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

130 Money, Bank Credit, and Economic Cyclescompany’s statutes, then by the prescriptions of this codeand last by common law rules applicable to all deposits.The nature of the “odious” privilege enjoyed by banks andother similar associations is obvious. Even from the standpointof Spanish positive law, it could be argued that, accordingto Article 306 (cited above) of the Commercial Code, anyperson who is not a banker or similar professional and usesthe money entrusted to him through an irregular depositwould violate the safekeeping obligation and therefore committhe crime of misappropriation. Bankers, however, areexempt from this possibility if their company’s statutes determinethat they may use and appropriate depositors’ funds fortheir own business activities. Nevertheless bank statutes andcontracts are not at all easy to understand. On the contrary,documents of this type are usually ambiguous and confusing,13 which explains court decisions stating that Spanish13 Curiously Spanish banks, when specifying the general conditions fortheir different checking account contracts, avoid using the word“deposit” for fear of the legal repercussions of such a contract (especiallycharges of misappropriation). They also avoid the words “loan”and “credit” because, although they would be legally covered if theycalled monetary irregular deposits “loans,” it is obvious that businesswise,it would be much harder to attract deposits from customers ifthey were generally aware that in opening a checking account theyare actually loaning money to the bank rather than making a deposit.Consequently, bankers prefer to maintain the current ambiguity andconfusion, since the existing contractual obscurity benefits them as longas they enjoy the privilege of using a fractional-reserve ratio and arebacked by the central bank in the event of a liquidity crisis. However,bankers’ own legal classifications of their operations sometimes givethem away. For example, the sixth general condition established by theBanco Bilbao-Vizcaya for draft discounting reads as follows:Regardless of the different accounts and operations of theassignor, whether in cash, securities, collateral, guarantees oranother type of document representing them, and notwithstandingthe manner in which they are itemized . . . the bank isauthorized to offset them by the loans it chooses to contract forany entitlement, including any type of deposit . . . this conditionshall apply even to operations and loans which theassignor holds against the bank prior to the current transaction.