114 BANKING THEORIES IN UNITED STATES

doing he created media of payment. On the other hand, only a
small minority saw that liabilities taking the form of deposit
credits upon the books of the bank could similarly be creations
of the banker. The failure to distinguish in bank statements
between deposits originating in the process of discounting and
those arising from the actual lodging of cash in the bank led the
great majority of writers to conceive of all such liabilities as of
the latter type.
That deposits were regarded as representing money left with
the bank is shown by the practice of speaking of notes as based
upon the deposits of the bank. “A bank,’ one early writer insisted,
 “should not emit a single note beyond the sum of specie
in its possession. The profits of a bank should arise only from
shares and deposits.” ! Like opinions were expressed from time
to time throughout the entire period. The liabilities of the first
Bank of the United States were limited by its charter to the
amount of its capital and of ‘the moneys actually deposited in
the bank for safe-keeping.” 2 doubtless on the assumption that all
deposits were of such origin. The charter of the second Bank of
the United States contained a similar provision,’ and Connecticut
limited the note issue of its banks to fifty per cent of capital and
deposits combined.*
It was a similar misconception of the nature of deposits that led
many American writers, in common with the English disciples of
the currency principle, to distinguish sharply between a bank that
did but a deposit and discount business, and one that added also
the function of note issue. “A Bank of Issue,” Lord Overstone
maintained, “is entrusted with the creation of the circulating
medium. A Bank of Deposit and Discount is concerned only
with the use, distribution, or application of that circulating
medium.” * Raymond seems to have been of like opinion in 1823,
1 Nestor, “Thoughts on Paper Money,” American Museum (1787), ii, 40.
Similarly, Sullivan, Path to Riches (1792), pp- 50, 65, 70, etc.
? Holdsworth, First Bank of the United States, p. 129.
8 Catterall, Second Bank of the United States, p. 483.
4 Dewey, State Banking Before the Civil War, p- 54. See also, Bissell, “Banking
in Massachusetts,” Bankers’ Magazine (March, 1853), vii, 677, 678.
5 « Reflections . . . on the Money Market” (1837), Overstone, Tracts . . . on
Metallic and Paper Currency, 1837-1857 (London, 1858), p- 31.