The morning news. [volume] (Savannah, Ga.) 1887-1900, 1890-01-08
JUST WHAT A BANK IS.
rx-Postmaster General James Tells
How One Is Run.
From the Nelg York World.

thar most of my readers would answer that
ouestion by saying: "Why, it Is a place to
taep money; the little ircn boxes we had
when we were children, and in which we
liant our money, were called banks"
That idea Of bank is not exactly correct.
A hank that did nothing but take care of
cher peoples money would be nothing
more Il an cashkeeper, and would serve
me public in only a small degree.
4 bank not only takes care of peoples
money, but gives the greater portion of its
5anosits out to loan. 1t receives from its
Torious depositors, we will say 81. OO00O9.
Instead of allowing the money to lie idle,
serving no useful purpose, the banker lends
Z N the manufacturer, who needs cash to
nnrcbase raw material which will be used
n his business, where many workmen are
smploved, or he will loan a portion to large
traders wlo go into tbs markets and pur-
chase the commodities in which they deal,
which will be sold to the public In this
vav the bank serves to stimulate trade.
People who put their money in bank
are willing that it shall be used in this way,
because they are secured against loss by
money which the bank has in its own right,
and which is called its capital. II the bauf
should happen TO make bad loan, it would
PROMPTLY pocket the loss itself; in other
words, would take the amount from its
capital.
In tne large banks of deposit, of which
only am speaking, the depositor receives
no interest on his money. He finds the bank
useful. first, because it is a safe place to put
his mOney-better than strong box in his
house, which thieves might get hold of and
carry away-and. second, because ne can
write out an order or a check Oh the baak
ewing it authority to pay money to any
Tersol lie may designate. Instead of a
,fac C-9
with $4,000 or 81, 900 stuffed in his pockets
and paying actual money to the various
persons with whom he has dealings, he
simply gives them an order-that is, a
cbeck-for the amount on the bank where
be has deposited his money for safe-keep-
ing.
for its trouble of taking care of the money
of other peoplem One source Of its income
Is the interest it receives for money loaned
To guard the depOsitors from loss, bank is
allowed to loan only certain proportion of
its gross deposits. In the Lincoln National
Bank we are allowed to loan rs per cent, or
tAree-fourtbs of the gross deposits; the
other fourth must be kept on hand oil the
ume Under ordinary business conditions
bank can approximate quite closely to the
auouat Of money which should be kept on
Ia 4 TO satisfy the calls of Gepo,i ors.
q Ogcs in 2 great while there is what bust
ness men call u panlc, or period of sudden
flight.
FOR some reason peculiar to the time peo-
DE think the bank is going to fail, aud they
v hurry - its &c RS and demand their money.
If the bank mas lot enough money on hand
to meet this demand it has to suspend or
postpone payment, and that is pretty bad
4 state ut affairs for bank, for it has to stop
n business, with no Likelihood of resuming
aEaln people would have no confidence in
8 JslA that did not keen enough money on
hand 10 pay the demands of It's depositOrs.
For his reason the men who have charge
Of banks are, first, very careful never to
Il lend money except on good security, though
the interest they may eceIve for this ac-
cmmodatIon may be quite small, and,
second, TO keep plenty Of money in the bank
& s'tisfy the demands Of depositOrs, no
matter how large they may be. Money is
dten loaned by a bank 10 its deposit)rs,
who give their notes, or promises to pay, for
tie amour received. These notes are in
G1rsed." Some man known to have plenty
\ Of money of his own puts his name on the
back, signifying tuat if the man who made
the note fails TO pay the money to tie bank
4 Wheult becomes due, the lndorScr i'll pay 1T
iJr hlm. Large sums of money are often
/ aaed ION demand" at a good rate of in
teres the borrower agreeing to pay back
The sum, not on any particular day, but
IL.
| given to the bank good securities in the
Nape of bonds, which are forfeited in case
be fails to pay the money when it is de-
handed of HIM. What are called savings
/ banks are allowed TO loan money on real
estate. but national banks must have their
assets in stocks and bonds which can be
read " sold and C inverted into money.
Here is another way bank makes money ::
A man wants 500 for six months. He
nh me Iud
for that must always be understood
aud receives S91 in cash. At the end of
six months he pays the 800. and the bank
has made So BY the transaction, or interest
at the rate Of per cent per annum. This
is called discount.
Banks have been found very useful when
money has to be sent from one place to an
other You live in New York and want to
sind 500 from your home to friend in
London. You give the money to banker
who carries on private banking business,
and he gives you draft or order on a Lon
| dol banker to pay the money to your friend.
You send the draft to London, and your
| correspondent gets the funds when he pre-
seuts his draft at the London bankers office.
| The New York man, of course, charges you
| q small fee for rformiug t1is service.
Banks formerly did great deal of this kind
business in our own country, giving drafts
| to be transmitted between the various cities
aud towns of the union, but since the intro
ductioa of the money order and postal nore
| systems i'll the postoffice and the reduction
Of rates for carrying money that have beer
| made by the express companies, this brancL
Of the banking business has been very much
| reduced
National banks are all organized under
the laws Of aud chartered by the United
| States Unless they are located in nal
cities they must have capital of not les
than 100000. Before they commerce bust
ness they must send to the treasurer of the
United States any United States interest
bearing Sbonds toa the amount of not les
thsn one-third of the capital stock paid in
A bank of this kind has for its officers
President, a vice president, cashier, and I
board Of directors The president preside
at all meetings of the beard, notifies tn
directors when they are to meet, signs tn
Oils the bank issues, and superintends gen
orally the whole institution. In the absenct
Of the president, the vice president attend
10 the duties of that office. The cashier
responsible for the money and valuables
and sees that the clerks properly perform
tleir duties. There are usually about tel
directors, each one of whom must be
resident Of the United States, and own IL
us own right at least ten shares of tn
stock of the concern, which forms the "cap
Nal," to which allusion was made momen
ago.
There are some things in the banking