THE NATURE OF BANK DEPOSITS II§

when he contended that the*evils of banking arise entirely from
the ill-advised union of the functions of loan office and of manufactory
 of paper money. ‘By being loan offices, they are enabled
to loan all the money they can make, or at least, as much as they
please; and by being the manufacturers of a paper currency they
are enabled to make as much money as they can loan.” ! He
would forbid the issue of notes by banks. Gallatin believed that
“the proper banking business consists not in making currency,
but in dealing in existing currency and in credit, or, as both are
generally expressed, bankers are money dealers.” 2 Banks should
borrow and lend money. The New York law prohibiting private
banking he deemed entirely desirable with respect to note issue,
but professed himself unable to understand, “Why individuals
should not be permitted to deposit their money with whom they
please.” 3 Gouge, Vethake, Walker, and many others as well,
would have subscribed readily to the statement of a writer in
Hunt's Merchants’ Magazine, that
The business of banks and bankers is to borrow money from one class and
lend it to another. . . . Credits they may issue, sight or time drafts, or any
other means to accomplish the proper transfer of moneys or commodities
from one place to another, but the issue of paper for the circulation of a
country ought not to be connected with banks or banking privileges. . . .
Take away from the banks of the United States the power of issuing paper
money, and the whole difficulty of banking vanishes. Banks would borrow
and lend money as individuals.?

That banks of deposit and discount are entirely different in
character from banks that add the function of issuing credit in
the form of circulating notes was very nearly the universal view.
The faulty conception of deposits was indicated, again, by the
distinction drawn between them and bank notes with respect to
! Raymond, Elements of Political Economy (1823), ii, 129.
2 Gallatin, Letter to Maison (December 20, 1836), Writings, ii, 515.
$ Ibid.,ii, 514; Considerations, etc. (1831), p. 95, note ¢. In 1837 New York did in
fact repeal the law of 1818 prohibiting unincorporated banking in so far as it referred
 to merely “keeping offices for the purpose of receiving deposits, or discounting
notes or bills.” Laws (1837), chap. 20, p. 14.
* Wilkes, “Banking and the Currency,” Hunt's Merchants’ Magazine (August,
1858), xxxix, 192.
§ Ibid., p. 193. See also, James Buchanan, First Annual Message (December 8,
1857), in Richardson, Messages of the Presidents, v, 441.