The subject of this chapter was so well handled by a cashier of a National Bank several years ago, at a meeting of the American Bankers' Association, that his paper may fitly be incorporated into our work.

Let us start a bank in a New England city. Some stormy winter afternoon a half dozen men are sitting around a stove in a counting-room on Commercial Street. They have discussed the weather and their neighbors, have whittled the chairs, have told a few stories, and have listened to the eloquence of a teamster who dropped in, as he cursed the banks and ventilated some new theory of finance. By the way, says Mr. A, it seems to me that if we had another bank here, we could have an easier money market, and could get better accommodation. Why, I took up a note the other day, to my bank, and they didn't discount it, though with my own eyes I saw the clerk put a discount on the little book for old Sykes, and I reckon my note is as good as his. The other members of the crowd, being well aware that Mr. A is a habitual growler, as well as a persistent borrower of $150 a day to make his checks good, and an inveterate swapper of checks, do not wonder at the obstinacy of the bank. In a few minutes Mr. A goes out, and in walks Mr. B, who is a well-known, honorable, retired merchant. The subject is renewed, and Mr. B remarks that he has had some talk of seeing some of the merchants and inquiring how they would feel about having a new bank. Some variety of opinion is expressed. But Mr. B at length says that he has determined to try it on, if he can find the right men to go with him. He wants a grocer and a lumber dealer, and a retired man, like himself, and one or two more good men, to make up a board of directors. He says that there is plenty of money seeking investment, and that with good management the stock will be worth $125 in three years.

In the course of a week or so Mr. B has selected five men who will sign a paper subscribing for at least ten shares each of a new bank, to be called the National Bank of Commerce, to be located in Portland, Maine. They write to Washington, to an officer of the Treasury Department, called the Comptroller of the Currency. He makes inquiries about the needs of Portland and the character of the men, and at length sends some blanks for the signatures of the subscribers to the proposed capital stock of $250,000. He reminds the gentlemen that the law must be strictly followed, that the gentlemen who are to be directors must each own absolutely at least ten shares of the stock, and that at least one-half of the money must be paid in before he can grant them any rights. Mr. B takes his paper around among his friends, and in a few weeks he has the amount subscribed. Certain preliminary steps are now taken. A room is hired, a good vault built, and the subscribers are called together to choose five directors. A cashier is selected. There are many applicants for this office, but the directors choose Mr. Perkins, because he has been in another bank for several years, has borne a good reputation and knows his business.

The papers, duly signed and sworn to, have been sent to Washington for approval. They come back in a week, with a big seal, and a certificate that must be published in some local paper, showing that the bank is recognized by the powers that be. One of the stationers' houses has subscribed to the stock, and so they are making the new books. The cashier says they must hurry up first with a stock journal and stock ledger, as the money is to be paid in at once, and he must have these books. That old growler, Mr. A, comes round before the bank is fairly started, and wants to hire $ 500, on four months, with a poor indorser. When he is told that they can't lend any money till they get under way, he remarks that he thought this bank was going to help our merchants, and he would like to know what banks are for. The teamster, of whom we spoke a few moments ago, said, as Mr. A returned to his office, that he could tell what banks are for: "Yer see, they are jest to skin us poor fellows who haven't got nothing." Presently, however, our new bank has all of its $250,000 paid in. The directors are called upon to decide whether they will issue circulating notes or not. And for fear that some of you present tonight may think that banks are compelled to issue notes, and that their whole profit is derived from the profit upon the circulation, I will at this point explain a few things.

The business of banking does not, of necessity, include the function of issuing bank notes. The privilege of issuing notes is granted by the State or the Nation, as the case may be; but, for the privilege, certain taxes have to be paid to the party granting the permission. In addition to the tax, the expense of handling the notes, the expenses of the redemption of the same, the express charges, etc., make it a serious question with many banks whether it pays to issue notes. The fact is, though it is not often stated, that a very considerable number of large and well-managed banks long ago gave up their circulation, finding that it did not pay. In places like Portland, where the banking capital is not excessive, I think that a fair profit can be made if money is worth five and a half per cent, the year through. But the banks here would make a respectable living if they had no circulation.