132 THE FARMER AS A BUSINESS MAN. 



not due, it is not in a position to pay on demand, if the greater 

 part of its depositors call for their money. For this reason the 

 loans of commercial banks are always made on short time — 

 usually from thirty to ninety days — so that its funds may be 

 available to pay depositors at short notice. A country bank 

 which should owe depositors $100,000, would probably have 

 a capital of $50,000, of which a portion would probably be 

 invested in its business premises and furniture, a portion in 

 some reliable bonds, capable of being quickly turned into 

 money, and the remainder paid into the business for loaning. 

 The bank's capital is the security to depositors. In most states, 

 also, the stockholders are personally liable to depositors, to a 

 certain extent, in case of failure. 



A high character for integrity is, of course, a prerequisite to 

 employment of any kind in a bank. In addition to this, the 

 responsible ofhcers must be personally popular, in order to 

 attract deposits, and sound judges of the value of })roperty, 

 and of men, in order to make safe loans. In addition to 

 the judgment of the president and cashier, all considerable 

 loans must be passed upon by a " security committee " of the 

 directors. 



Bank failures occur from bad loans. The officers of the 

 bank have lent money on property which is unable to earn 

 interest upon it, or upon personal security which proves bad. 

 In the majority of cases, this occurs from putting too much 

 confidence in one man — usually the president — who has lent 

 the bank's money either to himself, or to enterprises in which 

 he is interested, or to personal friends. 



As farmers are quite as much interested in sound banking 

 as any other class, they can do much towards effecting a radical 

 reform by urging the passage of laws forbidding banks to 

 make any loan whatever to their own officers, or to any busi- 

 ness in w.iich any one of them has any important pecuniary 

 interest. Such a law, well enforced, would prevent the major- 

 ity of bank failures, and work no hardship to any one. If the 

 security is good, the bank officer could obtain the loan else- 

 where. If it is not good, ho ought not to expect it. Nearly 

 all bad bank failures occur as a result of loans to bank officers. 



