National banking under the Federal Reserve System

Bibliographic data

Monograph

Identifikator:: 1757542345

URN:: urn:nbn:de:zbw-retromon-135097

Document type:: Monograph

Title:: National banking under the Federal Reserve System

Place of publication:: New York

Publisher:: The National City Bank of New York

Year of publication:: 1927

Scope:: 154 S.

Digitisation:: 2021

Collection:: Economics Books

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Growth of the national banking system

Collection:: Economics Books

NATIONAL BANKING UNDER THE FEDERAL RESERVE SYSTEM thoroughly established by 1870, at the close of which year there were 1648 national banks in the United States. In that year, national bank notes comprised 40.3%, of the money in circulation in the country; in 1920, national bank notes aggregated less than 9% of the stock of money in the United States, despite the fact that the total volume of these notes was more than double what it had been in 1870. Measured by the country’s total volume of money, therefore, these figures indicate that national bank note circulation was nearly five- fold as important in 1870 as it is today. In the year that the National Bank Act was passed, there were in the United States 1466 state banks, capitalized at $405,000,000. Bank circulation the same year was $239,000,000, or 59 cents bank circulation for every $1 of bank capitalization, which was the highest point state bank circulation ever reached. From the earliest years of the country’s history, the banks had assumed the right of note issue, and this right was supported, but in only a few cases adequately regulated, by the various states. There was no Federal legislation governing banking practices or bank note issue. Because state supervision was generally lax, and reserves against bank notes were not infrequently wholly insufficient, notes of numerous banks were at varying degrees of discount throughout the country. Some of them were entirely worthless. Counterfeiting was extensive. Thus, with the bank’s cash capital and deposits small, with checks and drafts in quite uncommon use, with note issue the chief function of the banks, and with this function in more or less dis- repute because of the discount at which many bank notes passed, it is not surprising that the country was ready for a new banking system at the time the National Bank Act went into effect. Salmon P. Chase, Secretary of the Treasury, aggressively advo- cated the establishment of the national banking system because he believed that, as it had been planned, it would accomplish two out- standing results: (1) Provide a market for government bonds; (2) Give the country a unified currency system. Therefore, one of the fundamental requirements of national banks was that they should deposit with the Treasury Department a certain quantity of government bonds which they should be required to own. As some- thing in the nature of an exchange for this requirement, the national banks were given the privilege of note issue based upon Government 12 -

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