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61 s t C o n g r e s s \

2d Session

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NATIONAL MONETARY COMMISSION

German Bank Inquiry
of 1908-9

Stenographic Reports

Vol. II
Proceedings of the Entire Commission on
Point V I of the Question Sheet

(The Deposit System)

Washington : Government Printing Office : 1911

6 1st C o n g r ess \

2d Session

SEN ATE

( D

o cum ent

Part

407

N A T IO N A L M O N E T A R Y C O M M IS S IO N

German Bank Inquiry
of 1908-9

Stenographic Reports

Vol. II
Proceedings of the Entire Commission on
Point VI of the Question Sheet

(The Deposit System)

Washington : Government Printing Office : 1911

N A T IO N A L M O N E T A R Y COMMISSION.

N elso n W . A ldrich , Rhode Island, Chairman.
E d w ard B . V r EELAND, New York, Vice-Chairman.
J u liu s C. B u r r o w s , Michigan.

J ohn W . W e e k s , Massachusetts.

E u g e n e H a l e , Maine.

R o ber t W . B o n y n g e , Colorado.

P h ila n d e r C. K n o x , Pennsylvania.

S y l v e s t e r C. S m ith , California.

T h eo d ore E . B u rto n , Ohio.

L e m u e l P. P a d g e t t , Tennessee.

H e n r y M. T e l l e r , Colorado.

G e o r g e F . B u r g e s s , Texas.

H ern an d o D. M o n e y , Mississippi.

A r s i n e P. P u jo . Louisiana.

J o seph W . B a i l e y , Texas.

A rth ur B. S h e l to n , Secretary.

A . P iatt A n d r e w . Special Assistant to Commission.

N o te.
The English translation of this volume, and of the preceding volume comprising the pro
ceedings of the German Bank Inquiry Commission on Points I to V of the Question Sheet,
was prepared for the National Monetary Commission b y Louis Heilprin, Julia Franklin,
and Margaret Franklin.

L IS T

OF T H E

M E M B E R S OF T H E
C O M M ISSIO N .

BA N K

IN Q U IR Y

*
CH AIRM AN .
Havenstein, president of the Reichsbankdirektorium, Wirklicher Geheimer
Rat.
VICE-CH A IRM A N .
Doctor von Glasenapp, vice-president of the Reichsbankdirektorium.
M E M BE R S.
Von Cetto-Reichertshausen, Freiherr, director of the Bavarian Landwirtschaftsbank, E . G. m. b. H ., Munich.
Fischel, Arthur, banker (Mendelssohn & Co.), Berlin.
Fischer, Ernst, Kommerzienrat, Privatier, chairman of the Chamber of
Commerce, Reutlingen.
Von Gamp-Massaunen, Freiherr, Wirklicher Geheimer Ober-Regierungsrat, Member of the Reichstag and of the Prussian House of Delegates,
Hebron-Damnitz, Kreis Stolp and Massaunen, Kreis Gerdanen.
Gontard, Friedrich, manufacturer (Gontard & Henny), Leutzsch near
Leipzig.
Heiligenstadt, Dr. Carl, president of the Prussian ZentralgenossenschaftsKasse, Berlin.
Kaempf, Johannes, Stadtaltester, president of the German Handelstag;
president of the deans of the Merchants’ Association of Berlin; vicepresident of the Reichstag, Berlin.
Von Kanitz, Count, Chamberlain, captain of cavalry, retired; Member of
the Reichstag and of the Prussian House of Delegates, Podangen
near Tiingen (East Prussia).
Lexis, Dr. W., Geheimer Ober-Regierungsrat, professor of political sciences
in the University of Gottingen.
Mommsen, Karl, assistant judge, retired, director of the Mitteldeutsche
Kreditbank, Member of the Reichstag, Berlin.
Muller, Richard, manufacturer, Stadtrat, Member of the Reichstag, Fulda.
Peter, Karl, director of the Vereinsbank, Karlsruhe (Baden).
Raab, Friedrich, porcelain painter, Member of the Reichstag, Hamburg.

N a t i o n a l M o n et a r y C o m m i s s i o n
Riesser, Dr. Jakob, Geheimer Justizrat, honorary profe^or in the U ni
versity of Berlin.
Roland-Liicke, Ludwig, landed proprietor, formerly director of the
Deutsche Bank, Sonnenburg, near Freienwalde on the Oder.
Schinckel, Max, chairman of the Hamburg Chamber of Commerce, part
ner in the Norddeutsche Bank in Hamburg, partner and director
in the Diskonto-Gesellschaft in Berlin, Hamburg.
Schmidt, Dr. A., member of the directorate of the Friedrich Krupp jointstock company, Essen on the Ruhr.
Singer, Paul, Privatier, member of the city council, Member of the Reichs
tag, Berlin.
Stroll, Dr. Moritz, director of the Bayerische Notenbank, Munich.
Wachler, Dr. Paul, Ober-Bergrat, retired, member of the Herrenhaus,
Berlin-Charlottenburg.
Wagner, Dr. Adolph, Wirklicher Geheimer Rat, professor of political sci
ences in the University of Berlin.
Von Wangenheim, Freiherr, landed proprietor, chairman of the Bund der
Landwirte, Klein-Spiegel, near Gross-Mellen, Regierungsbezirk
Stettin.
Weber, Dr. August, director of the Lobauer Bank, Member of the Reichs
tag, Lobau (Saxony).

L IS T O F R E P R E S E N T A T IV E S OF T H E IM P E R IA L
E R N M E N T AN D T H E F E D E R A T E D
G O V E R N M E N T S.

GOV

From the I m per ial Min is t r y of t h e I n t e r io r :
Dr. Richter, Under Secretary of State.
Muller, Geheimer Ober-Regierungsrat, vortragender Rat.
Von Sanden, Koniglich Preussischer Gerichtsassessor, kommissarischer Hilfsarbeiter.
From the I m per ial Min is t r y of J u s t ic e :
Dr. Struckmann, Geheimer Ober-Regierungsrat, vortragender Rat.
From the I m per ial T r e a s u r y :
Dombois, Geheimer Ober-Regierungsrat, vortragender Rat.
From the R eic h sb a n k D ir e k t o r iu m :
Dr. von Lumm, Geheimer Ober-Finanzrat, member of the Reichsbankdirektorium.
From P r u s s i a :
From the Ministry of Finance—
Dr. Busch, Geheimer Finanzrat, vortragender Rat.
Dr. Schroeder, Geheimer Finanzrat, vortragender Rat.
From the Ministry of Commerce and Industry—
Dr. Goppert, Geheimer Regierungsrat, vortragender Rat, Staatskommissar at the Berlin Bourse.
From the Ministry of Agriculture, Public Lands, and Forests—
, Von Falkenhausen, Freiherr, Geheimer Regierungsrat, vortra
gender Rat.
Von Massenbach, Freiherr, Geheimer Regierungsrat, vortragender
Rat.
From B a v a r i a :
Dr. Wolf, Koniglich Bayerischer Ober-Regierungsrat, deputy plen* ipotentiary to the Bundesrat.
Meinel, Koniglicher Ministerialrat in the Ministry of the Royal
House and of the Interior.
From the K ingdom of S a x o n y :
Hartig, Koniglich Sachsischer Geheimer Rat, president of the
Royal Bureau of Duties and Taxes, deputy plenipotentiary to
the Bundesrat.

N at ion a l M o net a r y C o m m i s s i o n
From the K ingdom op S a x o n y —Continued.
Steglich, Koniglich Sachsischer Geheimer Regierungsrat, vortragender Rat in the Ministry of the Interior.
From W u r t t e m b e r g :
Dr. von Kohler, Koniglich Wurttembergischer Ministerialrat
deputy plenipotentiary to the Bundesrat.
From B a d e n :

Weingartner, Grossherzoglich Badischer Ministerialdirektor in the
Ministry of the Interior, Geheimer Ober-Regierungsrat.
From H a m b u r g :
Dr. Sthamer, Senator.

Q U EST IO N

SH EET

FO R T H E H E A R IN G S OF T H E
EXPERTS.

[Made the basis of the proceedings of the entire Commission.]

V I .0— Does it seem warranted in the public interest (and upon what
grounds?) to take care, by way of legislation, of the security and fluidity
of the investment of deposits and savings?
What measures to this end should be taken under consideration,
and what effects might be expected from them?
In particular, would a provision of law be desirable that should
impose on those institutions (banks, cooperative institutions, and
savings banks) that undertake to receive deposits the obligation—
x. With reference to the covering of these moneys, to subject
themselves to fixed regulations guaranteeing not only secur
ity but also fluidity? If so, what should these regula
tions be?
2. To make and publish, within definite periods of time,
detailed balance sheets of prescribed forms? If so, what
should those periods be? (Yearly, half-yearly, quarterly,
monthly?) And how should the forms of the balance
sheets be constructed so as to serve the purpose in view?
° The proceedings of the Commission on Points I to V have appeared in a
separate volume.

O U T L IN E

PRO PO SED

FO R

TH E

DISCUSSIO NS

TH E

BA N K IN Q U IR Y C O M M ISSIO N ON T H E Q U ESTIO N OF
T H E D E P O SIT S Y ST E M .

The following scheme is intended to serve only as a
general guide; in detailed discussion it will be desirable to
distinguish, so far as possible, between banks, corporative
institutions, and savings institutions:
I.

General discussion of the question.
1. The interest of the public in the disposition of the question.
2. The safety and the fluidity of the investment of deposits and sav
ings.
(a) Nature of deposits and savings, and their relation to outside
moneys generally.
(b) The safety of investments.
(c) The fluidity of investments.
II. Discussion of proposed measures and their prospective effects.
1. The establishment of legal normative requirements for the accept
ance, management, and investment of deposits and savings.
A. Does the establishment of such requirements seem practi
cable and advisable?
B. What should they comprise?
x. Regulations as to acceptance:
(a) Limitation to certain institutions,
(b) Limitation of the total amount to be received.
2. Regulations as to separate management (preferential
rights of deposit and savings creditors).
3. Regulations as to investment:
(a) Fixing of a percentage of cover.
(b) Investment in bills and other fluid resources.
(c) Investment in State loans and similar securities.
(d) Investment of the surplus.
4. Other suggestions.
2. The publication of balance sheets:
(a) Is it desirable to require the publication of detailed balance
sheet at prescribed intervals and conforming to a fixed
scheme ?
(b) When and where should this publication take place?

VIII

B a n k I n q u i r y of 1 9 0 8 - 9
I I . Discussion of proposed measures and their prospective effects—Contd.
2. The publication of balance sheets—Continued.
(c) Content of the published balance sheet:
1. Model form for the annual balance sheet.
2. Model form for an intermediate balance sheet or for a
statement.
(d) The bimonthly balance sheets published heretofore.
3. Other measures.
(a) The depositing of a fixed percentage of the outside moneys
at the Reichsbank.
(b) The establishment of government institutions for deposits.
(c) The undertaking by the Reichsbank of an interest-bearing
deposit business.
(d) The establishment of a bureau of supervision for the banking
system.
(e) Other measures.
4. What are the most effective means, legislative or other, of pro
tecting the public against the dangers connected with banks
and bankers that attract deposits and savings through adver
tisements, solicitation by letter, or agents? [Resolution of the
Reichstag, May 14, 1909.]
5. Other remarks and proposals.

BANK INQUIRY OF 1908-9.
T uesday , N ovember 23, 1909— 10.15 A- MThe Chairman, Wirklicher Geheimer Rat H avenstein ,
President of the Reichsbank direktorium:
G e n t l e m e n : In opening the conference which is to
consider the last section of the questions presented to the
bank inquiry commission a year and a half ago, I take
pleasure in welcoming you, as I did then, to the halls of
the Reichsbank; and I wish to express my hearty thanks
for your presence and for the readiness with which you
place your ripe judgment, your experience, and your
discriminating counsel at our service in this last and also
very important question.
Gentlemen, the debates of last year made great demands
upon your devotion, but they have, as I perceive in looking
back upon them to-day, as well as upon the debates in
the Reichstag linked with them, achieved a great measure
of success, which I now acknowledge with redoubled
thanks. On the basis of strictly positive evidence, you
illumined, moderated, brought into closer harmony the
views regarding the more acute Reichsbank problems
under discussion at the time; views that had previously
been widely and harshly antagonistic, that had largely been
formed under the confusing impress of the fresh and vivid
memories of the trying and extraordinary experiences of
the year 1907; that were partly influenced, too, by party
animosity and favor. And to you is due the greatest

N a t i ona l M o net a r y C o mmi s s i o n
share of thanks and acknowledgment that the debates
upon the supplementary bank bill, too, were subsequently
carried on and brought to an almost unanimous conclusion
on the basis of a thorough consideration of the actual
facts.
The question now presented to you is no less important;
and it is more difficult and complicated than a great many,
at least, of those discussed by you before; for it extends
far beyond the sphere of the Reichsbank, and is of great
significance for our entire economic life, with whose
intricate threads it is bound up at many points.
It may be, gentlemen, that many within and without
the circles of the commission and of the experts have, in
considering the debates of last year, been unable to
obtain a simple and clear answer to the question: How
can we permanently avert crises such as traversed the
world in 1907? And this question, at a time following
so close upon such grave experiences, may have seemed the
first, the most important thing to be considered. It may
be that the only conclusion reached has been this: The
Reichsbank is only a single member of our economic
body and of our credit system; it alone can not accomplish
that; its province is to remain strong and sound, in order
that it may do its part, within the sphere of its power and
influence, in striving for that result and solving the prob
lems that arise.
It may be, gentlemen, that the answer to that ques
tion will likewise not be supplied by the present de
bate upon the subject of deposits; though, comprising
as it does the broader sphere of our entire credit system
and a part of our general economic system, the question,

B a n k I n q u i r y of 1 9 0 8 ~ 9
if ever justifiable, might with a greater show of reason be
asked in connection with this subject. And the question
can not be answered because against general develop
ments and phenomena, proceeding not from our own soil
and our own economics alone but from the entire economic
condition of the world, and against such elemental
occurrences as came to a head in 1907, no panacea, no
prescription may all of a sudden be found, that shall per
manently prevent them; because our present national
economic development and the development of our money
and credit system are closely interwoven with those of
the world at large; because they represent a highly com
plex fabric produced by innumerable threads and independ
ent forces; a fabric of which we must first of all understand
the constitution and growth, the significance of the indi
vidual forces and their cooperation, and the causes of any
possibly threatening phenomena; and try, from that basis,
to find for the future a corrective, or better system—to be
introduced only gradually, however, in individual points
and for individual forces which have been recognized as
entering into the matter. And, gentlemen, this of itself
would be a great gain; for to recognize and comprehend a
danger means to diminish its importance and enable us
to resist it.
If, then, these debates may likewise not yield a short
and simple answer to that question so often propounded,
I cherish the hope—and permit me to join this wish to
my greetings and thanks—that your deliberations upon
this single but most important field of the deposit and
credit systems—a problem in itself—will carry us far ahead;
that, though you may not fully solve the problem at the

N a t i o n a l M on e t a ry Commission
first blow, you will elucidate it and bring us nearer to its
solution. And now, gentlemen, let us enter upon our
deliberations. [Applause.]
Gentlemen, in regard to the *composition of the com
mission, I will state that on the part of the government
commissioners the following changes have been made:
For the imperial ministry of the interior, Herr Gerichtsassessor von Sanden has taken the place of Herr Gerichtsassessor Doctor Fastenau, retired. Doctor Richter,
under secretary, chairman of the former subcommission
concerned with the system of deposits, who at that time
represented the Prussian ministry of commerce and trades,
likewise represents the ministry of the interior.
As representative of the imperial ministry of justice,
Geheimer Ober-Regierungsrat Doctor Struckmann has
been appointed.
For the Prussian ministry of finance, we have Geheimer
Finanzrat Doctor Schroeder in place of Geheimer Finanzrat Dickhuth, retired.
For Bavaria, Ober-Regierungsrat Doctor Wolf, acting
as proxy in the Bundesrat, has taken the place of Staatsrat Ritter von Burkhard.
His excellency, von Schicker, who has hitherto repre
sented Wurttemberg, is deceased; he has been replaced by
Ministerialrat Doctor von Kohler, proxy to the Bundesrat.
Of the government commissioners, Doctor Richter,
Freiherr von Falkenhausen, Meinel, Hartig, Weingartner,
and Doctor Sthamer are, as they have informed me with
expressions of earnest regret, prevented by urgent duties
from attending our sittings to-day, and it may be for
some days to come.

Bank

Inquiry

of 1 9 0 8 - 9

Of the members of the commission, the following are
excused: Herr Fischel, Herr Kaempf, Freiherr von Wangenheim, and Herr Muller of Fulda. Herr Kaempf will
presumably take part in subsequent sessions, perhaps also
Herr Fischel and Herr Muller of Fulda. Freiherr von
Wangenheim has expressed his regret that important sit
tings, at which he is obliged to preside, and which he
could not defer, engross his entire attention. He has,
therefore, transmitted a brief written opinion upon the
question, with which I shall take occasion to acquaint
you later on, so as to incorporate his judgment and advice
in the minutes of the proceedings.
In the way of printed matter, you received in the course
of the summer Doctor Fastenau’s lucid and comprehen
sive digest of the opinions given by the experts on the
question of regulating the deposit system; furthermore,
statistics of the German stock banks, by Alfred Lansburgh; and with the invitation to to-day’s session, a
memorial, “ Gesetzliche Regelung des Depositenwesens in
Deutschland” (Legal regulation of the deposit system in
Germany), b y . Dr. Georg Obst; there have also been
transmitted to you within the last weeks and days some
publications ° from the statistical department of the
Reichsbank; in particular, a paper entitled “ Zur Frage
der Regelung des Depositenwesens” (On the question of
the regulation of the deposit system)—intended to sup
plement the work of Doctor Fastenau—which comprises
a systematic arrangement of the most important utter
ances in the bank inquiry itself on the one hand, and con° These publications appear in a separate volume under the title “ Ma
terialien zur Frage des Depositenwesens.”

N a t i o n a l M o n e t a r y Commission
tains, besides, the most significant opinions voiced in
literature, the press, and Parliament; and seeks to give a
comprehensive survey of the whole of this many-sided
question.
This work is allied to another, “ Zur Frage der Verstarkung der Goldreserven in England” (On the question of
the strengthening of the gold reserves in England), describ
ing the status of this question, which arouses lively dis
cussion in England also; furthermore, a paper, “ Zur
Frage der Emissionsstatistik ” (On the question of the
statistics of flotations), and, finally, two publications,
“ Zur Bilanz der deutschen Kreditgenossenschaften ” and
“ Tabellen zur Bankstatistik.” There was a widely ex
pressed desire for the first-named survey, “ Zur Frage der
Emissionsstatistik,” incident upon last year’s debates,
particularly on the part of Freiherr von Gamp; a work
which, starting from a number of different standpoints,
and treating the subject with greater completeness than
the private publications—whose accuracy and credibility
have been widely questioned—have hitherto done, aims
to put the statistics of flotations upon a more trustworthy
basis. I may add that to-day a final work has been com
pleted, “ Zur Bilanzstatistik der deutschen Banken ” (On
the statistics of the balance sheets of the German banks).
The statistics themselves are in your hands and furnish
you a comprehensive survey—such as has not in like com
pleteness hitherto been forthcoming—in the first place, of
the statements of all the existing German banks for 1908,
including the 458 joint stock banks as well as 127 banks in
the form of partnerships with limited liability; and,
beyond that, give a comprehensive survey of the interim

B a n k I n q u i r y of 1 9 0 8~ 9
balance sheets published by a large number of great and
medium banks in the course of the year 1909. I assume
that all the members as well as the commissioners are in
possession of this printed matter, and would request any
one who is not, to inform Bank Director Doctor Arnold of
the fact.
And now, gentlemen, I will ask you to begin the pro
ceedings.
Doctor RiESSER (on the order of the day). Gentlemen,
it seems requisite to me that we should, as his excellency,
our president, remarked, conduct our discussions, and
particularly the discussions of the present session, strictly
upon the basis of a consideration of actual facts—these
debates on the question of the proposed reforms of the
deposit system, which, to my surprise, suddenly consti
tutes, according to page 7 of one document, the most
important point in the entire deliberations of the bank
inquiry. Now, I have been charged by gentlemen with
whom I have spoken, to emphasize the fact that the gen
tlemen who are still directly connected with banking con
cerns— as well as I, who am now a professor, but was
formerly a bank director— consider themselves in no wise
as representatives of a party, as representatives of certain
interests, but that we look upon our task as one submitted
to experts whose concern it is to make the common weal
the prime consideration. We believe also that the experts
connected with banking interests who were examined by
us took a like standpoint, and we do not, therefore, regard
it as just that they should be characterized on page 8 of
the document, treating of the regulation of the deposit
system, as “ representatives of banks, Genossenschaften
6 2 8 38 °— pt 2 - 1 1

-2

N at ion al M on et a r y C o m m i s s i o n
(cooperative institutions), and savings institutions” who
“ are most directly interested in the solution of the
problem.”
We object, further, to remarks of this same document
which claims to be a “ digest of the most important utter
ances,” etc., and was produced in the statistical depart
ment of the Reichsbank. We take exception to certain
remarks on pages 7, 28, and 63, and that because they
seem to go far beyond the appropriate limits of a statistical
bureau, and do not, therefore, compare favorably with the
purely objective digests repeatedly presented by Herr
Fastenau.
The passage on page 7 reads:
“ But if we follow the historical course that the public
examination of this question has taken, and if we consider
the widening circles that occupy themselves with it, it may
be clearly discerned that the voices calling for the necessity
of some solution of a problem whose far-reaching signifi
cance is more and more recognized, are gaining in number
and weight. The impression produced is that the ques
tion must continue to be the order of the day until a
satisfactory solution is found.”
We believe that the proper bounds of a statistical
bureau have here been transgressed— in regard to a prob
lem, too, which hardly falls within its province— in
measuring votes not only according to number but also
according to weight; thus pronouncing a judgment upon
the solution of a question which we have been invited here
to solve, for we must first be heard on the subject. I de
plore this and the following utterances, which I shall pro
ceed to mention, for the reason, too, that our president

Bank

Inquiry

of 1 9 0 8 - 9

has hitherto been so strictly impartial in conducting the
proceedings, and since this document is authorized by him,
he is placed in a position which, as chairman of our expert
commission, he is, in my judgment, assuredly unwilling to
occupy.
Another assertion to which we object is found on page
28:
“ All these questions are, of course, of far-reaching im
portance to the problem, and will require a further farreaching elucidation if a legal regulation is to be attempted.
It does, however, seem as if the difficulties of these defini
tions and the demarcation of the moneys in question should
not in themselves offer an insuperable obstacle, provided
legislative interposition should, in principle, be deemed
desirable.”
This, too, in our judgment, transcends the competence
of a statistical bureau, involving as it does the assumption
of a position, which is the business for which we are con
voked here; and we can not approve of it.
Finally, on page 63 of this same document, it is
remarked:
“ The problem is a difficult one, yet it does not seem in
soluble. Whether its solution can and will be accom
plished at the first throw can not to-day be predicted.”
This last is an observation to which we do not, of course,
object in the same measure as to the foregoing ones, but
we do attach importance to the two preceding passages
being expunged from the document; because this docu
ment will go to the Reichstag and the impression created
there would be that the direktorium of the Reichsbank
and its president have assumed a certain position before

N at io n a l M on et a r y C o m m i s s i o n
the members of the commission have been heard, and this,
naturally, must be avoided.
Finally, we request that in printing the statistics of
flotations, which have likewise been included, the publica
tion be limited to Table 4, where correct statistics of
flotations have been attempted on the basis of the pro
ceeds from the stamps upon securities. On the other hand,
my colleague, Herr Schinckel, will present our objections
regarding pages 26 and 27; while Table 3—which is based
merely on the estimates of the Frankfurter Zeitung and
the Deutscher Okonomist—has already been characterized
in our examination of the experts and in other quarters,
as requiring copious correction, and has been attacked for
its errors. Flotation figures have been frequently cited
without any attempt to determine what part has remained
in Germany; while, in fact, the question how much of the
foreign issues was really placed in Germany plays an im
portant part. We shall return to this in the special
debates.
Lastly, we should like to point out that if we should
express opposition to certain propositions, our attitude is
not a negative one; that we have, on the contrary, specially
exerted ourselves to bring about the issuing by the banks
of interim statements, which has, in fact, been in oper
ation since as far back as last February; and I consider
this a very positive action and one that is likely to have
beneficial results.
If I may add a personal remark, I would say that I
attach special importance to what I observed in the first
place in regard to our character as experts, on account of
the fact that Freiherr von Wangenheim, who is unfortu

B a n k I n q u i r y of 1 9 0 8 - 9
nately absent, characterized me a few days ago as a “ syndicus of the Berlin great banks,” or as a paid and conse
quently dependent employee of those Berlin banks. I am
not that, nor ever have been, but the honorary president
of the Central Union of German Banks and Bankers, which
comprises not only the Berlin and other great banks, but
also the provincial banks, and banking concerns on a me
dium and lesser scale as well. This honorary office will
not prevent me, particularly as I am also a man of science,
from making the general welfare the sole consideration in
forming my judgment.
Freiherr von G am p -Ma ssa u n en (on the order of the
day). I, for my part, should like to express the profound
gratitude we feel toward the Reichsbank for the material
which it has laid before us.

I find in it such a wealth of

labor and thorough knowledge of the subject that, even
though some of the observations do not tally with my
judgment, that fact would not prevent me from giving a
warm expression to that gratitude. [Applause.] Nor have
I received the impression that this material contains any
thing prejudicial in any way to the Reichsbank or, going
beyond that, the president of the Reichsbank. The
remarks in the document, objected to by the previous
speaker, on the question of regulating the deposit system,
have, as I can show here, been blue-penciled by me also.
They indicate, of course, the position of the editor; but I
believe it would be impossible to produce a scientific
work—nor is this, in my judgment, a requirement of a
scientific work—which should be wholly uninfluenced by
the editor’s views. For the rest, I must say that I con

N a t i o n a l M o net a r y C o mm i s s i o n
sider the remarks objected to as entirely correct; nor do I
see how my colleague, Herr Riesser, has any occasion,
from his standpoint, to raise objections against them.
When it is said, “ The voices calling for the necessity of
some solution of this problem have increased in number
and weight,” this must be acknowledged as absolutely true.
I shall only remind you of the debates in England concern
ing the question of strengthening the gold reserve. If opin
ion in England is at present almost unanimous that some
thing must be done to increase the gold reserve, while but a
few years ago people there would have nothing to do with
the question and repelled all efforts in that direction, then
we may, we must, indeed, say, without departing from the
objective standpoint, that the voices that call for some
solution of the question as a necessity are multiplying in
a remarkable degree in number and weight.
Nor can I see any objection to this sentence, on page 28:
“ It does, however, seem as if the difficulties of these
definitions and the demarcation of the moneys in ques
tion should not, in themselves, offer an insuperable
obstacle, provided legislative interposition should, in
principle, be deemed desirable.”
It is not detrimental or prejudicial to anyone’s view, and
I feel convinced that if such formal objections should be
insisted on, no one will regard them decisive in them
selves. My colleague, Herr Riesser, and the other gentle
men will presumably agree with me that the difficulty of
differentiation can not by itself form a hindrance “ pro
vided legislative interposition should, in principle, be
deemed desirable.” The editor has thus expressed himself
as guardedly as possible.

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And now, finally, the remark on page 63 which Herr
Geheimrat Riesser himself declared weighed less heavily
as an objection:
“ The problem is a difficult one, yet it does not seem
insoluble.”
Well, if the idea were entertained anywhere that the
problem is insoluble, then I think it would have been a
good thing not to set the whole machinery of the bank
inquiry in motion. I believe that all of us who have
taken the trouble to take part in the commission as
experts share the opinion that the problem is indeed
difficult, but that it is not insoluble.
Gentlemen, I merely wished to convey by what I have
said my acknowledgment of the assiduity, the remarkable
knowledge of the subject, and the great impartiality of
the editor of all this material, and I believe that many
members of the commission will coincide in my opinion.
Doctor H e il ig e n st a d t (on the order of the day). I
should like to add a few remarks to those of the two pre
ceding speakers, mainly in order to signify that I should
consider it quite expedient to have the statistics of flota
tions, after the correction of any possible mistakes, pub
lished as they stand. I think that the objections that,
have been raised would be met by adding an appropriate
note to Table 3. It is, as has frequently been pointed out
in the commission, the publications, taken essentially
from the Frankfurter Zeitung, and hitherto generally the
only sources of information, that are in question. Who
ever wishes to work in this field in a scientific spirit will
be grateful for being enabled to make comparisons with
the previous information given by the financial press.

N a t i o n a l M on et a r y C o m m i s s i o n
I attach great importance, therefore, to the table in ques
tion being published with the other matter. As far as
the other table is concerned, its practical and scientific
value could be enhanced by the addition of a footnote;
but here, too, I consider it very important that the
material should be published, because I believe that the
matter that issues from the bank inquiry will supply a
great number of facts important for the purposes of scien
tific investigation. What is involved is a great wealth of
material which is, in part, made available for the first
time for scientific elaboration. The publication of this
material will give to scientific w’orkers a great incentive to
fruitful activity, and it is this scientific activity which we
shall subsequently have to thank should a considerably
greater degree of clearness and insight generally prevail
regarding these delicate fields of inquiry. It is precisely
the fact that in the bank inquiry practical men may ex
press themselves along with theorists, which I consider
the essential thing, and I regard it, therefore, from my
point of view—standing as I do, in a manner, midway
between practice and science— as extremely desirable that
the table should be made available to science, providing
it thereby with desirable material for further elaboration.
Mr. S ch in ck el (on the order of the day). Since the
question of the statistics of flotations has been broached
here, I should like to make a few brief remarks in regard
to it. We are, naturally, greatly indebted to those
who have done this very laborious work; I, for my
part, too, wish to give expression to that feeling; nor,
assuredly, did Herr Geheimrat Riesser wish to deny

B a n k I n q u i r y of 1 9 0 8 ~ 9
it. When, however, it was remarked that the compila
tion of the statistics of flotations should be specially
employed for scientific purposes—and it may be assumed
that not only would-be scientists, but also men of business,
and among the latter many who will not penetrate deeper
into the matter, will concern themselves with these
statistics—then the editor was right in being very cau
tious in the preface; he says over and over again that
these statistics are not to be absolutely relied on; we
find this on every page of the preface. But, gentlemen,
from page 26 on, this compilation is, in my opinion,
positively misleading, and here I would concur in the
proposition that it should be revised once more before
it is made public. From page 26 on, namely, there is a
specification of the foreign securities at the German
exchanges—the conversions not being noted—and that
is something that will be of unusual interest to the
practical man, or, I should say, to the majority of the
members of the Reichstag. [“ Very true!” ] If, how
ever, these statistics shall remain as they are, they will,
I repeat, be positively misleading. The foreign loans
are entered at their full amount. I shall briefly cite a
few of them: The Japanese loan at 612,000,000 marks.
As is well known, it can be easily verified in the stamp
bureau how little of the 612,000,000 marks has been
placed in Germany. Furthermore, the Pennsylvania
Railroad shares are entered here at 1,680,000,000 marks.
Anyone in touch with the actual facts knows that only
a few hundred thousand Pennsylvania Railroad shares
have really been handled in Germany. The shares of the
Deutsch-Asiatische Bank are also entered as foreign

National

Monetary

Commission

bank shares on the merely formal ground that the bank
is located at Shanghai. The Deutsch-Asiatische Bank
was, however, established, at the desire of the German
Government, by the German Haute-Banque in Berlin,
and its shares are strictly German domestic securities.
These statistics, then, gentlemen, I will frankly say,
are greatly in need of revision, and I very willingly
offer my services, in case the gentlemen of the Reichsbank
shall agree to make such a revision. During my secre
taryship I had compilations made on a certain day
which, in themselves, show what erroneous figures are,
unfortunately, recorded in these statistics. Canadian
Pacific Railroad shares, for example, are entered twice
at 118,000,000 marks; once, because they were listed
in December, in Berlin, and a second time because they
were listed in January, in Hamburg; each time at
118,000,000 marks. Consequently, if this table is to stand
and be made public, the amounts that were actually
placed in Germany would have to be printed alongside the
figures given here. This could easily be done with the aid
of the stock-stamp offices, as there are not many of them.
If this is not done, the figures running into the billions
will stick in the memory of the public, while in reality
it is an affair of only a few millions. If you compare
the really correct figures given in the margin, where
the amounts actually stamped are stated, with our
domestic flotations, you will find the foreign securities
to amount to very little, probably less than the domestic
issues which have found their way abroad. But if you
read the whole thing as it stands here, especially, from
page 26 on, the impression produced is that many billions

.....

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of foreign securities have in the last years found their
way to Germany; and that would be entirely misleading.
Freiherr von G am p -Ma ssa u n en (on the order of the
day). I should like to remark that among the members of
the Reichstag there must certainly be at least enough inti
mate knowledge of the subject for them to know perfectly
well that the 612 millions and the 1,680 millions that are
cited here are not sums that have come to Germany in their
entirety; for if such sums had been transferred abroad
from Germany, our balance of payments and our economic
balance would have long since been bankrupt. I, for my
part, however, shall be very thankful to my colleague,
Herr Schinckel, if he should take the trouble to establish,
where it can be established, what amounts have actually
come into Germany, for I likewise attach great value to
the determination of objective truth. Nevertheless, I
find that “ last year,” for example, very large amounts
were involved—quite aside from the Pennsylvania and the
Canadian Pacific Railroad shares—of which it must be
said that a considerable portion remained in the country;
of many loans it must be said positively that they have
remained exclusively, or almost exclusively, in the coun
try, and these alone amount to such considerable sums— I
shall not go into it further here—that one can not simply
dismiss the matter. I would therefore request that the
pages from 26 to 30 should not by any means be eliminated;
for when this information has been made public it will be
made accessible to wider circles, and the Reichstag will
also have to occupy itself with these statistics. But, as I
have remarked, I am grateful to all the gentlemen who

N at ion a l M o n et a r y C o mm i s s i o n
direct atcention to mistakes and take the trouble to correct
the figures.
The C h airm an . Gentlemen, I should like to add a few
remarks on this question. I desire in the first place to
express my thanks to the gentlemen, and particularly to
Freiherr von Gamp, for their acknowledgment of the
labors of our statistical department. Gentlemen, what a
mass of self-sacrificing labor and devotion are embodied
in these publications does not appear from a glance at the
little volumes before you. We of the Reichsbank direktorium know, however, with what painstaking assiduity
and unselfishness the gentlemen labored throughout an
entire year over this work; and I gladly seize this oppor
tunity to express my most sincere thanks, and those of the
direktorium, to the gentlemen of the statistical department,
for what they have accomplished this year. [Applause.]
Now as to the remarks of Herr Geheimrat Riesser. I
can assure him that the statistical department was ani
mated by the unqualified desire to proceed with the strict
est objectivity and impartiality. I can tell him, further
more, that these productions of our statistical department
were most carefully examined by Herr von Lamm, as well
as Herr von Glasenapp, and, finally, by myself, with a
view to ascertaining whether they violated that para
mount principle, the principle of impartiality. We sub
mitted the sentences pointed out by Herr Geheimrat
Riesser likewise to the same particular examination; but,
gentlemen, we, on our part, came to the conclusion that
those sentences did not violate the principle. I must say
that I was simply astonished at how completely this sci
entific work kept aloof from any sort of partisanship; and

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if the passage on page 7 of the paper: “ Zur Frage der
Regelung des Depositenwesens ” (On the question of the
regulation of the deposit system), which states that the
forces urging a solution of this problem have increased,
is objected to, the truth of the matter is that that state
ment is only an expression of what has actually been his
torically established beyond doubt. To give a brief exam
ple : At the head of our question sheet we have the question
as to the public interest in the security and the fluidity
of our deposits. If you follow the historical development,
you will see that formerly this whole question was dealt
with almost exclusively from the standpoint of security,
but that the question is being shifted, and that to a
steadily increasing extent, quite parallel with the changes
that are taking place in our credit system and in the
development of our credit institutions; that interest in
the soundness and fluidity of the credit system and of
our economic organization are coming to the front in place
of the question of the security of the depositors. The
resolution of the Reichstag of 1896 on the Arnim bill and
the resolution of the Reichstag of 1909 are a striking
illustration of this change of views, and a striking exam
ple in particular of how the question of security is reced
ing, and how, while it controlled the whole question in
1896, now, in 1909, it confines itself essentially to the wish
that the inexperienced should at least be guarded against
solicitation; while in the foreground—we have observed
this, too, in all the discussions with our experts—we find
the public interest in the development of our credit system.
The passage on page 28, too, was carefully scrutinized
by us, but we did not consider it objectionable, because,

N at io n a l M on et a r y C o m m i s s i o n
as Freiherr von Gamp has already remarked, here like
wise the principle of impartiality is thoroughly observed,
the question whether legal measures are regarded as desir
able being left wholly in abeyance. It is only qualifiedly
mentioned there, and it is expressly remarked that if
legislative interposition should be deemed desirable for
the solution of this great problem then it would seem as
if the difficulty of these definitions of deposits ought not
to offer an absolutely insuperable obstacle. I hold that
this utterance can not be regarded as nonobjective and
partisan; and now, gentlemen, as regards the final pas
sage, it really only points out the difficulty of the ques
tion, and that it seems doubtful whether the debates of
the inquiry commission—convened to examine and dis
cuss any possible questions, because these questions have
been projected more and more into the foreground by the
public interest and have been recognized as specially
difficult and complex—will result in a complete solution.
And the desire and hope are expressed, just as I have
expressed them in the conclusion of my introductory
remarks, that even if we shall not succeed in solving
the question at once it may at any rate be elucidated
and brought nearer to a solution. I really can not see
that those few sentences offer any serious ground for
objection.
Now as to the question of the statistics of flotations.
They were meant, gentlemen, as an attempt to remove
the doubts expressed concerning the statistics that have
been given in private publications. Statistical surveys
are not to be taken by themselves, but, to be understood,
must be read in connection wdth explanatory remarks,

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and the work is merely an attempt to attack the question
from many points of view; it characterizes itself, indeed,
expressly as such an attempt; it calls attention throughout
to the defectiveness of its sources; and, as far as the statis
tics of the foreign loans admitted into our country are con
cerned, it is explicitly pointed out that it should not be
concluded from these admissions that the German money
market was actually drawn upon to the extent of the
figures cited, but that the demand on the money market
must be inferred from the foregoing tables. But that
a real interest attaches to having a record made of the
foreign loans admitted into our country" and to making
it public was shown in several quarters in the previous
debates, for this admission makes it possible for foreign
countries to enter the German market at any moment.
It was from this point of view that a certain significance
was at that time attached to those statistics, and it is
a point of view from which such a record can not be
denied importance. This record, then, possesses inter
est, at any rate, and it may be expected that he who
reads these statistics, and, furthermore, should wish to
draw conclusions from them, will by all means take
cognizance of the accompanying explanatory remarks,
which alone, indeed, make the reading and comprehension
of the statistics possible.
Gentlemen, I forgot to refer to the remark on page 8
of the digest concerning the deposit system, which, speak
ing of the representatives of banks, Genossenschaften,
and savings institutions, who have in the main taken a
negative position before the inquiry commission, says:

N at ion a l M on et a r y C o mm i s s i o n
“ They are the most directly interested in the solution
of the problem and would be the first and most seriously
affected by any injurious consequences that might result
from inexpedient measures.”
Gentlemen, it is a matter of course in an inquiry,
that even though every expert be desirous to take
and retain an impartial point of view, his statements
should reflect the impressions produced by his practical
experience with the matter in hand, representing, at the
same time, his own interests; that he is not biased by
these conceptions, yet is subject to their influence because
they have become a part of.himself. This is quite nat
ural, and no more than this was intended to be implied.
That the gentlemen meant to be partisan is out of the
question; nor can anyone gather this from the remark
in question. I believe, therefore, that this passage also
will be hardly subject to misconception.
If there are errors and defects in the statistics of flota
tions, we shall be most grateful should you kindly correct
and supplement the statistics. I believe, likewise, that
the edge of the misconception regarding the compila
tion of the foreign admissions, which Herr Geheimrat
Riesser apprehends, would at once be taken away if we
pointed out explicitly in a footnote to that survey that
these admissions do not, of course, represent the extent
to which the German money market was drawn upon,
but that the extent of that drain must be gathered from
the preceding tables.
Doctor W a g n e r (on the order of the day). I can not
help concurring completely with Herr von Gamp, par
ticularly in his remarks in opposition to Herr Geheimrat

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Riesser. Nor can I convince myself—and in this respect
I coincide with what his excellency, the president, has
said—that the principal paper shows bias of any kind.
I have examined it very carefully with this question in
view, and have not been able to find that it shows any
leaning to one side or another; and I would question, too,
whether the statements of Herr Geheimer Justizrat
Riesser have furnished proof to the contrary. The
passages mentioned represent essentially the result of
the organized investigation which the statistical depart
ment has with praiseworthy industry and in an impartial
spirit devoted to the subject. If the paper states that
there has been an increase in the strength of the opinion
that a certain interposition in this field is desirable, I
believe that this is an actual fact. If Herr Geheimrat
Riesser replies that the weight and not the number of the
voices is the thing to be considered, then I may say that
opinions differ as to the weight of the voices. It would
not be admissible to regard the standpoint of the practical
men, who in one respect are always somewhat biased,
as alone decisive; it will have to be admitted that other
points of view also should in this matter be taken into
account. I should say, therefore—if I understood Herr
Geheimrat Riessei^ correctly—that there is no ground for
changing the main document: “ On the question of the
regulation of the deposit system. ” As regards the sta
tistics of flotations, the criticism that has been made is
doubtless justified. I can only say that the statistical
paper contains everything that is essential; and it must,
indeed, be assumed of a person who deals with statistics,
that when hundreds of millions of foreign securities are
6 2 8 3 8 °— PT 2— II ------3

N a t i o n a l M o n et a r y C o m m i s s i o n
spoken of he knows that they are not all floated in Ger
many. It is true, however, as his excellency, President
Havenstein, pertinently pointed out, that being once
admitted, they can enter the German market; and to
ascertain how large a part of them do enter the German
market is a matter of importance also. That could be
readily added, and we should be very thankful to the gen
tlemen connected with the banking business if they would
lend their aid in doing this. For the rest, I can but
express the wish that the statistics, essentially as they
stand, should be made accessible to a wider public.
Doctor R ie s s e r (on the order of the day). In replying
to his excellency, our chairman, I should like to say, in
the first place, that I had to carry out certain instructions
with which, indeed, I, on my own part, agree in every par
ticular, and that the statements which we have heard can
not induce me to retract even one word of what I have said.
Nor can I concede that the question should be shifted,
and that, as a reply to objections raised against individual
passages of the papers, the excellence of the work of the
statistical bureau should be dwelt upon, for I have shared
and do share the opinion expressed in regard to the work
as a whole.
And I wish to emphasize another point: We are all
interested in having a sound credit system; have given
practical proof of that interest, and intend to give further
proof of it. But that is not the question now. The
reason why I did not call especial attention to the fact
that we are all heartily grateful to the statistical depart
ment for its work, is that my instructions were to bring up
certain things, within the scope of the order of the day, for

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debate; while I had made up my mind to give personal
expression, in delivering my opinion, to the thanks we all
owe to the statistical department. But I stand by the
criticisms that I have made, because I do not consider it
the business of a statistical bureau, which presents the
requisite data to the expert commission designed to
examine the questions, to express definite views on its
part. Had the matter proceeded from the Reichsbank
Direktorium, we should, of course, have had to accept it
at once, but should even then have accepted it with regret,
because we believed, and still believe, that a decided atti
tude is assumed here, and that a decided view has been
expressed. It is also repeated in the conclusion that
utterances in literature and in practical life were at hand
which confirm what was said in the preface; and that is
what, in my opinion, a statistical bureau in particular has
no right to do, and what Herr Gerichtsassessor Fastenau,
in the previous digest, rightly avoided with care. It is
asserted with the utmost positiveness that the impression
created by the views expressed is that this question will
not disappear until it shall have been satisfactorily solved.
It is stated on page 28—I can not by any means agree
with Freiherr von Gamp that it is a self-evident fact—that
it appears “ as if the difficulties of these definitions and the
demarcation of the moneys in question should not in
themselves offer an insuperable obstacle;” but this is
highly questionable, and very different opinions may be
entertained on the subject. We have been called here, as
I take it, to express our views freely and uninfluenced by
this or that preconceived opinion.

I hold, therefore, that

this statement, too, far transgresses the limits which have

N a t i o n a l M o n et ar y C o m m i s s i o n
hitherto, under the full sanction of the president of the
Reichsbank, been observed.; and I can state it as a fact—
and it is a fact that can not be controverted—that it has
created a painful impression, and I was consequently in
structed to give expression to the feeling it has aroused.
As regards the statistics of flotations, I am thankful to
his excellency, our chairman, that he wishes to obviate
any misleading conclusions by means of a footnote to the
tables on pages 26 to 30. I should like to point out, how
ever, that these erroneous inferences have already been
drawn within the Reichstag, as well as outside of it, since
it is the estimates of the Frankfurter Zeitung and the
Deutscher Okonomist that are in question, which had long
been known and from which inferences have been drawn
by treating them as the figures of the foreign securities
that are circulating in Germany. This has been exten
sively done in the Reichstag and out of it; of that I am
ready to offer proof.
Mr. S chincke Iv (on the order of the day). I must
revert for a moment to the statistics. I should not like
to appear here as a grumbler, but I consider it our bounden
duty, should we actually find any gross errors in the sta
tistics in regard to foreign securities, to expose and criti
cise them. What the consequences are if erroneous sta
tistics are recorded, Herr von Gamp’s remarks have shown
us. I look upon Herr von Gamp, after his having at
tended the inquiry, as the greatest expert in this field in
the Reichstag, and he has remarked that the figures of
1908 had caused in him a feeling of alarm. I must, there
fore, permit myself to subject these figures of 1908 to
criticism.

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Freiherr von G a m p -M a s s a u n e n . Nineteen hundred
and nine.
Mr. S chinckee . But you said before, 1908. On page
29 there is an entry of 112,000,000 marks of securities of
the Jutland Real Estate Credit Association. Everyone fa
miliar with the facts knows that only an insignificant part
of this came into this country. The 112,000,000 of secu
rities were to be only granted admission into Germany;
the figure is quite correct. I should wish, however, that
it were stated, in addition, how much of this was disposed
of in Germany. The loan of the Chinese State Railway
is given correctly. The figures of the Hungarian Gov
ernment rentes, of which far from the whole is in Ger
many, are otherwise correctly stated. Then comes the
gold loan of the province of Buenos Aires at 199,000,000.
According to the scheme of the tables, conversions should
be excluded. Now, all these 199,000,000 marks are not
placed in Germany, but scattered all over the world, and
they do not belong to the statistics, because it is only
conversions that were involved.
A V oice . Had the conversions already been admitted
in our country ?
Mr. S c h in c k e e . They had been listed at Hamburg;
these 199,000,000 should therefore have been omitted
altogether. The loans of the province of Buenos Aires
at 30,000,000 are in themselves correct, but they are not
all held here. Then we have the shares of the Canadian
Pacific Railway, which, however, belong to the preceding
year, and thus 118,000,000 marks fall away. Then come
once again the 112,000,000 of the Jutland Real Estate
Credit Association, which had already been entered.

N a t i o n a l M o n e t a r y C o mmi s s i o n
These also, then, fall away. There remain, therefore,
de facto, only a few hundred millions, and Freiherr von
Gamp speaks of alarming figures.
Freiherr von G a m p -M a s s a u n e n . I have repeatedly said
that I meant to say 1909.
Mr. S c h in c k e e . There I can show you the same thing.
These certainly are errors that evidently need to be cor
rected, and I consider it my duty to express my opinion
at the outset that the statistics ought not, in their present
shape, to be made public.
The C h a ir m a n . The errors we shall, of course, gladly
correct, and I should be grateful to Herr Schinckel if he
would have the kindness to inform the statistical depart
ment or us of any mistakes that may have appeared for
other years; it is to our own interest to give correct fig
ures.
Doctor W a c h e e r (on the order of the day). I should
not attach the importance which Herr Riesser has ascribed
to the faults of the various sentences in the paper on the
question of regulating the deposit system, to which
exception has been taken. We have seen that different
opinions may be entertained as to the meaning of the
sentences objected to by Herr Geheimrat Riesser; but I
believe that those sentences can not, in reality, bias our
judgment of the questions we have to decide here, nor
be in any way prejudicial to their further treatment. I
submit it to you, therefore, whether it would not be best
for us to pass over them. As regards the statistics, I,
too, must say that I can not admit that the statements
as they appear on pages 26, 27, and 28 can be of any
importance in scientific statistical investigation; I hold,

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on the contrary, that if it must be admitted that these
statistics are erroneous, it would by all means be better
that they should not be made the basis of scientific
investigations, because, otherwise, erroneous conclusions
will be drawn from an erroneous basis. The correction
of this statement is, then, necessary at all events, in so
far as it can be made. For me, however, these statistics
were of special value, in spite of their defects, because
they showed what enormous errors were involved in the
figures used by our expert, Doctor Ruhland. If you
compare his statements on page 19 of the compilation
which he has given us, you will find that his account of
the foreign flotations makes them about two or three
times as great as those still erroneously given us on pages
26 and 27. Since the opinions which have been formu
lated by various experts, even if they are not made
public by the inquiry commission, do, nevertheless, in a
measure become public, it is of great consequence, in my
judgment, if this statistical compilation serves to show
upon what a false basis the conclusions expressed by
certain experts rest. I must, therefore, say that even
the uncorrected statements which have been given us
here are, in my judgment, of value; but they will be of
far greater value if they shall be corrected in the manner
proposed by Herr Schinckel.
Doctor H e ie ig e n s t a d t (on the order of the day). I
believe, in the first place, that it is most expedient that
this question of statistics should be discussed as it has
been upon the instigation of Herr Schinckel. I think
that if our debates were made public they would help to
elucidate things. I therefore welcome Herr Schinckel’s

N a t i o n a l M o neta ry Commission
criticism, and regard the assertion that these statements
contain mistakes as just. It would, in my judgment,
then, be very desirable, as Herr Schinckel has already
remarked, that the gentlemen who are in a position to do
so should give the necessary information to the Reichsbank direktorium. For the rest, I hold that the statis
tics, even as they are given here, are of an importance
not to be despised. In the domain of financial statistics
we are, in fact, more or less dependent upon conjectural
statistics, and it is consequently very important that all
possible material be collected upon which the people who
are called upon to do so may form their own judgment.
I can not agree with Geheimrat Wachler, who asserted
that the figures in themselves were erroneous. Formally
erroneous these figures are not by any means—for they
relate to the admission of foreign securities— but they may
perhaps be falsely interpreted as to their substantial sig
nificance. For in the statistics of flotations a variety of
things is involved: First, the statistics of the securities
actually placed in Germany; and, second, the statistics
of admissions. The latter furnish the economic writer
with material useful to him in an inquiry into the German
banking business in judging to what extent the German
banking business is interwoven with international busi
ness, etc. That errors may occur here is a matter of
course, and whoever has worked in the field of financial
statistics knows how very difficult it is to secure a statis
tical basis for every individual fact. Just as I say that
I accept the statistics of the flotations which, though
formally correct, are practically misleading, so I say the
same thing of the statistics of the Genossenschaften

3°

B a n k I n q u i r y of 1 9 0 8 ~ 9
[cooperative banks]. I have carefully looked over the
statistics of the Genossenschaften submitted to us and I
consider them, as they are put and explained, erroneous,
for the same reasons that Herr Schinckel adduced in
regard to the statistics of flotations. I am entitled on
this point, I think, to speak as an expert. We occupy
ourselves—and the president will confirm what I say from
his own experience—very actively with this matter; for
fifteen years we have been making the most strenuous
efforts to obtain correct statistics of the cooperative-bank
system. I have not dared to come out officially with the
material. I likewise have expressed my objections to
this or that point of the document before us, prepared for
the commission by the Reichsbank direktorium, but I
have not closed my eyes to the importance of the fact
that it is extremely valuable as material for criticism and
that it then becomes a matter for those connected with
the Genossenschaften to bring their criticism to bear upon
this material. I wish to add right here that the estimates
of the fluidity of the Genossenschaften and of the security
of bills issued by them do not at all agree with the facts;
they may, indeed, be formally correct, but in substantial
effect they are absolutely incorrect in every respect. As
far as the Genossenschaft bills, in particular, are con
cerned, I may state positively that they are, in general,
as safe and redeemable as any other bills. I spoke more
at length here a year and a half ago in regard to the form
and character of commercial bills. The comparative
value of the Genossenschaft bill is much greater than is
generally assumed. The strictures that have been passed
here in the commission, and likewise in this report, upon the
fluidity of the savings institutions and the Genossenschaften

N a t i on al M on et a r y C o mm i s s i o n
I must characterize as substantially unfounded, for the
same reasons that the two preceding speakers have given.
Nevertheless I do not feel inclined to discard entirely the
statistics before us, for I say that the statistics are for
mally correct and we must understand how to read them
properly, and that is why I welcome this very discussion
before we enter upon the real order of the day, for by its
means the value of the material is justly indicated and
it is made clear to everyone who wishes to consult these
facts as a basis for his conclusions what conclusions he
can and may draw from them.
The C h a ir m a n . President Heiligenstadt was perfectly
right when he said that it is very difficult to read/statistics,
and I can corroborate his remarks—for I, too, have been
connected with the Genossenschaft system for fifteen
years—as essentially correct.

But here, also, it is sup

posed that the explanatory remarks to the Genossenschaft
statistics, which give only cold figures, shall be read, and
that the significance of the figures will by their aid be cor
rectly understood.

It is true, as President Heiligenstadt

says, that the fluidity of the Genossenschaften must not
be judged by these rigid figures alone; and that is why it
is expressly pointed out in the explanatory remarks that
precisely in the Genossenschaften a certain fluidity is
guaranteed on one hand by the partly limited, partly un
limited, liability; and, in the case of rural Genossenschaften
beyond that by their association in unions, by the union
funds, and, above these, by the strength of the Prussian
Central-Genossenschaftskasse. These things must not be
overlooked in reading the statistics of the Genossenschaften

B a n k I n q u i r y of 1 9 0 8 - 9
and in making comparisons between them and those of the
banks.
Freiherr von G a m p -M a s s a u n e n (on the order of the
day). Not only every Prussian, but every member of the
bank inquiry commission, is, of course, entitled to express
his opinions freely and frankly, and just as I do not natu
rally wish to limit Herr Geheimrat Riesser in this right, I,
on my part, likewise claim that right. But it is another
question—and I think Herr Geheimrat Riesser, too, might
recognize and acknowledge it to be so—whether a member
of the commission is privileged to bring before the com
mission instructions with which he has been charged by
others. Who, indeed, has the power to give Herr Geheimrat
Riesser instructions ? He says that he received this
commission from outside.
Doctor R ie s s e r . N o ; from members of the bank
inquiry commission.
Freiherr von G a m p -M a s s a u n e n . Then I would request
him to communicate to us the names of those by whom he
was commissioned, so that it may be known who stand
behind him. I am ready to admit that if members of the
bank inquiry commission are in question, the discussion
would be simplified if Herr Geheimrat Riesser were to sa y :
“ Doctor Weber, Herr Mommsen, Herr Schinckel, etc.,
have instructed me, and with a view to curtailing the
debate, I shall summarize their instructions;” but to receive
instructions from other quarters, I should not consider
admissible.
A V oice . Nor should I.
Freiherr von G a m p -M a s s a u n e n . Very well, then; we
agree here again. [Laughter.] Now, I should like to

N a t i o n a l M o n e t a r y Co mmi s s i o n
make a remark in reply to Herr Schinckel. If I made a
mistake and said “ 1908,” I corrected it just as soon as
he described the conditions of 1908. Herr Schinckel
apparently did not hear me call out the correction, though
it was very audible, for he has not accepted it. Accord
ing to the stenographic report, I did not speak of the
securities admitted in 1908, but of those “ of last year.”
I should like to point out that I also, as stands to
reason, queried the 112,000,000 marks of securities entered
twice in the paper. The data for January to October of
the current year were of special value for the reason that
the remarks state under what conditions the securities
were introduced, who handled them, and what object they
serve. Now the matter stands thus, that outside of
certain emendations the thing is to distinguish between
admission to the operations of the Bourse in Germany
and actual absorption by the German market. To have
these statistics is of great importance. These figures
are, as a rule, correct and not misleading, and they serve,
in my judgment, to place our dependence on the foreign
market in a proper light. If the 1,600,000,000 marks of
original shares of the Pennsylvania Railroad Company in
Germany are admitted to the operations of the Bourse,
then these 1,600,000,000 can, in case of a gold crisis,
which may, perhaps, even surpass the one we experienced
in the German gold market in the year 1907, be thrown
on the German market.
A V oice . On the contrary.
Freiherr von G a m p -M a s s a u n e n . N o ; they can be
thrown on the German market if they are admitted. I
wish to say that we are all certainly greatly obliged to

Bank

I n q u i r y of

1 9 0 8- 9

Herr Schinckel for the correction of mistakes, and I
should think that we could have a reprint made of the
, information on page 26 and the following pages, in which
the errors would be eliminated. I would, then, by all
means, request that both sets of figures be given; first,
the statistics of the foreign securities admitted to the
Bourse—these figures can not be objected to in any
quarter, for they are well established—and, second, the
figures, based upon estimates, showing to what extent
they were taken up by the German market. If in float
ing a foreign loan 100,000,000 marks of it found their
way into Germany there is a possibility that the next
year 100,000,000 marks, and in the year following another
100,000,000, will again find their way here. These are
but estimates which must be more closely characterized.
If Herr Geheimrat Riesser has criticised but a few
points in all the vast mass of material presented to us
in the printed matter----Doctor R i e s s e r . N o, no; I reserve the rest for the
general debate.
Freiherr von G a m p -M a s s a u n e u —then I think I ought
to give expression to my gratification that even he ac
knowledges the essential correctness of this digest.
Mr. M o m m sen (on the order of the day). The remarks

of Herr von Gamp in regard to the statistics of the securi
ties admitted to the Bourse induce me to make an obser
vation. I have for many years been connected with the
admission office here and know that the admission office
in Berlin and those in other great financial centers are ex
tremely anxious that if foreign securities are to be admitted
here it should be not only the small amount taken by the

N at ion al M o n e t a r y Co mmi s s i o n
German banks to be disposed of here that should be ad
mitted, but the entire issue. In this matter changes have
repeatedly taken place; and that is why the statistics are
somewhat misleading here also. But now the point is
strenuously insisted on, not for the reason adduced by
Herr von Gamp that securities held in foreign countries
are thrown on the German market, but because the
salability of securities held in Germany is, naturally,
very seriously affected if they can not be thrown on the
foreign market; for it has been found that, as a matter
of fact, many such securities placed here first gradually
returned abroad. We can not, therefore, draw the con
clusions from these high figures that Herr von Gamp
draws, and that is why I share Herr Geheimrat Riesser’s
view, that it is hazardous to publish this kind of a com
pilation, even after it shall have been corrected. If you
utilize such statistics in the way Herr von Gamp does, you
bring pressure to bear on the admission offices, so that
the admission of the total loan will no longer take place,
and thus you harm the German buyer instead of bene
fiting him.
Doctor H e iu g e n s t a d t (on the order of the day). I
will address still another request to the chairman, and
that in regard to the publication of additional matter.
I attach great importance to making the present debates
as widely known as possible, in order to make accessible
to a larger public an adequate discussion of the sub
ject. I believe that this wish can not fail to*be shared by
all. I should think it would be expedient for the entire
material to be systematically printed and published
anew, so that it might have as wide a circulation as

Bank

Inquiry

of 1 9 0 8 ~ 9

possible; above all, the statistical matter and likewise the
stenographic reports of the hearings of the experts. I
regard this as extremely important. And from a scien
tific standpoint, I hold it to be proper that our material
be made available for scientific research, for it is by means
of such research that we shall really make progress. How
far it will be possible to make public the stenographic
reports of the hearings of the experts at some future time,
I can not judge, since it was promised that the statements
would be held confidential. At any rate, I request that
the remarks of the members of the commission and all the
other matter, including the matter received by or laid
before the commission, be subsequently made accessible
again to the members of the commission as well as to the
Reichstag and other interested parties. The material
which came to us in the shape of separate publications
has been in part marked up by us with annotations; in
part, it may have been lost. I request, therefore, that
the material, systematically arranged, with all the papers
submitted, be republished and made accessible to the
members of the commission.
The C h a ir m a n . Gentlemen, the proceedings of last
year, as far as the commission itself is concerned, and
the papers connected with those proceedings have already
been made public, having been published here by E. S.
Mittler & Son. I assume that the same will be the case
with the proceedings that are now going on and likewise
with the papers which are the basis of those proceedings.
We may, then, gentlemen, begin the actual discussion
of the subject. I have permitted myself to hand the
members a syllabus of the points to be considered as a

N a t i o n a l M o n e t a r y C o mmi s s i o n
general guide to the debates, and would beg you to
adhere in general, as far as possible, to the scheme thus
outlined in the interest of the clearness and order of our
proceedings. I hope that the debates will show that
this is possible and useful. It is naturally not my object
to prevent members, in expounding their views- par
ticularly in the first great general question, which is the
central point of interest—while discussing the grounds
upon which in the public interest a betterment of con
ditions in the domain of our credit system appears desir
able, from referring briefly to particulars comprised in
the subsequent groups of questions and measures. But
I would request that the discussion be directed sepa
rately to each of these special questions and to the specific
measures which are suggested in the proceedings of the
experts, and that this opportunity be taken for the
expression of any individual desire in the matter. If
the members agree with me in regard to this treatment
of the matter, I would now ask them to take up the
discussion.
Mr. S c h in c k e e (on the order of the day). Would it
not be possible to lay down more definite lines, so as to
keep the debate within bounds? I call your attention to
the fact that when the inquiry commission was convoked
we were, for instance, informed by the Government that
the system of mixed banks, which had been tested,
should not be tampered with; that a separation of the
banks should not be thought of. Could not that, for
example, serve as a guide, so that subjects that we are
not at all called upon to treat should not be discussed ?
I believe, moreover, that I was not wrong in assuming

Bank I n q u i r y

of 1 9 0 8~ 9

that it was the resolution of the Reichstag of May of
this year that occasioned the resummoning of the in
quiry commission at this time. This resolution of the
Reichstag has its limits, however; otherwise I can not
see why we did not treat the subject more fully last year.
But, if I should be mistaken in the matter, if we are
actually to enter once more into a full inquiry into such
far-reaching questions, then I would ask how many
weeks are we to sit here? For since the Reichstag con
venes on the 30th and a part of the members of the com
mission are likewise members of the Reichstag, the matter
will be rendered vastly more difficult. I think, there
fore, that we should have a somewhat more circum
scribed field of discussion laid out for us than appears in
the syllabus that has been presented. We should then,
I believe, advance more rapidly.
Freiherr von G amp -Massaunen (on the order of the
day). I should think that too much time would be taken
up if we should follow the proposal of our honored presi
dent and treat each question separately. Nor can I even
conceive the possibility of such a sharp division. How,
for instance, can one take a stand on the question of se
curity and fluidity without at the same time taking a
stand upon what is understood by fluidity and the means
by which fluidity is meant to be brought about? I be
lieve that if we confine ourselves to showing clearly, in
systematic sequence, the standpoint that each one occu
pies on this question, the proceedings would, in my judg
ment, be greatly shortened and at the same time be more
comprehensible. We should have an utterly disjointed
discussion if the members were to speak first of what is
62838°— PT 2 — I I
-4
39

N a t i o n a l M o n e t a r y C o mmi s s i o n
meant by public interest, by fluidity and security, and if,
days after, they were to speak about the means by which
fluidity may be secured, and again, days after that about
how the balance sheets of the banks are to be made up.
These are really all only means of producing a greater
degree of fluidity. The object of these balance sheets is
that the public be informed of the condition of the bank,
and that the banks may find in them reason for adopting
better methods. It was a different thing with the other
question sheet; entirely isolated groups of questions were
involved there, toward which one could and had to as
sume a stand. But now it is only the deposit system that
is left, and I think it would be desirable to take a position
on the whole question and not dismember the discussion
into ten or fifteen main and subsidiary questions.
The C h a ir m a n . The questions, gentlemen, that occupy
us to-day constitute the second division of the questions
laid before the bank inquiry commission by the Bundesrat a year and a half ago; and I think wre shall not be able
to avoid a settlement of these questions, nor to confine
ourselves to what Herr Schinckel has kindly indicated,
namely, the wishes of the Reichstag. It was not the wishes
of the Reichstag that caused the adjournment of the com
mission; the wishes of the Reichstag were made known
only this spring, while the adjournment of the commission
took place last year, and it was due to the circumstance, as
Herr Schinckel probably knows, that a new element had
come into the case, which interfered with a final judgment
on the whole question—^an element affecting one-half of
the question, namely, our view of the policy and organi
zation of the private banks, which is a necessary part of

B a n k

I n q u i r y

o f

8 - 9

the foundation of any conclusion on the question as a
whole. This new element was the decision of the Berlin
great banks to publish their intermediate balance sheets;
and another reason was that it was impossible to sift the
comprehensive and intricate material which the proceed
ings of the experts brought to light, and prepare a lucid
compendium of it for the members of the commission.
And finally, the third reason, gentlemen, was that a series
of publications of the statistical department, which were
to serve likewise as the basis for the deliberations of the
commission, had become desirable, but could not be
completed in a few days. These were the causes that
made the adjournment necessary, but which can have no
influence upon the range of the subject we are debating
here.
Doctor S t r o l l (on the order of the day). I should like
to put a question. A year and a half ago the Govern
ment made a declaration, in the form of a programme,
which tended in a certain direction. When the sessions
of the commission were opened it was emphasized in the
opening speech that the Government did not favof- the
separation of the deposit banks from the stock banks,
etc. I may assume— I have heard nothing to the con
trary—that the Government and our honored chairman
still occupy the same ground. If this should be con
firmed by the president of the Reichsbank, there is a
great mass of discussion that becomes irrelevant. If
the adoption of a law concerning deposits, and in par
ticular of regulations governing them, is to be discussed,
then the question of this separation is of the highest
moment. For a separation of the deposit banks from

N a t i o n a l M o n e t a r y C o mm i s s i o n
the stock banks [Efjektenbanken] there is, in my opinion,
no historical foundation, and I would by no means advo
cate it; but if it is eliminated from the discussion at the
outset— and I think it must be eliminated—then the
debates concerning the kind of normative regulations it
might be desirable to make for deposit institutions would
be confined to comparatively narrow limits. The dis
position that the president of the Reichsbank has pro
posed appears to me appropriate and expedient in every
respect. *
Freiherr von G a m p -M a s s a u n e n (on the order of the
day). I would ask you, gentlemen, not to make the
attempt to fix definite limits at the outset on the basis
of an authoritative declaration of the president of the
Reichsbank. I must say that it did not strike me pleas
antly, even the last time, and I think that precisely in
this question— I believe, for that matter, that no such
suggestion will come from any other quarter—we should
avoid anything of the kind. I am very doubtful whether
it would be expedient—nay, I regard it, on the contrary,
as inexpedient—to say that the Imperial Government
does not contemplate a separation of the deposit banks,
and that it is therefore not to be discussed.
A V oice . But this has actually been stated in the
paper intended as our programme.
Freiherr vo n G a m p -M a s s a u n e n . B y whom has it been
stated ?
A V o ic e . In the name of the Imperial Government.
Freiherr von G a m p -M a s s a u n e n . But the Reichstag,
too, has its initiative, and I think you do not render
any service to the cause if at the start you wish in a way

Bank

Inquiry

of 1 9 0 8 - 9

to muzzle us. I have no intention of making a sugges
tion in the direction of a separation of the banks, nor
do I believe that it will proceed from any other quarter,
but I think a most disagreeable and painful impression
would be created at the outset were the Imperial Gov
ernment to declare that it does not wish to have any
opinions on the subject.
A V oice . It has so declared.
Freiherr von G a m p -M a s s a u n e n . If you will kindly
refer to the stenographic report, you will find that it does
not say that it was in the name of the Bundesrat, which,
after all, is one of the two factors of legislative power,
nor in the name of the “ Imperial Government”—I do
not know what Doctor Stroll understands that term to
mean----A V oice . I beg pardon; that was a slip.
Freiherr von G a m p -M a s s a u n e n —that such a declaration
was made.
I consider the question sheet proper and would express
myself against entering into discussion—first, under
No. I—i , upon the public interest in the regulation of
the question; then under No. 1-2 , upon security and
fluidity; then under No. II—1, upon normative provisions;
for I am of the opinion that we must take a stand sys
tematically on the whole question.
The C h a ir m a n . I beg permission to make a few re
marks. At the opening of the bank inquiry it was cer
tainly declared that the imperial chancellor, and, if I
remember right, the Bundesrat, did not contemplate a
separation between the deposit banks and the mixed
banks. This declaration is just as valid to-day as it was

N at ion a l M o n e t a r y C o mmi s s i o n
then, and will, I assume, exert some influence upon the
commission in the way of a certain moderation in the
discussion and judgment of this problem. The questions
that occupy our attention are, however, of such an
exceedingly complicated nature that I do not intend to
cut short every word that may be spoken beyond this
narrower subject. We have, as a matter of fact, been
placed in similar circumstances in former proceedings,
where individual members declared that they would on
the intrinsic merits of the case, for such and such reasons,
advocate a separation of the deposit banks; but that if
this can not be accomplished, then they would pronounce
in favor of such and such measures, which, while perhaps
not as good, are, at any rate, advantageous. Nor do I
believe, gentlemen, that there is any disposition in this
inquiry commission to actually separate by law our
deposit banks from the credit banks. [“ Very true.” ]
Meanwhile I am of the opinion that the disposition is not
in favor of regulating our entire credit system organically
by a comprehensive law regarding deposits, and of putting
it on a different basis; that the commission is aware of
the gravity of the question; that conditions which pene
trate so deep into our economic life, which are still wholly
in a state of flux, and are woven of such multiform threads,
can not be regulated offhand and at once by a legal decree;
and that, perhaps— I do not wish to enter into any criti
cism, I merely point out a possibility—the only thing for
individual members will be to propose separate measures,
be it of a legal, administrative, or voluntary nature,
regarding separate points which they think need amend
ment; and that the chief consideration will be to indicate

B a n k I n q u i r y of 1 9 0 8 - 9
clearly the points in our economic development and in
the development of our credit system where, in the
individual’s opinion, flaws have been exhibited; to place
the finger on the wound, and then, perhaps, wait to see
whether the pressure exerted by the disclosure of those
conditions upon the parties concerned and also upon the
supervising authorities has not of itself meanwhile
exercised a salutary effect; and, gentlemen, I feel con
vinced that the pressure of your votes in that direction
will, indeed, be a strong one.
But if Herr von Gamp asks what may be discussed or
should be discussed under Point I of the general discus
sion of the question, and whether it would not be better to
enter at once into a discussion of the separate measures,
I would submit it to your judgment whether such a course
would be right. It appears to me, according to the
entire impression produced upon me by the proceedings
of the experts, that the separate measures can not be
judged at all without making clear to ourselves whether
or not injuries wrought by our economic system and by
our credit system, that require amendment, have actually
been disclosed— and for this reason, gentlemen, since in
our opinion this whole question is the crucial point of the
matter, we must perforce enter into the general discussion
first.
On the one hand, the question at issue is the credit
institutions peculiar to our credit system: Genossenschaften, savings institutions, banks. I would request you,
in discussing the general question, as well as the separate
measures, to keep these three kinds of credit institutions
apart. But, gentlemen, I should like, in order to give

N a t i o n a l M o n e ta r y Commission
at least a brief reply to Herr von Gamp’s question, with
out wishing to indulge in any sort of criticism, to make
a few remarks. The first question that will be considered
in the debates will, I should say, presumably be the credit
system of the banks; it occupied the foreground in the
proceedings of the experts and likewise in public discus
sion; and along with it in the foreground we shall have
the question of the maintenance of the fluidity and sound
ness of our credit system and of our economic life. Now,
gentlemen, that the organization and development and
policy of our banks are intimately connected wdth our
entire rapidly advancing economic development is surely
beyond doubt. Many foreign countries envy us for the
efficacy of our banks, and even in England this view’, as
opposed to the separation of the credit from the deposit
banks, which obtains there, and which was often held
up to us formerly as a model, is being advocated more
and more widely; and it is ungrudgingly recognized— I
may indeed say without any serious contradiction—that
our economic development has been vastly advanced and
in part only made possible through the development and
activity of our banks. Gentlemen, this, too, is a con
sequence of the ever greater concentration of capital in
the banks, of the steady increase of deposits, or—if, owing
to the uncertain and fluctuating character of this term,
I may replace it by the more general term—of outside
moneys. And this we must not forget when we shall
come to consider this question. But, gentlemen, with this
development, the banks, as has been pointed out in many
and important quarters, have become more and more the
guardians and custodians of the fluid working capital of

B a n k

I n q u i r y

o f

1 9 0 8 - 9

the German people and of our economic interests gen
erally. This constitutes them responsible powers in our
public life and imposes duties upon them. And just
here, gentlemen—and these are the points that I would
at least indicate as an answer to Herr von Gamp’s ques
tion— it is pointed out in many quarters that elements
did nevertheless make themselves felt, most particularly
at the time of the last great crisis, which admonish us to
caution and suggest misgivings; misgivings bearing on
the public interest.
I can only go into the matter briefly. On the one
hand, the danger is pointed out that the vast capitalistic
power conferred by the outside moneys has led to an
excessive sinking of what should be fluid working capital
in our economic life, in permanent investments and
long-term credits, as, for example, in the supplying of
permanent working capital; that this danger is further
heightened by an immense and unsound increase of bank
acceptances and bank drafts in so far as they do not pro
ceed from mercantile transactions, but serve again merely
as credit grants; and that here again there is danger that,
owing to the ease with which credit may be obtained,
great numbers of our people stretch their credit to an in
ordinate extent, and that this overstraining of credit
represents a continuous burden on our money market and
may lead to an unwholesome and dangerous development.
On the other hand, gentlemen, it is contended that,
owing to the growing power of the banks in the money
market, and to this development based upon overextended
credit, the position and influence of the Reichsbank itself
have experienced a change, as has likewise happened to

N at i o n a l M o net a r y C o mmi s s i o n
our great western neighbors—it being the reason why in
England this question has recently been absorbing so
much attention—and that the very great and, under
certain circumstances, dangerous strain upon the Reichsbank is connected with these circumstances.
Furthermore, gentlemen, to take up another point, it
has been indicated that to this development the strong
reform movement in favor of the introduction of checks—
of substituting cash-saving devices for cash payment—
has of late been added; but that every step whereby we
approach these ends, which are by all means desirable,
involves other dangers; the danger which in England, too,
is specially emphasized, that the credit structure will
grow apace with increasing rapidity and the metallic basis
upon which it rests become steadily narrower. England
has come down to the single-reserve system, which is
to-day regarded as dangerous by many authorities in
England, and that is why I have laid before you the inter
esting compilation of English opinions on-this.subject.
Gentlemen, I confine myself to these suggestions. I
merely wished to show that enough elements of a general
nature are before us, and have been set forth in the pro
ceedings and the opinions of the experts, to justify placing
a general section before you first, in order to probe those
considerations, to elucidate the economic development of
our credit system in Germany, and to find the basis here
upon which we can form a judgment on the question:
Are the existing evils so great that interference should
be resorted to; and, if so, what measures*should be taken?
I should think, therefore, gentlemen, that it is the right
thing to take up these general questions first—and there

B a n k I n q u i r y of 1 9 0 8 ~9
are, besides, a whole series of others—and center into
special debates only later on. But here, too, it rests
with you to set forth any opposing views, so that we may
come to a clear understanding as to the course of our
proceedings.
I would add, furthermore, that if it meets the wishes of
the members, I propose to have the sessions in the morn
ing until about half past i, as last year; then a recess
of about two hours; and in the afternoon at half past 3
or 4, just as the members may desire, to continue our
debates, which, since gentlemen are apt to have so many
engagements in the winter season, will probably close at
about half past 6 or 7.
Mr. S in g e r (on the order of the day). I regard the
arrangement, as it is presented to us, as most satisfactory,
and agree with the president that it is absolutely essential
to enter into a general discussion, because I believe that if
in this general discussion it is determined in what special
fields the abuses and evils occur, the special deliberations
will be more useful and effective. If we begin at once
with a consideration of the special questions, we shall
unavoidably have very frequent repetitions, while with a
preceding general discussion the special debates will
assume a clearer and more practical form. If it is found
in the general discussion that, on the whole, there is
agreement in the commission upon certain necessary
measures, we shall be in a much better position, in the
special discussions, to reach an agreement as to ways and
means, because the answer to the question whether legal
measures should be resorted to will already have been
given in the general discussion.

N a t i o n a l M o n e t a r y Commission
I regard it, therefore— I wish to express myself only
on this point—as positively requisite that we enter upon
a general discussion, in order to draw the conclusions re
quired for the special consideration of individual points.
I shall, however, venture to make a remark here con
cerning the possible adoption of a deposit law. This ques
tion must be made to depend upon the course of the debate,
upon the determination that such a law is or is not
required; and I believe that one of the speakers of the
commission misunderstood the president in interpreting
his remarks to mean that the inquiry commission was to
be prevented from expressing its opinion upon the neces
sity, or it may be the inexpediency, of a deposit law.
That, in my judgment, would be absolutely at variance
with the functions of the inquiry commission. I think
that the commission should be in a position to make
suggestions to the Government without restriction. I
can not conceive that the Government is resolved in ad
vance to pay no attention to such suggestions if it can
be convinced of their justice. We should not at this
stage, I think, assume that a deposit law is proposed or,
on the other hand, that such a law is not to be considered,
but should make all propositions dependent upon the
course of the debates. But I do not regard it as the duty
of the commission to confine itself strictly to the questions
put before it, for it must naturally be entitled to make
such proposals as it may deem necessary in relation to
our system of banking and credit.
In order to make the work of the commission really
fruitful, a general discussion seems to me very desirable.
The more fundamental, comprehensive, and effective this

5°

B a n k I n q u i r y of 1 9 0 8~9
general deliberation will be, the shorter and more to the
purpose will be our treatment of the separate propositions,
and I can not conceive that the time of the commission
would be economized by cutting out a general discussion
and yet having in each individual question to return to
the general points of view, for the necessity of any specific
measures must be based upon those points of view.
I should, therefore, recommend that the scheme of
our proceedings presented to us by the president be
accepted.
The C h a ir m a n . Gentlemen, if no opposition is mani
fested, I shall assume that you will at least make an
attempt to begin the discussion under the guidance of
this scheme, and I would request members to give me
notice of their intention to speak.
Doctor L e x i s . The first question to be considered is
whether there is a public interest in the regulation of the
matter before us for debate, and I wish to state my views
on that point.
For the great body of the people the object of greatest
interest, as is well known, is that of preventing the
owners of small savings from being enticed by the offer
of high rates of interest from taking their savings to the
banks and bankers in order to obtain higher interest
than is given by the savings banks. That such things
happen is beyond doubt. We saw, also, notably in the
year 1907, that in many quarters, particularly on the
part of small bankers and small banks, very high rates
of interest were offered; they were published in the
papers, too, and many people of slender means were

N a t i o n a l M on et a r y C o m m i s s i o n
thus induced to place their savings in that way. At
that time this did not, as a rule, result in embarrassment
or loss to the people; the small banks and bankers raised
the rate of interest on their loans to from 7 to 8 per cent,
and could consequently pay from 4 ^ to 5 per cent on
demand deposits. But these were, in great measure,
business men, who could in reality hardly lay claim to
the name of bankers; small money-changers who, how
ever, by calling themselves bankers, are invested in the
eyes of the masses with a certain prestige, and often
thus actually attract considerable quantities of savings.
This is unquestionably bad, and it is a thing to be dis
cussed whether some sort of measures might be adopted
to protect the great mass of people of small means. It
will, in my opinion, hardly be possible, but the question
can be discussed later, and this would be one subject
that certainly represents a general public interest.
Next to this the public is interested, it appears to me,
in securing for the prospective development of the check
system the most positive guarantees possible for that
part of the public that does not belong to the business
world, yet wishes to avail itself of the check system.
We must, therefore, distinguish between those real
deposits of savings consigned to banks and bankers by
people of moderate means, with the object of actually
saving, and check deposits consigned to banks by non
business people. In the latter case there is not the dan
ger inherent in the case before mentioned. Here, namely,
no promise of high interest can be made; our check
deposits will, under any circumstances, command only
very moderate rates of interest, and, altogether, we have

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Inquiry

of 1 9 0 8 ~ 9

not the danger here that people—and they are, besides,
persons of a wealthier class—will be induced by enticing
promises of interest to take their money to the banks.
The question, then, that would come up for discussion
here would be simply: What precautionary measures
should be adopted in case of a great development of the
check system so as to render moneys of that kind secure
for non-business people? In my judgment nothing in
that way could, indeed, be practically done; neverthe
less, the question might be discussed, particularly as here
again some smaller banking concerns or bankers, as they
term themselves, might, perhaps, use the opportunity to
attract moneys.
Then, there is a third point which also, and that to a
higher degree, might touch the public interest, the ques
tion of the relationship between account-current debtors
and account-current creditors. In this case the business
patrons of the bank only are involved; one could, there
fore, define the class very sharply and say that the only
persons in question are those entered in the commercial
register who, according to the bourse law also, occupy in
other respects as well a particular position.
It might be said that business people having accounts
with a bank form a group by themselves, and the accountcurrent creditors and account-current debtors are, indeed,
very intimately connected with each other; the creditor
may become debtor, and vice versa. Here comes in the
question, How is the working capital of the business world
in general managed? The current-account creditors are,
for the time being, holders of fluid, temporarily unap
plied capital, which is in the banks; their credits are not

N a t i o n a l M o n e t a r y Co mmi s s i o n
savings deposits; they are deposits of another kind, which
it would be best not to call deposits at all, or to call
credit deposits. These may, to be sure, be jeopardized,
as happened, for instance, in the striking case of the Leipziger Bank, by the investments made by others (with the
aid of this temporarily disposable capital) being ill judged,
by their being in some way tied up— in other words, it
may be that the debtors of the banks do not stand in a
proper relation to the creditors. The chief danger, which
seems to me to represent the kernel of the question before
us, must be recognized in this: Is the fluidity of the debt
ors as opposed to that of the creditors rightly gauged in
the accounts current? Here, then, we should have an
other question of very great general significance; much
more important than the first question which, econom
ically considered, would, after all, jeopardize relatively
only very small sums, while here far greater possible
dangers might be involved.
I would, for the rest, remark that it is not by any means
inherently necessary that there should be a dispropor
tion of that kind between credits and debits. As a
matter of fact, as I wish to state at the outset, we see
from the statistics of the assets and liabilities of the banks
communicated to us, that precisely in the case of the
largest banks almost exactly the same sum is found in
the balance sheet for account-current credits as for
account-current debits; in the case of the other banks,
on the contrary, the amount of debit moneys is greater
than that of credit moneys, and, indeed, considerably
greater. But this would lead to the special questions
themselves. I shall not go into the matter any further.

B a n k I n q u i r y of 1 9 0 8 - 9
This question of the proper relation of debits to cred
its in the accounts current—consequently in the affairs
of business in which only business men are concerned—
would again represent a distinct and perhaps the most
important side of the problem before us. With it, fur
thermore, is allied the question: Are these outside moneys
employed for purposes which have perhaps no connection
at all with German economic activities? Are they em
ployed, namely, in foreign business, in foreign promotions,
syndicates, loans, and the like? That is a question that
is often insisted upon with exaggerated emphasis. In my
opinion it is very desirable that we should have as many
safe investments abroad as possible. This question,
however, is not directly connected with the deposit ques
tion, for Argentine railways are not built with deposit
moneys—deposit moneys are not directly applied to
that; at most, then, it can only be a question of tempo
rarily employing the deposits for the purchase of newly
issued shares or foreign obligations. That, however, is
only a passing employment of the moneys whereby the
average fluidity of the outside moneys in the banks need
not be at all imperiled. But at any rate a point is pre
sented here which might be discussed.
Doctor W a c h l e r . I think that in view of the fact that
since the year 1857 in the joint-stock banks alone the credits
increased from 90,000,000 marks to over 5,500,000,000
at the end of 1908, and the deposits from 110,000,000 to
over 2,750,000,000, and the credits and deposits com
bined at the close of 1908 in the Kreditgenossenschaften
amounted to nearly 3,000,000,000, the deposits of savings
in savings institutions to over 15,000,000,000, that the
6 2 8 3 8 0— PT 2—

I I ------5

N at ion a l M o net a r y C o m m i s s i o n
consideration of the deposit system touches the public
interest in a very great measure.
Along with this, as a matter of course, the next and
most important things to be considered are the security
and the fluidity of the investments made with the deposit
and savings moneys.
This question, as the president has pointed out, was
originally publicly agitated chiefly in connection with the
question of insufficient security. Passing gradually from
arguments upon security, other points—inadequate fluidity
and the management of the moneys—were taken up. Per
haps they were taken up only because it was seen that
the objection of inadequate security, especially in the case
of the joint-stock banks, was without foundation, and yet
the critics, having begun to find fault with the deposit
system as carried on by the credit banks, did not feel
disposed to drop the subject altogether.
Now, it appears from the tables of the bank statistics
that in the case of the credit banks, particularly those
having a capital of over a million, in view of their spare
capital and surplus and also of their easily realizable
resources, no danger can be apprehended either to the
security or to the fluidity of the deposits and outside
moneys. In the case of credit banks with a working
capital of less than a million these conditions are, to be
sure, not as favorable, but, then again, smaller quantities
of deposits are here in question. The experts who have
been questioned have almost without exception—only
Doctors Ruhland, Kreth, and Vorster desired still further
provisions for the security and fluidity of deposits—
acknowledged that on the part of the credit banks ade
quate security and fluidity of deposits are offered.

B a n k I n q u i r y of 1 9 0 8 - 9
On the basis of the opinions of the experts we must,
accordingly, answer the question propounded under Point
V I unreservedly in the negative, the question being:
Does it seem warranted in the public interest to take
care, by way of legislation, of the security and fluidity of
the investment of deposits and savings?
Nevertheless, some of the experts have in their opin
ions spoken of a limitation to the extent that—
1. They recognize existing conditions as satisfactory
only under the present managers of the credit banks, but
perceive danger should these managers be replaced by
inferior ones, and desire such danger to be counteracted
by legislation.
2. They see, irrespectively of this, a danger in the con
centration of the great banks.
3. Even if they have no misgivings as to the security
and fluidity of the deposits, they nevertheless take de
cided exception to the kind of uses to which these funds,
representing the national working capital, are put, espe
cially by the great banks, and desire a more satisfactory
economic utilization of these funds.
As regards the remark that confidence may be placed
in the present managers but that there is danger that other
people may in their management of the banks misuse such
such funds, I would make the following observation:
It is recognized in England and France, as well as at
home, that the development of the German banking system
has for many decades been most admirable. This devel
opment the banking system owes to the predecessors of the
present managers; and just as their predecessors found
capable successors who have furthered the work begun by

N a t i o n a l M o n e t a r y C o mmi s s i o n
them, it may be assumed that the present managers will,
in their turn, find and attract successors who shall know
how to continue their activity in a salutary way. No
legislation would be capable of securing qualified people.
[“ Very true!” ] But to limit by legislation the activity of
the managers, which is regarded as efficient at the present
time, and confine it within rules, would be both perverse
and futile. Financial conditions are affected to a most
far-reaching extent by every incident in the economic
concerns not of Germany alone but of the world at large,
and their treatment requires the utmost freedom of
motion. Moreover, any legislative requirements would
be evaded by dishonorable and unscrupulous persons,
and in fact no legal measures can secure the absolute pro
tection of depositors. If it were possible, without doing
injury to our economic interests as a whole, to secure a
part of the deposits by certain measures, though it were
by transporting the funds to some sort of a Juliusturm,
this would affect only such a minute fraction that no
security would thereby be created for the deposits which
could in the remotest be compared to the injury that free
economic activity would suffer from such legislative ex
periments.
As for the fear of the concentration peril, it has been
playing a great role recently in our economic life, but I
can not understand how scientific men, who have gained
a wider insight into economic conditions and are able to
compare the events of the past and the present with a
fair, critical judgment can share such a feeling. We all
know the proverb that trees can not grow up to the
sky, and we know from the history of nations and of the

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Inquiry

of 1 9 0 8 - 9

development of states, how in these fields concentrations
of various kinds were developed, but also that when these
agglomerations went beyond the limit of wholesomeness
they disintegrated of themselves. It is barely for two
decades that we have witnessed here in Germany a strong
movement of concentration in the economic sphere—in
dustrial as well as financial; and I believe that the move
ment has been entirely justified and has thus far been a
wholesome one.
Just consider the development of our trade, our com
mercial relations with all the leading countries of the
world; cast a glance at the progress of our shipbuilding,
our mining, our electrical industry; lately, too, the utiliz
ing of water power; and recognize from this what vast de
mands have been thereby made upon our iron industries
and machine shops in order to produce the magnificent
machinery and other elements that have been necessary.
In all other departments of industry and business, in build
ing, in municipal life—elevated and underground railways,
colonization, canalization, etc.—conditions have changed
in every way on so grand a scale that it should be no matter
of surprise to anyone if in industry and in the domain of
finance a considerable concentration has been developed.
I regard it as an inevitable necessity, and I look upon it
as a piece of good fortune for our country that farseeing
men were quickly enough found who recognized the needs
of our day in good time and acted in accordance with
them. No one, I should think, can doubt that if our
industrial and financial world were still in their dwarfed
condition of about fifty years ago, they could not do
justice to the demands of to-day, and that if we had

N at i ona l M o n e t a r y C o mmi s s i o n
maintained the old and more patriarchal point of view,
we could not have advanced to our present political
development either.
Nobody, it may be presumed, will wish to dispute this.
But now come the anxious and the omniscient, who per
ceive in this development excrescences and abuses for
the future, and think, therefore, that they can, by way of
precaution, establish by legislative means regulations
which will guard us against such dangers. That is a
mistaken idea. It is precisely economic development—
which, along with the ever-changing views and necessities
of life, is in a constant state of flux—that can least suffer
legislative regulation; it can be regulated only by the
sound sense pervading our social and national life, not
by legal paragraphs, which can have only a detrimental
and obstructive effect and can not possibly serve any
useful end. I would refer to the trusts and syndicates.
In that field, too, many politicians perceived the danger
of abuse and wanted to anticipate it by legislation and
government control. A decade has elapsed since meas
ures considered appropriate were discussed, and, finally,
further development was left, after all, to run a free
course. The dangers apprehended not only did not
materialize, but the National Government and many
business interests are resorting to every means to secure
for the potash industry the continuance of a syndicate.
In the domain of financial management, too, then,
matters may be calmly left to develop themselves, and
people will become convinced that the concentration
now objected to will continue to progress in a wholesome
way and prove useful to our economic life.

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of 1 9 0 8 - 9

But, finally, the main objection raised by some experts
against the accumulation of great quantities of deposits
proceeds from the idea that the great banks do not dis
pose of these moneys in an economically desirable way,
nor in accordance with the intentions which the depositors
would probably wish to see carried out.
Were this reproach justified, a remedy for such an
abuse would, indeed, have to be considered necessary in
the public interest and the question considered whether
legislative interposition might not be requisite and expe
dient, or what other measures would have to be adopted.
But, to begin with, the assertion that the great banks
dispose of the deposits in a different way from that
desired by the depositors appears altogether vague,
absolutely unsupported by any proof. Whence do the
critics gather how the depositor wants his funds to be
employed? No actual material of any kind for the
proof of such an assertion has been brought forward by
any expert. Such a presumption is, indeed, entirely
incompatible with the facts; if a depositor in a great
bank were to signify how he wished the bank to employ
his money, the bank would either unqualifiedly comply
with that arrangement or decline the deposit altogether.
It appears from the statistics of the German joint-stock
banks that the deposits in the credit banks rose from
1 19,712,000 marks in 1872 to over 2,500,000,000 at the close
of 1908— increased, therefore, about twenty times. One
must naturally conclude from this that the depositors
were not of the opinion that the banks employed deposits
in a way contrary to their wishes, for otherwise they
would undoubtedly have taken their funds not to the

N at ion al M on et a r y C o mm i s s i o n
great banks but to other institutions, such as the Seehandlung, the Preussische Zentral-Genossenschaftskasse, the
Provincial-Credit institutions, the agricultural banks, the
communal banks, etc.
Still more serious is the charge that the great banks do
not employ the funds consigned to them in an economically
desirable way. The great service that the banks have
rendered by attracting and utilizing the disposable funds
of the people, contributing thereby in such great measure
to the increase of the national wealth of Germany, is
universally acknowledged. Diametrically opposed to this
view is that of the experts—very few of them, to be sure—
who hold that the deposits have not been managed in an
economically desirable way.
Such a false conception can be explained only on the
score of the peculiar economic and political attitude which
these experts represent.
These gentlemen take an altogether one-sided, agrarian
point of view, and demand that the deposit moneys should
be withdrawn from the great banks because they misuse
them by granting too much credit to industry and com
merce, while the money ought to be applied to the strength
ening of productive agriculture and the raising of the
market price of government securities. They see in the
deposit moneys of the great banks a means of bringing
about an overstraining of credit in industry and com
merce; of keeping up, on the part of the Reichsbank, a
high rate of discount, to the detriment particularly of the
middle class and of agriculture, and notably also the
floating of foreign securities to the detriment of domestic
needs, and the strengthening of foreign competition

Bank

Inquiry

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against productive domestic industries. In my judgment,
such a view, founded directly upon jealousy of industry,
commerce, and the Bourse, is wholly erroneous, and com
pletely lacks any real and objective basis. It is alto
gether incorrect to say that the great credit banks inten
tionally withhold credit from agricultural concerns in the
interest of industry and commerce or of speculators on the
Bourse. Agriculture is more than sufficiently provided
for by the Provincial-Credit institutions and the ZentralGenossenschaftskasse, and it is well known that in spite
of the immense increase of all land values in the last
decades, landed property is burdened to excess with
debts----Freiherr von G a m p -M a s s a u n e n . Only too true.
Doctor W a c h l ER—so that efforts are being made to free
landed property from debt by means of legislation. Per
sonal credit has been granted to agriculture in quite ade
quate measure and with very favorable conditions through
the Zentralgenossenschaftskasse, as the yearly accounts
of that institution show. The statement, therefore, is
erroneous that our economic equilibrium suffers from the
use of the deposit moneys by the great banks in favor of
industry and commerce. Another thing to be considered
is that besides the deposit moneys in the great banks,
amounting, according to the bimonthly statements, to
almost one and a quarter billions, nearly 2,000,000,000
marks in deposits in the cooperative credit banks and over
15,000,000,000 marks in deposits in the savings banks
must be taken into account, of which a very considerable
part is employed in the interest of agricultural credit,
so that there can by no means be any question of a

N a t i on a l M o n e t a r y Co mmi s s i o n
disturbance of the economic equilibrium to the detriment
of agriculture. That no prejudicial influence at all is exer
cised by the great banks upon bank discount, and surely
not by their manner of employing the deposit moneys,
Herr Fischel has heretofore set forth, and it has likewise
been established in many ways, by those professionally
qualified to decide, that there has been no detrimental
flotation of foreign securities. In the document presented
to us dealing with the question of the statistics of flota
tions it is convincingly shown, too, that all statistics in
regard to the flotations of foreign securities are thoroughly
unreliable, because they are based solely upon the reports
of the admission offices, which exhibit merely the total
amount of the flotations and not the sums actually taken
up by us, and recently upon the information gathered
from receipts of stamps upon securities, which, however,
do not tell what part of the amounts taken up passed out
of the country again. Hence it follows that all state
ments concerning the flotations of foreign securities, espe
cially the kind prepared by Doctor Ruhland, give figures
that are entirely false and much too high. The statement
in the pamphlet dealing with the statistics of flotations
which I have just mentioned shows, for that matter, that
operations in flotations of foreign securities have dimin
ished very considerably since 1905, and in 1906 and 1907
did not attain even one-third of the amounts given by
Doctor Ruhland, and in 1908 also were estimated to be
under a billion.
As to measures aimed at the utilization of deposit
moneys to raise the market price of domestic govern
ment loans, that point will be discussed further in another

B a n k I n q u i r y of 1 9 0 8 ~ 9
connection. Here I would only remark that the Gov
ernment has, I should assume, no sort of legal right to
any such interference in the private affairs of the credit
banks to compel them to invest the deposit moneys, in
whole or in part, in domestic government securities;
that the market price of government loans suffers, on
the contrary, from the circumstance that great quantities
of new loans are put on the market every year; and
that an artificial raising of the market price would, in
the event of a crisis, result in losses so much the greater
to the holders of government securities.
It must, indeed, strike everyone as an exaggeration
to hear an expert declare, in the last communications
transmitted to us, that our economic life is based upon the
unsound constitution of our money market; that, owing
to the unbounded license in the investment of money,
brought about by the banks, perfect anarchy holds
sway; particularly as the same expert must acknowledge
that, notwithstanding such a state of affairs, Germany
has worked its way up in the economic world in a way
that has aroused the envy of all rival nations.
It must, on the contrary, be concluded from this
development that it was precisely the great banks that,
by their efforts to attract great quantities of deposits
and utilize them in our economic life in general, even
if in greatest measure in industry and trade, have sig
nally contributed to furthering the growth of our eco
nomic life; and the conviction must therefore be reached
that it would be entirely ill judged and prejudicial should
measures of any kind be resorted to that would disturb
the situation.

N a t i o n a l M on et a r y Co mmi s s i o n
Various opinions can, to be sure, be entertained as
to what, economically considered, would be the most
expedient way of managing deposits; but no one
assuredly, can doubt that it would not do to submit the
decision to some official authority that can never be as
familiar or as closely connected with the movements
of economic life as are the managers of the different
banking concerns. The introduction of such an author
ity wTould only have the effect of promoting concen
tration, and a mistaken view on the part of such an
authority would in critical times lead to altogether unsus
pected catastrophes.
Recognizing the great credit due to the banks for the
improvement of our economic condition—achieving that
object in spite of their activity having; in some respects,
been impaired by bourse and tax legislation— it would
evidently be most dangerous to follow the advice of
those few experts who view the question from a limited,
agrarian standpoint and wish to make it appear that
the present conditions are thoroughly unsound, while
they themselves must admit that they have vastly pro
moted the national prosperity. The National Govern
ment ought to recognize that such propositions can
proceed only from a false conception of conditions or from
selfish motives, and take a most determined stand in
opposition, if it does not wish to conjure up serious
dangers to our further favorable economic development.
The banks have thus far stood the test perfectly, even in
critical junctures.
These are the general points of view upon which I base
my position on the question at issue. If it be thought

B a n k I n q u i r y of 1 9 0 8 ~ 9
advisable to bring forward those points also that were
discussed by the experts as determining their general
attitude, and which the president has referred to in his
remarks, I would state my position as follows: I deny,
along with the great majority of the experts, the expe
diency of issuing normative regulations concerning the
acceptance, management, and investment of deposits,
and would regard such regulations, for reasons adduced
by the experts, which I fully approve, as very disad
vantageous, particularly for the reason that the subsist
ence of the provincial banks and private bankers would
by any such measures be impaired to no inconsiderable
extent and thus concentration, which many consider
objectionable, would only be promoted.
I would limit myself to this general reference to the
hearings of the experts, not entering into the separate
reasons adduced by them because only a general dis
cussion is called for now. Against the publication of
statements at shorter intervals I have no sort of ob
jection. A number of great banks have already under
taken such publication. I would consider it well to leave
the further shaping of this publication to the banks and
to professional judgment. I do not deem it advisable
to prescribe a scheme, but would leave it to the public
judgment and the sagacity of the banks interested to
find the proper form of publication, one that would afford
an insight into the state of business without injuring
the interests of the bank.
I would mention in addition that the public does not
concern itself at all about the statements; while, for
the judgment referred to, the form favored at present

N a t ion a l M o n et a r y C o mm i s s i o n
suffices to yield a correct conclusion as to the security
and fluidity of outside moneys in the banks.
As regards the various measures of another kind, aimed
at banks that receive deposits, I would just remark that
in so far as such measures should be based upon the idea
of promoting security and fluidity, I could not support
them, if only upon the ground that I believe—and this
belief is borne out by the statistics and recognized by a
great majority of the experts—that absolutely no mis
giving exists, at least as regards the larger banks, as to
security and fluidity.
If another justification is further sought in the idea
that such measures contribute toward raising the market
price of government loans, then I hold that, aside from
the fact that that object would not be promoted to any
appreciable extent, I can not perceive any just ground
for asking the banks to devote themselves to such an
object simply because third parties, in consideration of a
proper rate of interest, hand their money to the banks
to be managed and used by them. The Government
does not give the banks any sort of advantage in con
nection with the receiving of deposits; it can conse
quently make no just claim to any advantage to be
derived on that score from the banks.
Nor can I recognize any just ground for an obligation
to place a given proportion of the deposits in the Reichsbank in order to strengthen its working capital, although
it may, indeed, be urged that the Reichsbank furnishes
the other banks indirectly with money. But it does that
for all other discounters and money lenders as well. For
the rest, I subscribe to the objections raised by the
experts against such a measure.

Bank

Inquiry

of 1 9 0 8 - 9

Against the establishment of additional state deposit
banks I should not raise any material objections. A
necessity for such an arrangement I can not, to be sure,
recognize, since we have state and municipal institutions
where funds may be deposited with perfect security in
every city and in every district, in sufficient numbers to
satisfy even the most anxious. Besides, I would not
pronounce in favor of creating additional competition to
the private banks by such measures, which would be
prejudicial, above all, to the business interests of the
provincial banks.
I fully concur in the objection shared by nearly all the
experts against the acceptance by the Reichsbank of
interest-bearing deposits and in the convincing grounds
adduced against such acceptance.
To the establishment of a supervisory bureau for the
banking system, I must declare myself as most decidedly
opposed.
Such a measure can not by any means be justified by
an analogy with the mortgage and insurance companies.
The mortgage banks are granted authority to circulate
debentures; and the insurance companies are engaged in
a kind of business in which they receive money from the
public for a long series of years, paying out a sum of
money on the occasion of a definite event or granting a
life interest on. payment to them of a capital sum. In
reference to a peculiar and definitely limited business of
this kind under a charter from the Government, the
establishment of government supervision is of course
justified. Such reasons, however, do not enter into the
banking business, which every citizen of the State may
follow as a free branch of enterprise.

N at ion a l M on et a r y Co mmi s s i o n
Moreover, it does not seem very consistent to me that
in a State in which everybody is regarded as politically
mature an ever-extending tutelage is sought to be spread
over the economic field, ostensibly for the protection of
the inexperienced public. Government supervision would
not really look after the inexperienced public at all, but
only the institutions themselves, which are able to con
duct their own affairs, which, as a matter of fact, it
would prove incapable of watching over or safeguarding,
and which are indeed in no need of guardianship. The
alleged inexperienced and unprotected public will in spite
of such supervision dispose of their money as they like, arid
lose, too, under certain circumstances. The supervision
would exert an injurious effect upon the banks, crippling
them, perhaps, by interposing in their operations at the
wrong time; and it would exert an injurious effect upon
the public by lulling them into a sense of security and
misleading them, by reliance upon the supervision, to
neglect examining things themselves. Instead, therefore,
of having an educational value in the direction of mak
ing the public more self-reliant, such a scheme would
promote and maintain their dependence.
That government supervision can not in fact save the
public from loss has been shown in the case of the mort
gage banks; and yet the supervision in their case is much
simpler and easier than in that of the credit banks. The
thing is of no real value. But, strange to say, it is of
the spirit of the time to demand every possible kind of
government supervision, and thereby extend the admin
istrative apparatus and strengthen formalism and
bureaucracy—

B a n k

I n q u i r y

o f

9 0 8 ~ 9

Freiherr vo n G a m p -M a s s a u n e n . Very true.
Doctor W a c h e ER—while at the same time it is declared
to be an urgent necessity to make government adminis
tration simpler and less expensive. [“ Very true.” ]
As to other measures, such as the creation of an impe
rial board to manage long-term deposits secured by state
bonds, or the creation of an imperial deposit-insurance
institution, I shall not enter into them here, since the
suggestions for such measures that have thus far been
made are, in the form indicated, certainly not practicable.
My remarks refer primarily to credit banks. I believe,
however, that on the whole, unanimity prevails on this
point, too, that at least so far as savings banks and Genossenschaften are concerned, they are presumably suf
ficiently safe; that in the case of these institutions, if there
be any misgivings, they relate only to the question of
fluidity. But we must take into account that fluidity in
these institutions must be judged from entirely different
standpoints from those applying to the case of credit
banks, and the experts intimately acquainted with the
circumstances have held that even in the former, owing
to the peculiar nature of their business, the necessary
fluidity is provided for. Where it does not exist in ade
quate measure redress may be had by administrative
means, since the management of the savings institutions—
owing to their communal character and to the fact that
the taxable resources of the respective communal asso
ciations are pledged for their operations—is under the
control of the state government.
Finally, another question to be discussed would be how
the public might be guarded against loss through bankers
6 2 8 3 8 °— PT 2— I

N a t i o n a l M o n et a r y C o mm i s s i o n
who, by public or written appeals or by means of agents,
entice people to make deposits. This question, of which
Professor Lexis likewise spoke, should, however, in my opin
ion be more closely discussed only in the special debates.
Economic opinion regarding the free development of
business activity on the one hand and the undertaking or
supervision of business enterprises by the State on the
other has changed in no inconsiderable measure from that
which was dominant thirty years ago.
Freiherr von G a m p -M a s s a u n E n . Very true.
Doctor W a c h e ER. But whether increasing govern
mental interference in the business affairs of private indi
viduals promotes the national welfare is still a matter
upon which opinion is greatly divided. Undoubtedly
during the period of business freedom a very great advance
has taken place in every department of our economic
life. This economic development is steadily manifested in
a lively activity and assumes the most varied and fre
quently changing forms, so that it will always be difficult
for legislative action to follow this brisk evolution with
out retarding it by rigid forms. Legislation in the eco
nomic field requires, besides, in an especial degree, along
with a delicate and just appreciation of all economic re
quirements, the greatest impartiality and freedom from
political agitation. The bourse legislation has undoubt
edly been injurious to German economic life. Economic
questions are to-day of the greatest importance in
world politics. The German bourses have evidently lost
in international influence since the enactment of the
bourse legislation. In spite of the greatest efforts on the
part of the bourse, of industry and commerce, they have

B a n k I n q u i r y of 1 9 0 8 ~ 9
certainly not gained ground in international business.
That is a great loss to the political power of Germany.
The advantages gained and the peaceful victories achieved
by means of our industry and commerce are the best
foundation and greatest aid to the extension of our polit
ical power; even more effective, perhaps, than the increase
of the army and navy. But it is precisely in international
business that commerce and industry require the support
of the German banks and exchanges. It is therefore
exceedingly hazardous to adopt measures that would in
any way interfere with the free activity of our financial
and banking world.
Legislative measures of other countries that may be
cited can not serve as a criterion for us at all, because
the material premises in the various countries— the condi
tions of capital, the habits of the people, trade relations,
and likewise the banking system—have been developed and
formed in a totally different manner, so that a transference
of arrangements which suit England or France would not
by any means be appropriate to our circumstances.
The tax legislation passed in the last session of the
Reichstag has heightened the discontent with the previous
legislation concerning economic affairs, increased the ten
sion between the political parties, and materially altered
the position which they had occupied toward each other.
These circumstances, in particular, clearly show that the
time is altogether inopportune for the interposition of
legislative measures in economic affairs, especially in the
domain of the deposit system, since it is precisely there
that the agrarian tendencies are in sharp opposition to the
other economic tendencies.

N at io n a l M on et a r y C o m m i s s i o n
If, according to this, our time has not exhibited a
specially happy faculty for lawmaking, all the more urgent
should the warning be against legislative experiments,
where opinions are still so sharply divided. The financial
burden on commerce, industry, financial and bourse busi
ness has just recently been directly and indirectly in
creased and the taxable capacity of the country has been
strained in a considerably increased measure for the urgent
needs of the Prussian and German fatherland, so that it
would be extremely dangerous to come forward just at
this time with a legislative act which might not only
impair the capacity of the chief sources of taxation, but is
avowedly meant to reduce it.
These are the various considerations which lead me to
answer the question put under V I, whether it would be
advisable to adopt legislative or new administrative meas
ures for the further regulation of the deposit system, in the
negative.
The C h a ir m a n . Gentlemen, I abstained from interrupt
ing the previous speaker at several points, but should
nevertheless like to remark that in a number of instances—
for example, in regard to the question of supervision— he
entered into an amount of detail that would carry us too
far from the subject. I would request that the subse
quent speakers observe some restraint in that respect.
I would, in the next place, gentlemen, give the floor to
Freiherr von Wangenheim, so as to bring his judgment
to bear also, and make his voice and his views a part of
our proceedings.
Herr von ‘ Wangenheim, since he is permanently
prevented from taking part in the deliberations, has

B a n k I n q u i r y of 1 9 0 8~9
transmitted to me the following statement regarding
Point V I of the question sheet:
“ I gained the impression at the very beginning of the
debates in the bank inquiry that the numerous specific
questions, useful as they might be in directing the course
of the debates, must find their chief usefulness in con
nection with the consideration of the technical points of
banking. The discussion of general points of view would
suffer from them. Thus, though the individual parts
were in the grasp of the members during the debates, the
spiritual bond to unite them was lacking, and conse
quently also the power of passing judgment on the func
tions of our banking system in the life of the people. Our
bank inquiry, however, should bring to the ‘ life of the
people’ something out of life. It has always seemed to
me, therefore, a doubtful proceeding to enter so deep into
details that there would be danger of not seeing the forest
for the trees.
“ This impression is specially strong in considering the
questions now before us under Point VI.
“ The starting point of the whole bank inquiry was the
crisis of 1907-8. The great body of the people are look
ing for an answer to the grave question: ‘ How can the
recurrence of such crises be prevented in the future?’
With this in view, I have given a connected general expo
sition of my opinions on Points I to V, in pages 496 to
539 a of the bank inquiry already published, and would
refer to it here also in its entirety. Judging from the
questions now before us under Point V I, the impression
“ These are the pages of the translation as issued b y the National
Monetary Commission.—T r a n sla t o r .

N at i ona l M o net a r y C o m m i s s i o n
created id that the Bank Inquiry Commission was con
voked for the sole purpose of increasing the safety of the
moneys intrusted to the banks. I must, however, empha
size particularly that that is only one of the secondary
questions which, When the main question is solved, settle
themselves. But if this main question— How in the
future can the recurrence of great, general crises be
avoided?—is left unanswered, then it is, in my opinion,
of little practical value to trouble one’s self about sepa
rate, technical improvements relating to a secondary
question.
“ The matter that has appeared in print concerning our
question since the publication of my statements in the
report of the commission, to which I have referred, has
only confirmed my views. If, for instance, the Frank
furter Zeitung, in its well-known observations on the result
of our inquiry, says that crises are the ‘ necessary cor
rective of the haste to get rich,’ that quite agrees with
piy view of the matter. I differ with the Frankfurter
Zeitung only in this, that I would check this evil, the
haste to get rich, at its source and anticipate its conse
quences by demanding that banking legislation be framed
which will have the effect of admitting to the market only
such credit as is economically covered and excluding
purely speculative and baseless credit; while the Frank
furter Zeitung is content to leave this evil, the haste to
get rich, undisturbed in the future and to note again, at
the next recurrence of a general crisis, that it is the inevi
table result of the haste to get rich.
“ I also demanded in the memorandum mentioned an
imperial bureau of supervision for our banks and their

Bank

Inquiry

of 1 9 0 8 ~ 9

credit transactions. But I can not agree with the view
of Professor Fassbender, who would have this bureau cost
as little as possible. The Reichstag had under consider
ation, with material participation of the Center, the ques
tion of insuring wage-earners against crises, and it was
calculated that 80,000,000 marks of the national resources
would annually be required for that special purpose. Now,
if it is not difficult to perceive that prevention is by far the
best insurance against such crises, and if this prevention
of crises rests preeminently with an imperial bureau of
supervision over the credit transactions of our banks,
then, in my judgment, it is impossible that it should be
desired to carry on this bureau with only 200,000 marks,
while actual readiness was shown to appropriate 80,000,000
marks yearly as insurance against crises. The question
of economy must not enter into the creation of such a
bureau. For its responsible management only a certain
small number of persons, whom almost anyone could
name, can be considered. Their salary should be very
ample; but they should be obliged to resign their office
as soon as they shall have failed to prevent the occur
rence of another crisis [laughter], unless the lawmaking
bodies had failed to carry out their proposals of reform.
In that case the entire responsibility for that crisis would
fall upon those bodies. In this way only will it be pos
sible to interest eminent specialists in helping to organize
a modern credit system which will redound to the well
being of every section of the people engaged in productive
labor.”
Mr. M o m m sen . Gentlemen, only a few words. I am
not present in the afternoons, and should like to make at

N at to n a l Mo ne t a r y Co mmi s s i o n
least a few remarks, especially relating to the views ex
pressed by Herr Geheimrat Lexis. If I do not enter into
a discussion of the views set forth by Herr von Wangenheim, it is solely because I, personally, do not wish to take
part in the consideration of an absolutely insoluble prob
lem. I regard it as absolutely impossible to find a means
of preventing economic crises through legislation, a bureau
of supervision, or in any other way; and I do not see why
I should take up the time of the commission with the
consideration of such a question.
I had requested permission to speak when Professor
Lexis expressed his views. To begin with, I start, of
course, from the same standpoint, that public interest
does undoubtedly attach to the question how deposits and
savings are managed. Whether this public interest also
includes regulating the present management of these sav
ings by legislation or otherwise, I have very strong doubts.
I do not think that such an interest exists in the circles
that are actively involved; that is, the people who take
the money to the banks— I am speaking, first of all, only
of the banks. For we should bear this in mind: Our ques
tion relates to deposits and savings. We are speaking
here to-day— and, as it appears, indeed, with intention—
about banks only in their aspect of accepting deposits and
savings; and, as a matter of fact— I think every person
engaged in banking will confirm this—the amount of the
deposits and savings, in their real sense, especially in the
case of the greater institutions, is infinitesimally small in
comparison with the total of outside moneys.
We must not be misled by the statistics and publica
tions of the banks themselves, for in the hearings of the

Bank

Inquiry

of 1 9 0 8 ~ 9

experts it was made as clear as day by the individual
experts that no definite line can be drawn between de
posits and other outside moneys; it is an absolutely
arbitrary distinction. If here, to be sure, the Deutsche
Bank, or the nine Berlin great banks, state deposits at
about one and a quarter billion marks and credits two and
a half billion, and if some method could be agreed upon
which would determine what constitutes a deposit of
money and what savings—if these sums, amounting to
nearly 4,000,000,000 marks, could be separated accord
ingly, then genuine deposits and savings would be found
to be a quite infinitesimally small quantity. It is very
clear that the division is a purely mechanical one. It
was, indeed, explained to us at the time, that, for example,
the Deutsche Bank or the Dresdner Bank separated
deposits and savings from the other debits by classifying
all the credits of deposit institutions and exchange offices as
deposits and everything else as credits. That is, of course,
not a true classification. The central and branch banks
may also have deposits and the deposit banks may have
credits, and in both cases the credits will generally pre
dominate. Consequently, I believe that if only the ques
tion of the security and fluidity of deposits and savings is
to be considered, the larger establishments—not only the
great banks, which are precisely the ones upon which our
economical development has in part depended and con
tinues to depend—really*do not enter into the question
at all. Where it is that large quantities of such deposits
and savings are to be found, the statistics help us to ascer
tain; it is in the smaller and, in part, the smallest institu
tions ; there the securing of a certain security and fluidity

N a t ion a l M o n et a r y C o mmi s s i o n
is, of course, a desideratum. But if, on the other hand,
we introduce definite restrictive measures and thereby
lower the rate of interest, it is precisely these smaller
institutions, whose maintenance is requisite to our eco
nomic development, upon which we shall inflict an im
mense injury; to the great ones we shall do no harm;
they will not be impeded in their development, though
their profits may, perhaps, be somewhat reduced.
Freiherr von G a m p -M a s s a u n e n . Very gratifying.
Mr. M o m m sen . Very gratifying—why ?
Freiherr von G a m p -M a s s a u n e n . Of course it would be
very gratifying.
Mr. M o m m sen . If they were reduced? Oh!
Then Professor Lexis takes up the relation of accountcurrent debits to account-current credits and assumes
here that these embrace the debit and credit items of
business men only. That is an entirely false assumption.
Among the debits, as among the credits, there are, natu
rally, debits and credits of private people as well as of
business men, and up to the present no bank has come to
the point of separating these different moneys or debits
according to the status of the individual; it would,
indeed, be practically impossible, since the one item often
passes over into the other.
Professor Lexis was of the opinion that the relation
between these account-current debits and credits should
be differently treated according as they were private or
business accounts, because the employment of credit
items—that is, of the moneys belonging to business
men—constitutes an entirely separate question in our
economics. I believe that he errs on that point. He errs

B a n k I n q u i r y of 1 9 0 8 - 9
not only in the interpretation of those items, but also in
thinking that those who have their business credits in the
banks feel a very special interest in the question of how
this business credit is managed and employed. They
have only one interest, like everybody that takes money
to a bank, and that is to be able to get it back when they
want it. That is the whole thing, and for that I can
neither devise a law nor do anything else; the banks
themselves must be managed with that in view. As
long as you can not make a law that a bank should be
conducted in a certain way, it is useless to consider legis
lative measures tending in that direction.
Now, in the compilation which we have received, in the
views of the press, of the experts, etc., and also in the
remarks of Professor Lexis to-day, reference has been
made to the law concerning checks, and the question has
been raised whether it should not be declared a duty of
the lawmaking power, or of the banks, to provide special
safeguards, more than ever, for the check credits, which
are now under legal protection. In the case of check
credits, likewise, no distinction can be made between
those of private individuals and those of business men;
it can not be ascertained what is industrial working
capital—which is always in question here—and what is
the cash holdings of private individuals. There are
check accounts, too, where there is no credit at all; we
must not forget that. If the law pertaining to checks
shall be used to impose additional duties upon the banks
in regard to the investment of their outside moneys, then
you will be taking a dangerous step. Ask any bank
manager. In the check law the banks have no interest

N a t ion a l M o n e t a r y C o m m i s s i o n
whatever—the greater the bank, the less the interest—
and if you carry this matter to an extreme, it may happen
to you that some fine day the nine Berlin great banks will
meet around a table and say: “ Since the check law is
used, entirely contrary to the predictions and alleged
purposes of the lawmaker, to throttle the banks, we
shall, in a body, declare some fine day that we shall issue
no more checks and shall allow no more checks to be
issued.” And this would go, too. We shall thus proba
bly save a great deal of money; but, of course, the eco
nomic advantage pertaining to the check system, which
is now obtained in great part at the expense of the great
banks, will not be secured.
But I would warn you against creating new burdens on
the strength of the existence of the check laws, which are
alleged to yield great advantages to the banks. Gentle
men, the check credit of every individual is so absolutely
safe with the larger banks— I do not mean only the great
banks—that unless some uncommon circumstances arise
(which may happen even if you pass the most beautiful
laws) it is entirely unnecessary to devise any additional
special measures.
I do not at present wish to enter into particulars which
Oberbergrat Wachler has discussed. But I think that we
should not allow the occasion of this inquiry to pass
without making it unmistakably clear to the public that
no laws are really of any use in these economic questions;
all that is necessary is to bring about a good organization
of the banking system of Germany. The basis of that
organization is to be found in our commercial code, and,
furthermore, in the element-of personality. We can not

B a n k I n q u i r y of 1 9 0 8- 9
do anything beyond that; and I would earnestly warn
against the advocacy of any changes by this commission.
We should thereby only inflict a vast amount of injury,
and could do no good whatever.
Freiherr von G a m p -M a s s a u n e n . Gentlemen, that pub
lic interests are involved in this matter I feel is beyond
doubt. Our entire money and credit system is so closely
bound together that it is impossible that mistakes and
evils that may occur in one department should fail to
affect the whole of our economic life. But I do not
conceive this public interest to consist in providing an
absolute guarantee that every individual will be guarded
against loss; that is impossible, and it is not the function
of legislation, either in this or any other field. Hundreds
of millions are lost through bankruptcy, because the
buyer or the seller did not keep his eyes open, and engaged
in business transactions with unreliable persons; and
losses will likewise occur if the same carelessness is com
mitted in depositing savings. On the whole, we may say:
The losses in savings are comparatively slight, and, from
this point of view, there can be, in my judgment, no
ground for legislative interposition. [Hear! Hear!]
One remark in this connection. Why are the losses in
savings deposits so slight ? The largest amounts are held
by the public savings banks. The savings banks are
absolutely safe by reason of government supervision;
they are safe because the disposal of the funds is given
the widest publicity; because a certain number of persons
naturally keep track of these matters. If 30,000 or
20,000 marks are given to some one on a mortgage upon
a certain piece of property by the savings bank of any

N a t i o n a l M o n e t a r y Commission
district, any community, the entire public has its eye on
the matter, and if this sum is not secure it is immediately
discussed and the remedy resorted to. Besides the sav
ings banks are backed by the communes, which have
thus far in Germany proved themselves perfectly capable
of fulfilling their duties.
The Genossenschaften (cooperative banks) also I would
credit with absolute security; for, whether they are
Genossenschaften with limited or unlimited liability, the
guarantee is considerably greater in every Genossenschaft than the amount of the obligations. There have,
as a matter of fact, therefore, been no material losses of
savings in the Genossenschaften.
Mr. M o m m sen . I s that so ?
Freiherr von G a m p -M a s s a u n e n . Some of the members
of the Genossenschaften have lost their money there;
but that is quite another matter, into which I do not wish
to enter. But through the auditing arrangements,
through the supervision of state authorities, and particu
larly now through the Preussenkasse, there is brought
about such a safeguarding of the obligations of these
institutions that losses to depositors are hardly possible.
The Preussenkasse, and likewise the Genossenschaften,
inquire so closely into the personal circumstances of the
individual cooperative, members that it hinders many
from joining the Genossenschaften, since they object to
having all their financial and property concerns made
knowm to outsiders.
Thus, gentlemen, security in my estimation is so well
provided for that the interposition of legislation is abso
lutely unnecessary here.

B a n k I n q u i r y of 1 9 0 8 - 9
But how about fluidity 9 The savings banks, gentle
men, really seldom have actual fluid resources. In
speaking of fluidity we must distinguish between real
fluidity and fluidity as it is understood in ordinary life.
Short-term bills, state securities, debentures, etc., are
spoken of as means of securing absolutely the fluidity of
an enterprise. That is, in my opinion, a mistake. I can
not always dispose of a bill. For state and municipal
securities, to be sure, a purchaser may be found any time
that one wishes to dispose of them; such papers, then,
are means of bringing about fluidity, but this is not true
of bills, even though they be absolutely safe, which can
be realized on only by taking them to the Reichsbank.
The savings banks, Genossenschaften, banks, etc., do not
wish, however, save in exceptional instances, to sell the
state and municipal securities, but to use them as collateral
for money which they temporarily need. For such loans
on collateral they can count with certainty only upon the
Reichsbank. But in the same measure in which the
Reichsbank accepts bills from the savings banks or the
Genossenschaften or advances money to them on consols,
etc., in order to secure their fluidity, it weakens its own
resources, which it requires for the fluidity of its own
obligations. Thus, gentlemen, it is not an assured
fluidity for the savings banks or the Genossenschaften to
have government securities, bills, etc., at their disposal;
fluidity must be brought about in some other way.
How, then, is the fluidity of the savings banks to be
secured? For this purpose it would, in my opinion, be
expedient to provide that the savings that may be with
drawn at any time or those that can be withdrawn at

Nat ion a l Monetary Commission
very short notice shall not exceed a certain percentage
of the total deposits. I think that such a restriction
would not be at all prejudicial to the economic interests
of the public. A person who to-day takes his money to
the savings bank is asked by the bank official: “ Do you
wish it to be payable to you at any time or upon notice?”
“ Well,” says he, “ I would rather have it payable at any
time.”
[An interruption by Mr. Mommser.]
Freiherr von G a m p -M a s s a u n e n . But it is withdraw
able at any time.
The C h a ir m a n . There is no uniformity on that point.
Freiherr von G a m p -M a s s a u n e n . There are, of course,
people who want to be able to withdraw their money at
any time, and some of the savings deposits would not
be made if they were not withdrawable at will. In that
respect the savings banks ought to be subject to certain
regulations, so that the demands which have to be satis
fied at any time should not attain too great proportions.
Precisely in the case of savings banks a disturbance
rarely exerts any material influence upon the general
credit and money system, because the runs upon savings
banks are mostly, or exclusively, traceable to local causes.
If there is a run upon a particular savings bank, it hap
pens because certain reports are circulated in the city
that the manager is not reliable, or that some irregu
larities have taken place; but, except in case of inter
national troubles and wars, this disturbance will not
spread all along the line, and will, therefore, not produce
any serious effects upon the general money and credit
system of the nation.

B a n k I n q u i r y of 1 9 0 8 - 9
The fluidity of the Genossenschaften and the savings
banks, then, is not sufficient. It must be demanded
that both shall have at their disposal at all times a cer
tain portion of their savings deposits in ready money,
and that another portion shall be put into investments
that may be realized on at any time, such as bills and
government securities.
In the case of private banks, gentlemen, the circum
stances are quite different. I recognize perfectly that
not only the great banks but also nearly all the middlesized and even smaller banks are admirably managed, and
that, viewed from this standpoint, the necessity of impos
ing such regulations upon them can hardly be urged.
But the effect upon the money market if a serious run
on a great bank were to take place would be so momentous
and entail such grave consequences upon our business
affairs in general that we can not pass this question by
lightly and carelessly.
Herr Mommsen remarked that for the great banks
such a reserve would mean a slight diminution of their
income.
Mr. M o m m sen . I did not speak of this point!
Freiherr von G a m p -M a s s a u n e n . It was to this that my
“ gratifying” referred. But I think that if the having
on hand a certain amount of cash reserve, of moderate
proportions, is not a vital question for the banks, but
signifies only a slight diminution of their income, which
it actually does, the great banks can not, in good truth,
be absolved from that obligation. But that in the case
of the small banks, gentlemen, there are serious objec
tions against the holding of large amounts of savings
6 2 8 3 8 ° — P T 2— II---- 7

J
N ation al Monetary Commission
deposits, I would ask you to gather from these statistics.
If 82 small banks—banks with a capital of less than
100,000 marks—have 10,500,000 of their own and 98,500,000 of outside moneys, and of this last 96,500,000 are de
posits, then these are very serious considerations. These
small banks have a tenfold amount of deposits on an
average. Some of them, therefore, must have a much
larger quantity still of outside money in proportion to
their own resources. It is by all means necessary here to
ponder these things seriously. It ought to be provided
that the amount returnable at any time on demand shall
not exceed a certain percentage of the bank’s own capital.
In the case of the great banks this is provided for by their
natural business requirements. The Deutsche Bank has
200,000,000 of capital and about 450,000,000 in deposits;
thus, these are normal conditions. But if the deposits of
a bank are ten times as great as its own capital, it is a
very serious matter, which legislation can not overlook.
Now, gentlemen, the following question was exhaus
tively discussed in the previous deliberations also: Can a
distinction be made between deposits and credits? May
both be treated alike? The two categories present, of
course, very considerable differences, both as to their
origin and in regard to their economic significance to
the persons concerned. But in one respect no difference
exists between them. Credits that may be withdrawn at
any time or upon very short notice require a fluidity just
as great as deposits that may be withdrawn at any time.
If I were to declare my position, therefore, as to legislative
measures, to which I shall recur later on, I should not
make any difference in that respect between deposits and
88

B a n k I n q u i r y of 1 9 0 8 - 9
short-term credits, and should provide that all obligations
of the bank subject to demand without notice or upon
very short notice be treated alike, so far as security and
fluidity are concerned, and that for these two categories—
actual deposits and the short-time credits—certain regu
lations should be instituted, about which I shall express
myself later.
The C h a ir m a n . Gentlemen, it is half past i o’clock. I
would propose that we take a recess and reassemble at
half past 3.
[Recess.]
The C h a ir m a n . Gentlemen, we resume our delibera
tions. I request Herr Doctor Stroll to give his views.
Doctor S troll,. Gentlemen, there is not the slightest
doubt in my mind that the German deposit system is a
subject that possesses a high degree of interest for the
public.

The simple fact of the gigantic amount of capital

involved—if we include all classes of deposits, it amounts
to perhaps 25,000,000,000 marks—is a sufficient justifica
tion of that interest. To watch over this enormous capital,
to observe the channels from which it flows, how it dis
tributes itself, how it is directed and administered—these
are undoubtedly economic problems that are most inti
mately connected with the national welfare and the welfare
of a vast number of the citizens of the state. The deposit
problem enters very profoundly into the progress of the
national production and the weal and woe of the individual
business man.
As for the question of the security and fluidity of deposit
funds, the question of security may, perhaps, be eliminated

N at ion a l M on et a r y C o mm i s s i o n
for the present. If the deposits are fluid, they are like
wise safe; fluidity is a heightened degree of security. On
the other hand, some investments are not characterized by
absolute fluidity and yet are perfectly safe. Let us, then,
take up the question of fluidity first. The question of
security, in so far as it will not be answered of itself, is a
thing to be considered separately.
In investigating the subject of fluidity a distinction
will have to be made between the theoretical and the
practical side of the question.
Fluid in the abstract, theoretical sense, German deposit
funds certainly are not, or, at most, only an infinitesimal
part of them—the part, namely, that has ready money for
a cover. All other deposits that have other covering—
the great mass of them, therefore—are theoretically non
fluid; for these other kinds of cover must in case of neces
sity look out for a way of being converted into cash, and,
what is the main point, be able in the given instance to
find it, too. Theoretical nonfluidity is, consequently,
with few exceptions, the rule.
Nevertheless, this condition of affairs is not, as every
practical banker knows, specially menacing, for, in spite
of the theoretical nonfluidity, it is quite possible that for
all practical purposes the fluidity may be quite sufficient.
Such practical fluidity is all that we need be concerned
about, and it may be regarded as actually prevailing in
the great majority of cases.
The two greatest German credit institutions, the Reichsbank and the Deutsche Bank, have gigantic obligations
of the short-term variety resting upon their shoulders,
obligations referring to their circulating notes and their

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deposits respectively. Either institutions would be em
barrassed if it were called upon to redeem these obligations
by a sudden presentation of its entire issue of bank notes
or a sudden withdrawal of all its deposits. I take this
extreme example to show the vagueness of all theory,
for theoretical possibilities are often practical impossi
bilities. Life, however, reckons only with practical possi
bilities and draws its conclusions from them alone.
Life and the business world reckon with facts of expe
rience extending over many years, with average estimates
and calculations and with computations of probabilities.
Were this not done; were, instead of a moderate opti
mism, a crass pessimism to hold sway, all the national
savings, all business reserves, and in general all capital
which, temporarily unemployed by the owner, is placed
with others on call, would be simply shut up in safes and
could not be put out at interest. [“ Very true!” ] The
economic and cultural employment of the savings of the
nation would thereby be made impossible. And from
the modern economic system there would be eliminated
one of its most important factors, credit and the recipro
cal business confidence of all in all. [“ Very true!” ]
Gentlemen, in speaking in a general way upon the ques
tion of the fluidity of the banks, savings, institutions, and
Genossenschaften, there is another consideration of great
practical importance to be taken into account; one
which, in my opinion, was touched upon far too lightly
in the hearings of the experts.
In the modern economic organization, where all the
various credit organisms are linked with each other in a
thousand ways, it will not by any means do to regard

N at ion a l M o net a r y C o mm i s s i o n
each separate institution—in our case the individual
depositary—by itself and, in a manner, to dissect it; this
would lead to erroneous and far too unfavorable con
clusions. The individual must, on the contrary, be
regarded and estimated as part of a whole, or at least as a
member of the category to which he belongs. All the
members jointly are united into a whole; they mutually
guard, sustain, and support each other like the celestial
bodies in the planetary system. Over the individual
there extends the protecting arm of the whole. If one
member falls there is a crackling through the entire struc
ture, a premonition of a threatening general disaster.
This, gentlemen, is of immense and far-reaching prac
tical importance, for, from the structure just described,
we obtain, as a practical application, the mutual support,
the reciprocal giving of aid on occasions of need and stress
which threaten the individual organism within the limits
of his own category. This aid, moreover, is by no means
given solely in the interest of the person in danger or
prompted by feelings of altruism, of mutual considera
tion; no; it is often prompted by selfishness and egotism,
by regard for one’s personal welfare, inasmuch as, in an
enforced solidarity, we must stand by one another lest in
the fall of one individual all, or at least many, be dragged
down with him.
To cite instances of this half compulsory, half voluntary
solidarity, I feel is unnecessary in an assembly of expe
rienced, practically informed men. We are, indeed, very
familiar with these conditions: The diversified chapter of
aid given, of painless liquidations, etc., is known to us
all, I might almost say, only too well. Based upon the

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consciousness of this absolutely essential solidarity, there
have been developed, as you know, various permanent, pro
tective institutions, which the community has established
in the interest of the individual, and which are a sheltering
roof over the organisms of a certain category: Bank asso
ciations, syndicates, central institutions, auditing bureaus,
clearing houses, etc. In short, protective organizations and
protective unions of all kinds, partly of a preventive,
partly of a restrictive character—an extensive protective
apparatus, therefore, evidencing the lively interest of the
whole in the welfare of the parts. This point will, perhaps,
be considered in greater detail in discussing the three
classes of deposits spoken of in the question sheet.
And to these concrete agencies, whose function it is to
guard the fluidity of the individual depositary, and to
guarantee it as far as possible, are joined valuable intan
gible factors. I mean the instruction, enlightenment,
observation, and critical illumination which have for a
number of years been furnished by the professional press
and in the literature of the subject; furthermore, the everincreasing publicity of banking affairs. All these circum
stances must serve to impress the managers of the deposit
institutions, be they termed what they may, more and
more with the necessity of occupying a position of unex
ceptionable fluidity, and to quicken their conscience.
Most assuredly the effort to attain the greatest possible
fluidity is to be seen everywhere.
I lay special stress upon the words greatest possible
fluidity, for no institution, as has already been explained,
can, in my judgment, pretend to absolute fluidity; for to
do so it would have to lock up all the outside moneys that

N at ion a l M onet ary Commission
it receives in a safe and wait until they are demanded
back. The depositary satisfies the demands of fluidity if
it keeps on hand an equivalent of the outside moneys en
trusted to it; a small fraction in cash, the main part,
however, in what are known as easily realizable assets—
that is, according to current acceptation, in bills, good
securities, and debits; and even here, as far as possible,
not only such as are simply realizable, but such as are re
alizable at once. Realizable; in other words, convertible
into cash. But convertible where, and convertible by
whom? And here we come to the crucial point of the
matter; to the pivot, indeed, upon which the whole ques
tion of fluidity turns.
Neither with bills nor first-class securities can a depositdebtor at once procure by his unaided efforts the means to
pay back deposits demanded suddenly and in unexpectedly
large quantities. He needs here, in fact, in so far as he
may be short of cash, a potent intermediary who will
discount his bills and ledger-claims and buy his securities
or advance money upon them. These intermediary ser
vices are, in normal times, gladly and willingly rendered
by those who furnish credit, and in the case in question
by the banks, from the smallest to the greatest. It is
•
through this interposition of rediscounters and acceptors
of collateral that the fluidity of the individual depositdebtor is guaranteed. The final and supreme agency,
however, upon whose shoulders everything ultimately
rests, upon which everything converges, which represents
the general reservoir of the means of payment, and must
be ever ready when all else fails; this, the great redis
counter and acceptor of pledges, and chief sponsor of the

B a n k I n q u i r y of 1 9 0 8 ~ 9
general economic fluidity, can only be a central bank pro
vided with an elastic power of note issue, and operating
throughout the country by means of its branches, such as,
fortunately, Germany possesses in the Reichsbank.
[“ Very true.” ] The powers of this sponsor of fluidity
have just been considerably increased by the last supple
mentary bank act, and will, it is to be hoped, always be
sufficient to enable it to meet all legimitate and just
demands.
Gentlemen, where the national credit system has wellorganized, efficient bourse arrangements at its disposal
and can point to a powerful central bank of issue as its
pivot and center, the question of fluidity must be judged
entirely differently and infinitely more favorably than
where such supports are lacking. It is only necessary to
recall the American crisis of 1907, which was very in
structive precisely in this respect. In normal times the
business of a country stands in comparatively slight
need of a supreme credit institution; fluidity is then
sufficiently cared for and guaranteed by the lower and
middling agencies; in normal times pretty much everybody
is all right as to fluidity, while in critical times scarcely
any one is—possibly not even the Reichsbank, or if so,
only because it may in case of need resort to forced circula
tion. Anyhow, the Reichsbank can create lawful money
and distribute it with a lavish hand and thus the specter
of nonfluidity, of individuals and of business inter
ests as a whole, may be exorcised. In the case of the
individual only so far, of course, as he has the benefit,
either directly or through an intermediary, of access to the
Reichsbank, the general reservoir of the circulating medium.

N at ion a l M onet ary Commission
The degree, therefore, to which the individual depositary
can have recourse, in case of need, to the general source
of money, is the measure of its fluidity in a time of dis
turbance. I take no account here of the possibility that
the individual depositary may be the possessor of realizable
international paper. The possibility of obtaining access
to the resources of the Reichsbank is fixed by law. The
Reichsbank is obliged to discount and to advance money
on collateral; it can not evade this legal obligation.
Whoever, then, wishes to make use of the Reichsbank
must offer it good bills for discount or first-class securities
for advances of money. The bill must be good, that is,
be redeemed at maturity, otherwise it will go back and
the fluidity of the depositary concerned will rest on a
slender basis. As to what constitutes a good bill, one
that will be rediscounted by it, the Reichsbank is the
supreme judge. And consequently the Reichsbank is the
final arbiter as to the fluidity of every deposit-debtor, be
he ever so great and powerful. In 1901, 60,000,000
marks in deposits were withdrawn from the Dresdner
Bank. Had not the Reichsbank intervened in a helpful
way with great rediscounts, embarrassments might have
arisen.
Summing up, gentlemen, I wish to emphasize this point:
In examining the question of fluidity, the individual
depositary must not be regarded as an isolated, or at
least as an altogether isolated, organism; it must be re
garded rather as occupying a place in its class as a whole, in
its environment; it must be regarded as a part, and in a
certain measure as a beneficiary, of all the important
economic institutions and mechanisms that contribute to

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the maintenance of fluidity. If we do this in regard
to the Germany of to-day the result of our observation
must, speaking broadly, be distinctly favorable as to the
conditions prevailing in this regard in our deposit system.
I have considered these preliminary remarks to be
necessary and important, and beg your pardon if I have
been somewhat discursive. I can, on the other hand,
be so much the more concise in considering the different
classes of depositaries.
Our question sheet states these classes to be: Banks,
savings institutions, and Genossenschaften—a trio, there
fore, very dissimilar in character and circumstances. Dis
similar in economic purpose, in historical development,
and in internal organization; dissimilar especially in
respect to the part played by their own funds— a point
of such importance in the deposit problem—their own
cover at their disposal from their own resources, as dis
tinguished from outside resources. In this important
point the banks occupy the strongest position, the sav
ings institutions the weakest, while the Genossenschaften
occupy a middle ground.
Before considering the different classes of depositaries
I shall say just a few words in regard to the German
deposit system as a whole. The statistical figures are
generally known. Conclusive statistics we do not, indeed,
have, if only for the reason that there is no definite idea
as to what the term “ deposit moneys ” signifies. Figures,
for that matter, are perhaps of minor importance. What
is above all important is to determine the general situa
tion, the general trend; and the direction of this general
trend is perfectly clear and undisputed. W"ell known, in

N at i on a l Mo n et a r y Commission
particular, is the fact that the deposits in the banks have
increased enormously in the last decades, while in the
case of the savings banks and the Genossenschaften the
increase has been on a smaller scale. Equally well known
is the keen competition for deposits that prevails in the
banking world, this being further promoted by the decen
tralized organization of the banks and by other circum
stances. Conspicuous, moreover, is the general tend
ency toward concentration of deposits in the great banks,
and above all in the Berlin great banks. It is known to
everybody, furthermore, that the investigation which has
been inaugurated regarding the deposit system is spe
cially aimed in the direction of the banking world of
Germany.
The banks, therefore, lorm the most interesting chapter.
Allow me to linger over them a while. They have over
8,000,000,000 marks of outside moneys in their hands— a
mighty sum. But mighty also are their own resources in
share capital and reserves, standing as security and guar
antee for the outside moneys. And the way that deposits
are generally covered is entirely unexceptionable, and in
accord with the fundamental principle of banking man
agement that the asset business must be in keeping with
the liability business.
A single speaker can, of course, give only a general out
line of things here, a bird’s-eye view, and can not enter
into the particulars. For the extremely interesting par
ticulars I refer you to Lansburgh’s recent publication,
“ Das Deutsche Bankwesen von 1857 bis 1908 ” (The Ger
man banking system from 1857 to 1908), which gives a
searching analysis of the condition of the great banks,

B a n k I n q u i r y of 1 9 0 8 - 9
the middle-sized and small banks, and presents the results
arrived at in a broad and comprehensive way.
Now, gentlemen, how is it in regard to the cover of
the deposits held by the banks ? Have the banks readily
realizable assets at their disposal as against outside moneys
that are payable on demand? Have they access through
these assets to the general reservoir of circulating medium,
the Reichsbank? These questions may, as a rule, be
answered in the affirmative. Outside moneys are cov
ered in a small part by cash, in a far greater part by
bills and debits. And, indeed, it is generally regarded
as an axiom of banking and carried out in practice that
40 per cent of the deposits shall be covered by cash or
bills, 60 per cent by debits; while the bank’s own resources
are utilized in the less fluid and more risky business con
nected with the handling of stocks and promotions. Tansburgh states further that the proportion of their own
resources to outside moneys is favorable in the case of
the great and middle-sized banks; least favorable, com
paratively, in the case of the small banks.
The 40 per cent cover in bills above mentioned consti
tutes, in the event of an extensive recalling of deposits,
the most fluid part of the cover; more fluid than the
debits, because, although bills may be rediscounted at the
Reichsbank, ledger accounts can not be. The cover in
bills must, therefore, be considered along with securities
which can be used as collateral, as the piece de resistance.
And this it actually is, provided an essential condition is
fulfilled, namely, that the quality of the bills is good;
that is, that they are such as will be redeemed at matu
rity or that before maturity they will be rated by the
Reichsbank as good enough to be rediscounted.

N ati o n a l Mo net ar y Commission
Upon this very important point, gentlemen, I must say
a few words. Opinions as to the quality of the German
bill circulation are, notoriously, divided. It is pointed out
that the German bill circulation is decidedly more extended
and greater relatively than is the case in neighboring
countries. Moreover, that in Germany many a transac
tion is carried on in the shape of bills, which shape it
should never have assumed, because it does not fit into it.
And yet—it is further said—this great and at times arti
ficial and nonfluid mass of bills is not sufficient to satisfy
the great demand, emanating for the most part from the
banks, that exists in the bill market. This urgent demand
gives rise on its part to a supply of illegitimate bills. Thus
the thing goes on in a vicious circle, and from this un
healthy condition there results a deterioration of the Ger
man bill circulation in general, which, increasing in quan
tity, is constantly losing in intrinsic quality.
Gentlemen, these criticisms are not altogether without
foundation. I conclude this not only from my own pro
fessional experiences, but from what seems a very striking
fact. The highest authority passing on the character of
our bill business, the Reichsbank, found itself called upon
last year to restrict the range of the paper which it would
rediscount, and other rediscounting banks have followed
its example. From this it may be inferred that not every
German bill portfolio is of such fluidity that it might be
marked “ interest-bearing cash.” You know, gentlemen,
that the step taken by the central bank was much dis
cussed and assuredly furnished food for thought.
Now, it may be that in our bill business there are some
things that are not as they should be—it may be that in

IOO

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Germany some transactions take the form of bills which,
strictly considered, should not do so; but there is no par
ticular occasion for any exaggerated fears—that is, so far
as the question of fluidity is concerned, for it is not
necessary, in order to guarantee the fluidity of deposits,
for every bill in every bill portfolio to be fluid. The fluid
ity of a fraction of them would suffice for this purpose.
In practice, for that matter, everyone who regularly dis
counts at the Reichsbank examines his bills, so as not to
risk a refusal. And it is not as if the fluidity of the de
posits depended exclusively upon the bill portfolio; the
deposits have other props and guarantees of fluidity be
sides— money, debits, securities available as collateral,
international paper, etc. And if the bills were really of
as doubtful a character as they are said to be, it would
become noticeable not only in the number of protested
bills, but particularly in the shape of losses in the bill
business of the banks. So far as I have been able to
observe, neither the one nor the other is the case. And
as for the more rigid censorship on the part of the Reichs
bank, it would, in critical times, in its own interest, as
well as with a view to the general good, have to guard
against bending the bow too far by exercising too severe
a censorship.
On the whole, gentlemen, I have not the impression that
there is much the matter with the fluidity of the banks in
Germany or the outside moneys handled by them. The
general observance of sound banking principles, the adap
tation of assets to liabilities, the access of the banks to the
Reichsbank through their bill holdings, the mutual pro
tection that the banks must extend to each other by

IOI

N at ion a l M onet ary Commission
reason of a self-interest well understood, the connection
of nearly every institution with some greater concern or
syndicate, and the consequent increased capacity of re
sistance enjoyed by each, the high degree of publicity and
supervision that exist in our banking system—all these,
gentlemen, all these varied circumstances and facts, these
protective arrangements, all this in its combined opera
tion and its resultant effect causes the German banking
world as a whole to present, in my opinion, not an unsatis
factory, but on the whole a thoroughly satisfactory picture.
That, in spite of this, we have from time to time very
distressing manifestations and very regrettable experiences
in the domain of banking, gentlemen, is inherent in the
imperfection of all things and all men. No legislation
can prevent that.
And now, gentlemen, as to the Genossenschaften.
Here we are dealing, at least in great part, with a terra
incognita. Up to the present there have been no com
prehensive statistics, at least so far as I know, of the
German Genossenschaft system, with all its various forms
and methods. The total amount of the deposit moneys
handled is said to be 2,500,000,000 marks. We have had
reliable estimates only in regard to certain States of the
Empire, and in these particular regions the Genossen
schaft system can, to be sure, point to excellent authori
ties upon the special conditions there. We have, indeed,
three such men among us here—Herr Doctor Heiligenstadt, who is not here just at present, for Bavarian affairs
my esteemed compatriot, Freiherr von Cetto; and for
conditions in Baden, Herr Peter. How, indeed, would it
have been possible to get a thorough knowledge of the

102

B a n k I n q u i r y of 1 9 0 8 ~ 9
German Genossenschaft system? We can, if necessary,
obtain a general view of the few hundred joint-stock
banks, but hardly of the 16,000 Genossenschaft insti
tutions with all their various methods, for they are
hardly under strict legal requirement to make a state
ment, not to speak of any obligation of regular publicity.
Just at the right time there comes a work giving compre
hensive balance-sheet statistics of the German Kreditgenossenschaften, transmitted to us by the Reichsbank;
a thoroughly lucid, precise, and fine piece of work, which
has filled in the happiest manner a gap in the literature
of the subject. This memoir contains much numerical
matter and abstains, except on one point, which relates
to the rediscountability of bills, from drawing conclusions.
The conclusions are obvious enough. The memoir, as
a result of its exact investigations, fairly confirms the
view which has hitherto, one may say instinctively, been
entertained in regard to the fluidity of the German
Kreditgenossenschaften.
Everybody has instinctively felt that the fluidity of
the Genossenschaften does not stand on a level with that
of the banks. The assets are less fluid, the proportion
of outside moneys to their own resources less favorable;
the liabilities, on the other hand, are less urgent and
dangerous because they are for the most part subject to
demand only upon notice. Bills less fluid, owing to their
origin, and not rediscountable; less cover in the shape
of securities; on the other hand, assets in the shape of
valuables of various kinds left as collateral, but not
always of the first quality. Credits in driblets, granted
in large part to people of small means, with the inevitable
62838° — p t 2—11---- 8

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N at ion a l M on et a r y Commission
accompaniment of numerous and frequent extensions.
Occasionally, lack of careful business management
and inadequate training and experience in business
matters. And, along with these things, something
of local patriotism, some vestry-interests, and what
we call in South Germany Vettermichelei (cousinly feel
ing), a certain inclination to act with neighborly and
cousinly kindness. All intangible things, which are
fostered and heightened by the local, restricted sphere of
activity of the small Genossenschaften.
Fortunately these circumstances, which are rather un
favorable to the fluidity of the German Genossenschaften,
are more than neutralized by other factors which have an
entirely opposite and a decidedly favorable effect. There
is, for one, that most potent and fundamental principle
of cooperation, which links the members and the associa
tions in town and country in a brotherly bond and, with
its guarantee of solidarity, furnishes the associations to a
notable degree with a strong basis for credit. “ Each for
all, all for each,” is a motto not only of ideal potency,
but of practical efficiency; and that is the source of the
cooperative activity which, meant to affect only a cer
tain circle, is directed toward that end alone; to it is due,
furthermore, the obligatory and constant supervision of
the affairs of the associations introduced for the protec
tion of the members, which has such a salutary effect;
this supervision embraces not only the formal, but the
material, character of the business, and is conducted by
experts acting as examiners and advisers. It is the cause,
too, of the solidity of the cooperative institutions, of
their firm hold on the locality in which they are situated,

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and of the intimate familiarity of the members with the
circumstances and needs of their fellow-members. And,
finally, the development of this idea of cooperative aid
has brought about the creation of protective establish
ments of all kinds throughout Germany, which gather
the separate institutions under their wing and cover them
like a sheltering roof—protective unions, central loan in
stitutions, clearing houses, exchange brokers’ and dis
bursing concerns, or whatever all these arrangements
may be called in the different parts of the country.
Though all these organizations are of importance in the
regular course of business, they are especially important
as bulwarks at critical junctures, when the stress of the
times threatens the Genossenschaften and their fluidity,
for then the potent and well-accredited mediative agen
cies indirectly affect the access of the cooperative organi
zations not only to the banking world, but above all
again indirectly to the great, powerful central bank.
And it is precisely this, as I have already often empha
sized, that is of decisive importance in the matter of
fluidity. [“ Very true!” ] The small local Genossen
schaften can not apply for general bank credit because,
as the memoir shows, the bills they hold are not, as a rule,
such as can be directly rediscounted. This must be and
is done through intermediaries, and in this way the activi
ties and benefits of the central monetary institution, the
Reichsbank, penetrate indirectly into the remotest chan
nels and are, in due proportion, of service to those who
do business on a very small scale.
I may in this connection refer to my professional ex
perience, and I recognize in the credit-granting feature,

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N at ion a l M on et a r y Commission
which I have just described, an extremely important and
valuable guarantee of the fluidity of the Genossenschaften
in general. Naturally I should like to see in addition
that the strengthening of their own capital by the indi
vidual Genossenschaften should not be neglected. An
increase in their capital and surplus is doubtless greatly
needed and would tend to increase their fluidity.
I now come to the third of the main species of German
receivers of deposits— the savings institutions.
On the subject of the German savings institutions,
which manage such a vast amount of deposit-capital,
nearly double that of the banks, I can express myself
briefly.
The moneys in the savings banks are extremely safe
and just as extremely nonfluid. They are safe because,
as a rule, the communes or districts stand behind the
savings banks as sponsors, and there can, therefore, be
no question of inadequacy. A case of bankruptcy of
a communal savings bank is, indeed, practically incon
ceivable. The savings banks are nonfluid only because
their assets are not as readily convertible as is to be
desired in relation to deposits payable on demand.
Of assets in the shape of bills, the savings banks have
little or nothing, although more in securities, yet by no
means enough; a great deal, on the contrary, in mort
gages, 60 to 70 per cent, in which the bulk of the deposits
is invested, and, moreover, partly in highly nonfluid
second mortgages, in spite of “ control” and “ pupilary
security.” In addition to this, the cumbrous bureau
cratic administration, the lack of publicity, and the
small amount of the banks’ own resources must be

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added as unfavorable factors; the obligatory auditing of
accounts by the commune and board of trustees, on the
other hand, stands as a favorable factor.
This condition of affairs would, but for the subsidiary
guarantee of the municipalities and districts, mean not
only nonfluidity but positive danger; that guarantee set
tles the question of security, but not by any means that
of fluidity. A certain thoroughgoing modernizing would
in the case of the savings banks be really no luxury.
I would remark, quite incidentally, since we are engaged
upon an imperial inquiry, that the savings-bank system
does not at present fall under the imperial jurisdiction,
but under that of the separate States. In particular,
the savings banks are completely debarred from possible
admission to the Reichsbank, a thing which may be
come very critical in a time of stress. On their mort
gages they can not get a brass farthing from the Reichs
bank. Securities and other effects upon which money
can be borrowed, they do not possess in sufficient quan
tity, at least in the case of any sudden and widespread
trouble. This condition of the German savings banks
constitutes a deplorable defect in our financial prepared
ness for war, and I fully understand the view of the
Prussian Government, which wished to compel the sav
ings banks, at first by legislative requirement—unfortu
nately in vain—to hold a greater quantity of first-class
securities, and now seeks to attain the same end by
administrative means. I wish this proceeding would
serve as a model for all Germany and find imitators;
otherwise communities may experience serious embar
rassments in critical times.

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For the rest, it must be admitted that even without
compulsion the conditions referred to have improved,
there having been a considerable increase in the per
centage invested in securities. For Bavaria I have char
acteristic figures at my disposal, which I may be able
to communicate later. In Bavaria savings banks have
been granted permission to invest in bills, particularly
in bills indorsed by certain banks. There are, of course,
two sides to this, for the demand for bills becomes steadily
greater in consequence, and that is a thing to which there
are objections.
I would now permit myself briefly to sum up my views.
The deposit moneys intrusted to the depositaries referred
to, amounting to perhaps 25,000,000,000 marks, I regard,
in the aggregate, as safe. In respect to the degree of
fluidity, there are considerable differences and gradations.
Here the palm must undoubtedly be accorded to the
banks, on account of the nature of their assets. Then
follow the Genossenschaften, and only after them the
savings institutions. However, the Genossenschaften
and the savings institutions have guarantees in the
background which the banks lack. I pointedout, more
over, that in some cases what appears as theoretical
nonfluidity when considered in isolation is nevertheless
practically transformed into fluidity by intervening cir
cumstances and protective agencies. The degree of
fluidity prevailing in normal times may, on the whole,
be characterized as satisfactory. In abnormal times, on
the contrary, the fluidity of every concern must, to a cer
tain extent, be regarded as diminished, and depends upon
the degree of access it possesses, and makes use of, to the

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central bank, at least in so far as it has no realizable
international securities at its disposal. The savings in
stitutions and Genossenschaften have as good as nothing
of such holdings. The Reichsbank, gentlemen, is and
remains the prime sponsor, not only of the fluidity of
individual depositaries, but of that of our entire economic
system. [“ Very true!” ] This is my firm conviction, and
just because I entertain that conviction I must, in closing,
emphasize one point most expressly.
Gentlemen, this guarantor of fluidity must not be
misused by the lower concerns [“ Very true!” ]; the Reichs
bank must not be sinned against. If, as sometimes
happens, the numberless intermediary credit concerns do
not hesitate, when circumstances suggest such a course,
to unload everything on the shoulders of the Reichsbank
[“ Very true!” ], then I, as the director of a bank of issue,
who professionally stand, perhaps, somewhat closer to
these conditions, would call to the Reichsbank: “ Land
grave, be stern!” [“ Very good! “ Quite right!” ] In look
ing over certain recent returns of the Reichsbank, one
involuntarily feels somewhat doubtful whether the neces
sary discretion and the necessary restraint are everywhere
observed in relation to the central bank. It is quite
needless, gentlemen, - to name any individual offenders.
I regard that as entirely superfluous, for here it may really
be said: Peccatur intra muros et extra. For how can
one preach self-restraint to business concerns and the
banks if the imperial treasury itself sets a bad example
by making excessive demands upon the central bank?
[“ Very good!” “ Just s o !” ] But I refrain from going
into further details.

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Gentlemen, from the whole drift of my remarks it may
be gathered that I am not inclined toward a great degree
of legislative interference in the domain of the deposit
system. But by this I do not at all mean to say that in
particular instances this or that specific measure, such as
those mentioned in the syllabus of the president of the
Reichsbank, may not be very useful. But that will be
discussed later.
Mr. G o n t a r d . Gentlemen, I am in agreement with a
great deal of what I have heard to-day; particularly with
the admirable remarks of the last speaker. If I do not
deliver the elaborate opinion which I have prepared, it is
only out of regard to your time, and not in any way
because I deem it not worth while.
In considering the first question: Does it seem war
ranted in the public interest (and upon what grounds ?) to
take care, by way of legislation, of the security and
fluidity of the investment of deposits and savings? the
further question at once suggests itself as to what legis
lative measures might be useful. I think I shall eventually
give an affirmative reply to that question in one direction
or another, but I am fully aware of the responsibility that
rests upon this commission. I do not think that it is nec
essary to settle the matter in such great haste; the whole
question must be treated with the greatest calmness and
the greatest impartiality.
One reason that chiefly inclines me toward possible
legislative regulation does not indeed apply to the security
and fluidity of the money institutions at all. But since
so much has been said to-day on that point, I, too, may
perhaps be permitted to make a few remarks upon it. I

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mean the relation of the power of the great banks to that
of the Reichsbank. It has been somewhat painful to
me— I am recurring here to what one of the representa
tives of the banks said this morning—that we have as
sembled here again after our inquiry developed, contrary
to general expectations, into something like a commission
of investigation directed against the great banks; and
still more painful is it to me that we, in a way, approach
the great banks in this assembly with the request: “ Be so
kind as to furnish us with the weapons with which the
Reichstag can proceed against your own interests.”
[Assent and laughter.]
However, gentlemen, sympathy for the great banks is
perceptibly diminished on hearing assertions such as we
heard from Herr Mommsen this morning. I must say
that I had a feeling— Herr Mommsen was speaking about
the check-system—as if his utterance contained a kind of
mild challenge. Increased rights, increased duties! I
hope that the great banks are conscious of their mission,
to support the Reichsbank in every respect; and I hope,
in particular, that the Reichsbank is supported by the
great banks in its efforts to attract gold. As regards
activity in this direction, I have grown somewhat doubt
ful, because I have heard nothing further about Herr
Fischel’s fine plan concerning the establishment of a gold
market here in Berlin.
After this digression, permit me to say a few words as
to the relation of industry to the banks, since I am here
in their midst as an industrial in a small way. I know
quite well that if the power of the banks were to be somewhat curtailed, in one way or another, it might have the

N at io n a l M on et ary Commission
effect of restricting industrial credit. To be sure! But
I say to myself, there might be developed other kinds of
money institutions to provide industry with money, and
then I say, further, that if measures wrere adopted which
would lead to a greater uniformity in discounts and as a
consequence in rates of interest, then the benefit to indus
try would, under certain circumstances, be far greater
than the injury produced by a slight restriction of credit.
I am, anyway, of the opinion that it is not well for indus
try to be too dependent upon the banks. And if I may
be allowed another slight digression, I w'ould say that I
have already suggested in industrial unions—unfortunately
without success—that the industrials should combine for
the purpose of placing the shares of the Berlin great
banks controlled by them in charge of a central board,
which would represent them in the general meetings of
the banks, with a view to securing in this way some
insight into the bank’s affairs and procuring the election
of members of the supervisory councils who would not
represent merely the interests of the great banks, but
who, more than hitherto, would put the economic and
the nationa.1 point of view into the foreground in the
management of the great banks.
I hold it a general principle, also, that all legislative
measures whose execution can not be effectively super
vised are practically worthless. I may say in this con
nection that I regard it as impossible for credit banks to
be effectively supervised by a bureau of supervision.
The supervision must come from within. And just here
I would request our delegates in the Reichstag to see to
it that steps be taken, particularly so far as banks are

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concerned, toward procuring legislation bearing upon the
supervisory councils. It has been pointed out to me by
various parties, whose judgment I regard as more con
clusive than my own, that this question does not belong
here. I shall, therefore, not dilate upon it further, but
I wished to draw attention to it once more.
The weightiest arguments for the interposition of legis
lation are so well put in the publication “ Zur Frage der
Regelung des Depositenwesens ” (On the question of the
regulation of the deposit system) that I shall only say
that I agree essentially with the views expressed under
“ A, ” pages 9 to 15. I know, of course, that the mana
gers of our great banks are at present honorable men and
open to no criticism, but I am afraid that, under certain
circumstances, this might not always be the case.
So far as to-day’s debate is concerned I can only say
that I am decidedly of the opinion of those gentlemen
who hold that it is hardly possible to make any essential
distinction between deposits and most other outside
moneys.
As regards security, I know very well that our great
banks are most remarkably safe tq-day; they are decidedly
the safest institutions we have. The small banks are not
quite as good, although I know quite well that there
are a great number of private bankers who are likewise
irreproachable in that respect. The Genossenschaften I
consider as less safe than the banks. On the other hand,
the security of most of the savings banks is quite unex
ceptionable—placed beyond all doubt. As for fluidity,
I feel as if—all this, to be sure, is a matter of individual
feeling—the degree of fluidity of the great banks is not
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as yet as great as it should be. The smaller banks often
show still less fluidity. The Genossenschaften—in whose
case other factors, for instance those that have been
cited, must, of course, be considered—occupy a lower
position still as regards fluidity, and most of the savings
banks have no fluidity at all. But in the case of savings
banks the question of fluidity is not so important. I
hold, just as the preceding speaker does, that legislation
bearing on savings banks is a matter that appertains
primarily to the separate States; but still I would point
out this lack of fluidity in the savings banks.
I hope, with our honored president, that our delibera
tions will prove of great benefit to the people; and I hope
also that a way will be found that will be satisfactory
to all concerned, including the great banks.
Mr. S i n g e r . I would begin my brief exposition with
a remark which bears upon Herr von Wangenheim’s
communication read to us by the president; the paper
was communicated to us officially, and Herr von Wangenheim presumably wishes that his views should be
discussed in the commission. As to that paper, I can
only say that I have not as optimistic an opinion of the
wisdom and power of the commission as Herr von Wangenheim; I have never believed that the bank inquiry
commission would have the effect of preventing or avert
ing economic crises. That is a conception of the duties
of this commission which betokens, indeed, a great degree
of naivete. I think that Herr von Wangenheim, also,
should know that crises are an immanent law and are
necessary consequences of the present economic order;
if Herr von Wangenheim wants to avert crises he must

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abolish the capitalistic economic order, as Social Democ
racy demands. [Laughter.]
While Herr von Wangenheim takes the view that we are
in a position, within the bounds of the existing social order,
to make suggestions and to adopt effective measures to
prevent crises, this transcends my horizon; I regard it as
quite out of the question and as a futile effort. I merely
wish to express the hope that the views of Herr von
Wangenheim will be included in the report of our
proceedings, so that others, too, may experience the
pleasure which I felt while that curiosity was being read
to us. [Laughter.]
The question, gentlemen, whether the conditions of the
credit system which are under discussion affect the general
public, and whether the general interest is involved in the
correction of abuses and the putting of these matters on a
sound basis, I can, without hesitation, answer in the affirm
ative. It is, in my opinion, quite beyond doubt that the
interests of our entire economic life, and consequently of
the general public, are deeply involved in the efforts to
remedy the evils which have been and still are to be found
in this domain.
It is not a question merely of measures which shall
guard the public against losses through mistaken and bad
management of deposit funds— which, also, to be sure, is
in the public interest—but rather the taking into account
of the economic connection which beyond doubt exists
between the domain of the credit system and all the other
economic domains, and, therefore, the economic interests
of the whole people. Thus the general interest is posi
tively involved. Effects and reactions upon industry,

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N ationa l M onetary Commission
commerce, trades, and agriculture absolutely demand
consideration of the deposit system.
Now, gentlemen, I shall take the liberty of expressing
myself very briefly on the question of separation of the
deposits. I think a very sharp distinction must be made
between the three categories which have been pointed out
to us. In speaking first of savings banks, I would say that,
from my point of view, I do not consider it the business of
savings institutions at all to engage in credit transactions;
savings institutions have an entirely different object. Nor
can I admit that the single example that has been brought
forward—where the watchman goes to the savings bank to
draw out his deposit, but can not get it— should induce the
savings banks to invest their moneys in any way but that
which is absolutely safe. I believe that precisely because
the maintenance of the savings banks and their security
and fluidity are of essential, great, and general interest, it
should be provided that the savings banks shall, as re
spects fluidity, receive support from the State. Their
activities should, as far as possible, be promoted, and com
petition with them avoided; but the savings banks should,
on their part, stick to their own business. If, then, it is
possible to keep savings banks out of reach of the effects
of a crisis, I should consider it very desirable. But in
order to make this possible the savings banks must, nat
urally, not be granted freedom to enter into all sorts of
transactions in which it is not so much a question of insur
ing the safety of the deposits for their depositors as of
making bigger profits and assuming the risks connected
with them. I should, therefore, be not at all sorry if the
savings banks would withdraw from the “ Konzern,” and

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not occupy themselves with the investment of deposit
moneys. The savings-banks. ought to be left to work
quietly by themselves; their security should not be im
paired by credit and othet money transactions. If
defects appear in the savings-bank system, it is the place
of the communes and of the Government to see to it—
and by legislative means if necessary—that those defects
be corrected. But to draw the savings banks also into the
public credit system I do not consider right, because their
business does not lie in that field at all.
The case is quite similar as regards the Genossenschaften.
One may be a great advocate of the Genossenschaften, as
I am, but he need not for all that approve all the manipu
lations and transactions that the Genossenschaften engage
in, in their endeavor to handle millions. It would be very
desirable in the case of some Genossenschaften if they
were somewhat more restricted in this respect. And if
we must finally perceive from the opinions of the experts
and from the statistical tables which we have received
that some Genossenschaften, with a capital haftlly worth
mentioning, engage in transactions involving hundreds
of thousands and millions, then, gentlemen, how do you
propose to take measures which will, on the one hand,
guarantee the security of the deposits placed with the
Genossenschaften, and, on the other, provide for fluidity?
The main question, after all, then, with which we must
concern ourselves relates to the banks—the middle-sized
and great banks; perhaps also the small banks. And here
it appears that in general as regards security and fluidity
there is much less danger in the case of the great banks
than in that of the small institutions. For the great
banks are in a position, by reason of their surplus, their
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N at ion a l M o n et a r y C o m m i s s i o n
accumulations, by reason of the credit they possess, by
reason of the seriousness to the community of the collapse
of a great bank—in short, the great banks are in a posi
tion to obtain assistance from outside much more readily
at a critical time than any single small institution whose
security and fluidity do not affect such wide interests. If,
therefore, measures in that direction are to be adopted it
must not be forgotten that if there is danger to the security
and the fluidity of deposits at all it is likely to be fully
as great in the small institutions as in the great banks.
Perhaps the great banks and their management may, in
general, even be credited with a broader view and superior
sagacity in the investment of their own and outside
moneys.
In answering the question, gentlemen, wrhether it is in
the public interest to resort to legislative measures, one
must be extremely cautious. In my opinion, you will
not be able to devise a law that will satisfactorily accom
plish its object, and least of all will you be in a position
effectually to enforce the observance of the law through
an official bureau of supervision. We certainly are not
suffering, gentlemen, in public life and in public adminis
tration from a lack of supervising officials, and yet these
arrangements often prove ineffectual. The phenomena
which are the occasion of our discussions are inherent in
the prevailing system, are the attendant manifestations
of the capitalistic economic system. I must say that from
my standpoint there are only two ways: Either one is an
opponent of the present social order and its institutions,
and then one is bound to advocate the creation of other,
and that socialistic, foundations for society; or one is

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B a n k I n q u i r y of 1 9 0 8 ~ 9
satisfied with the ruling principle of our economic order,
and then the phenomena against which complaint is made
here must be taken into the bargain, for they are only a
consequence of the capitalistic method of carrying on pro
duction and business, and inseparably connected with it.
If the present economic system is to fulfill its functions
it must be free from fetters, which can not affect the essence
of the matter, but only the outward manifestations. It
seems to me, too, that a so-called bourgeois policy is
sought to be followed here, which—with the best inten
tion of shielding the small people from the injuries of
capitalistic development—vainly searches for legislative
remedies, and, in ignorance of the real relations of things,
sees the remedy in the creation of a new governmental
authority. I can not possibly conceive that a bureau of
supervision could effect anything. How, for instance,
do the gentlemen imagine the accounts of the Deutsche
Bank are to be examined? How should the Deutsche
Bank, which has, I suppose, several hundred thousand
accounts, be examined? What is your idea o f the organ
ization of this bureau of supervision? How many hun
dreds of officials are to constitute the force of the bureau ?
Herr von Gamp has suggested that safety should be
secured by depositing a portion of the capital with which
the banks operate in the Reichsbank as a guarantee.
Well, I don’t know what gentlemen hope to gain by that.
Let us assume that it is a considerable part of the capital;
then this capital will, of course, be withdrawn from general
business. For, if I am not mistaken, it is intended to
strengthen the gold reserves at the same time by this
measure; the Reichsbank would, therefore, have to simply
6 2 8 3 8 ° — PT 2 — I I -------9

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let it lie in gold, and that part of the capital would be
withdrawn from business. If, however, it is an incon
siderable portion, where is the security for those for whom
this thing was planned ? If you do actually tie up one or
two per cent of the bank’s capital, then those that first
lay claim to it, or who have a preference, may perhaps
have their demand satisfied out of the capital and surplus.
But if one starts out with the idea that these deposits
with the Reichsbank will be sufficient and will answer the
purpose of settling any possible losses of the creditors,
then, gentlemen, I think you yourselves must see that
such small deposits can not accomplish that object. I
have, besides, no intimation whatever as to how, when,
and by whom the amounts to be deposited could be
collected. I think that one view—assuming that legisla
tive experts would succeed in doing something with it—
might perhaps be entertained. It might be said—there are
average computations for such things—that in granting
institutions that do a credit business a sort of concession,
the condition should be imposed that they shall not go
beyond a limit comformable to their capital, in their
credit and business transactions. If an institution, for
example, is working with a capital of a million marks, it
might perhaps be provided that it may not extend its
business enterprises beyond 3,000,000 marks. I mention
these figures merely by way of example; whether it would
be possible, I do not know; for the present it seems doubt
ful to me. But I can imagine that it would afford a cer
tain protection, because, in my judgment, the possibility
of loss is undoubtedly increased with the expansion of the
operations of these institutions without their having an

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adequate surplus, sufficient resources of their own. One
might assume the position that if a certain legal restriction
is prescribed here, which must be observed, and the
observance of which can be actually enforced, it may per
haps serve to mitigate some evils; but of much use this
will not be either.
I believe, therefore, to sum up briefly, that unless leg
islative measures that can be easily executed are devised
we shall have to leave a bureau of supervision and legis
lative interference out of consideration. For, gentlemen,
mere general desires do not get us forward in this kind
of question. One may be filled with sympathy for those
who lose money through the fault of others. If, for in
stance, it is now said that measures should be taken that
the public shall not be allured by agents, advertisements,
etc., it must be borne in mind that the boundary lines
between legitimate and illegitimate business are very
faint, and it is difficult to distinguish them. And then
he who wishes to get a high rate of interest or to make
gains on the stock market must take the possibility of
loss into the bargain. You will, in my opinion, then,
accomplish nothing by means of legislation. It will not
be possible to exercise effective control of the working of
such legislation, and at the utmost the question will be—
one that will probably be discussed in taking up subse
quent points—whether it would not be possible to estab
lish regulations which will have to be observed by the
institutions engaged in money transactions. But even
here I do not conceal from myself the fact that any con
trol of the execution of such regulations will be excessively
difficult. The opinions delivered to us by the experts are

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so contradictory that I, for my part, have not been suffi
ciently enlightened by the study of these opinions to be
enabled to say what really should be done. I can only find
one thing in these expert opinions—that those gentlemen
endeavored to make clear such evils as had come to their
knowledge, and that they tried, each from his own economic
standpoint, to suggest changes, but that their suggestions
really offered no remedies for the evils they deplored.
These views are indeed so bound up with the general
economic life of to-day that no special medicine, at least
no effective one, can be found among them. I am very
ready, should our deliberations crystallize into definite
propositions, to support all efforts calculated to lead to
economic improvement. But I can not convince myself
that the suggestions that have been made will supply
a remedy.
Doctor L e x i s . I should like to say, in the first place,
in relation to Herr Mommsen’s remarks, that in express
ing my views this morning I had by no means the inten
tion of advocating decisive measures at this time. I
wished merely to sum up the points in the questions
before us, which, in my opinion, touch the public in
terest; these points can, I believe, then be brought up
for discussion. But, as I have observed, I had no inten
tion of expressing my opinion at this time and saying that
I favor compulsory measures or any special supervisory
regulations. I do not wish to enter into that at all.
I discussed, for that matter, only the first point of the
first question, and shall right here add my opinion in
regard to No. 2 of question 1: “ The meaning and nature
of deposits and savings, and their relation to outside

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of 1 9 0 8 - 9

moneys in general. ’ ’ I indicated this morning that it seems
to me that it is possible to distinguish between those
deposits or outside moneys which proceed from merchants
who are entered in the commercial register—that is,
between current-account credits of registered merchants—
on the one hand, and on the other hand deposits which
proceed from private individuals, from such, then, as are
not entered in the commercial register. Under the latter,
again, the distinction could be made as to which are sav
ings properly so called—such, namely, as are deposited by
nonmerchants, subject to at least a week’s notice. It
might be declared, too, that all those moneys that proceed
from private individuals, not merchants entered in the
commercial register, are savings if they are not intended
to serve as a basis for checks. Now, it has been said that
this differentiation according to the mercantile quality
would not be practicable, would be much too complicated;
but still I would assert that there is in any case a certain
group consisting of private persons who are not entered
in the commercial register and who bring moneys to the
banks which they do not wish to consider as a basis for
checks. That seems to me to be a clearly definable class
of people, and precisely the kind of people that are more
or less in need of the protection that is claimed for them—
that is, the small people who are allured by advertise
ments, etc., to take their money to the bank. I do not
say that protective measures would be expedient and
feasible; I only say that the category can be distinguished
and has a special significance.
That would be one category, and a second would be
formed by all those—I leave out further differences—who

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have an account current with a bank. They form a class
by themselves, and may be private people who are not
merchants. For there are private capitalists who have
regular account-current transactions with the banks.
There is still a third category: Such private persons, or
merchants for that matter, as have a check account which
is to be used solely as the basis of check transactions.
Thus it seems to me that at least three categories could
here be distinguished, namely, the pure savings deposits,
according to my conception of them, then the accountcurrent deposits or account-current credits, and, finally,
the check deposits. These three different classes could
be variously treated, but it is not at all my intention to
advocate measures to that effect.
As regards the check system in general, however, it
seems to me that it would be in place here to discuss a
general question, for it has been repeatedly said that the
check is more and more taking the place of bank notes,
and that it will be necessary, therefore, to regulate, and
perhaps limit, the check system as the note system has
been limited. The check, it is urged, is becoming more
and more a bank note, or a means of payment like the
bank note, and, therefore, measures must, of course, be
taken to safeguard the interests of the public here as was
done in the case of bank notes. Now, I would reply that
the check will never be anything like the bank note; the
check is not a means of payment; the Reichsbank note
is legal tender; the check, on the other hand, is never a
means of payment but an order for a payment, which the
bank may carry out in any way it pleases. And there is
the additional consideration that, if not exactly in

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B a n k I n q u i r y of 1 9 0 8 ~ 9
contradiction, it is not in harmony with the check system
for the check to be used as a circulating medium in the
broader acceptance of the term; to be circulated and go
through various hands until it is either taken up, or—a
thing that would be the most desirable—balanced in the
clearing house. That is not at all in harmony with the real
essence of the check, and consequently, it will never be
possible to say that the check is a medium of payment in
the same way as a bank note, and that, therefore, a
limitation of the check system—and therefore likewise of
deposits, which serve as the basis of the check system—
would be desirable. That in America the banks of issue
are so stringently regulated, while, as a matter of fact,
the deposit debt of the banks of issue is about three times
as great as their issue of notes; that there the national
banks are obliged to keep constantly a reserve covering
25 per cent of their deposits—the special reason of this is
that the national banks are banks of issue; they circulate
$600,000,000 in bank notes anyway, even though they
may have $1,700,000,000 to $1,800,000,000 in deposits.
A special safeguard had to be established for the
$600,000,000 of notes, which, though they are covered by
the deposited bonds, must, nevertheless, be redeemable
at any time; no conclusion, therefore, can be drawn from
this in respect to pure deposit banks. This appears to
me, then, a general consideration, which may be well
worth discussing at this point, since, as has been said,
even experts have remarked that checks are more and
more taking the place of bank notes, and that, therefore,
the pure deposit banks that carry on a check business
must be treated like the banks of issue.

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N at ion a l M on et a r y C o mm i s s i o n
Doctor W e b e r . Gentlemen, to-day’s debate has pre
sented the interesting spectacle of the gentlemen of the
commission arguing upon an entirely different basis from
that upon which the experts proceeded as regards the
main issue. According to the opinions presented by the
experts, their attention was turned chiefly upon the great
banks, and the great banks, as far as the security and
fluidity of deposits and other outside moneys are con
cerned, are to-day entirely eliminated. Some of the
experts explained their position upon this whole question
of the public interest by saying that the concentration of
capital in the great banks had steadily put more and more
power into the hands of the great concerns; that these
great concerns had, in part, not employed this power in
the right way; that this capital had been “ crammed”—
as some one remarked—above all into industry and com
merce, and that this sort of activity of the great banks
required counteraction through governmental measures.
If, in the first place, one fixes one’s attention upon this
question— and I can, perhaps, do that—it must be ad
mitted that in the opinions of the experts there is a great
error, and it is the following. The gentlemen say that
the great banks have “ crammed” capital into industry
and commerce. Now, I believe that the problem pre
sented to the Germany of to-day is a quite peculiar one.
Our great increase in population demands that capital
shall assume an activity which shall bring bread and sus
tenance to this increase in population. [“ Quite right.” ]
We can not, therefore, speak of a “ cramming” into indus
try and commerce, but must say that it has been precisely
the great banks, perhaps, that rightly conceived and

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B a n k I n q u i r y of 1 9 0 8 - 9
rightly accomplished the solution of this great problem,
and that without this concentration and the far-seeing
leadership of these great banks we should not have been
in a position to give the increase in our population the
employment, the sustenance they have had, keeping Ger
many thereby upon its old level. [“ Very true.” ] It
must, indeed, be admitted that Germany’s level—due in
no small measure to the activity of the great banks—has
not sunk, but that in spite of the great increase in popu
lation it has been raised. I interpret a number of these
opinions as indicating that a great many opponents of the
activities of the great banks had been actuated by a cer
tain animosity to mobile capital. I take it that we have
in all this rather the manifestations of a political move
ment than a discussion of purely economic questions.
The case is, indeed, very clear, gentlemen. In the last
few years, and this year as well, it has been again and
again pointed out, particularly by the representatives of
agriculture, that not sufficient money at suitably low
rates of interest is placed at the disposal of agriculture.
Gentlemen, a great error is involved here. There is truly
no country on earth where the mobility of the ownership
of land is as great. The ownership of land is mobilized
in the highest degree by means of negotiable securities,
and I do not regard it as desirable to provide agriculture
with still more capital. I would declare quite openly,
too— even at the risk of its being made public—that I
estimate the danger that here and there 100,000 or even
1,000,000 marks may be lost by some individuals as far
inferior to the great danger there would be in checking
and restricting by legislative measures the present

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N a t i o n a l M o n e t a r y C o mmi s s i o n
development of the movement of capital. It is quite be
yond dispute, for example, that if you consider the measure
proposed by President Heiligenstadt and Herr Bernhard,
if you decide to have a certain part of the outside moneys
deposited by the banks in the Reichsbank, then you
withdraw it directly, in the first place, from the economic
uses which it has hitherto served; and if by this means
the Reichsbank is put in a position to increase its stock
of gold and to prevent this money from entering economic
life, then I would ask, How would it be possible with our
growing population to give people employment? What
is to become of industry? How will it be possible to
satisfy our increasing needs, remembering, as we must,
that we are under a great strain, owing to the excess of
imports over exports and that, altogether, our circum
stances are such as can not be compared with those of
other countries which people are so fond of citing as
examples. To-day, for instance, our attention was called
to the example of England, which is always held up to us,
but not to that of France; but no one complains in France,
which has no laws in this domain. And if you say, further,
that you here in Germany will have to establish a bureau
of supervision—perhaps a bureau of control, such as Herr
von Wangenheim has described in writing—in order to
supervise the entire business of our banks and to lead
them into other channels, this measure would, considering
our entire situation, be likely to prove an absolutely futile
beginning. And the man who would be placed at the
head of such a bureau of control would, my word for it,
never be in the position to do what Herr von Wangenheim
would require of him to prevent a crisis of any consequence,

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I n q u i r y

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9 0 8 ~ 9

and even should there be a change of heads, a crisis
could, for that matter, not be averted by anyone occu
pying that position.
Now, I would, as a matter of principle, eliminate the
savings banks from the discussion. Gentlemen, a person
who takes his money to the savings banks wants to
deposit it there, merely wants to draw interest; only
exceptionally does he *draw the money, or he draws it
only temporarily and puts it back again. And if in
critical times demands are made upon a savings bank it
always has securities in its possession which enable it
to help itself in one way or another. It has also been
asserted in the opinions presented by practical men who
are intimately acquainted with the conditions that there
has as yet been practically no deficiency of fluid resources
in the savings institutions. I eliminate them, there
fore—only in so far, of course, as they do not engage
in pure banking business. Unfortunately, some savings
banks, notably in the Kingdom of Saxony, engage in
such business. For example, there appeared some time
ago in the Chemnitz Allgemeine Zeitung a long article
about a Saxon savings institution, in which emphatic
objection was made to this institution engaging on a
a large scale in bill transactions, thereby destroying its
qualification as a savings bank and passing over to pure
banking business.
I should, however, like to see the Kreditgenossenschaften brought into our discussion. If, on pages 28
and 29, gentlemen, you compare the statistical figures
given, you will be surprised at the proportion that
their own resources bear to the outside moneys of the

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N at ion al Mo n et ar y C o mmi s s i o n
Genossenschaften. In the Imperial Union of the German
agricultural Genossenschaften it is 4.4 per cent! All the
safeguards, gentlemen, that President Heiligenstadt has
referred to can not do away with the fact that this is a
dangerous condition, and if a supervising authority
were to be established it would have to take cognizance
of this; the Kreditgenossenschaften could not be exempted
from its operations.
Then, gentlemen, the check law has been under dis
cussion. Herr Gontard, if I am not mistaken, misunder
stood Herr Mommsen. Herr Mommsen’s remarks did
not by any means convey the idea that he wished to
make a threat against the check system. What he said
was only that the passing of the check law ought not,
on the other hand, call forth legal measures on the part
of the Government or the community, directed against
the great banks or the banks in general; for if it did, the
enactment of the check law would turn out a failure.
For the banks the check law is really no joke, of that
I can assure Herr Gontard; for in the check business
there is no profit under any circumstances; most banks,
on the contrary, lose by it.
I should say, also, that Herr Lexis has slipped into an
error. Check deposits are put out at interest exactly
like other ordinary deposits; there is no difference between
them.
Doctor L e x is . In America.
Doctor We b e r . But here in Germany it is not the case.
From the fact, too, that checks are entered under credits
you can see that they bear the same character as other
deposits. Then, another point: You [to Herr Geheimrat

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Lexis] stated that at times 4^2 per cent interest is paid on
check credits. You must not forget, however, that we
had at that time a discount rate of 7L2 per cent. I would
remark further that if we have a low rate of discount in
Germany, Austria usually enters into direct competition
in Silesia and in the Kingdom of Saxony. I can demon
strate to you that German money in Austria, subject to
withdrawal on demand, is yielding as high as \ ] / 2 per cent,
reckoned from the day the deposit is taken; and the man
ager of an Austrian savings bank recently said to me that
on certain days he simply could not keep out German
deposits offered in German money. This, gentlemen, is
another great objection to any legal measures whatsoever.
If you make regulations that impede the free action of our
German banks, you may depend upon it that the money
will go out of the country, just as it did after the bourse
law of 1896. The bourse law of that year undoubtedly
did have this effect; any expert will tell you so, and the
Reichstag itself recognized the fact. The very same thing
will happen in the present instance if any such law is
passed.
Then, too, Herr Geheimrat Lexis has adduced the rela
tion of this matter to the question of foreign loans. You
said [turning to Geheimrat Lexis] that no deposit moneys
would be invested in foreign loans except temporarily. I
should rather say that even as it is our dealings with for
eign loans are to a certain extent under government super
vision. At present, even though a foreign bond issue may
be offered for admission at a given bourse, yet the Govern
ment has it in its power, through its right of supervision,
to forbid such admission. When the Government wishes

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N a t i o n a l M o net a r y C o mmi s s i o n
to do so it can adopt this measure. We need not, there
fore, make any further legal provisions. I admit that a
bank here and there has made a mistake; there have un
doubtedly been occasions on which money has been turned
into wrong channels. But, gentlemen, if the Government
wishes to prevent an excessive flotation of foreign loans, it
has it in its power to pronounce its veto at the proper
time.
Herr Geheimrat Lexis made a distinction between de
posits made by private individuals and such as come from
people who are entered in the commercial register. I do
not think this distinction could be legally established.
All those small tradesmen, for instance, who now have
themselves entered in the commercial register would be
discriminated against as compared with those who are not
entered, and I think this can not be the purpose of the
legislation. The only important effect of this measure
would be an injurious one.
Now, gentlemen, with reference to the statistics that
have been submitted about the small banks, it has been
said that there are banks that have ten times as much in
deposits as they have in capital. I, too, know such a bank;
the Oldenburg Spar- und Leihbank has to-day a capital of
4,000,000 marks and deposits of about 45,000,000. But
if you look closer into the matter, you will be obliged to
admit that not all of this consists of savings; for it consists
also of temporary investments, and from statistics like
these surely no general conclusions can be drawn with
\
regard to the administration of the whole banking business.
Freiherr von Gamp, who, by the way, contradicted
himself by leaving out the savings banks altogether in

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one part of his discussion and making them the corner
stone of the whole matter in another part, approved of
the suggestion that a certain sum be deposited at the
Reichsbank, and then, on the other hand, recommended
that if occasion should arise the bank should have
the right to withdraw the money. But, gentlemen, in
that case no end would be served. What is it that he
has in mind? Certainly this will give the people who
have deposited their money in the bank no assurance
whatever of its being safe.
And the suggestion made by Herr Singer that a bank
should not receive more than a certain amount of de
posits in excess of its own capital seems to me quite out
of the question. If you wish to make such a rule, you
must fix upon a certain sum—let us say twice as much as
the bank’s capital. If you do this, you will bring imme
diate and complete ruin upon 11,780 agricultural Kreditgenossenschaften. And the Deutsche Bank, which, if I
remember correctly, has a capital of 200,000,000 marks
and a surplus of 100,000,000, will be permitted to receive
not more than about 600,000,000 marks of deposit
moneys [interruption]. I simply take these figures as
good enough, and finally you will not be able to make
any distinction on the ground of prudence of manage
ment; whereas the capital of one great bank may be
administered with extraordinary prudence, and that of
another may not be managed so well.
Doctor RiESSER. The surplus must also be taken into
account.
Doctor W e b e r . Y es; but counting the surplus, it
comes to only 600,000,000 marks, and there is no telling

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N a tio n a l Monetary Commission
what would be the result upon our economic conditions
if this scheme were put through.
Gentlemen, we are on the way toward putting every
thing under supervision, under control; you yourself [to
Herr Singer] have referred in a jesting spirit to that
written proposal of Herr von Waggenheim’s about a
“ bureau of crises.” We want to put everything under
control, and imagine that if we do so, everything wall be
in good order. Gentlemen, if we do not have confidence
in the managers of our great banks, although they have
always shown themselves in every way worthy of it, then
we shall not have confidence in a supervisory bureau, if
such a thing is instituted. In the opinions of the experts,
and in to-day’s discussion, too, the talk has all been about
the interests of the public, and we have acted as if these
interests had been in some way or other not sufficiently
considered. If you will look up the statistics for America,
and even for England, you will find that wherever you
look there have been more failures than there have been
in Germany. And why should we chase after laws of this
kind, we who have not a single valid reason for doing so,
when we know that any such law is bound to have unfore
seen economic consequences ? When we consider our
whole economic development, there is really no reason
for our adopting any such legal measures. At the very
most, one might maintain that the overextension of
credit stands in need of a remedy. But, gentlemen, is it
not true that this overextension of credit must have
been brought about by our general condition? Must not
technical improvements have advanced more rapidly
than the formation of capital? And this is why the

*34

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formation of capital, always called forth by an increase
in the population, has not kept pace with industry and
trade. Now I am convinced that the consequence of all
this will be that we shall do just what we did in the
seventies and eighties; we shall send our excess popula
tion into other countries, and thus create competition
against us abroad. I believe we should give up all idea
of arbitrary interference, and that we should never
institute legal regulation when there is not the slightest
occasion for it. After all, some sound reason must be
adduced for such a policy; it will not do to go back every
time to the case of the Teipziger Bank (in point of fact
even there 70 per cent was finally distributed) and to
demand on that score that everything be put into fetters.
Then, too, it has been said that we should consider the
possibility of instituting a system of supervision modeled
after that of Austria. I believe, on the contrary, that
through the bills that are presented to it, the Reichsbank
can even now exercise a most extensive control over busi
ness, and that this control, if made use of, may in certain
cases be very opportune. I think, therefore, that any legal
regulation in this domain would be a great mistake, and
that any additional protection it might confer upon this
or that deposit creditor would be more than offset by
enormous economic disadvantages.
Gentlemen, I must say just a few words about the dis
tinction between savings and deposits. My view is that
no distinction can be made. Deposits and savings merge
into each other in all sorts of ways. I should say that
this question can not be settled at all. I don’t think there
is a man here in the commission, either a theorist or a
6 2 8 3 8 ° — PT 2 — I I -------IO

13 5

N a t i o n a l M onetary Commission
practical man, who can give an exact definition of the
terms deposits, credits, and savings.
As for safety of investment, I have been delighted to
find that the members of the commission agree in think
ing that there has been on the whole very little complaint
in this regard, and I have been much interested in learn
ing from the proceedings of the experts that a large
number of them are of the same opinion.
I wish to make objection, however, to one remark. It
has been stated that the power of the great banks develops
at a constantly increasing rate and takes under its wings
industry and trade. Gentlemen, in a certain report of
business— I think it was that of the Dresdner Bank—it
was quite correctly remarked last year that the power of
the great banks will not increase, but, on the contrary,
will show a falling off, inasmuch as the industrial inter
ests can confront them with another power by combining
into cartels and syndicates. I do not think that the power
of the great banks can be shown to have increased in
relation to industry and trade. Indeed, I believe that
industry and trade are in a position to counteract the
power of the great banks by means of cartels and syndi
cates. Doctor Schmidt shakes his head. It was, I think,
the Dresdner Bank that expressed the very opinion that
I have just brought forward.
In summing up I will say that I am opposed to every
kind of legal restriction and regulation in the domain of
the deposit system, especially when this would encourage
an investment of money in state paper. And the resolu
tion passed by the Reichstag, besides being in itself of
very little value, has very little relevance to the case of

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B a n k I n q u i r y of 1 9 0 8 ~ 9
Germany, since it can be proved by the statistics for all
bank failures within recent years that in the last five years
at most 3 per cent of the failures among banks and bank
ers of any magnitude worth considering can possibly be
included in this class of soliciting bankers or the like. I
am therefore of the opinion that we should refrain from
trying to alter arbitrarily the movements of capital in
Germany, especially as there is no sort of need of our
doing so.
Mr. R oeand -L u ck E. It is of the utmost importance to
the community that the savings of the general public be
invested in ways that will secure practical fluidity, and
also that they be so used as to subserve the economic
interests of the country at large; but it is just as impor
tant for the community that we should persistently refrain
from allowing laws to be made which, while they are
designed for this purpose, do not really have the desired
effect, laws which, on the contrary, are harmful to the
community and finally are a direct cause of danger to the
depositors, as I shall later on show them to be.
I will now take up a question which has already been
almost fully settled. Can we or can we not determine
just what, in the different depositaries, should be accounted
as savings—can we determine it, I mean, with such
precision as would be necessary for the formulation of
an actual working law? The gentlemen that I have
listened to so far are on the whole at least doubtful
whether this could be done—if, indeed, they are not
agreed that it would be impracticable. My honored
neighbor [Geheimrat Lexis] suggested that the distinction
might be drawn between money deposited by firms that

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N a tio n a l M onetary Commission
are entered in the commercial register and money from
other depositors. Well, gentlemen, just look about you
in this very room. I think there are few among us who
are entered in the commercial register, or who belong
to firms that are so entered. Are we who are not
among these few— are we the persons who for the
sake of the national welfare must be protected in the
employment and investment of their money? And the
great number of agriculturists, officials, scholars, artists,
and men who live on their incomes, can they be relegated
to an inferior class in respect to the ability to turn money
to account ? I do not think that this was Herr Geheimrat Lexis’s intention. Indeed, he afterwards modified
his proposal and said that we may leave it to the
public to find a method; people will make the decision
for themselves when they deposit their money; a man
will say, “ I should like to have a sort of guardianship
account.” Let us just look closely at this point for a
minute; how did these terms—deposit account, giro
account, check account—really arise in Germany, and
how are they used by the bankers? All the profound
expositions that scientific writers have made of them are
not really borne out by practice. That which in Ham
burg is called Girokonto is called in Berlin Depositenkonto, and in Braunschweig Scheckkonto. Since some of
you are in a manner laymen as regards the banking
business, I will give you a rather useful formula: As a
general thing, a man carries a deposit account, a giro
account, or a check account when he can transact a
considerable part of his business with the bank orally,
either in person or through a deputy. If he can not do

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this, he generally has an account current; but this does
not prevent his having at the same time another account
current, which is also called a check account. Thus the
two things can not be kept apart in practice. It has
been stated that one gets higher interest on an account
current than on a check account. Of course that is
so. The whole management of a check account is in
some respects comparatively simple. Certainly there is
higher interest in the case of a current account, but then
one has to pay commissions. To sumup, I should say that
no definition of the term “ savings” can be found which
shall be practically applicable by law in the case of the
great banks or the middle-sized banks, but that such a
definition is practicable in the case of the small banks, the
Genossenschaften, and such institutions as are authorized
to act as depositaries of moneys thoroughly secured, for
the various classes that form the clientele of these
institutions.
Now, it has been asked whether we can imagine a method
by which safe and fluid investment of their holdings
by the different classes of money institutions can be
brought about and made sure by law. Least of all can
we make it sure by a law requiring that a safety fund,
bearing a definite ratio to the total of demand liabilities
at the time, shall be deposited at the Reichsbank. So
far as the Reichsbank is concerned, or the monetary
circulation, the effect of this would be simply zero. Any
institution that had occasion to make up its required
safety fund would take the proper amount of its bill
portfolio to the Reichsbank. The Reichsbank lets these
bills expire; when they fall due, it must renew them

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N at ion a l M o n e t a r y C o m m i s s i o n
directly or indirectly by accepting other bills, with the
effect that the portfolio of the Reichsbank is permanently
enlarged. The only thing that might be subject of dis
pute is whether the discounting of bills by hundreds of
banks instead of by the Reichsbank is to be looked upon
as a system economically less desirable.
Would the security of the bank be increased even in a
general way? The safety fund is of course a fund that
can not be got at offhand. If a bank wants to get at this
safety fund it has to enter into special explanations with
the Reichsbank. Otherwise this safety deposit would in
large measure fail to fulfill its purpose. Suppose, for ex
ample, that a provincial institution finds itself confronted
with this question: In the next few days heavy demands
will be made upon us; shall we go and ask the Reichs
bank for the use of our safety fund? In a great many
cases the result will be that the mere discussion of the
question will itself create in the public an attitude of
anxiety and distrust toward the institution.
Herr von Gamp also suggested that it might be speci
fied that a certain percentage be held in government loans
(I assume that he meant to include loans of the separate
states of the Empire), because these loans are better
adapted than bills for the raising of money when needed.
I think, gentlemen, that those of you who are merchants
will question this statement, except as applied to certain
exceptional cases. When I have a bill in my pocket with
sufficiently well-known and unimpeachable signatures, I
have an absolute assurance of receiving money in six weeks
or twelve weeks. Now, if times are hard and I need
money, it will take me much less time to find someone

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who will buy a claim that will soon be converted into
money than one who will buy a paper when he has no
means of judging its future market price and knows that
he is taking a risk. In the case of such a bill as I have
described the question of the rate of discount is absolutely
the only thing that has to be considered. Herr von Gamp
says that all this is no concern of the general public—if
a bill is handed in, the Reichsbank is obliged to discount
it; but if a government obligation is offered for sale, the
Reichsbank need have nothing to do with it. Gentlemen,
I do not know whether I had better say anything more
on this subject. The effect on the Reichsbank is exactly
the same in both cases. Herr von Gamp always makes
what seems to me to be a very strange assumption—that in
Germany large numbers of people go about with 10,000 or
20,000 marks in their pockets which they have no intention
of using at an early date. I have very seldom come across
these people. Of course there are people here and there
who are occasionally found to have kept very considerable
amounts of cash in their old stockings. But these are
certainly not cases to be considered in connection with
the subject of bills or government loans. But let us sup
pose for a moment that an investment in government loans
were legally required. In point of security certainly an
excellent arrangement; but here, too, if you think of how
the law is to be formulated and how it is to be carried out,
you will at once come up against the drawback that has
already been pointed out. If the thing is to be of any
use, it will not be enough to prescribe that a certain pro
portion be held in government loans, for of course this
paper will have to be deposited in a safe place. If you

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do not make this provision, you must expect to find, when
at some future time you look to see whether these holdings
are on hand, that in a great many cases they are no longer
at the institutions in question, but are at some larger
bank that acts as a reservoir from which the smaller banks
can draw. Well, then, the holdings must be deposited
somewhere. If they are so deposited, the question natur
ally arises, What happens in case of need? Herr von
Gamp is surely not thinking only of those cases in which
a bank has suspended payments and in which as a matter
of course these holdings would furnish a definite security
for all depositors. Surely, in order to protect the credit
and fluidity of the bank he will wish to make sure of its
having these reserve holdings at its disposal in case of
need, without rigmarole and without uncertainty. I come
now to the point I referred to above. Here you at once
create a danger for the bank. If the bank goes to the
Seehandlung or the Reichsbank, or whatever other insti
tution you have fixed upon for this function—goes and
demands the money it has deposited, negotiations must be
entered into, and the same thing will happen that I spoke
of above in connection with the disposal of the safety fund
at the Reichsbank. Either there will be a run on the
bank because it was not aware a day or two beforehand
of the danger that threatened it (otherwise it will have
the outward appearance of being prepared); or else it is
anxious and foresees the danger and begins negotiations
with the depositary in question in order to obtain the
securities it has deposited, in which case the rumor at once
arises that the bank is in difficulties. Through this rumor
you will bring about that very run on the bank which your

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measure was designed to prevent; only the run will be
more serious, and sometimes the bank will suspend pay
ment, and the depositors will be in danger of loss.
I think that in this division of the subject we should
confine ourselves strictly to the consideration of such
legislative measures as are feasible and suited to the
purpose. I have said what I could on these lines. As for
what it is possible and advisable for us to do, apart from
legislative measures, we shall come back to that later
on, and we shall then consider the various proposals
and suggestions. And I take my stand firmly on the
ground that if we have any opportunity of this kind—
even if there is only the slightest chance for an improve
ment—we ought by all means to make every effort to
contribute toward any such improvement.
The C h a ir m a n . Gentlemen, do you wish to continue
the sitting? Count Kanitz is also on the program for
to-day.
[Motion to adjourn.]
Count K a n it z . Your Excellency, I beg that my speech
be put off till to-morrow.
The C h a ir m a n . Then I will close the meeting for to
day, and request you to assemble to-morrow at io
o’clock.
[Close of session, 5.44 p. m.]

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W e d n e s d a y , N o v e m b e r 24, 1909— 10.45 A- M-

The Chairman, Wirklicher Geheimer Rat H a v e n s TEi n ,
President of the Reichsbank direktorium. Gentlemen,
we shall take up our discussion where we left it yester
day, and I give the floor first to Count Kanitz.
Count K a n it z . There are two principal reasons, to
my mind, for answering in the affirmative the question
of whether the safety of deposits and savings is a matter
for public concern. In the first place, it is unquestion
ably a matter of interest to the community that the
deposits, the hard-earned savings, of the man of small
means should be protected against careless or fraudulent
use. Misfortunes of this kind, though lately, to be sure,
of rare occurrence, were formerly quite frequent. Fif
teen or sixteen years ago there was a case in Berlin
where two great banking houses went into bankruptcy,
and countless depositors, especially the lesser ones, lost
their money. These happenings were the occasion of
the Bourse Inquiry Commission, which met at that
time, and held its meetings for two years in these very
rooms, under the chairmanship of the worthy predeces
sor of our present Reichsbank president. I am just
now the only person here who was a member of that
commission; Herr Geheimrat von Gamp has not yet
arrived. Even at that time the chief problem before us
was how distressing occurrences of this kind might in
future be prevented; but we could not at that time make
any attempt at a law regulating deposits; the possibility
of doing so was always dismissed and regarded as a last

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resort, and the final result of our deliberations was the
bourse law of 1896.
Gentlemen, the bourse law does not concern us here,
but some of the speakers, especially Herr Wachler and
Herr Mommsen, spoke of it yesterday and laid special
stress upon the harm it has done. I hope, therefore,
that you will permit me to say a few words on the sub
ject, since I was not without some share in the drafting
of it.
Gentlemen, I do not agree with Herr Mommsen in
thinking that the bourse law has forced our money into
other countries. On the contrary, I am inclined to
think that in the whole history of the German bourse
there has been no such flourishing period as that of this
very bourse law. If it were true that the bourse law
has had the result of sending our money into other
countries, then this money would now be flowing back,
and the German bourse would be better off than it is.
All that is now left of the work we did then, all that is
left of the whole bourse law, is simply the Staatkommissarius. [Laughter.]
So much, gentlemen, for the bourse law.
Gentlemen, I come now to my second reason for believ
ing in the necessity of a legislative measure to secure
the safety of deposits for the community. I do not think
it is a good thing that many capitalists, large and small,
should intrust their fortunes to banks and bankers
that promise high rates of interest, and should thus be
prevented from investing their money in paper that is
safe, even though the rate of interest be lower. The
low market prices of our imperial and state loans, and

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of obligations incurred by our provinces, districts, and
cities, are in my opinion due in part, though not of
course altogether, to the fact that a great many small
capitalists are persuaded to invest their money in banks
that offer high rates of interest. In this way the demand
for safe paper is considerably decreased. Herr Oberbergrat Wachler said yesterday that in agricultural districts
the need of credit is fully satisfied even as matters now
stand; I should like to remind him that in Prussia 3 ^
per cent mortgage debentures stand on an average at 91
or 92. The agricultural landowner, therefore, gives up
the best part of his credit, the surest things in his land
holdings, in order to obtain a loan on which he loses at
the outset 8 or 9 per cent. This being so, I doubt
whether the agriculturist’s need of credit is altogether
satisfied.
It was stated yesterday, especially by Herr Geheimrat
von Gamp, that a distinction must be made between
savings banks and cooperative institutions (Genossenschaften) on the one hand and the regular banks on the
other. That is true; public savings banks are as a rule
on a sound foundation, being backed by the whole
resources of the district, the province, or the city, so that
one may regard them as absolutely safe, and I believe
the cooperative institutions are also perfectly safe. A
distinction may properly be made, therefore, between
the treatment of the regular banks and the treatment of
the savings banks and cooperative institutions.
On the other hand, I think no distinction need be
made between savings and deposits. I see no reason for
treating them differently. What are savings anyway, as

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distinguished from deposits? Whether the little business
man or the working man has carefully saved up his
hundred marks or has won them in a lottery (in which
case they certainly are not savings), it comes to the same
thing in the end—in either case it is to the man's interest
to have his deposit safely placed.
I come now to the question of fluidity, on which some
of yesterday’s speakers laid special stress. I do not in
the least underrate the importance of this point, but I
think that here too we ought to proceed with caution.
Those institutions which have invested their holdings
chiefly in mortgages will be obliged to stipulate for longer
notice since, as you know, it is customary to make mort
gages calling for a three months’ or six months’ notice;
and when an institution finds itself in the situation of
having to pay back a large deposit within a very short
time—to pay back money that it has invested in mort
gages, it may fall into difficulties. I think, therefore,
that this, too, is a matter of interest to the public. The
mortgage business ought not to suffer injury. We have
here a matter that concerns not only country real estate,
but city real estate as well. The city savings banks, as
you all know, prefer to invest in city mortgages, and I
should expect injurious consequences to both country
and city real estate if this negotiation of mortgages
through savings banks and Genossenschaften were in any
way interfered with.
I lay no special stress, then, on the question of fluidity.
The man who brings his money to the savings bank
knows, to start with, that he can not get it out again very
quickly. I am inclined to think, therefore, that we

m for FRASER
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should not lay very much emphasis upon the question of
fluidity.
As for the question of checks, Herr Mommsen, as well
as Doctor Weber, said yesterday that the check busi
ness was not of the slightest use to the great banks.
I am extremely sorry that Herr Kaempf is not here.
Doctor Weber knows, he having been in the Reichstag,
that Herr Kaempf advocated the check law and the
establishment of the check system with the greatest zeal—
not only because Herr Kaempf himself is the chairman of
the Berlin Kaufmannschaft [Merchants’ Guild] but simply
on public grounds, since he believes that the check system
and the check law would considerably facilitate the whole
of our financial and mercantile business. If that is so—
and I think I must agree with Herr Kaempf—I should
think that the great banks, too, would derive no harm, but
even a certain advantage, from the check system, just as
from any other means of facilitating and simplifying the
operations of finance and trade. I can not, therefore,
agree without reservation to what was said on this subject
by the gentlemen who spoke of it yesterday. Moreover, I
do not think we are here called upon to examine very closely
the workings of the check system; the check law is already
in existence and is not to be changed in a moment.
A good deal of consideration was given yesterday to
the relations of our great industrial concerns to our great
banks. Herr Gontard deplored, and to my mind rightly
deplored, the excessive dependence of our industries upon
the great banks. Doctor Weber, on the other hand,
expressed the opinion that the increase in population
has given rise to an enormous increase of activity in our

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industrial world, and that if, in spite of the tremendous
increase in population, it is true not only that our indus
tries have been fully equal to the occasion, but that our
whole standard of living has actually risen to a higher
plane, these developments are to be attributed primarily
to the fertilizing activity of the great banks, by which he
meant, of course, only their fertilization of the great
industries. In a certain sense I admit this is so; I fully
recognize the fact that the great banks furnish the great
industries with the necessary capital; for it goes without
saying that, when the industries are obliged to supply
the wants of a rapidly growing community, they must
expand. For this expansion money is necessary, and
this money must be obtained through the medium of the
banks. Much as I sympathize, therefore, with Herr
Gontard, I must admit that the attitude of Doctor Weber
has a certain justification. We can not dispense with
the activity of the great banks in supplying the industries
always and everywhere with the necessary funds. I
merely deplore the difficulty we shall have in keeping
this dependence within bounds. Gentlemen, it is nowa
days absolutely impossible for our imperial loans, our
state loans, our safest papers and bonds, to be brought
upon the market without the mediation of the banks.
Unhappily, therefore, it would be no simple matter for
the industries to escape from their dependence on the
great banks. I should be very grateful to Herr Gontard
if he would some time explain how this relation of depend
ence could be modified to its betterment.
Gentlemen, we were told yesterday—and that by Herr
Roland-Liicke himself—that our industries are most

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B a n k I n q u i r y of 1 9 0 8 - 9
likely on the eve of hard times; he spoke of England and
the new elections that may take place there, at which
the English people will have to decide whether to keep
up free trade or to adopt a protective system such as
other countries have. Herr Roland-Eiicke might have
referred also to America and the Payne tariff. [“ Quite
true.’’] But as for England, we shall probably have to
consider that question very carefully in the Reichstag in
the next few weeks; we shall then have to take up the
question of the extension of the provisional commercial
agreement with England. For my part, whenever this
provisional agreement has been extended, I have been
unreservedly in favor of it. And in the economic com
mittee, in which I always had this matter to report on,
I advocated the simple extension of the agreement.
Herr Roland-Eiicke is perfectly right when he says that
the present situation is a very good thing for our indus
tries if the English free-trade system is retained. But,
gentlemen, I am afraid that system will not be retained
much longer. Whether there is a general election in
England or not, the English are at any rate finding out
\
that the present system can not be kept up, that England
can not remain a free-trade country when almost all the
other countries of the world have gone over to the pro
tective system. Gentlemen, the state of affairs in Eng
land seems to be in many ways desperate. The number
of the unemployed is already reaching the hundred thou
sands, and Englishmen are naturally asking, Why are
these hundreds of thousands running around without
work? The millions of English laborers who used to find
employment in farming are now without a trade and are
62838°— pt 2— ix----- 11

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a l M o n e t a r y Commission
being driven to emigration. Even the Englishman must
see that this situation can not go on; I think, therefore,
that there is nothing for it but that England should
adopt a protective system—a very moderate one to start
with, of course.
Gentlemen, it was said yesterday that we should take
care that we do not revert to the condition of a purely
agricultural country. What is meant by a purely agri
cultural country? Eet me remind you of the saying of
England’s greatest political economist, Adam Smith—
the home market is the best market. England has injured
her home market; she has absolutely cast aside the teach
ing of her greatest political economist; now she is taking
the consequences, and at last she is beginning to perceive
that the home market is the best market.
And as for us, gentlemen, I think that, in view of the
possible injurious consequences that threaten us from
England’s adoption of a protective system and from the
Payne tariff, we should make it our business to increase
the purchasing power of our own people and to improve
the home market. This is the easiest way of enabling our
industries to look with equanimity upon the possible
diminution of their exports.
Doctor Weber also expressed an opinion with which I
can not but agree; he said that in Germany the creation
of capital has not kept pace with the increase in the
population. That is true, but it remains for us to ask
why it is. I am inclined to think that here in Germany
too large a fraction of the values that are created by the
national labor are absorbed by taxes and expended in
unproductive activities; I believe that the weight of taxes

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upon the German people is too heavy. I believe, further
more, that the boundless projects of social improvement
that we undertake must also militate against the creation
of capital, so that what Doctor Weber said on this point
was fully justified. I think that the enormous burdens
that our social legislation lays upon us, especially upon
our industrial enterprises (I say nothing whatever about
agriculture)— I think these burdens are certainly a factor
to be taken into account in this connection; I think they
are directly prejudicial to the creation of capital.
Finally, gentlemen, we must, after all, take up the
question of what is to be done about it. Most of the
gentlemen that spoke yesterday will not hear a word of
any legislative measures with regard to the deposit sys
tem. Ah, gentlemen, but the question can not be dis
missed so easily. Let me remind you of the resolution
passed last May by the Reichstag, asking that the
imperial chancellor draw up a bill for the Reichstag to
consider. You know the resolution; it is among your
printed documents. The chancellor, therefore, will have
to comply with this decree of the Reichstag and submit
some sort of bill; the question then arises, Shall we declare
at the outset that no legislative measures of this kind are
worth considering, or shall we make some suggestion in
the matter ? Gentlemen, do you realize that this resolution
was carried in the Reichstag by a very large majority?
In the committee the vote was 17 to 4, and in the
general body of the Reichstag the proportion was about
the same—only the Freisinnigen and the Social Demo
crats voted against it. If you keep this in mind, you
will see that in face of this large majority the chancellor

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N at ion al M on et ar y C o mmi s s i o n
is surely obliged to submit a bill, and I think it should
be our task to shape this bill in such a way that it will con
form as much as possible to the interest of our industries,
and also, I gladly add, to that of the banks.
Now, of course, if we are to make any preparations at
all for meeting the evils that undoubtedly do beset us,
the simplest way of doing so would be to adopt the pro
posal made yesterday by Herr Singer, and revolutionize
the whole order of society. Then, to be sure, the banks
and bankers would be got out of the way; then we should
have a tabula rasa; then there could be no more talk of
abuses in the banking world. But I should prefer not
to try this cure h la Doktor Eisenbart; I should prefer to
reckon with the facts as they stand. It is our duty,
gentlemen, to make definite proposals, and I hope we are
not going to dismiss this duty with a simple negation.
I should think that the very smallest measure we could
possibly propose would be that the balance sheets of the
banks and bankers be published. In fact, the Reichstag
did not look for much more than this, since it knows
very well how dangerous it is to interfere by means of
legislation with the independent activity of the banks.
But this small measure, gentlemen, is not a thing to be
lightly dismissed. To be sure, I do not expect it to have
very far-reaching consequences. If you will glance over
the compilations that we have before us in the docu
ments—if you will look at the published balance sheets
of the great banks, you will see that even if the balance
sheets were published there would be very few people
among the general public who would know how to read
them. Whatever the balance sheets may contain, the

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general public, and especially the great number of small
investors, is perfectly helpless when confronted with
these balance sheets; it does not know what to do with
them. Only here and there, when a man obtains the
advice of an expert, will the balance sheets occasionally
be of some use; the expert may say, “ Take care; I do
not feel quite sure about this.” Well, then, as I have said,
I do not look for great or far-reaching consequences from
this measure. But this is, to my mind, absolutely the
only proposal that we can make. I do not think that a
board of supervision in connection with the publication
of the balance sheets would accomplish much. [“ Very
true.” ] It would only lead to a further enlargement of
our already overgrown bureaucracy. [“ Very true.” ] But,
gentlemen, I know of no other proposal we can make,
and I therefore entreat you to set your approval upon
this one, so that we may not disperse without having
accomplished anything at all. [“ Applause.” ]
Doctor H e i u g e n s t a d T. Gentlemen, according to the
wishes of our president, our discussion should in the first
instance pertain to the general aspect of the question
before us. Most of those who have spoken hitherto,
like the gentleman who has just been speaking, have
treated it chiefly in its general aspect; but I think it
would be a very good thing if we were also to discuss its
more strictly economic side. I think that many questions
may come up that can not be settled until we have a
fairly thorough grasp of the technique of the banking
business as it has developed in Germany.
Gentlemen, I have concerned myself for some time
with questions of banking theory and practice, and what

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N a t i o n a l M o n e t a r y C o mmi s s i o n
I wish to tell you about now is chiefly the impressions
and experiences that I have collected in my twenty years
or so of practical 'activity in the banking business. I
refer especially to observations that I have been able to
make in the post that I now occupy—observations with
regard to the credit system of the Genossenschaften—
which has a great influence upon the credit business of
the great banks, the bourses, and the general money
market.
If, before going into the question in detail, I were to
say at the start whether I consider some regulation or
ordering of the deposit system to be to the interest of the
public, I should have to reply in the affirmative, and
indeed you will not expect me to do otherwise, since I
have already expressed myself in public on this subject.
I believe that in a political and economic system such as
we have in Germany the money and credit system is
eminently a public affair. The classes that are directly
affected by the public money and credit system are
becoming larger and larger, and more and more people
have an interest in the effective handling and regulation
of this system. The greater the concentration in industry
and in the whole business world becomes, the more prog
ress the state makes in this direction and the more bureaus
it inaugurates, the more necessary will it be in the interest
of the public to have adequate banking arrangements for
the effective maintenance and further development of
economic production.
As I have said, I regard a proper organization of our
money and credit system as distinctly a public matter—a
matter that ought constantly to be submitted to public

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criticism. At the same time, I do think that in this sphere,
in which the activity is and should be chiefly that of pri
vate individuals, there ought not to be very strenuous
legislative interference if it can possibly be avoided.
It would be superfluous for me to take up this whole
question in more detail, since my views on the subject,
have already been set forth in an article that appeared
some time ago; nor have I found any reason to revise my
opinion since that article was written— it was about two
years ago. In particular the economic developments that
have since then taken place have not caused me to change
my mind; on the contrary, I think that what has happened
in the money and credit market has shown my view to be
justified.
Gentlemen, under this same general question there is
in the list a subsidiary sentence (sec. i, No. 2), in which
the commission is asked to express an opinion with regard
to the safety and fluidity of the investments of deposits
and savings. In the first place, we have to consider, in
my opinion, not only savings and deposits, but also— as
appears from the monograph before us, which I must say
has made a very deep impression upon me—the so-called
credits. On page 27 it is stated that the credits are no
less important than the deposits. I am convinced that
the credits, pure and simple, have a much more important
bearing on the public interest than the deposits, especially
than the savings deposits, which to my mind do not
properly fall within the limits of our discussion.
This section speaks of the safety and fluidity of invest
ments. Much more important to my mind than the ques
tion of the safety and fluidity of deposit moneys is the

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question of what part the so-called outside moneys shall
play in the general economic life of the country, in our
whole system of production. Gentlemen, as for the safety
of deposits and savings, I have already had occasion earlier
in the summer, at a convention of agricultural Genossenschaften, to observe that, on the whole, no fault can be
found as to the safety of the deposit moneys, and that the
criticism that is often made in country circles, especially
in communities where there are agricultural Genossenschaften, of the use made of deposit moneys by the banks
and money institutions is not ‘altogether well founded.
In my opinion wre should not draw large inferences from
single cases. There is no safeguard in the economic world
against dishonesty and deceit. I do not approve of the
severe criticism often made in banking circles of the con
duct of the Genossenschaften when some -one of these
institutions has happened to go into bankruptcy, and I
disapprove just as much of a hasty criticism of the banks.
Surely we are a conscientious people; in our business
circles, as well as elsewhere, sound conscience and a true
sense of duty prevail, and we may depend upon it that
most of our business is conducted in a conscientious way.
As for the fluidity of the banks, I have often on other
occasions had an opportunity of giving public expression
to my opinion on this point. On the whole, I agree with
the view expressed some time ago in the Bankarchiv by
Herr Geheimrat Muller. Fluidity consists in the preser
vation of a certain arithmetical relation between assets
and liabilities. With the modern organization of the
money and credit system as it exists in Germany, England,
and France, it is impossible to keep on hand an actual

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cash cover for all liabilities. It is the function of the
credit system to convey capital to the places where it
can be rendered most productive, and to do this so far as
possible without the use of actual cash. The whole
money and credit system of a country may be compared
to a modern suspension bridge, the very existence of
which depends on its holding itself together. If you take
out a single portion the whole thing falls to pieces. So
it is with the modern money and credit system: If you
take away one link from the chain of credit connections
the whole edifice may be endangered. Therefore in such
cases everything depends upon our at once repairing the
slightest break in our credit system, so that the con
struction may remain an organic whole. This is proved
with special force by the history of the English crises.
The history of the Bank of England may serve us as an
example to show that in critical times the best thing
that can be done is for every person or institution con
cerned to preach tranquillity—each, from the top down
ward, affecting in this way those lower in the scale.
I do not by any means wish to imply that what is
generally designated as fluidity is really unquestionably
fluidity; on the contrary, I think that this is a matter
that constantly requires the greatest watchfulness on
the part of those concerned. But, gentlemen, I regard
legislative interference in the matter as impracticable,
since most of the elements in the case are not subject to
control. The character of the assets in a balance sheet
can be judged—and here again I speak from my own
experience—only by one who has himself closely exam
ined the specific investments. What is needed is that

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criticism should bring about a general understanding,
accepted by all as binding, as to what shall be regarded
as a lower limit for a margin of safety. For this reason I
consider the publication of balance sheets a matter of
urgent necessity—and publication in such form as will en
able the financial journals to give them effective criticism.
Any man through whose hands many balance sheets have
passed knows very well how extremely difficult this is.
At the same time, publication of the balance sheets and
the public criticism that would go with it are not for
this reason superfluous; on the contrary, they are all the
more necessary, since they will educate a larger and
larger public in matters of banking practice and make
them more competent critics than they have generally
been hitherto—and this, again, is a thing which I am
convinced would also be to the advantage of the banks
themselves.
Gentlemen, in section i, No. 2a, there is a question
about the nature of deposits and savings and their rela
tions to outside moneys in general. I consider this to be
a very important point.
In the paper before us—and if I am not mistaken men
tion has been made of this point by Herr Geheimrat Muller,
of the Dresdner Bank, and by others also— it is stated that
at the Dresdner Bank, and I think also at the Deutsche
Bank, those moneys are designated as deposit moneys
which are paid in at the so-called deposit offices. This is
a purely arbitrary distinction. The accident of a cus
tomer’s coming to the deposit office or to the central office
determines here the classification of the moneys that are
paid in.

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Now, how is it in actual practice ? A customer— a man
ufacturer, for instance, living on the Oranienstrasse, which
is the habitat of the metal industry—goes to the near-by
deposit office. Why does he go there ? Because his busi
ness is small; he is just a small manufacturer and he has
need of the bank and its credit only within certain nar
row limits. That is why he uses the deposit office that
is close at hand. On the other hand, a large metal firm,
with considerable export business, will go to the central
office, which can also manage for him without loss of time
his business in securities and the collection of international
claims. In both cases the persons in question are manu
facturers; the economic nature of their business is the same;
it is only in point of quantity that they are distinguished.
An exact knowledge of the character of moneys depos
ited in banks is often of great importance. I have
often found it to be of great importance in relation to my
own official activities. For many years I have tried to
make up my mind as to what is the distinctive character
of the so-called outside moneys with which we have to
do in the credit business. My chief purpose in doing this
was that I might decide to what uses these moneys ought
to be put. I hope you will permit me to tell you now
about the experiences I have had and the theories I have
built upon them. Of course, I must leave it to your own
judgment to decide whether you agree or not with what
I shall say. For my part I can only say that for about
ten years I have held to this classification; that during
this time I have passed through a great many very diffi
cult situations in the conduct of my official business; that
in the light of this theory I have examined many ques

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tions that are to-day in the foreground of public interest,
and that in my opinion this theory has provided me with
a very good basis for the answering of these questions.
In order to understand the nature of outside moneys, it
is best, I think, to start with a classification that is based
upon the nature of man’s economic activity. The eco
nomic activity of men has two poles, production and con
sumption, and the interests of producers and consumers
often conflict with each other to a very great degree.
Now, if you will permit me to classify the outside moneys
of the banks according as they have their origin in the
ranks of producers or in the ranks of consumers, then I
think I shall be able to adduce many considerations that
will throw light upon the whole situation.
First, gentlemen, I will take up the moneys that come
from the ranks of what are called the consumers. There
is now everywhere a propaganda in favor of the use of the
check system for the making of deposits by the class of
people who are not themselves directly engaged on their
own account as entrepreneurs in the production of goods
as a business. The number of people in this class is con
stantly increasing in consequence of the growth of largescale industries. The sums in question are extremely
large; I need only remind you what enownous sums the
Prussian Government has to pay out in salaries four times
a year. Then there are also the salaries of private em
ployees and officials. Gentlemen, the primary fact about
these moneys is that they represent the means by which
the recipients of them support themselves for consider
able periods of time. They are moneys of which the chief
function is to minister to consumption. Whether in the

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form of interest, of salaries, or of professional fees, these
consumption moneys, if I may use the term, constitute
the recompense for economically valuable services of all
kinds. Moreover, in many instances they come in at fairly
regular intervals and in fairly equal amounts; mostly, too
(and this is a very important point), in the form of cash.
This last fact involves, in case there are not adequate
banking facilities, the frequent withdrawal of large amounts
of cash from economic production. This cash—and on
this point there can hardly be any doubt—forms a part
of the national working capital, as to the necessity of which
for the maintenance of our national production there can
certainly be no manner of question.
The larger these sums become the more imperative
it is that they be conveyed back again as quickly as
possible to the sphere of production. This is to the
interest, not only of production, but of the whole eco
nomic system. Therefore the efforts that are being made
by the Imperial Government and the Prussian Govern
ment to persuade their officials to open deposit accounts
can but be welcomed as in the interest of the whole
economic life of the nation.
I might discuss the matter at greater length, but I
think that all that was necessary just nowr w^as to offer
this basis of distinction. I should like to add, however,
from the purely technical standpoint of the banker,
that these moneys actually have the character of pure
depositum irregulare. And in the so-called deposit con
ditions, which the bankers get people to sign wdien they
open accounts, there is from a technical standpoint
nothing but a stipulation about a depositum irregulare,

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and, apart from promises of interest, about which I shall
speak later on, there are no subsidiary stipulations of
any kind. And technically the account has no debit
side, but only a credit side. If any loan business hap
pens to come up, it is generally treated as Konsumtivkredit, which is entered on an entirely different page,
and with which we have at present no concern.
To be sure, the private individuals who engage in
speculations occupy a peculiar position. My view of
the matter is that since speculation creates time-andplace values, it is in so far a part of production. The
accounts of profe&ional speculators, therefore, should
unquestionably be treated as production acounts, whereas
occasional speculations in connection with the manage
ment of property should unquestionably be entered on
deposit account.
In contradistinction to these moneys we have the de
posits of all such persons as are engaged, on their own
account, as entrepreneurs, in the production of commodi
ties. The moneys that come in in this way are the proceeds
of productive economic enterprise. They are distinguished
from those that come from the consumer and nonentre
preneur class by the fact that they do not often come
in as cash. They generally come in directly or indi
rectly by way of the discounting of bills, especially in
Germany, where, as has often been emphatically pointed
out in the inquiry commission, the discounting of bills
plays a particularly large part. That these moneys are
working capital is an incontestable fact.
Now, gentlemen, these deposits are technically known
as account-current moneys proper. Their deposit is

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made on the basis of a special form of contract, the
account-current contract, which is distinguished from
the contract of the depositum irregulare proper by the
fact that it is fundamentally connected with a credit
contract. In the French statement of the terms this
point is made particularly explicit. The account-current
contract is there designated as “ comptes courants avec
faculte d’escompte,” or “ d’avance.” Naturally, there
fore, the entrepreneur account, the account-current
account, has a debit side also; must have one. For it
is the function of the entrepreneur to unite capital and /
labor in productive activity.
In another respect also the moneys of these two prove
nances are somewhat sharply distinguished. In the
case of moneys paid into the banks by consumers it is
not the bank that performs any special economic function,
any special service. But in the account-current business,
on the contrary, the bank does perform a special eco
nomic function in giving credit to the man that has an
account; in this case, therefore, it is not only the right,
but even the duty, of the bank to charge a commission.
For this reason the account-current account is naturally
always an account for which a commission is exacted,
whereas the deposit account is an account free of com
mission. And this rule is not infringed by the fact that
for certain reasons some account-current accounts are
carried on that are said to be free of commission—for
example, check accounts. These apparent exceptions
are merely a kind of account-current account entered into
by business people who, having large numbers of payments
to make, wish to make the charges on these ostensibly

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N a t i o n a l M*o n et a r y Co mmi s s i o n
less. In such cases the bank receives its commission in
the form of a lower rate of interest paid by it.
Gentlemen, it may be said that this distinction can not
be made in practice, but I \io not think this objection
can hold. One can determine with a fair degree of accu
racy whether the parties in-question are entrepreneurs—
that is, business men; that is, producers—or whether
they are, as I have expressed it, consumers. A banker
will not open an account for anyone without his signing
the account-current agreement or the deposit agreement.
In view of the many things that may happen in trans
actions with a banker this is absolutely necessary, and a
banker would be neglecting his duty if he did not require
people to sign their names to some such agreement. This
being so, he can tell whether in any given case a person
is actively engaged in productive business or whether he
receives an income of wages, salary, or interest, upon
which he lives. In view of the large sums here involved,
it does not matter if a small mistake occasionally creeps
in. If only the moneys are on the whole rightly classified,
a great deal will have been accomplished.
Gentlemen, I have already permitted myself to remark
that, in my opinion, the moneys that come in in both
these kinds of accounts have the character of economic
working capital; but, as has already been said in this
bank inquiry, there appear also, in both kinds of accounts,
savings, or, as Herr Geheimrat Lexis calls them, savings
deposits. When the productive activity of a period ends
with a surplus and the party in question does not use
this surplus in his business, or when a consumer finds
after a while that he does not need the whole amount of

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his income for purposes of consumption, then these
moneys lose the character of working capital. They
become savings capital and investment capital, and it is
no objection to this view that these moneys are thereupon
also invested, that they find a fixed investment. But,
gentlemen, these so-called savings deposits on deposit
accounts or on account-current accounts are distinguished
in this way from savings proper, the moneys that the
little people keep in the savings banks. In the former
case we have to do for the most part with large sums
and with men of business experience, who, as soon as
they come to look over the condition of their account,
will decide to make the investment it makes possible
themselves. This is an important criterion. The savings
investments (savings deposits) on the bank accounts are
the final result of some economic activity or of a process
of saving in consumption.
The savings moneys of the savings institutions, on the
other hand, have a very different character. These are the
moneys of little people. These savings moneys proper are
never, or at least very seldom, found in the great banks,
though of course it occasionally happens that a sum of
money of this kind gets into a great bank by mistake, and
vice versa. The places in which they are chiefly to be found
are the Genossenschaften and the savings institutions,
and of the Genossenschaften it is chiefly the rural ones—
and this is a point I wish to emphasize—at which the
genuine savings of little people are collected to a great
extent.
Moreover, these moneys are collected in small individual
occupations. Where people obtain their income or their
6 2 8 3 8 ° — P T 2 — I I -------1 2

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N at ion a l M o ne t a r y C o mmi s s i o n
wages at very short intervals they can easily provide for
their affairs in advance, and if you look at any public
savings institution you will see that people go and make
payments on the day on which they receive their wages
or the day after. In this way the savings of the little
people possess the character of savings capital, not in
consequence or in virtue of a preceding period of economic
production, but because they have from the very first—
from the time of their being deposited—the character
of savings capital, and because they have from the very
first the character of capital that can, I am convinced,
be invested in permanent form without fear of harm.
That this investment, however, as distinguished from
that of the savings capital of the upper varieties of savings
deposits, is not effected by the saver himself is a necessary
part of the case, since in dealing with the savings of the
lower varieties there is no question of any but very small
sums, and further because the people concerned are per
sons unskilled in business matters or completely ignorant
on the subject.
It was therefore by a natural development that a
special organ was created to take care of the investment
of the savings of these little people. But the conse
quence of this is that the arrangements of the owner of
savings moneys and those of the organ that made the
investment may clash with each other. Practically this
may come about when the depositor withdraws his money
in order to make a different investment. For this reason,
although the whole nature of savings moneys is that of
investment capital and not working capital, neverthe
less the savings banks must take care to have a certain

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fluidity. I am not of the opinion that the deposits of
the savings banks are actually, in their economic aspect,
to be looked upon as demand obligations, moneys that
are daily falling due, but they are, of course, such in the
legal sense, since they may be called for without notice.
For this reason I do not feel justified in criticising, as
severely as many people have lately done in public chan
nels, the conduct of the savings banks in seeking to invest
the greater part of their moneys in mortgage loans. If
you consider what it is that the small customer most
often thinks of in connection with the money he saves,
you will find that he is very frequently saving in order
that he may some day be able to purchase a little piece
of ground. The land hunger of the little people is pro
verbial ; in my opinion it is entirely logical for the savings
bank to turn to that kind of investment which the little
people would themselves choose if they had command of
sufficiently large sums of money. I am inclined to agree,
therefore, with the view that savings-bank moneys are
essentially economic investment capital, and that
savings—that is, savings in the Genossenschaften and
the savings banks—should be managed on entirely
different principles from deposit and account-current
moneys, which in my opinion are working capital.
I should like to make one more remark about savings or
outside moneys at the little country Genossenschaften,
since on this subject mistaken notions are very common.
If you will only try to realize the situation in country
districts, and if you will keep in mind my classification of
outside moneys into production moneys, consumption
moneys, and savings, you will agree with me when I say

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N a t i o n a l Mone t a r y Commission
that in the country there are as a general thing no deposit
moneys at all, properly speaking, that if there are any
they do not amount to anything worth considering, and
that this not only is but must be the case. For in the
country districts there are, generally speaking, no persons
who can make deposit investments. The only persons
there who receive salaries are the minister and the school
master and sometimes, perhaps, a doctor and a head
forester. The money that is invested in the country
Genossenschaften is for the most part, therefore, either
account-current money coming from the members of the
association, money acquired by the sale of agricultural
products, or else true savings deposits— deposits from
the servants, the children, and the farm laborers.
Gentlemen, if I may say a few very general words on
the subject of the measures that have been suggested, I am,
as I have often publicly declared, very decidedly opposed,
for the present, to a separation of deposit banks from
general banks. I consider this to be a measure which, so
far as the present time is concerned, could work nothing
but harm to our economic development. I think that in
this matter we may as well let the historical development
take its course, and I believe that after all we may some
day have deposit banks. I do not think that the time for
the formation of deposit banks is past; on the contrary,
I am of the opinion that it may yet come.
I see germs of the development of pure deposit banks,
for example, not only in the well-known text-book example
of the Oldenburger und Osnabrucker Bank, but also and
particularly in the activity of many Schulze-Delitzsch co
operative institutions (Genossenschaften) in small and

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B a n k I n q u i r y of 1 9 0 8 ~ 9
middle sized cities. A large number of these cooperative
institutions will certainly develop into pure deposit banks
so efficiently conducted that no fault can be found with
them in point of the security and fluidity of their invest
ment of deposit moneys. In the same way—and here I
have only to agree with the expressions of opinion that
are to be found now and then in banking journals—it
seems to me that the Deutsche Bank is also, perhaps,
tending more and more to become a pure deposit bank,
as the Credit Lyonnais quite consciously is. It looks as
if the Deutsche Bank were doing much less business than
it used to do in flotations, especially foreign flotations----A V oice . Wait and see.
Doctor H e ic ig e n st a d t . At least this is the impression
received by the general public.
I think, therefore, gentlemen, that the harm that might
be done by a separation into deposit banks and stock banks
would be greater than any good that might come of it. I
should therefore regard such a measure as objectionable.
I think it would be better to let things take their course.
Nor do I think it would be a good thing to establish
state deposit banks. I do not wish to go into the matter
in detail. I will merely say that I hardly think the state
deposit banks would grind much grist, and I think that
the risks involved are not to be lightly estimated.
Furthermore, gentlemen, I am not in favor of reintro
ducing interest-bearing deposits at the Reichsbank. I
have often expressed myself in public on this question.
Even supposing that there are no legal considerations
against it and that the Reichsbank would be acting
entirely within the sphere of its legal function if it should

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N at ion a l M o n e t a r y C o m m i s s i o n
receive interest-bearing deposits, I still think that in times
of rapid change in the condition of the money market,
which are sure to recur, they would greatly increase the
difficulties of a sound banking policy. I think that from
the point of view of the general interest it would be much
better for the bank to carry on its discount policy with a
free hand, without being influenced, as it certainly might
be, by the consideration of having to pay interest on
deposits. It is possible, in my opinion, that if interestbearing deposits were again introduced, the seeds might
be sown of developments that would put the Reichsbank
in danger.
As for the plan of changing the Seehandlung into a
deposit bank, the Prussian minister of finance spoke of it
in the Prussian Landtag, and declared that for various
reasons he was opposed to it.
It has also been suggested that the Preussische ZentralGenossenschaftskasse be assigned the functions of a pure
deposit bank. The consequence of this would be that the
Preussische Zentral-Genossenschaftskasse would have to
institute branch offices in the provinces, and this is a
development that could not be reconciled with the limits
and sphere of the functions that are assigned to the
Preussische Zentral-Genossenschaftskasse in the law by
which it was organized. The Preussische Zentral-Genossenschaftskasse can not establish branch offices in the
provinces, because the business it may carry on in the
provinces is restricted by law to transactions with Verbandsgenossenschaften, that manage their business on
their own responsibility and on their own initiative, an
arrangement which is certainly much more in the interest

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of the public than would be the establishment of branch
offices in the provinces by the Preussische ZentralGenossenschaftskasse.
I should like to make one final observation. I think
that, if all the essential factors of the case are taken
into consideration, we may some time, after all, estab
lish certain regulations which will call for the drawing up
and publication of balance-sheets, in which also a certain
fixed minimum cash cover for outside moneys—but in
that case all such moneys—will be prescribed, and in
which perhaps the extent to which bills may be accepted
will also be regulated—regulations, however, that must
be so carefully constructed that they will take account of
the local conditions of individual banks, and of the man
ner of their historical development. I think, gentlemen,
that this is quite practicable, and that in this way much
would be accomplished and much good might be done.
Doctor W a g n e r . Gentlemen, the list of questions set
for us to answer gives first and chief place—and rightly
so—to the question whether it would be to the interest
of the public that legislative measures be adopted with
a view to effecting the security and fluidity of the invest
ment of deposits and savings in credit institutions,
cooperative institutions (Genossenschaften), and savings
institutions. I wish first of all to say that in my opinion
this question, taken in an altogether general sense, should
be answered in the affirmative, and I shall try to establish
this opinion by bringing forward a number of consid
erations.
Even the gentlemen who have already spoken, who
have for the most part held themselves averse to any
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N at ion a l M o n e t a r y C o mmi s s i o n
such plan, must admit that it is at any rate an open
question, and it is precisely one of the duties of this
commission to give it a close and careful examination.
From the assertion, therefore, that was made at the be
ginning of last year’s sittings—namely, that the Gov
ernment is not going to rush headlong into a separation
of deposit banks and stock banks— I do not conclude
that it is not our business to concern ourselves here with
this question. The Government may hold this view,
but any number of considerations may conceivably
come up which may convince the Government that this
question should at least not be dismissed at the very
start and without qualification. For my part, I do not
answer it in the affirmative, but I wish to persuade you
to regard it as an open question.
Gentlemen, when I look at the matter from this point
of view, I should like to distinguish between two kinds
of interests. In the first place, there are private inter
ests, above all the interests of the depositors, which are
of general significance and may be regarded, even if only
to a slight extent, as public interests (I refer especially
to the interests of those who belong to the small and
middle capitalist classes); in the second place, I ask
whether, besides these interests, which are, after all, those
of private individuals, the question does not involve
also a large and general public interest?
As for the first point, it is to my mind much less im
portant, but it must of course be considered. It will be
admitted that here we have to do with classes of people
that can not always look out for themselves; that we
wish to see them conduct their economic activities—

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those that relate to consumption as well as those that
relate to production—in an efficient manner; and that
we wish to make them as safe as possible wffien they enter
into relations with a bank. In this matter it is chiefly
the savings banks that are concerned, and no one has
made any objection to the fact that in the conduct of the
savings banks there is a very considerable admixture—
gradually evolved, it is true, and already existing—
of legislation, supervision, and administration. Whether
this is in every instance of the right character is another
question.
But the objection is made that in the case of the other
banks, in the case of the Kreditgenossenchaften, and above
all in the case of great banks, there is really no question of
great danger of heavy losses; it has been estimated by
several people how small the losses have actually been,
taken altogether. I am willing to admit this, but I do
not consider it decisive. It is poor consolation to the
small depositor to be told, “ You have lost your money,
but only a small fraction of all deposits is lost—this time
the loss happens to fall upon you.” The man on whom the
loss falls will in point of fact always ask himself the ques
tion, “ Was everything possible done for my safety ? ” And
so we come to the factor of guardianship, which we can
not altogether eliminate from our modern political econ
omy unless we go over to the other extreme and tell each
man to look out for himself, which he simply can not do.
It has been urged that even the simple statement of the
balance sheets of the banks would be understood only by
a few people, that questions of qualitative as well as of
quantitative values arise, and that even quantitative

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N a t ion a l M o net a r y C o mmi s s i o n
statements are not fully comprehensible. How, indeed,
can one expect this of the average man ? And in this class
I mean to include the whole of the lower classes and a
large part of the middle classes—all those, in short,
whether officials or private individuals, who can not
properly look out for themselves. And the question
then arises, “ How can we take care of them ?” Here we
have, then, an interest, the interest of security; the
people should be, so far as possible, protected from losses,
and I do not think that the state can continue to maintain
in this matter an attitude of unqualified negation. It is
the same way with the banks; I will remind you, for
example, of the fact that in the interest of the check
system efforts have rightly been made in government
circles and by our highest authorities to induce the
officials to draw their salaries so far as possible in the
form of drafts on the banks, etc. If this comes about, it
must be made absolutely certain that the person in ques
tion shall know beyond peradventure that the amount
represented by the draft will not only be paid to him
sometime in cash— I will say nothing about any danger in
this direction—but that he can get that cash at any mo
ment. Here, therefore, lies an absolute necessity for a
certain degree of fluidity of bank investments; for a
recommendation like this, which is made in the interest
of the whole money, credit, and banking system, of itself
places an obligation on the government not to dismiss
these matters offhand.
Yesterday, to be sure—unfortunately I was unable to
be here yesterday afternoon, since my professional duties
keep me at the university in the afternoons—it was

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maintained, especially by Herr Geheimrat Wachler, that
all such interference is either useless or harmful.
Everything he said reminds me of the situation thirty,
forty, and fifty years ago, when the catchword everywhere
was, “ No state interference in matters of economics.”
That was the principle by which free trade was brought
about in the North German Confederation and afterwards
in the German Empire—a principle which has long been
abandoned in theory, and has by this time been abandoned
in practice too. We have seen that it does not do to
tell everyone to look after his own interests. If, then,
and in so far as, private interests are here at stake, the
question whether in the public interest a certain amount
of legislative control should not be permitted, is neverthe
less a question that deserves to be discussed.
But now I must explain just what I mean by a public
interest. Many things are here comprised—in the first
place, the question of security, and not only the question
of security in the narrower sense, but also the question
of fluidity. For just suppose for a moment that a great
crisis should arise—and I think our business world does
not take nearly enough account of this possibility. We
Germans especially ought to remind ourselves over and
over again that what chiefly should concern us is not
economic crises—in fact, we have not lately had any
really big economic crises, for even the crisis of 1907 is
no exception; what should chiefly concern us is political
crises. It is with these we must reckon; the actual cir
cumstances of the time positively demand it. And we
do, in point of fact, reckon with such things, since we
have defenses that we should not need if we did not

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%
have to reckon with them. We reckon with them also in
the domain of banking legislation, of the Reichsbank, etc.;
in these domains there are far-reaching legal prescrip
tions, since we feel that conditions here in Germany call
for greater security in these domains than is demanded
by the very different conditions in England, for example,
or in the United States, or—to give an instance of a
continental country—in France. All this is simply the
result of our historical development and of our geograph
ical situation.
I think, therefore, gentlemen, that in point of fact a
public interest is here involved, and that our credit and
banking system ought to afford at least as much security
and fluidity as can be reasonably expected or even possibly
attained. It goes without saying that absolute security
is unattainable. If we were to demand absolute security,
we should have to give up the credit system altogether;
the foremost house in the world may fail under some
circumstances. But to strive for the very best and
fullest security that can possibly be attained is, in my
opinion, our duty. And this being so, the question again
arises whether the state should interfere in this matter.
Besides cases like that of the Leipziger Bank and that
of the Dresdner Kreditanstalt, there have been cases
like that of the great bank which a few years ago was
admittedly in a situation in which it had difficulty in
returning deposits—a situation aggravated perhaps by the
Eeipziger Bank affair; at any rate, the fact remains that
there arose a small economic crisis, and that help had to
be furnished, partly by certain other banks, which had
a reciprocal interest, and partly by the Reichsbank, to

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which, after all, resort is had in such cases. The gentle
men who are opposed to any state interference must in
consistency object outright to help from the Reichsbank
in time of need. But it cannot be denied that help is
accepted.
The following consideration is another argument in
favor of my view that a great public interest is involved
in this matter—especially in the attainment of a real and
impregnable security for our so-called stock banks, in so
far as they are deposit banks, and for all similar institu
tions. Just imagine what an effect it would have on
foreign countries if cases like that of the Dresden affair
were to arise here in Berlin, if it should be a matter of
common knowledge that some bank here could be saved
only by the support of the other banks, and if besides
this it should have to beg for special help—and this is a
thing that could not be kept secret—from the Reichs
bank. And to my mind these are possibilities to be
reckoned with. But even leaving them out of account,
I think that precisely in the matter of fluidity even the
great banks, to judge from their statements—and I can
not persuade myself that this has been successfully
contradicted by anybody—even the great banks still
leave much to be desired. If the great banks have only
about 3 or 4 per cent of all their assets in cash—and even
if we include their outstanding credits with banks and
bankers, it would come to only about 6 or 8 per cent—well,
that certainly isn’t very much; and if all the rest of the
credit banks have a percentage of cash even lower than
this—only 2 or 3 per cent, that is—I do not think that
the whole outlook is a particularly cheerful one.

17 9

N at io n a l M on et a r y C o m m i s s i o n
Now for another point: What will be the result of the
modern development of the deposit system, especially as
it shows itself in the large stock banks? Larger and
larger sums are being collected. It is no longer a matter of
hundreds of millions; it is a matter of thousands of millions.
This money comes from all classes of the community; the
greater part, to be sure, comes from the so-called pro
ducing classes and business classes, but a considerable
part—though it is hard to make accurate distinctions—
comes from the classes that President Heiligenstadt has
comprised under the name of consumption classes. All
this money now flows into these banks, and how is it
employed? I think this is a point to be considered. It
is employed, as has often been remarked by others, in the
great business transactions effected by the great stock
banks, and it is eminently advantageous to manufactures
and mining and conducive to the larger undertakings in
these departments. To be sure, in a way, this is not
undesirable— I do not deny that it is even in a way
necessary—but the question remains whether too much
is not consigned to this use, and whether the development
in this direction has not consequently been too rapid and
unrestrained.
I come now to the point which seems to me in many
ways the most important of all. In the speeches that
were made yesterday morning—I think especially in the
speech of Herr Geheimrat Wachler—reference was made
to an utterance of the Frankfurter Zeitung. The Frank
furter Zeitung said that, although perhaps nothing could
be done to prevent crises, still we have to assume that
crises are the result of an incontinent haste to acquire

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wealth. I repeat this with heartfelt agreement; here,
to my mind, lies the prime fault. I think that a certain
up-and-down movement in the condition of business is
to be regarded as not only natural, but even in many ways
beneficial; but here, too, we must constantly remind our
selves that we must keep within bounds. Now our whole
modern tendency in this matter is not to keep within
bounds at all, but to go as far as we can. As soon as
some particularly favorable opportunity arises, everyone
rushes in to exploit it first, and then come the familiar
stages of development; first proper promotions in proper
measure, next promotions on an excessive scale, and
then—even to-day it is so, though less often than for
merly—come many kinds of promotions that are alto
gether undesirable. Thus too much capital is in
vested. I have heard something to this effect said even
by men of the industrial classes. They themselves
admit that at any favorable moment our manufacturers,
miners, and the like increase their investments at once as
much as they possibly can so as to make them yield
enormous profits. In a way this is perhaps desirable and
necessary; but in another way it is not so satisfactory,
since the investors are acting on the unsafe hypothesis
that the additional investments will also be profitable.
They attract workmen and for a time pay higher wages,
but all that does not last very long.
The development of our stock-bank system is in my
opinion another element of the case, since undertakings
of this kind are supported in large measure with the
means furnished by the large sums of deposit and credit
moneys that are concentrated in these banks. Indeed,

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the question of the concentration of capital is a veryimportant one, and there is a growing tendency in this
direction. The rapidity of pace pervading our business
life, necessitated by modern technical development,
becomes in consequence greater and greater, stages of
development succeed each other more and more quickly,
and the reaction is therefore inevitably all the stronger.
Of course the reaction affects in the first instance those
most directly concerned—people of the entrepreneur
class; but it falls most heavily upon the workingmen—
the workingmen, who, as for example, in the Rhine
country and Westphalia, are brought into the industrial
system by all the devices of modern business, and who
are then not so easy to get rid of; the workingmen,
who have become used to better wages and a higher
standard of living, and are then either employed at
reduced wages or dismissed altogether. And then people
wonder that there should be discontent. I agree, not
indeed with the socialist agitators, but with the scien
tific socialists, in thinking that one great source of injury
to our modern economic life is this irregularity—or
rather, to put it plainly, this anarchy—in the matter
of production.
With reference to the paper of Herr von Wangenheim
which was read yesterday, Herr Mommsen said that
he preferred not to take part in the discussion of an insol
uble problem—that of the prevention of crises. Very well,
I suppose it is impossible to prevent crises altogether.
Is it impossible to mitigate them ? And at what stage
should they be mitigated ? Not at the stage of the
crisis itself, but in the preceding stage of excessive

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exploitation of opportunities and of excessive growth of
speculation. Retarding weights must be thrown into
the scale, and it is precisely here that the action of the
banks is called for. People say: “ What do you want of
the banks ? They can not be held to blame; they are in
the business for profit, and they want to make money.”
Personal elements also enter in, for it is not only the
shareholders that are concerned, but also the directors,
the managers, the supervisory council, etc. This is all
natural enough, considering the weakness of human
nature; and the existing system of commissions is also a
factor. This system has been commended on the ground
that in a measure it places a premium on men of eminent
ability. But every thing is directed to the one end of
getting as much money and as fast as possible. In the
case of joint-stock companies the gain is still greater,
when there is a gain, since not only do the dividends rise
by i or 2 per cent (that is indeed only a trifle for the
parties concerned), but the value of the shares itself
goes up, so that there is also a gain in the capital itself.
This is what is rightly called by socialists the planless
ness of production. We can not—and here I must take
issue with Herr Singer, who, as I am told, made yester
day some such suggestion—we can not cast aside our
economic system, because we simply can not carry out
the socialistic economic system, not because we do not
wish to but because we can not. We must, then, retain
the existing economic system, but we must do whatever
we can to get rid of its imperfections, or at least to lessen
them, for imperfections are sure to exist in anything
of human creation.
62838° ----PT 2---- IX--------- 13

18 3

N a t i o n a l M on et a r y C o m m i s s i o n
What, then, can we do to improve the general situation
and to prevent disasters? In both regards, we should,
I think, direct our appeal to the modern stock banks.
The developments that I have portrayed are encouraged
by them in too feverish a manner. If it be said that
this is necessary on account of the rapid increase of
population in Germany, I reply that this answer will
not serve, for the economic development does not keep
pace with that movement, but goes feverishly in advance
of it. We have been going too far in all sorts of ways in
this age of ours; it would be no misfortune if elements
should enter into our economic development which
would exercise some restraining influence even upon this
tendency in population. I can not go into this question
any further—last year, too, there was some talk about
the increase in the population—but it remains a fact
that the banks play a part in this matter, and therefore
I think that if the Frankfurter Zeitung was right in using
the words “ incontinent haste to acquire wealth,” then
it is time that we devised some means by which this
incontinent haste may be—not got rid of, since that is
perhaps impossible, but mitigated; and a slowing up of
the pace of the banks is one of the things that are necessary
Now, it has been said that our economic advancement
has been due in large measure to the stock banks. To
a certain extent I admit this is so, but on the other hand
we must also ask to see the reverse side of this great
and rapid development. Certainly the deposit moneys
have been contributory factors in that picture, too. I
will go back to an idea that I advanced, if I am not
mistaken, in the course of last year’s proceedings. It

18 4

B a n k I n q u i r y of 1 9 0 8 - 9
has been said with truth in England that the taking of
interest-bearing deposits has unfortunate consequences;
especially the large joint stock banks in London, which
are essentially deposit banks, have regulated their rate
of interest on deposits to some extent by the rate of the
Bank of England, as indeed ours are influenced by
the rate of the Reichsbank. When the Reichsbank rate
rises, the rate on deposits rises also. I had experience
of this myself recently—only in a small way, you under
stand—and of course so far as I myself am concerned
I am glad of it. [Laughter.] But on the other hand one
asks oneself, Are the larger consequences also desirable?
Mr. S c h in c k e e . The beneficiary asks this!
Doctor W a g n e r . Yes, in this case it is the beneficiary.
Well, then, one goes further and one says: My own pri
vate satisfaction in receiving now i per cent, or half of one
per cent more, is of no consequence; the important thing
is what part it plays in our economics. In consequence
of the higher rates of interest, more money comes in, and
fewer deposits are withdrawn, and through these new
funds the stock bank has greater resources to put into
the market to promote industrial enterprise directly or
indirectly, either by furnishing the initial funds or in
some other way, and thus to stimulate this rapid—often
too rapid—economic development. The consequence is
that the money market again beomes tighter, and above
all that the supply of cash becomes smaller, especially
in proportion to the sums that should be covered by it.
Thus the same thing happens that has often been seen
to happen in the history of the Bank of England: As
soon as the bank rate rises, the rate of interest on deposits

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N at ion a l M o n et a r y C o m m i s s i o n
at once rises also; less money is withdrawn from the bank
and more is carried to it, and all this is repeated once
and twice, and so the development may go still further.
But the consequence is that the whole immoderately
exaggerated boom, though it lasts longer, is still more
immoderate, and the reaction is all the greater.
Therefore I think we should ask ourselves whether, if
we could devise some means of requiring the banks, and
especially the great banks, to give somewhat lower rates
of interest on such occasions and thus not to attract so
much capital—whether, I say, if we could do this, it would
not have the happy result of making the banks more
careful in granting credit and slower in their procedure,
so that right here in the preliminary stage of the crisis,
when the boom is just beginning, retarding weights will
be thrown in. And if the banks will not do this of their
own accord—and they will not, for competition is not
the thing to induce them to do it—then surely we might
at least consider the possibility of making regulations;
for example, the requirement of a certain minimum
amount of cash, perhaps including credits at the Reichsbank, or should it be exclusive of these? I will at once
make my demand rather high; there should be a cash
reserve of io per cent against all demand liabilities. The
result of this would be that fewer deposits would be made in
the bank, since the rates of interest would have to be lower.
That the banks would perhaps make less profit in this
way is a fact of very minor importance from the general
economic standpoint. That the banks, like any other
joint stock companies, shall make their paid-in capital
safe—that is, shall be so placed that their stock shall not

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be below par—this, to be sure, is an economic benefit to
the whole community, since it is the indispensable condi
tion of the investment of the necessary capital in the
companies. But that the banks should receive on the
average higher dividends than those required to keep
their stock at par, is only an advantage to the bank
and to the shareholders; it is an advantage to certain
individuals, but it is no advantage whatever to the country
at large. [Contradiction.] It is not of the slightest
benefit to the community that a bank share should yield
average dividends of, say, 5, 6, or 8 per cent, or more—
should consequently stand so and so much above par.
Such high value of the shares may, it is true, be caused
by a big surplus, and in so far as this is the case, it is
justifiable; but in point of fact, in the case of banks, the
price of shares is much more often regulated by the aver
age dividends, and this sort of rise in their price is a mat
ter of indifference to the economic life of the community.
Doctor RiESSER. H ow about the productive investment
of its resources ?
Doctor W a g n e r . I beg your pardon; if a bank has to
give 8 or 9 per cent dividends instead of 10 per cent, be
cause its rate of interest, the business it is doing, does not
make it possible for it to give 10 per cent, no harm what
ever is done to the economic life of the community. From
the standpoint of the economic interests of the community,
the amount of profit made is not always the only thing
to be considered. There is danger here of confusing
private and public interests. The community as a whole
derives no benefit whatever from an increase of a few per
cent in the price of bank shares.

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N at i on a l M o net ar y Co mmi s s i o n
Doctor RiESSER. And how about the taxes?
Doctor W a g n e r . I shall take up this matter again
later. If, then, we adopt the plan I have indicated and
put some difficulties in the way of the banks, the result
will be that the deposit business will be carried on with
greater moderation, and the result of that will be that not
every time of expanding business will be at once excess
ively exploited. We have, it seems to me, given much
too little attention to the connection between these
things.
Of the documents that have been sent to us, I have
read with very special interest the one from Lansburgh.
In this paper a great many views are brought forward
which seem to me excellent. In fact, all I could say
was that I agreed with them heart and soul. Among
other things this question is raised—and it relates itself
to what Count Kanitz has already touched upon: Why
is it that for years there has been on the whole a low,
though somewhat variable, market price for our so-called
best investment paper—consols, imperial and state loans,
mortgage debentures, etc.? Now suppose I, a public
functionary, have a few thousand marks to spare, and
suppose I must say to myself: I am getting 3 or
4 per cent on demand deposits, and I am sure of the
safety of the capital I have invested, but the case would
be different if I were to invest in consols or mortgage
debentures; well, then, I let my own interest decide the
matter, and I withdraw my capital from investment in
state paper. If we were to cut down the business of the
stock banks, we should have in this way a factor which
would prove to be a distinct aid to progress.

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Eansburgh justly remarks that it is not only that
trade, manufactures, and mining receive too large a pro
portion of the national capital, but that a great deal too
much money is withdrawn from agriculture. We must
remember also that lately too little capital is safely in
vested in state and imperial loans. But what has been
stated with regard to the banks is again quite closely
connected with these developments.
If you will look at the matter from this point of view
you will conclude that a great national interest is here
involved.
As the last point on this aspect of our question I should
like to propound this question: What is the cause of
this whole development, which has been promoted
especially by the banks? Why is it that in Germany
our whole economic life has been more rapidly developed
than anywhere else in Europe—almost as rapidly as in
America—and that this development has heightened the
contrast between the poor and needy on the one hand,
and the rich, the very rich, and the immoderately rich on
the other? The tendency toward plutocracy is in fact
stronger to-day in Germany than it is in any other Euro
pean country—than in Great Britain, for example, the
center of capitalism, not to mention any other countries.
That this is true my own investigations convince me.
This tendency toward plutocracy is characteristic of the
modern system of private capitalism, as it has been
developed in our own day.
It is objected that we can not alter that system; we
need it; it is necessary and salutary. That it is necessary
and salutary I am willing in some measure to admit; but

N at io n a l M o n et a r y Co mmi s s i o n
that we can not alter it I question. In fact I think we
might restrain it if we would. We are living among con
ditions that breed millionaires, and the breeding of mil
lionaires is never a desirable thing. The millionaire is
no less an extreme development than the proletarian,
and our economic conditions tend to produce both ex
tremes. The banks especially, and above all the stock
banks, have this effect. Do you wonder then that there
is discontent? When you find the people discontented
you say: The masses are ungrateful, for they are much
better off than they were; their wages are growing higher;
their standard of living is being raised; their social posi
tion is more satisfactory; and, as Count Kanitz said, a
tremendous amount is being done for them—ours is a
period of boundless social legislation. This last point is
one in which I shall take very decided exception to the
view of Count Kanitz. Ours is not an age of boundless
social legislation, but an age in which a certain
restraining influence is being exercised upon the proc
esses of the distribution of incomes and the distribution
of wealth which go on among us under the system of free
competition. If we had no social legislation the ex
tremes would become still greater. I assure you that
what is accomplished by social legislation directly and
indirectly is not the laying on of new burdens which
manufacture and agriculture could not properly be ex
pected to carry, but the laying on of burdens the neces
sity for which is obvious, since wages have altogether
failed to keep pace with the increase in the national
wealth. Thus in establishing workmen’s insurance we
have done no more in the way of improving the condition

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of the workmen than every modern country is bound to
do if it lays claim to being one of the civilized nations.
Our present economic system has a tendency to push
extremes further than ever, and to bring about a still
greater concentration of wealth among the uppermost
classes. I can not look upon this as a good thing; it is
more of a goad to the working classes than the Social
Democratic agitation with all its exaggerations.
People say that after all the workman to-day is better
off than his father was, or his grandfather. But the
workman can reply: Is there not a vastly greater improve
ment still in the status of the large manufacturer as
compared with the status of the artisan or small manu
facturer of former times? These are dangerous accom
paniments of progress, with which we have to reckon.
The question of the public interest in a regulation of
the stock business, the deposit business, etc., of the
banks reduces itself in the final analysis to the question
of whether, since we must retain the basic principles of
our economic system, we can not introduce some modifi
cations to prevent the development from becoming still
more exaggerated. Here, too, I must say a word in
opposition to Count Kanitz. It has often been said that
our creation of capital suffers from this so-called bound
less, measureless imposition of taxes for purposes of
social improvement. Here and there, perhaps, some
such thing may have happened; nevertheless, the fact
remains that on the whole our taxes are smaller than
those of any other modern nation, even if we include all
taxes, direct and indirect, for the state, for the Verbande,
and for the communes. In fact, in the matter of direct

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N a t i o n a l M on e t a r y C o m m i s s i o n
taxes, we have actually made the mistake of not daring,
at a time when wealth is increasing so rapidly, to impose
an inheritance tax.
A V o ic e . W e wanted to.

Doctor W a g n e r . Yes, you did; but other people did
not. And the graduation of the income tax is the con
sequence of the present economic system, and must there
fore be retained.
But if the creation of capital is, in point of fact, a
somewhat slower process here than elsewhere, one reason
for this lies in our too high birth rate, which is in many
quarters regarded as a great blessing; another reason
lies in a desire for luxury, which is greater among us than
among any other European people—even the English,
the French, the Roumanians. [Contradiction.] This ex
cessive luxury, this very high standard of living, inter
feres with our formation of capital, otherwise there would
be no lack of capital to meet all our actual requirements.
Gentlemen, I will close my remarks about the existence
of a public interest by expressing my firm conviction that
the stock banks, in the capacity of deposit banks, have
intensified, though they did not bring about, our modern
economic development. The insatiable greed of the
modern world is the primary evil, but it is an evil which
is fostered by this development. In this point my
opinion is at variance with that of the Frankfurter
Zeitung. And from this point of view it is clearly very
much to the public interest that we should at least ask
whether we can not consider, and perhaps propose, a
number of measures that might be taken to lessen the
pace of this development. Then the different proposals

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would come up for consideration. I assume that the
present debate should concern itself rather with the gen
eral aspects of things, if I have understood our president
aright. [Assent by the chairman.] Then I shall keep
the rest of what I have to say for the special discussions
which will no doubt take place later. But I think that
on the point of the need for greater publicity we are all
agreed—even Count Kanitz gave this as his only positive
suggestion. That publicity is not of itself sufficient no
expert will deny, and that a great many people would
derive no benefit from it because they have no professional
knowledge is also undeniable. But we can say at once
that the question of the manner of publication—by what
method, at what time, how frequently the balance sheets
are to be published—this is a matter that should not
again be left entirely to the discretion of the parties most
nearly concerned. Why have we placed the banks of
issue everywhere under such requirements of publicity,
prescribed for them definite forms of public statement?
Why should it not be possible to do so in the case of our
other banks as well? I think, by the way, that even
for the banks of issue, not excepting the Reichsbank, a
better plan of publication could be devised. It is not,
in my opinion, sufficient that all credits should appear
together as one item in the balance sheet, and I do not
see why the Reichsbank should not distinguish between
imperial and state credits on the one hand and the moneys
of business firms and private individuals on the other
hand. ’ At any rate this should certainly be required of
the other banks. The stock banks ought not to be
allowed to determine for themselves the form in which

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a t i o n a l M o n e t a r y_______________________
Commission
their balance sheets shall be made up. I think this is
proved by the criticism that has been made in the press—
to be sure by rather harsh critics—of the so much lauded
voluntary bimonthly publication of balance sheets after
the manner of the great banks. I refer to the judgments
pronounced by men like Bendix or Bernhard in “ Plutus,”
and by a number of others. It happens that these men
are former students of mine, and I am proud of it.
[Laughter.] Well, Herr Kollege Riesser, do you mean
to say I have no reason to be proud ? Why ? [Renewed
laughter.]
Doctor R i e s s e r . I am only glad they are your students.
Doctor W a g n e r . I am, too. And some of them are
men of practical experience, who certainly know some
thing about the matter. Obst, for example, was in the
banking business. [Renewed interruptions.]
A V o ic e . T h at is your school.

Doctor W a g n e r . Not in the sense that they had been
taught by me to cast abuse upon the great banks. Do
you think I do it out of malice?
A V o ic e . N o, no; out of conviction.

Doctor W a g n e r . Perhaps you may regard my view
as mistaken; I must put up with that. But the men I
am talking about are men who have all had a thorough
theoretical and practical training. Note, by the way,
that even in other countries it would be hard to find a
writer of practical experience in banking who does not
fully acknowledge the necessity of a thorough training
in theory also. I need only remind you of Ricardo;
he was a banker. This is worth remembering. Such
men have made good use of criticism.

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One more point, which occurs to me. I see here the
item “ bank credits of every kind.” This does not
make a separate statement of Reichsbank credits.
Mr. M o m m sen . W hy, th at is m y cash account.

Doctor W a g n e r . But it stands here in the state
ments that are collected in the published documents.
If that is the case, then I have fallen into an error;
I understood it differently.
The difficulty—so it is stated at another point—of
stating separately cash, foreign coins, coupons, etc., is
very great. That may be, but it is not insuperable.
Why should not a body composed of experts— drawn,
for example, from the Reichsbank, from the Seehandlung, from the Zentralgenossenschaftskasse—why should
not such a body be able to arrange a scheme? And
bank directors, too, might be included as experts. Why
should this lie absolutely outside the sphere of legisla
tion ? Only when this is done will moderation and
restraint be exacted of all parties. On this point I
acknowledge the truth of what President Havenstein
said yesterday—we must remember that where there
are rights there are also duties. Among the latter I
include the principle of publicity. But here I differ
again from Count Kanitz. I think it would be well to
consider whether something further should not be done.
President Heiligenstadt, if I understood him aright,
was also, at the end, in favor of such consideration.
Why, then, should we absolutely refuse to consider the
possibility of making certain specific prescriptions as to
the cover for obligations? We do not act in this way
in the case of the banks of issue; it is partly through

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N at io n a l M o n et a r y C o m m i s s i o n
prejudice that we treat them differently. The banks
of issue were never in any great danger. Even during
the time between 1850 and 1870 there was no great
trouble about the banks of issue, and yet we made
definite prescriptions as to their note cover, because we
thought it necessary to do so. Even for the Reichsbank
we have made regulations of this kind—regulations
that are sometimes rather inconvenient. Why should
not something of the kind be done in the case of stock
banks, deposit banks, etc. ? Of course this would not
mean that the banks should do nothing but what is pre
scribed, but that they should do at least as much.
Then, too, we should consider the plan of requiring a
certain minimum cash cover for demand liabilities and
for such as are payable in a week, or at most in two
weeks, after notification. These are the moneys which
are chiefly concerned so far as regards the question of
fluidity, and in their case a greater cash cover should be
prescribed. The 3 or 4 per cent of all assets a which
is at present customary among the stock banks is an
extremely small minimum. This question connects itself
also with the question of the gold reserve. In making re
quirements of this kind, we make it necessary for the banks
to keep larger supplies of cash, at least in the form of
credits at the Reichsbank, and in this way, again, the
keeping of a larger gold reserve may be made requisite.
The means that have hitherto been taken may have
accomplished something toward this end; they certainly
have not attained it. Nor have the Reichsbank’s cash
holdings been materially increased by the issue of small
a Presumably, the speaker meant to say “ liabilities” .—Translator.

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bank notes; indeed, has it not increased the danger of less
gold being kept in the country, in the channels of trade?
In England they are trying to increase the gold reserve,
and we should be doing so, too; and the fixing of a
minimum for the cash funds of the stock banks might
contribute more or less toward this end.
Furthermore, I think one might say that the demand
deposits should be covered by, say, io per cent in cash
and about 40 per cent in standard bills. In this way
we should have covered half the sum so thoroughly that
we should be able to say: In all likelihood this will insure
fluidity enough even for difficult situations.
Now for the question of a bureau of supervision. So
far as I see, there is a prevailing sentiment against this
plan, even among members who are, on the whole, on my
side. Well, gentlemen, I have long entertained this idea
of a supervisory bureau. In 1884, when the draft of the
joint-stock companies law was under consideration, I had
the honor of being asked to take part in the discussion.
We had fairly thrashed the matter out when, near the end
of the deliberations, I expressed the opinion that a general
law like this ought to establish a series of formal regula
tions for uniform application to all joint stock companies,
but that it was further necessary for the proper legal
regulation of affairs in this domain that a series of special
laws be also enacted, corresponding to the particular ends
which the various kinds of joint stock companies serve.
I know that I was not only ridiculed at the time, especially
by those versed in the law and unfortunately also by my
lamented colleague, but that I was also attacked. Now,
we have finally settled matters as regards the mortgage

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N a t ion a l M o n e t a r y C o m m i s s i o n
banks and we are achieving the same result at last with
the insurance companies. What prevents us from going
further? It will not do for us to make merely uniform
regulations for all joint-stock companies. They have got
to be allowed to manage, each class in accordance with its
own requirements. I therefore consider it a necessary
inference that we should add to the law regarding banks
of issue and that regarding mortgage banks, as well as
that relative to insurance companies, a law regarding
stock and deposit banks, of course with different and
less stringent provisions.
I must begin by asking this question: Who guarantees
to us that the public statements that are made are all
correct ? As has been rightly asserted, the quality of the
individual items can not be stated but only the quantity.
This is all the more reason for guaranteeing against the
occurrence of errors and intentional inaccuracies in the
published quantities.
Doctor RiESSER. There’s the penal code.
Doctor W a g n e r . Yes; but we must first have somebody
who will discover them.
Mr. M o m m sen . That is always the case.
Doctor W a g n e r . We must therefore have an office that
will have the right to examine the balance sheets and
books and to verify the balance sheets.
Mr. M o m m sen , A n accountant can do that.

Doctor W a g n e r . Then you come and tell us—and this
struck me as very characteristic in the remarks of Count
Kanitz; “ There, you have got some more officials.” To
this I say: “ Of course more officials—a fresh bureau
cracy.” If we have new institutions that can not be left

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to themselves but require such supervision, then this is a
necessary accompaniment. This strenuous opposition to
an increase in the number of government officials may be
justifiable in certain cases, but taking everything together
it is not justified, the fact being overlooked that in the
matter before us we have to deal with a product of our
entire social and economic development.
Mr. M o m m sen . Then give it up.
Doctor W a g n e r . N o ; that is not the thing. What we
have to do is to see to it that where profits are excessive
taxes shall be imposed which shall replenish the National
Treasury and enable it to pay the additional officials. I
can not help saying that this objection goes too far, no
account being taken of the fact that this development is
going on in the same way all over the world. We Germans
have not gone too far in this matter, and this everlasting
talk about the bureaucracy—have we not seen recently,
gentlemen, a bank robbed of millions, I might almost say?
Doctor RiESSER. Where was that ?
Doctor W a g n e r : At the Mitteldeutsche Kreditbank.
A sum of 700,000 marks and last year 500,000 marks.
That is a good deal over a million. If such things can
happen to private institutions, there is no sense in con
stantly pointing to the fact that the bureaucracy is
responsible for certain abuses, as in the case of the Kiel
docks. Are we on this account to say that the banks
can' manage best when left to themselves—that it is not
a question of regulations that are needed but of men?
No; regulations also have to be considered, as all men are
exposed to temptations, and for this reason such super
vision can not be dispensed with.
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The outcome of it all, in my opinion, is that super
vision is required in the interest of the public. We need
it inasmuch as by means of certain provisions in regard
to cover, aiming at the fixing of a minimum in the matter
of security and fluidity, we create a certain guarantee,
and we need it for the sake of the public as a necessary
and efficient protection. This protection is not adequate
in itself, and therefore a body of expert officials is required.
There are no organs that could undertake this other than
expert officials. We may allow ourselves to be abso
lutely guided in this matter by the example of the impe
rial insurance bureau. Of course, the kinds of business
are different, but in the insurance business itself not
everything can be laid down so precisely. I need only
remind you of the fire-insurance business, whose sched
ules are still more or less arbitrary, whereas in life insur
ance a solid statistical and mathematical foundation for
the schedules may be secured. The arrangement has
been working well in Austria, Switzerland, and of late in
this country. This is enough to make me an advocate of
the scheme of regulating general and deposit banks and
kindred institutions.
I have not said anything regarding the savings insti
tutions and Genossenschaften. Here, too, I can say
that I believe the savings institutions in general leave
nothing to be desired on the score of solidity, but that it
may be questioned in their case also whether they are
not deficient on the score of fluidity----Freiherr von G a m p -M a s s a u n e n . Quite correct.
Doctor W a g n e r . —and whether they ought not like
wise to be compelled to maintain a larger stock of cash

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and of such readily and quickly convertible resources as
bills and the like. It may be granted on general economic
grounds that the investments in urban and rural mort
gages, which with us constitute the main assets, are
proper and sufficient; but that the matter is not to be
considered merely from the standpoint of the interests of
the mortgage market is evinced by the character of the
savings institutions as banks. Here the rule applies
more or less, the rule which theory—yes, theory—science,
and history have established that the nature of the liabil
ities of a bank shall in a measure correspond to that of
its assets. Mortgages do not sufficiently fulfill this con
dition with respect to those sums in savings institutions
which not only legally are payable immediately or within
a short time but which practically are liable to be with
drawn at any moment. I am of opinion, therefore, that
in the case of savings institutions also it is worth consid
ering whether it would not be well for them to increase
their stock of cash and perfectly liquid assets.
The same thing, I believe, applies to all cooperative
credit associations, for with respect to them one may
always assert that for a bank security is an important
point, but the most important point is fluidity. Our
legislation has recognized this. The legislation in the
United States regarding banks of issue has on the other
hand made the mistake of putting security in the first
placQ and fluidity in the second. We have gone to the
opposite extreme, except that in regard to savings institu
tions we have perhaps laid too little stress on the matter
of fluidity.
I have taken the liberty, gentlemen, of discussing the
whole subject on the strength of what has been stated here

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yesterday morning and to-day. As I was unable to listen
to the addresses that were delivered yesterday afternoon,
I must ask you to excuse me if I have perhaps wearied you
somewhat [exclamations of “ No! n o!” ] and have not
always adhered closely to the actual subject of the dis
cussion. But all these questions culminate ultimately in
the question, Is it in the public interest that there shall be
a more effective control? In accordance with the views
which I have formed on the matter, I am compelled to
answer this question decidedly in the affirmative.
Freiherr von C etto - R e ic h e r t s h a u s e n . After the
splendid and broadly outlined addresses of the two
speakers who have preceded me, I shall first of all have
to beg you, gentlemen, with the captatio benevolentioe, to
be indulgent with my utterances and to follow me in the
restricted field of agricultural conditions, a realm whose
circumstances as delegate of the German and Bavarian
Agricultural Councils, I find myself called upon to place
before you.
In considering the question, gentlemen, as to whether
the public interest demands the regulation of banks as
deposit institutions, I am compelled to ask myself the
secondary question, What is to be the attitude of agri
culture with respect to this question? In what way is
agriculture interested in the regulation of the deposit
business? Is the activity of the great banks possibly
prejudicial to the interests of agriculture? Is it harmful
to these interests in depriving agriculture of its working
capital by appropriating the funds that have been accumu
lated in agriculture and withdrawing them from their
rightful owners—a matter to which the pamphlets of Herr

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Tansburgh and the address which Doctor Wagner has just
delivered have called attention—or is agriculture perhaps
hurt through the directly injurious effect resulting from
the solicitations of the great banks, especially from their
offers of a high rate of interest on deposits, which might
tend to inveigle agriculturists into making unsafe invest
ments and expose them to losses due to such investments ?
I believe, gentlemen, that this question ought to be
considered with reference to the fact that the great banks—
I do not refer to the Berlin banks in particular, with which
I am not sufficiently acquainted, but- I have in mind a
number of other great banks, with whose affairs I am very
familiar—as a result of mutual competition, have for some
time past been induced to expand their field of operations
by the establishment of numerous branches in the country;
that is to say, they have extended their activity from the
urban into the rural districts, from which they have
hitherto kept aloof.
The interest of agriculture in the regulation of the banks
of deposit is therefore, in my opinion, rather an indirect
one in so far as such regulation concerns the banks, and
the question of a direct interest can only arise if the rural
credit institutions, the Genossenschaften, should be ham
pered in their operations by restrictive provisions of gov
ernmental supervision/ For it is a well-known fact that
the majority of agriculturists seek and get credit, of what
ever sort it may be, not at the banks but at the Genos
senschaften, and that they deposit their idle money with
these associations and intrust their savings to them.
I shall ask you, gentlemen, to take this remark with
a grain of salt. It does not apply, of course, to the big

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N a t i o n a l M on et ar y Commission
landed estates, but it certainly does apply to the peasant
proprietors of the soil, and the question derives its chief
importance from the circumstance that the great bulk of
the product of agriculture is dependent on the lands of
the peasant proprietors. It is they who create it.
If, therefore, I leave the landed gentry out of account
in this matter, I shall beg you on general grounds to follow
me in the discussion of the question as to what is meant
when we speak of “ outside moneys” in the hands of the
Genossenschaften.
You will find that it is necessary, in order properly to
define this concept, to go back to the history of the origin
of the system of Genossenschaften in Germany. I must
beg you not to lose sight of the fact that the impulse to
the foundation of the rural credit associations, especially
of the Raiffeisen associations, was the need of credit
among the peasants who were exploited by usurers. In
the region in which Raiffeisen first established his associa
tions usury had increased to such an extent that the
entire population was getting more and more impover
ished, and Raiffeisen believed that he could remedy this
evil by making the ranks of the small agriculturists them
selves contribute available working capital, working capi
tal that would be supplied through the channels of legiti
mate credit to those in need of credit, under a double con
dition, the condition of a low rate of interest and the
condition of long-term credit, both required by the pecu
liarities of agricultural industry, which I hardly believe
it is necessary for me to dwell upon.
In order to secure this working capital the idle money
in the rural community had to be collected and savings

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taken on deposit, and from these resources assistance
could then be given to those in need of credit.
The security in the investment of these funds consisted
primarily in the close knowledge of individual conditions
within narrow circles. As we all know, the Raiffeisen
associations—and this is still mostly the case—were
established within the limits of a parish, and the security
of all the operations of the associations lay mainly in the
accurate knowledge of the condition of the individual
members, both of the depositors and of those who applied
for money.
Due stress should likewise be laid on the factor, to which
attention has repeatedly been called, of the joint respon
sibility of the members. In this respect the associations
had the benefit of the example afforded by the success of
the large credit operations of the unions of the rural
gentry, conducted under the joint guaranty of those con
stituting the credit association. We have seen the same
thing in the case of the Prussian Landschaften (agricul
tural credit associations) and we have it before us again
in the recent development of the system of rural mort
gage institutions, a development rooted in this one factor
that through the association of those in need of credit a
framework can be created that will answer the demands
of agriculturists with respect to a proper system of credit
based on mortgage, adapted to the conditions of produc
tion and cultivation.
The so-called “ outside moneys” (fremde Gelder) of the
agricultural associations, therefore, was, and is still, not
such, either with respect to its application or to its origin.
The fact is that it was mainly money contributed by the

http://fraser.stlouisfed.org/
i
Federal Reserve Bank of St. Louis

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N a t i o n a l M o n et a r y C o m m i s s i o n
rural community, money which at the present time is
still taken from those living in the country and is again
devoted to their needs.
In this arrangement there is not only a great material
advantage, but also an educational asset. The activity
of the credit associations in the way of banking prevented
the alienation of agricultural capital through unsafe
investments, a matter on which I lay great stress. It
taught the peasants the value of capital available at all
times and has kept them from hoarding their money in
stockings without interest, as was formerly done, or
devoting it constantly to fixed investments in the land
and soil, by which ultimately the disparity in the matter
of fixed capital and working capital, which is a concomi
tant of the traditional natural method in agriculture,
became more and more accentuated.
The charge made by one of the gentlemen who have
addressed you that the afflux of capital in agricultural
industry has the effect of promoting the mobilization of
landed property can easily be refuted if we consider the
activity of the Genossenscliaften and especially the kind
of activity which I have depicted.
The immense output of German agriculture, in the
face of a rapidly increasing population and in spite of
more or less depopulation of the rural districts, still sup
plies by far the greater part of the food required by the
German people, the increasing intensiveness of cultivation
constantly adding to the amount of the raw products of agri
culture, so that the demand for breadstuffs and meat not
produced at home but imported from abroad has, if any
thing, amounted to a smaller percentage of the total

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B a n k I n q u i r y of 1 9 0 8 ~ 9
demand this last decade than in the preceding years.
And this result, I do not hesitate to affirm, is mainly
due to the extension and improvement of the system of
agricultural credit associations.
Herr Roland-Eiicke has propounded this question:
Shall we return to the old agrarian state or shall we have
an economic regime consonant with the times, which shall
benefit every class of the population, agricultural as well
as industrial and commercial? In my opinion this is a
false way of putting it. That is not the question. The
real question is this: Is our agricultural industry to be
accorded its full birthright by the side of the other produc
tive activities and to be treated and cared for accordingly,
or shall it, as has been the case in England, hand over the
field to manufactures and commerce, be repressed as an
insignificant factor in the national economy, and be driven
to a reduction and even to a suspension of its activity?
The decision of this question may well be left to the
judgment of such thoughtful and well-informed men as
those in whose midst I am speaking.
That modern agriculture, on a large as well as a small
scale, is as much in need of credit as manufacturing indus
try and commerce is as indisputable as the fact which I
have just mentioned that the development of our agricul
ture—a development not open to the charge (to which
reference has been made) of an excessive eagerness on the
part of the producers to make money—would never have
attained to its present level, leaving behind most of the
countries of Europe, and indeed, one might say, of the old
and the new world, had not the activity of the mutualhelp associations supplied the means.

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Herein lies the prime interest that agriculture has in
the method of regulation of the deposit business of the
Genossenschaften.
That the statistics of the condition of the agricultural
credit associations would arouse a feeling of doubt and of
apprehension among some of the gentlemen was to be antici
pated. In advance of the publication of these statistics
it was necessary for me to reconcile myself to the idea that
when they came they would not make as satisfactory a
showing as those of the large credit banks. I was gratified,
however, to see the doubt as to the soundness of the Gen
ossenschaften and their readiness to meet their obligations
dissipated in great part by the excellent address of my
countryman, Director Stroll, for which I am very thankful
to him. I need not repeat what he has emphasized—the
value of the accounting unions and the importance
of the creation of the central clearing, institution for the
mutual business of the small associations. I should, how
ever, like to call attention to a special arrangement which
provides an additional guarantee for the security of the
business of the small associations, the socalled Ausschliesslichkeitserkldrung, binding the associations to deal
exclusively with the central association banks in the mat
ter of credit and the deposit of their surplus funds. Nearly
all the smaller institutions now subject themselves to
this provision and it has been adopted by some of the
larger unions. In this connection you will allow me to
read to you an extract from an expert opinion which I
have obtained from our Bavarian Central Loan Institu
tion. This is what it says:
“ Our agricultural credit associations, in consonance
with their organization, have relatively but little capital

j tm

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of their own. They operate almost exclusively with
funds deposited with them, and a restriction of the
deposit business of the associations would be of farreaching importance with respect to the rural credit
associations and consequently with respect to agriculture.
The need of legislative measures affecting agricultural
credit associations appears all the less imperative inas
much as the entire organization of the agricultural Genossenschaften in Germany affords a safeguard against
the occurrence of abuses.
“ The system of unlimited responsibility offers sufficient
security for the deposits, in addition to which the business
of the agricultural Genossenschaften is subjected to
constant supervision by means of expert accounting on
the part of the unions. The monetary intercourse of
the individual associations is under the constant super
vision of the central association banks, which are in the
main conducted according to approved banking prin
ciples. Most of these central-association banks have the
Ausschliesslichkeitserklarung, according to which not only
the needs of the associations in the matter of credit are
to be met exclusively by these central banks, but all
the surplus funds of the associations must be deposited
with them.
“ The central association is consequently in a position
to supervise completely the business management of the
smaller associations subordinated to it, and it has a guar
anty that no unsafe operation will be undertaken through
other agencies to the prejudice of the credit which it
accords to the small associations.
“ The central association banks constitute, therefore,
in a certain measure the central deposit bank of the

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-

—

--------------------------------------

Genossenschaften, and it is their business to keep the
funds flowing into them from the subordinated associa
tions in as liquid a form as possible. Thus the agricul
tural credit association may be said to meet pretty closely
the requirements exacted in the case of a deposit bank
pure and simple.”
I shall take the liberty of reading to you the text of the
provision in question as it appears in the rules and regu
lations of the Bavarian Central Loan Institution. It
reads as follows:
All surplus funds of the individual associations are to be deposited only
at the clearing institution.
The needs of the individual associations in the matter of credit in the
discharge of the business for which they are legally qualified are to be satis
fied exclusively at the clearing institution.

Further on it reads:
A provisional suspension of credit is ordered by the committee if an asso
ciation opens an account current with another banking institution, or as
soon as the committee has doubts regarding its credit.

As regards the relation which the capital and the readily
available resources of the Genossenschaften bear to their
deposits, I refer you in particular to the statements of
Doctor Stroll respecting the matter of fluidity in normal
and abnormal times, as well as to his very appropriate
remark to the effect that the deposit institutions, as far
as they can command credit through the potential reali
zation on their assets, are permitted to use such credit as
a cover against the sums due their creditors.
In what concerns the savings institutions we must
bear in mind first of all that in the majority of the States
of the Empire fairly strict provisions have been enacted
regarding the investment of savings deposits. It would

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be well, perhaps, that these regulations were extended
and amplified, and in this connection I should like to call
attention to a passage in the statements of Herr Lansburgh (which seem to me to be applicable to some of the
conditions), where he remarks (p. 16 of his pamphlet):
“ We should see to it that any person whosoever, who
is in no way restrained with respect to the application
of the sums intrusted to him, shall not be allowed to go
before the people and solicit savings and thus make capital
out of the ignorance of the public, which quite naturally
connects the word ‘ savings ’ with certain notions of legis
lative safeguards and governmental supervision—quite
naturally I say, for as a matter of fact the security of sav
ings, that is to say, money deposited in savings insti
tutions, is adequately looked to.”
As regards the security of savings not deposited in insti
tutions under state supervision, there is no doubt in my
mind after my own experience that additional safeguards
could be provided. I have had occasion in the immediate
vicinity of my place of abode to witness the collapse of
an industrial credit bank, in which a large portion of the
inhabitants of the place, with a perfect sense of security,
had deposited their savings, with respect to whose dispo
sition, however, there was absolutely no supervision.
These are evils, gentlemen, that ought to prompt a closer
investigation of the whole matter.
Whether the regulation of the system of savings insti
tutions by imperial legislation is advisable ought in my
opinion to be considered an open question. Even if such
regulation should appear desirable with respect to the
security of the investments, still in what concerns their

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fluidity it hardly seems possible to enact statutory pro
visions applicable to all local conditions throughout the
length and breadth of the Empire. Even in the matter
of the investment of savings deposits in mortgages—such
investments, if I remember right, constitute at present
about 50 per cent of the total investments of savings insti
tutions—there may be great diversity of opinion. The
investment of savings in mortgages may, as has already
been mentioned, be partially in accord with the intent of
the depositors. Nevertheless, considered from the stand
point of the agriculturist, the mortgages of savings institu
tions have two great defects—their terminability, which
is generally exploited for the purpose of raising the rate
of interest, and the absence of the feature of amortiza
tion. These are two factors to which I desire to call par
ticular attention in the interest of agricultural credit
based on landed property.
I come now to the question of the creation of a bureau
of supervision. In regard to this question I must say that
I am with those gentlemen who have declared themselves
to be opposed to such an institution. Considering that the
present supervision of mortgage banks is only of doubtful
value, in spite of the fact that in the case of these institu
tions credit rests on a firmer basis, a bureau of supervision
for banking in general will necessarily have to confront
well-nigh insoluble problems. I am still prepared to
maintain this view against the highly interesting expres
sion of opinion on the part of Doctor Wagner. We have,
for example, a much more thorough supervision of mort
gage banks than there is in Prussia. We have had for a
long time in Bavaria a special supervising commissary for

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every mortgage bank. These supervising commissaries
have been selected from among the higher administrative
officials. It was supposed that they could, owing to their
general training, be relied upon to possess the ability to
make themselves familiar with these matters of bank
management and banking business. As a matter of fact,
these gentlemen discharged the duties of supervision as
something outside of their regular business. What was
the reward of their exertions? A demand was presently
made in the Bavarian landtag for a more thorough and
stricter supervision of the mortgage banks, and these men
themselves had to confess that with the best intentions
they had not been able to master the details of the busi
ness. The result was that, in addition to the eight super
vising commissaries of our Bavarian mortgage banks, a
head supervising commissary—if I may so express it—
was installed, a gentleman who has hitherto been con
nected with the Royal Bank, upon whom the other eight,
relying on his technical knowledge, will shift a large part
of their duties.
I cite this example merely in order to show you how
difficult I consider it to be to extend the governmental
supervision to those banks which, in addition to their other
business, have a great deal to do with credit and securities.
I need only point, gentlemen, to the biggest mortgage
bank that we have in Bavaria and the Empire, the Bayerische Hypotheken- und Wechselbank, which has at present
mortgage debentures in circulation to the sum of a billion
marks, and a corresponding volume of real estate mortgages,
and to a concern barely inferior in the range of its business,
the Preussische Zentralbodenkredit-Aktiengesellschaft.

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— —

To exercise a constant and adequate supervision over con
cerns like these is a tour de force such that I should not envy
the one to whom it is intrusted. And how much more
complicated and intricate are the threads of the business of
the credit banks which it is proposed to subject to govern
mental supervision! I felt called upon to make these
remarks in response to the utterances of Doctor Wagner,
which I fully comprehend and appreciate. But I must
beg you, esteemed colleague, to be willing to agree with me
to the extent at least that the difficulties of execution are
so great that we are justified in asking ourselves whether
we can actually expect to effectuate these requirements,
however legitimate they may be, or whether we are not
attempting a really impossible task.
There is still another factor, one which seems to me of
special importance, and that is that the responsibility
which the Government assumes with respect to the public
in the exercise of such supervision is apt to degenerate
into a sort of governmental guaranty in the eyes of the
people. [“ Very true.” ] I deprecate the infusion of a
certain sense of security in the public, which might, per
haps, have worse consequences than the necessity which
we at present impose upon the thoughtful and cautious
public of testing the security and stability of the indi
vidual “ great banks.”
I shall ask you, gentlemen, to permit me to make a little
digression at this point. When in the course of our last
discussion Herr Bernhard and, I believe, Herr Christians
made minute suggestions regarding the form of the inter
mediate balance sheets of the great Berlin banks, I could
not help asking myself the question as to whether there is

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in reality any form that would render such statements
capable of affording an oversight of the business of the
banks, and I must confess that I have still grave doubts as
to whether these intermediate balance sheets are in reality
calculated to offer a certain guaranty of a continuous and
uninterrupted sound management of the business of the
banks. Of course, I can see some advantage in the fact
that the drawing up of the intermediate balance sheet
after a pretty long interval affords the possibility of getting
a closer view of the entire management of the banks than
the mere publication of an annual statement. The socalled cooking-up of the annual statement, with which the
banks are occasionally charged, can not take place quite
so easily with the regular publication of extra balance
sheets. At all events these interstitial statements have
this one advantage that they are frequently examined by
experts, so that, even if the individual customers of the
bank are n.ot in a position to examine them, nevertheless a
sort of communis opinio is established regarding the sound
ness of the management of the various banks, which can
exert its influence over those customers of the banks who
are not able to undertake the examination of the inter
mediate statements with any technical understanding.
Having made this brief digression, I shall close what I
have had to say. Getting back to my starting point, I
shall conclude my statements as follows: Without wishing
to deny the need of regulating the system of deposit bank
ing—I should in any case be in a position to give my con
ditional assent to the promulgation of uniformly regulative
provisions—I may sum up by saying that agriculture has
in the main only an indirect interest in the regulation of
6 2 8 3 8 ° — PT 2 — I I

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N a t i o n a l M on et a r y C o m m i s s i o n
deposit banking, but that, in so far as it has a direct in
terest, it is of great importance to it that excessive re
striction of monetary intercourse and hampering of the
institutions that carry it on shall not cripple those arrange
ments whose free development is no less necessary and
beneficial to agricultural industry than it is to the other
branches of national production.
Mr. P E T E R . The question of the legislative regulation of
banks of deposit and savings institutions has engaged the
attention of the public for many years. I wish to say,
therefore, that the public is interested in seeing that this
question is answered in an official manner by a body of
men having technical knowledge of the subject and that it
is once for all, as I hope, definitely settled. On account
of the frequent discussion of the subject in books and
newspapers and the movement, initiated long ago, for the
regulation of deposit banks and savings institutions, it is
a pressing duty to throw all the light possible upon the
question and to subject it to a thorough-going discussion,
if for no other reason in order that the feeling of uncer
tainty which has been aroused in banking circles by the
various suggestions shall be dissipated and that tranquillity
restored which is so essential to our economic existence.
If I admit unconditionally that the public has an
interest in the question, I must, however, at once express
my opinion that the regulation of the question by means
of legislative measures appears to me impracticable, for,
judging from my experience of forty years in the field of
banking and in connection with cooperative credit asso
ciations, there is no occasion whatever for imposing tram
mels upon the activity of our credit institutions, for it is

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B a n k I n q u i r y of 1 9 0 8- 9
to them that Germany is indebted for her great economic
development, and without them the brains of our mer
chants and manufacturers would not have succeeded in
raising German trade and industry to the level which they
occupy to-day in international economic life. This devel
opment was and is indispensable in order to provide
work and food for our constantly increasing population.
For this reason I regard any fundamental change in the
organization of our banking system as undesirable. In
my opinion it would be placing fetters on our credit in
stitutions if we proposed to make the taking of deposits
and of savings in any way more difficult, or to enact
restrictive regulations with respect to their investments.
In what concerns the second point of the question, that
regarding the security and fluidity of the investments
made in connection with deposits and savings, I have to
say that with respect to subquestion “ a ” I agree with
those who say that it is nowadays altogether impossible
to determine numerically just what constitutes deposits
and savings, dr their relation to the outside moneys in
general, for the difference between deposits and savings
on the one hand and their disassociation from the total
amount of the outside moneys held by the bank on the
other has, according to my observations, been gradually
eliminated.
Theoretically speaking, we can very accurately say:
“ These are savings, these are deposits, these are current
account balances.” But the moment we set about to
transfer this into practice, we at once encounter the dif
ficulty—I should say impossibilty—of properly classing
the funds held by the bank according to the various

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N a t i o n a l M on e t a r y C o m m i s s i o n
categories. I may as well begin with the savings. Well,
gentlemen, you will probably say that they include, in
the first place, the deposits in the savings institutions.
I say, “ No.” Formerly, it is true, it was practically the
savings which flowed into the savings institutions, but
now it is also deposits, so called, and any money that has
to be kept in readiness for future use in trade or industry.
Such funds also, nowadays, find their way to the saving
institutions since these institutions have abolished the
limitation of the sum one may deposit and introduced
the payment of interest on daily balances. At times the
savings institutions offer a rate of interest in excess of
what is considered safe in regular banking. The savings
institutions have in some places expanded into banking
concerns, and in consequence receive deposits of money
which in my opinion ought rather to go to other institu
tions, to be employed in ways that are in accord with
approved principles of banking. I refer to these things
in this connection merely to show that it would be a
mistake to consider the deposits in the savings institu
tions as consisting practically only of money set aside
by the common people.
In the same way so-called deposits and current-account
balances coalesce, and a proper distinction, even if it can
be made on the books, is practically not feasible. In my
opinion, therefore, it is only the collective concept of
“ outside moneys ” (fremde Gelder) that should find a place
in this discussion.
That the ways in which our German “ great banks,”
so called, invest the funds deposited with them, leave
nothing to be desired on the score of security, has been

Bank

Inquiry

of 1 9 0 8 - 9

recognized by all the speakers who have preceded me,
I have merely to say that I concur in their statements
with respect to this matter as well as with respect to
the security of the investments made by the savings
institutions.
And as regards the investments of the cooperative
credit associations, I trust you will permit me as an old
Genossenschafter, to say a few words in regard to them.
As I am the head of one of the largest German coopera
tive credit associations, the Karlsruhe Union Bank, which
has now 5,000 members and has property of its own
amounting to more than 3,000,000 marks, which is about
37 per cent of the funds deposited with it, and a vicepresident of the Union of Credit Associations of Lower
Baden, I think I ought to know something about these
associations. In this connection I desire first of all to
express my thanks to the statistical department of the
Reichsbank, which in its publication, submitted to us,
entitled “ Zur Bilanzstatistik der deutschen Kreditgenossenschaften,” has shown in a splendid way what has been
accomplished by these associations in the domain of public
economy. We ought to be all the more grateful for this
presentation, as the work of our Genossenschaften is still
overlooked in various sections of the community, or at
least is not sufficiently recognized. It is not longer ago
than yesterday that our colleague, Bank Direktor Stroll,
spoke of them as a terra incognita for many people, and in
the course of our discussions I had repeatedly to remark
that it would be a good thing, with respect to our economic
life, if every now and then attention were called to the
activity of our cooperative credit associations.

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N a t i o n a l M o n e t a r y Commission
We find in the compilation likewise received from the
statistical department of the Reichsbank, entitled “ £ur
Frage der Regelnng des Depositenwesens,” various reso
lutions appended as a supplement. I miss, however, the
resolution adopted at the fiftieth convention of the Gene
ral Union of the German Trade and Industrial Associa
tions, Based on Mutual Help, which was held at Freiburg
on August 9-12 and which was attended by more than
800 delegates. It reads as follows:
The business of the associations does not give any occasion for the enact
ment of legislative regulations regarding the system of deposits and savings
institutions. It would be against the public interest to impose restrictions
upon the savings-bank and deposit business of the Genossenschaften

I have said, gentlemen, that over 800 delegates of the
General Union of the Trade and Industrial Associations
voted unanimously for this resolution. It has been
indorsed by the representatives of foreign associations,
especially those of Austria, where similar movements in
favor of legislative regulation have been started.
In the discussions of the experts the main question
considered was that relative to the economically soundest
and most practical way of employing the deposits. As
regards the cooperative credit associations this question
admits of only one answer, to the effect that no better
way has been suggested or could be suggested than the
one at present followed by the associations. Our credit
associations are enabled by means of the deposits and
savings to fulfill the task of placing at the disposal of
their members the necessary working capital at a low
rate of interest. The associations conduct the deposits
and savings into the proper channels and constitute an

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B a n k I n q u i r y of 1 9 0 8 ~ 9
economically advantageous counterpoise to the excessive
centralization of the deposit business. In the face of
this, the proposition of Professor Warschauer, contained
in the collection of papers on the question of the deposit
business, that the associations with unlimited liability
shall be permitted to accept deposits only to the amount
of the working capital paid in by the members, while
the credit associations with limited liability shall be
altogether prohibited from taking savings deposits, cer
tainly sounds very queer.
The great Genossenschaften, gentlemen, retain the
form of associations merely in a spirit of idealism and
only when they feel that they are powerful enough do
they exchange unlimited liability for limited liability.
But when they have done this they offer no less a guar
anty for their deposits than before.
Some one remarked yesterday that it is not desirable
that the business of the associations should mount up
into the millions. Yes, gentlemen, we have associa
tions that do a business amounting to millions—our
Union Bank does—but it is made up of an enormous
number of small transactions and my colleague, Herr
Singer, himself will not try to find fault with this kind
of business up into the millions.
I affirm that the deposits in the associations are on
the whole not invested a bit worse and sometimes are
invested even better than those in the joint-stock banks.
Permit me, gentlemen, to relate to you a little anecdote,
the kind that is told in order to impress a lesson on the
young. A few years ago one of the Genossensschaften
of our union, the Union of Lower Baden, through the

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N a t i o n a l M o n et a r y C o m m i s s i o n
dishonest manipulation of its president, who, because he
was a mayor of a city, possessed the absolute confidence of
the members, sustained a loss of upward of 800,000 marks,
a loss far surpassing in mount the combined capital, the
current-account balances in other institutions, and the
surplus. Through the combined action of the asso
ciations it was found possible to prevent the loss of even
a single pfennig of the deposits (so-called) or of the sav
ings. The associations in cooperation with the Dresdner
Bank, which serves as the central bank for our Genossenschaften, allowed a loan on mortgage to the loan
association, which enabled it to stay' on its feet, and
now after the lapse of only a few years the Genossenchaft
has been placed once more in the position of being able
to distribute among its members a dividend on the funds
it possesses. I repeat, gentlemen, the depositors sus
tained no loss, thanks to the strength of the Genossenschaften and their combination, while in the case of any
other kind of business association a loss would have
been incurred.
With respect, likewise, to the fluidity of the invest
ments made by the associations, it is necessary to bear in
mind what I have just mentioned, that is, the combi
nation of the associations in “ unions ” and the accounting
functions that are being exercised. The “ general union,”
moreover, as was explained in the memorial submitted to
us, lays great stress on the creation of an individual capital
fund by the associations belonging to the union, and herein
is an important factor in the matter of the readiness of our
Genossenschaften to meet their liabilities.

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B a n k I n q u i r y of 1 9 0 8 ~ 9
I should, therefore, also like to express it as my opinion
that the security of the investments and deposits is in gen
eral such that legislative regulation is unnecessary. I
agree with what our colleague, Doctor Weber, asserted
yesterday to the effect that the competition of the Aus
trian savings banks, already noticeable in Saxony, would
be rendered keener by a law relative to deposits. The
same thing is already visible where I am, in Baden, the
neighboring Swiss savings institutions and big banks
trying to outdo one another by means of circulars and let
ters of every kind in efforts to induce the German dwellers
in neighboring towns to do business with them. They
point to the various tax laws—to the coupon tax, for ex
ample—and they could do this with still greater success if,
as a result of restrictive legislation relative to deposits,
the rate of interest on deposits in Germany were to be re
duced. Such legislation would cause money to flow
abroad and precisely the contrary of what is sought would
be achieved.
If it were practicable, gentlemen, to frame a law that
would make it impossible for dishonest men to accept de
posits and which would not injure legitimate business, I
should rejoice, and I am sure you would also. I can not
perceive any feasible way, however, and I find that the
solution of the problem by legislative means, appears the
more difficult and the less probable the deeper one goes
into the study of the matter.
Some of the questions submitted, as, for example, those
relative to investments in government bonds and similar
securities and the publication of intermediate statements,
appear to me to admit of discussion in spite of my being on
the whole opposed to legislative regulation.

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N a t i o n a l M on et a r y C o m m i s s i o n
Doctor L e x is .—Gentlemen, I made an attempt yester
day to get up some sort of classification of the various
kinds of deposits, and I am happy to state that I pretty
much concur in what President Heiligenstadt expressed
to-day. I had likewise made a distinction between the
deposits of merchants, that is, persons whose names are
entered in the commercial register, and those of non
merchants. It would perhaps be better to say, of business
men and of nonbusiness men, in which case the small pro
ducers and trades people would also be included in the
first category. As regards the nonbusiness men, who like
wise constitute a well-defined class, the deposits of this
category would again have to be divided into those on
the one hand which may have to be paid out at any
time and which may serve as the basis of check trans
actions—constituting thus the real deposits, in the sense
in which President Heiligenstadt conceives the notion—
and those, on the other hand, which have the charac
ter of savings deposits, which do not represent demand
liabilities, and are withdrawable only on at least a week’s
notice. I am speaking here of banks only and not of
savings institutions and cooperative credit associations.
Personally I have merely a theoretical interest in under
taking such a calssification. But, of course, there is also
a practical interest involved in it. For my part, indeed,
I am not going to advocate any restrictive measures of
whatsoever kind relative to the acceptance of deposits, but
if such restrictions were, as a matter of fact, to be decreed,
it would be well to discriminate between the various
kinds of deposits, placing those apart that belong to the
third category—that is to say, the savings deposits of

22 4

B a n k I n q u i r y of 1 9 0 8 - 9
nonbusiness men—in the case of which notice of withdrawal
has to be given at least a week in advance. However,
as I have said before, I am not in favor of restriction.
But the practical men keep telling us that such a dis
tinction is not feasible. Perhaps, with the present meth
ods of accounting it is not altogether practicable. The
question is whether it may not be made so through a
change in the methods of accounting. To me this does
not appear by any means unattainable. I am not pro
posing anything. I am merely suggesting discussion.
With respect to the future, however, regard should be had
for probable further developments. Above all, the check
system is going to expand, and many persons who now
belong to the class of depositors without business occupa
tion will be enrolled among the users of checks. It seems
to me, however, very important, both from a theoretical
standpoint and with reference to our whole monetary
policy, that it shall be possible in the future to deter
mine in some measure how large the sum is that is the
basis of the monetary intercourse by means of checks in
Germany. We have no accurate knowledge at present
in regard to the subject in what concerns England either.
The “ Economist” gives every half-year an estimate of
the aggregate amount of deposits. These, however, are
not all deposits subject to check, but include also those
that are withdrawable only “ at short notice” or after the
lapse of a considerable time. The question remains, How
large is the actual sum which is the basis of the English
system of payment by check ? It is very desirable, there
fore, in view of the anticipated economic development
in Germany, that we should have in advance a better

N at i on a l M on et a r y C o m m i s s i o n
statistical foundation and that we should be able to say:
This kind of deposits—meaning, specifically, the savings
deposits—need not be taken into account in connection
with payments made by means of checks, but, on the other
hand, we have to consider the deposits of nonbusiness
men, which are expressly meant to be used for making
check payments, in addition to the aggregate of the
deposits figuring in accounts current.
I would urge, therefore, that we try to arrive in some
measure at a common understanding in regard to the dif
ferent kinds of deposits and some practicable method of
discriminating between them. If this can not be done
just at the present moment, it will be feasible later on.
As regards the other subjects that have been submitted
to our consideration, I shall not enter into a discussion of
them. I should like, however, to express my opinion
concerning one point. The competition of the banks, in
particular the competition of bank deposits with govern
ment securities, does not appear to me nearly as formidable
as it does to some of the gentlemen here, for the banks do
not actually allow a higher rate of interest on their
deposits, but usually a lower rate than that afforded by
government securities. Even in the worst times, the big
German banks have never to my knowledge, paid more
than
per cent on deposits. It is not the deposits in
the banks that are in competition with the government
securities, but the shares. The bulk of the people who
are anxious for a higher rate of interest prefer to invest
in stocks. Consequently the objections that have been
raised against the banks of deposit on this score appear
to me to be without any point.

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B a n k I n q u i r y of 1 9 0 8 - 9
The C h a ir m a n . Gentlemen, it is nearly half past one.
I move that we adjourn. It has been suggested not to
stretch the noon recess to two hours. Would it be agree
able to the gentlemen if we were to begin promptly at
three o’clock and perhaps stop a little earlier ? [Assent.]
(Recess.)
The C h a ir m a n . We shall proceed with the discussion.
Count Kanitz has the floor first, in order to make a brief
correction.
Count K a n it z . I said this morning, gentlemen, that
the resolution adopted by the Reichstag in May of this
year had been adopted in the previous deliberation of the
commission by a vote of 21 to 4, and that only the
Freisinnige and Social-Democrats had voted against it.
Herr Singer has since called my attention to the fact that
the Social-Democratic members of the commission did not
vote against the resolution, but in favor of it. I consider
it my duty to correct my statement regarding the matter.
Mr. S c h in c k eh . I should not like to appear, even for a
moment, to have any doubts regarding the interest of the
public in the management of our entire system of banks,
Genassen-schaften, and savings institutions. Neither do
I wish to question the fact that, just as is the case with all
human arrangements, so in this domain there may occur,
as has already been pointed out, overstrains and mistakes
of every kind; but I hold to the opinion that unless clearly
demonstrable dangers and abuses have been manifested
in the management, such as it has been, we should refrain
from setting the machinery of legislation in motion. The
experiences which we have had in this field—to which I
shall refer again later on—have not been of such a nature

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N ational M on et ary Commission
that we should, without the stress of pressing necessity,
resolve again upon new laws, or, to express myself properly,
to advocate new laws, which, however framed, will in any
way hamper or restrict our industry and our monetary
intercourse, and in particular our credit system.
In his introductory address our chairman declared that
if our banking system, our system of savings institutions,
and our system of cooperative credit associations have
revealed weakness, it is our duty to face the dangers
squarely, to locate the weak spots, and to think about
the remedy. That is the object of this inquiry, and I
affirm emphatically that I shall be extremely glad to
cooperate in this work.
I have been intentionally so late in taking the floor in
order to be able to learn from the utterances of the speak
ers wherein the dangers and abuses have actually mani
fested themselves, and the result of my close attention
has been a remarkably meager one. In order to make this
more apparent, I shall enter in detail into some of the
statements of the gentlemen who have preceded me.
Freiherr von Gamp thought there was something wrong
in the fact, as revealed by statistics, that the banks—he
spoke of the small banks in particular—should hold so
much borrowed money relatively to their capital and their
liquid assets, and he expressed his fear that this might
lead at some time or another to disastrous consequences.
He asserted the same thing with reference to savings insti
tutions and individual credit associations, adding, how
ever, that this, although very regrettable, was not of great
consequence, the matter being mainly one of local interest.
I wish to say that this very redeeming feature is manifest

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B a n k I n q u i r y of 1 9 0 8 - 9
in the case of the small banks likewise. As regards the
great banks, so called, however—and it is with these that
we are mainly concerned—Freiherr von Gamp did not in
the least question their security or their ability to mobilize
their resources.
Count Kanitz also, in the first part of his address,
declared that it was especially people of small means who
had to be protected, people who are being inveigled by a
high rate of interest, or through all kinds of advertisements
like those to which reference was made in the last resolu
tion of the Reichstag, into depositing their savings in an
unsound institution. I can not help agreeing with Count
Kanitz in this matter. Personally, I am not of opinion
that legislative measures will be required in order to
prevent this. I shall return to the subject later on.
Count Kanitz spoke also of the law relative to the
Bourse. Now, I am not at all eager to enter into a dis
cussion of the Bourse Law, but inasmuch as this was also
a sort of exceptional piece of legislation, an emergency
law, and we are about to discuss the question as to
whether a similar exceptional law ought not now to be
enacted, I am obliged to refer in a few words to the results
of the law in question.
Count Kanitz asserted that all that was left of the
Bourse law was the government bourse commissary.* I
wish I could say he was right, but it is not possible for me
to admit it, for there are various things besides this
that have stuck to the measure. I need merely remind
you of the forms and the detailed character of the prospec
tuses. I beg you, gentlemen—and I assure you that I am
really unprejudiced in this matter—to look at the thing

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at ion a l M on et a r y C o m m i s s i o n

from a practical standpoint and to tell me whether any
one has been able to discover the least use in these long
prospectuses. On the contrary, the prospectuses have
grown to good-sized books, so that you will not find any
body who reads them except the typesetter who has to
print them or the unfortunate official who has to report
upon them to the listing bureau. [Laughter.] In addi
tion, of course, there are certain newspapers that are inter
ested, which have made this thing a large source of reve
nue—a not very virtuous proceeding, I must say. [Laugh
ter.] I mention this, gentlemen, because I fear that in
the case of these detailed intermediate statements the
same thing may happen. The more details there are in
these so-called intermediate statements the more time will
be required to get them out and the less real interest
will they possess. I am willing to admit that men of a
scientific turn of mind, to which class newspaper editors
now also belong, have a certain curiosity, and even a
scientific interest, impelling them to enrich their knowledge
with the bare figures. I do not consider, however, the
advantage as great as is the mischief that results. To
this subject, likewise, I shall refer again farther on.
Count Kanitz then came to the subject of agriculture
and to that of agricultural credit. I should naturally
be very glad if we had a lower rate of interest in Germany,
and that, as a result of it, the agricultural credit in con
nection with agricultural mortgage debentures were
cheaper. But it is useless to ask that these debentures
be issued with a lower rate of interest than that of govern
ment bonds, and it was a mistake— I have publicly asserted
it to be such whenever I had occasion to express myself

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B a n k I n q u i r y of 1 9 0 8 - 9
on the subject—on the part of the Tandschaften, or agri
cultural credit associations, when they adopted the policy
of forced conversions, for it was practically nothing else
when they all of a sudden called in mortgage debentures
to the sum of hundreds of millions and tried to lower the
rate of interest to
per cent. This had the effect of
reducing the rate of interest on government bonds, which
were now placed on a 3 per cent basis, a change that
did not improve the general economic situation. On the
whole, I must admit—and I am an agriculturist myself—
that otherwise agriculture has no right to complain in the
matter of the protection that it receives in Germany and
that the public has to take some burdens into the bargain.
Glad though I am to be able to concur, all in all, in the
statements made to-day by Count Kanitz, I must say
that, in addition to the burdens entailed by our socialreform legislation and the excessive taxes, the rise in the
price of bread and meat is sorely felt—something that
benefits agriculture alone and which I do not begrudge
in the least to agriculture but which, all the same, is a
large unfavorable economic factor.
The subject of checks also came up for a brief discus
sion. Herr Mommsen was altogether misunderstood yes
terday in regard to this matter. The banks at the time
supported the Reichsbank in a body in every possible
way by word, script, and deed in the endeavor to restrict
the use of metallic cash in monetary intercourse, sub
jecting themselves willingly to the extremely dangerous,
unprofitable, and expensive system of payments which
has checks for its vehicle. All that our colleague Momm
sen wished to say is that it would be a great wrong toward
62838°—

2— II---- 16

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N at ion a l M o n e t a r y C o mm i s s i o n
the banks, after they have assumed the great burden of
the labor, the expense, and the risk which the use of checks
at present imposes upon them, to try to make them appear
as though they still owed us something by using language
like this: “ You see the banks profit greatly by the cir
cumstance that checks can be drawn upon them; they
are protected by legal regulations, and therefore they are
able and ought to render the public additional service.’’
That would be a grossly mistaken conclusion. In that
case it were better for the banks in every respect if the
obligation to allow checks to be drawn upon them were to
be rescinded.
Count Kanitz touched upon conditions in England,
and I should like to say a word by way of comment on
his statements. The question is not merely as to whether
or when England is to go over to protection. The reform
of the tariff which threatens us has for us a vastly more
serious aspect. It is proposed to establish preferential
duties for all the English colonies, even for those English
colonies, so called, which constitute in reality independ
ent States, stretching over the whole breadth of the
globe, and which, if England proceeded to introduce
preferential zones for all her colonies, protectorates, or
other dependencies, threaten to close to us a large part
of the world of commerce. There is consequently much
more involved in the matter than what we should call
an agrarian English interest. It is a matter affecting a
great territory, hitherto international, whose open door
would no longer exist for us.
Herr Gontard had little of a precise nature to say
regarding the dangers involved in our banking system,

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B a n k I n q u i r y of 1 9 0 8 - 9
in particular those presented by our so-called “ great
banks.” He said, however, that he had a peculiar feel
ing that the resources of the banks were at times not
sufficiently liquid. I am fair and unprejudiced enough to
say that I likewise am acquainted with banks in respect
to which this feeling is not altogether unjustifiable.
In the very interesting and earnest utterances of Direktor Stroll there was one thing that I did not fully under
stand, the distinction which he makes between cash
reserves and credit balances in banks, a point which, it
seems to me, needs some explanation. What is a cash
reserve nowadays? Are the banks to begin once more
keeping their own stock of cash in gold, silver, and bank
notes instead of turning them over to the Reichsbank?
We have been taught to do everything in order, by
means of the system of transfers from one account cur
rent to another and the mechanism of checks, to restrict
the demand for cash currency in Germany, and if any
bank to-day were to put the gold that it receives into its
vaults and to try to run things its own way in the matter
of gold, it would, in my opinion, not be rendering any
service to the Reichsbank, which could say with justice:
“ This gold belongs to my vaults, for it can be put to a
much better purpose here, inasmuch as the law authorizes
us to issue against this gold a volume of bank notes
exceeding the amount of the gold.” I must say that I
can not discover any difference between a cash reserve in
my bank and my credit balance in the Reichsbank. I
wish to say right here that the proposition that a certain
percentage of the outside moneys of a bank should be con
stantly kept on hand in the shape of cash—a proposition

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N at ion al M on et a r y C o mm i s s i o n
that we ourselves are discussing—would amount to
nothing more than that for the time being the cash
holdings of the Reichsbank would be increased by so
much, but that at the very time when such reserve is
needed this money would in some form or another be
withdrawn from the bank. If for any reason I am obliged
to set aside money, in the way of a reserve not to be
touched, either in my own vaults or in the Reichsbank,
then, in the first place, I am withdrawing it from circula
tion, and in the second place, it will not be of any use
to me in case of need, unless I am bankrupt. This has
already been adverted to by several of the speakers. Such
a reserve would offer security to an individual who has
got into deep water, or rather to his creditors, only at
the moment when he can have recourse to this reserve,
and this can not be the case until he is on the point of
suspending payments J in every other case it is the Reichs
bank that will be called upon first for additional advances.
Above all things, I wish to say that I, as a banker, can
see no difference whatever between cash in my vaults
and the credit balance at the Reichsbank with respect
to fluidity and security.
Doctor Stroll dwelt, furthermore, on the strong reserve
that the Genossenschaften possess in their solidarity,
and he said that this was really an ideal feature of our
economic existence. Of course, gentlemen, this is per
tinent to the matter before us, as we ought to express
ourselves in regard to the dangers that may perhaps be
threatening the credit associations. My position is
this—and I do not wish at all to deny it—that in so far as
the members of the associations are all jointly liable, and

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Inquiry

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in so far as they are not carrying on a cooperative busi
ness in the way of the manufacture and sale of butter, or
the production of beet sugar, or something of the sort; in
other words, so long as they are not productive associa
tions and the moment they begin to turn into credit asso
ciations I consider the feature of solidarity as one involving
«
great economic danger. I consider an association, pos
sessing, let us say, some sort of a central treasury, having
limited liability, a liability ever so restricted, but one
that actually exists, or may be reckoned upon, preferable
to an association with unlimited liability, about whose
resources for meeting this unlimited liability I am alto
gether in the dark. I do not mean to say that I am
altogether blind to this ideal feature, which Doctor Stroll
has so nicely touched upon, but I should nevertheless like
to call your attention to the fact that the ideal in this
arrangement will flourish only just so long as all are liable
for the one; this is all very fine, I know. But as soon as
the occasion arrives where one or two have to be liable
for all the ideal in the matter will disappear and there
will be a very sick feeling somewhere in our economic
organism. All I mean to say by this is that there is
certainly some advantage in solidarity and—I admit
that Doctor Stroll is perfectly right in this—that a feeling
of solidarity should, and does, hold the great credit banks
together just as it does the credit associations. But as
regards liability I must say, as a bank director, that
joint liability is a notion which, as a result of my sad
experience in this field, I have erased from my lexicon.
President Heiligenstadt, who is unfortunately absent,
referred at various times to his published writings. I

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N a t ion a l M o n e t a r y C o m m i s s i o n
believe he meant to say that the credit banks, the Genossenschaften, and the savings institutions ought to de
posit with the Reichsbank a sum representing a certain
percentage of the outside moneys. I am not very familiar
with these publications, but what he said transcended
the bounds of really practicable legislation, and what he
said regarding the division into consumers and producers
I must frankly confess I did not comprehend. I shall
not dwell on this any further, as he is not present, and we
can return to the subject later on. I would, however,
remark in this connection that in my opinion every
producer is also a consumer, for there never was a person
who only produced and did not consume at all. What I
fear is that if there were to be legislative provisions or,
for that matter, mere instructions relative to the publica
tion of statements and intermediate balance sheets no
one would care to be much longer a bank president.
I should, for example, if a foreign government were sud
denly to favor me with a credit balance, have to ask my
self whether that government was a consumer or a pro
ducer, and I fear if I were continually subjected to the
necessity of making such decisions my brain would come
to a complete standstill. [Exclamation: The Govern
ment is only a consumer.—Laughter.] All right, then;
I should have to enter it among the consumers.
In any case, such an arrangement would, I believe, be a
great hardship for the banks. I should also advise Herr
Gontard just to wait before he becomes supervisory coun
cillor of a bank, and proposes more stringent penal pro
visions for supervisory councillors, until he sees how the
thing works, for he might fare very badly.

2 36

B a n k I n q u i r y of 1 9 0 8 - 9
Herr von Cetto spoke of the agrarian country, England.
Unfortunately, his words have slipped from my memory.
I shall later ascertain from the stenographic reports just
what he said.
Reference has repeatedly been made to the fact—and
Professor Lexis, in particular, has stated it—that the dual
system of management in the English banks has always
met with emphatic commendation. I must destroy this
picture. It has developed more and more in the past year
that the Englishmen evidently regard this arrangement as
antiquated. They will not be able to preserve it. As
everyone knows, the deposit banks in that country are
being, one after the other, fused with the credit banks.
The concentration of the banks in England in these last
years has been going on at a much more rapid rate than in
Germany, and I shall not mind divulging the information
to you that it was one of the biggest deposit banks which
is said recently to have received warning from the Bank of
England in regard to the excessive range of its acceptances,
on the ground of its having accepted too much paper
against American securities. Thus the system of deposit
banking, pure and simple, is getting to be a thing of the
past in England. There is another circumstance that I
am going to mention, just by way of illustration—the fact
that it was one of the oldest banks of deposit that issued
all the Japanese loans, a proceeding with which I do not
mean to find the least fault, but which, in the eyes of the
gentlemen who are enthusiastic in regard to banks of
deposit, does not enter into the scope of its business. In
my opinion, we should not have acted wisely if we had
pinned our faith to English institutions.

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N ation al M onetary Commission
I must now say a word with reference to Professor
Wagner, whose absence I regret exceedingly. Were he
present, the homage due to his age and that due to the
undoubtedly great services which he must have rendered
to economics—otherwise he would not have become pro
fessor, Geheimrat, and Exzellenz—would prevent me
from making such a reply to his statements as they
actually call for. I shall endeavor, as far as possible, to
say what is pragmatic to our discussion. I can not, how
ever, refrain from remarking that I consider it a great
pity that the chairs in our universities should be inculcat
ing such principles into the minds of those who study
political economy there. Professor Wagner remarked
incidentally that when he had interest at the rate of 3 ^
per cent placed to his credit at the Discontogesellschaft
he was quite sure that his deposits were perfectly safe.
Another thing that he said was that he was sorry that pro
duction had reached such dimensions with us, and this he
uttered on top of a very telling and earnest remark coming
from Herr Roland-Eiicke. I hope—and I should not have
liked to hear it—that Professor Wagner did not say that
he would welcome a decrease in production with reference
to the growth of our population.
Mr. M o m m sen . He did say it.
Mr. S c h in c k e e . Then I have certainly a right to pro
test. Gentlemen, if we should ever fall so low as to
follow the example of the blessed land, France, and inl
troduce the two-children system into Germany—some
thing that is unfortunately getting to be the fashion
in England, and to a very large extent in some of the
English colonies—then in my opinion there is no use in

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