All of them are like the subject on which the advance or loan is made. It is a fair presumption, therefore, that Congress regarded an advance or loan on bonds as similar in its character to an advance or loan on stocks, involving in each case an hypothecation of the subject on which the advance is made. If not so, if it was intended to embrace loans generally, there was no necessity for introducing the qualifying words, on bonds, bills of exchange, or promissory notes.'

"It was, however, not the lending, but the method or mode of operation, which was in view. If it was mere lending, Congress had in contemplation, it is difficult to conceive of a reason why mortgages of real estate were not included with stocks, bonds, bullion, etc. But it is a well known common usage for banks to make advances or loans on the hypothecation or pledge of such property, though not upon the hypothecation or mortgage of real estate. There was a reason, therefore, for omitting real estate from the catalogue of things upon which the advances or loans contemplated might be made. Advances on them are not within the ordinary business of a banker. To us, therefore, it appears plain, that it is the business of advancing or lending in the mode usual with bankers, that is, on collaterals, or on the pledge of personal property, that, by the statute, is defined to be banking within the intention of Congress, and that lending upon mortgages of real

estate is not intended.

"The third class described by the statute comprises those who have a place of business where stocks, bonds, bullion, bills of exchange or promissory notes are received for discount or for sale. The language is not where stocks, bonds, etc., are sold or are held for sale.'

"Surely Congress did not intend that corporation or persons who have a place of business where they sell their stocks, bonds, bullion, bills or notes should be regarded as bankers. If they did, a vast proportion of the corporations and of the merchants and manufacturers of the country would be included. But the language of the statute is: 'Where' such property is received for discount or for sale.' The use of the

sense can it be

word 'received' is significant. In no proper understood that one receives his own stocks and bonds, or bills or notes for discount or for sale. He receives the bonds, bills,

or notes belonging to him, as evidences of debt, though he may sell them afterwards. Nobody would understand that to be banking business. But when a corporation or natural person receives from another person, for discount, bills of exchange or promissory notes belonging to that other, he is acting as a banker; and when a customer brings bonds, bullion, or stocks for sale, and they are received for the purpose for which they are bought, that is, to be sold, the case is presented which we think was contemplated by the Statute. In common understanding, he who receives goods for sale is one who receives them as an agent for the principal and is the owner. He is not one who buys and sells on his own account.”

Again, the Supreme Court, in the case of Richmond, Plaintiff in Error v. Blake, Collector of Internal Revenue, 132 U. S. 592, lays down the law to be that:

"Where a broker employs his own capital with the capital of others for the purpose of purchasing and selling stocks, bonds, bills of exchange, or promissory notes, he is a banker under the revenue law. But where he negotiates the sale of such securities for others, receiving therefor only a commission, he does not become a banker within the meaning or construction of sections 3407 and 3408 of the Revised Statutes of the United States."

§ 9. Broker and banker distinguished.

The business of a broker is distinguished from that of a banker in this: A broker buys and sells stocks and securities for others on commission, while a banker buys and sells securities by investing his own means, and the capital of others for a profit to the bank. It is not generally considered a part of the business of a bank, to conduct a brokerage business for others on commission. The National Banking Law expressly prohibits this power to National banks, and declares it to be unlawful for a National bank to take money, or the capital of others, and invest the same for them, either on a commission, or otherwise. It is the business of a National bank to make investments of its own funds, but not to invest for others.

The Supreme Court of the United States, in the case of Warren v. Shook, 91 U. S. 704, very clearly distinguishes the business of a banker and broker.

§ 10. Bank further defined.

The definition of a banker as given by Gilbert is, "a dealer in capital, or, more properly, a dealer in money. He is an intermediate party between the borrower and the lender."

This definition applies more directly to a broker who acts in the intermediate capacity between the parties. He may, and usually does, act for both parties. A banker who receives money on deposit for the purpose of re-loaning the same is not an agent for the depositor. He is the agent of the bank. He acts only for the bank, and never consults the depositor as to the character of security or class of loans that the bank may invest in, or hold. The law may define the kind of investments or securities which the bank may take, but the depositor has nothing to say.

§ 11. Private banker defined.

A private banker is one who conducts the business of banking without incorporation, and without any special privilege or authority of law.2

A private banker may, when not prohibited by law, conduct the business of banking, and may make such lawful contracts with his dealers in relation thereto, as to receiving and the repayment of money, as may be mutually agreed upon between the parties.

A private banker, then, is one who conducts the business of banking without incorporation, or a fixed capital stock invested; which is by law required of all duly incorporated banks, excepting mutual savings banks which, under the law as enacted by some of the States, may become incorporations for the purpose of doing a savings bank business, without capital stock.

§ 12. Trust companies defined.

A trust company may conduct the business of banking when not prohibited by law, without the use of the word "bank" incorporated in its charter. The name of a corporation, which may indicate its business, does not always express its powers or authority. A trust company formed and duly incorporated under an act of the Legislature providing for the incorporation

2 Perkins v. Smith, 116 N. Y. 441; People v. Doty, 80 N. Y. 225.

and administration of trusts and of trust funds only and which defines its powers to be the receiving and administering of trust funds, is not a bank, and its manager cannot be termed a banker.

This subject is enlarged upon, and further discussed under a subsequent chapter treating upon trust companies. See sec

tion 47.

§ 13. Clearing house defined.

A clearing house is a voluntary association of banks for the purpose of making exchanges of notes, checks, bills, and moneys and settlements between the banks, all of whom must belong to the association.

In the case of O'Brien v. Grant, 146 N. Y. 163, 166, the business of the clearing house is defined to be "the effecting, at one place, of the daily exchanges between the several associated banks, and the payment at the same place of balances resulting from such exchanges."

A clearing house is not a bank used for the purpose of receiving moneys or other securities on deposit. Neither does. it do a discount business. Therefore, it is not a bank. It may be an incorporated body composed of banks where such banks may become stockholders, but is usually an association of bankers for the purpose of making exchanges. A clearinghouse is not subject to taxation under the revenue laws. Neither is it subject to examination by National or State examiners.

The powers and limitations of a clearing-house are treated at length in a subsequent chapter on clearing-houses. See section 46.

14. Commercial bank further defined.

The definition of a banker conducting a commercial banking business is properly defined to be, "one who conducts the business of banking, who has a place or keeps a place or room for receiving money on deposit, and repaying the same out again to his depositors." He may buy and sell (when not prohibited by special acts of law) stocks, bonds, bills, promissory notes, checks, evidences of indebtedness, bullion, and bills of exchange for the accommodation of his customers, and for

profit to the bank. He may invest his own, and the money of his customers, in any way not prohibited by law. He has, however, no authority to issue notes of the bank to be used, circulated, or passed as money, unless the law, by constitutional and legislative enactment, expressly authorizes the privilege. He may act as an agent for his customers and depositors in the transaction of any and all classes of business, when not specifically prohibited by law from so doing. It will be seen, therefore, that the business of a commercial banker, or, in other words, the definition of a banker of this class, may be extended to any length.

§ 15. Mutual savings bank defined.

A mutual savings bank, as its name implies, is mutual in character and principle. It is an institution authorized by law, either by special enactment of the Legislature (where permitted by the Constitution) or under the general laws of the State.

It is not endowed with any of the commercial powers of a bank; and while called a bank, its business comes more strictly within the duties and powers of a trust or trustee. It receives the money of its members, and loans the same only for their benefit. The general definition of a bank does not apply to a mutual savings corporation. A mutual savings bank, if it may be called a bank, is a place where money is received, invested for, and paid out to, its members. The officers of such an institution act strictly in the capacity of trustees. It certainly does not come within the definition which defines a banker to be "a money changer" or "one who traffics in money, bills of exchange, etc."

§ 16. Capitalized savings banks defined.

There is considerable difference between a capitalized savings bank and a mutual savings bank. The one is incorporated with a capital stock, while the other has no capital stock. In the one, the principal object is to engage the capital for profit to the stockholder. In a capitalized savings bank, the depositor has no mutual interest with the stockholder. This kind of an institution has but few, if any, of the elements of a mutual savings bank.

A corporation formed with a capital stock to conduct a banking business, may designate itself as a savings bank; and