ic involves
the use of certain machinery and certain methods of procedure, and the
assumption of a role in the nation's economy which is distinctive and
peculiar, and which has set these institutions apart in every country
as objects of legislation and of scientific treatment, as well as in
the thought and regard of the people.

_2. The Economic Functions of Banks_

Viewed from the standpoint of the nation rather than from that of
individuals, the functions of banks may be described as those of
intermediaries in exchanges and in the investment of capital. In the
former capacity they supply the world with the major part of its
medium of exchange and serve as distributing agents for that portion
of the supply which comes from other sources. They create a medium of
exchange through a process of bookkeeping which is world-wide in
extent, and through which the mutual indebtedness of individuals,
cities, and other subdivisions of countries and nations, brought about
by purchases and sales on credit, are offset without the use of money.

The practice of depositing surplus funds with banks for safekeeping
and consequently of using them as paymasters has resulted in the
reliance of everybody upon banks for currency in any form, and has
thus thrown upon them the responsibility of directly utilizing all the
sources of money supply. Thus while the mints of the United States and
most other countries coin gold bullion, and supply subsidiary silver
and copper and nickel coins to private persons on the same terms as to
banks, as a matter of fact few private persons take advantage of this
privilege, finding it more convenient and profitable to get the coin
they want from banks. The same is true of government notes in
countries in which such notes constitute a portion of the currency.

The accumulation of a nation's capital and its investment require the
cooperation of numerous agencies of which banks are the chief. They
collect the savings of the people, combine them into amounts of
sufficient size for investment purposes, and invest them temporarily
and sometimes permanently. Cooperating agencies in this work are
insurance companies, societies of various kinds for the promotion of
saving, stock exchanges, promoters, etc. Some of these take the place
of banks in the performance of these services, while others supplement
and aid them.

_3. Classification of Banking Institutions_

Banks differ from one another chiefly in the na