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BANKS well as the Greeks and Romans are known to have made use of the principles of banking; but the bank of Venice in the i2th century was the first institution which carried on banking business as it is now practiced. The bank of Barcelona, was founded in 1401; and one at Genoa, started in 1407, was for centuries one of the first banks in Europe. The bank of Amsterdam (1609) was the great warehouse for bullion during the 17th century, giving receipts for the coin and bullion put there, which receipts were used as money.

Modern banking begins with the 18th century, and the modern bank in its simplest form is an institution which receives money from its depositors and loans it out to borrowers, charging the latter interest for the loan. The difference between the higher rate of interest which the bank charges the borrowers and the lower rate which it pays its depositors is the gross profit which the bank makes.

The money which the bank loans is represented in the bank by notes, which are promises to pay back the money at a certain time and place, signed by the borrowers. In order that the bank may safely loan money it requires the borrower to give security. This may be in the form of an endorsement which is the signature of a person, firm or corporation on the back of the note, and this endorsement makes the endorser guarantee the payment of the note and interest. Other forms of security are stock, bonds, mortgages, etc. If the borrower fails to pay the note when it is due, the bank can then sell the stock, bonds, mortgages, etc., and apply the proceeds in payment of the note.

In the United States banks may be divided into national banks, state banks, trust companies, savings banks and private banks. National banks are organized and operated under the national banking laws, and are examined by national bank examiners who are under the Comptroller of the Currency in Washington, D. C., and make their reports to him. National banks are also required to make sworn statements of their condition to the comptroller whenever he calls for them. State banks, savings banks and trust companies are organized and operated under the banking laws of the states in which they are located. They are subject to examinations by state bank examiners and must make sworn statements of their conditions when the proper state official calls on them to do so. Private banks are not organized under the national or state banking laws and are not subject to the supervision of federal or state officials. When a bank is organized under the national or state banking laws, it is known as a chartered bank, because the national or state government gives the owners of the bank, known as stockholders, a charter which authorizes them to conduct a banking business.

The stockholders supply the money to start the bank, and this money is called the capital of the bank. As the bank prospers, it lays aside a certain amount of its net earnings each year in a fund called surplus. Some banks have a surplus larger than the capital. The capital and surplus belong to the stockholders; but if for some cause the bank should fail—that is, be unable to pay back to the depositors the money they had deposited, then the public authorities take the capital and surplus to pay the depositors what is owing them. If this is not sufficient, an assessment is made on the stockholders, sometimes for as much as the par or face value of the amount of stock they own.

Stockholders of a bank meet each year and elect directors to represent them in the management of the bank. The directors in turn elect the officers of the bank to whom they delegate authority to operate the bank. It is the duty of the directors to see that the bank is properly managed and that the officers conduct the bank's business carefully, safely and properly and with profit, for unless the bank makes a profit it cannot pay dividends upon its stock, A dividend is a division of the net profits of the bank among the stockholders in proportion to the amount of stock each holds and is designated as a percentage of the capital. Thus, if a bank pays 10 per cent, dividends, it divides each year among the stockholders an amount of money equal to 10 per cent, of its capital stock. The par or face value of the stock of national or state banks is $100. Its real value is what it sells for. The stock of some banks is worth many times its par or face value.

The first chartered bank in this country was the Bank of North America. The charter was granted by the Congress of the Confederation in 1780. Because there was some doubt as to the power of Congress to do this, the bank was rechartered by Pennsylvania in 1781, In 1784 the Bank of Massachusetts and the Bank of New York were organized. In 1791 Congress established the Bank of the United States; the charter was limited to 20 years. The capital was $19,000,000 one fifth of which was supplied by the government. The headquarters of the bank was in Philadelphia, with branches in other cities of the country. When the charter expired in 1811, Congress refused to renew it. In 1816 the second United States Bank was chartered by the government with a capital of $35,000,000 of which the government subscribed one fifth. This bank was used as a depository for government funds, and five of its 25 directors were appointed by the government. In 1832 Congress passed an act renewing its charter, but President