Branch banking in the United States has always aroused much opposition, especially among the smaller banks, on the theory that it results in monopoly and is contrary to our democratic ideals, "the big banks eating up the little ones." In the fact of their private ownership our state and national banks afford a wide contrast to the system in vogue in Canada and in England where, indeed, the tendency to consolidation has been strongly evident for many years. In the last-named country, between 1891 and 1917 the number of private banks decreased from 37 to 6, and between 1886 and 1918 the joint-stock banks fell from 109 to 35, the number of branches of the latter increasing from 1,547 to 5,993, and the total liabilities increasing from 376,808,999 to 1,316,220,000. In 1917, however, the proposal to amalgamate two more of these large banks led to public outcry and adverse Parliamentary action.

The great objection to the concentration of banking resources is a fear of a "money trust," with results detrimental to the national interest; and the small trader fears that the big bank will favor the more important traders and dealers at his expense.

In order to guard against these evils, in the United States the law prohibits a national bank from acquiring and holding the stocks of another national bank as an investment. The reasoning behind this inhibition, according to our courts, is, that to permit one bank to invest its surplus funds in other banks situated perhaps at a distance would make it no longer possible to confine the management of each bank to persons who live in the neighborhood and who may be supposed to know the trustworthiness of the appointed officers and the financial ability of applicant borrowers; and that such concentration of ownership would deprive the people of the advantages from bank competition.

Of course, the fundamental reason for establishing branches is to gather more business so that the economies of large-scale business can be realized and additional services performed. Since the branch bank need not be as fully equipped as an independent local bank, since its official list may be small. and since its accounting system may be combined with that of the parent bank, a branch can be operated at lower cost than an independent bank, and therefore branches can reach communities too small for independent banks. On the other hand, as compared with the independent bank, the parent and branch system may not be so alive to local needs, may be tardy in establishing branches, and may not adapt them to local conditions as fully.