Deposit Banking Began As a Totally Different Institution from Loan Banking

Deposit banking began as a totally different institution from loan banking. Hence it was unfortunate that the same name, bank, became attached to both. If loan banking was a way of channeling savings into productive loans to earn interest, deposit banking arose to serve the convenience of the holders of gold and silver. Owners of gold bullion did not wish to keep it at home or office and suffer the risk of theft; far better to store the gold in a safe place. Similarly, holders of gold coin found the metal often heavy and inconvenient to carry, and needed a place for safekeeping. These deposit banks functioned very much as safe-deposit boxes do today: as safe “money warehouses.” As in the case of any warehouse, the depositor placed his goods on deposit or in trust at the warehouse, and in return received a ticket (or warehouse receipt) stating that he could redeem his goods whenever he presented the ticket at the warehouse. In short, his ticket or receipt or claim check was to be instantly redeemable on demand at the warehouse.

--Murray N. Rothbard, The Mystery of Banking, 2nd ed. (Auburn, AL: Ludwig von Mises Institute, 2008), 85.