MR. LABORINGMAN: That's it; you bankers are always milking the public, and the interest you get is all cream; all profit.
MR. BANKER: Oh, no! it is not as bad as that. Don't make such a mistake. The average cost to the bankers of the country, outside of any losses, is about 4 per cent upon their deposits for interest paid on deposits, rent for building, clerk hire and other general expenses. So you see that it is not all profit by any means.
But let me get right back to what I was saying. The banker is nothing but a trader who keeps an open shop for the purpose of trading his debts for the debts of his depositors; or to put it in another way, for the purpose of exchanging his credit for actual money which is deposited with him, or for checks and drafts that are deposited with him, or for promissory notes which he buys when he loans money to his customers, and gives them credit on his books for the amount of the loans. All these different things, money, checks, drafts and promissory notes are bought by the banker with his credit, and the greater the amount he buys with his credit the greater will be his debt. But, you will probably say these are his deposits. Very true, but his deposits are his debts. Don't forget that.
MR. LAWYER: Mr. Banker, you have accurately described the situation, just as it exists today, and that, of course, is what we are interested in; but it seems to me as though it would be a great help to us to follow the development of banking, as we have it now.
MacLeod, the highest authority upon banking credit, and the theory of banking, used this language: "The first business of a banker is not to lend money to others, but to collect money from others."
Bagehot used this language, in describing the business of the bank: "Thus, a banker's business--his proper business--does not begin while he is using his own money; it commences when he begins to use the capital of others."
Many writers have maintained that a bank should only be allowed to create exactly as much credit as the specie paid in, and that its sole function should be to exchange its credit for coin, and coin for credit; and that the quantity of the bank's credit should always be exactly the same as the coin it displaces. This principle is called the currency principle.