depression may be broken by some fortuitous event, such as a presidential election, the signing of a treaty, the favorable turn of the balance of trade, and the like. The normal timerequired for the cycleof boom, panic, depression, and recoveryis twenty
years, with minor disturbances at the end of the first ten years.
A certain periodicity in panicshas been frequentlypointed out, and such periodicity is exemplified by the American panics of 1819, 1837, 1847, ^nd 1857; and of 1873, 1884, and 1893, and 1903, the more severe of which occurred in the years in heavy type.
CLASSIFICATIOX .\XD FUNCTIONS OF B.INKS
Specialization ofBank Functions
Bankinginstitutionsare specialized dealers in andguarantors of credits. Theevolutionofoursystemofcredithasbeencharac- terizedby the same di\'isionoflabor whichdominates oursocial
and economicstructure. Notonly have creditinstitutions sepa- ratedfromthemerchant andindustrialinstitutions,butthecredit institutionshave themselves specializedon the basis offunction.
Thisdifferentiation offimctions affords themostusefulclassifica- tionofbanks. Banks maybe^"iewed, ofcourse,from an economic or social point of ^-iew as well as from that of business. The economistand sociologist consider the ser\*ices of the bank with reference to thefurtheranceofhumanwelfare. Thebanker,how-
ever, thinks of his bank as a profit-making institution; he may
philosophize on its economic and social influences, but unless
moved bya highsenseofpubKc dutyheisprone tothinkmostof diAadends. His customers, moreover, are likely to think of the
bank from the purely business point of view—as an institution
from whichto secureloans, inwhichtodepositmoney, and bythe aid ofwhichsecuritiesmaybefloatedand estatesmanaged.
Classificationby Functions
The most common classification ofAmerican banks basedon bankfunctionsmakesthreedi%'isions. namely:
1. Commercial banks.
2. Investment institutions, including sa\'ings banks and bondhouses orinvestment banks.
3. Trust companies.
Butfurther diN^siononthesamebasisispossible. The New York
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CLASSIFICATION OF BANKS l8l State banking law has special sections for the following classes:
state and national (commercial) banks, federal reserve banks, credit unions, foreignbankingcorporations,investment bankers, investment companies, Land Bank of the State of New York, personal loan brokers, personal loan companies, privatebankers, state deposit companies, savings and loan associations, savings banks, trust companies, discount companies, acceptance houses, note-brokers,andothers. Indeedthe subclassesthat are possible are limited innumber onlyby thenumberoffunctionsand com- binationsoffunctionsopentosuchinstitutions.
Classified as to source of authority to do business, banks are
commonly grouped as federal or national, state, private, and
foreign. Another classification is into parent or mother bank, branch, agency, and correspondent. Still another is into joint- stock, mutual, private, and individual. And in any system the banks may be specified as central, member, or non-member; as
bankofissueor non-issue; as reserve city bank, central reserve city bank, or country bank; as land bank, agricultural bank, mercantile bank,industrialbank, andsoforth.
Functions of Commercial Banks
The majorfunctions ofcommercial banks havebeendescribed inChapter IVas the testingand guaranty ofcredit, and the ex- tension of credit by means of notes, deposits, and acceptances.
Commercial banksextendshort-timeloans,handleshort-timemer- cantilepaper, receive deposits subject to check,issuebanknotes, issue letters of credit, and accept bills drawn upon themselves.
Incarryingon thesemain activitiesmanyincidental services are performed for customers. In a circular published recently a metropolitan bank advertised "forty-three separate service divisions—all working for a single object, namely, to render a powerfuland well-balancedbankingservice." In their competi- tion for business, banks adapt their services to their actual and prospective customers' needs, adding feature after feature.
Inthispointofservice,bytheway, thereisprobably opportunity forboththe largeandsmallbanks. Thesmallerbankscan render theirfewercustomersservicesthat areprobablymoreintimateand personal than the great metropolitan banks, whereas the latter can offer facilities more powerful, varied, complete, and expert.
The accessoryand minor functions of commercial bankswill bediscussed indetailin thebodyof this text. Thenatureofthese functionsappears inthe statement thatfromhisbank thebusi- ness man receives the ready accommodation of a loan or the
promptcash conversionofcommercial papers;hefindsitconven- ienttokeephismoney and makehispaymentsat thebank;heis
advisedinthepurchaseandsaleof securitiesand theirhandling;
the bank assembles vast credit files which are open to him; his funds are transmitted over distances, his foreign trade is facili- tated, hisbusinessoperationsplannedandguidedforhim.
From the point of view of economics, bank credit obviates theuseofmetallicmoney andconservesthemetalsforusein the arts; it facilitates the production, movement, and exchange of goodsmoreeflfectuallyeven than moneydoes;itstabilizes credit, restingituponlong-established,widely extended, conservatively
managed institutions. The banker determines the personnel of the business world, by extending credit to persons of character and capacity and by choosing as debtors those who have either proved abilities or give reasonable promise. Capital is thus di- vertedinto channels and hands where it ismost productive and mostusefulto society. The bankassemblesthe strayand hoarded fundsof the countryintoitsvaults andputsthem toproductive use. Capital is thereby conserved. The benefits of thrift are taughtandtheimportanceandequityofkeepingcontracts to the letterare brought home to thecommercial world.
Specialization of Commercial Banks
Commercial banks specializein loans, adapting their services to their localityor to a special clientele. Some carry specializa-