Bank

“ Each bank is seeking, through its branches, to satisfy all the legitimate needs of the people for a circulating medium. When the note of a bank is in circulation it is earning money for the bank, but when it is in the vault or on the counter of the bank it is an idle and useless piece of paper. Hence every bank always pays out its own notes through its branches and sends the notes of other banks in for redemption, thus increasing its own circulation and strengthening its own reserve. ”

“ First of all, let me state the simple fact that when you deposit money in a bank the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit—bonds, commercial paper, mortgages and many other kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money you put into the bank is kept in currency—an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen. ”

“ Deposits and Solvency.—It is, therefore, a sheer blunder to infer that a bank is rich or strong because of its great total of deposits, or to regard deposits in banking institutions as making part of the aggregate wealth of the community. Instead, the deposits indicate for a bank the extent of its operations, and indicate for a community the extent to which the banks, under the guise of noninterest-bearing obligations, have assumed the debts of business men, on terms of these business men becoming debtors—and interest-paying debtors—to the banks. ”

“ The unique powers of commercial banks to accept demand deposits, provide checking account services, and lend against fractional reserves permit the banking system as a whole to create a supply of 'money,' a function which is indispensable to the maintenance of the structure of our national economy. ”

“ You cannot create the necessity of a bank, and then plead that necessity for its establishment. In the administration of the finances, the bank acts simply as a payer and receiver. The secretary of the treasury has money in New York, and wants it in Charleston; the bank will furnish him with a check, or bill, to make the remittance, which any merchant would do just as well. ”

“ This Bank, being thus past the first hazards, stands too fast for the power of art to shake it; and immense sums being lodged with them, their payments are much safer than the money in any man's pocket. ”

“ Bank Commissioners to inspect the bank and certify that this has been done; no loan to be made to a director for more than half his shares; in a $100,000 bank no one person to owe it more than $8,000, and so on according to a scale; no loan to be made to an officer; debts, exclusive of deposits, not to exceed one and a-half times the capital; the circulation never to exceed the capital, and one-third of it to be held in specie; a State officer to register and countersign the notes, and to guard the limit for each bank as returned to him by the Commissioners; tax to be one-half of one per cent. ”

“ The bank is as necessary to the thrifty farmer as it is to the greatest railroad or the most wide-spread trust.
Banks are depositories for money not in circulation.
Banks have facilities for the safe-guarding of money which the ordinary business man could not provide for himself. ”

“ The best writers on banking, in the third decade of the nineteenth century, had generally reached the conviction that the capital of a bank ought to be invested in some permanent security, and that the operations should be carried on with the notes. Evidently, if a bank should be formed by an association of capitalists who should buy bonds with the capital and carry on the business with the notes; or if they should be already owners of government bonds, which they subscribed as capital, printing notes for use in banking ”

“ An officer of a bank there asserts that banking in the north coast countries is not to any great extent a matter of handling currency or money funds. The intermediary system of brokers, merchants, and other middlemen between the producer and his market, to which we are accustomed, is lacking, and the banker must take the place of all of them. ”

“ Standard of value, money, currency, exchange, capital, credit, government credit as money and as currency, land credit as money and as currency and reserves. What else can there be?
Mr. Banker: I do not think there is any particular topic for us to tackle now, but the bank itself, and I want to be permitted in the outset to describe just what a bank is, and what it does. I do not think there is any single thing in business life that is so misunderstood. People think of a bank as a kind of mystery. ”

“ We are studying in order the forms of commercial Credits, and we have now come to that one which is central in the operations of Banking, and accordingly this is the place for us to understand clearly what a Bank is, who a Banker is, and what are the motives actuating at once the Banker and his Customers. A Bank is an institution for the Creation, Management, and Extinction of Credits. Money of any kind plays a very subordinate part in the general operations of banks, which live and move and have their being in the sphere of pure Credits. Bankers are buyers and sellers of credits. ”

“ I started with the policy of buying and selling for cash, keeping a large fund of cash always on hand, taking full advantage of all discounts, and collecting interest on bank balances. I regard a bank principally as a place in which it is safe and convenient to keep money. The minutes we spend on a competitor's business we lose on our own. The minutes we spend in becoming expert in finance we lose in production. The place to finance a manufacturing business is the shop, and not the bank. ”

“ Banks supply two kinds of currency, viz. bank notes—which are money; and bank deposits (or rights to draw) —which are not money. (2) A bank check is merely a certificate of a right to draw. (3) Behind the claims of depositors and note holders stand, not simply the cash reserve, but all the assets of the bank. (4) Deposit banking is a device by which wealth, incapable of direct circulation, may be made the basis of the circulation of rights to draw. ”

“ Each independent bank is to deposit with the State Treasurer bonds of the State, or of the United States, to the amount of its capital, and he is to give to it its circulating notes to an amount not exceeding the value of the bonds, nor three times the paid-up capital. ”

“ The Savings Bank exacts from those persons who wish to transact business through its medium, a fixed monetary deposit of 100 florins, without relation therefore to the importance of the transactions which they can effect; it opens for them an account and delivers them, upon request, cheque books which serve to effect the payments which they desire to make. ”

“ The Bank is a private one, the property of one person, and on that one person all the wrath would fall. It is not like a joint stock, or a limited liability, where many are concerned as principals or shareholders or directors. ”

“ But in discounting notes and managing its property in legitimate banking business, it must be able to assign or sell those notes when necessary and proper, as, for instance, to procure more specie in an emergency, or return an unusual amount of deposits withdrawn, or pay large debts for a banking-house, and for any 'goods and effects' connected with banking which it may properly own. It is its duty to pay in some way every debt. ”

“ The business of banking, including all the operations which distinguish it, might be carried on under state laws, either by corporations or private persons, and capital in the form of money might be invested and employed by individual citizens in many single and separate operations forming substantial parts of the business of banking. ”

“ The majority declare that the Bank ought to use its capital as a permanent fund and loan the public deposits on time, so that they would be repaid near the time when they would be required by government for the debt payment. ”

“ The bank is a corporation and body politic having a separate existence, as a distinct person in law, in whom the whole stock and property of the bank are vested, and to whom all agents, debtors, officers, and servants, are responsible for all contracts, express or implied, made in reference to such capital ”

“ As the Bank of England is the channel through which, directly or indirectly, payments are made and moneys received, by other banks, it is more convenient for them to have their reserve lying as a deposit in it than lying as gold within their own vaults. ”

“ Deposit banking operations affect not only the volume of money and credit, but also the value of the dollar and the stability of the currency system. In this field, considerations other than simply the preservation of competition are relevant. ”

“ A. The Société Générale, Crédit Lyonnais, etc., receive deposits from the public; they invest these deposits and try to make the most of them, paying a small rate of interest on them; they also loan money on commercial paper which can be rediscounted at the Bank of France. Here we are more a business bank; we do not care for deposits from the public; we work with our own money, with the money which is the capital of the bank, and we are occasionally assisted by the capital of the directors, the people who sit around this table, who are all rich people and some of them bankers. ”

“ If the great Bank secured through its branches, as it appears to have done, all the internal exchange business of the entire country, it would indeed, by promising to pay everything, never need to pay anything, but settle the whole by bookkeeping balances. ”

“ A bank which lends its notes, lends capital which it borrows from the community, and for which it pays no interest. A bank of deposit lends capital which it collects from the community in small parcels; sometimes without paying any interest, as is the case with the London private bankers ”

“ An inquiry into the transactions of the institution, embracing the branches as well as the principal Bank, seems called for by the credit which is given throughout the country to many serious charges impeaching its character, and which, if true, may justly excite the apprehension that it is no longer a safe depository of the money of the people. ”

“ He immediately took the omnium to other brokers, represented to them an urgent necessity for money, sold it, and having been paid checks for the amount, immediately presented them to the bankers on whom they were drawn, and received the amount in cash. He then went to all whom he knew, or would trust him, borrowed money on the security of his own checks,—a common practice on the Stock Exchange,—with remarkable boldness, remained in London until near the hour when he knew his own draught would be presented and refused, and then left, laden alike with gold and a guilty conscience. ”

“ Bank described.—A brief description of the most modern form of banks under state or national restrictions will help to understand how these institutions serve the world of commerce.
In simplest terms, a bank is a company founded for the sole purpose of dealing in coin and current certificates of credit of every form, the prime object being the convenience of people in making exchanges of any kind. Sometimes a bank is called upon simply to make change, or, as we say, to break a valuable coin or a bill of large denomination into smaller pieces. ”

“ He must himself inspect and sell produce. Loans are made, for instance, secured by growing crops; the bank sends a man to the plantation [Pg 572] to look over the coffee or cocoa, or whatever the crop may be, and report on its condition and prospects; to protect itself the bank sees that it is properly prepared for shipment, and takes care of the sale in the New York, London, or Hamburg market. The bank collects the proceeds and credits the customer with his share. Interest rates run from 8 to 15 per cent. and commissions for selling from 1 to 3 per cent. ”

“ Banks are usually created for the purpose of making loans, and this in a medium, in theory at least, equal to money; not for the purpose of borrowing, or of raising means to eke out their daily existence by selling off their securities or their own paper. ”

“ They include not only moneys invested in private banking, properly so called, but investments of individuals in securities that represent money at interest and other evidences of indebtedness such as normally enter into the business of banking. ”

“ Banks shall: maintain adequate capital and liquidity; make adequate provision for
depreciation of assets, for discharge of liabilities, and for losses; maintain adequate
accounting and other records of business; observe sufficient and effective risk controls; and
ensure that their assets are diversified as to risk of loss.
3. The CBI shall, by regulation, prescribe detailed standards of conduct for banks which the
CBI shall apply in its prudential supervision in accordance with international standards and
best practices. ”

“ This discourse of banks, the reader is to understand, to have no relation to the present posture of affairs, with respect to the scarcity of current money, which seems to have put a stop to that part of a stock we call credit, which always is, and indeed must be, the most essential part of a bank, and without which no bank can pretend to subsist—at least, to advantage. ”

“ Therefore, when a bank notifies you that it holds your note, or a draft drawn on you, for collection, bear in mind four points. First: the bank must follow the instructions of the sender or owner of the paper. Second: it can not disregard the law. Third: you are benefiting yourself more than the bank by paying your paper promptly. Fourth: the bank is taking a risk every time it accepts anything other than actual cash for a collection. ”