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bank. While the stock type of organization is found throughout the western and southern states, the non-stock, or mutual savings bank prevails in the northeastern states. This institution has no capital stock, for its resources are contributed not by stockholders but at first by the organizers and later by the depositors. In place of a board of directors there is a body of trustees, who determine the policies of the mutual savings bank in the interest solely of the depositors.

VII. CO-OPERATIVE BANKING INSTITUTIONS.

Similar to the mutual savings bank is the building-andloan association. Both receive earnings from a number of small depositors and lend these funds on security, consisting usually of real estate. These associations are owned by the contributors of the funds and such persons receive the net profits derived from the granting of the loans. However, there is a difference in operation. The savings bank obtained its resources from persons making deposits, while the loan association secures its funds from individuals buying shares in the organization. Furthermore, the savings bank uniformly lends its money to borrowers who have no connection with the institution, whereas the loan association generally grants accommodation only to its members. Savings banks distribute their funds over a wide range of investments, but loan associations ordinarily confine their activities to assist persons who are buying real estate or building houses.

Another form of co-operative banking is the credit union. Its development has not been extensive in the United States, although the building-and-loan association has experienced a rapid growth. Both aim to encourage thrift among their members by receiving their savings and lending them to borrowers at a reasonable rate of interest. The credit union differs from the loan association in that it supplies credit for a short period of time, and makes these grants exclusively to its own members. Thus each borrower is personally known to his associates in the union and so the loan

is based on his character rather than on collateral such as real estate.

The Morris Plan Bank also makes loans to small borrowers who have no bank accounts and who find difficulty in securing credit. These loans are made on a promissory note of the borrower, whose credit is further guaranteed by at least two indorsers, or "co-makers." The Morris Plan Bank is not really a co-operative association, for while it seeks to sell its shares to prospective borrowers, it is a regular business enterprise whose capital is derived largely from stockholders not necessarily recipients of loans. VIII. TENDENCIES IN AMERICAN BANKING.

From this survey it must not be concluded that the banking structure of the United States is composed of a number of groups of specialized institutions, for there has been comparatively little tendency toward specialization in the field of banking proper. A large commercial bank has frequently absorbed a trust company, or, on the contrary, a progressive trust company-desiring to enter into commercial banking-has at times taken over a long-established national bank. These mergers have resulted in powerful banking institutions which have further extended their activities to include other fields of finance by opening departments for receiving time deposits and also by operating securities departments for handling investments. A large modern bank is therefore able to offer its customers practically every possible financial service in much the same manner as a department store places on sale goods of every description.

Part II

COMMERCIAL BANKING

CHAPTER V

BANK ORGANIZATION AND ADMINISTRA

TION

I. THE BANK AS A TYPE OF BUSINESS ORGANIZATION.

HAVING surveyed the entire field of banking, we shall now consider the various aspects of the commercial bank. Its organization will first be analyzed with particular reference to differences from and similarities to the ordinary business enterprise. The three types of business organization-the individual, partnership, and corporation—are all found in the field of banking. Any person or group of persons may engage in banking in the same manner as in an ordinary private business such as manufacturing or retailing. Although the business of banking, by reason of its semi-public nature, is placed under certain governmental regulations, it is not confined by law to the corporate form of organization. But as most banks are chartered institutions it is necessary to study them particularly from the corporate point of view.

Chartered banks share in all the advantages derived from being organized as corporations. The existence of the bank is practically continuous, for it receives a charter which generally grants a life of ninety-nine years, and this term may be extended by mere application to the proper authorities. The feature of the limited liability of owners is especially attractive in banking where the element of risk is heavy. Also the issue of shares renders possible the raising of capital in large amounts.

On the other hand, corporate organization carries with it certain disadvantages which are especially onerous in the

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