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-
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