nd can be sold
or used as security for loans in any money market. If real estate forms a
part of the capital, it can never be made available for immediate use.
Hence any bank dealing in mortgages on real estate invests its funds where
they cannot be had when wanted. All banking schemes based upon security in
land have necessarily failed, because land has no current use in trade.

Under the pressure of panic, from whatever source, each depositor is sure
to demand every cent due him from the bank, and just as certainly the
bank's own resources are insufficient to meet those dues without the sale
of bonds and notes in other markets. For these reasons in any great period
of distrust the banks are obliged to suspend payments. Since all the banks
of the community are in similar circumstances they cannot help each other,
and time must be given for the collection of loans, according to
agreement, that the gradual accumulation of ready cash may return to the
vault, and so to the depositors, all that has been loaned. Because of this
necessary instability bankers watch most carefully the tendencies of the
money market, and necessarily reduce their loans for safety when any
anxious pressure begins. For the same reason legitimate banking is limited
to short time loans--on demand, thirty, sixty, ninety days--the shorter
being the safer. Laws sometimes prohibit a bank from dealing in any other
business, where a stock of goods must tie up funds, or from speculation in
real estate, which confines capital more certainly.

In most banks the amount to be loaned to a single individual or firm is
limited to a small portion, one-tenth to one-fifth, of the total capital.
The principal causes of failure in banking are defalcation of officers,
misuse of funds in speculative enterprises, dealing in speculative
securities or on boards of trade, careless loaning to poor paymasters,
investment in long time securities not readily marketable, or sacrifice in
hurried sale of stocks and bonds under the pressure of panic.

The better the customers of a bank understand its condition and
management, the less is its danger, for the basis of banking, as of the
credit of the world, is the public confidence. Farmers who acquaint
themselves with the workings of neighboring banks by making use of their
aid in business benefit both themselves and their neighbors. The progress
of the world demands of every farmer a closer contact with business and,
therefore, a g