The general character and function of the private banks is shown by their small averages, and also by their geographical distributions. Nearly two-thirds of their number, and over fifty per cent, of their deposits, are reported from the Western States and Territories. It is in that region of new and small communities where active enterprise and industry abound, along with a plentiful lack of capital, that the conditions are found most favorable to their establishment and maintenance. A town too small to establish or support a National bank, with a capital of fifty thousand dollars, may yet feel the need of banking facilities, and this need becomes more and more pressing until a leading merchant, or some man who has been in the way of buying notes or making small loans at remunerative rates, either assumes or gradually has forced upon him the functions of a banker and puts out his sign. His capital may be, and usually is, small at the outset, but in a rural community every man is known to his neighbors. His "means" are closely estimated, his integrity and ability are pretty correctly gauged, his habits and manner of life are known. In respect to these he is subjected, not to periodical and perfunctory examinations by National or State officials, but to continuous and rigid watchfulness by self-constituted examiners who are very apt to reach correct results, although they are not permitted to count his cash or scrutinize his bills discounted and his ledger. If he passes this investigation successfully he will win the confidence of his townsmen and his business will prosper. Such has been the origin of many of the largest and most respectable private institutions now in existence.

Private bankers, so far as they command public confidence, do so upon their reputation for wealth and their character for honesty and ability, and these are applied directly to the management of the business confided to them. Under these circumstances there must be, other things being equal, a greater concentration of responsibility, a stronger sense of direct, personal liability than is felt by either the directors or officers of incorporated institutions, so that this form of banking offers to the dealer, equally with any other system, that which must after all be his chiefest and best guaranty, namely, faith in the integrity and capacity of the management.

Private banks, however, lack one important quality, that of permanency. Especially is this the case in the United States, and as, from various causes, they may be wound up, they are little likely, in the great cities and larger towns, to be replaced by similar institutions. Gradually, with the growth and development of the country, the function which they are best fitted to fill diminishes, and their business is merged into or usurped by National and State banks; and this tendency will continue.

As to the details of their management, little need be said. These should in no wise differ from those of well-conducted National and State banks, and for the most part they are so managed. In rare instances private banks have adopted the practice of making public reports of their condition, and publishing them along with those furnished periodically by their National and State competitors. It would be well if in some way this could be made a universal custom.

Occasionally there is to be found a banker who affects to despise theory and red tape, names by which he designates the restrictions which it is the intention of National and State statutes to impose, but it will generally prove that, if successful, he adheres to their substance if not to their form. The advantages which are sometimes claimed to be found in an immunity from these salutary requirements are questionable. So far as such so-called advantages are embraced, their tendency is to allure men from the safe paths of correct banking; the prudent and successful bankers, under any system, are those who hold themselves strictly amenable to the rules and principles which experience has proved ought to govern.

A few words should be said about the large banking houses that are only to be found in great commercial centers like New York. Many of them were originally founded with a view to conducting a regular banking business, of receiving deposits and discounting commercial bills, and numbers of them continue to do a large business of this kind, especially for out of town correspondents.

But they have, for the most part, gone largely into the business of placing corporate loans, of acting as agents for States and municipalities, and of dealing in foreign exchange. Along with their growth in this direction there has been a decline in that which may be more strictly termed banking, until many of them have come to resemble the great financial firms of London, who style themselves merchants, not bankers.

"Several of the larger banks in New York have from time to time sought to enlarge their dealings in foreign exchange, but never with any marked degree of success. The causes of this are not far to seek. A busy banker engrossed in the management of a large line of deposits and discounts cannot scan with sufficient care the wide field of foreign exchanges. The conditions of supply and demand, the different standards of money, the changing rates of interest in the various financial centers, and the numerous other influences, ordinary and extraordinary, which affect the business of exchanges, demand nothing less than constant study by the man who would master them, and their perfect mastery is necessary. It is probable, too, that the foreign agencies which are available for a bank to employ do not render the effective service that is requisite; that the London and Continental branches, having common interests, which form a part of the organization of all the large houses dealing in exchange, are essential to success. This segregation of the exchange business from that of banking is, however, but an illustration of the inevitable tendency to specialization which marks commercial progress.