But

it may be declared to be such by the law and the courts. the fact that it has a capital stock, and that its business is principally, if not wholly, to earn dividends for its stockholders and the owners of said capital stock, its business and all of its acts demonstrate that it is commercial in its nature, lacking all the elements of a mutual savings bank.

§ 17. National banks further defined.

A national bank, as has been stated, is an incorporated institution organized under the law enacted by the Congress of the United States, authorizing certain persons to carry on the business of banking.

The general definition, that a banker is "one who conducts the business of banking," applies to a national bank; but the powers granted in the conduct of a national bank, by reason of certain limitations placed upon it and specifically enacted in the law which prohibits certain privileges allowed to State banks, confine the business of banking under the national system strictly to the law enacted for their government and management.

The powers and limitations governing a national bank are very clearly defined by the National Bank Act; and the agents and managers of a national bank are held closely to the enforcement of the law governing them.

While a national bank is clearly commercial in its character, business, and powers, it is yet, nevertheless, estopped from conducting certain kinds of commercial transactions which are deemed dangerous for such institutions. For example, the statute fixing the powers of national banks specifically prohibits a national bank from holding real estate as security for a debt, unless such debt has been previously contracted in good faith.

A national bank is also prohibited from negotiating loans for its own customers; and by implied limitation cannot buy and sell stocks, or realty bonds on commission. All of these privileges are commercial transactions, which may be carried on by commercial State banks without restriction, and unless a special statute intervenes.

It will be seen, therefore, that a national bank, which is endowed with commercial powers, is restrained by law from

doing certain things which are purely commercial in their nature, and which may be done by commercial State banks.

§ 18. Enlarged and specific definition under State authority. A bank, when incorporated under the general laws of the State, is, as stated, a private corporation; organized and to be operated for profit to its stockholders. It is subject, in its privileges and powers as to issuing and circulating its notes as money, to the laws of the United States, as enacted by Congress, and the laws of the State in which it conducts its business. A bank may be one of deposit where persons may simply deposit their money for safe-keeping, and one where the funds may be kept separate, or all be intermingled, and paid out upon demand by the depositor. A bank may be one of discount, where persons may place their notes for sale and discount, the profit going to the banker. The Supreme Court of the United States has decided that "the discounting of notes by a person, or corporation, for profit, where the customer's funds are used, is conducting the business of banking."

Commercial banks more clearly defined.

A bank, in a commercial sense, has authority, under State law, to receive deposits, make discounts, and circulate its own notes as money, where no inhibition is enacted by the Constitution or law of the State. Such institutions are clothed with power to transact a commercial banking business. The issuing of notes and circulating the same as money is not, however, a necessary element in the full and complete exercise of commercial banking. A bank incorporated under State authority to conduct a commercial banking business has power to carry into execution and exercise all commercial transactions necessary in the conduct of its business. It has power to receive money on deposit from persons, municipalities and corporations (where not especially prohibited by State legislation), and repay the same to its depositors upon such terms, and at such times, as may be lawfully agreed upon. It has the right to receive general and special deposits. It has the right to discount notes; to make loans on personal and real estate security, under regulation of law; to discount foreign and domestic bills of exchange; and to transact any and all other business coming under the commercial class, and authorized.

by law. Its business is called. commercial, as it is the medium through which the exchange of merchandise is transacted. It acts as the beneficiary for the commerce of the world. It holds intercourse with all business transactions, either directly or indirectly, and becomes, and is, indispensable in the transactions of business. It holds a confidential relationship with all customers dealing with it; and the bank has the right to protect this relationship against all persons, and cannot be compelled to disclose this right, except by order of a court of competent jurisdiction.

Commercial banks are the active agents of all parties who may do business with them, and as such their interests are mutual, and in the conduct of the business they are governed by law, and are therefore possessed with all lawful, expressed, implied, and incidental powers necessary to carry into execution their business and purposes.

§ 19. Mutual and capitalized savings banks more clearly distinguished.

A savings bank may be mutual, or an institution organized with capital stock. Mutual savings banks originally were organized as eleemosynary institutions in character, while mutual in principle; their purpose being to stimulate and fix the habit of saving with the poor. They were fiduciary agents, acting for those with limited means, which could not be easily invested; but when an accumulation of a sufficient fund was obtained, loans could be made and all depositors became interested in the profits.

They are mutual in principle, as all the loans are made in the interest of the members or depositors, from whom the money is obtained. In case of loss, the bank having no capital stock, which may be assessed to cover the same, or other property out of which it may be paid, the loss can be apportioned pro rata among the members.

It having no capital stock, its management must be conducted wholly in the interest of the members. It is merely an incorporated institution, organized for the purpose of receiving money of its customers or members on deposit, and investing the same for them, and repaying the same upon such terms and agreements as may be lawfully entered into between

themselves. No profits can be made upon the funds except they enure to the benefit of the members. After the necessary expenses are paid for its management, as stated, all the profits, at fixed periods, belong to the members, and must be ratably divided between them.

The distinction between a mutual savings bank, namely, one without capital stock, and a savings bank incorporated with capital stock, is, that in the one the members receive all the profits, less the actual expense required in managing the same, and are liable for all the losses pro rata among the members; while in the other, the depositors receive a stipulated dividend (that the directors may agree with the depositors as to interests or dividends, is fully conceded), and are relieved from any liability which the stockholder may be required to pay; the stockholder's liability being fixed by the law of the State wherein the bank is located.

Savings banks, with or without capital stock, are organized institutions for the purpose of receiving money on deposit from their members, on such terms as may be mutually agreed upon.

In a savings bank purely mutual, and without capital stock, the conditions upon which money may be received and repaid to its members, are entirely in their personal control. In a savings bank organized with capital stock, the mutual principle is entirely eliminated, and money can be received and repaid. to the depositor upon such terms as may be agreed upon between each customer and the corporation, acting through its directors.

Savings banks, organized with capital stock, are institutions having a fixed liability against the stock in case of loss, or insolvency of the bank. In some respects, they are incidentally possessed with commercial qualities and power; but are usually limited by law to a class of investments, which are allowed or prohibited by legislative enactments of the State where they are located. The Legislature, or statutory laws directing what securities may be taken (and in some cases fixing the sum or limit that can be loaned upon lands and other securities), operates as a guardian of the depositor, throwing around such institution such protection and safeguards as are deemed to be wise, the laws becoming a financial shield to those transacting business with the bank.

CHAPTER V.

THE ORGANIZATION OF BANKS AND PROOF OF CORPORATE EXISTENCE.

§ 20. Preliminary steps-organization of national banks.

Section 5133, Revised Statutes of the United States provides as follows:

"Associations for carrying on the business of banking under this title may be formed by any number of natural persons, not less in any case than five. They shall enter into articles of association, which shall specify in general terms the object for which the association is formed, and may contain any other provisions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons uniting to form the association, and a copy of them shall be forwarded to the Comptroller of the Currency, to be filed and preserved in his office."

The foregoing section provides for the formation and organization of a national bank. The language of the statute is, that a national bank can be formed "by any number of natural persons, not less in any case than five."

§ 21. Who are natural persons.

Human beings, without distinction as to race or color, male or female, are natural persons. Corporations, joint-stock companies, firms, or associations are prohibited from the very nature of their creation and powers in forming or becoming a principal in the formation or organization of national banks. While the stock of a bank can, after its formation, be legally held or acquired by a corporation, it cannot acquire the same as a subscriber in the primary proceedings of organization.

§ 22. Who can form a bank.

Any person who can legally enter into a binding and lawful contract, which cannot subsequently be repudiated by him, can be an incorporator of a bank. Infants, persons under age, may