Arizona republican., 1916-03-12
Talks On Banking

It would seem that after the bank takes your money, protects it, pays f back on demand or as you order. lends your money, discounts your neighbours note for you. it would have nothing else to offer in your behalf. But it has-it makes money for you, and i incidentally makes money for itself. When you see the president or the
 cashier of a bank signing his name to a row of four crisp new bills (they 1 always come in sheets of fOur) you may wonder what he is doing, and what
 is behind it all We will show you by simple illustration. Let us sup pose you want to borrow thousand l dollars and offer your note to your banker He knows you, knows that ! you will pay, and wants to accommodate you. He looks at his books and says: i Il can't spare the money. The law says I must have fifteen certs out of
 every dollar I owe my depositors in
 cash, or where I can get it on de mand; and I have just what the law requires lf I give you credit for the 1 note anG let you check against it, I | increase my debts and make my con-
 dition worse for if I do not pay you 1 in cash l must stand ready to do SO" l But being a resOurceful banker and | knowing how. he asks you to wait | minute while he goes to his strong box 1 He finds a government bond which he | bought 9 year ago when he had plenty I of spare money, for cash, and comes | back smiling and says: Very well,
 in three days you can have your mon
 ey I will turn this bond into bank
 notes for yCu.' So he sends the bond | to Washington and in return the gov
 crnment sends him 200 crisp new five
 dollar bills, to be signed by two off
 cers of the bank, cut and handed out
 to you.
 The government keeps the bond as security that he will redeem the notes in lawful money on demand-that $ pay greenhacks or gold for them if | demanded (but this is seldom dOne,) rays him interest on the bond and you pay him interest on your note for the
 use of his notes, and both are satis- fled.
 You see, by this proposition. he ha- turned your nOle l1lIO Ddnk notes. Wllll i himself behind it and the government behind him Your promise WOuldn': go very far from home, these promises will Everybody knows them. They are "mcney' and circluate as such. Now, what has the banker done by | this process He has furnished the community as well as you with cir cuating medium. handy to carry, cheap
 tO create. and satisfactory to all. He has taken your credit and turned it into bank credit. He makes money and you take the money he has made and make some money for yourself. It is a very simple proposition, understood by few, but practiced by many If you don't fully understand it. ask your banker to tell you more about it. This | feature of banking. however, is per formed in this country only by banks l under control of the Federal gov ernment, namely, the national banks
 and Federal reserve banks. but it .
 common banking practice the world over, differing in form but not in sub stance, it being universal function of the bank to turn credit Which is unknown into that which is known and will therefore be freely taken. and bank note credit is the most common and useful form.
 American Bankers Association