3. The Nature of a Bank therefore being to receive Money and issue Credit in exchange for it, the business of a "Banker" is exactly the same.

The Romans invented the business of banking. Roman bankers were called Argentarii: they received the money of their clients, who could give their creditors cheques on their bankers, as is the modern custom. We have already seen that they invented Bills of Exchange, and to send a draft or bill for money was called permutare. But about the first century a.d. a provincial Latin word cambio (-ire or -tare) began to be used instead of peimutare: and eventually entirely superseded it. And those persons who followed the business of the Roman Argentarii came in the course of the middle ages to be called Cambitores, or Cambiatores. As Commerce increased in the prosperity of the eleventh century, they established correspondents in various parts of Europe and drew bills upon them called Litteræ Cambitoriæ or Bills of Exchange.

Afterwards when the word Banco came into use, as their business was similar in its nature, they came to be called Ban-chieri, and the drafts they issued Litteræ bancales,

Galiani, an Italian writer, says - "The first Banks were in the hands of private persons with whom people deposited Money, and from whom they received Bills of Credit, and who were governed by the same rules as the public Banks are now. And thus the Italians have not only been the lathers, and the masters, and the arbiters of commerce: so that in all Europe they have been the depositaries of money and are called Bankers."

Genovesi says - "These Monti were at first administered with scrupulous fidelity, as are all human institutions made in the heat of virtue. From which it came to pass that many placed their money in deposit, and as a security received Paper which was called and is still called Bills of Credit. Thus private banks were established among us, whose Bills of Credit acquired gradually a great circulation and increased the quantity of signs and the velocity of Commerce."

Also - "The Bill of Exchange is called drawn by him who sells it, and is called remitted on the part of the correspondent who must pay it. Those who make this their special business are called Cambists, and Bankers in the language of the great commerce of Europe."

The essential feature of a "Banker" is that when his customers place money with him, it becomes his absolute property to deal with as he pleases, and he is in no way accountable to them for the purposes he applies the money to. The customers of a "banker" cede to him absolutely the property in their money; and receive in exchange for it the Right to have an equal sum paid back on demand. A banker, therefore, is not the Trustee of his customers, but simply their Debtor.

And this was always regarded as the essential feature of a "banker." Marquardus says - "And by 'banking' is meant a certain species of trading in money, under the sanction of public authority, in which money is placed with bankers (who are also called Cashiers and Depositaries of money), for the security of Creditors and the convenience of Debtors, in such a way that the Property in the money passes to them: but always on this condition understood, that any one who places his money with them may have it back whenever he pleases."

Thus a "Banker" always buys money with his Credit: and moreover when he buys Commercial Debts, he always does it with his Credit also and not with cash. This is the essential distinction between a "Banker" and a bill discounter, that a banker always buys Bills with his Credit, and a bill discounter with cash. Hence when a Bill discounter has invested all the cash in his possession, either his own, or what others have placed with him, in this way, he is at the end of his resources. But a Banker always buys Commercial Debts with his own Credit, or with his promise to pay: and experience shews that his Credit may exceed several times the cash in his possession. How many times his Credit may safely exceed his cash, may differ in different localities: and in different methods of doing business: but at all events it may do so several times. Thus the essence of the business of banking is to create Credit. This Credit is of course made payable in money, but in practice it is very rarely actually paid in money. We have shewn above that a mutual release of debts is absolutely equivalent to a reciprocal payment of debts; and by the modern banking system, the enormously greater proportion of banking Credit is extinguished by mutual releases of debts.

This is the true definition of a "Banker" -

A Banker is a Trader who buys Money, or Money and Debts, by creating other Debts.

A banker, then, is a trader who keeps an open shop for the sale of Credit: he may, it is true, add other species of money dealing to his business: but the above is the essential definition of "Banking." The first business of a banker is not to lend money to others, but to collect money from others.