CONTRIBUTORS O. M. W. SPRAGUE Professor of Banking and Finance in Harvard University E. W. KEMMERER Professor of Banking and Economics in Princeton University H. PARKER WILLIS Secretary Federal Reserve Board THOMAS B. PATON General Counsel American Bankers Association HAROLD J. DREHER Assistant Cashier National City Bank of New York C. W. ALLENDOERFER Assistant Cashier First National Bank of Kansas City GEORGE E. ALLEN Educational Director American Institute of Banking Section Messrs. Sprague, Kemmerer, Dreher, Allendoerfer and American Institute of Banking Section American Bankers Association Five Nassau Street New York City CALIFORNIA LOANS AND INVESTMENTS B CHAPTER I Commercial Loans ANKS are commonly thought of as being chiefly engaged in the business of lending money, but at a matter of fact money loans make up a small part of their business. The investments of savings banks are indeed limited to the funds which they have received from depositors, together with such amounts as have been set aside from profits as surplus, and also in the case of stock savings banks the amount received from subscriptions to capital stock. Other banks, including the banking departments of trust companies, while they must always be prepared to furnish money on demand, do not limit their loans and other investments to the funds received from depositors and shareholders. They lend their credit as well, and thus create a large part of the funds utilized by borrowers. Banks other than savings banks might well therefore be called credit banks. Unfortunately a somewhat less descriptive term is in common use-Commercial Banks. 2. BANK NOTES AND CHECKS.- Commercial banks are able to lend their own credit and thus manufacture a large part of the funds which 5 |