Note (finance)

“ When we give our note, the effect of the transaction is just the opposite of the receipt of a note. Instead of adding to one class of our resources we are increasing one class of our liabilities, in return for which we either receive something of value or reduce our liabilities of another class. When we give our note in payment of a loan, we receive cash; if we buy goods and give a note in payment, we receive merchandise; if we give a note in payment of an account, we simply reduce our liabilities of one class and add to those of another. ”

“ To make a note solvent, and suitable for circulation as money, it is only necessary that it should be made payable in coin on demand, and be issued by a person, or persons, who are known to have in their hands abundant material property, that can be taken by law, and applied to the payment of the note, with all costs and damages for non-payment on demand.
Theoretically, I repeat, all the material property in the country, that can be taken by law, and applied to the payment of debt can be used as banking capital; and be represented by promissory notes, made payable in coin on demand. ”

“ The fact is that borrowing and lending have to do chiefly with other forms of wealth. Most notes are given for the transfer of all sorts of property under a promise to return equal value in the future. Money may not enter into the transaction at all, except as the standard of value is in terms of money. Even when money is exchanged for a note, the borrower hastens to part with the money for the tools or provisions which make him a profitable producer. In payment of his note he offers money again, simply because it commands every desirable form of value for the owner of the wealth. ”

“ This type of journal gives easy control over maturities, and forecasts for a given month the amount of cash receipts from notes.
Notes Entered at Face Value Always.—Some notes are interest-bearing from their date of issue; others only after their due date when not paid. Even on non-interest-bearing notes, the law allows the charging of interest for their overdue period. From the standpoint of strict accuracy, a note payable at a future time is not worth its face value at the time of entry, unless it is interest-bearing from date at approximately as high a rate as the current discount rate. ”

“ To banks of issue a further source of profit is open in their note circulation, inasmuch as the bank is enabled to lend these notes, or promises to pay, as if they were so much money and to receive interest on the loan accordingly, as well as to make a profitable use of the money or property that may be received in exchange for its notes, so long as the latter remain in circulation. ”

“ It is hardly probable that when a banker and broker holds the note of another for twelve thousand dollars—the note being unpaid—he would loan thirteen thousand five hundred dollars more, taking another note on demand in which the rate of interest was not stated. ”

“ When we borrow money or discount a note, we do it because we need cash capital, and the interest paid is a capital expense or a direct source of loss. Exchange charged for the collection of notes and drafts belongs in the same class. All interest paid for the use of money, and exchange paid for the collection of notes, drafts, and checks, should be debited to interest account. When we save the discount by prepayment of bills, the discount is earned by the use of capital. All such earnings are a direct source of profit and should be credited to interest account. ”

“ We believe that a United States note, issued directly by the government, and convertible, on demand, into United States obligations, bearing a rate of interest not exceeding one cent a day on each one hundred dollars, and exchangeable for United States notes at par, will afford the best circulating medium ever devised. ”

“ So strong is the wish of most people to see their money that they for some time continue to hoard bank notes: for a long period a few do so. But in the end common sense conquers. The circulation of bank notes decreases and the deposit of money with the banker increases. The credit of the banker having been efficiently advertised by the note, and accepted by the public, he lives on the credit so gained years after the note issue itself has ceased to be very important to him. ”

“ The true rule, therefore, for ascertaining the rights of the parties in the case, is to calculate the interest on the principal of the note up to the time of the payment, and, having then deducted the payment, to treat the balance as the debt then due; the amount in money to be determined by the value in Georgia of Confederate notes in coin or the legal currency of the United States at the time the note was made. ”

“ A bank-check, a memorandum-check, a draft, or a bill of exchange each furnishes written or printed evidence of an amount of money to be paid. So does a promissory note. A note is, indeed, the regular and usual evidence in dealings between men, that money is to be paid, whether in cities or in the country, and whether the transactions be limited or extensive; and yet, bank-checks and drafts, or orders at sight or on demand, require different stamps from memorandum-checks, bills of exchange, and promissory notes. ”

“ We must not be misled by the fact that the cash assets may be less than the deposits. When the uninitiated first learn that the number of dollars which note holders and depositors have the right to draw out of a bank exceeds the number of dollars in the bank, they are apt to jump to the conclusion that there is nothing behind the notes or deposit liabilities. ”

“ Anyone who had money enough to pay down a small amount as earnest and intelligence enough to sign a note and mortgage for the balance of the purchase price became purchasers to the limit of their credit. ”

“ If you prefer the one year loan I shall ask you to reduce your note to $5300 which makes the interest the regular 6%. I do not wish to make any money out of you, the principal things I have in view being to help you and at the same time to be well secured in my investments—this because my fortune is very limited and my time for acquiring wealth past. ”

“ The possession by the note holder of a first lien upon the assets of a bank, including the funds that may be collected from shareholders on account of their double liability, gives rise to such general confidence in the ultimate convertibility of a bank note that the notes of a failed bank, on account of the interest they bear, sometimes command a premium. ”

“ And the advance, therefore, upon every note discounted, without reference to its character as business or accommodation paper, is properly denominated a loan, for interest is predicable only of loans, being the price paid for the use of money. ”

“ When money is loaned at the minimum rate of two per cent, or in exceptional cases one and a half per cent a month, the borrower, besides giving security, generally gets some wellknown and reliable merchant to endorse the note. As this merchant cannot afford to have his credit brought in question, the chances of loss are very small. ”

“ To perceive that a pa-per representative of value so secured will perform every function of a coin of equal value needs only an instant's reflection. A five-dollar national bank note, for example, one of hundreds of such notes, drawn from a bank by the paymaster of a woolen mill, may be paid to one of the operatives as the measure and reward in part of the expenditure of his effort in guiding the loom. It may be paid by him to his grocer, thereby measuring and rewarding in part the efforts of men expended in producing and bringing to him potatoes, flour, coffee, sugar, bacon. ”

“ When he discounts the note of another, his debtor, it is selling. If he writes before his endorsement of the note, "without recourse," (unusual at a bank, but common enough with real estate mortgage-notes) he has made a perfect sale, and is entirely out of the transaction. Is it, however, in economic nature a different transaction from the original one in which he got the note from a borrower? Legally bonds are credit instruments, and stocks are not. Stocks represent ownership. ”

“ When the customer discounts a note at his bank he parts with the property in it, just as when he sells any other article. The note becomes the absolute property of the banker and he may sell it again, or pledge it, or deal with it in any way that suits his own interests best. ”

“ The bank note, for the convenience of the people, is always in even amounts, and passes without indorsement, while the check of the depositor is for any amount, odd or even, that may be involved in a transaction, and almost universally passes only by indorsement. ”

“ The Head Rifler of an insolvent bank, learning that it was about to be visited by the official Noser into Things, placed his own personal note for a large amount among its resources, and, gaily touching his guitar, awaited the inspection. When the Noser came to the note he asked, “What’s this?”
“That,” said the Assistant Pocketer of Deposits, “is one of our liabilities.”
“A liability?” exclaimed the Noser. “Nay, nay, an asset. That is what you mean, doubtless.”
“Therein you err,” the Pocketer explained; ”

“ Noteholders were given a right of action against each partner for the amount and interest, although by the tenor the note might not yet be due. Any person suffering harm might recover treble damages and costs ”

“ In the United States, however, the function of note issue has always occupied the chief place in public thought about banks. It is as note issuers that they have had their greatest share in the national life, and it is in this capacity that the historian has chiefly to deal with them. ”

“ Traders and merchants, also, who frequently take promissory notes for money due and payable to them or to their order at a certain date, and who sometimes have occasion for the money before the time elapses, procure these notes to be discounted by bankers before the time of payment, so that the latter deduct the interest which will become due by the time such notes are payable. ”

“ May sell the goods in case of non-payment of monies so advanced And in the event of the non-payment of such bill or note or debt when due, such Bank or private person may sell the said cereal grains, goods, wares or merchandize, and retain the proceeds or so much thereof as will be equal to the amount due to the Bank or private person upon such bill or note or debt, with any interest or costs, returning the overplus, if any, to such indorser. ”

“ An issue of notes is a manifest gain to the issuers, who, until the notes are returned for payment, obtain the use of them as if they were a real capital: and so long as the notes are no permanent addition to the currency, but merely supersede gold or silver to the same amount, the gain of the issuer is a loss to no one; it is obtained by saving to the community the expense of the more costly material. ”

“ There are two kinds of credit money, as to the material out of which they are made. One is made on paper and embraces all forms of government and bank notes that are issued from time to time as authorized by law. ”

“ But it does not follow that when a bank makes a loan in its own notes for a definite period, it will really obtain the benefit of the whole of the interest on it for that period; for the borrower does not apply for the notes that he may keep them lying idle, but that he may pay them out in making a purchase, or in liquidating a debt ”

“ Discussions concerning the issue of notes by banking institutions, which largely occupied the attention of students of finance and business men in the eighteenth and the first three quarters of the nineteenth centuries, have been succeeded by equally intense discussions of the amount and influence of credit deposits on the books of the banks, when drawn on by their customers with checks. ”

“ A bank note, on the other hand, is both circulating medium and money. Between these two lies the final line of distinction between what is money and what is not. True, the line is delicately drawn, especially when we come to such checks as cashier's checks or certified checks, for the latter are almost identical with bank notes. Each is a demand liability on a bank, and each confers on the holder the right to draw money. Yet while a note is generally acceptable in exchange, a check is specially acceptable only, i.e. ”

“ It can only consist of receipts and expenditures, and so it is said to have two sides, a debtor and a creditor side.
All accounts are kept in money. If goods be bought, they are estimated by the money paid for them. If a debtor give a bill of exchange, being a promise to pay a certain sum at a certain time, it is put down as worth that sum of money. All the tools, furniture, horses, &c. used in the business are rated at their value in money. All the actual coin, bank-notes, &c., which are in or come in, being the only money in the books which really is money, is called cash. ”

“ Whatever be the value or denomination of the notes, the holder is at liberty to demand payment of the whole whenever he pleases, and receives it without abatement, as the banker makes his profit at the time of their issue. When notes are lost, payment is stopped, as here, and they are speedily traced, as it is the practice not to take notes of a high value—say, 100 dollars—without first inquiring at the bank as to their genuineness. ”