A National bank may also buy and own real estate, to be used as a banking house or office, but it cannot buy it or take a mortgage on it, except to save itself from loss on a loan previously made in good faith.

The business of commercial banking is, to a limited extent, done by "private bankers," but chiefly by stock corporations organized either under United States laws, which are uniform for all National banks, wherever located, or under State laws, which vary in the case of each State.

The management of National and State banks is entrusted to officers, called "directors," elected annually by the shareholders, each share counting as one vote.

The powers and duties usually prescribed for directors may best be described by the following extracts from section 5136, National Bank Act:

"Par. 5. Officers.-To elect or appoint directors, and by its board of directors to appoint a president, vicepresident, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.

"Par. 6. By-Laws.-To prescribe, by its board of directors, by-laws not inconsistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers appointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed."

One of the chief functions of "commercial" banks is to

receive deposits for safe-keeping from parties who have funds for which temporarily they have no use, but which they may need at any moment for some purpose; such, for instance, as the funds that individuals, firms or corporations need to have on hand for the payment of current expenses, or for goods bought, or other such purposes. Such parties are constantly receiving sums in payment of goods sold, services rendered, or for interest or dividends paid on investments, and these items of income, as received from day to day, are deposited with the bank for safe-keeping, to be withdrawn from time to time, as they may be needed to meet disbursements for various purposes.

Where a bank receives deposits of this nature it must be prepared to repay its depositors on demand at any time, and for this reason it cannot safely lend out or invest such funds except in loans repayable on demand, called "call" or "demand" loans, or in those repayable in one, two, three, or four months. As a rule, a commercial bank which retains the confidence of its depositors can count, in times of normal business, upon having a certain average aggregate amount of deposits on hand, a certain proportion of which it can safely lend out for periods of time not exceeding four months usually. Commercial banks, from the nature of their deposits, must always have a certain proportion of these on hand in actual currency or cash, or part cash and part on deposit with other banks. This cash fund is called "reserve" against deposits, and the percentage varies in different locations. Banks in smaller places are not required usually to keep more than 15 per cent. on hand, although they custom

arily keep more, while National banks in larger financial centers, like New York, Chicago and St. Louis, are required by law to keep at least 25 per cent. in actual cash on hand. The reason for this is to provide for meeting any unusual withdrawal of deposits at any time.

Formerly it was rather the exception for commercial banks to pay any interest on deposits, but in late years, owing to the competition between these banks and that from loan and trust companies, commercial banks are compelled in many cases to allow a small rate of interest on deposits to keep their business, and in course of time this will probably be the rule rather than the exception.

Besides the receiving of deposits and the making of loans for short periods of time, an important feature of commercial banking is the making of collections for customers, and the buying and selling of "bills of exchange" on other places, which will be more fully explained in another place.

National banks also issue notes to circulate as money, referred to in the first chapter, and more fully described in a separate chapter, and the borrowing of money when neces sary is a function which may be exercised by all commercial banks.

In case of losses which exceed any surplus or profits on hand, and so use up or impair the capital stock of a bank to any extent, shareholders in National and other commercial banks are liable to pay an "assessment" on their stock sufficient to make the capital good, or restore it to the original amount, but this liability never exceeds the par value of the stock.

If the losses exceed the surplus and undivided profits, and are so great that the shareholders are unwilling or unable to pay an assessment, then the bank must be closed up, either by "voluntary liquidation," in case it is able promptly to pay its creditors, or by being placed in the hands of a receiver, who converts the assets into cash, using same to pay off the creditors, distributing the remainder, if any, to the shareholders. In case the assets do not realize enough to pay the creditors, then a ratable assessment is made on the shareholders for enough to do this, but not exceeding the par value of stock in any event.

SAVINGS BANKS.

The business done by these banks is confined to the receiving of deposits in small sums, usually limited not to exceed a certain amount from each depositor, upon which deposits interest is paid at rates varying from 2 to 4 per cent. per annum.

Some of these banks, known as "stock savings banks,” are organized with capital stock, which participates in the profits over and above the interest paid on deposits, but the greater part of the business is done by "mutual" savings banks, conducted entirely for the benefit of the depositors, who receive in the form of interest all the profits made over and above the necessary expenses, and a moderate portion of the profits is laid aside in a surplus fund to provide for any unexpected losses which might occur.

"Stock" savings banks are managed usually by directors, or trustees, chosen annually by the shareholders, but the management of "mutual" savings banks is usually entrusted to a board of trustees, composed of the organizers or incorporators of the bank, and continuing indefinitely thereafter, vacancies occurring from death or disqualification being filled by the surviving members of the board. These trustees have the power to appoint the officers and clerks to conduct the business, and, within the limitations of law, to prescribe how the affairs shall be managed. No trustee is allowed to receive any compensation whatever for his services, unless employed regularly as an executive officer, nor is he allowed to borrow any of the funds of the bank, nor to be in any way indebted to it.

The profits are made chiefly by lending out the deposits on the security of real estate estimated to be worth twice as much as the amount loaned on it; also by purchasing for investment United States bonds and bonds issued by States, counties, cities or towns. To a limited amount they are sometimes permitted to invest in railroad bonds and stocks and in bank stocks.

Deposits in savings banks, unlike those in commercial banks, are made with the intention of allowing them to remain for a certain length of time, and in this view the funds are largely invested in loans on real estate, which are usually prohibited to commercial banks because such investments cannot ordinarily be quickly converted into cash wh rewich to pay off depositors if they desire to withdraw their funds. To provide against any sudden withdrawal, deposits in sav