1. Read and translate the text.

2. Retell the text. Principles of Management

Bankers have a reputation, probably deserved, for conservatism in politics, dress, and business affairs. From what has been said so far, the economics rationale for this conservatism should be dear. Checking deposits are pure flat money. Years ago, these deposits were “backed” by nothing more than the bank’s promise to convert them into currency on demand. If people lost trust in a bank was doomed.

Thus, it has always been imperative for bankers to acquire a reputation for prudence. This they did (and continue to do) in to principal ways. First, they have to maintain a sufficiently generous level of reserves to minimize their vulnerability to runs. Second, they had to be somewhat cautious in making loans and investments, since any large losses on their loans would undermine the confidence of depositors.

It is important to realize that banking under a system of fractional reserves is an inherently risky business that is rendered relatively safe only by cautious and prudent management. America’s continuing history of bank failures bears sober testimony to the fact that many bankers have been neither cautious nor prudent. Why? Because this is not a recipe for high profits. Bank profits are maximized by keeping reserves as low as possible, by making at least some risky investments, and by giving loans to borrowers of questionable credit, standing (because these borrowers will pay the highest interest rates). The art of bank management is to strike the appropriate balance between the lure of profits and the need for safety. When a banker errs by being too stodgy, his bank will earn inadequate profits. When he errs by taking unwarranted risks, his bank may not survive at all. Many banks have perished in this latter way in recent years.

1 If the period is over or reference is made to a particular past point of time within that period, the Past Indefinite is used.

* Conditional sentence type 2 (of unreal condition referring to the present or future. The Present Conditional is used in the main clause and the Present Subjunctive II is used in the if-clause. The verb to be has the form were both in the plural and sigular, but the form was is also possible in spoken English.

* Sentences with adverbial clauses of condition.

* Although shoud is generally used for the first person (singular and plural) and would for the other persons, there is a tendency in modern English to use would for all persons.

^** The contracted form ‘d+infinitive is used in spoken English.

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