banks. The investment of the funds of the State banks is generally restricted by the laws of the States in which they conduct business. They may, within certain limitations, purchase, own, and sell real estate; they may discount notes and loan money on personal securities to a limited extent; they may loan money on real estate securities in certain limited localities; they may purchase and own the bonds of the United States, certain State bonds, the bonds of certain cities, counties, towns, and villages, and in general transact what is commonly known as a banking business. Private banks are, generally speaking, under restrictions similar to those of the State banks. But their responsibility depends mainly upon the few persons who compose the firms, or upon the single proprietors, instead of upon the larger number of shareholders as in other banks. The business of a private or individual bank is the property of the proprietor; he may (within certain restrictions intended to protect the holders of notes or bills) sell out the business or bequeath it to persons with whom the depositors may not be willing to transact business.

The laws of the various States with regard to the regulation of banks and other moneyed institutions are so numerous and so different in detail that it is difficult to give a general purport. It may, however, be safely taken for granted that in the older and more conservative States banks and moneyed corporations are more carefully restricted and regulated than in the newer and so-called progressive States, where, in order to encourage enterprises, the statutory regulations of these institutions have been enacted, in some cases, apparently without proper regard for the welfare of the depositors. Where a choice between States in which to transact the business of the bank-account is possible, a comparison of the banking laws and also of the statistics of bank failures will not fail to prove beneficial.

Another important rule which may be followed with advantage when selecting a bank is that all considerations shall be confined to old and successful banks having large or considerable capitals and long-established, high reputations.

Recently instituted banks may, it is true, be conducted upon the safest and most conservative principles; but until the test of endurance has been applied to them, and until their good reputations have been fairly earned, they must be regarded as experiments in the financial world, notwithstanding all recommendations which may be founded upon statements of large financial supports and the high characters of officers and managers. Profitable banking businesses are by no means easily or quickly to be obtained, and for this reason newly established banks are often tempted to attract business by offering dangerous inducements, such as the discounting of doubtful notes, the allowing of unreasonable overdrafts, and the taking of improper risks in the investment of funds.

The capitals, or capital stocks, of banks are divided into shares and distributed among the several stockholders or shareholders, according to the respective amounts which have been purchased by them. Since the stockholders are usually liable, to the amounts of stock held by them, for the debts of the banks, the financial responsibilities of the banks will depend largely upon the amounts of their capitals and upon the financial characters of their stockholders; in these respects, evidently, banks having large capitals and established good reputations will have the advantage over others.

In some instances banks which have made large profits in business, instead of distributing the profits as dividends to the stockholders, or using the profits to increase the capitals, have accumulated out of the profits funds which are called surplusses. In this manner certain banks have become wealthy and highly responsible although the amounts of their actual capitals may be comparatively small; for the purpose of estimating the responsibilities of such banks, the surplusses may to a certain extent be considered as forming parts of the capitals.

The rule for the selection of banks which has been last under consideration, will evidently tend to preclude from the list of satisfactory banks all such as are located in small cities and villages. These must generally be regarded as

dangerous institutions, and must be entirely avoided except in cases which practically compel the making use of them.

And here it may profitably be remarked that too great care cannot be taken to avoid the dangerous influences of locality upon the safety of investments generally and of bankaccounts in particular. Persons living in small villages which are distant from any of the larger cities are, unless extremely careful, almost certain to follow the general opinions of their neighborhoods, which, because of ignorance and local pride, often look upon local investments which are actually worthless as first-class, and consider local banks which are often upon the sure road to failure as great and sound financial institutions. Small banks and institutions of a similar nature which are situated in small cities and villages, have been, and will undoubtedly continue to be, the causes of great losses of property-losses which, unfortunately, often fall upon those who are not at all able to sustain them.

The reasons for such facts are not difficult to discover. Small affairs are generally managed by small men, and the incompetent officers and directors of small banks in small places, although looked up to as sound and reliable men by the unsophisticated people of the localities, with alarming, though perhaps not with unreasonable, frequency bring their banks and their depositors to ruin. Men of great sagacity, experience, and business ability cannot reasonably be expected to devote their time and energies to small institutions the entire profits of which would be poor compensations for their services. Small banks have small capitals, and inadequate facilities for obtaining money in cases of need; they therefore are unable to withstand sudden losses and are quick to suspend in times of sudden panic. Again, banks located in small communities, controlled by the dangerous influences of locality, often invest their funds largely in the enterprises of the neighborhoods in which they are located, and meet with the disasters which follow quickly in the wake of poor investments.

The discounting of notes constitutes, to a greater or less extent, a part of the business of nearly every bank; it is a

practice which, carelessly pursued, involves great risk, and has been the actual cause of many a bank failure. The practice may be briefly explained in the following manner :

A business man may find himself in need of money for immediate uses. He draws and signs a promissory note, takes it to his bank, and asks the bank to discount it— that is, to pay him the amount of the note less a certain discount, greater or less, according to the responsibility of the business man, and to which the bank is entitled for the accommodation. The business man is expected to deposit with the bank some security or collateral (such as Government bonds, railroad bonds, or stocks), or to have the note indorsed by a responsible third party, or both. If the note, at maturity, shall be promptly paid, the transaction will prove a profitable one for the bank; for, in addition to the regular interest, the bank will have received the amount of the discount. Thus, tempted by the prospect of large profits, and of increasing business through liberal policies, banks may discount the notes of persons who, with their indorsers and collaterals, may turn out to be irresponsible and worthless, in which cases the banks are without remedy and must suffer the losses.

The published statements, and the statements which are printed by the banks for circulation among their depositors, may be of some value to the depositors in determining whether their banks are prudently managed. If the statements show very large businesses in the discounting of notes, or that the banks are dealing largely in dangerous so-called securities, the accounts should be at once withdrawn and more conservative banks made use of.

It may also be remarked in this place that, while firstclass banks are generally unwilling to receive or maintain the accounts of persons whose balances are uniformly very small, or who are in the habit of drawing numerous checks for very small amounts, yet the balances at the banks should always be kept within proper bounds, more especially in times of panic and general financial disaster. All moneys over and above reasonable bank-balances should, until they

may be more permanently invested, be deposited in trust companies, savings banks, or other safe depositories; and in times of panic, when there is an unusually large number of bank failures and suspensions, balances in the banks may wisely be reduced, at least temporarily, to much smaller

amounts.

In some cases considerable amounts are deposited in banks with the understanding that the money is to be left on deposit for stated periods of time, and in consideration of this fact the banks often pay interest on such accounts. These accounts or deposits are called special" or "time" deposits. As a general rule they possess no advantages over deposits in trust companies and savings banks, and they are open to the serious objection that the amounts cannot be quickly withdrawn for the purpose of depositing them in safer places, if occasion shall make such action necessary. In view of these facts special arrangements of this kind may well be dispensed with entirely.

The officers and clerks of the banks, with whom business women may have dealings, are: the president and cashier, who are the executive officers, and with whom all business except that of the bank-accounts must be transacted; the receiving-teller, who receives deposits; the paying teller, who pays checks and certifies them when requested to do so; and the bookkeepers, with whom bank-books must occasionally be left to be balanced.

The ordinary method of procedure upon opening an account at a bank is as follows: The proposed depositor presents herself at the bank during business hours, accompanied by a friend or acquaintance who is known at the bank and who may introduce her; or, if no such acquaintance shall be available, she may introduce herself, giving her name and residence, and whatever references may be required, and stating that she desires to open an account. She then writes the regular signature, which she intends to use for the signing and indorsing of checks, in a book which is provided by the bank for that purpose; gives the bank officers such further information as they may require; hands in the