Clinch Valley news. [volume] (Jeffersonville, Va.) 18??-2019, 1890-02-21
HOW BANKS Do BUSINESS.
THINGS THAT LOOK MYSTERIOUS
EASILY EXPLAINED.
Tho Way Banks are Organizcu-
Uses OF Checks, Drafts, Notes
and Discounts-A Clearing House.


Uses OF Checks. Drafts, Notes
and Discounts-A Clearing House.
A bank, writes cX-Postmaster- General
Thomas L.. James, now President of the
Lincoln Bank in New York, not only
takes caro- of peoples money, but gives
tho greater portion of its deposits out to
loan. 1t receives from it's various dcpos-
tors wo will say 81, 900, 900. Instead of
allowing the money to lio idle, serving
no useful purpose, the banker lends it to
the manufacturers, who needs cash with
which to purchase raw material which
will be used in his business, where many
worimcn are employed, or he will loan
a portion to large traders, who go into
the markets and purchase the conmotli-
ties in which they deal, which will be
sold to the public. In this way the bank
serves to stimulate trade.
People who put their money in bank
arc willing that it shall bc used in this
way, because they aro secured against
loss by money which tho bank hns in its
own right md which is called its capital.
If the bank should happen to make Il bad
loan it would promptly pocket tho loss
itSNh OtllCE WOItlS, WOUltt IukN the
amount from its capital.
One usual source Of banks income
is tho interest it receives for money
loaned. TO guard the dcpositors from
loss u bank is allowed to loan only GER
tain portion Of its gross deposits. In the
bank OF which am President VIC are al
lowed to loan scvcnty-iivc per cent. or
thrcc-fourtlls of the gross Deposits the
other fourth must bo kept on hand all
tho time. Under ordinary business CON
ditions II bank can approximate quite
closely the amount of money which
should bo kept Oh hand to satisfy the
calls Of .dopositors.
NATURE on PANrCs.
Once in great while thoro is what
business mGn Gull panic, or period of
sudden fright. For some reason peculiar
to the timo, people think tho bank is
going to fail and they hurry to its door
and demand their money. If the bank
has not money enough on hand to meet
this dcmand il hns to suspend or post
ponc payment, aud that is pretty bnd
stntc of affairs for bank, for 1t has to
stop business with no likelihood Of re-
suming again; people would have no
confidence in II bank that did not keep
enough money on hnnd to pny the do
mnnds of its dcpositors. For this reason,
the men who have Charge of banks are,
first, very careful never to lend money en-
cept on good security, though the inter
est they may receive for this nccommodn-
tion may be quito small and second, to
keep plenty of money on hand in the
bank to sntisfy tho dcmnnds of dcposi
tors, no matter how large they may be.
DIscouNTrNG NOTES.
Money is often loaned by II banlS to lis
dcpostors, who give their notes, or
promises to pny, for the amounts re-.
ceivcd. These notes aro endorsed. :"
Some man known TO have plenty Of
money Of his own puts his name on The
back, signifying that if The man who
made the note fnls to pay the money to
the bank when it becomes due tho in
dorscr will pay it for him. Large sums
of money arc often loaned son demand" I"
ut good rate of interest, the borrower
agreeing TO pay bncle the sum, not on any
particular day, but whenever the bank
demands it. He Inns given 10 the bank
good securities in the shnpc of bonds,
Which nrc forfeited in case hc fails to
pay the money when it is demanded of
him. What arc called savings bnnks arc
allowed to loan money on real estate,
but national banks must have their
nsscts in stocks and bonds which can be
readily sold and converted into money.
rIri, rkptrrt, ~, nm ,,,,
Banks have been found very useful
when money has to be sent from one
plncc to another. You live in phila-
dolphin and want to send 500 from your
home to n friend in London. You give
the money TO Il bunker who carries on
private banking business and he gives
you draft or order on London banker
to pay the money to your friend You
send the draft to London, and your cor
respondent gets the funds when he pre-
scnts his draft at the London bankers
office. The Philadelphia man, of course,
charges you II small fee for performing
this service. Banks formerly did great
deal of this kind of business in our own
country, giving drafts to be transmitted
between the various cities and towns of
the Union, but since the introduction of
the money-ordcr and postal-notc systems
in the Postoiiicc and the reduction of
rates for carrying money that have been
made by the express companies, this
branch of the banking business has been
very much reduced.
NATIONAL BANK CHARTERS.
National banks are all organized under
the laws of, and chartered by, the United
States. Unless they are located in small
cities they must havea capital of no less
than 100000 Before they commence
business they must send to the Treasurer
of the United States any United States
interest-bearing bonds to the amount OF !
not less than onc-third of the capital stock |
paid in. A bank of this kind has for its !
officers President. Vicc-P President, y
Cashier and Board of Directors. The |
President presdcs at all meetings of the
ho1rl uofiiipc tl,c Dirnc,rr. Whom 4I,a.,