The function of issuing notes, which is exclusively a privilege of national banks, has diminished in importance in America, as other methods of transferring credit have attained a wide development. This has not only been true of the national banks themselves, but has accounted for the development alongside the national banking system of state banks, private banks and trust companies, which have not had the privilege of note-issue, but have obtained other privileges sometimes greater than those of the national banks.

The aggregate resources of all classes of banks in the United States have greatly increased in recent years. The following table shows the increase in the chief items of the accounts of national banks for representative years from the reports made nearest to the beginning of the year: -

Progress of National Banks, 1865-1908

Year.

No of
Banks

Loans and
Discounts.

Individual
Deposits

1865

638

$166,448,718

$183,479,636

1870

1615

688,875,203

546,236,881

1875

2027

955,862,580

682,846,607

1880

2052

933,543,661

755,459,966

1885

2664

1,234,202,226

987,649,055

1890

3326

1,811,686,891

1,436,402,685

1895

3737

1,991,913,123

1,695,489,346

1897

3661

1,901,160,110

1,639,688,393

1899

3590

2,214,394,838

2,225,269,813

1900

3602

2,479,819,494

2,380,610,361

1901

3942

2,706,534,643

2,623,997,521

1902

4291

3,038,255,447

2,964,417,965

1903

4666

3,303,148,091

3,152,878,796

1904

5180

3,469,195,043

3,300,619,898

1905

5528

3,728,166,086

3,612,499,598

1906

5911

4,071,041,164

4,088,420,135

1907

6288

4,463,267,629

4,115,650,294

1908

6625

4,585,337,094

4,176,873,717

The combined returns of state and private banks, savings banks and loan and trust companies in the United States show a growth within a few years which is indicated by the principal items of their accounts: -

Resources of State Banks, Trust Companies, etc.

Items.

1897.

1907.

Capital stock

$380,090,778

$807,178,262

Surplus and profits

382,436,990

924,655,010

Loans

2,231,013,262

6,099,897,535

Deposits

3,324,254,807

8,776,755,207

Total Resources

4,258,677,065

11,168,514,516

The aggregate banking power of the United States, as computed by the comptroller of the currency in his annual report for 1907, increased from $5,150,000,000 in 1890 to $17,824,800,000 in 1907, and the banking power of foreign countries from $10,835,000,000 to $27,034,200,000, representing an increase for all reporting countries from $15,985,000,000 to $44,859,000,000.

The system of clearing cheques has attained a higher development in the United States than in any other country, except perhaps, Great Britain. Clearing-houses exist in about 112 leading cities, and the aggregate clearings for the year ending 30th September 1907 reached $154,662,515,258. The New York Clearing-House inevitably does a large proportion of this business; its clearings constituted in 1906 67.2% of the total clearings in 55 of the larger cities. The volume of clearings fluctuates greatly with the volume of stock-exchange transactions and with the business prosperity of the country. An indication of these fluctuations at New York is afforded by the following table, taken from Conant's Principles of Money and Banking, brought down to 1907.

Variations in Clearings at New York

Year.

Average
Daily
Clearings.

Per cent
Balances to
Clearings.

Remarks.

1870

$90,274,479

3.72

1873

115,885,794

4.15

Great business activity.

1874

74,692,574

5.62

Industrial depression.

1881

159,232,191

3.66

Renewal of railway building.

1885

82,789,480

5.12

Results of bank panic.

1890

123,074,139

4.65

Business expansion.

1894

79,704,426

6.54

Depression following panic.

1896

96,232,442

6.28

Free silver panic.

1899

189,961,029

5.37

Renewed confidence and activity.

1901

254,193,639

4.56

Culmination of industrial flotations.

1904

195,648,514

5.20

Diminished stock-exchange and business activity.

1906

342,422,773

3.69

Stock-market activity.

The Clearing-House Committee of the New York Clearing-House exercises a powerful influence over the banking situation through its ability to refuse aid in emergencies to a bank which is unwisely conducted. This power was used in the panic of 1907 to eliminate several important, but speculative, financial interests from control of national banks. Only national and state banks and the sub-Treasury were members of the Clearing-House at this time. Their weekly reports of condition were awaited every Saturday as an index of the state of the money-market and the exchanges; but this index was incomplete and sometimes misleading, because regular weekly reports were not made by trust companies. It was announced early in 1908 by the state superintendent of banking that he would exercise a power vested in him by law to require weekly reports in future from trust companies, so that the two classes of reports would present a substantially complete mirror of banking conditions in New York.

Authorities

William M. Gouge, A History of Paper Money and Banking in the United States (Philadelphia, 1833); Condy Raguet, A Treatise on Currency and Banking (Philadelphia, 1840); J. S. Gibbons, The Banks of New York, their Dealers, the Clearing-House and the Panic of 1857 (New York, 1858); Albert S. Bolles. Financial History of the United States (3 vols., New York, 1884-1886); Charles F. Dunbar, Chapters on the Theory and History of Banking (New York and London, 1891); Horace White, Money and Banking (Boston, 1902); Charles A. Conant, A History of Modern Banks of Issue (New York, 1896); Alexander D. Noyes, Thirty Years of American Finance (New York, 1898); Davis Rich Dewey, Financial History of the United States (New York and London, 1903); John C. Schwab, The Confederate States of America, 1861-1865 (New York, 1901); David Kinley, The Independent Treasury of the United States (New York, 1893); Report of the Monetary Commission of the Indianapolis Convention (Chicago, 1898); Charles A. Conant, The Principles of Money and Banking (2 vols., New York, 1905); William G. Sumner, A History of American Currency (New York, 1884); Amos Kidder Fiske, The Modern Bank (New York, 1904); William G. Sumner, A History of Banking in the United States (New York, 1896), being vol. i. in A History of Banking in All the Leading Nations; John Jay Knox, History of Banking in the United States (rev. ed., New York, 1900); and R. C. H. Catterall, The Second Bank of the United States (Chicago, 1903).

Much statistical information is contained in the annual reports of the comptroller of the currency of the United States, published annually at Washington.

(C. A. C.)