in bonds secured by personal property. (Deposits are invested in this last item.) 3. They make loans on real estate or personal property; on collateral security of stocks and bonds; on other security. 4. They may be appointed to act as trustee under any mortgage or bond issued by any municipality, body politic, or corporation, or to execute any other municipal or corporate trust; to act under appointment of any court, as guardian, receiver, or trustee of any minor, or as trustee or executor for the estates of deceased persons or of lunatics, idiots, or habitual drunkards; to act as fiscal or transfer agents for any state, municipality, body politic, or corporation. 5. They purchase, invest in, and sell stocks, bills of exchange, bonds and mortgages, and other securities. 6. They borrow money. 7. They receive upon deposit for safekeeping bonds, mortgages, jewelry, plate, stocks, and valuable property of any kind. 8. They guarantee or insure persons holding titles to real estate against loss. Loan and trust companies cannot issue circulating notes. Functions of Savings Banks. - (1) Deposits. — Savings banks receive deposits. A depositor upon making a deposit receives a pass book in which the deposit is entered. This serves as a receipt book, indicating the indebtedness of the bank to him. The money deposited will draw interest, which is computed semiannually or quarterly. Money deposited may be withdrawn, but the bank may insist on demanding thirty or sixty days' notice whenever large sums are to be withdrawn, or when there is danger of a run on the bank. This agreement is usually entered into at the time of deposit. Interest on the money withdrawn is lost for the quarter or the half year, if taken out before the expiration of that period. Usually deposits are limited to a certain amount from each person. This is due to the principle that savings banks were instituted for the benefit of the poorer classes, to enable persons of small means to participate in the benefits to be derived from the investment of their combined deposits. Hence limitations are fixed with a view to excluding the wealthier class. For instance: Connecticut limits amounts receivable in any one year from a single individual to $1000. Vermont limits the aggregate to $2000. New York limits the aggregate to $3000. Massachusetts limits deposits to $1000 from each individual, and allows it, by accumulation of interest, to reach $1600, but allows no dividend upon any sum exceeding $1600. Each of these states makes varying exceptions as to trust funds, etc." (A. B. Hepburn, in Bolles, Practical Banking, p. 152, note.) (2) Investments. The deposits may be invested in first mortgages on real estate to the amount of 60 per cent of the market value of the property. In this respect savings banks differ from commercial banks. Deposits in savings banks are supposed to be more or less permanent, and hence they can be invested in securities that are but slowly liquidated. Such are mortgages on real estate. National banks that may require money on short notice cannot allow their securities to be tied up in the form of real estate mortgages. Savings banks may invest in United States bonds, state bonds, bonds of counties, cities, towns, certain railroad bonds, when the railroads have been paying dividends for a certain number of years past, and in bank stocks. The savings banks may own real estate of two kinds: (1) They may own the buildings they use; they may rent out what portions of the buildings they do not need for bank use. (2) When mortgages are foreclosed, they may hold the property and collect rents for it. History of Banking in General. Banking originated in Italy in the twelfth century. The first banks were established in Venice, 1164-1178; Genoa, 1300; Florence, 1345. (P. H. Holzapfel, O. F. M., Die Anfänge der Montes Pietatis, pp. 17, 18.) The functions of these first banks were very limited as compared with the functions of banks of the present day. Then came the Bank of Amsterdam in Holland in the seventeenth century (1609). This was the more evident precursor of the present form of banking. It lasted for two hundred years. The banks of Antwerp and Hamburg were founded on the principle of the Amsterdam Bank. The Bank of Hamburg, which began in 1619, was merged in 1875 in the Reichsbank (Imperial Bank) of Germany. Banks were gradually established in different countries, England, Scotland, Ireland, France, Germany, Russia, and out of very crude and imperfect beginnings developed into the great systems of to-day. The following countries have a government or national bank, which is the depositary of the government funds, is supported wholly or in part by the government, and has exclusive right to issue notes: England France Germany Russia Holland. Belgium. Norway Denmark Spain Austria-Hungary . Bank of England, 1694. Reichsbank, 1875. Imperial Bank of Russia, about 1856. Bank of Netherlands, 1814. National Bank of Belgium, 1850. Bank of Norway, 1814. National Danish Bank, 1818. Bank of Spain, 1856. Austro-Hungarian Bank (1816), 1877. History of Banking in the United States. In the United States, during the colonial times, the first attempt at the establishment of a bank was made in Massachusetts in 1714. The bank lasted but a short time. After the adoption of the Consitution, banks were organized in many of the states. (1) Bank of the United States. - Alexander Hamilton, the first Secretary of the Treasury, drew up a plan for the establishment of a United States Bank, " to be a regulator of the currency, a depositary for public money, and a fiscal agent for the government." A charter was granted the bank, to run for twenty years. The bank lasted from 1791 to 1811. The first United States Bank had a capital of $10,000,000 divided into 25,000 shares. The government held one fifth of the shares. The others were subscribed for by private individuals and were paid for, one fourth in coin and three fourths in government bonds. The management of the bank was placed in the hands of the shareholders resident in the United States. It was supervised by the Secretary of the Treasury. It established branches in nearly all the leading cities. Its circulating notes reached the value of about half of the capital. The bank was a success, and when it went into liquidation, the shareholders received $434 for each $400 share. At the expiration of the twenty years, the charter was not renewed. In 1816 the second United States Bank was established, the charter again to run for twenty years. The capital was fixed at $35,000,000, one fifth to be subscribed by the government. Five of the twenty-five directors were to be appointed by the government. Public moneys were to be deposited in the bank, although the Secretary of the Treasury had the power to deposit in other banks. Branches were to be established everywhere. "The bank acted as agent of the Treasury, taking charge of all loan negotiations and performing various duties free of charge." (Handy, Banking Systems of the World.) When the time came to renew the charter, a renewal was voted by Congress but vetoed by President Jackson. The chartering of the bank became a political issue, and Jackson, who opposed the bank, won a decisive victory at the polls over Clay, who advocated the renewal of the bank's charter. The United States Bank has never been revived. It was the purpose of the founders of the United States Bank to found an institution that should perform in the United States the functions of the great national banks which exist in most other countries, e.g. the Bank of England, the Bank of France, the Imperial Bank of Germany. It was to hold the moneys of the government, and to be alone allowed to issue notes of circulation, or at least to be able to regulate note issue. The first bank (1791-1811) was successful. The second bank (1816-1836), owing to mismanagement and to alleged interference in politics, aroused the opposition of the Jacksonian party. Its constitutionality, which, though upheld by the Supreme Court in 1819, had never been definitely settled in the popular mind, was again objected to in 1832, and politics brought about its downfall. (2) Independent Treasury System. — In 1837 the system known as the " Independent Treasury System" was advocated, but was not finally adopted until 1846. The United States Treasury became the custodian of its own funds, and this system prevails to-day, although somewhat modified so as to allow the deposit of a certain part of the national moneys in specified national banks throughout the country. (3) State Banks. The state banks had been established even before the establishment of the first United States Bank in 1791. In 1781, the first real bank was established in Philadelphia. The Bank of Massachusetts was established in Massachusetts in 1784. Other banks soon followed in this state, and in 1805 the first law to regulate banking was passed. Incited by the success that attended the United States Bank, state banks were started in nearly all the states. During these early years, banking was in a deplorable condition. There was little or no restraint and little or no supervision. There existed a mania for issuing circulating notes, and the amount of issue was seldom restricted to any proportionate amount of money held by the banks. The country was flooded with bank notes, which owed their credit merely to the standing of the banks that issued them, and as the standing of many of the banks was very precarious, some having issued their notes without any capital at all and without any intention of redeeming them, the notes differed widely in value, and there was no security in monetary transactions. In 1811, there were |