If

Every shareholder's liability is his individual affair. A can not pay, his inability is no excuse for B. If the bank owes shareholder C, his claim can not be set off against his assessment. Furthermore, no more can be collected than is needed to pay creditors. The Controller is careful not to demand more than is needed, but if he should make an assessment equal to twenty-five per cent of the par value of the stock, and this should prove insufficient, he could order as many as he pleased until the full one hundred per cent was paid. Generally, only one assessment is ordered. Lastly, the failure or inability of any shareholder to pay can not be added to the burden of another. Thus, if an assessment of twenty-five per cent is made, and some of the shareholders do not pay (for rarely is the amount assessed collected from all), the sum thus lacking can not be added to the deficiency due creditors, and thereby increase the burden of those who have paid. In every

respect, therefore, the liability of each shareholder to assessment is an individual liability, which can not become entangled, increased, or diminished by the action of any other shareholder.

e. Claims. Having described the duty of the receiver in collecting assets, we shall next consider the receiving of claims. All claims are allowed which are "proved to the satisfaction of the Controller." Of course they must be against the bank and not the officers. Once the federal government had a priority over other creditors, but this is the law no longer. It was also claimed that if a depositor owed a note to the bank, the amount could not be deducted from his deposit and a claim be allowed for the balance, because, to permit this, was to give him a preference or priority over other creditors. It was contended that he must pay his note in full to the receiver just as though he

was not a depositor, and afterward accept his dividend on his deposit. The lower federal courts gave conflicting opinions on this question. Finally it reached the Supreme Court of the United States, which decided by a bare majority that the depositor could use his deposit as an offset against his note, and if it was more than sufficient, he had a claim like that of any other creditor for the balance; if his deposit was insufficient for the purpose, he must pay the balance due.

One other question relating to claims may be considered. As soon as a bank fails, its depositors have claims that are at once due which it must pay out of its assets or proceeds after they have been collected. Suppose a depositor's note is not due at the time of the bank's failure, can he set off his deposit against it the same as though the note had matured or was overdue? The highest court says he The effect of the bank's insolvency is to render the depositor's obligation at once payable, and therefore he can set it off against any claim the bank may have against him except an assessment, should he happen also to be a shareholder, which has been made against him.

can.

f. Dividends. After the claims have all been paid the next step is to declare a dividend. This is done by the Controller. Several may be made during the settlement of a bank. Usually as soon as a considerable amount has been collected, and the claims determined or so nearly that there is no danger of overpayment, a dividend is declared. Quite often if the assets of a bank are large, there may be one or two dividends declared within two or three months after the appointment of a receiver, and smaller ones afterward. The final dividend may be very small, running down to two or three per cent, or even less than one.

g. Expenses. The expenses of the receiver are taken out.

of the assets, and are not large compared with the expenses attending the settlement of many other failures. The chief basis of payment is a percentage based on the amount of assets or business transacted, with such additions as the circumstances of the case require.

3. State Banks. - With respect to the failure of state banks and trust companies a word will suffice. When they fail their business is settled by officers, usually called receivers, appointed by the bank superintendent, or some court possessing competent authority, whose general course of procedure is quite similar to that above described. The state laws differ most in the classification of claims as preferential, and in the liabilities of shareholders.

XXXI. PRIVATE BANKING

1. Magnitude of the Business. Private banks are 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 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.

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, are adventurous and unsystematic. Many are trusted without sufficient inquiry; the larger number who fail pull down their houses by rash attempts to make a fortune in a day. With no one to investigate their business or check them in their operations, they 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.