THE FAiniEK AM) Till: liAXKEJ;. 131 



essence of the banking business is a protit on deposits, and 

 those in control of the bank must not be obnoxious to the 

 mass of the people. The managers of a bank must be men 

 who have the respect and good-will of the community, or 

 deposits will be light, and the bank unprofitable. 



It is another popular error to consider the managers of 

 banks as persons of great wealth. Of course, wealthy men often 

 do manage banks, but, as a rule, the officers of banks are men 

 of moderate means, but high character, employed upon fair, 

 but not large, salaries. They are not handling their own 

 money, but that of others, and the rules upon which they 

 handle it are not made by themselves, but are the result of 

 the experience of all banks. The money of the banks is not 

 largely the property of the stockholders, mucli less of the man- 

 agers, but belongs to those who have deposited it, and who have 

 the right to take it out without notice. The profit of banking 

 arises from the known fact that, while every dollar of deposits in 

 commercial banks is subject to check at sight, as a matter of fact 

 the greater portion, in ordinary times, will be allowed to remain 

 indefinitely, the witlidrawals and deposits about balancing 

 each other from week to week. From seventy-five to eighty-five 

 per cent of the deposits can, therefore, be loaned with safety, and 

 the interest on these loans, less the expenses of tlie bank, is the 

 profit of banking. To this is added commissions on collec- 

 tions and exchange, and on the sale of securities. If local 

 bonds are issued, either by the public or by industrial enter- 

 prises, a local bank may subscribe for the entire issue with the 

 view of selling them to customers at a small profit. Some- 

 times, in spite of the low interest which first-class bonds usually 

 bear, they are retained as permanent investments of the bank, 

 becauso, in case of sudden calls for money from deposits in 

 unexpected amounts, first-class bonds are highly available as 

 securities u]>on which the bank itself may borrow money to 

 pay depositors. In cases of sudden demands for money, country 

 banks frequently have to borrow largely of city banks to pay 

 depositors, although ordinary demands are usually foreseen 

 and prepared for. It is quite evident, however, that if a bank 

 owes j;^100,000 to depositors, of which $75,000 is loaned out and 



