It will be observed that the purpose of this law is to put na tional and state banks on the same competitive basis and hedge them about with the same safeguards.
4. To Handle Savings Deposits. The act distinguished be tween demand and time deposits, and fixed the required reserve against the latter at a very low rate. It is now 3 per cent. Here tofore it had been quite impossible for a national bank to handle savings accounts except through an affiliated savings bank or ganized under state law.
5. To Lend on Real Estate Security. State banks had enjoyed a competitive advantage in their powers to loan on real estate security; as a result they flourished in agricultural regions where national banks could not. This inequality was reduced by the act, which permitted national banks not situated in central re serve cities to make loans on improved and unencumbered farm land situated in its federal reserve district or within ioo miles from the bank, irrespective of district lines, and to make loans on im proved and unencumbered real estate within ioo miles of the bank, irrespective of district lines. No loan may be for a longer time than five years, and no loan on real estate as distinguished from farm land may be for more than one year. No loan may
exceed 5o per cent of the actual value of the property offered as security. The total of loans of this character may not ex ceed 25 per cent of the bank's capital and surplus, or per cent of its time deposits. The board is empowered to name, from time to time, other cities besides central reserve cities in which such loans may not be made.
By entering into the trust, savings, and real estate loan busi ness the commercial banks tended to reduce the liquidity of their assets; compensation for this, however, is realized in the higher liquidity of their other assets through rediscounts with and loans from the federal reserve banks.
The national banks were given power to accept bills drawn upon them under certain conditions, to establish foreign branches, and to do other things denied them heretofore. But since such powers were not much used by state banks, if they had them, the legislation was not occasioned by a desire to equalize the condi tions of competition.