[Gutenberg 35120] • Readings in Money and Banking / Selected and Adapted by Phillips, Chester Arthur -- Read -- Imperial Library of Trantor

Index

E-text prepared by Jonathan Ingram, Josephine Paolucci, and the Online Distributed Proofreading Team (http://www.pgdp.net) from page images generously made available by Internet Archive/Canadian Libraries (http://www.archive.org/details/toronto) READINGS IN MONEY AND BANKING

READINGS IN MONEY AND BANKING

SELECTED AND ADAPTED BY

CHESTER ARTHUR PHILLIPS PREFACE TABLE OF CONTENTS READINGS IN MONEY AND BANKING CHAPTER I

THE ORIGIN AND FUNCTIONS OF MONEY FOOTNOTES:

CHAPTER II

THE EARLY HISTORY OF MONEY Currency in the Hunting State Currency in the Pastoral State Articles of Ornament as Currency Currency in the Agricultural State Manufactured and Miscellaneous Articles as Currency The Invention of Coining FOOTNOTES:

CHAPTER III

QUALITIES OF THE MATERIAL OF MONEY 1. Utility and Value 2. Portability 3. Indestructibility 4. Homogeneity 5. Divisibility 6. Stability of Value 7. Cognisability FOOTNOTES:

CHAPTER IV

LEGAL TENDER[5] FOOTNOTES:

CHAPTER V

THE GREENBACKS The Greenback Issues The Fluctuating Premium on Gold The Effects of Greenbacks upon Wages Rent

URBAN RENTS FARM RENTS

Interest and Loan Capital

THE PROBLEM OF LENDERS AND BORROWERS OF CAPITAL PURCHASING POWER OF THE PRINCIPAL OF LOANS THE RATE OF INTEREST

Profits

PROFITS IN AGRICULTURE STATISTICAL EVIDENCE REGARDING PROFITS

The Production and Consumption of Wealth

PRODUCTION CONSUMPTION

The Greenbacks and the Cost of the Civil War

GREENBACKS AND EXPENDITURES THE GREENBACKS AND RECEIPTS (In millions of dollars)

Contraction and Inflation of the Legal Tenders[9] Passage of the Resumption Act[10] The Struggle for Resumption[11] Arrangements for Resumption[12] Should the Greenbacks Be Retired?

WHY RETIREMENT IS NOT IMPORTANT

The Confederate Currency[14] FOOTNOTES:

CHAPTER VI

INTERNATIONAL BIMETALLISM FOOTNOTES:

CHAPTER VII

THE SILVER QUESTION IN THE UNITED STATES Agitation for Silver and the Passage of the Bland Bill Provisions of the Act of 1878

SILVER CERTIFICATES

Causes of the Act Wherein Peculiar Limited Circulation of the Silver Dollars Provisions of the Act of 1890

AMOUNT OF MONTHLY ISSUES The Policy of the Banks

The Argument for Silver

THE BIMETALLIST ARGUMENTS THE EFFECT OF IMPROVEMENTS IN PRODUCTION THE CASE OF THE FARMER

The Repeal of the Sherman Silver Purchase Act and the Financial and Economic Consequences of Silver Legislation

SALE OF BONDS FOR GOLD

FOOTNOTES:

CHAPTER VIII

INDEX NUMBERS FOOTNOTES:

CHAPTER IX

BANKING OPERATIONS AND ACCOUNTS Statement of A Representative National Bank The Relation Between Loans and Deposits Relation Between Reserves and Demand Liabilities Again

THE RÔLE OF A SPECIE RESERVE ILLUSTRATED BY THE INCONVERTIBLE NOTES OF THE BANK OF ENGLAND ISSUED DURING THE OPERATION OF THE RESTRICTION ACT[37]

FOOTNOTES:

CHAPTER X

THE USE OF CREDIT INSTRUMENTS IN PAYMENTS IN THE UNITED STATES FOOTNOTES:

CHAPTER XI

A SYMPOSIUM ON THE RELATION BETWEEN MONEY AND GENERAL PRICES Indirect Influences on Purchasing Power[52] [Summary] The Testimony of Ricardo FOOTNOTES:

CHAPTER XII

THE GOLD EXCHANGE STANDARD Objections To The Gold-Exchange Standard For The Straits Settlements Answered FOOTNOTES:

CHAPTER XIII

A PLAN FOR A COMPENSATED DOLLAR FOOTNOTES:

CHAPTER XIV

MONETARY SYSTEMS OF FOREIGN COUNTRIES England[89] Canada British Colonies Latin Union France Belgium Italy Switzerland Greece Spain Germany Austria-Hungary Portugal Netherlands Sweden—Norway—Denmark (Scandinavian Union) Russia Japan China Philippines Argentina Brazil Chili FOOTNOTES:

CHAPTER XV

THE NATURE AND FUNCTIONS OF TRUST COMPANIES The Advantages of a Trust Company as Trustee Banking Corporate Trusts Individual Trusts Other Functions Care of Securities and Valuables Insurance Compensation Government Regulation FOOTNOTES:

CHAPTER XVI

SAVINGS BANKS Classification of Savings Banks Trustee Savings Banks Stock Savings Banks Guaranty Savings Banks Municipal Savings Banks People's Banks The Localization of Savings Banks in the United States Postal Savings Banks American Postal Savings Banks

ARGUMENTS FOR AND AGAINST THE ESTABLISHMENT OF POSTAL SAVINGS BANKS IN THE UNITED STATES. THE MAIN FEATURES OF THE SYSTEM

"Postal Savings Behind the Scenes" FOOTNOTES:

CHAPTER XVII

DOMESTIC EXCHANGE Exchange Relations Between Chicago and New York Exchange Relations Between St. Louis and New York Domestic Exchange in San Francisco on New York City Currency Movements Between New England and the Eastern States The Domestic Exchanges During the Crisis of 1907[102] FOOTNOTES:

CHAPTER XVIII

FOREIGN EXCHANGE The Nature of Foreign Exchange "Favourable" and "Unfavourable" Exchanges The Origin and Supply of Foreign Exchange The Sources of the Demand for Foreign Exchange[106] Methods of Financing Imports and Exports[107] Credit Risks of Drafts Drawn on Buyers Abroad England Draws Few Bills, But Accepts Many—The Reason and the Result The Recent Rise of the American Acceptance Market The Economies and Advantages of "Dollar Credits"[113] The New York Foreign Exchange Market[114] New York City Practically Absorbs by Purchase All American Foreign Exchange How Money Is Made in Foreign Exchange—The Operations of the Foreign Department

I. SELLING "DEMAND" AGAINST "DEMAND" II. SELLING CABLES AGAINST DEMAND EXCHANGE III. SELLING "DEMAND" BILLS AGAINST REMITTANCES OF LONG BILLS IV. THE OPERATION OF MAKING FOREIGN LOANS V. THE DRAWING OF FINANCE-BILLS VI. ARBITRAGING IN EXCHANGE.

Gold Movements

COMPLICATIONS IN THE DETERMINATION OF GOLD POINTS THE HANDLING OF GOLD SHIPMENTS

The Silver Exchanges FOOTNOTES:

CHAPTER XIX

CLEARING HOUSES I. In the United States

A CLEARING HOUSE DEFINED METHODS OF EXCHANGE IN NEW YORK PRIOR TO 1853 THE ORIGIN OF THE NEW YORK CLEARING HOUSE MEMBERSHIP AND ADMITTANCE FEES AT NEW YORK [126]METHODS OF SETTLING BALANCES [127]RATIO OF BALANCES TO CLEARINGS [128]THE NATURE OF CLEARING-HOUSE LOAN CERTIFICATES CLEARING-HOUSE LOAN CERTIFICATES AND THE EQUALIZATION OF RESERVES[129] CLEARING-HOUSE BANK EXAMINATIONS[133]

II. Clearing Houses in England

THE LONDON BANKERS' CLEARING HOUSE AS THE FOREMOST EXAMPLE PROVINCIAL CLEARINGS

FOOTNOTES:

CHAPTER XX

STATE BANKS AND TRUST COMPANIES SINCE THE PASSAGE OF THE NATIONAL BANK ACT The Evolution of the Trust Company Incorporation Capital and Surplus Requirements Liability of Stockholders Restrictions on Loans and Discounts

LOANS TO DIRECTORS AND OFFICERS REAL ESTATE LOANS

Reserves Branch Banks Further Reason for the Lack of Branch Banks in the United States The New York State Bank Act of 1914[145] FOOTNOTES:

CHAPTER XXI

THE CANADIAN BANKING SYSTEM The System Not New Other Financial Institutions The Essentials of the System

PROCESS OF INCORPORATION NOTE ISSUES SECURITY OF NOTES IMPORTANCE OF REDEMPTION THE CIRCULATION REDEMPTION FUND TWO NEGATIVE QUALITIES CANADIAN BANKERS' ASSOCIATION ELASTICITY OF THE CIRCULATION BANK NOTES HAVE NO COMPETITION NO LIMIT OF ISSUE REALLY NECESSARY THE PRACTICAL LIMIT UNDER THE LEGAL

Deposits

SAVINGS DEPOSITS ALWAYS PAID ON DEMAND SAVINGS DEPOSITORS NOT PROPERLY REWARDED

No Bankers' Bank Amount of the Reserve Fixed by Each Bank Competition Is Not Lacking Banking in Different Provinces

EASTERN PROVINCES HAVE SUFFERED

Large Use of Deposit Currency Banks Silent Partners in Industry A Customer's Line of Credit Loans to Farmers Call Loans in Canada and Elsewhere The Banks as Financial Institutions The Revision of the Bank Act, 1913[148] Comparative Figures of Condition of Canadian Banks[149]

ASSETS LIABILITIES

FOOTNOTES:

CHAPTER XXII

THE ENGLISH BANKING SYSTEM Foundation and Growth of the Bank of England Peel's Act or the Bank Charter Act of 1844, and its Suspensions Account of the Liabilities and Assets of the Bank of England

For the Week ending 7th September, 1844

The Functions of the Bank of England The Joint-Stock Banks The Private Banks The Merchant Bankers and Accepting Houses The Discount Houses Interview with the Governor and Directors of the Bank of England Interview with Sir Felix Schuster, Governor of the Union of London and Smith's Bank Limited Interview with Mr. Charles Gow, General Manager of the London Joint Stock Bank, Limited FOOTNOTES:

CHAPTER XXIII

THE SCOTCH BANKS Democracy of Scotch Banking Use of Notes as "Till Money" in Relation to the Establishment of Branches Evasion of Peel's Act Defects Bank of Scotland

INTERVIEW WITH SIR GEORGE ANDERSON, GENERAL MANAGER[160]

Royal Bank of Scotland

INTERVIEW WITH ADAM TAIT, CASHIER AND GENERAL MANAGER[161]

Commercial Bank of Scotland (Limited)

INTERVIEW WITH ALEXANDER BOGIE, GENERAL MANAGER[162]

Union Bank of Scotland (Limited)

INTERVIEW WITH ROBERT BLYTH, GENERAL MANAGER[164]

FOOTNOTES:

CHAPTER XXIV

THE FRENCH BANKING SYSTEM The Bank of France

CASH HOLDINGS OF THE BANK OF FRANCE

Place of the Bank of France in the Distribution of Credit

LOCAL BANKS AND THE FINANCIAL INSTITUTIONS IN WHAT MANNER THE BANK OF FRANCE PROMOTES THE FREE DISTRIBUTION OF CREDIT IN FRANCE IN WHAT MEASURE THE BANK MUST CONTROL CREDIT

Territorial Expansion of the Bank of France The Bank of France and Agricultural Credit The Bank of France

INTERVIEW WITH M. PALLAIN, GOVERNOR OF THE BANK OF FRANCE[177]

The Crédit Lyonnais

INTERVIEWS WITH BARON BRINCARD, ADMINISTRATEUR DÉLÉGUÉ, AND OTHER OFFICIALS OF THE CRÉDIT LYONNAIS[178]

Comptoir d'Escompte

INTERVIEW WITH M. ULLMANN, DIRECTOR OF THE COMPTOIR D'ESCOMPTE[179]

Banque de Paris et des Pays-Bas

INTERVIEW WITH M. MORET, MANAGER OF THE BANQUE DE PARIS ET DES PAYS-BAS[180]

Crédit Foncier de France

INTERVIEW WITH M. TOUCHARD, SECRETARY[181]

Caisse des Dépôts et Consignations

INTERVIEW WITH M. DELATOUR, GENERAL DIRECTOR OF THE CAISSE DES DÉPÔTS ET CONSIGNATIONS[182]

Crédit Agricole

INTERVIEW WITH M. DECHARME, CHEF DU SERVICE DU CRÉDIT MUTUEL ET DE LA COOPÉRATION AGRICOLE AT THE MINISTÈRE DE L'AGRICULTURE[183]

FOOTNOTES:

CHAPTER XXV

THE GERMAN BANKING SYSTEM Banking Arrangements in Germany General Sketch of Bank and Credit Organisation in Germany

BANKS OF ISSUE COMMERCIAL BANKS AND THEIR RELATION TO INDUSTRY AND COMMERCE LAND CREDIT INSTITUTIONS RAIFFEISEN AND SCHULZE-DELITZSCH BANKS

Interview with Herr Kleemann, Director of the Dresdner Bank The Reichsbank

INTERVIEWS WITH HERR DR. VON GLASENAPP, VICE-PRESIDENT, AND HERR DR. VON LUMM, DIRECTOR, OF THE REICHSBANK[191]

Königliche Seehandlung (Royal Sea-Trade Society)

INTERVIEW WITH HERR GEH. OBERFINANZRAT LOTTNER, DIRECTOR OF THE ROYAL SEEHANDLUNG, PRUSSIAN STATE BANK[192]

Deutsche Bank

INTERVIEWS WITH HERR PAUL MANKIEWITZ, DIRECTOR, AND HERR A. BLINZIG, ALTERNATE, OF THE DEUTSCHE BANK[193]

Dresdner Bank

INTERVIEWS WITH HERR SCHUSTER AND HERR NATHAN, DIRECTORS OF THE DRESDNER BANK[194]

Bank des Berliner Kassen-Vereins

INTERVIEW WITH HERR HOPPENSTEDT[195]

FOOTNOTES:

CHAPTER XXVI

BANKING IN SOUTH AMERICA Our Growing Surplus for Foreign Investment Greater Lending Power of Banks European War English Banks in South America

ENGLISH TRADE AND BANKS DEVELOP TOGETHER

German Banks in South America

OTHER INFLUENCES IN BANK EXPANSION

Other Banking Institutions

AMERICAN BANKS DOMESTIC BANKS LAND MORTGAGE BANKS

Conditions of Commercial Banking

LITTLE CONTROL OR CO-OPERATION NATIONAL COLONIES PERSONAL CHARACTER OF BUSINESS DEALINGS UNDEVELOPED ECONOMIC ORGANISATION INTEREST RATES COMPENSATION OF DIRECTORATE CLASSES OF BUSINESS OF FOREIGN BANKS

FOOTNOTES:

CHAPTER XXVII

AGRICULTURAL CREDIT IN THE UNITED STATES Agricultural Credit Conditions in the United States Value of Farm Implements and Machinery in the U. S.[206] Farm Credit in a Northwestern State[225]

LONG-TIME LOANS SHORT-TIME LOANS

Cattle Loan Banks[226] FOOTNOTES:

CHAPTER XXVIII

THE CONCENTRATION OF CONTROL OF MONEY AND CREDIT Have We a Money Trust? The Borrower and the Money Trust

BANKING THE MOST LOGICAL OF TRUSTS NO LACK OF BANKING FACILITIES WHERE THE MONEY HAS GONE CONSOLIDATION—A STEADY PROCESS HOW THE LAW HAS FOSTERED AFFILIATION THE CORPORATION AND THE BANK HARMONY THE WATCHWORD MONEY POWER NOT DISTINCTLY AMERICAN WHY, THEN, DO WE HEAR FEW COMPLAINTS FROM ABROAD? WHERE IS THE VITAL DIFFERENCE?

The Banks and Railway Finance FOOTNOTES:

CHAPTER XXIX

CRISES The Nature of an Economic Crisis The Crisis of 1907 in the Light of History Current Theories of Crises

TWO POINTS OF AGREEMENT BEVERIDGE'S "COMPETITION THEORY" MAY'S THEORY OF THE DISCREPANCY BETWEEN WAGES AND PRODUCTIVITY HOBSON'S THEORY OF OVER-SAVING HULL'S THEORY OF THE CHANGING COSTS OF CONSTRUCTION SOMBART'S THEORY OF THE UNEVEN EXPANSION IN THE PRODUCTION OF ORGANIC AND INORGANIC GOODS CARVER'S THEORY OF THE DISSIMILAR PRICE FLUCTUATIONS OF PRODUCERS' AND CONSUMERS' GOODS FISHER'S THEORY OF THE LAGGING ADJUSTMENT OF INTEREST

Mitchell's Theory of Business Cycles

1. THE CUMULATION OF PROSPERITY 2. HOW PROSPERITY BREEDS A CRISIS 3. CRISES AND PANICS 4. DEPRESSION

Moore's "Rainfall" Theory Stringent Money and Financial Panics[247] How Banks Should Handle Panics FOOTNOTES:

CHAPTER XXX

THE WEAKNESSES OF OUR BANKING SYSTEM PRIOR TO THE ESTABLISHMENT OF THE FEDERAL RESERVE SYSTEM Conflicting Opinions Inflexibility of Ledger Balances

RIGID RESERVE REQUIREMENTS NEED OF BANKERS' BANK

The Parcellation of Reserves Redeposited or Overlapping Reserves The Perverse Elasticity of National Bank Notes National Bank Notes Unsound and Unsafe Speculation Involved in the Issue of Notes

STATEMENT I STATEMENT II

The Lack of Adjustment Between Bank Notes and Deposits The Commercial Paper Situation in the United States No System of Bank Acceptances and the Absence of an Open Discount Market

THE ESSENTIAL CONDITIONS FOR THE ESTABLISHMENT OF AN INTERNATIONAL DISCOUNT MARKET

Cash Stock Exchange Dealings No Power to Lend on Real Estate[278] The Independent Treasury as a Source of Weakness in Our Banking System[280]

DIFFICULTIES ARISING FROM THE TREASURY SYSTEM CORRESPONDENCE OF TREASURY RECEIPTS AND DISBURSEMENTS EXAGGERATION OF TREASURY EVILS

Lack of Central Control Absence of Regulation of Ratio of Deposits to Capital and Surplus Banking Abuses

USURIOUS INTEREST RATES BANKERS' VIEW OF USURIOUS INTEREST RATES

FOOTNOTES:

CHAPTER XXXI

THE FEDERAL RESERVE SYSTEM The Federal Reserve Act[287]

THE SPIRIT AND OBJECTS OF THE ACT ORGANIZATION CAPITAL, EARNINGS, DEPOSITS OF THE FEDERAL RESERVE BANKS FEDERAL RESERVE NOTES AND NATIONAL BANK NOTES LENDING OPERATIONS OF THE FEDERAL RESERVE BANKS ADDITIONAL POWERS OF NATIONAL BANKS SUPERVISORY FUNCTIONS OF THE FEDERAL RESERVE BOARD

The Federal Reserve Act—an Experiment The Federal Reserve Act and Democracy in Banking The Elasticity of Note Issue Under the New Currency Law[299] Notes Printed and Issued Impounding Gold The Financial Policy of the Federal Reserve Banks[302] Relations of Federal Reserve Banks with Member Banks[303]

RELATIONS BETWEEN THE FEDERAL RESERVE BANK OF MINNEAPOLIS AND ITS MEMBERS RELATIONS BETWEEN THE FEDERAL RESERVE BANK OF BOSTON AND ITS MEMBER BANKS

Federal Reserve Banks and the Acceptance Market Clearings and Collections in Practice Branches and Agencies Proposed Amendments to Federal Reserve Act[311]

STATEMENT OF CONDITION OF FEDERAL RESERVE BANKS.[312] Combined resources and liabilities of all Federal Reserve Banks as at close of business on the last Friday of each month during 1915.

FOOTNOTES:

CHAPTER XXXII

THE EARLY EVENTS OF THE EUROPEAN WAR IN RELATION TO MONEY BANKING AND FINANCE American Finance and the European War

I II III IV V VI

National Bank Failures and Suspensions—1914 Compared with 1893 and 1907[317] The Effects of the War with Special Reference to the Central Banks of France, Germany, and England

I II III

Darlehnskassen and Other Financial Novelties in Germany The War and the World's Financial Centre

MR. WITHERS A GOOD ENGLISHMAN

America's Chance of Holding World Purse-Strings[323] FOOTNOTES:

APPENDIX A

AN APPROXIMATE FORMULA FOR DETERMINING THE VELOCITY OF THE CIRCULATION OF MONEY FOOTNOTES:

APPENDIX B

SOME REGULATIONS OF THE FEDERAL RESERVE BOARD

ACCEPTANCE OF STATEMENTS IN LIEU OF CERTIFICATES AS TO CHARACTER OF COMMERCIAL PAPER BANKERS' ACCEPTANCES

DEFINITION

STATUTORY REQUIREMENTS UNDER SECTIONS 13 AND 14

III

RULING

ELIGIBILITY

POLICY AS TO PURCHASES ACCEPTANCE BY MEMBER BANKS

CLEARINGS BETWEEN FEDERAL RESERVE BANKS I

STATUTORY PROVISIONS UNDER SECTION 16

GENERAL PROVISIONS

III

DEPOSITS IN THE GOLD SETTLEMENT FUND

CUSTODY OF FUNDS

ACCOUNTS

PROCEDURE

VII

DEFICITS

VIII

EXCESS BALANCES

RESERVE

EXPENSES

AUDIT

XII

Membership of State Banks

STATUTORY REQUIREMENTS

BANKS ELIGIBLE FOR MEMBERSHIP

III

APPLICATION FOR MEMBERSHIP

APPROVAL OF APPLICATION

POWERS AND RESTRICTIONS

WITHDRAWALS

VII

EXAMINATIONS

VIII

FUTURE REGULATIONS

FOOTNOTES:

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