CHAPTER XXV

THE GERMAN BANKING SYSTEM

BANKING ARRANGEMENTS IN GERMANY

[184]Various systems can be adopted in the banking profession for the transaction of business. The most lucrative method, at all events the one in which the power of large capital is most effectively turned to account, is that of the Rothschild firms, whose example was followed by many large private concerns at home and abroad. These firms avoid troublesome current business, maintain only a few connections, and concentrate their whole energies on isolated but important ventures and undertakings in which, owing to the large amount of means immediately required, no competition worth mentioning existed before the growth of capable joint-stock banks. Up to the middle of last century these firms actually possessed a monopoly so far as the loan issues of most European States were concerned, and they earned enormous profits according to present-day ideas. In the course of the last decades, however, this monopoly has been done away with so far as European States are concerned and only prevails to a limited extent in some foreign countries. Since that time the Rothschilds have devoted themselves to several large industrial enterprises, such as the Russian naphtha industry, the Spanish copper and quicksilver mines, etc.

Another system consists in the division of work and specialisation, customary in England, but which has been frequently abandoned of late. In England the issuing and syndicate business is carried on by special houses which, like Rothschild, do not call themselves bankers, but merchants. Brokers and jobbers carry on stock broking on the stock exchange and in the open market, the former (theoretically at least) on account of third persons and the latter on their own account. It is the exclusive business of other firms to place credit at the disposal of home and foreign firms by giving acceptance to bills. These firms, strange to say, are mostly of German origin (Fruehling & Goschen, Frederik Huth & Co., Kleinwort & Sons, etc.), and carry on business in such a reliable manner that they are allowed to enter into bill obligations amounting to more than five times their estimated means. The clearing and deposit banks manage moneys on account of third parties.

It must be noted that the division of labour and its operation are based on free business practice in England without any legal compulsion. Consequently, no opposition is offered in that country to the different methods of carrying on business employed by the so-called foreign banks, _i. e._, the numerous branches of continental banks, including the branch offices of the Deutsche Bank, the Dresdner Bank, and the Disconto-Gesellschaft, despite the fact that their competition is unpleasant for the English institutions. In Germany, in consequence of business requirements and also of the small amount of capital in the country at the beginning of its modern economic development, the peculiar system has developed that credit banks combine all kinds of financial business (generally with the sole exception of mortgage-credit transactions), so that every customer can settle all his financial affairs in one spot on comparatively the cheapest terms possible.

Account-current transactions form the fundamental branch of business. The bank undertakes all the financial business of its client in return for a moderate commission on the turnover calculated on that side of the account which happens to be the greater, makes and receives payments, collects bills, checks, and other documents, and pays, or charges, interest on the balance, generally at 1 per cent. below the Reichsbank discount rate for credit balances and 1 per cent. above the Reichsbank discount rate for balances debited. The bank discounts the bills received by its customers, special arrangements being made as to the limit of the amount and terms, according to the quality of the bill, _i. e._, according to the trustworthiness of the other persons figuring on it. Should a customer require foreign bills to settle his liabilities abroad, _i. e._, checks or bills payable in the country concerned, the bank provides them from its own stock or draws bills or checks to the amount desired on its agents or correspondents in the country in question.

Should the debit balance not be a merely temporary one, or one soon covered by fresh receipts, the granting of special credit is necessary, and arrangements have to be made as to the amount and conditions of the same. Such credit is either covered or uncovered credit. The cover consists principally of current securities with a margin against fluctuations according to the nature of the security, and which is higher for shares than for securities bearing a fixed rate of interest. Uncovered credit is only granted in exceptional cases to others than business men--as a rule only to first-class mercantile firms of repute, whose affairs are in strict order.

Bankers and other firms with large cash transactions keep a so-called "cheque" account at their bank in addition to the chief account, in which no debit balances may occur; no interest is paid on the amount deposited, which is always kept in suitable proportion to the payments made, but, on the other hand, no turnover commission is charged.

Those customers are appreciated most who claim credit during their buying seasons, but who not only pay back the borrowed money during their selling season, but who have balances to their credit. This is the case with a great number of commercial firms and in many branches of industry, more especially in Berlin. The seasons in different branches occurring at different times of the year, it follows that a large bank, with branches and connections in all industrial parts of Germany, has the advantage of a suitable distribution of accounts among all branches of trade, etc., and the best possible adjustment of its debit and credit arrangements.

The debtors in a bank's balance sheet comprise not only those who have received advances of ready money but also those to whom the bank has granted credit by bill acceptance; the bill drawn by the debtor and accepted by the bank is discounted elsewhere. It is the duty of the drawer of the bill to cover it before it matures, and when the bill is accepted he is booked simultaneously as a debtor to the bank under _the date of maturity_.

Whether the general public will make an extensive use of checks is doubtful. In England the conditions necessary for check transactions exist, as every one has a banking account, and all payments to be made or received are effected through the banks. To Germans this seems very strange; a large part of the public cannot keep a banking account, and when it is in a position to do so either expects high rates of interest or keeps no permanent balances and pays no commissions. Under such circumstances there is no sense, from a business point of view, in the shoemaker, who has no banking account, accepting a check, which he has to cash, instead of ready money; for the shoemaker has to take an unprofitable walk, and the bank has to examine the check, pay and book it, and in some cases notify by letter the customer of its payment. The ingenuous idea prevails that by some cabalistic method of procedure the bank earns something by such transactions that in reality only cause irksome work.

The Reichsbank, with a creative and organising spirit, laid the foundations of the system of payments by means of transfers to, and deductions from accounts current that obtains in Germany, the so-called giro system.[185] It was in every way preordained for this creative work, for at the time of its foundation it was the only financial institution whose activities extended over the whole Empire, while in the territorially restricted and immature banking systems of those days the conditions were lacking for the development either of a giro business or of a system of payments by means of checks. In the giro system, with its splendid organisation, the Reichsbank has created an institution that has given the German system of payments its characteristic stamp, just as the apparatus of checks and clearing houses has imparted a typical character to the system of payments in other countries, like England and the United States. The giro business in Germany, however, is far from having attained the dimensions that the use of checks has in England and America.

The number of long-distance transfers is about double that of the locals. This is as it should be, as it is mainly in the matter of long-distance transfers that the giro system has the advantage over the method of payment by check. In the matter of local transfers, on the other hand, giro and check are probably about on a level with respect to the number of transactions.

To prevent themselves from being ruined by the competition of the Reichsbank, the private banks of issue[186] have been obliged to offer various inducements to their customers in the matter of the giro business. They make no demands in regard to a minimum balance, pay interest on deposits, do not oblige their customers to domicile bills drawn on them at the bank, and exact no charge from persons having no account with them who desire to have sums placed to the account of depositors (to some extent also making cash payments free to third parties who are nondepositors for account of depositors). The private banks of issue sustained a severe blow in 1900 on the occasion of the renewal of the bank laws through the provision prohibiting them from discounting bills at a lower rate than the Reichsbank whenever its rate reaches or exceeds 4 per cent. and not allowing them to go more than one-fourth of 1 per cent. below the official rate and one-eighth of 1 per cent. below whatever private rate the Reichsbank may have whenever the bank rate is below 4 per cent. These trammels imposed upon the principal business of the banks was bound to affect their giro business injuriously in spite of the efforts made to counteract the mischief by the establishment (especially in Wuerttemberg) of many new branches and agencies. These banks of issue have never had any great importance as regards the giro business, and even at the present day the volume of their transactions is relatively insignificant.

The post-check system supplements in a most effective manner the giro system of the Reichsbank in that it brings in connection with the five hundred establishments (more or less) of the Reichsbank about 39,000 post-offices and post agencies. As all the post stations are included in the post-check system, the Reichsbank's network of branches is spread out uniformly in a compact manner over the whole Empire.

The post-check system, inaugurated January 1, 1909, would more appropriately be termed the post giro system. For at bottom its purpose is to become a giro system, a system of monetary transfers by means of assignments to, and deductions from accounts current. What it is aiming at is to make it unnecessary for German letter carriers to be lugging around millions in cash every day. The money sent through the German post-office in 1907 amounted to no less than 13-1/3 billion marks. The post-check system has this in common with the giro system of the Reichsbank that it extends over the whole length and breadth of the German Empire, while the activity of all other institutions carrying on a system of giro, as well as check, payments, with the exception of the union of the Schulze-Delitzsch credit associations, is territorially or locally restricted. The giro network and that of the post-check system are connected with each other by certain channels that render it possible for payments to travel unhindered from the one system over to the other without the intervention of cash.

GENERAL SKETCH OF BANK AND CREDIT ORGANISATION IN GERMANY

[187]Germany witnessed a tremendous economic expansion during the twenty-year period 1888-1907. There occurred a considerable increase and extensive circulation of capital. This movement of capital naturally passes through the banks and is brought about by them. As collectors and distributors of capital, the banks are, so to speak, the focal points of economic life.

We are here concerned with three kinds of credit institutions--the note banks (banks of issue), the credit banks, and the land credit institutions (mortgage banks and land mortgage associations).

BANKS OF ISSUE

The present organisation of the note-bank system is based on the bank act of March 14, 1875, and the supplement to this act of June 7, 1899. Even previous to the founding of the German Empire the greater part of Germany had become united commercially through the formation of the Customs Union (Zollverein). Similar further movements toward union, however, had met with but little success in the domain of currency and with none whatever in that of banking. In the newly founded German Empire seven different monetary systems were in existence, and as all German States, with the exception of the free city of Bremen, were on a silver basis, there was above all a great want of a well regulated and adequate circulation of gold coin. The prevalence of paper circulation was felt in the most annoying manner.

Thirty-two banks had the right to issue notes, and in the absence of adequate legislation, it was found on many occasions that the notes issued were not sufficiently secured.

The first step which the Government took to improve these conditions was the act of December 4, 1871, concerning the coining of imperial gold pieces. The coinage act of July 9, 1873, which proclaimed the gold standard for the Empire, formally completed the organisation of the German currency system. It was recognised more and more that, in order to give effect to the gold standard, which for the time being existed merely on paper, and in order to regulate and supervise the entire currency circulation, the establishment of a central bank was an absolute necessity. This consideration finally led to the establishment of the German Reichsbank, which came into being on January 1, 1876, absorbing at the same time the Bank of Prussia (note bank).

The predominance of the Reichsbank over the private note banks was secured through its considerably larger capital, further through the volume of its tax-free note contingent, which exceeded considerably the amount of all the other contingents, and which subsequently was to increase still more through the accretion of the contingents of the note banks which might renounce their rights of issue.

COMMERCIAL BANKS AND THEIR RELATION TO INDUSTRY AND COMMERCE

The close relation of the so-called regular banking business to that of the floating of enterprises, the trading in and the issue of shares is typical of the organisation of the German credit-bank system. The development of the railroad system beginning about the middle of the last century, which caused a considerable demand for and circulation of capital, and the greater extension of state credit, induced the banks to turn to the flotation and issue business.

The period following the founding of the German Empire, as mentioned before, witnessed a vigorous development of German industry, especially of the mining and (beginning with the nineties) of the electrical industries, which required a continuous inflow of new capital. At the same time German foreign commerce, particularly with oversea countries, kept on steadily increasing. Under such conditions the economic policy of the banks of placing the funds entrusted to them at the service of the new development must be regarded as perfectly proper. The banks furthered this development by forming stock companies, granting long-term credit, assuming shares and bonds, placing the new industrials on the stock market and selling them to the public. There is no doubt that but for their policy of furthering the industries, the economic development of Germany would have taken considerably longer than has been the case.

In order to obtain the means for granting industrial credit and to dispose of the enormous amounts of newly created industrial securities, it was and is necessary to attract in as large a measure as possible the surplus funds of the community available for capital investments. For this purpose the joint-stock banks spread a network of deposit branches, destined to serve as reservoirs for the inflow of available funds, and at the same time as distributors for the industrial securities created. With the same end in view the large Berlin banks, either through the acquisition or exchange of stock (for permanent investment), entered into friendly alliances with the provincial banks.

It cannot be said that the banks created our industries, since the funds which are gathered by the banks in increasing volume are mainly the result of the increasing productivity of capital invested in industrial undertakings. It is true, however, that the creative power which in a comparatively short time placed German industry in its present commanding position took its origin with the men who put to practical use and in the interest of economic progress of the nation the achievements and inventions in the domain of science and technique. It is the undisputed merit of the persons at the head of the banks that they appreciated those endeavours and supported them by advancing the requisite capital, oftentimes incurring great risks for the banks. It is almost self-evident that the banks, which in carrying out their policy of furthering industry had often to assume considerable risks, have tried to secure, and in a large measure have succeeded in securing, a lasting and decisive control over industrial corporations.

Until the seventies of the last century the financial regulation of German foreign oversea trade had been almost exclusively in the hands of London banks. The establishment in 1870 of the Deutsche Bank at Berlin meant a turning point in this regard. The founders of the Deutsche Bank had recognised that there existed in the organisation of the German banking and credit system a gap which had to be filled in order to render German foreign trade independent of the English intermediary, and to secure for German commerce a firm position in the international market. It was rather difficult to carry out this programme during the early years, the more so, because Germany at that time had no gold standard and bills of exchange made out in various kinds of currency were neither known nor liked in the international market. The introduction of the gold standard in Germany in 1873 did away with these difficulties, and by establishing branches at the central points of German oversea trade (Bremen and Hamburg) and by opening an agency in London the Deutsche Bank succeeded in vigorously furthering its programme. Very much later the other Berlin joint-stock banks, especially the Disconto Gesellschaft and the Dresdner Bank, followed the example of the Deutsche Bank, and during the last years particularly the Berlin joint-stock banks have shown great energy in extending the sphere of their interests abroad.

Among the customers of the joint-stock credit banks figure chiefly members of the commercial and industrial classes, who obtain from these banks both their long- and short-term credit, and in the second place holders of medium-sized and large agricultural property, who apply to them for short-term "operation" credit. The credit demands of the members of the small-farm class and of the small independent producers are generally met by the co-operative credit societies.

LAND CREDIT INSTITUTIONS

As regards the credit on landed property there is hardly a country with an organisation as perfect as Germany. The beginning of this organisation dates back about one hundred and thirty years. The Prussian State had emerged from the storms of the Seven Years' War (1756-1763) as a recognised European power, but the sacrifices of the years of war had completely exhausted the country.

As the landed nobility was then the principal support of the State and was so regarded by the Government, it became a matter of public interest to relieve the financial distress of the landed proprietors by enabling them to pay off systematically their mortgage debts.

The efforts in this direction, in which the Prussian King, Frederick the Great, personally took an active part, led to the creation of the land-mortgage associations (_Landschaften_), which must be considered the first important step toward the organisation of land credit.

"Landschaften" are associations endowed with the rights of a corporation and operating under state control. Their boards of directors have the attributes of official authority. They are autonomous institutions within the limits set by the state supervision.

The Landschaften obtain the funds for the granting of credit through the issues of letters of mortgage or mortgage bonds--_i. e._, as a rule, the borrowers receive the loan in the shape of mortgage bonds of the association, and it is left to them to negotiate these bonds on the stock exchange. At first the letters of mortgage were made out on a certain estate (estate debentures). But as the purchaser of such letters of mortgage was forced to keep watch over the condition and management of the mortgaged estate--even though the association itself maintained permanent control of the debtor--the sphere of circulation and the ease with which these bonds could be sold were naturally limited.

It was only when the issue of corporate mortgage bonds was started, the security of which was guaranteed either by the entire mortgage claims of the association or the collective responsibility of their members, and when these bonds were given a large market through their admission to exchange transactions, that the highest degree of mobility was reached.

It was mainly to meet the needs of credit on urban real estate that mortgage banks (_Hypothekenbanken_) were created, and thus a special organisation of city real estate credit was formed. The greater number of the mortgage banks now in existence was founded during the decade 1862 to 1872; practically all the others were founded during the building boom of 1894-1896. Most of the mortgage banks cater exclusively to the demand for real estate credit; some others combine this specialty with other lines of banking.

While the land-mortgage associations are based on the principle of co-operation and do not pursue a profit-making policy, the mortgage banks have been founded as joint-stock companies. The capital stock serves as working capital as well as guaranty fund.

Bonds are issued against acquired mortgages and secured by the latter. Almost all these banks issue their bonds to bearer, a privilege granted them by the State. Inasmuch as the bonds are held in many cases by small investors, the State, in order to protect the interests of these bondholders, from the very beginning secured to itself the right of control, limiting at the same time the field of operation of these banks by certain legal enactments and regulations.

On the whole, interest rates on mortgage loans are subject to but slight variations. It should be remarked, however, that the borrower when obtaining a mortgage loan has to pay a bonus the rate of which will be considerably higher in times when money is scarce than in times when its supply is redundant.

In times of a large increase in the supply of bonds the mortgage banks may go into the market to buy their own bonds. Such action prevents serious fluctuations in the quotations of these securities and fits them to be objects of permanent as well as temporary investments, including the investment of funds which must be kept in liquid shape.

In the present day when complaints are urged against the great indebtedness of country landowners, the fact must not be lost sight of that the transition from extensive to intensive operations in agriculture could not have been accomplished without a wide use of mortgage credit, and that such development was necessary to feed the rapidly increasing population of the country. Moreover, through this great growth in the population a basis was created for industrial activity on a large scale.

RAIFFEISEN AND SCHULZE-DELITZSCH BANKS

[188]The Raiffeisen bank is the Schulze-Delitzsch bank applied to the country, with the variations required and justified by the difference of environment.

The model rules of the Raiffeisen societies state that: "the object of the society is to improve the situation of its members both materially and morally, to take the necessary steps for the same, to obtain through the common guarantee the necessary capital for granting loans to members for the development of their business and their household, and to bring idle capital into productive use, for which purpose a savings bank will be attached to the society." One word in the above, viz., "morally," intimates at the outset a distinctive trait. Raiffeisen always kept the moral aspect very prominently before him. He insisted that all the members of his institutions should profess the Christian virtues. In his propaganda he used to the full the one intelligent power in rural districts, the parish priest or pastor. With their help he developed a new parochial life around the village bank. With their help he touched in the peasant the chord of neighbourly affection and stirred him to give it practical effect.

What is the structure of a Raiffeisen bank? and, first of all, whence comes the working capital?

The subscribed capital of the bank is practically nil; there is nothing but the universal unlimited liability of the associating members. Schulze-Delitzsch, dealing with industrialists subject to unseen risks, who operated in trade matters out of sight and control of the society, obliged his associates to subscribe a considerable share capital, not only as a proof of thrift, but as a material guarantee for their individual and corporate debts. Raiffeisen, dealing with agriculturists and villagers, demanded no such security, since each member possessed in his little farm, his cattle or implements, material guarantee far beyond those of any subscribed share. In addition he avoided the danger to which a share bank is always exposed, namely, that the concern may be run for the benefit of a few non-borrowing shareholders, rather than for that of the general credit-seeking members.

Unfortunately this natural difference was elevated, or rather dragged down, into an issue of principle; and the law of 1889, drawn up under the guidance of the Schulze-Delitzsch party, insisted that every co-operative society should have shares. The Raiffeisen societies comply with this by nominal shares of (say) 10 marks[189] on which no dividend is declared; though, occasionally, some of the annual profit is indirectly returned to individuals in the shape of a slight addition to deposit rates and a slight deduction from loan charges, calculated at the end of the year.

Because Raiffeisen wished to create credit among small agriculturists out of the immaterial asset of mutual knowledge, he limited the size of each society to a single village. For his purpose he was right, but his partisans are not right when they look askance at the larger areas of the town bank, where the nature of the members' business and the society's control is different.

All profits remain the collective property of the society, to be used for the society's good. They are divided into two classes of reserve fund--(1) reserve fund proper; (2) foundation fund. The former is regulated in the same way as in town banks. The second corresponds to the shareholders' dividend. It is undesirable to have nothing beyond an ordinary reserve fund, because money thus placed can only be withdrawn to cover losses: while if placed in the foundation fund it can be used for positive improvements, such as the extension of premises or the establishment of a burial fund. In actual figures, the reserve funds are not so strong as in the town bank, owing in part to the lower loan charges.

The loan capital, as in the town banks, is made up of small savings and deposits. It is drawn, either from within the area covered by the bank, in which case it comes both from members and non-members, the former being where possible rewarded at slightly higher rates in order to encourage membership; or from without the area, in which case it of necessity comes from non-members. Savings are received in sums from one mark upwards: the smaller amounts being collected by penny stamp books, similar to those used in the Post Office Savings banks of England. The willingness with which the peasants bring their savings to the bank is a triumphant proof of Raiffeisen's contention that the small agriculturists by a combination of unlimited liability and close supervision can become absolutely credit-worthy. No savings since the foundation of the first village bank have ever been lost through bankruptcy.

In addition the bank obtains credit from a central bank with which it has a current account.

The funds thus raised are utilised for three kinds of credit--(1) Simple loans; (2) current accounts; (3) property transfers.

Current accounts are rare except in villages where there is a little industry. With regard to the simple loan, the security, as in town banks, is personal pledge, land mortgage, or (very rarely) deposit of collateral. The personal pledge, as with Schulze-Delitzsch, is the most frequent. But Raiffeisen interpreted it more strictly than Schulze-Delitzsch. Not only must the credit-seeker produce an outside testimony to his character: he must also convince his society that he really merits this testimony. The member of the Schulze-Delitzsch bank is accepted on the strength of his general business reputation, added to his security, personal or material. The member of the Raiffeisen bank, though he have the best of pledges, is rejected unless he is known in his private life to be virtuous and industrious. The man of doubtful sobriety has no chance of obtaining anything from a country bank.

If it happen that an applicant is little known or new in the district, so that no one will go pledge for him, then the society, provided it is convinced of his good character, will grant a loan against land mortgage. This is not to be confused with the real credit granted by a land bank, where the value of the estate alone is considered. It is personal credit with a material caution, and it is not a long-term loan.

Furthermore, the society requires to know not only the character of the borrower, but also the specific object for which his loan is destined. It must be satisfied not only that the borrower wishes to employ the loan in his business, but also that the operation proposed is likely to turn out successful.

Property transfers are not strictly credit business. They are in the nature of investments for superfluous money, just as a town bank might invest in railway shares, with the difference that the investment is local and designed to meet indirectly the credit wants of members. The nature of the operation is as follows: A dies, leaving his estate to his heirs; and these, perhaps because they wish to leave the neighbourhood or because they want ready money for other reasons, put up the estate for sale in allotments. Or perhaps A during his lifetime wishes to get rid of a part of his estate. X, Y, Z, neighbouring peasants, are buyers, but they can pay only gradually--which they are allowed to do by law. The credit bank steps in as intermediary. It pays to the heirs of A or to A himself, as the case may be, the price of the estate minus a small commission. X, Y, Z become the debtors of the credit society, paying off their debt by regular instalments, which include principal and interest. The bank cuts out small traffickers in land, usually Jews, to the benefit of sellers and buyers. It benefits the sellers by charging them a moderate instead of an extravagant commission: the buyers by saving them from permanent relationship with land dealers who seek their ruin. The bank insists on regular payment of the instalments, because it wants its money back, while the dealer is constantly tempting the buyers to fall into arrears in order that he may eventually acquire the land himself.

There is a second form of property transfer, where the bank not only acts as intermediary but itself holds the estate for a time. Some land dealer, having obtained a mortgage on the estate of A, demands payment. A cannot pay and is forced to sell his estate by public auction. The dealer forces the sale, just when the estate market is likely to be most unfavourable, hoping to buy the estate for himself at an absurdly low rate. Thereupon the bank steps in; it bids against the dealer, and if he does not offer a good price, buys the estate itself and resells it later in the year, when the market is more favourable. In this way A can pay off his debts at once. Moreover, the bank does not keep the difference between the price of purchase and final resale. After the deduction of a moderate commission, it is handed over to A, who thus obtains a further sum with which he can make a fresh start.

These dealings in property transfers are confined to Southwest Germany, where estates are sold to be split up into little lots. The banks only enter on these transactions where the following conditions are satisfied--(a) where they have a superfluity of money over and above that needed in their ordinary loan business; (b) where some party to the transaction is a member of the society: either the seller or the buyer or the creditors of the seller holding second and third mortgages, who would obtain nothing were the estate sold below its real value.

What is the nature of the machinery by which this work is conducted? A Raiffeisen bank is never what a Schulze-Delitzsch bank sometimes is; a handsome building with barred windows, within which are a number of clerks discharging a constant round of business, while the directors interview special clients in a room apart. It is a small single room, probably at the back of a farm building, opened twice a week and presided over by a single occupant--the accountant. Business is apt to proceed desultorily; a small child brings in a few savings; an hour afterwards a palsied old man, signing by a cross, draws out a couple of pounds, and so on to the end of the day. But this is the unimportant part of the business. The really important part is the weekly meeting of the directors, half a dozen in number, who meet to discuss the various credit claims which have arisen. They are unpaid, as by the nature of their work they can afford to be. The accountant, their executive clerk who keeps the books, "the soul of the society," as Raiffeisen called him, is the only salaried official. The committee of supervision and the general assembly function as in the town banks; except that their control is more decided, probably because their knowledge is more on a level with that of the directorate, which is itself unspecialised.

What are the results achieved by the rural bank, thus operating and thus controlled?

More than ten times the number of country banks grant only one-sixth of the credit afforded by the town banks. The total membership of the country banks is nearly twice as large, but the average membership per bank is nearly seven times as small.

The average credit advanced per member is 500 marks. The average rate of interest is not exactly known; it appears to be between 4 and 5 per cent., _i. e._, nearly 1 per cent. cheaper than in the town bank. The duration of loans varies between one and ten years in accordance with the requirements of agriculture. They are repayable in small instalments, covering principal and interest, although the member may repay in lump if he wishes. The loan can always be called on four weeks' notice, but the right is never exercised, unless the borrower is allowing his property to deteriorate or is becoming insolvent through extravagance or has misapplied money lent for a particular purpose. The inculcation of punctuality in payment, as a moral duty, was the hardest of Raiffeisen's tasks, as it was his greatest triumph.

If it be asked finally what Raiffeisen banks have done, which other banks have not, it may be replied that Raiffeisen created out of hopeless chaos the only kind of credit organisation possible for the small agriculturist. Industry necessarily brings business men together to some extent. Agriculture in itself holds the farmer apart, and preserves him in lonely ignorance to be the victim of the perambulating money-lender. To-day more than 50 per cent. of the independent agriculturists of Germany are members of rural banks; and another 10 per cent., chiefly the larger farmers, are members of town banks. The non-co-operative agriculturist is becoming the exception. The Raiffeisen banks are thickest in the southwest of Germany, the home of the small peasant proprietors. Indeed the change wrought in many of these villages is nothing short of a revolution. The experience of the parent village bank may serve in illustration:

"About an hour's walk from Neuwied on the Rhine is situated on a plateau bordering the Westerwald the little village of Anhausen. The district is not very fertile and the inhabitants are mostly small peasant proprietors, some with only sufficient land to graze a single ox or cow. An owner of ten acres is a rich man. Before the year 1862 the village presented a sorry aspect; rickety buildings, untidy yards, in rainy weather running with filth; the inhabitants themselves ragged and immoral; drunkenness and quarrelling universal. Houses and oxen belonged with few exceptions to Jewish dealers. Agricultural implements were scanty and dilapidated; and badly-worked fields brought in poor returns. The villagers had lost confidence and hope, they were the serfs of dealers and usurers. To-day Anhausen is a clean and friendly-looking village, the buildings well kept, the farmyards clean even on work days. The inhabitants are well if simply clothed, and their manners are reputable. They own the cattle in their stalls. They are out of debt to dealers and usurers. Modern implements are used by nearly every farmer, the value of the farms has risen and the fields, carefully and thoroughly cultivated, yield large crops." And this change, which is something more than statistics can express, is the work of a simple Raiffeisen bank.

Both town and country banks are formed into higher unions for general organisation and educational propaganda; the country banks also unite for credit business.

The partisans of the town banks are apt to pride themselves on their complete self-sufficiency. They forget that this is possible for them, not because they have sufficient funds in their own coffers to supply every credit need, but because an increasing part of their business is conducted through the trade bill of exchange, which is a marketable commodity that can be rediscounted by any outside bank, the Imperial Bank, the Dresdner Bank or any other. But agricultural societies, inasmuch as their loan papers cannot readily be bought and sold on the open market, require a special organisation. Hence central organisations act as money equalisers between the different societies. In some districts money is superabundant, in others it is deficient. The central bank acts as a channel through which the abundance of one district can be drawn to supply the scarcity of another, the operations being conducted by means of current accounts with both parties. In Germany as a whole the societies of small agriculturists of the Southwest have always an abundance of money, which is one reason why they dispense so much of their funds in the purchase of property transfers. The societies of large agriculturists in the Northeast (the Ost-Elbien Provinces), where the capital employed on each farm is large and the population thin, are as a whole in continual want of it.

INTERVIEW WITH HERR KLEEMANN, DIRECTOR OF THE DRESDNER BANK

[190]Q. When were the first of your co-operative societies organised?

A. In 1848. They were organised on a voluntary basis and for philanthropic purposes. They developed very rapidly. The first form which developed was for the purchase of means of subsistence, such as sugar, coffee, grain, wine, cigars, etc. Then they bought agricultural machinery, threshing machines, etc., which they would rent to small farmers in the country who could not purchase such machinery. They also formed societies to build houses for peasants and working people. There might be six or seven with different purposes. Later on Schulze-Delitzsch came to the conclusion that it would serve working people and small tradesmen to have co-operative societies founded simply for the purpose of extending credit to them. That was the last development in the system.

Q. How many kinds of co-operative societies are there in Germany?

A. It is very difficult to classify them. The Raiffeisen societies are confined to Prussia. There are other organisations in Saxony, Bavaria, and different States in Germany.

Q. The attitude of the Reichsbank is the same toward them as toward any other bank?

A. Yes; and their bills are frequently offered and taken by the Reichsbank as from other institutions.

Q. Do they carry their reserve with the Reichsbank or with the Dresdner Bank?

A. Principally with the Dresdner Bank, because they get interest upon it.

Q. Do they pay interest on deposits?

A. They pay an average of 4 per cent., which may be considered as an almost permanent rate. The money they get is in most cases money for a long period. They have to compete with the savings banks.

Q. Are the small societies at all in competition with the Reichsbank, where they have a branch?

A. No. There is no competition. They do a business which the Reichsbank would not do. They give credit to people who would not suit the Reichsbank, because they could not give the guarantee.

THE REICHSBANK

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

Q. By whom are the shares of the Reichsbank owned?

A. It is all private ownership. The shares are held mostly in Germany and Holland, and distributed in small lots.

Q. Would the bank discount a bill drawn by one merchant and accepted by another?

A. Yes. The Reichsbank is not only a bank for banks, but for the commercial and industrial enterprises of the Empire.

Q. If a railroad finds it necessary to make improvements and wants to borrow money could they get money at the Reichsbank?

A. Only on collateral acceptable by the Reichsbank. The railroad would probably in such a case go to private banks to be financed.

Q. Assume that there is a manufacturer in Bremen, making well-known articles, which he ships to a merchant in Berlin and draws a bill against that merchant, would it be a satisfactory bill to the Reichsbank?

A. Yes; but in that instance also the merchant would probably go to the private bank, where he would get a better rate of discount.

Q. If there were a severe money stringency, would he still go to his bank?

A. Yes; that would probably be the case, and his bank might afterwards take his bills to the Reichsbank.

Q. What is the smallest bill the bank will discount?

A. We have no minimum. We discount bills as low as 10 marks.

Q. Upon what kind of a bill does the farmer secure an advance from the bank?

A. He sells his produce, draws a bill upon the purchaser, and takes the bill to the bank as any other man would do, or a bill might be drawn upon a farmer and accepted by him.

Q. When he borrows money in the spring with which to buy seeds, how does he secure the cash?

A. He goes to his own bank for that. There are co-operative societies for this purpose, which are a great factor in Germany.

Q. Will the manager of a branch of the Reichsbank renew a farmer's three months' bill if desired?

A. Yes; an exception is made for the farmer. Other bills are not renewed.

Q. The bank rate is 4 per cent. Does that mean 4 per cent. is charged on three months' bills?

A. The Reichsbank has only one rate of discount. There was a time when the Reichsbank did a similar business to that which the Bank of England does now, _i. e._, that they would purchase in the market prime bills at a more favourable rate, but in 1896 it was decided to have but one rate for everybody.

Q. Please state the reason for the change of policy.

A. The most important reason was that it was thought that a great central institution like the Reichsbank, with its tasks and duties to the whole of the community, ought not to make a distinction of any class, or make an exception in favour of any one. It is the policy of the bank to serve all alike.

Q. Is the Reichsbank disposed to favour every application for discount or loans if the character of the offering be satisfactory?

A. It is their duty to listen to every one who comes for accommodation, whether he has an account or not. The principle of the Reichsbank is not to serve a part of the community, but the whole. The Reichsbank is for everybody.

Q. Are your deposits subject to check?

A. The money is drawn against check. There are two kinds of check--white and pink. The white is for withdrawing cash over the counter, the pink for making transfers.

Q. Have you different classes of deposits?

A. No.

Q. Do you pay interest on your deposits?

A. The Reichsbank does not pay interest on money deposited with it. It receives money on deposit and for transfer. Most large houses keep an account with the Reichsbank. The Reichsbank does a large transfer business for them.

Q. Is it the custom for banks in Berlin and other important centres to carry balances in the Reichsbank as a part of their reserve?

A. It is the custom for the banks to keep a large part of their cash with the Reichsbank. They keep only a small amount of cash in their tills.

Q. Is that true of banks in other cities than Berlin?

A. Yes.

Q. Does the Reichsbank pay the same taxes that the other banks do? For instance, income tax and other taxes?

A. No; we are free from the government income tax, and the license fees, but we must pay the real-estate tax.

Q. What is the relation between this bank and other banks, such as the Deutsche and the Dresdner--that is, as to the character of business transacted? Are you not competitors?

A. It may be said that the Reichsbank is more restricted by law. At a private bank the rate of discount may be much cheaper than at the Reichsbank. The private banker knows his clients, and he may be willing to accept from them a bill that the Reichsbank would not and could not accept.

Q. Then there is to some extent competition?

A. Yes; but that competition is not large. It is not felt that the Reichsbank is a competitor of other banks, but it is a public institution. The Reichsbank has its official rate, which is higher than the private rate. A bank will take bills on its own account running three months or more and hold them, and in case of need will take bills running ten days or less to the Reichsbank for discount. The Reichsbank pays no interest and acts as agent for transfer of currency and credit to all parts of the Empire without charge.

Q. Has there been any feeling that your branches were supplanting the private local banks in small towns?

A. There may have been some instances where a banker may have been dissatisfied at the Reichsbank opening a branch in his locality, but as a rule the banks at such a place are quite pleased to have the Reichsbank open a branch in order that they may have the benefits of its facilities.

Q. The government deposits are received and treated exactly the same as the deposits of farmers?

A. Yes. The business for the Government and its departments is handled the same as for others, and no interest is paid on deposits. There is, however, one exception; every private institution is required to keep a minimum balance to its credit, but not so with the departments of the Government. The Empire keeps in the aggregate sufficient to compensate.

Q. Do you always charge a higher rate of discount for bills when you have a large amount of taxed notes outstanding?

A. No. On occasions the Reichsbank has not increased its rate of discount above 5 per cent. At times we have discounted even at 3 per cent., when we have had to pay a tax of 5 per cent.

Q. It has been suggested to us as a matter of policy in times of stress that it would be better for you to add the 5 per cent. tax to the rate of discount.

A. The Reichsbank must be considered in the first place as a public institution which has to take care of the public interest, and secondarily as a money-making institution.

Q. Is there any restriction as to the percentage of silver in your reserve?

A. No; but there is another law, the coinage act, by which the amount of silver coined depends upon the population. They do not coin more than 20 marks per capita.

Q. What steps do you take to increase your gold reserve or to protect it?

A. We always have a large amount of bills of exchange payable in foreign countries, payable in gold. We also increase the rate of discount. We consider that the latter measure is the only effective one. We also make advances without interest to importers for the time the gold is in transit; we do that even in times when the ordinary gold import point is not reached. Then we may raise our tariff for the purchase of foreign gold coins, as the Bank of England does.

Q. Do you take any steps to prevent exports of gold? We have been told that it is the habit of the Reichsbank, in case of large exports of gold from Germany, to suggest to the other banks that it is not agreeable to have the gold exported.

A. It has never been the case and never will be the case that any such suggestion has been made by the Reichsbank to anybody.

KOENIGLICHE SEEHANDLUNG

(ROYAL SEA-TRADE SOCIETY)

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

Q. When was this bank organised?

A. In 1772.

Q. What is the capital of the bank?

A. One hundred million marks.

Q. By whom are the shares owned?

A. There are no shares; the capital is owned by the bank, which may be regarded as a juristic person, an independent legal subject.

Q. Who invested the money?

A. The money was originally invested by stockholders in the time of Frederick II, but afterwards the shareholders gave up their stock, for which they were paid. The shares were mostly owned by the King and by his associates, and they handed them over to the bank, so the capital is really owned by the bank itself. The proceeds in excess of all the expenses are paid to the Prussian State.

Q. Who is responsible for the conduct of the business?

A. The president.

Q. Has he associated with him directors?

A. No; he is personally responsible.

Q. By whom is the president appointed?

A. By the King of Prussia for life.

Q. What are the particular functions of the bank?

A. In the first place, it is an organisation to help the State of Prussia. The principal part of the business is to finance the loans of the State. It may undertake the loans alone, but as a rule it heads a syndicate of the large banks.

Q. Do you compete for deposits from merchants, manufacturing concerns, banks, etc., with the Deutsche Bank or the Dresdner Bank?

A. Yes, to some extent. It is not our intention to do so, but of course we practically compete in some ways. Our rates on deposits are less favorable than those of these banks.

Q. Do you take real estate mortgages?

A. No.

Q. You are known as the sea-trade (Seehandlung) society. Why is that?

A. Frederick the Great founded the Seehandlung to promote Prussian trade, especially the oversea trade. At one time this company had a salt monopoly and a wax monopoly. The salt which came into the different ports of Prussia and the wax which came from Poland were bought up by the Seehandlung. At one time the Seehandlung also had mills, spinning and weaving plants, iron foundries, and river steamers. We still own two industrial establishments, the flour mills in Bromberg and a linen spinnery in Landeshut in Silesia.

Q. A large percentage of your funds is loaned on the stock exchange?

A. Yes.

Q. And your discount business is comparatively insignificant?

A. Not insignificant, but small compared with our loans on the stock exchange.

Q. Do you receive promissory notes from customers?

A. No.

Q. Do you transact business of any other character than that heretofore mentioned?

A. We have a branch known as the Royal Loan Office, which lends money in small amounts upon the pledge of different kinds of goods as security. This was established in 1834. In 1906 we made 99,000 loans upon watches, jewels, clothing, etc., at an average of 31 marks per loan. Two-thirds of the borrowers are labourers; last year about 16 per cent. were widows and spinsters, also a few were mechanics--occasionally professional men--artists, actors, and the like. Our rate is very low, 12 per cent. for the year, which is low compared with the ordinary pawnshops. No other banks conduct a business of this class.

DEUTSCHE BANK

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

Q. When was your bank organised?

A. In the year 1870.

Q. How is your stock owned?

A. By a large number of shareholders. Our shareholders are principally in Germany, but also in England, France, Austria, and elsewhere.

Q. What does the item "Shares in other banks," $19,000,000, represent?

A. This represents the purchase by us of practically the controlling interest in 13 independent banks in the Empire. We are represented upon each board and we are kept closely informed of the business. Our return is in the dividends.

Q. A large percentage of the stock exchange business is really handled through the incorporated banks, is it not?

A. Yes. We ourselves have fifty members on the stock exchange.

Q. You mean that the Deutsche Bank has fifty men, members of the stock exchange, who trade there on the floor?

A. Yes. There is quite a difference, however, in our method of handling the business from that followed in New York. We do not have the margin system. Most of our customers who do not pay in full pay at least for half the amount involved in the purchase.

Q. Are the clearing-house associations important factors in the cities in Germany?

A. No. They are not associations of importance or power, but merely pieces of machinery through which cheques are cleared.

Q. You all go to the Reichsbank to clear?

A. Yes; once a day. There are 14 clearing houses and 160 members in the Empire.

Q. What taxes do you have to pay?

A. We pay to the State 4 per cent. on our income remaining after deduction of 3-1/2 per cent. of our share capital, which is exempt, and to the city of Berlin 4 per cent. on our income. All banks pay on the same basis.

Q. Is there a limit to the amount of discretion given to the branch directors on first-class bills?

A. Each of the main branches has a fixed capital arbitrarily set aside by the Deutsche Bank. They have a sum according to the importance of the branch, and they must do business according to it.

Q. The Reichsbank has branches everywhere?

A. Yes; in every place where there is sufficient business. It has about 500 branches. We transferred through the Reichsbank last year 21,000,000,000 marks. Our strength is the Reichsbank. Our branch in Bremen, for instance, wants money when cotton shipments start, and the money is transferred to them. The importers in Bremen sell the cotton to the large manufacturers. When they get the money the money comes back to us.

Q. In London the joint-stock banks usually pay interest at about 1-1/2 per cent. below the bank rate. In the country they have to pay more. What is the custom here?

A. There is no strict rule. The bank rate is now 4 per cent. and we allow 1-1/2 per cent. on call money. In the interior our branches allow a little more. It is the same as in England.

Q. Does the bank rate influence your rate for discounts?

A. Yes; we are influenced. The bank rate is now 4 per cent. and our private discount rate is 2-1/2 per cent.

Q. If a mercantile customer came with a four months' bill satisfactory in character, what would be the rate to him?

A. We have no fixed rate. It depends upon the man and the bill.

Q. How do you invest your surplus funds when you have no demand from customers?

A. We buy bills in the open market, or accept offerings made to us from houses desiring to borrow.

DRESDNER BANK

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

Q. What is the date of your organisation?

A. 1872.

Q. In practice, you and all other banks endeavour to fully employ all available funds?

A. Yes; we only carry in the Reichsbank and other banks sufficient cash for the conduct of business.

Q. You regard your item "Bills discounted" as one of practical reserve?

A. Yes; it is immediately convertible into cash at the Reichsbank.

Q. Referring to the item "Shares in other banks," $6,662,753, do you control all banks in which you have any interest?

A. Yes; practically. We probably have not the majority of the stock in any bank; but our holdings are sufficiently large to give us control.

Q. Is the tendency toward bank consolidation? Are the smaller banks becoming more closely affiliated with the larger banks?

A. Yes; because it serves a mutual advantage. The smaller bank needs better facilities to take care of the increasing business. If a bank wants to increase its capital, and the shareholders do not care to subscribe for the increase, the new shares are frequently offered to us. We look out for the business of these banks in the centres and give them participations in some of our important undertakings.

Q. In Great Britain we found that banking interests were practically controlled by from 15 to 20 large banks. Does that condition prevail in Germany?

A. No; but the tendency is in that direction. One difference between the banks of England and Germany is this--in England the primary purpose of the banks seems to be to secure large earnings for their shareholders. In Germany our banks are largely responsible for the development in the Empire, having fostered and built up its industries.

Q. Would it be any reflection upon a bank if it should go to the Reichsbank for discounts or loans in easy times?

A. No; we seldom go in easy times, however, because there is no need of our doing so.

Q. Is there strong competition between the important banks of Berlin or do they work more or less together?

A. Of course there is strong competition between the large, important banks, but there is no lack of harmony, and they very frequently work together in syndicate operations. While it is the desire and endeavour of each bank to build up its business, it must be recognised that each institution has more or less its own field of operation, which is in a measure respected by the other banks. As, for instance, the Deutsche Bank has done a very large volume of business with Turkey, and business emanating from that source is expected to and naturally does go to the Deutsche Bank, while another institution may have been largely identified with Roumania, or another with some large local interest. We ourselves are recognised as representing the Krupp interest and have just recently formed a syndicate to finance one of their operations.

Q. Our understanding is that a merchant, a customer of yours, may arrange with you for a credit of, say, 100,000 marks, which may or may not be secured, and may draw a ninety-day bill upon you for that amount. He may send that bill to the Deutsche Bank for discount. If the Deutsche Bank will discount it, they present it to you and you accept it. Will you kindly state why this custom prevails?

A. One reason is that it makes a bill which is acceptable at the Reichsbank and is a prime bill. We receive one-fourth of 1 per cent., or more, for our acceptance, and the Deutsche Bank, or any other bank discounting, invests its money at a rate for the period. It might be that we would prefer to give our customers a cash credit rather than to accept his bill, in which event we would so arrange.

Q. Then this practically enables you to sell your credit without using your cash?

A. Yes.

Q. We understand this is the usual custom in Germany.

A. Yes.

Q. Is it not a fact that in the last analysis the customer who uses the money usually pays more than the bank rate--that is, would it not cost him, in such a transaction to-day, say 5 or 6 per cent., while the bank rate is 4 per cent.?

A. Yes.

Q. Is it your endeavour to reach the small country towns?

A. No.

Q. In the United States we have brokers who handle commercial paper, and many of the banks purchase it to employ their surplus funds. In London we found discount houses whose sole business was to handle paper for sale to banks to employ their surplus funds. What corresponds to that agency in Berlin?

A. In Berlin there are two brokers who handle prime bills, but they are not an important factor.

Q. How do you employ your surplus funds?

A. We buy bills in the market or through these brokers.

Q. In employing your surplus funds do you buy any other bills than those which the Reichsbank would accept?

A. No.

Q. Would you consider the issue of taxed notes by the Reichsbank in a sense an evidence of an abnormal condition?

A. No: on the contrary, it is quite normal. Last year it happened twenty-five times.

Q. In times of trouble do the large banks, like your own, the Deutsche Bank, and Disconto, co-operate with the Reichsbank in an endeavour to prevent the exportation of gold?

A. Yes. Opinions are divided as to whether it is for the good of our country to do so or not. Last year, for instance, many people asked for gold. It was refused at first in some quarters; later we shipped freely.

Q. Are you members of the stock exchange?

A. All banks and bankers are members of the stock exchange.

Q. By virtue of their being banks?

A. Yes; they have to pay a tax for the exchange.

Q. Are the seats expensive?

A. No. You do not buy a seat. There is no limit to the number of people admitted. We have from twenty to thirty people go to execute our orders.

BANK DES BERLINER KASSEN-VEREINS

INTERVIEW WITH HERR HOPPENSTEDT[195]

Q. When was this bank organised?

A. In 1823, under the general companies act.

Q. What are its particular functions?

A. This bank might be called strictly a clearing bank. It clears transactions made on the stock exchange and also cheques on banks which do not clear through the Reichsbank Clearing House. As you know, our banks do a large stock exchange business. It is their custom to send to us all securities sold to others clearing through us with a list of the purchasers. We charge the purchasers the amounts due from them and credit the amounts received from them, balancing every night. The securities are delivered to the various purchasers. _Some settlements are made daily and others monthly._ A large volume of cheques and bills are also cleared. This is simply a clearing business.

Q. You show loans and discounts in your statement. What is the character of these?

A. We invest our funds in first-class loans and prime bills.

Q. Is this bank owned by the other banks?

A. It is partly owned by other banks. There is also a commission of shareholders of the bank, among whom are the first banks of our city. These are members of our board.

Q. Is it the custom for all banks which clear through you to have a balance in order to facilitate the payment of debits through clearing?

A. Yes.

FOOTNOTES:

[184] Adapted from Geh. Oberfinanzrat Waldemar Mueller, _The Organization of Credit and Banking Arrangements in Germany_; Max Wittner and Siegfried Wolff, _The Method of Payment by means of Bank-Account Transfers and the Use of Checks in Germany_. Publications of the National Monetary Commission, Senate Document No. 508, 61st Congress, _2nd Session_, pp. 117-271.

[185] In order to facilitate its giro business and reduce the friction to a minimum, the Reichsbank has special printed forms prepared for the various kinds of transactions, the use of which is made compulsory on the public. For a simple transfer of money from one customer to another, whether they be in the same town or in different places, the "red check" is employed, which is filled out by the party making the transfer and handed in to the bank. It is not a check in the proper sense of the term, but is so called because the printed forms resemble checks and are put up in books in the same way as checks. The word "check" does not occur in the printed matter of the blank; neither is the instrument transferable. When a number of payments are made simultaneously the party making the transfers is furnished with a blanket form on which the names of the individual firms and the various sums are entered and which has to be accompanied by a red check covering the aggregate amount. For the so-called "great banks" of Berlin, some of which have a volume of transfer transactions amounting to as much as one hundred transfers for each bank per diem, there are blanket forms which are of a different colour for each bank. When cash is wanted the so-called "white check" is employed. This is a legally constituted check. There are special printed forms for the use of those who have no account with the Reichsbank.

[186] Banks of issue were formerly numerous in Germany. Gradually, however, nearly all of them renounced the privilege of issue, as the laws relating to banking made their existence as banks of issue more and more difficult. At the present time there are only 4 such banks besides the Reichsbank, viz.: the Bayerische Notenbank, the Wurttembergische Notenbank, the Sachsische Bank, and the Badische Bank.

[187] Adapted from Robert Franz, _The Statistical History of the German Banking System, 1888-1907_, Publications of the National Monetary Commission, Senate Document No. 508, 61st Congress, _2nd Session_, pp. 7-115.

[188] Adapted from C.R. Fay, _Co-operation at Home and Abroad_, pp. 42-51, 56. P.S. King and Son, London. 1908.

[189] Occasionally even as low as 1_d._ or less.

[190] Adapted from _Interviews on the Banking and Currency Systems of England, Scotland, France, Germany, Switzerland, and Italy_, Publications of the National Monetary Commission, Senate Document No. 405, 61st Congress, 2d. Session, pp. 452-468.

[191] _Ibid._, pp. 335-358.

[192] _Ibid._, pp. 359-370.

[193] _Ibid._, pp. 371-391.

[194] _Ibid._, pp. 392-418.

[195] _Ibid._, pp. 486, 487.