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he draws it out, by checks payable to himself or to others. Banks of discount are occupied in discounting promissory notes and bills of exchange, or in lending money on security. Banks of circulation issue bills or notes of their own, intended to be the circulating currency or medium of exchange, instead of gold and silver. The notes or bills of national banks are guaranteed by the government, which holds as security bonds belonging to the bank to a still larger amount than their issue of bills, or, as commonly termed, their circulation.” The government also retains a five per cent fund for immediate redemption. Banks of exchange receive money on deposit, and, instead of paying it back to the depositors, make payments by drafts on other banks. They keep money on deposit at the principal trade centers; thus money can be sent to different points at small expense and without risk. They charge one who desires to remit, a small amount for their services, and sell him their draft on the place to which the remittance is to be sent. Savings banks make a specialty of receiving for deposit relatively small sums of money, paying a small rate of interest thereon.

A bank may combine two or more functions of banks described above, being at the same time a bank of deposit and discount, etc. Savings banks are usually a department of a bank of circulation or exchange.

PRIVATE BANKS. Organization.-Private banks are organized in the same manner as ordinary partnerships. They may belong to an individual or a firm.

Functions.—The business of private banks varies in different localities. In many cases they possess the principal functions of national banks; in other cases their attention is directed only to special features of banking such as the buying and selling of foreign exchange, stocks and bonds, etc.

Protection to Creditors.-In a few states private banks are restricted in their operations by statute, in which case they are subject to the inspection of state oficials, but usually their operations are regulated and restricted only by the common laws of business.

STATE BANKS. How Organized.-State banks are organized under the laws of the state in which they are located, the preliminary steps being much the same as those in organizing national banks.

Circulating Notes.-Prior to July 1, 1866, state banks issued notes which circulated as money, but on that date the government imposed a tax of 10 per cent on the circulation of all state banks, which had the effect of withdrawing the circulation, as the rate was to high to allow any profit to the banks.

Difference Between State and National Banks.-National banks are organized under the National Bank Act, are under the supervision of the general govern. ment and alone issue circulating notes, while state banks are organized under the laws of the various states, are subject to the state statutes, and do not issue circulating notes. The advantages claimed by state over national banks is that they are not restricted so closely in their business methods as national banks.

NATIONAL BANKS. A national bank is a bank organized under an act passed by Congress, entitled “The National Bank Act,” and in addition to doing a general banking business, it has authority to issue circulating notes against bonds deposited with the Treasurer of the United States. The government does not own nor control the bank, but only authorizes its creation and prescribes the mode of doing business. Every banking association doing business under this act is governed by the same principles, is subject to the same inspection, uses the same forms in making reports to the comptroller at Washington, and is liable to the same penalties for the violation of any requirement of the national banking law.

Powers.--National banks have power to adopt and use a corporate seal; to have succession for a period of twenty years; to make contracts; to sue and be

sued; to elect directors, and by its board of directors to elect officers; to make all needful by-laws not in consistent with the national bank act; to discount and negotiate notes, drafts, bills of exchange, etc.; to receive deposits, buy and sell exchange, coin and bullion; to loan money on personal security; and to issue and circulate its own notes.

Stockholder's Liability.-The liability of each stockholder of a national bank is to the par value of stock owned, in addition to the amount invested in such stock.

Real Estate.-National banks are prohibited from holding real estate other than the buildings in which they do business and land mortgaged to secure a loan which was made in good faith upon personal security.

Reserve.-National banks are required to keep on hand at all times a lawful money reserve equaling 25 per cent of the deposits if in a large city, and 15 per cent of the deposits, if located in a small city.

Overcertifying Checks.-National banks are prohibited under severe penalty from certifying a check in excess of a depositor's account.

Surplus.-Each national bank shall accumulate a surplus by setting apart one-tenth of its net profits before declaring any dividend, until the surplus equals 20 per cent of the capital stock.

Reports to Comptroller.-Banks must make at least five reports to the comptroller during the year.

LOAN AND TRUST COMPANIES. How Organized.—Loan and trust companies are organized by a number of persons, usually ten or more, under the laws of the various states.

Kinds of Business Transacted.—These companies usually receive deposits and make loans, but as a rule they do not undertake the collection of commercial paper. They act as agents for corporations in transferring stocks and bonds, make investments, collect interest, act as trustees, receivers, executors, administrators, etc. Many companies have boxes in fire and burg. lar proof safes which they rent to customers desiring

a safe place for the keeping of valuable papers, etc.; others make a business of examining and insuring titles to real estate.

Clearing Houses.-A clearing house is the place where the representatives of certain banks, associated for the purpose, meet, and, under the supervision of a committee or officers selected by the members, settle their accounts with one another and make and receive payment of balances.

Each bank in its daily dealings receives many bills of other banks, and checks drawn on them, so that at the close of the day's business every bank has in its drawers various sums due to it by other banks. It is, in like manner, the debtor of other banks which have received its bills and checks. These sums due by and to the banks among themselves are at the clearing house set off against each other and the balances paid or received.

AGENCY

Agency is the relation existing between two or more persons, arising out of a contract giving authority to one to represent the other in business transactions. A person who so represents another is called an “agent;” the one whom he represents is known as the “principal.”

How Created.-The contract which creates the agency may be a formal writing under seal, as a power of attorney, or it may be a written agreement, or a letter of instructions, or a verbal agreement or appointment, or it may be implied from facts and circumstances.

Who May Act as Principal or Agent.-Any one who is competent to do business for himself may act as principal, and appoint an agent to transact it for him. Persons who cannot do business for themselves may, however, be appointed to act as agents. Therefore minors and married women may act as agents.

Extent of Authority.The employing of an agent is the act which gives him his authority. An agent has authority to do whatever is necessary or generally done in connection with the purposes for which he is employed.

Kinds of Agency. There are several kinds of agency, the first division of which is into special and general; second, limited and unlimited; third, factor and broker. A special agency is an agency to do a single act. A general agency is one in which the agent is delegated authority to do anything about a particular business. Limited agency is one in which the agent is bound by particular instructions, and applies to a general agent, restricting his authority. Unlimited agency is the power of a special agent, giving him authority to use any means he may find necessary to accomplish the thing to be done. A factor is one who has the property of his principal in his own possession for sale, and is commonly termed a commission merchant. A broker is one employed to negotiate sales between the buyer and the seller. He does not have possession of the goods or property which he negotiates, nor has he any authority to sell in his own name.

Liability of Principal. The principal is responsible for the acts of his agent committed in the execution of the agency and which are within the real or apparent scope of the principal's business. A distinction is here made between a special and a general agent. If a special agent exceeds or disobeys his instructions the principal is not liable; but if a general agent exceeds his authority the principal will be bound, if the act is within the apparent scope of an agent's authority, when it is such an act as is natural and usual in transacting business of that kind. By appointing him to do that business, the principal is considered as saying to the world that his agent has all the authority necessary to transact it in the usual way. For any criminal act, however, of the agent, the principal is not responsible unless he directly commands him to commit it.

Wrongful Acts of Agents. In case of wrongs and injuries (torts), the general rule is that the principal is liable to third persons for the wrongful acts of the agent when acting within the scope of his agency. But

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