Bankbook

“ But in connection with banking and in ordinary commercial parlance it means money taken to a bank, left there, and understood to be subject to check or draft. [2] Money thus deposited and drawn on enters largely into the commerce of the country: checks and drafts are mercantile instruments, part of the machinery of trade, having commercial value and bearing no resemblance to the 'pass-book' held by the poor seamstress, or washerwoman, or cook, who can go but four times a year and after notice to have a debit entered in it. ”

“ 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. ”

“ Originally the business of banking consisted only in receiving deposits, such as bullion, plate, and the like, for safe-keeping until the depositor should see fit to draw it out for use, but the business, in the progress of events, was extended, and bankers assumed to discount bills and notes and to loan money upon mortgage, pawn, or other security, and at a still later period to issue notes of their own intended as a circulating currency and a medium of exchange instead of gold and silver. ”

“ For this purpose the currency of active banks is delivered from the assorters through the teller to a "maker-up" who takes an inventory. Next day he assorts the packages of a group in a till similar to those already described, except that it is laid flat upon a low counter. Then he takes the contents of a box, ascertains, by examining the upper note of each package, that the money is all the issue of a single bank, and writes in ink upon a blank label the title of the bank, the amount of each denomination, and the total of all, signs and dates this, and straps it upon the bundle. ”

“ Thus the cash account and the bank account are frequently bound together in one separate book called the cash book, showing in parallel columns the movements of office cash and of cash at the bank, and by the addition of a third column for discounts the necessity of keeping an additional book of first entry as a discount journal may also be avoided. Of late years, however, most businesses pay all moneys received into their bankers without deduction, and pay all accounts by cheque ”

“ All the paper currency in the hands of the people, excepting $1 and $2 bills, is in the form of bank notes. There is no chance to substitute bank notes for government notes. Hence, if at any time business relaxes and the need for money among the people grows less, an increasing tide of bank notes flows into the banks. The people who bring these notes do not ask for money in exchange, for to them the notes are money. They take bank [Pg 418] notes to the banks just as people in the United States take greenbacks and silver certificates—to be exchanged for a deposit credit or account. ”

“ 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. ”

“ A bank, by the issue of notes, puts into circulation as money its own promises to pay. The customer, in borrowing money or in withdrawing deposits or cashing checks and drafts from other banks, is paid with the bank's notes instead of with standard money. These notes may be returned to the issuing bank either to be redeemed in specie or to be paid in some other form of credit, such as deposits or exchange. The limit of the issue of such notes is the need of the community for that form of money, and if they are promptly redeemed in standard money on demand, they never can exceed that amount. ”

“ This first step being taken, you open what is called a current or drawing account; that is to say, an account into which you can pay money whenever it suits you, and from which you can draw money at any time by means of orders, or cheques, as they are called. In a current account in a good bank money is kept safely—which is a great matter—and at the same time you can make use of it as readily as if it were lying in your pocket. ”

“ Bankers make up their pass-books in two ways. When the customer is in account with the banker the cash he pays in appears on the right-hand side of his book, and the cheques he draws out on the left. The more general method, however, is to make the bank in account with the customer, when the debits and credits in the pass-book are an exact copy of the client’s own cash-book, whereas the entries in the bank’s ledger are reversed. ”

“ Now, this institution is not a 'bank,' by which term, in an unqualified presentation of it, is meant a bank of the ordinary kind. It is a Bank for Savings only. But if it still be a tank, that is to say, a common repository for people's money, having a bench or counter,-it is assuredly not a bank 'engaged in the business of banking.' The business of banking consists in buying, selling, and discounting commercial paper, with or without collaterals; in issuing notes; in making collections, and in receiving deposits of money and in paying them out on check, at call. ”

“ Property, produce, stock, farming utensils, everything which the people of the country were tempted by advanced prices to dispose of, were purchased and paid for in paper, which was known by the utterers to be absolutely valueless. Large amounts of notes were hypothecated for small advances, or loans of specie, to save appearances. Quantities of paper were drawn out by exchange checks—that is to say, checked out of the banks by individuals who had not a cent in bank—with no security beyond the verbal understanding that notes of other banks should be returned at some future time. ”

“ In all these ways the banking power of a country is extended to several times the coin money in circulation, and that with perfect safety. But it is possible for banks to be tempted through the very perfection of their own credit. The note of an individual has no established market value. A deposit in the bank is valued as cash. It is possible to secure the credit of having a bank deposit by discounting an individual note. ”

“ The accounts of a bank with its correspondents are a record of the transactions of its customers with the outside world, the checks they receive as a result of sales to outsiders of merchandise, real estate or other property, or as a result of gifts by outsiders to them being credited on such accounts, while the checks they draw or the drafts they purchase in payment for merchandise, real estate or other property purchased of outsiders, or of gifts made to them are debited. ”

“ Nothing can be held over without risk, no matter how heavy the day's work. The rule in every bank is to clean up all the work on the very day it is received. None of this daily balancing of cash, or books, can be commenced until the last check has been cashed, the last depositor has come in, and the last payer of a collection has settled. For instance, the payment of a single draft or note after banking hours, necessitates the holding open of several sets of books or the erasure and changing of various totals by the bookkeepers. ”

“ Instead of running the risk of paying bills with money carried about on his person, the business man, and every man with ready money should follow his example, deposits his money in a convenient bank, for which he receives a proper voucher in the shape of a credit in a deposit book.
When he pays a bill, he draws a check for the amount, payable to the order of his creditor. This check, when endorsed by the receiver and paid by the bank, is in itself a receipt for the money. ”

“ If the cheque is paid into a different bank, it will not be presented for payment, but liquidated by set-off against other cheques; and in a state of circumstances favourable to a general extension of banking credits, a banker who has granted more credit, and has therefore more cheques drawn on him, will also have more cheques on other bankers paid to him, and will only have to provide notes or cash for the payment of balances; for which purpose the ordinary reserve of prudent bankers, one-third of their liabilities, will abundantly suffice. ”

“ The bills of banks pass as money. A bank bill or note is a promise of the bank to pay the bearer a certain sum on demand, signed by the president and cashier. It passes as money, because the bank is bound to pay it in specie if it is demanded. Paying notes thus is redeeming them. When a bank is unable to redeem all its bills, it is said to have failed, or to be broken; and the bill holders suffer loss, unless some security has been provided. ”

“ Checking accounts meet in the most satisfactory manner all currency needs for which hand-to-hand money is not well adapted, such as large payments and payments at a distance. With a few strokes of a pen payments of the greatest magnitude can be made through their agency. Checks can be sent through the mails at slight expense and without danger of loss of the amount involved. By the devices known as travelers' and commercial letters of credit, checking accounts supply the most convenient form of currency for travelers and for merchants engaged in foreign trade. ”

“ The stocks are all to be or to be made equal to the New York five per cent. bonds. The bank is to execute and sign and may then circulate the notes. If any such bank fails to redeem any of the notes issued by it in lawful money of the United States upon a lawful demand, the note may be protested and the protest filed in the office of the Comptroller. The bank is then given ten days to pay. After that the Comptroller is to give notice in the State paper that all the notes of that bank will be redeemed by him out of the trust funds in his hands for that purpose. ”

“ The boy returned with the check, the cashier put upon his own file a "tag" representing the amount of money, along with many other similar records, and the boy was sent with the check to the Bank of North America. The boy handed to the banker, with the check, a similar "tag" from the cashier, which was also filed. When you deposit money, at many banks, you fill out a "tag" or deposit-check, and offer it with the money, which "tag" is used by the banker as a safeguard against errors and lapses of all kinds. ”

“ 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. ”

“ I had now, for example, a banking account; and though I seldom risked drawing a cheque for more than two pounds without first performing quite an intricate little sum, the data for which were furnished by my cheque, pass and paying-in books respectively, still—I had a banking account. I had also good boots, two fairish suits of clothes (though no evening clothes) , an umbrella, a watch, and other possessions that, three or four years before, had seemed beyond dreams unattainable. ”

“ In accepting a note from a customer, do not have it made payable at your bank. Have the drawer make it payable in his own town and at his own bank. Demand for payment must be made at the exact place stated in the note. As every business man is particular about protecting his credit in his own town, and especially at his own bank, it is obvious that he will be most diligent about providing for the payment of paper made payable at the bank with which he is doing business. ”

“ Now the law says that banks shall keep open during certain hours on every business day, which is not a legal holiday. After the closing hour there is a tremendous amount of work to be done. The tellers must balance their cash; the bookkeepers must take off a balance of every account on their particular set of books; and every check and draft deposited, or received through the mails, and payable in other towns, must be listed and forwarded for collection. ”

“ A private individual usually feeds his purse from his bank account; a retail commercial firm usually feeds its bank account from its till. The bank acts as intermediary for both.
In a given community the quantitative relation of deposit currency to money is determined by several considerations of convenience. In the first place, the more highly developed the business of a community, the more prevalent the use of checks. Where business is conducted on a large scale, merchants habitually transact their larger operations with each other by means of checks, and their smaller ones by means of cash. ”

“ The ordinary customer of a commercial bank every day brings to the bank the cash he receives as the result of the day's business, and the checks received, drawn on his own and other banks, and is credited with the amount on the books of the bank as well as on a passbook which he himself retains. If he needs cash during the day, he presents to the bank a check payable to himself for the amount needed, and receives the kinds and denominations wanted ”