Daily Arizona silver belt., 1907-11-23
Saturday Evening Post)

Saturday Evening Post)
 During the late crisis several banks and one large trust company closed their doors. As result there was not only alarm among the depositors of these various institutions, but among the depositors of a good many other banks and trust companies who were not familiar with the details of the banking business. In many quarters much surprise was displayed when some of the banks posted notices reading like this:
 This Bank is solvent; but is closed
 temporarily because it is unable to secure cash for the depositors.
 The question therefore arose: "How can bank be solvent and yet be un- able to pay its depositors on demand?''
 An effort will be made to answer this question, because it involves knowl- edge of the first principles of banking, and this knowledge should be part of the education of every investor.
 What Banks Are
 In the first place, what is bank ' Not everybody stops to realize how universal and how necessary bank is. Banks stand for stability, for credit and for business. Although paper money was used in China as long ago as one thousand years before Christ, and bills of exchange were employed in ancient Rome, it was not until the twelfth cen tury, and in Venice, that the first bank was started. Modern banking began with the establishment of the Bank of England, in l649.
 Banking simply means dealing in money or papers that represent money. Through the medium of banking, men and firms thousands of miles apart may do business without the actual exchange of cash. There are four kinds of banks:
 Commercial banks, which include both national and state banks.
 Savings banks, which are, in the main, philanthropic trusts for the thrifty.
 Loan and trust companies, which combine the functions of bank with those of trustee and executor. Private banks, which resemble a pri- vate business in their conduct.
 The commercial banks are the most numerous. A national bank is one which contains the word national in its name and which is governed by what is known as the National Banking Act. As such, it is under the supervision of the United States government, which may send an examiner in at any time to examine its accounts. A national bank, by depositing government bonds with the secretary of the treasury, may issue it's own notes-that is, bills bear ing the name of the bank.
 Commercial banks, other than na- tional. are called state banks because they are under the supervision of the authorities of the state in which they happen to be located. Every state has its own banking laws. Some are more stringent than others. Each state, too, has banking commissioner who has the right to know the condition of the banks, and who may take charge of them if he thinks such step is neces- sary. Commercial banks have capital stock like corporations.
 There are two kinds of savings banks, mutual and stock savings banks. A mutual savings bank is one that is con- dueted solely for the benefit of the de- positors. There is no capital stock to be bought and sold or to increase or decrease in value.
 A stock savings bank, on the other hand, is like any commercial bank in that it is conducted primarily to make money for the stockholders as well asl for the depositors. Many of them do general banking business. In most states the investments of savings banks are regulated by law.
 Trust companies receive deposits and lend money like banks. But they do more things than the banks, because the banking laws authorize them to act as trustees and executors, to underwrite bond issues and to perform certain le- gal services.
 A private bank is conducted by a private individual or firm. It receives and lends money; acts as agent for local or foreign corporations; deals in for eign exchange, and underwrites issues of securities.
 These banks could not do business without deposits, and since deposits form such necessary part of the busi- ness and mean, at the same time, so much to the people who own them, both state and rational governments have sought to put some safeguards about their use. In the case of national banks it is required that they kep twenty-five per cent of their deposits on hand in actual legal tender and specie (paper money and coin.) This is called the legal reserve. The usual reserve requir- city to individuals As in ordinary