The nature of the banking business requires some kind of organization of the individual institutions in which certain ones will assume to a degree at least the role of bankers' banks. In most European countries this position is occupied by single institutions specially chartered and endowed with special privileges and usually described as central banks. Examples are the Bank of England in England, the Bank of France in France, and the Imperial Bank of Germany in Germany. Around these are grouped the other institutions in a kind of hierarchy, certain large banks in the larger cities forming centers about which smaller institutions group themselves. In the United States there is no single central institution, but a small group of banks in New York City are the real centers of the system. Around these are grouped the banks in the other large cities of the country and these in turn perform important services for banks in the surrounding smaller towns and country districts. CHAPTER II THE NATURE AND OPERATIONS OF COMMERCIAL BANKING In the preceding chapter commercial banking has been defined as the conduct of exchanges by means of a world-wide process of bookkeeping. We must now describe this process. Its essential features are the discount of commercial paper, the conduct of checking accounts, and the issue of notes. _1. Commercial Paper_ By commercial paper is meant the credit instruments or documents which the credit system now in general use throughout the commercial world regularly brings into existence and liquidates. The essence of this system is buying and selling _on time_. The farmer buys seed, implements, fertilizer, labor, etc., and pays for them after the crops have been harvested and sold. The manufacturer buys raw materials and pays for them after they have passed through the transformation process which he conducts and the completed goods have been marketed. He frequently sells them to jobbers or wholesalers on time and these in turn sell them on time to retailers and these to consumers. Farmers, manufacturers, and merchants both buy on time and sell on time, and are thus both debtors and creditors, and each expects that his sales will ultimately pay for his purchases. The obligations involved in these transactions are represented and recorded in the form of book accounts, promissory notes, or bills of exchange, the latter being written or printed, or partly written and partly printed, orders of creditors on debtors to pay to themselves or to third parties the sums indicated. These documents are being constantly made and constantly paid as the processes of agriculture, industry, and commerce proceed. Indeed, their creation and liquidation is a normal phenomenon of our modern economic life.