1. Magnitude Of The Business

Private banks arc not so conspicuous as public banks because their capital is not so large and their business is more contracted. Nevertheless, in the large cities especially, there are private banking houses which possess large means and transact important business.

2. Conversion Into Corporate Banks

Private banks have formed the basis of many of the national banks. Begun as individual enterprises, they have acquired a good reputation, and at length reorganized as national banks. Such is the origin of many national banks, especially in the western and southwestern states. In these sections are the largest numbers outside the large cities. Nearly two thirds of those reporting to the Controller of the Currency are in those states. 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 establishing and maintaining them. A town too small to establish or support a national bank may yet feel the need of banking facilities, and this need becomes more and more pressing until a leading merchant, or some other man who has been in the way of buying notes or making small loans at remunerative rates, at last undertakes the business. His capital may be, and usually is, not large, his integrity is well gauged, for in a small community his manner of life is well known. It has been claimed for him that though he is not subjected to "periodical and perfunctory examinations by national and state officials," he is subjected to continuous and rigid watchfulness by self-constituted examiners, who arc very apt to reach correct results, although they arc 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.

3. Lack Of Permanency

One of the most important lacks of private banks is permanency. In European countries they have often attained a long life and splendid reputation; and there are a few in our country possessing large means and a widely extended name. Not infrequently a banking house disappears with its founder or with the death of his sons. Now and then a concern maintains its life by adding new partners, in hundreds of cases they soon blossom out into a public bank or die with the death of the projector.

4. Operation

The business itself is conducted in essentially the same manner as in a public bank. In the smaller banks there is less formality, less bookkeeping, fewer reports, fewer balance sheets. Possessing a small capital it has less need of the elaborate machinery set up and used by a large bank.

5. Lack Of Method

Bankers sometimes go too far in discarding method. This is one of their chief defects Private bankers often possess great energy and integrity, an adventurous and unsystematic Many are trusted without sufficient inquiry; the larger number who tail pull down their houses by rash attempts to make a fortune in a day. With no one to investigate their business 01 check them in their operations permit their energy and confidence to run unrestrained by much serious thinking until it is too late for their belated wisdom to save them from ruin.