then the establishment of the state banking system made the affiliation of savings banks and commercial banks possible, thereby expanding customer services. Later, the national banking system (1863-1930) replaced the state banking system. A prime reason for establishing national banks was to encourage investors to purchase federal and municipal bonds to help pay for the Civil War.
Historical accounts of early banking consider this era the “experimental period" – lawmakers and bankers alike were pioneers with few precedents to guide them. During the period from 1860 to 1873, a rapid growth in banking occurred, creating both new possibilities as well as many problems. As a result, from 1873 to 1875, many banks failed because of a business panic, due (for the most part) to failed investments in American and European railroads, and failed oil and mining speculation in the western states. These failures subsequently caused a depression.
Despite its share of ups and downs, Maine grew and prospered. By the mid-1800s, the general population began earning wages that enabled them to save money. The check became a common medium of payment for business affairs by 1865. Deposits exploded in the years from 1866 to 1870. By 1870, savings bank deposits totaled $15,829,000. This increase in deposits is attributable to three major factors: confirmation that savings banks were established entities; the capacity for people to save; and the incentive to save, given high interest rates (the average being 5% in 1866). This is further highlighted by the number of banks in Maine increasing from 14 to 43 during the 1860s. Since the early 1800s, mutual savings banks have gained the confidence of Maine customers, and evolved into one of the oldest and most important depositories for peoples' savings. While there were a few unfortunate failings, savings banks headed into the 20th century firmly established.