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§ 179. “Banking.”

Banking is the business of a bank or banker. A bank is an institution formed for the deposit, custody, investment, loan, exchange or issue of money, or for facilitating the transmission of money by drafts or bills of exchange; it is an establishment generally incorporated for the purpose of performing one or more of those functions. (Webster's Internat. Dict.) This definition covers every possible phase or combination of banking, viz., the deposit, custody, investment, loan, exchange, issue and transmission of money.


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It is wide enough to embrace every person, partnership or corporate body, under whatever name, carrying on business in money. Legislation relating to banking would, therefore, include laws regulating the inception, organization and conduct of such a business; the terms, conditions and securities for good faith under which it could be carried on; the powers, rights and privileges to be exercised and enjoyed by bankers; the obligations and responsibilities of bankers.

This sub-section presents another suitable opportunity for drawing attention to a subject elsewhere referred to (see “Legal Tender,” § 178, supra), viz., the vast area of implied powers which may exist within the four corners of a written Constitution such as this. In the Constitution of the United States no power is in express terms given to Congress to incorporate banks. Yet the genius of Alexander Hamilton discerned that such a power might be deduced by inference or implication, from a clause in the Constitution authorizing Congress to make all laws “necessary and proper for carrying into execution the foregoing powers.” (Art. i. sec. viii. sub-s. 18, U.S. Constitution, to which sec. 51—xxxvii. of this Constitution corresponds.) The power to charter a bank to facilitate the financial measures of the Federal Government was (argued Hamilton) subsidiary and incidental to the power to tax and to borrow. “Every power vested in a government is, in its nature, sovereign, and includes by force of the term a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power, and which are not precluded by restrictions and exceptions specified in the Constitution.” (Hamilton's Works, Lodge's ed. vol. iii. p. 181.) Accordingly he urged upon Congress the importance of chartering a National Bank of the United States, as an aid and instrument of the Federal Government in its financial operations. The Bill passed Congress in 1791, and thus the first bank of the United States was established. (Von Holst, p. 126.)

The validity of the Act to create a national bank was tested in the Supreme Court of the United States in the great case of McCulloch v. Maryland, 4 Wheat. 316. By a liberal interpretation of the Constitution, the Court, under the presidency of Chief Justice Marshall, held that Congress had the power to incorporate the subscribers of the United States Bank, and that its notes and branches were exempt from State taxation.

“In 1879, ministers submitted a bill to the Imperial Parliament to deal with certain colonial banks which were in operation under royal charters. These charters had been granted before it had become customary to establish joint stock banks under a general law; and the banks were subject to the supervision and control of the Treasury and of other Imperial departments, in respect to divers matters. By this bill it was proposed to do away with this imperial responsibility, and to subject all banks holding royal charters to the laws of the particular colonies wherein they were situated. This would have the further effect of preventing any unfair advantages on such corporations in comparison with other banks established under colonial laws. The bill was dropped in 1879, but reintroduced in 1880, and referred to a select committee, which reported evidence taken thereon; but owing to the then pending dissolution of Parliament it was not pressed in that session. Nevertheless, the general principle of the measure was approved by the house; and the opinion of the Treasury was expressed that, in a self-governing colony, the action of the local legislature would override a royal charter, within the limits of the jurisdiction of that legislature.” (Todd's Parl. Gov. in Col. 2nd ed. p. 220.)

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