5. Banks Created By General Law

These evils were at length largely remedied by the enactment of general laws providing for the establishing of banking institutions. These provide a cheap, easy, and swift way of obtaining the needful authority to form a bank. The national bank act is of this nature, and every state has a general banking law. These usually provide that five or more persons may apply to the superintendent of banking, in a state where such an officer exists, and in other states to the secretary of the state, for the right to be incorporated and entitled to the rights and privileges of the laws relating to banking. The application, the name of the proposed bank, the amount of its capital, the names and residences of the shareholders, are duly considered, and if these matters are deemed satisfactory, letters patent, signed by the governor, to which the seal of the state is added, authorize the applicants to organize a bank in accordance with the laws providing for its creation and management. The laws usually provide, among other things, that the bank shall be duly advertised so that the public may know under what authority it exists, what capital it possesses, the names of its officers, and such other matters as render it worthy of confidence and support.

6. The Two Methods Compared

This process, compared with the method of obtaining a charter from the legislature, is very simple, economical, and swift. In a few days after its inception, a bank can be launched under the state regulations now existing in every state in the Union.

Nevertheless, charters for banks are still granted by some state legislatures, while perhaps in all of them banks are living under charters granted many years ago, before general laws providing for their creation were enacted.

7. Banks Organized Under General Laws Are Not Monopolies

It may be remarked that banks organized under general laws are not monopolies, like those established in the early days; for example, the Bank of North America, or Bank of New York, or Massachusetts, with well-defined and strongly guarded exclusive privileges. As these were valuable, the owners looked with ill favor on any new association of individuals who sought to wrest their rights from them. Hence the shocking quarrels that often occurred in legislatures between those who fought to preserve their exclusive chartered privileges and others who strove to abridge or take them away, that others might have a chance to share the profits of the favored ones. By the general banking laws that now exist, individuals can organize banks without limit; the monopoly feature has entirely disappeared.

8. Banks Of Discount And Deposit, Savings Banks, And Trust Companies

Let us now describe briefly the differences between banks of discount and deposit, savings banks, and trust companies.

A bank of discount (1) possesses a capital, (2) which is owned by shareholders. (3) It receives deposits Largely from business men, which are mostly payable on demand, (4) and loans money for a short time, usually four months or Less, and (5) to business men for mercantile purposes (6) It is managed by a board of directors chosen by the shareholders, (7) who hold annual meetings to elect direc-tors and do such other business as the law requires of them.

A savings bank, properly so-called, (1) has no capital, (2) and consequently no shareholders. (3) It receives deposits, chiefly in small sums from the working classes, (4) which are payable only after notification by depositors (unless the amounts are small) that they desire their money. (5) The loans, too, are usually made for longer periods, (6) and to investors, - -persons who desire it to pay for land, building a house, and the like. (7) As savings hanks have no capital, they are organized by trustees, who often elect a portion of their number as directors to manage the business. (8) Lastly, when a trustee resigns or dies, the other trustees elect a successor; the depositors therefore can not elect officers or in any way exercise authority.

Trust companies combine most functions of the ordinary bank of discount with the execution of trusts. They receive deposits, and usually pay interest on them, and lend money on collateral security, and not on the mere credit of borrowers. The trusts they execute are of a varied nature, as administrators and executors of estates, guardians to minors, trustees to beneficiaries, who are established by wills and in other ways. They sometimes reorganize railroads, and act as trustees of bondholders in various railroad operations. They manage lands, rent houses, repair them, in short, act as an agent or trustee for estates, individuals, corporations in a great variety of business which can not be done at all, or done as well, by individuals Furthermore, they are rapidly replacing individual trusteeships, because (1) they possess a capital and are not only responsible for the losses they incur, but are able to respond to them; and because (2) they usually possess much experience and act conservatively; and lastly (3) because they have fixed charges and perform their services for a more reasonable compensation.