CONTENTS

PART 11

THE UTILITY OF BANKS AS AGENCIES IN THE
DISTRIBUTION OF LOANABLE FUNDS

VIII. BANKS SERVE AS INTERMEDIARIES BETWEEN BORROWERS
AND LENDERS (i Jie eras
The thesis that banks are mere intermediaries in their lending operations
the prevailing one.— Their alleged benefits as such.— Basis of the
dogma that banks cannot lend more than they receive from depositors
and shareholders. — The error into which the quantity theorists fell here.
— Some inklings of a deeper insight. — The persistence of this issue
even to the present day.

7

IX

Banks Direct CAPITAL INTO UNDESIRABLE CHANNELS .
Banks of no assistance to farmers. — Their loans encourage speculation
primarily. — Possibilities of discrimination in making loans.

02

NN.

SUMMARY OF VIEWS ON THE NATURE AND UTILITY OF BANKS. 08
The dual role of commercial banking. — The utility of banks as source
of a form of currency. — The utility of banks as distributors of loanable
funds.

BANK NOTES AND BANK DEPOSITS

PART III

XI. THE NATURE oF BANK DEPOSITS . Sle
Early recognition that deposits constitute part of the currency. — Failure
 generally to realize that deposits may be created by the banks. —
A few instances in which this was understood. — Conclusion.
XII. PrincipLES OF NOTE ISSUE — CONVERTIBILITY , . . . . I25
The need of convertibility little understood in the colonies. — Convertibility
 was generally assumed in the later period. — Belated land-bank
projects. — Other advocates of an inconvertible currency. — The banking
 principle as basis for such a proposal. — Stephen Colwell’s notable
statement of the thesis.

109

XIII. PrINCIPLES OF NOTE ISSUE (continued). . . . . . . . I39
The currency principle. — The question of small notes. — Bondsecured
 issue. — The safety-fund system.

XIV. PriNcIpLES oF Note ISSUE (continmwed) . . . . . . . - 152
Legal reserve requirements. — Suffolk Bank System. — Taxing banks
for reculative purposes. — Banking structure.