Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Historical Violations of the Legal PrinciplesGoverning the Monetary Irregular-Deposit Contract 49On various occasions research has suggested Greekbankers usually knew they should maintain a 100-percentreserve ratio on demand deposits. This would explain the lackof evidence of interest payments on these deposits, as well asthe proven fact that in Athens banks were usually not consideredsources of credit. 18 Clients made deposits for reasons ofsafety and expected bankers to provide custody and safekeeping,along with the additional benefits of easily-documentedcashier services and payments to third parties. Nevertheless,the fact that these were the basic principles of legitimate bankingdid not prevent a large group of bankers from yielding tothe temptation to (quite profitably) appropriate deposits, afraudulent activity which was relatively safe as long as peopleretained their trust in bankers, but in the long run it was destinedto end in bankruptcy. Moreover, as we will illustratewith various historical examples, networks of fraudulent18 Stephen C. Todd, in reference to Athenian banking, affirms thatbanks were not seen as obvious sources of credit . . . it is strikingthat out of hundreds of attested loans in the sources onlyeleven are borrowed from bankers; and there is indeed no evidencethat a depositor could normally expect to receive interestfrom his bank. (S.C. Todd, The Shape of Athenian Law[Oxford: Clarendon Press, 1993], p. 251)Bogaert, for his part, confirms that bankers paid no interest on demanddeposits and even charged a commission for their custody and safekeeping:Les dépôts de paiement pouvaient donc avoir différentesformes. Ce qu’ils ont en commun est l’absence d’intérêts.Dans aucun des cas précités nous n’en avons trouvé destraces. Il est même possible que certains banquiers aientdemandé une commission pour la tenue de comptes de dépôtou pour “l’exécution des mandats.” (Raymond Bogaert, Banqueset banquiers dans les cités grecques [Leyden, Holland: A.W.Sijthoff, 1968], p. 336)Bogaert also mentions the absence of any indication that bankers inAthens maintained a certain fractional-reserve ratio (“Nous ne possédonsmalheureusement aucune indication concernant l’encaisse d’unebanque antique,” p. 364), though we know that various bankers, includingPison, acted fraudulently and did not maintain a 100-percent reserveratio. As a result, on many occasions they could not pay and went bankrupt.