Sec. 1.  Nature and classes of banks.  Sec. 2.  Functions of banks.  Sec. 3.  The essential banking function.  Sec. 4.  Time deposits.  Sec. 5.  Demand deposits.  Sec. 6.  Discount and deposit.  Sec. 7.  Nature of banking reserves.  Sec. 8.  Bills of exchange, domestic.  Sec. 9.  Issue of notes.  Sec. 10.  Divergent views of typical bank notes.  Sec. 11.  Banking credit as a medium of trade.  Sec. 12.  Productive services of banks.  Sec. 13.  Income of banks.

Sec. 1. #Nature and classes of banks.# Banks perform a variety of useful functions in every modern community.  All these functions touch in some way upon the use of money, and banking problems always are related to money problems.  It is our purpose now to understand the general nature and work of banks in relation to the general business activity of the community.  A bank, as one first comes to know it, is a building (or a room in some building) in which there is a fire- and burglar-proof safe.  In this room are men receiving and paying out money and acting as bookkeepers.  Gradually one comes to understand that the bank is perhaps not the building but the business organization that is there performing these transactions.

In the United States there were in 1913 about 26,000 banks reported.[1] These may be classified first according to the source from which they derive their charters or authority to do a banking business as:  national, state, and private.  The last are unchartered and act under the general state laws governing private contracts; in general they are unsupervised.[2] Banks may be classified also according to the two main types of business they perform, as banks for savings and commercial banks.  Most banks do mainly a general commercial business; some are distinctly banks for savings; but in truth this dividing line can be less and less sharply drawn between banks as wholes; rather the distinction must be made between the savings function and the commercial discount function, which are more and more being performed by one and the same bank.  The trust company usually well exemplifies this union of functions.  This will best be explained in connection with the subject to which we now turn, the analysis of the functions which banks perform.

Sec. 2. #Functions of banks.# Almost every bank performs various functions useful to its customers, but some of which are not essentially bound up with banking, and may be performed by institutions that are not truly banks.  Among these are: 

(a) Maintaining a safe deposit vault, where space may be rented by an individual to keep his valuable papers, jewels, etc.  The customer does not usually deliver to the bank possession of the valuables, but himself retains the key to the box which the bank has no right to open.  In larger cities this work is often done by separate institutions.

(b) Acting as money-changer to buy and sell moneys of different nations.  This function is of less importance in America than elsewhere because of the great size of our country and of the small portion of our boundaries touching those of other nations using different monetary units.  Moreover, the function is in large part performed for Americans by ticket agencies at the ports of embarkation and by the steamship companies en route.