reduced in amount even by an individual bank. In other words, they are not liquid. But the importance of this quality in all its assets disappears when a bank begins to acquire time or savings deposits as well as those payable on demand.

Some of the advantages which the banks would derive if they were able to lend on real estate are so evident that they require little more than mere mention. It would give them more of the most profitable kind of business, that which has its origin in the neighborhood of the bank. The immediate return is generally greater than can be secured from the employment of funds in the money centers or in the purchase of paper from note brokers. Moreover, in fostering the growth of wealth and population in its locality a bank is laying a solid foundation for the future expansion of its own business. Finally, the ability to lend on real estate will often enable a bank to secure valuable customers who would otherwise go elsewhere. It has been the unpleasant experience of many a national banker to be obliged to refuse a loan to a would-be borrower who has nothing but real estate to offer as security and see him enter a neighboring state bank or trust company where there was no legal obstacle to the transaction. Relations once established are pretty certain to continue even after the borrower has security which falls within the provisions of the national law.

In order that such loans may be made with safety, however, it is necessary to establish time savings departments, segregating the deposits.

109. CAUSES OF NATIONAL BANK FAILURES1

Sixty per cent of the failures of national banks were caused by violations of the national banking laws; 23 per cent were caused by injudicious banking; 13 per cent by shrinkage in values and general stringency in the money market, while 4 per cent resulted from the failure of large debtors and other minor causes.

Criminal violations of law caused about 37 per cent of the failures, 23 per cent being caused by fraudulent management, 7 per cent by defalcations, and 7 per cent were wrecked by the cashier or other employee. Excessive loans caused 20 per cent of the failures and heavy investments in real estate or mortgages about 3 per cent.

'Adapted from Report of Comptroller of the Currency, 1911, p. 27.

The following table shows the number and percentage of insolvent national banks classified according to causes of failure from 1865 to October 31, 1911:

III. SUMMARY OF LEGISLATION AFFECTING STATE BANKS' BY JOHN FRANKLIN EBERSOLE

The prevailing requirements for state banks may be sketched in their main outlines. The minimum capital required for state banks varies from nothing to $50,000 in the different states. In the South and West the requirement is less than the $25,000 required for national banks. Some twenty states require but $10,000 or less. In twenty-nine of the thirty-seven states and territories which require a minimum under a general law, the amount is graded according to population. In most of these states $25,000 is the maximum, though several require $100,000. As compared with the national-bank minimum of $25,000 for towns of less than 3,000 population, three states have higher, seven states have the same, and seventeen have lower requirements. As compared with the national-bank requirement of $50,000 for places of 3,000 to 25,000 population, over three-fourths of the states which prescribe a fixed capital have lower requirements. None of the states require more; in several they require much less. For cities of 25,000 to 150,000 three-fourths of all the states have lower requirements than the national-bank requirement of $100,000.

This difference in the amount of capital required is one of the noteworthy contrasts between national and state legislation, and this difference exists not in legislation only. Sixty-two per cent of the 11,319 state banks in operation on April 28, 1909, had less than $25,000, and 27 per cent had capital ranging between $10,000 and $15,000. A few states show some lack of banking ideals in permitting an authorized capital larger than the paid-in requirements, undue prolongation of the paying in of capital, and the payment of subscriptions to capital in things other than "cash" or "money of the United States."

The national-bank act requires one-tenth of net earnings to be set aside annually toward a surplus fund until it amounts to one-fifth of the capital. Nineteen states have this rule; seven states have more stringent provisions; Virginia has a lower requirement, and seventeen states do not require, by general law, such a surplus accumulation. In addition to this surplus fund added to capital, most states follow the national-bank act in providing for the double liability of shareholders. In nineteen states the shareholders are responsible

Adapted from "The Relation of State to National Banks," Proceedings of the American Academy of Political and Social Science, I (1911), 286-90.