The Bemidji daily pioneer. [volume] (Bemidji, Minn.) 1904-1971, 1920-11-23
BIC OF FINANCE
ssl BANK cATEcHlSM
By Stuart H. Patterson, Comp
tfoller, Guaranty Trust Company
sof New York. .r.7 -<@E

n OF CNeW 0fka &t;Fs f. ~
h note: This article is the first Of
~ short series in question and an
ssyler 4 form, designed to present in
simple form some OF the fundament
gSI principles OF banking without att
tempting to- cover rail- Of the tech
snfcal RANT ations. s z;t: ::...- =
WHAT'S q bank? .@ @$
u I. n, banEis s8 Constitution chart
cred by state d the national GOV
\ efnment which ictepts the care OF
money belonging to individuals,
Arms corporations, thereby, among
ether things. relieving them Of the
s1iske of keeping large sums Of money
IN their Possession 1t Is also the
med ium thru which nearly all gen
4 eral business transactions are ulti-
mately cleared. Without the facil-
tiles afforded by banks the business
'Tof the. country, would be at stand
still fs 55 sss - + .>>>
s# IN the very early days Of civiliza-
I ton all commerce was conducted Dy
barter, trading one product for an
other. Later came the creation OF
money, which greatly advanced the
\ operations OF commerce as 1t pro-
vided 4 medium permitting the sale
@cf commodity to one person in one
place, and the purchase Of some 9TH
TEX commodity from another person
Or IN some other place, thereby af-
fording wider market and more OPP
8portunities for profit. The posses
~ If M
however. subjected the owner to risk
OF theft and loss Of life, and ulti-
mately banks were organized in
which the money could be deposited
4 for safekeeping and the owner OF the
money could pay his debts by writ
Ing an order on. the bank to pay a
stated amount of his money to
8whomever he designated and there
i by be relieved Of all risk from hay
Ing large amounts of money in his
possession. These written orders I'LL
timately became known as checks
and today form one Of the most i'm
portsnt mediums for transacting
s. Q. Is there more than one kind
OF bank?I @.., ! j. A%%.
A. There are many kinds of banks.
There is the bank Of deposit, des-
cribed in a general way in the fore
going paragraph, and there are saw
ings banks trust companies, private
/ banks, banks Of discount, acceptance
banks and the Federal Reserve
banks. 4$tsa s>..yf..-- T.. .-
O. How does a savings bank diff
fer from other banks?E J. n
II tss A. "A, savings bank is one in
which people deposit money that
they do not expect to use immedi-
atefy and upon which they can re-
ceive d higher rate of interest than
IS generally allowed by banks of de-
post. iz.t '.-
tf 5 Q.3fWhy can a savings bank pay a
higher rate of INTEREST," -, ~ NV
WA + The principal reasons are
that most of the money is deposited
for long aperiodsstAntn the clerical
work In i savings bank is less than
ona, bank of deposit, and conse-
Quently its expenses are much less,
~ the accounts are inactive: ~ p.
:. What is meant by money de-
posted in savings banks for long
periods? W -. IT, -. g.. -.
a. Usually savings bank accounts
afe started with small sums and ARE
added to AZ money is saved against
the proverbial "rainy day." Conse-
quently, the money usually remains
until there is urgent need for it, or
enough has accumulated to war
rant investment in, some bond or BUSH
ness. t ~, -
Nj 9. II savings banks pay more in
tarest why does not everyone use a
savings bank instead of bank of
deposit? .a.r " - Z
A. II savings banks were used for
I commercial purposes their expenses
would be so large they would be un-
able TO pay the higher interest, and
besides, the method of transacting
business bya savings bank is entirely
different. In a savings bank the usu-
Il method Of withdrawing money is
upon the presentation Of bank book,
and it can readily be seen that COM
mercial business could not be trans
acted in that manner. ..s
@. What is the difference between
State bank and a National bank?
A. The differences between State
and National banks are not as great
Z ~ before the passage Of the Federal
Reserve Act in 1913. A State bank
is chartered by The state in which it
is located and is subject to the laws
Of the state and examinations by
state authorities. A National bank is
authorized by act Of congress and is
part Of the Federal Reserve System,
while I State bank may or may not
belong to such system. l..
Prior to the passage of the Federal
Reserve Act, the principal difference
between the State and National banks
Swas that National banks issued money
IN the form of bank notes, which a
State bank could not do, although, in
the early days Of the Republic, State
hanks were, permitted to issue bank
notes and the notes of one bank
would frequently have a different
value from the notes of some other
bank, causing no end Of complica-