320 
BANKING STANDARDS 
which increased, and those which were relatively high which de- 
creased between 1924 and 1925. Moreover, the lower they were, 
the more they rose; and the higher they were, the more they fell. 
It should be observed that these latter results are obtained by 
the simple process of (1) classifying the banks into groups ac- 
cording to their net earnings ratios in 1924, (2) calculating the 
average ratio for each class in that year, and (3) comparing this 
amount with the average for the same banks in 1925. This proc- 
ess is direct. It does not involve the use of averages as standards 
of reference to determine positions, nor does it identify changes 
from year to year with differences in relative dispersion. And 
yet the results secured by both methods of study indicate changes 
according to a well-defined pattern—a pattern encountered in 
the discussion of gross earnings ratios in the Boston district for 
1924 and 1925, and of total expense ratios in the Boston and 
New York districts for the years 1922 to 1925 and 1923 to 1925, 
respectively. 
In the discussion of gross earnings and of total expense ratios 
for individual banks, confidence is expressed in the belief that 
results secured by the types of analyses just presented are sig- 
nificant. It is maintained that they seem to indicate that forces 
are operating to establish equilibria with respect to these ratios. 
It is also believed that forces are similarly tending to bring ratios 
of net earnings to an equilibrium. What is the evidence which 
appears to support this conclusion? 
In Chapter VII it was found, first, that from year to year, 
during the years 1919 to 1925, district ratios of net earnings to 
earning assets which were low tended to increase, and those which 
were high tended to decrease.” Similar tendencies between 1924 
and 1925 are now found for the net earnings ratios of individual 
banks in the Boston district.® Second, the net rates of increase 
or of decrease from year to year, during the period 1919 to 1925 
for district ratios, varied directly with the percentage amounts 
of deviation from type—type being the seven-year average ratios 
for the respective districts.? It is now found that similar condi- 
tions obtain for the Boston district member banks for the years 
7 See Table 84. 
8 See Tables 187 and 188. 
2 Gee Table 853.