It thus appears that, in its pure form, banking is essentially a study of credit, a process of insuring such credit, and the transfer of titles thereto. It is partly a process of scientific analysis and partly a business organized for pooling or distributing risks. Most of the risks incurred turn out favorably to the banker. Some do not, and the loss which results from this minority of risks is borne by the banker out of his profits on the other operations he has undertaken, or at times out of his capital. In one sense, therefore, banking is credit insurance, and in another sense it is credit recording and credit transfer. Its relations to money, the holding of funds, the payment of checks, dealings in specie, the issue of notes to take the place of coin, and many others are merely incidents. They have developed as the outgrowth of the banking business. Many of them are necessary to the convenience of the public; others may be better performed by some other types of institution and will eventually be transferred to such institutions. The essential function of banking remains and is basically necessary in any society which is developed upon a footing of division of labor and exchange of values. In such a society credit must be had by those who produce goods that are not immediately consumable or instantly salable. The bank makes this credit available. Banking is therefore a part of the credit mechanism of society, and, since the latter is essential to any advanced development of business or industrial life, banking is also essential thereto. Banking, however, does not develop business or ordinarily precede the division of labor, but succeeds it. It is not a profession or occupation which initiates, but one which follows. In this aspect it may be classed in some measure with railroad transportation. True, a railroad may be built through an uninhabited country and its owners may then await the slow development of freight. In the same way the bank may be built up in advance of the business enterprise which will give it full occupation. These, however, are pioneer activities which must be regarded as the exception and not the rule.

What has been said thus far is, as has been made clear, applicable solely to what is called commercial bank credit - the extension of credit or the making of loans by the creation of deposits and the issue of notes. This is a typical method of bank operation in so far as relates to what, for want of a better term, we call commercial credit - the credit which involves the exchange of goods or the application of funds to the process of making them ready for consumption over very short-term periods.