Discount

1.

A counting ofE; an allowance or deduction from a gross sum on any account.^ A right -which a debtor has to an abatement of the demand against him in consequence of a partial failure of the consideration, or on account of some equity arising out of the transaction on which the demand is founded.

2 3.

The difference between what is paid for a claim evidenced by negotiable paper and the face amount thereof. A bank of discount furnishes loans upon drafts, promissory notes, bonds, and other securities... " Discounting " and " buying " a note are not identical. The latter denotes the transaction "when the seller does not indorse the note and is not accountable for it."., Power to carry on the business of banking, by discounting evidences of debt, is merely an authority to lend money thereon, with the right to deduct the legal rate of interest in advance.' In Atlantic State Bank v. Savery, 88 N. T. 291, 302 (1880), it was decided that the purchase of a promissory note for a less sum than its face is a discoimt thereof within the meaning of the provision of the Banking Act of that State (Laws of 1836, o. 260, § 18), which authorizes associations organized imder it to discount bills and notes. And in support of that definition of the terms the court cites the authority of Mc Leod on Banking, p. 43, where the author says, " The difference between the price of the debt and the amount of the debt is called discount," and " to buy or purchase a debt is always in commerce termed to discount it." In Fledkner v, Banlc of United States, 8 ■Wheat. 850 (1823), Mr. Justice Story said, "Nothing can be clearer than that, by the language of the commercial world and the settled practice of banks, a discount by a bank means a deduction or drawback made upon its advances or loans of money, upon negotiable paper or other evidences of debt, payable at a future day, which are transferred to the bank," and added that if the transaction could properly be called a sale " it is a purchase by way of discount." Discount, then, is the difference between the price and the amount of the debt, the evidence of which is transferred, and that difference represents interest charged, bemg at some rate, according to which the price paid, if invested untU the maturity of the debt, w Ul just produceits amount. And the advance, therefore, upon every note discounted, without reference to its character as busmess or accommodation paper, is properly denominated a " loan," for interest is predicable only of loans, being the price paid for the use of money. The specific power given to national banks (Rev. St. § 6136) is " to carry on the business of banking by discounting and negotiating promissory notes, drafts, 1 [Dunkle v. Eenick, 6 Ohio St. 53.5 (1856). = Trabue v. Harris, 1 Mete. 599 (Ky., 1838), Simpson, Chief Justice. bills of exchange, and other evidences of debt." So that the discount of negotiable paper is the form according to which they are authorized to make their loans, and the terms loans and discounts are synonymous. It was so held in Talmage v. Pell, 3 Sold. 328, 339 (1852); and in Niagara County Banlc v. Baker, 15 Ohio St. 68, 87 (1864), the point decided was that " to discount paper, as understood in the business of banking, is only a mode of lending money with the right to take the interest allowed by law in advance.".. A national bank is restricted to taking no more than seven per centum for the discount of negotiable paper when the person discounting is an indorser thereon, i

See Usury.