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Classification of Loans Including Paper Bought Made by

bank, demand, banks, brokers, call and special

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CLASSIFICATION OF LOANS (INCLUDING PAPER BOUGHT) MADE BY Goo NATIONAL BANKS IN ALL RESERVE AND OTHER CITIES HAVING A POPULATION OF OVER 50,000, AS OF DECEMBER 31, 1918 Total loans $6,485 Loans placed for account of correspondents: For national banks in reserve and central reserve cities 52 For national banks outside of reserve and central re serve cities 6g For state banks and trust companies 166 Total $ 287 It will be observed that at this date four-fifths of the loans were made to depositors; a good proportion of the deposits in fact arises from loan operations. The classification shows that reserve city banks place loans for their correspondents, both national and state institutions.

Classification of Collateral Loans I. Merchandise Loans. These are payable on demand, and are secured by warehouse receipts and bills of lading representing commodities of various kinds.

2. Time Loans. These are payable at a specified time, are made to banks, brokers, firms, or persons, and are secured by stocks, bonds, and bills receivable. They are not subject to call until the expiration of a certain number of days. The tendency is to shorten the period of time loans and to quote it in days rather than months. Brokers and other borrowers seek to arrange matters so that a certain proportion of their borrowings shall be on time, but banks prefer to loan on call and thus enjoy a higher liquidity of assets. On this account call loans, except in times of great stringency, command a lower rate of interest.

3. Special Loans. Special loans are payable on demand and they are made to individuals who keep accounts with the bank, to officers of banks which keep accounts with the bank, who borrow for their personal use, and to banks which keep accounts with the bank, borrowing on their demand notes secured by stocks and bonds or on bills receivable. Included in this class are also other loans made under special agreement and payable on demand. The special loans are seldom called, and when they are it is not with the expectation of receiving payment at once.

4. Demand Loans, or strictly Street Loans.

S. Brokers' Special Loans.

The bank may also act as agent for many of its customers, loaning in the metropolitan market any excess money they have.

In such cases the bank generally handles the funds as if they were its own and informs the customers that it will give the same care to loans made for their account as it does for its own, but that beyond that it assumes no responsibility. The customer is advised by the bank of the amount and rate of each loan and is furnished with a list of collateral, all sub stitutions and changes of rates being reported the day they are made.

Stock Brokers' Loans Loans to brokers have been classified above into time, demand, and special loans.

The demand loans are those made by the bank to brokers who keep no account with the bank. They are strictly demand loans, and the bank does not hesitate to call them whenever the need arises. The makers have no claim on the bank and under stand perfectly that when money stiffens or the market has a sudden break, demand loans are those which the bank will call first. Some banks make a practice of calling all their loans every day; others do not call unless they have pressing need for the money. The broker knows by experience which banks call and which do not, and can to some extent guard against the emergency, but not always. The demand loans constitute one of the very quick assets of the bank, and it tries to have large amounts of these loans at all times. "Brokers' specials" comprise loans to brokers who do keep accounts with the bank. These are also quick call loans, but on account of business relations the bank does not call them until the demand loans are all closed out, unless it wishes to reduce a line that is exceptionally large. It happens quite frequently that they arc not called for years, even for a decade or more. Both demand loans and brokers' specials are secured by stocks and bonds listed on the stock exchange.

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