52. In course of time, the loaning-houses were permitted by the Roman pontiff to charge a moderate interest on a part of their capital, and, finally, upon the whole of it; still, they retained, for a long period, the original denomination of montes pietatis. The receiving of interest on loans was declared lawful by the Pope, about the middle of the fifteenth century. Soon after this period, all the cities of Italy hastened to establish these institutions; and their example was, at length, followed in other parts of Europe.
53. But long before the Pope had granted this privilege, individuals were in the habit of loaning money at an exorbitant usury. These were principally Jews and merchants from Lombardy; hence, all persons in those countries, who dealt in money, came to be called Lombard merchants. The prohibitions of the Church against receiving interest were eluded, when necessary, by causing it to be paid in advance, by way of present or premium.
54. In the twelfth century, many of the dealers in money were expelled from England, France, and the Netherlands, for usurious practices; and, in order to regain possession of their effects, which they had, in their haste, left in the hands of confidential friends, they adopted the method of writing concise orders or drafts. Hence originated bills of exchange, so convenient in commercial transactions.
55. The Bank of England was established in the year 1694. Hitherto, the banks of deposit, and loaning-houses, were entirely distinct; but, in this institution, these two branches of pecuniary operations were united. It seems, also, that this was the first bank that issued notes, to serve as a medium of circulation, and to supply, in part, the place of gold and silver.
56. In the United States, banking institutions are very numerous. They are all established by companies, incorporated by the legislatures of the different states, or by the congress of the United States. The act which grants the privileges of banking, also fixes the amount of the capital stock, and divides it into equal shares. The holders of the stock choose the officers to transact the business of the corporation.
57. Our banks receive deposits from individual customers, loan money on notes of hand, acceptances, and drafts, issue notes of circulation, and purchase and sell bills of exchange. They are usually authorized, by their charters, to loan three times the amount, and to issue bank-notes to twice the amount, of the capital stock paid in. Few banking companies, however, exercise these privileges to the full extent, lest the bank be embarrassed by too great a demand for specie. As soon as a bank ceases to pay specie for its notes, it is said to be broken, and its operations must cease.
58. The Bank of North America was the first institution of this kind, established in the United States. It was incorporated by Congress, in 1781, at the suggestion of Robert Morris. In 1791, after the union of the states had been effected under the present constitution, the first Bank of the United States was incorporated, with a capital of ten millions of dollars. Most of the states soon followed this example; and, before the beginning of the present century, the whole banking capital amounted to near thirty millions of dollars.
59. The charter of the first Bank of the United States expired, by its own limitation, in 1811; and a new one, with a capital of thirty-five millions of dollars, was established in 1816, which also closed its concerns, as a national bank, in 1836, President Jackson having vetoed the bill for its recharter. In that year the number of banks was 567, and the bank capital $251,875,292. In the year 1840, the number of banks had increased to 722, and their capital to $358,442,692.