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NELSON ALDRICH




Monetary C:m

NATIONAL

COMMISSION

MONETARY

VOLUIZS ISSUED
lute iv iews on the Banking aid. Currenc y Syst ems of Englan d, France,
Gernany, Switzerland, and Italy.
Address by Senator Aldrich.
Conmissi on.

The Woilk of the National Monetary

Fiscal Systoms of England, France, Germany, and the United States.
By J. 0. Manson.
By Paul M. Warburg.

The Discount System in Europe.

Special Report from the Banks of the United States, 1909.
Compiled by Chas. A. Stewart.
Digest of State Banking Laws.

By Satnuel A. Welldon.

History of Crises under the National Banking System.
By Dr. 0. M. ',Y. Sprague.
The Use of Credit Instrurants in Payments in the United S tates.
By Dr. David I.7in1ey.
Clearing House Methods aid Practices.

By J. G. Cannon.

Suggested Chances in Administrative Features of the National
Banking Laws.
Fistory of Banking in Canada.

By R. M. Breckenridge.

Evollrtion of Credit and Banks in France.

By Andre Liesse.

The Bank of France in its Relati on to Nati anal an d. International
By Mauric e Patron.
Credit.
The. Reichsbank, 1876-1900.
Geran Inperial Banking Laws.

Edited by Dr. R. Koch.

/.7iscellaneous Articles on German Banking.
Renewal of Reichabank Charter.
The German Bank Inquiry of 1908.
The Swiss Banking Law.

Staiographic Reports.

By D r. Julius Landmain.

By A. W. Flux
The Swedish Banking System.
By Charles A. Conant.
The National Bank of' Belgium.
By Charles L. Conant.
The Bankinc Systap of Mexico.
Prepared by A. Platt Andrew.
Financial Diagrams.




NAT 10 NAL

MONETARY

COL:MISSION

VOLULZS TO BE ISSUED

Statistics for Great Britain, Germany, and France, 1867-1908, prepared by Sir R. II. I. Pa'grave, F. '3. Hirst, B. Broslauer,
Robert Franz, Albert Aupetit, aid M. Lefevro.
The Credit of Nations.
Bank Acceptances.

By Francis W. Hirst.

By Lawrence Merton Jacobs.

Statistics fez. the United States.

Comniled by A. Platt Andrew.

Laws of the United States Concerning Money, Banking, and Loans.
Compiled by A. T. Huntington.
The First and Second Bail of the United States.
z
Hold S170rth and Dr. Davis R. Dewey.
State Banking before the Civil War.
Dr. Robert E. Chaddock.

By Dr. J. T.

By Dr. Davis fl. Dewey, aid

The Origin of the National Banking System.
History of the :Tational Bank Currency.

By Andrew Macrarland Davis.

By A. D. :Toyes.

The Developient of the Independent Treasury Systlr..

By D r. David. Kinley.

Seasonal Variations in the D omancls for Currency and Capital.
By Dr. Edwin W. Mie rer.
.
The Trade Balance of the United States.
The Canadian Banking System.

By George Paish.

By Dr. Joseph French Johnson.

Interviews on the Banking and Currency Systems of Canada.
The Engi I sh Banking System.
By Hartley 71 ithers, Sr. R. II. Inglis
Palgravo, aid others.
The History and Methods of the Paris Bourse.

By 1.1. Vidal.

The Great German Banks and their Concentration in connection with
tho Economic Devoloirrnt of Germany.
By Dr.
Riossor.
Italian Banks of Issue.

By Comm. Tito Canovai, and Carlo F. Ferraris.

Banking in Russia, Austro-Hungary, Holland and Japan.




NATIONAL

MONETARY

COL:MISSION

VOLULES IN PREPARATIO::

State 72,ank2 and. Trust Companies sine o the Civil War.
E. Barnett.
Bank Loans and Stock Exclr.nge Speculation.
History of Banking in Encland.
The French Banking Syst an.




By Dr. George

By Dr. Jacob TI. Hollander.

By H. S. Pony°11.

By Albert Aupetit.

NATIONAL MONETARY COMMISSION.

28

TABLE No. 15.—CONDENSED STATEMENT OF
Investments in
Number Loans, including
overdrafts
bonds, sto, ks, and
of banks. mortgages and
owned. other securities.

Due from banks
and bankers.

Casli

_
Maine
2 New Hampshire
3 Vermont
4 Massachusetts
5 Rhode Island
6 Connecticut

170
121
100
432
54
203

New England State

7
8
9
10
11
12
13

New York
New Jersey
Pennsylvania
Delaware
Maryland
District of Columbia

14

27

Virginia
West Virginia
North Carolina
South Carolina
Georgia
Florida
Alabama
Mississippi
Louisiana
Texas
Arkansas
Kentucky
Tennessee.

28

38
39
40
41
42
43
44
45
46

2,443,834,439

895,026,286

117,378,559
81,204,334
65,598,858
56,059,563
115,474,156
33,798,631
58,312,611
54,647,671
90.677,491
191,565,351
39,250,649
124,293,943
98,970,228

Hawaii
Porto Rico
Philippines

01

Island possessions

62

United States and island possessions




716,188,425

219,410,073

531,454,787
212,790,298
788,183,507
252,426,774
184,123,098
220,352,328
343,340,591
430,593,846

198,565,974
60,402,691
197,406,757
60,638,956
50,337,732
38,776,576
34,250,197
92,810,914

117,265,226
53,790,842
198,696,305
57,033,633
41,861.403
51,422,463
70,145,450
131,791,084

52,375,097
22,459,901
147,483,205
25,047,507
17.825,565
21,624,383
19,841,065
66,782,007

2,963,265,229

733,189,797

722,006,406

373,438,730

567
538
859
991 ,
115
77 !
259
71
854 ,

I
1

1,127,232,045

21,602,228
14,638,744
13,198,780
8,441,794
19,484,728
10,925,441
13,624,890
12,705,034
25,927,597
76,755,116
10,091,083 ;
30,754,065
25,340,976
,
283,490,476

50,083,365
55,515,995
145,380,860
135,202,237
40,709,488
14,452,075
65,842,214
12,826,730
66,507.327
_
586,520,291

4.430,492
5,428,964
15,651,310
19,134,399
6,536,869
2,332,382
32,201,703
2,564,686
13,543,334

4,331 ;
,_
301
199
6.32
167
82
39
48
13

14,372,144
22,039,893 .
46,576,983
52,126,460
13.775,079
4,229,057
45,016,646
5,060,042
29,601,346

8,461,962
6,295,441
4,321,060
2,765,919
7,318,608
3,367,186
6,880,330
3,656,881
9,154,180
26,597,412
4,124,738
12,364,374 ,
10,458,700
105,766,791

4,026,483
4,763,648
14,485,216
15,748,938
5,942,250
1,307,201
15,128,624
1,551,203
8,065.369

101,824,139

232,827,650

71,018,932

22,613,88,5
20,185,754
163,968,658
4,096,947
7,681,190
2,717,186
2,564,225
712,496

36,116,539
22,865,768
118,236,193
7.152,058
12.840,788
4,344,831
5,097,876
4,159,623

19,330.822
12,989,483
45,992,800
2,805,869
4,588,607
1,356,115
1,861,751
654,083

......
106,580,754
5:3,315,475
469,084,823
25,437,012
36,176,676
11,876,101
10,086,415
3,165,532

1,481

715,722,788

22,459

11,350,046,854

224,540,341
—
4,609,067,959

2,556,364,818

1,444,312,388

14
9
9

8,593,913
5,248,251
9,328,673

2,733,750
2,263,983
376,524 i

304.100
1,193,533
4,209,251

2,509,187
2,084,560
3,108,541

32

23,170,837

5r 374 r 257

1

5.706,884

7,702,288

22.491

11,373,217,691

4,614,442,216 1

2,562.071,702

1.452.014.676

_

58
59
60

25,549,767 ,
19,044,352
9,141,900
9,856,706
15,300,851)
8,102,190
12,853,300
6,816,573
22,139,278 ,
35,828,486
3,506,540
33,644,974
17,625,157

,

7,709 :

Washington
Oregon
California
Idaho
Utah
Nevada
Arizona
Alaska

United States

4,531,447,667

557,453,827
18,072,284
121,909,462
1,237,967
12,882,228
4,6.32,657

1,020 ,
798
1,263
572 ,
598
907
1,365
1,186

Western States

57

500,401,524
72,185,259
2(18,783,051
3,184,879
31,905,661
18,565,912

5,143

North Dakota
South Dakota
Nebraska
Kansas
Montana
Wyoming
Colorado
New Mexico
Oklahoma

Pacific States

1,447,174,710 t
184,238,838
641,308,562
15,971,643
136,299,737
18,840,949 ,

427

•

Middle West vrn State.,........

56

3,041,236,444
257,899,149
1,049,456,264
18,260,554
116,487,766
48,107,490

353
262
376
272
573
142
274 ,
352
222
1,017 .
264
609

_
48
49
50
51
52
53
54
5.5

$3,9Z1.
2,046,
1,602,32
64,230,556
7,519,525
8,984,042

212.200.324

2,715

Southern States....

47

$10,121,219
6,441,287
5,804,552
146,361,926
20,151,197
23,320,143

885
318
1,233
43
208
28

•
•
•
•

29 Ohio
30 Indiana
31 Illinois
32 Michigan
33 Wisconsin
31 Minnesota
35 Iowa
36 Missouri
37

$104,788,583
60,893,254
24,507,089
401,965,267
91,638,446
202,476,531

1,

Eastern States

15
16
17
18
19
20
21
22
23
24
25
26

469,179,623
55,677,294
65,852,395
937,139,322
113,844,348
184,165,852

21u,813,676

89,579,530
,

r, E BAN
SPECIAL REPORT FROM
AND LIABILITIES OF ALL REPORTING BANK

BY STATES

OF THE UNITED STATES.

29

PRIL 28, 1909
_

•}Hr resources.

Total resources.

Individual deposits.

Surplus and undivided profits.

Capital.

1r

Cluverninent deposits..

All other lia-

Due to banks
and bankers.
_

$153,527,530 ,
101,195,882 '
77,605,020 .
1,237,202,718 :
191,688,971
345,029,374

$382,358
503,504
238,710
1,541,325
275,974
538,203

42,224,502
2,603,510 .'
1,101,297 '
126,101,068 '
3,795,652
6,115,751 i

49,465,237
5,458,702
5,554,828
55,098,154
7,902,749
14,035,172

2
.1
4
5
6

226,274,981

2,106,249,495

3,480,074 .

141,941,780 '

77,514,842

7

263,664,478
38,618,950
229,825,373 .
4,561,185 •
29,952,760
14,747,385 ,

537,724,124
61,767,121
313,759,139
6,190,186
31,880,828
9,114,866

4,039,703,167
408,182,158
1,314,027,268
26,886,642
200,104,074
58,812,121

6,861,653
911,564
4,307,688
, 56,912
1,817,685 .
2,036,921

980,626,233 '
26,646,192
250,693,003
971,406
29,741,699
5,773,346

130,345,429
18,048,035
99,394,344
1,824,207
19,887,943
7,783,726

9
10
11
12
13

6,047,715,430

$6,443,958
2,656,383
1,616,433
56,873,676
4,549,175
9,172,757

$194,468,508
127,716,627
99,382,792
1,606,570,747
237,702,691
428,119,325

$12,288,900
6,426,400
6,884,800
72,532,700
14,456,668
25,910,050

$16,579,981
11,328,629
7,998,137
134,094,782
19,582,677
36,490,775

81,312,382

2,693,960,690

138,499,518

412,658,579
21,178,490
130,549,476
1,835,495
15,809,597
8,121,357

5.958,925,684
553,574,020
2,212,006,815
40,490,538
313,384,989
98,268,365

590,152,994 •

9,176,649,811

__

.

15,992,423

1,293,851,879

277,283,684

14

2,712,464
746,973
730,769
427,635
1,097,130
821,683
521,562
200,000
425,410
1,787,574
109,461
3,165,198
1,163,028

12,063,102
4,379,990
5,304,413
3,060,777
8,180,446
4,523,297
4,033,590
1,746,836
20,377,809
40,074,182
3,895,187
16,990,841
11,816,422

14,178,385
8,343,364
12,137,856
9,153,375
19,152,173
5,363,720
9,945,812
6,221,923
9,704,328
31,348,141
2,794,746
20,167,454
13,985,407

15
16
17
18
19
21
22
23
24
25
26
27

13,908,887

136,446,892

162,496,684

28

3,248,153
2,870,606
5,943,506
1,604,281
1,274,850
1,677,988
1,521,830
2,422,609

77,803,015
22,648,028
277,876,885
25,323,421
16,448,205
47,213,527
44,249,211
180,765,032

62,299,913
25,762,433
54,658,442
14,202,768
16,357,272
15,307,476
20,827,237
32,428,630

29
30
31
32
33
34
35

3,196,178,923

20,563,823

692,327,324

241,844,171

37

56,840,122
69,560,260
149,373,019
154,608,971
49,169,031
15,653,954
169,688,532
14,870,326
80,390,202

357,152
752,907
1,545,914
1,133,082
894,074
459,235
1,565,691
392,660
1,210,425

3,697,111
6,769,461
34,478,787
22,833,378
3,925,178
1,098,362
22,446,892
1,613,909
9,073,619

3,516,263
3,088,449
9,848,443
10,780,796
3,431,300
1,455,983
7,557,090
1,784,331
8,687,175

38
39
40
41
42
43
44
45
46

56,103,834

700,154,417

8,311,140

105,836,697 .

47

9,809,603
6,128,460
69,993,931
2,718,486
3,032,959
1,347,605
1,649,919
299,845

140,786,085
80,271,009
567,185,799
28,882,773
43,603,838
13,319,665
15,615,193
7,434,797

2,880,429
1,584,535
2,018,022
394,380
367,100
110,060
259,981
199,509

16,012,504
9,780,426
72,896,055
2,140,393
7,503,183
781,197 ,
548,962
286,565

50,149,830
-8,190,319
4,236,101
34,032,925
1,824,829
3,474,035
2,085,918
883,137
72,198

897,099,159

7,814,016

109,949,285

54,799,462

56

581,370,131

960,436,264

7,772,464
. 6,802,929
5,284,604
3,192,587
8,144,302
2,832,993
5,187,034
44458,781
10,743,956
16,738,351
4,047,427
9,715,382
9,888,662

180,764,980
127,985,800
97,545,202
80,316,569
165,722,644 ,
59,026,441
96,858,165
82,284,940 '
158,642,502
347,484,716 .
61,020,437 '
210,772,738 ,
162,283,723 ,

24,516,830
18,579,193
14,689,242
14,131,360
31,173,724
8,497,500
17,909,360
15,947,413
21,955,800
57,529,866
11,661,989
36,682,385
23,863,065

18,271,819
11,779,975
6,933,476
7,225,376
19,413,429
3,766,443
9,994,142
6,737,509
15,674,625
29,642,424
5,625,161
15,831,263
10,585,426

94,809,472

1,830,708,857 ,

297,137,727

161,481,068 .

42,651,152
12,817,882
58,878,848
14,826,768
9,210,414
16,285,524
18,892,378
27,539,994

942,312,236
362,261,614
1,390,648,622
409,973,638
303,358,212
348,461,274
486,469,681
749,517,845

101,859,017
48,608,567
122,703,381
36,819,149
31,688,150
34,263,000
53,859,697
79,821,260

67,415,653
21,995,205
91,384,587
24,720,938
15,630,463
21,304,332
24,240,456
65,775,026

201,102,960

4,993,003,122

509,622,221

332,466,660

5,334,963
5,274,876
9,372,313
8,113,350
2,828,590
684,815
5,706,826
1,004,688
8,119,612

78,247,447
93,023,376
231,466,682
230,325,384
69,792,276
23,005,530
163,926,013
23,007,349
125,836,988

3,477,022
3,671,693
11,206,279
14,270,157
4,702,393
1,856,996
8,872,656
1,269,021
6,777,617

46,440,033

1,038,631,045

109,022,380
84,156,305
57,749,446
46,318,046
86,705,742
36,053,798 .
54,453,699
51,431,259
90,504,530
187,102,529 ,
36,933,893
117,935,597
100,870,375
1,059,237,599
629,686,485
240,376,775
838,081,821
307,303,081
221,959,272 '
228,694,951
341,771,250
388,305,288

20

as

-

13,831,825
4,531,801
45,687,406
3,246,356
2,553.361
1,240,332 '
1,360,125
814,780

1,313,922,321

7,265,986
1,087,083,827
__
977,615
675,412
4,571,281

198,473,825
113,888,281
842,969,880
42,738,242
63,840,622
21,534,565
20,970,392 ,
9,506,514

I.
1
'
'

6,224,308
1,09,
3308,135 I

,
21,046,875,846 :

10,459,777 .
9,180,606
25,014,240
26,699,000
7,670,300
2,481,000
13,795,152
3,077,102
19,697,950 .
118,075,127
20,794,895
11,887,750
96,843,148
6,777,381
5,859,507
3,890,120
2,013,200
1,213,600

'
,
.
.

94,980,798

149,279,601
1,793,984,325

ao
as
as
at
as

81

,
864,088,673 • 57

1,831,743,605 1

14,006,635.023

70,070,363

2,480,353,857

15,118,565 1
11,465,739
21,594,270

3,065,077 1
1,454,302
1,532,664

968,286 •
817,166 ,
1,096,372

9,959,053
7,144,382
11,784,706

331,456

130,304
161,221
3,458,513

664,389
1,888,668
3,722,015 I

48,178,574

6,052.043

2,881,824

28,888,141

331,456

3,750,038

6,275,072

61

1,800,036,368

1,834,625,429

14,035,523,164

70,401,819

2,484,103.895

870,363,745

e9

21,095,054,420 '

•

%eludes deposits of United States disbursing °Meets




48
49

4 Maul'

';1'36,367,528 circulation of national bank .
,
,

e_.4/

*•

30




NATIONAL MONETARY COMMISSION.
T A BL

No. 16.

CAPITAL OF ALL BANKS AND AVERAGE PER CAPITA
, BY STATES, APRIL
Paid-in capital.
Population
,inne 1.1909..

ine
N
Hampshire
Ve ont
Mass
usetts
Rhode land
Connect! t

Amount.

Average
per
capit

gland States

New York
New Jersey
Pennsylvania
Delaware
Maryland
District of Columbia
Emterii States
Virginia......
West Virginia
North Carolina
South Carolina
Georgia
Florida
Alabama
Mississippi
Louisiana
Texas
Arkansas
Kentucky
Tennessee
Southern States
Ohio
Indiana
Illinois
Michigan
Wisconsin
Minnesota
Iowa
Missouri....
Middle 55 ester!' States.
North 1 )3kota
South Dakota
Nebraska.
Kansas
Montana
Wyoming
Colorado
New Mexico
Oklahoma.
Wnstnrn Si Mali

*12,288,900
caf.97
11, 928,400 /14.50
6,884,800
19.81
72,532.7W
23.35
14,456,1&
27.80
25,9 ,
050
24.24

6,213,000

14999,518

22.28

8,814,000
2,378,000
7,287,000
198,000
1,393,000
364,000

163,664,478
38,618,950
229,825,373
4,561,185
29,952,760
14,747,385

29.91
16.24
31.34
23.03
22.30
40.51

20,384,

581,370,131

28.52

2.0 .,000
1/36,000
,148,000
1,520,000
2,580,000
682,000
2,133,000
1,815,000
1,642,000
&32,000
1,483,000
2,432,000
2,271,000

24,516,&30
18,579,193
14,689,242
14,131,360
.11,173,724
8,497,500
17.909,360
I 1,947,413
21,955,800
57.529,866
11,661,989
36,682,385
23,863,065

12.01
16.35
6.84
9.30
12.08
12.46
8.90
8.78
13.37
15.01
7.86
15.08
10.50

25,714,000 I

297, 137,727

1155

4,627,000
2,853,000
5,785,000
2,675,000
2,342,000
2,165,00(1
".265,000
\478,000

New

724,000
443,000
3.51,000
3,108,000
520,000
1,069,000

101,859,017
48,608,567
122,703,381
36,819,149
31,688,150
34,263,000
53,859,697
79,821,260

22.01
17.04
21.21
13.76
13.53
15.82
23.78
22.95

26,1,000509,
622,221

19.441

510,)0
509,0lQ
1,077,
1,675,000
338,000
111,000
654,000
230,000
1,335,000 ,
6,437,000

10,459,777
9,180,606
25,014,240
26,699,000
7,670,300
2,481,000
13,795,152
s, 3,077,102
'1.9,697,950

20.51
18.03
23.22
15.94
22.83
22.35
21.09
13.38
19.75

670,000
505,060
1,732,000
239,000
340,000
42,000
155,000
95,000

118,1175,127
18.34
20,794,895
31.03
II,887,/GO
23.54
96,893,14
55.91
6,777,381
28.35
5,859,507
17.23
3,890,120 81112.62
2,013,200
11.99
1,213,600
12.

3,778,(K)0

119,279,601

88,716,000

1,793,984,325

20.22

3,065,077

19.59

1,454,302
1,532,664

1.92
.19

Islam( possessions

210,000
1,020,000
b8,000,000
_
9,230,000

6,052,043

.65

united States and island possegslons

97.998,000

1,800,036,368

18.38

Washington
Oregon
California
Idaho
Utah
Nevada
Arizona.
Alaska
Pacific State
ni ted States..
.
Porto Rico
Philippines

Estimated by Actuary of the Treasury.

b Estimate for Mk

.5

era.

1

FA ....

et

ltniteA 1!itatet-i ,(4enate,
WASHINGTON, O. C.

00-e-

c,4„,

11A-LAcc)
°V-

ift4r,t4,,..

caL wr
"

eA-4-t-LsO—t,

1-0




a--a-44-4 444- kiit-A--tA-t_
" 1




MONETARY
FORMS ENTI-4:.; 0PE
Monetary Files.

UNITED STATES SENATE
PUBL,C DOCUMENT
FREE




1J. b. S.

OHIO.

SUGGESTED CHANGES IN NATIONAL BANKING LAWS
BOSTON, MASS., Sept. 26, 1908.

Section 18 of the Act of Congress approved May 30, 1908, known as the AldrichVreeland
Bill, provides "that it shall be the duty of this Commission to inquire into,
and report to Congress at the earliest date practicable, what changes are necessary or desirabl
e in the monetary
system of the United States, or in the laws relating to banking and currency
." Under this
authority the National Monetary Commission is making a careful study
of the laws authorizing
the establishment of National Banks and their administration. Believing
that the officers of
National Banks have had the most intimate knowledge of the workings of these
laws, and have
considered the reasons for or against any changes which may be suggeste
d, it seems wise to the
Commission that their opinion be obtained before making any recommendation
to Congress.
For that reason we request that, at as early a date as possible, a reply be made,
either by the
President or some officer of your bank, to the following questions.
1. Section 5240 of the Revised Statutes authorizes the Comptrol
ler of the Currency, with
the approval of the Secretary of the Treasury, to appoint suitable persons
to make examinations
of National Bank Associations.

Should, in your judgment, the method of appointing examiners be
continued as at present,
or be made subject to Civil Service rules?
Is it desirable to apply Civil Service regulations to the tenure in office
of bank examiners?
2. The same Section of the Revised Statutes, 5240, provides
the method for paying examiners, basing it on the fee system.
In your judgment, is it desirable to change this to a salary or per diem
basis, to which there
should be added the necessary expenses incurred in making examinat
ions; it being understood
that banks shall be assessed to pay salaries and expenses in a similar
manner as now provided
for by the existing law?
3. In making assessments to provide a fund to pay examiners, and other
expenses, do you
think the law should be changed so as to base the amount of this assessme
nt on capital and gross
assets rather than on capital alone, as the law now provides?
4. Do you think it would be desirable to provide a force of
assistant examiners, to work in

co-operation with examiners in larger places, and, in future, when
vacancies occur, to recruit
the force of examiners from these assistants?




5. As examiners are frequently in charge of failed banks,
acting as temporary receivers,

do you think it would be desirable to require them to give a suffici
ent bond for the protection
of the Government and the bank when such contingencie occur?
s
6. Section 5200 of the Revised Statutes limits the total
liabilities to any Association of any
person, company, corporation or firm, but excepts bills of exchan
ge in the following terms: "But
the discount of bills of exchange, drawn in good faith agains
t actually existing values, and the
discount of commercial or business paper, actually owned
by the person negotiating the same,
shall not be considered as money borrowed." Evidently the
intention, in making this exception, was to enable the owner of such paper to realize on
it at once, preventing the necessity of
tying his capital up in forms of indebtedness not of his
own making. Frequently banks have
allowed a liability of this class to greatly exceed in amoun
t what they could legally take as a
direct loan. Many failures have resulted from these excess
ive loans made to a single, or allied,
interest.
In what manner do you think the law can be amended to
remedy this condition, and sufficiently limit the amount of paper of this character which
a bank can properly discount?
Should the Comptroller, in such cases, be given authority
to take action when, in his judgment, loans are being made in excess of the limit indicated
by prudence and safety?
Should directors and officers of banks be placed in a differe
nt category from general creditors in such cases?
Should a penalty be provided for violation of such change
s as may be recommended, enforcible against the officers or directors responsible for such
violation?
7. Section 5205 of the Revised Statutes provides for the
impairment of capital. Under
the present law this impairment must be made good by a stock
assessment within three months
from the receipt, by the directors, of notice from the Comptr
oller. If this is not (lone, the Association is placed in liquidation.
Should not the Comptroller have authority in such
cases to protect depositors who may,
during the three months specified, deposit their money in a
bank in which he, the Comptroller,
knows the capital is impaired? If so, in what manner
do you suggest that such deposits should
be protected? There have been many instances of bank
failures, and some serious losses to
depositors in such cases.
8. In what manner would you suggest the limitation
of borrowing from a bank by its officers,
directors or employees, both in making direct and
indirect loans, and would you make any difference in such cases between officers and directors?
Do you think any officer should be permitted to borrow from his own bank?

9. The Supreme Court of the United States has held
that it is unlawful for a National Bank
to purchase or invest in the shares of stock of other
corporations, but the laws of several States
authorize the ownership of stock of National Banks
by other corporations. There have been
several instances in which the directors of the holdin
g corporation and of the National Bank
have been the same individuals, and when trouble arose
the holding corporation became involv
ed
as well as the bank, and in such cases the possibility of
double liability was entirely annulled.




In your opinion, would it be wise to provide against the holding of shares
of National Banks
by any other corporation, except in cases when taken in satisfaction of debts?
10. In your judgment, is the operation of another banking institution
in the same building
with a National Association so undesirable that legislation should be recommend
ed preventing
it? There have been cases where securities owned by one corporation
have been used during
examinations of the other, preventing examiners from obtaining a correct knowledge
of the condition of either of such allied corporations.
11. Under Section 5211 of the Revised Statutes, which provides for bank reports,
banks are
not required to make them in duplicate, and in several instances the examiner has been
furnished
by the officers of the bank with a report entirely dissimilar from the one on file at
the Department in Washington, and, in using the imperfect report, he has found that the bank's
books
corresponded to it. This permits of deliberate falsification of accounts.
Would it, in your judgment, be wise to require that reports be made in duplicate, both
reports being sent to the Comptroller of the Currency, and one copy furnished to the examiner
by the Comptroller when about to undertake the examination of the bank?
12. Section 5211 of the Revised Statutes provides for the publication of reports, showing
the condition of National Banks, including the direct and indirect liabilities of officers and
directors.
In your judgment, would it be wise, in publishing such reports, to show the individual liability of the officers and directors; not individually, but collectively?
13. Section 327 of the Revised Statutes provides for a Deputy Comptroller of the Currency,
to be appointed by the Secretary of the Treasury, and the Legislative, Executive and Judicial
Appropriation Bill, approved May 22, 1908, provides for an additional Deputy Comptroller,
to be appointed by the President.
Would you recommend that both these Deputies be appointed by the Secretary of the Treasury as a result of Civil Service examinations, and be subject to Civil Service regulations?
14. Section 5209 of the Revised Statutes makes it a misdemeanor for an officer or an employee
of a bank to make false entries with intention to deceive, but the Courts have decided that this
does not apply to reports made to the Comptroller of the Currency, as he is not mentioned in
the law.
Should not the law be extended to apply to false reports made to the Comptroller?
15. In your judgment, should the law be so changed as to make it possible to enforce the
liability of shareholders who have foreseen the insolvency of a bank in which they own stock,
and have transferred that stock, to escape liability, before an assignment is made?
16. The law as it now stands requires every National Bank to keep on deposit with the
Treasurer, in lawful money of the United States, a sum equal to five per cent of its outstanding
circulation, to be used for the redemption of circulating notes. There have been many instances
where banks have failed to promptly reimburse the Treasury for the redemption of their circulation, and, as the law now stands, the only recourse the Comptroller has is to sell the bonds




held against circulation, or to appoint a receiver, either of which courses might be detrimental
to the interests of the Government, the note holders and creditors of the defaulting bank. At
the present time the aggregate deficiency due the Treasury for this reason amounts to several
millions of dollars.
Should not the Treasurer be authorized to, in some way, enforce this law without taking
the extreme measures which are now provided, and, if your answer is in the affirmative, in what
way would you provide for its enforcement?
17. The present law limits the amount of the notes of the denomination of five dollars which
a bank may have outstanding to one-third of its total circulation. Frequent complaints are
made in some localities that this amount is insufficient to meet the requirements for small bills.
Do you think it desirable that this limit be increased?
18. Would it be well, in your opinion, to change the existing laws so that liquidating banks
could, in some way, arrange to pay depositors more rapidly? A careful examination of the
assets of failed banks will frequently show about how much dividend they can eventually pay,
and considerable distress would be prevented if something approximating this amount could be
paid to depositors without any delay.
19. Have you any suggestions to make relative to changes in the organization of the Comp-

troller's Office?
There are many other minor changes which it is apparent should be made in the administrative features of National Bank laws, some of which may occur to you, and the Commission
will be gratified if you, in your answer to the above questions, will make any recommendations
which seem to you wise, giving your reasons for urging such changes. In replying please direct
to Room e13, No. 60 Congress Street, Boston, Massachusetts.




JOHN W. WEEKS,
Vice-Chairman of Committee to consider
changes in National Banking Laws.

SUGGESTED CHANGES IN NATIONAL BANKING LAWS
BOSTON, MASS., Sept. 26, 1908.

Section 18 of the Act of Congress approved May 30, 1908, known as the
Aldrich-Vreeland
Bill, provides "that it shall be the duty of this Commission to inquire
into, and report to Congress at the earliest date practicable, what changes are necessary or desirabl
e in the monetary
system of the United States, or in the laws relating to banking and currenc
y." Under this
authority the National Monetary Commission is making a careful study
of the laws authorizing
the establishment of National Banks and their administration. Believin
g that the officers of
National Banks have had the most intimate knowledge of the working
s of these laws, and have
considered the reasons for or against any changes which may be suggest
ed, it seems wise to the
Commission that their opinion be obtained before making any recomme
ndation to Congress.
For that reason we request that, at as early a date as possible, a reply
be made, either by the
President or some officer of your bank, to the following questions.
1. Section 5240 of the Revised Statutes authorizes the Comptroller
of the Currency, with
the approval of the Secretary of the Treasury, to appoint suitable
persons to make examinations
of National Bank Associations.
Should, in your judgment, the method of appointing examiners be
continued as at present,
or be made subject to Civil Service rules?
Is it desirable to apply Civil Service regulations to the tenure in
office of bank examiners?
2. The same Section of the Revised Statutes, 5240, provide
s the method for paying examiners, basing it on the fee system.
In your judgment, is it desirable to change this to a salary or per
diem basis, to which there
should be added the necessary experses incurred in making examina
tions; it being understood
that banks shall be assessed to pay salaries and expenses in a similar
manner as now provided
for by the existing law?
3. In making assessments to provide a fund to pay examiners,
and other expenses, do you
think the law should be changed so as to base the amount of this
assessment on capital and gross
assets rather than on capital alone, as the law now provides?
4. Do you think it would be desirable to provide a force
of assistant examiners, to work in

co-operation with examiners in larger places, and, in future,
when vacancies occur, to recruit
the force of examiners from these assistants?




5. As examiners are frequently in charge of failed banks, acting as temporary receivers,

do you think it would be desirable to require them to give a sufficient bond for the protection
of the Government and the bank when such contingencies occur?
6. Section 5200 of the Revised Statutes limits the total liabilities to any Association of any

person, company, corporation or firm, but excepts bills of exchange in the following terms: "But
the discount of bills of exchange, drawn in good faith against actually existing values, and the
discount of commercial or business paper, actually owned by the person negotiating the same,
shall not be considered as money borrowed." Evidently the intention, in making this exception, was to enable the owner of such paper to realize on it at once, preventing the necessity of
tying his capital up in forms of indebtedness not of his own making. Frequently banks have
allowed a liability of this class to greatly exceed in amount what they could legally take as a
direct loan. Many failures have resulted from these excessive loans made to a single, or allied,
interest.

In what manner do you think the law can be amended to remedy this condition, and sufficiently limit the amount of paper of this character which a bank can properly discount?
Should the Comptroller, in such cases, be given authority to take action when, in his judgment, loans are being made in excess of the limit indicated by prudence and safety?
Should directors and officers of banks be placed in a different category from general creditors in such cases?
Should a penalty be provided for violation of such changes as may be recommended, enforcible against the officers or directors responsible for such violation?
7. Section 5205 of the Revised Statutes provides for the impairment of capital. Under
the present law this impairment must be made good by a stock assessment within three months
from the receipt, by the directors, of notice from the Comptroller. If this is not done, the Association is placed in liquidation.
Should not the Comptroller have authority in such cases to protect depositors who may,
during the three months specified, deposit their money in a bank in which he, the Comptroller,
knows the capital is impaired? If so, in what manner do you suggest that such deposits should
be protected? There have been many instances of bank failures, and some serious losses to
depositors in such cases.
8. In what manner would you suggest the limitation of borrowing from a bank by its officers,
directors or employees, both in making direct and indirect loans, and would you make any difference in such cases between officers and directors? Do you think any officer should be permitted to borrow from his own bank?
9. The Supreme Court of the United States has held that it is unlawful for a National
Bank
to purchase or invest in the shares of stock of other corporations, but the laws of several States
authorize the ownership of stock of National Banks by other corporations. There have
been
several instances in which the directors of the holding corporation and of the National
Bank
have been the same individuals, and when trouble arose the holding corporation became
involved
as well as the bank, and in such cases the possibility of double liability was entirely annulled.




In your opinion, would it be wise to provide against the holding of shares of National
Banks
by any other corporation, except in cases when taken in satisfaction of debts?
10. In your judgment, is the operation of another banking institution in the same
building
with a National Association so undesirable that legislation should be recommended
preventing
it? There have been cases where securities owned by one corporation have been used
during
examinations of the other, preventing examiners from obtaining a correct knowledge of the
condition of either of such allied corporations.
11. Under Section 5211 of the Revised Statutes, which provides for bank reports, banks are
not required to make them in duplicate, and in several instances the examiner has been furnished
by the officers of the bank with a report entirely dissimilar from the one on file at the Department in Washington, and, in using the imperfect report, he has found that the bank's books
corresponded to it. This permits of deliberate falsification of accounts.
Would it, in your judgment, be wise to require that reports be made in duplicate, both
reports being sent to the Comptroller of the Currency, and one copy furnished to the examiner
by the Comptroller when about to undertake the examination of the bank?
12. Section .5211 of the Revised Statutes provides for the publication of reports, showing
the condition of National Banks, including the direct and indirect liabilities of officers and
directors.
In your judgment, would it be wise, in publishing such reports, to show the individual liability of the officers and directors; not individually, but collectively?
13. Section 327 of the Revised Statutes provides for a Deputy Comptroller of the Currency,

to be appointed by the Secretary of the Treasury, and the Legislative, Executive and Judicial
Appropriation Bill, approved May 22, 1908, provides for an additional Deputy Comptroller,
to be appointed by the President.
Would you recommend that both these Deputies be appointed by the Secretary of the Treasury as a result of Civil Service examinations, and be subject to Civil Service regulations?
14. Section 5209 of the Revised Statutes makes it a misdemeanor for an officer or an employee
of a bank to make false entries with intention to deceive, but the Courts have decided that this
does not apply to reports made to the Comptroller of the Currency, as he is not mentioned in
the law.
Should not the law be extended to apply to false reports made to the Comptroller?
15. In your judgment, should the law be so changed as to make it possible to enforce the

liability of shareholders who have foreseen the insolvency of a bank in which they own stock,
and have transferred that stock, to escape liability, before an assignment is made?
16. The law as it now stands requires every National Bank to keep on deposit with the
Treasurer, in lawful money of the United States, a sum equal to five per cent of its outstanding
circulation, to be used for the redemption of circulating notes. There have been many instances
where banks have failed to promptly reimburse the Treasury for the redemption of their circulation, and, as the law now stands, the only recourse the Comptroller has is to sell the bonds




held against circulation, or to appoint a receiver, either of which courses might be detrimental
to the interests of the Government, the note holders and creditors of the defaulting bank. At
the present time the aggregate deficiency due the Treasury for this reason amounts to several
millions of dollars.
Should not the Treasurer be authorized to, in some way, enforce this law without taking
the extreme measures which are now provided, and, if your answer is in the affirmative, in what
way would you provide for its enforcement?
17. The present law limits the amount of the notes of the denomination of five dollars which
a bank may have outstanding to one-third of its total circulation. Frequent complaints are
made in some localities that this amount is insufficient to meet the requirements for small bills.
Do you think it desirable that this limit be increased?
18. Would it be well, in your opinion, to change the existing laws so that liquidating banks

could, in some way, arrange to pay depositors more rapidly? A careful examination of the
assets of failed banks will frequently show about how much dividend they can eventually pay,
and considerable distress would be prevented if something approximating this amount could be
paid to depositors without any delay.
19. Have you any suggestions to make relative to changes in the organization of the Comptroller's Office?
There are many other minor changes which it is apparent should be made in the administrative features of National Bank laws, some of which may occur to you, and the Commission
will be gratified if you, in your answer to the above questions, will make any recommendations
which seem to you wise, giving your reasons for urging such changes. In replying please direct
to Room 213, No. 60 Congress Street, Boston, Massachusetts.




JOHN W. WEEKS,
Vice-Chairman of Committee to consider
changes in National Banking Laws.

kror
NUMBER
OF
1/
39/VMS

_D/1q6IMAI

/2000

SHOW/N6 4/0/1BCR

PIWAITE, TRTE,/IND NfT/0/09L BRAIKS, /877-19
_

1/000

/0000

37ATE BfiNKS

PRIVIITE B17411(.5 ------

9000
N11770Nla BIWA'S --- — —

00D

7000

6 000

5000

. .....
0
,,
.

4a
_411
40'
1,
#

4000

4
0"

, .m.”..m....
go
...
110
0

44

MO.....
...#
...

o
..
..,I.

.1..

II.
11

Oftiallb

O.... ."'

IMMIff.

=11.40#"

0....

j000
.......
1......

0....
1"."'..
I.
°.

2000

•

/000

YERI? le




-

A58/

4583

/683

/d87

/689

/891

/893

/835

/8a7

/4999

/90/

1903

/805

-r°
.

e
11
" t

D/IWRIIM

NUMBER
OF

wiNo 4/0/145rR OFPR/1 ,6 TfiTE,fiN_D Nic/770/1/fiL 817A1115, /877-1909
/
2
'1TE

BRNICS
/2 000

/1 000
STATE BfiNKS

/0000

PR/V/ITE B5N1(5 — — --- —

9000

NHT/ONRL 13,9NIIS — — —

8000

7000

.,
/
,/
,
/
6000
/
,
I
•

•
0#
I
0
I

.5000
/

/
...

•.•

1
/

4000

0
0
... 0o." ....
000 ...

.0..

3000
.......
....."

2000

—

/000

68/

/883

/885




i
/687

/8119

/891

/t9?

/A cl_c

/A.97

/A90

/96/

1.94A

1.903

1907

ig• 9

-Flo
NUMBER
OF
or
B/INKS




NUMBER

_D/f/GRAA/1

OF

5//OW/A/C A/UMBCROF PR/VRTE,6 TR TE,IND N117:/GNIIL BRAIM5, /877 —/909

/2000

.
BfiN/1 S
/2 000

/1 000

1/000

s rfi TE

/0000

/0000

BAN/IS

PRIVeITE BANA'S

9000

9000

NATIONAL BIWA S — —

8000

6000

7000

7000

6 000

6000

5 000

.5000

-----

4000

4000

-------

3000

3000

2000

2000

/ 000

/000

VTAR /877

/879

/68/

/88,3

1683

/887

/669

/691

/893

/835

I87

/699

/90/

ISO.)

/903

/907

/909

AG-RICITETUatE.
I .i).1 NS.

REA I. ENT ATE M4 )1I1'G.k( ES.*

BRAN

Rates of interest.
Are they
permitted.

How secured.

Rate of interest
upon.

Usual character of collateral.

Avera
perio(

For average
period.

For lower
period.

Usual character of
property.

Usual length ! Usual percent- Usual rate of
of time.
age advanced.
interest.

How managed.

7

*Banks may not loan on real property, but they are
allowed to take a mortgage on real estate as "additional
Digitized forof the value at the current Inen1 rates
FRASER
security" after the loan has been made. Lenders of
money on real estate (loan and


.1 Gr-RICU ETITIIE.
REA I. EsTATE MORTGAGES.*

BRAN( ES.
'0

tates of interest.
erage

od.

For longer
period.

Usual character of Usual length Usual percent-I Usual rate of
property.
of time.
age advanced.
interest.

1.i ENERA I.

How managed.

Discretion of
manager.

TREND OF INTEREST HATES IN RECENT YEARS.

1

1 estate as "additional security"after the loan has been made. Lenders of money on
real estate (loan and trust companies or individuals) make loans for thee to live years on

about 60 per cent


AGOItEGATE OF DEPOSITS.

PROVINCES AND CITIES OR
TOWNS.




POPI I kTION.

ARACTER OF LOCAL
InWSINI*44.

NAMES AND CHARACTER OF BANKS.
Savings.

Current balSAM.

Time.

Proportion
loaned
locally.

Proportion
bearing
interest.*

ARE TIME CERTIFI—
CATES ISSUED.

*All interest-bearing accounts are "savings" accounts except

where specified RS current balances.

A(:(.1(1, ATE
;(;

DEPOSITS.

INTIERENT PAID ON DEPOSITA.

DiscouN is.

ExCII A NOE.

i
Savings.

Current I

Time.

Proportion
1oane(1
locally.

Proporti( rn
bearing
interest.*

ARE TIME CERTIFICATES ISSUED.

Rates.

Savings.

Current balances.

Time.

Is singleUsual
name Is guaran- length of
paper
paper teed
tune
required.
used.
Paper.

Are secRates on tions 93
checks, and 94 of
For
bank
Forlonger drafts,
average
act
period. bills, etc.
period.
availed of.

1

^

*All interest-bearing accounts are "savings" accounts except where specified as
current balances.



••

11
f
\

State of

Congressional District

Population _
Character of business in territory covered by this
report.

Number and kinds of banks:
(a) National
(b) State
(e) Trust Companies
(d) Savings
(p) Private _ _

DEPOSITS:
Interest paid on deposits—(a) Demand
(b) Time
Do banks make any charge for handling accounts? _
(1) Nature of charges and amount
(2) Charges for collection and exchange

DISCOUNTS:
Usual length of time of paper
Rates of discount for average period
Rates of discount for longer periods_




1
Subdivision

County.
Town.
City.

Congressional District

State of

1County.

Subdivision Town.
City.

Population
Character of business in territory covered by this
report.

Number and kinds of banks:
(a) National
(b) State
(c) Trust Companies
(d) Savings

•

(e) Private

DEPOSITS:
Interest paid on deposits—(a) Demand

_

(b) Time
Do banks make any charge for handling accounts? _
(1) Nature of charges and amount
(2) Charges for collection and exchange

DISCOUNTS:
Usual length of time of paper
Rates of discount for average period _ _ _ _
Rates of discount for longer periods_ -




State of

Congressional District

Population
Character of business in territory covered by this
report.

Number and kinds of banks:
(a) National
(b) State
(c) Trust Companies
((I) Savings
(e) Private

DEPOSITS:
Interest paid on deposits—(a) Demand _ _ _
(b) Time
Do banks make any charge for handling accounts? _
(I) Nature of charges and amount
(2) Charges for collection and exchange

DISCOUNTS:
Usual length of time of paper
Rates of discount for average period
Rates of discount for longer periods_




Subdivision

County.
Town.
City.

iCounty.

State of

Congressional District

Population
Character of business in territory covered by this
report.

Number and kinds of banks:
(a) National
(b) State
(c) Trust Companies
(d) Savings
(e) Private

DEPOSITS:
Interest paid on deposits—(a) Demand _ _
(b) Time
Do banks make any charge for handling accounts? _
(1) Nature of charges and amount
(2) Charges for collection and exchange

DISCOUNTS:
Usual length of time of paper _ _ _
Rates of discount for average period
Rates of discount for longer periods




.
Subdivision Tan.

State of

Congressional District

County.

Subdivision Town.
City.

Population_ _
Character of business in territory covered by this
report.

Number and kinds of banks:
(a) National
(b) State
(c) Trust Companies
(d) Savings

--

(f) Private

DErosyrs:
Interest paid on deposits—(a) Demand _
(b) Time
Do banks make any charge for handling accounts? _
(1) Nature of charges and amount
(2) Charges for collection and exchange-------

DISCOUNTS:
Usual length of time of paper _
Rates of discount for average period ___ _ ______
Rates of discount for longer periods




OVERDRAFTS:

Are overdrafts permitted?

0

....

_ _

If so, how secured?
Rate of interest upon overdrafts.
LOANS:
Average period _ _ _
Rates of interest for average period
Rates of interest for longer periods _ _
What institutions loan upon real estate:
Usual character of property
Usual length of time
Usual percentage advanced
Usual rate of interest
General trend of interest rates in recent years
Deficiencies in local hank facilities




(Signature)

OVERDRAFTS:
Are overdrafts permitted
If so, how secured?. _
Rate of interest upon overdrafts
LOANS:
Average period. _ _ . _
Rates of interest for average period
Rates of interest for longer periods _ _
What institutions loan upon real estate:
Usual character of property-----Usual length of time
Usual percentage advanced
Usual rate of interest
General trend of interest rates in recent years
Deficiencies in local I-auk facilities




Sipuzture)

.M.

OVERDRAFTS:

Are overdrafts permitted? ......

.... _

If so, how secured?
Rate of interest upon overdrafts_
LOANS:
Average period _ _ _ _
Rates of interest for average period
Rates of interest for longer period:- _
What institutions loan upon real estate:
Usual character of property
Usual length of time
Usual percentage advanced -----------Usual rate of interest
General trend of interest rates in recent years
Deficiencies in local bank facilities




(Sifflature)

OVERDRAFTS:
Are overdrafts permitted?
If so, how secured? _ _ _ _
Rate of interest upon overdrafts

LOANS:
Average period_ _ _
Rates of interest for average period
Rates of interest for longer periods _ _ .
What institutions loan upon real estate:
Usual character of property
Usual length of time
Usual percentage advanced
Usual rate of interest
General trend of interest rates in recent years
Deficiencies in local hank facilities




•
(Sibtature)

OVERDRAFTS:
Are overdrafts permitted? .
If so, how secured?. _
Rate of interest upon overdrafts. _ .
LOANS:
Average period _ _
Rates of interest for average period
Rates of interest for longer periods _ _

____

What institutions loan upon real estate:
Usual character of property
Usual length of time_ _ _
Usual percentage advanced _ _ _ _ ___
Usual rate of interest._

__

General trend of interest rates in recent years
Deficiencies in local bank facilities




)
Siona t urr

inanc ia.t. c":,u est ion 8--Monza Juggl
OI- course there may be--as lately seems to have been the case-contraction of the money by hoarding, either from fright or for sinis-.
ter entja; and so long as the hoarding continues, the result is the same
as that which obtains when the currency is tin/rored with and contracte(1
;lut it is evident that--in whichby the "safe and sare u 1a7-maerm.
ever way the money gets contracto--the greater the extent of the prior
inflation, the f,;reat•Dr may be the extent of the contraction and the
more disastrous tho results.
12th--Ts the banking system of our country *safe, sound and sane."
and for the here!It of the whole people; or is it upheld and fostered
While
by our government officials for the sole benefit of bankers?
the barfters, through this ban17ing system, have--at the expense of the
people--been piling Up billions of dollars, who else, through the same
system, has beer pilinl up so much as one single dollar?
13th--About how far short does the money question come from lqualir7
in tm5i2martIv2tve tnportance all other economic ouestions combined?
14th--In Lincoln's day the uinterestA" were able to fool a part of
At
the people all the time, and all the people a part of the time.
the present day are not the lying, deceivin7, plucking and fl3ecing
"interests* (owning, as they do, nearly all the preachers, printers,
and other so-called teuxhers) fooling nearly all the people nearly all
the time?
13th--What better remedy can he offered for the presert rotten concitions, than to elect and appoint persons to office whc will run
things, and see that things are run, not in the interest of the pluto:.y
crats but in the interest of the whole poople?
This remec. never will
be adopted, however, while a majority of the voters retain any of the
rot long stuffed into them by grafting politicians.
16th--Here is a sample of the rot we 7:et on economic ouestfcns from
the mouthpieces of the plutocrats: "Our country has in circulation, at
the present time, more nonoy than it ever had before, p,73r capita; more
than any other country has or over had; and the beauty of it all 13,
that every dollar is worth a hundred cents!--and every hundred cents
Is werth a dollar!!"
Another argument (?) handed cut for the nourishment of the sapheaes Is, that m in forelom countries our money will buy
from two to five times as moll as it will buy in our own country! m
What ist be the mental caliber of men who gulp down such twaddle,
and thin!r_ tnlmselT3s fed wit!. "safe and sane" politico-economic
science?
Miles Sidiin7er.
ConcorrA, N. H., November 1, 1908.







\ . ;,: litj
VL
NON

A System of Currency, founded on the Natural
Law of Demand and Supply, and not on Arbitrary L5g1slation.

0

W HEREAS, all the coin and curr:incy used
to—day, as a matter of fa'A, is received as satisfac—
tory, because guaranteed by thE, Ii nited.
directly or indirectly;

1•Jates Govt rnent,
,

and,

W HEREAS, saff.tty is best secured by
methods that are simple and easily understood;
W HEREAS

and,

the demand is now imperative

for; us-chdnge from the present vitricate system of curran
to one that is simply and finally mottled.
the followin

Therefore,

is suggested:

_First
There should be only throe Icird

of cumncy:

(a)

Gold, or certificates of deposit of said

(b)

Silver

"

z=ilv r.

(c) Bond Certificates, secured by a deposit of
United States bonds.
In each and every case cold, silver o.r bonds
should be on deposit in the United Sttes Treasury, dol—
lar for dollar, for all certificates issued;

siiid de—

posits to be guaranteed by the United States Government.
The silver certificates should. be from one (1)
dollar to five (5) dollars in .:lusive, and all isues what—
ever, from ten (10) cents to five (5) dollars should be
reserved for silver only.

.1




The bond certtfieates should be for ten,
twenty and fifty dollars.
The gold certificates should be for one
hundred (100) dollars rind L;pwards.
Al! these certificates should be received as
legal tender for all payments to the iinited States Government, or individuele, each th

:mime as the other.

S e e 0 n d.
AND, WIIFRIAS, the de,Iend for currency is perpetual, ther-fore, the bones thet guarantee certifioetes
should elso be eerpetuel, i.e., like English .loesels,
the prin'Apal should never be peid, hut only the interest,
and that in ,Nld.

These bond

should draw two (2)

pee cent. interest per annum and should be known as
"Our-fincy Bonds", and used only for curreryly protection
and
not for public s le.

Then certificates,

based on these

, urnency bonds, ere in eir':ulation, the bonds that
:
guarent e
suAi curren;y will be in the United States Treasur
y, and
will belon .): to the United States Government, end will,
therefore, net cA.1 for the peynent of eny interest.
charge for interest on th se bonde will,
very smell.

The

ndcessarily, be

These :ond certificates will form e Quickly

elastic , ureencly that oen be ';onverd from certifi
:
cates
to ' rrency Bonth;", or vice versa, on short notice.
,Cu
N o t e:

The United States Government should

not pay a second party, i.e., Ranks,

lArge premium for

iseuing eureency, whin it guarantees ii effect
all the
-2-




currency thus issued, and een itself peer ou

said notes,

or exchange them for notes to be retired.
When currency is a drug, Bankerr, Trust Com—
punies and othdrs will deposit bond certifie;etes in the
United Iltate, Treasury, and receive two (2) per cent.
bonds (or, if preferred, demand certificetes p! yi
interest) in exchange for the same;

and then, when

circulation is Tledee to move crops, etc., currency bonds
or demand certIliceee will be exchaned at

h

United

,ates Treasury for "Bond Certific,etesn, ell done r•A
eny time and in a few minutes.
These exclellges will be reulated by the
demnd for currency, chiefly throueh the, eediu

of ex—

perienced bu:Anese nen.

Third.
AND, WH- A-EA2, safety and economy demand the
2
retiring of all e;reen—back, treesury and National Rank
Notes;

therefore, the eforeseid bOddvcertifie3etes should

be iesued to retire said notes or cu!.roney.

InFmtv.:h as

the United SttAes Government now holds, as Trustee,
ninety (90) per

of all the bonds held as collateral

for National Rank notes (having pid for said nirety
per

90)

it. by said Nationel BTFIZ riots), it follows, that

the said rJollaterel bond

will be replaced by "2:/0 Per—

petual Bonds", that wiil seldom call for eny interest, as
explained abov.e.

florid Certiftes will better satisfy

the peeplo, end, at the Ballle

-eln.ov

ous element in our liatioeel cur'en3y

forever e dengerr
green—backs an

unsecured treasury notes), for 2) Perpetual Bond

held

in the United StateF Trtlailury, dollar for dollar, will
—3—

isk°




i*Je

flbsolutely command confidence.

Fourt h.

Under the above plan, the three forms of money
gold, silver and bond certificates will soon furnish
all the currency needed, and the natural law of Demand
and SulY):V will regulate the amount of each kind of
currency.
The United States can do as defined above,
without consultation with any othr nation, and can do it
at any tine.

The Great Republic will thus again "en—

lighten the World” in a matter of su.,reme 3mportance.

In

fact, the only monetary questions left for international
Lgreoment iiii be the purity of grad (:oins, and the unit
of value in order that all the world may Jse the same
currency.

John Torrey,
#10 Winthrop Terrace,
East Orange, N. J.
—4_.

•
0




A System of Currency, founded
on the Natural Law of Demand , Ind
t
Supply, and not on Abritrary
Legislation.

John Torrey,
'Inthrop Terrace,
;
,
East Oran: , N. J.

TREASURER'S OFFICE.
-Form 5702.
ACCOUNTS op.!. AND R.
-Ed. Dec. 1-10-100.

MONTHLY STATEMENT.
PAPER CURRENCY of each Denomination Outstanding Novemb
er 30, 1910.
1

Denomination.

One dollar

$1, 840,650

Two dollars

I, 386,028 I

Five dollars
Ten dollars

Five thousand dollars
Ten thousand dollars

Treasury
Notes of 1890.

National
Bank Notes.

NET

$150,829,47

$148, 254, 358

164,320
133,091,380

62,115,534

63,922,930

240,563,347

512 740 2
667,052,387

1, 136,790

18, 440,502

563,150

2, 178,625
6, 230,200

$190,851,410

21,723,361

241, 792,404

16,850

322,849,810
219,917,740
16, 384,950

6,877.570
8,021, 110

203,300

37, 160, 700

73, 824,500
14, 759,500

583, 220

65,552,500
82,905,000

26,000

6,090,500

48,849,355

90,000

122,000

23,000

10,000

25, 500

47,978

347, 681,016

3, 494,000

730,073,488

1,000,000
346, 681,016

487,591, -.66
:

`Y2
1 .‘45

04„- O4t(y1
s

75,450 890
8,001,920
20,965,500

108, 455,500
82,905,000

(pri.7.20

191, 820,000

Fractional parts
TUT.“.
Unknown, destroyed

TOTA L.

$343,610

804,005

42, 732,000

Silver
Certificates.

257,048

130,491,016

_

Gold
Certificates.

$390,857

138, 281,495

Twenty dollars
Fifty dollars
One hundred dollars
Five hundred dollars
One thousand dollars

United States
Notes.

47,978
910, 354,669

488,190,000

2,479, 793, 173

910, 354,669

488, 190,000

2,475, 575,518

*3,217,655
3,494,000

*Redeemed but not

726,855,833

4, 217,655

orted Iiti,noniinat ion.

MS

Trcasurg licpartntcnt,
OFFICE OP 111F. TREASURER OF THE UNITED STATES.
-




.
•




EXI-LAAATURY NOTLS
1st.

The people of

consent to th
only.

he Tiriite.

States will never

use of paper money based o; "assets"

The Anti—bellum experience of State Bank money,

swers this proposition finA.ly, for then money was
bused on lonk assets :plus !tate Bonds, and was a failure.
The fearful Lorse Rank experier:ce proves Bank Assets to
be unfit for a circulation security.
2nd.

If 'National Banks continue to issue currency

it must be based oo United States Bonds as 'ollateri-„1
security.

3ut this the Uniteci States Governent it—

self can do, and by holding the collateral in its: own
Treasury, o,in save at least three—fourths of interest
due on said bonds.

7)-(1.

The expoionce of other and older govern—

ments (3rinot now be wisely used, because electricity and
steam have changed the vary foundations of thou ';ht, and
experience — "Old thinzs have paed awLy, and all things
have bonr3 ntni".

This country is too large for any

bank or hi;.nks to supply its currency.
jational currency is

The vA.ue of a

ured, and no other can ever take

its place.

4th.

dold certificate

will be chiefly used for

bunk and Government resrves and will, therefore, not
circulat7, actively.

Aenc-, the mininun Oenonination

vhould be One hundred dollars.

The active money

will,

naturlly, be Bond 'And Silver oertifiotes, which will (:o
stantly pass from one person or party to anothr, so that
but littl

will be presened for red-lIption.

The fact th




wages are now paid generally in cash,
and rarely in "stor
pay", confirms this proposition.
The same is true of
retail purchases, which are sttled
in cash, montly at the
latest.
These two facts will very largely
increase the
issue of silver certificates of fro
t One D, 11ar to Five
)
Dollars, 1n3lusive.
5th.

The United States Government
never has been,
and never will be, called upon
to redeem silver certificates, for they are like the
Irishman's flea( "too lively
to catch".
6th.

The law of Demand and Supply,
acting as it

will through banks and other moni
ed institutions, must
surely determine the relative
proportions of o1d,silver
and bond certificates,
tfld dgring the busy seasond all
the Government currency wil
l be in active demand.
It
follows, therefore, that, instea
d of paying two per cent
per annum on bonds securing Nati
onal bank notes, there
will be paid out less than onelfourth of said amount
if the Government issues all the
currency, and itself
holds the two per (:ent.
P.s has been suggested. In
fact, the National Banks pro
pose to use the Government
credit to secure their issues
of notes, and coolly demand
a bonus of two per cent. per
annum for so doing. If such
a proposition were made to
any business man, the answer
would be, "Go to the Devil".
7th.

Many of the large and wefilthy Nat
ional
Banks issue little, if any, currency.
They will not
issue NIE if they must hold a supply of
sold constantly
-2-




on hand for redemption of their issue of notes — s
because it will not pay;

nor will they assume obligation

for weak banks.

8th.

The conclusion is logiJal and final, that

if the United States Govermlent only c;An issue gold and
silver coins and certificates of the stifle, it also should
issue all the money used, especially as the United States
Constitution expressly gives to the United States Govern—
ment the sole control of "commerce between states"
and
this surely covers that which represents values and trans
Pgrtation, i.e., mney.

This corsAusion, although in—

ferential, is businesslike, for currency represents all
values, and, therefore, should be issued by the power
tha
represents, protects and .tontrols all parties and FAl
interests, i.e., the National Govermlent.
9th.

Each certificate should be rdeemed in kind;

i.e., Gold .;ertificates in Gold;
silver;

silver certificates in

and Bond certificates in currency bonds.

coin should be exch:J.nged for ;
:
;016 coin;

Silver

and Pond Certi—

ficates for gold coin, at the option of the holder.
10th.

It is charged by some, that "the Govern—

ment is trying to

into the banking business".

The

converse is true, for banks are trying to .*,c) into
the
"Government bw,iness", and would control as much
of the
currency as possible.
11th.

The United States Governmnnt should be

authorized to issue special Bond Certificates of large
denominations to be known as "Emergency Currency1;
and
the Secretary of the Treasury should be authorized
to




approve all securities to be acepted for such emergency
buns.

The maximum amount of emergency .)ertificates

need not exceed 000,0u6,00.
Unil.ed States Treasury should be

These advnces by the
de to the Clearin

houses of the country, as they represent .:ombirition
s of
Bunk Oapital and will amply secure str:h loans, and surely
the Banks of the country best understand financial neces—
sities.

Issuing of currency will thus be separated from

tne natilr91 bui:iness of banking, i.e., the receiving of
deposits and loaning money.

After th:- separation is

made, the s fety of banKing, like ordim,
,
;..ry mercantile
bui.ineso), will rest on the integrity ;And in'.eiligenc
,
e of
managers, t'id Statute Laws, whether National or State.

C1APTER 11.
DI3COT.:T,DEPO -I-1 21:- D ISSUE.
.

A Bank may be descirbed, in general terms, as an establ
ishment which makes to 1 ,(lividuals such advances of money
or other means
of payment as may be required and s rely made, and to which
individuals
entrst money or the means of payment, when not requir
ed lxy then for
use.

In other words, the business of a bank is said to Je
to lend

or discou t, and to hold deposits.

With these two fuLations may be

combined a third, that ef issuing bank-notes, or the
bank's own promises to pay, for use in general circulation as a silbst
iLute for moAq.
The object of the present Chapter is to inquire into the
real
nature of the operations, thus roughly classified and
usually deseribed
by the terms Discoult, Deposit and Issue; and for
Ale purpose we shall
analyze the trans actions attending the ordinary and
simple case of
a loan made by a bank to one of its Oustomers.
The borrower who procures a 2 oan from abank does
so in order to provide himself with the radians, eith
r of making sone
purchase, or of paying some debt.

He seeks, therefore, to obtain not

necessarily money, but a certain amount of purchasing
power in available form, or of whatever may be the usual medium of
payment, measured in terms of money.

If we suprose him to be a merchant, buying and

selling goods upon credit in the tregilar course of
business, he is
likely to have at any given time to have in his hands
a greater or
less nAmber of notes not :?et due, signed by the person
s to aim he
has heretofo e made sales; and it is in the form of
a loan, made upon
the security of nue or more of these notes and

Jving him immediate

command of the ar.ount which will become due upon them
in the fut ure,




-8-

that he is likely to prucure what he n, eds from the bank.

This loan

may be supposed to take the form of what is termed a discou It; in
which case, in exchange for the note "discounted" the bo:Tower in entitled to receive from the bank the amount promised in the note, less the
interest on that amount computed at an agreed rate for the time which
the note has still to run.

The disi -znted note beco:'es the property

of the bank, to which the promisor is henceforward bound to make payment at maturity; and this payment when made obciously restores to the
bank the amount advanced by it in exchan-e for the note, together with
the interest which was the inducement for making the exchange.
It is nn'Ar Clear, however, th-t the operation ahich

AV

have des-

cribed, although spoken of as a loan by the bank to a 1)orrower, is in
fact something more than a loan'

The note when given was evidence that

its holder owned the ri.;ht to receive at a fixed date a certain sum of
money, and this riht the so-called borrower has ceded to the bank.
Passing ov r for the pri sent all efuestion .s to what he has received
in exchange, his cession of property by sale is as distinct and complete as if he had sold a bale of co',ton to another merchant, instead
of selling to a bank h s riht to receive money in the future.

It is

true that in parting with the note he probably endorsed it, and thus
bound himself to make good its amount in case the pro misor should
fail to do so; but he might equally bind himself by some warranty
given to the purchaser, vhen selling any other

description of property.

The note has ceased to be lie, and now takes its'
,lace amog the investments or securities of the Jank, although custom may 'ead to its classi
float ion as a "loan or discount"
The op.ration which we have here present,e in its simplest
form may easily change its Wm* according to circumstances.



Thus,

-9-

instead of offering for "disco-lnt" the notes of as costoners, our
merchant may offer his o.

tote for the s ,m which he wishes to ob-

tain, and attach to it, as security for its payment at maturity, one
or more of the notes of

is customers.

In this case the principal

note, his lwn, becomes the property of the b.zik, the ri, ht to receive
;
from him at its maturity the s- u;t1 promised in it being the re:d object
of sale; and the attached notes, originally reoGiTed by him for merchandise and now pled, ed to the bank as collateral security for the
:
peffor-lance of nis contract, continue to be his property, subject to the
rif:it of the bank to be indemnified then from in case of

is failre.

So too, he may offer his own Lote, secT,ring it by the pledge of bo:.ds,
stocks, or other valuable property, the ownership of which he 'oes not
part with, while at the sane time he sells as effectually as in the
first case the ri :ht to receive from him a certain sum at a fixed
date.

Or, instead of the

ote of hand which :ye have supposed to

be used, some other kind of negotiable paper, a9, for exmple, the
bill of exchaege, my be preferred by loc 1 usage as the evide..ce of
cornercial obligation.

Still, :thatev,- r the form of the transaction
.

by which a link may iake "advances or "loans", it will be fo- 11(1 that
in every c ase a ri

ut to demand and receive a certn 5:1m of money has

been acquired by Vie bank for a co-sideration.
Vie now have to consider what it is that t;Le 1)..nk gives in
excha ge for the right to dernrid and receive mo:.ey
acquired by it :rider thee circ-insta..ces.

To return to our rir-t

case of so-called discount; the proceeds of
note, or its neminal amou :t

a future time,

he discounted

_ess the interest for the time for which

it is to rin, are in '2.w 7irbt iestance placed to t,le credit of the mer
cha t, to be dr _wn cut by him at once or at d:fferent times, as con


-10-

wenience or necessity may dictate.

In thus crediting him with the

procceds, the bank plainly gives to him simply the right to cal]
upon it at pleasure for that sum of money.

Whether this risht

is exercised at once by dtmandlg and receiving the mono-

or whether

the exercise of it is postponed aa regards the whole or a part of the
amount, in Hither case the right to demand, or to "draw" is the equivalent received by the merchant in exchange for the right, sold b7 itm
to the bank, of which the note disco-intd was the evidence.

The

SUM

which he is this ectitled to call for is said, so long as it sta ds to
his credit, to be ileposited in the bank, or, to be a deposit stadning
in his name; so that the transaction is seen to be, both in form and
in substance, an exchange of rights.

The sane thing is true also in

other cases of so-call- d "loans" or discou.ts"; whatever form they take
and whatever the collateral security held by the bank may be, the
oper.tion is after all essentially an e xchange of riglits, whereby
the bank acquir_s the right to receive money, or the :egal tender of
the country, at some future

and the individual acquires the right

to call £m* money or legal tender at pleasure.
to him thztt immadiate command of purchasing

The result is to give

ower or of the utile.l medium

of payment, which, as we have said, is the real o,eot sought by him;
but at the outset this result is lszally secured and the relations of
#he bank and the 9borrower2 are settled, by the sale of

no right for

another, and dithout the intervention of money or any of its tangivle
substitutes.
But a deposit may owe its origin to a different operation
from that which has just been examined.
merchant, having cash on hand , prefers

It happens every day that the
ot to

old it in his possession

until it is required for use, blt to "deposit" it with the bank where



-11-

he usually transacts his business, until he needs to use
it.

In this

ease, when he makes ',is deposit, the property in t'rie money
or substitutes for money actually handed in by him passes to the
bank, and he
receives in exdhange the right to demand and receive at
pleasrue, not
that which he has paid in, but an equivalent amount
'

Here then, as

in the former case, the transaction is in effect a sale,
although the
use of the word "deposit"seems at first to suggest an entire
ly different
Idea of its character.
The other leading operations of banks, when analyxed, can
also
be r,,solved into cases of the exchange of rights agains
t rights, or of
rights against money.

As, for example, when the bank, for the convenien ce

of its oustcxqer or depositor, undertakes to collect a note
due to him by
some third party, in Which case the amount paid to the
b:Lnk in money
by the promisor is :, sised to the credit of the promis
.
ee as a deposit'
Here the bank Aas received money for the acooant
of the depositor, and
has given to hin in exchange a right to draw at pleasu
re for the amount or
any part thereef, the property in the money actually
paid having passed
absolutely to the b'nk in excha4:e for the right to draw.

And aga'n,

when the bank buys from 's. merchant a bill of (=han
g°, or :.-hen it sells
a bill of exchange drawn by itself on some corresponden
t, it effects
an exchange of money against a right, or of a right
against money, strongly
resembling those already considered'

And so, too, if in any of those

oases any substitute or equivalent for money is used,
instead of money
Itself, the transaction is still an f)x.- ..h&- ge of a right
.
.
on the one side and
some menns of payment on theother, the latter incoming
the property of the
bank.
We have thus far, for the sake of simplicity, spoken only
of
the "rights to receive"



money, bought by the bank in one
another.

lass of cases, and s:)1d by it in

But .!ifiero there is a right to receive on the part of
a °red' -

tor, there is a corresponding duty to pay on the part
of the debtor;
and these riT7hts or credits, when viewed fran the other
.
sid.-, are,
therefore, debts or liabilities.

The deposit which is credited in mak-

ing a loan is accordingly a liability ot i.ay on da.Land
, assumed by the
bank in exchan'e for a security promising a paymen
t to the bank in the
future; and the deposit credited upon the receipt of
cash from the depositor is a

similar liability, assumed in exchange for so much
money

or so much of its substitutes.

In short, as any addition to the loans

of a bank is an increase of its investrients or resour
ces, so an: addition to its dyposits is an increase

or

its debts or liabilities.

A ii tle co%sideraion of t?le :nanikor in which notes are
issued by banks will show that in the bank-note we have
only anot:le7. form
of liability, diffeing in appearance, but not in substa
nce, from the
liability for deposits.

The bank-note is the duly certifiea

of the bank to pay on demad, adapted for circulation
as a co:Nenient
3AbStit to

for the no oy 7Mch it promises.

It is issued by the bank,

and can be issued only to such persons as are willin
g to receive the
ona;a4ment of the bank in ,his folm inste&A of receivi_g
money, or
instead of being credited with a deposit.

This the so-caJled bor-

rower, who in the first instance has been credited with
a deposit aid
to Whom the 3ank is therefore to
.

this extent liable, :.lay prer, r to

draw the hiaount in notes of the bank and to use toln
in making his
payments.

But, in

case, it is
hat the liability of the
S
bank is changed only in for; it is till a liabil
ity to pay a certain sum
of money on demand.




And so if the :epositor pays in

money a:41 receives

-13
-

notes or receives notes in satisfaction of a demand of any kind
against
the bank, he, in fact, foregoes the use of the money itself
and consents
to receive in its stead a promi3e to pay upom demand, and to
receive
the evide ce of that promise in the form of notes.

The question,

in which form he Shall hold his right of demand against the
bank, is one
to be decided by the nature of ills busi,ess or by his present
convenience,
but plai .ly the decision of this question in no way alters
the relation
between himself or any transferee of his right, on the one
hand, and the
bank on the other.

The notes issued by a bank are thus a liability dis-

tinguishable in form only from its liability for deposits, and
the functions of deposit and issue, spoken of at the opening of this chapter
,
instead of being distinct, as is often assumed, are one in substan
ce.
In the operations which have now been considered the subject
matter involved is in every case either money or contracts for
the payment therefor.

No form of dealing in merchandise or real property

comes proptirly within the privice

of banking.

And, inasmuch as a con-

tract for the pa:ment of money may be vied either as a credit or
as
a debt,

according as it is looked at from the one side or the other,

ba:Ilcing is sometimes described as the business of dealing in credits
and sometimes as that of dealing in debts.

For the transaltion of this

business in the modern world both of the functions "discount" and"deposit" are indispensable.

in order to be a bank, at the present day,

an establishment must carry on the purchase of rights to demand money
in the future, or securities; and it must also use in some form or
other
its own engagements for the pa:ment of money upon demand.

If it prac-

tises the former only, it is simply an invebtor of its lwn money, as
any prevate individual may be; if it practises the latter only, it may




-14

indeed be said to be

a bank of the obso7 ete type of the Bank of Am-

sterdam, but it then plainly ceases to -tnswer one of the chief purposes
of a modern bank, viz, that of anablin13 individuals to convert into immediate purchasing power such debts as may be due to them in the future.
The use of the third function, however, that of 14suing notes, is not
indespensible to the existence of a bank, for, as has been shown, issue
is bit a modification of deposit,
necessity.

adopted for lonvenienOe and not for

There a-e conditions under which the liability of the bank

in the Thrm of notes is desired for use, and there are also conditions
under which the liability in the form of deposits better serves the convenience of individuals or of the community.

Many banks in every coun-

try, therefore, carry on their business successfully without making any
issue of notes Whatever.
It mist be added that incorporation
condition of the existence of a. bank.

law is not a necessary

Discount and deposit, and if no

legal prohibition exists, issue also, may be carried on by individuals
and firms as well as Jy incorporated companies.
cussions of banking it is usual to

It is ttue that in dis-

ive -lmost exollsive attention to

incorporated banks, partly because they a e usually more important and
conspicous, and partly because their affaris are im some degree open to
official imspection, so that tie nature of their bqsi ass is not easily
concealed, where as the transactions of lxivate banks are usually known
only to the persons co learned.

It is none the less true, however,

that in the economic effects of their trans ations the two kinds

of banks

do not differ, and thet neither can be gegleoted in an e2ctmilation of
the economic problems presented by any community in which it is found
to exist.




OTTA-TIM
BA7ZI1:G

111.
1:S AND ACOOLMTS
.

Having thus taken a general view of the natur
e of banking
operations, it is now necessary that we shoul
d enter upon the consideration of some of their details.
For a bank, as well as for any other considerab
le
it is requisite that a capital should be provi
ded at the outset.
establihmn,
There con be no constant proportion betlleen the
amount of this caiital
and tae extent of the business which may be
built up by its means.
We can only lay down the very ganerallrale, that
the larger ths busLiess
that can be carri ,id on with safety with a given
capital, the larger will
be the field from which profits

can

e earned, and the higher the propor-

tion which the profits will bear to the origi
nal investment; but the point
at which the extension of the business passe
s the line of safety, must
be determined by the circumstances of the parti
cular bank, by the kind
of busi .,'ss carried on by taose dealing with it,
and by the condition
of the oeluanity in aaich iy is established.
been made to limit by

The attempt has sometimes

aw for incorporated banks the proportion of
tran-

sactions for a given amount of :apital, bit no
such Irovision has any
foundation except a conjectured avera3e, too
rough to be of serlice in
any individual ca)e.

In this respect,

in so many

t.ers, the judg-

ment of the persons most interested, actin
g under the law of self
preservation, is far more trustworthy than any
legilative decision.
The capital thus to ae provided at the outset
is, of course,
in the case of a private bank, the contr
ibution of the lartmers, as in
any oth r andertakingi

In the owl) of an incorporated bank the
capi-

tal is divided by 1: ; into equal shares
or unites of fixed amount; as
e. g., under the laa of the United State
s, a capital if $1oo,000
is divided into 1,000 shares of $



-15-

$100 each; and these shares are contrils:uted by the individual shareholders,
in such proportaion

they please.

The law may as a matter of public

policy limit the proportion of capital stock to be owned by any one individual firm, and it may also limit the liability of shareholders for
debts due by the bnk, in case of its failure; but in gen. ral,

in the

absence of special provisions to the contrary, the powers, rihts, and
liabilities of ev:ry shareholder are now usually determindd by the number
of shares of the stock con#ributed or owned by him.

In the election

of dircetors and of other officers, for the immediate management of t e
business, every share entitles its owner to cast one vbe; the dividend
of profit is allotted in the ratio of shares own...d, and controbutions
to meet losses, of required by law, are called for in the same r tio.
The capital subseribe(1 by the ilLtending shareholders must
necessarily be paid in in money or in the legal tadder of the country.
It is not necessary that tie AThkle should be paid in at the outlet,
but

the payment of the -7ho1eusually precedes the full establishment of

the business; and, in ca e of incorporated banks, the law often re(:uires
that some definte proportion, as e. g., one bald, shall be paid in before the opetild of business, in order %o insure good faith and a solid
basis for the bzsifiess undertaken.
If, now, we undertake to represent by a -brief staterent of
account the condition of a bank having a capital of 1.00,000 paid in,
in specie, on the moring ',hen it opens its doors for business, we shall
have tie folloaing.
Liabilities
Capital
1100,000

Resources.
Specie *A

n00,000

It may at first sight appear to be a contrad.ction in terms, that the
capital should be set down as a liability and not as a resource, but




-16-

we must here distinguish between the fiLancial liability for what has
been received from the shareholders and the right of property in tbp
thing recielved.

The bank has become acoointable to its shareholders

for the amou !ts paid in by t,lem respectively, but the money actually
paid in has become the property of the bank; or, in the lang-iae

f

accou :tants, the bank has become liable for itscapital, and the money
in hand is for the present its resource for meeting this liability,
or for eIplaining the disposition made of what has been received.
As the bank requires balki-g-rooms and a certain supply of
farniture and fixturos for the conw-nient transaction of its busiess,
we may sup:ose it ot expend : 5000 of its
1
ment.

cash In providing the equip-

The property thus procured, with the remaining

895,000 in

cash, will t,en be the 0.7:gregate resources by means of which the capital
is to be aacou,.ted for, and the account will stand as follows:
Liabilities.
Capital
11.00,000

3100,000

Resources.
aeal nst te, furniture, fixtur, s,
eta.,
$5,000
Specie
95 000
100,000

The bank however, cannot answer the purposes of its existencip,
or earn a profit for its shareholders, until its idle cash :s converted
into some ki d of interest-bearing security.

Nor is it enough that a

permanent investment of the ordinary kind should bt- made, as by the simple exchane of the cash for 3overnment bonds or railway securities.
It is the chief business of the barac to afford to rurchasers and dealers
the means of using, by anticipation, funds which are receivable by them
In the fature, and this Implies both the purchase of private securities or "business paper" to a considerable coctnet, and aslo frequent
chan, and rano-m(11 of purchases.
;e

L:oreover, while the private capita-

list finds it advantageous to make simple investments of a permanent



-17-

sort, this would pla;n]y be insufficiest for t'le sllareholders of a bsnk,
who lave to " :7 fro:: it
.

profits sone serious expens.s of management,

and need tserefore, a larr field for earnings tsan the ordinary returss on their capital alosie.

TAe bank being obliged then to extend

its operatioss beyond the smoust of its capital, is compelled for this
purpose to make Ise of its crejit.
its credit that tie

In fact, it is only ssch a use of

stablishment secos,es in reality a bank.

Most of the conditions of the ca - e a -e

at answered by the

"discoust" of comercial paper as aboce desvribed.

The time for jIich

filch obligations have to run varies with the custom of thr trade whiCh
g.ve rise to them, but is
repayment to tA)

most cases short enough to imply early
A:.,(1 even ;Are custom s_:ives tse paper longer

tine, if the paper itself is

sed only as a collstsral sscurss, the

note which is the actual objsct of negotiation with the bank is by preference

suslly made not to exceed

our !.71onths.

It is easy then to

arrsns:e the purchases of paper with rsference to the times of matIsity,
30

as

o provide for a steady sly

and thus fasilitate the reiuction

cession of paymsnts to the jsrik,
f the business, if necessary, or

its direction into n vi cna nnels, as prudence or ,
:ood policy may require.

The certainty of prompt payment at maturity, n•eded for this

end, is

;.esented in a hih dogr!e bj the paper created in the ordinary

course of busisess.

Independently of the collateral security ;h

Ii

the bank may hold, the writ6en promise of A merchant or manufacturer to
pay on a fixed day is an en,:s.:E.
promisor

30

-Shich involv, s t'le credit of the

far that failsre is an act bot, of legal :nsolvency, and of

Comercial dishonor.

selected with judg.sent, !-Len, such paper is not

Only the investment which most completely ans.eers the purposes of the
bank's existence, but is probably as safe as any hive, tent which chould



-18-

be found.
It may easily hayien, however, that the bank

may find it

desirable to invest a part of its resoirces in some other form, eiliher
beaause good commercial paper ca:mot be procured ih surficient amount,
or as a Matter of policy.
securities as offer

In this case it will purchase stAl other

,nt, but the
not only complete safety of investri

possihility of easy oonversion into slash in ca,e of need.

In this

country Unite:, states bonds, and many descriptions of State, municipal, and corporati)n bonds, might answer this purpo3e.

3tocks would

more rarely answer it, being m re liable to the fluctuations in price
caused by misfortune or the ordinary vicissit-Aes of busi.ess.
gages of real estate, however,

ort-

not be admissible, except wrien

held as a securith, collateral to some other a;Lichis more easily convertible, for even when the mortgaged propety is so ample and stable
as to ins re the goodness of the mortgage, the conversion of the mortgage into cash by sale is not alwacs easy, and is especialy difficult
at those times when the iank nowt needs to have all its rescurc s at
,
oommand.

Indeed, the dc.ngr,r to 1)e apprehended from the locking up

of resou roes, in securiti,s which may be solid but are not easily realized, is so great, that it has been said to be the first dury of the
banker to learn to disti-glish between a note and a mortgage, his
busi less

with the former.

Real estae, of soaarse, ca note

be regarded as a banking security, hoAD:vor desirable it may be as an
investz.ent for individuals, for it not only subject to great fluctuations in value, b t is at times Ansalable; and

he Law of the United

States therefore wisely prohibits investments in it by the national
banks, e accept so far as is necessary for the accomodation of their
busi_ess.



The results of the process of investment in commeroial pa-

-19--

per and in other securities are best u'Iderstood when la trace
the effect




An Cutline Plan for tIle Refbrmati
on
of the
UNITED
STJ•T;i
CURRENCY
by
N\
Frank E T)elhl
•

I.

The Golrermient; rhat it should
do:(a)

Legislate 80 as to make posLib
le the doing of all acts
herein callel for.

(b)

Continue, as at present, the issu
rince
gold certificates; but in denaninations ran
ging frm one dollar up,
ac;cording to the d.ei.nnds of tra
de. Gold certificates
shall be u legal tender.

(n)

Discontinue absolutely t'f:e cin
age of silver doltars,
but all ot:r..er coinage is ti e
continreft an at present.

(d) Provide for t,fe redenption
and the retire,lent of all silver certificates as follows:
As new silver is needed
to coin additional sulnidiary
coins, take a sufficient
mber of silver dollars, now
on deposit to secure silver certificates, and retile
an equivalent anount of the
silver certificates. The advant
ages to be derived from
the retireent of said certif
ic;ttes are obvious. The
r.5tirenent of said certificates
will :tot result in a decrease in circulation because
National Bank Currency
will tylediately be issued
in their stcad.
(e) Not increase the United States not
es and the Treasury
notes beyond the present ailo
unt, and the reserve of
0.51,000,0On in gold for the
rederription of these notes
shall be naintained. The sai
d notes shall be isqued in
denoninations; and, because the
y are so issued,
Vey will be kept in genera
l circulation. Recause of
the general circulition of Fli
d notes, they will tend
to gradually disappear, having
been lost or degt2oyed;
and ultimately there may cowe
a ti:ae when there will be
a dollar of re: erve for a dol
,
lar of circulation. When
this latter tt.ie sali h,ve arr
ived, the governilent
,light retire said notes and be
rid of an onerous banking duty. The proce'.-s above
described will not reIllt
in a decreace of circPlat:Lon
for te sale reason an given 1:rider (d).

(r)




Cuse tbe National bf-invs to ret
ire thir present circulation, rind in its stead all
ow then to in ue a new
"N:Itional P;Trik Currency", whi
ch 7!laall be easily distinguishable fro:1 United States
nos; and th said "Natlonql Ban Currency" shall
not be a it-al tender, except for debts due to the ban
k of
Said "Nntional Tiank 0=ency" shall be
a first lien on the assets
of an insolvent tank.

(g)

aintain a stricY. sl-pervision and regulation of all
National b,nks.
Be the crstodi,n of a reserve fund of five i;er oent7m
of thi: capital stock of National bans. Said r6serve
fund is to provide for the 11!..edli,te redeuptin of
.
notes of failed ba:s.

II.




The National L.1:s; 1711 -4t they should do
(a)

If it
still :'.onsidered advis,ble that United State
bonds shalt have an artificial trket, then a rmall
cent'::1 of the capital stook of each bank nhall he invested in United States bonds, and said bonds sh:,11 be de-posited with the Government.
ti-121s shall retire their notes,
at ,reent
in circi"lation, hut they .lay ific.e "Nati:nal Bank C=Tenoy" to an a,ID1- nt erival to t:leir cri1 it:t1 stock. All
banks shall
to the G:vernment
tax of t77ocentu,, of the cLiount of their "Ntional Bank Currency" in
circulation.
Pay to the Govern ,ent five per ..entwi of t: elr caiital
!
:
-Aock to create a reserve fund an exidainecl in section
I under (:7).
:laintain a sufficient reserTe against their liabilities,
including their "National Bant Currency" in cirorlation,
in gold c)in or gold certificate'.
11 ,,intain agencies for te rede;,ption of the "Yati:nal
Bank Currency" at „Any and convenient cities th-:o170out
J.
the col'ntry. So,le 1Jrge tr7.st
O
1: ei,r1h r€ 'e 1 ,tion city Llight e ade the re(7emption ancy,
corq)ensation therefor a certain per cent.m of •L'e
currency redeened.

L

.4

.

L

. .

...is

172 C.1-z-itnut

ftve?...t,

FLUSIiii‘Pay

M. V.

kla

iiih

L

(c.0
iftL

AtA

V
j ally 9-q /
ny

t

c.-t-ce,JL 0-11
-ut;-

09

cutA

90'
/ 4
1
4

t/vvt.ey —LA1

6kA,t7i60 .

(1 14;0 LIAA-AA/JUI-1g

3

0k4a-aALT-t0
7gq,70 .6 7- ZczArt.AA1
a

o

71 8 70,3 0")(e
I
ig

c—t ctL

—

04,kip0-utto-t. (:),Tmg 70

1304,00 491.-ff5
,
.14.4..t vtAILJ

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1/v4.3 4g,v6g

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a, 6% cLA.,0(Aft,




067.

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1
4
42AA41)raLL,v-IA_Q.AAtctL

-u-LAA.k,Q.LAkL

a/u-viA,
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ra,L4-t-k,

'

_

TREASURY DEPARTMENT
WASHINGTON

July 1, 1909.

ADDRE88 REPLY TO
"COMPTROLLER OF THE CURRENCY'

The Cashier,

Dear Sir:
In connection with the statement submitted by you in compliance
with the request made by the National Monetary Commission for a
detailed statement of the amount of the resources and liabilities
of your bank on April 28, 1909, information is desired in respect
to the number of depositors in savings banks and the rate and
amount of interest paid to depositors in such banks.
As it is the desire of the Commission to publish this information in their report to Congress, it will be esteemed a favor if
you will advise this office of:
1. The amount of deposits
1909,
-

in your bank on April 28,
Amount, $

2. Number of depositors on that date,
No.
3. Average rate of interest paid to depositors during
the past year,
Per cent,
4. Aggregate amount of interest paid during past
year,
Amount, $
The information submitted will be regarded as confidential,
and used only in connection with like returns from other savings
banks in your State to ascertain the aggregate number of depositors, average account, and average rate and amount of interest
paid during the past year.
Please send your statement, or this communication with the information appended, by return mail if possible, under cover of
the inclosed addressed envelope, which does not require postage.
Yours, very respectfully,




(41,1tuatt

hum.mui

Comptroller of the Currency.

TREASURY DEPARTMENT
WASHINGTON

ADDRESS REPLY TO
'
'COMPTROLLER OF THE CURRENCY"

July 1, 1909.

The Cashier,

Dear Sir:
In connection with the statement submitted by you in compliance
with the request made by the National Monetary Commission for a
detailed statement of the amount of the resources and liabilities
of your bank on April 28, 1909, information is desired in respect
to the number of depositors in savings banks and the rate and
amount of interest paid to depositors in such banks.
As it is the desire of the Commission to publish this information in their report to Congress, it will be esteemed a favor if
you will advise this office of:
1. The amount of deposits
1909,
-

in your bank on April 28,
Amount, $

2. Number of depositors on that date,
No.
3. Average rate of interest paid to depositors during
the past year,
Per cent,
4. Aggregate amount of interest paid during past
year,
Amount, $
The information submitted will be regarded as confidential,
and used only in connection with like returns from other savings
banks in your State to ascertain the aggregate number of depositors, average account, and average rate and amount of interest
paid during the past year.
Please send your statement, or this communication with the information appended, by return mail if possible, under cover of
the inclosed addressed envelope, which does not require postage.
Yours, very respectfully,

kiwAtitat 0,huthatii
2-A630




Comptroller of the Currency.




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\
A. s_6.2

L,

012 12 L's 9_5\tg\

or--oei-x6)001-Y14---(VO.

•

TREASURY DEPARTMENT
WASHINGTON

ADDRESS REPLY TO
COMPTROLLER Of TAE CURRENCY-

JULY 22, 1909.

To THE CASHIER.
SIR: In connection with the report submitted by you in compliance with the request made by
the National Monetary Commission for a detailed statement of the resources and liabilities of your
bank on April 28, 1909, information is also desired by the Commission with respect to the character
of deposits, number of depositors, average rate of interest paid, and minimum amount of deposit on
which interest is allowed as shown by the bank's records at the close of business on June 30, 1909.
The information submitted by you will be regarded as confidential and used only in connection
with like returns from other banking institutions.
If possible, please forward your statement by return mail on the appended form under cover of
the inclosed addressed envelope, which does not require postage.
Yours, very respectfully,

IR(tuuNtuet 0, buithml
Comptroller.

2-6575

TRUST COMPANY REPORT.
THE COMPTROLLER OF THE CURRENCY.
SIR: The information requested in your letter of July 22 is submitted herewith:
Deposits in this bank on June 30, 1909, exclusive of amounts due to other banks—
Savings deposits*
All other deposits
TOTAL
Minimum individual deposit on which interest is allowed
Depositors:
Number of savings depositors
Number of all other depositors, excluding banks
Average rate of interest paid:
On savings accounts
On all other accounts, excluding banks

1
4111•11111111116L

BANK OF

Cashier.
*Savings deposits may bP defined at deposits (n) which may be withdrawn only on presentation of the pass book, or other similar form
successive deposits or withdrawals to be entered thereon; or (A) which at the option of the bank may be withdrawn only at the expiration of aof receipts which permits
stated period after notice
of intention to withdraw has been given; or (c) upon which 110 interest is allowed until the funds have remained on deposit for at least three
months.
2-6676




The ol)erations of banking, as the system ,1:15 been developed in the lat
two centuries, appeat at first sight to be singularly complex a.-,c1 difficult
of comprehension.

This is _ot due, ,lover, to any m:, stery in the opera,

tions the:Islevea, but is the resAlt of tileir multiplicity and of %ho varied
conditions under

t'le:r take plac.

The wants which banks satisfy are

of a simple kind, s.zre to aril:e early in the ' istoru of any commer3Ial or
-i
industrial 3omma,.ity in which there is mutual confidence among men.; and the
satisfaction of these wants is a business easily established, in what might
well be regarded as an almost primitive.-c:eldition

of trade.

1

qe 1uran-

sactions by which these wants are satisfied are, moreover, as sinIlle as
the wants thomselve'l, 9,-(1 are speedily re duced to s-lh
Adam Smith, in a well-',c:Lowa passar,), to rate

routine as to lead

"the b:inking

trade" as one

of the few which, in his judgment, could be brought to such uniformity of
met.lod as to be safely conducted by a joint-stock compa,.y.
The leading wants to be provided for by banks ate, first, loans 'upon
a aolisiderablo scale, required by individuals embarking in enterprises
beyond their own means; and, second, the temporary emplOymeat of money
which is not required by the owner for immediate use, or at least the
means of safely keeping it.

Some ac;e:-Icy for lending and !;oine place of

deposit are called for as soon as co-meroe begins to move in a regular
course.

With the 30 may be required

30710

system for simplfying the cur-

rency of the co munity, or for ;iving it an ascertained value, btt
is after all a s,,00ndary matte-.

The primary and indespensable

lotions

to be provided for are t:1030 of lending and of recei vi.,g on depostt, and
it is these which have given rise to modern banking.
These fanotiona, it is clear, imply no very complex operalos.
They require prudence, iate;;rith, and patience, but tney have no



M

ystery

-2
-

ho banker who lends, or Who engages
to sup :y cash to his customer
as it may be called form a eds to
be sure of the solvency of his borr
ower
and of he 7:oo1ness of the security
received, and must have the evidence
of the transaction made indubitable,
its terns clearly fixed, all +:he
record of it com7lete and exact.
,:hen he rceives cash on de:osit,
or collects for ot.t,rs cash ihih
is

e and holds it

it is

wanted by the ow:.ers, he must in
like man%er be sure that the evide.Ice
of every transacti a is resular and
placed beyond doubt, and that its
record is ;:,r6cise 3.41 s stulatio.
And when, as an extension of his
system of holding dei,osits, he re3og.11.
:es the ri;Lt of a depositor to
transfer his deposit or any ;art of
it - o another person, in order
;
to make a payment to the latter, the
0,)er%tion of transfer mast be clos
ely followed and the resqlting changes
in the banker s accounts must be
A
m4de mith fidelity and minute accu
racy.
But in no one of these
cases does the actual transaction
present any more di'ficulty of cam';1=L11 the s.mrle payment or receipt
of mo ey.

The question

of , -;.de,l; ,--how 1 - ch anl to wham
it is advisable to lend, and upon
what ter is, ov far it is safe to ass
- me that deposits will be left
u.ldistm,ed, and to /rant otent it
is needful to be
by depositors,-- req111.5- all the li4h
t that
perience

repared for demands

trained saacity and ex-

an throw upon them, as do the ques
tions rela%ing to the con-

duct of busi:,ess in other departme
nts.; but the essence of

tkA trallsa0tios the selves, to - ihish the judg
ment of the b ,ner in a:Tlied, is 3M-

pie.
As a natural lonseciten3o or the s'mp
licity of the operations involved in lending and in re eivi
ng deposits, it is probable that they
11a7e been undertaken an




carried on in every

30

mmunity b; i.:dlvidnais

-3

long in advance of any public establishments, and long before the chroniolersof history thought it worth while to noti.e phenomena of such
a humble order.

Private lenders established banking in Venice two

centuries before the Senate opened its first public bank of deposit.
Banking was in like malr:er practised by individuals in Amsterdam
long before a special class of evils led the city to establish the
famous Bank of Amsterdam.

And banking of a well-defined modern

type was introduce d by the London goldsmiths at least a gneration beInsta.,ces of the sane sort

fore the opening of the Bank of England.

could easily be multiplied, tending to show that in other contries
also banki..g has had its orlgin in the effort of individuals to supply
certain rath, r primitive wa.,ts of an advancing co-nunith, and that the
process of satisfaction was by means of a few throoqghly simple opera tions.

Such as these le_tding operations were two or hhr, e eenturies

ac_7o, they have cent nut() to be in the midst of the changes and the enormous development of the present eentury.
It is probable, however, that in most modern comanities the individual wants Aenich banking undertakes to supply have ceased to be the
exclusive object of attention, and that the general influence a-ei ulterior effec:s of a banking syetem, not originally foreseen qnd long
a matter of dispute have taken the leading place among the reasons for
introducing such a system.

,
The firrit bankers probabl: had little

thought of affording encour,Lgement or applying a stimulus to the
industry of the co munity as a whole.

When they began, however, to lend

their money systematically to merohats or the producers of goods, they
began to

Ave

the command of capital in the enterpirses where, for the

time being, tt was most willed for and presumablv most needed.




When

-4
-

they increased their loans of this sort, by means of the funds 1 et
,
temporarily in their care by persons der,ositi-g with the, they began to give to industry the benefit of capital which wold oth erwise have remained idle, or to secure the more speedy application of
capital slowly seeking employment.

The use of their own notes as the

medium for maki .g their loans, in a man er strictly analogous, crave
to their borrowers the command of capital which the fluctuw;Ing
body of noteholdeas might forbear to demand.

And their practice of

discounting the bills received by dealers from their customres tended to
a rapid oranization of credit, and, by giving the dealer the immediate
use of that which w s due to aim at some time in the future, shortened
the period required for "turning Lis money" and undortaing same fresh
enterprise.

It is Obvious that the banktirs created no n,tw wealth

by their lending and deposit holding, but it is equally plain that they
directed the exis ting capital to the ent-eprises

industries most in

need of support, and the* they quickened the succession of commercial
and industrial operations.

A given amount of capital was thus made

more effective, so that the result of the introduction of banking in amy
community was the equivalent of a considerable increase of capital, although not omplying any real increase in the first instance.
The stimulus thzs applied bT banking to the general commercial and
Industrial movement of aay community, whether young or old, ha long been
's
clearly seen; and it is this effect of operations, at first undertaken
simply with reference to the demands of inditidual convenience, that now
chiefly claims attention and excites interest.
unattended by risk.
operations of credit.

This stimulus is not

Deposit-holding and the increase of notes aro alike
They imply, as conditions of their existence,

a certain growth of mutual confidence in any corrnunity, and a oertain



growt. or mutual confidece in any connunity, and a certain d- ;roe of
domestic reace: and andf.ir conditions otherwise similar, nations will
differ in their resort to such operatios, as the national temperament
is more or less sanguine and as tradition and habit have prepared the
way, or to reverse.

But to

-latever e-terlt credit in thus sued, it

i_trod-Ices not only the dangers of misplaced co%fidence, but the greater
danger coming from the spirit of ,.Tventure.
-

The tendency under the

keen spur of a developed banking system to carry enterpirsed based upon
credit beyond the point of safety, the infection of an entire community
by tl.le fever of spec-alaticAL, are too familiar for comme-nt, and the
Orrors of bankers in aiding and encouraging that which the

should have

striven to repress or cotrol, have at times brought the utulity of
banki g itself into question.
The modern dorld, however, does not discard any gret agency merely
because its use is attended by danger.

To secure a balance of gain

by minimi:;ing the risks, always recognizing their existence and their
deplorable character, has been the aim of most
in dealing with banking daring at

commercial communities

east for generations.

The ignor-

ant hostility to the s-stem itself, instead of its abuses, of which
traces may sti 11 be fou d in the constitutions of one or two of the
United states, has generally given way to a wiser appreciation of the
services rendered by banks and bank rs in the , evelpilnent of a country
like

his.
Tlie difficulty of properly we13hing the •:dvants.;es and the risks

of banking has been greatly Incre4e0 by the reckless imprudence with
which banks have so often manw,
:ed ';heir issues of notes, to '3hich allusion has already been made.



3uch issues, although not a necessary ad-

-6-

junat of the business of lending and of deposit-holding, are a natural
and, in some conditions of society, a asual

adjunct.

Wh re they are

made, the issui .g banks or bankers at once be:orle responsible for an
important part of the visible circulating medium of the country.
Their mistakes or wrongdoing may affect a multitude of persons having
no intentional or consicous share in or

rela'Aon to the concerns of

any bank; and may easily throw the affairsof a co mullity into confusion.
It is true, as we shall see hereafter, that the steps by which a tank
Issues its notes do not di Ter from those by w Lich it asslnes otier
less observed liabilities, and that its obligations in the two cases
are the sane in essence*

Still the wide diffusion of an issue of

notes and the more visible and notorious .atlre of the evils resultmis
ing from ite management make such issut.s the object of ext.ene
jealousy, and have often led to the indiscriminate condumnation of
all banks.

Although, therefore, the issue of notes is not one of

what we ilave called "the primary and indispensable functions" of
banking, it is a functi n yhich fills a large space in most disoussions 'of banking theory, as well as in the history of the great
banking systems and in legislation.
The starting point in the present exi-,osition of the subject then
must be an oxi.mination of the tra:Isactions involved in lending, deposit-holding, and note issue or circulation.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102