358 
BANKING STANDARDS 
to vary from year to year in the same direction—such proportions 
reflecting the needs of general business in its year-to-year changes, 
which, it will be recalled, tend to be relatively the same not only 
among districts but also among cities within districts. 
Banks, however, though interrelated with the fortunes of gen- 
eral business, are distinctive as banks. If they are essentially 
commercial, their assets must be measurably liquid. Yet, within 
the realm of administrative discretion, the business needs of the 
clientéle which they serve, standards of regulation, and matters of 
solvency, they are free as they see fit to divide their resources as 
between loans and investments. Moreover, they are free, with 
essentially the same limitations, to seek increases in either or both 
their time and demand deposits, attracting them from new or old 
accounts, from immediately adjacent or distant territory, by the 
competitive devices freely employed by all, and held to be legiti- 
mate according to standards of business ethics and likelihood of 
success. The flow of goods, of gold, and of credit from district 
to district, and the geographical specialization in industry, in 
trade and commerce, and in investment opportunity, as well as 
the geographical distribution and concentration of wealth, place 
different parts of the country on different levels with respect to 
the distribution of their earning assets as between loans and 
investments, and the proportion of their deposits as between time 
and demand items. Yet, relative to their own levels, changes 
in the proportions of both tend to occur with regularity and 
to follow much the same course from year to year. District 
differentials, however, tend to persist. 
If, with levels divergent from district to district with respect 
to ratios of loans and discounts to earning assets or of time de- 
posits to total deposits, for instance, conditions occur which 
disturb the “normal” relations, then administrative control— 
suggestive of the existence in bank management of a conscious 
standard of “right” relations—, requirements in the loan and in- 
vestment market, regulation, and competitive pressure apply 
correctives which tend to re-establish an equilibrium. How 
much of this process is consciously carried out, and how much 
is due to the working of competitive forces governing the 
use and price of credit, it is difficult to say. But that such 
phenomena occur cannot be disputed. There are regressions 
to type, not only for the series indicated but for others as