THE FUNCTIONS OF BANKING 18

This promising approach to the problem of ascertaining the
fundamental part that banks play in our economic organization
received but little attention for a time. We meet with it again
in Thomas Cooper’s Lectures on the Elements of Political Economy
(1826). The supply of gold and silver, Cooper explained, is inadequate
 for effecting all the payments of modern commerce. This
leads to the use of promises to pay, which is further commended
by the inconvenience of making large payments in coin. But it
is only the notes of a well-known promisor that can circulate
widely. It is the province of banks to supply such acceptable
notes by exchanging their own credit for that of their customers.!
It was upon the furnishing of a widely accepted credit that
Cooper laid emphasis. The other aspect of the matter — determining
 who shall receive credit — was stressed by a writer in
the North American Review of the following year. Banks remedy
the defect that individuals, in a position to extend credit to those
who need it, are unable to ascertain who is worthy of their trust.
“They assume the responsibility of the debtor; they relieve the
creditor of his anxiety and doubt;? they enable him to divide
into small pieces, and transfer some of his risk to those with whom
he deals”? John Rae made the same point. A business man
may be unable to convince the many with whom he wishes to
deal that he is capable of discharging the transactions in question,
and even if he could do so, the credit he would receive would
frequently fail to satisfy his needs. He is far more likely to be
able to persuade one person, his banker, that his stocks and establishment
 afford ample security for the accommodation he seeks.
The banker lends him money when he wants to buy, and receives
money from him when he has effected sales. The banker serves,
then, as “the general lender, and receiver of the society,” a
“dealer in credits.’’ 4

1 Cooper, Lectures on the Elements of Political Economy (1826), pp. 37, 38.
2 In discounting, “the bank insures the parties to the note discounted; and the
community, which is the loser if the bank fails, virtually insures the bank.” J. C.
Calhoun, in a speech in the Senate, October 3, 1837.
' Jonathan Porter, “ Review of Cardozo’s Notes on Political Economy,” North
American Review (1827), xxiv, 183.
4 Rae, New Principles of Political Economy (1834). (Mixter’s Reprint, p. 208,
under title. ““ The Sociological Theorv of Capital ”’