one who wishes to lend. And thus, by bringing the wants of both parties to act upon each other, each has the advantage of loaning or of borrowing, on the most favorable terms.

Nor is this all. When this is once accomplished, the whole may be done, in the shortest possible time; because, the greatest part of the time, without such an arrangement, would be spent in bringing together two individuals who could agree upon the loan in question. Hence, a negotiation, which might otherwise have taken half a day from the labor of both parties, may now be perfected, in a very few minutes. This is a great saving of time and labor, and contributes greatly to the punctuality of the whole community, which is a still farther saving of time and capital.

Besides, we have already shown that when a man devotes himself to any occupation, and to nothing else, he will acquire a skill which can never be attained by him who only practises it occasionally. This principle applies with full force to the present case. He whose only business it is to loan money, will keep himself, at all times, acquainted with the state of the money market; he will ascertain the character and responsibility of the individuals who are desirous of loans; he will be the first to ascertain the indications of their failure, either in skill or in fidelity; and will, therefore, be the best prepared to decide, whether it be necessary to withdraw capital from a debtor. This will be especially the case, if there be interested in the management of the funds thus collected, several men engaged in general monetary operations, and who, therefore, are likely to collect all the information on these subjects, that may at any time be afloat in the mercantile community.

Such is the nature of banks, as offices of discount. Some of the private banks of Great Britain are of this character. They issue no notes of their own, but merely negotiate the bills of other banks, or of

the Bank of England. Of the same nature, to some degree, are saving's banks, of which the object is, to collect the capital from small owners, and loan it out at interest for their benefit.

OF BANKS OF CIRCULATION OR ISSUE.

If banks were established on the principles which we have suggested, and if the depositors and contributors placed in the hands of the banker, metallic currency, it is evident, that the bankers or bank would soon collect a great part of the metallic currency in the country. Were this the case, it is evident that they might do a very considerable service to the community, by furnishing the depositor with a certificate of deposit, which he might use instead of the money which he had deposited. Thus, if I had deposited one thousand dollars in a bank in Providence and wished to use it in New York; if their certificate that they owed me so much money, were as good in New York as the specie, the carrying of this piece of paper, or the sending it by mail, would save all the trouble and risk of carrying the specie. If he who wished to send the same sum of money to Providence, did the same in New York, the exchange of these obligations by the respective banks, would perform the whole operation of the exchange. Or, the same might be accomplished, if the bank upon sufficient security, loaned to me its obligation to pay on demand, and allowed me to use this obligation, in any place where it might be for my interest to do so. And, still more readily might this be done, if a number of individuals had deposited in the bank specie, for the purpose of having it loaned, at stated rates, to any persons who could offer a reasonable guaranty that whatever was borrowed would be, at an appointed time, refunded. It is always to be understood, that the bank obliges

itself, in all cases, to pay these obligations to the bearer on demand, in the precious metals; and that hence, these notes represent the value in the precious metals, which their obligation designates. And thus, from the nature of the case, a large amount of the money in circulation, would soon become specie certificates, or notes of obligation of the bank. And they would get rapidly into circulation, because of their greater convenience for transportation; their diminished liability to robbery; and the greater ease with which they could be identified in case they were stolen.

But still further. It is manifest, that many of these bills thus issued by banks, in this condition, would never need to be repaid in specie, but would be cancelled by an equal amount of similar bills from other banks. Again: Of those for which specie was demanded, it is impossible that it should all be demanded at the same instant. And yet more: As some persons were receiving payments in specie, other persons would also be depositing specie, which would make good the deficiency which. this withdrawal occasioned. Hence, from these causes combined, it is evident that a bank thus constituted, might, without violating its engagement to pay every certificate or bill in specie, issue a larger amount of such obligations, than it at any time contained of specie in its vaults. And, inasmuch as it redeemed every such note on demand, with the precious metals, these notes would have, in exchange, the same value as the precious metals, every where in the immediate vicinity of the bank; and they might have the same value in other places, if this bank were in correspondence with other banks of the same character, in the different places with which its customers transacted business.

Inasmuch as these notes possess some considerable advantages over specie; that is, as they are lighter, occupy less bulk, and are equal in exchangeable value to specie, they would be commonly preferred.

That they are so preferred, every one proves, every day, by his own conduct. When we take a check to the bank, and can receive for it, either notes of the bank or specie, we never take the specie, except in such quantities as may be required for small exchanges. The bills of the late United States Bank were frequently preferred to specie. Travellers would not uncommonly give a small premium for them if they could not be obtained without it. From these reasons it is manifest, that under such circumstances, a portion of the currency in a country, when banks were established which had the confidence of the community, would become paper instead of metal.

Now, banks, in this country, and in Great Britain, generally perform all three of these functions. They receive and pay out money on deposit, and keep all the accounts necessary to these transactions; they loan money at interest, and collect monies so loaned; and they also issue their own promissory notes, payable in specie, on demand.

We shall close this section, by a brief notice of the manner in which banks are created in this country, and a statement of their sources of profit.

Banks, in this country, are chartered incorporations; that is, the privilege of banking is conferred on several associated individuals, by a special act of legislation. By these acts, banking companies are entitled to certain privileges, are subject to certain forms of legislative inspection, and are restricted, in their operations, within such limits as the wisdom of the legislature may see fit to impose. These privileges generally refer either to the mode of collecting their debts; or to the limit of the liability of the individuals, in case of failure; or to the power of issuing bills on demand. And the restrictions limit the amount of their circulation, in proportion to their actual capital or their specie in actual possession.

When any number of persons desire to be incorporated as a banking company, they present a pe

tition to the legislature of the state in which they reside, praying for such privilege. If the prayer be granted, they are thus incorporated, and the amount of their capital is limited in the act. This sum is divided into shares, or equal portions, of such amount as may be supposed best suited to answer the wants of the community. At a given time and place, publicly notified, books are opened for subscription; that is, every one is allowed to subscribe for as many shares as he wishes. The subscribers are called stockholders, and the shares are commonly, in mercantile language, called stock. When the necessary amount has been subscribed the stockholders meet, and choose, from their number, certain persons to conduct the operations of the bank, who are called Directors, and the whole of these together, are called the Board of Directors. These directors then choose, from their own number, a President, and some person not of their number, as Cashier. On these two last mentioned persons, the active duties of conducting the affairs of the bank depend; though the directors meet, at stated times, for the purposes of general consultation, and especially to decide upon the commercial character of those, to whom they are requested to loan their money.

The bank is thus organized. The subscribers are now required to pay to the cashier the sums which they have subscribed for; that is, that portion of the amount, which each has agreed to invest in the general business of the bank. Suppose the capital were one hundred thousand dollars, and each share were one hundred dollars, there would then be one thousand shares, and might be one thousand stockholders. As soon as each one had paid the portion for which he had subscribed, one hundred thousand dollars would be collected in the banking house, and this would be the capital, with which they would be prepared to commence their banking operations.

The manner in which these operations are conducted, is something like the following: The bank