GROWTH OF THE NATIONAL BANKING SYSTEM 
Foreign banking 
There were no American banking institutions maintaining branches in foreign 
countries, and the organization of such foreign branches was necessary for the 
proper development of our foreign trade. 
Loans on real estate 
The inability of national banks legally to make loans upon real estate restricted 
their power to serve farmers and other borrowers in rural communities. 
IV 
UNDER FEDERAL RESERVE SYSTEM 
It is often said, and generally conceded, that the Federal Reserve 
System saved the United States from financial chaos during the 
European War. With equal emphasis it may be said that the national 
banking system made the Federal Reserve System possible. The 
national banks (particularly in the early days of the Federal Reserve 
System’s existence) supplied not only the skeleton for the Reserve 
plan, but they supplied likewise its sinews—its very life-blood. 
Two elements, in analysis, were necessary to make the Federal 
Reserve System a success: first, capital for the twelve F ederal Re- 
serve Banks; second, support and use of the facilities offered by those 
banks. Both of these elements the national banks supplied. The 
Federal Reserve Act itself provided that each national bank should 
be a member of the Federal Reserve System and should subscribe to 
the capital stock of one of the twelve Federal Reserve Banks. The 
alternative, in effect, was surrender of the charters of those national 
banks which did not see their way clear to join the System. In other 
words, when the government was ready to put the Federal Reserve 
System into effect, it found already in existence an eminently strong 
banking system, reaching to every point of the national compass, 
able to subscribe the necessary capital, lend the necessary support 
and cooperation, and “make the system march.” 
The non-national banks, likewise, rendered invaluable cooperation 
in the launching and operation of the Federal Reserve System. At 
the end of 1925 there were 1441 State bank and trust company mem- 
[19]