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Abstract

The vast majority of case law establishes that, in the absence of a specific agreement to the contrary, the deposit of funds into a bank creates a debtor-creditor relationship, pursuant to which depositors are deemed creditors of their respective banks. In effect, depositors loan their deposits to banks, which may then use such deposits for ordinary banking activities, including investment and lending, speculative or otherwise. This Article examines the case history pertaining to this legal classification and proposes that such case history does not comport with depositor intent, is not supported by purportedly relevant legal premises (as illustrated by an analogy to deposits of commodities in the agricultural context), and does not justify the conclusion that bank deposits give rise to debtor-creditor relationships. The Article proceeds to explore the practical consequences of the anomalous legal classification of bank deposits as loans instead of the natural and obvious alternative—bailments.

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