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Banking And Business | by H. Parker Willis, George W. Edwards



In this volume the authors have undertaken to present an outline of modern American banking in its relation to other business. Their intention has been to prepare a university and college text that would be of service in teaching those elements of banking which are most needed in the schools of business and commerce now in process of development at many of our universities. The arrangement of topics and the general direction of the discussion corresponds, broadly speaking, to the organization of the work in the introductory course in banking in the School of Business of Columbia University.

TitleBanking And Business
AuthorH. Parker Willis, George W. Edwards
PublisherHarper & Brothers Publishers
Year1922
Copyright1922, Harper & Brothers
AmazonBanking and Business

Banking And Business

By

H. Parker Willis, Ph.D.

Professor of Banking, Columbia University Formerly Secretary, Federal Reserce Board

And

George W. Edwards, Ph.D.

Assistant Professor of Banking School of Business, Columbia University

Harper & Brothers Publishers

Harper & Brothers Publishers

New York and London M C M X X I I

Banking and Business

Copyright, 1922. by Harper & Brothers Printed in the United States of America

-Preface
In this volume the authors have undertaken to present an outline of modern American banking in its relation to other business. Their intention has been to prepare a university and college text that wo...
-I. Exchange And The Division Of Labor
If we glance even casually at the modern organiza-tion of business, two features or elements in it present themselves as of striking suggestiveness: 1. Few persons are producing articles which they t...
-II. Evolution Of Exchange
Exchange takes place because a greater amount of values can be produced through what has just been termed division of labor. In the primitive organization of society, division of labor was very limite...
-III. Types Of Exchange Transactions
We must now study somewhat more analytically the different possible types of exchange to which reference has been made, for the purpose of ascertaining the true significance of each. 1. When a produc...
-IV. Banking Viewed As A Phase Of The Theory Of Exchange
In the past there has been a disposition among writers on the subject to deal with banking as if it were in some way an expansion or application of monetary theory. There would seem to be little justi...
-V. Development Of The Credit System
Viewing banking theory as an element in general economic theory, the reason for the development of banking as a mechanism likewise becomes plain. It is the outcome of the experience of other methods o...
-VI. Credit As A Form Of Exchange Without Money
The term credit has already several times been used and a credit transaction has been incidentally defined as denoting an uncompleted exchange. Since modern banking proceeds upon a money basis in the ...
-VII. Definition Of A Bank, Banking System, Credit System
A commercial bank, for the purposes of the present discussion, is an institution of credit or an institution whose purpose it is to facilitate or effect exchanges without the use of money. Every bank ...
-VIII. Commercial And Investment Banking
Banking may be recognized as distinguished into two separate branches - commercial banking and investment banking. By commercial banking is meant that phase of banking which has to do with short-term ...
-I. Differences Between Direct And Indirect Exchange
Accepting for the moment the definition and analysis of credit, furnished in the foregoing chapter, the question now presents itself, How does a credit system operate or in what way does it differ fro...
-II. Classes Of Credit
Writers on credit enumerate various kinds or species of credit, including: 1. Personal credit. This is currently taken to mean credit which effects the transfer of goods or money to an individual on ...
-III. Classes Of Credit On Basis Of Time
There is a classification of credit less popular than that just given which presents a special problem deserving of notice. By some writers credit is classified on a time basis thus: 1. Long-term or ...
-IV. Analysis Of Time Element In Credit
In the theory of credit which is popularly accepted by the greater number of men in business, the idea of credit is undoubtedly associated with that of time. The borrower thinks of credit as a means o...
-V. Bank Credit As A Mechanism Of Exchange
Suppose we generalize this view of credit, remembering that the total amount of bank obligations is fairly stable, and that, though it may increase for a period of months at a time, this upward moveme...
-VI. Relation Of Bank Credit To Money
Bearing this view of bank credit in mind, it becomes necessary to refine upon some of the commonly accepted ideas of the nature of bank credit and particularly of its relation to money. It is seen at ...
-VII. Functions Of A Bank
1. Recognition of Right to Credit. The view thus given of bank credit in general furnishes the key to the view which should be taken of the bank itself. It is, as we have already seen, a credit insti...
-VIII. Banking As A Form Of Credit Mechanism
It thus appears that, in its pure form, banking is essentially a study of credit, a process of insuring such credit, and the transfer of titles thereto. It is partly a process of scientific analysis a...
-IX. Investment Banking
It has been pointed out, as a reason why the theory of credit cannot be regarded as final or absolute, that this short-term credit is not capable of exact definition and that what is short term in s...
-X. Commercial And Investment Credit Differentiated
A difference between this kind of credit operation on one hand and commercial credit on the other may be found in the fact that whereas reimbursement or liquidation of commercial credit comes from the...
-Chapter III. Credit Instruments
Credit in the sense in which it has already been defined as a means of exchanging goods has to take some definite form. Although credit itself is intangible, in actual practice it assumes a distinct s...
-I. Commercial Credit Instruments
1. Open Book-account. The most elementary type of credit instrument may be said to be the open book-account. A sells goods to B and debits him with the value of these goods, or in the current phrase ...
-II. Legal Aspects
In commercial usage the term bill, or bill of exchange, is practically synonymous with the draft or accepted draft. Where the words notes, drafts, and bills of exchange are used, the term notes cove...
-1. Conditions of Negotiability
Since credit instruments are the means of making payments, they must possess certain characteristics which enable them to pass freely from hand to hand. In the United States, these features are summar...
-2. Indorsement
The correct procedure of negotiating an instrument follows certain legal principles which have been gradually developed by commercial usage. An instrument which is payable to bearer may be negotiated ...
-3. Presentment
Having now described the meaning and classification of indorsement, it is necessary to consider next the effect of this act on the various parties to a negotiable instrument. The bona-fide holder has ...
-1. The Stock Certificate
Consideration has thus far been confined to notes and bills, which are the fundamental instruments of commercial credit, but attention must also be given to investment credit instruments. As they are ...
-2. The Bond
A bond in every respect is an instrument of credit. It possesses practically all the features of a time note, for it is a promise by the maker to pay interest and principal at a designated time in the...
-3. Short-term Note
The purpose in issuing a bond is to raise capital for undertaking more or less permanent improvements, and this accounts for the length of its maturity. The corporation may secure funds to cover a bri...
-I. Principles Of Bank Classification
The thirty thousand banking institutions in the United States may be classified according to the following principles: (1) legal status, (2) economic function, (3) operating method, (4) customers' con...
-II. Private Banks
As noted above, banking may be conducted by either chartered institutions or unincorporated associations. The latter include the many individuals and partnerships conducting private banks. In the coun...
-III. Commercial Banking And Financing Institutions
The commercial or business bank performs the operations of receiving deposits and making loans. It uses its own capital and its receipts of money as a basis for the making of loans to several times th...
-IV. Investment Banks
The investment banker, like the commercial-paper dealer, is essentially a middleman engaging with governments and corporations who seek permanent capital to make public improvements or to develop priv...
-V. Trust Companies
Trust companies may be regarded as investment institutions, for they also contribute permanent capital to industrial and railroad corporations. These investment activities of trust companies are more ...
-VI. Savings Banks
The savings bank is also a form of investment institution. It receives deposits mainly from persons of moderate means who are desirous of selecting a secure depository for their funds, and, since they...
-VII. Co-operative Banking Institutions
Similar to the mutual savings bank is the building-and-loan association. They both receive earnings from a number of small depositors and lend these funds on security consisting usually of real estate...
-VIII. Tendencies In American Banking
From this survey, it must not be concluded that the banking structure of the United States is composed of a number of groups of specialized institutions, for there has been comparatively little tenden...
-I. The Bank As A Type Of Business Organization
Having surveyed the entire field of banking, consideration will be confined to the various aspects of the commercial bank. Its organization will first be analyzed with particular reference to differen...
-II. The Incorporation Of A Bank
Before the Civil War, when banks were first organized as corporations, it was generally necessary to obtain a special act of incorporation from the legislature. In time, such special charters gave way...
-III. Capital Stock
It is evident that organizing a national bank in some respects differs from starting an ordinary business corporation. The bank's capital stock has particular characteristics not ordinarily possessed ...
-IV. Surplus
Earnings are not entirely distributed to the stockholders of the bank, for a conservative management follows the policy of setting aside a portion to form a surplus in order to meet unexpected losses....
-V. Stockholders
Although stockholders are the nominal proprietors of the bank, they hold a position relatively unimportant, for they take no active part in management. Stockholders have access to a few records of the...
-1. Qualifications
The stockholders of a bank choose a board of directors who formulate the policies of the institution. They are elected for a term of one year by the shareholders at their annual meeting, which is usua...
-2. Duties
The list of the directors may serve as a valuable factor in increasing the bank's business, for the nomination of citizens of character and ability will inspire the confidence of the community and wil...
-3. Liabilities
Although acting without large compensation, a bank director assumes individual liabilities which may prove costly under conditions of adversity. As in the case of any other corporation, the director o...
-4 Interlocking Directorates,
The tendency toward integration which has influenced the evolution of all lines of big business has also affected the development of financial corporations. One method of eliminating competition and...
-1. President
The function of the board of directors is essentially one of general supervision of the bank's affairs, for actual management is delegated to an executive staff. The president is the active head of th...
-2. Vice-President
At times the vice-president is also selected from the board of directors. This plan results in a close connection between the vice-president and the board. A vice-president is occasionally appointed b...
-3. Cashier
The position of the cashier in a bank really involves all the duties usually attaching to the office of secretary, chief clerk and treasurer combined. While the position of secretary can be found on t...
-I. Function Of A Commercial Bank
The previous chapter has traced the organization of a commercial bank and has touched upon its administration by explaining the duties of the officers Continuing the general survey of the commercial b...
-II. Receiving Teller
The work of the receiving teller offers a logical point to begin a study of the bank's operations, for his department is the first to handle the cash and credit instruments presented by customers. In ...
-III. Paying Teller
Through deposits of cash and credit instruments the customer builds up his account with the bank. This bank credit confers upon the depositor the right to draw checks with which to settle his debts an...
-IV. Classification Of Exchange Items
The receiving teller transfers deposits of cash to the paying teller, who in turn uses the money to meet the claims drawn against the bank. The receiving teller also handles deposits of credit instrum...
-V. Collection Of City Items
Most important among the city cash items are checks drawn on other local banks which are also receiving checks from their own customers. Banks in the same community are thus mutually engaged in presen...
-VI. Collection Of Country Items
Country cash items are credited to the account of the depositors at once, although their collection and ultimate payment may not take place for some time, owing to the fact that the instruments are dr...
-VII. Collection Of Coupons
Discussion so far has been confined to the collection of checks, notes, and drafts, but it should be remembered that customers deposit also coupons which the bank must present for payment. They may be...
-VIII. The Credit Department
A depositor's account may be built up by cash, credit instruments, or by loans. The disposition of the cash by the paying teller, and the handling of credit instruments by the collection departments, ...
-IX. Loan And Discount Department
The advances which a bank extends to its customers are described either as loans or discounts. The distinction lies in the fact that in the case of the former interest is collected usually at maturity...
-X. Bookkeeping Department
In considering the operation of the various departments, reference has been made to the use of ticklers for making temporary entries of daily transactions and also registers for posting more permanent...
-XI. Service Departments
In addition to the general operation departments for handling deposits, collecting items, and making loans, a bank also conducts a service department consisting of a number of internal and external di...
-Chapter VII. The Depositor And His Bank
Deposits in the broad meaning are created from: (1) actual cash, (2) credit instruments left by customers, and (3) credit extended by the bank itself. Discussion of the third type will be deferred unt...
-1. Special Deposits
Deposits from the standpoint of the bank may be classified either as special or general. The legal nature of a special deposit is quite similar to that of cotton or any other commodity stored in a war...
-2. General Deposits
A general deposit differs from the special in respect to composition, title, and liability. A general deposit consists largely of cash or cash items which include checks, notes, drafts, or coupons. Th...
-3. Certificates of Deposit
General deposits are recorded by entries in a pass book, or evidenced by certificates of deposit. These are instruments in which a bank acknowledges that it has received a sum of money from an individ...
-II. Classes Of Depositors
Viewed from the standpoint of origin, the deposits of a commercial bank may be grouped as public or private. The United States government maintains accounts with many of the large national banks throu...
-III. Methods Of Securing New Accounts
Deposits are essential to the continued existence of any bank, and so there is keen competition to retain old accounts and to secure new ones. Banks formerly regarded the soliciting of deposits as an ...
-IV. Payment Of Interest On Deposits
A wide difference of opinion exists as to payment of interest on balances as a means of attracting deposits. This problem may best be understood by viewing it in connection with the various classes of...
-V. Rate Of Interest On Deposits
There is no settled practice among American banks regarding the payment of interest on individual demand deposits. Unless the bank and the depositor enter into a special agreement, a demand deposit, b...
-I. Problems In Financing Business Enterprises
As already seen, the relationships between the public and the banker may be merely those of depositor and safe keeper, or of purchaser and furnisher of remittance or exchange, or of user and supplier ...
-II. Methods Of Settlement
In another important way the practices of the business community establish a foundation for, or limit to, those of the bank. This is seen in connection with the kind of settlement which is habitual be...
-III. Use Of Security
The question of security is also largely determined for the banks by the habits of the customers. While it is practicable for the banker to exact in many cases special security from borrowers, this is...
-IV. Sources Of Credit Information
It is now time to see in what practical forms the problem of financing the business man presents itself. Probably the first question which the banker has to meet in this connection is the amount of cr...
-V. The Borrower's Statement
While the bank thus gathers credit information from a wide variety of sources, these serve merely as checks to the borrower's financial statement or property blank which really constitutes the basis o...
-VI. Determination Of Line Of Credit
When the credit department has reported upon the standing of a given borrower, that standing must be checked and analyzed so far as practicable for the purpose of detecting errors or flaws and of intr...
-VII. Oversight Of Use Of Credit
As has thus been seen, when a definite line of credit has been assigned to the business man the first step has been taken toward the establishment of a fixed relationship between him and his banker. T...
-VIII. Improvement Of Methods Of Business Finance
On the whole, the banker's service to his customer does not consist in devising various schemes or plans to enable him to get credit, but does consist in studying his credit and determining the amount...
-IX. Open-market Borrowing
It is frequently also the duty of the banker to explain to the business man the conditions under which he may obtain credit to better advantage from some other source. With certain types of concerns t...
-X. Relation Between Business Man And Banker In Time Of Financial Stress
One phase of the relation of the bank to the business man and the latter's financing which should be carefully thought of is the condition which exists in time of financial strain or panic. This is a ...
-I. Limitations On Lending Power Of A Bank
In studying the financing of different kinds of enterprises from the point of view of the borrower, it must not be forgotten that a general limiting condition underlying the whole question of financin...
-II. Contents Of The Bank's Portfolio
The bank's object must be primarily that of insuring its own liquidity and solvency at the same time that it distributes its funds fairly and equitably among the different elements in its clientele. F...
-III. Problems In Developing A Portfolio
This simple analysis or outline of the country bank's portfolio is intended merely as a cross section of the bank's operations and throws no light upon the difficulties that have been encountered in d...
-IV. Establishing A Sound Bank Portfolio
In a general way the problem of establishing a sound bank portfolio can be solved only through a careful study of general business conditions. The time has passed when a mere inquiry into the solvency...
-V. Government Restrictions On Loans
Consideration has thus far been given to the methods which a bank may follow in establishing a sound portfolio. This policy is determined not alone by the judgment of the banker, but also by a certain...
-1. Loans to One Interest
Under the National Bank Act a loan evidenced by an unsecured obligation, whether promissory note or bill of exchange, cannot exceed 10 per cent of a bank's paid-up and unimpaired capital and surplus. ...
-2. Aggregate Amount of Acceptances
The above analysis has viewed only regulations limiting the amount of loans which a bank may grant to one borrower. Other restrictions apply to the aggregate liabilities which a bank may assume to all...
-3. Real-estate Loans
The third class of restrictions is based on loans secured by real estate. Such security for a loan was prohibited absolutely under the provisions of the National Bank Act, but the Federal Reserve Act ...
-I. Meaning Of A Reserve And Reserve Policy
In dealing with bank reserves thus far the subject has been spoken of as if the reserve of a bank were more or less a self-regulating factor in its business. In some countries, notably our own, the la...
-II. Maintenance Of Reserve
Supposing, however, that a banker has, through experience, guided by legislative requirements, determined the approximate amount of reserve which he needs to carry in ordinary circumstances, it will b...
-1. Refusal of Further Credit Accommodation
If the banker resorts to the plan of refusing to accommodate his customers merely because his reserves have fallen below a desired limit, he has cut these customers off from credit which may be absolu...
-2. Advance of Discount Rate
In lieu, therefore, of refusing credit, it is customary with bankers to advance the rate of discount for the purpose of inducing the less necessary credit applications to be withdrawn. The plan in ord...
-3. Rediscount of Paper or Sale of Assets
So clearly is this obligation recognized by most bankers that they will not usually refuse credit or even attempt to ration it in too narrow a way unless there is very good reason for doing so, but in...
-4. Purchase of Specie
Under some circumstances the demand on banks may be such as to necessitate a more drastic operation than that of rediscounting. It may be necessary to acquire or purchase specie by importing it. For i...
-III. Inflation And Deflation
In studying the reserve policy of banks it is worth while to devote some attention to what is called inflation and deflation. By the former term, when used in banking discussion, is meant the undue or...
-I. Significance Of A Bank Statement
Consideration has been given in preceding chapters to such commercial bank operations as the receiving of deposits and the granting of loans. These transactions are all recorded in the general ledger ...
-II. Assets Of The Bank
The assets or resources are composed of all the items which are in possession of or due to the bank, and it relies upon these assets to meet the liabilities which it owes to others. Loans and Discoun...
-III. Liabilities Of A Bank
The following are the bank's liabilities or obligations which are due to its stockholders and creditors. Capital Stock. At the organization of the bank, its shares are purchased by individuals, who m...
-IV. Analysis Of Transactions
In order to indicate clearly the way various transactions give rise to items in the statement, the business conducted in the first few days of a new bank will serve as a basis for analysis. To simplif...
-IV. Analysis Of Transactions. Continued
Assets Loans............ +$20,000 Liabilities Circulating notes outstanding...... +$20,000 In addition to buying United States bonds, the bank invests its funds in a form of short-term government ...
-V. Classification Of Assets And Liabilities
The bank's assets and liabilities first were viewed as independent items and in the previous section they were considered in relation to one another. From this survey, it is evident that the accounts ...
-VI. Analysis Of A Bank Statement
The statement of a bank reveals its condition on a certain date, and when several past statements are compared its record over a given period of time may be ascertained. The various items will gradual...
-I. Adjustment Of Cost In General Business
Every business institution has to consider the rate of charge which it will be able to make for its service or product, and the establishment of such rates is often one of the most serious problems in...
-II. Influence Of Competition In Determining Bank Charges
The bank corresponds probably more nearly in its price-fixing problem to the public-service corporation than to any single type of industrial business. While within certain limits the bank can establi...
-III. Rates On Loans And Discounts To Customers
Several sources of income may be recognized at any bank. They may be classified roughly as follows: 1. Income from loans and discounts. 2. Profit from exchange or remittances. 3. Charges for collec...
-IV. Loans And Discounts In The Open Market
But since at any given time there are different conditions in different communities, the banker has always open to him the option of shifting his funds from one community to another. He may transfer h...
-V. Legal Interest Rate
At this point it may be noted that many states have what are called usury laws which specify that not more than a given rate of interest is to be charged for any loan or discount. Such laws are always...
-VI. Call-money Rate
In the large cities where securities speculation has taken deep root, it is usually possible for the bank to employ some of its funds in loans upon collateral security - that is to say, to allow borro...
-VII. Acceptance Rates
The acceptance market is a special branch of the general discount market organization, and the rates that are charged by banks for accepting paper are fixed after exactly the same principles that appl...
-VIII. Central-Bank Rate
In countries where central banking exists there is a central-bank rate, or rediscount rate, which is different from any of the various commercial rates just described and which has an influence upon t...
-IX. Central-Bank Rate And Credit Policy
Rates cannot be studied to advantage without also studying the general problem of credit policy. Evidently, if rates were raised or lowered without any reference to credit policy, they would be a mino...
-I. Elements Of Cost
In the preceding chapter the sources of income which are ordinarily open to a bank have been outlined, and one of them - the rate of interest or discount - has been analyzed at some length. It is equa...
-II. Operating Expenses
When we come to the operating expenses of the bank, and to the cost of the capital involved, a very different situation exists. The larger part of the bank's expenses for regular operation is found in...
-III. Overhead Expenses
Of course, all this has taken no account of the overhead expenses or the fixed expenses. There is naturally no definite or positive way of segregating and assigning them, and yet it is reasonable to m...
-IV. Determination Of Cost Per Unit
Thus far the analysis is comparatively an easy one even if the results obtained are not much more than approximate. Now, however, it is necessary to recognize that there is nothing fixed about bank ex...
-V. Reserve As An Item Of Cost
Even allowing for difficulties inherent in fluctuations in volume of banking operations, however, the problem of ascertaining costs per unit of business done might not be considered very complex by th...
-VI. Methods Of Limiting Cost Of Accounts
Nevertheless, there are some principles which stand out so clearly in this kind of cost analysis as to make it possible to limit costs quite definitely. For instance, assuming that every loan is made ...
-VII. External Items Of Cost
The principal items of expense outside of the bank which must be figured upon are exchange or collection charges to other banks and interest paid to other banks and to depositors. If the banker is obl...
-VIII. Significance Of Cost Analysis
Remembering that bankers find it difficult to fix rates of interest, these being established largely on a competitive basis, the importance of carefully watching the cost in the bank is evident. The b...
-I. Government Control Of Banking
The subject of government supervision was given some consideration in Chapter V, which studied the bank as a type of business organization. It was there noted that banks are subject to practically all...
-II. Supervision Of Banks
During the Civil War, Congress passed the National Bank Act, which provided for the organization and operation of banks under federal law. The Act created the office of Comptroller of the Currency. Th...
-III. Reports
In the United States, government regulation of business enterprises is rendered more effective by providing for some form of publicity. The data thus presented enables the public to pass its own judgm...
-IV. Government Examinations
Bank reports alone would be insufficient to safeguard the interests of stockholders and creditors, for these statements are compiled by the banks themselves and are not verified by any outside agency....
-V. Clearing-house Examinations
The work of the government in examining banks is sometimes supplemented by the co-operation of the clearing houses. Since the members of these associations are daily receiving obligations due from one...
-VI. Internal Examinations
In addition to these external examinations conducted by the government and by the clearing house, an internal investigation of the bank's condition is also made by the board of directors. As a rule th...
-VII. Bank Audits
Another form of internal analysis is the bank audit, which differs from an examination, especially in pur-pose. It has been shown that the examination of a bank seeks to verify the existence and value...
-VIII. Reserve Requirements
The most important obligation which a bank assumes is the necessity of meeting its current liabilities, whether deposits or circulating notes. It is therefore essential for the bank to keep its genera...
-IX. Computation Of Reserves
For the purpose of computing these amounts the Federal Reserve Board has prepared a form to be followed by all member banks in reckoning reserves. In order to illustrate the method of calculation, the...
-X. Liquidation Of Banks
Notwithstanding the above regulations of the government, banks at times become insolvent. It is interesting to note the principal causes of failures among national banks since the inauguration of the ...
-Chapter XV. Interbank Relations
What has thus far been said about banking deals chiefly with relations between the bank and the individual or between the bank and the public. It must be remembered, however, that in most countries th...
-1. Collection
The simplest type of interbank relationship is that of collection. Bank A receives from a depositor a check on bank B. It credits this check to the depositor - that is to say, it undertakes to pay him...
-2. Clearing
The most familiar type of relationship between banks is that of clearing, and for purposes of convenience it is customary that banks should be united in what is called a clearing house. A clearing hou...
-3. General Services
For various reasons banks find it desirable to carry balances with other banks. The primary reason for such balances is that of keeping themselves in position to furnish their customers with exchange....
-II. Interbank Organization
While considering the general question of interbank relationships, it is desirable to refer briefly to the idea of bank federation or of interbank organization. What has been said thus far has referen...
-III. Technic Of Local Clearing
Having thus reviewed the theory of clearing and the relations between correspondent banks, it may be worth while to sketch briefly the technic of clearing as developed in the United States to-day. It ...
-IV. Technic Of National Clearing
It is now necessary to take another step in depicting the clearing-house system of the United States. As explained elsewhere in this volume, every national bank and all of the more important state ban...
-V. International Relationships Among Banks
What has been said thus far relates primarily to correspondent relationships between banks situated in the same country. The international relationship of banks which act as correspondents for one ano...
-I. Meaning Of Foreign Exchange
The subject of exchange, whether domestic or foreign, may be studied as a phase of economics, commerce, or banking, and its meaning will vary with the viewpoint from which it is being considered. In t...
-II. Demand And Supply Of Foreign Exchange
While the par of exchange of a given monetary unit remains practically stationary, the market price or rate of exchange fluctuates daily. As in the case of any commodity, the market price or rate of e...
-1. Movement of Goods
When American firms import goods from abroad, they may make payment through buying bills of exchange drawn on foreign countries. This demand tends to raise the value of the foreign currency as express...
-2. Movement of Capital
The theory of the classical economists, such as Adam Smith, Ricardo, and Mill, as to international trade held that if a country's exports exceeded its imports in value, this surplus would necessitate ...
-3. Payment of Services
In addition to securities, the invisible balance of trade is composed of other items such as charges of foreign shipowners carrying freight; payments to foreign companies issuing insurance policies; r...
-III. Foreign-Exchange Market
These forces of supply and demand exert their influence over foreign exchange so quickly that rates are quite uniform all over the world. Thus in a sense there is a foreign-exchange market which is in...
-IV. Classes Of Foreign-Exchange Bills
Bills of exchange bought and sold on the market are classified primarily according to whether the parties are bankers or merchants. A banker's bill is an order drawn by one bank on another to pay a sp...
-V. Factors Determining Rates On Various Classes Of Bills
The rates quoted on the leading types of these bills are indicated in the following table: Rates on Sterling Bills on October 4, 1921 Classes of Bills Closing Rates Bankers' nine...
-VI. Foreign-Exchange Quotations
As foreign-exchange trading has no organized market where dealers are in personal contact with one another, prices are not exactly uniform, and so there are several kinds of quotations. As in any mark...
-VII. Trading In Foreign Exchange
The buying and selling of foreign bills of exchange is known as trading. In performing this function the banker acts as middleman between those who have bills to sell and those who wish to buy. The ba...
-I. Special Nature Of Foreign Trade Finance
In the preceding chapter foreign exchange was considered in its application to all forms of international business such as shipment of goods, sale of securities, and payment of services. In this chapt...
-II. Documents In Foreign Trade
In addition to what precedes, the absence of credit knowledge limits the amount of unsecured loans extended in foreign trade and therefore most advances are based on some form of collateral. In the mo...
-III. Financing Of A Shipment By The Exporter Or His Bank
The burden of financing a shipment of goods may be carried by the exporter, the importer, or their respective banks. The exporters bank finances the transaction when it discounts his draft drawn on th...
-IV. Financing Of Foreign Trade By The Importer
In foreign trade the sellers and buyers of merchandise are confronted with greater risks than in domestic commerce, and so it is necessary for both parties to take measures for the protection of their...
-V. Classification Of Letters Of Credit
Letters of credit may also be classified, according to whether the issuing bank may or may not rescind its obligation to the beneficiary. When a bank agrees to honor the drafts of the exporter within ...
-VI. Traveler's Letter Of Credit
The instrument of commerce described above is fre-quently confused with the traveler's letter of credit. These two documents differ as to purpose, form, and classification. The former is used to facil...
-VII. The Organization Of A Foreign Department
In this survey of international banking, its similarity to and its difference from domestic practice has been surveyed, and now the special features in the organization of a foreign department will be...
-VIII. Development Of American Banks Financing
Foreign Trade. For many years these services could be secured by American exporters and importers from foreign banks with New York agencies only or from a small number of private banks. In recent yea...
-I. Difference In Relationships Between Business And Banking In The United States And Great Britain
While banking methods are in their essential nature the same in all countries, there are differences of detail which exist as between the principal commercial nations, and which must be understood by ...
-II. Comparison Of Methods Of Financing Business
Partly as a result of the different relationships existing between the business and the bank as thus set forth, there is to be noted a peculiarity in the method of financing industry which has taken r...
-III. Character Of Paper
Growing out of this difference in practice regarding the location of financing there has been of late years a distinct difference of practice with respect to the character of the paper by which loans ...
-IV. Credit Study
The American single-name-note and cash-discount method of lending, however (and for that matter the overdraft plan in so far as adopted), necessitates a special type of credit study. Since the goods d...
-V. Method Of Credit Extension
Foreign banking methods differ from American not only in the matter of technic and in the relationship which exists between the individual and his bank, but also from the standpoint of internal bankin...
-VI. Foreign And Domestic Trade Financing
A further distinction between American and foreign banking methods is seen in the different emphasis which is placed, respectively, upon domestic and foreign trade in foreign countries. In the United ...
-VII. Personnel
One other element in foreign methods which distinctly differentiates them from those of the United States is seen in the fact that in Europe banking has become a highly professionalized occupation. In...
-Part III. Noncommercial Banking. Chapter XIX. The Investment Bank
Consideration has thus far been given mainly to the various aspects of commercial banking which supplies business men with short-term credit to meet their current needs. Reference has occasionally bee...
-I. Development Of The Investment Bank
Investment bankers originated in the Middle Ages, when governments and kings received long-term loans for conducting wars and maintaining courts. Notable among the early money lenders were the Hansa m...
-II. Organization Of an Investment Bank
The modern investment bank is seldom organized in the form of a corporation, but rather as a partnership including from two to twenty members. In addition, large commercial banks have either opened bo...
-III. Classes Of Investment Banks
Investment institutions may be divided into three general groups - wholesale houses, large retail houses, and small retail, or bond, houses. The first group is composed of about a dozen large banking ...
-IV. Functions Of an Investment Bank
As already indicated, the types of investment banks considered perform in general one or more of the following functions: (1) investigating proposals, (2) forming syndicates for underwriting, (3) sell...
-1. Investigation
Investment banks, especially those of high standing, exercise caution before handling a new issue of securities, and therefore an investigation is first conducted. In the case of states or municipalit...
-2. Underwriting
The corporation could possibly market its own securities directly and have the investment bank merely underwrite the issue by insuring the corporation that if the securities are not entirely absorbed ...
-3. Selling
Having completed the investigation, and having settled the matter of underwriting, the investment house now begins an active selling campaign. It first compiles a careful memorandum or circular consis...
-V. Services Of Investment Banks
Through the operations considered above, investment banks perform important services for both borrowing corporations and the investing public. To the former it furnishes fluid capital at a reasonable ...
-I. The Savings Bank As Compared With Commercial And Investment Banks
Before describing the various classes of financial institutions for the accumulation of savings, it is well to consider first the general meaning of savings banking as compared with commercial banking...
-II. The Organization Of A Mutual Savings Bank
In the above description of the nature of the savings bank, it has been conceived as a single institution, but it is organized in various forms, of which the most important is the mutual savings bank....
-III. Deposits Of Savings Banks
Savings banks carry single-name, joint, trustee, and society accounts. Most important is the single-name account, opened by an individual in his own name, and he alone has control over deposits and wi...
-IV. The Pass Book
With the account thus opened, the depositor receives a pass book which from his standpoint is the most important of all savings-bank documents. It serves (a) as a contract between customer and bank, (...
-V. Investments Of Savings-Banks
The second phase of savings-bank operation is the investment of funds intrusted by depositors. In investing these deposits a policy should be followed which assures the ends of safety, diversity, liqu...
-1. Real-estate Mortgages
In that state the mutual savings banks have invested about one-half of their funds in real-estate mortgages. When a prospective borrower wants a savings bank to advance him a loan on the pledge of his...
-2. Investment in Bonds
Because of the difficulty encountered in disposing of their mortgage holdings in time of need, savings banks invest heavily in bonds, which possess great liquidity. The savings banks are usually permi...
-3. Short-term Investments
It is therefore necessary for a savings bank to place some of its funds in a form which possesses both stability of value and marketability. A checking account may be maintained with a commercial bank...
-VI. Classes Of Savings Banks
In addition to the mutual savings bank just considered, there are several other forms of savings institutions to be found in the United States, such as, (1) stock savings bank, (2) savings department ...
-1. Stock Savings Banks
The mutual savings-bank plan has not extended to the West and the South, where savings institutions are formed not for philanthropic purposes, but rather for profits, and are therefore organized the s...
-2. Savings Departments of Commercial Banks
Many institutions, especially in the West, combine both saving and commercial banking. Savings deposits at times exceed checking accounts in amount, but as a rule these banks engage essentially in com...
-3. Guaranty-fund Banks
Another type of savings institution is the guaranty-fund bank which prevails in New Hampshire. It combines several of the essential features both of the mutual and of the stock banks. In common with t...
-4. Co-operative Associations
The co-operative savings institutions, such as build-ing-and-loan associations and the credit union, have been described in Chapter III. ...
-5. Postal Savings System
The postal savings system aims to encourage thrift by offering a secure depository for savers through the mechanism of the government post office. This was the subject of active discussion following t...
-VII. Recent Developments Among Savings Insti-tutions
There is an ever-growing competition between mutual savings banks and commercial banks with savings departments. As a result of the struggle for savings accounts, the interest rate has often been for...
-I. Nature Of A Trust
Before considering the subject of trust companies, it is necessary first to understand the nature of a trust. For example, A surrenders certain property to B with the understanding that the former ret...
-II. Individual And Corporate Trustees Compared
There are individual or corporate trusts, depending upon the nature of the trustors who have created them. Trustees are not necessarily real persons, for corporations may be designated in this capaci...
-III. Development Of Trust Companies
As indicated above, the essential feature of a trust is the separation of the use of certain property from its ownership and the division of the use and ownership between two different parties. This c...
-IV. Growth Of Trust Departments Of Banks
As trust companies entered the field of commercial banking, they came into direct competition with national banks. These institutions began to appreciate the advantages of conducting a fiduciary busin...
-1. Voluntary
A trust company can render a variety of service to the individual during his lifetime, and to his estate after his death. If the fiduciary relation is effective while the individual still lives, the c...
-2. Testamentary
A trust company may also be called upon to administer a testamentary trust. This is created by a will, which is a declaration signed by the testator or maker for the disposition of his property after ...
-1. Member or Manager of an Underwriting Syndicate
From the above description of the more important trusts it is evident that a fiduciary company can serve the individual during his entire period of life. In like manner, a corporation can be aided fro...
-2. Transfer Agent
After a corporation has been successfully started, the trust company may act as general fiscal agent, rendering all kinds of financial services to the corporation. The trust company is not usually giv...
-3. Registrar
As securities worth hundreds of millions of dollars change hands daily, every precaution must be taken to protect the holders. The New York Stock Exchange has, therefore, ruled that every certificate ...
-4 Trustee under Corporate Mortgage
Probably the most important single trust arises when a corporation borrows money for a long period of time and pledges some of its property as collateral. The corporation, like the individual borrowin...
-5. Depository under Reorganization Agreement
A foreclosure against a railway company presents an added problem, for even during these proceedings the road must continue in operation in the interest of the public which uses the system, and also f...
-6. Assignee and Receiver
If the finances of the railroad continue in a critical condition, the stockholders to protect their property, or the creditors to guard their interests, may appoint a trust company as assignee. Under ...
-VII. Regulation Of Fiduciary Institutions
It is evident from this survey of the nature of trusts that fiduciary business differs from commercial banking in respect to fundamental principles and technical operations. It is apparent that the le...
-I. Banking Systems Grouped According To Organization
From what has been said in the foregoing chapters it will have been seen that banking experience in the different countries of the world has evolved several types of banking systems. Writers on bankin...
-II. Central Banking System Of Great Britain
In the case of the central banking systems there has been developed a nucleus which represents practically the combined banking strength or the pooling of bank reserves of the community. Other banks a...
-III. Independent - Charter System Of British Colonies
As contrasted with this highly centralized, highly organized banking system of Great Britain, attention may be given to the colonial systems of banking, of which those of Canada and Australia are good...
-IV. Free Banking System Of The United States
In the United States under the national banking system the idea of free banking was carried to its extreme not only through the unrestrained chartering of institutions with very small capital (the min...
-V. Movement Toward Centralization
Everywhere in banking there is a movement toward what is called centralization, not in the sense of autocratic control or monopolistic price fixing, but merely in the sense of economy of resources and...
-VI. Banking Systems Classified According To Operation
A problem which should be considered as distinctly associated with this matter of type of banking system is, however, that of the discount market. In studying the discount market we are in position to...
-VII. Heterogeneous Banking
We may look first at the early, primitive type of heterogeneous banking institution in which there was practically little or no limitation of function. The banks of the early modern period in Europe w...
-VIII. Specialized Banking
The question has naturally presented itself in most countries whether it is wise to attempt by law to develop banking on specified lines, recognizing given types of institutions and enacting codes of ...
-IX. Organized Banking
A further refinement of conditions such as those which have been sketched in the case of institutions which grow up with their functions differentiated as the result of law or custom is found in those...
-Chapter XXIII. Banking Abroad
Works on banking frequently include a somewhat detailed description of European central banking institutions, such as the banks of England, France, Germany, etc., and the discussion is sometimes at le...
-I. The Bank Of England
The oldest among banking systems in anything like their present form is the Bank of England, which dates from 1694, and which as operated to-day finds its fundamental charter in the Bank Act of 1844, ...
-II. The Bank Of France
Dating from 1803, the Bank of France is in many important respects analogous to the Bank of England in its organization and general public service. The public service of the bank, however, is in Franc...
-III. The Reichsbank
Banking had developed in Germany along very much the same lines as in England and France during the period from 1875 onward. Germany, broken as it was into a considerable number of independent states ...
-IV. Canadian System
The Canadian banking system differs materially from the standard central banking systems of Europe, being without any central banking organization and consisting of seventeen large specially chartered...
-V. Other European Banking Systems
Most of the banking systems of the world have been developed in comparatively recent times and have been modeled more or less closely upon the practices of France, England and her colonies, or Germany...
-VI. Banking In South America
South American countries had had a banking experience widely different in character from that of Europe prior to the outbreak of war in 1914. None of them was an active participant in the struggle and...
-VII. Banking In The Far East
Banking in the Far East varies greatly from country to country, some nations and states having reached a substantially high degree of development following Western models, while others are far behind ...
-VIII. Conclusions
The hasty survey which has thus been made of foreign systems of banking leads to the conclusion that while there has been no absolutely uniform trend of development in foreign countries, the general m...
-Chapter XXIV. 1 Evolution Of The American Banking System
While there is not much use in studying banking from the standpoint of ancient history, or in an antiquarian way, it is of considerable importance to understand how existing banking institutions have ...
-I. First And Second Banks Of The United States
When the government of the United States was first organized it found that banking institutions were almost entirely lacking in this country. Owing to the bad condition of the currency and the disorga...
-II. Development Of State Banking
While the Second Bank of the United States had been running its course, the various states had been experimenting with different kinds of banking systems, some successfully and others disastrously. In...
-1. New England System
The New England banks had been chartered by the several states in which they existed, but very shortly came to feel a much higher degree of community of interest and to recognize a much stronger neces...
-2. New York System
Early banking in New York was conducted on the same general plan as in the first banks of New England - that is, without any specific security behind the notes. Charters were granted on a somewhat pol...
-3. "State Banks."
The success of the First and Second United States banks naturally led to the growth of imitations, and in a number of states banks modeled upon the federal institutions were established. Thus the stat...
-III. Independent Treasury System
Meanwhile the government, discouraged and an-annoyed at the experience it had had after the discontinuance of the Second Bank of the United States, had established the so-called independent treasury ...
-IV. National Bank Act
The first Act to provide a national currency secured by a pledge of United States stock and to provide for the circulation and redemption thereof became a law February 25, 1863. This was found defec...
-V. Development Of The National Banking System
The power to control note issues, and the prestige resulting from federal supervision, however, gave the national banks the lead, and from 1866 onward they were rapidly organized, extending into the S...
-VI. Growth Of A Government Surplus
The curtailment of bank currency under the national system which had started, in consequence of the natural causes already set forth, which grew out of the greater prosperity of the country and the mo...
-II. The Baltimore Plan
The result of these events was to draw the attention of American bankers toward the practice of other countries. Many persons believed that the past experience of the United States with so-called cent...
-III. Indianapolis Currency Commission
The most notable movement of the four years from 1896 to 1900 was that embodied in what was called the Indianapolis Currency Commission. This was a body appointed by a convention of boards of trade an...
-IV. Gold Standard Act
It is probable that this report would have evoked immediate action by Congress to some effect had not the Spanish-American War intervened. The close of the war found the United States approaching anot...
-V. Effect Of Panic Of 1907
Notwithstanding the apparent prosperity of the country, there were signs of danger in the inflation and unsound finance that prevailed during the period, and these, at about the beginning of the year ...
-VI. The Aldrich Bill
It was strongly felt that Congress ought to do something by way of relief, particularly as another presidential election was in sight. Consequently, in the spring of 1908 a bill was reported by the Ho...
-1. Features of the Original Bill
Upon the basis of careful investigation, conducted under direction and supervision of that committee, partly at public hearings during the winter of 1912-13, partly by private investigations, it was f...
-2. Congressional Action on the Bill
As first presented, the bill was taken in hand by the House Committee on Banking and Currency, which, however, had not been named until a few days previous to the introduction of the measure. The comm...
-3. Contents of the Final Bill
The substance of the work done in conference committee may be summarized somewhat further in order to bring out the points that had been accepted as innovations upon the House bill and those that had ...
-I. The Federal Reserve Board
Governmental supervision of banking is everywhere to-day accepted as a public necessity. Under the old National Bank Act it was furnished by the Comptroller of the Currency. Under the Federal Reserve ...
-1. Administrative Duties,
Administrative functions are essentially of two kinds: (a) The regular and recurring duties necessary to the operation of the system, and (b) the sporadic or occasional duties which grow out of the op...
-2. Constructive Duties
The constructive duties of the board prescribed by law are seen to best advantage in the provision which calls for the development and application of regulations designed to control methods of busines...
-3. Educative Functions
Among the implied or educative duties of the board is undoubtedly that of bringing about general and harmonious action among the several districts and of welding the different parts into a consistent,...
-II. Organization Of The Board
The Federal Reserve Act imposes practically no limitations upon the methods by which the board performs its own work. In accordance with the provision of the law which authorizes the Secretary of the ...
-III. Supervision Of Reserve Banks
Federal Reserve banks which are under special obligations and duties are not only closely supervised by, but in fact operated under, close government supervision. Two features deserve to be specially ...
-IV. Board Of Directors
The fundamental control of the Federal Reserve bank is in the hands of the board of directors, consisting of nine members. This board of directors consists of three classes, each containing three memb...
-V. Federal Reserve Agent
Reference has already been made to the Federal Reserve agent. As chairman of the board of directors, his function is to preside over meetings of the board and in general to perform all those functions...
-VI. The Federal Advisory Council
The Federal Reserve Act creates an advisory council consisting of as many members as there are Federal Reserve districts. It directs the board of directors of each Federal Reserve bank to select annua...
-VII. Outside Membership In The Federal Reserve
System.1 When the Federal Reserve Act was first projected it was not intended to include in the system banks or companies organized under non-national charters. Many state bankers and trust-company m...
-VII. Outside Membership In The Federal Reserve. Continued
Correspondence with the Federal Reserve agent (chairman of the board of directors of the Federal Reserve bank) of the district may precede or follow the adoption of this resolution and results in furn...
-VIII. Privileges Of Membership
The member of the Federal Reserve system enjoys certain privileges which have been the primary cause for entering it and which may now be stated in detail: Power to rediscount. The member may at any ...
-IX. Duties And Obligations Of Membership
The chief duties and obligations of membership have already been made plain in connection with the terms and conditions of admission. The member must hold its investment in the stock of the Reserve ba...
-X. Loss Of Membership
A nonnational member of a Federal Reserve bank may return to its original status as a nonmember or outside institution in any one of several ways It may consolidate with another under a new charter, o...
-I. Relationships Between Governments And Banks
In almost all modern countries the business of banking has assumed a special relationship to the government; for there has been a tendency to exercise an increasing degree of surveillance over essenti...
-II. Government Ownership Of Banks
Cases in which there is complete or partial government ownership of banking institutions should probably be considered as distinct from those in which the government merely controls or directs banking...
-III. Government Supervision Of Banks
The second type of participation, already enumerated, is that in which the government is merely a supervisor or director of the various banks, and as such acts in a negative way only. Of such supervis...
-IV. Government As A Depositor Of Banks
The third elementary type of relationship between government and banking system, already referred to at the opening of this chapter, was seen in the fact that the government is itself a large deposito...
-V. Direct Deposit Of Goverment Funds
Three methods in general have been followed in regard to the control or management of public funds during the nineteenth century. The first and simplest plan is that of depositing funds directly in ba...
-VI. Independent Holding Of Government Funds
The method of independent holding of public funds as provided for by the Independent Treasury Act of 1846 was originally bottomed upon the notion that the government should accept nothing but specie a...
-VII. Effect Of Withdrawal Of Cash
The continuous fluctuation in the supply of money which grew out of such variations in public revenue was bad enough in its way and undoubtedly contributed in an important degree to the regular annual...
-VIII. Relation To Central Bank
In all modern countries at the present time, accordingly, the plan has been developed for placing the government's funds in a single strong bank; and as a rule the central banking organization of the ...
-IX. Special Financial Aid To Producers
As already seen, the relationship between the government and the banking system, as well as the banking relationship of the government to the public, includes a fourth type which deserves careful stud...
-I. Relation Of Money To Bank Credit
In preceding chapters reference has often been made to money, with only a passing explanation of its functions and uses. The most extensive reference that has been made to it in its relation to bankin...
-II. Meaning Of The Value Of Money
What is meant by the value of money? The significance of the term can best be understood by regarding it as the converse of the term value of com-modities. When we speak of the price of a given grou...
-III. Measurement Of Value By Index Numbers
There must, however, be a way of measuring the value of money and of ascertaining it at any given time. Since it is not possible to measure or ascertain the exchange value of money for all commodities...
-IV. Quantity Theory Of Money
The question whether the supply of money directly influences prices, and if so to what extent, has figured prominently in economic discussions for many years. The so-called classical economists early ...
-V. Banking And Paper Money
In any of these views of the price situation there was clearly an important public side of banking not ordinarily thought of by the customer or patron of the bank, and which consisted in the furnishin...
-VI. Banking And Prices
There is a subtler relationship between the bank and the community than this function of furnishing a medium of exchange. It, however, grows out of the latter phase of bank activity. If a bank actuall...
-VII. Banking And Exchange
Whether it be regarded as merely rendering money more efficient, enabling a unit of money to perform a larger number of exchanges, or as permitting exchanges to take place without the use of money, th...
-VIII. Theory Of Prices
Question is often raised as to the definitive theory of prices as generally held at the present moment. The subject is still one as to which controversy exists among economists and theorists. Without ...
-I. Permanence Of Present Form Of Banking
A review of the present practice of banking and the elements of financial theory upon which it is founded suggests to the student of the subject certain broader considerations which must be taken into...
-II. Continuation Of Division Of Labor
The first question which suggests itself with respect to banking in its present form is probably the recurrent question which is always asked as to all economic forms - how far is it permanent, and ho...
-III. Future Position Of Banking
Supposing that such a development were possible, what would be the effect of it upon the situation of banking? It would presumably render unnecessary the present arrangements between individuals and i...
-IV. Public Service Nature Of Future Banking
The direction of its development is not toward atrophy, but is rather toward expansion along new lines and with new purposes. These purposes are essentially those of public service. As industrial orga...
-V. Recognition Of Public Service Nature Of Banking
Meantime, however, progress toward a condition which may render unnecessary further intervention on the part of the government is rapid. The best bankers are more and more recognizing that in addition...
-VI. Adjustment Of Relations Between Industry And Banking
In one way or another banking will undoubtedly become a larger and larger, as well as a more usually employed, mechanism in connection with business, and from the practical standpoint the problem of i...
-VII. Future Development Of Banking
In this aspect the future development of banking opens a broad field to the constructive and ingenious man. It calls for the working out and application of well-tried principles in an immense variety ...
-Appendices Definitions Of Credit
Adapted from J. L. Laughlin, Principles of Money, pp. 72-73. (See text, p. 11) 1. Knies: Exchange in which one party renders a service in the present, while the return made by the other falls in th...
-Operations Of Commercial Banks
Adapted from article by H. G. Moulton on Commercial Banking and Capital Formation, in Journal of Political Economy, vol. xxvi, 1918, pp. 490-494. (See text, pp. 21-23) Gilbart: Providing safety-d...
-Operations Of Commercial Banks. Continued
There is a pool of commercial financing through which effective utilization of the social circulating capital is rendered possible. The individual business enterprise contributes its surplus and obtai...
-Limitations On Loans By National Banks
From the National Bank Act as amended, the Federal Reserve Act. and other laws relating to national banks. Section 5200 (as amended 1919). (See text, pp. 144-46) The total liabilities to any associ...
-Interbank Loans
Adapted from articles by W. H. Steiner, in Federal Reserve Bulletin, June, 1920; January, May, 1921. (See text, pp. 182-84) The methods which are followed in extending accommodation to banks differ ...
-The New York Call-Money Market
From the Federal Reserve Bulletin, April, 1920, pp. 369-371. (See text, pp. 191-92) Definition of call loans. - Collateral call loans, in the general acceptance of the term, are made chiefly in New ...
-Causes Affecting Present Call-Money Rates
The reference in the congressional resolution to high rates for call money in the financial centers and the inquiry as to their causes require, it is felt, a survey of the operations of the money mark...
-Rates Are Determined By The Operation Of The Law Of Supply And Demand
The underlying cause of fluctuations, and especially of increases in call-money rates, is the operation of the law of supply and demand. In other words, as the supply of loanable funds diminishes in p...
-Possibilities Of Change In The Conditions And Methods Of The Call-Money Market
So long as collateral call loans are made under prevailing conditions it is difficult to see how the present situation can be altered, because of the impracticability of controlling the underlying cau...
-The Importance Of A "Call-Money" Market
Call money in some form is indispensable to every important financial center. There must be not only an outlet for the employment of funds temporarily idle, but a large volume of call and short-time m...
-Statements Of Foreign Banks
(See text, pp. 372-80) Bank of England September 28, 1921 (in pounds sterling) Issue Department Notes issued.................... 145,044,950 145,044,950 Governm...
-Banking Department
Proprietors' capital.. 14,553,000 Rest.............. 3,529,568 Public deposits1.. .. 12,231,323 Other deposits...... 105,420,935 Seven-day...
-Resources
Sept. 28. 1921 Sept. 21. 1921 Oct. 1. 1920 Gold and gold certificates .. $442,707,000 $428,036,000 $201,046,000 Gold settlement, F. R. B'd.. 4...
-Questions And Answers Relating To Membership Of State Institutions In The Federal Reserve System
(Compiled by the Federal Reserve Bank of New York.) (See text, pp. 452-62) Rediscounting safety for depositors, stockholders, and borrowers Q. 1. In what way is membership of advantage to a bank or...
-Certainty Of Accommodation
Q. 3. How does this affect the ability of a bank to grant accommodation to its customers? A. The ability of a bank to grant accommodation to its customers under our system of banking is dependent upo...
-Practically All Banks Have Paper Eligible For Rediscount
Q. 6. Banks and trust companies frequently state that they do not hold paper of a kind eligible for redis-count at the Federal Reserve bank. Is this true? A. The experience of banks and trust compani...
-Rediscounting A Simple Operation
Q. 12. Is not rediscounting very complicated? A. No. Items intended for rediscount are listed on an application blank and forwarded to the Federal Reserve bank, which gives credit on the day of recei...
-Collection Of Notes And Bills Of Exchange
Q. 25. Does the Federal Reserve bank also collect notes, drafts, and bills of exchange? A. Yes. Drafts, notes, coupons, acceptances, etc., are collected without charge other than any exchange charge ...
-Money Transferred Without Charge
Q. 26. What advantages does the Federal Reserve bank-offer in transferring funds? A. The Federal Reserve bank makes telegraphic transfers of funds at par to any part of the United States for its memb...
-Currency
Q. 27. What must a member bank do to obtain Federal Reserve notes from the Federal Reserve bank? A. Federal Reserve notes in denominations of $5, $10, $20, $50, $100, $500, $1,000, $5,000 and $10,000...
-Selected List Of Collateral Reading
1. Exchange Fisher, I., Purchasing Power of Money. Laughlin, J. L., Principles of Money. Todd, J. A., Mechanism of Exchange. 2. Credit Cleveland, F. A., Funds and Their Uses. Ettinger, R. P., and ...









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