tablished by law. Certificates of
deposit may, by indorsement, be made transferable as promissory notes
and other negotiable paper, (Chap. LX., Sec.2,) and are often remitted,
instead of money, to distant places, where, by presenting them at a
bank, they may, for a trifling compensation, be converted into money.

Sec.5. A material part of the business of banks is to assist merchants and
others in transmitting money to distant places. Thus: A, in New York,
wishing to send $1,000 to B, in Philadelphia, puts the money into a bank
in New York, takes for it an order, called _draft_, on a bank in
Philadelphia, for that amount, to be paid to B. The draft is sent by
mail to B, who presents his draft at the bank, and receives the money;
and the bank charges the amount to the New York bank.

Sec.6. But persons unacquainted with commercial business, especially young
persons, may not know how the bank in Philadelphia is to be repaid. In
the course of trade between the two cities, business men are constantly
remitting money both ways through the banks, which thus receive the
money and draw upon each other. Thus millions of dollars may be annually
transmitted between the two cities, without any expense except the small
charge of the banks for doing the business, and without the risk of loss
by accident or robbery which attends the conveyance of money in person.

Sec.7. Banks also lend money. The borrower gives a note for the sum
wanted, signed by himself, and indorsed by one or more others as
sureties. The cashier pays the money for the note, retaining out of it
the interest on the sum lent, instead of waiting for it until the note
becomes due. This is called _discounting_ a note.

Sec.8. The bills of banks pass as money. A bank bill or note is a promise
of the bank to pay the bearer a certain sum on demand, signed by the
president and cashier. It passes as money, because the bank is bound to
pay it in specie if it is demanded. Paying notes thus is _redeeming_
them. When a bank is unable to redeem all its bills, it is said to have
failed, or to be broken; and the bill holders suffer loss, unless some
security has been provided. This has been done in some states by making
the stockholders individually liable for the redemption of the bills;
that is, the property owned by them as individuals may be taken and sold
on execution for that purpose. Such security, however, has never been
generally provided.

Sec.9. But a system of bankin