Elenaor Harrison, age 13, of Haggerstown, Md., for her question:
HOW MANY BANKS ARE THERE IN THE UNITED STATES?
A bank receives money for safekeeping and it makes loans to borrowers. There are more than .14,200 banks in the United States.
All of the banks in the country together have deposits of over $550 billion. Their loans total almost $400 billion in an average year. About 90 percent of all loan payments in the United States each year are made through banks.
Most important type of bank is the commercial bank. It can extend credit or give credit to borrowers in the form of loans. These banks finance industry, aid individuals by lending them money and accept both savings and checking accounts.
The federal government charters and supervises 4,500 commercial National Banks while various states supervise about 9,000 commercial State Banks.
Banks are required by law to set aside a legal reserve. The reserve is a deposit balance which a bank must keep on hand at all times in an approved depository.
An important function of commercial banks is to handle all of the details involved in checking accounts. When a person makes a payment by check, the check is canceled and must eventually be returned to the payer. But first the check must go through clearing or collection.
Suppose you write a check for $10. The bank will substract $10 from your account and it will add this amount to the account of the person who was paid. This is clearing. If the accounts are in different banks, the bank that receives the $10 will add it to the account of its customer, and present the check for payment to the bank on which the check was drawn.
The bank of the debtor will pay $10 for the check and subtract that amount from his account. This process is called collection.
Most large cities have a clearinghouse. This is a place where representatives of various local banks gather to exchange checks. Little money is exchanged since most checks balance each other.
Banking is nearly as old as history. Ancient writers mention money changers and moneylenders. These were often men who bought the money of other countries and gave local coins in return.
People eventually began to leave their own coins with the money changers to be kept in strongboxes for safe keeping. Thus, the easiest banking was that of accepting deposits.
Modern banking had its start in 1587 when the Banco di Rialto was established in Venice, Italy. Our term banking comes from the Italian word banco, meaning bench. Early Italian bankers carried on their business at a bench in the street.
In the ~1600s in England, goldsmiths accepted gold and silver for storage in their vaults and issued notes for the deposits. The notes were easier to carry than coins, so people started using them for money.