THE FUNCTIONS OF BANKING 17

such cancellation, instead of by the less convenient resort to
transfer of metallic money. (He did not regard bank notes as
money.) Two equal funds arise, the one of credits, or credit
securities, the other of debts.! Banks intervene for two purposes;
 their own promissory notes, or book credits, substituted for
the notes of their customers, are of more generally recognized
credit, and better fitted to serve as means of payment;? and,
secondly, the fund of credits becomes very active and efficient
as a medium of payment only when concentrated in banks. “As
the debts of men of business find their way into the banks, so do
their credits; and the functions of the banks, stripped of their
many complications, consist chiefly in balancing and thus extinguishing
 the debts and credits of their customers.” * The banks
are ‘substantially bookkeepers for their customers’ in the process
 of cancellation that constitutes the credit system.*

The colonial conception of banks, then, as little more than
the source of a form of media of payment, still had its adherents,
but they were becoming relatively few. The mechanical operations
 of banking were commonly classified as those of deposit,
discount, and note issue; and while that of note issue was regarded
 by many as virtually synonymous with banking, others,
whose number increased as the years progressed, urged that it
be denied to banks completely.
Meanwhile the significance of banks as agencies in the distribution
 of credit, whereby the nation’s capital was more effectively
utilized, was being emphasized. From this point of view the
functions of banks were described as those of assuming for prospective
 lenders the responsibility of determining who merits
loans, and of providing borrowers with a form of credit that is
universally accepted.
Finally, we find one writer who regarded banks primarily as
clearing centers, capping that modern system of payments in
which debts offset credits. This view gave attention once more
to the relation of bankers to the media of payment rather than
2 Ibid., p. 444.
4 Ibid.. D.O.

1 Colwell, p. 4.
3 Ibid., pp. 5, 104.

44 Hg 2
Sor PCM
X FRA
od pig