on of
ideal conditions, and a conscious and persistent effort to attain
them.

(_b_) _Loan Operations._--In making loans, a typical method of
procedure for a business man is to arrange with a bank for what is
technically called a "line," that is, the maximum amount he may expect
to be able to borrow under normal conditions. This "line" determined,
he borrows from time to time according to his needs, giving as
security his personal note, payable in one, two, three, four, or six
months. Sometimes an indorser is required, and sometimes the deposit
of collateral, mortgages on real estate, bonds, stocks, and warehouse
receipts being the most commonly used securities employed in such
cases. Ordinarily, when a note falls due, he expects the bank to renew
it, if its payment at the time is not convenient, the agreement on a
"line of credit" ordinarily carrying with it that implication, though
not legally, probably not morally, binding the bank so to do. Indeed,
the customer ordinarily counts the amount of his "line" as a part of
his working capital and expects to keep it in use a large part, if not
all, of the time.

In the determination of the amount of these "lines of credit," the
judgment of some one or more bank officers, assisted by a discount
committee and sometimes, though not as a rule, by a specially
organized credit department, rules. In forming these judgments, the
bankers of the United States as a class are not guided by any
universally recognized and well established principles. The best ones
require from their customers carefully prepared statements showing the
nature and volume of the business they transact, and a careful
classification of their assets and liabilities. Others, and these are
a large majority, rely upon the knowledge they already possess, gained
by general observation, and supplemented by verbal inquiries made from
time to time and by the voluntary statements of the customers
themselves.

The significance of the distinction between commercial and investment
operations in the business of banking is not generally understood, and
is consequently little regarded. The dominant question in the mind of
the average banker, both in determining the amount of a customer's
line and in making loans to him after the line is fixed, is how much
he is "good for," and on this point the total net worth, rather than
the nature of the business operations, of the customer is likely to be
decisive. Of course, the ban