instead of their own. The operations of such a bank, it will be perceived, are different from those of the two preceding ones, inasmuch as the currency by the introduction into it of paper money and paper credits, createable at will, in addition to the coin which before constituted the entire currency of the country, admits of expansion and contraction, and consesequently of fluctuations such as are unknown under a metallic currency.
In the nine hundred banks and branches which now exist in the United States,[1] all the operations of these three distinct institutions are combined; and it is owing to this combination, by which dissimilar things are confusedly mixed together, that the public mind has been led into so much error upon the subject of banking. An analytical examination can alone enable any one to understand the true merits of this important subject.
From the foregoing definitions it will be seen that banks of deposit and banks of discount are of positive advantage to every country in which they are estabblished. The former protects the gold and silver of the community from the danger of robbery and fire, as well as from loss by abrasion, as has already been remarked, and at the same time greatly facilitates the operations of commerce by the convenience of payments in checks instead of payments in coin. The latter keeps the money of the community in constant employment by lending it to one borrower, as fast as it is paid back by another. But it will be readily seen, that such institutions do not hold out sufficient temptations for their frequent establishment, as corporations. To maintain a bank of deposits, a fund must be provided by government or individuals to defray its expenses, inasmuch as no number of
- ↑ According to the report of the secretary of the treasury of April, 1840, the number was 901, with a paid up capital of near $360,000,000. See Appendix C.
