Sec.2.  Banks in this country can be established only by authority of law.  They are incorporated by an act of the legislature.  The capital stock is raised by the sale of shares, and issue of certificates, as in the case of rail-roads. (Chap.  XXIII., Sec.13.) The stockholders elect of their number (usually) thirteen directors, who choose one of themselves as president.  The president and directors choose a cashier and clerks.

Sec.3.  Merchants and others in commercial places, deposit in banks, for safe-keeping, the money they receive in the course of business, and then draw it out on their written orders as they have occasion to use it.  An order of this kind is called a check.

Sec.4.  Persons depositing money only once, or very seldom, and intending to draw for the same at once, usually receive from the cashier a certificate of deposit, which states the name of the depositor, the sum deposited, and to whose order it is to be paid.  For the use of money deposited for any considerable period, banks agree to pay interest, usually less, however, than the rate established by law.  Certificates of deposit may, by indorsement, be made transferable as promissory notes and other negotiable paper, (Chap.  LX., Sec.2,) and are often remitted, instead of money, to distant places, where, by presenting them at a bank, they may, for a trifling compensation, be converted into money.

Sec.5.  A material part of the business of banks is to assist merchants and others in transmitting money to distant places.  Thus:  A, in New York, wishing to send $1,000 to B, in Philadelphia, puts the money into a bank in New York, takes for it an order, called draft, on a bank in Philadelphia, for that amount, to be paid to B. The draft is sent by mail to B, who presents his draft at the bank, and receives the money; and the bank charges the amount to the New York bank.

Sec.6.  But persons unacquainted with commercial business, especially young persons, may not know how the bank in Philadelphia is to be repaid.  In the course of trade between the two cities, business men are constantly remitting money both ways through the banks, which thus receive the money and draw upon each other.  Thus millions of dollars may be annually transmitted between the two cities, without any expense except the small charge of the banks for doing the business, and without the risk of loss by accident or robbery which attends the conveyance of money in person.

Sec.7.  Banks also lend money.  The borrower gives a note for the sum wanted, signed by himself, and indorsed by one or more others as sureties.  The cashier pays the money for the note, retaining out of it the interest on the sum lent, instead of waiting for it until the note becomes due.  This is called discounting a note.