they are
in danger to the extent that these qualities are lacking. To
substitute for the present basis of competition between banks that
established by mutual insurance laws is to undermine the foundations
of our credit system and to invite disaster and ruin.

_5. Adequacy and Economy of Service_

From the point of view of adequacy and economy of service, two types
of banking systems require attention; namely, that characterized by a
large number of relatively small local independent banks, chartered
under general laws, and exemplified in this country; and that
characterized by a relatively small number of large banks endowed with
the privilege of establishing branches, and exemplified in the other
leading nations of the world.

Under our system each community is encouraged to look after its own
banking needs. Local initiative in the establishment of new
institutions is given free play and local capital and local talent is
attracted. Outside promoters and outside capital are not excluded,
but, if they come, they do so as colonists expecting to cast in their
lot with the community and to become identified with it. The managers
of our banks for the most part are local men who are the real heads of
the institutions they manage and whose careers and prosperity depend
on the success of these institutions.

The localism which characterizes this system contributes elements both
of strength and of weakness. It develops local talent, and promotes
mutual understanding and cooperation between the banks and the
business enterprises of the community, and conformity of organization
and methods to local needs. Its weakness consists in the financial
isolation and the narrowness of vision and training which are its
natural accompaniments. Under this system capital does not easily and
quickly move from place to place and readily distribute itself
according to the relative needs of different communities. In
consequence, rates of interest are apt to vary widely, some
communities to be under- and others over-capitalized, and the capital
of the nation as a whole to be inefficiently employed. Under this
system the opportunity of bankers for training is meager, since the
broader and more fundamental aspects of the business are rarely
brought to their attention, and in the smaller towns and country
districts they are apt to be recruited from people of mediocre ability
and often from those not well fitted by nature and education for this