BANKING IN IOWA ^^2 6 // COPYRIGHT 1922 BY THE STATE HISTOBICAL SOCIETY OF IOWA t^^-^-v- THE HOMESTEAD PRINTING CO. OES MOINES EDITOR'S INTRODUCTION While Iowa has more banks than any other State in the Union, there is nothing unusual in the banking history of this Commonwealth: the record here is closely paralleled in other jurisdictions during the same period. Thus the history of banking in Iowa from 1838 to 1921 offers to the student a cross-sectional view of the history of banking throughout the nation. The author's training in economics, his experience in teaching the subject of banking, and his first-hand knowledge of Iowa economic conditions have made it possible for him to handle a difficult undertaking in a most satisfactory manner. Benj. F. Shambaugh OmcE OF THE Superintendent and Editor The State Historical Society of Iowa Iowa City Iowa 49^50' AUTHOR'S PEEFACE In the pages that follow the author has undertaken to give a history of banking in Iowa from the earliest settlement to the present time. Obviously many details had to be omitted in order to keep within the bounds of a single volume. More- over, the information for certain periods and phases of the subject was very incomplete. Nevertheless it is believed that sufficient data have been presented to give a true record of Iowa's banking development. Special attention has been given throughout to legislation in regard to banking, since the laws enacted represent the popular sentiment toward banks and their control. The field covered includes more than simply those insti- tutions which technically speaking can be called banks. In the recent Federal Farm Loan Case the Supreme Court of the United States announced a broad definition of banking in these words : ' * Speaking generally, a bank is a moneyed institution to facilitate the borrowing, lending and caring for money. " Under such a liberal definition, practically all institutions making up the financial organization of the State could be comprehended. This study does not claim to be all-inclusive, but it does cover a broad field : it includes com- mercial banks, savings banks, fiduciary institutions, invest- ment banks of various classes, farm mortgage companies, industrial loan institutions, building and loan associations, and various other special types of financial institutions. The Iowa Bankers Association also receives considerable ix X AUTHOR'S PREFACE attention. To some of these institutions the use of the word bank, or any of its derivatives, in the formal title is ex- pressly prohibited. Banks or financial institutions in Iowa operating under Federal law are included in the treatment. Thus, there is considerable discussion of institutions not peculiar to Iowa; this seemed necessary for the benefit of readers not familiar with the general banking history of the United States. During the formative period of American banking, prior to the Civil War, Iowa can not be said to have contributed any distinctive type of banking institution or control. Its banking history presents rather a cross section of the his- tory of banking in the nation. Wildcat banking, prohibi- tion of banking, a free banking law, and a State bank were all found in Iowa in this first epoch. In the development since the founding of the national banking system, the experience of Iowa has paralleled that of the other Commonwealths. Perhaps the most distinctive feature of the banking situa- tion in Iowa at the present time is the large number of banks: indeed, Iowa possesses more banks than any other State in the Union. Some reasons for this unusual develop- ment and the results thereof have been given in Chapter XIV. Iowa's banking history is of special interest also because the majority of the banks are strictly country banks and their business is actually agricultural credit. The regular banks do not, for the most part, loan on farm mort- gage security but confine themselves to short time loans. Farm mortgage banking, therefore, has had an unusual development within the State. Here owing to the absence of a large industrial population special types of industrial AUTHOR'S PREFACE xi loan organizations have not spread widely. Investment banking is also somewhat less prominent than in many States — unless the special farm mortgage companies are included in that class. Iowa has an exceptional number of banks called '* savings banks", but these are in reality chiefly commercial banks. The reader who is interested only in special phases of the subject will find it possible to cover these topics without reading the entire volume. The years prior to the Civil War may be considered a distinct epoch in Iowa banking. Existing State laws were rendered obsolete by the passage of the national banking act. The establishment of the pres- ent commercial and savings bank system and its develop- ment to date are sketched in Chapters VII-X. The remain- ing five chapters deal with special topics and each is prac- tically a unit in itself, so that the reader may omit any por- tion without serious loss of continuity. For assistance in the preparation of this volume the author wishes to acknowledge his indebtedness first of all to the late Professor Isaac A. Loos for his inspiration as a teacher and for suggesting this topic of investigation. The main portion of the study was prepared under the direction of Professor N. R. Whitney, now of the University of Cin- cinnati, and from him the writer received many valuable suggestions. Professor H. L. Lutz of Oberlin College, Pro- fessor E. T. Miller of the University of Texas, and Pro- fessor George W. Dowrie of the University of Minnesota read portions of the manuscript and made helpful sugges- tions. For assistance in securing material and also for reading those portions af the manuscript which pertain to their CONTENTS I. Economic and Political Background ... 1 II. The Miners' Bank of Dubuque .... 10 III. Prohibition of Banking 35 IV. Frontier Banking in Iowa 45 V. Constitutional Authorization of Banking Corporations 70 VI. The State Bank of Iowa 83 VII. Establishment of the Present Banking System 126 VIII. Development of Banking, 1875-1921 . . . 143 IX. Supervision of Banking 183 X. The Federal Reserve System in Iowa . . . 204 XL Building and Loan Associations .... 229 XII. Farm Mortgage Banking 267 XIII. Special Types of Banking 306 XIV. Banks and the Community 333 XV. The Iowa Bankers Association .... 362 Notes and References 385 Index 433 ECONOMIC AND POLITICAL BACKGROUND For more than a century and a half after its first explora- tion by Marquette and Joliet in 1673, the Iowa country re- mained the hunting ground of Indian tribes : indeed, it was not until the early thirties that white settlers crossed the Mississippi in any considerable number, and even then the land had not been surveyed and offered for sale. The best evidence shows that these hardy pioneers who ** squatted'* on the public domain were not lawless intruders, but an industrious people coming from all parts of the Union. Later when the country was surveyed and the territory officially opened for settlement the rich prairie land of Iowa was sold at $1.25 per acre. In 1835 there were over ten thousand inhabitants in the Iowa country, and when the Territory of Iowa was established in 1838 it had a popula- tion of 22,859. The great highway of commerce was the Mississippi River and along its banks the early towns ap- peared. St. Louis, which was then the most important trading point of the region, was the market for Iowa products.^ At this time, when Iowa was being first settled and when its first economic institutions were being established, Ameri- can banking was in a very chaotic condition. In 1832 the question of the recharter of the Second Bank of the United States was the leading issue in the presidential campaign. The Whigs under the leadership of Henry Clay espoused the cause of the Bank, while the Democrats opposed it under the leadership of President Jackson. The decisive victory of the anti-bank party resulted in making the bank question the leading political issue of the thirties and early forties. 2 HISTORY OF BANKING IN IOWA Moreover, the salutary influence of the Bank of the United States being removed, all banking regulation was left to the discretion of the several State governments. An era of State bank inflation resulted. The number of State banks increased from 330 in 1830 to 788 at the close of the year 1836 ; and their note issue more than trebled in the same period. With the lax regulation imposed by many of the States, particularly in the West and South, the quality of this circulation greatly deteriorated. A wave of speculation in public lands swept over the coun- try. In 1837 there came a violent financial collapse, fol- lowed by the suspension of specie payments and heavy liquidation. The latter continued until about 1843, with some periods of improvement. Meantime, the volume of bank notes in circulation dropped from the high level of 1836-1837 to about the point where it had been in 1830. Some gain had been made in the quantity of specie in cir- culation ; but in the six years of contraction the per capita money in circulation in the United States fell from $13.87 to $7.87.2 It is not surprising that early banking in Iowa was strongly colored by the economic and political background against which it was projected. From the meager data available it seems that the general economic disorders pre- valent in the country were even more severe in the pioneer communities of Iowa. Money was scarce and its quality was very poor. The Iowa pioneer brought little money with him to the new home. His former property had fre- quently been converted into cash to pay for land. Often, therefore, he was ' * land poor ' '. Heavily in debt as he fre- quently was, he found the period of falling prices which resulted from the heavy liquidation after the panic of 1837 very detrimental to his interest. The effect of this scarcity of a satisfactory currency was shown in the economic conditions of the early forties. A ECONOMIC AND POLITICAL BACKGROUND 3 Muscatine County correspondent of The Iowa Standard — then published simultaneously at Bloomington (now Musca- tine) and Iowa City — describes agricultural conditions in Iowa in the fall of 1840 in a very interesting way. Doubt- less the condition he pictures was characteristic of all other Iowa communities at that time. The communication, signed "Poor Richard and his Brother", reads in part as follows: We are, many of us in debt. We came here, some two, some six years ago, and settled upon land that was not in market, and was not expected to be for some time after we settled. Some of us then had a Uttle money and some of our neighbors had none. We loaned to each other to buy the necessaries of our families, which then cost us '*a right good chance of money." We also sold our little effects in our old settlement partly on credit, expecting the money when our land came into market. But the day of sale came when many of us were not ready. We were obliged to borrow money, at from 25 to 75 per cent, and pledge our homes for its payment. We were also in debt to our neighbors and our mer- chants. How are we to pay all these debts ? We must sell part of our land. We know that Iowa has a rich and productive soil, and that with little labor, compared with other wild countries, it is brought into a cultivated field — that our great navigable river will always enable us to carry off our produce with little expense ; and therefore our lands will some day become valu- able. If we wish to retain a footing here, we must sell a part and redeem our pledges, satisfy our creditors and keep off the Sheriff. We had better have but 80 acres and have it secure and safe, than have twice or four times the quantity and make slaves of ourselves to keep peace with our creditors. . . . We may calculate that next spring there will be a good chance of farm hunters, and we who are in debt, had better embrace the opportunity and sell a part and save a part, than to do worse. We have had the pleasures and hardships of settling this new country, and don't want to try it over again. We want to stay here near the river and near the market. We want to fix stables and shelters for our stock ; to fix our gardens and set out orchards ; to make our houses neat, durable, and comfortable; and to live in peace, com- fort and happiness the remainder of our days.^ 4 HISTORY OF BANKING IN IOWA In the years immediately following, the situation de- scribed by ''Poor Richard" in 1840 seems to have become worse rather than better. An extract from the Iowa Sun of Davenport shows how serious the condition had become by April, 1841: The times are hard, and business of all kinds dull. Money, even counterfeit paper, and bogus, have almost totally disappeared (no other money having been current here since the last land sales.) Emigrants continue to pour into the Promised Land by tens, hun- dreds, and thousands — filling up the back country with an indus- trious and enterprising population.^ The hard times evidently reached their most acute stage in the winter of 1842-1843. In the spring of that year the economic conditions are reflected in the difficulties confront- ing the newspapers. Notice is given that The Burlington Haivkeye had been forced to suspend because it was unable to collect the money due on subscriptions. The editor of The Iowa Standard was very sympathetic, being in danger of much the same fate himself. Money being scarce, he asked for payment in produce ; and this notice appeared in the comment on the fate of his colleague : We are at this time in pressing need of many articles which our country friends could supply us with, would they but wake up and make an effort to pay their dues. Almost every description of produce, in reasonable quantities, can be turned to account ; and if those who are in arrearage would either come and see us, or com- municate upon the subject by letter or messenger — (not subjecting us to postage however) — doubtless arrangements mutually advan- tageous could be made in almost every instance.^ Prices quoted on the St. Louis market at about this time show that it would take a considerable quantity of bacon and beans to pay a year's subscription to a weekly news- paper. Representative of the value of products of the Iowa farmer are quotations of bacon and ham at three cents per pound; beans at fifty cents per bushel; butter in kegs at ten ECONOMIC AND POLITICAL BACKGROUND 5 cents per pound, in barrels at six cents ; wheat at forty-eight to fifty cents per bushel; and shelled corn at twenty cents per bushel. Since these quotations were for St. Louis in May and were spoken of as representing a return of pros- perity, we may safely assume that, at the worst of the hard times, prices in Iowa were much lower.® Under the caption ''Hard Money Times", The Iowa Standard gives some earlier prices at a constable's sale of the property of a poor widow in Pike County, Missouri — a county on the Mississippi River in the northern part of the State. The following named articles were sold at the prices annexed : 3 good horses, each $1.50 1 large ox 12i/^ 5 cows, 2 steers, 1 calf, the lot 3.25 20 sheep each 12i^ 24 hogs, lot 75 1 dining table 50 1 eight day clock 2.50 1 lot of tobacco, 7 or 8 cwt., lot 5.00 3 stacks of hay each 25 1 stack fodder 25 The Hannibal Journal, from which these figures were taken, was led to comment as follows: Truly we are beginning to feel the benefits which flowed from the destruction of the old United States Bank — the consequent influx of shinplasters — and the ultimate return to a purely specie cur- rency. The rich may well rejoice at a policy that more than trebles their wealth — but as for the poor — God help them.^ Scarcity of money is evidenced by one more instance which came a few months later. The Iowa Standard states that the workmen who built the dam and mill at Iowa City took their pay in stock of the corporation. Only $12 in cash was spent in erecting a dam which cost $5000.® It must be re- membered, too, that banks of deposit were not available, so that no bank check was used by the builders. 6 HISTORY OF BANKING IN IOWA The quality of the circulation appears to have been as poor as its quantity was limited. There was little specie in circulation in Iowa, and such as was used contained few coins from the United States mint. By some writers this lack of specie was ascribed to the policy of the treasury de- partment as laid down in the specie circular — an order issued on July 11, 1836, which required land payments to be made in coin.® By others the blame was laid to the illegal circulation of small bank notes which drove the better money from use. A pioneer who came to Iowa in 1844, and is still a resident of Iowa City, told the writer that in those days most of the silver coins were of foreign mintage. Spanish silver quarters were used until worn smooth. They were then crossed with a knife and reduced to twenty cents. In like manner the twelve and one-half and six and one-fourth cent pieces were reduced to ten and five cents respectively.^^ The California gold discoveries increased the quantity of American gold coins in circulation during the fifties. After the change of the coinage ratio in 1834, silver was under- valued to such a degree that a serious dearth of minor coins was felt throughout the whole country. The situation be- came so serious that in 1853 an act was passed providing for the coinage of subsidiary silver coins of reduced weight and limited legal tender quality. Four years later Con- gress passed an act repealing all statutes giving legal tender power to foreign coins. This legislation did much to estab- lish a currency made up of domestic coins.^^ Paper currency included the poorest bank notes in cir- culation. Michigan bank notes were a large item among the assets of the Miners' Bank of Dubuque at the time of its first published statements in 1837. These were the worst of a very doubtful lot of currency. ' ' Michigan money was reported in June, 1838, to consist of three kinds, red dog, wild cat, and catamount. ' Of the best quality it is said that it takes five pecks to make a bushel.' "^^ It appears that ECONOMIC AND POLITICAL BACKGROUND 7 rather more than five pecks of the notes in circulation in Iowa were required for a bushel. In view of the severe financial conditions against which they were struggling, it is not surprising to find the Iowa pioneers absorbingly interested in the questions of banking and currency. Around these issues the political battles of the thirties and early forties were waged. Andrew Jackson had led the Democratic party into the fight against the Sec- ond Bank of the United States. The substitute which was provided was a heterogeneous system of State regulated — or unregulated — ^banks. The Whigs had undertaken the es- tablishment of a third Bank of the United States and gen- erally supported the regulation rather than the prohibition of banking within the States. The loiva Standard, a supporter of the Whig doctrines, in addition to upholding the Whig positions in national and State affairs, printed the more extreme statements of the opposition. A considerable amount of the space de- voted to the Whig position was given over to long articles defending the party doctrines. In one issue the front page was almost entirely devoted to the ** Report of the Select Committee of the States on the Currency". This was Henry Clay's plan for the proposed Bank of the United States in 1841. The Iowa Standard also carried articles supporting the measure. A speech by State Senator Nash, in the Ohio Senate, concerning banks and the currency was given the entire front page and half of the second in two issues. The Whig doctrine from the editor's own view point was set forth in a series of long editorials which were concluded on November 23, 1843. He pointed out that the abolition of bank paper was working a hardship to the land- owners of Iowa, who were largely in the debtor class.^^ Editors seemed to express themselves most feelingly when describing conditions in neighboring Commonwealths or attacking opposition papers. To show the extreme doctrine 8 HISTORY OF BANKING IN IOWA of some opponents of banking The Iowa Standard quotes the following from the Kalida Venture (Ohio), which it calls a Loco-foco ^^ paper of the first water: There is not a single hank in the United States that is much bet- ter than a den of thieves, seeking an opportunity to "fail" to ad- vantage and rob the people! How disgusting, then, is the hypo- critical jargon of the bank lackeys and slaves, about the recharter of the ' * good banks, " " sound banks ! ' ' Pish ! — humbug ! — how can Goodness come out of Hell ?^^ The Iowa Capital Reporter, the organ of Democracy at the capital, was untiring in its opposition to banks of any kind. Antagonism to banking institutions even transcended civic pride. When it was proposed to establish a bank at Iowa City the brief notice in the paper fairly bristled with invectives. The institution was called an ''incipient little monster", a "vampire upon the body politic", and a ma- chine for "swindling honest industry". The writer charged that it was being promoted for the advantage of "a pam- pered bank aristocracy in Iowa." But his firm faith in the attitude of the Democratic majority in the legislature led him to "bespeak: for this hybrid little monster, a warm reception, a summary disposal, and a speedy quietus."^® With statesmanship that would do credit to twentieth century politicians each party sought to lay all the eco- nomic ills of the day at the door of the party in power. As is usual in such cases, strange inconsistencies may be found in their reasoning. A writer in the Bloomington Herald charged the unfortunate pecuniary condition of Indiana to the Whigs. The Iowa Standard called attention to Illi- nois, "where loco-focism rides triumphant, and the gov- ernor was obliged to inform the legislature that the treasury was not able even to pay the postage on his official corre- spondence. "^'^ A review of the existing economic and political conditions shows clearly that banking in Iowa began under anything ECONOMIC AND POLITICAL BACKGROUND 9 but favorable circumstances. The Territory was rich in natural wealth, but sorely in need of working capital. Its circulating medium was insufficient in quantity and poor in quality. The entire country was suffering from a chaotic banking situation and passing through a severe financial depression. Bitter partisanship colored all consideration of the banking question. II THE MINERS' BANK OF DUBUQUE During the Territorial period the only chartered bank established in what is now Iowa was the Miners' Bank of Dubuque. The lead mines near Dubuque were responsible for the early settlement and commercial importance of the city. Lead had been discovered in this region by the Indians, and the mines were later developed by Julien Du- buque during the period of the Spanish possession of the trans-Mississippi country. Prior to 1833 the lead district was not legally open for settlement, and settlers were sev- eral times ejected by the military forces of the United States. In June of that year the government began leasing the mines to its citizens, and by 1840 Dubuque had come to be known as one of the chief lead producing sections in America.^^ ESTABLISHMENT OF THE BANK Late in the year 1835 a branch of the Bank of Illinois was established at Galena, Illinois.^^ Stimulated doubtless by this action and feeling a real need for banking facilities, the citizens of Dubuque made application to the legislature of the Territory of Wisconsin (of which the Iowa country was then a part) for a bank charter. On November 30, 1836, an act to incorporate the stockholders of the Miners ' Bank of Dubuque was approved by the Territorial legislature.^® The approval of Congress was given, with certain limitations, on March 3, 1837.^1 The terms of incorporation, as amended by Congress, fixed the capital at $200,000 — divided into two thousand shares of $100 each. Nine commissioners were appointed 10 THE MINERS' BANK OF DUBUQUE 11 to receive subscriptions; and these same men were to be- come the first directors. Subscriptions were to be opened in Dubuque County, and in such other places as the com- missioners might think proper, as soon as convenient after the act received the approval of Congress. One-tenth of the amount of each share was to be paid at the time of sub- scribing and the balance in installments at the discretion of the directors who were to give ninety days notice in a local newspaper. The directors were authorized to call for not exceeding forty per cent of the subscriptions of each stockholder at one installment; and the stockholders were not permitted to increase the capital without the consent of Congress previously obtained.^^ The management of the affairs of the bank was vested in a board of seven directors. These directors were required to be residents, citizens of the Territory, and stockholders of the bank. Their term of office was for one year, and election was to take place at a general meeting of the stock- holders to be held on the first Monday in October. At these elections the shares were not given equal representation, but each stockholder was allowed one vote each for his first ten shares and above that amount only one vote for every ten shares. Stockholders not resident within the United States were denied the privilege of voting by proxy. Other stockholders were given the right to be represented by proxies to other stockholders or to the cashier of the bank.^* The powers and duties of the directors were such as are commonly vested in such a body. They could elect one of their own number president, prescribe by-laws, and make rules and regulations concerning the conduct of business and duties of officers and employees. A majority of the board of directors was authorized to declare the half-yearly dividends. Directors were individually liable for all obligations of the corporation in excess of twice the sum of the capital 12 HISTORY OF BANKING IN IOWA stock subscribed and actually paid into the bank. However, a director was relieved of this personal liability if absent when the excess was contracted or if he dissented from the resolution or act whereby the same was contracted. It was further provided that, **No one director shall be permitted at any one time to become indebted to the bank by loans, endorsement or otherwise, to an amount exceeding five thou- sand dollars. "2^ The bank was prohibited from owning any real estate except the necessary banking house and lot or such other realty as it might acquire in satisfaction of debts pre- viously contracted or purchased at sales upon judgments. In like manner it was prohibited from purchasing or selling goods, wares, or merchandise, directly or indirectly, except when these had been pledged as security or bought at judg- ment sale for subsequent resale. The interest rate of the bank on its loans and discounts was limited to seven per cent payable in advance. State- ments of the condition of the bank were required to be made by the president and cashier whenever desired by the Legis- lative Assembly of the Territory. The bank was not to be permitted to owe ''either by bond, bill, note, or other con- tract, over and above its actual deposits, an amount to ex- ceed twice the amount of its capital stock actually paid in". It was required to commence business by January 1, 1838, or forfeit its charter, and its corporate life was to continue until May 1, 1857. The most important function of a bank of that period was the issue of notes for circulation. Indeed, a bank without the right of issue was scarcely considered feasible. Bank- ing laws aiid special charters were framed, therefore, pri- marily to provide safety for the community against un- sound note issues. The Miners' Bank was not allowed to issue notes for circulation until one-half of the capital had been actually paid in. Of this amount of capital, $40,000 THE MINERS' BANK OF DUBUQUE 13 was required to be paid by the stockholders in legal coin of the United States. The limitation of the bank's indebted- ness, other than for its actual deposits, to twice the amount of its capital stock actually paid in, fixed a maximum limit to its note issue. No note or bill could be issued of less denomination than $5 and the legislature reserved the power to raise the minimum denomination of notes to $10 after four years, and to $20 after ten years.^'^ We find in these limitations no special security against notes, such as the familiar bond deposit of the national banks. There were no special provisions for redemption of notes in specie or penalty for non-redemption. No pref- erence was given to note holders over other creditors. The limitation on the volume of notes was very lax. The bank was not required to retain permanently the specie paid in at the outset. Objections to small notes were the ease of counterfeiting and the tendency for small notes to remain longer in circulation and hence the greater possibility of inflation. In this one respect the charter of the Miners ' Bank went as far as could be desired.^^ But on the whole its note issue restrictions were not strict enough to avoid the pitfalls of the banking practices of that day. OPENING OF THE BANK Subscriptions for the capital stock were received on May 22nd, 23rd, 24th, and 30th, and all of the stock was sub- scribed for on those days. The directors issued a call for the payment of forty per cent on the capital stock to be made on the second Monday of October — one-half of this installment to be in specie. An election of directors was held on October 14th at the counting room of E. Lockwood. On October 31, 1837, the bank opened its doors for the trans- action of business. The opening of the bank was not accomplished without 14 HISTORY OF BANKING IN IOWA considerable friction; the selection of officers occasioned some ill-feeling; and almost as soon as the bank began operations charges of various kinds of corruption were made. It was said that the full amount of capital had not been paid before issuing notes. Large stockholders were charged with attempting to secure control of the stock of small holders. The panic of that year and the general sus- picion of banks made it easy for these rumors to gain cre- dence among the people.^^ FIEST LEGISLATIVE INVESTIGATION The rumors concerning the bank soon reached the Legis- lative Assembly of the Territory of Wisconsin which was in session at the time in Burlington ; and on November 16, 1837, just a little over two weeks after the opening of the bank, a committee of three from the House of Representatives was appointed to make an examination of the affairs of the banks incorporated in the Territory.^^ This committee made a personal visit to the Miners ' Bank of Dubuque to get accurate first-hand information and to give the citizens of Dubuque a chance to present any facts they might have as to the condition or management of the bank. The investigation by the committee consisted of sub- mitting to the officers of the bank a list of written questions which were answered by the cashier. The committee re- mained in Dubuque twenty-eight hours, but according to their own statement they did not deem it ' ' within the scope of their authority to inspect the books of the bank, or to count the money, although every facility for that purpose was offered to them by the Cashier. " No persons appeared to report to the committee, either favorably or unfavorably. A more lax and inadequate investigation could scarcely have been made, but it seemed to satisfy the entire committee that the bank was in a sound condition. The report also stated that the bank had complied with all the regulations of the THE MINERS' BANK OF DUBUQUE 15 charter, but on this point there was a difference of opinion. One member of the committee claimed that the issuing of post notes was a violation of the charter ; but the other two, while questioning the wisdom of issuing this type of notes, did not regard it as illegal. The report of the committee was adopted and the bank was pronounced in a ' ' sound and solvent condition". The resolutions adopted by the House stated, however, that that body did not consider it within the scope of the bank's authority to issue post notes for the purpose of making ordinary discounts.^^ Although the result of this first investigation was highly satisfactory to friends of the bank, it did not stop criticism of the institution. The Iowa News, a Dubuque newspaper, was a strong supporter of the bank and used its editorial columns to uphold it.^^ Its efforts, however, were not suc- cessful in quieting the opposition. Opponents of the bank continued their fight on the institution through such news- papers as would print their articles and also sent statements concerning it to the legislature.^^ These attacks soon called forth a second investigation. SECOND LEGISLATIVE INVESTIGATION The first investigation had been conducted by a coromittee of three appointed by the House of Eepresentatives. On January 19, 1838, a joint resolution was approved providing for the appointment of a committee of two from each house to investigate the affairs and condition of the Miners ' Bank and to report at the extra session of the Legislative As- sembly in June of that year. This committee was directed to "visit the bank in person, to examine its books and pa- pers, count the money in its vaults and to examine whether the said bank has complied with the provisions of its charter or not".^^ On February 3, 1838, the committee of investigation met in Dubuque and proceeded to make the examination as di- 16 HISTORY OF BANKING IN IOWA rected. Their first action was to address to the officers of the bank nineteen questions on which they asked written answers under oath or affirmation. It was the object of these questions to find out how well the provisions of the charter had been carried out in the organization of the bank and what its condition was at the time of the investigation. The answers showed that the required $100,000 of capital had been paid in, but gave the payments as having been made in the following manner: $40,000 in certificates for specie deposited in Detroit; $50,000 in notes of the Jackson County Bank and the Bank of Manchester in the State of Michigan; and $10,000 in specie and various other bank notes.^^ The value of the notes of the two Michigan banks, however, is suggested by the fact that, in April, 1838, among a long list of banks whose notes had no claim to public con- fidence, the bank commissioners of Michigan reported the Bank of Manchester and the Jackson County Bank.^* As to the Jackson County Bank the following facts had been revealed by examination: Gold coin was exhibited loose in a drawer, which, being counted, amounted to the sum of $1037.78; about $150 in loose silver was also counted. Beneath the counter of the bank, nine boxes were pointed out by the teller as containing $1000 each. The teller se- lected one of these boxes and opened it; this was examined, and appeared to be a full box of American half dollars. One of the Commissioners then selected a box, which he opened, and found the same to contain a superficies only of silver, while the remaining portion consisted of lead and ten-penny nails. The Commissioner then proceeded to open the remaining seven boxes ; they presented the same contents precisely, with a single exception, in which the substratum was window-glass broken into small pieces.^^ This report from a neighboring State illustrates the evils in contemporary banking practice. Moreover, it shows that in accepting notes issued by this institution in payment of stock subscriptions, the directors of the Miners' Bank were launching it upon a very unstable basis. THE MINERS' BANK OF DUBUQUE 17 From testimony of the cashier, G. D. Dillon, it appears that some stockholders of the Miners' Bank paid forty per cent on their stock, put in their notes, and drew out the money at once. Only nominally, therefore, had the bank complied with the charter requirement that one-half the capital be actually paid in before any notes were issued for circulation. In reply to a question concerning the denom- ination of the bank notes, the officers stated that they had never issued notes of less denomination than $5.^® By the terms of the charter, notes could not be issued until $40,000 of specie had been paid in by the stockholders. As a matter of fact, the specie on hand as shown by a statement of con- dition of the bank on February 3, 1838, and verified count of the investigating committee was $1318.02. The officers explained that arrangements had been made with a Detroit bank to hold $40,000 in specie for them and assured the com- mittee that the $40,000 would be in the hands of the bank at the opening of navigation. This did not satisfy the require- ments of the committee and, although the officers were con- fident that they would shortly receive the money from De- troit, this shortage of specie was responsible for a supple- mentary examination held in June. The investigation showed further that the majority of the circulating notes were not payable on demand but at a future date. Thus on February 5, 1838, the amount of notes in circulation was $14,030 — of which $1350 was payable on demand and $12,680 twelve months after date. The officers stated that they paid out these post notes in payment of discounted notes or drafts, and that they received them in payment of debts due the bank without regard to maturity. To the question, ''Have you at any time refused the pay- ment of specie for your bills when demanded at your counter?" the answer was, "We have never declined paying specie on our bills, when presented at our counter." In reply to a further question regarding redemption of post 18 HISTORY OF BANKING IN IOWA notes the answer was given, that they were redeemed partly by notes of other banks and partly with notes of the Du- buque bank. Notes of other banks constituted such an important part of the assets of the bank and were used to such an extent by them in discounting, that the attitude of the bank toward receiving them is of interest. The question was asked whether such notes when used in discounting would be ac- cepted in payment of debts due the bank. To which the officials replied that they were received by the bank to pay any debt due the bank * * which may have been created by the issues of those notes." The use of bank notes of all shades of value was not uncommon in that period, and in thus promoting the circulation of such a large volume of almost worthless notes — $20,000 of the notes of the two Michigan banks noted above were still included among the bank's assets — the Miners ' Bank was following the accepted prac- tice of the time. The bank was able to show that the rate of discount had not exceeded seven per cent. No director had ever been indebted to the bank to the amount of $5000 which was the charter limit. On these and certain other points there is no evidence that the bank had violated the provisions of its charter. As noted above, the committee was not satisfied with the amount of specie on hand and postponed its final report on the bank until after a supplementary examination was held in June. This examination showed a considerable increase in bills discounted and individual deposits. The notes of the Jackson County Bank and the Manchester Bank had mostly been disposed of. Promises had been made that the bank would increase its specie holdings as soon as the $40,000 for which they held certificate of deposit in a Detroit bank could be transported. It is noted, however, that on June 4th the amount of specie on hand was only $457.30 — ^nearly $1000 THE MINERS' BANK OF DUBUQUE 19 less than at the time of the February report. An item of $20,000 '' Specie intransito" is found among the assets.. This j£,ailed to satisfy the examining committee; and their report to the legislature was to the effect that the bank had not met the charter provisions nor kept the promises made at the time of the February examination. They regarded the bank as in an unsound condition and found very little confidence placed in it by the citizens of the community. In view of these facts they recommended the immediate repeal of the bank's charter.^ ^ Nothing was done, however, about repealing the bank's charter, for on June 12, 1838, the Territory of Iowa was established by act of Congress — the act of separation taking effect on July 4, 1838.^^. The legislature of Wisconsin Ter- ritory adjourned its meeting at Burlington; and the first session of the Legislative Assembly of the Territory of Iowa was begun at Burlington on November 12, 1838.^^ This change in jurisdiction was doubtless responsible for the lack of definite action on the committee 's report. THIED LEGISLATIVE INVESTIGATION Early in the session of the First Legislative Assembly of the Territory of Iowa the third of the series of legislative investigations of the Miners' Bank was instigated. On November 29, 1838, a resolution was approved^^ providing for a committee of three — one from the Council and two from the House of Representatives — to proceed at once to Dubuque and examine the bank. This committee worked in much the same manner as the former joint committee. The questions asked were almost all answered from the bank's statement for December 7, 1838, submitted by the cashier. In answer to the question as to the amount of capital stock paid in before the bank commenced business, the cashier replied that ** fifty per cent upon the capital stock, was required to be paid in before 20 HISTORY OF BANKING IN IOWA the bank could legally commence operations." This reply seemed to satisfy the committee, but adds nothing to the in- formation on the disputed point. The statement shows a decrease in the volume of post notes in circulation, an in- crease in bills discounted, and a relatively large decrease in individual deposits since June 4, 1838. The amount of specie on hand was still very low — amounting to $3033. Notes of other banks were held to the amount of $18,874. In the report to the Legislative Assembly the committee announced that the cash on hand was nearly double the amount of liabilities of the bank, exclusive of the capital stock and undivided profits. There is no distinction made between notes of other banks and specie, the committee ap- parently not being concerned with the ability of the bank to meet its obligations in specie. Circulation amounted to $16,025; so that for redemption of its notes alone, not in- cluding anything for deposits, the bank had a specie reserve of only about one to five. The report of the committee was to the effect that the Miners' Bank of Dubuque was in a safe and solvent condi- tion. This report appears to have been satisfactory to both houses of the Assembly.^^ From December 19, 1838, when this report was concurred in, until the meeting of the Fourth Legislative Assembly, which convened on December 6, 1841, there was no further investigation of the affairs of the bank by the Legislative Assembly. SUSPENSION OF SPECIE PAYMENTS On March 29, 1841, the directors of the Miners' Bank adopted a series of resolutions formally suspending specie payments. Holding that there was no cause for alarm regarding the condition of the bank, the directors attrib- uted the necessity for suspension to the practice of a large St. Louis firm which, for purpose of speculation, discredited the notes of the Miners' Bank in order to buy them at a THE MINERS' BANK OF DUBUQUE 21 discount and then present them for redemption in specie. This unfair practice was a loss to the ordinary bill holders and an expensive operation for the bank. Accordingly they announced that in the future the bank would pay out specie only in small amounts at its own discretion. As evidence of the solvency of the bank and its desire to act in good faith toward the creditors, the directors promised to publish quarterly statements of the bank's condition. The report accompanying the resolutions showed that the bank was apparently in a sound condition. Its liabilities exclusive of capital stock and profits were $106,654 — of which $97,005 was notes in circulation and $9649 was deposits. To meet these demands the bank had cash of $58,486.99 — of which $40,051.99 was ''Gold and Silver on hand."''^ ATTITUDE OF THE FOURTH LEGISLATIVE ASSEMBLY In the Fourth Legislative Assembly the question of the Miners' Bank, its condition and suspension, became a live issue. Bills and resolutions regarding it were of three kinds: first, those calling for another investigation by a joint legislative committee ; second, those calling for a state- ment from the bank of its condition as authorized by the charter ; and third, bills or resolutions requiring the bank to resume specie payments. A joint resolution authorizing an investigating committee to examine the affairs of the bank was passed by the CounciP^ and referred to the House, where action was post- poned until late in the session. The resolution was never passed. In the House opponents of a joint investigating committee favored a resolution calling for a sworn state- ment from the bank officials ; but such a resolution failed to pass.^* In the Council a resolution was passed on February 1, 1842, requesting the cashier of the bank to make out and furnish to the Council a statement of its affairs. On the same date a statement was presented to the Council through 22 HISTORY OF BANKING IN IOWA M. Bainb ridge giving the bank's condition as of January 1, 1842.^^ This statement is not entirely clear and does not reveal the bank 's exact condition as regards notes outstanding and specie on hand. Among the liabilities are listed bank notes in circulation to the amount of $167,030 — an increase of $70,025 since the time of suspension of specie payments on March 29th preceding. In addition, there is an item of notes on special deposit with other banking institutions amounting to $46,000. Just what this means is not clear, but it seems to be a special note issue. Instead of placing the item of gold and silver alone on the balance sheet, the report reads ''Gold, silver and notes of the State Bank of Missouri .... $43,277.66." If there were no more Bank of Missouri notes than at the former time, the specie was practically unchanged. This, however, is not revealed by the balance sheet. At any rate, because of the increased liability for notes outstanding, the relative specie reserve had been lessened. An effort to compel the bank to resume specie payments was also made in both branches of the Legislative Assembly. In the Council a bill. Council File 103, was passed by a vote of seven to six, which would have required the bank to resume specie payments by August 1, 1842.*® On the same day on which this bill passed its second reading in the Council, the House of Representatives passed a similar bill, House File 79, by a vote of fifteen to eleven.*'^ This measure was sent to the Council where it was laid on the table indefi- nitely.*^ The Council bill met a similar fate in the House a few days later.** A joint resolution was then passed by the House requiring the bank to * * stop its discounts and issues while it continues to suspend specie payment. "'*® This was referred to the Council, and at its first reading was laid on the table.^^ Thus, although similar bills were passed by each house of the Legislative Assembly calling for a re- THE MINERS' BANK OF DUBUQUE 23 sumption of specie payments by the bank before August 1, 1842, no bill was enacted into law. M. Bainbridge of Dubuque defended the bank against at- tacks in the legislature. He said there was no complaint on the part of the people of the community. He held that it had paid in specie long after all other Western banks had sus- pended, and explained that suspension was an act of self- defense against St. Louis brokers. The bank, he maintained, paid out specie to farmers when they needed it to enter on their lands.^^ The facts do not seem to indicate that at this time the credit of the bank was as high as Bainbridge said it was. In the spring of 1842 the bank's notes fell to a low point in the chief commercial cities. In a letter to an Iowa friend dated February 28th, a gentleman in St. Louis stated that notes of the Miners' Bank of Dubuque were no longer received in that city, * * and the prevalent im- pression is, they will go entirely down."®* CHANGE OF OWNEESHIP In June, 1842, the controlling interest in the bank was bought by men connected with the St. Louis Gas Light Com- pany. The new cashier, Mr. Pearson, had been one of the principal clerks in the employ of the Gas Light Company, while the new directors were all prominent business men of Dubuque.®^ From testimony given at a later legislative in- vestigation it is learned that all of the directors were quali- fied to act as such by having certificates for $50 of bank stock handed to them. One of their number, Timothy Davis, further testified that he intended to return the stock when he ceased to act as director. In July an effort was made to resume specie payments, $20,000 in specie having been de- posited in a Galena bank by the St. Louis Gas Company. For about a week the bank did redeem its notes.^® In spite of these efforts at restoration, the bank does not appear to have carried on much business at this time. In an 24 HISTORY OF BANKING IN IOWA Iowa City newspaper in December, 1842, there is a news item to the effect that Thomas Rogers of the Dubuque dele- gation intended to introduce a bill to repeal its charter. After stating this fact the paper says: **It is pretty well known that that institution is not at present doing any business, and has but little paper afloat. From these causes very limited interest is felt on the subject of the continuance of its charter. ' '^^ ATTEMPT TO EEPEAL THE CHAETEE In the Fifth General Assembly of the Territory of Iowa, which convened at Iowa City on December 5, 1842, the perennial question of the Miners' Bank came up early in the session. A bill to repeal the charter, introduced in the House of Representatives early in January, 1843, was re- ferred to a select committee consisting of one member from each electoral district.^^ Two weeks later the committee submitted a majority and a minority report. Both reports were in favor of repealing the bank 's charter, but they dif- fered upon the plan to be followed in closing up the affairs of the bank. The majority report set forth three distinct points upon which the bank had violated its charter: (1) it had com- menced issuing notes without having the required $40,000 in specie paid in; (2) it had on its board of directors men who were not bona fide stockholders; and (3) it had sus- pended payment of specie for its notes. The minority report did not dissent from any of these charges, and the evidence submitted supports the decision of the committee. Witnesses examined were J. T. Fales, Chief Clerk of the House and a resident of Dubuque, Timothy Davis, a bank director, and M. Mobley of Spring- field, Illinois, who had been employed by Dr. Richard Bar- rett and Thomas Mather, principal owners of the bank, to examine the condition of the institution. THE MINERS' BANK OF DUBUQUE 25 Mr. Fales testified that he believed "the stock subscribed was never paid in any other way than by the stockholders giving their notes to the institution." Mr. Davis also testi- fied to the same effect. No evidence could be found by the committee to show that any more than a small amount was actually paid in in legal coin of the United States. Upon the second point there is positive testimony from Mr. Davis that he had not invested one cent in the institu- tion, but had been given a certificate for $50 of stock paid in to qualify him to act as a director. Moreover, he testified that Messrs. Farley, Waples, Quigley, and Wallard were qualified and became directors in the same manner as he did. Upon the question of suspension of specie payments there was likewise no doubt. With the exception of about a w^eek in July, 1842, the bank had not redeemed its notes in specie since March, 1841. The testimony of Mr. Fales shows the resulting depreciation. He said that in the store of Mr. Quigley, one of the directors, he had been paid forty cents on the dollar for the notes, in spite of a notice in the store "Notes of the Miners' Bank of Dubuque, taken here." When he left home they were worth from thirty-seven to forty cents on the dollar. A bill for the repeal of the bank's charter passed the House by a unanimous vote,^^ but failed of passage in the Council.^^ CHAEGES OF BRIBERY While the bill to repeal the charter of the bank was pend- ing in the legislature, charges were made in the Iowa Capi- tal Reporter, a newspaper published in Iowa City, that cer- tain members had been influenced in their action by offers of "personal reward and private advantage". A committee of five was appointed to investigate these bribery charges and report on the same.^*' On the first of February this committee made its report. 26 HISTORY OF BANKING IN IOWA They had investigated the matter thoroughly and submitted a mass of testimony to the House. The first witnesses ex- amined were the editors of the Iowa Capital Reporter^ Thomas Hughes and Jesse Williams. From them the com- mittee learned that letters had been written by Dr. Eichard Barrett of Springfield, Illinois, to certain members of the House and Council, designated by name, asking them to assist in saving the bank's charter until such time as he could consummate arrangements to buy out the interests of the bankrupt Gas Light Company of St. Louis. Included in the evidence presented were four letters directed to James M. Morgan, Shepherd Leffler, Francis Springer, and William Patterson — these being the only ones received by members of the legislature according to their own sworn testimony. In the letter to Mr. Morgan there are offers of private and local advantage in case the charter was saved ; in the other letters there was no suggestion of personal advantage, but merely a statement of the purpose of Dr. Barrett and his request for the support of these members to save the bank's charter in the public interest. The resolutions presented by a majority of the committee condemned Dr. Barrett and Mr. Mobley, who had delivered the letters, for their action in seeking thus to influence legis- lation. Mr. Morgan was cleared from suspicion and his ac- tions were shown to be free from influence. The Iowa Capi- tal Reporter was denounced for having made a charge ' ' utterly untrue and highly reprehensible in its character ' '. The majority of the committee, therefore, deemed the editors as deserving the censure of the House. Upon this point a minority of the committee, Greorge Hefner and Henry Felkner, disagreed. They believed that the revela- tions were of an alarming nature and justified the editors in being suspicious that the offers might not have been wholly without effect. Furthermore, they did not believe such censure to be within the jurisdiction of the House : they THE MINERS' BANK OF DUBUQUE 27 held it to be beyond the power of the legislature to punish or censure an individual for speaking against its members. The reports of both the majority and the minority were laid on the table and no further action taken.^^ Although this closed the official action on the bribery charges, so much feeling had been aroused that two of the principals of the bribery investigation engaged in personal recrimination. The controversy, indeed, became so hot that the editor of the Reporter, Jesse Williams, was given a beating by George H. Walworth, of the legislature, in the Capitol library. The Iowa City newspapers took opposite sides, the Standard sharply criticizing the action of the Reporter and in its columns graphically writing up the thrashing of the rival editor. There was no effort to conceal the fact that the Standard was pleased at the resulting dis- grace.®^ OPPOSITION IN THE SIXTH LEGISLATIVE ASSEMBLY Opposition to the Miners' Bank was again manifest early in the session of the Sixth Legislative Assembly. The first bill introduced in the House of Eepresentatives was one to repeal the bank's charter. When called up a few days later, the bill was considered in Committee of the Whole and re- ported to the House for passage. Action was delayed by a motion to lay the bill on the table until January 2nd because information had been received that memorials relative to the bank were in circulation in Dubuque and Jackson coun- ties. This motion had precedence and was passed by a majority of one vote.®^ As soon as the Legislative Assembly convened after its holiday recess, a number of petitions and letters of instruc- tion to county delegations were received by the House. Each of these letters of instruction — one signed by 1172 citizens of Des Moines County, one signed by 173 citizens of Clinton County, and one signed by 213 Jackson County 28 HISTORY OF BANKING IN IOWA constituents — urged the respective delegations to vote for a law to force the Miners' Bank either to resume specie pay- ments or close up its business. On the other hand, a peti- tion from 559 citizens of the counties of Dubuque, Delaware, and Clayton asked that more time be given the bank to resume specie payments.*'^ When the bill came before the House for discussion, sev- eral attempts were made to amend. These amendments, amounting in one or tw^o cases to a new bill, provided for the continuation of the bank's charter if it met certain con- ditions. The first of these amendments would have forced the bank to mortgage to the State $400,000 worth of land to secure the payment of its notes. This was rejected, but later a vigorous fight was made to save the bank's charter by amending with a similar land mortgage clause. Finally, amendment having proved futile, the bill was brought to a vote in substantially its original form. This called for the repeal of the bank's charter and the winding up of its affairs, and the vote stood eighteen to seven in favor of such action.*'^ An interesting suggestion appears in a petition from Iowa City presented by Thomas Rogers on the day fol- lowing the vote but before the final engrossment of the bill. In this petition the legislature was asked to resuscitate the bank, ' ' Provided, that the Stockholders cause to be paid into the ofiice of the Secretary of the Territory the sum of $10,000, as a bonus; the said sum to be appropriated for the encouragement of the emigration of marriageable females from New England to this Territory. "^^ The bill for the repeal was sent at once to the Council and was there referred to a select committee. Petitions were also submitted to the Council by citizens of various counties. The report of the select committee substituted a new bill — with the exception of the enacting clause — which would have compelled the bank to resume specie payments THE MINERS' BANK OF DUBUQUE 29 within thirty days and have made its notes redeemable at par in gold or silver in Burlington, St. Louis, and New York, as well as at the bank at Dubuque. When this bill was later considered by the Council, strin- gent amendments were added. The President, directors, and stockholders w^ere made individually liable to the note holders in case of failure of the bank to pay specie for. its notes. This was an unconditional and unlimited personal liability of stockholders. A further amendment prohibited the bank from importing and vending in the Territory bills of less denomination than $5. In its final form the bill passed the Council by a vote of ten to three.*^' The House bill had provided for immediate repeal of the bank's char- ter; while the amended bill which passed the Council gave the bank thirty days in which to resume specie payments, and, if it did so and continued in business, provided for a sound form of regulation. The notes that this bill would have permitted the bank to circulate would have been far superior to many notes then circulating in the Territory. But when the amended bill was presented in the House, that body refused to concur by a vote of fourteen to eleven.^^ The bill was returned to the Council where it was laid on the table until "the Fourth of July next".*^^ Thus closed the legislative record for another session. Again it seemed to have been the desire of both branches of the Assembly to take action, but they failed to get together on a bill. EESUMPTION OF SPECIE PAYMENTS When the legislature had adjourned its session, the bank did on its own initiative what the legislators failed to re- quire of it : on April 19, 1844, it resumed the payment of its liabilities in specie. Thereafter, until the repeal of its charter and final closing, the bank "promptly met all its liabilities." This resumption came after a change in the 30 HISTORY OF BANKING IN IOWA management and control of the bank — M. Mobley of Spring- field, Illinois, being the new cashier J® The extent to which the public gained by this resumption is not clear. The Iowa Capital Reporter, an anti-bank paper, charged that the new owners could adopt this course with perfect safety to themselves, because they had pur- chased, through their agents, all of the outstanding liabil- ities of the bank. In so doing, it was claimed, they realized a considerable profit by purchasing these obligations "at a discount of 75 or 80 per cent. ' '^^ There is not sufficient evi- dence to prove the truth or falsity of this charge. The extreme partisanship manifested by the anti-bank faction leads one to discount the statement somewhat. On the other hand, it is unlikely that foreign stockholders would put a defunct institution on its feet primarily for the benefit of its creditors. Moreover, the probability of a legislative repeal of the bank's charter was so great that conservative in- vestors would not have risked much on its future. What- ever may have been the motive, resumption at this time did not restore the bank to the popular favor. EEPEAL OF THE BANK'S CHAETEE One of the first bills brought before the House of Repre- sentatives in the Seventh Legislative Assembly was for the repeal of the charter of the Miners' Bank. No further charges were made against the bank at this time. There was a recital of the former illegal practices of the bank and a statement of the authority by which the legislature might repeal the charter. In conferring upon the stockholders their corporate powers and privileges, the legislature had reserved to itself and its successors the right *Hhat if said corporation .... shall abuse or misuse their privi- leges under this charter, it shall be in the power of the legis- lative assembly of this territory, at any time, to annul, va- cate and make void this charter. ' '" THE MINERS' BANK OF DUBUQUE 31 The bill for the repeal of the bank's charter was passed unanimously by the House and concurred in by the Council by a vote of eleven to one. It became law without the sig- nature of the Governor on May 21, 1845, and was to take effect twenty days after its passage. According to the pro- visions of the bill, the judge of the third judicial district was empowered to appoint two trustees with full power to settle the affairs of the bank. Certain points as to the manner of settlement were specified, among which was the provision that notes of the bank must be accepted at par in payment of all debts due to the bank. This is evidence that bill holders were probably not losers in the final settlement.'^^ Before the trustees were appointed the directors of the bank issued an address to the people of Iowa as a protest against the action of the legislature. It consisted largely of an historical review of the operations of the bank. The action of the bank in suspending specie payments is espe- cially defended. With a single exception every bank west of the Alleghanies had suspended. It was pointed out that the first suspension was made long after most other banks in the West had suspended and only because of the unfair action of note speculators. The bank resumed payments about a year later and its directors maintained that it could have sustained them but for disappointment over a draft. The directors very justly claimed that the legislature was unfair in attacking it — especially since at the same time it failed to pay a debt of $5500 plus interest due from the Ter- ritory. In 1842 this debt amounted to $6000 or $7000, which if paid would have enabled the bank to continue specie pay- ments.'^^ The address closes with the statement that the officers would not submit to the action of the legislature without a fight, and before the directors gave possession to the trustees they intended to settle the matter in the courts.'^^ This threat was later carried out. In August, 1845, Judge Wilson appointed Benjamin Rupert and John G. Shields 32 HISTORY OF BANKING IN IOWA trustees to settle up the affairs of the bank.^'^ The directors refused to turn over the property of the bank to the trustees and suit was brought in the November, 1845, term of the dis- trict court. By a rejoinder the bank raised the point that the legislative act was passed without notice to them and without any evidence of abuse or misuse of their corporate powers and privileges. To this the plaintiffs filed a de- murrer which was sustained by the court. The case was appealed by the bank directors to the Supreme Court of the Territory of Iowa, where the decision of the lower court was sustained.'^ '^ The case was then submitted to the district court for trial upon the question of the constitutionality of the repeal of its charter. Here the repeal was held to be constitutional, and again the case was appealed. In the July, 1848, term of the Supreme Court of Iowa, the decision of the lower court was once more upheld,"^^ with the result that the trustees were given legal possession of the bank. In the three intervening years, however, the affairs of the bank had been settled and it had ceased to exist. On February 25, 1849, the final meet- ing of the directors was held to close up their connection with the bank.'^^ In looking back upon the career of the Miners' Bank it is difficult to judge to what extent it was marked by mis- management and fraud and how far it was the victim of the disturbed economic and political conditions of the times. It seems rather clear that at the time of organization the bank did not comply with the charter requirements regarding stock payments and specie holdings. Its suspension in 1841 appears to have come at a time when it was in reason- ably sound condition and to have been due largely to the financial conditions of the period. From that time on its record was rather doubtful. It filled its board with ''dum- my" directors in order to meet the residence requirement THE MINERS BANK OF DUBUQUE 33 of the charter ; it was guilty of making improper offers to members of the legislature ; and it promoted the circulation of notes of neighboring ''wild cat" institutions — but these would doubtless have found their way into the circulating medium of the Territory without its aid. The loss to the community through depreciation of the bank's notes can not be accurately estimated. It is certain from testimony given at one of the investigations that the notes feU as low as forty cents on the dollar. In the report of the investigating committee of 1843 it was stated that the bank had made arrangements with the land office by which the bills were to be received in payment for land to ' ' some small extent." Whatever losses were experienced must have fallen largely upon the bill holders, for deposits never constituted a considerable portion of the liabilities of the bank. At the time of suspension of specie payments in 1841, at the high point in the bank's career, the published statement showed individual deposits of only a little over $6000 as compared to $97,000 of notes in circulation.^** In the early opposition to the Miners' Bank of Dubuque there is no evidence of party alignment. Personal and local considerations were manifested in the votes. But later opposition became a party issue. In the debates regarding the proposed repeal of the bank's charter in the Fourth Legislative Assembly (1842), the attitude of the parties was first clearly brought out. The business of bam ing was as much the object of attack as was this particular bank. While party lines were ignored at times during this and the subse- quent session of the Legislative Assembly, in the final vote taken in the Sixth Assembly party lines were strictly ad- hered to. The bill before the House of Eepresentatives called for the immediate closing of the bank ; and in the final vote the eighteen Democrats voted for the passage of the bill, while the seven Whigs voted against it.^^ In the Coun- cil the Whigs held the balance of power, and the action there 34 HISTORY OF BANKING IN IOWA favored extension of the bank's charter on condition that it resume specie payments in thirty days. This was inter- preted by the opponents of the bank as a defense of banking as such as well as an attempt to save the Dubuque institu- tion. The repeal of the bank's charter by the Seventh Leg- islative Assembly was almost unanimous, only one vote being registered against it in both houses. The Democratic majority was by this time quite overwhelming. ^^ ni PKOHIBITION OF BANKING During the Territorial period unsuccessful attempts were made to secure bank charters for at least three different institutions. In December, 1838, certain citizens of Jackson County petitioned the House for a charter for a bank to be established at Charleston in that county.^^ The petition was referred to the Committee on Incorporations and never heard of again. A second attempt was made to establish a bank in 1842, this time at Davenport in Scott County. The bill for incorporation was defeated in the House by a vote of twenty-one to two.^* At the session of the Seventh Legis- lative Assembly in 1845, a petition was presented in the House of Representatives asking the legislature to charter the Bank of Iowa in Iowa City. This was to have been a stock bank with the right of note issue. The bill to incorpo- rate the bank was referred to a special committee from which it never emerged.®^ In order to restrain unincorporated banking associations from issuing notes, the Territorial legislature passed an act in 1838 making unlawful the issue of notes or bank bills by individuals or firms, a penalty of $1000 for each offense being fixed by the law.®^ In the history of the Miners' Bank, therefore, there is far more than a record of a typical western bank of its period. During the years of Iowa 's Territorial history, the struggle went on between those who would deny to any form of bank the right of existence and those who favored banking with proper regulation. The members of the jury were the qualified electors of the Territory of Iowa: and their verdict will be found in the vote on the Constitution which made Iowa a State in 1846. 35 36 HISTORY OF BANKING IN IOWA THE CONSTITUTIONAL CONVENTION OF 1844 When the Territory of Iowa was established in 1838 it had been prophesied that it would soon become a State. The movement for statehood was first given official endorsement by Governor Lucas in his message to the Legislative Assem- bly which met at Burlington on November 4, 1839. Support was not lacking for his proposal, but there was also strong opposition to the establishment of a State governn^nt at that time. Perhaps the leading objection concerned the matter of expense — the fear that the burden of taxation would be too heavy if the limited number of inhabitants undertook to support a State government. After consider- able agitation and failure of the earlier attempts to secure a majority of voters in support of calling a constitutional convention, a convention was finally authorized by the peo- ple at the election of April, 1844.^'^ On Monday, October 7, 1844, the delegates met in Iowa City to formulate a State constitution. Several days of the rather short session of the convention were devoted to a discussion of the question of corporations in general and of banks in particular. The bank issue had been a large factor in national politics and one of the most important points of division between Whigs and Democrats. The business of the convention was divided among eleven standing commit- tees.^^ On October 11, 1844, the Committee on Incorpora- tions reported, majority and minority reports being pre- sented. The majority report provided that one bank might be established in the State with branches not to exceed one for every six counties. The regulations under which it might be created were stringent and included among others the following provisions : first, the bill establishing the bank and branches must, after passage by the legislature and approval by the Governor, be submitted to the people for approval or rejection; second, one-half the capital must be paid in gold or silver before the bank would be permitted to PROHIBITION OF BANKING 37 commence operation ; third, no note or bill should be issued of a denomination less than ten dollars; fourth, the stock- holders must be liable without limit for all debts ; fifth, the bank must pay its notes and promises on demand or forfeit its charter; and finally, the legislature must reserve the right to alter, amend, or repeal the charter. To the banker of the present day some of these provisions would seem onerous and unnecessary, but to the minority members of the committee and to a considerable following in the convention the restrictions seemed to be too lenient. The report submitted by the minority members was brief but clean cut: ''No bank or banking corporation of discount, or circulation, shall ever be established in this State." This was signed by Stephen Hempstead (later Governor of the State) and Michael 0'Brien.«» On October 19th the report came before the convention for consideration. A motion by Stephen Hempstead to strike out the majority report and insert the minority report called forth lively and extended debate.^^ In this debate there is evidence of the attitude toward banking then prev- alent. Mr. Hempstead opened the debate in opposition to banks. He described three kinds of banks: banks of de- posit, banks of discount, and banks of circulation. It was to the banks of circulation that he objected. He pointed out that such banks loaned their credit and not money ; that the right to issue notes enabled them to loan two or three times the amount they possessed. Holding that the banks did nothing to create capital, he considered the loaning of their credit as usury. Mr. Hempstead's analysis of the function of note issue is correct. Upon the second point, however, he was undoubt- edly in error ; for, while a bank may not serve directly in the production of wealth, it has been amply demonstrated that a properly conducted bank plays a very important role in promoting the prosperity of a community. Mr. Hemp- 38 HISTORY OF BANKING IN IOWA stead's inability to see any good in banks is a commentary upon the banking practice of the time. In the course of his remarks he described the practice of a group of Massachu- setts banks in which the specie required by law was assem- bled from all the banks and sent from one bank, as soon as it had been inspected by the bank commissioners, to the next one in order of inspection, the same coin thus serving for all. The practices in banking circles at that time, as de- scribed by other writers, would lead us to believe that Mr. Hempstead's story was no exaggeration. As another evil of banking Mr. Hempstead pointed to the inflation of prices resulting from a large increase in the circulating medium with a consequent lessening of its value. Property acquired thereby a fictitious value, speculation was stimulated, and extravagance encouraged. He held that there would be less fluctuation if only gold and silver were used as money. It is probably true, as Mr. Hempstead argued, that many of the financial evils of the preceding decade had been due to the abuse of banking privileges. He feared that the evils so common in contemporary banking practice could not be eliminated from the proposed State bank. The arguments and the position of Mr. Hempstead must be judged in the light of the banking practices of the day; viewed in this way, he can hardly be classed as unreasonable in his attitude. Some members went even further in de- nouncing banking. Eichard Quinton of Keokuk County classed all banks as a " set of swindling machines ' '. Some of the delegates professed to favor a bank of some kind — just what, they did not specify — ^but they were opposed to the plan presented by the majority report of the committee. Still others wished to leave the question to the decision of the legislature to be elected under the terms of the Consti- tution, Certain members announced that they were under instructions from their constituents to favor a bank and PROHIBITION OF BANKING 39 would therefore cast a favorable vote, though in doing so they were acting contrary to their own convictions. A final effort was made to split on party lines.^^ The Democrats, the anti-bank party, outnumbered the Whigs fifty-one to twenty-one. Although considerable party feeling was aroused, the vote was not along party lines. The motion to substitute the minority report, placing a total prohibition of banking in the organic law of the State, was lost by a vote of seventeen to fifty-one.** After extended debate and numerous roll calls on amend- ments to the banking section, it appeared evident that the constitutional convention was not prepared to formulate the details of a plan for a bank. At the same time there was unwillingness to have the Constitution left open on this matter. Distrust of the legislature was evidently at the bottom of the attempt to include details in a document which should be a flexible instrument. The only reason for placing greater confidence in the results of the convention would seem to have been that the action of the convention required ratification by popular vote. But to have sub- mitted a detailed Constitution to the people for ratification would have resulted in losing the banking plan in a maze of other questions equally important and difficult. The members of the legislature were to be chosen by the same electors as had voted for the members of the convention. This body could have devised a banking act and submitted it to the people in definite form, if it were desirable to secure popular ratification. The public attention could then be focused upon that question alone and an adequate expres- sion of public opinion gained by such a referendum. When it became evident that the convention was in hope- less disagreement over the entire matter, a select committee of seven was appointed to bring in a new report.^^ The rec- ommendations of this committee favored the rejection of the former report and the substitution therefor of a provision 40 HISTORY OF BANKING IN IOWA that the legislature should create no bank or banking insti- tution or corporation with banking privileges in this State unless the charter, with all its provisions, be approved by a majority of votes at a general election.®^ This met the contention that the question should not be left entirely to the discretion of future legislatures and avoided, on the other hand, the necessity for providing at that time the detailed regulations for banking. The discussion thereafter centered on the section of the amended report which provided unlimited liability for stock- holders of all corporations. Ebenezer Cook of Davenport contended that the convention had gone as far as it intended to go when it applied unlimited liability to stockholders of corporations with banking privileges. Certain other mem- bers also argued that a distinction should be made between banks and general corporations in this respect. These mem- bers were anxious to attract manufacturing industries, rail- roads, and other industrial enterprises to the State they were building. Ordinarily the capital required for such projects would necessitate the corporate form of organiza- tion ; but, it was asserted, investors would be deterred from putting their money into an enterprise where there was an unlimited liability.^ ^ This debate is of especial interest as an early attempt to differentiate between the stockholders of banks and those of other corporations. To-day the almost universal prac- tice is to make the liability heavier for stockholders in bank- ing corporations. Most States have followed the national banking law in this respect and have prescribed double lia- bility for stockholders in banks. But, in spite of the efforts of the more liberal members, the corporation article as finally passed contained a section placing unlimited liability on the stockholders of all corporations. The section of the corporation article relating especially to banks provided that the legislature should not create a PROHIBITION OP BANKING 41 bank or banking institution unless the charter with its pro- visions should be submitted to a vote of the people at a general election and be endorsed by a vote of the electors. The State was prohibited from becoming a stockholder di- rectly or indirectly in any bank or other corporation.®*' In order to make valid the work of the constitutional con- vention, approval of Congress and ratification by the elec- tors of the Territory were necessary. Congress found no objection to the proposed Constitution, but materially re- duced the area included within the new State. This reduc- tion was strongly opposed by the inhabitants of the Terri- tory. When submitted to the voters of Iowa, the Constitu- tion was twice defeated. Although there was considerable partisan objection to the Constitution aside from the change of boundaries by Congress, it is likely that its defeat was due principally to the boundary question. At any rate there is little evidence that the banking section was a decisive factor in bringing about its defeat.^'^ THE CONSTITUTION OF 1846 In spite of the rejection of the Constitution of 1844, the people of the Territory of Iowa were desirous of statehood. Governor James Clarke had served as a delegate in the Con- vention of 1844. Although his attitude was favorable to State organization he took no active steps to secure it. But the Legislative Assembly in 1845-1846 was ready to act, and so authorized an election of delegates for another cbnstitu- tional convention. At the township elections in April thirty- two delegates were selected to meet at Iowa City on the first Monday of May, 1846. This time the draft of the Constitu- tion as prepared by the convention was to be submitted to the people for ratification or rejection before its presenta- tion to Congress. In this way it was hoped that changes by Congress — which had resulted in the rejection of the Constitution of 1844 — would be forestalled.®^ 42 HISTORY OF BANKING IN IOWA The election of delegates proceeded along party lines in spite of the efforts of the Whigs to secure a non-partisan selection. In all of the Democratic nominating conventions the delegates were instructed to vote against banks.®^ In the discussions and resolutions of these conventions the party attitude concerning banking was vigorously stated.^ *^^ The election returns gave the Democrats twenty-two dele- gates out of the total number of thirty-two^°^ thus assuring them a working majority in the convention and a large num- ber of delegates who were unfriendly to banking interests. On May 4, 1846, the convention assembled at Iowa City and continued in session just fifteen days. The report of the Committee on Incorporations contained a positive pro- hibition of corporations ''with banking or discounting privi- leges. ' ' A futile effort was made to substitute for this rec- ommendation an amendment which would leave the whole matter of corporations to the future legislatures.^ ^^ By a union of Whigs and the more moderate anti-bank Democrats a substitute for the section prohibiting banking was passed which would have enabled future legislatures to create bank- ing corporations by law, provided the law in question was first submitted to the people for confirmation. This sub- stitute was amended so as to require publication of the act for at least twelve successive weeks in at least twelve weekly newspapers of the State, at the expense of the applicant for a charter, before it could be submitted to a vote. Finally, after further discussion and amendment, the entire report was struck out and by a vote of twenty-one to nine was re- placed by two sections which became, with a change only in paragraphing, the ''Article on Incorporation" that was finally approved by the convention.^ *'^ Once more the power to establish banks was taken out of the hands of the mem- bers of the legislature and a definite prohibition of banking was made a part of Iowa's fundamental law. PROHIBITION OF BANKING 43 BANKING PEOHIBITED Article IX in the Constitution of 1846 dealt with incorpo- rations and read as follows : 1. No corporate body shall hereafter be created, renewed, or ex- tended, with the privilege of making, issuing, or putting in circu- lation, any bill, check, ticket, certificate, promissory note, or other paper, or the paper of any bank, to circulate as money. The Gen- eral Assembly of this State shall prohibit, by law, any person or persons, association, company or corporation, from exercising the privileges of banking, or creating paper to circulate as money. 2. Corporations shall not be created in this State by special laws, except for political or municipal purposes, but the General Assem- bly shall provide, by general laws, for the organization of all other corporations, except corporations with banking privileges, the crea- tion of which is prohibited. The stockholders shall be subject to such liabilities and restrictions as shall be provided by law. The State shall not, directly or indirectly, become a stockholder in any corporation.^*** When the Constitution of 1846 was before the people for ratification the bank clause came in for considerable discus- sion. The Democrats had a large majority among the voters of Iowa, and they were emphatic in their support of the prohibition of banking. In an article on this feature the Iowa Capital Reporter maintained that the convention had been doubly instructed to insert a prohibitory clause against banking — ''first, by the rejection of the instrument which did not prohibit them — and secondly, by the most unequi- vocal expressions of the people at their primary assemblies and through the ballot box." This mandate the delegates had heeded, for in the final vote on Article IX not a single Democrat had opposed prohibition.^ •^^ Opposition to the Constitution was not confined to this article, but there was considerable feeling especially among the Whigs upon this issue. In an editorial comment on the 44 HISTORY OF BANKING IN IOWA Constitution, The Iowa Standard (Whig) urged the voters to meet the issue of bank or no bank by rejecting the whole Constitution. In case they deemed it more expedient to vote for the Constitution, the voters were urged to endorse on their ballots that they ^^ except the Ninth Article." In this way they would place themselves on record as being in favor of amendment as soon as the ratification by Congress granted the coveted statehood.^**® The arguments of Wm. Penn Clarke, in an address to the electors of Johnson and Muscatine counties, clearly set forth the effects which would follow the prohibition of banking. He stated that inhibition of banks would not be inhibition of bank paper : it would only substitute a foreign for a home currency, one not subject to the laws of Iowa. Opponents of banking urged ''hard money", but Mr. Clarke prophesied that under existing conditions they would get a currency ''well mixed" in which notes of banks having no credit at home would predominate. He believed that so long as other States had banks and bank paper, Iowa could best protect herself from foreign notes by establishing banks of her own. From local institutions would emanate notes controlled by Iowa legislation, and these banks would aid in driving out foreign notes. Failure to provide banks would permit Iowa to become the "plunder ground of all the Banks in the Union, "i*^"^ By a narrow margin the Constitution of 1846 was ac- cepted by the voters at the August election. Congress accepted the instrument, and on December 28, 1846, the State of Iowa was admitted into the Union.^*'^ For nearly twelve years the prohibition of banking contained in the State Constitution remained in force ; and during that time the forebodings of Wm. Penn Clarke were fully realized. IV FRONTIER BANKING IN IOWA 1846-1858 When Iowa entered the Union in 1846 the census gave the population of the State as 102,388. At that time twenty- nine counties were organized, and these were located mainly in the eastern third of the State. During the first decade of statehood seven enumerations were taken, including the Federal census of 1850. Most of these were more or less incomplete and inaccurate, but they reveal fairly well the rapid growth of the new State in population and economic resources. By 1856 the population had reached 517,875 — nearly all the present counties reporting inhabitants. In- deed, only a few counties in the northwestern part of the State were without settlements. Great waves of immigration had swept in from the older States — especially from Pennsylvania, New York, Ohio, and the New England States. Moreover, the failure of the revo- lutionary movements of 1848 in Europe increased the cur- rent of foreign immigration to America, and Iowa attracted a fair share of these people. The increase of population and the development of the Commonwealth was checked some- what by a severe crop failure in 1858, but it was clear to all that Iowa was destined to become a well-populated and prosperous section. This expectation was soon fully re- alized, for within a decade after the close of the Civil War, nearly a million and a half persons were resident in Iowa. If the increase in population was remarkable, even more noteworthy was the development of the agricultural and in- dustrial resources of the State. The acreage in farms in 1850 was 2,736,064 ; by 1856 it had more than trebled, total- 45 46 HISTORY OF BANKING IN IOWA ing 8,559,437. And the production of cereals also kept pace with this growth. The wheat yield in 1855 was more than three times as much as in 1849. Corn production during the same time increased from 8,656,799 bushels to 31,163,362 bushels. Oats yielded nearly four times as much in the latter year as in the former. In 1849 only 276,120 bushels of potatoes were produced, while in 1855 the output was 2,014,388 bushels. Butter, cheese, and meat production show an increase no less marked. Large production was accompanied by exceptionally high prices during 1855-1856 because the Crimean War had cut off Russia from the mar- kets of Western Europe. Even though then as now Iowa was primarily an agricul- tural State, the beginning of manufacturing is discerned. This branch of industry, which at the time of the census of 1840 was almost non-existent, yielded products valued at $3,773,075 in 1850 and $14,289,015 in 1860. In 1854 the first railroad was completed between Lake Michigan and the Mississippi River opposite Davenport ; and in the following year the first locomotive entered the State.^"^ INHIBITION OF BANKING It might be expected that during this time banks would be developing pari passu with the growth of the State. That this was not the case is due to the fact that the course of normal banking development was blocked by the corporation article of the Constitution of 1846. It is difficult to determine accurately the real purpose of the authors of the clause of the Constitution prohibiting the creation of corporations with banking privileges. Unques- tionably the main purpose was to prevent banks of issue, but whether or not the framers of the Constitution intended to strike at banks of discount and deposit is not so certain. The function of note issue occupied the chief place in the public thought concerning banks. It was as note-issuing FRONTIER BANKING 47 institutions that they played the greatest part in the eco- nomic life of the community; and so in those days it was regarded as virtually equivalent to a prohibition against banking to prohibit the issuing of circulation of any kind.^^" The evils of ''wild cat" banking had become so intolerable, however, that absolute prohibition seemed the only safe course. That Iowa was not alone in adopting this method of checking the evils is shown by the fact that in 1852 there were nine States and the District of Columbia in which banking was illegal.^" In the debates in the constitutional convention some of the strongest opponents of banking made a distinction be- tween banks of issue and banks of deposit and discount. No exception in favor of banks of discount or deposit was made, however, in the language of the Constitution of 1846. If the proper interpretation may be judged from a resolu- tion passed by the Democratic convention held in Iowa City on September 24, 1846, it appears that the people wished to prohibit all forms of banking. Eeferring to the vote on the Constitution which had been taken on August 3rd pre- ceding, the platform makers held that this is *'a decisive indication of public sentiment against all banking institu- tions of whatever name, nature, or description. "^^^ The opposite interpretation may be arrived at from the first sentence of the article on corporations, in which the prohibition rests upon banks or corporations issuing some form of circulating medium. No record can be found of a court ruling upon the point of what was included under banking privileges in Iowa from 1846-1858.^^^ Uncertainty is likewise reflected in the legislation of the period. Before 1846 the practice in Iowa had been to grant charters to corporations by special act of the legislature. Under the terms of the State Constitution that practice was specifically prohibited so far as corporations for profit were concerned. The legislature was directed to pass a general 48 HISTORY OP BANKING IN IOWA incorporation law — an action taken early in the session of 1847. Since the Constitution had definitely forbidden cor- porations with banking privileges, there is nothing in this law that specifically concerns banks.^^^ It may be inferred from the number of private institutions which sprang up during the decade after 1846 that prospective bankers were either unable to see any advantage in incorporation or else were very doubtful as to the possibility of incorporation. No action appears to have been taken by the legislature to supplement the prohibitory clause of the Constitution until the enactment of the Code of 1851. One section of this Code prohibits the formation of bank- ing associations with the privilege of issuing circulation. Any person becoming a subscriber to, member of, or in any manner interested in, such associations or company was liable to fine and imprisonment. Directors of any incorpo- rated company which used any of its funds to aid in putting out circulation were also liable to the same penalty. Notes given to any company violating these sections were void. Finally, it was provided that, *'No person, association, or corporation, shall issue any bills, drafts, or other evidences of debt to be loaned or put in circulation as money or to pass or to be used as a currency or circulating medium; and every person, association, or corporation, and every member thereof, who violates the provisions of this section shall be punished by a fine not exceeding one thousand dollars. "^^^ Of course in a progressive young State financial institu- tions were inevitable. Realizing the demand for some kind of banking facilities, keen business men were quick to meet the need by the establishment of unauthorized private bank- ing houses. The origins of these early banks are difficult to trace, for in most cases they go back to a commission business, a land agency, a law office, a general store, or other recognized business. At first merely one department of the general business, banking eventually became so important FRONTIER BANKING 49 that the other features were eliminated, and banking became the sole business. EAELY BANKS IN THE MISSISSIPPI EIVEK TOWNS In the early days of statehood the larger towns of the State were located along the Mississippi River, and in them is found the beginnings of private banking. It would be interesting to describe in detail these beginnings, but scar- city of data makes this impossible. Such records as are available, however, afford considerable information con- cerning the earliest banks and some interesting pictures of the banking of that day. Of contemporary accounts, the story of early banking by Major Hoyt Sherman, a pioneer banker of Des Moines, takes high rank. He states that the only institutions that could be called regular banks in the early fifties were located in the river towns. He names Charles Parsons, of Keokuk; Coolbaugh and Brooks, of Burlington; Greene and Stone, of Muscatine; Cook and Sargent, of Davenport; W. J. Barney and Co., and Lang- worthy Bros., of Dubuque. ^^^ The honor of being the oldest established bank in Iowa is now claimed by the National State Bank of Burlington. Located on the Mississippi, the city of Burlington is one of the oldest towns in the State; it was the temporary capital of the original Territory of Wisconsin and the first capital of the Territory of Iowa. Until 1860 it was the largest city in Iowa. The National State Bank traces its lineage back to F. J. C. Peasley who was doing a banking business in con- nection with a forwarding and commission business in the year 1842 or possibly earlier.^^^ This institution with nu- merous changes in organization has been in continuous existence since that time. Probably its banking business was not the most important in that early day. In the local paper of the time is found an advertisement of ' * Francis J. C. Peasley, Forwarding and Commission Merchant, Water 50 HISTORY OF BANKING IN IOWA Street". Although no reference is made to the banking business,^ ^^ the claim of the National State Bank to being the oldest of Iowa banks can probably not be successfully disputed. In the early fifties its successor, Coolbaugh and Brooks, was a prominent institution which in 1858 became one of the original branches of the State Bank of Iowa. Banking in Davenport originated in 1847 in connection with a general land agency conducted by Cook and Sargent. This firm early took a high place among the banks of the State and was considered one of the strongest banks in the Northwest. Branches were established at Iowa City and Fort Des Moines. One contemporary, writing at a later date, describes them as the *'Pierpont Morgans of the day"."^ In May, 1857, the firm moved into a handsome new three-story limestone building costing $75,000 which was said at the time to be the finest bank building west of New York City. The second bank in Davenport was the firm of Macklot and Corbin, established in 1852. Austin Corbin later became President of the First National Bank of Dav- enport which was the first national banking association to commence operations in the United States.^ ^^ Early banking at Dubuque centered about the Miners' Bank. After the repeal of its charter in 1845 other banking institutions soon appear to have developed but the records concerning them are uncertain and contradictory. The first of these seem to have originated in 1849 under the names of Finley Burton and Company, and Jesup and Stimson. M. Mobley, W. J. Barney and Company, and Langworthy Brothers date from the early fifties.^ ^^ These three insti- tutions, together with the firms of F. S. Jesup & Company, Taylor, Eichards & Burden, and Herron Brothers, are listed in the Dubuque City Directory of 1856-1857. Dubuque appears to have furnished an early example of a financial district within the city, for these six banks were all situated near together on Main Street.^ ^^ FRONTIER BANKING 51 George C. Anderson appears to have been the pioneer banker of Keokuk. He conducted his banking business in connection with a wholesale grocery and supply house. First opened in 1846, the bank was conducted as a broker's office. Later Mr. Anderson devoted his entire time to bank- ing until his death in 1867. In 1852 Charles Parsons opened the second bank in Keokuk.^ ^^ Lyons was the pioneer seat of banking in Clinton County. A. C. Root in 1845 established a private bank there and this bank was later merged into the First Natonal Bank of Lyons.^2* At Muscatine banking seems to have developed first in a store operated by Greene and Stone. Joseph Greene was engaged in the mercantile business in the early forties. About 1851 this business house became the first bank of the city, and it continued to operate until the panic of 1857, when it failed, its business being soon afterwards liquidated. The second bank at Muscatine was opened by Isett and Brewster.^ 25 The first bank at Fort Madison was established in 1854 as a branch of the banking house of E. H. Thomas and Com- pany of Burlington. It was bought by Knapp and Eaton in 1856, became a branch of the State Bank of Iowa in 1858, and was succeeded in 1865 by the Fort Madison National Bank.126 EAELY BANKS IN THE INTEEIOE TOWNS Banking facilities developed in the interior towns in very much the same way as at the Mississippi Eiver points. Iowa City was the State capital until 1857, and here the pioneer bankers appear to have been the firms of Cook, Sargent, and Downey — a branch of the Davenport firm of Cook and Sar- gent — Culbertson and Reno, and J. H. Gower Brothers and Company. Dealing in exchange, making collections, and handling land warrants were features of their early busi- ness. Scholte and Grant at Pella and Charruaud and 52 HISTORY OF BANKING IN IOWA Nichols at Newton were bankers in other localities whose advertisements early appeared in the newspapers of the capital city.^2'^ The pioneer bankers in Cedar Rapids were the firm of Weare, Finch, and Company, whose business dates back to 1850 or 1851. An indication of the capital required by the pioneer banker is given by the fact that S. D. Carpenter was offered a fourth interest in the firm for $500. He would gladly have bought in as a partner, but found it impossible to raise the $500. By the practice of his profession as a physician and land speculation on the side he was able to accumulate enough to become a partner in a firm of bankers a few years later. The second Cedar Rapids bank was started by Ward and Bryan in 1852 or 1853, but because B. S. Bryan bought a new top buggy and a fine horse public suspicion was aroused and the bank was forced to close its doors. The original firm of Weare, Finch, and Company soon became the firm of Greene and Weare. This institu- tion grew rapidly and established branches in Des Moines, Council Bluffs, Omaha, Fort Dodge, Sioux City, and other lowai points. Later it controlled one of the famous Iowa- Nebraska banks. It alone of the Cedar Rapids banks sur- vived the first shock of the panic of 1857. All the others failed ''for want of money ".^^^ At Des Moines and Fort Des Moines the early banking firms as given in a list of banks in Iowa published in 1855 were Cook, Sargent, and Cook; Greene, Weare, and Rice; Macklot, Corbin, and White; and Hoyt Sherman and Com- pany.^ ^^ A prominent banker of Des Moines was B. F. Allen, whose banking house was opened in 1855. Allen and Sherman were apparently the leading local men in Des Moines to engage in the banking business — the other banks being identified with institutions in other cities. These men later organized the Des Moines branch of the Iowa State Bank.130 FRONTIER BANKING 53 The earliest bank at Waterloo was opened in 1854 by A. P. Hosford and Edmund Miller. A little later John H. Leavitt established a private banking house, which after- wards became the Leavitt and Johnson National Bank.^-^^ W. H. Tuthill at Tipton, Henn Williams and Company at Fairfield, and Norman Everson at Washington, were other bankers in interior towns whose business was established before ISSS.^^^ There is no pretense that the above list includes all in- terior banks established prior to 1855, but those mentioned are some of the more important pioneer private banks. EARLY BANKS IN THE MISSOURI RIVER TOWNS The Missouri River towns of most interest in pioneer days were Council Bluffs and Sioux City. Council Bluffs was the gateway to the western gold fields through which hun- dreds of immigrants passed. Near there, too, the Mormons settled before moving on to their Utah home. It was an important river point, and in 1853 the United States land office was opened in the city. Very shortly afterwards the first bank appeared. This was a branch of the Cedar Rapids firm of Greene and Weare, the firm being known as Greene, Weare, and Benton. The firm of Officer and Pusey, a bank- ing institution prominent in the subsequent history of the city, seems to have been established about the same time, for there is an account of its moving its place of business in 1856. By 1856 five banks were located in Council Bluffs.^-'^ Sioux City's first bank was also connected with the well- known firm of Greene and Weare. In 1855 United States land registry offices were opened in Fort Dodge and Sioux City. George Weare, a younger brother of John Weare of Cedar Rapids, was sent out to represent the banking firm. After a month in Fort Dodge, Mr. Weare moved on to Sioux City via Council Bluffs. He arrived in his new location the day after Christmas, 1855. The bank which Mr. Weare 54 HISTORY OF BANKING IN IOWA started was opened in the log house in which Dr. S. P. Yeomans, the register, was conducting the government land office. The front room on the ground floor, a room about 12 by 15 feet, was the land office ; Dr. Yeomans 's family occu- pied the rear of the building ; and in the second story of this house Mr. Weare established his bank. His capital consisted of $1000 in gold and some land warrants ; and his equipment was a dry goods box for a counter * ' and a tin box about the size of a woman's cake box for a safe." By the summer of 1857 there were seven banks in Sioux City. There is one other claimant for the distinction of being the first bank in Sioux City. The firm of Cassady, Myers, and Moore opened an office in October, 1855. Its name was soon after- wards changed and its business seems to have been more on the order of that of a modern real estate office. George Weare lived to celebrate, as President of the Iowa State National Bank, his semi-centennial as a banker in Sioux City; and the bank which he founded became one of the prominent institutions in northwestern Iowa and one of the oldest banks in the State under one continuous manage- ment.^34 FUNCTIONS OF THE PIONEER BANKS The early banks of Iowa numbered among their most im- portant functions transactions connected with real estate. Often they were little more than real estate agencies at the outset. The government lands in Iowa were being opened for purchasers at $1.25 per acre. Land warrants had been granted to veterans of the War of 1812, the Mexican War, and Indian wars ; and these warrants were bought and sold on the eastern exchanges at eighty-five to ninety cents an acre. They were acceptable at a government land office in payment for land at $1.25. The banker usually included land warrants among his assets, for one of his leading oper- ations was ' ' entering land on time ' '. While land was sold FRONTIER BANKING 55 by the government to the settler for $1.25 per acre, pay- ments must be in cash and only specie was accepted under the terms of the Specie Circular of 1836. The banker pur- chased the land from the government at the regular rate and sold it to the speculator or settler usually at $1.75 per acre on one year 's time. His profit on the transaction was thus forty per cent in addition to what he may have made on the warrants. G. L. Tremain, first President of the Iowa Bankers Association, stated that he borrowed $200 on 160 acres of land for which he paid $320 at the end of the year. H. W. Sanford, the banker from whom he had made the purchase, had entered on the land with Mexican War land warrants, making the cost to him only fifty cents per acre.^^^ In the boom days of new towns banks literally appeared in a night. S. D. Carpenter of Cedar Rapids describes a trip to Fort Dodge with John Weare, Jr., presumably in the fall of 1855 just after the opening of the land office at that place. They found there seven banks in full operation, one of which was operating in a tent. In the early days in Sioux City the banks were ready to undertake anything that per- tained to land business. One or two institutions advertised * ' surveying done ' ', while one house had a civil engineer and would do anything from running a road to building a bridge. It would pay taxes, collect debts, or sell a farm.^^^ A second very profitable function of the early banks was dealing in exchange. The government required payment for land in gold. Eastern drafts of land buyers were an excel- lent investment. The land buyer was required to pay a good round sum for the gold. Merchant customers regarded the eastern drafts very highly and would pay well for them in order to make the necessary settlement for goods pur- chased. During the opening years of their careers most of these frontier banks were not in a position to provide east- ern exchange regularly. Major Sherman says a call upon 56 HISTORY OF BANKING IN IOWA the typical Iowa banker of the early fifties for a New York draft would have been '* received with a stare of astonish- ment, or treated as a feeble joke. "^^^ By 1856, however, the Iowa City bankers were advertising to buy and sell bills of exchange on all the principal cities of the United States and Europe.^^^ A third function carried on by the pioneer Iowa banker was collecting notes and bills, paying taxes for non- residents, and investing in land for eastern customers. ^^® The deposit business was very meagre. In the time inter- vening between his arrival at the settlement and his pur- chase of land, the land buyer sometimes left his money with the banker. The Sioux City banks advertised that they would pay ten per cent for money which was deposited with them for thirty days or longer. The firm of J. H. Gower Brothers and Company of Iowa City offered the "extra" inducement of ten per cent interest on special deposits for three months or more. This was in 1856, however, when the earlier pioneer stage was over. Some of the banks asked ten days' notice before paying regular certificates of de- posit.^ ^"^ The tent bank that Dr. Carpenter described in his visit to Fort Dodge advertised that it would pay ten per cent on current deposits. Whether or not the probable stability of the institution was questioned by prospective depositors does not appear from the record. The discount of notes and commercial bills of exchange, which forms so large a part of the business of the modern bank, was not an important function of the newly organized Iowa banks. Major Hoyt Sherman says that a call upon the pioneer bank for a discount would have been regarded with astonishment.^ ^^ Before the end of the period under dis- cussion, however, the older Iowa banks were carrying on a regular deposit and discount banking business. Another activity which was a necessary part of the early bankers' business was the dealing in all kinds of current and non- FRONTIER BANKING 57 current money ; but the treatment of this phase of their work can best be reserved until we examine the currency situation existing in the new State. EQUIPMENT OF THE EARLY BANKS The banking office of the middle of the last century would not be recognized as such by people of the twentieth century. To-day we recognize a bank on first sight by a number of distinguishing features ; but in the early part of the latter half of the nineteenth century, the bank did not differ exter- nally from other places of business. The office was gen- erally in a cheap and ordinary one-story frame or brick building with few doors and windows. The building con- sisted of one and sometimes two rooms. In the front room, a plain, wide counter of pine or black walnut separated the banker from his customer. Little furniture was found in these early banks : in general a couple of chairs, a stove, a table, and a standing desk were sufficient. There were no individual cages for each employee, for often there was but one man who was the president, cashier, teller, bookkeeper, and janitor. Neither were there mahogany furnished wait- ing rooms for the comfort of the bank's customers. Anyone who wished to sit down might use the counter as a seat. There were no private rooms into which one might withdraw and hold business conferences — for these one might retire to the corner of the building most remote from the counter. In the bank of to-day the heavy steel safe with its time lock and ingenious combinations may be located in that part of the building which is considered to be most nearly burglar- proof and all precautions are taken to protect it. Contrast in imagination the modern vault with the banker's strong box of that generation, which has been graphically described in the following words : That was the safe — the gorgeously painted and decorated sheet- iron safe — in which the treasures of the bank were nightly stored 58 HISTORY OF BANKING IN IOWA .... the treasures and trusts were given in charge of that won- derful box, which would offer no more resistance to the modern bur- glar than if constructed of pine. The simple but unbounded confi- dence with which the banker in those primitive times nightly placed all his treasure in that safe, located in a cheap, pine shanty, and retired to his "peaceful couch", was the very sublimity of faith. It needed only a visit to a neighboring blacksmith shop for a cold chisel, or to a carpenter shop for even a hatchet, as the only tools necessary for the enterprising burglar to force the outer door or window, then cut through the thin sheet-iron outer casing of the formidable safe, then the plaster filling and slight wooden interior work, and all the coveted treasures were within his reach ; but for- tunately the bank burglar of those days did not follow the advice of Mr. Greeley to "Go West", perhaps because he had a suspicion that it would prove too "poor picking ".^*^ The routine of business was likewise far different. Bank- ing hours were longer and specialization of functions was unknown. It frequently happened that one man performed all the duties of the institution. One bank is described where the banker loaned and took in money in the front room and fried eggs for his dinner in the back room.**' GENERAL STATE OF THE CUREENCY The currency in Iowa during the period preceding the Civil "War was typicalof the condition that then obtained in the West. There were no banks of issue located in Iowa, but several nearby States had banks of issue which flooded Iowa with their depreciated notes. The ''free banking" system was adopted in Illinois in 1851, in Indiana in 1852, and in Wisconsin in 1853.^^^ Under this plan banks were permitted to issue notes upon the security of United States or State bonds deposited with a designated State official. Notes were often based on the depreciated bonds of Southern States which at the outbreak of the Civil War became worth- less. Nor was there any attempt to compel these banks to maintain an adequate specie reserve with which to redeem FRONTIER BANKING 59 notes when presented. Many of them were banks of circu- lation only, and were located at out-of-the-way places. An Iowa pioneer described one of these "wild cat" banks in the following language : I visited one of those banks once. It was in a logging camp in the thick woods near the east shore of Lake Michigan. It was about eight feet square, eight feet high, made of rough boards, flat roof, with one small sliding window, a plain board shelf, on which the notes were signed, a small door, over which, in red chalk, was the name of the bank. It was never occupied but once. When I saw it, the bank had closed.^*^ Various methods of evading redemption were practiced by banks even where they did not go to the extreme described by this writer of putting notes in circulation at such out-of- the-way places as to be found only by the ''wild cats".^^® In 1856 two gentlemen interested in the great number of bank notes in circulation, found passing as money, in Iowa City, the bills of more than three hundred banks, two-thirds of them below par.^*^ An important part of the banker 's literature was the bank note reporter. A standard authority was Thompson's Bank- Note Reporter published monthly in Wall Street. The bank note deposits could not all be treated alike by the banker of that day : they must be carefully assorted as they came in. Major Sherman describes the labels on the several compart- ments of an old currency tray and the method of handling the various kinds of bank notes as follows : To illustrate how the bank note deposits were assorted and treated by the bankers at that interesting period, I copy literally the labels on the several compartments in an old currency tray, in which the notes were assorted as they came in, and from which the checks were paid. These labels were : Eastern Penn., N. Y. and New Eng- land, in one compartment ; Ohio, Indiana and Missouri, in another ; then Va., Md., and Ky. ; in another lU. and Wis., and lastly, West- ern Mixed. 60 HISTORY OF BANKING IN IOWA The first named notes were choice par funds, rating next to gold, and they were shipped to New York for exchange purposes. The next two (0., Ind,, Mo., Va., Md. and Ky.) were "bankable funds", so-called, and graded as among the safest of bank notes. ''Illinois and Wisconsin ' ' took in the few legitimate free banks in those states, located principally in Chicago and Milwaukee; but the last label was more comprehensive than all the others put together. It in- cluded ' ' rag tag and bob-tail ' ', everything not comprehended under the other labels but resembling a bank note. ' ' Western Mixed ' ' was the dignified and formal name for it. Its pet names were "stump- tail ", " red-horse ", " wild-cat ", " brindle-pup ' ' and many others of like endearing character. The vigilant banker watched that pile of currency closer than the others. Its increase in quantity caused much anxious concern — and its decrease corresponding elation. . . . That kind of money reversed the usual order of things in the mind of the banker — a large balance, instead of being a source of satisfaction, was a very disagreeable menace.^*** A similar condition is described by W. H. M. Pusey, a pioneer banker of Council Bluffs. All bills presented at the bank were assorted, classified, and discounted at the current rates on such bills. Sometimes when deposits were made by a customer, so-called "special deposits" were created. The kind of funds deposited was designated in the passbook. The depositor was then repaid in the same kind of funds, no bank being willing to assume the risk of sudden depreciation to which the money of the day was constantly subjected.^ ^* The coin current in the early days was likewise of many varieties. Coins of foreign countries had formed a large part of the circulating medium in the early history of the United States. Congress had enacted that the gold coins of foreign countries should be a legal tender in all payments by weight.^ ^^ Likewise certain foreign silver coins had been made legal tender.^ ^^ These laws making foreign coin a legal tender were not repealed until 1857.^^^ The gold coins current in Iowa included American gold coins, English sovereigns, French and Spanish gold coins ; while the silver FRONTIER BANKING 61 coins most prevalent were Spanish milled dollars and quar- ters, Mexican dollars, and French five-franc pieces. The smaller coin, however, was not current in the State: half- cent, cent, and three-cent pieces were seldom seen — the latter is described as being '*in church-plates, and at the post-office ".^^^ SUBSTITUTES FOR BANK NOTES Scarcity of a circulating medium and the profit to be secured through note issue led Iowa bankers and other citi- zens or corporations to adopt various methods of evading the constitutional provision against the issue of such notes — which added to the general confusion of circulation. Of the substitutes for legitimate bank notes, four types are dis- tinguishable — Nebraska-Iowa bank notes; A. J. Stevens money; scrip issued by cities, counties, or other minor po- litical subdivisions; and scrip issued by corporations. Nebraska-Iowa Bank Notes : — The First General Assem- bly of the Territory of Nebraska convened at Omaha, on January 16, 1855. At the first session of the Assembly cer- tain sections of the Iowa Code of 1851 were adopted by the new government. These included those sections of the crim- inal code which prohibited the issue of circulating notes. Of the Nebraska banking institutions the first to operate in Iowa was, therefore, started by subterfuge : it was known as the Western Exchange, Fire and Marine Insurance Com- pany, and was chartered on March 16, 1855. In addition to its power to write insurance it was given power to deal in exchange of all kinds, to buy bonds, mortgages on real estate, promissory notes, and to receive deposits and issue certificates therefor.^ ^^ The President was Thomas H. Benton, Jr., an original Iowa hard-money man. Beginning operations early in 1855, this concern soon developed into a general banking business. Until January, 1856, there were 62 HISTORY OF BANKING IN IOWA more of the notes of this bank in circulation in Iowa than of any other. Early in the crisis of 1857 it went under and its notes became worthless.^ °^ When the Second General Assembly of Nebraska Terri- tory convened, the attitude seems to have changed and the doors were thrown wide open for banks of issue. Five spe- cial acts to charter banks were passed and approved on January 18, 1856. Two of these acts contain the names of well-known Iowa bankers among the commissioners or in- corporators. The Bank of Florence was chartered by H. D. Downey of Iowa City, Ebenezer Cook of Davenport, and five other men ; the Bank of Nebraska, by Benjamin F. Allen of Des Moines, Hoyt Sherman of Des Moines, and others.^ ^^ It is not easy to identify among the incorporators of the other banks the names of Iowa bankers, but the Bank of Fontanelle was soon under the ownership of Greene and Weare of Cedar Rapids.^ ^^ Two other banks were incorpo- rated on the same date — the Platte Valley Bank at Nebraska City and the Nemaha Valley Bank at Brownsville — ^but the names of the incorporators do not include the names of any well-known Iowa bankers. Since the Bank of Florence fur- nishes a good model of the charter provisions and methods of these institutions, a somewhat extended description of this bank 's career is warranted. According to the provisions of its charter, approved on January 18, 1856, the capital stock was $100,000 — ^which might be increased at the will of the stockholders to any amount not exceeding $500,000. The bank was given the right of note issue, of dealing in exchange, and of engaging in other regular and legitimate banking business. The pres- ident and cashier of the bank were required to sign all notes. Stockholders were made ''each and individually liable for the full and final redemption of such issue, payable at their Banking House in gold and silver". There was no require- ment of specie reserve ; neither was there any security re- FRONTIER BANKING 63 quired for the issue ; nor any limit as to amount. The bank was required to make an annual report of its condition to the Auditor of the Territory, and the stockholders were per- sonally liable for the redemption of notes. No other pro- tection being afforded the public, possibilities were present for the wildest of ''wild cats", unless the institution was in the hands of responsible men.^^® When the bank began operations the stock was owned by the banking houses of Cook and Sargent of Davenport; Cook, Sargent, and Downey of Iowa City; and Cook, Sar- gent, and Cook of Fort Des Moines. They stated in the newspapers that they would be personally responsible for all its issues and agreed to redeem its notes at its counter at Florence in coin, and at their respective banking houses with exchange at current rates.^^^ The notes of the Bank of Florence were put in circulation in Davenport, Iowa City, and Des Moines. In the two first- named places they were used to pay for the erection of bank buildings;^®" they were maintained at par during most of their career by the banking houses and were finally all re- deemed.^^^ Doubtless they played a part in stimulating business and encouraging speculation. During the summer of 1858 they were connected with a dramatic demonstration in Davenport against "shinplasters".^^^ The notes of the Bank of Nebraska were put in circulation by B. F. Allen through his private bank at Des Moines, and they were current everywhere because of the high credit of Allen.^^3 Indeed, this was the last of the Iowa-Nebraska banks to succumb in the panic of 1857, its notes being at par as late as April, 1858. When the business of the bank was finally closed, '4ts assets were thirteen sacks of flour, one iron safe, a counter, desk, stove-drum, three arm chairs, and a map of Douglass County" all of which were returned as sold by the sheriff. There is no evidence to show that bill holders lost money, for Allen was one of the wealthiest men 64 HISTORY OF BANKING IN IOWA in Iowa and was abundantly able to redeem all notes. In 1858 he became the heaviest stockholder in the Des Moines branch of the Iowa State Bank. The notes of the Bank of Fontanelle were floated from banking houses in Cedar Rapids, Marion, Vinton, Osage, Des Moines, Council Bluffs, Fort Dodge, and Sioux City. Little record of this bank is available, but it did not survive the panic of 1857.i«^ The Third Legislative Assembly of Nebraska Territory was more cautious than its predecessor. One of its earliest acts was to repeal that portion of the general corporation law of January 25, 1856, which authorized the incorporation of banks. ^*^^ This act had authorized incorporation for any lawful business purposes. No special reference was made to banks, nor were any restrictions placed upon their in- corporation.^^^ During this third session, however, two more banks were incorporated by special charter — the Bank of De Soto and the Bank of Tekama.^^^ These institutions added their quota to the supply of bank notes. The maxi- mum circulation of all these Nebraska banks was $420,000 ; their specie amounted to $136,000.^''^ In 1859 the notes of certain of these banks were quoted in an advertisement of Hatch Brothers of Iowa City at the following discounts: Bank of Florence, par ; Bank of Nebraska, Bank of De Soto, and Platte Valley Bank, twenty-five per cent discount.*^® A. J. Stevens Money: — Other very common currency in Iowa just preceding the panic of 1857 were notes of the Ag- ricultural Bank of Tennessee. In 1855 Andrew J. Stevens of Des Moines became prominent in land speculation. He induced James Callanan and S. R. Ingham of New York to join him in the banking firm of A. J. Stevens and Company. They bought the charter of the Agricultural Bank of Ten- nessee and began to circulate its notes in Iowa by making loans to land buyers. They agreed to redeem the notes when FRONTIER BANKING 65 presented, the notes being stamped on their face with the firm name. The bank went down early in the crash of 1857 and its notes became worthless.^ ^** In connection with this bank's affairs the courts estab- lished the principle that a banker giving circulation and currency to bank notes becomes liable therefor. In a case appealed to the Supreme Court of Iowa from the District Court for Polk County, the plaintiff, Mr. Tarbell, sued on certain bills of the Agricultural Bank of Tennessee amount- ing to $214. He alleged that Stevens and Company in the course of their business represented themselves to be the owners of and personally liable for these bank notes. On or about August 8, 1857, the bank ceased to redeem the notes and they became '^wholly worthless". The court in holding for Tarbell declared : Where a party holds himself out to the public, as liable for the re- demption of the bills of a bank, as a stockholder, and advertises to re- deem the same at the counter of a bank different from that by which the bills were issued, and where by such representations he gives character, credit, and currency to the bills, and causes them to be re- ceived in the community, the promise or undertaking, or the liability assumed, is not in the nature of an assumption to pay the debt of an- other, but is original and independent in its nature, and it is not necessary to aver that the promise or undertaking was in writing.^^^ City, Township, cmd County Scrip : — A third type of cir- culating medium which was ''made in Iowa" was the ''scrip" of various cities, townships, and counties. This was issued to pay current expenses of the political sub- division. It was printed in the size and style of bank notes in denominations of one, two, three, five, and ten dollars. Samples of this scrip, in the possession of the State His- torical Society of Iowa, issued by Iowa City bear date of January 1, 1858. "Wapello Scrip" is preserved dating from 1857.1^2 66 HISTORY OF BANKING IN IOWA This scrip was payable on demand to bearer and circu- • lated freely for a time, though not far from home. A j&nan- cial statement of Iowa City in August, 1859, included almost $15,000 in scrip and warrants outstanding. After several years of issue the scrip was ordered to be collected and destroyed.^ ^^ Other cities, townships, and counties issued the same kind of paper which circulated as money. An unusual form of scrip which amounted practically to an issue by the banks and the city in partnership was adopted by the city of Burlington. The city borrowed $25,000 in gold, which was distributed among the three banks of the city. They held this specie and paid six per cent interest to the city as long as they had the gold in their vaults. Against this gold the city issued orders which were used by the citizens as currency: Details of this scheme are lacking, but a spirited debate over it was indulged in at the constitutional convention of 1857, one delegate charging that the city of Burlington had ** flooded the State with her shin-plasters". J. C. Hall, delegate from Burlington, warmly denied the allegation. He stated that this currency had always been redeemable in gold. If this was the case it appears to have been a form of gold certificate or at least on a specie basis.^^^ Corporation Scrip : — Corporations of the State were not slow in following the practice of the bankers and the cities in their contributions to the circulating medium of Iowa. One of the most interesting examples of this kind is the Burrows and Prettyman scrip, issued by that firm in Daven- port. This concern had a large general store in Davenport and a flouring mill at Rockingham, which was then the county seat of Scott County. It later extended its business to include the buying of pork and produce, and the operation of a cooper shop in connection with a pork-packing estab- lishment. During the winter, for from three to five months. FRONTIER BANKING 67 the river was frozen and no shipping was possible. Money was tight and media of exchange scarce, but the buyer of farm products needed a large amount of cash or credit to handle this business. During the winter of 1853-1854 Bur- rows and Prettyman made a record pack of 19,000 hogs and bought large quantities of wheat. The banks being unable to finance these operations, Burrows and Prettyman began to issue checks payable in the spring when they should have realized cash for their products. This worked so well that in the following year they prepared beautifully engraved notes, resembling bank notes, and paid out $100,000 of these notes for produce. These notes soon became an important part of the local circulation.^ '^^ An excellent description of the method of issuing the scrip has been written by Hiram Price, later President of the State Bank of Iowa and one of the most substantial finan- ciers of that time. He says : ' 'I have a very distinct recol- lection of seeing the chief member of the firm carrying in his hat (a large bell-crown, such as our Uncle Samuel is represented as wearing) whole printed sheets, resembling bank bills, of what was called the money of the firm and in his vest pocket a pair of scissors, so that whenever and wherever he was met on the street or other place he was prepared to pay in this currency for wheat or pork, or any other legal claim, by simply extracting from his capacious hat a sheet of what he called, and what for the time being passed, as 'money', and with his scissors cutting off the necessary sum to liquidate the claim!" The writer continues by describing the prosperity of the gentleman of the large hat. He lived in a house ' ' set on a hill", and his coach was the envy of his less prosperous neighbors. But the career of these ''wild cats" was ended in the panic of 1857 and they caused some stormy scenes in Davenport, as we shall note. Mr. Price in describing the decline of prosperity built on such an unsound basis draws 68 HISTORY OF BANKING IN IOWA a sound moral lesson in his concluding words: "But time, that tries all the things of earth, clutched with rude and relentless grasp this seemingly solid and beautiful structure of wealth and all its surroundings, and it crumbled and fell, and then the common people made the discovery that all that seems to glitter may not be gold, and that in the lan- guage of a pious colored brother, many beautiful and sub- stantial structures may be built upon 'foundy sanda- tions '."!'« Another example of corporation ''scrip" with a more fortunate career is that of the Western Stage Company. This company issued scrip to pay for labor, horses, horse feed, and other current expenses. Taken in payment for stage fare, arrangements were made for the redemption of this scrip in current funds at one of the banks in Chicago. ^^'^ Other instances of corporation scrip serving as a medium of exchange might be given.^^^ The prophecy of Wm. Penn Clarke had proved sound; Iowa had a currency "well- mixed ' '. THE CEISIS OF 1857 In August, 1857, a severe panic started in New York pre- cipitated by the failure of the Ohio Life Insurance and Trust Company.^ ■^^ The crisis, which spread rapidly over the entire country, was especially severe in the undeveloped sections of the West. Iowa banks were unprepared. Land speculation was rampant, and in all the newer sections of the State the credit of the banks had been strained thereby. The statistics of bank failures are not available, but the fact of liquidation is certain. Eastern exchange rose to a pre- mium of ten or fifteen per cent. S. D. Carpenter, a con- temporary Cedar Rapids -banker, states that the only bank to survive in that city was the firm of Greene and Weare. The well-known firm of Cook and Sargent of Davenport, vnth. branches in many other points, suspended on December 16, 1859.is« FRONTIER BANKING 69 A feature of the crisis was the attack upon the illegal forms of currency in circulation. In Davenport, notes of the Bank of Florence and Burrows and Prettyman checks drove out the better forms of currency. By January, 1858, Florence notes were at a discount, and by summer the banks refused to accept Burrows and PrettjTiian checks. On the night of August 10, 1858, a mob marched the streets bearing- banners marked ''Down With Shinplasters " and "We Want Good Money". Some windows were broken and other dis- turbances started near the bank of Cook and Sargent and at the home of Ebenezer Cook. A mass meeting was called which demanded that Cook and Sargent redeem the Bank of Florence notes. Judge Grant was made arbiter and given funds to redeem notes. Notes in small lots were first redeemed for the laboring classes, but later all holders were invited to present them for redemption. On September 6, 1858, the bank burned $200,000 of redeemed Bank of Flor- ence currency.^ ^^ The effects of the liquidations and failures during the panic and subsequently were to reduce the number of banks, weed out the weaker institutions, and rid the State of much of its poorest currency. The economic situation which resulted from the crisis was most difficult. Keal estate be- came nearly valueless, and thousands of farmers, merchants, and mechanics were reduced from prosperity to poverty and want.^®2 CONSTITUTIONAL AUTHORIZATION OF BANKING CORPORATIONS When the constitutional convention of 1846 finished its work, the people were not wholly satisfied with the results ; but they accepted the Constitution in order to secure state- hood. Many who voted for the adoption of the Constitution did so with the expectation that it would soon be amended. Consequently early efforts were made to secure a change. In February, 1847, a bill providing for an expression of the people upon the question of revision passed the House of Representatives and was lost in the Senate only by a vote of ten to eight. During the fourth session of the State legislature, petitions favorable to amendment were received from the people.^ ^^ In the meantime Stephen Hempstead had become Gov- ernor, and in his inaugural address of December, 1850, he stated his views on banking. He had been an opponent of banking in the convention of 1844, and his attitude re- mained unchanged. The absence of banks of issue in Iowa was to his mind largely responsible for the growth and prosperity of the new State. He reiterated his opposition to banking in later messages, expressing "deep concern'* that some of his fellow citizens were in favor of amending the Constitution so as to authorize banking. He pointed to the experience of 1840-1841 as the best guide for action. In order to restrict the use of currency and to substitute a con- siderable amount of specie, he recommended the passage of a law to prohibit circulation of all bank notes of a smaller denomination than $10. When Governor Hempstead re- tired from office in 1854 the country was in the midst of a 70 AUTHORIZATION OF BANKING 71 monetary crisis, which he attributed to the effects of paper money, and he pointed out the fact that the worst sufferers were the laborers. Once more he cautioned the people of Iowa not to amend the Constitution to authorize banking.^ ^^ On the other hand, James W. Grimes who became Gov- ernor in 1854 was in favor of revision. The legislature submitted the issue to the people, and at the general election of 1856 the voters authorized a constitutional convention.^ ^^ On January 19, 1857, the convention convened at Iowa City to draft what has been for over sixty years the fundamental law of Iowa. Of the thirty-six delegates, twenty-one were Kepublicans and fifteen were Democrats.^ *^ The popular demand for a new Constitution was based largely on a desire to change the article on incorporation, and, more particu- larly, to remove the restrictions which prevented the legisla- ture from providing banking facilities.^ ^'^ Evidently the people had come to feel that the prohibition of banking cor- porations was not the most satisfactory solution of the prob- lem. The Committee on Incorporations made its report to the convention on January 30, 1857. This report contained sec- tions authorizing the General Assembly to pass a general banking law and also to charter a State bank with branches. Judging by the provisions included in its report, the com- mittee was unwilling to trust the judgment of members of the legislature. Detailed restrictions were to be placed in the Constitution concerning the powers which could be granted to banking institutions created by the General As- sembly.^ ^^ In the debate on the question of limiting the laws which might be enacted by the legislature, some interesting opin- ions were expressed. One member stated that his constitu- ents were in favor of some such provision because they had been told banking was a scheme by which men were going to combine and deceive the people and ' ' that bankers would 72 HISTORY OF BANKING IN IOWA invariably steal". He was, therefore, in favor of constitu- tional provisions requiring the legislature to provide that if the bankers stole they would be punished. Another mem- ber suggested that the same provision be made to apply to farmers. Still another thought that the contemplated re- strictions on legislative action were so great that the con- vention might as well add the penal code of Iowa to the article. Certain members were emphatic in denying that every man who has a dollar to invest in a banking institu- tion is a scoundrel and thief. ^^^ It appears obvious now, as was frequently charged by members of the convention, that the framers of the Consti- tution were exercising functions which properly belonged to the legislature. This extreme precaution on their part was especially unnecessary in view of the fact that it was also proposed that the Constitution should prescribe that no banking law should take effect until approved by a ma- jority of the voters at a general or special election.^^*^ It seemed clear to a majority of the members of the con- vention that some change must be made in the banking law. The first problem was whether to provide for a State bank with branches, or for a system of general banking with note issue secured by the deposit of State stocks with bank commissioners. Some of the arguments advanced by advo- cates of the State bank system were : first, experience, espe- cially in Ohio and Indiana, had proved the superiority of that system; second, such a system inspired confidence be- cause of the mutual responsibility of all branches ; third, it could be used as a depository of State funds; fourth, it would lower the interest rate so that instead of the two or three per cent per month, then being paid, it would enable borrowers to secure funds at ten per cent per annum ; and fifth, paper of a State bank system would be current abroad, while notes under a general banking system would never circulate far from home at par. AUTHORIZATION OF BANKING 73 The principal opponents of the State bank system at- tacked it on the grounds of its monopolistic tendency. Under a general banking system it was pointed out that anyone could engage in banking under proper restrictions. It was contended that in order to protect themselves against un- sound branches, the branches of the State bank already in the system must have the right to pass on the application of a new branch. If any applying branch was allowed to force itself in, there would be unfair liability resting on the sound banks. On the other hand, this very protection might be the instrument of dangerous monopoly. Considerable objection was raised to the name ^' State Bank of Iowa" since it would appear to the public that the State was an owner of stock in the bank or at least was responsible for its notes. It was pointed out that the State of Indiana had an interest in the State bank there ; but such a situation was not only not contemplated in Iowa, but was actually pro- hibited by another section of the Article on Incorpora- tions.i^^ The subject was warmly debated in Committee of the Whole for nearly a week and numerous amendments were adopted. Finally the report as amended was referred to a select committee of five.^^^ When this committee brought in its report on February 23rd, all restrictions upon the legis- lature regarding the details of banking legislation had been removed. A minority report in favor of retaining the re- strictions was rejected by the convention, and the report as amended previous to its reference to the select committee was then taken up. This was considered on the following day and the select committee's report was again taken under consideration. Point by point the sections were added and amended until the report was again filled with restric- tions upon the legislature.^®^ Only a few members were openly opposed to any altera- tion of the Constitution with reference to the subject of 74 HISTORY OF BANKING IN IOWA banking. The sentiments of J. H. Emerson, an anti-bank man, seem to represent fairly well the opinions of the group which distrusted the legislature. He reminded the conven- tion that it was the legislatures of other States that had created the **wild cats" and *' red-dogs" that were in ex- istence.^^"* The only test of radical anti-bank sentiment came when Daniel H. Solomon moved to strike out the fourth and subsequent sections of the report and insert in lieu thereof these words : "The power to issue paper money shall not be granted by this State". This motion was de- feated by a vote of four to thirty-one. After this the report of the select committee, with its amendments, was adopted with only five dissenting votes.^^^ Article VIII of the Con- stitution, as finally approved by the convention, contains the banking provisions. Subject to the restriction that any banking legislation enacted by the General Assembly must be submitted to the electors, the way was opened for a State bank with branches and a free banking law.^^® GENEEAL OE FEEE BANKING LAW OF 1858 In his second biennial message of January 12, 1858, Gov- ernor James W. Grimes called the attention of the General Assembly to the fact that the Constitution authorized the establishment of a State bank and the enactment of a free banking law under certain restrictions. He urged the pas- sage of laws for these purposes, but cautioned the General Assembly "that banks are to be established to secure the public ivelfare and not to promote the purposes of stock- holders and capitalists ".^^"^ The General Assembly immediately proceeded to enact into law what was clearly the popular will in this matter. On February 6, 1858, the Committee on Banks and Banking of the House of Eepresentatives reported that the commit- tee had acted with the Senate committee. In order to ex- pedite business it had been agreed that two bills were to AUTHORIZATION OF BANKING 75 be introduced simultaneously, a Free Banking Bill in the House and a State Bank Bill in the Senate. After careful consideration by the House in Committee of the Whole, the Free Banking Bill was reported back to the House with numerous amendments, most of which were of minor im- portance. When finally revised, the bill passed the House by a vote of forty to twenty-five.^ ^^ In the Senate, after considerable amendment, the bill passed by a vote of twenty- three to five.^^^ Differences between the houses were ad- justed in conference and the measure received the executive approval on March 22, 1858. According to the Constitu- tion, and as provided in the statute, the act was submitted to a vote of the people at a -special election held on June 28th. At this election the law was endorsed by a large majority, 30,419 votes being cast in favor of the measure and 10,447 against it. Thereupon Governor E. P. Lowe proclaimed the act as law on July 29, 1858.^'^'^ This law remained in force until March 16, 1870, but no banks were established^*'^ under its provisions. Its chief interest lies in showing the sentiment regarding banking, and the type of regulations regarded as essential to safeguard the ''pub- lic welfare". Under the provisions of the act, any number of persons might be incorporated to establish banks of discount, de- posit, and circulation. The minimum capital was fixed at $50,000, all of which must be fully paid in cash. Subsequent withdrawal of any portion of this capital was strictly pro- hibited. No bank could be located in a town of less than five hundred inhabitants, and the oflSce where the business was transacted must be in the city or town where the cor- poration was located. Banks so organized would be per- mitted to do a general banking business.^^^ Stockholders were made liable to the creditors to an amount equal to the shares held, over and above the stock itself; that is, they were subject to double liability.-^' A 76 HISTORY OF BANKING IN IOWA strong attempt to make stockholders liable without limit as to amount failed in the House.^*'^ Shares of stock were made transferable on the books of the corporation, but the transfer of stock would not affect the responsibility of stock- holders for liabilities accruing while they remained stock- holders. Semi-annual statements must include the names of stockholders, places of residence, amount of stock held, and all transfers of stock. A copy of this statement was to be conspicuously posted in the bank for public inspection and another copy filed with the county recorder — the latter statement being prima facie evidence in the courts of the facts contained therein. Clearly the obligation of share- holders would not be lightly assumed under these condi- tions. ^^^ While the banks were permitted to do a general banking business, their activities were limited in certain respects. Loans must be made on personal security only and could have only four months to run to maturity. Interest and discount was limited to ten per cent until January 1, 1863, after which it was to be not over eight per cent. Usury was to be punished by forfeiture of the debt. The banks were forbidden to pay interest on current deposits. Reserve against deposits of twenty-five per cent was required to be kept at all times. The banks were prohibited from pur- chasing or holding real estate, except that which was needed for the banking house and that obtained at sales under judg- ment to secure debts.^^^ In its provisions regarding note issue, the law was most specific and exacting. Experience with notes of free banks of other States led the framers to use great caution in this respect. Certain constitutional limitations had also to be complied with : the security required, the countersigning by a State officer, publicity of shareholders, prohibition of sus- pension of specie payments, making bill holders preferred creditors, and double liability of stockholders were impor- AUTHORIZATION OF BANKING 77 tant requirements of the Constitution for the protection of note holders. The State Auditor was designated by the act to have charge of note issue. Notes of circulation were to be numbered, registered, and countersigned by a register appointed for such purpose by the State Auditor. Banks might procure their own plates and dies for engraving or secure the notes from the Auditor. In either case the bank was required to reimburse the Auditor for the costs. After having signed the circulating notes a bank could put them in circulation in the ordinary course of business. Notes were made payable on demand at the banking house of the corporation. Circulation of foreign notes of non-specie banks was prohibited. The notes were to be secured by the deposit of public stocks. Eligible stocks consisted of United States or State stocks upon which full interest was annually paid; and in the case of State bonds the interest rate must not be less than six per cent. The value of the stocks as security was to be rated at ten per cent below their average market value in New York, for the thirty days next preceding their de- posit with the Auditor. In case the stocks so held depre- ciated, the bank was required to make them good. Upon the stocks so rated in value the Auditor issued notes to an amount ten per cent less than the market value of the secur- ities. The aggregate amount of notes issued was limited only by the stocks so deposited.-^ ^ As long as it redeemed its circulation and continued its affairs in a normal manner, the bank was to receive the interest on the bonds deposited. If the bank wished to close its affairs, the Auditor was authorized to exchange stocks (bonds) for circulating notes. These bank notes were then to be cancelled and destroyed. No redemption fund was supplied to the Auditor, but if any bank suspended specie payments on its notes the Auditor was authorized imme- diately to sell the stocks at public auction in New York and 78 HISTORY OF BANKING IN IOWA pay the bill holders. The State did not, however, guarantee the ultimate payment of all notes beyond the proper ap- plication of the securities pledged to the Auditor for their redemption. In case a bank failed, and refusal to redeem notes in specie constituted an act of insolvency, the notes were preferred to all other liabilities, the receiver being directed to apply the assets, first, to the redemption or pay- ment of circulating notes; second, to the payment of de- posits ; third, to the payment of all other indebtedness ; and, fourth, to the payment of stockholders. With this prefer- ence, and fortified by double liability of stockholders, little possibility of loss by note holders existed.^"^ Whenever any corporation desiring to relinquish the banking business redeemed ninety per cent of its notes, it could deposit with the Auditor a sum equal to the notes then outstanding and receive all of its securities deposited with the Auditor. Thereafter, the Auditor could pay out the money solely for the redemption of notes. The bank could give notice for two years of final redemption of notes by proper publication. At the end of that time, if the notice had been properly given, the Auditor was authorized to return to the corporation all money and securities.^"^ Notes lost or destroyed would be a clear gain to the bank. An at- tempt during the passage of the act to give the right to a note holder to recover for notes that he could prove were "irrevocably destroyed", was defeated.^^" In the national system this profit on unredeemed notes goes to the United States government. The proportion of small notes was limited by the act. Thus, no notes less than $1 were permitted. Not more than ten per cent of the amount could be in notes of $2 each, not more than twenty-five per cent could, be in notes of all denominations under $5, and not more than fifty per cent in notes of all denominations under $10. The prejudice against small notes had led to a fight, during the passage of the law, AUTHORIZATION OF BANKING 79 for a more rigid limitation. An amendment was defeated which would have made the minimum note $10.^^^ The act named Thomas Hedge, George L. Davenport, P. Gad. Bryan, Thomas A. Graham, and E. G. Potter as bank commissioners to hold office until their successors were elected and qualified. Thereafter at each regular biennial session of the General Assembly three bank commissioners were to be elected. The seeming inconsistency of appoint- ing five commissioners and thereafter electing only three can be explained only by the fact that the House bill named the commissioners and provided for five men thereafter. The Senate reduced the permanent board to three, but left the other section without amendment. No stockholder, di- rector, or employee in any bank established by the act was eligible for election as commissioner. Compensation for the commissioners was on a fee basis at the rate of $5 per day spent in making examinations of banks. These fees were to be paid by the banks in proportion to their capital stock. The most important duty of the commissioners was to make semi-annual, or if they deemed it advisable, more frequent examinations of the condition of the banks. They were given ample power to examine the books, documents, officers, and agents of the bank. Reports of condition were to be published. In addition to these public reports the banks were required to make quarterly statements of their condition to the Auditor. These statements were to contain the amount of capital stock, the real estate held, the bills receivable, the bills payable, deposits with other banks, the amount of circulation, the loans and discounts, specie on hand, notes of other banks, loans to directors and stock- holders, suspended debts, and reserve against deposits on hand.2^2 The statute is long and detailed, and only its more essen- tial features have been outlined here. As one is accustomed to look upon banks, the minimum capital requirement of 80 HISTORY OF BANKING IN IOWA $50,000 seems to have been rather high to meet the needs of a pioneer community. Savings banks in Iowa to-day may incorporate with a capital of $10,000. But it must be re- membered that this legislation was framed to govern banks of issue. In order to control circulation under a decentral- ized system such as this, the number and size of the institu- tions must be restricted. No provision was made at all for banks of discount and deposit not desiring the right of issue. This shows that the issue function was still regarded as the only one which needed public regulation ; banking and note issue were still regarded as essentially the same thing. In regard to the safety of notes the act seems open to no criti- cism. The provision requiring the deposit of public stocks as security for notes was substantially the same as that of the free banking laws of other States ; the same general plan was incorporated into the national banking system. In- stead of throwing wide open the opportunity for big profits to bankers at the expense of the note holders, the framers of this act used every precaution to provide a sound circula- tion. The fact that no banks were incorporated under the law is evidence that it did not oifer easy opportunity to the ''wild cat" banker or speculator. Nevertheless, the opposi- tion to banks was not entirely dead. The votes in both branches of the legislature registered a considerable pro- test. A better test of the extreme prejudice was obtained in the House immediately after the passage of the act. A motion to amend the title to strike out the word "banking" and insert in lieu thereof the word "swindling" so as to read an act authorizing general swindling in the State of Iowa was supported by fourteen members. -^^ By the capitalists of this and other States the measure was regarded as too stringent; consequently early agitation was made to modify its provisions, but Governor Lowe and his successor, Governor Kirkwood, were both opposed to AUTHORIZATION OF BANKING 81 modification. In his biennial message to the legislature in January, 1860, Governor Lowe said: '*! have not under- stood that any banks have been established under the Free Banking Law. I have heard it suggested that it was too stringent and ought to be modified. I doubt whether an application of this kind ought to be entertained, should one be made. It is the want of these stringent provisions in the Free Banking systems of Illinois and Wisconsin that have flooded those States and Iowa with their irredeemable paper. It is infinitely better for the people of this State to have no free or State banks, if their paper cannot be redeemed on demand in specie. "^^* In spite of the wishes of the executive, the General As- sembly proceeded to amend the act. The amendment would have changed the then existing law in three particulars: first, by permitting banks to be organized with a capital of $25,000 instead of $50,000; second, by abolishing the office of bank commissioners and thus doing away with super- vision and examination ; and, third, by permitting the estab- lishment of banks in towns of 250 population instead of 500 as before provided. Governor Kirkwood was opposed to the second and third changes suggested and upon those grounds vetoed the bill. In his veto message he elaborated upon his reasons for opposing the changes. He regarded careful and disinter- ested supervision coupled with thorough and searching ex- amination as necessary to protect the public interest. The object of the limitation of banks to towns of at least five hundred population, he stated, was to prevent the establish- ment of banks at remote and inaccessible places — a favorite trick of the ''wild cat" banker. Banks of issue were only to be tolerated when their notes could be promptly converted into specie. Placing them at inaccessible points would make the notes practically irredeemable. He felt also that such small places would not support a legitimate banking 82 HISTORY OF BANKING IN IOWA business, and banks established there must necessarily be unsafe. He denounced the evils of the irredeemable paper of Illinois and Wisconsin, and warned against adding to the evil by permitting similar conditions in Iowa. Neither was he willing to shirk his responsibility by allowing the bill to go to the people for approval or rejection. Governor Kirkwood had been a member of the Senate in 1858 when the law was passed and knew the reasons for its stringency. To be sure he was also a heavy stockholder in the Iowa City branch of the State Bank of Iowa, but there is no evidence that he was improperly influenced on this account. Indeed, the State Bank would not have suffered from competition with free banks. The Governor's reason- ing was sound and his motives were of the highest. An attempt to pass the bill over his veto failed in the Senate by a vote of fifteen to sixteen, thus falling far short of the con- stitutional majority.^^'' The free banking law of Iowa was rendered obsolete by the amendment to the national banking act on March 3, 1865, which taxed out of existence the notes of State banks. No banks had been established under its provisions ; and it was finally repealed on March 16, 1870.216 VI THE STATE BANK OF IOWA The sections relating to banking in the Constitution of 1857 authorized the State legislature to enact a general banking law and also to provide for a State bank with branches. As has been shown in the previous chapter, a free banking law was duly enacted but no banks were estab- lished under its provisions, A State Bank, on the other hand, was promptly created and continued in successful operation until absorbed by the national banking system. In the creation of a State bank, Iowa was guided by the experience of other States. Many of the neighboring Com- monwealths had tried out the State bank system in some form. The State Bank of Indiana was chartered in 1817 ; in 1818 the Constitution of Illinois prohibited all other forms of banking except a State bank with branches ; Ohio had established her State bank in 1845 ; and Michigan, Mis- souri, Arkansas, and other States had already experimented with this plan of banking. In many cases the States owned stock in the bank, but State ownership was not essential in order to constitute a *' State Bank". In fact States often owned stock in the banks of the State where there was no attempt at centralization. On the other hand, some * ^ State Banks" existed in which the State held no stock. In Illi- nois the State was the sole owner of the stock of the State Bank of Illinois ; in Indiana the State was a large minority stockholder ; in the case of the State Bank of Ohio none of the stock was State owned.^^^ Experience in other States with State ownership of bank stock had proved so generally unsatisfactory that the con- stitution makers in Iowa specifically prohibited political or 83 84 HISTORY OF BANKING IN IOWA municipal corporations from becoming stockholders, di- rectly or indirectly, in any banking corporation. Private ownership was therefore a basic principle upon which the State Bank of Iowa was created. The Constitution imposed the further restrictions that the bank must be founded on an actual specie basis and that the branches thereof must be made mutually responsible for all notes issued to circu- late as money.^^* The bill to incorporate the State Bank of Iowa was intro- duced in the Senate at the same time that the free banking law was placed before the House of Representatives. As reported by the committee, the bill was before the Senate for about four weeks. During this time it occupied the foremost place on the calendar. Each section was dis- cussed, and sometimes amended, before the bill was finally passed. Its passage by the Senate was by a majority of twenty-eight to four and by the House, after slight amend- ment, by a vote of forty-five to eighteen.^^^ The Constitu- tion required that this act, after passage by the General Assembly and approval by the Governor, must be submitted to the voters for their endorsement. A special election was ordered for June 28, 1858, at which time the act was carried by an overwhelming majority, the vote being 41,568 for and 3697 against. On the 29th of July, Governor Lowe pro- claimed the act in force.^^*^ PEOVISIONS OF THE CHARTEE The statute created a board of ten commissioners to or- ganize the system and carry into effect the provisions of the act. The men named were designated as the Board of Bank Commissioners. C. H. Booth of Dubuque County, E. H. Harrison of Lee County, Ezekiel Clark of Johnson County, J. W. Duton of Muscatine County, William J. Gat- ling of Polk County, C. W. Slagle of Jefferson County, Elihu Baker of Linn County, William S. Dart of Mahaska County, THE STATE BANK OF IOWx\ 85 L. W. Babbitt of Pottawattamie County, and Edward T. Edgington of Lucas County were named by the act to serve as commissioners.^^^ It was provided that the commissioners should meet within thirty days from the passage of the act to examine certificates of branches. This was to be followed by a per- sonal examination of the condition of the branch, especially with respect to the money paid in on account of the capital stock and with respect to the responsibility and integrity of stockholders and directors. Whenever they were satis- fied that at least five branches had met the requirements of the act, they were to certify the same to the Governor and notify the branches of the fact. Each branch must then choose a director and these, together with three directors named in the statute to represent the State, should there- after control the destiny of the State Bank of Iowa. Upon proclamation of the Governor that the law had been in all respects complied with, the several branches were author- ized to commence business.^^^ Thus the State Bank of Iowa was not a single institution but rather the federation of a group of institutions, each having its own capital, stockholders, directors, and corpor- ate charter. The parent bank was incorporated by the act and as such had legal power to make contracts, to sue or to be sued in court, and to exercise the usual powers of a cor- poration. But it had no capital stock apart from that of its branches, nor was it to transact any banking business except with the branches. The head office was maintained at Iowa City, but there was organized also at Iowa City a branch of the State Bank. This branch sustained exactly the same relations to the State Bank as did any of the other branches. This plan of organization was found also in the State banks of Indiana^^^ and of Ohio,^-* which were the models for the Iowa bank. Of Iowa's political leaders, many received their early impressions in Ohio. Governor Lucas, the first Terri- 86 HISTORY OF BANKING IN IOWA torial Governor of Iowa, had, as Governor of Ohio, strongly- supported a State bank in his native State.^^^ Governor Lowe, in office when the Iowa law was passed, was born and educated in Ohio.^^^ The law establishing the State Bank of Iowa bears very strongly the impress of S. J. Kirkwood's ideas. In the State Senate he presented numerous amend- ments which were adopted.^ ^^ He had but recently come to Iowa (in 1855) after twenty years in the practice of law in Ohio, where he had also taken an active part in political affairs.^^^ Control of the State Bank as a whole was vested in a Board of Directors consisting of one director representing each branch and three directors representing the State. The original State directors named in the statute were Benjamin Lake of Clinton County, Hoyt Sherman of Polk County, and Elias H. Williams of Clayton County. Their compensation, to be paid by the State, was fixed at $3 per day and mileage. Their term of office was two years. No stockholder, officer, or employee of a branch bank could serve as a State director.^^^ Not infrequently the president of the branch served as the representative of his branch on the Board of Directors of the State Bank. Voting at board meetings was roughly adjusted to the capital stock of the branch. Each member of the board was entitled to two votes, plus one additional vote for each $50,000 of the paid- up stock of his branch in excess of $100,000. Directors were required to give bond, and to take oath that they would ''faithfully, diligently, and impartially" perform their duties.^^^ The most important specific duties of the Board of Direc- tors were to pass upon the applications of new branches, supervise the note issue, make examinations, and publish the monthly statements. They also formulated general policies for the system as a whole. If, upon examination, they found a branch in dangerous condition they were THE STATE BANK OF IOWA 87 authorized to assume full control of its affairs. They ap- proved and allowed the dividends of each branch. They elected their own officers and appointed a permanent secre- tary from outside their own number. Broadly speaking, they had final authority over all of the bank's affairs.^^^ Thirty was the maximum number of branches sanctioned by law. No branch could be organized in a town having less than 500 population; and in no case could more than one branch be organized in any town or city. The name of the branch must include the name of the town.232 Beyond the limitation of one to a town there was no geographical limita- tion on the distribution of branches. An amendment to place the minimum distance between branches at twenty miles was defeated in the Senate.^^^ Branches could be organized by any number of persons, not less than five. The capital stock of each branch was to be from $50,000 to $300,000, with the aggregate for all branches limited to $6,000,000. Fifty per cent of the capital stock must be paid in specie and must be in the possession of the branch as its bona fide property upon the commence- ment of business. The remaining fifty per cent must also be paid in specie in ten per cent installments. Unless other- wise ordered by the directors of the State Bank, these in- stallments must be paid every four months. Two provisions of the law were designed to obtain wide distribution for the stock. Each branch was required to give twenty days' public notice before opening the stock book for subscriptions. On the first day upon which sub- scriptions were received, ten shares of $100 each was the maximum amount of stock which any subscriber was per- mitted to buy. In case all the stock was not subscribed for on one day, the total which any individual or firm could purchase was raised to fifty shares. If, upon closing the subscription books at the close of the second day, the amount subscribed did not equal the capital authorized, the maxi- 88 HISTORY OF BANKING IN IOWA mum limit was removed entirely — it evidently being as- sumed that small purchasers, in the meantime, had had plenty of opportunity to make their subscriptions. Stockholders were subject to double liability in case of the failure of a branch. ^^^ In this respect Iowa was one of the pioneer States. Massachusetts in 1849 and New York in 1846 were among the States that had earlier adopted special liability for stockholders in banking corporations.^^® Stock of the State Bank was made freely transferable, but in order to protect creditors no individual was allowed to sell his stock as long as he was indebted to the bank. Trans- fer of stock did not relieve the seller of responsibility for liabilities accruing while the stock was in his possession. Eecord of the stock, as shown in the stock book, was on file with the recorder of deeds in the county where the branch was located. In case of suit this was prima facie evidence of ownership, although the real owner was held liable, even when the ownership appeared on the books in the name of another person.^^^ The position of creditors of the branches was further strengthened by the provision that the capital stock could not be impaired to pay dividends. Loans to stockholders were limited to four months ' duration, and the stockholders collectively could not at any time owe more than three- fifths of the amount of the paid-up capital. With certain minor exceptions, a branch could not buy its own stock nor the stock of any other incorporated company. The banks were thus restrained from speculation, and banking capital could not be reduced by inter-ownership of stock. One rea- son for placing the latter restriction in the law was that banking corporations of the mid-nineteenth century in- dulged sometimes in the practice of buying their own stock, thereby reducing the actual capital of the institution below the nominal amount. Moreover, it was especially desirable to prevent the holding of stock in other banks. Unless so re- THE STATE BANK OF IOWA 89 stricted one branch might control one or more of the others through ownership of a majority of its stock. A monopoly- might thus be created, and in any case the total strength of the State Bank would be weakened in time of stress. Fail- ure of any branch holding considerable stock in several other branches would seriously cripple, if it did not entirely force under, the subsidiary branches. As a safety measure, therefore, the prohibition on stock investment was a wise restriction.^^'^ Management of each branch was vested in a Board of Directors, elected annually by the stockholders. At all stockholders ' meetings each share of stock was allowed one vote. The number of directors might vary from five to nine. In order to be qualified for the office of director the stockholder must be a citizen of the United States and a resident of Iowa during his whole term of office. Directors were required to take oath diligently and honestly to per- form their duties — this oath to be filed with the county re- corder. Directors collectively were not permitted to owe to the branch of which they were officers an amount exceed- ing one-fifth of the capital stock of which they were bona fide owners.^^^ Bankers of the twentieth century do not consider note issue an essential function of commercial banking, but to the banker of the mid-nineteenth century this function was still very important. The early bankers, instead of grant- ing the borrower book credits in the form of a deposit which he might transfer by means of a check, handed him the bank's notes. Notes issued on this "banking principle" were essentially the same sort of liability for the banker as his deposits. When the State Bank of Iowa was chartered the necessity of guarding the interests both of note holders and of depositors was recognized, but by far the most legis- lative attention was devoted to the regulation of note issue. Since note issue provisions formed such a large part of the 90 HISTORY OF BANKING IN IOWA act incorporating the State Bank, this phase of the law is reserved for special treatment. Important restrictions placed upon the deposits of the branches were: each branch was required to keep a specie reserve of twenty-five per cent against its current deposits, in addition to the same specie reserve against circulation; and branches were prohibited from paying interest on cur- rent deposits. The amount due depositors was to be re- ported separately in the regular monthly statement required by the law. Notes were made a prior claim over deposits in the settlement of the affairs of an insolvent branch. This was done on the generally accepted theory that a note holder usually is an involuntary creditor of the bank, whereas the depositor voluntarily chooses the place of deposit after in- vestigation. ^^^ During the early part of the nineteenth century the bank- ing business was surrounded with great secrecy. Accord- ing to its charter the First Bank of the United States was required to make regular returns to the Treasury Depart- ment, but only two of these reports were ever published. The legislatures of most States did not require reports from banks until well toward the middle of the century. Sometimes reports were called for, but no penalties were provided for failure to make returns. Specific forms were not prescribed, hence ambiguities and inaccuracies crept in.24o In this respect the founders of the State Bank of Iowa took a very advanced position. Certified statements of the condition of each branch were required to be made on the first Monday in each month. This statement was to be transmitted to the Auditor of State and to the State Bank. The form of the report specified seventeen distinct items on which information was to be given. An abstract of the statement was to be published in some newspaper of the county and a copy was to be sent to each branch of the State Bank. The directors of the State Bank were re- THE STATE BANK OF IOWA 91 quired to publish a consolidated abstract of these monthly reports in some newspaper published at Iowa City, the loca- tion of the head office of the bank, as soon after the first of the month as practicable. Judged by our present standard, this system of regular monthly statements was a weak one ; but it was, nevertheless, a notable advance in the matter of giving publicity, and was a safe method of determining the bank's condition. Supplemented as it was by examina- tion of the branches by the State Bank directors, it proved an adequate method of supervision of the general condition of those branches. The present-day practice of calling for way of obtaining bank statements, but this plan was not in- troduced until several years later when it was made a fea- ture of the national banking system and later was adopted for State banks.^" Interest or discount on loans was fixed at ten per cent until the first day of January, 1863 ; after that no more than eight per cent was to be charged. Discounting was allowed and exchange could be charged at the current rate upon a bona fide bill or note payable at some other than the place of discount. To charge a rate higher than the legal rate was usury, and caused the entire debt to be forfeited unless made to a director or stockholder, in which case it was a valid claim. A second restriction was that loans were lim- ited to four months time. This prevented loans and dis- counts for land purchase, a practice which had wrecked many banks in 1837 and again in 1857. The time limitation took into consideration that principle of commercial bank- ing which recognizes that a bank's assets should be kept in easily liquidated short-time paper. A limit of four months would seem to have been rather rigid in an agricultural community, experience having since demonstrated that prime agricultural paper may have a maturity of six months at least.2« 92 HISTORY OF BANKING IN IOWA During the period of the State Bank and the decade fol- lowing, during which the national banking system was domi- nant, long time credit was of necessity supplied by other institutions. The available facts concerning these institu- tions were very meager. It is known that some of the private banks survived the panic of 1857 and continued to carry on their business, which included a great deal of loan- ing on mortgage security. The number of private banks in Iowa in 1875 was approximately two hundred. We have no means of knowing how many of these were in operation contemporaneously with the State Bank, but doubtless a considerable number had their origin before the close of its career. Directly and indirectly they supplied the long time credit to the Iowa borrowers. Collectively the stockholders could not borrow more than three-fifths of the amount of the paid-up capital; and the directors of any branch could not owe more than one-fifth of the amount of the stock owned by them collectively. The section relating to the maximum indebtedness which any individual might contract with a branch is not clearly stated. It appears, however, that no person, company, or several members of a firm collectively could owe on a single-name promissory note more than one-twentieth of the amount of the circulation which the branch was authorized to issue. On the first $100,000 or less of paid-up capital the branches were allowed to issue notes at a rate of two to one. The maximum individual loan was, therefore, ten per cent of the paid-up capital — the ratio shortly afterward adopted in the national banking law. Branches were allowed to dis- count bona fide bills of exchange, payable out of the State, bearing the acceptance of one individual or firm to an amount equal to one-fourth of its circulation. A further clause was included to the effect that no person or firm could be indebted, exclusive of liability as an acceptor, to an amount in excess of one-tenth of the circulation. This would THE STATE BANK OF IOWA 93 seem to mean that the branch could discount bills of ex- change for one firm only up to ten per cent of its maximum note issue, or twenty per cent of its capital. This appears, however, to have been in addition to the one-twentieth lia- bility on single-name paper. It is clear why a larger line of credit was granted on double-name than on single-name paper, but the relatively high amount of paper which could be discounted bearing the acceptance of one firm is not easily understood. The wording of the statute limits the amount of the latter to one-fourth of the bank's circulation when the bills were payable outside of the State, but made no express limitation in any other case.^'*^ The loans of the bank were further limited to those made on personal security. An early ruling of the Board of Direc- tors of the State Bank interpreted this to prohibit taking collateral security. Shortly afterwards the board reversed itself and decided that section twenty-three of the act was intended to prevent the taking of real estate security. Thereafter the branches were allowed to use their own dis- cretion in the matter of taking collateral.^^^ They were not allowed, however, to take a lien on any part of their capital stock; and the same security was required from sharehold- ers as from other borrowers.^^^ The banks were prohibited from owning real estate be- yond the amount in each case ''necessary for the convenient transaction of its business". If it became necessary to purchase at execution sale, or to take over real estate to secure payment of a debt previously contracted, the real estate was to be sold as soon as possible without loss. The branch was required to offer such real estate for sale pub- licly at least once a year. Subject to these restrictions the branches had power to transact a general banking business. They could issue notes furnished by the State Bank, loan money, buy, sell, and discount bills of exchange, notes, and other written evidences of debt, receive deposits, buy and 94 HISTORY OF BANKING IN IOWA sell coin and bullion, make collections, and do any other business properly appertaining to banking.^*® NOTE ISSUE The provisions of the State Bank law regulating note issue were drawn with care in order to insure a uniform and sound circulating medium. For the protection of note holders the two plans most commonly adopted in banks under State charter before the Civil War were the free banking plan, having all note issues secured by interest bear- ing bonds, and the safety fund plan. Ohio had adopted the safety fund plan in the law of February 24, 1845, creating a State bank.^*'^ This plan, having proven successful in Ohio, was copied in the act creating the State Bank of Iowa. But a more important protection than the safety fund was the provision that the branches were mutually responsible for all of the notes issued. No occasion ever arose in the his- tory of the State Bank of Iowa to make use of the safety fund, but the mutual responsibility provision early saved the note holders of one branch from loss and avoided for the bank public disfavor. The safety fund for the redemption of notes consisted of either money or bonds to an amount equal to twelve and one-half per cent of the circulating notes delivered to the branch. It was specified that the bonds so deposited must be ''United States stocks, or interest paying State stocks at their current value in the city of New York, but in no instance above their par value ' '. The money paid into the safety fund must also be invested, under the direction of the Bank, in the afore-mentioned bonds. Interest accruing on the stocks so held was received by the branches owning the same. In case of the failure of any branch the portion of the safety fund belonging to the insolvent branch was first to be used to redeem its outstanding notes. The solvent branches could then be called upon to make up losses of the THE STATE BANK OF IOWA 95 insolvent branch. It was a mutual liability only for note issue, and no part of the safety fund except that belonging to the failed branch was to be called upon for payment of other liabilities.^^^ The administration of the safety fund was in the hands of the President of the Bank. In November, 1860, the Pres- ident was given power to require any branch to deposit additional security in the safety fund if its bonds declined so that in his judgment, with the concurrence of the Execu- tive Committee, the interests of the Bank required such deposit. Again, just at the outbreak of the Civil War, a resolution was adopted providing that the safety fund be made good by a return of circulation or by depositing coin or bonds. This was accompanied by a resolution to the effect that bonds of Southern States were not to be received for the safety fund. At first the bonds were kept in the office at Iowa City, but in November, 1861, the President was directed to remove the bonds belonging to the safety fund to the vault of the Merchants Branch at Davenport for safe keeping.249 To limit the volume of circulating notes and to make sure of their prompt redemption, two restrictions were adopted. The volume of circulation bore the following proportion to the capital stock : on the first $100,000 or any lesser amount of its capital actually paid in, the branch could issue notes to twice the amount; for the second $100,000 this propor- tion was reduced to one and three-fourths times the capital ; on the third $100,000, to one and one-half times the capital. A second limitation was the requirement that a specie reserve of twenty-five per cent of the circulation must at all times be kept on hand in the vault of the issuing branch. Whenever the volume of notes outstanding exceeded this proportion the bank was not permitted to put any more notes in circulation, nor to increase its liabilities by making new loans or discounts, except to purchase sight bills of 96 HISTORY OF BANKING IN IOWA exchange, nor to pay any dividend until the proper propor- tion was restored.^^*^ The Bank strictly enforced this statu- tory requirement even during the exceptional circumstances of the Civil War. When there was general suspension of specie payments and the banks were redeeming their notes in national bank notes and United States treasury notes, the branches were tempted, by the possible profit, to sell gold at a high premium. This policy was promptly opposed by the Bank. Any branch violating the statute in this re- spect was called to account. For instance, the Iowa City branch, in February, 1864, was given an opportunity until the next meeting of the Board to restore the proper equilib- rium between specie and circulation. At a later meeting in the same year, the branches were directed to keep at all times in their own vaults in coin twenty-five per cent of their outstanding circulation.^^^ Specie redemption of bank notes was a cardinal prin- ciple of the State Bank of Iowa. Failure on the part of any branch to redeem its notes promptly in specie when de- manded at its banking house during the usual banking hours was to be deemed an act of insolvency. The entire business and property of such a branch must be immediately taken over by the State Bank. The State Bank would then ap- point an examining committee and a receiver for the branch ; its affairs would be settled and the debts paid as fully as possible. The notes would all be promptly redeemed by the State Bank, the safety fund of the several branches being later reimbursed from the assets. By the terms of the law the denominations of notes were $1, $2, $3, $5, $10, $20, $50, and $100. Small notes were in general disfavor. In the Senate, during the consideration of the bill, a motion to prohibit all notes below $5 was passed by a majority of a single vote. An attempt to raise the minimum to $20 was decisively beaten. The House of Representatives restored the provision of the bill permit- THE STATE BANK OF IOWA 97 ting a limited proportion of small notes. In the conference on the House amendments the Senate agreed to this change.^^^ The percentage of small notes was limited as follows : not more than ten per cent of the amount issued by any branch could be in notes of $1 each, not more than ten per cent in notes of $2 each, not more than twenty-five per cent in notes of all denominations under $5, and not more than fifty per cent in notes of all denominations under $10,253 The effort to prohibit small notes and the final action limiting the percentage of these notes was due to the popu- lar dissatisfaction with the so-called "shinplasters" or frac- tional currency of all kinds that had made up a large part of the circulating medium. It was hoped by such regula- tions to keep coin in circulation. Limitation or prohibition of small bank notes has been commonly prescribed in bank- ing laws even up to the present time and is included in our national banking laws. In the United States, under the na- tional banking system, government paper money has met the demand for small notes, but in Iowa the only substitute would have been the small notes of outside banks. It was the realization of this fact that led the Iowa legislators to choose the limitation of the number rather than the entire prohibition of the issue of small notes by the State Bank of Iowa. No provision was made in the law and no regulation can be found in the records of the Board of Directors for frac- tional currency. In the collections of the State Historical Society of Iowa are to be found samples of fractional cur- rency which appear to have been small checks payable to the bearer at the branches of the State Bank. This currency is in the form of cards or tickets about one and one-half by two and one-half inches in size. Samples are preserved of the currency drawn on the branches at Iowa City and Washington. The branches were directed to redeem the 98 HISTORY OF BANKING IN IOWA tickets in bank notes if presented in sums of $1. The de- nominations were five, ten, twenty-five, and fifty cents. They bear the date of 1862, that is, of a period after the general suspension of specie payments. The form of the bank notes was left to the Board of Di- rectors, and was a problem of considerable moment at the first meeting of the Board. While the directors desired to get the circulation as early as possible they were also de- sirous of choosing a distinctive design. Plates were avail- able from which notes could have been immediately struck off. The Board finally referred the entire matter to a com- mittee composed of Hiram Price and Hoyt Sherman, with instructions to go east and procure the bills required for circulation.^^^ This delayed somewhat the note issue, but enabled designs to be chosen which were related distinc- tively to Iowa. The notes selected attracted favorable com- ment in the local press. ^^^ In general they pictured fanciful rural scenes, but they also included some pictures of his- torical interest. On the $1 bill was a cut made from a portrait of Governor Robert Lucas, the first Territorial Governor. The picture on the $5 bill was that of Antoine Le Claire, one of the pioneer founders of Davenport. The $10 bill had a cut made from a scroll map of Iowa as it was before 1856, and Governor Ealph P. Lowe's picture ap- peared in the corner. In all cases the notes were issued in the name of the State Bank of Iowa ; and the names of the various branches were written in with a pen. All notes were signed by the president and cashier of the branch, and reg- istered and countersigned by the Secretary of the State Bank.256 Because the name of the branch was written on the notes, it was necessary to return worn notes for exchange more frequently than might otherwise have been necessary. The statute provided that mutilated currency be ''burned to THE STATE BANK OF IOWA 99 ashes in the presence of the President or Vice President, and at least two of the Directors of said Bank."^^^ This order was literally and conscientiously carried out. Hiram Price describes the burning in these words : * * This burning was done in a large, old-fashioned, ten-plate stove, in the office of the State Bank at Iowa City. Sometimes, in warm weather, this was by no means a pleasant job. The door of the stove had to be kept open so that the witnesses could certify, not that the mutilated currency had been put into the fire in the stove and burned, but that the burning was done in the presence of those who made the certificate."^^* He further relates how they watched to see that there was not draft enough to draw the notes out of the flue and that the charred paper was thoroughly stirred so as to burn the notes to ashes. The minutes of the Board of Directors con- tain frequent record of the appointment of committees to burn mutilated currency.^^® ORGANIZATION OF THE BANK Shortly after the special election of June 28, 1858, the Governor called together the Bank Commissioners for the purpose of putting the new system into operation. The first meeting was held at Iowa City on July 28, 1858, at which time the commissioners took the oath of office. The mem- bers present were C. H. Booth, E. H. Harrison, Ezekiel Clark, W. J. Gatling, C. W. Slagle, Elihu Baker, William S. Dart, and Edward T. Edgington. After electing Ezekiel Clark chairman of the Board and William J. Gatling secre- tary pro tem, they adjourned to meet at the same place on July 30th.26o At that time applications for the establishment of branches were received from Council Bluffs, Oskaloosa, Ca- manche, Lyons, and Washington. All these were laid on the table and the Board adjourned to meet on September 15th to act on applications. 100 HISTORY OP Bz\NKING IN IOWA The next meeting of the Board was held on September 15-17, 1858. Nineteen applications were filed by parties de- sirous of forming branches of the State Bank. These were : No. 1. Muscatine — Branan and others No. 2. Dubuque — Goodrich and others No. 3. Washington — Abbott and others No. 4. Iowa City — Kirkwood and others No. 5. Davenport — Le Claire and others No. 6. Dubuque — Langworthy and others No. 7. Clinton — Sam Clark and others No. 8. Sioux City — Hubbard and others No. 9. Davenport — Macklot and others No. 10. Des Moines — Allen and others No. 11. Muscatine — J. Green and others No. 12. Grinnell — Grinnell and others No. 13. Council Bluffs — Noble and others No. 14. Wapello — Copeland and others No. 15. Oskaloosa — No. 16. Keokuk — Southern No. 17. Mount Pleasant — No. 18. Sioux City — J. W. Boster and others No. 19. Keokuk — Hammell, Ralston, and Company and others The commissioners at a later meeting received applica- tions from Camanche, Pacific City, and Waterloo, but these were laid on the table. ^^^ In order to act intelligently upon the nineteen applica- tions the Board referred them to examining agents from their own numbers for personal examination. A set of "interrogatories" was prepared and general instructions agreed upon in order to insure uniformity and impartiality of action. The Board then adjourned, to meet again on October 6th, and went out two by two as examining agents. When the Board reassembled they found that eight branches had met all the requirements of the law and were entitled THE STATE BANK OF I0V7A >01 to commence banking. Certificate to that effect was made to the Governor naming the following branches: 1. The Muscatine Branch — Application No. 1 2. The Iowa City Branch — Application No. 4 3. The Des Moines Branch — Application No. 10 4. The Dubuque Branch — Application No. 2 5. The Oskaloosa Branch — Application No. 15 6. The Mt. Pleasant Branch — Application No. 17 7. The Keokuk Branch — Application No. 19 8. The Merchants Branch of Davenport — Application No. 5^62 There were subsequently established under the authoriza- tion of the State Bank directors, seven additional branches : Lyons City Branch of the State Bank of Iowa, February 17, 1859 Branch of the State Bank of Iowa at Burlington, March 18, 1859 Washington Branch of the State Bank of Iowa, March 18, 1859 Fort Madison Branch of the State Bank of Iowa, August 11, 1859 McGregor Branch of the State Bank of Iowa, February 15, 1860 Council Bluffs Branch of the State Bank of Iowa, Novem- ber 14, 1860 The Farmers Branch of the State Bank of Iowa at Ma- quoketa, February 10, 1864^®^ These fifteen branches continued from the time of admis- sion until the Bank's affairs were closed in 1865. Col- lectively they constituted the State Bank of Iowa. The action taken on October 9, 1858, by the Board of Com- missioners establishing the original eight branches was communicated to each branch that had been accepted, and October 27, 1858, was set as the date for the first meeting of the Board of Directors. The commissioners adjourned :..G'2: HL3T0RY OF BANKING IN IOWA until November 11, 1858, but there is no reason to believe they ever assembled again. The record book used by the commissioners became the minute book of the Board of Di- rectors. In it the record closes with the meeting of October 9th. The commissioners were responsible only for getting the system established. At the first directors' meeting Ezekiel Clark, President of the Board of Bank Commis- sioners, turned over to the directors all the books, papers, and documents in the possession of the commissioners.^®* Thereafter the responsibility for the conduct of the State Bank rested on the Board of Directors. The first meeting of the Board of Directors was held in the Council Chamber of the Old Capitol at Iowa City on October 27, 1858. The members present were : W. T. Smith, representing the Oskaloosa Branch Samuel F. MiUer, representing the Keokuk Branch P. M. Casady, representing the Des Moines Branch S. J. Kirkwood, representing the Iowa City Branch Chester Weed, representing the Muscatine Branch Richard Bonson, representing the Dubuque Branch Timothy Whiting, representing the Mt. Pleasant Branch Hiram Price, representing the Davenport Branch Benjamin Lake, representing the State of Iowa Hoyt Sherman, representing the State of Iowa S. J. Kirkwood was elected president pro tem and Hoyt Sherman secretary pro tem. By-laws were adopted and a permanent organization effected. Chester Weed of Musca- tine was elected President and Elihu Baker of Cedar Rap- ids, Secretary. Mr. Baker continued in that capacity throughout the history of the bank. In February, 1860, Mr. Weed was succeeded by Hiram Price, who was President from that date until the bank closed in 1865.^®^ The principal business before the first directors' meet- ing was the adoption of by-laws and of plans to obtain cir- culating notes. It was provided in the by-laws that there THE STATE BANK OF IOWA 103 should be regular quarterly meetings of the Board of Di- rectors on the first Wednesday after the second Monday of February, May, August, and November. Special meetings might be held at the call of the President or of any four members of the Board. The regular officers were Presi- dent, Vice President, and Secretary. These men were to be elected annually at the February meeting of the Board, the first election to be at the time of organization, and the first regular election to occur in February, 1860. The duties of the President included the usual duty of presiding at meetings. In addition he had charge and gen- eral oversight of the office at Iowa City. He was required to make examinations of the branches. At each regular session of the Board he made a written report of matters that concerned the Bank or branches. This report must include any matter requiring action by the directors. He was originally allowed a salary of $1200 per year and ex- penses incurred in visiting and examining the branches. This was put on a per diem basis after February, 1863, and the compensation was reduced. He was required to give bond of $100,000 and to discharge honestly and faithfully the duties of the office. ^^^ When we consider the responsi- bility undertaken and the amount of work involved, this pay seems hopelessly inadequate to command the highest ability. Hiram Price, the President during all but the first year, speaks of the inadequacy of the salary but seems entirely satisfied to have earned from his associates 'and all those interested the ''better and more valuable pay" of ''well done, good and faithful servant. ' '^^'^ The Vice President was required to assume the duties of the President in his absence and to make examination of the branch represented by the President as director. By virtue of his office he was a member of the Executive Committee of three members who met monthly at Iowa City to examine statements of the branches and, if they deemed necessary. 104 HISTORY OF BANKING IN IOWA to cause a personal examination of the condition of any branch to be made. This committee also examined the accounts of the Secretary and in general the condition of the State Bank.268 The Secretary was given the duty of keeping the books and accounts of the head office at Iowa City. He was re- quired to register and countersign all notes issued for cir- culation and keep a record of the same. His salary was $1500 per year, payable quarterly. This position was filled by Elihu Baker during the entire life of the Bank. At the last regular meeting of the Board a resolution was adopted commending Mr. Baker for the ' ' skill and ability with which he has discharged the arduous and complicated duties of Secretary of this Board. "^'^^ Directors were not paid a salary for their services. At first they were allowed a per diem of $3 for attending di- rectors' meetings and mileage at the rate of fifteen cents per mile. At the meeting on August 15, 1860, it was decided to pay the per diem but no mileage. This was rescinded at the next meeting and the directors continued to receive $3 per day, although the mileage was reduced to seven and one- half cents per mile.^'^" Salaries and other expenses were met by assessments on the branches in proportion to the paid-up capital stock. These assessments were very small relatively. In February, 1862, an assessment of one mill on the dollar was ordered. This was followed in August by an assessment of one and one-half mills plus an additional one mill to pay a note. Again in May, 1863, one and one-half mills was assessed.^^^ A special meeting of the Board of Directors was called on December 28, 1858, at which time the first installment of notes was ordered to be delivered to the directors of the branches. The register of circulation of the Iowa City branch shows December 30, 1858, as the date of receipt of the first notes, the notes being dated January 1, 1859. The THE STATE BANK OF IOWA 105 maximum circulation of two hundred per cent of the capital stock was allowed to the original branches at the meeting of the directors on August 11, 1859.-''2 One of the important problems with which the Board of Directors was confronted, especially during the early- months of the Bank's history, was the consideration of the applications of associations seeking admission as branches. In addition to the seven branches admitted subsequently to the first organization, a number of other would-be members were rejected. The history of the State Bank of Indiana, where a single opposing vote could prevent the establish- ment of a new branch, shows that dangerous possibilities lurked in the provision that membership in the system depended on the favorable vote of the existing members. Logansport was kept out of the Indiana institution by the opposition of Lafayette.^^^ The provisions of the Iowa law on this point were subjected to considerable criticism during the passage of the act. But there is no evidence to show that the directors excluded deserving applicants in order to preserve a monopoly for themselves. The Board of Com- missioners, a disinterested body, rejected eleven out of nine- teen applications and declined to consider applications from four other towns. When the directors assumed this function there was thorough consideration but fewer re- jections. When considering applications the Board exercised great care in examining certificates, verifying the specie paid in, and investigating the responsibility of stockholders. The cost of these examinations was borne by the applicants whether accepted or rejected. Applications from McGregor and Cedar Rapids were refused on the ground that too large a proportion of the stock was owned outside of the locality or State. In the case of McGregor, $12,000 of the $50,000 authorized stock was owned in Dubuque, and from $6000 to $7000 was owned in New Hampshire. Cedar Rapids was 106 HISTORY OF BANKING IN IOWA rejected on the ground that one-fourth of the capital was owned by residents of Chicago. It was felt by the Board that outsiders would have few interests in common with the people of the community for whose benefit the bank should be managed. In the case of McGregor the objection was met and admission followed. Waterloo and Cedar Falls were simultaneously rejected on the ground that the establish- ment of a branch in Black Hawk County was then of doubt- ful expediency.^^* SUPERVISION OF THE BRANCHES The soundness of the provision for mutual responsibility of branches was clearly demonstrated. A report reached the Executive Committee that the cashier at Muscatine was pursuing an unwise policy, and an examination was made on January 5, 1860. It was shown that the affairs of the bank were in bad condition, but it was deemed possible to save the branch and lessen the loss to the bondsmen of the cashier by continuing in business under the direction of the Executive Committee. Mr. Stone, of Washington, a mem- ber of the Executive Committee, was given one share of stock and thereby qualified to act as director and chairman of the board of directors of the branch. The assistance of the other branches was secured and the affairs of the branch were satisfactorily arranged. There was loss to some stock- holders, but not a cent was lost by depositors or note holders. The bank did not suspend its regular business at any time and eventually paid good dividends.^'^^ At a later date the Fort Madison branch became involved in difficulties of a less serious nature. A committee ap- pointed to investigate its affairs reported on May 14, 1863, that the branch was in serious condition. They recom- mended that the State Bank take charge of the assets in the interest of the State Bank and of the stockholders of the branch. Elihu Baker, the Secretary, was appointed re- THE STATE BANK OF IOWA 107 ceiver, but a proposition was made by Geo. P. Eaton, cashier at Fort Madison, which proved satisfactory for an adjust- ment of the matter. He offered to deposit coin, safety fund securities, and currency to the amount of $120,000 with the President of the State Bank. This was done and the entire control of affairs of the branch was left in the hands of the local directors. This fund was to be returned in proportion as the branch retired circulation. From the records of the plan it seems to have proved successful, for in November of the same year $25,000 was returned and a little over a year after the investigation all of the special funds were returned to the Fort Madison branch.^^® It must not be inferred that it was the policy of the State Bank to assume unnecessary control over the affairs of the branches. On one occasion complaints were made against the Mt. Pleasant branch. A committee of the directors appointed to consider these complaints reported that in the main the affairs were conducted properly and that most of the trouble was caused by local jealousy arising from the election of directors. The committee concluded that ''where the safety and good standing of the Branch is not endan- gered, it is not a matter requiring the attention or inter- ference of this Board. ' ' Rules were laid down from time to time and orders issued to the branches, but these were general in their nature. In May, 1859, the directors passed a resolution advising the branches to keep their New York and Boston accounts with regular bankers rather than private bankers. At one time the branches were ordered to close their Chicago accounts with the prominent firm of Solomon Sturges and Son within sixty days ' ' on account of the legal disabilities under which the otherwise responsible head of that house is understood to be placed by his insanity. ' ' At their meeting on August 16, 1860, the Board passed a resolution that branches be re- quired to report monthly the amount of overdrafts.^'^'^ 108 HISTORY OF BANKING IN IOWA AID DUKING THE CIVIL WAE During the emergency of the Civil War the State Bank bore its share of the burden of placing loans and supplying credit. This aid was first extended to the State government and later to the Federal government. When the call for troops came, Iowa was very poorly prepared to meet the demands made upon the Commonwealth. There were no arms or equipment for soldiers, the militia was unorganized, the financial administration was very weak, and there were no funds in the treasury. When the Secretary of War called upon Governor Kirkwood to furnish troops for immediate service, the Governor promptly issued a call for volunteer companies. He acted upon the assumption that the State would pay the expenses of the troops until they were mus- tered into Federal service. The Governor wished to avoid the expense of an extra session of the legislature until it proved necessary, but funds had to be provided. It was in this crisis that the State Bank came to the aid of the Com- monwealth.^^^ The branches were prompt in offering the Governor assistance. Party spirit was entirely subordi- nated to the thought of service. Democrats like W. T. Smith of Oskaloosa and W. F. Coolbaugh of Burlington offered their financial support as willingly as such staunch Republican bankers as Hiram Price of Davenport and Ezekiel Clark of Iowa City. J. K. Graves of Dubuque noti- fied Governor Kirkwood to draw on the branch of the State Bank there for thi/ty thousand dollars and the draft would be honored.^^® Not only did the banks in their corporate capacity offer material assistance, but prominent among the individuals who supported the State finances in the crisis were well- known officers or stockholders in the State Bank. Among these may be mentioned Hiram Price of Davenport, Ezekiel Clark of Iowa City, Samuel F. Miller of Keokuk, and Gov- ernor Kirkwood himself.^^*' THE STATE BANK OF IOWA 109 The Bank continued its aid to the State government, pro- tecting its credit in every way possible, buying bonds, and marketing warrants in anticipation of revenue to be col- lected. The Dubuque Herald sums up this service in these words: "The State Bank of Iowa has added much both at home and abroad to the j&nancial reputation of the State. The several branches made liberal advances to Governor Kirkwood at the commencement of the rebellion and now own nearly two-thirds of the whole indebtedness of the State, the Dubuque Branch alone owning one-fifth of the entire amount. ' '^^^ The State Bank also aided in selling the obligations of the Federal government. Treasury notes and bonds of the United States government were on sale at the various branches. For instance, in one issue of the local paper the Iowa City branch advertises that it is the authorized gov- ernment agency for the United States five to twenty-year six per cent bonds, and states further that it has on hand a full supply of all denominations. On another page explana- tion is made of an arrangement whereby people with surplus funds may buy two-year Treasury notes bearing five per cent interest. The State Bank had ordered $50,000 of these notes in denominations of $50 and $100.^^2 AS FISCAL AGENT OF THE STATE From the outset the State made a limited use of the branches of the State Bank as its fiscal agents. The State Auditor's reports show balances in the State Bank as fol- lows r^^^ November 7, 1859, $10,035.58; November 4, 1861, $9944.84; November 2, 1863, $14,604.82. Governor Lowe in I860 recommended a more extensive use of the State Bank as a fiscal agency. He stated that revenue was being paid into the nearest branch of the State Bank in the more populous counties and thence forwarded to the capital at the risk of the Bank and on reasonable 110 HISTORY OF BANKING IN IOWA terms. He favored extending this service by disbursing on warrants directed to the branches. This, he argued, would save moving money in both directions, thus lessening risk and expense. No action appears to have been taken by the legislature to make this possible.^^^ EEDEMPTION OF NOTES IN GREENBACKS The most difficult problem in connection with note issue which confronted the Board of Directors during the Civil War came when the United States government began the issue of Treasury notes. Without waiting for this difficulty to come before any individual branch for discussion the Board of Directors anticipated the matter by taking decisive action on February 12, 1862. The President appointed a committee to consider the question and to suggest a course of action. The strength of the Bank was shown to be such that it was entitled to the confidence of the public. The monthly report of February 3, 1862, showed a specie reserve of $754,412.23 and a circulation of $1,111,908 less $140,000 held by the banks themselves. It was expected that Con- gress, in passing the act to authorize $150,000,000 of Treas- ury notes, would make them legal tender. The branches would then be required to receive them in all payments. If they continued to redeem their own notes indiscriminately their supply of specie would be depleted. The parties to benefit would be non-resident brokers, at that time engaged in collecting notes of the Bank. The people of Iowa would gain nothing and specie would be drained off to the profit of speculators. The committee, after thus setting out the facts in the situ- ation, proposed that whenever the bill passed making Treasury notes legal tender it would not, in the opinion of the Board, be a forfeiture of its charter for a branch to use Treasury notes to redeem its circulation. While the branches were left to their own discretion regarding redemption for THE STATE BANK OF IOWA 111 outsiders, the committee held that they must under all cir- cumstances redeem in coin for all bona fide holders amongst the people of the State. The report of the committee was accepted by the Board. At the May meeting of the Board it was voted unani- mously that in case of suit brought against any branch because of redemption in Treasury notes instead of specie, the branches should mutually support one another and pay the costs in proportion to their paid-up capital. The Presi- dent and executive council were authorized to employ legal counsel, to cooperate with such brauph. In August, 1862, the President was specifically authorized to employ counsel to defend a suit against the Lyons City branch. No further notice is found of this matter, nor is there any record of suit. Care was exercised to see that branches did not abuse the privilege granted them in this respect. Charges were made against the branches at Burlington, Keokuk, Oska- loosa, Lyons City, and Muscatine by parties who claimed that these branches had committed an act of insolvency by failing to redeem in coin. Committees were appointed by the President and in each case the branch was found to have offered to redeem in United States legal tender notes. This was not considered improper by the Bank, nor was it regarded as an act of insolvency. As noted above, the branches were closely restrained by the Bank against dis- posing of their specie for their individual profit. ^^^ HIGH STANDING OF STATE BANK NOTES From its inception the State Bank sought to establish a sound currency in Iowa. This policy was continued dur- ing the Civil War, when the standard became the United States notes. In order to attain this end and to obtain the profits from its own circulation, the Bank undertook to drive out the notes of unsound banks of neighboring States. When the State Bank notes were first put into circulation certain 112 HISTORY OF BANKING IN IOWA brokers and private bankers made it a policy to return the circulation of the branches for redemption. This was an easy way to obtain specie and might cause embarrassment to the branches. Chester Weed, President of the State Bank, raised the question as to the best way to meet this threatened run, whether to pay in coin or furnish exchange at some fixed rate. The law fixing the mode of redemption in specie was, however, strictly adhered to and no trouble seems to have developed.^^^ By the terms of the law the State Bank was prohibited from knowingly putting doubtful notes in circulation. At an early meeting of the Board a resolution was passed con- demning the circulation of Minnesota banks. Branches were advised not to receive them in deposit or continue their cir- culation. Depreciation of these notes was so great that the President and Secretary were requested to correspond with specie paying banks in Kentucky, Ohio, Indiana, and else- where relative to the expediency of forming some organiza- tion for the purpose of establishing a rate of redeeming circulation as nearly uniform as practicable and to secure for "a legitimate circulation the advantages it is entitled to." So far as the branches themselves were concerned, the directors early went on record as favoring the mutual protection of each other's notes. They were advised to hold State Bank notes and pay out the circulating notes of for- eign banks. 2^'^ The general acceptability of the notes was promoted by the fact that the notes of all the other branches were legal tender in payment of any debt due to a branch of the State Bank.2^^ Iowa law required the payment of taxes in specie, which was a great inconvenience to taxpayers. In his mes- sage to the legislature in 1860 Governor E. P. Lowe recom- mended that the notes of the State Bank be received in pay- ment of taxes. He believed that since the State had given its name to the Bank and regularly appointed three of its THE STATE BANK OF IOWA 113 directors, it should be willing to receive its notes. On this recommendation no action was taken at that session of the legislature.-^*^ Upon the renewal of the recommendation in 1862 by Gov- ernor S. J. Kirkwood the General Assembly acted promptly. The notes were made a legal tender for all payments of taxes and for all payments of interest and principal of the school fund.-*^^ But a clause was added to the effect that the notes were not to be so received after the suspension of specie payments by any one of its branches. In the mean- time United States Treasury notes were issued and made legal tender. A general suspension of specie payments re- sulted and the State Bank of Iowa found it necessary to sus- pend redemption in specie and substitute redemption in legal tender. Additional legislation was necessary to place the State Bank notes on a par with the "greenbacks" and the national bank currency authorized in 1863. Governor Kirkwood again recommended acceptance of State Bank notes as long as they were redeemed in legal tender notes. Again the legislature responded and national bank notes, greenbacks, and State Bank notes were all received in pay- ments by county treasurers. This time the branches of the State Bank were merely required by the law to redeem their issues. 2*^^ In spite of the preference given to notes of the State Bank, foreign bank notes occupied a very large place in the circulating medium. In accordance with Gresham's law the circulation of the more doubtful bank currency seems to have been promoted while the notes of the State Bank, which were redeemed promptly when presented, were hoarded.^^^ A law to expel "wild cat" currency from Iowa was passed and became effective on July 4, 1864. Since the law did not prohibit the circulation of national banks, it did not give a monopoly of note issue to the State Bank. The opposition to the bill was very intense in both the Senate and the House 8 114 HISTORY OF BANKING IN IOWA of Representatives, since private bankers and brokers had made large profits by putting in circulation the inferior notes of distant banks. The effects of this law can not be accurately evaluated, for in the following year Congress passed legislation which entirely eliminated State bank notes. The author of the bill, however, held that it ' ' termi- nated the existence of currency of doubtful value in the State"; but this is an overestimate of its importance. Iowa could not prevent the issue of such notes and, unaided by national law, would have found it difficult to prevent their circulation. There was no good reason why notes of solvent specie-paying banks of other States should not have be^n received. This opinion was voiced by some of the Iowa newspapers in opposition to the law. The brief period of its existence makes the question as to the extent of its enforce- ment uncertain.2»* In spite of competition from notes of banks located in other States and later from the national banks, the volume of circulation was large. The outstanding circulation passed the half -million dollar mark by the end of the first year. At its maximum, in the early months of 1864, the note circulation was over a million and a half dollars. This was almost up to the maximum permitted by the law, unless the capital stock should be increased. EETIEEMENT OF CIECULATION The retirement of the currency of the State Bank was caused by the establishment of the national banking system. It was on February 25, 1863, that the national banking act was passed by Congress. The revenue act of March 30, 1863, taxed the notes of State banks two per cent, which was just double the tax imposed on the national currency. It was hoped thereby to induce State banks to come into the national banking system. But the law was not entirely sat- isfactory and the growth of the system was slow. In June, THE STATE BANK OF IOWA 115 1864, the law was entirely revised, and on March 3, 1865, it was again amended with the purpose of taxing State bank notes out of existence. A ten per cent tax was imposed on State bank notes paid out by any bank after July 1, 1866. This ten per cent tax was later extended to State bank notes used in payment by anyone. The legislation amounted in effect to a prohibition on note issue by State banks or by any persons or associations. ^^^ Even before the passage of the national banking act the directors of the State Bank of Iowa considered plans for going into the national system. On February 11, 1863, a resolution was introduced at the regular meeting of the di- rectors to provide for retiring the circulation of the branches. This resolution was laid on the table pending the final passage of a bill then before Congress. At the May, 1863, meeting of the Board, the committee nn national cur- rency reported that in addition to the currency procured from the State Bank of Iowa any branch bank had the right to procure government currency under the provisions of section sixty-two of the national banking law.^^^ This sec- tion permitted banks organized under State law to issue circulating notes without becoming national banks. A State bank to be entitled to this privilege must be the owner of United States bonds to the amount of fifty per cent of its capital stock. By transferring these bonds to the custody of the Treasurer of the United States the bank was entitled to receive from the comptroller notes similar to national bank notes, equal in amount to eighty per cent of the amount of the bonds so delivered.^^^ The report of the committee was accepted but no evidence appears that regulations gov- erning such action were adopted by the directors, nor is there any other indication that this privilege was made use of. The terms of note issue under the State Bank law were more liberal, hence there was at first little reason for the banks to seek national currency. 116 HISTORY OF BANKING IN IOWA The outstanding circulation of State Bank notes attained its maximum early in 1864. The revision of the national banking act of June, 1864, made the system more attractive to State banks and made it evident that the purpose of the national administration was to supplant all State bank notes by national currency. In November, 1864, the first steps to- ward contracting the State Bank circulation were taken. A resolution was passed by the Board of Directors recom- mending that the branches reduce their circulation, within the next ninety days, to an amount equal to the paid-up cap- ital of each branch. At that time the outstanding circula- tion was $1,428,432 and the capital $1,031,925. Thus the contraction to the point contemplated involved retiring nearly a third of the notes outstanding. In addition to this contraction the branches were required to provide redemp- tion in Chicago.^^^ At the meeting of the Board in February, 1865, prepara- tions were made to dissolve the State Bank and wind up its affairs. All blank notes in the custody of the Secretary were burned by order of the Board. Steps were then taken to draw in the circulation outstanding, but these provisions were prefaced by a resolution to the effect that no branch could be released from its liability until ' ' all the Circulation of all the Branches is redeemed or its redemption is pro- vided for beyond a doubt." After the 15th of March the branches were prohibited from paying out their own notes or the notes of any other branch. At least once each month the branches were required to send to the Secretary all State Bank notes in their possession. They were also required to keep a redemption fund of two per cent of their circulation with the Secretary. Stringent penalties were provided for the violation of these regulations. S. J. Kirkwood and S. D. Viele were appointed as a special committee to burn the cir- culating notes which came in during the vacation of the Board.2^« THE STATE BANK OF IOWA 117 Steps were taken in May, 1865, looking to the complete retirement of the circulation. Before June 15, 1865, each branch was required to deposit with the President of the Bank approved securities or legal tender notes equal to seventy-five per cent of its outstanding circulation. The amount so deposited by the branch must remain in the hands of the President until, by the redemption of its notes, the amount of notes outstanding equalled in amount the secu- rities so held. Thereafter the branch would be permitted to withdraw securities in sufficient amount to keep the circu- lation and securities deposited equal. Branches were per- mitted to reduce their capital stock to $50,000 — provided this did not violate the law fixing the proportion of circula- tion to paid-up capital.^^^ The last regular meeting of the State Bank directors con- vened in Iowa City on August 16, 1865. A resolution was passed that any branch having a safety fund equal to or in excess of its outstanding circulation be permitted to divide its capital stock as the stockholders deemed expedient. Oc- tober 31st was set as the last day upon which notes would be redeemed through the Iowa City office. The Secretary WAS directed to close the Iowa City office and dispose of the furniture and fixtures before November 1st. Any further meeting of the Board was to be held in Davenport at the call of the President. S. J. Kirkwood and S. D. Viele were ap- pointed a committee to act with the President in all matters connected with closing up the affairs of the Bank. Their action was binding in the same manner as a resolution of the Board.300 An informal meeting of the Board was held at Davenport on November 22, 1865. At this meeting exchanges were made and balances settled between the branches. The cir- culation returned, amounting to $35,460, was burned. This was the final act in the short but successful life of the State Bank of Iowa. The brief minutes of this meeting were 118 HISTORY OF BANKING IN IOWA signed *'H. Price, Prest." and written in his handwriting. The minutes of all other meetings are signed by '^Elihu Baker, Secty", frequently also with Mr. Price's name; but Mr. Baker 's signature is not affixed to the closing record.^'^^ The branches thereafter redeemed small amounts of the circulation and burned it. State Bank currency had so fully acquired the confidence of the people that it was a slow process to get it all in. The circulating register of the Iowa City branch shows that notes were burned on August 31, 1866, and on April 24, 1867, and that the final date of re- demption was November 14, 1867.^"^ According to this rec- ord hundreds of dollars were never returned for redemption — presumably being lost or destroyed. In this case it was a clear profit to the bank and not to the government, as is the case with notes lost or destroyed under the national banking act. BBANCHES CONVEETED INTO NATIONAL BANKS The chief function of the State Bank had been the super- vision of note issue. With the retirement of the circulation, the individual branches accepted the opportunity of becom- ing national banks. At the directors ' meeting in February, 1865, the Merchants branch at Davenport was given permis- sion to increase its capital solely for the purpose of be- coming a national bank. The Burlington branch became the National State Bank of Burlington. The Iowa City Na- tional Bank succeeded to the business of the branch at that place, taking over its deposits and business in April, 1865. The Des Moines branch became the National State Bank in 1865. The Washington branch formed the First National Bank on April 30, 1865. The Keokuk branch became the State National Bank of that place with a capital of $150,000. Its successor is now the State Central Savings Bank. Nearly, if not all, of the other branches also entered the na- tional system.^*'* THE STATE BANK OF IOWA VOLUME OF BUSINESS 119 The financial condition of the State Bank of Iowa during its existence can best be understood through a study of some representative bank statements which are presented in Table I. These statements cover the period from February 7, 1859, down to April 3, 1865. Table I Combined Statements op THE Branches of the State Bank OF lowA^*** Assets Feb. 7. 1859 Feb. 6. 1860 Feb. 4, 1861 July 7. 1862 Safety fund $ 31,680.40 $ 107,832.71 $ 140,418.19 $ 220.867.27 Specie 171,248.64 284,431.98 382,478.49 659.377.86 Notes of other BANKS 82,258.00 361,658.00 546,829.00 459.894.00* Due from other BANKS 95,365.59 266,714.32 345,689.04 529,393.87 Loans and dis- counts 155.414.49 822,964.16 1,186,869.93 1,175,900.99 U. S. AND State bonds Other items 27,698.81 103,001.91 96,882.88 78,544.57 Total Assets 563,665.93 1,945,803.08 2.699,161.98 3,123,978.56 Liabilities Capital $ 215,550.00 S 473.020.00 S 614.130.00 $ 737,170.00 Circulation 106,798.00 634,163.00 652.406.00 1.149,935.00 Due to other BANKS 32,797.18 47,855.61 23,039.00 Deposits 235,383.31 757,542.76 1,279,498.03 1,110,453.33 Other items 5,938.62 49,080.14 105,272.34 103,381.23 Total Liabilities 563,665.93 1,945,803.08 2,699,161.98 3.123,978.56 * Included Ui lited States note s 120 HISTORY OF BANKING IN IOWA Table I (continued) Combined Statements of THE Branches of the State Bank OF Iowa Abbets Dec. 7, 1S63 Apr. 4, 1864 Jan. 2, 1865 Apr. 3, 1805 Safety fund $ 238,900.00 S 251,905.54 S 308,905.54 $ 338,228.74 Specie 440,285.22 418,710.01 389,802.11 151,049.24 Notes of other BANKS 734,056.02* 1,050,436.34* 1,300,481.76* 811,641.38* Due from other BANKS 461,196.11 708,465.29 668,511.81 541,822.08 Loans and dis- counts 2,123,146.10 2,241,283.49 2,468,362.53 1,859,368.89 U. S. AND State BONDS 423,876.83 440.836.89 361,182.71 425,504.37 Other items 104,662.61 123,824.50 122,844.95 132,537.99 Total Assets 4,526,122.89 5,235,462.06 5,620,091.41 4,260,152.69 Liabilities Capital $ 969,320.00 $ 994,320.00 $1,048,200.00 $1,011,000.00 Circulation 1,416,811.00 1,532,739.00 1,439,764.00 1,029,526.00 Due to other banks 51,228.82 91,161.73 34,929.57 118,714.94 Deposits 1,943,959.69 2,362,426.00 2,851,462.10 1,687,791.73 Other items 144,803.38 254,815.33 245,735.74 413.120.02 Total Liabilities 4,526,122.89 5.235,462.06 5,620,091.41 4,200,152.69 * Included United States not es. It will be noted that the Bank maintained a large vol- ume of specie during the war period when it w^as no longer required to redeem its notes in specie. The ''notes of other specie paying banks" included, after 1862, the United States notes and later national bank notes. Loans and discounts reached a total of about two and one-half millions. The high-water mark of the Bank's resources is shown to be January 2, 1865, when the combined resources were over five and one-half million dollars. Circulation reached its height in April, 1864, with a total of over one and one-half THE STATE BANK OF IOWA 121 million dollars. With the note circulation at its highest point, the deposits exceeded circulation by more than fifty per cent; thereafter the proportion of deposits to notes increased. PEOFITS EAENED BY THE BEANCHES To its owners the institution was a source of very con- siderable profit. Dividends declared by the branches had first to receive the approval of the Board of Directors of the State Bank. The record of the directors' action on the proposed dividends enables us to determine the amounts paid. Dividends were allowed semi-annually, but the banks were not regular in their payments. Considerable variation is found between the various branches, showing that mutual responsibility for notes did not in any way hamper the man- agers of the various branches in making profits for the stockholders. Beginning with the meeting of November 17, 1859, dividends were approved as shown in Table II. In addition to the dividends paid, a surplus fund was created out of the earnings. During the consideration of the bill by the Senate various attempts were made to require that a certain proportion of the earnings be set aside as a permanent surplus fund.""^"^ No action was taken by the leg- islature, but the directors ruled that before declaring the first dividend a contingent fund of one per cent of the paid- up capital must be set aside. Later this surplus require- ment was raised so that no dividend was to be permitted unless the branch had a clear surplus of ten per cent after declaring the dividend. This amount was soon reduced, however, to five per cent.^^^ The abstracts of the state- ments as published by the Bank do not show this surplus as a separate item. Accordingly it is not possible to determine the exact total profit. The heavy dividends allowed in May, 1865, probably represent a distribution of this surplus to the stockholders. For some branches there is no such distri- 122 HISTORY OF BANKING IN IOWA o '^ i« o o •0 o o o o o >>S CO IN IN lO IC lO (S 00 s o 1 •1- ^ ;3! O o O >0 o « lo o o IN 4- o >• to > 00 '"' '^ ^ CO ■* o ^ :?; ^ '^ ^ o lO o lO t^ © o o o o . to 1>> 00 CO f-( '^ (N e^ l> cS ^ "■< 5 ^ <5 1 o "^ M o o o ■o lO O o lO o o |X( 12 ■^ ^ (N w IN o ^ (M o lO * « » "O * << W 1 N •)- ++ * < m > 00 o o »o to lO IN o ■* H o lO * >o iC lO a fc, d 2 '"' O m § W « K ^ 00 t» o lO Q o ^ IC o « 10 o © 10 * o tH !>> 00 a S TjT too :^ <3 *"* O IN t^ o Oi o o 05 lO t^ o Oh i% ^^ ^ CO H -< o Q ■* K lO la o lO o lO >o > S ^ P n" &• ■^ Oi O > 00 OO t^ to o lO •* to lO lO Eh O rt ^ ■§ cc 00 00 00 00 00 w « o o 0-. © o o ■"^ > g Q Z; Irt lO •c >o >f5 lO lO lO lO in o »0 o o © fc o 00 00 00 00 00 00 00 00 00 00 00 00 00 00 M a « i. 00 '^ ■^ '^ '"' '"' "^ '"' ^ '"' "^ '^ "^ '^ ■^ '^ H H m ;o" to to" to" to" to" to" ©" t>." 00 oo" *-4 lo" ■*" o" 0^ 5 s '^ '^ "^ '^ ^ o Q^ +^ ■U3 ^ ^ 4^ ^ ^ ■M ^ si o Sf XJ t^ ^ a o u o o o o y u o 3 aj o o •a C O O o o o O O &H be o w o « en a S5 » >> -< IS < 2 H H z o H o z z o 00 K 5 « S 5 B. O u M m H O 6 o 5 O >j M < « a; or O p -< bt O 00 o n 00 < ^ H ^ P3 O O z & o or » T— \ s_ > 1 ro "^ •^ ^v.. \ "^^. s -^ \ \ ov ■J p ^ ->^ "^^ "^v. N, ■J 11 i CD 10 «0 1 -T ^ •^ V, > o i. «v,__^ ? NATIONAL BANKS STATE AND SAVINGS BAh AND TRUST COMPANIES ^ "s. p 5^ ■ N -hz|z \ < TOTAL ASSENTS AND STATE AND ^ TRUST OOMPANiE, \ ^ O \ \ \ 0) 1 V 03 \ 00 \ \ ^ Si jvn- loa JO SN on IIW ^ If W5 55 to on CO 8 to }2 g I o in o o o p o » 1^ 148 HISTORY OF BANKING IN IOWA of resources in the national banks and a comparison with those of the State chartered banks is shown in Chart I. In 1900 the national banking law was amended so as to permit the issue of circulation up to the full par value of the bonds deposited, instead of the former limit of ninety per cent, the tax on circulation, secured by two per cent bonds, was reduced to one-half per cent annually; and per- mission was granted for the establishment of national banks in towns of 3000 or less, with a capital of $25,000.^^^ The six years following these changes saw an increase of more than one hundred in the number of national banks, a doubling of circulation, and an increase of about seventy per cent in total assets. Many of the new national banks were the re- sult of the rechartering of existing State institutions under national law; but while the national banks were increasing in number and strength an even greater growth of State chartered institutions was taking place. Chartered banks were also gaining at the expense of the private banks.^^^ This general growth in banking institutions, indicated in Table III, was an accompaniment of a period of great pros- perity and business activity. In Iowa the growth of banking resources, scarcely checked by the panic of 1907, has con- tinued until the present time. The important modifications of the national system which came with the passage of the Federal Reserve Act in 1913 are discussed in Chapter X. DEVELOPMENT OF BANKING Table III 149 Number, Deposits, Capital Stock, and Total Assets of the National Banks in Iowa, 1863-192C 357 Date Number Deposits Capital Stock Total Assets 1863 3 $ 245 , 000 S 97,000 $ 390,000 1864 20 1,698,000 1,145.000 4,004,000 1865 36 5,110,000 3.196.000 11,128,000 1866 45 4,890,000 3,722,000 13,079,000 1867 45 5,234,000 3,842,000 13,523,000 1868 44 6,444,000 3,692,000 14,809,000 1869 43 5,252,000 3,742,000 13,891,000 1870 43 5,248,000 3,802,000 14,306,000 1871 57 7,014,000 4,780,000 18,097,000 1872 70 7,853,000 5,632,000 20,926,000 1873 75 9,380.000 5,812,000 22,902,000 1874 75 9,232,000 6.017.000 23.208,000 1875 81 10,851,000 6.352,000 24,932,000 1876 78 8.004,000 6,287,000 21,198,000 1877 78 7,842,000 6,057,000 20,808,000 1878 76 7,129,000 5,957,000 19,619,000 1879 73 8,752,000 5,707,000 21,125,000 1880 75 11,608,000 5.867,000 24,842,000 1881 76 15,770,000 5,950,000 29,997,000 1882 88 16,169,000 7,135,000 32,305.000 1883 110 16,648,000 9,055,000 35,265,000 1884 123 16,124,000 10,146,000 35,609,000 1885 125 17,054,000 10,155,000 36,845,000 1886 128 17.814,000 10,295,000 37.902,000 1887 128 19,285,000 10,150,000 38.810,000 1888 129 21,278,000 10,148,000 41,841,000 1889 133 21.182,000 10,585.000 42,671,000 1890 139 26,800,000' 11,320,000 61,188,000 1891 151 28,354,000 13.460,000 54,881,000 1892 161 32,296,000 14.520,000 62,356,000 1893 169 24.624.000 14.700,000 52,830,000 1894 169 27,490.000 13,855,000 56,325,000 1895 167 24,897,000 13,430.000 52,687,000 1896 166 23.725,000 13.095,000 50,100,000 1897 165 27.502.000 13.020.000 56,224,000 1898 168 32.871.000 13,150,000 64,118,000 1899 172 42,238.000 13.300,000 81,937,000 1900 196 49,041,000 14,035,000 94,829,000 1901 221 61.677.000 15,032,000 115,321,000 1902 230 66,585,000 15,485,000 117,700,000 1903 253 64.336,000 16,582,000 118,279,000 1904 269 61.206,000 17.053,000 117,190,000 1905 281 69,709,000 17,665,000 134,197,000 150 HISTORY OF BANKING IN IOWA Table III (continued) Number, Deposits, Capital Stock, and Total Assets of the National Banks in Iowa, 1863-192C 357 Date Number Deposits Capital Stock Total Assets 1906 297 $ 81,780,000 $ 18,705,000 S 156,614,000 1907 304 92,873,000 18,735,000 170,841,000 1908 319 94,473,000 20,330,000 177,062,000 1909 320 102,900.000 20,585,000 188,393,000 1910 326 107,462,000 20,991,000 194,261 .000 1911 329 110,389,000 21,520,000 202,020,000 1912 338 125,011.000 22,280,000 230,919,000 1913 340 131,404,000 23,085,000 234,583,000 1914 343 134,539,000 23,460.000 232,614,000 1915 348 142,338,000 23,855,000 243,045,000 1916 353 160,728.000 24,289,000 270,732,000 1917 351 196,530,000 24,400,000 333,114,000 1918 353 206 , 829 , 000 24,560,000 367,174,000 1919 355 258,277,000 25,115,000 422,381,000 1920 358 264 , 132 , 000 26,420,000 459,043,000 STATE BANKS Provisions of the Code of 1873 constitute the basis for the regulation of State banks in Iowa. The law did not give the Auditor adequate control over the State banks, and therefore certain amendments were soon adopted.^ ^* The first amendment which affected. State banks came in 1880 and applied to all banks and banking institutions alike. It was made a felony, punishable by fine or imprisonment or both, for banks to receive deposits when insolvent. In the same year a law was passed amending the Code of 1873 so as to impose double liability on the stockholders of banking corporations. Both of these laws were intended for the protection of depositors.^^^ In 1886 an act was passed which defined State banks and required the use of the word ^ ' State ' ' in the name of a bank incorporated under the general incorporation laws. Unin- corporated banks and savings banks were not allowed to use the word ''State" as part of their title. An exception was DEVELOPMENT OF BANKING 151 made in the case of national banks by allowing them to be so designated. Incorporated banking associations, except sav- ings banks, already in existence, were required to amend their articles of incorporation to comply with this law.^®*' Two acts were passed in 1894 to provide for the better security of depositors in State banks. The first of these included the savings banks and prescribed that in case the capital stock of any bank became impaired it was the duty of the board of directors to levy an assessment to meet the deficiency. Failure to pay the assessment upon notice duly given must be followed by sale of the stock at public auction. Neglect by the directors to proceed under the act when re- quested in writing by the owners of two-thirds of the stock of the bank rendered them personally liable to the creditors or stockholders. The second act of the same date was lim- ited to State banks and covered points already contained in the savings bank law. Under its terms bank directors were prohibited from receiving any compensation; and all loans to directors, officers, or agents of the bank were to be upon the same security as that required of other borrowers and under the same rules. All such loans must be made by the directors, the party concerned being absent from the meet- ing. False entries or false statements knowingly made by an officer or agent of a bank were made felonies, punishable by fine or imprisonment. The board of directors was re- quired to appoint, from its own members, an examining committee whose duty it was to examine the bank quarterly and report to the board. The maximum amount the bank was permitted to loan to any individual or firm was limited to twenty per cent of the paid-up capital stock.^^^ The Code of 1897 brought together the bank laws of the State and also added certain important provisions. The requirement that banks should file articles of incorporation with the county recorder and the Secretary of State was renewed. The provision regarding minimum capital stock 152 HISTORY OF BANKING IN IOWA of $25,000 for towns of 3000 or less and $50,000 for larger places was continued. Shares were to be fully paid up and carry a double liability. Management was placed in the hands of not less than five directors, who in order to qualify had to own from two to five shares of stock according to the capitalization of the bank. Banks in towns under 3000 population were required to keep a cash reserve of ten per cent of the total deposits ; other banks were required to have a fifteen per cent reserve. In either case three-fourths of the required reserve might be kept on deposit, subject to call, with other banks under State or national laws. A piece of new legislation found in the Code is the requirement that all State chartered banks must keep in the bank sub- ject to inspection during business hours a complete list of officers, directors, and stockholders, and the number of shares held by each.^^^ The maximum limit on a loan to any individual of twenty per cent of the capital stock of the bank was raised in 1902 to fifty per cent when the loan was secured by real estate. The requirement that the real estate offered as security be worth twice the amount loaned was not changed.^^^ In 1907 the sections of the Code relating to loans to officers were repealed and reenacted on the same principles. Such loans can only be made by a vote of the board of directors in the absence of the applicant and on the same terms as are re- quired of other borrowers.^^^ In 1913 the General Assembly authorized State and sav- ings banks to deposit with the Treasurer of the United States such securities as might be required in order to secure the postal savings funds deposited therein. Addi- tional trust powers were also conferred in 1913 and 1915. In 1915 State banks were permitted to become members of the Federal reserve system.^^^ In 1917 the reserve require- ment was modified by increasing the proportion of reserve which might be kept in the vaults of other banks from DEVELOPMENT OF BANKING 153 seventy-five per cent to eighty-five per cent of the total amount required by law.^^^ Two years later the reserve requirement was raised and made to conform with the sav- ings bank law. This fixed the reserves in all State banks located in towns of less than 3000 population at fifteen per cent of the sight and demand deposits and eight per cent of the savings deposits and time certificates of indebtedness. For towns above 3000 population the proportions were twenty and eight per cent respectively. In both classes the banks were permitted to keep eighty-five per cent in other banks under State or national laws.^^^ A further amend- ment allowed the State banks which are members of the Federal reserve system to conform to the reserve require- ments of the national bank members.^®^ This meant that the legal reserve might be reduced to ten per cent for banks in reserve cities and seven per cent for country banks. All of the required reserve would be held in the Federal reserve bank of the district. State banks, as distinguished from savings banks under State charters, numbered twenty-three in 1875, increased nine in the next biennium, then remained at about the same figure for four years. Since that time they have grown steadily in number. In the late nineties they outnumbered the national banks, ranking second in number to the private banks. After 1900 there was an unusual^expansion in the number of savings banks, which placed that class far in the lead so far as numbers is concerned. State and national banks have about kept pace since that time. The high minimum capital requirement for national banks had been a bar against national incorporation. Of the two hundred and seven State banks doing business in Iowa in 1899 only eighty-seven had a capital of $50,000 or over — the minimum then permitted for national banks. The following year the capital requirement was lowered to $25,000 for national banks in towns of less than 3000. By 1909 the records 154 HISTORY OF BANKING IN IOWA show that three hundred and twenty national banks were operating in Iowa ; of these, one hundred and fifteen had a capital of less than $50,000.^^'' Capital requirements have been practically the same for national and State banks since 1900. The loan and reserve requirements were more favor- able to State banks until recently. On the other hand, the national banks have had the circulation privilege which after the amendments of 1900 again became a source of profit. The numbers of State and national banks have re- mained fairly near equal for twenty-five years or more. The reasons for the greater growth of savings banks will be discussed in the following sections. SAVINGS BANKS Two main types of savings banks are found in the United States. The mutual savings bank was copied from English institutions and is found almost exclusively in the older sections of the country, particularly in New England. It has no capital or stockholders, but is operated for the bene- fit of the depositors by a board of trustees who often serve without pay. All the profits above the expenses of carrying on the business are divided among the depositors. The function of this type of bank is primarily to invest the sav- ings of the man of small income who is inexperienced in making investments or whose savings are too small for profitable investment. A second type of savings bank is the stock savings bank. In this class a fixed rate of interest is paid to depositors and the profits remaining are divided among the stockholders. These may differ in no essential function from the mutual savings bank or they may be pri- marily commercial banks and only nominally savings insti- tutions. Savings banks in Iowa are all of the latter type.^'''" Stock savings banks are so much more numerous in Iowa than elsewhere in the United States that their history in this State possesses unusual interest for the student of DEVELOPMENT OF BANKING 155 banking. Of 1185 stock savings banks in the United States reporting in 1917 to the Comptroller of the Currency, 892 were in lowa.^'^^ This unusual number of institutions under the savings title must largely be accounted for by the provisions of Iowa law. They are, for the most part, banks of discount, differ- ing to no considerable extent from the State and national banks. It will be recalled that the act of 1874 in defining the legal investments for savings banks included the right "to discount, to purchase, sell, and make loans upon com- mercial paper, notes, bills of exchange, drafts, or any other personal or public security ".^'^^ This left the Iowa savings banks practically free to do a strictly commercial business. Various reasons explain why Iowa bankers, although in- tending to engage primarily in commercial banking, have chosen to incorporate under the savings bank law. The fact that the savings bank law was more explicitly and com- pletely formulated at an early date no doubt led some banks to choose incorporation thereunder rather than under the more general incorporation laws governing the State banks. The most important reason, however, for the large number of savings banks has been the lower capital requirement. Under the terms of the savings bank law of 1874 these in- stitutions were permitted to organize in towns of less than 10,000 population with a capital of $10,000. The minimum capital permitted to State banks was $25,000 for towns of 3000 or less and $50,000 for cities having a greater popula- tion; the same was true for national banks after 1900. Out of sixty-eight savings banks organized in the two years ending July 1, 1901, fifty-four had insufficient capital to incorporate either as State or national banks.^'^^ In 1909 three hundred and forty-nine out of five hundred and sev- enty-two, or more than sixty-one per cent of the savings banks in Iowa had a capital of less than $25,000.^^^ More- over, State and national banks are required by law to have 156 HISTORY OF BANKING IN IOWA a minimum capital of $50,000 in towns of 3000 or more popu- lation, and in the ease of the national banks this minimum is graduated up to $200,000 in cities over 50,000. Although before 1917 savings banks could be incorporated in any town of less than 10,000 population with a capital of $10,000, some banks having capital stock of $25,000 or over, in 1909, would, nevertheless, have been unable to meet the capital requirements for national or State banks in these towns. In addition there were some savings banks, capitalized at $25,000 or more, which had been organized with a capital stock less than $25,000 and gradually enlarged. We must, therefore, include a considerable number of other banks with the three hundred and forty-nine shown to be below the $25,000 minimum in order to determine the number of banks which were incorporated as savings banks solely on account of the capital requirement. Although it is not possible to get exact statistics on this point, this reason seems to be the fundamental explanation for about two-thirds of Iowa's savings banks. The savings bank law of 1874 has undergone certain modifications in detail during the forty-five intervening years. In recent years the provisions relating to the in- vestment of funds have been widened. Drainage bonds were included among the lawful investments in 1906; and in 1913 an amendment was passed permitting investment in notes or bonds secured by real estate outside of Iowa if the real estate was situated in any county adjoining the Iowa State line. This was further extended in 1917 to any ad- joining State, except that no loan may be made on real estate west of the hundredth meridian line. It was specified in the savings bank law that a savings bank may own the lot and building in which its business is carried on. Under the power thus granted them, savings banks have sometimes built large office buildings, upon the ground floor of which is located the bank's own business DEVELOPMENT OF BANKING 157 room.'^"° In the Code of 1897 savings banks doing a com- mercial business were required to keep cash reserves as follows ; in towns under 3000 population they were to keep a reserve of fifteen per cent of the commercial deposits and eight per cent of the savings deposits; banks located in towns of over 3000 population were to keep twenty per cent and eight per cent respectively ; and if any bank was doing an exclusively saving business it was to keep eight per cent of its deposits in reserve. Three-fourths of the reserve of all classes might be kept in other State or national banks.^^^ In 1915 the law was revised by changing the word "com- mercial " to ' * sight and demand ' ' and adding after ' ' savings deposits" the words "and time certificates having a fixed and definite time of maturity". The effect of this was to reduce the reserve against time certificates from fifteen per cent to eight per cent, this class of deposits having formerly been treated as commercial accounts.^^"^ An amendment in 1917 raised the percentage of reserves which a bank might keep in other banks from seventy-five per cent to eighty-five per cent.^"^^ This reduced the legal cash-in-bank reserve to an almost nominal amount — about two per cent when com- puted on all deposits of a small town bank. The reserve requirement was further modified in 1919 by permitting any savings bank which became a member of the Federal reserve system to keep the same reserve as national bank members.^ ^® By an amendment passed in 1900 savings banks were allowed to add their surplus to the capital stock when com- puting the percentage of deposits, the aggregate deposits being limited to ten times the combined capital and surplus of the bank. This limit was raised two years later to twenty times the capital and surplus. The restriction on with- drawal of deposits which had been imposed, requiring sixty days' notice for withdrawal, was changed in 1900 to apply only to time deposits. In 1913 the legislature authorized 158 HISTORY OF BANKING IN IOWA State and savings banks to deposit with the Treasurer of the United States such securities as may be required to secure the postal savings funds deposited therein.^**^ In the case of savings banks, as of State banks, legisla- tion was passed in 1894 for the protection of depositors which required any impairment of the capital stock to be made good by assessment on the stockholders. The penalty for failure to pay is forfeiture of the stock, or of so much as is necessary to meet the assessment. Neglect on the part of the directors to proceed to an assessment, when requested by the owners of two-thirds of the stock, with the consent of the State Auditor, makes the directors individually liable. As a further means of strengthening the banks a surplus fund was authorized in 1900. Directors were permitted to set aside a surplus fund from the earnings which was to be maintained separate from the undivided profits account. This fund could be invested in the same manner as the cap- ital, and might be made use of as a stock dividend for in- creasing the capital of the bank. It was not ordinarily to be drawn on for expenses, but if needed for this purpose could be transferred back in whole or in part to the undivided profits account. This could be done, however, only if the capital, or capital and remaining portion of the surplus equalled ten times (later twenty times) the deposits. In 1917 banks were given authority to reduce the capital stock on the afiSrmative vote of two-thirds of the shareholders, with the approval of the Superintendent of Banking.^^^ Furthermore, at the 1917 session of the legislature a law was passed ^^^ which modified the capital requirement of savings banks. The minimum, which prior to 1917 had been $10,000 in cities under 10,000 population and $50,000 in places with a larger population was graduated in steps as follows : In towns of 1000 population or less $10,000 capital In towns of 1000 but less than 2000 15,000 capital DEVELOPMENT OF BANKING 159 In towns of 2000 but less than 10,000 $25,000 capital In towns of over 10,000 50,000 capital The limit on the amount which could be loaned to one individual was raised in 1902 from twenty per cent to fifty per cent of the bank's capital in case the loan was secured by real estate. This was further raised in 1915 to allow fifty per cent of the surplus also to be loaned to one person on real estate security.^^^ Amendments have been made from time to time in the provisions for the management of savings banks. Originally the number of directors had been from five to nine, a major- ity of whom constituted a quorum. In 1888 the additional restriction on a quorum of the directors provided that in no case could a measure be passed unless it received three affirmative votes. Instead of requiring all the directors to be citizens of Iowa, the Code of 1897 reduced the require- ment to three-fourths of the board. The number of shares of stock required by a shareholder to qualify as a director was graduated according to the capital. An amendment passed in 1913 permitted the stockholders of banks to allow directors a reasonable compensation for attending board meetings. Four years later the legislature amended the section of the law which had limited the maximum number of directors to nine, leaving this thereafter to the discretion of the stockholders. In 1921 the law pertaining to State banks was also amended in this particular, so that the laws for both classes of banks are similar on this point. No State or savings bank may now have less than five directors nor more than the number designated by its articles of in- corporation. But within these limits the stockholders are free to change the number by resolution at any annual meeting.^ ^^ Savings banks are the oldest incorporated banks of record in Iowa. Until the late nineties, however, they were the least numerous of the various classes of Iowa banks. At 160 HISTORY OF BANKING IN IOWA the beginning of the present century, the rapid growth of this type of bank began and they were soon numerically in the lead of any of the other classes. While most of the savings banks are such only in name, being in fact small commercial banks, there are some large banks devoted espe- cially to a savings bank business which are incorporated as savings banks. The German Savings Bank of Davenport (now the American Commercial and Savings Bank), with total resources of $13,215,161 in 1916, was at that time the largest bank in lowa.^®^ LOAN AND TRUST COMPANIES The first legislation concerning loan and trust companies is found in the Code of 1897. In the final section of the law dealing with banks in general is a clause which prohibits any corporation from engaging in the banking business unless it conforms to the banking laws. An exception to this is made in favor of loan and trust companies which ''may receive time deposits and issue drafts on their depos- itories". These companies are then made subject to the same regulation and control by the State Auditor as in the case of the State and savings banks. Double liability for stockholders of these institutions is also prescribed. The law itself gives evidence that loan and trust companies had been in existence for several years. The statement is made that loan and trust companies that had been in continuous existence since before January 1, 1886, need not incorporate the word "State" in their title in order to become State banks within the provisions of the section.^^^ Statistics of the number and strength of the loan and trust companies are not easily obtained since they are grouped with State banks and not separately reported by the Auditor. In 1909 the National Monetary Commission reported fourteen loan and trust companies in Iowa; and in 1916 there were twenty- one.^®''' DEVELOPMENT OF BANKING 161 In 1900 the law specifying the limitations on deposits for State banks was made applicable to loan and trust com- panies. Four years later the capital stock requirements of the savings banks were also applied to trust companies.^^^ The first comprehensive legislation concerning trust com- panies was enacted in 1913, the act of that year greatly ex- tending the powers of trust companies and conferring upon State and savings banks the same fiduciary powers. Trust companies and State and savings banks were given power: first, to be appointed assignee, guardian, executor, trustee, or receiver, in the same manner as might a natural person, except that the appointment as guardian should apply to estates and not to persons ; second, to act as fiscal or transfer agents or registrars for estates, municipalities, companies, and corporations; third, to act in execution of trusts that may be handled by any person or corporation; fourth, to issue drafts upon depositories and to purchase, invest in, and sell promissory notes, bills of exchange, bonds, mortgages, and other securities; and fifth, to carry on a safe deposit business. The third section of the act emphatically states that the trust funds must be kept separate from other funds or property of the bank, the purpose of this being plainly to protect the trust funds from the risks incident to banking. In case the trust company or bank should fail the trust fund would still be safe and unaffected. Another requirement in the interest of safety for the trust funds is that all such trusts must be reported to the Auditor of the State. These lists are to be filed by the Auditor but their publication is not provided for. Banks acting in a fiduciary capacity were given the same powers and rights as individuals exercising similar offices. They must give bond in the same manner and receive the same compensation. In case of the dissolution of the corpo- ration the court having jurisdiction is empowered to appoint 11 162 HISTORY OF BANKING IN IOWA a successor and release the original trustee. Any such cor- poration must also have the word ''trust", or ''State", or "savings" as part of its name. Moreover, no person or corporation not complying with the act may use the word "trust" in its name. The limit to which a bank or trust company might become indebted, except to depositors, or for regular expenses, had been the capital stock. This limi- tation was continued, but the act stated that it did not apply to the issue of bonds or debentures by a trust company when protected by real estate securities. The act also defined the profits from which dividends might be declared. All trust companies or banks exercising the powers given by the law were required to set aside one-tenth of the net earnings as a surplus fund until this surplus equalled at least twenty per cent of the net capital. This surplus must be kept unim- paired or restored in the same manner as originally accumu- lated. The distinctions which had separated the functions of trust companies from those of State and savings banks were largely broken down by this law. All general laws which applied alike to State and savings banks concerning state- ments, reports, examinations, and the like, were made to apply to trust companies. The provisions of the savings bank law as to formation, renewal of charter, capital, man- agement, deposits, value of shares, and reserve were applied to trust companies. But the sections of the savings bank law as to investment of funds, limitation on the right to pur- chase real estate, and the payment of interest and dividends were not applied to the trust companies.^ ^^ In 1915 practically all distinctions between the various classes of banks, so far as their trust powers were con- cerned, were eliminated. An amendment was passed which permitted national banks, when authorized by the United States laws, to exercise the trust powers previously con- ferred on trust companies, State and savings banks.^^° DEVELOPMENT OF BANKING 163 Powers of trust companies having already been expanded in the direction of general banking, and the regular banks hav- ing now been granted practically all trust company powers, there was 'in fact little distinction between them. A con- siderable percentage of the trust companies of Iowa have been organized in connection with national banks. They have had the same officers and conducted their business in the same building. Although it is no longer so advantageous for a national bank to form an associate trust company or savings bank, those already in existence will doubtless be continued as they are free to carry on business under the trust company law which is more liberal concerning real estate ownership and loans than is the national bank law. PEIVATE BANKING It has already been shown that the private banks arose in Iowa during the years of early statehood and that they continued during the period of the dominance of the national system. The continued growth of these banks in competi- tion with both national and State chartered institutions, the efforts that have been made to force them under State super- vision, and the decline in their number which began about 1900 will be discussed in the present section. The growth in the number of private banks is shown in Table IV and is graphically portrayed in Chart II. These statistics are fairly accurate, although there is no complete record of the capital, deposits, or total resources. In gen- eral, these banks are the smaller ones in the State, as shown by the Auditor's report of the incorporation of banks which succeeded private banks.^^^ Soon after the passage of the savings bank law, agitation was begun to bring the private banks also under State supervision. In his biennial report for 1877 the Auditor of State, Buren R. Sherman, set forth in a very forceful way the reasons why the private banks should be required to 164 HISTORY OF BANKING IN IOWA - \ ] \ \ 9 \ \ f f 1 ; Q ^^Sw / ( I p IT N a. o N, / / 1 G V \ / 1 C UNAU1 )MPANIE \ 1 \ v^ M it 2 , u U Q - NAL BANKS BANKS SS BANKS AND TRUS1 ED E BANKS \ - ~ y < ^ K \ g \ N s. a - VJ or AU OF lOW/ HORIZEC NATIO STATE SAVIN LOAN ^.UTHORIZ PRIVAT v \ \ \ u 1 \ a IT Z \ \ \ t — g IZ D < Z 10 1 / 4^ 1^ — \ a \ \ a \ \ ^ ' C c c ) C > Q c ► a G c > o 9 o O o c ) r DEVELOPMENT OF BANKING 165 make regular reports. He called attention to the number of failures which had occurred during the past two years as evidence of the need of protecting the general interests of the people. The keynote of his argument is struck in the sentence : ' ' Banking is a public and peculiar business. ' ' The man who is entrusted with the care of the people's money, he believed, should be subjected to publicity in his business. He also advocated a minimum capital requirement as a protection to the depositors. No action was taken by the legislature on this recommendation, although Governor J. G. Newbold in his biennial message to the legislature had supported the recommendation of the Auditor. Two years later Mr. Sherman renewed his request ;^^^ but aside from prohibitions upon the use of the words ''State" or ** sav- ings" in the titles adopted by such banks, no legislation was enacted. The movement to enact legislation for the control of private banks was further endorsed in the report of Auditor W. V. Lucas and in the message of Governor J. H. Gear to the next legislature.^''^ In 1885 Auditor J. W. Cattell ad- vised the enactment of a law similar to one which had re- cently been enacted in New York forbidding the use of the word "bank" by any institution not under State law.^^^ It was not until 1905 that the matter was once more urgently pressed by the Auditor. He pointed out that there had been twenty-five failures of private banks in the biennium from June 30, 1903, to June 30, 1905, as against eight among the State supervised banks, although the latter were more numerous.^®^ The war against unregulated private banking has also been carried on by the Iowa Bankers Association. At its fourth annual convention in 1890 the ''Finn Bill" to regu- late private banks and bring them under the same State supervision as incorporated banks was warmly debated. Certain members were in favor of having the convention 166 HISTORY OF BANKING IN IOWA endorse the measure; but the private bankers contended that the bill was backed by a desire to tax the private banker more heavily. They insisted that most private banks were as sound as any other type. The advantage of the personal relation and of unlimited individual liability was cited. They pointed out that because of freedom from restrictions they could make more money as private bankers. The private bankers were strong enough to carry their point and no action followed the discussion.^^^ A year later the question was again a leading subject for discussion. In a paper on ' ' The Feasibility of State Control and Examination of Private Banks", H. D. Copeland, State Bank Examiner from Chariton, held that State examination was not feasible. He claimed that this would involve going over a man's entire assets, since the amount for which he was liable was unlimited. Moreover, he charged that the failure on the part of banks to incorporate was due to the defects of the State bank laws, although he felt that incor- porated banks were gaining in public confidence by examina- tion and publicity. At the same meeting a resolution stating that the Association believed it expedient for the State to exercise such supervision over the private banks of the State as would properly protect the interests of depositors and customers was laid on the table after prolonged dis- cussion.^^''' In 1912 the question was broached again by E. J. Curtin in his address as President of the Association. He took the ground that all organizations bearing the name bank should be regulated by State or national laws. An objection had been raised by some members that the Iowa Bankers Asso- ciation had taken the private bankers into the Association and was now using their money to fight them. Mr. Curtin took the stand that the proposed action was in the interest of the private banker. If a committee of bankers friendly to banks did not draw up a fair bill, he was convinced that DEVELOPMENT OF BANKING 167 unfriendly outside interests would take action. He met the general opposition to State regulation with sound argu- ments. He said in part: Public opinion, however, is gradually settling to the fact, that banking is not a private business. That the use of the name bank, has through the course of time come to mean something, and that if the assets of a bank are good, inspection and investigation will not hurt them ; whereas, if they are not good, they most certainly need both, very badly. Many private banks are as good as the incorpo- rated ones, and as well conducted, but it is a well established fact, that when a private bank does close it does not do so, until about all that is left, of any value, is the walls."^^ Bills have frequently been introduced in the legislature for the purpose of requiring private banks to incorporate or submit to State supervision.^^^ In this respect other States have been in advance of Iowa, although the regulations have been of comparatively recent origin. In 1882 New York prohibited unincorporated firms, doing a banking business, from using a corporate title. This regulation has since been adopted by other States. Various forms of restriction on the use of the word "bank" have been adopted by several of the States. By January, 1919, sixteen States had re- quired private banks to submit to the same regulation and supervision as State banks. Several States require bonds of all private bankers who accept deposits. In 1910 the laws of California, Colorado, South Dakota, Idaho, Indiana, Kansas, Mississippi, Missouri, New Jersey, Oregon, and Utah required that private bankers have a specified mini- mum capital. There are difficulties in the way of enforcing such a regulation since the private banker is frequently en- gaged in other business enterprises and finds it difficult to separate his banking from his other interests. But some States go so far in this respect as to make the private bank essentially a corporation. At least a third of the States have followed the example set by North Dakota in 1890 of 168 HISTORY OF BANKING IN IOWA forbidding private individuals to engage in the banking business,^"*^ Restrictive legislation on private banks in Iowa was en- acted by the General Assembly in 1919, making it a misde- meanor punishable by heavy fines or imprisonment or both for a new private bank to use as part of its name the word ** 'Bank', 'Banking', 'Banker', or any derivative, plural or compound of the word 'Banking', or word or words in a foreign language having the same or similar meaning". The restriction is against the use of these words in any sign, letterheads, bank paper, or other manner which would in- dicate to the general public that the institution is a bank. The law does not, however, apply to private banks already in existence when the act was passed. Although this enact- ment is a step in the right direction, it does not yet meet the requirements that should govern the operation of newly organized private banks, nor does it suflQciently provide regulation for those already in existence.^^^ STATISTICS OF IOWA BANKING Comparative statistics of banking show that Iowa leads all the States of the Union in number of banks. When the National Monetary Commission secured a special report from all banks on April 28, 1909, Iowa had a total of 1365 banks of all classes. Illinois was second with 1263 banks.^"^ The Comptroller regularly secures reports from such banks as will file statements with him. Since this is voluntary on the part of some of the banks, the data are not complete. Incomplete data given in the Comptroller's reports indicate that Iowa still retains first place.^^^ The lists of banks com- piled by the secretary of the Iowa Bankers Association, the Bankers Directory, and the Federal Reserve Board are the most complete and up-to-date statistics available. The latest figure published by the Iowa Bankers Association, under date of June 1, 1920, placed the total number of banks at DEVELOPMENT OF BANKING 169 1919;*"^ the Bankers Directory published by Rand McNally and Company listed 1941 Iowa banks in January, 1921; the Federal Reserve Board included 1930 Iowa banks on the exchange list on June 1, 1920. This was forty-seven more than were listed in Illinois, the State ranking second in numbers. ^"^ In total banking resources Iowa ranked tenth in the list of States,^*'^ falling just under a billion dollars in June, 1918. The growth in number of banks of the various classes in Iowa can best be seen by reference to Table IV and Chart III. In 1875 there were only 123 authorized banks in Iowa ; in 1918 there were 1665. Private banks, after an increase of approximately two hundred and fifty per cent, reached a maximum of 534 in 1900 and have declined to about the number in existence in 1875. Practically half of the Iowa banks are incorporated under the savings bank law. Na- tional and State banks in Iowa are almost identical in number. Data regarding the resources of private banks are so incomplete that no historical figures on their total resources are possible. Tables III and V show the banking capital, deposits, and total assets of the authorized State banks and national banks separately. The total resources of each class are also shown graphically in Chart I. The remark- able growth of banking resources in the past twenty years is especially noticeable. It might also be noted that during this time many private banks have been converted into na- tional, State, or savings banks so that the aggregate in- crease in banking resources is somewhat less than is indi- cated by these statistics of authorized banks. As may be noted from Tables III and V the growth of banking resources was greatly accelerated by the "World War and continued for some months thereafter. Data are available for the State and savings banks showing at fre- quent intervals the rapidly changing condition of the banks 170 HISTORY OF BANKING IN IOWA h < o (A D g u X I- li. o 7 1 < o m li. z o to ft:uj iij (0 UJ (n I< D J 2Q o o o S 2 o 2 <^ 00 o o o o o c o o o o CO cu - I -J < (L Z VD CO \ ^X5^ O S o 2 O 0^ CO \ \ / \ \ rr •\\ \'v \r H i^ 1\ T 11 I il ^5 o o 6 o o o o o o o o o o r^ vo *'> ^ ^ w — DEVELOPMENT OF BANKING Table IV 171 Number of Banks in Iowa, 1875-1920*°^ Year Total Number OF Banks Authorized Banks Pri- vate Banks Total Number Nation- al Banks State Supervised Total Number State Banks Sav- ings Banks Loan AND Trust Cos. 1875 322 123 81 42 23 19 199 1876 78 1877 329 128 78 50 31 19 201 1878 76 32 232 1879 378 126 73 53 33 20 252 1880 75 32 264 1881 418 129 76 53 31 22 289 1882 88 40 380 1883 539 186 110 76 48 28 353 1884 123 49 373 1885 592 209 125 84 50 34 383 1886 158 59 388 1887 641 230 128 102 65 37 411 1888 678 245 129 116 74 42 423 1889 719 263 133 130 80 50 456 1890 788 303 139 164 105 59 485 1891 838 356 151 205 122 83 482 1892 884 406 161 245 141 104 478 1893 968 494 169 325 177 148 474 1894 979 519 169 350 188 162 460 1895 995 531 167 364 194 170 464 1896 1013 536 166 370 201 477 1897 1014 537 165 372 206 166 477 1898 1041 551 168 383 209 490 1899 1093 574 172 402 207 195 519 1900 1178 644 196 448 214 534 1901 1216 695 221 474 218 256 521 1902 1241 761 230 531 230 480 1903 1320 827 253 574 238 336 493 1904 1372 888 269 619 244 484 1905 1396 958 281 677 248 429 438 1906 1480 1042 297 745 251 494 438 1907 1515 1116 304 812 259 399 1908 1546 1164 319 845 261 571 13 382 1909 1564 1218 320 898 282 356 1910 1622 1277 326 951 272 663 15 345 1911 1659 1313 329 984 346 1912 1685 1354 338 1016 281 721 14 331 1913 1728 1408 340 1068 320 1914 1755 1457 343 1114 304 791 19 298 1915 1801 1519 348 1171 282 1916 1843 1570 353 1217 331 865 21 273 1917 1880 1618 351 1267 343 899 25 262 1918 1917 1662 353 1309 363 923 25 255 1919 1916 1675 355 1320 371 926 23 241 1920 1923 1704 358 1346 389 934 23 219 172 HISTORY OF BANKING IN IOWA during the period of unusual prosperity and the first effects of the crisis of 1920 upon bank resources. Abstracts of the reports of the State and savings banks show that the high water mark for total assets was reached in the early months of 1920. On April 2, 1920, the State supervised banks re- ported total assets of $839,413,141 — an increase of $120,- 091,046 over the figure shown at the corresponding call in 1919. The lour reports made during the remaining months of 1920 show that liquidation was under way. At the No- vember call the total assets were higher than in September, but this may be explained as a normal seasonal condition. All the reports show a gain in resources over the corre- sponding date in the previous year, but the difference of $120,000,000 of April, 1920, over March, 1919, had dwindled by December 31, 1920, to a difference of $7,855,718 as com- pared to December 31, 1919. In 1921 liquidation continued • and the first report (March 22, 1921) showed a decline of about $75,000,000 in total resources from the high tide of 1920. Similar detailed data are not available for the national banks. The figures in Table III are for about October first of each year. From this it may be seen that the total re- sources had nearly doubled in five years. The figure for 1920 is considerably higher than that for 1919. This is in line with the situation reported for State incorporated banks. On the whole the assumption may be made that the fluctuations in State banks are representative of the general banking situation during this period. The chief decline in banking assets during the year are found to be in the loan and reserve items. Loans and dis- counts were reduced over $30,000,000 and cash in vault and other reserve items by over $37,000,000. In normal times the loans and discounts increase or decrease in close relation to the deposits, but during a commercial crisis the deposits are drawn down more rapidly than the loans can be liqui- DEVELOPMENT OF BANKING Table V 173 Number, Deposits, Capital Stock, and Total Assets of State AND Savings Banks and Trust Companies in Iowa, 1875-1921*°* Date Number Deposits Capital Stock Total Assets 1875 42 S 3,959,000 $ 2.063.000 $ 6,486.000 1877 50 3,985,000 2.416.000 7,091.000 1879 53 4,900,000 2,321,000 7,829,000 1881 53 9,667,000 2,456,000 12.735,000 1883 76 11,200,000 3,701,000 15,846,000 1885 84 11,639,000 4,541,000 17,480,000 1887 102 15,716.000 5,708,000 22,942,000 1888 106 18.435,000 6,666.000 27,212,000 1889 130 20,396.000 7,673,000 30,355,000 1890 164 25,773,000 8,824,000 37,489,000 1891 205 33.781.000 11,026,000 48,254,000 1892 245 42.476,000 12,734,000 59,011.000 1893 325 42,151,000 14,484,000 60,854,000 1894 350 41.987,000 15,671,000 61,271,000 1895 364 43,827,000 16,161,000 64,045,000 1896 370 43,955,000 16.411.000 64,626,000 1897 372 45,442.000 16,287.000 65,799,000 1898 383 59.336.000 16,447,000 79,697,000 1899 402 77.405,000 16,874,000 98,704,000 1900 448 91,147,000 16,054,000 114.392.000 1901 474 114,731,000 18,845,000 139,554,000 1902 531 133,692,000 20,205,000 160,711,000 1903 574 132,443,000 21,315.000 161,462,000 1904 619 131,471,000 22,329.000 161,676,000 1905 677 146.493.000 24,096.000 179,679,000 1906 745 169.609.000 25,699,000 205,145,000 1907 812 201,953,000 28,010.000 241,512,000 1908 845 197,927,000 28,604,000 239,340,000 1909 898 225,155.000 30,578,000 269,730,000 1910 951 246,921,000 32,478,000 296,673,000 1911 984 249,829,000 33,901,000 306,680.000 1912 1016 278.761.000 35,982,000 336.742,000 1913 1068 304,794.000 37,895.000 368.819,000 1914 1114 314.129.000 39,918,000 383,784,000 1915 1171 325,812,000 41.834,000 398,503,000 1916 1217 359,282,000 43,866,000 436,461,000 1917 1254 447,054,000 45,196,000 526,652.000 1918 1309 496,506.000 48,407,000 584,588,000 1919 1320 599.879,000 49,546,000 696,565,000 1920 1346 657,886,000 53,816.000 800,862,000 1921* 1356 586,079,000 55.909.000 764,414,000 ♦ Marc li 22, 1921 174 HISTORY OF BANKING IN IOWA dated. An analysis of the data for Iowa banks shows that while loans declined only $30,000,000, deposits dropped almost $120,000,000. The extent to which this increased the volume of rediscounting is shown in Chapter X. The effect of the strain upon the number of bank failures is shown in a later section of this chapter. The banks are not classified according to capital in the regular reports published by the Comptroller or the State banking department, but such a classification was made in the report of the National Monetary Commission in 1909 and is presented in Table VI. There are one or two incon- sistencies in this report. For example, there are twenty-two State banks listed as having capital stock of less than $25,000. Three savings banks are said to have no capital. Both of these conditions would be contrary to State law. If we accept the figures as given, some interesting facts are revealed. Five hundred banks are seen to have had a capital Table VI Classification of Iowa Banks According to Capital , April 28, 1909, BY Types op Banks"" Total Nation- Total Loan Capital Number al Exclud- State Savings AND Private OF Banks ing Banks Banks Trust Banks Banks Nat'l Cos. $10,000 or less 281 281 10 177* 94 1 10.000-24,900 219 219 12 172 1 34 25,000 296 92 204 108 77 19 25,100-49,900 124 22 102 50 42 10 50,000-99,900 306 134 172 80 72 7 13 100,000-249,900 125 65 60 21 27 4 8 250,000-999,900 13 5 8 1 5 2 1,000,000 1 1 Total 1365 319 1046 282 572 14 178 * Includes three banks having no capital. t Includes nine banks having no capital. DEVELOPMENT OF BANKING 175 of less than $25,000 — the minimum amount permitted for national banks. Only one hundred and thirty-nine Iowa banks had a capital of $100,000 or over, and only one reached the $1,000,000 mark. CLEAEING HOUSE ASSOCIATIONS Des Moines banks appear to have been the first in Iowa to organize a clearing house association. Its formal organi- zation dates from December 5, 1887, although it had cleared, informally, a few days earlier. ^^^ In Sioux City twelve banks associated on July 14, 1889, to form the Sioux City Clearing House. The Davenport Clearing House Associa- tion was organized in August, 1895.^^^ The Cedar Rapids association adopted a constitution and by-laws on November 6, 1902, but did not begin the actual work of clearing until January 4, 1904.^^^ Dates of the organization of the other Iowa associations are not available, but it is of record that the Council Bluffs association was also active during the panic of 1907. Data regarding clearing houses in Iowa cities are difficult to present satisfactorily because often no formal organiza- tion exists. The list of towns having recognized clearing houses at present includes Cedar Rapids, Council Bluffs, Clinton, Davenport, Des Moines, Dubuque, Estherville, Fort Dodge, Iowa City, Mason City, Muscatine, Osage, Sioux City, and Waterloo. Osage, the smallest of these towns, had less than 3000 population in 1915, and had but four banks. On the other hand, several of the larger cities of the State are not included in the list. But many cities having no recognized organization have some designated place where the exchange of checks is made each morning. None of the Iowa clearing houses make examinations of their mem- bers.^13 Statistics of the volume of clearings and other activities of clearing house associations are published in the annual 176 HISTORY OF BANKING IN IOWA reports of the Comptroller of the Currency. Although re- ports are not secured from all of the clearing houses, the exchanges of those reporting from Iowa are given in Table VII. Table VII Exchanges in Iowa Clearing Houses*^* Exchanges fob Exchanges fob Exchanges for Clearing House YEAR ending YEAR ending YEAR ending Sept. 30. 1920 Sept. 30. 1919 Sept. 30, 1918 Des Moines $ 660,067,000 $ 528.019.000 $ 489.694.000 Sioux City 542,135,000 517.577,000 430.718,000 Davenport 596,537,000 455.987.000 132,922.000 Cedar rapids 156,979,000 120,714.000 109.432.000 Waterloo 109,812.000 88.755.000 112.062.000 Dubuque 74,821.000 59,058.000 49,641.000 Muscatine 36,727,000 28.597,000 23.268.000 Iowa City 47,782,000 26.075.000 20.274.000 Osage 5,482.000 5.064.000 In the crisis of 1907 the clearing house associations of several Iowa cities, following the example set by the associa- tions in the financial centers, united to meet the financial strain. At the outbreak of the panic, Auditor B. F. Carroll sent a circular letter to the Iowa bankers stating that the department would permit temporarily considerable latitude as to reserve requirements and other restrictions. He ad- vised the bankers to take the depositors into their confi- dence, but suggested limiting the amount of cash payments to depositors if necessary. The Federal Comptroller of the Currency also tolerated restriction of payments in the na- tional banks, although he gave no explicit assent to the prac- tice. The larger cities of the State immediately took action to limit their payments and create substitutes for cash dur- ing the period of the panic, but the record of the extent to which this was done is quite fragmentary. Data were se- DEVELOPMENT OF BANKING 177 cured on this point shortly after the panic and these were later published by the National Monetary Commission. This study shows that the Cedar Rapids, Council Bluffs, Daven- port, Des Moines, and Sioux City clearing houses imposed cash restrictions and made use of some kind of currency substitutes. Clearing house loan certificates and cashiers checks in convenient denominations for general circulation were the forms used by the Iowa associations. Undoubtedly there were other towns or cities where restrictions were im- posed, but the general situation in Iowa was sound and little alarm was manifested by the people generally. J. N. Dar- ling — *'Ding" — in a cartoon published in the Des Moines Register and Leader depicted the frightened banker leading the old mare labeled ''Public Confidence" past the financial jack-o-lantern. Old Dolly did not ''bat an eye" throughout the ordeal, but when safely past was reproached for causing no end of trouble by losing her head in that way. This fairly reflected the situation in the State. Iowa farmers were so busy piling up the golden corn at good prices that they were not seriously concerned about the shortage of gold in the vaults of metropolitan banks.*^^ BANK FAILUEES A record of the number of bank failures and the losses sustained by depositors would be of interest if complete data were available. The record for the national banks is complete up to October 30, 1920, and is shown in Table VIII. It will be seen that there have been seventeen failures. Within the past few months three other failures have been reported but the data for them are incomplete. Of those shown in the table the First National Bank of Ida Grove had already gone into voluntary liquidation, and the First Na- tional of Sioux City was restored to solvency. In the case of the failure at Ida Grove the record does not show any pajnnents to depositors after the bank had been placed in 12 178 HISTORY OF BANKING IN IOWA Table Vin National Bank Failures in Iowa from 1865 TO October 30, 1920"« Per Date or Capital Claim* Dividends CENT Loss to Bank Failure Stock Proved Paid Divi- dends Paid Deposi- tors Keoxuk 1st Nat'l Mch. 3.1868 $ 100.000 S 205,256 $ 134,929 68.33 $ 70.327 Bedford 1st Nat'l Feb. 1,1876 30.000 56,457 12,624 22.50 43.833 Osceola 1st Nat'l Feb. 25,1876 50,000 34,535 34,536 100.00 Dubuque Com'l Nat'l Apr. 2,1888 100.000 435,319 248 , 132 57.00 187 . 187 Cedar Falls 1st Nat'l June 13.1893 50,000 126,411 75,969 58.50 50.442 Ida Grove 1st Nat'l* June 4,1895 150.000 Pblla 1st Nat'l June 5.1895 50,000 61.853 39,969 64.62 21.884 Sioux City Sioux Nat'l Sept. 9,1896 300,000 146,199 114,035 78.00 32,164 Decorah 1st Nat'l Nov.24,1896 75,000 224,862 104,551 46.50 120,311 Sioux City 1st NAT'Lt Jan. 7.1897 100.000 Griswold 1st Nat'l Feb. 17.1897 50,000 58,906 44,866 82.00 14,040 LeMarb LeMabb Nat'l Apr. 17,1901 100,000 122.403 75,971 60.00 46,432 Storm Lake 1st Nat'l Jan. 2,1904 50,000 139.455 37,786 29.00 101,669 Grinnell 1st Nat'l July 27,1904 100,000 337.215 290.220 86.00 46.995 Chariton 1st Nat'l Oct. 31,1907 50,000 1.311,365 628.121 47.87 683.244 Carroll 1st Nat'l Oct. 21.1908 100,000 406,276 257,708 63.10 148.568 Corning 1st Nat'l June 22,1914 50,000 236,241 163,718 69.35 72.523 Total $1,505,000 $3,903,753 $2,263,135 $1,639,418 * Former t Restore! y in volimtaj i to solvency ■y liquidation. DEVELOPMENT OF BANKING 179 the hands of the receiver. The First National Bank of Osceola paid the depositors in full. Losses to depositors have been considerable in the aggregate, although very- small when compared to the total amount which has been on deposit throughout this period. The record for the State supervised banks is not so com- plete. The only satisfactory data available cover the period since 1892, and hence include the panics of 1893 and 1907. Aside from the number of failures, little information is available. In 1892 there were no failures, but during the summer of 1893 four banks failed and a number of others suspended temporarily. During the two years following there were no failures, but in 1896 and 1897 six bank fail- ures were noted. In the biennium following three failures were reported. One liquidation — whether or not to be classed as a failure is not clear — occurred in 1900-1901. In the next few years the number of failures increased some- what: two in 1903, four in 1904, two in 1905, one in 1906, and four in 1907. During the eleven years from November 1907, to June, 1918, only one small failure was reported. Thirteen failures were reported from that date to the cor- responding period in 1921. As to losses the data show that for the thirteen failures from 1903 to 1907, four banks paid the depositors in full and the other nine an average of seventy per cent. In 1904, a year of unusual strain on banks in Iowa, Bradstreet's agency reported that the difference between the assets and the liabilities of the four State supervised banks which failed was $269,000.^'^ As for the private banks, the data available are not even as satisfactory as those which concern the State supervised banks. From the facts pertaining to years of unusual strain on banks it is safe to say, however, that the number of fail- ures and the losses sustained have been proportionately much heavier than for the authorized banks. Figures quoted 180 HISTORY OF BANKING IN IOWA from Bradford and Rhodes' Bank Directory for September 1, 1893, showed a total of thirty-one Iowa banks closed dur- ing the panic of 1893 (between April 6 and August 23, 1893). Of this number seventeen were private banks. Of the four- teen suspensions of authorized banks, seven had already resumed operation by September 1st; but none of the private banks are reported to have started operations again by that date.*^^ Again during the period of strain in 1904 the heavy losses were in the private banks. In the year end- ing December 31, 1904, nineteen banks failed, and of this number fourteen were private banks. The crisis of 1920 placed a heavy strain on the banks. During the past fifteen months seventeen banks reported to have closed have not been able to resume business. Of these, eight were under State supervision, seven were private banks, and two were national banks. In addition to these there have been two or three banks which closed temporarily but have since been reorganized. Possibly some of the remaining ones may be restored to solvency, but it is not unlikely that other suspensions will take place before liquidation is completed. No data are available to show the amount of the losses. The proportion of bank failures does not appear to be high in Iowa as compared with other States.*^* Nearly half a century has elapsed since the foundations were laid for the present banking system. In the early sev- enties many counties in Iowa were still in the pioneer stage. Incorporated banks had not entered the newer sections; private banks were still the dominant type in the State as a whole. Banking institutions were scattered and resources were small. The remarkable growth in the number of banks, which has placed Iowa in the lead of all the States, has been accompanied by an even more remarkable growth of bank- ing resources. In 1919 the total assets of the 1320 State supervised banks were over one hundred times as great as those of the forty-two banks of 1875. During the same time DEVELOPMENT OF BANKING 181 the national banks, older and more numerous at the outset of this period, have also increased nearly twenty fold. Private banks are not any more numerous but probably have larger aggregate resources than they had fifty years ago. Consolidation, with a resulting development of larger in- stitutions, is a tendency which has recently been noticeable in Iowa banking. Complete statistics of mergers are not available, but in the biennial period covered by the last re- port of the State Superintendent of Banking, ten State in- corporated banks were merged with other banking institu- tions. An even larger number consolidated in the preceding period.^2° It seems likely that the future will see the devel- opment of more big banks in Iowa and not such a rapid in- crease in numbers. In 1919 there were one hundred and twenty national banks in the country having assets of more than $25,000,000. These were distributed in thirty-nine cities in all sections of the nation, but no Iowa bank had yet attained that size, the largest national bank in the State having aggregate resources of $23,157,724.^^^ One effect of the World War was to cut down the rate of increase in the number of banks and to accelerate the growth in bank resources. This may be attributed in general to the great expansion of credit the country over. An interesting by-product of the war psychology was manifested in the effort of banks to eliminate any trace of Teutonic connec- tion. Twenty-one State banks changed their names, before July 1, 1918, in order to eliminate the word ''German ".^22 The half century record of Iowa banking has been one of distinct progress in other directions besides that of size. Thus, the high integrity of the men in the banking business is attested by the splendid record of safety which has marked the recent decades. The panic of 1907 did not result in heavy losses to Iowa depositors and while data for the present crisis are incomplete they do not show a high per- centage of failures and losses. Moreover, in larger measure 182 HISTORY OF BANKING IN IOWA than ever before the Iowa banker is reaching out for oppor- tunities to promote the business of his community. In this manner the bankers have won a place of leadership in the commercial development of the State commensurate with the increased volume of their material resources. IX SUPERVISION OF BANKING The supervision of banking which developed before the Civil War was devised primarily to protect note holders. With the establishment of the national banking system, how- ever, publicity of the affairs of the banks was also provided in the interests of depositors and stockholders, and in this respect the national law became the model for later State legislation. Two general methods were adopted whereby the public interests could be conserved : reports of condition filed by the banks themselves were regularly called for ; and periodic examinations by disinterested examiners were au- thorized. In the following discussion the treatment of these two forms of publicity will be considered separately. EEPOETS FEOM BANKS In the national banking act as revised in 1864 regular quarterly reports from the banks were prescribed. The dates were the first Mondays of January, April, July, and October. A bank's report of its condition was to be a de- tailed statement of the resources and liabilities. The Comp- troller was directed to publish an abstract of the statements in some Washington newspaper and to require the indi- vidual banks to publish their statements in some newspaper in the town where the bank was located, or, in case no paper was published there, in the nearest town that had a news- paper. In addition to the quarterly statements, a monthly statement of the loans and discounts, cash on hand, deposits, and circulation was provided for.^^s The weakness of the provisions of the original law was that it specified the dates upon which banks were to make 183 184 HISTORY OF BANKING IN IOWA reports. In this way a bank could prepare for the periodic report and make a favorable showing. In 1869 the law was amended to meet this defect and to place still greater re- sponsibility upon the officers for the correctness of the state- ments. This legislation required that banks make five re- ports annually on some past date designated by the Comp- troller. The form of statement was to be prescribed by the Comptroller, and the report was to be verified by the president or the cashier of the bank and three of the di- rectors under oath. Five days were allowed the banks in which to submit the report after the call was issued. Proof of publication in a newspaper of the town had to be fur- nished by the bank. The Comptroller was also permitted to call for special reports whenever he deemed such reports necessary. Additional reports to the Comptroller of the amount of dividends and of net earnings were prescribed. These were to be made within ten days after the declaration of each dividend. Delay or failure to submit the reports was made punishable by a fine of $100 a day.^^^ National banks have also been required to make a semi- annual report of the amount of notes outstanding January 1st and July 1st. These reports are made to the Treasurer of the United States and are for the purpose of levying the tax on circulation rather than for the protection of credit- ors.^^^ In general the requirements laid down in this early law as to statements and reports from national banks have remained unchanged up to the present time. The Auditor of State was the officer charged with the duty of supervising State chartered banks in Iowa prior to 1917. Under the provisions of the unused free banking law of 1858 he was to have had charge of the note issue, and to him quarterly reports of conditions were to have been made. Three bank commissioners were also provided for, who were expected to make examinations and exercise general super- vision.'*^^ In 1860 the first law calling for reports from SUPERVISION OF BANKING 185 banks not carrying on the function of note issue was placed on the statute books. This act required all associations in- corporated under the general incorporation laws of the State to make regular reports of their condition to the Audi- tor of State. The dates for these reports were the first Mon- day in January, April, July, and October. The prescribed statements were required to contain the following items of information : 1. The amount of the capital stock actually paid in, and then remaining as the capital of such association. 2. The amount of debts of every kind due to banks, bankers or other persons, other than regular depositors. 3. The total amount due depositors, including sight and time deposits. 4. The amount subject to be drawn at sight, then remaining on deposit with solvent banks or bankers of the country, specifying each city or town and the amount deposited in each and belonging to such association. 5. The amount of gold or silver coin and bullion belonging to such association at the time of making the statement. 6. The amount then on hand, of bills of solvent specie paying banks. 7. The amount of bills, bonds, notes and other evidences of debt, discounted or purchased by such association, and then belonging to the same, specifying particularly the amount of suspended debts, the amount considered good, the amount considered doubtful, and the amount in suit or judgment. 8. The value of real or personal property held for the con- venience of such associations, specifying the amount of each. 9. The amount of the undivided profits (if any) then on hand. 10. The total amount of all liabilities to such associations on the part of the directors thereof .^^'^ The law did not require the Auditor to publish statements of the condition of the banks : the reports were merely filed in the Auditor's office.^^^ He had no way of knowing what institutions were incorporated. Consequently he was unable 186 HISTORY OF BANKING IN IOWA to call on them for statements in case tkey did not comply with the law. As shown in an earlier chapter, banks in- corporated under the general incorporation laws existed even before 1860 ; but the data concerning them is scattered through the offices of the county recorders with whom they filed their articles of incorporation. Provisions of the law of 1860 with some modifications were reenacted in the Code of 1873. Before being allowed to begin operations the stockholders of a bank were required to secure a certificate from the Auditor authorizing them to commence business, and this was not to be issued until the Auditor had satisfied himself that the association had complied with the minimum capital requirements laid down in the Code. The fixed date for submitting reports was dropped, and the plan of the national system of calling for reports on some past day was substituted therefor. The number of reports per year was limited to four. So far as the content of the reports was concerned no change was made; even the obsolete section regarding the amount of bills of "solvent specie-paying banks" was included.^ ^^ The Auditor was required to publish the reports in some newspaper of the county in which the bank was located. He was not specifically directed to make a statement of the condition of banks in his biennial report ; but Auditor John Russell, after calling for reports from all banks that had their articles recorded in the office of the Secretary of State under the provisions of an act of 1870, made a synopsis of the reports received on September 26, 1873, which he pub- lished in his report for 1873. This was admittedly incom- plete, but it was the beginning of regularly published statis- tics on general banking in lowa.^^^ Legislation enacted in 1874 to regulate savings banks con- tinued the same power of the Auditor to call for statements from savings banks which he had already possessed over these same institutions under the general law. Only slight SUPERVISION OF BANKING 187 modifications were made in the wording of the law regard- ing the content of the reports. The Auditor was required by law to communicate to the General Assembly a statement of the condition of every savings bank and also to make recom- mendations concerning changes in the law. Since this prac- tice had been started during the preceding year, no practical result came from this feature of the law except the separa- tion of the State banks from the savings banks in the Audi- tors ' summaries.^^^ In the Code of 1897 the same provisions regarding quar- terly reports were reenacted; and in addition the Auditor was given authority to call for special reports from the banks whenever he deemed it necessary. Prior to 1921 no penalty was imposed for withholding this statement. An amendment by the legislature in that year fixed a penalty of $10 per day for each day of delinquency, ten days being allowed in which to file the report after the call was issued before it became delinquent. By an amendment in 1921 it was further provided that the statement need not show the cash on hand and amount due from banks separately.*^ ^ At about this time an effort was made by the Iowa Bank- ers Association to secure a correlation of the reports of na- tional and State chartered banks. A resolution was adopted at the 1897 convention recommending that the Auditor make the date of his call the same as that of the Comptroller for general statistical and comparative purposes.*^^ In his report for 1903, Auditor B. F. Carroll stated that the banks were recommending that five reports per year be submitted on the same date as the national bank statements were called for.*^* In 1911 an amendment to the Iowa law directed the Auditor to call for reports of condition five* times a year instead of four times.*^^ This made it possible for the Audi- tor to issue calls simultaneously with the Comptroller ; and since September, 1917, the State Department of Banking has been sending out calls at the same time as the Comp- 188 HISTORY OF BANKING IN IOWA troller.^^*^ By the 1911 amendment the names of the banks in which the bank making the statement had deposits subject to call were eliminated from the published statement of the report. Banks were no longer required to publish the amount of liabilities due the bank by the directors thereof. Provision was made for the publication of the report by the Auditor in some newspaper of the town where the bank is located, the expense to be borne by the bank. When the State Department of Banking was created in 1917, the only change made in the matter of bank statements and reports was to transfer the duties of calling for state- ments and publishing the same from the Auditor to the Superintendent of Banking. No provision was made for changing certain long recognized weaknesses in the manner of giving these reports to the public. During the past twenty years the Auditors have repeatedly called attention to the inadequacy of the present reports. The bank report which has been published biennially, includes only one of the eight to ten statements received during the two years. It was published as part of the Auditor's report, an arrangement which was neither convenient nor economical since many persons would be interested only in one report and not the other. Auditor B. F. Carroll pointed out that reports should contain a compilation of all reports made during the year. Auditor J. L. Bleakly, in an address before the Iowa Bankers Association in 1910, asked the support of the Asso- ciation for proposed legislation providing for annual re- ports instead of the regular biennial reports, which he char- acterized as ''ancient history when it emerges from the press." He stated that he was meeting this difficulty, in part, by making abstracts of the call reports and sending them to each bank in the State. ^^^ Since 1917 the report of the State Department of Banking has been issued sep- arately. In the interests of economy a considerable forward step SUPERVISION OF BANKING 189 was taken in the manner of presenting the statements of the banks in the reports published by the Auditor in 1916. Prior to that time a large portion of the Auditor 's biennial report was taken up with printing, three to a page, the statements of each bank separately and for only one date. In 1916 the method of arranging the assets and liabilities by columns, following the model of the Comptroller's re- ports, was adopted. The condition of each bank at the close of the two fiscal years was thus presented. In 1914 Part 11 of the Auditor 's report, dealing with the condition of banks, consisted of 382 printed pages. Considerably more data was given in quite as accessible form in ninety-seven pages of the 1916 report. In 1918 the Superintendent of Banking returned to the former method of printing each report sepa- rately. By placing four to a page he was able to include aU of his report in 348 pages, all but eighteen of which were devoted to individual statements for one date only. In this matter the Iowa department is outdone by some of those in neighboring States. The report of the Michigan Bank Com- missioner in 1916 consisted of 635 printed pages, each bank having a page of its own. A comparison of the statistics compiled and published by the Department of Banking in Iowa with those put out by the Comptroller of the Currency and the banking depart- ments or bank commissioners of other States shows that the Iowa statistics are incomplete and inadequate. Among the features which are to be found in other reports, and would be of value and interest are : the earnings of the banks ; a classification of the kinds of loans ; complete data as to all failures of banks under the supervision of the Banking De- partment; an abstract of the reports of the Comptroller dealing with the national banks of Iowa for comparative purposes ; the members of the Federal reserve system ; and the data on all banks of the leading cities of the State sepa- rately. As part of their report, the Comptroller and cer- 190 HISTORY OF BANKING IN IOWA tain of the State bank commissioners, or superintendents, make rather full reports of general financial conditions, the administration of laws that have been enacted, and recom- mendations as to needed legislation. The Auditor has, in the past, suggested many desirable reforms which have sub- sequently been enacted into law. He has not, however, been able in addition to his numerous other duties to devote much time to a general survey of financial conditions. In the first report submitted by the Department of Banking there is no effort to do anything more than what had been done before in this respect. Certain observations of G. H. Mes- senger, at that time Superintendent of Banking, regarding land values in Iowa, quoted by the Iowa press during the summer of 1919, indicated that he was in a position to incor- porate in his report some facts concerning Iowa economic conditions that might well be published.^^^ EXAMINATION OF BANKS In addition to the reports and statements which the na- tional and State supervised banks are required to make, they are also subject to periodic examinations by the supervising authorities. Under the terms of the national banking law of 1864 the Comptroller was authorized to appoint suitable persons to make examinations of the banks whenever he deemed it necessary. It was the duty of such examiners to make full and detailed reports of the condition of the insti- tutions to the Comptroller. The examiner was given power to make a thorough examination into all the affairs of a bank, including an examination under oath of the officers and agents thereof. Compensation for examiners was fixed at $5 per day, and $2 for each twenty-five miles they were compelled to travel in the performance of their duties. This fee was paid by the bank examined. In 1875 the basis of compensation was changed from a per diem fee to a fee based on the capital of the bank ex- SUPERVISION OF BANKING 191 amined. The fee was graduated according to the capital, varying from $20 for banks having a capital of less than $100,000 up to $75 for those having a capital of $600,000 or Qygj. 439 This fee system was open to the objection that since the examiner's income depended upon the number of banks he could examine there was a temptation to do hurried work — an evil which was recognized by the Iowa bankers and condemned by a resolution of the Bankers Associa- tion.^^^ In the Federal Eeserve Act of 1913 several im- portant changes were made in the conduct of the Comp- troller's examinations. While the former law had left the number of examinations to the discretion of the Comp- troller, the amendment fixed this number at a minimum of two in each calendar year. More frequent examinations may be made if the Comptroller considers it necessary. The fee system was abolished, and regular salaries have since been paid to the examiners. The expense of the examina- tion was thereafter to be assessed upon the banks examined in proportion to the assets. This change from capital to assets as a basis of assessment is recognized as a sound principle, since the assets may vary considerably without a change in the capital; while the assets are the items which the examiner must inspect. In order to remove any temptations to partiality in mak- ing examinations, no examiner is permitted, under pain of heavy penalties, to receive any loan or gratuity from any bank which he examines. He may not be in any way finan- cially connected with the bank. Nor is the examiner allowed to disclose his findings to any person or persons except the Comptroller, the proper officers, or a court of competent jurisdiction.^^^ Examinations come at irregular intervals without warning to the bank: the examiner is permitted to come in at any time, to count the cash, to inspect the loans, to examine the investments, to scrutinize the expense accounts, and to make 192 HISTORY OF BANKING IN IOWA himself generally familiar with the bank's management and condition. If he is not satisfied from investigation that the bank is in a satisfactory condition, he makes such report to the Comptroller who then sends notice to that effect to the bank with suggestions also for correcting the defect.^^- In addition to the examinations by the regular examiners under the Comptroller, the Federal Reserve Act authorized each Federal reserve bank, with the approval of the Federal reserve agent or the Federal Reserve Board, to make spe- cial examinations of member banks within its district.^^^ The Code of 1873 contains the first provisions for examin- ations of the banks under the present laws of Iowa. At that time the Auditor was authorized to make, or cause to be made, an examination of any banking association operating under the general incorporation laws. No provision was made for bearing the expense of such examinations, nor was any number of examinations per year prescribed. At first, the examinations appear to have been conducted very infre- quently and irregularly. In his report for 1881 the Auditor noted that he had caused to be made an examination of all incorporated banks of the State. Apparently only one ex- amination was made in the biennium. His predecessor also notes the fact that he had complied with the law in respect to making examinations, but he does not state the number. At present it is the practice of the State Department of Banking to make at least one examination of all banks under its supervision each year. Banks needing special attention are given more frequent examinations, but this number is not large, so that on the whole annual examinations are now the rule. In 1885 Auditor J. W. Cattell called attention to the fact that no provision was made for defraying the expenses of needed examinations. He said the custom had been to charge them to the bank, and that the banks had quite gen- erally paid them. It was his opinion that the matter should SUPERVISION OF BANKING 193 not be left in this doubtful condition, and so he recommended a fee for examination similar to that required of the na- tional banks, graduated according to capital. The legisla- ture failed to act at that time, and the recommendation was renewed by the succeeding Auditor.*^ ^ In 1890 the legislature acted on the matter, specifically authorizing the Auditor to appoint one or more bank ex- aminers to hold office at his pleasure. The expense of the examinations was to be paid by any bank, State or savings, which received examination. If the examination was con- ducted by the Auditor personally, he received only his neces- sary expenses. The fees for the regular examiners were graduated according to capital, ranging from $15 for a bank of $50,000 capital or less up to $30 for a bank having a capital of $200,000 or over.^^^ The provisions of this legis- lation regarding examinations followed rather closely the national banking law. In so doing it introduced the two evils of a fee system for compensating examiners and of an assessment of expenses according to capital stock, rather than the more accurate basis, later adopted, of total assets. The first of these defects was remedied by legislation enacted in 1904. At that time all previous laws regarding bank examiners were repealed, and the Auditor was author- ized to appoint four bank examiners at an annual salary of $1800 and necessary expenses. The total amount paid for salaries and expenses was not allowed to exceed the amount of fees collected from the banks examined. The amount of the fees from the banks was not changed, but, instead of being assessed at the time of examination, the fees were made payable to the Auditor annually before March 1st of each year.^*^ In 1906 the number of bank examiners was increased to five, and provision was made to include loan and trust companies under the law relating to examination of banks.'*^''^ Again, in 1909 the number of examiners was increased from five to six. No change was made in the 13 IM HISTORY OF BANKING IN IOWA salar}^ paid, but the fees payable by the banks were raised. The rates were fixed at $15 for a bank having a capital of $25,000 or under, and were graduated up to $50 for a bank having a capital exceeding $150,000. One of the examiners was to be designated by the Auditor as chief examiner; it was his duty to have charge of the department examiners and of reports.^^** Again in 1915 the number of examiners was increased and the assessed fees were raised while other modifications were made in the law. The Auditor was authorized to appoint from six to nine examiners. A qualification for examiners introduced at this time was five years of banking experi- ence. The fees assessed against the smaller banks re- mained unchanged, but the maximum amount was increased so that a bank with a capital in excess of $200,000 was charged $150 annually.'*''^ The duties of supervision taken over by the Banking Department in 1917 included the examination of the banks and trust companies of the State. Power to appoint from six to eight bank examiners was given to the Superintend- ent. Three years of practical bank experience was made a qualification for the office. The maximum salary was raised to $2200 per annum plus the necessary expenses incurred in making examinations. Salaries and expenses of the Superintendent and examiners were again limited to not more than the fees collected from the banks and trust com- panies.^^" In 1919 the section of the law relating to the number and salary of bank examiners and clerks in the Banking Depart- ment was repealed and a substitute enacted therefor. It had been found that the number of examiners was too small for the amount of work they were required to do. More- over, the salary was inadequate to hold men of ability — as many as three examiners had left the Department in a single week to take better paying positions elsewhere. To meet SUPERVISION OF BANKING 195 these difficulties the General Assembly substituted for the maximum number of eight examiners, a limit of one exam- iner for each hundred banks or major fraction thereof under the jurisdiction of the Banking Department. At the time of the passage of the act there were 1318 State supervised banks, therefore the number of examiners was automatically increased from eight to thirteen. The maximum salary of examiners was raised from $2200 to $3000. Increased expenses due to the increased number and pay of examiners made necessary a change in the fee system which had been in vogue for several years. The law re- quired that the expenses of the Department be met from the fees collected from the banks. During the year 1918 sev- eral hundred banks had voluntarily contributed ten dollars each in order to sustain the Department. The basis of fees paid by banks had formerly been the capital stock of the banks. As a matter of fact the inspection of the assets con- stituted the real work of examining the bank. The total assets of the banks were growing very rapidly, more so than the capital stock. Hence the basis of assets, already used in the fee system of the national banks, was adopted in the new law. The rate of the fees assessed was $1 per $1,000 of assets on the first $25,000 of assets, and at the rate of two cents per $1000 of assets on all assets over and above $25,000. It was also provided that no examination would be made for less than $20. All fees were made payable to the Superintendent of Banking within ten days of the time of making the examination. These fees were then to be turned over to the State Treasurer. No payments toward salaries or expenses of the Department could be made by the Treasurer unless there were funds on hand, received as income from the Department to pay the same.^"^^ The national or State bank examiners forward their re- ports of the examinations they make to the Comptroller or the State Banking Department as the case may be. These 196 HISTORY OF BANKING IN IOWA reports are not communicated to the bank officials, except when it is necessary to bring to their attention some unsatis- factory condition which demands correction. Bank direc- tors should possess intelligent knowledge of the bank's affairs, for it is recognized that a bank whose affairs are known to only one or two men is likely to be mismanaged. The Comptroller has urged upon national banks the desir- ability of examinations by the board of directors. State Auditor C. C. McCarthy in 1893 recommended to the Gen- eral Assembly the passage of a law requiring that directors of State supervised banks make regular examinations. The legislature enacted a law the following year which provided that the board of directors of any State or savings bank must appoint an examining committee from its own mem- bers to make an examination of the bank at least once every quarter. This examining committee was to report its find- ings to the board, which report must be recorded in the minute book of the bank.*^^ In 1906, upon the recommenda- tion of Auditor B. F. Carroll, this section was amended to require that one of the quarterly examinations should be in June and another in December. The results of these exam- inations, in addition to their being recorded in the minute book, must be reported to the Auditor. Failure to make this report promptly to the Auditor was to be followed by an examination of the bank by one of the regular bank ex- aminers at the expense of the bank.*^^ Frequently a national bank and a savings bank or trust company operate in the same room and are owned by the same stockholders. For the convenience of these associated banks, the Banking Department and the Comptroller's De- partment always cooperate in making examinations.^^* THE STATE BANKING DEPAETMENT Reference has frequently been made in the preceding pages to the State Department of Banking. Prior to 1917 SUPERVISION OF BANKING 197 the State chartered banks were under the supervision of the Auditor of State. It was early recognized that the busi- ness of the Auditor exceeded that of other State oflScers and, therefore, he was unable to give the personal attention to the details of certain branches of his department that was desirable. The Auditors during the seventies and early- eighties all recommended the creation of a separate depart- ment for the supervision of insurance and banking.^^^ Prob- lems connected with the supervision of insurance were espe- cially arduous, and it was in that connection particularly that the recommendation was pressed. A separate insur- ance department was not created until 1913 ; but for some time after this the banks were left under the Auditor'-^ supervision.*^^ In general the early recommendation of the Auditors favoring a separate department or departments of banking and insurance was supported by the Grovernors. When former Auditor Buren R. Sherman became Governor in 1882, one of the recommendations in his first inaugural mes- sage to the General Assembly was the creation of a Com- missioner of Banks and Insurance.*^'^ The Iowa Bankers Association was also on record as favoring a separate bank- ing department. At their 1912 convention a resolution to that effect was adopted on the grounds that such supervision would be more efficient and satisfactory to the banks and afford greater protection and security to the public at large. The law passed by the Thirty-seventh General Assembly creating a separate State Banking Department was drafted by the officers of the Iowa Bankers Association and fos- tered by the Association. It was doubtless due to their support that the measure was passed, since at that time the Auditor was opposed to having the Banking Department divorced from his office.*^^ In March, 1917, the General Assembly passed an act estab- lishing the ''Banking Department of Iowa", the chief officer 198 HISTORY OF BANKING IN IOWA of which was to be the *' Superintendent of Banking". All of the books, records, reports, and securities or papers of any kind in the possession of the Auditor relating to bank- ing were at the time of taking effect of the act (July, 1917) to be delivered to the Superintendent of Banking. His duties included all those imposed upon the Auditor which related in any way to banking matters. The Superintendent of Banking was made an appointive officer, nominated by the Governor and confirmed by a two- thirds vote of the members of the Senate in executive ses- sion. But nominations made to the Senate may not be con- sidered by that body until the same have been referred to a committee of five appointed by the president of the Sen- ate. Nor may consideration of the nominations take place on the same legislative day that the nomination is referred to the committee of five. The principal qualifications of the Superintendent, aside from general fitness, is that he shall have had at least five years executive experience in a State or savings bank in Iowa. He is appointed for a term of four years with a salary of $4000 per year.^'^^ George H. Messenger, president of the Van Meter State Bank and of the Linden Bank was the first appointee. He began his banking experience in Iowa in 1895 and had, dur- ing more than twenty years of practical experience, become thoroughly familiar with banking in Iowa and possessed of a wide personal acquaintance among bankers. ■*^'^ Mr. Mes- senger resigned early in 1920 and M. V. Henderson, Jr., of Hawkeye, Iowa, was appointed to succeed him. Mr. Hen- derson was also a man of wide banking experience and at the time of his appointment was treasurer of the Iowa Bank- ers Association. At the expiration of his term of office, July 1, 1921, W. J. Murray of Eldora was appointed for the regular term of four years. By the terms of the law of 1917 the Superintendent of Banking was given authority to appoint not to exceed four SUPERVISION OF BANKING ^ 199 clerks or stenographers in addition to the eight bank exam- iners. He was to fix the salaries of clerks and was held responsible for all work done by his department.^®^ The 1918 report of the Banking Department shows that the office force consisted of a secretary, a legal clerk, an account- ant, and a stenographer. The duties of the Department proved to be too heavy to be properly conducted by the office force permitted by law. Accordingly when the num- ber of examiners was increased in 1919, the law was also amended to permit the employment of additional office help. Clerks, stenographers, or special assistants to the number of one for each two hundred banks were authorized. One of these was to be a Deputy Superintendent of Banking, who should be qualified to perform all of the duties of the Superintendent during his absence or inability. The maxi- mum salary of the deputy was fixed at $3000 per annum; the amount of salaries of the other clerks was left to the discre- tion of the Superintendent. A general salary act was passed by the Thirty-ninth General Assembly fixing the number and compensation of employees in the several State departments, including those in the Department of Banking. This act did not change the salary of the Superintendent or the Deputy Superintendent and allows for a salary range of from $1800 to $3000 per annum for bank examiners. Ex- penses are also allowed the Superintendent for attending the group meetings, and the State convention of the Iowa Bankers Association, meetings called by the Federal Re- serve Bank of Chicago, or other annual meetings of banking supervisors or commissioners. A limit of $500 per year has been fixed for expenses in attending these meetings.*®^ In 1919 the powers of the Superintendent of Banking were enlarged ; he was given authority to deny a charter to any proposed bank whenever in his judgment the locality in which the proposed new bank was to be established was amply served with banking facilities, or if he believed the 200 HISTORY OF BANKING IN IOWA individuals named as officers and directors are not such as to command the confidence of the community. An appeal might be taken from his ruling to the Committee on Re- trenchment and Reform — a committee of the legislature composed of five members each of the Senate and House of Representatives. Any order reversing the decision of the Superintendent must have the majority vote of this com- mittee, which decision should be final and conclusive. This increased power granted the Superintendent was but tem- porary, the provisions of the law in this respect being of no force or effect after December 31, 1920. Prior to the meet- ing of the General Assembly in 1921, an investigation was conducted by the Iowa Bankers Association concerning the powers of the banking departments or boards of other States to refuse bank charters. On the basis of the infor- mation secured it was planned to support the reenactment of the bill, but circumstances arose which made it seem cer- tain that such a measure could not be passed. Accordingly the matter was dropped without presenting any bill to the legislature. ^^^ Two principal reasons, growing immediately out of the war, are to be found for this temporary measure : to curtail unnecessary business expansion during the period of recon- struction following the war ; and to prevent the formation of the so-called ' ' spite banks ' '. In addition to those who sup- ported the temporary measure for these reasons there were many who desired a law which would permanently confer this power on the Superintendent in order thereby to reduce competition among banks. In fact, the opponents of the bill charged that this was the real reason for the passage of the law. Evidence is not lacking, however, showing that the temporary causes played an important part in creating sentiment for the measure. At the 1918 convention of the Iowa Bankers Association a resolution had been passed to the effect that the Association was opposed to any new SUPERVISION OF BANKING 201 enterprise not of direct benefit in winning the war and therefore the Association requested the Comptroller of the Currency and the Superintendent of Banking not to issue authority for any new bank or corporation not essential in Iowa during the period of the war.^^^ Although the armis- tice had been signed before the legislature convened, this reason seems to have had some weight. It was also charged that in some communities the Germans were withdrawing and forming the so-called ' ' spite banks ' ', supported by their own nationality. These Germans were said to be boycotting the established banks because of the subscriptions required of them in the drives for the sale of war bonds. Under the authority thus conferred upon him the Super- intendent of Banking has had occasion to defend his opinion in at least two cases. An appeal was brought to the Com- mittee on Retrenchment and Reform by merchants and busi- ness men of Unionville who had been denied a charter by Mr. Messenger. The place is a small unincorporated town which already had one bank. It was on the ground that this town could not support two banks that the proposed charter was denied. The decision of the committee was a tie vote, thus affirming the decision of the Superintendent. In the case appealed from West Union the decision of the Superintendent of Banking was reversed.^^^ The desirability of thus allowing one man to decide the question as to whether a bank may be permitted to obtain a charter has been seriously questioned. Since a similar authority is vested in the Comptroller of the Currency, so far as the establishment of national banks is concerned, there is a precedent for this kind of legislation.^^^ A ma- jority of the States also have some provision for preventing the establishment of banks where they do not appear to be needed or where the founders do not command public con- fidence. The act which vested this power in the Superin- tendent of Banking also prohibited any more private banks 202 HISTORY OF BANKING IN IOWA from commencing business. Of the wisdom of the latter provision there can be no question. Neither can the tem- porary authority conferred upon the Superintendent be regarded as a menace. The question as to whether or not the provisions of the temporary measure should be per- manently adopted has aroused considerable difference of opinion. Iowa already leads all the States of the Union in the number of banks. The intensity of competition has re- sulted in certain evils/''^ but it has also forced the bankers to adopt a policy of community service and business alert- ness which has been highly beneficial. If the effect of such a law is to grant a monopoly to existing institutions without reserving the right to regulate rates and service, it would be contrary to public policy. There is no reason to believe, however, that the Superintendent of Banking would under- take to arbitrarily restrict the legitimate extension of bank- ing facilities, especially since there is a chance to appeal to the Committee on Retrenchment and Reform. The legislative committee of the Iowa Bankers Associa- tion backed several blue sky bills which were intended to provide regulations for the promotion fees for the issuance or sale of stock by corporations. In general this program failed of passage, but one bill, prohibiting the receiving of a commission or bonus of any kind for organizing a bank or securing subscriptions of capital to the same, was enacted into law.^®* This would appear to be a further step in the direction of discouraging the establishment of new banks except where really needed. In the supervision of banking Iowa ranks fairly well among the States. Supervision of private banks continues to be lax and wholly inadequate, but the prohibition by law of new private banks and the steady rate at which this type of institution has been organizing under State or national laws makes it seem probable that the number of these banks SUPERVISION OF BANKING 203 in the future will be relatively insignificant. Perhaps in time public sentiment will support a law which will either force the remaining institutions under State supervision or else take from them the right to call themselves banks. With the organization of the Department of Banking a for- ward step was taken which placed Iowa in line with the other leading States. As time passes this Department may be expected to be of still greater service to the banks and the public. The efficiency of supervision in the past, as well as the conservative character of Iowa 's bankers, is at- tested by the small list of failures among the State super- vised banks. THE FEDERAL RESERVE SYSTEM IN IOWA The establishment by Congress of the Federal reserve system in 1913 changed materially the position of the na- tional banks of Iowa. Moreover, its influence on the State chartered banks has been very marked. Considerable spe- cial legislation has been necessary to adapt the Iowa bank- ing laws to the changed conditions, and in the future the influence of the Federal reserve system in Iowa banking may be expected to become even more important. Because of its importance and because of its special nature, the his- tory of the system in Iowa has been reserved for special treatment in this chapter. ORIGIN OF THE FEDERAL RESERVE SYSTEM The temporary breakdown of the nation's banking sys- tem in the panic of 1907 was the immediate cause of the adoption of the Federal Reserve Act. Defects in the bank- ing system of the country had been pointed out from time to time, but the nation was not thoroughly awakened to the need of a fundamental change in its banking organization until the crisis of 1907 revealed the weaknesses of the old system. The underlying defect was shown to be a lack of cohesion in the entire banking structure. Nearly twenty- five thousand banks were operating in the United States in 1907; and approximately seven thousand of these were under national law. The remainder were either under State laws or were entirely unregulated.^^^ Even in the case of the national banks there was lacking the necessary centralization of control and unity of action. Whatever united effort was put forth to save the banks in the crisis 204 FEDERAL RESERVE SYSTEM IN IOWA 205 came through the clearing house associations of the various cities. Congress was not prepared to adopt a comprehensive re- form in banking during the session of 1907-1908. The need for more information was recognized and met by the crea- tion of a National Monetary Commission, composed of nine members from each branch of Congress. This commission was given liberal appropriations and authorized to make a thorough study of monetary conditions in this country and abroad. Meanwhile, some steps had to be taken to meet the strong popular demand for currency reform. A bill was hurriedly passed and approved. May 30, 1908, known as the Aldrich-Vreeland Act. This act was recognized as a tem- porary expedient, since it was to expire by limitation on June 30, 1914. It was later extended one year by the Fed- eral Reserve Act. Under the provisions of this act asso- ciations of banks, known as '^ National Currency Associa- tions", were permitted to issue currency secured by a de- posit of commercial paper. There was also provision for the issue of additional circulation secured by deposit of bonds other than bonds of the United States by national banks not members of a currency association. The purpose of the additional circulation provided by the act was solely to furnish an emergency currency.*"^*^ After a thorough study of banking and currency problems in the United States and the other leading commercial coun- tries, the National Monetary Commission brought in a re- port and a bill in 1911 ; but no action was taken until after President Wilson's inauguration in 1913. Together with tariff revision, banking and currency reform became one of the important problems before the special session of Con- gress. The monetary legislation was put through as a party measure, and the majority of the Iowa members of Congress, being Republicans, opposed its enactment. While the bill was before Congress the sentiment of Iowa bankers 206 HISTORY OF BANKING IN IOWA was unfavorable to the measure. Speaking in opposition to the compulsory feature of the measure, so far as national banks were concerned, Representative H. M. Towner stated that he had sent copies of the bill to bankers in his district, asking an expression of opinion. Of the thirty-eight answers received, only two favored the bill ; three Avere non- committal; and the rest opposed it. Eighteen national bankers stated that they would give up their charters rather than accept the conditions of the bill."*^^ Amendments sub- sequently adopted met some of the objections raised by the bankers ; but, on the whole, the sentiment of Iowa bankers was one either of opposition or of indifference to the act when finally passed. Some prominent Iowa bankers, on the other hand, strongly endorsed the new system. Among these, Arthur Reynolds of Des Moines, President of the American Bankers Association, was an active leader.*'^ When the time came to organize the system and divide the country into districts, Iowa bankers were interested in preventing the State from being split into several parts. The Council of Administration of the Iowa Bankers Asso- ciation voted on January 9, 1914, to take up with the organ- ization committee the question of having the entire State placed in the Chicago district. A large committee of Iowa bankers met with the committee on January 19th. ^"^^ The division of the country into districts, which resulted in plac- ing the entire State of Iowa in the seventh district, with headquarters at Chicago, was an arrangement very satis- factory to the Iowa banks. Provision was made for the establishment of branches of the Federal reserve banks to serve localities inconveniently located with regard to the bank of their district. Twenty- one branches of the twelve Federal reserve banks had been established by March 1, 1920.*'^* The fact that no such branches have been established to serve Iowa banks is evi- dence that Chicago has proved suflficiently convenient. FEDERAL RESERVE SYSTEM IN IOWA 207 MEMBERSHIP IN THE SYSTEM Membership in the Federal reserve system was made com- pulsory for all national banks and optional for the State chartered banks. Sixty days were allowed the national banks in which to signify their intention of joining; State banks were allowed the privilege of entering at any time. In spite of the earlier threats of withdrawal from the na- tional system, all but seventeen of the national banks of the entire country had signified their acceptance of the system by the end of the sixty day limit.^'^^ State banks, on the other hand, were almost as unanimous in staying out of the system. Up to June 21, 1917, when some important amendments to the law were passed, only fifty-three State banks and trust companies in the United States had become members.*^® The provisions of the Federal Reserve Act regarding State bank membership required the banks to conform to the capital requirements of national banks, to observe the limi- tation on loans to a single individual or firm of ten per cent of the capital and surplus of the bank, to meet the same reserve requirements as national banks, and to be subject to examination and supervision of the Federal Reserve Board.^^'^ In the amendments which have since been en- acted, particularly those of June 21, 1917, changes have been made in certain general features of the act and in the sections relating especially to State bank membership which make the system more attractive to State banks. The important changes made in the system in June, 1917, were, first, the lowering of the reserve requirements for all member banks, the cash-in-bank reserve being left entirely at the option of the banker. The amount to be held on de- posit in the Federal Reserve Bank was fixed at thirteen per cent of the demand deposits and three per cent of the time deposits for banks in a central reserve city. Banks situated in reserve cities must have on reserve, with the Federal 208 HISTORY OF BANKING IN IOWA Reserve Bank, ten per cent of the demand deposits and three per cent of the time deposits. At present banks in four Iowa cities come under this provision.^ '^ Banks in all other cities or towns of the State were required to keep reserves of seven per cent of their demand deposits and three per cent of their time deposits. In the second place, the State bank members were given certain new special privileges. They were given the oppor- tunity of withdrawing from membership at any time upon six months written notice to the Federal Reserve Board. State banks were permitted to become members of the sys- tem and still loan to one individual or firm an amount above the ten per cent of capital and surplus which was the maxi- mum for national bank members. But in case any borrower owed a member State bank in excess of the ten per cent, his paper was made ineligible for rediscount. Provision was also made whereby the examinations made by State author- ities might be accepted in lieu of examinations made by the examiners approved by the Federal Reserve Board. The number of reports of condition and of payment of dividends required from State bank members was fixed at not less than three each year.^^® State banks in Iowa were barred from the opportunity of becoming members of the system during the first year of operation. Auditor John L. Bleakly stated that he had many inquiries at the outset from State banks desiring membership, but his ruling was that the permission could not be granted until the legislature changed the Iowa laws to permit banks to hold stock in other banks.^^^ At the 1915 session of the legislature, State banks, savings banks, and trust companies were granted the right to subscribe for stock of the Federal Reserve Bank, upon an affirmative vote of fifty-one per cent of their stockholders.**^ Although the way was thus cleared as soon as possible for State banks to join the system, only one State chartered bank in Iowa, the FEDERAL RESERVE SYSTEM IN IOWA 209 Bankers Loan and Trust Company of Sioux City, was a member of the Federal reserve system by the end of the year 1916.^^'' ATTITUDE OF IOWA BANKERS The explanation of the failure of State banks to join the system lies partly in defects of the law during the early years and partly in the attitude of hostility or opposition shown to the system by national bank members. The posi- tion of the Iowa Bankers Association can be shown from the attitude of the 1915 and 1916 conventions. At the 1915 convention Senator John Weeks of Massachusetts, a mem- ber of the banking and currency committee of the Senate during the session which passed the Federal reserve law, addressed the bankers on the general relations of the gov- ernment to business. Senator Weeks had been one of the few Republican Senators to vote for the bill; and in the course of his address he endorsed the Federal reserve sys- tem in rather luke-warm manner.^^^ A year later the spirit of the convention was one of open opposition to certain phases of the system. The President of the Association in his annual address stated that in his opinion the war alone had prevented a disastrous panic at the opening of operation of the banks. He advised banks not members to ''think long and earnestly", if they were considering joining, before deciding affirmatively. He even went so far as to say: "I believe I am not suggesting any- thing out of the way in saying that the State and savings banks of this State, should they ever desire or feel that they should belong to the Federal Reserve Bank, would find it a great mistake and calamity to them."*^** F. Howard Hooke, editor of the Financial Age of New York City, addressed the same session of the Association. He asserted that the Federal Reserve Act as it stood on the statute books "is fundamentally unsound, structurally 14 210 HISTORY OF BANKING IN IOWA wrong and impracticable in its operation." One of his arguments, which might be expected to be particularly effec- tive in discouraging State bank membership, was the cost of the system to the member banks. "It cost the bankers and indirectly the people $1,700,000 to operate the Federal Eeserve Banks last year, and with increasing activities the Lord only knows what it will cost in subsequent years ' *, was one of Mr. Hooke's statements.^^^ In view of the subsequent record under increasing activ- ities these objections furnish interesting reading. In 1918 the gross earnings of the entire system were $67,584,417, and net earnings were $55,446,979. The net earnings of the Federal Eeserve Bank of Chicago were $6,805,081 — equivalent to about sixty-one per cent of the paid-up capital as of December 31, 1918. After paying dividends of $603,602 there remained $3,100,223 to transfer to the surplus fund and an equal amount to turn over to the government as a franchise tax, in accordance with the plan for division of earnings above the six per cent cumulative dividend allowed the member banks. In 1919 the net earnings of the Federal Reserve Bank of Chicago were $8,576,204. The net earnings for the entire system in 1920 were 158.4 per cent of the capital stock.^^^ Some support for the Federal reserve system was brought out in the discussion of a resolution to the effect that the Iowa Bankers Association favored the abolition of the Comptroller's office. The resolution was finally tabled.**'^ On the whole, however, the attitude toward the new system during the first two years of. its existence, as shown by the Iowa Bankers Association, was either one of indifference or opposition. The outbreak of the war and the amendments of June, 1917, were responsible for a marked change in the member- ship of State institutions. The removal of obstacles in the way of State bank membership came at a time when the FEDERAL RESERVE SYSTEM IN IOWA 211 requirements of financing the war made evident the need for cooperation. Patriotism was coupled with a desire on the part of banks to strengthen their own position for the great effort of war financing. President Wilson urged upon the banks the need for strengthening the resources of the Federal reserve system. He stated that the financial power of the country would depend largely ^ ^ upon the strength and staying powers of the Federal reserve banks". Eligible State banks were urged to consider the question of member- ship in the Federal reserve system as a ''solemn obliga- tion ".''^^ Iowa 's response to this appeal is noteworthy. By the end of 1918 seventy-seven State banks were members. Among these were included some of the larger State banks, notably the American Commercial Savings Bank of Davenport with resources of fourteen and one-half million dollars.^*® By 1918 there was a complete reversal of attitude by the Iowa Bankers Association. The members of the Associa- tion gathered in convention at Dubuque on June 19th and 20th when the war situation was not encouraging. The thought of the hour was centered upon winning the war, and as bankers the members of the Association sought to carry their share of the burden. Praise for the part played by the Federal reserve banks in handling the financial prob- lems of the war was frank and generous. C. A. Hinsch, President of the American Bankers Association, stated in the course of his address, that: **The Federal Reserve Act is the greatest piece of constructive legislation ever enacted by our Government and it is very fortunate indeed that we were able to place this great system in operation before en- tering the world war. . . . All eligible State Banks should join the system. It is inconceivable that the Na- tional Banks alone would be expected or permitted to insure the financial stability of the country unaided by the eligible State Banks." J. B. McDougal, Governor of the Federal 212 HISTORY OF BANKING IN IOWA Eeserve Bank of Chicago, also strongly urged State banks to join. He expressed the opinion that the attitude of in- difference and criticism at first shown by members had changed. President-elect J. H. Ingwersen endorsed every statement made by Governor McDougal and urged the need of a unified system of banking. Official endorsement of the Federal reserve system was given by the Iowa Bankers Association in a resolution which reads as follows : Whereas, the Federal Reserve System has proven a tower of strength to the Nation, and to our aUies in financing the activities of war and in stabilizing and protecting the business interests of the country: Therefore, Be It Resolved, That we, the Iowa Bankers, in Con- vention assembled, endorse the Federal Reserve System and recom- mend that State Banks give careful and favorable consideration to the privilege they have of becoming members of the system, both for the advantages they wiQ gain and as a patriotic duty to aid the Government to mobilize the financial resources of the Nation for the successful prosecution of the War.*^*' The good will of the Iowa Bankers Association toward the Federal reserve banks has been repeatedly manifested in succeeding years. Governor W. P. G. Harding of the Fed- eral Reserve Board has twice been welcomed as a conven- tion speaker and the officers of the Federal Reserve Bank of Chicago have also addressed the Iowa bankers at the an- nual convention. In November, 1920, the Association pro- moted a series of farmer-banker conferences at which the officials of the Reserve Bank were the principal speakers. At the annual convention earlier in the same year a per- manent Federal Reserve Committee was created whose duty is to present to the officers of the Federal Reserve Bank matters affecting the members of the Association and to co- operate with them in securing needed changes in the law or its administration.^^^ FEDERAL RESERVE SYSTEM IN IOWA 213 SEEVICE IN THE CEISI8 OF 1920 The signing of the armistice did not terminate immedi- ately the necessity for government financing. Moreover, it left a heavy problem of credit readjustment. During the early months of the year 1919 business was somewhat un- certain and wholesale prices slumped slightly. This was followed by a post war boom in practically all lines of indus- try. In Iowa this activity in general business was accom- panied by land speculation and the flotation of many indus- trial propositions, few of which gave promise to a conserva- tive investor of being ultimately successful. The average price of land increased $63 per acre during 1919 ; cases of re-sale within a few weeks at an advance of from $50 to $100 per acre were not uncommon during the summer months. During the same period $200,000,000 of capital are estimated to have been wasted in wildcat promotion projects. During 1919 the Federal Reserve Board hesitated to try to curb this over-extension of credit by raising the discount rates of the banks. According to the Governor of the Fed- eral Reserve Board, the ''principal reason why discount rates were not increased earlier than they were in 1919 was on account of Treasury financing." Purchasers of Liberty bonds had been urged to ''borrow and buy" on the promise of low interest rate on notes secured by government obliga- tions. By the end of the year 1919 it was felt that the bond purchasers had been given sufficient assistance. In the early weeks of 1920, therefore, the Federal reserve discount rates were increased in the hope of checking further infla- tion. Rates on commercial paper were advanced from four and three-fourths per cent to six per cent for the Chicago district. In the early summer the commercial rate was ad- vanced to seven per cent. The effect of this was to aid in checking the expansion of credit and starting a movement toward liquidation. 214 HISTORY OF BANKING IN IOWA The reports of the State and savings banks in Iowa show that expansion of credit continued until the spring of 1920. On April 2nd, the State and savings banks reached the maxi- mum volume of loans shown by any report to date, the total being $647,850,601. Compared with the nearest correspond- ing date in 1919 this was an increase of $168,705,165, repre- senting an expansion of loans of over thirty-five per cent during the year. From April to November, 1920, there was a decline of $7,814,576 in loans. In the meantime deposits had fallen from $705,487,819 to $620,861,010, a drop of $83,626,809, or over ten times the reduction which had taken place in loans. Since that time liqiudation has continued, loans on March 22, 1921, being $616,993,214, or $30,857,386, below the corresponding date in 1920 at which time they had stood at the maximum. Deposits still continued to de- cline more rapidly than loans, but after November the liquidation of the two proceeded at a more nearly equal rate. On March 22nd the deposits were $586,079,164, this being $119,408,654 below the high mark of one year earlier. To meet such an unusual demand by depositors the banks were compelled to increase materially their bills payable and rediscounts. On April 2, 1920, this item in the con- solidated statement was $36,776,367, w^hich was slightly more than double what it had been a year earlier. This figure mounted rapidly during 1920, reaching a maximum of $80,143,951 on December 31st. The March, 1921, state- ment shows that the banks had somewhat improved their position in this respect. The average percentage of reserve in all State and savings banks was 16.7 per cent on April 2, 1920, 12.5 per cent on November 3rd, and 13.4 per cent on March 22, 1921. Taken as a whole, therefore, the reserve position of the banks was fairly well sustained, a thing which would seemingly have been quite impossible without liberal resort to rediscounting operations. The data given are for State and savings banks, of which FEDERAL RESERVE SYSTEM IN IOWA 215 only 80 out of over 1300 were members of the Federal re- serve system. Data for the national banks covering the same period are not available to the writer, but data con- cerning total rediscounts with the Federal reserve bank indicate that somewhat similar results would be shown by including them. Since all of the national banks are mem- bers of the Federal reserve system, it was to them that the rediscount privilege proved of most direct benefit. But the rediscounts secured by Iowa banks from their corre- spondents in Chicago, New York, and other financial cen- ters, were practically all made with members of the Federal reserve system. They made these advances much more freely because they were able to look to the Federal reserve bank in their district for assistance. Indirectly, therefore, the non-member banks were securing help from the Federal reserve system. The direct service of the Federal Reserve Bank of Chi- cago in rediscounting paper for Iowa banks is shown by data of the rediscounts on representative dates. During the months following the war when war borrowing was still the dominant reason for advances by the Federal reserve banks, the loans to Iowa member banks by the Federal Re- serve Bank of Chicago reached a high point in May, 1919, of only $32,000,000. A year later the figure was $65,000,000. During the summer of 1920 the amount was reduced some- what ; but in the fall it mounted steadily, reaching $91,000,- 000 in November, 1920, and $97,000,000 in January, 1921. On April 8, 1921, it was reported that of the 457 Iowa mem- bers of the Federal reserve system 375 banks were borrow- ing. The records on that date showed outstanding loans by the Federal Reserve Bank with Iowa banks of $75,000,- 000. The basic line for the Iowa banks was then $36,000,- 000; the excess was, therefore, more than one hundred per cent. Three hundred and twelve of the borrowing banks were reported to be over their basic loaning line, some of 216 HISTORY OF BANKING IN IOWA them as much as fifteen times. By an amendment of the Federal Reserve Act of April 13, 1920, the Federal reserve banks were authorized with the approval of the Board to establish graduated rates of discount. These progressive rates could be assessed only against amounts discounted in excess of the basic line. Four of the Federal reserve banks applied the^e super-rates, but the Chicago bank maintained uniform rates on all rediscounts. In spite of these large rediscounts by Iowa banks, the idea has persisted that the reserve system has not served the needs of the farmer. In order to promote a better mutual understanding between the farmers, the Iowa bank- ers, and the officials of the Federal Reserve Bank of Chicago, four farmer-banker conferences were arranged by the Fed- eral Reserve Committee of the Iowa Bankers Association. These conferences were held in different sections of the State during November, 1920. Executive officers of the Federal Reserve Bank of Chicago attended each of these conferences. In the estimation of the committee, they * * served immeasurably in bridging a difficult situation ; be- cause they not only corrected the viewpoint of the farmer, but also the officials of the Federal Reserve Bank on just the circumstances under which the Iowa banker was work- ing." In the spring of 1921 the officials of the Federal Reserve Bank appeared anxious to press liquidation somewhat more rapidly. But at that time further liquidation appeared to the Iowa bankers to be quite impracticable. A conference was, therefore, held on April 8th in Chicago by L. A. An- drew, President of the Iowa Bankers Association, and M. V. Henderson, Jr., State Superintendent of Banking, with the executive officers of the Federal Reserve Bank. The result of the conference was an understanding that con- servatively managed Iowa banks would be granted the credit absolutely needed. Unsound practices were to be FEDERAL RESERVE SYSTEM IN IOWA 217 severely censured. Mr. Andrew expressed himself in his report on the conference as surprised at the extent to which the Federal Reserve Board had gone to take care of the Iowa situation.^^2 ADVANTAGES AND DISADVANTAGES OF STATE BANK MEMBERSHIP One of the advantages that membership in the Federal reserve system brings to the State banks of Iowa is lower reserve requirements. Under the Iowa law State and sav- ings banks located in towns of less than 3000 population must keep a cash reserve of fifteen per cent of their sight and demand deposits and eight per cent of the savings de- posits and certificates of indebtedness. For towns above 3000 population the proportions are twenty and eight per cent respectively. Of this reserve, eighty-five per cent may be kept in other banks under State or national law. By an amendment to the State law in 1919 State bank members of the Federal reserve system were permitted to conform their reserve requirements to those of the national bank members.*^^ The reserve requirement for the Fed- eral reserve system is seven per cent of the demand and three per cent of the time deposits for all the banks of Iowa with the exception of those banks located in the reserve cities of Cedar Rapids, Des Moines, Dubuque, and Sioux City, in which the percentages are ten per cent on the de- mand deposits and three per cent for time deposits. All of this prescribed reserve must be kept in the Federal Re- serve Bank at Chicago. Moreover, this reserve balance need not be inactive, but may be drawn against in precisely the same manner as a balance with any correspondent. The average daily balance over a weekly or semi-monthly period, however, must equal an amount representing the percent- ages applicable to the bank in question. The cash-in-bank reserve of the member banks is left optional with them. 218 HISTORY OF BANKING IN IOWA If the percentage of cash which the Iowa law requires a bank to keep on hand represents an adequate supply, mem- bership in the Federal reserve system would reduce by one- half the legal reserves of Iowa banks. The concentration of reserves in the Federal reserve banks makes possible this reduction in reserves with a gain in strength for the system as a whole. A second advantage is the rediscount privilege which is open only to member banks. The degree to which State banks will value this opportunity depends on the demand for loans in their communities and the amount of eligible paper which they carry. Even a non-borrowing bank can conduct its business with greater confidence if it knows that assistance will be available when necessary. Prior to the passage of the Federal Reserve Act it was regarded as a sign of weakness for a bank to rediscount paper but this is no longer the case. The officers of a savings bank member of the system in the writer 's native town bank testify to the value of the rediscount privilege during seasons of excep- tional demand on the country bank for loans. Bankers gen- erally are finding a larger proportion of paper eligible for rediscount than they thought would be the case. During the year 1918 three hundred and thirty-three Iowa banks rediscounted $385,191,839 worth of paper. This shows that at least three-fourths of the Iowa member banks had found this privilege valuable even before the period of crisis.^®* A third advantage which State and savings banks may gain from the Federal reserve system is the right to par- ticipate in the clearing and collection system inaugurated by the Federal Reserve Board. The framers of the Fed- eral Reserve Act had in mind the possibility of applying the principle of the city clearing house to a nation-wide system. This feature was not put into operation, however, when the Federal reserve banks were established in 1914; but after some experience with a ** voluntary" system during 1915 FEDERAL RESERVE SYSTEM IN IOWA 219 and 1916 a country-wide system of clearing checks was made effective on July 15, 1916. Member banks were not re- quired to use the facilities of the clearing plan, but they were required to remit without deduction for checks on themselves sent for collection by the Federal reserve banks. By an amendment passed on June 21, 1917, non-member banks or trust companies, which would maintain a clearing account with the Federal Reserve Bank, were allowed to participate in the clearing system.^^^ The cost of operating the clearing system was at first borne by the banks using its facilities; but beginning with July 1, 1918, all service charges were abolished. With these extensions of the service and elimination of expense the volume of clearings materially increased. The average number of items handled daily by all of the Fed- eral reserve banks in 1917 was approximately 276,000 ; dur- ing the period from October 15th to November 15, 1918, the daily average was 828,000. The Federal reserve banks at present receive at par, from member and clearing member banks, checks on all member banks and other banks whose checks can be collected at par. By means of the gold-set- tlement fund at Washington, inter-district clearings are also affected. In this way member banks have exchange facilities throughout the entire country and are enabled to keep smaller balances with correspondent banks at various points. For some time the service of the clearing system was hampered by the lack of cooperation on the part of non- member banks. Checks on banks making exchange or col- lection charges could not be cleared or collected through Federal reserve banks. This clearing system will not, therefore, be able to function fully until checks on every bank in the country can be collected at par. By the end of 1918 all of the banks in the Boston and New York districts were on the par list. In the Chicago district there were 220 HISTORY OF BANKING IN IOWA 1334 member banks and 2392 non-member banks on the par list as of December 15, 1918. Non-member banks not re- mitting at par numbered 1805. In order to reduce the num- ber of banks in the latter class, personal representatives of the Federal Eeserve Bank of Chicago visited the non-par banks of the district during 1919. In Iowa they were so successful in reducing the number of non-par banks that before January 1, 1920, the entire State was listed as par territory. Non-member banks have not found it of real advantage to maintain a clearing account, and in fact only a very few in the seventh district do so at present. The reason for the refusal of some banks to remit at par was that they would lose thereby the profit which they had been accustomed to receive from their exchange charges. They have argued in the past that these charges were based on what it would cost them if they were to ship currency. To combat this argument the Federal reserve banks agreed, after October 1, 1918, to absorb the cost of postage, express- age, insurance, and other expenses when shipments of cur- rency are needed. Stamped letters are also enclosed with collection letters for return remittances. With the facil- ities for making remittances furnished at present by the Federal reserve banks, there seems to be no longer any valid argument for a bank refusing to remit on its checks at par. The exchange charging banks, nevertheless, have stren- uously opposed the efforts of the Federal reserve banks to establish a universal system of par collections. When banks refused to remit for their checks without deduction for exchange, the Federal reserve banks arranged to collect their checks directly through an agent. On January 21, 1920, the Federal Reserve Bank of Chicago reported that seven Iowa banks were being collected through the express company and two through agents. The opposition of some Iowa bankers has been very decided, but on the whole such FEDERAL RESERVE SYSTEM IN IOWA 221 opposition has not equalled that of other sections of the country. It appears that the competition among bankers had already largely eliminated the practice of charging exchange. In response to the protest from State chartered banks, the legislative committee of the Iowa Bankers Association took up the matter in the fall of 1919. It was found that only about 224 banks were not paying their checks at par when presented by the Federal Reserve Bank. In order to give the bankers who were opposed to par remittance an oppor- tunity for organized opposition to the action of the Federal Reserve Board, a letter was sent by the committee suggest- ing that a meeting be called for this purpose. Only seventy- nine answers were received, and of those replying forty- eight stated that they would try to attend such a meeting if called. Owing to this very apparent lack of interest the committee concluded that it was not justified in calling the meeting. Nevertheless three State bankers attended a na- tional conference in Washington early in May, 1920, called by the National and State Bankers Protective Association. The purpose of this conference was to bring the matter before Congress in an effort to secure protective legislation. No immediate results were secured. In addition to individual checks, collection items, clearing- house notes and bills and miscellaneous drafts are also handled for the banks. These were subject to a service charge of ten cents per item until July 1, 1918, when the Chicago Reserve Bank suspended the service charge in order to stimulate interest in this feature of the collection system. During the six months ending December 31, 1918, the Bank handled an average of twenty-two items of this class per day for the Iowa banks. *^® Further advantages of membership to State banks are that the capital stock is a tax-free, six per cent investment ; membership adds prestige; and government deposits, with 222 HISTORY OF BANKING IN IOWA the exception of postal savings deposits, are made in normal times only in member banks. *^^ Disadvantages of State bank membership have practically- all been eliminated by amendments to the act since 1914. The right of State banks to withdraw upon six months writ- ten notice has been definitely established. State banks are allowed to retain full statutory or charter rights as State banks or trust companies, even to the extent of being re- leased from restrictions of section eight of the Clayton Act, which relates to joint directorship.^^^ They may carry loans for a single individual which would be "excessive" for a national bank member, the only restrictions being the State law and the prohibition on the right to rediscount that indi- vidual 's paper with the Federal Reserve Bank. State bankers frequently object to becoming members of the Federal reserve system because they would lose thereby the interest on their reserve account. City banks have cus- tomarily allowed their country correspondents a low rate of interest on the average balance carried. The Federal reserve banks, on the other hand, do not pay any interest on balances kept with them. If they should pay interest, they would be obliged to keep a large proportion of their funds employed in productive investments. This would im- pair their strength as reserve institutions and force them into competition with member banks. The large earnings of the Federal reserve banks in 1918, 1919, and 1920 have been responsible for a renewal of the agitation for interest on reserve balances, but no change has been made. Lower reserve requirements offset in some degree the loss of in- terest; nevertheless, this objection has had considerable weight with most country bankers. Moreover, there are certain services which the city cor- respondent renders to the country banker which the Federal reserve banks are not in a position to duplicate. Many Iowa bankers have manifested an unwillingness to transfer their FEDERAL RESERVE SYSTEM IN IOWA 223 reserve account away from established connections and in so doing break up valuable business relationships of long standing. They realize, too, that many of the advantages of membership can be secured indirectly through the city correspondent. The capital stock requirement is a definite obstacle to membership in the way of many State banks which might otherwise join the system. The State bank members are required to meet the same standards as those prescribed for national banks. This of itself would bar hundreds of Iowa banks, especially of the savings bank group, from entering. NEW POWEES GEANTED TO NATIONAL BANKS The extension to the State chartered banks of the rights and privileges of membership in the Federal reserve system necessitated modifications in the direction of greater free- dom and scope for the national banks. Note issue is a much less valuable privilege, since the Federal reserve banks will probably supply all of the need for further expansion of bank notes. More liberal provisions as to maximum loans to an individual, real estate loans, trust company powers, and savings deposit business were needed in the national banking law, if the national banks were to find it advan- tageous to retain their national charters and new banks were to incorporate under the national banking law. Since the State bank members can not rediscount paper of an individual whose borrowings aggregate over ten per cent of the capital and surplus of the bank, it was not deemed necessary to make any change in this feature of the national banking law. In regard to the loans on real estate, the act as amended on September 7, 1916, provides that na- tional banks may loan on improved and unencumbered farm land within its Federal reserve district, or within one hun- dred miles of the bank irrespective of district lines. The limit of the loan was placed at one-half the value of the land. 224 HISTORY OF BANKING IN IOWA and the time limit at not over five years. On real estate as distinguished from farm land the distance limit is one htin- dred miles, the time limit one year, and the value limit is again fifty per cent. The maximum amount of such loans by any bank is fixed at twenty-five per cent of its capital and surplus or one-third of its time deposits.^^^ Trust company powers were valuable privileges which had been extended to all State chartered banks by the Gen- eral Assembly of Iowa in 1913. Among the powers con- ferred upon the Federal Reserve Board by the Federal Reserve Act is the authority to ' ^ grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe. ' '^^'^ In 1915 the General Assembly of Iowa granted authority to any national bank, when authorized by the United States law, to act in a fiduciary capacity and to carry on a safe deposit business.^^^ By this act trust companies. State, savings, and national banks were all placed on an equality in their trust company powers. The validity of the Federal act granting powers to the national banks was challenged in two or more States, where suits were instituted to test its constitutionality. ^^2 Qn June 11, 1917, the United States Supreme Court handed down a decision reversing the de- cision of the Michigan court in the case of Bank v. Fellows. By this decision the Supreme Court sustained the right of Congress to grant to national banks the trust company powers enumerated in Section 11 (k) of 'the Federal Re- serve Act. Moreover it recognized the right of Congress to modify the law so as to enable national banks to meet the competition of State chartered banks.^"^ The policy of the Federal Reserve Board regarding the granting of trust company powers has been very conserva- tive. Permits are granted only after careful examination of FEDERAL RESERVE SYSTEM IN IOWA 225 the fitness of the bank to exercise fiduciary functions. By the end of 1917, thirty-four national banks in Iowa had been granted permits to exercise trust company powers; five more were added to the list in 1918, fifteen in 1919, and eleven in 1920.^*^^ In order to clear up doubt as to the authority of the Board to bring about a more thorough coordination of banking powers as between State and Federal institutions, an amendment was passed on September 26, 1918, to Sec- tion 11 (k) of the act, enlarging the fiduciary power which may be granted to national banks so as to include authority to act ''as guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations, which come into competition with national banks, are per- mitted to act under the laws of the State in which the na- tional bank is located. "^^^ Savings accounts in national banks were encouraged by the lowering of reserve requirements against this class of deposits. By the terms of the act in 1913 a reserve of five per cent only was required against time deposits. The defi- nition of this class of deposits was that ''time deposits shall comprise all deposits payable after thirty days, all savings accounts and certificates of deposit which are subject to not less than thirty days ' notice before payment ' '. Postal sav- ings deposits were included in this class in 1917 and the required reserve reduced to three per cent.^^*^ Legitimate savings business is now more profitable for national banks than formerly. Coupled with the lower reserve require- ment is the right to invest one-third of all time deposits in approved loans secured by real estate. The national banks were given the additional power by the Federal Reserve Act, when located in towns having a population of 5000 or less, to act as insurance agent or as agent for real estate loans.^*'^ 15 226 HISTORY OF BANKING IN IOWA INFLUENCE ON IOWA BANKING The result of the changes brought about by the Federal reserve system in Iowa is to eliminate many of the differ- ences between commercial banks of whatever name. In so far as a banking institution engages primarily in a savings bank business, or an investment business, or in the exercise of trust company powers, it will be outside the range of banks affected by the Federal reserve system. The com- mercial banks of the State have been unified in function and method. Not only member banks but non-member banks have been affected, especially through the operations of the Federal reserve clearing system. Moreover, in the matter of rediscounts and borrowings the non-member bank also feels the influence of the new banks. The Federal reserve system provides a market for commercial paper. Through the city correspondent, who is a member of the system, the country banker may share the rediscount privilege. The published discount rates of the Federal reserve banks have brought about a greater degree of uniformity in discount rates. The introduction of trade and bank acceptances will do much to modify banking practice. In 1913 national banks were granted the right to accept drafts or bills of exchange drawn upon them, having not more than six months to run. At that time bank acceptances were limited to bills of ex- change based upon the importation or exportation of goods, but by subsequent amendment bills or drafts growing out of domestic transactions were also included. In 1919 the State, savings banks, and trust companies of Iowa were also au- thorized to accept drafts. Federal reserve banks may rediscount these bankers ' acceptances or purchase the same in the open market. The banker 's acceptance has long been a familiar credit instrument in Europe, but it was little used in America until the establishment of the Federal reserve system. '^^^ FEDERAL RESERVE SYSTEM IN IOWA 227 Financial leadership of the Federal reserve system and its unifying influence upon the banking machinery of the country has been shown in the way the emergency of war financing has been met. When the Federal Reserve Act was passed it superseded the temporary Aldrich-Vreeland Act which was to expire by limitation on June 30, 1914. The framers of the Federal Reserve Act, however, not wishing to leave the banks without the possibility of issuing emer- gency currency in case the new act was not in readiness for operation by June 30th, reenacted certain of its provisions and extended them one year.^°^ Fortunate indeed was it that this precaution was taken, although few of its sponsors could have foreseen the emergency that was to make it use- ful. The outbreak of the World War in Europe came just at the time when the Federal reserve system was being or- ganized. In the strain of the readjustment of international finance heavy demands were made on the banks of the coun- try. The emergency currency authorized under the Aldrich- Vreeland Act filled the gap until the Federal reserve banks could be put into operation. The Aldrich-Vreeland Act as amended, provided for the formation of national currency associations. In Iowa such an association was formed and issued to the national banks of the State over $3,000,000 of currency early in the fall of 1914. This was especially needed in counties where the live stock quarantine, due to the foot and mouth disease, was enforced.^^^ On November 16, 1914, the Federal reserve banks began actual operations. They were organized too late to assist in meeting the first shock of the European war but the Fed- eral Reserve Board had been appointed earlier and had assumed a position of leadership in the first stages of finan- cial readjustment. As the months passed and war between the United States and Germany seemed imminent, the Board directed the policy of the Federal reserve system so that it 228 HISTORY OF BANKING IN IOWA might be prepared to meet the financial problems of the war. When the United States finally entered the war in April, 1917, the Federal reserve banks were in excellent condition with vast stores of gold and surplus reserves with which to extend credit wherever needed. The new functions performed by the Federal reserve banks during the war brought them into intimate contact with all the banks in their districts. As a means of adver- tising the services of the Federal reserve system, the war accomplished in a few months what would normally have taken years. It would seem that the system has so amply justified its place as the centralizing factor in American banking as to warrant all eligible State banks in entering. XI BUILDING AND LOAN ASSOCIATIONS The Code of 1897 defines institutions treated under the general title of *' Building and Loan Associations" as, ''cor- porations organized for the purpose of furnishing money to their members upon sufficient security". As implied by this definition the purpose of building and loan associations is primarily to serve the borrower, usually a home builder or purchaser. They are allowed to receive deposits but musi issue shares of stock for the same. Borrowers are also re- quired to take out shares having a maturity value equal to the amount of the loan. This being the case, building and loan associations are strictly cooperative institutions. Technically they are not banks, being prohibited by statute from transacting a banking business. They are, however, important and successful financial institutions, supplement- ing and being closely connected with banking activities, under special State regulation which makes it necessary to give them some consideration in this study. ^" OEIGIN AND GEOWTH OF THE BUILDING AND LOAN MOVEMENT Building and loan and savings and loan associations ex- isted in England as early as 1789, the earliest association of which we have a full account being the Union Building As- sociation of Greenwich, England, established in January, 1809. Its purpose was to raise funds by monthly subscrip- tions to be expended in building houses. Each share in this association represented a house built under the direct super- vision of the society. When houses were furnished they were distributed among the members by lot. A member suc- cessful in the drawing was compelled to give satisfactory security, continue payments on his share, and pay five per 229 230 HISTORY OF BANKING IN IOWA cent interest to the society until all had secured homes.^^^ The first association in the United States was organized at Frankford — then a suburb of Philadelphia, Pennsylva- nia, but now incorporated in the city — on January 3, 1831, under the name of the ' ' Oxford Provident Building Associa- tion ' '. It followed the English models in general principles, and its organization was probably due to the efforts of English workmen. A few years later associations were formed in Brooklyn and Baltimore. Soon they spread somewhat generally throughout the country. In Massachu- setts the building and loan associations are known as co- operative banks; in Louisiana they are called homestead associations. The first comprehensive report of the development of the movement in the United States made by the Department of Labor in 1893, shows that the period of most rapid growth in number of associations was during the decade 1880-1890. The total number of associations in 1893 was 5838. This number increased slightly in the following years, being 5975 in 1896. Then followed a period of steady decrease in num- bers, the total at the time of the next report in 1903 being 5350. This was accompanied by a decline also in total assets from $651,544,641 in 1896 to $599,550,855 in 1903. The years since 1903 have witnessed a slow growth in the number of associations but a remarkable increase in financial impor- tance.^^^ In 1918 the total assets of the 7484 associations in America were $1,898,344,346, while the members numbered 4,011,401. In number of members and total assets of asso- ciations, Pennsylvania and Ohio are well in the lead of the other States, followed by New Jersey, Massachusetts, Illi- nois, New York, and Indiana. Iowa ranked nineteenth in 1918, but there was a decided difference between the leading States and those rating near Iowa in the list. Ohio had 723 associations with assets of $359,559,538; while Iowa had only 57 associations with assets of $12,385,755.^^* BUILDING AND LOAN ASSOCIATIONS 231 No legislation concerning building and loan associations was enacted in Iowa until 1872, and the law at that time merely authorized the incorporation of cooperative and mutual loan associations and permitted them to carry on their business under the general incorporation law. The usury law was held not to apply to the cost of loans made by the associations, which might include premiums and fines ; but they were limited for current expenses to ten per cent of the earnings. The remainder of the earnings must be placed to the credit of shareholders. No reports were called for or further supervision provided. ^^^ This statute remained as the only legislative provision until 1896 when comprehen- sive regulations were enacted and all such associations were required to report annually to the State Auditor.^^® Be- ginning with 1897, therefore, the official records are com- plete; while for the period before that time continuous statistics can not be secured. Meantime, the greatest de- velopment of the movement had taken place. The Auditor's report in 1897 listed 117 associations — the largest number that has ever been reported.^^^ According to a study published by the United States Com- missioner of Labor in 1893 the oldest association then in existence in Iowa was the Perpetual Building Association of Clinton, which was organized on January 1, 1870. The second oldest was the Keokuk Loan and Building Associa- tion, the date of its organization being March, 1872. This association still continues under the same name and is the oldest Iowa association now in existence. The Perpetual and two other Clinton associations formed in 1873 have since been discontinued, leaving as the second oldest the Perpetual Savings and Loan Association of Cedar Rapids founded on January 19, 1875, which in 1918 was also the largest association in lowa.^** By 1893 eighty-nine associations were in operation in Iowa. Two of these had been formed before 1873; nine, in 232 HISTORY OF BANKING IN IOWA the five years following; twelve, from 1879 to 1882; twenty- four, in the next five years; and forty-two, from 1888 to 1893.^^^ Comparing these statistics with the Auditor's fig- ures three years later, it is evident that the period of great- est growth occurred in the late eighties and early nineties. Table IX shows the steady decline in number of associa- tions after the law placed them under the Auditor's super- vision in 1896. Table IX Number of Budding and Loan Associations IN lOWA, 1896-1918"« Year Total Number Domestic-Local Domestic FOREIQN 1896 117 87 29 1 1898 108 79 28 1 1900 88 63 24 1 1902 72 65 17 1904 60 52 8 1905 57 46 11 1907 48 43 5 1909 49 45 4 1911 47 46 1 1913 60 50 1915 50 50 1917 54 54 1918 57 57 The numbers given are those reporting to the Auditor as of December 31st in each year. The total assets of the 117 associations in 1896 were $12,565,465. With the decline of numbers the assets also declined to $5,656,569 in 1902. Thereafter for ten years the Auditor's reports do not give a record of the total assets. In 1913 the total had recovered to $7,367,344 in spite of the further decline in number of associations. By the end of 1918 the number of associations had increased only seven, but the total assets had grown to $12,385,755, or almost seventy per cent in five years. BUILDING AND LOAN ASSOCIATIONS 233 TYPES OF ASSOCIATIONS Two general types of associations have been distinguished — local and national. Their business has been conducted under substantially similar methods, but the field of opera- tion is far different. The local association confines its busi- ness to a small community, usually the city or county in which it is located; the national association is ready to make its loans on property anywhere or sell its shares to anyone without regard to his residence. Numerically and finan- cially the local associations have always been far more im- portant. In 1893, when the United States Commissioner of Labor made the first comprehensive report on building and loan associations covering the entire country, 5598 local associations were reported, as compared to 240 national or- ganizations. The average size of the national associations was considerably greater, the average number of share- holders per association being 1637.1 as compared to 244.5 per local association. ^^^ The leaders of the building and loan association move- ment have always insisted that the proper field of opera- tions is a strictly local one. Judge Seymour Dexter, an authority on the subject, stated his views in an address before the annual meeting of the United States League of Local Building and Loan Associations held at Cleveland in 1895 as follows : In my own thoughts and ideas, the building and loan association is a local institution, and the principles on which it is founded do not admit of unlimited extension. The unparalleled success of these associations in the past has been largely due to the fact that they were local and neighborhood institutions, and comparatively small in the aggregation of capital in each. The moment these associa- tions become extended in the conduct of their business over large territory, that moment many of the elements of safety involved in the local association methods are necessarily eliminated, and dan- gerous ones substituted in their place. They are no longer genuine 234 HISTORY OF BANKING IN IOWA building and loan associations because no longer conducted on the methods on which these associations have won their success and grown into fame. These principles of the true building and loan association, to which Judge Dexter refers, he set forth in another ad- dress and included officers willing to serve for the good of the association ; shareholders in a position to know what the association is doing and upon what securities their money is being invested; and shareholders in a position to attend meetings and vote in person for officers of their own choice. He held that all these elements are lacking in a national as- sociation, and into such a field many scheming and dishonest individuals would enter unless legally restrained. ^^^ In the survey made by the Commissioner of Labor in 1893, Iowa is credited with eighty-one local and eight national associations. When the present legal classification was adopted in 1896 three types of association were recognized by the statutes : domestic-local associations, whose business is confined to the county wherein is situated the town or city which is the principal place of business; domestic associa- tions, which may operate anywhere within the State or in other States ; and foreign associations, which are those in- corporated under the laws of another State.^^s At the time of the last published report all of the Iowa associations were of the domestic-local type.^^* When the first annual reports were made to the Auditor in 1897 there were eighty-seven domestic-local, twenty-nine domestic, and one foreign association operating in lowa.^^^ Of these the twenty-nine domestic associations might in practice have operated as local associations, but undoubtedly many were of the national type. At about this time the prejudice against national associations led the various States to enact stringent restrictions against foreign associations. Ne- braska claims the honor of being the first State to pass a law to exclude national associations.^^^ This legislation was BUILDING AND LOAN ASSOCIATIONS 235 directed principally against Iowa and Minnesota companies which by their methods had caused Omaha people to lose confidence in building associations, many of them having lost money through the national associations. The Iowa associations centered in Des Moines, and because of their methods they made the name building and loan '*a by- word" in that city. So true was this statement that Des Moines was unable to organize a local of the true co- operative type until 1916.^^^ The Iowa legislation of 1896 was very drastic in re- stricting the operations of associations of this type. For some years there was a marked falling off in number and strength of these institutions, but the movement was puri- fied and strengthened and is once more growing in strength and public favor. The special regulations applying to the foreign associations included a requirement that these as- sociations deposit with the Auditor of State $100,000 in bonds or other securities for the protection of resident shareholders. They were further required to furnish the Executive Council with a copy of the articles of incorpora- tion and by-laws, a certified copy of the State laws under which they were organized, and a report for the preceding year showing their condition in detail. Foreign associations were required to allow legal processes to be served by mail at the home office. Amendments to articles of incorporation or by-laws must be filed within ten days after adoption. Fees were much heavier than for the local organizations. They were required to pay $100 for the application to do business ; $50 for the certificate of authority and its annual renewal ; and from $3 to $50, according to assets, for filing the annual statement. When fees imposed by other States on Iowa associations exceeded the Iowa fees, the fees in Iowa were to be increased thereto for associations chartered in those States. A fee of $25 for the certificate of authority and each renewal and $10 for filing each annual statement 236 HISTORY OF BANKING IN IOWA was imposed on domestic associations. The only fee im- posed on domestic-local associations was $5 for filing each annual statement.'^^* In 1900 foreign companies were pro- hibited from doing business in Iowa unless the laws under which they were incorporated were in substantial agree- ment with the Iowa laws and afforded equal protection to shareholders.^^^ These restrictions and public dissatisfac- tion with their methods drove national associations from Iowa. MEMBEESHIP IN ASSOCIATIONS Any number of persons, not less than five, may now be in- corporated as a building and loan or savings and loan association under the general incorporation laws of the State. The capital named is known as the authorized cap- ital, and the association is allowed to commence business as soon as one hundred shares thereof have been subscribed, provided the other features of the law have been complied with. Stock is either installment or fully paid. The original payment on installment stock may be as low as fifty cents ; hence an association may begin business with a very small amount of paid in capital. Usually the incorporators name a capital far in excess of the immediate needs of the busi- ness. For instance, one Waterloo association with assets of $750,000 has an authorized capital of $15,000,000. The maximum amount of stock which can be issued to one indi- vidual is $10,000 par value except that any association hav- ing assets of more than $1,000,000 may issue to one person stock not in excess of one per cent of its assets. Since bor- rowers are limited by the stock they must buy, this limits the amount of the maximum loan as well as the maximum de- posit. ^^^ Members of building and loan associations are of two classes — depositing members and borrowing members. In the earlier associations all members expected at some time BUILDING AND LOAN ASSOCIATIONS 237 to be borrowers. It is still true that many persons who are at any given time depositing members expect eventually to use the association as a source from which to borrow. There are, however, a considerable number of shareholders who are strictly depositing members. Building and loan asso- ciations are mutual or cooperative institutions. No stock- holder receives special returns or carries special responsi- bility in case of loss. All investors receive shares of stock rather than certificates of deposit. Shares of depositing members may be fully paid or bought on the installment plan. In 1893 about twenty-six per cent of all shareholders in Iowa associations were borrowers. In the local associa- tions approximately thirty-four per cent of the members were borrowers ; in the national associations of Iowa only about fourteen per cent of the members were borrowers. This points to onf' weakness of the national type of associa- tion : it was not devised to serve the borrower, but was pro- moted rather as an investment proposition. Only a small proportion of the Iowa members own fully paid stock; on January 1, 1918, the Iowa associations were liable to mem- bers for $10,202,639 paid on installment stock, while fully paid stock was credited with only $463,496.^^^ PLANS FOE ISSUING SHARES Three plans for issuing shares have been used. In the order of historical development these are the terminating, the serial, and the permanent (or Dayton) plans. The earliest associations were composed of groups of men desir- ous of building homes and did not include those who were strictly depositing members. Under the terminating plan a certain limited number of shares were issued in a single series. The life of the association was limited to the time it took the shares to reach their matured value. Persons entering after the date of the first issue must pay back dues. Frequently as the shares progressed toward maturity it 238 HISTORY OF BANKING IN IOWA became difficult to get all the money loaned. In some cases the associations resorted to forced loans. The serious defects of this plan were : first, the dissolution of the asso- ciation when the stock matured ; second, the large amount of back dues which must be paid by a new stockholder; and third, the necessity of making forced loans. The serial plan was then developed to meet these obvious defects. Under this plan a new series was started at reg- ular intervals. In this way the association became per- petual, back dues were made small, and usually there were no forced loans. Ordinarily the series were conducted sep- arately, amounting in effect to so many terminating associa- tions. This proved a cumbersome and in some ways unsatis- factory method. It made necessary unvaried payments when frequently a member's circumstances would change greatly during the years. He had no inducement to pay more rapidly, but was fined for delay. In most serial asso- ciations withdrawal of shares at maturity has been required. This involves loss of members when the money is needed to make loans and requires the expensive process of collecting a larger sum to meet an entire series in one payment. The next plan in order of development was the perma- nent, or Dayton plan. This plan was first adopted by the Mutual Home Association of Dayton, Ohio, in 1875, and was evolved by Judge A. A. Winters.^^^ Its main features are that new members may be admitted at any time without back dues, and shares may be issued either in installments of fully paid-up. The permanent plan makes unnecessary the assessment of fines or penalties for failure to pay the regular weekly or monthly installments. Experience has shown that most members exceed the regular rate of pay- ment. Dividends are computed on the amount each member has actually paid in, and earnings are credited to the stock- holders semi-annually. The association may lay aside a certain percentage of the profits each year as a contingent BUILDING AND LOAN ASSOCIATIONS 239 fund or reserve to meet losses.^^^ When the dividends have been computed and placed to a member's credit he may, if a non-borrower, withdraw the same under the same conditions as his cash payments. Dividends on paid-up shares may be paid to the holder in cash. In 189.^ the division of associations in Iowa according to the plan of issuing shares showed that of the eighty-nine associations fifty-nine were serial, twenty-three were per- manent, and seven were terminating.^^* The serial plan is still used in Iowa, but not extensively.*^^ ^ It is worthy of note that while many associations change from the serial to the permanent plan, none change from the permanent to the serial. '^^^ DISTRIBUTION OF PROFITS Profits of building and loan associations come largely from interest on loans. Formerly the associations added considerable income from premiums, entrance fees, fines, withheld profits of withdrawing members, and other sources which have been largely eliminated in the progressive asso- ciation. The Iowa law does not specify the manner in which profits shall be distributed beyond requiring that associa- tions shall not issue any forms of preferred or guaranty stock. Fully paid stock, in the certificate of which a maxi- mum rate of dividend may be named, can be issued upon the payment by the holder thereof of the par value of such stock. In no case can the dividend on such a stock exceed eight per cent or the rate of dividend declared upon the other stock of the association. The law permits the appor- tionment of the net earnings quarterly, semi-annually, or annually. °^^ The practice of the larger Iowa associations is to declare dividends semi-annually at the end of June and December. From the net earnings of a period the directors first set aside a small percentage of the profits as a contin- gent fund against losses. The articles of incorporation of 240 HISTORY OF BANKING IN IOWA the Perpetual Savings and Loan Association of Cedar Rap- ids specify that three per cent of the net earnings shall be set aside as a contingent fund. The Waterloo Building and Loan Association sets aside one per cent for such a fund.^^^ Dividends on installment stock, whether of a depositing or a borrowing member, are credited to the stock, thereby aiding to mature the shares. Where the stock is fully paid the dividends may be withdrawn in cash. In order to protect shareholders against the possibility of profiteering by officers, the Iowa law limits very rigidly the expenditures for management. A graduated percentage scale of expenses to assets is fixed, beginning with three per cent in case the assets are not in excess of $100,000 and going down to one per cent for associations with assets in excess of $1,000,000. ^^^ As a matter of fact the ratio for all associations at the last report was about one and three- tenths per cent.^^*^ Even the larger associations have very modest quarters and pay very moderate salaries. It is the opinion of the writer that some of these associations could profitably expend additional amounts for more convenient and attractive locations. People are so accustomed to see- ing elaborate buildings for banking and financial institu- tions that they discount somewhat the importance of an association that is housed in a back room with some other business concern. The limitation of expenses has doubtless been a factor in enabling the associations to pay good divi- dends. Records available show annual dividends paid by Iowa associations of from six to seven and eight-tenths per cent, distributed semi-annually. ^^^ From the report of the Commissioner of Labor in 1893 it is seen that the total loss through foreclosure of mortgages during the entire life of the 5440 associations then reporting was less than $500,000.^^ ^ ^ith the added experience and increased safeguards it is safe to assume that the losses of the associations in existence at the present time are even BUILDING AND LOAN ASSOCIATIONS 241 smaller than they were for those twenty-five years ago. The experience of many persons in Iowa, however, with badly managed national associations has prejudiced them against the safety of building and loan associations. The facts seem to be that the present local associations are quite as safe as the savings banks. Officers and directors of banks in some cities are connected with the associations and have been influential in promoting them. WITHDEAWAL OF MEMBERS In earlier times the withdrawal of members was not per- mitted by most associations. Failure to complete the pay- ments forfeited all payments as well as all profits; but greater liberality was soon demanded, and under the Dayton or permanent plan of issuing shares this can be readily pro- vided. The Iowa law prescribes that the terms of with- drawal must be such that a member will receive a sum not less than he has paid into the association unless losses have occurred to the association during the time the withdrawing member was a shareholder. In case the losses exceed the profits, or any fund created with which to pay losses, "the withdrawing member shall be charged with his propor- tionate share of the excess of the losses over the profits, and no more."^*^ Nothing is said in the State law regarding the disposition of the accumulated profits of the withdrawing member. The regulations regarding withdrawals are usually found in the constitution or by-laws of the association. Some proportion of the profits on shares is often retained, which serves to discourage withdrawals. Notice of withdrawal is usually required, associations reserving the right to ask thirty to sixty days time before payment. Applications are usually acted upon in regular order. If sufficient funds are on hand to permit withdrawal without notice, the association does not take advantage of the provision requiring that notice 16 242 HISTORY OF BANKING IN IOWA be given. Usually only a certain portion of the weekly or monthly receipts of the association may be used to meet the demands of withdrawing members. In the Waterloo and Cedar Rapids associations this amount can not exceed one- half of the receipts of the period.^^* The methods of crediting profits to withdrawing members vary widely. At the time of the extensive investigation of the building and loan associations made by the Department of Labor in 1893, twelve principal withdrawal plans were found to be in use. Only four per cent of the local associa- tions reporting did not allow any interest or profit to with- drawing shareholders. In about thirty per cent of the asso- ciations shareholders received the dues paid in and also all of the accumulated profits. Thirty-one per cent allowed the withdrawing shareholders a fixed rate of interest, usually six per cent on all payments. In the others some arbitrary or graduated scale of allowing profits was found.^^^ At present Iowa associations differ as to the rules for withdrawal. In this respect, as in many others, the practice of the different associations can be determined only by a study of their articles of incorporation and by-laws. The leading cities of the State, in the number and size of their building and loan associations, are Waterloo and Cedar Rapids, the assets of the four associations in the former city aggregating slightly more than those of the three associations in the latter. The combined assets of the seven associations in the two cities were $6,957,152.81 at the time of the 1918 report. This represented about sixty per cent of the total assets of $11,659,195.86 reported by all of the Iowa associations. Because of their dominant position and because of their accessibility to the writer, the associations of those cities will be frequently referred to concerning points upon which information is not available for all asso- ciations of the State. The treatment of withdrawing members differs consider- BUILDING AND LOAN ASSOCIATIONS 243 ably in the different associations. In the largest Iowa as- sociation, the Perpetual of Cedar Rapids, the withdrawing members receive all of the installments paid * * together with the dividends then standing to the credit of their shares". Members withdrawing immediately after the declaration of the January or July dividends receive all accumulated profits. No earnings are credited for less than a six months period, but members are allowed to borrow ninety per cent of the value of their stock. By making such a loan until the end of the fiscal period they may secure the dividends."^ Waterloo associations return all of the installments paid, but graduate the payment of accumulated profits according to the length of time the stock has run. In the Waterloo Building and Loan Association and the Perpetual Building and Loan Association of Waterloo sixty-six and two-thirds per cent of the dividends are paid on stock that has run less than two years ; and on stock that has run over two years, withdrawing members may receive all dividends then cred- ited to the stock. In the Home Building and Loan Associa- tion of Waterloo a more extensively graduated scale is used. If the stock is under twenty-four months old, sixty per cent of the dividends are allowed ; seventy per cent is paid, if the stock is over twenty-four months and under thirty-six months, seventy-five per cent if from thirty-six to sixty months, eighty per cent if over sixty and under ninety months, ninety per cent if over ninety months, but not to exceed seven per cent dividends in any case for the average time the money has been in the hands of the association.""^ Experience and the opinion of building and loan associa- tion officers generally seem to point toward a considerable degree of liberality in the matter of withdrawal of non- borrowing members. Primarily the association is to enable members to become home owners, but it does not seem neces- sary nor desirable to limit its activities to this single func- tion. Persons may wish to use the association to accumulate 244 HISTORY OF BANKING IN IOWA a fund with which to embark in business, to meet some ap- proaching obligation, or as a safe depository where a good rate of interest can be secured. The majority of the mem- bers are not borrowers; and while the depositing member must be kept subordinate, there is no reason why depositors should not be welcomed and encouraged. In this way more funds can be secured for loaning purposes and the service of the association can be extended. An effective way t^^ accomplish this purpose is to enable members to withdraw on rather liberal terms. While the stricter terms may pre- vent unnecessary withdrawal before maturity of the stock, it also discourages many persons from entering because of the difficulty of getting their money when it is needed. More encouragement could also be given by associations to the purchase of paid-up stock by individuals having money for investment. In this way the association would have the command of more capital. If necessary the paid- up stock can be used as a financial regulator since the State law permits and the articles of incorporation of most asso- ciations provide that non-borrowing members may be forced to withdraw upon notice duly given by the directors.^** This, however, has not generally been necessary. Except in associations with assets in excess of $1,000,000 not more than $10,000 of stock computed at par value can be issued to one person.^^^ As a matter of fact the report of associa- tions having a considerable amount of paid-up stock show that this is not held by capitalists but is usually in small blocks.^^*^ PLAN OF MAKING LOANS Borrowers from a building and loan association are re- quired to buy shares equal in maturing value to the amount of the loan. The loan is allowed to run until the borrower's payments and profits mature the share, when his stock is surrendered and the loan cancelled. It has been urged BUILDING AND LOAN ASSOCIATIONS 245 against this plan of requiring borrowers to assume a stock liability in addition to a mortgage obligation, that this is needlessly burdensome and expensive to the borrower. If losses occur, the value of his stock is reduced. An extreme case might arise where his share of the loss would equal his credit and he would lose the entire amount on his loan to date. This contingency, however, would not be likely to arise in practice. A more practical disadvantage of this arrangement is the fact that the rate of interest charged the borrower is higher by about one per cent than the dividend on his shares. This amount covers expenses of the business. Where the bor- rower's credits are applied to the reduction of his debt at each annual or semi-annual distribution, rather than being placed to the credit of his shares of stock, these difficulties are satisfactorily met. The State law in Iowa requires the associations to issue stock to borrowers ;^^^ at the same time it permits owners of stock to withdraw their stock credits or any part thereof at any time. In this way some of the Iowa associations have met this problem to the borrower's advantage. When the withdrawal value of the shares of any member, borrowing on a real estate mortgage, is sufficient to mature one or more shares of his stock, he may have the amount applied to such shares and thus reduce the amount of his loan as well as the number of shares upon which he makes payment. The practice of such associations ia to apply stock credits on loans only in amounts of $100 or multiples thereof.^^^ Loans made by Iowa building and loan associations have been secured almost exclusively by real estate or stock of the association. At the time of the investigation by the Depart- ment of Labor in 1893 the eighty-nine Iowa associations had about ninety-five per cent of their loans backed by real estate security, four per cent by stock of the association, and one per cent by other securities.^^^ 246 HISTORY OF BANKING IN IOWA Under the terms of the law passed in 1896 Iowa associa- tions were limited to loans secured either by real estate mortgages or by their own shares of stock. Real estate loans were required to be secured by a first mortgage, or by a second mortgage in case the association also held the first mortgage. Loans on stock might not exceed ninety per cent of the withdrawal value.**^* The law did not place a limit on the percentage of appraised value of the real estate on which an association might loan, but it did require that all of the terms of making loans be stated in the articles of in- corporation and by-laws of the association. The Cedar Rapids associations may loan not to exceed two-thirds of the appraised value of the realty, while the Waterloo associa- tions are limited to sixty-five per cent of the appraised value.^*^^ In 1918 the reports of associations submitted to the Auditor show a total of loans secured by real estate aggregating $11,122,909 and stock loans of $98,605.^5« Appraisement of the real estate is a very important duty of the directors of the association. The plan followed in the Iowa associations may be briefly described. When a member applies for a loan the president appoints an ap- praisal committee of three from the members of the board of directors. They are required to examine the property, appraise its value, and state in writing whether or not the loan applied for thereon is desirable. The board of di- rectors then decides whether or not the loan shall be made. Care is exercised to place loans in such a way as to avoid loss or expense and delay due to foreclosures. The bor- rower is required to pay the costs of making the loan. This includes the appraisers' fee (about $1.50), cost of abstract, expense of making note and mortgage, and the recording of the latter. Aside from the expenses incurred in making the loans, Iowa associations are prohibited by law from charging more than eight per cent per annum. Moreover the rate of interest charged, under whatever name, must BUILDING AND LOAN ASSOCIATIONS 247 be the same to all borrowers. This even involves making any new rate, if lower than the prescribed rate, apply equally to all who have theretofore borrowed.'^^'^ EEPAYMENT OF LOANS Formerly a very rigid plan of repayment of loans existed. Borrowers were fined for failure to make regular payments and were not encouraged to pay out more rapidly than the fixed rate. At present the practice concerning fines varies in different States. Ohio leads in having practically abol- ished fines; Massachusetts and Pennsylvania use fines for the purpose of promoting regularity of payment.^^* The law in Iowa permits the imposition of fines for delinquency not to exceed three cents per $100 share for the first month's delinquency and five cents per share for each succeeding month's delinquency. These fines, however, must come out of the member's profits and can not reduce the withdrawal value of any share below the amount actually paid in.^^* It is generally recognized as desirable to retain the right to impose fines in cases of mere negligence or carelessness ; but nearly one-half of the Iowa associations, including the largest ones in the State, do not show any receipts from this source in their 1918 reports. The total of fines collected during 1917 by all of the Iowa associations was only $3856 ; and in 1915 only $1952 were collected in fines.'^®'^ In case the borrower does not meet his interest payments, the mortgage on his property may be foreclosed under terms prescribed in the by-laws of the association. The associa- tions allow about three months delinquency before foreclos- ure proceedings are instituted. By the terms of the Iowa statutes the mortgagor can not be charged more than the agreed rate of interest, never in excess of eight per cent. He must be credited with all payments and a legitimate share of the earnings of the association. In any case where 248 HISTORY OF BANKING IN IOWA suit is brought for an excessive amount, the costs may, in the discretion of the court, be taxed to the plaintiff.^^^ Repayment of loans in the building and loan associations is accomplished by paying out on shares of stock on an in- stallment basis. A typical loan of $1000 would require the purchase of ten shares of stock at $100 each. Assuming an interest rate of 7.02 per cent, the rate of one of the large associations, the borrower's interest payment would be $70.20 per year. Stock payments of $1.50 per week added to the interest payments, which are usually reduced to a monthly or weekly basis also, will discharge the debt in nine and one-half years if the stock earns six per cent dividends. Although the payments are usually figured on a weekly basis, the experience of the association whose figures have just been cited is that the bulk of stockholders pay monthly rather than weekly. ^^^ The advantage of this plan to the home builder with a regular weekly or monthly income lies in the fact that the mortgage fades away gradually, whereas if he takes a straight five year loan, with interest payable annually or semi-annually, the face value of the mortgage is seldom re- duced. Accumulation of amounts of $100 or more to apply on the mortgage are difficult to make. On the other hand, small monthly amounts will be met and the sacrifice will be little felt. Herein lies the chief advantage of the building and loan associations to the borrower. It is true that other agencies make loans on this plan, but individuals or savings banks usually prefer to receive the interest in larger in- stallments and to preserve the principal intact until it is paid off by a few large payments. The building and loan association is prepared to offer this easier and more prac- tical plan of paying for a home. It is pointed out to the prospective borrower, accustomed to paying rent, how by a small addition to his monthly rental payment he can own his home. He is reminded that every dollar spent for rent is BUILDING AND LOAN ASSOCIATIONS 249 gone forever, but by this plan eventually he has a home of his own. As to the feasibility of the plan there can be no question. When it comes to a question of cost of repayment of a loan on the above system, there is not so much to be said in favor of the building and loan association. The rates charged in Iowa have been from seven to eight per cent in recent years, somewhat higher than current rates charged by other lenders on similar securities. In fact this is justi- fied by the cost of the service rendered. To handle repay- ment on the above described plan is costly from the stand- point of office and bookkeeping charges, and this constitutes one of the chief reasons why other institutions do not en- courage this type of loan. Again the cost is offset in a measure by the liberal rate of interest earned by the money deposited by the borrower as stock payments. Under the plan followed by some of the Iowa associations the bor- rower, when the withdrawal value of all of his stock is suffi- cient to mature one or more shares of his stock, may have this credited directly on his loan. Thereafter his interest on the loan would be less and his liability as a stockholder for losses be reduced. It must be clearly borne in mind that the actual cost of the loan is the rate of interest paid, not the difference be- tween the rate paid by the borrower and the amount he receives in interest on an exchange transaction. For in- stance, an association in its advertising shows that the interest payments of the borrower amount to $666.90 on $1000 for nine and one-half years and the stock payments $746.89, making total payments of $1413.79. The with- drawal value is $1000 and the cost of the loan is therefore stated to be $413.79 which for nine and one-half years is 4.35 per cent per year. Actually the loan cost $666.90 and the deposit is a separate transaction. An illustration will make this point clearer. Suppose A had borrowed the $1000 250 HISTORY OF BANKING IN IOWA from an individual at 7.02 per cent for a nine and one-half year period and at the same time had purchased stock in a building and loan association paying dividends semi-annu- ally of three per cent. At the end of the period he would have a withdrawal value of $1000 and could apply the same to pajdng his debt. The cost of the loan is here clearly shown to be the total interest payments of $666.90. The error in the method referred to is in assuming that the bor- rower's savings were not worth any interest to him and that what he received as interest was merely a gift. This as- sumption, however, is commonly made in such tables.^^^ The loan from an individual or savings bank, if at a lower in- terest rate, will cost less. However, the nominal interest rate charged is often not the actual cost of a term mortgage. Often a cash commission is charged the borrower in advance and repeated whenever renewal is made, usually every five years. A loan once made with a building and loan associa- tion has no further expense attached until the final satis- faction of mortgage. Making due allowance for commissions, renewal expenses, and other incidental expenses of the term mortgage, it is doubtless true that lower rates can usually be secured from other sources by persons having first-class real estate to offer as security. The rate charged on loans in Waterloo, where four live associations are at the service of borrowers, is eight per cent. In Cedar Rapids the associations charge 7.02 per cent. The newly organized Des Moines and Iowa City associations charge seven per cent.^^^ Straight mort- gage loans can be secured in these cities at lower rates ; but in spite of the difference the plan is very popular and a large proportion of home buying and building in "Waterloo and Cedar Rapids has been financed by this means. The ad- vantage of installment payments is accompanied by the fact that building and loan associations are in a position to loan a somewhat larger amount on the property with safety. BUILDING AND LOAN ASSOCIATIONS 251 Banks in the larger towns and cities in Iowa are usually un- willing to loan more than from forty to fifty per cent of the value of city real estate. It appears, however, that high interest charge to borrow- ers has been one cause of the failure of Iowa associations to keep pace with those of neighboring States. The city of Omaha has six associations, two of which have each larger amounts loaned on real estate than all of the Iowa associa- tions together. These associations have gradually reduced the rate charged borrowers :^rom nine and six-tenths per cent, about fifteen years ago, to six and six-tenths per cent. The Omaha associations have aided in the erection of nine thousand homes during the past fifteen years. ^^^ Attracting less necessitous borrowers by a more favorable interest rate has been a factor in popularizing the building and loan movement in Omaha. LOANS TO FAEMEES A class of loans which might be attracted by lower in- terest is the farm mortgage loan. Iowa associations have confined their activities to the towns and cities; and loans are not made on farm land or farm homes. In general this has been true of the associations elsewhere, but a consider- able advance in the direction of taking care of farm loans is found in other States — ^notably Ohio. It is also being done by associations in Indiana, Kansas, and Nebraska. The report for Ohio on June 30, 1916, shows that the associations of the State had in force 9843 farm loans, amounting to $21,621,952.71. The interest rate charged in Ohio is six per cent with no commission added.^®^ Interest is payable semi- annually ; loans are made for one, three, or five years. There is a provision for carrying the loans for a longer time when overdue than in the case of city property. Deposits by farm- ers are in about the same proportion to total deposits as this class of loans is to the total. In other words this adds a 252 HISTORY OF BANKING IN IOWA large class of business quite distinct and able to provide the funds for carrying its own class of loans. ^^'^ In an address before the Iowa Building and Loan League in 1917, K. V. Haymaker of Detroit, Michigan, formerly of Defiance, Ohio, strongly urged Iowa associations to make their privileges available to the farmers of their communi- ties after the manner of the Ohio associations. He clearly pointed out the necessity for adapting the plan to meet the business of farming. Sometimes the assumption has been made that weekly or monthly payments are a vital feature of the building and loan association. He asserted that the only essential is regularity. The period may be made monthly, as in dairying, semi-annually, or annually accord- ing to the type of farming. He insisted that the idea of compulsory payments must be dropped, fines abolished, and other changes effected to meet the conditions of farming. If this were done he believed that the field of operations could be greatly widened, as has been the case in Ohio.^^* The question of the extension of the field of operations of Iowa associations to include farm loans will depend on cer- tain factors. In the first place competition is entirely too keen to make it necessary for Iowa farmers to pay a high interest rate on loans. Insurance companies, mortgage banks, savings banks, investment companies, individual lenders, all look upon Iowa farm mortgages as a most desir- able investment. Added to these are the national farm loan associations and joint stock land banks of the Federal farm loan system. At present, rates charged by these companies range from five and one-half per cent up. Terms of re- payment are usually rather liberal. In many cases com- missions are charged which add somewhat to the net cost of the loan; but even considering these factors, the rates are considerably lower than those granted by building and loan associations to their members. Certainly, as Haymaker has said, the rules of associations would also have to be BUILDING AND LOAN ASSOCIATIONS 253 adapted to the needs of the farming business. Until the rates and conditions are changed Iowa associations will not find a field for operation in rural credits. INSUEANCE FOR THE PROTECTION OF BORROWERS A difficult problem which may occasionally confront an association is the necessity for foreclosing on property in cases where the death of the wage earner makes it impos- sible for a family to continue payments. Ordinarily the as- sociation is protected by the security, but the sale of prop- erty under foreclosure usually results in serious loss to the family. Associations in some States have met this problem by arranging for special life insurance policies to meet such an emergency. This type of policy is known as a "Diminishing Term Policy", As outlined before the 1917 session of the Iowa Building and Loan League, this plan provides a very cheap form of protection especially adapted for taking care of the balance of payments due the associa- tion in the event of the borrower's death. The face value of the policy decreases as payments to the association in- crease his investment, so that at all times it has a value, in case of the borrower's death, equal to the balance due the building and loan association, if payments to the association have been regularly met. The plan contemplated a lump payment in advance for the entire cost of the policy. For instance, a ten year term policy of this type, age thirty-five, could be paid for by a single gross premium of $51.59 per $1000. Payments of $8.33 per month on the principal of the loan would extinguish the debt in ten years. The insur- ance policy, therefore, decreases by that much each month. In the event of the borrower's death the mortgage note would be stamped ''paid" and the home handed over to the family clear of all debt. If he lived the home would be paid for in the regular course of time, the extra amount added to the original loan not being sufficient to lengthen mater- 254 HISTORY OF BANKING IN IOWA ially the time necessary to pay out. In some cases the secre- tary of the association acts as the agent for the insurance company, but this gives rise to certain complications. In Omaha the building and loan secretary gives a list of bor- rowers to all insurance companies in the city. Iowa build- ing and loan associations have not yet undertaken to edu- cate the borrowers to the value of life insurance protec- tion.^«8 MANAGEMENT AND CONTKOL OF ASSOCIATIONS The ultimate control of the associations rests in the hands of the shareholders or members. At any election each mem- ber has one vote for each $100 share of stock owned by him. Voting may be by proxy, but no person is allowed to vote over ten per cent of the outstanding shares at the time of the election. The government of an association rests with the board of directors. The number of directors is not spe- cified in the Iowa law, but it is provided that they shall hold office for not less than one nor more than five years. If directors are elected for a longer term than one year there must be annual elections with as nearly as possible an equal number retiring each year. The directors exercise general supervision and direction of all financial affairs of associa- tions, and they elect the officers and have power to suspend them at any time. All loans must be approved by the direc- tors, and they declare the dividends.^^^ Directors are usually allowed a small fee for attending the meetings of the board and compensation for services rendered outside of the meetings. Ordinarily the directors are men of prom- inence in the business and financial affairs of the community who could scarcely be induced to give their services for the financial reward alone. Unlike the directors of a bank, who are usually the principal stockholders and hence di- rectly interested in the bank's financial success, these men do not profit even from the larger measure of success of the BUILDING AND LOAN ASSOCIATIONS 255 association. It is largely a public spirited service rewarded only indirectly through the greater prosperity of the com- munity and the welfare of its citizens. The active executive of the association is the secretary. In the larger associations he gives his full time to the ad- ministration of his duties and may even have assistants. In such circumstances he is paid a salary for his services commensurate with his ability. He receives all money paid in on shares, keeps the accounts of the association, and countersigns all certificates for sliares of stock, contracts, and conveyances requiring the signature of the president. The money he receives is paid over to the treasurer, usually a banker, and orders are issued by the secretary payable by the treasurer. He acts as secretary of the board of direc- tors and as custodian of the securities, books, and insurance policies. He reports regularly to the board of directors regarding receipts and disbursements. Semi-annually, or of tener when so required, he makes a full financial statement of the condition of the business. In large measure the success of the association depends upon the qualities of the secretary. Coming into direct contact with the shareholders, his manner and personality must be such as to inspire confidence and enable him to at- tract and hold members. He is required to give bond for the faithful performance of his duties, but this is in no way a substitute for character and capacity. In the larger asso- ciations he is assisted by others whose duties are purely clerical. ^"^^ In addition to these officers there is the treasurer who acts in a purely ministerial capacity. He receives the funds from the secretary, gives his receipt for the same, and pays out the money on orders from the secretary. Even in the matter of selecting a bank for the depositing of cash on hand he is subject to the advice of the board of directors. Some associations retain an attorney as a regular officer 256 HISTORY OF BANKING IN IOWA of the association to examine titles, make out the legal pa- pers, and perform other duties in connection with the legal aspects of the business. Accounts must be regularly audited — a duty that is usually performed by a committee of the directors appointed for that purpose — but sometimes a single qualified individual makes the audit. STATE SUPERVISION The first effort at State supervision of building and loan associations in Iowa came in 1872 through legislation per- mitting the organization of associations under the general corporation laws. They were empowered to collect dues, fines, interest on loans advanced, and premiums bid by members for the right of precedence in taking loans; to make loans; to convey real estate; and to do other things incident to their business. Out of the earnings they were allowed to set aside ten per cent for current expenses. The remainder of the earnings were to be credited to the share- holders. The usury law was held not to apply to those already organized or to those to be organized in the future. No person was allowed to hold more than twenty shares.^^^ No requirement was made for reports or examinations. State supervision can hardly be said to have really begun until twenty-five years later. In the meantime a large growth of business had taken place. Effective State super- vision came with the legislation of 1896. By that time a hundred associations were operating in Iowa. A consider- able number of foreign companies were carrying on their business in a manner which was not to the best interests of the Iowa investors. State supervision with its consequent publicity was adopted for the purpose of eliminating those institutions operating primarily in their own and against the public interest. In the first place the statute required that the articles of incorporation of building and loan associations must be ap- BUILDING AND LOAN ASSOCIATIONS 257 proved by the Executive Council. The articles with the cer- tificate of approval attached must then be filed with the State Auditor. Any amendments to the articles must be handled in the same manner. After the Auditor received the approved articles he was to issue a certificate author- izing the association to commence business. Thereafter the association was under the control of the Auditor, who was required to examine all associations at least once a year. This examination might be conducted by the Auditor or by some person appointed for the duty. Examiners were em- powered to summon witnesses and procure documents nec- essary to learn all facts. Costs of the examination must be paid by the association, a fee of $5 per day and expenses being allowed. In no case could an association be required to pay over $200 per year for examination costs. Twenty shareholders of a domestic-local association could apply to the Auditor for examination, in which case he must make the examination under the same conditions as the regular periodic examination.^'^' Annual reports were required of all associations. These must be made before February 1st on the business of the preceding year as of December 31st. This report must show the following: 1. The date when the association was incorporated and the par value of each share of stock. 2. The number of shares sold during the year. 3. The number of shares cancelled or withdrawn during the year. 4. The number of shares in force at the end of the year. 5. A detailed statement of receipts and disbursements showing specifically from what source received and in what manner applied. 6. A statement of the assets and liabilities at the end of the year. 7. The salary paid to each of its officers during the year. 8. All foreign building and loan or savings and loan associa- tions shall in addition to the above, report the names of each share- 17 258 HISTORY OF BANKING IN IOWA holder of such association residing within the state of Iowa, to- gether with the postoffice address of each and the number of shares owned by each of said persons on the first day of January pre- ceding, and the cash value of each said shares on said date. A failure to report promptly subjected the association to a penalty of $25 per day for each day the report was with- held. The Auditor was required to report the condition of the associations biennially. This report was to contain a summarized statement of the condition of the association, together with such suggestions as he might deem expedi- ent.^'^* In accordance with the statute the Auditor pub- lished in 1897 the first regular report of building and loan associations. ^'^^ In 1900 the law was amended to require a detailed statement in the report of the names of officers and salaries paid.^^^ The regulations then laid down hold sub- stantially at the present time. In 1917 the State Depart- ment of Banking was created, but the building and loan asso- ciations have remained under the Auditor's supervision. Of the value of regular public reports there can be no doubt. These enable members to keep in touch with the progress of the business, since they are usually printed for distribution to the members and to others interested. For this reason they serve also for advertising purposes. The reports are even more important as a stimulus to the officers to make a good showing and as a check on corruption. To guard further against corruption all officers who handle any funds have been required since 1896 to give bond or fidelity insurance: these bonds must be approved by the board of directors and the State Auditor.^'^'^ Within sixty days after the legislation of 1896 was en- acted all associations were required by the law to conform thereto. The only exception was in case an association signified its intention to close up its affairs, in which case it was given additional time to do so without being subject to penalties. Domestic or domestic-local associations were BUILDING AND LOAN ASSOCIATIONS 259 required to reincorporate or amend their articles to comply, while foreign associations were to furnish a copy of their articles and the required securities. Doing business with- out a certificate or soliciting business for an association without having a certificate was made a criminal act subject to a fine of not over $10,000 or imprisonment for not over ten years or both.^^^ In 1902 unincorporated associations were defined and regulated. Any organization or individuals engaged in creating funds on periodic payments by members to loan on real estate, personal property, or for similar purposes was deemed a building and loan association and subject to the provisions of the law governing them so far as it. was applicable. Before beginning business they must submit to the Executive Council a full and complete sworn state- ment of resources and liabilities, together with the proposed plan of business. Fifty thousand dollars worth of secur- ities must be deposited with the Auditor as a guaranty fund. Acceptable securities should consist of first mort- gages and negotiable notes bearing interest of not less than five per cent, said mortgages to be secured by real estate worth double the amount of the mortgages. The Auditor might require additional securities if necessary for the pro- tection of investors. The Executive Council must approve the plan and method of business and the Auditor issue a certificate to permit the association to transact business in the State. Officers must give approved bonds. Reports similar to those called for from incorporated companies must be made annually. In addition the Auditor may call for reports, of any desig- nated past date, as often as four times a year. Examina- tions might also be made at his discretion, the costs of $10 per day for the time spent and necessary expenses being borne by the building and loan association. Heavy penal- ties were prescribed for any false statements, unauthorized 260 HISTORY OF BANKING IN IOWA solicitation of funds, or other fraudulent or improper trans- action."^'-^ The occasion of this law appears to have been the estab- lishment within the State of a class of unincorporated asso- ciations or partnerships transacting their business under what were termed ' ' Diamond Contracts ' '. In some of these companies the member was promised a diamond on the maturity of the contract, in other cases he was to receive a home. The operations of the companies were of such a doubtful nature that the Auditor in his biennial report for 1901 asked the General Assembly either to prohibit them from doing business or to provide for their supervision and control.^*" Two years later the Auditor again called upon the legis- lature to regulate investment companies carrying on a busi- ness somewhat similar to that of building and loan associa- tions. These companies were engaged in the business of issuing investment securities on the installment plan, but varied their contracts so as to evade coming under the building and loan or insurance laws. Some of these com- panies had represented, through their agents, that they had deposited securities with the Auditor 's department to guar- antee their contracts. The evidence produced during the prosecution of one company for failure to comply with the law, passed by the General Assembly as the Auditor had requested, indicated the necessity for supervision. The General Assembly placed all such associations under the supervision of the Auditor and required them to report to him annually. Reports were not required to be published, so no further record is found of them — if indeed any ob- tained certificates under the law.^^^ BENEFITS FEOM BUILDING AND LOAN ASSOCIATIONS The direct benefits of the building and loan associations to members may be said to be threefold : first, they stimulate BUILDING AND LOAN ASSOCIATIONS 261 home owning; second, they inculcate habits of thrift; and third, they train in business methods and general knowledge of affairs. Arguments for the advantages of home owning need scarcely be urged. The home owner is almost always a steadier workman and more conservative citizen. One of the difficult problems confronting the employer of labor in America is the labor turn-over. At the Ford plant in De- troit one of the most effective means of checking this waste was found to be a stimulation of home owning. Bolshevism and other radical movements receive support from the propertyless individual. The building and loan association provides the means for the working man to save for a home ; it permits him to borrow on a basis which encourages pay- ment of the debt. At the time of the comprehensive investi- gation of 1893, seventy per cent of the shareholders were classed as working people. In a survey of the benefits of building and loan associations the Bureau of Labor con- tributes testimony which is the product of first hand infor- mation. ''In the testimony before the Industrial Commis- sion it was very strongly impressed upon the Commission that the influence of these institutions upon industrial life was conservative, tending toward the prevention of dis- putes and strikes and making for industrial peace. The home owner acquires a real and tangible interest in the community and its welfare as well as an increased self- respect and more elevated moral standard. "^^^ The second advantage, that of inculcating habits of thrift and saving, also needs little explanation or support. Build- ing and loan associations furnish a place for safe and profit- able investment for small sums. The plan of periodic pay- ment on shares gives a further stimulus toward regularity of deposit. All deposits are available in case of need, but the handicaps on withdrawing make it unlikely that money once saved will be spent for any trivial purpose. When the 262 HISTORY OF BANKING IN IOWA shareholder is a borrower the advantage of the installment method of attacking a debt is obvious ; it has been likened to attacking an army in detail — one installment after an- other is conquered until the whole debt is annihilated. Thus is saving stimulated and real property created. Business training and knowledge of affairs gained through connection with the association is a third benefit to the individual. This comes from the fact that all depositors are shareholders and participate in the management of the association — a cooperative feature that is undoubtedly of value in adding to the feeling of self-respect and importance of the members. The place of the building and loan associations in the community and their relation to other financial institutions have come to be quite clearly recognized. It is obvious that they are not in any sense rivals of the commercial banks. Banking, as such, is strictly prohibited to such associations by the laws of Iowa. The language of the statute is ex- plicit: ''It shall be unlawful for any building and loan or savings and loan association to receive deposits of money without issuing shares of stock for the same, or to transact a banking business. ' '^^^ The practice of practically all build- ing and loan associations is to deposit all their funds in some bank and keep no treasure vault of their own. They aid in creating permanent wealth in the community by gathering together small savings, a large percentage of which would not find their way into any bank. The working man is made a better and more thrifty citizen ; labor and merchandising in the community is stimulated. In the cities where the associations are well conducted, bankers are nearly unani- mous in their approval. In fact many officers and directors of building and loan associations are bank officers and direc- tors. Wise bankers encourage the association, recognizing that it occupies a special field and is not detrimental to their business.^^* BUILDING AND LOAN ASSOCIATIONS 263 LEAGUE ORGANIZATIONS As the building and loan movement developed in this country it was recognized that there was a need for some unification of the movement to enable officers of associations to exchange views and work in a spirit of harmony to pro- mote the general interests. This led to the formation of so-called leagues, the purpose which has been well stated in these words: ''The necessity for greater uniformity of methods, the constant vigilance required to prevent inimical legislation, and the concerted action necessary to secure progressive enactments favorable to the development of these associations, led to the formation of so-called leagues. "^^^ The league organizations were first perfected in the vari- ous States. These were followed by the United States League of Local Building and Loan Associations, the origin of which is traceable to a resolution at the State convention in Ohio in 1892. The first meeting was held in Chicago in July, 1893, at the time of the World's Fair. Since that time it has held regular annual meetings in various cities of the United States.^^^ In Iowa the Building and Loan League has been in exist- ence about the same length of time. It held its twenty- seventh meeting at Waterloo on September 25, 1918. Iowa associations do not support the State league as it would seem to deserve. The list of delegates usually in attend- ance shows that only about one-fourth to one-third of the associations of the State are actually represented. The larger associations, however, are included, so that at the Waterloo meeting four-fifths of the assets of the State asso- ciations were represented.^^'^ A recognized need of the Iowa building and loan move- ment is for greater publicity. The general public is not familiar with association methods. This need for public education has been recognized by the associations and dis- 264 HISTORY OF BANKING IN IOWA cussed at league meetings. In the discussion at the 1917 convention, advertising plans in use elsewhere were out- lined. A successful method was shown to be combined ad- vertising, as in Toledo, Ohio, where ten or twelve associa- tions united to carry on a successful campaign of education. Some associations have distributed copies of the American Building Association News over the counter or to legislators when favorable legislation was needed. As a result of the discussion the Iowa League voted to ask W. E. Boyd of Cedar Rapids to write some articles on thrift, and appointed a publicity committee to report at the next meeting.^^^ PEOPOSED FEDERAL CO-OPERATIVE BANK In connection with the af ter-the-war campaign to promote home building there was launched a movement for a na- tional system of home loan banks, through which building and loan associations might rediscount their securities and make available more funds for further loans. The purpose of the proposed system is to do for the building and loan associations what the Federal reserve system has done for the commercial banks and what the Federal land banks have done for the national farm loan associations. Such a sys- tem would be headed by a Federal home bureau in the Treasury Department. The general functions of the pro- posed banks and their methods of selling bonds to investors would resemble very closely those now followed by the Fed- eral land banks. The Department of Labor and the United States League of Local Building and Loan Associations strongly backed the proposal which was embodied in a bill at the first session of the Sixty-sixth Congress. ^^^ TAXATION OF BUILDING AND LOAN ASSOCIATIONS The first provision for taxing the shares of building and loan associations was made in 1876, when the shares were to be assessed at their cash value. ''Unredeemed" shares BUILDING AND LOAN ASSOCIATIONS 265 only were to be taxed and these were to be listed to the in- dividual owners thereof. In 1896 the law stated that the shares of stock should be classified as moneys and credits for purposes of taxation.^^" In 1913 previous provisions were repealed and a substitute section enacted. The gen- eral method of taxing shares remained unchanged. They were to be assessed and taxed to the individual holders at their places of residence. In 1911 the General Assembly had provided for the taxation of moneys and credits at a flat rate of five mills on the dollar, which became the rate for the loan association shares according to their cash value. The real estate and the reserve fund of the association must be assessed as real estate or personal property and be sub- ject to taxation at the principal place of business. The State Auditor furnishes, through the county auditor, to each assessor a statement of the names and post office addresses of all stockholders in foreign associations residing in the assessor's district, together with the actual value of the shares so held. In 1911 the general incorporation law was amended to make building and loan associations exempt from the payment of the incorporation filing fee provided therein in excess of $25. They were also made exempt from the payment of a renewal fee.^^^ The Federal government has also been liberal in granting exemption from taxation to building and loan associations. They were made exempt from the early income tax law, which was later held unconstitutional, from the stamp act of the Spanish- American War in 1898, and from the cor- poration income tax and the war excess profits tax. They were, however, made subject to the stamp taxes upon bonds, notes, conveyances, and other documents.^^^ Building and loan associations have now had a history of about half a century of operation in Iowa. During the first half of this time they grew in numbers and strength prac- tically unregulated and subject to the abuses incident to this 266 HISTORY OF BANKING IN IOWA lack of supervision. During the first few years of State supervision, beginning in 1896, the decline in number of as- sociations and total assets was so marked as to cause the Auditor to raise the question as to the desirability of con- tinuing the plan of publication of reports. He favored some plan of local publicity, evidently feeling that the future im- portance of building and loan associations would be very limited.^^^ The addition of new associations during the past decade and the growing prosperity of those now in existence proves that any fear that all associations will quit the field is unwarranted. The elimination of associations pursuing unsound methods has broken down prejudice — even in Des Moines, the headquarters of the old associations. The popular belief that the Iowa law is unfavorable to build- ing and loan associations of the proper type is being dis- pelled wherever parties interested in starting associations investigate the facts. In view of the existing situation in Iowa and the growing importance of building and loan asso- ciations in other Commonwealths, the outlook for the build- ing and loan movement in this State seems very bright. XII FARM MORTGAGE BANKING The chief business of the Iowa bankers during the period of the fifties was loaning to the pioneers on land security. But the panic of 1857 forcibly illustrated the danger of using a bank's credit to assist in land speculation and drove home the truth of the principle that commercial banks should loan as largely as possible on short time self-liquidating obligations. The founders of the State Bank of Iowa, and also of the national banking system, prohibited the banks established thereunder from accepting real estate security. A long step was thus taken toward establishing distinctly commercial banking. But the private banker continued in the field. He adapted his business to the needs of the com- munity. In some cases he carried on a commercial banking business, in others he maintained a mortgage and loan agency. The savings bank law also permitted the banks established thereunder to invest in real estate mortgages. State chartered and private banks have therefore continued to serve as agencies for furnishing long-time loans to farm- ers. Specialization, which has marked banking and commerce as a whole, has tended, however, toward the creation of in- vestment banks to deal in farm mortgages. By 1914 this type of institution was so well differentiated that national and State associations of farm mortgage bankers were formed. In 1916 Congress passed an act establishing the Federal farm loan system, under the provisions of which various types of institutions have come into being, devoted exclusively to the farm mortgage business. Within the past decade, therefore, farm mortgage banking has become "a distinct, well-recognized profession. "^^^ 267 268 HISTORY OF BANKING IN IOWA VALUE OF FAEM LAND IN IOWA The vast amount of wealth represented by farm property, the large per acre value of the land, and the rapid improve- ment of the farms of the State have made the volume of mortgage business in Iowa very large. Moreover, the high quality of this mortgage security has attracted much out- side capital which has contributed to the State's rural de- velopment. Unfortunately, much of the statistical data per- taining to the Iowa mortgage business are unsatisfactory. However, as an introduction to the discussion of mortgage banking in this chapter the available facts will be presented to show the basis for the business of these institutions. Federal and State census statistics show that the value of farm property in Iowa has increased steadily since 1850 when the first data were collected. Table X Value of Farm Property in Iowa'*®^ Yeab Land and Buildings Avebaqe "Value PER Farm AVEBAGE VALUE PER Acre 1920 $7,601,772,290 S35,616 $227.09 1915 3,992,100,158 19,924 121.00 1910 3,257,379,400 15,008 96.00 1900 1,497,554,790 6,550 43.31 1890 857,581.022 4,247 28.13 1880 567,430,227 3,061 22.92 1870 314,129,953 2,701 20.21 1860 119,899,547 1,960 11.91 1850 16,657,667 1,125 6.09 Table X shows that from a value of about sixteen and two- thirds millions in 1850, the farms and buildings in Iowa had risen in 1910 to over three and a quarter billions. In 1915 the Iowa State census placed the total value of all farm property, land and improvements, at nearly four billions. In the next five years farm property practically doubled in FARM MORTGAGE BANKING 269 value. Statistics published annually by the Department of Agriculture indicate that the average per acre value of all plow lands in 1916 was $153, in 1917 $156, in 1918 $174, and in 1919 $192. This placed Iowa at the head of the list of the corn-belt States based on land value per acre, being $28 per acre above Illinois, the next State in order.^^^ These figures were published in March of each year and thus rep- resent the value at the beginning rather than the close of the year. They are not exactly comparable with census figures, but are the most satisfactory data available for showing the recent increase in value. In 1919 a phenomenal boom in the selling price of Iowa land took place, stimulated primarily by the large profits obtained from farm products sold at war prices. Examples of farms being resold within ninety days at a cash advance of from $50 to $100 per acre were not uncommon during the early summer months of 1919. On August 21, 1919, 0. G. Lloyd of the farm management department of the Iowa State College of Agriculture at Ames reported that in fifty of the ninety-nine counties farms had sold for more than $300 per acre during the preceding six months. The Fed- eral Bureau of Crop Estimates credited Iowa with an aver- age increase of $63 per acre during 1919. This brought the average up to $255 per acre. An intensive survey of farm land values in Iowa was made by the Office of Farm Manage- ment of the United States Department of Agriculture in cooperation with the Iowa Agricultural Experiment Sta- tion. The average price per acre for the 1414 sales upon which data were obtained was $248, but this covered sales between January and September, 1919, whereas during the latter months of the period the figures as shown were con- siderably higher. Moreover, the investigators expressed the opinion that the better farms were sold during the early weeks of the ''boom", before the prices had reached the new high level. For this reason even the later sales would 270 HISTORY OF BANKING IN IOWA not reflect the full extent of the advance. Further informa- tion secured by the officers of the Iowa Farm Mortgage Association supports these estimates. Data were secured early in 1920 by a questionnaire to all members of the Asso- ciation, bankers throughout the State, and others in a posi- tion to give information concerning land sales. From 167 replies received the average value per acre was found to be $291.75, with an average per acre increase of $80 in twelve months."^ In total value of all property Iowa ranked sixth among the States in 1912 ; in per capita wealth the State was second only to sparsely settled Nevada.^^^ Of the total wealth of $7,868,454,211 over $5,000,000,000 was in real property, and about three-fourths of this consisted of farm land and build- ings. In addition to the real estate shown in Table X the farmers possessed working capital in the form of machin- ery, stock, feeds, and seed. Farming in Iowa, therefore, was a productive business representing, in 1920, about $8,500,000,000 of capital.^«« It over-shadowed all the other industries of the State combined. Quite naturally credit in the form of long-time loans is needed to finance this large volume of business. STATISTICS OF IOWA FARM MORTGAGES There are no complete and accurate data on the volume of mortgage loans in Iowa, although such statistics, if avail- able, would be of unusual interest in this agricultural State. Since the State does not compile such information, the statistics of the Federal census bureau and of life insurance companies are about the only material published. Data relating to mortgage debt were first collected in the regular decennial census in 1890. The basis of the returns in the three census reports has been the ''farm home" occupied by its owner. No reports have been secured for farms operated by tenants and managers. Data regarding the FARM MORTGAGE BANKING 271 amount of mortgage debt were obtained in 1890, 1910, and 1920 but not in 1900. The data are consequently incom- plete, but since they were collected on practically the same basis for the three reports they are quite accurate for com- parative purposes and are of considerable general value. Table XI Farm Mortgage and Debt Reports for Iowa""" 1920 1910 1890 Total number of farms opera- ted BY owners 121,888 133,003 144,698 Number free from mortgage DEBT 45,807 63,234 67,587 Number with mortgage debt 66,096 68,045 77,111 Number with no mortgage re- port 9,985 1,724 Per cent of mortgaged farms 69.1 51.8 53.3 Number reporting debt and amount 52,341 50,452 77,111 Value of their lands and build- ings $1,814,260,136 $735,265,320 $305 658,669 Amount of mortgage debt $489,816,739 $204,242,722 $101 745,929 Per cent of value of land and buildings 27.0 27.8 33 3 Average indebtedness per farm $9,358 $4,048 $1,319 In 1920 there were 213,439 farms in Iowa, but mortgage data were secured only on the 121,888 owned in whole or in part by the operators. Of this number 45,807 were reported as free from mortgage ; 66,096, that is, about fifty-nine per cent, were reported as mortgaged; and for 9985 no report concerning mortgage indebtedness was obtained. The amount of mortgage debt was $489,816,739 for the farms included, or an average indebtedness of $9358 per farm, equivalent to twenty-seven per cent of the value of the land and buildings mortgaged. The aggregate amount of mort- gage indebtedness and the average debt per farm more than doubled in the decade ending in 1920, but the percentage of debt to value was almost the same as in 1910. 272 HISTORY OF BANKING IN IOWA In 1890 the total mortgage debt was $101,745,924, or an average of $1319 per farm, equivalent to thirty-three and three-tenths per cent of the value. The figures for 1890 in- clude all owned farm homes, estimates being made of value of farms and amount of debt for all defective reports. It will be noted that, although the average size of the mort- gage was over seven times as great in 1920 as it had been thirty years earlier, yet as a result of the great increase in land value the percentage of debt to value decreased from thirty-three and three-tenths per cent to twenty-seven per cent. The data on mortgages cover only the owned farm homes, leaving over one-third of the land about which no informa- tion was secured. The amount of tenancy in 1900 and 1910 is shown by Table XII. Table XII shows that forty-four per cent of all the land in farms in 1920 was operated by tenants. The amount of mortgage indebtedness against these farms is unknown, but it was surely considerable, although probably not as great proportionally as for the farms operated by owners. Table XII Farm Operation and Ownership in Iowa***^ Number OF Farms Per Cent OF Total Number OF Farms Total Num- ber OF Acres Per Cent OF All Land in Farms Operated by Owners 1920 1910 1900 121,888 133,003 147,305 57.1 61.3 64.4 18,051,121 20,214,337 22,451,768 53.9 59.6 64.9 Operated by Manag- ers 1920 1910 1900 2,487 1,926 1,581 1.2 0.9 0.7 569,086 490,805 498,982 1.7 1.4 1.4 Operated by Tenants 1920 1910 1900 89,064 82,115 79,736 41.7 37.8 34.9 14,854,689 13,225,546 11,623,587 44.4 39.0 33.6 FARM MORTGAGE BANKING 273 many of whom were in the early stages of paying for the land. Increasing tenancy is an outcome of higher priced land. With the rapidly mounting price of land this becomes a serious economic and social problem. To check such a tendency is an important function of improved mortgage credit. Supplementary statistics on Iowa farm mortgages can be obtained from the reports of the life insurance com- panies, the largest investors in farm mortgages. The secre- tary of the association of life insurance presidents, an or- ganization representing about ninety-seven per cent of all investors in farm mortgages among the insurance companies in the United States, recently published a report on farm loan investments in war time. On December 31, 1914, the farm loans in Iowa by insurance companies were $139,- 511,101 ; two years later the total was $195,782,521. During the first nine months of 1917 new loans of $61,152,392 were placed by the insurance companies.®*^ ^ The latter figure does not take account of mortgages paid off or reduced during the same period. Insurance companies held approx- imately $250,000,000 of Iowa mortgages at the close of 1917. The volume of mortgages held by banks, endowed institu- tions, mortgage companies, and private investors can only be estimated. Well-informed farm mortgage dealers esti- mated the amount of mortgages outstanding in the summer of 1919 at approximately $500,000,000. This would appear now to be too low since the census figure for owned farms alone was $489,816,739 and moreover the amount of debt was secured on only 52,341 out of 66,096 reported as mort- gaged. A conservative banker after careful analysis esti- mated that $250,000,000 of standard first mortgages were placed in Iowa during the first three months of 1920.®°^ This probably does not represent an increase of that amount in outstanding mortgages since renewals appear to have been included. But estimates by well-informed 18 274 HISTORY OF BANKING IN IOWA mortgage dealers in June, 1921, placed the total of all Iowa farm mortgages at from $800,000,000 to $1,000,000,000. Farm mortgages have generally proved the foundation of prosperity for Iowa farmers. The farmer has needed capital to develop and improve his farm; for this purpose his land has offered the best security. The tenant has wished to become an owner, and the vendor in many cases has stood ready to accept a considerable part of the pur- chase price in the form of a first mortgage on the farm. In a few years the advancing price of land has greatly in- creased the new owner 's equity in the place and has enabled him to tide over any temporary depression. The average value of the mortgaged farms has been found to be greater than the unmortgaged : the buildings and improvements are also of higher value.^*'^ The average size of the Iowa farm in 1910 was 156.3 acres — twenty-three acres larger than the average farm of 1880.*'*^'^ With the average price ranging from $250 to $300 per acre since 1919, it can easily be seen that in the neighborhood of $50,000 is needed to buy an Iowa farm. Many persons who are now farming either bought the land at a fraction of its present market value, or they have inherited from parents who did so. The buyer at present prices needs, and will long continue to need, credit on a long term basis. Instead of a thing to be dreaded, as is the mortgage of fiction, the farm mortgage is the cheapest means the Iowa farmer has of securing capital for produc- tive purposes. The business of mortgage banking in some form seems sure to be a relatively permanent one. EARLY MORTGAGE BANKING The material for the complete history of mortgage bank- ing in Iowa has not been assembled — if, indeed, it ever can be. No State supervision has been exercised over this busi- ness as such. No reports of mortgage dealers are filed with State officials. During a large part of Iowa's Terri- FARM MORTGAGE BANKING 275 torial and State history there was no specialization in the mortgage business. Prior to the installation of the Fed- eral farm loan system the various classes of purchasers of farm mortgages might, for convenience, be grouped in five main classes : banks of all kinds, farm mortgage companies, insurance companies, endowed institutions, and private in- vestors. In placing their investments these various classes used different methods and facilities. In an earlier chapter the part played by the private banker of the fifties in "entering land on time", acting as agent for eastern capitalists in placing money in farm loans, dealing in land warrants, exchanging gold for the eastern drafts of land buyers, and carrying on a general real estate agency has already been described. Gradually the func- tions of commercial banking were developed by the older banks. But the pioneer banker had followed the establish- ment of the government land office at Council Bluffs, Fort Dodge, Sioux City, and other points. The banker took heavy risks and charged proportionately. The panic of 1857 swept away the majority of the existing banks in Iowa. Shortly thereafter the State Bank of Iowa was incorporated with a prohibition in its charter against real estate loans. A similar restriction was contained in the national banking act of 1863. These conspicuous ex- amples of successful banking without the use of real estate security show that even in the early period banking could be carried on in Iowa with its loans limited to the discount- ing of short time commercial paper. But throughout the existence of the State Bank, during the dominance of the national system before 1875, and even after the recognition of State and savings banks under Iowa laws, the private banks continued to thrive. Their business was what they chose to make it. In many cases they were small commer- cial banks, which later incorporated under State or national law and have become substantial institutions. Other private 276 HISTORY OF BANKING IN IOWA bankers were chiefly interested in the farm mortgage and real estate business, accepting deposits only incidentally and discounting very little short time paper. As a result of changing public sentiment and of the development of specialization in banking, the large place among the financial institutions of the State formerly taken by private banks has been lost. In a great many cases they have sought in- corporation under State or national law; in others they have developed the mortgage and loan business as a spe- cialty. FAEM MOETGAGE BUSINESS OF THE COMMERCIAL BANKS In 1863 the framers of the national banking law, influ- enced by the general abuse of the right of making real estate loans, prohibited the national banks to be created there- under from making any mortgage loans. In order to meet the legitimate demand for this class of loans, many national banks established an associate savings bank or trust com- pany. Usually this allied institution is owned by the same stockholders, operates in the same banking room, and is managed by the same officers. Savings deposits have been made through this affiliated institution, which has been free to loan on real estate, limited only by the State laws govern- ing the investment of savings bank funds. Where no asso- ciate institution has existed the national bank has often in a certain sense made real estate loans. This has been accom- plished by loaning to a farmer on his personal note although relying on the fact that he is a land owner to secure the note. Notes made in this way are recognized as investment loans and are renewed from time to time by the banker. The Federal Reserve Act permits national banks to loan on farm land an aggregate amount not exceeding twenty- five per cent of its capital and surplus, or one-third of its time deposits. The time limit on these loans is fixed at five years and the maximum amount at fifty per cent of the FARM MORTGAGE BANKING 277 actual valne of the property offered as security.^"® This has extended somewhat the opportunity for making farm loans by this class of banks, but the nature of the business of many national banks in the commercial centers and the affiliation of others with savings banks or trust companies have been such that only a moderate change was aifected by this amendment. State and savings banks have always been allowed to in- vest in real estate mortgages. The savings bank law of 1874 defined the class of investments which savings banks might make, and permitted them to purchase real estate mortgages upon unincumbered Iowa land worth twice the amount loaned thereon. In 1913 an amendment was passed which permitted savings banks to invest in notes or bonds secured by real estate outside of Iowa, if in any county ad- joining the Iowa State line. This loaning area was further extended in 1917 to any adjoining State, except that no loan may be made on real estate west of the 100th meridian line.*'"'^ Until very recently, therefore, the Iowa banks have been limited to Iowa mortgages. The amount which might be loaned to any one individual was limited to twenty per cent of the capital of the bank prior to 1902. The percent- age was raised in that year to fifty per cent when the loan was secured by mortgage upon unencumbered farm land.*^® Very little practical limitation has, therefore, existed upon the right of State incorporated banks to make farm mort- gage loans. As a matter of fact the practice in this respect has differed very markedly in different sections of the State. In the older counties in the eastern third of the State, it is quite common for a bank to carry a considerable amount of real estate mortgages, but it is unusual for banks in certain western counties of the State to loan any of their funds on real estate, except temporarily. The explanation of this difference lies in the heavier demand for short time loans in the western counties. These short loans are commonly 278 HISTORY OF BANKING IN IOWA made at eight per cent interest and are, therefore, much more remunerative than the mortgage loans which seldom draw over six per cent.^''® In addition to their part as investors in farm mortgages most country banks have served as agencies for placing the money of other institutions or individuals wishing to make this type of investment. Practically every farmer in Iowa has a bank to which he turns for all sorts of financial aid or advice. The farmer planning to make a loan looks to ''his bank" for the money. These banks have found it profitable to place loans for others on a cash commission basis. DEBENTUEE COMPANIES In the period from 1870 to 1893 many debenture com- panies were formed to handle the investments offered by the development of farm land. These were most active in the Upper Mississippi Valley, extending into Kansas, Nebraska, and the Dakotas. In an address before the Iowa Farm Mortgage Association, D. H. McKee, Vice President of the Iowa Loan and Trust Company, Des Moines, stated that 121 debenture companies were operating in this territory in the early nineties. The method of all of these companies was the same. Debentures were issued which were a first claim on the general assets of the company and were further secured by first mortgages on improved land worth twice the amount loaned thereon. Many of these were English or Scotch companies. From a prospectus in his possession of the Farm Land Mortgage and Debenture Company of Cedar Rapids, Mr. McKee presented many interesting facts. This document, issued in 1892 by McFarlane, Hutton, and Patrick of Glasgow, Scotland, showed that the company was organized in 1888, and apparently was financed by Scotch capital. Its paid-up capital was 20,618 pounds of ordinary and 87,744 pounds of preference shares. Deben- FARM MORTGAGE BANKING 279 tures of 710,200 pounds were outstanding, making total assets of over $4,000,000. The Mortgage and Debenture Company, Limited, was organized in England to carry the business of the Cedar Rapids Company, and the Law Guar- antee and Trust Society, Limited, of London, was named as trustee for the debenture stock issued by these companies. The territory of operation was in Iowa and the surrounding States. Another company of the same type mentioned by Mr. McKee was the West of Scotland, American Investment Company, Limited. It was also operating in Iowa, South Dakota, and Minnesota. Of all the debenture companies operating in the early nineties only one, the Iowa Loan and Trust Company of Des Moines, remained in active opera- tion in 1915. Some of these companies appear to have overloaded with mortgages and to have become involved in difficulties during the depression in the nineties. Even the conservative companies, however, have encountered a de- clining market for their debentures. The experience of the Iowa Loan and Trust Company is that its debenture busi- ness has declined during recent years, although it still had outstanding, in 1919, approximately $2,500,000 of these bonds. During the period of the successful business of this and other companies, the bonds paid interest of six per cent and were issued for ten years. At five per cent it was also possible to float the bonds successfully, but only a few bonds could be sold at a lower rate. These bonds were amply secured by carefully placed mortgages, but still were uijable to compete as an investment with the farm mortgage itself.«i« In recent years there seems to have been some revival of the use of debenture or mortgage bonds. The attention of the writer has been called to an Iowa trust company which is now issuing bonds of this type. It appears that the primary object of this company is to reach the small in- 280 HISTORY OF BANKING IN IOWA vestor and thus find an outlet for large mortgages. Mort- gages on Iowa farm land totalling at least $50,000 are de- posited with a trustee, and debenture bonds are then issued and sold in small denominations. Bonds are issued to run for a period of three or five years and yield, at present, five and one-half per cent to the investor. There is no ' ' spread ' ' between the interest rate on the mortgage and the interest rate on the bond. The profit for the company comes in the commission of one or two per cent charged the borrower at the time he makes his loan.^^^ EXISTING FAEM MOETGAGE COMPANIES Other farm mortgage companies of a different type have become increasingly numerous in Iowa in recent years. Banks, corporations, and individuals have specialized in the purchase and sale of farm mortgages. The number of such companies can not be accurately determined, since there is no way of definitely classifying them. Membership in the Iowa Farm Mortgage Association may perhaps be consid- ered as satisfactory a test as any ; but even this organization is not composed strictly of mortgage companies, nor does its roster include all such companies. The Iowa Farm Mortgage Association was organized in 1914. A preliminary meeting was held on February 21, 1914, at the call of Frank J. Long, D. H. McKee, G. M. Titus, J. F. Webber, and H. S. Merrick. The first annual meeting was held in Des Moines May 19, 1914, G. M. Titus of Mus- catine serving as first president. Eegular annual meetings of the association have been held since that time. The pur- pose of the organization, as stated in the preamble, is to maintain the high standard and credit of Iowa farm mort- gage loans at home and abroad. It was believed that this end could "best be secured by frequent conferences, ex- change of views, and closer cooperation of the individuals and representatives of firms and corporations in Iowa who FARM MORTGAGE BANKING 281 are engaged in dealing in farm mortgage loans ".^^^ The men^bership was expected to include corporations, firms, or individuals engaged in making loans or in the purchase and sale of mortgage loans. A list of the members furnished by F. C. Waples, secre- tary of the association, included seventy-six names in July, 1921. Of this number, thirteen were incorporated banks or trust companies. Some of these have a large farm mort- gage business, but are not devoting their entire attention to this field. Five insurance companies, which figure more largely as purchasers of mortgages than as dealers, are also members. Of the remainder, some are individual dealers, but forty-seven are incorporated mortgage companies. In the same year that the Iowa Farm Mortgage Associa- tion was started, a national organization was launched. A preliminary meeting was held in May, and the first annual convention assembled at Chicago on October 7 and 8, 1914. In defining and determining the membership the founders of the association undertook ''to establish as a distinct, well organized profession, the business of 'farm mortgage bank- ing' ". Brokers and dealers in city mortgages were ex- cluded on the ground that they were not farm mortgage bankers. In order to eliminate unreliable dealers the mini- mum capital of a firm eligible to membership was fixed at $25,000. In general the purposes of forming the association, as stated in the preamble of the constitution, are : to encour- age intelligent State and national legislation; to secure uni- formity of practice ; to aid in public discrimination between dealers and securities; and to give opportunity for those engaged in the business to exchange ideas, form personal acquaintances, and enjoy the fellowship of association meet- ings. In 1917 fourteen Iowa institutions were listed as members of the national association.^!^ The business of a farm mortgage company consists in making loans, or purchasing mortgages already made, and 282 HISTORY OF BANKING IN IOWA selling the same to investors. Very few now issue their own debentures for sale, and as a general rule they do not guarantee the mortgages sold, although at least one Iowa company has recently announced its intention of selling guaranteed mortgages.*^ ^^ To protect their reputation for dealing only in sound securities, the conservative companies look out for the interest of their clients in case of any trouble. They do not, however, incur any legal responsibil- ity to do so. Many smaller investors accept the opinion of the attorney of the mortgage company as to the validity of the title and other legal points connected with the draw- ing up and recording of the mortgage. On the other hand, some investors, especially the life insurance companies, rely wholly on the opinion of their own attorney. MAKKET FOR IOWA FAEM MORTGAGES Mortgage dealers sell their securities to private investors, savings banks, insurance companies, colleges, and other endowed institutions, and other brokers. Although the largest holders of Iowa mortgages are the insurance com- panies, the testimony of the dealers is that the best market for their offerings is with private investors. The other buyers are equipped to place their capital directly in many cases, hence do not rely on the dealers for their investments. The profits of the mortgage companies come from cash com- missions charged the borrower and from being able to sell mortgages in blocks at a lower net rate to the investor than is charged the borrower.^^^ Insurance companies, as was shown earlier in this chap- ter, have been heavy investors in Iowa farm mortgages. Out of a total of $828,568,867 invested in mortgages by all insurance companies on December 31, 1916, $195,782,521 or nearly one-fourth were Iowa mortgages. The State second to Iowa in respect to the amount of insurance money loaned therein was Missouri with $73,528,633.^^^ In placing this FARM MORTGAGE BANKING 283 large volume of loans, three methods are used by the insur- ance companies : to make loans through special representa- tives working for the company on a salary or commission basis ; to buy from brokers and mortgage companies in large blocks after special examination of the security; and to appoint county agents to make the loans for them.^^^ H. S. Nollen, vice president of the Equitable Life Insurance Com- pany of Iowa, told the mortgage bankers at their 1919 con- vention that the companies rely in considerable part on the man out in the field, the men represented in the gathering before him.^^^ The market for the sale of mortgages to savings banks is practically limited to Illinois, Wisconsin, Vermont, New Hampshire, and Iowa. Owing to injudicious loaning by the savings banks of New England during the early nineties, in- vestment in real estate mortgages outside of the State was denied by the laws of three of the New England and many other eastern States. Vermont and New Hampshire were an exception. Leslie M. Shaw is reported to have loaned very extensively for Vermont bankers through his bank at Denison, Iowa, during the seventies and eighties. Vermont savings banks continue to invest heavily in outside mort- gages, the total being stated at $45,000,000 in 1915 — prin- cipally on land in the Mississippi Valley.^^^ Iowa continues to receive a share of this money. The repeal of the restric- tive laws in other eastern States would broaden the market for Iowa farm mortgages. This is something Iowa mort- gage men have hoped to see brought about. In addition to loans made directly by savings banks in their own terri- tory, Iowa savings banks in certain sections are heavy pur- chasers of mortgages handled by the regular mortgage com- panies. The sale of Iowa mortgages to endowed institutions and to individuals has not been limited to Iowa, although there has been a good market here for these securities. In 1915 284 HISTORY OF BANKING IN IOWA the State census showed a total of twenty-seven endowed institutions for higher education with an enrollment of 10,148 students.^'^ The amount of their productive endow- ment and the amount of it which is invested in Iowa mort- gages are not given, but may safely be assumed to be con- siderable. Until recently there have not been many indi- viduals in Iowa with free capital seeking investment, but the number of these has rapidly increased in recent years. Many farms have been sold during 1918 and 1919, the terms of sale requiring the vendor to carry a large percentage of the purchase price in a mortgage on the land. If the holder of the mortgage wishes to realize cash on the same, he must seek some purchaser other than the banks and insurance companies, which are limited to loans not exceeding fifty per cent of the value of the mortgaged property. Acting as brokers for such parties would appear to offer an increasing field of activity for the mortgage companies. INTEEEST BATES The rates charged for real estate loans throughout Iowa's history are not available. In the early fifties the standard rate was forty per cent, with usually an added profit for the banker if he could enter on the land with warrants given by the government for service in the War of 1812, the Indian wars, or the Mexican War, which were often sold by the veterans at a considerable discount. During the nineties loans were made at about six per cent on good security. In the decade preceding the World War many loans were made at five per cent with an added cash commission of from one to two per cent at the time of making the loan, on a straight five year mortgage. The rates increased somewhat during the war. The only exception to this condition was in case of those rates granted by vendors in order to secure a higher price for their land. In some localities the rate of FARM MORTGAGE BANKING 285 five per cent was maintained under those circumstances and was a factor in stimulating land sales. The rates realized by insurance companies in recent years are a fair indication of the cost of the loans for the period covered. On December 31, 1914, the average rate on $139,- 511,101 of outstanding loans in Iowa was 5.32 per cent. Two years later the rate was 5.28 per cent on all the outstanding Iowa farm mortgages. On the business written from Janu- ary 1 to September 30, 1917, the average rate was 5.18 per cent.^^^ This does not represent the total cost to the bor- rower who usually pays a cash commission in addition which adds from one-fourth to one-half per cent annually to the average cost of the loan. By the spring of 1919 the cheap- est money available on the best securities was at five and one-half per cent, with a cash commission of one per cent and expenses also borne by the borrower. At the June, 1919, meeting of the Iowa Farm Mortgage Association, L. H. Bush, special loan agent at Des Moines of the North- western Mutual Life Insurance Company of Milwaukee, an- nounced that he was in a position to loan funds at five and one-half per cent for terms of either five or ten years. In 1920 the average rate of interest reported by the Federal census was five and one-half per cent. The high interest rates prevailing on all classes of loans during 1920 raised mortgage rates to a minimum of six per cent, while most loans were placed at still higher figures.^^^ Practically all of the loans made in Iowa by banks, insur- ance companies, and individuals are straight term mort- gages, five years being the most common period. The cus- tom has been to allow optional payments after the first year, usually in sums of not less than $100. Interest is payable semi-annually. H. S. Nollen, vice president of the Equit- able Life Insurance Company of Iowa, in discussing insur- ance investment for the future at the 1919 meeting of the Iowa Mortgage Association said, however, that he believed 286 HISTORY OF BANKING IN IOWA the insurance companies would also offer amortized loans hereafter.^-^ FORECLOSUKES AND LOSSES The record of losses and foreclosures on Iowa farm mort- gages is another phase of the history which would prove interesting if definite facts were available. It is known that there was wholesale loss occasioned by the panic of 1857. Again, during the crisis in the seventies there was doubt- less some increase in foreclosures. The partial crop failure of 1894 was followed by the abnormally low prices for the large crop of 1896, and the result was hard times for the farmer during the nineties, but even then most debtors weathered the strain. In the pioneer sections of Nebraska, the Dakotas, and Kansas the losses were very heavy. In those days it was not uncommon in western Iowa to see the passing ''prairie schooner" from those sections carrying the pioneer back to his former home. He had taken the risks of a new country and lost. Usually the plucky farmer had stayed on until there remained only a few household furnishings, a wagon or two, and several half starved horses. Iowa farmers were in a better position to meet the adverse conditions and very few were forced to lose their farms under foreclosure. In more recent years the rapid rise in land values has made losses on carefully placed loans virtually impossible. L. H. Bush stated to the Iowa farm mortgage bankers at their 1919 convention that he had represented the North- western Mutual Life Insurance Company in Iowa for twenty-four years, and during that time had had only two foreclosures. In both cases the matter was satisfactorily settled, without loss to the company, before leaving the court house. The savings banks of Vermont held nearly $45,000,000 of mortgages in 1915 originating in the Middle West and West. The State bank commissioner reported that during the preceding six years losses on mortgages had FARM MORTGAGE BANKING 287 been sustained not to exceed $12,000, and ''practically all of that was lost through the dishonesty of an agent in the west."«24 PEOPOSED STATE EURAL CREDIT LAW In spite of the favorable situation in Iowa regarding farm mortgages, both from the standpoint of the investor and of the borrower, the State was affected by the general agi- tation for an improved system of ''rural credits" which culminated during President Taft's administration in the appointment of a commission to study the rural credit situ- ation in Europe. D. P. Hogan, president of the Farmers Savings Bank of Massena, Iowa, who had been member of this commission, undertook to secure the passage of a bill establishing State farm mortgage banks at the 1915 session of the Iowa legislature. The plan as outlined by Mr. Hogan provided for the incorporation of State farm mortgage banks with capital of not less than $50,000. Their incorpo- ration was to follow the law for the incorporation of ordi- nary banks of deposit. Farm mortgage loans made on land worth at least twice the amount loaned thereon were to be deposited with the Auditor of State, upon which security bonds could be issued by the bank. The limit of the bonds so issued was to be twenty times the capital and surplus of the bank. The bill provided for supervision of the loans and bond issues. Bonds were to be in convenient denominations to meet the needs of all classes of investors. Originally the bill provided that the bonds should be tax exempt, but it was later amended to specify that the bonds be taxed. On March 18, 1915, the bill passed the House by a vote of ninety-six to three. In the Senate the bill met determined opposition. It was amended very decidedly, and finally failed of passage by a vote of twenty to twenty-four. Mean- time The Northtvestern Banker had asked D. P. Hogan, author of the bill, and Henry Jayne, vice president of the Hershey State Bank, Muscatine, to present both sides of 288 HISTORY OF BANKING IN IOWA the question of the desirability of the measure. Mr. Jayne 's first objection to the bill was that it would destroy accounts in the savings banks, thus substituting for a very successful and sound means of promoting thrift one which he regarded as very uncertain at best. A more serious objection which he raised to the bill was the inadequacy of the provisions for examining and appraising the land upon which the money was to be loaned. He asserted that all that was re- quired was that the property should be appraised by farmer neighbors of the applicant who would not personally assume responsibility for any loss which might occur. The bill it- self failed of passage and its provisions, as amended, never appeared in print. If this defect did exist in the degree charged by Mr. Jayne, it would have been easy to amend it in this particular. The defeat of the bill was probably due in part to the general feeling of satisfaction with exist- ing agencies, which made it impossible to get the farmers of the State strongly back of the measure. Its failure may be traced directly to the opposition of the mortgage bankers. This appears to have been the only strong effort to secure State legislation on mortgage banking.^^^ FEDEEAL FARM LOAN SYSTEM By an act approved on July 17, 1916, Congress established the Federal farm loan system. At the head of the system is the Federal Farm Loan Board, a bureau in the Treasury Department, consisting of four members appointed by the President, with the Secretary of the Treasury a member ex officio. The country was divided into twelve districts, in each of which was located a Federal land bank. No State was to be divided between two or more districts, and in fixing the districts it was the purpose of the organization committee to put States with well-recognized farm mortgage securities in the same district with one or more States the value of whose land was not so well stabilized. On that FARM MORTGAGE BANKING 289 basis the eighth district was composed of Iowa, Nebraska, South Dakota, and Wyoming with the Federal land bank located at Omaha.*^^^ It was provided that within the district local organiza- tions could be formed of ten or more borrowing farmers known as national farm loan associations. These were the institutions through which loans by the Federal land banks were to be placed. In case no association existed in a given locality the land bank was authorized to appoint some exist- ing State bank as agent in making loans and collecting pay- ments. In addition to the Federal land banks and their auxiliaries, the system provided for joint stock land banks to be independently organized by private individuals but under the supervision of the Federal Farm Loan Board.®-'^ The minimum capital of the Federal land banks was fixed at $750,000 each, and the act provided that if within thirty days after the opening of the subscription books any part of the minimum capitalization remained unsubscribed it should be taken up by the government. Practically all of the original stock was subscribed by the Secretary of the Treasury on behalf of the United States.*'^^ On June 30, 1919, the government still owned $570,110 of stock in the Omaha bank.^^^ Borrowers are required to subscribe to the bank's capital to the extent of five per cent of the loan re- ceived. In this way the permanent capital will be secured and the original subscriptions of the government or indi- viduals retired at par. When the subscriptions to capital stock by the national farm loan associations equalled the minimum of $750,000, twenty-five per cent of all subscrip- tions made thereafter were applied toward the retirement of such stock.^^" The stock held by farm loan associations in the Omaha bank amounted to $844,820 on December 31, 1918, and on June 30, 1919, it totaled $1,643,560. In the meantime the bank retired a portion of its original govern- ment owned stock, reducing the amount during the six 19 290 HISTORY OF BANKING IN IOWA months from $710,670 to $570,110.^31 jt ^^s intended that the banks should be owned by the borrowers cooperatively and that the government subsidy should be but temporary. The provision of the act which placed the Federal Farm Loan Bureau under the Treasury Department saddled the expense of that portion of the system on the public. This feature is of such doubtful expediency that an effort has been made to amend the law to place the expenses of the Bureau upon the banks operating under the system. A bill to this effect was passed by the Senate during the second session of the Sixty-sixth Congress but failed to pass the House so that this subsidy still remains.^^^ Loans are usually made by the Federal land banks through the national farm loan associations. These are or- ganizations of ten or more farmers desiring to borrow an aggregate of at least $20,000. Each member is required to subscribe to the capital of the association an amount equal to five per cent of the amount he wishes to borrow and assumes an additional liability for a like amount. In this way the associations are cooperative societies of borrowers. The principal officers of the association are the secretary- treasurer and a loan committee. The latter must pass on and approve all loans before they are sent on to the land bank for examination. Each land bank has its own apprais- ers who also pass on the security before it is accepted by the bank. The loan committee of the national farm loan association must be unanimous in its report upon the pro- posed loan and all sign a written report to that effect. The land bank appraiser must also send in a favorable written report before the loan is granted, the extent of his investiga- tion being prescribed by the Federal Farm Loan Board.^^^ The loans through the national farm loan associations may be made only to actual farmers, the purpose being to confine the services of the system to the man who tills the soil and not to extend it to the land speculator. In inter- FARM MORTGAGE BANKING 291 preting this part of the act the legal department of the Omaha bank has been very lenient in its rulings. If the land is rented under a proposition which can be construed as a partnership, or if it is operated by a member of the family, it may be construed as coming under the provisions of the law. The minimum loan is $100 and the maximum $10,000 to one individual. Critics of the system have pointed out that the maximum limit provision has been evaded by allow- ing a borrower to give a deed to some other member or members of the family for a portion of the farm so that two or more loans of the maximum amount have been made on what is in reality a single farm. Loans may not be made in excess of fifty per cent of the appraised value of the land and twenty per cent of the insured value of the buildings. Money borrowed from the Federal land bank may be used only for the following purposes: to provide for the pur- chase of agricultural land, equipment, fertilizers, and live stock necessary for the proper and reasonable operation of the mortgaged farm ; to provide for buildings and other im- provement of farm lands; and to liquidate a pre-existing indebtedness.^^^ Loans under the Federal farm loan system may be made for a term of from five to forty years. The policy of the Federal land banks at the outset has been to encourage long time loans, usually for thirty-four and one-half years. Money borrowed may not be repaid in less than five years even if the borrower should have the funds and desire to do so. All loans must be made on the amortization plan, a certain payment being made each year on the principal as well as the interest payments. To illustrate, a $1000 loan at six per cent, the maximum rate that may be charged, can be fully paid in twenty years by adding $26.52 per year to the interest of $60.00, making a total of $86.52 divided into semi-annual payments. At five and one-half per cent, the rate at which most loans have been made by the Federal land 292 HISTORY OF BANKING IN IOWA banks, the charge would be proportionately less. After the first five years the borrower may make additional payments in sums of $25 or any multiple thereof at any regular in- stallment date.®^^ The Federal farm loan act limited the maximum interest rate which might be charged on farm loans by institutions under its provisions to six per cent per annum. During the first months of operation the rate charged borrowers by the Federal land banks was five per cent. Owing to the financial conditions produced by the war the rate was raised early in 1918 to five and one-half per cent and in the spring of 1921 to six per cent. The rates of the joint stock land banks have been one-half per cent higher, six per cent being the prevailing rate in 1919. No commissions are charged the borrower, but the expenses of determination of title, the actual cost of appraisal, legal fees, and recording charges are charged to the applicant for a loan.^^^ To obtain the funds to make loans beyond the amount of their capital stock. Federal land banks issue bonds secured by farm mortgages not less in aggregate amount than the sum of the bonds proposed to be issued. The mortgages given as collateral are placed in the custody of the farm loan registrar who holds them in his name as trustee. No issue of farm loan bonds can be made without the written ap- proval of the Federal Farm Loan Board. Interest on bonds may not exceed five per cent per annum, they must run at least five years, and be issued in series of not less than $50,000. The interest rate and other terms are prescribed by the Board under these limitations. In order to provide a standard security which would appeal to all classes of investors the denominations of bonds range from $40 to $10,000. The bonds are held to be ''in- strumentalities of the Government of the United States", and as such they and the income derived therefrom were made exempt from Federal, State, municipal, and local tax- FARM MORTGAGE BANKING 293 ation. At the time of the framing of the act Federal income taxation was relatively insignificant, but with the greatly increased rates of Federal taxation due to the war, this tax exemption feature of the Federal farm loan bonds has made them increasingly attractive to wealthy investors.^^"^ In order to enable the land banks to continue granting loans and not interfere with the sale of Liberty bonds the Secretary of the Treasury was authorized, on January 18, 1918, to buy farm loan bonds to an amount not to exceed $100,000,000 in each of the fiscal years ending June 30, 1918, and June 30, 1919.^^^ These operations made the United States Treasury the heaviest purchaser of bonds during the first two years of operation. Some of these bonds were sub- sequently repurchased by the banks at the purchase price for resale to private investors. Large blocks of bonds have been marketed by investment bankers, apparently chiefly to wealthy investors who wish to escape taxation. A few bonds have been sold by the Federal Land Bank of Omaha direct to Iowa investors. Bonds were offered at lOli^ and accrued interest, and $79,350 were sold in this way to Iowa investors during the first six months of operation.^^^ The Federal Land Bank of Omaha began its operations about March 1, 1917 ; the president chosen was D. P. Hogan of Massena, Iowa. By October, 1917, loans to the amount of $3,730,590 had been made, of which only $138,000 were in Iowa. To encourage the formation of national farm loan associations the Omaha bank advised bankers that it was prepared to contract for the organization of associations, allowing a commission of one-half per cent on the loans ap- proved. Any bank appointed was to serve as secretary- treasurer of the association, and thus eliminate most of the expense for the local organization. Many bankers took ad- vantage of this opportunity.^*^ It gave the banker a reason- able commission and an opportunity to retain control of the farm mortgage situation in his community. At the outset 294 HISTORY OF BANKING IN IOWA the number of associations formed varied directly with the prevailing rates of interest on private capital in the various States.''^^ This situation seems to have changed somewhat in more recent months. On November 30, 1919, there were 138 associations in Iowa with 2539 members and loans of $17,995,150. This placed Iowa second to Texas in the total amount loaned within the State by the Federal land banks. The average size of the loans for the country as a whole was $2637; the Iowa loans averaged $7087 each.«" JOINT STOCK LAND BANKS Joint stock land banks authorized under the Federal farm loan act are in some ways independent of the other part of the system and in some ways dependent upon it. They are capitalized with private capital, and all loans are made to the individual borrower either directly or through a local agency. They are freed from many restrictions placed on the Federal land banks. The borrower is not required to be an actual farmer; no restrictions are put on the use he may make of the money borrowed ; and the amount of the loan is not limited to $10,000 as in the case of Federal land banks. The bond issues are also quite distinct. On the other hand, the joint stock land banks depend on the serv- ices of the land bank appraisers and farm loan registrar. Loans may not be made above fifty per cent of the valuation of the land and twenty per cent of the insurable valuation of the buildings ; these loans must be made on the amortization plan, they may not bear interest above six per cent and they must have a maturity of from five to forty years. Loans made by a joint stock land bank are confined to the State within which it has its principal office and one other con- tiguous State. Loans are further limited to fifteen times the capital and surplus of the bank.^^^ Such banks may be formed by any number of persons not less than ten with a capital stock of not less than $250,000. FARM MORTGAGE BANKING 295 They are incorporated by the Federal government on much the same basis as national banks. Stockholders incur a double liability on the stock owned by them. Federal examiners must examine and report the condition of every joint stock land bank at least twice each year. The bonds issued by the joint stock land banks are secured by mort- gages in the custody of the farm loan registrar of the dis- trict in which it is located.^ ^* By November 30, 1919, thirty joint stock land banks had been chartered in the entire country.^^'^ The first charter to be issued was granted to the Iowa Joint Stock Land Bank, located at Sioux City, Iowa, with authority to make loans in Iowa and South Dakota.^^^ The First Joint Stock Land Bank of Chicago, and the Lincoln Joint Stock Land Bank of Lincoln, Nebraska, were also making loans in Iowa by January, 1919.^*^ During the early months of 1919 five banks were added to the number previously operating in Iowa. They were located as follows: The Fremont Joint Stock Land Bank, at Fremont, Ne- braska. The Central Iowa Joint Stock Land Bank, at Des Moines, Iowa. The Peters Joint Stock Land Bank, at Omaha, Nebraska. The First Joint Stock Land Bank, at Minneapolis, Min- nesota. The Des Moines Joint Stock Land Bank, at Des Moines, lowa.^^^ The Illinois Joint Stock Land Bank of Monticello, Illinois, was also authorized to loan in Iowa, but at the latest report had not made any loans in this State. Statistics of the vol- ume of business done by the joint stock land banks in Iowa show that loans of $23,924,095 had been closed up to May 31, 1920. Practically all of this was outstanding at that date. The volume of business in Iowa alone represented nearly one-third of the total for the entire country. It is in 296 HISTORY OF BANKING IN IOWA the corn belt States of the Mississippi Valley that the great bulk of the business of joint stock land banks appears to have been done.®*^ It was expected that private capitalists operating bond or mortgage companies under State incorporation would re- charter as joint stock land banks, thereby taking advantage of the prestige of government supervision and of the exemp- tion of their securities from taxation. This, however, has not been the case to any considerable degree as yet. The failure of the system to attract private capital in large amounts may be explained in various ways. Certain defects and uncertainties in the law prevented existing in- stitutions from becoming joint stock land banks. In dis- cussing the question before the Iowa Farm Mortgage Asso- ciation in 1918, E. D. Chassell pointed out five changes which a committee of the Farm Mortgage Bankers Associa- tion of America had sought to secure in the law: first, to place the joint stock banks on a par with the Federal land banks by increasing the lending power to twenty times the capital and surplus ; second, to raise the maximum interest rate to six and one-half per cent in order to meet war con- ditions, and to warrant loaning in the territory where higher rates prevail; third, to permit an extension of the territory in which joint stock land banks might operate to the entire United States instead of limiting their operations to two States ; fourth, so to amend the law as definitely to protect the capitalist against the possibility of arbitrary political control; finally, to define clearly the right of banks to sell bonds at a premium.^ ^^ Even if these changes should be made there would still doubtless be many companies which would not care to change their present status. The minimum capitalization of $250,000 would serve to prevent many Iowa mortgage companies from becoming joint stock land banks, since many of them are at present carrying on a successful business FARM MORTGAGE BANKING 297 with a much lower capitalization. Opportunity for rapid turnover of capital is greatly reduced by the Federal sys- tem. Under the plan followed by the average mortgage company, there is no fixed relation between the volume of business which they are permitted to do and the capital of the company. Every mortgage is sold outright on its merits and the dealer has no further financial responsibility there- for. Under the mortgage bond plan of the Federal system the capital of the joint stock bank serves as a kind of safety fund for the additional protection of the bond holders. The law, therefore, limits the loans to fifteen times the capital stock of the bank. A successful mortgage company in Iowa reports sales of $5,500,000 in two years made with a capital of $100,000, or more than fifty times its capitalization.''^^ Bonds issued by the joint stock land banks have usually had a maturity of twenty years. To enable this company to con- tinue its present volume of sales over a period of years would, therefore, require it to multiply its present capital many times. There are, moreover, certain institutions which are de- terred from entering the system because of the unsatisfac- tory experience of the old debenture companies.*'^" D. P. Hogan, president of the Federal Land Bank of Omaha, has undertaken to meet this argument by charging that the weakness of the old debenture companies was the lack of standardization and government supervision.^^^ But it has been shown that even where conservatively managed the debenture companies were not able to market the bonds readily at a low rate of interest. Again, there exists a large class of borrowers who prefer the present plan of straight mortgages, at a flat rate with the privilege of optional payments. Straight mortgages usually bear a somewhat higher rate to the investor than mortgage-secured bonds. The tax exemption feature is of no advantage to educational, religious, and benevolent insti- 298 HISTORY OF BANKING IN IOWA tutions whose property is not taxable or to the small saver whose money and credits usually escape taxation. Nor could foreign investors gain anything by this feature. A disadvantage of bonds as an investment for insurance com- panies is that the market value will be subject to fluctua- tions, whereas a mortgage does not have a varying market value. The Iowa Joint Stock Land Bank of Sioux City was or- ganized by the same interests that control the Farmers Loan and Trust Company of that city. Borrowers are thus given their choice of making loans on the amortized plan or on the straight mortgage basis. The old constituency of borrowers and investors can thus be retained. At the outset bankers were in doubt as to whether they could become officers of a joint stock land bank and at the same time retain their other interests. When Charles E. Lobdell, of the Federal Farm Loan Board, assured the members of the Farm Mortgage Bankers Association at the 1917 convention that the Board had ''made a final and different construction", his an- nouncement was received with applause. Mr. Lobdell ear- nestly invited the mortgage bankers of the country to come into the system as joint stock land banks, use it, and help to improve it. He pledged the support of the Federal Farm Loan Board toward securing any reasonable amendment.^^* The same thing was strongly urged upon the Iowa mortgage men by James F. Toy, president of the Iowa Joint Stock Land Bank, at the 1918 meeting of the Iowa Association. He saw in the law a number of objectionable features but believed they could be eliminated by cooperation.^^^ THE TAX EXEMPTION ISSUE In spite of these suggestions the Iowa mortgage bankers have continued to be opponents of the Federal farm loan system. Their attack has centered on the tax exemption feature of the law. At the 1918 meeting of the Iowa Farm FARM MORTGAGE BANKING 299 Mortgage Association the following resolution was passed : "Resolved, That we regard the tax exemption feature of the federal farm loan act as unjust and of a class nature and that Congress should repeal this feature of the law. ' ' This resolution was opposed by some of the members on the ground that it would do no good to pass the resolution and would be regarded as passed in the selfish interest of the mortgage bankers. James F. Toy moved to strike out the paragraph, but upon a division of the house his motion was lost.^^^ Again at the 1919 and 1920 conventions the Associa- tion went on record as favoring the repeal of the tax exemp- tion feature.^ ^^ During the spring of 1919 the mortgage bankers con- ducted a campaign against the tax exemption feature of the Federal farm loan act. Their propaganda was directed to the bankers of Iowa and was met by strong counter argu- ments by representatives of the Federal Land Bank. E. D. Chassell, secretary of the Farm Mortgage Bankers Associa- tion of America, and M. L. Corey, attorney-registrar for the Federal Land Bank of Omaha, engaged in a warm debate before some of the group meetings of the Iowa Bankers As- sociation. Space was granted them in the June number of The Northwestern Banker to set forth their views, and the opinions of the bankers were invited as to the merits of the proposition. Mr. Corey asserted that the tax exemption feature was an essential part of the system and that, know- ing this, the farm mortgage bankers were undertaking to kill the system by ** tearing out an important piece of the structure. " Mr. Chassell objected to the growing volume of tax-free securities and especially attacked the provisions of the existing law granting these bonds greater privileges than most Liberty bonds.^^^ In August, 1919, a test suit was instituted to determine the constitutionality of the tax exemption of the Federal land bank bonds and the joint stock land bank bonds. The 300 HISTORY OF BANKING IN IOWA members of the Farm Mortgage Bankers Association of America, as individuals, raised the fund to instigate the suit, but it was not brought under the official direction of the Association. The case was first heard before Judge A. S. Van Valkenberg in the Federal District Court at Kansas City. At the conclusion of the argument, on October 31st, the court dismissed the bill. The case was immediately ap- pealed to the Supreme Court of the United States, where the hearing w^as set for January 5th. The Supreme Court submitted the case for reargument on April 26, 1920, but since oral arguments for that term of court closed April 30th, the case had to go over to the October term. The de- cision of the court was announced on February 28, 1921, sustaining the constitutionality of the entire act. Pending the final disposition of this case the activities of the Federal land banks were curtailed and the operations of the joint stock land banks were practically suspended. On February 4, 1920, the Federal Farm Loan Board issued an order to the Federal land banks asking them to hold all future applications in abeyance, but permitting them to close the loans already accepted. Since it was impossible to market bonds satisfactorily while the case was pending, the land banks, with the approval of the Board, borrowed money from banks in various cities. These loans were sub- ject to call and secured by farm mortgages as collateral. The loans were made with the expectation that a decision would be reached by the court early in 1920. It was not ex- pected that the commercial banks would furnish long time credit, nor were they in a position to do so in view of the general credit situation.^ ^^ When the Supreme Court ordered the case reargued the Federal Farm Loan Board sought relief through legislation. Congress was asked to extend the provisions of the act as passed in January, 1918, which had authorized the Treasury Department to purchase not to exceed $100,000,000 of Fed- FARM MORTGAGE BANKING 301 eral farm loan bonds in any fiscal year. The law originally gave this authority only for the years 1918 and 1919. A joint resolution was adopted by Congress authorizing the purchase of such bonds when issued against loans approved before March 1, 1920. Under this resolution the Treasury had available the unused portion of the original $200,000,000 appropriation amounting to $64,000,000 for the purchase of bonds. The banks were not, however, placed in a position to make any further loans. No relief whatever was granted to the joint stock land banks. The result was that during the spring of 1920, a season of unusually heavy demand for farm loans, the Federal system was unable to function to any considerable degree. Most of the joint stock land banks adopted the policy of marking time until the litigation was concluded and a few even went into voluntary liquidation. The net mortgage loans of the joint stock land banks in- creased only from $54,686,234 on November 30, 1919, to $77,958,642 on December 31, 1920. During the same period the twelve Federal land banks were only able to increase their loans from $284,137,419 to $346,000,000.««*> It is not within the province of this historical survey to go into the merits of the tax exemption controversy. The prob- lem is complicated because of the two types of institutions operating under the provisions of the Federal farm loan act. Federal land banks are cooperative non-profit making insti- tutions. If bonds are sold at a more favorable rate because of tax exemption, the savings should go to the borrowing farmer in reduced interest rates or dividends on stock in the land bank. Joint stock land banks, on the other hand, are private corporations operated for the profit of the stock- holders. There is practically no restriction on the size of loans which they may make and loans may be made to any landowner whether he is a farm operator or not. For this reason the joint stock land banks have been subject to spe- cial attack upon this point. A bill was introduced in the 302 HISTORY OF BANKING IN IOWA United States Senate to repeal the tax exemption privilege for all bonds issued by the joint stock land banks. The amendment if passed would not have affected the Federal land bank bonds. War taxation and the issue of Liberty bonds intensified the opposition to tax exempt securities. When the Federal farm loan act was passed in 1916 the rates of the Federal income tax were relatively low. Exemption from State and local taxation was then more important than exemption from Federal taxation. The passage of the war revenue acts, which raised the income tax rates to a high point, put a premium on tax exempt bonds for the wealthy investor. Farm loan bonds were superior in this respect to all but the issues of low yielding Liberty bonds. Under a uniform general property tax, mortgage taxation involves double taxation of the same property. State laws have in some instances sought to avoid this in their methods of taxing mortgages, but there is no uniformity in the mat- ter. The Iowa law does not allow a landowner to make any deduction from the assessed value of his property because of mortgage indebtedness. A $50,000 farm is taxed the same, with or without a mortgage standing against it. The holder of a mortgage is also taxed on the full value of the mortgage. Before 1911 the tax rate in Iowa on the mortgage would have been the same as that on other property. The rate on moneys and credits is now a uniform flat rate of five mills on the dollar, or $5 per $1000.^®^ The incidence of the tax on the mortgage is not certain. The theory of the framers of the Federal farm loan act was that it had been borne by the borrowing farmer in the form of increased interest rates. If all personal property were taxed, this would probably be true. The tax is so widely evaded that probably it is in considerable part a tax on honesty and ignorance. Thus, while exemption from State taxes is still an important advantage possessed by these bonds, their FARM MORTGAGE BANKING 303 superiority for the rich investor now lies primarily in the freedom from Federal income taxation. EFFECTS OF THE FEDERAL FARM LOAN SYSTEM Too short a time has elapsed to judge as to the probable place which the Federal farm loan system will occupy in the future of the Iowa mortgage business. On May 31, 1920, the aggregate loans made in the State by the Federal Land Bank of Omaha and the eight joint stock land banks oper- ating in Iowa was $46,956,445. This total represented less than ten per cent of the estimated amount of outstanding farm mortgages but exceeded that of any other State — Texas being second with about $44,000,000.^*^2 Whether or not the Iowa farmer has secured the advan- tage of lower interest rates because of the competition of the Federal farm loan system can not be easily determined be- cause of the disturbing influence of the war. On the $61,- 152,392 of new loans granted by life insurance companies in Iowa during the first nine months of 1917, the interest rate was 5.18 per cent. This was during the time the Federal land banks were being organized and before their influence was felt. At the outset the rate of the Federal land banks was five per cent. The rates were subsequently raised to five and one-half per cent, and in 1921 to six per cent, and at these rates the insurance companies and other established lending agencies have been able to compete effectively. In other States, even in the eighth district, the situation seems to be entirely different. In Wyoming $29,400 of new loans were added by the insurance companies to their former total of $381,462, during the period from January 1, to September 30, 1917. On the new loans the rate was 7.43 per cent; on those in force December 31, 1916, the rate was 7.97 per cent. Insurance companies scrutinize their loans very carefully and accept only the best. It is safe to assume therefore that most of these loans would have been acceptable if made to 304 HISTORY OF BANKING IN IOWA farm operators under the Federal farm loan act. Bor- rowers in that State would be able to effect a saving of about two per cent per annum. It is the purpose of the system to make interest rates as nearly uniform over the entire United States as practicable. Doubtless such wide variations as formerly existed were unwarranted, but the effort to bring the Iowa and Wyoming borrowers to the same level appears to be contrary to the economic principle of higher interest rates where risks are greater. Before the Federal farm loan system makes very serious inroads on the half billion or more of Iowa farm mortgages it will have to make a rate lower than other loan organizations. A uniform rate will force private capital out of the more hazardous territory into still more active com- petition in the ''favored territory" of the Upper Missis- sippi Valley States. Only one State, Illinois, had as favor- able a rate from the insurance companies as had Iowa in ^927 663 ijiq bring the general interest rate for all mort- gages below that now prevalent in Iowa and Illinois would seem to be very difficult indeed. Therefore large oppor- tunity will continue to exist for private capital in the mort- gage business in Iowa. Bankers appear to be unduly alarmed over any form of government competition. When the postal savings bank law was pending the bankers attacked it violently. The same sort of fight was waged on the Federal reserve system, and the most dire results were predicted to follow its estab- lishment. In both cases the fears of the bankers have proved unfounded. In the same manner the mortgage bank- ers seem to have become unduly exercised over the future of their business in competition with the Federal farm loan system. It would seem desirable so to amend the law as to make the present farm mortgage machinery an effective part of the system. The attitude of criticism by mortgage dealers might well be supplanted by a larger spirit of co- FARM MORTGAGE BANKING 305 operation in the interest of securing necessary changes in the law. 0. M. Corwin, president of the Farm Mortgage Bankers Association of America, in his annual address at the 1918 convention urged his colleagues to cultivate this spirit.^^^ EECAPITULATION In the mid-nineteenth century lending on mortgage secu- rity appears to have been a large part of the business of the banker. Distinctly commercial banking was first suc- cessfully carried on by the State Bank of Iowa, which was prohibited from making real estate loans. The national banks, which succeeded it as the dominant financial institu- tions in the State, were also prohibited from loaning on real estate security. State and savings banks have not been restricted by law from making farm loans, but in large measure have not found it profitable to tie up funds in long time investment credit. Accordingly the farm mortgage business has been largely handled by other lending agencies. The established private institutions have met the legiti- mate demands of the Iowa land owner under fairly satis- factory terms. Instances of the use of ''loan shark" meth- ods were not infrequent in the pioneer days, but had become almost, if not quite, a thing of the past by the close of the nineteenth century. Iowa mortgages have been looked upon by investors as a very desirable form of investment secu- rity. Losses were practically negligible. From the stand- point of the borrower the terms have been considered favor- able. No strong demand existed among Iowa farmers for State or Federal rural credit legislation. The agitation which culminated in the creation of the Federal farm loan system was started on behalf of the farmers in less favored territory. In spite of the recent court decision upholding the tax exemption of Federal farm loan bonds and the joint stock land bank bonds, the mortgage situation in Iowa will probably not be seriously affected. 20 XIII SPECIAL TYPES OF BANKING It is the purpose of the present chapter to consider some of the newer specialized types of banking which have ap- peared in Iowa. With the exception of the postal savings banks, these institutions are not banks of deposit. They are not under the supervision of the State Department of Banking, although some of them use the name bank or its derivatives in their title. In the future this will be pro- hibited to new institutions of the same type. For the most part the field of operation within which they confine their business is distinctly defined. The location of these insti- tutions will be shown to be chiefly in the urban centers ; the bank in the rural communities, like the general store, serves all the needs of its patrons. In the cities the banks have en- larged their field by creating various departments. Never- theless there are classes of individuals or types of business which can best be taken care of by specialized institutions. MOEEIS PLAN COMPANIES A new type of institution which made its first appearance in Iowa in 1916 was established by the Morris Plan com- panies. The commercial banking system has not in all places been in a position to extend a line of credit to the wage-earner or small tradesman who needed to borrow. The security offered and the size of the loan were such that the city bank could not economically make these loans. Often illness, family misfortune, or the necessity for new tools or equipment are legitimate reasons for borrowing by the wage-earner. Into this neglected field of industrial credit in our cities the dubious pawn broker entered. The 306 SPECIAL TYPES OF BANKING 307 borrower who was without banking facilities but whose posi- tion was somewhat above that of the pawn customer re- sorted to commercial money-lenders who demanded a mort- gage on household goods or an assignment of salary. The weapon of these loan-sharks was usually the threat of pub- licity. Expenses were heavy and profits large so that the money cost of the loan to the borrower often reached a very high figure.^^^ Added to this was the greater cost in loss of independence and self-respect of the patron. The prac- tices of the loan-shark are deplorable, but he has been a necessary evil in some communities where no proper substi- tute existed. In 1910 the first Morris Plan company was organized at Norfolk, Virginia, by Arthur J. Morris, a young lawyer who had been an interested student of European systems of in- dustrial credit. This original company was formed with $20,000 capital to make loans on personal credit. The or- ganization proved a decided success and was soon extended to over one hundred American cities. The Morris Plan com- panies from the time of their establishment in 1910 to Feb- ruary, 1919, had made about 625,000 small loans, aggregat- ing considerably over $90,000,000.««« In Iowa four companies were in operation on June 30, Table XHI Data Concerning the Morris Plan Companies in Iowa^*^ Location Date op Organization Paid up Capital Loans made from Date OP Organization to June 30, 1921 Des Moines Waterloo Cedab Rapids Davenport Feb. 18, 1916 April 16, 1916 Nov. 14, 1916 Apr. 30, 1917 $ 100,000 60,000 92,200 60,000 Number Amount 11,387 6,240 6,358 2,494 $ 2,453,821 1,048,881 1, OSS, 975 904,078 308 HISTORY OF BANKING IN IOWA 1921. The location of these companies with the principal facts concerning them are given in Table XIII. The Industrial Finance Corporation was organized in February, 1914, to centralize and standardize the Morris Plan movement. This corporation owns about twenty per cent of the capital of the operating companies, it holds the copyright to the Morris Plan name and various other ex- pressions necessary to the operation of the plan. It assists in the organization of new companies, sells the right to oper- ate the Morris Plan, instructs the managing force in the operation of the new company, furnishes forms and other items of equipment and exercises a cooperative supervision over all of the different companies.^^^ The result is that companies of this type use the same name and have made use of the distinctive black diamond, with the words "The Morris Plan" thereon, in their signs, and engraved on all stationery and advertising circulars. Their general meth- ods are also practically the same in all cities. At the second annual convention of the managers and representatives of the Morris Plan companies, held in New York City in October, 1916, there was organized a National Association of Morris Plan Bankers. Its purpose was to promote the national development of the Morris Plan sys- tem and to give the managers the advantage of personal acquaintanceship and interchange of ideas.^^® New developments of the Morris Plan include an insur- ance department which was started in 1917, known as the Morris Plan Insurance Society and organized under the New York State laws. By the payment of a small fee a borrower is enabled to carry insurance to cancel his debt in the event of his death, and also to return to his family the amount previously paid toward the liquidation of his loan. The insurance society had written 22,245 contracts by December 31, 1918, but had not done any business in Iowa up to that date. In February, 1919, the officers of the Indus- SPECIAL TYPES OF BANKING 309 trial Finance Corporation reported that it was then seeking a license to operate in Iowa. A still more recent develop- ment is the Morris Plan of retail trade acceptances. Details of this new feature of the system are not available, but it is expected to be of assistance to people of small means who desire to make purchases on the installment plan.^^^ Loans by the Morris Plan companies are made on the basis of character as security. They do not accept pawns, chattel mortgages, or salary assignments as security for loans. The note given must be signed by two co-makers, in addition to the borrower, who are willing to vouch for the character of the borrower and become responsible with him for the repayment of the loan. It is maintained that the system reduces the risk of the co-makers to a minimum be- cause of the thorough investigation made of the borrower's character and ability to repay the loan when due. It is the policy of the companies to loan only when satisfied of the ability of the borrower to meet the loan, not relying gener- ally on the credit of the co-makers. The method of install- ment payments and the well-organized follow-up system when the borrower becomes in arrears in his weekly pay- ments strengthen the position of the co-makers. The manager of the Cedar Rapids company reports that thousands of dollars of endorsements are made by mer- chants to the amount of their bills. Should a man owe the grocer $25, the fuel dealer $25, the doctor $25, and some other creditor $15 he is constantly worried by bills he can not pay and is harassed by collectors to no one of whom he dares give preference. The Morris Plan company will accept the endorsement of these various creditors, limit the liability of each to the amount he receives, and mail each one a check for the amount of his bill. The debtor has a clean slate, his obligation is in a form where he can meet it in two dollar a week installments. Should he default on his payments the endorsers are not worse off than formerly 310 HISTORY OF BANKING IN IOWA since they have the same opportunity as before to recover from the debtor.^'^^ The process of making a loan and repaying the same are standardized for all associations and for loans of all sizes. For every $50 loan, or part thereof, the borrower agrees to buy an investment certificate of the company and assign it to the company as security for the loan. He is then required to make weekly payments on the certificate. Neglect to make the weekly payment promptly subjects him to a fine of five cents on each $50 certificate subscribed. The loans are made on a one year basis, repayable in fifty installments. When the fifty payments have been completed the full-paid certificates are surrendered to the company and the note cancelled. Interest at six per cent per annum is deducted in advance. An investigation charge of $1 is made on each $50 borrowed, but not to exceed $5 on the loan. In the case of a $100 loan, therefore, the borrower would receive in cash $92. He is required to begin, one week later, weekly payments to- ward the repayment of the loan. No interest is allowed for the deposits then made. The managers of the plan liken these deposits to the balance ordinarily kept in the bank by the commercial borrower. As a matter of fact the cost of the loan to the borrower is considerably over six per cent when there is added the investigation cost, and the loss of interest on his savings. The advantage of regular repay- ment is, however, of no inconsiderable weight. Theoreti- cally the borrower might secure his loan from a commercial bank, assuming his credit to be good, and accumulate a fund with which to repay it by weekly deposits in an interest bearing savings account. In such a case the cost would be less than through a Morris Plan company. Practically, however, the Morris Plan provides a scheme of repayment that is adapted to industrial needs and is sure to result in liquidating the loan when due. SPECIAL TYPES OP BANKING 311 In addition to loans based on character and earning power as security, loans are also made on certain accepted forms of collateral, which includes those forms which would ordi- narily be accepted at a commercial bank. The Waterloo company lists full-paid investment certificates of the Morris Plan companies, savings bank accounts, securities listed on the New York Stock Exchange, and Liberty bonds as ac- ceptable classes of collateral. Out of 1904 loans made by the Cedar Eapids company to December 31, 1918, it appears that 434 were based on collateral and 1470 were endorsed by co-makers.®'^^ Before granting a loan the Morris Plan companies de- termine the reason for borrowing. The facts shown in Table XIV were compiled from the records of the Cedar Rapids and Waterloo companies. Miscellaneous and business debts will be seen to lead the Table XIV Reasons for Borrowing from the Morris Plan Companies of Waterloo and Cedar Rapids®^^ Waterloo Cedar Rapids Sickness Death Birth Miscellaneous Debts Business Debts Home Improvement Buying Home Taxes Mortgage and Interest Loan Sharks Education Vacation Beginning Housekeeping Buying Coal Liberty Bonds Buying Cab Insurance Christmas 31 2 20 517 60 8 5 12 2 22 3 4 3 9 117 3 6 137 18 1185 230 34 18 44 20 42 8 7 13 128 16 4 312 HISTORY OF BANKING IN IOWA list. Evidently the Waterloo company encouraged patrons to borrow in order to buy Liberty bonds. In Cedar Rapids the results of the efforts of the fuel administration may be observed from the large number who borrowed to lay in their winter 's coal supply. Sickness has been an important cause of borrowing. A considerable number of persons seem to have used these companies to escape from the toils of the loan-shark. A more detailed and intimate knowledge of the reasons for borrowing would furnish an interesting study. The list of occupations of the borrowers from the Cedar Rapids company classes laborers first and skilled mechanics as a close second. Salesmen, owners or partners of a busi- ness, clerks, teachers, civil service employees, professional people, foremen, managers, and housewives are classed as borrowers. The nationality of borrowers was predomi- nantly American, with Bohemians ranking second; the lat- ter may be explained by the fact that they are the dominant foreign element of the city. As to amounts borrowed the most common were $50 or $100, these two representing 631 and 629 of the loans respectively. The largest loan granted by the Cedar Rapids company was $2000. Of the borrowers 782 owned real estate ; 1542 had dependents ; 1631 were men ; and 273 were women.^'^^ The losses sustained by the Morris Plan companies are remarkably small. Although the data for the Iowa com- panies are not available it may be observed that the general experience of Morris Plan companies shows a surprising degree of safety. It has been demonstrated that with pru- dent management the average losses will not exceed one- fourth of one per cent. The Morris Plan company at Wash- ington, D. C, loaned in two years about $750,000 to 4000 borrowers, and sustained only one loss amounting to $60. The statement of condition of the Cedar Rapids company, as of December 31, 1918, had a reserve for losses of only SPECIAL TYPES OF BANKING 313 $388 against loans of $107,612. This company is conserva- tively managed and had at the time over two years experi- ence upon which to base its estimate of losses, so this sum probably indicates fairly well the proportion of its losses.®'^ Ownership of the capital stock of the Morris Plan com- panies is divided between local investors and the Industrial Finance Corporation of New York City on the basis of about seventy-five per cent and twenty-five per cent respectively. The Iowa companies are backed by the best business inter- ests of their respective cities. These men look upon the in- stitutions partly from a sociological and philanthropic point of view. The companies if successfully managed, however, pay good dividends to the stockholders. The Des Moines company in 1918 netted seven per cent ; and the Cedar Rap- ids company earned over six per cent. The executive officer of a company is known as the secretary-manager. He has charge of making loans, keeping the records, receiving in- stallments, and carrying out the policies of the directors.^^^ Morris Plan companies in Iowa are organized under the general incorporation laws of the State. They are not re- quired to make reports or subject themselves to State regu- lation. At the 1919 session of the General Assembly, how- ever, an act was passed which permits domestic corpora- tions engaged in making small loans to deserving persons, under terms similar to those of the Morris Plan companies, to come under the jurisdiction of the Auditor of State. If they elect to come under State regulation the corporations are to file reports of condition before January 15th of each year and are also to be subject to examination at the discre- tion of the Auditor. If, as a result of the reports and exam- inations, the Auditor is satisfied with the good faith of the corporation he is to issue to it a certificate to that effect. This would be official recognition of the standing of these institutions and would also entitle them to a more equitable rate of taxation. They are to be taxed on the net actual 314 HISTORY OF BANKING IN IOWA value of their moneys and credits at the rate of five mills on the dollar. The law was approved on April 5, 1919, but no reports were to be submitted before January 15, 1920.^^" The Morris Plan companies are not alone in making in- dustrial loans. Thus the Davenport company reports that there are three or four loan companies in that city doing a good business.®^^ These companies take chattel mortgages and in general do not carry on the business in the same man- ner as the Morris Plan companies. Perhaps some of them will find it advantageous to come under the provisions of the recent law and thus secure State recognition. The standardization of the Morris Plan banks and their unique method of making loans marks them as a distinctive type of loan companies. Moreover, the nature of their business is such that they do not compete with the commercial banks. In Cedar Rapids ofiicers or directors of the majority of the city's commercial banks are represented on the directorate. The field for institutions of this type is limited to the larger cities or industrial centers so that their number will prob- ably never be large in Iowa, but their usefulness may be expected to grow. FAKM CEEDIT COEPOEATIONS During the summer of 1921 a new corporation was launched in Iowa as a means of aiding in the financing of Iowa agriculture. This corporation was promoted by repre- sentatives of the bankers and farmers, working primarily through the Iowa Bankers Association and the Iowa Farm Bureau Federation. It was founded to meet the unfortunate experiences of the farmers in the post-war deflation period. It is not, however, a temporary makeshift, but a permanent institution. Other corporations of the same type may also be formed if the conditions seem to demand their estab- lishment. The purpose of the institution is to create capital for SPECIAL TYPES OF BANKING 315 agricultural 'loans varying in length from sixty days to a year or even longer. A farmer may make direct loans from the corporation or he may borrow through his local bank. It is to make advances on grain stored in licensed ware- houses, on wool warehouse receipts, for cattle feeding, and for other purposes. Funds to be used for this purpose beyond the original capital will be raised by the sale of the company's bonds or debentures. The plan itself is new, but the principle is not ; it is modelled after the Edge Act, passed by Congress for the purpose of financing foreign trade. In order to make it possible to operate legally under the plan contemplated it was first necessary to secure the pas- sage of certain laws. The program was supported in the legislature by the organizations of bankers and farmers. Subject to the approval of the Superintendent of Banking, State banks, savings banks, and trust companies were au- thorized to invest ten per cent of their capital and surplus in foreign trade financing corporations under the Edge Act and ten per cent in domestic agricultural corporations of the type under consideration. In no event, however, could the aggregate so invested exceed twenty per cent of the cap- ital and surplus of the bank. These laws were necessary in order to enable banks to be stockholders in the new corpo- ration. The provisions of the general incorporation law limiting the indebtedness of corporations were so amended as not to apply to a corporation having $1,000,000 or over of paid- in capital in case the indebtedness was secured by obliga- tions such as this organization would hold. This enables such a corporation to issue its own debentures or bonds up to any limit when properly secured. On warehouse receipts the farmer may borrow from his local bank seventy-five per cent of the market value of the commodity. Such paper properly endorsed by the bank can be used by the finance 316 HISTORY OF BANKING IN IOWA corporation as a security for bonds or debentures for one hundred per cent of its actual value. For cattle feeding the loan may amount to eighty per cent of the value of the live stock but such obligations can be used as security for bond issues by the corporation only up to ninety per cent of their full value. This seems to be the only legal limitation on the ratio of bonds to capital. Another important law, necessary in order to make it pos- sible for this corporation to function fully, was passed pro- viding for bonded warehouses and storage of agricultural and other commodities. Loans on grain or wool will be made to farmers when the commodity is stored in a licensed elevator or warehouse.^^^ The Iowa Farm Credit Corporation is the pioneer organi- zation under the new laws. Its articles of incorporation were filed on June 8, 1921. The authorized capital is $5,- 000,000; but at the outset only $1,000,000 of stock will be sold. It is planned to apportion the stock geographically and distribute it as widely as possible. Stock subscriptions are limited to $10,000 for any person. Banks have been urged to buy on the assurance that banks which are stock- holders will receive first consideration among applicants desiring to borrow money or rediscount with the corpora- tion. Farmers were circularized and urged to buy on the argument that it is ' ' the farmers of this state for whom it ie primarily organized to serve. ' ' Control of the Iowa Farm Credit Corporation is vested in a board of thirty directors equally representing farming and banking. It is intended that these directors shall be widely distributed throughout the State. To this end it is provided that there shall be one farmer and one banker from each of the eleven districts created by tiie Iowa Bankers As- sociation in its State-wide organization. In addition there are eight other directors at large. The first President is L. A. Andrew of Ottumwa, retiring President of the Iowa SPECIAL TYPES OF BANKING 317 Bankers Association ; the first Vice President is C. W. Hunt, President of the Iowa Farm Bureau Federation. Frank Warner, Secretary of the Iowa Bankers Association, has been made Executive Secretary and F. G. Redfield, Treas- urer. Included in the list of officers and directors of the Iowa Farm Credit Corporation are other equally prominent bankers and farmers. The place of this type of institution in the financial or- ganization of Iowa has not yet been demonstrated. That commercial banks are sometimes unable to meet the local demand for credit was amply demonstrated during the crisis of 1920. By means of this financing plan combined with the warehousing plan now made possible, the period of marketing of farm products can be lengthened and a more orderly marketing program can be secured. The character of this agricultural paper is such as to make it eligible for rediscount at the Federal reserve banks when it has a ma- turity of not over six months. Two reasons may be ad- vanced for adding to the rediscounting facilities thus af- forded through the Federal reserve system : paper of longer maturity may be taken care of; and less than one-fourth of Iowa's banks are now members of the system and the non-members can not directly avail themselves of the redis- count privilege. • The plan seems well calculated to serve its purpose of making capital available to Iowa farmers. The debentures issued will have as security the capital stock of the company, the farmer 's personal obligation, the warehouse receipt, or chattel mortgage, and the commodity represented thereby, and the endorsement of a bank when loans are placed through the local banks. Investors would seemingly regard this as an attractive type of paper. The pioneer company's soundness and stability is best evidenced by the list of pro- moters. The organizations of bankers and farmers have given it their support. Although organized primarily to 318 HISTORY OF BANKING IN IOWA serve agriculture, it is expected to be a substantial company with fair earnings.*^®'^ AUTO LOAN COMPANIES A specialized banking service for financing the wholesale and retail sale of automotive vehicles has recently been in- stituted in Iowa. In October, 1917, the first corporation of its kind in the State was organized in Des Moines. The com- mercial banks were not equipped with the credit and collec- tion machinery necessary to handle certain classes of de- ferred payment paper given for the purchase of automobiles or trucks. It was to meet the demand for a specialized insti- tution, prepared to handle this type of business, that the pioneer company was organized. Other companies have since been formed which conduct their business along the same lines. The original companies financed the sale of new cars, but with the growing volume of sales of used cars there have been companies formed which specialize in this phase of the business. Morris Plan companies also make loans for the purpose of buying service cars and trucks. A retail transaction is financed by these companies by having the dealer sell the vehicle under conditional sale con- tract which, with the note representing the deferred pay- ments, is assigned to the mortgage corporation. The en- dorsement of the dealer is required on the note, thus making all deferred payment paper two-name. This makes the note very suitable for purposes of rediscounting or for use as collateral. The service of the companies usually includes the furnishing of insurance against fire, theft, and collision. This protects the customer and also the company. For its own protection the company has each vehicle covered by a wrongful conversion bond. In this way the company is protected against nearly every contingency which might result in loss. The cost of the service is added to the cash price of the SPECIAL TYPES OF BANKING 319 car and is therefore borne by the purchaser. He is required to pay down thirty-three and one-third per cent or more of the purchase price of the car in cash and the balance in monthly installments, which keep pace with the depreciation of the car. The dealer receives his full one hundred per cent of the selling price as soon as the transaction is com- pleted. He is obliged to endorse the buyer's note, but the purchase contract protects him from loss in case the pur- chaser defaults in his payments. The buyer receives the necessary financial accommodation which enables him to purchase a car at once. To be sure, the insurance which is included adds to the cost of the car, but a prudent buyer wants this protection even where he pays cash for the car. The cost of the credit extended is not shown separately in the rate sheets, but the service includes the cost of credit machinery and monthly collections, which in addition to reasonable profit make it necessary for the companies to charge a rate materially above the usual bank interest rate. The usual plan of the companies for securing funds in ad- dition to their own capital is the sale of collateral trust notes to commercial banks or individuals having surplus funds to invest. Every $1000 of collateral trust notes is secured by $1200 of the two-name automobile paper depos- ited with the same bank or trust company as trustees. Notes are offered in denominations of from $1000 to $10,000 at discount rates that yield six per cent to seven and one-half per cent to the bank which buys them.®^^ These auto-loan companies have operated in Iowa for too short a period to furnish much basis for judging as to their future place among Iowa's financial institutions. Whether or not they will sustain themselves in periods of business adversity has not yet been demonstrated. The large number of automotive vehicles sold annually in the State would seem to offer a good field for their operations but as a matter of fact only a very few are in operation. During the 320 HISTORY OF BANKING IN IOWA past few years most of the automobile manufacturers have provided plans for financing the sale of their cars on a de- ferred credit plan of their own, thus largely eliminating the need for specialized banking institutions for this purpose. CATTLE LOAN COMPANIES Iowa's corn crops have been responsible for placing the State among the leading meat producing Commonwealths of the Union. The cattle feeding industry has necessitated a large amount of borrowing by farmers and stockmen. For the most part the cattle paper in Iowa is handled by the commercial banks, but there are a few specialized institu- tions in the State known as cattle loan companies. Such companies are not peculiar to Iowa, but may be found in other meat producing sections. Usually these are large companies located in the leading packing centers, prepared to loan to the big stockmen and cattle feeders. During the recent years Iowa and Illinois have been far in the lead of other States in corn production, Iowa's crop with a five year average (1914-1918) of 368,200,000 bushels being slightly in excess of that of her sister State.^*^ A considerable proportion of Iowa's corn crop is marketed in the form of beef and pork. In number of cattle on farms on January 1, 1917, Iowa ranked second to Texas, and in num- ber of hogs had more than double the total of Illinois, the State next to her.^^^ Many of the cattle on Iowa farms have been brought into the State ready to go into the last stage of corn feeding prior to their sale as finished beef. The cattle feeder, especially in the western part of Iowa, goes into the Sioux City and Omaha markets, or directly to the range and pasture country farther west, where he buys up mature steers, which after from three to six months feeding are ready for market. Usually he has corn and other feed on the farm sufficient to carry the cattle through to maturity. But in most cases he has to borrow the money to purchase SPECIAL TYPES OF BANKING 321 the feeders; frequently, loans of one hundred per cent of the cost price are made. Cattle loans of this type can be classed as prime commercial paper because of their safety and their very liquid character. In most cases the loans are from ninety days to six months. At the expiration of that time the cattle will be marketed and the note paid. In spite of panics or wars, a cash market for beef cattle has always been maintained in the chief packing centers. According to a representative of John Clay and Company, a leading commission firm engaged in marketing cattle, ninety-six per cent of cattle loans were paid at maturity during 1914, when loans made on stocks and bonds had to be contin- ued.^*^ Prices on beef cattle do not fluctuate widely over short periods, and the losses to the farmer from disease, even during an epidemic such as the foot and mouth disease, are very small.*^**^ The losses sustained on cattle loans are almost negligible when credit is extended judiciously. The Knorpp Cattle Loan Company of Kansas City has not had a loan become overdue in its experience of several years. Losses of the St. Joseph Cattle Loan Company on over $70,000,000 worth of loans amounted to only 0.00043 per cent; the St. Louis Cattle Loan Company has had an even more favorable record.*^*® Until within the past decade no specialized cattle loaning companies had been incorporated in Iowa : local banks made the loans direct, and when the seasonal demand was heavy secured an outlet for their excess paper through their cor- respondent banks. In 1913 the Sioux City Cattle Loan Com- pany was organized in connection with the Live Stock Na- tional Bank.*'*^ This seems to have been the pioneer com- pany in Iowa; but by 1919 at least four other companies were either operating or in process of organization.®^* The loaning area of these companies is not confined to Iowa but includes Nebraska, South Dakota, Montana, and Wyoming. The two principal types of cattle loan companies are the 21 322 HISTORY OF BANKING IN IOWA independent companies and those affiliated with a State or national bank. An illustration of the latter type is the Sioux City Cattle Loan Company. There are certain ad- vantages for a national bank to have an affiliated cattle loan company handle this class of business. In the first place the legal limit which a national bank may loan to one indi- vidual is ten per cent of the capital and surplus. Loans made by the Sioux City company run from $1500 to as much as $200,000 — many of them larger than the legal limit of the affiliated national bank. Moreover, it is not neces- sary to keep a cash reserve in the cattle loan company. A further advantage to the bank is that it furnishes a con- venient source from which to secure investment paper when- ever the bank has surplus funds ; at other times the paper can normally be sold to outside investors. The benefit to the allied cattle company is that it lowers the cost of opera- tion when the two institutions use the same quarters, and the prestige of a strong bank attracts business. The business of the cattle loan companies is primarily that of a broker for this class of notes; and the company keeps on hand paper about equal to its capital and surplus. The Sioux City Cattle Loan Company is capitalized at $200,000. In August, 1919, it had outstanding loans amount- ing to $3,500,000 ; at seasons when the demand is heavy the amount increases. Loans of the cattle loan companies are largely made through the country banks at rates current in the respective localities. These loans are secured by chattel mortgages, and the condition of the cattle is checked up from time to time by inspectors working in the loaning areas. Cattle notes are endorsed by the loan company and sold to investors in the financial centers, principally the large banks in the east. The rediscount rate is usually about two per cent less than that charged the borrower. The overhead expenses, reserves for losses and profits of the company are made from this difference in discount rates, or broker- SPECIAL TYPES OF BANKING 323 age. Large loans are frequently divided into several notes for easier marketing. Collection is made by the cattle loan company.^ ^^ During 1920 and the early months of 1921, the financial conditions of the country generally have be^n such as to make it difficult for cattle loan companies to operate. They are limited by Iowa law to charging interest not in excess of eight per cent. Interest rates have been at such a high level that no paper could be marketed at a rate sufficiently below this to allow the necessary '* spread" to cover ex- penses of operation. Consequently, activities have been practically suspended for some months. In July, 1921, a nation-wide loan pool to provide facilities up to $50,000,000 was announced. Representatives of east- ern banks provided $25,000,000 and the western bankers sub- scribed an equal amount. Loans are to be placed through the cattle loan companies and through local banks. The Iowa cattle loan companies hope through this agency to dis- pose of some cattle paper and thus resume loaning opera- tions. In Iowa the economic service of cattle companies varies largely with local conditions. Increased meat production is very desirable — not only directly but indirectly — in that it aids general food production through better fertility of the land when the grain and rough feeds are fed on the farm. The interests of the cattle feeder and his family are broader than those of the exclusive grain farmer. Trips to the markets to buy feeders and to Chicago or other packing centers with the fat cattle as they go to market give the stock farmer valuable contacts with outside commercial life. The farmer who feeds cattle has year round employment instead of spending his winter months in wasteful loafing. Any institution, therefore, which promotes the production of sheep and cattle renders the community an economic service. 324 HISTORY OF BANKING IN IOWA But whether or not these companies are necessary to handle the feeder loans in Iowa depends upon the alertness of the local bankers. In 1898 G. L. Tremain gave an ad- dress before the Iowa Bankers Association on "Cattle Paper ' '. He explained the advantages of cattle as security, and asserted that financial journals and capitalists were just waking up to the merits of the same. He stated that he had been loaning money from his bank at Humboldt on cattle paper for twenty years without loss. His security was always a chattel mortgage or bill of sale. Within Mr. Tremain 's recollection of events in Iowa, cattle were con- sidered such poor security for a loan that ' ' a man could not borrow $20 on all the cattle in this county ".^''*^ Ida County furnishes an illustration of what can be done toward financing the live stock industry locally when the bankers are alert. This is one of the smaller counties of the State with only five towns, the largest of which in 1915 had a population of only a little over 2000.*'^^ From Janu- ary 1 to May 15, 1918, the feeders of Ida County shipped to the various markets about 1300 carloads of fat stock valued at fully $2,500,000. All of this business was handled by the local banks which cater to the livestock business. In that community chattel mortgages are not taken on cattle except from an inexperienced tenant, or some one who is rather badly involved financially. Most of the real cattle paper does not run over 120 days and is, therefore, available for rediscount in the Federal Reserve Bank.^^^ When these banks have encountered difficulties in connection with the statutory limits on loans of ten or twenty per cent of the capital and surplus to one individual they have found an outlet for the excess paper through their correspondents. The statements of condition of three savings banks in the town of Battle Creek (population 688 in 1915) for June 29, 1918, show aggregate loans of approximately $1,500,000. This, however, is the season when cattle loans would be at SPECIAL TYPES OF BANKING 325 a minimum.*'''*^ Here the bankers have learned the advant- age of financing the cattle industry and have profited thereby. There are other communities of the State, however, where cattle loans are still frowned upon by local banks. In a town near Battle Creek, a banker recently reported that he had only $80,000 in local loans while he was carrying over $200,000 in outside paper.^^'^ In such a community cattle feeding might be promoted by improved credit conditions supplied by a cattle loan company. Another service of these Iowa companies consists in making stock loans in the States of the range and pasture area. The Sioux City Cat- tle Loan Company loans to stockmen of South Dakota, northern Nebraska, and some portions of Montana and Wyoming, on sheep as well as cattle.^^^ This territory is tributary to Sioux City and may legitimately look to her banks for capital to develop the livestock industry. Other Iowa companies also may find their field of operation in part outside the State. In this outside field they must meet the competition of numerous other companies, the number of which has been increasing rapidly in recent years. With the large volume of feeder loans in Iowa and a share of the stocker loans in adjacent States, Iowa companies should be able to employ considerable capital profitably. INVESTMENT BANKING Although investment banks are among the prominent banking institutions in the financial centers, they have not developed to such an important place in Iowa. Until quite recently there has been little surplus capital within the State for investment in bonds or other securities. There has been, however, a place for institutions equipped to buy and sell the bonds of cities, counties, and school districts. In part these securities have been bought by investment banking houses outside of Iowa, chiefly those located in 326 HISTORY OF BANKING IN IOWA Chicago. The greater part of the municipal issues in Iowa, however, are now financed by Iowa investment institu- tions.^^^ Iowa has had practically no funded State debt, the amount in 1913 being only $10,937. But the indebtedness of the counties and minor civil divisions has been considerable and is rapidly increasing in recent years. In 1880 the total amount, less sinking fund assets, was $7,592,332; in 1890 it was $11,025,384; in 1902 it had increased to $17,390,375; and during the following decade it more than doubled, total- ling $35,069,386 at the time of the Federal census report on wealth, debt, and taxation in 1913. The distribution of this between the civil divisions was twenty-seven and three- tenths per cent county, sixty-three and one-tenth per cent municipal, and nine and six-tenths per cent independent school districts. As to the county indebtedness the major portion was for drainage and road bonds. The percentage devoted to school purposes was considerably more than the nine and six-tenths per cent separately reported, for the obligation in cities over 2500 on account of schools was in- cluded in the city debt.^^'^ The oldest and best known investment banking institution in Iowa is George M. Bechtel and Company of Davenport, with offices also in Chicago, and New York. This company was organized in 1891, and since that time has financed im- provements in practically every municipality and school dis- trict of lowa.^^^ Schanke and Company, investment bank- ers of Mason City, have operated in Iowa since about 1900, and appear to have been the second of the well-recognized institutions to be established.^^^ It is impossible to deter- mine accurately the number of the Iowa companies and their volume of business. Some companies devoting a part or all of their time to the purchase and sale of securities have adopted the title ' ' Investment Bankers ' ' and can be identi- fied as such. Among the larger companies some are incor- SPECIAL TYPES OF BANKING 327 porated under Iowa law and others are unincorporated. The investment houses do not accept deposits and, there- fore, do not come under the general banking laws of Iowa or the supervision of the State Department of Banking. Under the circumstances definite data regarding investment bank- ing are very difficult to obtain."^"" In 1919 the Iowa legisla- ture passed a bill which, while aimed primarily at private commercial banks, was so framed as to prohibit any institu- tion not under national or State supervision from using the word banker, or any derivative thereof, in its title.^**^ This does not apply to banks already established, but will cut off any new investment institutions from the right to use the name "investment banker ".^"^ Securities handled by the Iowa investment banks consist largely of government and municipal bonds of various classes. Corporation securities are handled in only a lim- ited way. None of the companies from whom reports were secured are members of any stock exchange.'^*^^ The officers of one company report that they supply customers with securities listed on any of the exchanges if they desire. Usually bonds are bought outright and disposed of later. Some of the companies handle bond issues on a commission basis or serve as correspondents of other investment com- panies. Sales are made to private investors, banks, en- dowed institutions, and other bond houses. Private invest- ors appear to be the largest purchasers. The selling terri- tory of the older companies is from coast to coast, one com- pany reports a large clientele in California.'^"'* In addition to institutions carrying on the business of in- vestment banking, as it is commonly understood, some in- dividuals or companies handling loans, insurance, or real estate have taken the title ''Investment Bankers" for the sake of the prestige that they secure in this way.'^'^^ It is not uncommon either for the larger companies to broaden the range of their business somewhat by dealing in farm 328 HISTORY OF BANKING IN IOWA mortgages, acting as note brokers, guaranteeing titles, or engaging in other side issues. The term investment banker, therefore, does not have a standard meaning in Iowa and the number of firms doing strictly investment business is very limited. Efforts to secure estimates as to the volume of business handled by the Iowa companies have been unsuccessful. Geo. M. Bechtel and Company report annual investments of from twelve to fifteen million dollars. Schanke and Com- pany's sales were estimated at about ten millions, but this includes a large volume of farm mortgage business. At the end of the first year of business the Bankers Mortgage Com- pany of Des Moines had done a little over six million dol- lars of business and had expectations of greatly enlarging this as the sales force increased.'^"*' It is clear that the total volume of sales of bonds and securities is considerable in the aggregate. The highway law, enacted in 1919, permits the counties of Iowa to issue bonds in order to pave the primary road system of the State.'^'^^ Of the fourteen coun- ties which first voted to accept Federal aid for hard sur- facing the primary roads, six authorized bond issues to carry on the work at a faster rate than provided for by cur- rent receipts from the annual primary fund allotment. Bond issues authorized in these six counties aggregated $10,- 250,000.'^"^ The extent to which other low^a counties will vote bond issues for this purpose can not be determined until all the special elections for this purpose have been held. Doubtless road building and other public improve- ments will greatly increase the total indebtedness of the counties and other minor civil divisions of Iowa in the future. The volume of business of the investment banks will be correspondingly increased. A large market is also developing in Iowa for corporate securities. Investment banks will serve the needs of clients for this class of invest- ments. Indeed, it seems that investment banking, carried SPECIAL TYPES OF BANKING 329 on either by separate institutions or as a department of com- mercial banking, will have an increasing field in Iowa. POSTAL SAVINGS BANKS One further type of banking carried on in Iowa is that conducted through the postal savings banks. The postal savings bank system is not a product of Iowa law, nor is it peculiar to this State. Ordinarily postal savings banks are not numbered among Iowa's banking institutions; never- theless, in a study of this kind it seems advisable to devote some attention to the system. Its history in Iowa can not be considered, however, apart from the national movement. For this reason it will be necessary to outline very briefly the postal savings bank system as a whole, but wherever possible with special reference to Iowa conditions. In so far as they can be obtained, statistics of the number of de- positors and the volume of savings within the State will also be presented. As a result of the panic of 1907 the Republican party in the presidential campaign of 1908 went before the country in support of postal savings. The opposing plank in the Democratic party platform was one for a system of guar- antee of deposits in all banks. Depositors had become frightened during the panic and popular distrust of banks continued so strong as to induce both political parties to support some measure offering relief for the timid de- positor. Forty years of agitation, during which time scores of bills for the establishment of postal savings banks had been introduced into Congress, had failed to win support enough for such a measure to secure its enactment into law. Nor can the Republican victory of 1908 be interpreted as evidence of a strong demand for postal savings banks. But in order to redeem the party pledge, the Republican ma- jority in Congress secured the passage of a bill creating the postal savings bank system, which was approved by Presi- dent Taft on June 25, 1910.'«» 330 HISTORY OF BANKING IN IOWA In Iowa there had been very little demand for postal sav- ings banks. Losses due to bank failures during the panic had been nominal, and in most parts of the State there had been no suspension of payments by the banks. Banks were easily accessible in all sections of the State, and in indus- trial cities they were opened Saturday evenings to cash pay checks and receive deposits. Bankers in Iowa generally were opposed to the system, fearing that it would withdraw money from the regular savings accounts. Moreover, there was a fear that funds collected in Iowa would be withdrawn from the State for the purchase of government bonds or for deposit with the general treasury funds. It was also feared that the presence of postal savings banks would encourage timid depositors to withdraw their funds from banks in times of financial stress to deposit at the post office. As a matter of fact the gloomy outcome feared by oppon- ents of the measure has not been experienced. There is no evidence that postal savings banks have been competitors of the savings banks. The low interest rate of two per cent paid on deposits has not been sufficient to induce depositors to withdraw their money from the banks, since the latter pay interest of four per cent in most Iowa cities. The postal savings bank act of 1910 limited an individual's deposits to $100 in any calendar month and to $500 as a total, exclusive of accumulated interest. These restrictions were expected to confine the use of the system to small depositors and also to protect banks against withdrawals of heavy sums in time of panic. After six years of experience the $100 monthly limit on deposits was removed entirely by an act approved on May 18, 1916. At the same time the maximum amount which any depositor might have to his credit was raised from $500 to $1000 with the privilege of an additional $1000 without interest. '^^'^ Provision was made for the redeposit of the money re- ceived in postal savings accounts in the local banks. After SPECIAL TYPES OF BANKING 331 1914 member banks of the Federal reserve system were given preference as depository banks, but the list still in- cludes many non-member banks. On June 30, 1917, postal savings funds were held by 3486 national banks, 1274 State banks, 242 savings banks, 568 trust companies, and thirteen '^organized" private banks.'^^^ Funds so deposited are secured by approved bonds of the United States, States, municipalities or counties, and farm loan bonds. Bonds to the amount of $189,842,746 were held by the United States Treasurer on June 30, 1918, as security for postal savings funds deposited in the banks. '^^^ As a matter of fact, the banks have not lost savings accounts owing to the competi- tion of the postal savings system, but through the system have received the use of money at a lower rate than they are in the habit of paying. The records show that the total deposits in the postal savings banks of the United States on June 30, 1916, were $86,019,885. Deposits a year later were $131,954,696, an increase for the year of fifty-three and four-tenths per cent.'^^^ The competition of the war savings stamps, which were also sold at the post offices, and the demands upon all classes to buy Liberty bonds reduced the percentage of in- crease during the following year to about twelve per cent. The total deposits on June 30, 1918, were $148,471,499 ; on June 30, 1919, the total was $167,323,260.'^i* The only available statistics for Iowa compiled separately are as of June 30, 1916. There were then in Iowa 268 postal savings banks, 3155 depositors, and total deposits of $527,000. Iowa was far below the average of the States in the per capita deposits. The general average for the United States was eighty-three cents per capita; in Iowa it was twenty-four cents. Taking the country as a whole, there was one de- positor for each 172 persons ; in Iowa there was only one in 705.'^! « An analysis of the postal savings statistics explains these 332 HISTORY OF BANKING IN IOWA facts. The cities and towns having large per capita de- posits are industrial communities, the depositors being largely those who work for a daily wage. To them the post office is a familiar place, its hours are convenient, and they have confidence in its security. The foreign-born popula- tion is especially attracted to the post office as a savings bank.'^^ They have been accustomed to the postal savings banks in the land of their birth and have frequently been exploited by immigrant banks upon arrival in America. In 1916 sixty per cent of the depositors were foreign born, and this sixty per cent owned three-fourths of all the deposits.^^''^ In Iowa there are few industrial centers, and here the regu- lar savings banks have appealed especially to the foreign born. In the cities which possess a dominant foreign ele- ment, the banks issue advertising in the language of the im- migrants, employ clerks who can talk with them in their ow^n tongue, and in other ways seek to make them regular cus- tomers of the banks. The splendid record of safety of the Iowa banks has also doubtless contributed to inspiring con- fidence in the banks, while the disgraceful "immigrant bank" is almost, if not quite, unknown in this State. The reasons which have accounted for the failure of postal sav- ings banks to make considerable inroads into the business of the banks of Iowa seem certain to be of equal importance in the future. XIV BANKS AND THE COMMUNITY The relations of the banks of Iowa to the communities in which they are located do not differ materially from those of neighboring States. A discussion of the economic func- tions and services of banks in the community will, therefore, necessarily include much that is commonplace to the experi- enced banker or close student of banking theory and prac- tice. Nevertheless, for the sake of the general reader, the author regards it as desirable to undertake a classification of banking functions with special reference to the business and economic conditions of Iowa. This chapter will include an analysis of the banking functions, a summary of some of the community services of the banks, an account of the effect of increasing community service upon the popular attitude toward banks, an explanation of the unusual num- ber of banks in Iowa, an estimate as to the distribution of ownership of the banking institutions, a partial record of the profits received by banks for the services rendered, and a statement of the methods used in attracting additional business. The discussion will be confined primarily to the functions of the general or commercial banks. The place of specialized institutions has been covered in the chapters devoted to these types of banking. PRIMAEY BANKING FUNCTIONS The essential functions of the commercial bank are ordi- narily considered to be three — discount, deposit, and is- sue.'^^* Of these the first two are indispensable for any bank; the third, when narrowly limited to note issue is no longer regarded as equally important. Added to these pri- mary functions are certain secondary features which are 333 334 HISTORY OF BANKING IN IOWA also quite important in general banking. Among these may be mentioned: providing domestic and foreign exchange, facilitating investments, serving in a fiduciary capacity, and engaging in a safety deposit business. In addition to these banking functions the banks perform many important busi- ness functions and general community services. Receiving Deposits: — The first service which a bank ren- ders to most individuals is that of receiving money on de- posit. This may begin at a very early age in the individ- ual's life. Through school saving clubs, Christmas clubs, and other means the number of children using the banks as a place for the safe deposit of money has become consider- able. Many adults also use the banks chiefly as a place of deposit of money, either in a savings account or a current checking account. In providing a safe place for the deposit of money the banks stimulate productive saving and prevent hoarding. The bank serves as the financial middleman be- tween saver and borrower, thus directly aiding production. Small rills of saving are brought together which in the ag- gregate add enormously to the productive power of society. It is not possible to state the exact amount of total de- posits of Iowa banks because of the failure to secure reports from the private banks. On December 31, 1919, the deposits in savings banks. State banks, and trust companies aggre- gated $654,253,531.'^i» In October, 1919, the national banks reported deposits of $258,277,000. It is safe to assume that if the deposits of private banks had been included the total deposits in Iowa banks at the close of 1919 would have been approximately $1,000,000,000. A much higher figure was reached in 1920 but by the summer of 1921 all of this ad- vance had been lost and the figure reduced even below the 1919 amount. The reports do not show totals of savings deposits separately but this class constitutes a large pro- portion in the country banks of Iowa. National banks paid BANKS AND THE COMMUNITY 335 a total of $6,616,000 in interest upon their deposits in 1919J^® In a western Iowa town of approximately 700 population, three savings banks reported deposits of $1,- 844,727 on June 30, 1920. Of these deposits over $1,250,000 were in time certificates of deposit and savings accounts.''^^ The stimuli which banks offer to the saver are safety of the principal and a return in the form of interest. In re- spect to the former, Iowa banks have been shown to have an enviable record. No absolute guarantee is given the depositor, but careful supervision of banking is exercised primarily on his behalf. "^^2 rpj^g result is that very little hoarding occurs in the State and little anxiety is shown for the safety of the bank deposits. Interest rates paid on savings accounts in Iowa banks are from three and one-half to five per cent, the prevailing rate in most Iowa towns being four per cent. In western Iowa a considerable number of country banks pay five per cent on time deposits. The Federal Comptroller has under- taken in some years to ascertain the average rates paid on time deposits by all banks. His records for 1909 show that all reporting banks in Iowa averaged 3.95 per cent. By classes these were: national banks 3.88 per cent, savings banks 3.67 per cent, State banks 4.01 per cent, private banks 4.01 per cent, and loan and trust companies 4.00 per cent In 1915 the average rates were somewhat higher, ranging from 4.10 per cent for the savings banks to 4.25 per cent for private banks and trust companies. In both cases these reports are unofficial and incomplete, but they represent a large number of banks and are therefore about as satisfac- tory as can be obtained.'^^^ Most Iowa banks do not pay interest on individual check- ing accounts. Banks in the reserve cities allow interest on the daily balances of the reserve accounts of correspondent banks. The State law also specifies that interest of at least two and one-half per cent per annum on ninety per cent of 336 HISTORY OF BANKING IN IOWA the daily balance must be paid on certain public funds de- posited in the banks."^^ It appears, however, that this re- quirement is not rigidly enforced by the minor political units, where the balance is so small as to make the interest almost negligible. Charges are made in a few Iowa cities for handling small checking accounts. The rule is to impose the service charge on all accounts having an average balance below a certain fixed minimum, usually about $100. This practice appears to be confined to a limited number of cities, principally those designated as reserve centers. '^^^ Because of the en- couragement which they have always felt should be given to the small depositor, many bankers deem it inexpedient at the present time to impose a service charge even on accounts which are known to be unprofitable. They regard the stimu- lation of deposit banking as one of the services which they owe to the community. Moreover, the bank recognizes many potential profits in accounts now^ too small to be profit- able. It seems unlikely, therefore, that Iowa banks will generally adopt the practice of making service charges. Issue of Circulating Media: — In the early days of Iowa banking the issue of bank notes was a very important bank- ing function. It was the abuse of this privilege that caused the extreme prejudice against banks manifested in the mid- nineteenth century. Later most of the regulation of bank- ing was devised for the protection of the note holder. At present State banks do not issue any notes. National banks continue to issue notes and all member banks of the Federal reserve system play a part in bringing into existence the Federal reserve notes. "^^"^ On the whole, however, the note- issuing function has become of subordinate importance in commercial banks during the past half century. The chief form of circulating medium furnished by banks to-day is deposit or check currency. Banks receive deposits BANKS AND THE COMMUNITY 337 of money and also create deposits by making loans ; all such deposits may be transferred by means of checks. In 1909 Professor David Kinley, investigating for the National Monetary Commission, found that approximately ninety per cent of all payments in the United States are made by checks.'^^^ It has been commonly stated by writers on eco- nomics and finance that bank notes and specie are still used very extensively in the rural sections of the country. This situation certainly does not exist in Iowa at the present time, although it seems to have been true a generation ago. The writer 's boyhood was spent on a western Iowa farm and his first memories date back to the mid-nineties. In those days the farmer made most of his payments in coin or bills, the silver dollar being an important element of the medium of exchange, since bills of less than $5 were prac- tically unknown. What a cause for wonder and amazement to the small boy was the leather wallet and its contents car- ried by the farmer-manager of the neighborhood threshing outfit! Into its greasy depths went the money collected from the farmers to settle the threshing bill. A peep at its contents was enough to convince us youngsters that it con- tained fabulous sums of real money. To-day the collections for a similar outfit consist almost entirely of checks on the local banks. A banker of that community canvassed the situation in 1919 and could not find a farmer in the town- ship who did not have a banking connection. He expressed the opinion that not a farmer in the county would be found who did not call some bank "his bank". Iowa farmers issue checks large and small in payment of local bills or for the settlement of out-of-town obligations. Through their correspondent banks or through the facilities afforded by the clearing system of the Federal reserve banks, Iowa banks have made their customers ' checks read- ily acceptable at par in all domestic payments. In furnishing the three forms of media of exchange — 22 338 HISTORY OF BANKING IN IOWA national bank notes, Federal reserve notes, and deposit cur- rency — the banks make it possible to transact an enormous amount of business with a relatively small amount of actual specie. The use of gold and silver, chiefly the former, is thus greatly economized. Moreover, bank notes and checks are more convenient for the user. By a few strokes of the pen a check can be issued in any amount. Since it passes only by endorsement it is relatively more safe as well as more convenient than coin. Discounting Commercial Paper: — The discounting of commercial paper or making loans is perhaps the most diffi- cult and important of a bank's various functions. A modern bank has been quite aptly described by one author- ity as a ''manufactory of credit ".'^^^ It is sometimes as- sumed that a bank merely loans the money paid in by its stockholders and received from depositors. As a matter of fact only a portion of the credit, which the bank issues to borrowers either as notes or deposit credits, is obtained in this manner. The bank "manufactures" credit by the process of discounting commercial paper. Business credit is not available in liquid form, but bank credit which may circulate in the form of deposit currency is widely accept- able. An important function of banking is, therefore, to loan its credit to producers in the community pending the sale of products or the realization of cash upon contracts. In so doing it ' ' creates ' ' deposits amounting to many times the actual specie of the community. An illustration of how the bank creates deposit credits by its loaning process will simplify the explanation. A borrower seeks a discount at the bank for a $1000 note. Or- dinarily the bank, if willing to extend the loan, will deduct the interest and credit the borrower with the balance (say $980) of the amount. This credit is a deposit which may be drawn at the pleasure of the borrower. He may withdraw BANKS AND THE COMMUNITY 389 the entire amount at once but seldom, however, would this be the case. Usually the borrower transfers his credit by means of a check to some other person to whom he has a payment to make. He in turn may either deposit it in the bank or convert it into cash as suits his convenience. Nor- mally large transactions of this kind may take place with- out the intervention of any actual money. In order to be able to meet the probable demands of his depositors, however, the banker must keep on hand a certain amount of cash. This amount is called the reserve and is proportionate to the deposits. The right proportion to maintain will vary with seasonal and local conditions and can only be learned by experience. State law in Iowa fixes minimum limits upon the amount of such reserves — fifteen to twenty per cent against demand deposits depending upon the size of the city — but in this matter legal requirements can not be substituted for sound business judgment. A cash reserve large enough to meet all probable needs, under vary- ing credit conditions, and yet not so large as to reduce the possibility of making legitimate profits for the bank is the goal of the prudent banker. Loans may be made by discounting notes, drafts, or accep- tances bearing the endorsement of the manufacturer or wholesaler. In recent years an effort has been made by the Iowa bankers to promote the use of trade acceptances. A committee on trade acceptances was appointed by the Iowa Bankers Association to represent Iowa on the American Trade Acceptance Council in 1917-1918. At the 1918 con- vention of the State Association a resolution was passed endorsing trade acceptances and urging bankers and trade organizations to bring about their general use.'^^'^ It still remains true, however, that most of the country banks of Iowa loan on single-name promissory notes. The prevailing type of loans will depend upon local con- ditions. Since Iowa is predominately an agricultural State 340 HISTORY OF BANKING IN IOWA the valuable business is that of the farmers in all but the few larger cities of the State. This appears to be increas- ingly the case. An experienced banker states that during his connection with the banking business a marked change has taken place in the relative position of the farmer bor- rower. Fifteen or twenty years ago the town merchant was looked upon as the desirable customer whose line of credit was always good; now it is the farmers' accounts which are most diligently sought after. Considerations of the question of rural credit usually separate the problems of mortgage credit and personal credit. The agencies engaged in supplying farm mortgage credit in Iowa have already been described. The Iowa farmer with integrity and ability has no problem of secur- ing personal credit even when his capital is limited. Bank- ers are especially keen to assist capable young men to start farming realizing that in a few years they will probably be valuable customers of the institution. Short-time loans are made to the farmer for various purposes, one of the most popular types being those made for cattle feeding. These loans are usually liquidated in from ninety days to six months. They are usually made by the bankers without any chattel mortgage or lien on the livestock, but the losses are practically negligible and many bankers testify to the desirability of this class of paper. Interest rates charged on loans are relatively stable. The extreme fluctuations of the call money market are not found in the Iowa banks. In recent years commercial loans have been made at rates varying from six to eight per cent. The credit condition during and following the war have forced rates in all of the banks to practically eight per cent, the maximum permitted by law.'^^'* On mortgage loans the rate is as low as six per cent. The Federal reserve system, by its rediscount facilities, makes it possible for a member bank to render its commun- BANKS AND THE COMMUNITY 341 ity the maximum of service. As long as a bank can make profitable loans covering self -liquidating commercial trans- actions, it may continue to do so and look to the Federal reserve bank to rediscount its paper. Added resources are thus made available to the community which it serves. As yet this privilege has not been used very widely by banks in the smaller communities but in some instances this has been done successfully. ^^^ Bankers are beginning to realize that the old idea that rediscounting is a sign of weakness can no longer be sustained in view of the facilities available at the Federal reserve banks. SECONDAEY BANKING FUNCTIONS The banks of Iowa serve the communities in various ways which, while important, may be classed as secondary bank- ing functions. Of these we shall consider investment serv- ice, selling domestic and foreign exchange, acting in a fiduciary capacity, and engaging in the safe deposit busi- ness. Investment Service: — Strictly investment banks are not numerous in Iowa. Therefore the commercial bank's ac- tivity has included the providing of safe investment secur- ities for such of its customers as have accumulated enough to want a permanent investment. It may not seem con- sistent for a bank to maintain a savings department and at the same time provide facilities through which the investor may withdraw his savings from the custody of the bank. This seems to be particularly the case where the banker does not receive any compensation for the assistance given the customer in selecting and placing his investments. On the other hand it is certainly not consistent for banks to stimulate and safeguard individual savings and then leave the investor to deal unassisted with unscrupulous promoters and blue sky artists. 342 HISTORY OF BANKING IN IOWA Experienced bankers have found that many savers will accept quite readily a return of four per cent on their sav- ings until they have accumulated several hundred dollars. When this amount is at hand they desire to invest in bonds, stocks, or mortgages jaelding a somewhat higher return. When the customer knows that the banker will assist him in such investments he turns to him for advice and coopera- tion. Then it is that the conscientious "banker seeks to guide the investments of his client. It has been estimated that $200,000,000 were spent in Iowa in the months immediately following the close of the war for blue sky stock, much of which was worthless and proved a total loss to investors.'^^- Bankers individually and through the instrumentality of the Iowa Bankers Association have sought to discourage this waste of capital and promote sound investments. One way in which this has been done has been by assisting cus- tomers in making their choice of securities. The banker who has ignored the request of a patron for help in convert- ing his savings account into a permanent investment has often contributed indirectly to the promotion of wild-cat flotations. By giving their assistance many bankers have built up the confidence and good will of their customers, and have been instrumental in retaining a considerable balance in the savings account. The saver usually does not care to find an investment which will take care of the last penny in his savings account, but is often satisfied if he sees the major portion thereof converted into permanent invest- ments yielding a higher rate of return. Providing Domestic and Foreign Exchange: — Iowa banks are not called upon extensively to provide foreign exchange for their customers but most of them are in a position, di- rectly or indirectly, to serve their communities in this way. Buying and selling domestic exchange was one of the im- portant functions of the early Iowa banker and one from BANKS AND THE COMMUNITY 343 which he derived a considerable amount of profit. During the past generation the personal check has been largely substituted for the bank draft in settling out-of-town obliga- tions. In order, however, for a bank to be in a position to make remittances on its customers' checks, it is necessary for it to maintain accounts with correspondent banks or become a member of the Federal reserve clearing system. All Iowa banlis are now on the Federal reserve par list, but even before the inauguration of this system exchange charges had largely been eliminated. Fiduciary Services: — Under the Iowa law as it stands now all classes of banks are authorized to act in the capacity of trustee, executor, administrator of estates, or guardians. A considerable number of Iowa banks have qualified to act in this capacity and have established a distinct trust de- partment. In addition to those which have made a spe- cialty of this feature other banks generally stand ready to help their clients in these matters. Bankers often urge patrons, having property to dispose of, to make a will and thus direct its disposition while living. Usually the banker does not undertake personally to draw the will, but suggests the retention of a lawyer for this purpose. In some cases, however, the banks advertise that they are prepared to have the will drawn in legal form and urge the selection of the bank as executor.'^^^ Safety Deposit Business: — An incidental function of the modem bank which is of growing importance is caring for the valuable personal property of its patrons. City banks have established special safety deposit departments with elaborate vaults which are equipped to care for money, deeds, mortgages, wills, bonds, insurance policies, and other valuable documents. Jewelry and silverware are stored during the absence of the owners on vacation trips and 344 HISTORY OF BANKING IN IOWA some banks have even provided for summer storage of ex- pensive furs. The typical country bank of Iowa has ren- dered an equivalent service, often without cost to the cus- tomer. In its vault there are usually provisions made for keeping the valuable papers of its patrons, the larger cus- tomers being assigned individual boxes and those having less business being handled in a general file. This service has recently been considerably extended, due to the sale of war securities. In order to protect the inter- ests of their customers, hundreds of whom had not formerly owned valuable securities, the banks agreed to care for the Liberty bonds bought by their patrons. This has involved the additional labor of caring for the same and also in some cases the banks have gone so far as to protect their cus- tomers by carrying additional burglary and fire insurance, at their own expense, to cover these securities.'^^ GENERAL COMMUNITY FUNCTIONS In addition to strictly banking functions Iowa banks carry on many business and community welfare services for the benefit of individual customers and also of the com- munity as a whole. These may be subdivided into busi- ness services, agricultural services, and general welfare ac- tivities. Business Services: — Among the services of a general business nature which banks render to the community is the establishment and maintenance of a high standard of banking and commercial practice. An early English author placed among the important services of a bank the effect it has upon honesty and punctuality in pecuniary engagements of the community in which it is established."^^ This re- mains an important phase of banking service, especially in the rural communities. In many instances the commercial practices of the farmer or small town business man are BANKS AND THE COMMUNITY 345 learned largely from his dealings with his banker. Laxness about paying obligations promptly when due has been a serious fault with many farmers. The banker definitely undertakes to improve this situation. ''^'^ In this connection the banks have rendered a distinct service by assisting their patrons in better accounting methods. Very few farmers keep accounts, hence the bank- ers have cooperated in efforts to promote better accounting methods. In 1921 the Agricultural Committee of the Iowa Bankers Association reported that over 92,000 farm record books had been purchased in the preceding four years from the Iowa State Agricultural College by Iowa banks for the use of their customers.^^^ In more recent years banks have increasingly called upon their customers to furnish financial statements when apply- ing for a loan. The Federal reserve banks have requested member banks to secure financial statements from borrow- ers wherever possible if the paper is to be rediscounted by the Federal reserve bank. The necessity for making income tax returns has also contributed to the development of bet- ter accounting methods. Another business service which the banks render their patrons is in urging them to carry adequate insurance to protect themselves against loss of property or provide for their families in the event of premature death. Often the banker in a small community is himself an agent for various insurance companies. In that case it is a matter of com- missions as well as service which prompts him to see to it that his customers are carrying the proper amount of insur- ance. Again it may be a precaution taken to protect the bank's own interest where a loan is made to the individual. But in many cases the banker suggests the desirability of insurance where he has no personal end to gain. A further function of the banker is to encourage the de- velopment of new commercial enterprises in a community. 346 HISTORY OF BANKING IN IOWA He aids in building up his local community by attracting new capital to the support of local industries. In the small towns he renders a valuable service by doing his part to keep capable young men at home. By pointing out busi- ness opportunities and aiding with adequate credit he can often overcome the lure of the city. Banks have always served their patrons by assisting them with their tax problems. The bank receives payment of local taxes and thus saves its customer the necessity of mak- ing a trip to the county seat solely to pay taxes. In recent years the banks have also been called upon to render a large service in connection with the Federal income tax. Iowa has not had a State income tax, hence the problem of com- puting taxable income is a new one for most of its citizens. Bankers have done all they could to assist in these problems. In January, 1920, an Income Tax Short Course was con- ducted at Iowa City under the direction of the Iowa Bank- ers Association and the State University of Iowa. About 600 persoris, chiefly bankers, registered for the course.'^** Agricultural Services: — In addition to the general busi- ness functions there are certain special services which the bankers render to agriculture, the dominant industry with which most of them come in contact. In the interest of better farming the bankers have backed the movement for county agents and farm demonstrators. With the purpose of developing better farmers the bankers have fostered the work of the boys ' and girls ' clubs. Prizes have been offered by the Iowa Bankers Association and also by individual bankers for statewide or local contests in grain raising, at live stock shows, and at other agricultural exhibitions. In 1915, in cooperation with the Iowa State College at Ames, the "Iowa boys' corn contest" was promoted by the Iowa Bankers Association. The boy raising the best acre of corn in Iowa was given a free trip to the Panama Exposi- BANKS AND THE COMMUNITY 347 tion. Again, in 1917 the agricultural committee was active in cooperating with the work done at the State College. A two-year course for farm boys was endorsed, the ' ' acre yield contest" was supported, and a $25 prize was donated for the best exhibits of alfalfa made at the annual show of the Iowa Corn and Small Grain Growers Association/^^ Promotion of live stock raising and feeding is another phase of the banker's contribution toward better farming. This is accomplished primarily by furnishing proper credit for the purchase of cattle for feeding purposes. The banker often restrains the inexperienced cattle feeder from plung- ing in too heavily after a single season of successful feeding operations. The attitude of local bankers toward the live stock industry is an important factor in its development. Soil fertility is maintained, crop rotation is practiced, and a better type of farming is thereby promoted. In some communities the banker has endeavored to com- bat the evil of farm tenancy by encouraging absentee land owners to sell their farms and helping the tenant farmers solve the credit problem. There are many agencies ready to accept first mortgages up to approximately fifty per cent of the selling value of the land. But a recent survey of conditions in a typical Iowa community showed that the average net worth of tenants was only about eleven per cent of the average investment per f arm.'^^'^ In view of this situ- ation the banker undertakes to assist tenant farmers in se- curing an additional twenty-five to forty per cent of the purchase price. Farm sales are important business events of the rural community during the winter months. Some of these are closing out sales of men who are retiring from farming or moving to another locality; others are stock sales for the purpose of disposing of surplus breeding animals. The two important officials at these sales are the auctioneer and the clerk. The latter position is filled by the cashier or 348 HISTORY OF BANKING IN IOWA other official of the farmer 's local bank. The clerk not only- keeps the record of the sales but makes the entire settlement. He must know the buyers, must be able to decide offhand how much credit to extend to them on a promissory note, and be prepared to look after all details of the settlement. COMMUNITY WELFAEE FUNCTIONS In the educational field Iowa bankers have been especially active in movements to improve the rural schools of the State. The Iowa Bankers Association has supported the movement for consolidated schools and has cooperated with the Superintendent of Public Instruction to secure sound legislation for this purpose. Individual bankers will be found active on the local school boards, library boards, Chautauqua committees, and other agencies for educational betterment. "^^^ The good roads movement has also received the support of the bankers, a special committee of the Iowa Bankers Association having been regularly appointed for this pur- pose. In 1915 a resolution was passed favoring hard-sur- faced roads paid for by bond issues, with assessment accord- ing to the special benefit received. Similar legislation was urged the following year, but when the United States en- tered the World War the committee advised postponement of such action and the utilization of all available resources for the task of winning the war. In 1919 the Association cooperated with other organizations and individuals to se- cure the passage of legislation to improve the primary road system of the State.'^^^ Quite apart from their organized efforts on behalf of the community the bankers are often called upon personally to serve the various educational, philanthropic, religious, and social organizations of their town. When electing a treasurer for a college, a school board, a library association, a church, a community chautauqua, a Fourth of July com- BANKS AND THE COMMUNITY 349 mittee, or a village ball club, the choice is more likely than not to be a banker. This service is usually undertaken by the banker as his contribution to the community welfare. Among the boosters for public improvements of all kinds — electricity, sewerage, water, pavement, municipal play- grounds — the local banker usually takes a leading part. Bankers can and have done something toward encouraging the building of better farm homes with more conveniences for the housekeeper. WAE ACTIVITIES An example of the public spirited service of the bankers was given by their part in the bond campaigns during the World War. In the first bond campaign the organization already established by the Iowa Bankers Association was used in directing the sale of bonds.'^^^ Each of the eleven groups of the Iowa Bankers Association had an '* agricul- tural committeeman" and in every county there was a *' county agricultural chairman". This agricultural com- mittee organization was the working basis through which the Federal Reserve Bank carried on its organization.'^^* In the later campaigns the sales were handled by the organ- ization set up by the Federal Eeserve Bank of Chicago, but the Iowa Bankers Association cooperated throughout all of the selling campaigns. In the actual floating of the loans the bankers of the com- munities were especially called upon to help. They dis- tributed circulars and application blanks, received subscrip- tions, transmitted the money to the Federal reserve banks, converted bonds, paid the interest coupons, and otherwise acted as fiscal agent for the government. For this service the banks received no compensation, not even the franking privilege for correspondence in connection with the collec- tion of the bond installments. They were put to consider- able additional expense in carrying on this work, for which they received very little tangible return. 350 HISTORY OF BANKING IN IOWA The banks purchased bonds on their own behalf and took their share of the treasury certificates of indebtedness. They usually made arrangements to permit purchasers of bonds to pay on a weekly or monthly installment basis ex- tending over a longer period than the Treasury plan al- lowed. Bond buyers were granted more favorable interest rates than the usual commercial terms when it was neces- sary to borrow in order to buy, and liberal credit was granted by many bankers to the bond purchasers for the purpose of encouraging the purchase of Liberty bonds.'^^^ The service of the bankers in the sale of war bonds has been summarized by N. R. Whitney as follows: "Indeed it may truly be said that no group of men and no organiza- tion in Iowa can claim a greater share in the glorious achievement of the State in the bond campaigns than can the bankers of this State, and it should be added that among the bankers are included the various bond houses and bond salesmen who devoted their time and energy often without any compensation and often at a loss to themselves in help- ing to sell the war bonds. ' '^^^ In the matters of preparedness and support of the govern- ment's war activity the bankers have been very emphatic. At the 1916 convention of the Iowa Bankers Association a resolution favoring preparedness was passed. In 1917 the resolutions cited with apparent pride the success of the Liberty loan and the part played therein by the bankers of Iowa. Loyalty and continued service to the government was pledged at that time and a $5000 subscription to Lib- erty bonds was made by the Association. The published proceedings of the 1919 convention contained an honor roll of 747 names of men from Iowa banks then serving directly with the colors. In this list were found the names of four bank presidents, three directors, ten vice presidents, sev- enty-three cashiers, two hundred and eighty-two assistant cashiers, and three hundred and seventy clerks.''^^^ BANKS AND THE COMMUNITY 351 CHANGE IN THE POPULAE ATTITUDE TOWAED BANKS The bankers of a generation ago did not undertake to serve the welfare of the community to the same degree that the modern banker now does. Often the bankers adopted an attitude of coldness toward their customers and aloof- ness from the business interests of the community. They were apparently afraid to trust the people and take them into their confidence. As a result there was rather wide- spread prejudice against banks and bankers in most com- munities. An interesting account of the former attitude has been given by Henry Meyer, a former Iowa banker, who relates his experience on this point as follows : "In the olden days a banker was a 'God with a bell on' in his town. People that had any banking to do came to him and he dictated the terms. I remember very well when in '83 Governor Larra- bee asked me to take charge of the First National Bank at Elkader when I had had no banking experience. I asked him to give me some pointers and the first one he gave was not to ask anyone to do business with me, because in solicit- ing such the bank was placing itself under obligations to a possible customer and when asking for an accommodation it would perhaps be harder to say 'no' than otherwise. "'^^^ One of the earliest problems engaging the serious atten- tion of the Bankers Association was how to combat the popular prejudice against banks. In his address of wel- come to the second annual convention Mayor Osborne of Spirit Lake referred to the misunderstanding on the part of the public toward the banker. He said that the epithets "robber" and "usurer" are not uncommonly hurled at the banker. President G. L. Tremain, in his response, recog- nized the existence of this distrust and suspicion when he referred in one place to the demagogue who "will yet ha- rangue the voters of his district and point with alarm to the meeting of Iowa bankers at Spirit Lake."^*^ 352 HISTORY OF BANKING IN IOWA The existence of this popular distrust was noted again in 1889 by Mayor P. Mullally of Cedar Rapids. ^'The bank- er", he declared, ''in the popular opinion of a large class of persons, is considered cold and repellant, grasping and unsympathetic, anxiously seeking opportunity to hold as his own that which belongs to another; that he is unceas- ingly weaving a web of innumerable though almost imper- ceptible claims on his customers ' influence and business for the purpose not altogether mutual in their advantages ; that his social exterior and advances are as one who angles cautiously that his net may be well-filled."^^** He asserted that the opinion, while not a fair estimate of bankers as a class, was, however, true of many bankers. At this same convention there was under discussion a motion to appoint a legislative committee. The suggestion was opposed by some members on the ground that it would throw suspicion on the Association. J. H. Branch, the President, concluded his remarks by saying, ''and that there shall not be anything to add to the odium already resting on bankers." Again, in the fourth and sixth conventions this problem was confronted. A delegate raised the question as to how best to reduce the prejudice of the common people against banking interests and made this significant remark : ' ' We are ... at war with the farmer and the farmer with us". Calvin Manning of Ottumwa, vice president of the Iowa National Bank, explained this prejudice as the result of political agitation. He believed it could be counteracted if dealt with in a proper business way. In 1897 Mayor Wm. McNett of Ottumwa again brought up this question. He attributed the existing prejudice to the policy of isolated and independent action long pursued by the banks. He believed that sound banking principles were fundamental, and that by taking the people into his confidence the banker could destroy the influence of the demagogue.'^^^ The policy pursued by individual bankers and by the Iowa BANKS AND THE COMMUNITY 353 Bankers Association has followed the direction suggested by Mayor McNett. As a result, the suspicion and prejudice against banks, which existed even as late as the close of the nineteenth century, has practically disappeared. This has resulted in the almost universal use of the banks by the people of Iowa; especially has this come to be the case in the agricultural sections. ACCESSIBILITY OF BANKS Perhaps the most distinctive feature of Iowa banking is the large number of banks, especially in relation to the population of the State. This in itself would appear to be evidence of the fact that banks in Iowa are generously sup- ported by the people. For at least eleven years Iowa has led all States in the total number of banks. In 1910 Iowa had a population of 2,224,771, ranking fifteenth among the several States. In 1920 the population was 2,404,021.'^^^ Recent statistics place the total number of banks in Iowa at from 1915 to 1930, depending on just what institutions are included. This gives approximately one bank to every 1250 persons. No single explanation is to be found for this unusual number of banks. Obviously the banks must command the patronage of practically all members of the coipomunity. A further explanation for the strong banking position of the State is to be found in the high per capita wealth of the citizens. In 1912 the per capita estimated value of all prop- erty in the United States was $1965. The per capita wealth of Iowa was nearly double that of the average for all of the States, being $3539.'^'53 The large volume of rural business tributary to the small towns of the State seems to be the explanation for the estab- lishment of such a large number of banks. The larger cities of the State are well supplied with banking institutions but the vast majority of Iowa banks are of necessity in small 23 354 HISTORY OF BANKING IN IOWA towns. In 1915 there were 893 incorporated municipalities in Iowa. Fifteen of these were cities of the first class, hav- ing a population of 15,000 or more ; ninety were cities of the second class, having a population of 2000 but less than 15,000; 788 were incorporated towns. Of the latter 103 had more than 1000 population; 220 had between 500 and 1000 population and 465 had less than 500 inhabitants."^^* These small towns, a large percentage of which have less than 1000 inhabitants, are the location of a large number of Iowa's numerous banks. For instance the town of North Liberty, near Iowa City, had a population of less than 200 in 1915 but reported two live banks in 1918.'^^ Battle Creek was a town of 688 population in 1915 ; the three banks of the town had aggregate resources of $2,453,167 on June 30, 1920.'^'' Even small unincorporated places sustain in some instances one or more thriving banks which sometimes do considerable business. The ability of these small towns to support banks is a source of surprise to many persons not accustomed to the Iowa situation. It must be remembered that banks can be established in Iowa with a minimum capital of $10,000, hence many of these banks are small institutions. But, as in the case of Battle Creek, the banking capital and re- sources are often far more than might be expected in such small towns. The banks find a large demand for loans in financing the agricultural operations in the territory tribu- tary to the towns. By offering liberal interest on savings, for instance five per cent at Battle Creek, the banks are able to attract a large volume of savings deposits. As a result of this large number of banks competition in the banking business is very keen. For the most part it is clean competition and brings to the communities the maxi- mum of service from the banks. Banks are accessible to all the people of the State and stand ready to assist in the development of their respective communities. BANKS AND THE COMMUNITY 355 OWNEESHIP OF THE BANKS An important factor in enlarging the place of the banks in the community has been the increasing proportion of in- corporated banks with wide diffusion of ownership of the bank's capital stock. Ordinarily the bank is not an inde- pendent business institution owned by men who are unas- sociated with other industries and commercial undertakings. It is still true that private banks are owned and operated by one man or a small number of partners whose sole busi- ness is that of banking. Where an incorporated bank has succeeded a private bank the same situation often pre- vails in a modified degree. The banker associates with him a number of the successful business men of his community but he retains the controlling interest in the institution. Under these circumstances he is the president of the bank and its active manager, devoting his whole time to the bank- ing business. This same situation may even exist where the institution begins business as an incorporated bank at the outset. Often, however, the principal stockholders, in- cluding the president, are men active in other lines of busi- ness. Active management is then intrusted to the cashier, a salaried executive. Reports published by the banking department do not fur- nish any information concerning the distribution of owner- ship of the banks of the State. A representative bank with a capital of $100,000 has at present ninety-four stockhold- ^j.g 757 rpj^g $35,000 capital stock of a country bank was subscribed by forty persons no one of whom held more than twenty-five shares.'^'^^ Stockholders are nearly always customers of the institu- tion, hence wide distribution of stock gives the bank a sub- stantial group of regular patrons. In some instances a bank which wishes to enlarge its capitalization offers the entire block of new stock to men outside of the existing group of stockholders. By this means new customers have 356 HISTORY OF BANKING IN IOWA been brought into the bank. At times the same thing has been done for the purpose of preventing the formation of a rival institution. It appears that banks located in the small towns are largely owned by the farmers of the community. No statis- tical data can be presented on this point, but the conclusion is supported by the opinion of representative Iowa bankers. H. T. Blackburn, President of the Iowa Bankers Associa- tion, stated at the 1916 meeting that Iowa farmers owned seventy-five per cent of the banks represented at the con- vention.'^^^ D. H. Hedrick, a country banker with a wide knowledge of Iowa conditions, states as his opinion that ^'the majority of the rural banks in Iowa are owned by the farmers, either active or retired. ' ''^®" PEOFITS OF THE BANKS Very few institutions probably render as many gratuitous services for the community as do the banks. On the whole, however, the profits paid by banks to their stockholders have been highly satisfactory. In endeavoring to present statis- tics in regard to earnings, the student of Iowa banking is again met with the difficulty of incomplete data. Some States secure reports on earnings and dividends of all banks, but Iowa reports contain no information on this point. All national banks must make semi-annual state- ments of earnings and dividends as well as the principal sources of these earnings. These are the only complete data for any class of Iowa banks. Table XV presents some statistics which indicate the profits in certain banks. This table does not include the data for banks in the four reserve cities of Iowa. If these had been included, however, the results would not be very much changed. For instance in 1919 the ratio of net earnings to capital and surplus combined was 11.98 per cent in the country national banks. In the reserve cities the earnings averaged somewhat BANKS AND THE COMMUNITY Table XV 357 Net Earnings and Dividends of the Country National Banks IN Iowa, 1896-1919^«^ Percentage of Percentage of Ybar Dividends to Capital Net Earnings to Capital and Surplus 1896 8.0 6.8 1897 7.1 6.1 1898 7.7 6.8 1899 9.2 8.7 1900 8.6 8.1 1901 9.95 8.95 1902 10.46 11.66 1903 10.0 11.8 1904 9.6 10.6 1905 9.7 8.9 1906 10.7 9.7 1907 10.2 11.2 1908 9.6 9.9 1909 9.9 10.0 1910 11.2 10.6 1911 11.9 11.0 1912 11.54 10.73 1913 14.00 11.73 1914 12.56 11.31 1915 12.18 11.01 1916 13.21 11.32 1917 13.42 12.11 1918 13.28 10.77 1019 13.58 11.98 higher, being 11.42 per cent in Dubuque, 14.00 per cent in Cedar Rapids, 15.31 per cent in Des Moines, and 15.36 per cent in Sioux City.'^^^ Partial statistics are available for State supervised banks, but continuous data concerning either the amount or source of their earnings can not be presented. In 1914 and 1915 the Comptroller published reports of such State and pri- vate institutions as submitted statements to him. In 1914, 200 State banks reported dividends averaging 9.84 per cent of their capital; 510 savings banks 10.01 per cent; 9 loan and trust companies 8.97 per cent; and 32 private banks 20.62 per cent. The following year the number of reporting 358 HISTORY OF BANKING IN IOWA banks and percentage of dividends were: 199 State banks 10.68 per cent, 520 savings banks 17.63 per cent, 12 loan and trust companies 10.12 per cent, and 33 private banks 15.58 per cent.^^* The proportion of State supervised banks making this report to the Comptroller was large enough to warrant the assumption that these figures are fairly representative. They show that the dividends paid are as large in the State institutions as in the national banks. State and savings banks have smaller average capital, but they had, neverthe- less, a somewhat higher percentage of capital to total assets than the national banks.'^*'^ They are not required to build up a surplus, however, unless they wish to qualify to act in a fiduciary capacity. They have also been freer in the past in the matter of investments and have had greater liberty to engage in outside activities for profit. Only about one-tenth of the private banks reported their earnings, so that the data concerning this class are too in- complete to be of value in making generalizations. The banks which did report show earnings so distinctly above those of the incorporated banks as to lead to the conclusion that the greater liberty of action of the unincorporated bank makes it possible to earn larger profits. The analysis of the earnings of the national banks shows that the principal form of income was interest and discount, $19,269,000 out of $20,218,000 gross earnings being from this source. The second largest source of income was from exchange and collection charges, amounting to $310,000 for all of the banks. Banks outside of the reserve cities re- ported $142,000 commissions and earnings from insurance premiums and the negotiation of real estate loans. The right to act as agent for an insurance company or agent or broker in placing real estate loans was only recently granted to national banks by an amendment of the Federal Reserve Act. The privilege is denied to banks in cities with a popu- BANKS AND THE COMMUNITY 359 lation over five thousand, thus ruling out the reserve cities. Miscellaneous earnings aggregated $497,000/®^ BANK PUBLICITY Methods of attracting business to the bank and building up the position of banking institutions in the community have undergone marked changes in recent years. The best means of attracting and holding customers is unquestion- ably personal service. The various services which the banks render to their individual customers include first of all taking care of their legitimate financial needs. The prudent banker carefully watches the business enterprises of his customers and is often in a position to anticipate the needs of his patron. A case was recently brought to the writer's attention of an Iowa banker who, during a time of severe credit stringency, had secured the approval of the board of directors for a large loan to a customer who had not made any request therefor. When this man learned that his needs had been anticipated and that the necessary money had been set aside, he received a new insight into the thoughtful concern with which the banker serves his regular clients. One of the most effective forms of publicity is a personal letter from the ofiicers of the bank. Some banks send out these letters with monthly statements to depositors, divi- dend checks, or on other occasions when mail is being sent to patrons. Often letters are sent out to new residents in the community inviting them to use the facilities of the bank. Supplying conveniences for the use of the customers at the bank itself is another form of service. Some country banks have provided a rest room for their country patrons. Private rooms for business conferences are also made avail- able. Some banks have placed an adding machine in the bank lobbv for the exclusive use of its customers. The re- 360 HISTORY OF BANKING IN IOWA suit of this is to make the bank a place to which people may often come for other purposes than strictly banking service. In the newspaper and periodical advertising of the pres- ent day banks have departed almost entirely from the ''tombstone" type of notices which formerly characterized bank advertisements. Instead of stereotyped advertise- ments, giving merely the names of the bank's officers, its capital stock, deposits or other information concerning its financial condition, banks to-day call the attention of the reader to the various services of the bank. Many banks will not allow their newspaper advertising copy to stand beyond a single issue of the paper. Commonly the bank buys the copy for its advertisements from the established agencies and in this way secures the services of experts in copy writing. "^^^ The advertisements of three banks in a typical small town show the appeal made regularly to the public. The first is ''An Invitation" to come in and use the bank for accounts of any size. "We are in Business to be Bothered" is the challenge to the person who thinks his business is ''too trifling for the banker to bother with". The second bank advertises a saving plan which its officers wish to explain to all parties in the community interested in joining. In the advertisement of the third bank is an admonition to "Pro- tect your home and belongings from fire". For this pur- pose the bank offers the facilities of a fire insurance com- pany for which some member of its staff is agent. '^®'^ Each week these banks present different phases of their services to the reading public. Bank publicity includes the distribution of attractive wall calendars and novelties such as coin purses, bill-books, and memorandum books. A few banks in Iowa liave begun the publication of a monthly business bulletin, but this can only be undertaken by the larger banks. For the most part banks seek to obtain their business by BANKS AND THE COMMUNITY 361 straightforward appeal and legitimate business services. But the severity of competition is responsible for some weaknesses in banking practice. A careful student of Iowa banking has stated that one of the most important causes of overdrafts in Iowa banks is the intensity of competition among banks. This has resulted in placing Iowa in the un- enviable position of leader among the States in the matter of permitting overdrafts.^®® It is doubtless true also that many bankers allow themselves to be imposed upon in other ways because of a mistaken attempt to retain business at any cost. Nearly two thousand banks are maintained in Iowa com- munities, owned by thousands of different stockholders. Liberal returns have been paid upon the investment in bank stock and satisfactory interest rates have been allowed de- positors for their contribution toward the banking resources of the State. The community on its part has received a high measure of service from the banks at reasonable terms. Practically the only service for which the banks charge is for the use of their credit in the form of loans and dis- counts. Other services they contribute to their patrons and the community. Doubtless there are still many unworthy institutions, but the general record is one of large service which has merited and won the esteem and almost universal patronage of the community. XV THE IOWA BANKERS ASSOCIATION A generation ago it became manifest to many progressive Iowa bankers that there was a need for some organization of the bankers which would unify the banking system of the State and eliminate the extreme individualism which then characterized the banking business. Accordingly, twenty- nine bankers, the majority of whom represented Des Moines banks, issued a call for a convention to be held at Des Moines on July 26 and 27, 1887. The primary purpose of this first meeting was to effect the organization of a State associa- tion. It was hoped that through organization and regular interchange of views the bankers would be able to improve the general banking interests of the State and that this in turn would inure to the benefit of the business interests of the country. "^^^ In response to this call sixty-nine bank ofiicers and bank- ers registered at the first convention. Since the primary purpose of the gathering was organization, the program was very informal. John NoUen of Pella entertained the gath- ering by reminiscences of earlier banking, while W. A. McHenry of Denison and others joined in the discussion. Certain steps looking toward uniformity in exchange charges and other matters of banking practice were dis- cussed and resolutions passed relating to these points. In the constitution adopted at the first convention the organization was named the Iowa Bankers Association; membership was open to any national or State bank, trust company, savings bank, or banker. Officers of the Associa- tion were a president, first vice president, and one vice pres- ident for each congressional district. This group of officers 362 THE IOWA BANKERS ASSOCIATION 363 was to be known as the executive council and was authorized to appoint a secretary, a treasurer, and other employees. Membership fees of $3 and annual dues of $2 were pre- scribed. Gr. L. Tremain of Humboldt was chosen president at this first meeting ; "W. T. Fenton of Ottumwa was appointed the first treasurer; and J. E. Henriques of Marshalltown was named secretary. '^^*^ For years President Tremain was a leading spirit in the Association. He was highly regarded by his colleagues, as is shown by the following special resolution of respect which was recorded at the 1918 convention : "Whereas, a former President of this Association, Mr. George L. Tremaia, of Humboldt, Iowa, we are informed, has reached the noble age of three score and twenty, and as we owe to him the thought and initiative which formed this organization. Resolved, That we hereby extend to him our most sincere con- gratulations on the life lived and the years enjoyed by him, and our hopeful desire for a continuation of years of happiness.'^^^ This tribute was the last given to Mr. Tremain while he was still living; the 1919 convention, which convened at Fort Dodge, was called upon to pass resolutions to his memory.^^2 GROWTH OF THE ASSOCIATION The history of the early years of the Association is a record of disappointments. At the second annual meeting, held at Spirit Lake, the treasurer's report showed sixty- seven members.'^^^ The attendance is reported elsewhere as forty-five. In 1900 for the first time over two hundred dele- gates and visitors registered at an annual convention.'^'^^ In those early years, outside speakers of prominence could not be secured for the programs. Men would promise to appear and then fail to meet the appointment. Even the presidents of the Association were frequently absent. The records show that in 1890, 1891, and 1892 the place of the 364 HISTORY OF BANKING IN IOWA president was taken by the vice presidentJ^^ In his address of welcome, delivered at the thirty-second annual convention held in Dubuque in 1918, J. K. Deming made this statement : "Twenty-eight years ago the Iowa Bankers Association held its Fourth Annual Convention in this city. There were present about 150 Iowa bankers, and the occasion aroused so little interest that the President of the Association for- got, or at least, failed to attend. So the First Vice-President (a young fellow named Deming) presided. "^^^ Growth of membership in the Association was likewise very slow. In his report at the sixth annual meeting J. M. Dinwiddie, the Secretary, speaks of his disappointment over the slow growth of the organization. He reported a mem- bership of 284 out of 950 banks listed as eligible to member- ship."^^^ In 1897 the Secretary's report showed only 253 full paid members of the Association.'^^^ Throughout those early discouraging years the burden of maintaining the interest of members in the Association and of extending its life and influence fell largely upon J. M. Dinwiddie of Cedar Rapids, Secretary of the Association from 1888 until the appointment of a permanent, full-time Secretary in 1910. On September 26, 1888, Mr. Henriques, the first Secretary, resigned, and Mr. Dinwiddie was chosen as his successor. '^'^^ In spite of discouragement and lack of cooperation Mr. Dinwiddie labored to build up the great organization which now exists. In 1890 he asked to be re- lieved of his duties owing to his own business responsibili- ties and the pressure of his work. The President urged him to stay by the organization for fear that his resignation would be followed by that of others."^^" During the early period the salary paid the Secretary was nominal ;'^^^ the net salary Mr. Dinwiddie received for more than twenty years of service was in no way commensurate with the service he rendered the Association. But before Mr. Dinwiddie retired, his efforts had borne abundant fruit THE IOWA BANKERS ASSOCIATION 365 in the growth of interest, membership, and attendance; moreover, his colleagues gave hearty recognition to his part in building up the Association. In 1908 the President in his annual address in commending Mr. Dinwiddle 's work said : ''For practically all of its existence he has served in a most thorough, painstaking manner and done more perhaps to build it up than any other one man".'^^^ ^^ j^ig retirement in 1910 the convention passed a resolution commending him for his efficient service since 1888, presented him with a gift, and sent him to the Los Angeles convention of the American Bankers Association at the expense of the Iowa Associa- tion.^^^ The programs of the early meetings were marked by heated discussion of methods of handling business, the rates of exchange to be charged, plans to eliminate the com- petition of express companies, the evils of transacting busi- ness after banking hours and similar topics. The subject of the President's address at the second meeting was "Some Mistakes in Banking". Among those which he enumerated were undue anxiety for business, unfriendly competition, laxity regarding loans and discounts, carrying overdrawn accounts, allowing rebate of interest on paper paid before maturity at the rate originally charged, and encouraging customers to transact business after office hours. '^^^ Beginning early in the first decade of the twentieth cen- tury, there was a marked change in the attitude of banks toward one another and the Association. Instead of a spirit of suspicion, there arose a spirit of cooperation. In the cities the clearing houses brought the bankers together ; and the sessions of the State Association were well attended. At Des Moines in 1900 only about 200 registered for the con- vention ; but when the Association met there again in 1910, about 1000 were in attendance. The registration at the convention held in Des Moines on June 7, 8, 1921, was 2266.'^85 Tjjg Secretary in 1897 had reported 253 fully paid 366 HISTORY OF BANKING IN IOWA members. In 1906 the Iowa Association claimed to be the largest State association in the United States with a total of 1100 member banks out of a possible 1485.^*® By 1913 the number was 1600.'^*^ On June 1, 1919, there were 1850 active members in the Association out of a possible 1907 eligible institutions. In addition there were forty-four as- sociate members — including publishers of bank journals, note brokers, and banking institutions outside of lowa.'^^* Instead of barren discussion or extended debates on unim- portant matters, the programs of the Iowa bankers' conven- tions are filled with addresses on public questions by some of America's most noted speakers and discussion of impor- tant financial issues by leading bankers or treasury officials. Not infrequently of late years the President of the Ameri- can Bankers Association has attended the Iowa meeting. W. P. G. Harding, Governor of the Federal Reserve Board, was a speaker at the 1919 and 1921 conventions. SOCIAL FEATUEES After 1892 the social side of the Bankers Association meetings was provided for by inviting the ladies and fam- ilies of the bankers to be present. There has been an in- creasing number of women registered at the meetings. At Des Moines in 1917 out of a total registration of 1849 it appears that 418 were women ; in 1921 there were over 500 women present."^^^ During the same convention at which it was voted to invite the attendance of the ladies, a resolution was passed expressing the hope that the cost of entertain- ment would not be so increased that the reception given to the Association in the future would become a burden to the city. Among the features provided by Davenport in that year were: first, free use of the Masonic Temple for the meetings ; second, free use of the Davenport Business Men's Association rooms for committee meetings, rest, or recrea- tion ; third, a banquet at the Armory by the bankers of Dav- THE IOWA BANKERS ASSOCIATION 367 enport ; fourth, free transportation on ferry boats and street cars; fifth, open house at the Davenport Outing Club; sixth, a river excursion; seventh, carriages on Wednesday after- noon to visit the city water works which was said to have the largest filtering establishment in the world, the cities of Davenport, Eock Island, and Moline, and the United States arsenal on Rock Island, to which convention badges served as passes.'^^*' This is a typical example of the social features of the annual conventions. In 1900 it was voted to pay from the treasury of the Association $200 per year toward the ex- penses of entertaining the Association ;^^^ and in 1902, the appropriation was raised to $500. In the course of the dis- cussion it was stated that the bankers of Cedar Rapids had paid out $1400 for social features.'^^^ ^jj effort was made in 1912 to discontinue this custom of paying $500 to the en- tertaining city, but the motion was lost. In 1919 the amount was fixed at $750 henceforth. '^^^ The honor of entertaining the sessions of the Association has been much sought after by the cities of the State having facilities to entertain so large a convention. Des Moines has most frequently been chosen for the honor and has been the most popular place, if the number in attendance at the sessions is taken as a stand- ard. The selection of Des Moines, however, is no doubt due largely to the size and central location of the city. Joint sessions have been held from time to time with other organizations. In 1903 the Iowa bankers met at Davenport; and the Illinois Association assembled at Rock Island at the same time. Separate business sessions were held, but on July 29th a joint session was held in Davenport, addressed by C. M. Fowler, Representative in Congress from New Jersey, A. B. Cummins, Governor of Iowa, and H. J. Hamlin, Attorney General of Illinois."^®^ Joint ses- sions have also been held in Des Moines and Waterloo with the Iowa Farm Mortgage Association, a considerable num- 368 HISTORY OF BANKING IN IOWA ber of whose members are also members of the Iowa Bank- ers Association.^^^ By means of these joint sessions the good fellowship characteristic of the Association has been broadened. Among the social features introduced at the 1918 meeting was an ex-councilmen's dinner for members of the 1916-1917 council. J. K. Deming was also host to all former presidents of the Association.^^^ OEGANIZATION AND MEMBEESHIP Membership in the Iowa Bankers Association is of two kinds, active and associate. Active membership may in- clude any institution doing a general banking business in the State of Iowa. The annual membership fees of the Associa- tion are $6 for any bank having a capital and surplus and undivided profits of $35,000 or less and are graduated up to $50 for banks having a working capital over $750,000. Dues are payable in advance on the first of January. The Secre- tary is authorized to draw a sight draft on any member delinquent five days, and after three months delinquency to drop the member from the Association. Associate members consist of any publisher of a bank journal, any dealer or broker in bank stocks, bonds, commercial paper, or other securities, or any bank located outside of Iowa. Associate members pay annual dues of $15 each. Active and associate members are entitled to representa- tion by one delegate at the annual meeting of the Associa- tion. Delegates representing the associate members are not entitled to vote. Delegates appointed by active members must be officers or directors of the firm they represent, or members of a banking firm, or individuals doing business as bankers. They can vote only in person, no proxies being allowed. The administrative officers of the Association now consist of a President, Vice President, Secretary, and Treasurer THE IOWA BANKERS ASSOCIATION 369 elected annually. With the exception of the Secretary, the officers are elected by the annual convention. The choice of the President has frequently been made the subject of spe- cial resolutions at the group meetings, so that the election by the convention may become a mere matter of form. To discourage this practice a resolution was passed in the 1917 convention advising against endorsing candidates for the various offices of the Association except by their own group. This appears to be carried out so that now only the home group of a candidate endorses him. Election of officers oc- curs on the last day of the annual meeting. The President presides at the convention which closes his term of office. A complete roster of the presidents of the Association to- gether with their home cities when elected and the place of meeting of the Association at which each presided is given in Table XVL-^^^ FULL-TIME SECRETABT The constitution provides that no officer, except the Secretary, may succeed himself in office. Practically from the formation of the Association until 1910 this position was held by J. M. Dinwiddle, who handled this work in con- nection with his duties as a banker in Cedar Rapids. At the Waterloo convention of 1909 a resolution was adopted appointing a committee of three to investigate and make recommendation concerning the advisability of having a full-time secretary. Based upon the satisfactory results at- tained in Missouri, Illinois, Wisconsin, and Minnesota, all of which States had had such an officer, the committee re- ported in 1910 favoring the appointment of a permanent secretary at a salary of $2400 per year. Permanent quar- ters were to be rented in Des Moines and a stenographer regularly employed. Three names were suggested by the committee. The name of Mr. Dinwiddle was not included as he could not afford to give up his business to devote his full 24 370 HISTORY OF BANKING IN IOWA Table XVI Presidents and Place of Meeting of the Iowa Bankers Association President Home City When Elected Year Place or Meeting G. L. Tremain Humboldt 1887 Des Moines G. L. Tremain Humboldt 1888 Spirit Lake J. H. Branch Marengo 1889 Cedar Rapids J. H. Branch Marengo 1890 Dubuque D. N. Cooley Dubuque 1891 Sioux City John T. Remey Burlington 1892 Davenport S. F. Smith Davenport 1893 Council Bluffs W. A. McHenry Denison 1894 Des Moines Simon Casady Des Moines 1895 Storm Lake F. H. Helsell Sioux Rapids 1896 Marsh alltown J. K. Deming Dubuque 1897 Ottumwa Chas. R. Hannan Coxmcil Bluffs 1898 Mason City C. H. McNider Mason City 1899 Burlington Charles H. Martin Des Moines 1900 Des Moines E. D. Hiixford Cherokee 1901 Cedar Rapids C. B. Mills Sioux Rapids ]902 Des Moines Homer A. Miller Des Moines 1903 Davenport L. F. Potter Harlan 1904 Des Moines Ackley Hubbard Spencer 1905 Des Moines D. H. McKee Mediapolis 1906 Cedar Rapids John J. Large Rock Valley 1907 Clinton H. M. Carpenter Monticello 1908 Sioux City J. T. Brooks Hedrick 1909 Waterloo J. D. Easton Waterloo *L. E. Stevens Ottumwa 1910 Des Moines John McHugh Sioux City 1911 Mason City E. J. Curtin Decorah 1912 Cedar Rapids Chas. Shade Rock Rapids 1913 Des Moines D. L. Heinsheimer Glenwood ♦Frank Epperson Eddyville 1914 Clinton J. L. Edwards Bm-lington 1915 Davenport H. T. Blackburn Des Moines 1916 Waterloo George S. Parker Sioux City 1917 Des Moines S. M. Leach Adel 1918 Dubuque J. H. Ingwersen Clinton M. H. Calderwood Eldridge 1919 Fort Dodge J. H. McCord Spencer 1920 Des Moines L. A. Andrew Ottumwa 1921 Des Moines ♦Acting President. THE IOWA BANKERS ASSOCIATION 371 time to Association affairs. The report of the committee was adopted and in the election the choice of the convention fell to P. W. Hall, cashier of the Sheldon National Bank.''»« Mr. Hall resigned in 1916, and Frank Warner of Waterloo was elected at a special meeting of the Council held on August 9th of that year to fill the vacancy. Mr. Warner has continued to carry on the work of Secretary, his permanent headquarters being at Des Moines.'^^^ Under his able ad- ministration the Association has grown in membership and in the scope of its activities. GEOUP AND COUNTY OEGANIZATIONS The distinctive feature of the present organization is the division of the members of the Association into eleven groups, geographically divided by counties. This plan of group organization was first adopted in 1897; its purpose is to increase the membership of the Association, to arouse interest in practical matters, and to provide opportunity to discuss problems in small groups. The committee support- ing the plan reported that it was in successful operation in several States, including Pennsylvania, New York, Ohio, Texas, and Missouri. Opposition to the new system was based on the plea that it would kill the State Association to hold group meetings. The plan was adopted after pro- longed discussion by a vote of fifty-two to twenty-one. It has been modified from time to time, but, on the whole, has continued throughout to be a source of strength to the State Association.^^" The system as adopted in 1897 provided for nine groups having their own ofiicers, and holding their own meetings. It seems to have early proved successful, since in the presi- dent's address of 1900 the general scheme was commended. The number of groups was subsequently increased from nine to sixteen, but in 1905 this was reduced to eleven — the present number.^"^ The Association by-laws prescribe that 372 HISTORY OF BANKING IN IOWA each group shall hold at least one meeting each year. One of these meetings, known as the annual meeting, must be held not later than May 31st of each year. What may be the practice in regard to other meetings is not clear from the records, but in the annual report of the convention of the State Association, reports of these annual group meetings are included. The sessions last only one day and are usually devoted to practical discussions. Group officers include a chairman, a secretary, a treas- urer, and an executive committee composed of one repre- sentative from each county in the district. Group chair- men are chosen for two years — the odd numbered groups electing in the odd year and the even numbered in the even year. The group chairmen with the four officers elected by the State Association constitute the Council of Administra- tion of the State Association.®**^ The county association is a new unit of organization which is being developed by the Association. In his report in 1917 the Secretary describes the success of the county associations already formed and urges an extension of this type of organization. He stated that before the county de- pository associations were formed to help float the Liberty bond issues, there were only two such associations in the State — the Ida County Bankers Association and the Dela- ware County Bankers Association. The Secretary also called attention to the following purposes for which a county organization should be maintained : to analyze the banking business in that county and mutually determine what in- terest shall be paid on time deposits, and also what rate shall be asked on loans; to exchange methods that have proved practical in reducing the cost of operation; to create a complete credit file for the county; to make an arrange- ment for a county clearing house ; and even to give attention to the question of proper help.^^^ In 1918 the Secretary reported the formation of five or THE IOWA BANKERS ASSOCIATION 373 six additional county bankers associations. At the annual convention a resolution was passed commending these or- ganizations in the following language: "it is the sense of this convention that the county shall constitute the unit in Bankers Conventions, in creating fellowship among bank- ers, efficiency in banking methods, establishing credit files and such other things essential and beneficial to better bank- ing in Iowa. ' ' The resolution then urged the formation of county associations and commended the bankers in the coun- ties already organized. A year later the Secretary reported that there were only sixteen counties without associations already organized or in process of organization and in 1921 all of the counties were reported as having county bankers associations.^"^ EELATIONS WITH THE AMERICAN BANKERS ASSOCIATION In the earlier years of the Iowa Association considerable dissatisfaction was manifested with the American Bankers Association. It was charged that that organization was dominated by eastern men and was unresponsive to the needs of Iowa bankers. At the State convention held in 1897 the formation of a national association of bankers to represent the State associations was discussed; and it was voted to send delegates to a preliminary meeting, if one were held. It was generally felt, however, that the two or- ganizations would not be antagonistic, and delegates should be sent to each.^"^ Nothing of importance appears to have come from the movement for a second national organization of bankers. The relationship between the American Bankers Associa- tion and the Iowa Bankers Association was gradually im- proved through closer cooperation and through the fact that lowans, or former residents of the State, became prom- inent in the councils of the American Bankers Association. The position of President of the national Association was 374 HISTORY OF BANKING IN IOWA held by George Reynolds and Arthur Reynolds, both looked upon as Iowa men, and in their official position they did much to promote more cordial feelings. As a result, the bankers in Iowa have enthusiastically supported the Amer- ican Bankers Association in recent years. At the annual State convention, a meeting of the Iowa members of the American Bankers Association is held. In March, 1920, there were nearly 1100 Iowa members in the American Bankers Association. The Iowa members at the convention elect certain Iowa officers of the American Bankers Associa- tion. These are a vice president for the State of Iowa, six members of the executive council, a member of the nom- inating committee and an alternate, and vice presidents for the trust company section, the savings bank section, the national bank section, and the State bank section.^^^ The present organization of the Iowa bankers, therefore, begins with the county as the unit of organization, next comes the group or district, then the State Association, and finally the American Bankers Association. ACTIVITIES ON BEHALF OF MEMBEES In addition to the advantages the Association offers its members for an interchange of ideas, discussion, personal acquaintanceship, molding of correct policies, and the stimu- lating influence of personal contact at the conventions, there are certain specific advantages which come to member banks even when attendance at the convention is impossible. Among these special activities carried on in behalf of the members are the protective work, the time lock expert, the insurance department, the legislative committee, and the legal aid. Protective Service: — The protective work was inaugu- rated by a resolution of the 1897 convention. In any case where a member bank has been defrauded, burglarized, or THE IOWA BANKERS ASSOCIATION 375 robbed, the secretary is to be notified at once and the assist- ance of the Association will be given in detective work and legal proceedings. The Association now retains the services of the Wm. J. Burns international detective agency, whose Iowa representative has an office in Des Moines near the office of the secretary. Each year he has reported a con- siderable number of forgeries, fraudulent checks and notes, burglarizations, and hold-ups. In June, 1920, seven successful and four unsuccessful bank burglarizations or hold-ups were reported. To check this wave of crime a new department was established in August in cooperation with the State, E. C. Saunders, a special agent from the Governor's office, being in charge. The Burns Agency is now used primarily in ferreting out forgeries and fraudulent checks and notes and the new de- partment for apprehending bank robbers. The plan also provides for a vigilance committee of not less than four men in every town where there is a bank. These men are depu- tized under the county sheriff and provided with arms and ammunition secured from the War Department by the county bankers associations. In order to further protect the banks each county bankers association was asked to subscribe $1000 for the apprehen- sion of bank burglars operating in the county. The re- sponse of the county associations has been one hundred per cent and some counties exceeded their $1000 quota. As soon as the local vigilance committee was organized the banks were supplied with a red window card bearing the caption ''$1000 reward" and warning would-be bank burglars to beware. Special rewards have also been offered to tele- phone operators for giving prompt notification to the sheriff and vigilance committee. The officers of the Iowa Bankers Association sought to further strengthen their protective work by assisting in the drafting and passage of a bill creating a new criminal bu- 376 HISTORY OF BANKING IN IOWA reau under the Attorney General's office. The plan outlined by the Association's officers contemplated employing a finger print expert and a handwriting expert. It was also hoped to secure duplicate finger print files for all county sheriffs' offices and also for the chief of police in cities of over 20,000 population. The" law passed was much more general in form, but authorized the bureau to provide an adequate system of criminal identification. Apparently specific plans may now be developed at the discretion of the Attorney General. The Association has already paid liberal rewards for the apprehension of criminals. About 1902 John Sundblad was killed in the attempt to arrest safe-blowers who tried to loot the Greenville bank in Clay County. His family was left in straightened circumstances. By voluntary subscriptions the bankers of Iowa raised a fund of $4740.50 to clear his home- stead and provide for his wife and children. This fund was administered by trustees elected by the Iowa Bankers As- sociation, and reports were made on it for several years. In 1906 the trustees reported that nothing had been paid to the family for about two years, that Mrs. Sundblad had remar- ried, and that the plan was to save the money for the edu- cation of the Sundblad boys. In 1917 when the Association voted to turn over the fund to be used for this purpose, the report of the trustees showed a balance of $6472.61. On March 30, 1921, a second law enforcing officer, J. K. Myers, was killed by bandits who attempted to rob the First National Bank of Stuart. A memorial fund was immedi- ately authorized by the Council of Administration of the Association. The county bankers associations were each re- quested to subscribe $50, from which fund the widow of Mr. Myers is to be paid a life income of $50 per month. On July 8, 1921, the Secretary reported subscriptions received from sixty-five counties. As a preventive measure the mutual assistance and THE IOWA BANKERS ASSOCIATION 377 greater efficiency in prosecutions which is secured through cooperation has unquestionably deterred criminals from acting against member banks. The willingness of the bank- ers to do all in their power for the families of men who have lost their lives in their service has perhaps made officers more vigilant in apprehending criminals. Before the more recent developments in protective service the Iowa repre- sentative of the Wm. J. Burns detective agency in comment- ing on the comparative freedom of Iowa banks from bur- glarizations said : ' ' It is not out of the way, I am sure, to lay the majority of this record to the constant vigilance which has been maintained by this Protective Department, by the circularizations which have emanated from your State Secretary's office, and by the splendid co-operation that has been extended to your department by the sheriffs and police. ' ' The Protective Department under Mr. Saun- ders, aided by his staff and the local vigilance committees, has already given unusually satisfactory results. During the fiscal year ending June 1, 1921, twenty-two bank robbers were apprehended. Information was in the hands of the de- partment which it was believed would secure the conviction of men implicated in fifteen other robberies. When all phases of the new plan are fully in operation its results may be expected to be even more significant.^®''^ Time Lock Expert : — A second activity carried on by the Association for the member banks is the employment of a time lock expert to clean and repair time locks. At the 1904 convention a committee appointed by the executive council to look into the cleaning and repairing of time locks re- ported that the charges were ''unreasonable and exorbi- tant". They stated further that the charges were very irregular and that in their opinion the members acting to- gether as an Association could save sixty per cent. As a result of this report J. W. Loyer was employed to clean time 378 HISTORY OF BANKING IN IOWA locks for the members at $6 each. One dollar of the fee was sent to the Secretary to serve as a guarantee fund. The Association then guaranteed that if a banker had a lock-out caused by any fault of the time lock, bolt work, or automatic not working properly it would pay for the damages sus- tained from the money in the hands of the Secretary. In the report for 1906 the reduction in cost is estimated at from $4 to $9 per lock. Mr. Loyer 's work was satisfactory, but considerable com- plaint arose over his dilatory methods. He was unable to handle the work alone and unwilling to employ an assistant. As a result he resigned in the fall of 1911, and a five year contract was made with F. E. Davenport and Company of Omaha. Banks individually make contracts with the com- pany, but at a standard rate and with the guarantee of the Iowa Bankers Association, which in turn is protected by a surety company bond. In 1918 the time lock committee re- ported that there were 730 contracts in force and that the work was entirely satisfactory. A saving of twenty-five per cent in cost with ample protection against lock-outs was cited as a reason for urging more members to take advan- tage of the F. E. Davenport and Company contract.^"® Insurance Department : — A third activity of the Associa- tion on behalf of its members is the provision for fidelity and burglary insurance. As a result of dissatisfaction on the part of members with the rates on fidelity and burglary in- surance, a committee was appointed to investigate the ad- vantages of having a contract made by the Association on behalf of its members. This committee reported to the 1906 convention a provisional contract with the National Surety Company of New York. The agreement provided that the Secretary of the Iowa Bankers Association act as agent for the company to get insurance for members of the Associa- tion. The Association was not asked to guarantee any fixed THE IOWA BANKERS ASSOCIATION 379 amount of business nor to become responsible for the col- lection of premiums, but merely to agree to make a thorough canvass of members and to accept no other agency. The contract would grant the Association commissions on the business written. No member would be obligated to use the company. The contract was not accepted by the Association at this time; but in the President's address in the following year, the adoption of the plan which had been rejected in 1906 was strongly urged. When the committee report was again called up it was acted upon favorably. The only modifica- tion on the above contract was that one-half of the commis- sion received by the Association on each premium would be returned at the end of the fiscal year to the bank or banker from whence it originally came. This granting of a rebate is now forbidden under the State insurance law, so that member banks do not get a lower rate on insurance written through the Association. The influence of the bankers asso- ciations — State and national — has, however, been of dis- tinct advantage in securing better terms from insurance companies. The insurance work of the Association has grown to be an important feature and a source of considerable revenue. In 1910 the insurance in force was: burglary $1,880,000, and fidelity $850,000. One argument then advanced in favor of a permanent Secretary was to increase the revenue from commissions. There has been a marked increase in the amount of business done, due either to natural growth or to the Association's having a man free to develop business. In 1910 the revenue for insurance was $1842, in 1918 it was $5164, and in 1921 it was $12,495. This revenue alone prac- tically covers the salary of the secretary and the expenses of his office. The funds received from this source, however, are primarily intended to maintain the protective depart- ment."'* 380 HISTORY OF BANKING IN IOWA Legislative Committee : — A fourth activity undertaken on behalf of the banking interests of the State is that repre- sented by the legislative committee — a committee which has been especially active during the years when the biennial session of the legislature is held. At such times a program of legislation applicable to the banking conditions in Iowa is carefully drawn up in conference with the State Banking Department and is urged for passage in the legislature. This program is very broad, giving attention to the three classes of banks under State supervision — State and savings banks and trust companies. Protective measures dealing with criminal operations against banks are also supported. In addition the committee advocates measures which do not relate specifically to banking but in which Iowa bankers have an interest. Among the general bills supported by the legislative com- mittee in 1917 were a county agent bill, a road patrol bill, and a bill relating to bulk sales of merchandise. In 1919 the various measures prepared for introduction in the legislature included : a bill to amend the present blue sky law; a bill to empower the Superintendent of Banking to decline to issue certificates of authority for any banks that do not meet certain requirements and to prohibit the establishment of new private banks ; a bill to make uniform the reserve requirements of State and savings banks ; a bill to make $25,000 the minimum capitalization of savings banks ; a bill to authorize banks to make and execute bank- ers ' acceptances; a bill to prohibit the secret assignment of accounts ; and a bill to provide more examiners, clerks, and fees for the State Banking Department. In addition to the legislative activities of the committee at the sessions of the State legislature, an effort has been made to follow banking legislation which is being considered by Congress. This work is carried on primarily by the American Bankers Association and is supported by the THE IOWA BANKERS ASSOCIATION 381 Iowa committee. In the years 1917 and 1918 the passage of bills creating the War Finance Corporation and the Capital Issues Committee received their support. The committee supported an amendment to the Federal reserve clearing system, which would permit member banks to charge on checks cleared through the Federal reserve banks. It pro- tested vigorously before Congress against the personal credits act, against the excess profits tax, and against the guarantee of deposits not exceeding $5000 in national banks.*^® Opinions may be expected to differ as to the merits of certain proposed measures, but any fair-minded examina- tion of the legislative program of the Iowa bankers must lead to the conclusion that the general tone of their influence is sound and in the public interest. Conservative as a class the bankers always have been ; at times, doubtless, they have worked in their own selfish interest. Often, however, they have supported bills which would not bring them any special advantages. In every case the program represents the ma- jority opinion of the bankers and is, therefore, not the work of any small clique. Legal Department : — A fifth service the Association ren- ders for its members is the matter of legal advice. For a number of years the Association retained an attorney for the benefit of the members. Since January, 1920, two at- torneys have been retained. Questions may be submitted to them upon any point'* all the way from those referring to the administration of estates to the assessment of taxation of bank stock and to what constitutes negotiable notes '\ After a recent decision of the Supreme Court regarding what constituted a negotiable note, the Secretary obtained an opinion from the attorney upon a note form which would meet all of the conditions. An Association bulletin contain- ing the information was issued and sent out to all members 382 HISTORY OF BANKING IN IOWA without charge. During the year 1917-1918 an income tax attorney was also retained who looked after inquiries of member banks at a nominal cost. The legal department may also represent the Association in the prosecution of bank robbers when county attorneys or other officers re- quest assistance.*" ACTIVITIES FOE THE GENEEAL PUBLIC WELFAEE In addition to the activities of the Association on behalf of its members, there are standing committees maintained to work for the general public welfare. The work of the Asso- ciation in support of agriculture, commerce, and good roads has already been discussed in connection with the relations of the bank to the community. The Association has carried on propaganda for wider use of trade acceptances; it has promoted education and training for banking, especially by endorsing the work being carried on by the School of Com- merce of the State University of Iowa and through the In- stitute of Banking, an agency fostered by the American Bankers Association.*^ ^ From a small unrepresentative group of less than one hundred bankers, the Iowa Association has grown in thirty- five years into an organization of nearly 2000 members with an influence commensurate with the importance of the busi- ness represented. Working out in the open for its own in- terests and those of its patrons it has done much to dispel the suspicion formerly held for banking by the mass of the people. By its definite contribution in service to its mem- bers it has won to the Association almost one hundred per cent of the Iowa bankers. NOTES AND REFERENCES 383 NOTES AND REFERENCES CHAPTEE I 1 Salter 's Iowa : The First Free State in the Louisiana Purchase, p. 11 ; Shambaugh'a History of the Constitution of Iowa, ch. III. 2 Hepburn's Contest for Sound Money, pp. 113, 154. sihe Iowa Standard (Iowa City), November 27, 1840. 4 Wilkie 's Davenport Past and Present, p. 91. 5 The Iowa Standard (Iowa City), March 23, 1843. ^Ihe Iowa Standard (Iowa City), May 4, 1843. '^ The Iowa Standard (Iowa City), March 2, 1843. « The Iowa Standard (Iowa City), November 23, 1843. 9 Dewey 's Financial History of the United States, p. 227. 10 Interview with H. J. Wienicke, Iowa City. 11 Hepburn 's Contest for Sound Money, pp. 44, 45, 48. 12 Sumner's A History of Banking in the United States, p. 330, in A History of Banking in All the Leading Nations, Vol. I. 13 The Iowa City Standard, July 23, 1841; The Iowa Standard (Iowa City), March 9, November 23, 1843. 14 The name Loco-f oco was almost universally applied to the Democratic party by its opponents in Iowa during the forties when the Bank question was the absorbing political issue. The term originated at a political con- vention of the New York Democrats held in Tammany Hall in 1835. There had been a sharp split in the party over the question of banks and monopolies in general. At an exciting moment in the meeting all the lights were ex- tinguished; but the anti-monopolists, who had anticipated that some such event would occur, were supplied with loco-foco matches and candles. The room was immediately relighted, and thereafter the members of this section t of the party were dubbed Loco-focos. At first an epithet of contempt, the ' term Loco-foco came eventually to be synonymous with Democrat. — Town- send 's A Handbook of United States Political History, p. 175. 15 The Iowa Standard (Iowa City), March 28, 1844. 18 Zowo Capital Beporter (Iowa City), May 10, 1845. 17 The Iowa Standard (Iowa City), April 6, 1843. 25 " 385 386 HISTORY OF BANKING IN IOWA CHAPTER II 18 Van der Zee's Early History of Lead Mining in the Iowa Country in The Iowa Journal of History and Politics, Vol. XIII, pp, 3-52; Compendium of United States Census, 1840, pp. 294, 342. 19 Dowrie's The Development of BanTcing in Illinois, 1817-1863, in University of Illinois Studies in the Social Sciences, Vol. II, No. 4, p. 67. 20 Lou;* of the Territory of Wisconsin, 1836-1838, No. 7, pp. 27-34. 21 United States Statutes at Large, Vol. V, p. 198. "2 Laws of the Territory of Wisconsin, 1836-1838, No. 7, sees. 1, 2, 3, 4, pp. 27, 28, 29 ; United States Statutes at Large, Vol. V, p. 198. 23 Laws of the Territory of Wisconsin, 1836-1838, No. 7, sees. 5, 11, pp. 29, 31. 24 Laws of the Territory of Wisconsin, 1836-1838, No. 7, sees. 5, 7, 8, 13, 22, pp. 29, 30, 32, 34. ^5 Laws of the Territory of Wisconsin, 1836-1838, No. 7, sees. 4, 9, 19, 20, pp. 28, 30, 31, 33, 34; United States Statutes at Large, Vol. V, p. 198. 26 Dewey 's State BanTcing Before the Civil War, pp. 63-73. 27 Merritt 's The Early History of BanTcing in Iowa, pp. 8, 9. 28 Journal of tTie House of Bepresentatives of tlie Territory of Wisconsin, 1837-1838, pp. 52, 53. 29 The cashier reported a cireulation of $11,435, of which $9435 was in post notes payable twelve months after date. Such notes were very common in most sections of the country before 1837, being used for the purpose of ex- tending circidation. Many of the States empowered their banks to issue such bills. Although not authorized by the charter of the Miners' Bank they were not specifically prohibited. Hence the issue of such notes was not an infrac- tion of the Bank's charter. — Dewey's State BanTcing Before tTie Civil War, pp. 104-107; Journal of the House of Representatives of the Territory of Wisconsin, 1837-1838, pp. 101-105, 123, 378-381. ^0 Iowa News, December 9, 1837, as cited in Merritt 's The Early History of BanTcing in Iowa, p. 16. 31 A petition was presented to the legislature signed by a large number of persons in Dubuque which alleged gross violations of the charter provisions. This statement made the "astounding revelations" that the greater part of the first installment of capital stock was paid for by money loaned by the Galena Branch of the Bank of Illinois and was paid back immediately as soon as the stock was all taken. Appended to the petition was an aflidavit by Walter Lewis to the effect that G. D. DUlon, cashier of the bank, had stated to him that his testimony given in answer to the questions asked by the first investigating committee was false. Facts brought out by later investi- NOTES AND REFERENCES 387 gations would tend to coniirin this statement. — Journal of the House of Rep- resentatives of the Territory of Wisconsin, 1837-1838, p. 349. 32 Laws of the Territory of Wisconsin, 18S6-18S8, p. 527. 33 Journal of the Council of the Territory of Wisconsin, June Session, 1838, pp. 245-248. 3*Merritt's The Early History of BanJcing in Iowa, p. 35. 35 Sumner's A History of BanTcing in the United States, pp. 329, 330, in A History of Banking in All the Leading Nations, Vol. I. 3« The Iowa News, February 10, 1838, as cited in Merritt 's The Early His- tory of Banking in Iowa, pp. 18-23. 37 Journal of the Council of the Territory of Wisconsin, June Session, 1838, pp. 245-248; see also Journal of the House of Representatives of the Territory of Wisconsin, 1838, pp. 87-94. 38 Laws of the Territory of Iowa, 1838-1839, pp. 32-42 8» Journal of the House of Representatives, 1838, p. 3. *o Laws of the Territory of Iowa, 1838-1839, pp. 515, 516. *i Journal of the House of Representatives, 1838, pp. 132, 301-303, 42 The Iowa Standard (Iowa City), April 16, 1841* 43 Journal of the Council, 1842, p. 100. 44 Journal of the House of Representatives, 1842, pp. 143, 144, 284. 45 Journal of the Council, 1842, pp. 135, 137. 4« Journal of the Council, 1842, pp. 144, 154. 47 Journal of the House of Representatives, 1842, p. 190. *^ Journal of the Council, 1842, p. 162. 49 Journal of the House of Representatives, 1842, p. 215. 'io Journal of the House of Representatives, 1842, p. 222. 51 Journal of the Council, 1842, p. 187. 02 The Iowa Standard (Iowa City), February 5, 1842 83 The Iowa Standard (Iowa City), March 12, 1842. i 84 Merritt 's The Early History of Banking in Iowa, pp. 61, 62. 55 Journal of the House of Representatives, 1842-1843, p. 150. 66 TTie Iowa Standard (Iowa City), December 15, 1842. 87 Journal of the House of Representatives, 1842-1843, p. 86. 68 Journal of the Hou^e of Representatives, 1842-1843, pp. 150-173. 388 HISTORY OF BANKING IN IOWA 69 Journal of the Council, 1842-1843, pp. 91, 182, 183. «o Journal of the House of Bepresentatives, 1842-1843, p. 148. 81 Journal of the House of Bepresentatives, 1842-1843, pp. 209-226 62 The Iowa Standard (Iowa City), February 9, 16, 1843. 63 Journal of the House of Bepresentatives, 1843-1844, pp. 8, 28. 6* Journal of the House of Bepresentatives, 1843-1844, pp. 38, 40, 41, 50. 65 Journal of the House of Bepresentatives, 1843-1844, pp. 67, 74-79. 66 Journal of the House of Bepresentatives, 1843-1844, p. 81. 67 Journal of the Council, 1843-1844, pp. 73, 75, 77, 81, 82, 95. 68 Journal of the House of Bepresentatives, 1843-1844, p. 122. 69 Journal of the Council, 1843-1844, pp. 104, 105. 10 The Iowa Standard (Iowa City), April 25, 1844; Address of the Direc- tors of the Miners' Bank of Dubuque to the People of Iowa in Execut'>vef, Documents, 29th Congress, 1st Session, Vol. VIII, pp. 1228-1232. Ti/owo Capital Beporter (Iowa City), April 27, 1844. 72 Laws of the Territory of Wisconsin, 1836-1838, No. 7, sec. 23, p. 34. 73 Journal of the House of Bepresentatives, 1845, pp. 13, 48, 49 ; Journal of the Council, 1845, pp. 33, 40, 217-221; Laws of the Territory of Iowa, 1845, ch. 31. 74 In order to enable the Territory to continue improvements on the Capitol at Iowa City, the Territorial Agent, Col. Jesse Williams, had been authorized in 1841 to secure a loan of an amount not to exceed $20,000. The security for the loan was to be the unsold lots of Iowa City. In accordance with this order Col. Williams secured a loan of $5000 from the Miners' Bank on June 28, 1841, and a second loan of $500 in September of the same year. These loans bore 7 per cent interest and were payable in New York eighteen months after date. — The Iowa City Standard, July 30, 1841 ; Laws of the Territory of Iowa, 1840-1841, ch. 72; Journal of the Council, 1842-1843, pp. 192-196; Mer- ritt 's The Early History of Banking in Iowa, pp. 45, 62-64, 108, 109. 75 Address of the Directors of the Miners ' Bank of Dubuque to the People of Iowa in Executive Documents, 29th Congress, 1st Session, Vol. VIII, pp. 1228-1232. 76 Merritt's The Early History of Banking in Iowa, p. 117. 77 Miners' Bank of Dubuque v. United States, 1 Morris 482. 78 Miners ' Bank of Dubuque v. United States, 1 G. Greene 553. 79 Merritt's The Early History of Banking in Iowa, p. 117. NOTES AND REFERENCES 389 so Journal of the Kouse of Bepresentatives, 1842-1843, p. 165; The Iowa Standard (Iowa City), April 16, 1841. 6^ Journal of the House of Bepresentatives, 1843-1844, p. 85; and Chart of the Politics of Members of the Legislative Assemblies of the Territory of Iowa, prepared by Jacob Van der Zee, in the possession of The State Historical Society of Iowa. 82 Joiro Capital Beporter (Iowa City), May 24, 1845. CHAPTER III 83 Journal of the House of Bepresentatives, 1838, p. 140. 8* Journal of the House of Bepresentatives, 1841-1842, pp. 210, 211. 8B Journal of the House of Bepresentatives, 1845, pp. 81, 94, 95; Merritt's The Early History of Banking in Iowa, pp. 101-103. 86 Laws of the Territory of Iowa, 1838-1839, p. 64. 87 Shambaugh 's History of the Constitutions of Iowa, pp. 146, 167, 172. 88 Shambaugh 's History of the Constitutions of Iowa, pp. 176, 182, 219-227. 88 Journal of the Constitutional Convention, 1844, pp. 28-30. 90 Journal of the Constitutional Convention, 1844, pp. 89, 90. »i Tfte Iowa Standard (Iowa City), October 24, 1844; Shambaugh 's Frag- ments of the Debates of the Iowa Constitutional Conventions of 1844 and 1846, pp. 67-70, 81. 92 Journal of the Constitutional Convention, 1844, p. 90 ; Shambaugh 's His- tory of the Constitutions of Iowa, p. 183. 93 Journal of the Constitutional Convention, 1844, p. 107. ^*^ Journal of the Constitutional Convention, 1844, p. 121. 96 The Iowa Standard (Iowa City), November 7, 1844; Shambaugh 's Frag- ments of the Debates of the Iowa Constitutional Conventions of 1844 and 1846, pp. 143-147. 96 Journal of the Constitutional Convention, 1844, pp. 151, 184, 199, 200. 97 Shambaugh 's History of the Constitutions of Iowa, pp. 254, 255, 271, 283. 98 Shambaugh 's History of the Constitutions of Iowa, pp. 287-290. 99 Shambaugh 's History of the Constitutions of Iowa, pp. 291, 292. ^00 Iowa Capital Beporter (Iowa City), March 18, 1846. 101 Shambaugh 's History of the Constitutions of Iowa, p. 292. 102 Journal of the Constitutional Convention, 1846, pp. 23, 38, 56, 71. 103 Journal of the Constitutional Convention, 1846, pp. 72, 75, 76, 85, 86. 390 HISTORY OF BANKING IN IOWA 104 Journal of the Constitutional Convention, 1846, p. xv. 105 Jowa Capital Reporter (Iowa City), June 3, 1846; Journal of the Con- stitutional Convention, 1846, p. 86. Data relative to members of the con- vention are given in Shambaugh's Fragments of the Debates of the Iowa Constitutional Conventions of 1844 and 1846, pp. 413-415. 106 The Iowa Standard (Iowa City), July 8, 1846. lOT The Iowa Standard (Iowa City) , July 22, 1846. 108 Shambaugh's History of the Constitutions of Iowa, pp. 324-328. 109 Iowa Historical and Comparative Census, 1836-1880, pp. xiii, xvi, xxi, 179- 181, 187, 188, 189, 196. 110 Albert Gallatin, writing on banking in the United States in 1841, stated that "banking in America always implies the right and practice of issuing paper money as a substitute for a specie currency." — Callendar's Selections from the Economic History of the United States, 1765-1860, p. 596. 111 Treasury Report, August 31, 1852, cited in Sumner's A History of Bank- ing in the United States, p. 415, in A History of Banking in All the Leading Nations, Vol. I. The States prohibiting banks were Florida, Texas, Arkansas, Illinois, Wis- consin, Iowa, Minnesota, Oregon, and California. iizFairall's Manual of Iowa Politics, 1881, pp. 17, 18;Merritt's The Early History of Banking in Iowa, p. 129. 113 The author examined Dillon 's Iowa Digest, 1839-1860, for cases pertain- ing to banking; the Revision of i860; Greene's Reports, "Vols. I-IV, covering cases tried between 1847 and 1854; and Iowa Reports, Vols. I-VII, covering cases tried between 1855 and 1859. 114 Pollock's History of Economic Legislation in Iowa, pp. 110-114. 115 Code of 1851, sees. 2731, 2732, 2733, 2734. 116 Major Hoyt Sherman, youngest brother of General William T. and Hon. John Sherman, came to Iowa in May, 1848. He settled in Des Moines, where he lived until his death in June, 1904. In 1853 he built the Sherman Block and there established the following year the bank of Hoyt Sherman and Com- pany to do a legitimate banking and exchange business. This bank was merged into the Des Moines branch of the State Bank in 1858, of which branch Sherman was cashier. For more than a half century he was a resident of Iowa, and his contribution to the literature of early banking ia of especial value. — Andrews's Pioneers of Polk County, Iowa, Vol. I, pp. 67, 68; Sher- man's Early Banking in Iowa in Annals of Iowa (Third Series), Vol. V, p. 2. 117 Manuscript letter from J. T. Eemey, President of the National State Bank, Burlington, Iowa, dated July 13, 1918. NOTES AND REFERENCES 391 ^^^ Hawkey e and Iowa Patriot (Burlington), November 17, 1842. 119 From an account of banking in Cedar Eapids, by Dr. S. D. Carpenter, in Brewer and Wick's History of Linn County, Iowa, pp. 435-440. 120 The History of the First National BanJc in the United States, pp. 16-18, 91. This is a Mstory of the First National Bank of Davenport, Iowa. 121 History of Dubuque County (Western Historical Company, Chicago, 1880), pp. 620, 621. 122 Dubuque City Directory, 1856-1857, p. 31. 123 History of Lee County, Iowa (S. J. Clarke Publishing Co., Chicago, 1914), Vol. I, p. 253. 124 Wolfe's History of Clinton County, Iowa, Vol. I, pp. 335, 336. 125 Eichman's History of Muscatine County, Iowa, Vol. I, ch. 20. 1-^^ History of Lee County, Iowa (S. J. Clarke Publishing Co., Chicago, 1914), Vol. I, p. 255. '^-T Daily Evening Beporter (Iowa City), May 28, August 20, 28, September 12, 1856. 128 An account of banking in Cedar Eapids, by Dr. S. D. Carpenter, in Brewer and Wick's History of Linn County, Iowa, pp. 435-440. The firm of Greene and Weare evidently did not survive long for John Ely says the partnership was soon dissolved; "its affairs were liquidated and the partners were engaged for several years in saving what could be realized from the wreck". — Address of John S. Ely, Coe College Founders' Day, December 3, 1914. 129 Parker's Iowa As It Is In 1855, pp. 262,264. 130 Andrews 's Pioneers of Polk County, Iowa, Vol. I, pp. 56, 57, 69. 131 Hartman's History of Black Hawk County, Iowa, Vol. I, pp. 215, 247. i32Burrell's History of Washington County, Iowa, Vol. I, p. 368; Parker's Iowa As It Is In 1855, p. 263. 133 Field and Eeed 's History of Pottawattamie County, Iowa, Vol. I, pp. 19, 29. 134 The Sioux City Journal, December 27, 1905 ; The Sioux City Tribune, August 11, 1907. 135 Proceedings of the Second Annual Convention of the Iowa Bankers As- sociation, 1888, p. 10; Sherman's Early Banking in Iowa in Annals of Iowa (Third Series), Vol. V, p. 2. 136 An account of banking in Cedar Eapids, by Dr. S. D. Carpenter, in Brewer and Wick 's History of Linn County, lovm, pp. 435-440 ; The Sioux City Tribune, August 11, 1907. 392 HISTORY OF BANKING IN IOWA 137 Sherman's Early Banking in Iowa in Annals of Iowa (Third Series), "Vol. V, pp. 2, 3. ^36 Daily Evening Beporter (Iowa City), August 20, 28, 1856. 'i3Q Daily Evening Beporter (Iowa City), May 28, August 20, 28, September 12, 1856. ^*o Daily Evening Beporter (Iowa City), May 28, August 20, 28, September 12, 1856; The Sioiix City Tribune, August 11, 1907. 141 Sherman's Early BanJcing in Iowa in Annals of Iowa (Third Series), VoL V, p. 3. 142 Sherman's Early BanTcing in Iowa in Annals of Iowa (Third Series), Vol. V, p. 2 et seq. 143 BiirreU's History of Washington County, Iowa, Vol. I, p. 368. 144 White's Money and Banking (Fifth Edition), pp. 316-319. 146 Andrews's Pioneers of Folk County, loioa, Vol. I, p. 57. 146 Dewey 's State Banking Before the Civil War, p. 100 et seq. i47Aumer'8 Leading Events in Johnson County Iowa History, Vol. I, pp. 445-447. 148 Sherman's Early Banking in Iowa in Annals of Iowa (Third Series), Vol. V, p. 2 et seq. 149 Proceedings of the Seventh Annual Convention of the Iowa Bankers As- sociation, 1893, p. 77. isoBolles's The Financial History of the United States from 1789-1860, p. 516. 151 Hepburn 's A History of Currency in the United States, p. 66. i52Bolles's The Financial History of the United States from 1789-1860, p. 516. 153 Parker's Iowa As It Is In 1855, p. 264; Sherman's Early Banking in Iowa in Annals of Iowa (Third Series), Vol. V, p. 3. 164 Laws of the Territory of Nebraska, 1855, title page and pp. 55, 225, 249, 250, 347, 348. 165 Lathrop 's Some Iowa Bank History in the Iowa Historical Becord, Vol. XIII, p. 59. 156 Law* of the Territory of Nebraska, 1855-1856, pp. 177, 178, 202, 203, 208, 209, 224, 225, 230. 157 Brewer and Wick 's History of Linn County, Iowa, p. 439. 158 Laws of the Territory of Nebraska, 1855-1856, pp. 177, 178. 159 iSf ote Democrat (Davenport), June 23, 1856, as quoted in the Iowa City NOTES AND REFERENCES 393 Eepublican, July 6, 1856; advertisement in the Daily Evening Eeporter (Iowa City), September 12, 1856. 160 Lathrop 's Some Iowa Banlc History in the Iowa Historical Record, Vol. XIII, p. 59. 161 Advertisement of Hatch Brothers in the Iowa WeeJcly Bepublican (Iowa City), February 23, 1859. 162 The History of the First National Bank in the United States, pp. 19-23. 163 Andrews's Pioneers of Folk County, Iowa, Vol. I, p. 57. 164 Lathrop 's Some Iowa Bank History in the Iowa Historical Record, Vol. XIII, pp. 59, 60. 166 Laws of the Territory of Nebraska, 1857, p. 131. 166 Laws of the Territory of Nebraska, 1855-1856, pp. 37-40. 167 Laws of the Territory of Nebraska, 1857, pp. 143, 145. ^^s Annals of Iowa (Third Series), Vol. V, pp. 52-55. 169 Jotro Weekly Republican (Iowa City), February 23, 1859. 170 Sherman's Early Banking in Iowa in Annals of Iowa (Third Series), Vol. V, facing p. 10 ; Andrews 's Fioneers of Folk County, Iowa, Vol. I, p. 254. 171 Tarbell v. A. J. Stevens & Co., 7 Iowa 163. 172 Springer's History of Louisa County, Iowa, Vol. I, facing p. 48. 173 Aurner 's Leading Events in Johnson County Iowa History, Vol. I, pp. 140, 141. 174 The Debates of the Constitutional Convention of the State of Iowa, 1857, Vol. I, pp. 355-358. 175 The History of the First National Bank in the United States, pp. 18, 19. 176 Price's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. I, pp. 270, 271. 177 Lathrop 's Some Iowa Bank History in the Iowa Historical Record, Vol. XIII, p. 60. 178 Samples are on exhibition in the Iowa Masonic Library, Cedar Eapids, Iowa. 179 Dewey's Financial History of the United States, p. 263. 180 Brewer and Wick's History of Linn County, Iowa, p. 439; The History of the First National Bank in the United States, p. 23. 181 The History of the First National Bank in the United States, pp. 16-23. i82Gue's History of Iowa, Vol. I, pp. 353. 354. 394 HISTORY OF BANKING IN IOWA CHAPTER V 183 Shambaugh's History of the Constitutions of Iowa, pp. 330, 333. 18* Shambaugh's Messages and" Proclamations of the Governors of Iowa, Vol. I, pp. 426, 444-447, 465, 466. 185 Shambaugh's History of the Constitutions of Iowa, p. 335. 186 Shambaugh's History of the Constitutions of Iowa, p. 337. 187 Mc'Claiii's The Constitutional Convention and the Issues Before It, pp. 14, 40 ; Shambaugh 's History of the Constitutions of Iowa, p. 339. 188 Journal of the Constitutional Convention, 1857, pp. 93-95. 180 The Debates of the Constitutional Convention of the State of Iowa, 1857, Vol. I, pp. 393, 405. 100 Journal of the Constitutional Convention, 1857, pp. 93-95. 181 The Debates of the Constitutional Convention of the State of Iowa, 1857, Vol. I, pp. 345-348, 373-377, 387, 388. 192 Journal of the Constitutional Convention, 1857, p. 158. i«s Journal of the Constitutional Convention, 1857, pp. 238, 239, 267, 269, 271-278. 19-4 The Debates of the Constitutional Convention of the State of Iowa, 1857, Vol. II, p. 786. 195 Journal of the Constitutional Convention, 1857, pp. 275-278. 196 Constitution of Iowa, 1857, Art. VIII, sees. 5-11. 197 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, p. 45. 198 Journal of the House of Representatives, 1858, pp. 227, 587. 199 Journal of the Senate, 1858, pp. 508-510. 200 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, pp. 204, 205. 201 Laws of Iowa, 1870, ch. 25. 202 Laws of Iowa, 1858, ch. 114, sees. 7, 20. 203 Laws of Iowa, 1858, ch. 114, sec. 30. 204 Journal of the House of Representatives, 1858, pp. 535, 536. 205 Laws of Iowa, 1858, eh. 114, sees. 11, 30, 31. 206 Laws of Iowa, 1858, eh. 114, sees. 10, 22, 25, 26, 44. 207 Laws of Iowa, 1858, ch. 114, sees. 1, 3, 5, 16, 17, 18, 20, 21, 23, 35. 208 Laws of Iowa, 1858, ch. 114, sees. 15, 16, 28, 29, 30. NOTES AND REFERENCES 395 209 Laws of Iowa, 1858, ch. 114, sees. 41, 43. 210 Journal of the Souse of Bepresentatives, 1858, p. 517. 211 Laws of Iowa, 1858, ch. 114, sec. 1 ; Journal of the House of Bepresenta- tives, 1858, p. 537. 212 Laws of Iowa, 1858, ch. 114 sees. 33, 36 ; Journal of the Senate, 1858, p. 491; Laws of Iowa, 1858, ch. 114, sees. 33, 36, 37, 39. 213 Journal of the House of Bepresentatives, 1858, pp. 587, 588. 214 Journal of the Senate, 1860, p. 36. 21B Journal of the Senate, 1860, pp. 677-679. 216 Laws of the United States Concerning Money, Banking, Loans, 1778-1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, p. 362; Laws of Iowa, 1870, eh. 25. CHAPTER VI 217 Dewey 's State BanTcing Before the Civil War, pp. 33-40 ; Dowrie 's The Development of Banking in Illinois, 1817-1863, in the University of Illinois Studies in the Social Sciences, Vol. II, No. 4, pp. 22, 27; Sumner's A History of Banking in the United States, pp. 330, 333, 411, 439, in A History of Bank- ing in All the Leading Nations, Vol. I; Huntington's A History of Banking and Currency in Ohio Before the Civil War in the Ohio Archaeological and Historical Quarterly, Vol. XXIV, No. 3, p. 481. 218 Constitution of Iowa, 1857, Art VIII, sees. 4-12. ^^^ Journal of the Senate, 1858, pp. 174, 419; Journal of the House of Bep- resentatives, 1858, pp. 227, 600. The bill was introduced on February 6th and passed by the House on March 12th. 220 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, p. 204. 221 Laws of Iowa, 1858, ch. 87, sec. 51. 222 Laws of Iowa, 1858, ch. 87, sees. 51-55. 223Esarey's State Banking in Indiana, 1814-1873, in the Indiana University Studies, Vol. I, No. 15, pp. 251, 255. 224 Huntington 's A History of Banking and Currency in Ohio Before the Civil War in the Ohio Archaeological and Historical Quarterly, Vol. XXIV, No. 3, pp. 424, 425. 225 Huntington's A History of Banking and Currency in Ohio Before the Civil War in the Ohio Archaeological and Historical Quarterly, Vol. XXIV, No. 3, p. 365. 226 Cue's History of Iowa, Vol. IV, p. 171. 396 HISTORY OF BANKING IN IOWA 227 Journal of the Senate, 1858, pp. 334, 356, 362, 364-367, 371, 377, 378. 228 Clark 's Samuel Jordan Kirkwood, pp. ix, 47, 48. 229 Laws of Iowa, 1858, ch. 87, sees. 2, 51. 230 Laws of Iowa, 1858, ch. 87, sec. 5. 231 Laws of Iowa, 1858, ch. 87, sees. 3, 11. 232 Laws of Iowa, 1858, ch. 87, sees. 2, 19, 49. 233 Journal of the Senate, 1858, p. 374. 234 Laws of Iowa, 1858, ch. 87, sees. 18, 21, 42, 48, 49. 23B Dewey's State BanTcing Before the Civil War, pp. 117-120. 236 Laws of Iowa, 1858, ch. 87, sees. 20, 22, 42. 237 Laws of Iowa, 1858, ch. 87, sees. 23, 26, 28, 34. 238 Laws of Iowa, 1858, ch, 87, sees. 24-27. 239 Laws of Iowa, 1858, ch. 87, sees. 13, 32, 35. 2*0 Dewey's State Banking Before the Civil War, pp. 126-136. 241 Laws of Iowa, 1858, ch. 87, sees. 3, 35. 242 Laws of Iowa, 1858, ch. 87, sees. 28, 37. 243 Laws of Iowa, 1858, ch. 87, sees. 9, 26, 28, 38. 244 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 53, 98. 245 Laws of Iowa, 1858, ch. 87, sec. 23. 246 Laws of Iowa, 1858, ch. 87, sec. 28. 247 Huntington 's A History of Banking and Currency in Ohio Before the Civil War in the Ohio Archaeological and Historical Quarterly, Vol. XXIV, No. 3, pp. 423-425. 248 Laws of Iowa, 1858, ch. 87, sees. 7, 8, 12, 13. 249 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volimie), pp. 162, 182, 183, 201. 250 Laws of Iowa, 1858, ch. 87, sees. 9, 31. 251 Record of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 267, 276. 252 Laws of Iowa, 1858, ch. 87, sees. 9, 13 ; Journal of the Senate, 1858, pp. 347, 481; Journal of the House of Representatives, 1858, p. 594. 253 Laws of Iowa, 1858, ch. 87, sec. 9. 254 Record of the Board of Directors in the Records of the Commissioners (manuscript volume), p. 31. NOTES AND REFERENCES 397 255 Iowa WeeTcly Bepublican (Iowa City), January 5, 1859. 256 See Sherman's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. V, pp. 93-116. 257 Laws of Iowa, 1858, ch. 87, sec. 6. 258 Price's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. I, p. 274. 259 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 132, 144, 150, et seq. 260 Records of the Commissioners (manuscript volume), pp. 1, 2. 261 Records of the Commissioners (manuscript volume), pp. 3, 4, 6-8, 15. 262 Eecords of the Commissioners (manuscript volume), pp. 12-19. Of the eight towns chosen, four — Muscatine, Keokuk, Dubuque, and Daven- port — were Mississippi Eiver towns. Iowa City had been the early capital, Des Moines was then the capital. Oskaloosa is located in Mahaska County, and Mount Pleasant in Henry Coimty. The population of the cities at the census of 1854 ranged from 1306 for Mount Pleasant to 6634 for Dubuque. Burlington, then the largest city in the State, was not admitted until the fol- lowing year. The western half of the State and the northern part, with the exception of Dubuque on the Mississippi Eiver, were not represented. — Iowa Historical and Comparative Census, 1836-1880, Table LXXXII. 263 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 52, 65, 67, P4, 118, 164, 265. 264 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 19-25. 265 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 22, 32, 120. 266 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 26, 29, 232. 267 Price's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. I, p. 284. 268 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 27-29. 269 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 27, 306. 270 Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 150, 159. 2^^ Laws of Iowa, 1858, ch. 87, sec. 4; Eecord of the Board of Directors in the Records of the Commissioners (manuscript volume), pp. 207, 223, 245. 398 HISTORY OF BANKING IN IOWA 272 Kecord of the Board of Directors in the Bccords of the Commissioners (manuscript volume), pp. 42, 43, 99; Circulation Begister of the Iowa City Branch of the State Banlc of Iowa (manuscript) in the possession of The State Historical Society of Iowa. 273Esarey's State Banking in Indiana, 1814-1873, in the Indiana University Studies, Vol. I, No. 15, p. 261. 274 Eecord of the Board of Directors in the Becords of the Commissioners (manuscript volume), pp. 34, 91, 97, 197-199. 27B Record of the Board of Directors in the Becords of the Commissioners (manuscript volume), pp. 122-131. 276 Record of the Board of Directors in the Becords of the Commissioners (manuscript volume), pp. 247, 248, 258, 277. 277 Record of the Board of Directors in the Becords of the CommissioTiers (manuscript volume), pp. 98, 153, 179, 231. 278 Pollock's State Finances in Iowa During the Civil War in The Iowa Journal of History and Politics, Vol. XVI, pp. 55-107. See especially pp. 71-73. 270 Lathrop 's Some Iowa Banlc History in the Iowa Historical Becord, Vol. XIII, p. 63. 280 Pollock 's State Finances in Iowa During the Civil War in The Iowa Journal of History and Politics, Vol. XVI, p. 100. 281 Quoted in the Iowa City Bepuhlican (Weekly) , September 6, 1865. 282/o«;a City Bepublican ("Weekly), March 2, 1864. 283 Biennial Beport of the Auditor of State, 1859, p. 16, 1861, p. 18, 1863, p. 21. 284 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, pp. 168, 169. 280 Record of the Board of Directors in the Becords of the Commissioners (manuscript volimie), pp. 207, 208, 214, 224-226, 228, 233. For record of suit against the Bank, the author consulted Hammond's Iowa Digest, Vol. II, (1860-1866) covering the Supreme Court cases. 286 Record of the Board of Directors in the Becords of the Commissioners (manuscript volume), p. 77. 287 Record of the Board of Directors in the Becords of the Commissioners (manuscript volume), pp. 78, 81, 165. See also Konde's BanTcing in Iowa 1857-1874 for data on depreciation of bank notes. 288 Laws of Iowa, 1858, ch. 87, sec. 30. 289 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, p. 167. f NOTES AND REFERENCES 399 290 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, p. 274; Laws of Iowa, 1862, cli. 17, sec. 2. 291 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. II, p. 324; Laws of Iowa, 1864, ch. 43, sec. 1. 292 .*aidrews 's Pioneers of Polk County, Iowa, Vol. I, pp. 57, 58 ; interview with H. J. Wienicke at Iowa City. 293iai/;s of Iowa, 1S64, ch. 53; Gue's History of Iowa, Vol. II, pp. 105-107; The Muscatine Journal was quoted in opposition and supported by the Iowa City Bepuilican (Weekly), April 6, 1864. 29-t Hepburn's A History of Currency in the United States, pp. 306-311; Laws of the United States Concerning Money, BanTcing, and Loans, 1778-1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, p. 362. 295 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. 240, 248. 296 Laws of the United States Concerning Money, BanTcing, and Loans, 1778- 1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, pp. 328, 329. 29T Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript voliune), p. 285; Iowa City Bepublican (Weekly), November 30, 1864. 298 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. 291-295. 299 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. 298, 299. 300 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. 303, 304. 301 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), p. 308. 302 Circulation Eegister of the Iowa City Branch of the State Bank of Iowa (manuscript) in possession of the State Historical Society. 303 Eecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), p. 291; Antrobus's History of Des Moines County, Iowa, Vol. I, p. 358; Iowa City Eepublican (Weekly), April 12, 1865; Andrews's Pioneers of Polk County, Iowa, Vol. I, p. 58; BurreU's History of Washing- Ion County, Iowa, Vol. I, p. 371; Eoberts and Moorehead's History of Lee County, Iowa, p. 254; Sherman's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. V, p. 109; Eecord of Proceedings, Branch of the Stato Bank of Iowa at Iowa City (manuscript volume) , pp. 152, 153. 304 Sherman's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. V, pp. 112-115; Iowa City Eepublican (Weekly), February 22, 1860, 400 HISTORY OF BANKING IN IOWA February 20, 1861, July 23, 1862, December 23, 1863, April 20, 1864, January 18, AprH 27, 1865. 305 Journal of the Senate, 1858, pp. 367, 380. 306 Kecord of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. 109, 249, 253. 307 Record of the Board of Directors in the Eecords of the Commissioners (manuscript volume), pp. Ill, 137-139, 160, 169, 178, 183, 194, 217, 229, 241, 244, 256, 271, 280, 290, 301. 308 Becord of the Proceedings, Branch of the State Bank of Iowa at Iowa City (manuscript volume), p. 153. 309 Hepburn 's A History of Currency in the United States, p. 204. 310 Half of the total capital of the State Bank of Indiana was owned by the State. The bank went into liqiiidation at the expiration of its charter in 1859, "The state of Indiana realized a net profit of $3,500,000 — over and above the interest paid on the bank bonds — from the bank during the twenty- five years of its existence." — White's Money and Banking (Fifth Edition), p. 336. The State Bank of Ohio was "highly successful." — White's Money and Banking (Fifth Edition), p. 344. The State Bank of Illinois began operations in July, 1821. The main of- fice was located at Vandalia; branches were established at Edwardsville, Shawneetown, Palmyra, and Bro^vnsville. It was entirely owned by the State. After an vmsuccesful existence its affairs were finally wound up about 1835. The loss to the State was about $460,000; the loss to individuals was much more. — Dowrie's The Development of Banking in Illinois, 1817-1863, in the Illinois University Studies in the Social Sciences, Vok II, No. 4, 1913, pp. 27, 30, 57, 58; Knox's History of Banking in the United States, p. 716. 3iiEsarey's State Banking in Indiana, 1814-1873, in the Indiana University Studies, Vol. I, No. 15, pp. 263, 264, 288-296. 312 Price's The State Bank of Iowa in Annals of Iowa (Third Series), Vol. I, p. 293. CHAPTER VII 313 Barnett 's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, p. 11. 314 Davis's The Origin of the National Banking System in Senate Docu- ments, 61st Congress, 2nd Session, Vol. XXXV, pp. 1, 30-33. 315 Davis's The Origin of the National Banking System in Senate Docu- ments, eist Congress, 2nd Session, Vol. XXXV, pp. 11, 14. NOTES AND REFERENCES 401 316 Dewey 's Financial History of the United States, p. 322. SIX Davis's The Origin of the National Banking System in Senate Docu- ments, 61st Congress, 2nd Session, Vol. XXXV, pp. 67-82, 101. 318 Laws of the United States Concerning Money, Banking, and Loans, 1778- 1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, pp. 330- 362; WMte's Money and Banking (Fifth. Edition), p. 351. ^^^ History of the First National Bank in the United States, pp. 31-48; Bankers' Magazine, Vol. XVIII, p. 84 (July, 1863). 320 Iowa City Eepublican (Weekly), July 15, 1863, January 27, 1864. 321 r/ie Northwestern Banker, June, 1914, p. 18 ; Report of the Secretary of the Treasury (Finance Keport), 1863, pp. 49, 60; Annual Report of the Comp- troller of the Currency, 1916, Vol. II, p. 379. 322 Davis 's The Origin of the National Banking System in Senate Docu- ments, 61st Congress, 2nd Session, Vol. XXXV, pp. 95, 96. 323 Annual Report of the Comptroller of the Currency, 1917, Vol. II, pp. 124, 125. 324PoUock's State Finances in Iowa During the Civil War in The low A Journal of History and Politics, Vol. XVI, p. 106; History of the First Na- tional Bank in the United States, p. 40; Iowa City Republican (Weekly), February 8, 1865, 326 Report of the Secretary of the Treasury (Finance Report) , 1876, pp. 185, 234. 326 Biennial Report of the Auditor of State, 1875, pp. 13-15, 87-90. 327 Barnett 's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, facing p. 250. 328 Barnett 's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, p. 206. 329 Barnett 's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, p. 11. 330 Laws of Iowa, 1870, ch. 25. 331 Revision of 1860, sec. 1636. This law was chapter 129 of the laws passed in 1860. 332 American Statute Law, Vol. II, sec. 9500, p. 572, quoted in Barnett 's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, p. 11. 333 The Iowa Department of Banking has no statements on file which were 26 402 HISTORY OF BANKING IN IOWA made to the auditor before 1873. — Manuscript letter from Mrs. Sarah G. French, Legal Clerk, dated August 11, 1919. 334 According to a manuscript letter to the State Historical Society, dated July 26, 1918, and signed by E. C. Youngstrom, Eecorder of Des Moines County, the articles of incorporation of the Des Moines County Savings Bank are found of record in Mortgage Volume No. 10, at p. 309. The articles of the Merchants Insurance Company and Burlington Savings Bank are recorded in Mortgage Volume No. 9, at p. 602. The recorder states that the articles con- tain seventeen long paragraphs each and that he was therefore unable to give any further information concerning them. The original information concerning them was found in Antrobus's History of Des Moines County, Iowa, p. 357. Mr. Antrobus states that he secured all of his information concerning them, including the date of incorporation, from the records of the county recorder. 835 History of the First National Bank in the United States, p. 39. 336 Koberts and Moorehead 's History of Lee County, Iowa, p. 254. 337 Downer 's History of Davenport and Scott County, Iowa, Vol. I, p. 759. 338 Laws of Iowa, 1870, ch. 172, sees. 2, 11. 339 Census of Iowa, 1905, pp. c, ci. iio Biennial Report of the Auditor of State, 1873, pp. 60, 61, 101-104, 1875,. pp. 13-15, 87-90. s*i Code of 1873, sees. 1570-1576; Pollock's History of Economic Legisla- tion in Iowa, p. 188. 342 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. Ill, p. 379. 343 ShambaiTgh's Messages and Proclamations of the Governors of Iowa, Vol. IV, pp. 55, 83-86. 344 Laws of Iowa, 1874, ch. 60. 345 Biennial Beport of the Auditor of State, 1875, pp. 13-15, 87-90. CHAPTEE VIII 346 Hepburn's A History of C^irrency in the United States, p. 321. 347 Biennial Beport of the Auditor of State, 1875, pp. 13, 14. 348 Hepburn's A History of Currency in the United States, pp. 306-320. * 349 Beport of the Comptroller of the Currency, 1917, Vol. II, pp. 36, 357. 350 Haynes 's Third Party Movements, pp. 124, 125, 141, 167. 351 Noyes 's History of the National-Bank Currency in Senate Documents, NOTES AND REFERENCES 403 61st Congress, 2nd Session, Vol. XII, p. 11; Report of the Camptroller of the Currency, 1916, Vol. II, p. 154. 352 Eeport of the Comptroller of the Currency, 1882, p. 19. 353 Eeport of the Comptroller of the Currency, 1890, p. 41. 354 Report of the Comptroller of the Currency, 1916, Vol. II, p. 379. 355 Dewey 's Financial History of the United States, pp. 468-473 ; Laws of the United States Concerning Money, Banking, and Loans, 1778-1909, in Senate Documents, 61st Coligress, 2ncl Session, Vol. XXXIII, pp. 446-448. 356 Biennial Report of the Auditor of State, 1901, p. 251. 357 Report of the Comptroller of the Currency, 1920, Vol. II, p. 318. ^^^ Biennial Report of the Auditor of State, 1875, pp. 14, 15, 1883, pp. 89, 90 ; Pollock 's History of Economic Legislation in Iowa, p. 188. 359 Laws of Iowa, 1880, chs. 153, 208. 360 Laws of Iowa, 1886, ch. 72. 361 Laws of Iowa, 1894, chs. 29, 30. 362 Code of 1897, sees. 1863, 1864, 1866, 1867, 1882, 1889. 363 Laws of Iowa, 1902, ch. 76. 364 Laws of Iowa, 1907, ch. 91. 365 Laws of Iowa, 1913, chs. 151, 152, 1915, chs. 13, 121. 366 Laws of Iowa, 1917, ch. 189. 367 Laws of Iowa, 1919, ch. 67. 368 Laws of Iowa, 1919, ch. 319. 369 Barnett 's State BanTcs and Trust Companies Since the Passage of the National-BanJc Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, p. 222. 370 Special Report from the BanTcs of the United States (April 28, 1909) in Senate Documents, 61st Congress, 2nd Session, No. 225, pp. 13, 14. 371 Annual Report of the Secretary of the Treasury, 1917, p. 627. 372 Laws of Iowa, 1874, ch. 60, sec. 9. 373 Biennial Report of the Auditor of State, 1901, pp. 252, 253. 374 Supplement to Special Report from the Banks of the United States (April 28, 1909) in Senate Documents, 61st Congress, 2nd Session, No. 225, Pt. II, p. 85. 375 Laws of Iowa, 1874, ch. 60, see. 10, 1906, eh. 78, 1913, ch. 149, 1917, ch. 364. 376 Code of 1897, ch. 10, sec. 1860. 404 HISTORY OF BANKING IN IOWA 3'' 1 Laws of Iowa, 1915, ch. 107; Proceedings of the Twenty-ninth Annual Convention of the Iowa Bankers Association, 1915, p. 29. 378 Laws of Iowa, 1917, ch. 189. 379 Laws of Iowa, 1919, ch. 319. 380 Laws of Iowa, 1900, ch. 67, 1902, ch. 167, 1913, ch. 151. 381 Laws of Iowa, 1894, ch. 29, 1900, ch. 67, 1917, ch. 218. 382 Laws of Iowa, 1917, ch. 357 ; Proceedings of the Thirty-first Annual Con- vention of the Iowa BanJcers Association, 1917, p. 156. 383 Code of 1897, sec. 1870; Laws of Iowa, 1902, ch. 76, 1915, ch. 77. 384 Laws of Iowa, 1888, ch. 89; Code of 1897, ch. 10, sec. 1845; Laws of Iowa, 1913, ch. 150, 1917, ch. 238, 1921, ch. 70. 3^^ Biennial Report of the Auditor of State, 1916, Table No. 4; Report of the Comptroller of the Currency, 1916, pp. 570-581. The Iowa National Bank of Des Moines with total resources of $10,625,454 led the national banks and was the second largest bank in the State. 386 Code of 1897, sec. 1889. 3»T Special Report from the Banks of the United States (April 28, 1909) in Senate Documents, 61st Congress, 2nd Session, No. 225, p. 16; Biennial Report of the Auditor of State, 1916, Pt. Ill, p. 3. 388 Laws of Iowa, 1900, ch. 68, 1904, ch. 65. 389 Laws of Iowa, 1913, ch. 152 ; Proceedings of the Twenty-seventh Annual Convention of the Iowa Bankers Association, 1913, pp. 102-109. 390 Laws of Iowa, 1915, ch. 121. 391 From 1877 to 1909 the figures were compiled for the National Monetary Commission from the Homans's Bankers' Almanac and its continuations. Bar- nett's State Banks and Trust Companies Since the Passage of the National- Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, facing p. 250. From 1909 to 1920 the data have been obtained from Eand, McNally and Company 's Bankers ' Directory. Wherever possible the statistics have been checked by reports of the State Auditor, the Iowa Bankers Association, the Governor's messages, or other sources from which information may be obtained. There is some variation shown but the author's opinion is that the error is small.— Shambaugh 's Mes- sages and Proclamations of the Governors of Iowa, Vol. VI, p. 154; Biennial Report of the Auditor of State, 1916, pp. 6, 7. 392 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. IV, p. 364; Biennial Report of the Auditor of State, 1877, p. 16, 1879, pp. 16, 17. NOTES AND REFERENCES 405 393 J&ienniaZ Report of the Auditor of State, 1881, pp. 14, 15; Shambaugh's Messages and Proclamations of the Governors of Iowa, Vol. V, p. 172. 394 Biennial Eeport of the Auditor of State, 1885, p. 135. 395 Biennial Eeport of the Auditor of State, 1905, pp. xiii, xiv, 396 Proceedings of the Fourth Annual Convention of the Iowa BanTcers As- sociation, 1890. 397 Proceedings of the Fifth Annual Convention of the Iowa BanTcers As- sociation, 1891, pp. 50-59. 398 Proceedings of the Twenty-sixth Annual Convention of the Iowa Bankers Association, 1912, pp. 24, 25. 399 Journal of the Senate, 1915, p. 778 ; Proceedings of the Thirty-first An- nual Convention of the Iowa BanTcers Association, 1917, p. 156. p. 112, 113. 404 Proceedings of the Thirty-fourth Annual Convention of he Iowa BanTcers Association, 1920, p. 312. *05 Rand, McNally and Company's BanTce"s' Directory, January 1921, p. 6; Federal Eeserve Bulletin, June, 1920, p. 644'. 406 Eeport of tTie Comptroller of the Currency, 1918, Vol. I, pp. 112, 113. 407 Data for the national banks, 1863-1919, were taken from the Eeport of the Comptroller of the Currency, Vol. II, 1919, pp. 317, 318; data on State Banks, 1877-1909, are taken from Barnett 's State BanTcs and Trust Companies Since the Passage of tTie National-BanTc Act in Senate Documents, 61st Con- gress, 3rd Session, Vol. II, table facing p. 248; all others are taken from the Biennial Eeports of the Auditor of State and the Biennial Eeport of the Super- intendent of BanJcing, 1918; the statistics for the savings banks were all taken 406 HISTORY OF BANKING IN IOWA from the Biennial Beports of the Auditor of State and the Biennial Report of the Superintendent of Banking, 1918; the State Auditor's report for 1895, p. 202, gives continuous statistics, 1875-1895; the record of the State and sav- ings banks combined is found in the Biennial Report of the Auditor of State, 1895, p. 204, and in the Biennial Report of the Superintendent of Banking, 1918, p. 17, where the combined record for each year since 1891 is to be found; trust company statistics are taken from the biennial reiJorts of the Auditor of State for the years 1908-1916 and for the years 1917-1918 from the Bi- ennial Report of the Superintendent of Banking, 1918; statistics of private banks, 1877-1909, are from Barnett's State Banks and Trust Companies Since the Passage of the National-Bank Act in Senate Documents, 61st Congress, 3rd Session, Vol. II, facing p. 250. (These were compiled originally from Ho- mans's Bankers' Almanac.) From 1909-1919 the private bank record was compiled from the January number of Eand, McNally and Company's Bank- ers' Directory for each year. ^os Biennial Report of the Auditor of State, 1895, p. 204; Biennial Report of the Superintendent of Banking, 1918, p. 17; Abstracts of Reports of the Condition of Iowa Savings Banks, State Banks and Trust Companies, June 30, 1919. 400 Supplement to Special Report from the Banks of the United States (AprU 28, 1909) in Senate Documents, 61st Congress, 2nd Session, No. 225, Pt. II, 7p. 83-89. ■ii*^ Brigham 's History of Des Moines and Polk County, Iowa, Vol. I, p. 540. *ii Towner 's History of Davenport and Scott County, Iowa, Vol. I, p. 758 ; manuscript letter from L. M. Ashley, Assistant Cashier of the First National Bank of ftioux City, dated July 21, 1920. 412 Brewer and Wick's History of Linn County, Iowa, pp. 442, 443. 413 Eand, McNally and Company 's Bankers ' Directory listed Cedar Eapids, Davenport, Des Moines, Dubuque, Estherville, Mason City, Muscatine, Osage, Sioux City, and "Waterloo. A list of towns having clearing houses, supplied by Frank "Warner, Secretary of the Iowa Bankers Association, included only part of the towns given in th-? Directory but added Clinton, Council Bluffs, and Fort Dodge to the list. Io\'a City was not included in either list but ex- changes made by the banks of tr. -city are regularly reported in the annual reports of the Comptroller of the • Currency. — Eand, McNally and Company's Bankers' Directory, January, 1919, p. 24; manuscript letter from Frank "War- ner dated September 4, 1918. 414 Manuscript letter from W. J. Gilpin, manager New York Clearing. House, dated July 20, 1920 ; Report of the Comptroller of the Currency, 1919, A^ol. II, p. 830, 1920, Vol. II, pp. 851-853. 415 The Northwestern Banker, December, 1907, p. 31; Sprague's History of Crises Under the National Banking System in Senate Documents, 61st Congress, 2nd Session, Vol. XXV, pp. 434-459. NOTES AND REFERENCES 407 *i6 Interview with Frank Warner, Des Moines, Iowa, July 16, 1921; Beport of the Comptroller of the Currency, 1920, Vol. II, pp. 128, 129. Tlie First National Bank of Ida Grove was formerly in voluntary liquida- tion. The First National Bank of Sioux City was restored to solvency. ^-i-T Biennial Beport of the Auditor of State, 1893, p. 8d, 1895, p. 8, 1897, p. 10, 1899, p. 201, 1901, p. xi, 1916, Pt. Ill, p. 3; Biennial Beport of the Superintendent of Banking, 1918, pp. 5-17; Proceedings of the Eighth Annual Convention of the Iowa Bankers Association, 1894, pp. 9, 46; Proceedings of the Twenty-fourth Annual Convention of the Iowa Bankers Association, 1910, p. 71; The Northwestern Banker, January 1905, p. 13; letter from the De- partment of Banking, July 21, 1921. 418 Proceedings of the Eighth Annual Convention of the Iowa Bankers As- sociation, 1894, p. 46. 419 The Northwestern Banker, January, 1905, p. 13 ; interview with Frank Warner, Des Moines, Iowa, July 16, 1921. ^'^0 Biennial Beport of the Auditor of State, 1916, Pt. Ill, p. 6; Biennial Beport of the Superintendent of Banking, 1918, pp. 9, 10. 421 Beport of the Comptroller of th" Currency, 1919, Vol. I, pp. 33, 34, Vol. II, pp. 524, 525. 422 Biennial Beport of the Superintendent of Banking, 1918, p. 5. CHAPTER IX 423 Laws of the United States Concerning Money, Banking, and Loans, 1773- 1909, in Senate Documents, 61st Congress, 2nd Session, VoL XXXIII, p. 347. ^^^ Laws of the United States Concerning Money, Banking, and Loans, 1778- 1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, pp. 367, 368. 425 Holdsworth's Money and Banking, p. 279. 426 Laws of Iowa, 1858, ch. 114. i^T Bevision of 1860, sec. 1636. '«* 428 The Department of Banking has no statements on file in the ofl&ce ^ ^^ were made to the Auditor of State between the years 1860 and 1873.- ''-^ script letter from Mrs. Sarah G. French, Legal Clerk of the Departmen+ ^jj ing, dated August 11, 1919. 429 Code of 1873, sees. 1570-1576. ^,v„, 430 Biennial Beport of the Auditor of State, 1873, pp. 60, 61, 10 431 Laws of Iowa, 1874, ch. 60. '"5- 432 Code of 1897, sees. 1872-1874; Laws of Iowa, 1921, chs. 6 ^ 408 HISTORY OF BANKING IN IOWA 433 Proceedings of the Eleventh Annual Convention of the Iowa Bankers As- sociation, 1897, p. 94. *34 Biennial Report of the Auditor of State, 1903, p. xiii. 436 Laws of Iowa, 1911, ch. 83, 436 Manuscript letter from Mrs. Sarah G. French, Legal Clerk of the Depart- ment of Banking, dated August 11, 1919. 437 Biennial Report of the Auditor of State, 1899, p. x, 1903, p. adii, 1910, p. x, 1912, p. xi; Proceedings of the Twenty-fourth Annual Convention of the Iowa Bankers Association, 1910, p. 74. 438 The Des Moines Register, August 7, 1919. 439 Laws of the United States Concerning Money, Banking, and Loans, 1778- 1909, in Senate Documents, 61st Congress, 2nd Session, Vol. XXXIII, pp. 357, 358, 415. 440 Proceedings of the Twenty-second Annual Convention of the Iowa Bankers Association, 1908, pp. 89, 90. ^^''^ Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 42-44. 442 Holdsworth 's Money and Banking, p. 280. ^*3 Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), p. 42. 444 Code of 1873, sees. 1570-1576 ; Biennial Report of the Auditor of State, 1879, p. 16, 1881, p. 15, 1885, p. 135, 1887, p. 2; letter from W. O. Reed, Deputy Superintendent of Banking, July 21, 1921. 446 Laws of Iowa, 1890, ch. 50. 446 Laws of Iowa, 1904, ch. 64. 447 Laws of Iowa, 1906, ch. 81. 448 Laws of Iowa, 1909, ch. 115. 449 Laws of Iowa, 1915, ch. 313. 460 Laws of Iowa, 1917, ch. 40. « Lotos of Iowa, 1919, ch. 335; Iowa Bankers Association Bulletin No. 439, XIV, April 26, 1919, p. 4. Hennial Report of the Auditor of State, 1893, p. 8e; Laws of Iowa, 1894, 'nial Report of the Auditor of State, 1905, p. xiv; Laws of Iowa, 1906, from Mrs, Sarah G. French, Legal Clerk of the Department of 1 August 11, 1919. NOTES AND REFERENCES 409 455 Biennial Beport of the Auditor of State, 1883, pp. 90, 91, 1885, pp. 135, 136; Shambaugh's Messages and Proclamations of the Governors of Iowa, Vol. V, p. 331. 456 Pollock 's History of Economic Legislation in Iowa, p. 167. 467 Shambaugh 's Messages and Proclamations of the Governors of Iowa, Vol. V, p. 261. 4B8 Proceedings of the Twenty-sixth Annual Convention of the Iowa Bankers Association, 1912, p. 143 ; letter from Prank Warner, July 27, 1921. *69 Laws of Iowa, 1917, ch. 40. 460 The Northwestern Banker, April, 1917, p. 15, February, 1920, p. 36. 461 Laws of Iowa, 1917, ch. 40. 462 Laws of Iowa, 1919, cli. 335, 1921, chs. 209, 340. 463 Laws of Iowa, 1919, ch. 236 ; Iowa Bankers Association Bulletin No. 967, p. 10. 464 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, p. 164. 465 The Des Moines Begister, July, ls>19; letter from Mrs. Sarah G. French, dated Des Moines, September 16, 1920. 466 It is the practice of the Comptroller to reject a considerable number of applications. During the year ending October 31, 1918, applications for char- ters for 22 banks were rejected and 35 applications for charters were aban- doned. — Beport of the Comptroller of the Currency, 1918, Vol. I, p. 63. 467 Whitney 's The Overdraft Evil as Illustrated iy Conditions in Iowa in The American Economic Beview, Vol. VIII, pp. 48-61. 468 Laws of Iowa, 1919, ch. 144. CHAPTEE X 469 Special Beport from the Banks of the United States (April 28, 1909) in Senate Documents, 61st Congress, 2nd Session, No. 225, preface and p. 19. 470 WUlis 's The Federal Beserve, p. 38 ; White 's Money and Banking (Fifth Edition), pp. 453-466, 528. 471 Congressional Becord, 63rd Congress, Ist Session, pp. 4894, 5129. 472 The Northwestern Banker, January, 1914, p. 28. 473 T/ie Northwestern Banker, February, 1914, p. 31; Proceedings of the Twenty-eighth Annual Convention of the Iowa Bankers Association, 1914, pp. 36, 37. 474 Federal Beserve Bulletin, March, 1920, p. 308. 410 HISTORY OF BANKING IN IOWA 4"5 Manuscript letter from the Eeserve Bank Organization Committee, dated March 6, 1914. 470 Fifth Annual Beport of the Federal Eeserve Board, 1918, p. 25. *77 The Federal Eeserve Act, sec. 9. 478 Cities in Iowa which have been designated as reserve cities are Cedar Eapids, Des Moines, Dubuque, and Sioux City. — Beport of the Comptroller of the Currency, 1919, Vol. I, pp. 62, 63. ^''0 Index-Digest of the Federal Beserve Act and Amendments (Second Edi- tion), pp. 16-19, 40, 41. 480 The Northwestern BanTcer, February, 1914, p. 25. 4S1 Laws of Iowa, 1915, eh. 13. 432 Fifth Annual Beport of the Federal Beserve Board, 1918, p. 546. 483 Proceedings of the Twenty -ninth Annual Convention of the Iowa Bankers Association, 1915, pp. 75-78. 484 Proceedings of the Thirtieth Annual Convention of the Iowa Bankers As- sociation, 1916, pp. 25-28. 485 Proceedings of the Thirtieth Annual Convention of the Iowa Bankers As- sociation, 1916, pp. 95-107. i^^ Fifth Annual Beport of the Federal Beserve Board, 1918, pp. 29, 540, 565, 566; Sixth Annual Beport of the Federal Beserve Board, 1919, p. 39; Federal Beserve Bulletin, June, 1921, p. 673. 487 Proceedings of the Thirtieth Annual Convention of the Iowa Bankers As- sociation, 1916, pp. 89-94. 488 Fourth Annual Beport of the Federal Beserve Board, 1917, p. 9. 489 Fifth Annual Beport of the Federal Beserve Board, 1918, pp. 224, 225, 546, 400 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 92, 137-139, 140, 164. 491 Proceedings of the Thirty-third Annual Convention of the Iowa Bankers Association, 1919, pp. 137-145; The Northwestern Banker, June, 1921, p. 42; Proceedings of the Thirty-fourth Annual Convention of the Iowa Bankers As- sociation, 1920, p. 172. 492 Farm Land Values in Iowa, (BulletLn No. 874 issued by the United States Department of Agriculture) ; Miller 's Federal Beserve Policy in The American Economic Beview, June, 1921, pp. 177-206; Abstracts Nos. 52-57 of the Be- ports of the Savings Banks, State Banks, and Trust Companies of the State of Iowa; Bulletin of the National City Bank of New York, December 20, 1920, p. 15; Beports to the Thirty-fifth Annual Convention of the loiva Bankers As- sociation, 1921, pp. 48-51; Sixth Annual Beport of the Federal Beserve Board, 1919, p. 408; Seventh Annual Beport of the Federal Beserve Board, 1920, p. 58. NOTES AND REFERENCES 411 493 Laws of Iowa, 1919, chs. 67, 319, 494 Manuscript letter from D. H. Hedrick, President of the Battle Creek Savings Bank, dated January 7, 1919 (statement at the close of business on May 12, 1919) ; Fifth Annual Beport of the Federal Reserve Board, 1918, p. 543. ^^^ Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 24, 25; Fourth Annual Report of the Federal Reserve Board, 1917, pp. 23, 24, 181-183; State Banks in Federal Reserve System in Senate Docu- ments, 66th Congress, 2nd Session, No. 184. 480 Personal interview with Mark E. Lies, representing the Federal Reserve Bank of Chicago, in Chicago, September 12, 1919; Fifth Amiual Report of the Federal Reserve Board, 1918, pp. 74-77, 557-559; Federal Reserve Bulletin, January, 1920, facing p. 94; State BanJcs in the Federal Reserve System in Senate Documents, 66th Congress, 2nd Session, No. 184; Preston's The Fed- eral Reserve Bonis' System of Par Collections in The Journal of Political Economy, July, 1920, pp. 565-590; The Northwestern Banker, April, 1920, pp. 37, 52, June, 1920, pp. 15, 156, 158; Annual Reports of the Thirty-fourth Con- vention of the Iowa Bankers Association, 1920, pp. 20, 21. 49T Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 51, 53, 54. 498 Fifth Annual Report of the Federal Reserve Board, 1918, pp. 24, 25. <9^ Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 44, 45. BOO Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), p. 23, sec. Ilk. eoi Laws of Iowa, 1915, ch. 121. 60J Second Annual Report of the Federal Reserve Board, 1915, p. 12. 608 Fourth Annual Report of the Federal Reserve Board, 1917, p. 26. io^Fourt\ Annual Report of the Federal Reserve Board, 1917, pp. 446, 447; Fifth Annunl Report of the Federal Reserve Board, 1918, p. 570; Sixth Annual Report of the Federal Reserve Board, 1919, p. 408; Seventh Annual Report of the Federal Reserve Board, 1920, p. 480. 50B Fifth Annual Report of the Federal Reserve Board, 1918, pp. 71, 262. ii06 Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), p. 40. ^07 Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 27, 28. ^08 Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), p. 26; Laws of Iowa, 1919, ch. 66. 412 HISTORY OF BANKING IN IOWA 509 Federal Eeserve Act, sec. 27. 610 Proceedings of the Twenty-ninth Annual Convention of the Iowa Bankers Association, 1915, p. 30. CHAPTER XI 611 Code of 1897, sees. 1890, 1897, 1898. fii^ Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, p. 1492; Eosenthal's Building, Loan and Savings Associations, pp. 13-15. 61^3 Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1491- 1494; Ninth Annual Report of the Commissioner of Labor, 1893, p. 15; Ameri- can Building Association News, Vol. XXXVIII, No. 10, October 1918, cover page. 614 Report of the Comptroller of the Currency, 1919, Vol. I, p. 206; Pro- ceedings of the Twenty-fourth Annual Convention of the United States League of Local Building and Loan Associations, 1916, p. 13; Ohio General Statis- tics, Vol. II, 1916, p. 186; Biennial Report of the Auditor of State, 1916, Pt. IV, pp. 3-13. 615 Low* of Iowa (Public), 1872, chs. 30, 101. 616 Laws of Iowa, 1896, ch. 85. 617 Biennial Eeport of the Auditor of State, 1897, pp. 13-20, 161-257. 618 Ninth Annual Beport of the Commissioner of Labor, 1893, pp. 97-101 ; Biennial Beport of the Auditor of State, 1918, Pt. Ill, pp. 10, 11. 519 Ninth Annual Beport of the Commissioner of Labor, 1893, pp. 338, 339. 520 Table compiled from the biennial reports of the Auditor of State, 1897- 1918; Eeport of the Comptroller of the Currency, 1919, Vol. I, p. 206. 621 Ninth Annual Beport of the Commissioner of Labor, 1893, pp. 14, 15. 622 Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1499, 1500. 623 Code of 1897, sec. 1890. 524 Biennial Beport of the Auditor of State, 1918, Pt. Ill, p. 3. 625 Biennial Beport of the Auditor of State, 1897, pp. 252-254. 626 Adair's The Growth of the Building and Loan Associations of Nebraska in the Proceedings of the Iowa Building and Loan League, 1917, pp. 75-81. 627 Gilmore 's Building and Loan Associations of the United States, Their Usefulness and Mission in the Proceedings of the Iowa Building and Loan League, 1916, pp. 22-29; manuscript letter of John L. Bleakly, dated January 14, 1919. NOTES AND REFERENCES 413 528 Laws of Iowa, 1896, ch. 85. 529 Laws of Iowa, 1900, ch. 69. 530 Code of 1897, sees. 1891, 1892, 1898; Laws of Iowa, 1921, ch. 258. 531 Biennial Beport of the Auditor of State, 1918, Pt. Ill, pp. 12, 13 ; Ninth Annual Beport of the Commissioner of Labor, 1893, pp. 297-299. fis^ Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1504- 1511; Haymaker's Some Features of Building Association Evolution in the Proceedings of the Iowa Building and Loan League, 1917, pp. 28-47. 633 McKay's The Building and Loan Movement in the United States in Moulton's Principles of Money and Banking, p. 358; Biennial Beport of the Auditor of State, 1918, Pt. Ill, pp. 7, 13. 534 Ninth Annual Beport of the Commissioner of Labor, 1893, pp. 97-101. 535 Interview with F. D. DenUnger, Secretary of the Perpetual Savings and Loan Association of Cedar Eapids. 536 McKay's The Building and Loan Movement in the United States in Moulton's Principles of Money and Banking, p. 358. ^^T Code of 1897, sec. 1902; Supplement to the Code of Iowa, 1913, see. 1898-c. 638 Articles of Incorporation of the Perpetual Savings and Loan Association of Cedar Bapids, Iowa, Art. VII; Articles of Incorporation of the Waterloo Building and Loan Association of Waterloo, Iowa, Art. V. 639 Laws of Iowa, 1921, ch. 269. 540 Biennial Beport of the Auditor of State, 1918, Pt. Ill, pp. 8, 9. 541 Facts concerning Des Moines, Cedar Eapids, and Waterloo associations obtained through interviews and personal letters. 542 Ninth Annual Beport of the Commissioner of Labor, 1893, p. 307. 643 Supplement to the Code of Iowa, 1913, sec. 1903-a. 644 Constitutions of the Perpetual Savings and Loan Association of Cedar Rapids, the Waterloo Building and Loan Association, the Home Building and Loan Association, and the Perpetual Building and Loan Association of Water- loo. 5*^^ Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1528-1534. 546 Articles of Incorporation of the Perpetual Savings and Loan Association of Cedar Bapids, Iowa, Art. IX. 547 Articles of Incorporation of the Waterloo Building and Loan Association of Waterloo, Iowa, Art. VII; Articles of Incorporation of the Perpetual Build- ing and Loan Association of Waterloo, Art. XIX; Articles of Incorporation of the Home Building and Loan Association of Waterloo, Art. VII. 414 HISTORY OF BANKING IN IOWA 6<8 Supplement to the Code of Iowa, 1913, sec. 1903-b. 649 Code of 1897, sec. 1898. ^'io Bulletin of the Bureau of Labor (United States), 1904, pp. 1507, 1508. 6" Code of 1897, sec. 1898. ts2 Proceedings of the Iowa Building and Loan League, 1917, pp. 39, 40, 48, 49 ; By-laws of the Perpetual Savings and Loan Association of Cedar Bapids, Art. VI. 5B3 Ninth Annual Report of the Commissioner of Labor, 1893, p. 318. 554 Laws of Iowa, 1896, ch. 85, sees. 9, 10. »6B Constitutions and by-laws of Cedar Rapids and Waterloo associations. B6« Biennial Beport of the Auditor of State, 1918, Pt. Ill, p. 10. 057 Supplement to the Code of loiva, 1913, sec. 1893-a. 558 Proceedings of the Twenty-sixth Annual Convention of the United States League of Local Building and Loan Associations, 1918, pp. 75-84. 559 Supplement to the Code of Iowa, 1913, sec. 1903-a. 6«o Biennial Beport of the Auditor of State, 1916, Pt. IV, p. 7, 1918, Pt. Ill, p. 7. 581 Supplement to the Code of loiua, 1913, sec. 1898-d. 562 Interview with F. D. Denlinger, Secretary of the Perpetual Savings and Loan Association of Cedar Eapids. 583 Rosenthal's Building, Loan and Savings Associations, p. 223. 564 Constitutions and by-laws of Cedar Raj^ids and Waterloo associations; manuscript letter from John L. Bleakly, dated January 14, 1919. 585 Proceedings of the Twenty-seventh Annual Convention of the Nebrasica League of Savings and Loan Associations, 1918, pp. 7, 8; manuscript letter from W. R. Adair, Omaha, dated January 14, 1919; Proceedings of the Iowa Building and Loan League, 1916, p. 26. iM Proceedings of the Iowa Building and Loan League, 1917, pp. 37, 38; OUo General Statistics, 1916, Vol. II, p. 187. 567 Proceedings of the Twenty-third Annual Convention of the United States League of Local Building and Loan Associations, 1915, pp. 135-141. 568 Haymaker 's Some Features of Building Association Evolution in the Proceedings of the Iowa Building and Loan League, 1917, pp. 37, 38. 569 Proceedings of the Twenty-sixth Annual Convention of the United States League of Local Building and Loan Associations, 1918, p. 149; Proceedings of the Iowa Building and Loan League, 1917, pp. 43, 44, 50, 51. 570 Code of 1897, sees. 1892, 1900, 1901. NOTES AND REFERENCES 415 BTi Eosenthal 's Building, Loan and Savings Associations, p. 120 ; Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1535-1537; by- laws of various associations. 572 i^aws of Iowa (Public), 1872, chs. 30, 101. 573 z,aws of Iowa, 1896, ch. 85, sees. 5, 15, 16. 874 Laws of Iowa, 1896, ch. 85, sees. 17-26. 675 Biennial Beport of the Auditor of State, 1897, p. 19. 578 Laws of Iowa, 1900, ch. 69, sec. 13. ST 7 Laws of Iowa, 1896, ch. 85, sees. 6, 7. »78 Laws of Iowa, 1896, ch. 85, sees. 29-31. •79 Laws of Iowa, 1902, ch. 77. B80 Biennial Beport of the Auditor of State, 1901, p. xii. '^^'i- Biennial Beport of the Auditor of State, 1903, p. xiv; State v. Syndicate Land Company, 142 Iowa 22 ; Laws of Iowa, 1904, oh. 66. ^sz Bulletin of the Bureau of Labor (United States), 1904, Vol. IX, pp. 1571, 1572. 883 Laws of Iowa, 1896, ch. 85, see. 8. »s* Proceedings of the Twenty-third Annual Convention of the United States League of Local Building and Loan Associations, 1915, p. 126; opinions of Waterloo and Cedar Eapids bankers obtained by interviews. 885 Eosenthal 's Building, Loan and Savings Associations, p. 25. 888 Eosenthal 's Building, Loan and Savings Associations, pp. 25, 26. 587 American Building Association News, October, 1918, Vol. XXXVIII, No. 10, p. 465. Bm Proceedings of the Iowa Building and Loan League, 1917, pp. 45-47, 58. ^^^ Cleveland Plain Dealer, March 26, 1919; The Annalist, April 21, 1919, Vol. XIII, No. 327, p. 405; Proceedings of the Twenty-seventh Annual Con- vention of the United States League of Local Building and Loan Associations, 1919, pp. 64-92, 152-157. 590 j^aws of Iowa, 1876, ch. 163, 1896, ch. 85, sec. 33. 591 Supplement to the Code of Iowa, 1913, sec. 1326; Laws of Iowa, 1911, •hs. 63, 73. 892 Eosenthal 's Building, Loan and Savings Associations, pp. 39, 40; Pro- ceedings of the Twenty-sixth Annual Convention of the United States League of Local Building and Loan Associations, pp. 29-33. 593 Biennial Beport of the Auditor of State, 1903, p. xiv. 416 HISTORY OF BANKING IN IOWA CHAPTER XII ^oi Proceedings of the Fourth Annual Convention of the Farm Mortgage Bankers Association of America, 1917, p. 12. 595 Thirteenth Census of the United States, 1910, Vol. VI, p. 507; Census of Iowa, 1915, p. 643. Fourteenth Census of the United States, 1920, Bulletin on Agriculture in Iowa, p. 3. 590 Farm Land Values in Iowa (Bulletin No. 874 issued by the United States Department of Agriculture). 59T Farm Land Values in Iowa (Bulletin No. 874 issued by the United States Department of Agriculture); Iowa City Daily Citizen, August 21, 1919; Pro- ceedings of the Seventh Annual Convention of the Iowa Farm Mortgage Associa- tion, 1920, pp. 25-34. 598 Wealth, Debt and Taxation, Special Report of the Bureau of the Census, 1913, Vol. I, Pt. I, pp. 23, 26. 599 Fourteenth Census of the United States, 1920, Bulletin on Agriculture in Iowa, p. 3. 600 Thirteenth Census of the United States, 1910, Vol. VI, pp. 508, 509 ; Fourteenth Census of the United States, 1920, Bulletin on Agriculture in Iowa, p. 5. 601 Thirteenth Census of the United States, 1910, Vol. VI, pp. 507, 508. 602 Wight 's Beport on Life Insurance Farm Loan Investments in War Time, August 26, 1918, p. 11. 003 Interview with F. C. Waples, Secretary of the Iowa Farm Mortgage As- sociation, Cedar Rapids, July 27, 1919; manuscript letter from D. P. Hogan, President of the Federal Land Bank of Omaha, dated September 4, 1919; Mortgage Bankers vs. The Farmers, by M. L. Corey, Attorney-Registrar Fed- eral Land Bank of Omaha, in The Northwestern Banker, June, 1919, p. 7 ; Pro- ceedings of the Seventh Annual Convention of the Iowa Farm Mortgage Asso- ciation, 1920, p. 28. 604 Maynard 's Bural Credits in the United States, p. 77, a thesis in posses- sion of the Library of the State University of Iowa. 605 Thirteenth Census of the United States, 1910, Vol. VI, p. 507. ^0^ Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 44, 45. 607 Laws of Iowa, 1874, ch. 60, see. 9, 1913, ch. 149, 1917, ch. 364. 608 Laws of Iowa, 1902, ch. 76. 609 Manuscript letter from D. H. Hedrick, dated July 7, 1919; interview with F. C. Waples, Cedar Rapids, July 27, 1919. 610 Proceedings of the Fifth Annual Convention of the Iowa Farm Mortgage NOTES AND REFERENCES 417 Association, 1918, pp. 40-49; manuscript letter from D. H. McKee, dated August 15, 1919. 611 Manuscript letter from John W. Leavitt, Secretary and Treasurer, Cedar Falls Trust Company, dated July 31, 1920. 612 Preamble to the constitution of the Iowa Farm Mortgage Association, manuscript in the possession of the Secretary, F. C. Waples, Cedar Kapids. 613 Proceedings of the Fourth Annual Convention of the Farm Mortgage Bankers Association of America, 1917, pp. 11, 12, 259; Proceedings of the Second Annual Convention of the Iowa Farm Mortgage Association, 1915, pp. 58-70. 61* Prospectus of the Guarantee Mortgage and Finance Company, Des Moines. 615 Interview with F. C. Waples, Cedar Eapids, July 27, 1919. 616 Wight 's Beport on Life Insurance Farm Loan Investments in War Time, August 26, 1918, p. 11. 617 Interview with F. C. Waples, Cedar Rapids, July 27, 1919. 618 Proceedings of the Sixth Annual Convcniion of the Iowa Farm Mortgage Association, 1919, manuscript in the possession of the Secretary, F. C. Waples, Cedar Rapids. 619 Proceedings of the Second Annual Convention of the Iowa Farm Mortgage Association, 1915, p. 65; interview with F. C. Waples, Cedar Rapids, July 27, 1919. 620 Census of Iowa, 1915, p. cv. 621 Wight 's Report on Life Insurance Farm Loan Investments in War Time, August 26, 1918, p. 11. ' ' The interest rates given are the averages of rates reported by companies on about 75 per cent of loans outstanding in 1914, and 1916, and on over 50 per cent of new loans made in 1917. ' ' S22 Proceedings of the Sixth Annual Convention of the Iowa Farm Mort- gage Association, 1919, manuscript in the possession of the Secretary, F. C. Waples, Cedar Rapids. 623 Proceedings of the Sixth Annual Convention of the Iowa Farm Mort- gage Association, 1919, manuscript in the possession of the Secretary, F. C. Waples, Cedar, Rapids. 624 Proceedings of the Annual Conventions of the Iowa Farm Mortgage As- sociation, 1915, p. 65, 1919, manuscript in the possession of the Secretary, F. C. Waples, Cedar Rapids. 625 The Northwestern Banker, March, 1915, p. 7, April, 1915, pp. 20, 21, May, 1915, p. 20; Journal of the House of Bepresentatives, 1915, p. 1004; Journal of the Senate, 1915, pp. 1344, 1345; interview with F. C. Waples, Cedar Rapids, July 27, 1919. 27 418 HISTORY OF BANKING IN IOWA 620 The Federal Farm Loan Act, sees. 3, 4; The Northwestern Banker, Oc- tober, 1917, p. 8. 627 The Federal Farm Loan Act, sees. 7, 15, 16. 628 Eeport of the Secretary of the Treasury, 1918, pp. 102-104. 629 Condensed statement of condition of the Federal Land Bank of Omaha at the close of business, June 30, 1919. «30 The Federal Farm Loan Act, sec. 5. 631 statistical Abstract of the United States, 1918, p. 631; Annual Beport of the Secretary of the Treasury, 1918, p. 104; condensed statement of condition of the Federal Land Bank of Omaha at the close of business, June 30, 1919. 632 This amendment appears to have been supported by the Federal Farm Loan Board and the Joint Stock Land Banks. No good reason has been brought forward for making this subsidy permanent. Like the Federal re- serve system the Federal farm loan system should be made self-supporting. — Third Annual Eeport of the Federal Farm Loan Board, 1919, p. IS; Exemp- tion of Joint StocTc Land BanTc Bonds from Taxation (Hearings before the Committee on Banking and Currency United States Senate, January 10, 12, and 13, 1920), p. 19; manuscript letter from James B. Morman, Assistant Secretary, Farm Loan Board, dated July 19, 1920. 633 The Federal Farm Loan Act, sees. 7-10. 634 The Federal Farm Loan Act, sec. 12 ; manuscript letter from T. C. Hornby, Chief Appraiser, Federal Land Bank of Omaha, January 10, 1919; The Northwestern BanJcer, June, 1919, p. 6. 635 Circular of the Iowa Joint Stock Land Bank of Sioux City; manuscript letter of D. P. Hogan, President of the Federal Land Bank of Omaha, dated September 4, 1919; Federal Farm Loan Act, sec. 12. 636 Annual Eeport of the Secretary of the Treasury, 1918, pp. 102-104 ; Fed- eral Farm Loan Act, sees. 12, 13; manuscript letter from H. J. Crouse, Ex- aminer of the Iowa Joint Stock Land Bank of Sioux City, dated January 20, 1919. 637 Federal Farm Loan Act, sees. 18, 19, 20, 26. 638 Annual Eeport of the Secretary of the Treasury, 1918, pp. 104, 345. 639 The Northwestern Banker, October, 1917, pp. 21, 72. ^if^ The Northwestern Banker, October, 1917, pp. 8, 72; manuscript letter from D. P. Hogan, President of the Federal Land Bank of Omaha, dated September 4, 1919. «4i Putnam's The Federal Farm Loan System in The American Economic Beview, March, 1919, Vol. IX, No. 1, p. 64. «« Third Annual Eeport of the Federal Farm Loan Board, 1919, p. 20. NOTES AND REFERENCES 419 643 Federal Farm Loan Act, sec. 16. 644 Federal Farm Loan Act, sees. 16, 18, 28. «45 Third Annual Eeport of the Federal Farm Loan Board, 1919, p. 29. 646 Proceedings of the Fifth Annual Convention of the Iowa Farm Mort- gage Association, 1918, p. 25. 64T Manuscript letter from T. C. Hornby, Chief Appraiser, Federal Land Bank of Omaha, dated January 10, 1919. 645 Manuscript letter from D. P. Hogan, President of the Federal Land Bank of Omaha, dated September 4, 1919. 649 Statement of the Federal Farm Loan Board showing condition of banks to May 31, 1920. 650 Proceedings of the Fifth Annual Convention of the Iowa Farm Mort- gage Association, 1918, pp. 27-30. 651 The Midland Mortgage Company of Cedar Eapids made sales of $1,500,- 000 in 1918 and was capitalized for $60,000. The capital was increased to $100,000 and in two years this company handled five and a half million dol- lars worth of loans. — Manuscript letter from F. C. Waples, Cedar Rapids, dated June 10, 1920. 652 Manuscript letter from D. H. MeKee, Des Moines, dated August 15, 1919. 653 The Northwestern BanJcer, January, 1914, pp. 7-9, 16, 17, 33. 654 Proceedings of the Fourth Annual Convention of the Farm Mortgage BanJcers Association of America, 1917, p. 63. 655 Proceedings of the Fifth Annual Convention of the Iowa Farm Mort- gage Association, 1918, pp. 45-51. 656 Proceedings of the Fifth Annual Convention of the Iowa Farm Mort- gage Association, 1918, pp. 53-57. 657 Proceedings of the Sixth Annual Convention of the Iowa Farm Mort- gage Association, 1919, manuscript in the possession of the Secretary, F. C. Waples, Cedar Eapids; Proceedings of the Seventh Annual Convention of the Iowa Farm Mortgage Association, 1920, pp. 53-57. 658 The Northwestern BanHcer, June, 1919, pp. 4, 6, 7. 659 Third Annual Beport of the Federal Farm Loan Board, 1919, p. 19 ; The Commercial and Financial Chronicle, Vol. 109, p. 1937 (November 22, 1919), Vol. 110, p. 612 (February 14, 1920), p. 1931 (May 8, 1920); Proceedings of the Fourth Annual Convention of the Farm Mortgage Bankers Association of America, 1917, pp. 7, 88-105, 147-158; Proceedings of the Seventh Annual Meeting of the Iowa Farm Mortgage Association, 1920, p. 55; Federal Trade Information Service, Vol. XV, No. 29, p. 225 (May 4, 1920), No, 34, pp. 266, 267 (May 10, 1920) ; for a full discussion of the history and issues in this 420 HISTORY OF BANKING IN IOWA case see Preston's The Federal Farm Loan Case in The Journal of Political Economy, Vol. XXIX (June, 1921), pp. 433-454. ^^^ Cleveland Plain Dealer, May 19, 1920; Congressional Record (Joint Reso- lution 351, May 18, 1920), 66th Congress, 2nd Session, p. 7815; interview with J. M. Hungate, Secretary of the First Joint Stock Land Bank of Chicago, June, 1920; Third Annual Report of the Federal Farm Loan Board, pp. 28, 29; Consolidated Statement of Condition of the Joint Stock Land Banks at the Close of Business May 31, 19S0 ; Consolidated Statement of Condition of the Twelve Federal Land Banks at the Close of Business May 31, 1920; Report of the Federal Farm Loan Board, 1920, pp. 3, 4. 661 Taxation and Revenue Systems of State and Local Governments (Bureau of the Census, 1914), p. 79. 662 Statement of the Federal Farm Loan Board showing condition of banks to May 31, 1920. 663 Wight 's Report on Life Insurance Farm Loan Investments in War Time, August 26, 1918, p. 11. The interest rates are the average of rates reported by companies on over 50 per cent of the loans made. 664 United States Investor, Vol. XXIX, No. 39, p. 1398 (September 28, 1918). CHAPTER XIII 665 Wassam 'a Salary Loan Business in New York City, pp. 28-42. 666 Manuscript letter from J. B. Gilder, Secretary of the Industrial Finance Corporation, dated February 8, 1919. 667 Manuscript letter from J. B. Gilder, Secretary of the Industrial Finance Corporation, dated February 26, 1919. 668 The Morris Plan of Industrial Loans and Investments (published by the Industrial Finance Corporation, New York), pp. 8, 12, 32, 40. 669 National Magazine, Vol. XLV, No. 3, pp. 334-342, December, 1916. 670 Manuscript letters from J. B. Gilder, Secretary of the Industrial Finance Corporation, dated February 8, 26, 1919. 671 Interview with Harry E. Pratt, Cedar Rapids, August, 1918. 6T2 Sow to Borrow Money from the Waterloo Morris Plan Company; Annual Report of the Morris Plan Company of Cedar Rapids, 1918. 673 Statements of condition published by the Waterloo company, January 1, 1918, covering the period from April, 1916, to January 1, 1918, and by the Cedar Rapids Company, for the period from November, 1916, down to Janu- ary, 1919. 674 Annual Report of the Morris Plan Company of Cedar Rapids, 1918. NOTES AND REFERENCES 421 675 The Morris Plan of Industrial Loans and Investments (published by the Industrial Finance Corporation, New York), pp. 46-48; Annual Report of the Morris Plan Company of Cedar Rapids, 1918. 676 Manuscript letter from J. E. Kirbye, President of the Morris Plan Com- pany of Des Moines, dated March 5, 1919; Annual Report of the Morris Plan Company of Cedar Rapids, 1918. 677 Laws of Iowa, 1919, ch. 151 ; manuscript letter from Frank S. Shaw, Auditor of State, dated August 5, 1919. 678 Manuscript letter from L. B. Milligan, Secretary-Manager of the Daven- port Morris Plan Company, dated February 22, 1919. 679 Laws of Iowa, 1921, chs. 119, 131, 157, 161. 680 Prospectus of the Iowa Farm Credit Corporation. 681 Letters from Vincent Starzinger, Des Moines, dated August 12 and 16, 1919; interview with Harry E. Pratt, Secretary-Manager of the Cedar Eapida Morris Plan Company; circulars of the Iowa Guarantee Mortgage Corporation of Des Moines. «»2 Statistical Abstract of the United States, 1918, p. 156. 683 YearhooTc of the United States Department of Agriculture, 1916, pp. 672, 692. 684 Larmer 's The Cattle Loan Company in The Journal of Political Economy, Vol. XXVI, p. 822 (October, 1918). 685 When cattle are condemned because of contagious disease the loss is largely borne by the government. 686 Larmer 's The Cattle Loan Company in The Journal of Political Eco- nomy, Vol. XXVI, p. 823 (October, 1918). 687 Letter from A. G. Sam, Vice President of the Live Stock National Bank of Sioux City, dated August 20, 1919. 688 Companies listed in Iowa were : Sioux City Cattle Loan Company Sioux City Sioux City Bond and Mortgage Company Sioux City United Cattle Loan and Live Stock Company Des Moines Federal Cattle Loan Society Des Moines Union Cattle Loan and Mortgage Company Des Moines Manuscript letter from L. E. Stevens, Vice President of the United Cattle Loan and Live Stock Company, dated August 6, 1919. 689 Manuscript letter from A. G. Sam, Vice President of the Live Stock Na- tional Bank of Sioux City, dated August 20, 1919; manuscript letter from D. H. Hedrick, President of the Battle Creek Savings Bank, dated August 18, 1919. 422 HISTORY OF BANKING IN IOWA 690 Proceedings of the Twelfth Annual Convention of the Iowa Bankers As- sociation, 1898, pp. 43-45. 691 Census of Iowa, 1915, p. 191. 692 Manuscript of address delivered by D. H. Hedrick at the annual meeting of Group One, Iowa Bankers Association, May, 1918; manuscript letter from D. H. Hedrick, President of the Battle Creek Savings Bank, dated August 18, 1919. 693 Biennial Seport of the Superintendent of BanMng, 1918, p. 42. 694 Manuscript letter from D. H. Hedrick, President of the Battle Creek Savings Bank, dated August 18, 1919. 695 Manuscript letter from A. G. Sam, Vice President of the Live Stock National Bank, Sioux City, dated August 20, 1919. 696 Manuscript letter from I. E. Dierdorff, Vice President of Geo. M. Bech- tel and Co., Bankers, Davenport, dated August 27, 1919. 697 Wealth, Beht and Taxation, Special Report of the Bureau of the Census, 1913, Vol. I, Pt. II, p. 17, Pt. Ill, pp. 37, 38, 93. 698 Manuscript letter from I. E. Dierdorff, Vice President of Geo. M. Bech- tel and Co., Bankers, Davenport, dated July 25, 1919. 699 Manuscript letter from A. M. Schanke, President of Schanke and Com- pany, Investment Bankers, Mason City, dated August 8, 1919. 700 Partial list of Investment Bankers in Iowa in 1919 gathered from cor- respondence and advertisements. 1. Bankers Mortgage Company Des Moines 2. Bechtel and Company Davenport 3. White-Phillips Company Davenport 4. Schanke and Company Mason City 5. H. C. Adams and Co. Investment Bankers Algona 6. Iowa Investment Corporation Waterloo 7. Guarantee Mortgage and Finance Co Des Moines 8. Canfield Bros. Investment Bankers Cedar Eapids 9. C. J. Weiser Investment Banker Decorah Toi Laws of Iowa, 1919, ch. 236. 702 Manuscript letter from Frank Warner, Secretary of the Iowa Bankers Association, dated July 25, 1919. 703 Information regarding the nature of their business was obtained through letters from the following companies: Geo. M. Bechtel and Company Davenport Schanke and Company Mason City Guarantee Mortgage and Finance Company Des Moines Bankers Mortgage Company Des Moines NOTES AND REFERENCES 423 704 Manuscript letter from I. E. Dierdorff, Vice President of Geo. M. Bech- tel and Company, Davenport, dated August 27, 1919. 705 Manuscript letter from Frank Warner, Secretary of the Iowa Bankers Association, dated July 25, 1919. 706 Manuscript letter from I. E. Dierdorff, Vice President of Geo. M. Bech- tel and Company, Davenport, dated August 27, 1919; manuscript letter from A. M. Sehanke, President of Schanke and Company, Mason City, dated August 8, 1919; manuscript letter from Geo. A. Chaney, Vice President of the Bank- ers Mortgage Company, Des Moines, dated August 6, 1919; manuscript letter from E. B. Parrott, President of the Guarantee Mortgage and Finance Com- pany, Des Moines, dated August 6, 1919. 70T Laws of Iowa, 1919, ch. 237. 708 Iowa State Highway Commission Service Bulletin, Vol. VII, Nos. 5-6, p. 3, May-June, 1919. 709 Kemmerer 's Postal Savings, pp. 1-3. '^^0 Annual Report of the Post Office Department, 1917, p. 58; Kemmerer 'a Postal Savings, pp. 135, 136, 147. 7n Annual Beport of the Post Office Department, 1917, p. 58. T ^2 Annual Beport of the Secretary of the Treasury (Finance), 1918, p. 552. 713 Annual Beport of the Post Office Department, 1916, p. 28, 1917, p. 58. ''^i Statistical Abstract of the United States, 1918, p. 643; Beport of the Comptroller of the Currency, 1919, Vol. I, p. 196. 715 Kemmerer 's Postal Savings, pp. 68, 69. Deposits in Iowa postal banks reached a total of $620,362 in 1918 but dropped again in 1919 to $523,601. — Beport of the Comptroller of the Currency, 1919, Vol. I, p. 196. 716 Kemmerer 's Postal Savings, pp. 72, 73; Annual Beport of the Post Of- fice Department, 1917, p. 58. 717 Kemmerer 's Postal Savings, pp. 57, 58. CHAPTEE XIV 718 Dunbar's Theory and History of Banking, pp. 9-15; Holdsworth's Money and Banking, p. 148. 719 Abstract of reports of the condition of Iowa savings banks, State banks, and trust companies, December 31, 1919. 720 Beport of the Comptroller of the Currency, 1919, Vol. II, pp. 253, 318. 721 The Battle Creek Times, July 15, 1920. 424 HISTORY OF BANKING IN IOWA 722 Beginning with 1904 the question of deposit insurance in some form was a prominent issue before the conventions of the Iowa Bankers Association for some time. At first there was strong suj^port for the measure with almost equal division apparently on the issue. In 1908 the question became a party issue in the national political campaign. The Republican victory of that year seemed to quiet for a time any discussion of the problem. In Iowa the matter came before the State legislature in the session of 1915 and again in 1921. The legislative committee of the Iowa Bankers Associa- tion both times opposed the measure and claims credit for having helped to defeat it. During 1918-1919 there was pending in Congress a bill providing for the government guarantee of deposits in national banks to the amount of $5000. This measure was opposed by a resolution of the Iowa Bankers As- sociation which further stated : ' ' That we are opposed to the principle of Government Guarantee of Deposit in any form or amount. ' ' The opinion, therefore, of the bankers, which a decade earlier was not clearly either for or against the measure, has become conclusively lined up in opposition. The persistence of this question leads to the belief that it still remains an unset- tled issue. Iowa is in a favorable position, however, to watch the experiment in neighboring States before making a final decision. — Proceedings of the Eighteenth Annual Convention of the Iowa Bankers Association, 1904, p. 54; Proceedings of the Nineteenth Annual Convention of the Iowa Banlcers Asso- ciation, 1905, pp. 58-70 ; Proceedings of the Twentieth Annual Convention of the Iowa Banlcers Association, 1906, pp. 17, 61; Proceedings of the Twenty- first Annual Convention of the Iowa Bankers Association, 1907, pp. 15, 16; Proceedings of the Twenty-second Annual Convention of the Iowa Bankers Association, 1908, pp. 56-76, 109; Proceedings of the Twenty-ninth Annual Convention of the Iowa Bankers Association, 1915, p. 28; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, p. 164; Holdsworth's Money and Banking, pp. 198-200; Iowa Bankers Associa- tion, Bulletin No. 967, p. 16. "J^sBeports of the Comptroller of the Currency, 1909, p. 47, 1915, Vol. II, p. 977. 724 Laws of Iowa, 1921, ch. 114. Prior to 1921 the rate was two per cent. — Compiled Code, 1919, sec. 4767. 725 Letter from Mrs. Sarah G. French, Legal Clerk of the Department of Banking, dated July 22, 1920. 726 In October, 1919, Iowa national banks had outstanding $19,313,000 of circulating notes. — Report of the Comptroller of the Currency, 1919, Vol. II, p. 318. 727 Kinley's The Use of Credit Instruments in Payments in the United States in Senate Documents, 61st Congress, 2nd Session, Vol. IX, p. 198. 728 White's Money and Banking (Fifth Edition), p. 193. NOTES AND REFERENCES 425 729 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 163, 194-196. "0 Code of 1897, sec. 3038. 731 On June 30, 1920, the Battle Creek Savings Bank, a member bank of the Federal reserve system, reported rediscounts of $202,553 on loans of a little over a million dollars. 732 Monthly Bulletin of the National City Bank of New York, May, 1920, p. 13. 733 Pamphlet of the Cedar Bapids Savings Bank. 734 Interview with P. A. Korab, Vice President of the Iowa City State Bank, August 12, 1920. 735 James W. Gilbart in his book The History, Principles and Practice of Banking, published in 1837, lists this as one of the services of banks. — Mar- shall's Readings in Industrial Society, p. 349. 736 "Whiteside's The Economic Functions of a Country Bank, p. 21. This was privately published by the First National Bank of Greencastle, Indiana. 737 Reports to the Thirty-fifth Annual Convention of the Iowa Bankers As- sociation, 1921, p. 37. 738 Proceedings of the Thirty-fourth Annual Convention of the Iowa Bankers Association, 1920, p. 191. 739 Proceedings of the Twenty-ninth Annual Convention of the Iowa Bankers Association, 1915, pp. 24, 27; Proceedings of the Thirtieth Annual Convention of the Iowa Bankers Association, 1916, pp. 39-41, 75-84; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, pp. 159- 167; Proceedings of the Thirty-second Annual Convention of the Iowa Bank- ers Association, 1918, pp. 186-193. 740 Farm Land Values in Iowa (Bulletin No. 874 issued by the United States Department of Agriculture) . 741 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 188, 189. 742 Proceedings of the Twenty-ninth Annual Convention of the Iowa Bankers Association, 1915, pp. 122, 123; Proceedings of the Thirtieth Annual Conven- tion of the Iowa Bankers Association, 1916, p. 42; Proceedings of the Thirty- second Annual Convention of the Iowa Bankers Association, 1918, pp. 193, 194; Proceedings of the Thirty-third Annual Convention of the Iowa Bankers Asso- ciation, 1919, pp. 204-208. 743 Whitney's The Sale of War Bonds in Iowa, ch. Ill (manuscript). 744 Proceedings of the Thirty-first A7inual Convention of the Iowa Bankers Association, 1917, p. 164. 745 Whitney's The Sale of War Bonds in Iowa, ch. IV (manuscript). 426 HISTORY OF BANKING IN IOWA 746 Whitney's The Sale of War Bonds in Iowa, ch. IV (manuscript). 7*7 Proceedings of the Thirtieth Annual Convention of the Iowa Bankers Association, 1916, p. 95; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, pp. 69, 137, 138; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 163-165; Proceedings of the Thirty-third Annual Convention of the Iowa Bank- ers Association, 1919, p. 231. 718 The Northwestern Banker, June, 1920, p. 14. 749 Proceedings of the Second Annual Convention of the Iowa Bankers As- sociation, 1888, p. 7. 750 Proceedings of the Third Annual Convention of the Iowa Bankers As- sociation, 1889, pp. 7, 68, 69. 751 Proceedings of the Fourth Annual Convention of the Iowa Bankers As- sociation, 1890, p. 19; Proceedings of the Sixth Annual Convention of the Iowa Bankers Association, 1892, p. 17; Proceedings of the Eleventh Annual Convention of the Iowa Bankers Association, 1897, pp. 10-13. ''^^ Abstract of the Thirteenth Census of the United States, 1910, p. 24; Fourteenth Census of the United States, 1920, Bulletin on Population in Iowa, p. 1. 753 Wealth, Debt, and Taxation, Special Beport of the Bureau of the Census, 1913, Vol. I, Pt. I, p. 26. 764 Census of Iowa, 1915, p. xxvii. 755 Census of Iowa, 1915, p. 212; Biennial Beport of the Superintendent of Banking, 1918, p. 239. 766 Census of Iowa, 1915, p. 578; The Battle Creek Times, July 15, 1920. 767 Interview with P. A. Korab, Vice President of the Iowa City State Bank, August 12, 1920. 758 Interview with C. D. Kirkpatrick, Keota, Iowa, July, 1920. 759 Proceedings of the Thirtieth Annual Convention of the Iowa Bankers Association, 1916, p. 84. 7«o Letter from D. H. Hedrick, President of the Battle Creek Savings Bank, dated July 7, 1919. 761 Beport of the Comptroller of the Currency, 1900, Vol. I, p. 422, 1901, Vol. I, pp. 447, 451, 1902, Vol. I, pp. 239, 243, 1907, pp. 236, 237, 1911, p. 320, 1912, pp. 274, 275, 1913, pp. 302, 303, 1914, Vol. II, pp. 214, 215, 1915, Vol. II, pp. 278, 279, 1916, Vol. II, pp. 322, 323, 1917, Vol. II, pp. 292, 293, 1918, Vol. II, p. 239, 1919, Vol. II, p. 257. 782 Beport of the Comptroller of the Currency, 1919, Vol. II, p. 257. NOTES AND REFERENCES 427 '^^^ Report of the Comptroller of the Currency, 1914, Vol. II, pp. 752-755, 1915, Vol. II, p. 975. 764 National banks had aggregate capital of $25,115,000 and total assets of $422,381,000. The corresponding figures for State incorporated banks were $49,546,000 and $696,565,000 respectively. 105 Index-Digest of the Federal Reserve Act and Amendments (Second Edi- tion), pp. 27, 28; Report of the Comptroller of the Currency, 1919, Vol. II, p. 253. 766 Interview with W. J. McChesney, President of the First National Bank of Iowa City, August 14, 1920. 767 The Battle Creek Times, July 15, 1920. 768 Whitney 's The Overdraft Evil as Illustrated iy Conditions in Iowa Banks in The American Economic Review, Vol. VIII, pp. 48-61. CHAPTER XV 769 Proceedings of the First Annual Convention of the Iowa Bankers Asso- ciation, 1887, p. 5. 770 Proceedings of the First Annual Convention of the Iowa Bankers As- sociation, 1887, pp. 8-15. 771 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, p. 166. 772 The Fort Dodge Messenger, June 25, 1919 ; Proceedings of the Thirty- third Annual Convention of the Iowa Bankers Association, 1919, pp. 156, 157. 773 Proceedings of the Second Annual Convention of the Iowa Bankers As- sociation, 1888, p. 10. 774 Proceedings of the Twenty-fifth Annual Convention of the Iowa Bankers Association, 1911, pp. 94-103. 775 Proceedings of the Seventh Annual Convention of the Iowa Bankers As- sociation, 1893, p. 6. 776 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, p. 72. Whatever may have been Mr. Deming's basis for explanation of the presi- dent's absence the records show that his memory betrayed him into a rosy optimism regarding the size of the gathering. Instead of 150 bankers, 70 were registered for that meeting. — Proceedings of the Twenty-fifth Annual Convention of the Iowa Bankers Association, 1911, pp. 94-103. 777 Proceedings of the Sixth Annual Convention of the Iowa Bankers As- sociation, 1892, p. 14. 428 HISTORY OF BANKING IN IOWA TT^ Proceedings of the Eleventh Annual Convention of the Iowa Bankers Association, 1897, p. 18. T79 Proceedings of the Twenty-fifth Annual Convention of the Iowa Bankers Association, 1911, p. 97. 780 Proceedings of the Fourth Annual Convention of the Iowa Bankers As- sociation, 1890, pp. 59, 60. 'J ^^ Proceedings of the Eleventh Annual Convention of the Iowa Bankers Association, 1897, p. 95; Proceedings of the Fourteenth Annual Convention of the Iowa Bankers Association, 1900, p. 73; Proceedings of the Twenty- fourth Annual Convention of the Iowa Bankers Association, 1910, p. 37; inter- view with J. M. Dinwiddle, Cedar Kapids, 1918. Tf^- Proceedings of the Twenty-second Annual Convention of the Iowa Bank- ers Association, 1908, p. 21. 783 Proceedings of the Twenty-fourth Annual Convention of the Iowa Bank- ers Association, 1910, pp. 80, 81. 784 Proceedings of the Second Annual Convention of the Iowa Bankers As- sociation, 1888, pp. 19-24. 785 Proceedings of the Twenty-fifth Annual Convention of the Iowa Bankers Association, 1911, pp. 94-103; letter from Frank Warner, July 27, 1921. 786 Proceedings of the Twentieth Annual Convention of the Iowa Banker* Association, 1906, p. 19. T87 Proceedings of the Twenty -seventh Annual Convention of the Iowa Bank- ers Association, 1913, p. 113. 7 sa Proceedings of the Thirty-third Annual Convention of the Iowa Bankers Association, 1919, p. 330. 789 Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, p. 177. 790 Proceedings of the Sixth Annual Convention of the Iowa Bankers As- sociation, 1892, pp. 47, 74-77. 791 Proceedings of the Fourteenth Annual Convention of the Iowa Bankers Association, 1900, p. 56. ''^^Proceedings of the Sixteenth Annual Convention of the Iowa Bankers Association, 1902, pp. 48, 85. 793 Proceedings of the Twenty-sixth Annual Convention of the Iowa Bankers Association, 1912, p. 154; Proceedings of the Thirty-fourth Annual Convention of the Iowa Bankers Association, 1920, p. 14. 79* Proceedings of the Seventeenth Annual Convention of the Iowa Bankers Association, 1903, p. 12. 795 Proceedings of the Fifth Annual Convention of the Iowa Farm Mortgage NOTES AND REFERENCES 429 Association, 1918, p. 84; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, p. 53. 798 Proceedings of the Thirty-second Annual Convention of the Iowa Bank- ers Association, 1918, pp. 67, 68. i9~i Proceedings of the Second Annual Convention of the Iowa Bankers As- sociation, 1888, p. 13; Proceedings of the Thirty-third An7iual Convention of the Iowa Bankers Association, 1919, pp. 5-17, 28, 89-95. 798 Proceedings of the Twenty-fourth Annual Convention of the loiva Bank- ers Association, 1910, pp. 36-39, 85. 799 Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, pp. 62, 153. 800 Proceedings of the Eleventh Annual Convention of the Iowa Bankers Association, 1897, pp. 19-24, 50. 801 Proceedings of the Eleventh Annual Convention of the Iowa Bankers Association, 1897, p. 5; Proceedings of the Fourteenth Annual Convention of the Iowa Bankers Association, 1900, p. 17; Proceedings of the SeventeentU Annual Convention of the Iowa Bankers Association, 1903, p. 8; Proceedings of the Nineteenth Annual Convention of the Iowa Bankers Association, 1905, pp. 54-57; Proceedings of the Thirty-third Annual Convention of the Iowa Bankers Association, 1919, p. 12, 802 Proceedings of the Thirty-third Annual Convention of the Iowa Bankers Association, 1919, pp. 5-17. 803 Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, pp. 151, 152. 804 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 163, 178; Proceedings of the Thirty-third Annual Con- vention of the Iowa Bankers Association, 1919, p. 185; letter from Frank Warner, July 27, 1921. 805 Proceedings of the Eleventh Arinual Convention of the Iowa Bankers As- sociation, 1897, pp. 25, 94-97. 806 Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 114, 117, 118, 144; manuscript letter from Frank Warner, Secretary of the Iowa Bankers Association, dated Des Moines, March 30, 1920. 807 Proceedings of the Twelfth Annual Convention of the Iowa Bankers As- sociation, 1898, p. 72 ; Proceedings of the Sixteenth Annual Convention of the Iowa Bankers Association, 1902, p. 35; Proceedings of the Twentieth Annual Convention of the Iowa Bankers Association, 1906, p. 24; Proceedings of the Twenty-fifth Annual Convention of the Iowa Bankers Association, 1911, p. 58; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers As- sociation, 1917, pp. 138, 139, 171; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 196-202; Proceedings 430 HISTORY OF BANKING IN IOWA of the Thirty-third Annual Convention of the Iowa BanTcers Association, 1919, pp. 11, 176, 177; Eeports to the Thirty-fifth Annual Convention of the Iowa ' Banlcers Association, 1921, pp. 6-12, 54-66; manuscript letter from Frank War- ner, dated July 27, 1921; The Northivestern Banker, May, 1921, pp. 15, 110, 112; Laws of Iowa, 1921, ch. 186; Iowa Bankers Association Bulletin, No. 967. 808 Proceedings of the Eighteenth A7inual Convention of the Iowa Bankers Association, 1904, pp. 65-67; Proceedings of the Twentieth Annual Convention of the Iowa Bankers Association, 1906, pp. 21-23; Proceedings of the Twenty- sixth Annual Convention of the Iowa Bankers Association, 1912, pp. 21, 22; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers As- sociation, 1918, p. 194. 809 Proceedings of the Twentieth Annual Convention of the Iowa Bankers Association, 1906, pp. 24-32; Proceedings of the Twenty-first Annual Conven- tion of the Iowa Bankers Association, 1907, pp. 15, 27, 28; Proceedings of the Twenty-fourth Annual Convention of the Iowa Bankers Association, 1910, pp. 25, 28; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, p. 142; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, p. 177; Annual Eeports to the Thirty- fifth Annual Convention of the Iowa Bankers Association, 1921, p. 13. 810 Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, pp. 144, 154-159 ; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers Association, 1918, pp. 185, 186; Legislative Committee Bulletin Iowa Bankers Association, No. 439, Vol. XIV, April 26, 1919. 811 Proceedings of the Thirty-second Annual Convention of the Iowa Bank- ers Association, 1918, pp. 180, 181. «n Proceedings of the Twenty-sixth Annual Convention of the Iowa Bankers Association, 1912, pp. 94-99; Proceedings of the Twenty-eighth Annual Con- vention of the Iowa Bankers Association, 1914, p. 71; Proceedings of the Thirty-first Annual Convention of the Iowa Bankers Association, 1917, p. 152; Proceedings of the Thirty-second Annual Convention of the Iowa Bankers As- sociation, 1918, pp. 163, 194-196. INDEX 431 INDEX Abbott, Mr., application of, for bank char- ter, 100 Accessibility of banks, 353, 354 Accountant, employment of, in Banking De- partment, 199 Accounting, promotion of, by banks, 345 Adams, H. C, and Co., Investment Bank- ers (Algona), mention of, 422 Adding machine, provision for, 359 Agricultural Bank of Tennessee, notes of, 64, 65 Agricultural products, prices of, 4, 5 Agriculture, early difficulties in, 3, 4; growth of, in Iowa, 45, 46 ; assistance of banks to, 346-348 Aldrich-Vreeland Act, passage of, 205; pro- visions of, 205, 237; expiration of, 227 Alfalfa, prize for, 347 Algona, investment bankers at, 422 Allen, Benjamin F., early bank of, 52; banking interests of, 62 ; notes circulated by, 63, 64 ; application of, for bank char- ter, 100 American Bankers Association, sending of J. M. Dinwiddie to meeting of, 365 ; re- lations of, with Iowa Bankers Associa- tion, 373, 374; Iowa members of, 374; legislative work of, 380, 381 American Building Association News, dis- tribution of, 264 American Commercial and Savings Bank (Davenport), size of, 160; membership of, in Federal reserve system, 211 American Trade Acceptance Council, meet- ing of, 339 Anderson, George C, early bank of, 51 Andrew, L. A., participation of, in confer- ence, 216, 217; position of, as president of Iowa Farm Credit Corporation, 316; office of, in Iowa Bankers Association, 370 Arkansas, experiment of, with State bank, 83 ; banks prohibited by, 390 Assets, statistics of, for Iowa national banks, 149, 150; total amount of, for Iowa banks, 173, 427; growth of, 180, 181; reports concerning, 185; fees based on, 195 Attorney General, notice of insolvency sent to, 137; criminal bureau in office of, 376 28 Auditor of State, note issue supervised by, 77, 78; money kept in State Bank by, 109; bank report of, 133, 136, 137, 141, 142, 143; report of banks to, 135; authority of, over State banks, 137, 138, 150, 184, 185, 186, 187, 188, 189, 196 197; supervision of, over savings banks, 138, 139, 141, 158; control of, over loan and trust companies, 160, 161; recom- mendation of, concerning private banks, 163, 165, 166; banks examined by, 192; appointment of bank examiners by, 193, 194, 195; opposition of, to Banking De- partment, 197; supervision of, over build- ing and loan associations, 231, 232, 234, 235, 257, 258, 259, 260, 265, 266; supervision of, over loan corporations, 313 Author's preface, ix Auto loan companies, account of, 318-320 Automobiles, companies to finance pur- chase of, 318-320 Babbitt, L. W., appointment of, as bank commissioner, 85 Bainbridge, M., statement by, concerning Miners' Banlc, 22, 23 Baker, Elihu, appointment of, as bank commissioner, 84; presence of, at meet- ing of bank commissioners, 99 ; election of, as secretary of State Bank of Iowa, 102, 104; compensation of, 104; ap- pointment of, as receiver of Fort Madi- son branch, 106, 107; records signed by, 118 Baltimore (Maryland), building association formed at, 230 "Bank", restrictions on use of, in titles, 167, 168 Bank acceptances, use of, 226 Bank charter, authority of Superintendent of Banking to refuse issue of, 199, 200 Bank commissioners (general banking law), names of, 79; election of, 79; duties of, 79 ; abolition of office of, 81 Bank Commissioners, Board of, personnel of, 84, 85; duties of, 85; meeting of 99; adjournment of, 101, 102 Bank examiners, pay of, 190, 191, 193, 194, 195, 199; qualifications of, 191; 433 434 HISTORY OF BANKING IN IOWA appointment of, 193, 194, 195, 199; number of, 193, 194, 195 Bank notes, number of, 2 ; illegal circula- tion of, 6; importance of issue of, 12, 46, 47, 89, 90, 126, issue of, 13, 35, 61, 76, 77, 95, 96, 130, 134, 336; date of redemption of, 17; discount of, 18; kinds of, 59, 60; substitutes for, 61-69; deposits for, 77; withdrawal of, 77; penalty for non-redemption of, 78 ; de- struction of. 78, 98, 99 ; denominations of, 78, 79, 96, 97; redemption of, 96, 110, 111; description of, 98; exchange of, 98; arrival of, for State Bank, 104, 105; high standing of those issued by State Bank, 111-114; tax on, 114, 115; responsibility for, 126; fraudulent, 128; apportionment of, to national banks, 143, 144; number of, issued by national banks, 145 Bank of Illinois, branch of, at Galena, 10 Bank of Iowa, attempt to establish, 35, 36, 37 (see also State Bank of Iowa) Bank of Manchester (Michigan), notes of, 16, 18 Bank of Missouri, notes of, 22 Bank of the United States, First, reports of, 90 Bank of the United States, Second, re- charter of, 1 ; effect of failure to re- charter, 2, 5 ; fight against, 7 ; political difficulties of, 124; end of, 127 Bank v. Fellows, decision on, 224 Bankers, responsibility of, for notes, 65; criticism of, 71, 72; attitude of, toward Federal reserve system, 206, 209-212; opposition of, to government competition, 304, 305; opposition of, to postal savings law, 330; interest of, in schools, 348; personal services of, 348, 349; number of, in military service, 350; attitude of, toward customers, 351; characterization of, 351, 352, 353 ; need of organization of, 362 Bankers Directory, statistics of banks in, 168, 169 Bankers Loan and Trust Company (Sioux City), membership of, in Federal re- serve system, 209 Bankers Mortgage Company (Des Moines), business of, 328; mention of, 422 Banking, economic and political background of history of, 1-9 ; condition of, in United States in the thirties, 1, 2; political struggle over, 7; early opposition to, 33; prohibition of, 35-44, 46, 47; discussion of, in constitutional convention of 1844, 36-41; evils of, 37, 38; defeat of law- prohibiting, 39; proposal to submit char- ters for, to popular vote, 40 ; description of, on frontier, 45-69; evolution of, 48, 49; constitutional authorization of, 70- 82; general law concerning, 71, 74-82; vote on laws relative to, 75 ; firms car- rying on business of, 133; development of, from 1873 to 1921, 144-182; govern- ment regulation of, 165, 167, 183-203; estimate of, 180-182; publicity concern- ing, 183-190; special types of, 306-332; promotion of training for, 382; defini- tion of, 390 Banldng, State Department of, reports to, 187, 188, 195, 196; duties of, 188; re- ports issued by, 188, 190; creation of, 188, 197, 198; examination of banks by, 192 ; bank examiners appointed by, 194, 195; work of, 196-203; employees of, 199, 380 Banking. Superintendent of, supervision of, over banks, 158; reports by, 181; bank reports transferred to, 188 ; crea- tion of office of, 198; appointment of, 198; duties of, 198, 199, 200, 201; sal- ary of, 199, 202; supervision of, over farm credit corporations, 315; powers of, 380 Banking, Superintendent of. Deputy, em- Iiloyment of, 199 ; pay of, 199 Banking system, establishment of, 126-142 Banks, opposition to, 8, 351; function of, 12 ; attempts to secure charters for, 35, 409 ; discussion of, in constitutional con- vention of 1844, 36-41; liabilities of stockholders of, 40; committee report concerning, in constitutional convention, 42 ; arguments in favor of, 44 ; kinds of, 47; history of, in Mississippi River towns, 49-51; establishment of, in in- terior towns, 51-53; account of, on Mis- souri River, 53, 54; functions of, in pioneer times, 54-57; function of, in ex- change, 55; offers of, for deposits, 56; equipment of, 57, 58; failures of, in 1857, 68, 69; constitutional authoriza- tion of, 70-82; opposition of Governor Hempstead to, 70, 71; popular vote on, 75; capital of, 75, 79, 80, 81; location of, 75, 81, 82; liability of, 75, 76; ac- tivities of, 76; issue of notes by, 76, 77, 336-338; system of State control of, 126-142, 192, 193, 194, 195, 196; data concerning, 133, 173, 174, 189, 190, 214, 215; number of, 133, 148, 149, 150, 159, 160, 164, 168, 169, 170, 171, INDEX 435 173, 174, 180, 181, 202, 204, 353, 361; incorporation of, 135, 136, 137; reports from, 136, 137, 183-190; assets of, 147, 169, 172, 173, 180, 181; size of, 160; similarity of, 162; failures of, 174, 177- 182, 203; consolidation of, 181; com- munity activities of, 182, 202, 333-361; examination of, 190-196; fee for examin- ation of, 192, 193 ; clearing system for, 218, 219, 220; effect of Federal reserve system on, 226-228; attitude of, toward building and loan associations, 262; pur- chase of farm mortgages by, 275, 280; real estate investments of, 276, 277, 278; investment business of, 325-329, 341, 342; guarantee of deposits in, 329, 424, primary functions of, 333-341; de- posits in, 334; interest rate paid by, 335, 336; discount function of, 338-341; secondary banking functions of, 341- 344; exchange business of, 342, 343; fiduciary services of, 343 ; safety deposit business of, 343, 344; business stand- ards established by, 344-346; agricul- tural services of, 346-348 ; war activ- ities of, 349, 350; purchase of Liberty bonds by, 350; popular attitude toward, 351-353; accessibility of, 353, 354; own- ership of, 355, 356; stockholders of, 355, 356; profits of, 356-359; personal letters from, 359; courtesies of, to cus- tomers, 359, 360; publicity methods of, 359-361; overdrafts in, 361; number of, in Iowa Bankers Association, 366; pro- tection of, 374-377; robberies of, 376, 377, employment of time lock expert by, 377, 378; right to deny charters to, 380; prohibition of, 390 Banks, private, (see Private banks) Banks, savings, (see Savings banks) Banks, State, (see State banks) Banks and Banking, Committee on, report of, 74 Banks and Insurance, Commissioner of, recommendation of office of, 197 Barney, W. J., and Company, early bank of, 49, 50 Barrett, Richard, Miners' Bank owned by, 24 ; letters of, concerning Miners' Bank, 26 Battle Creek, cattle business at, 324, 325; banks in, 354 Beans, price of, 4 Bechtel, George M., and Company (Daven- port), business of, 326, 328; mention of, 422 Bedford, failure of First National Bank at, 178 Benton, Thomas H., Jr., banking work of, 61 Bill holders, provision for payment of, 7 7. 78 Bills, prohibition of, 48 Black Hawk County, denial to, of branch of State Bank, 106 Blackburn, H. T., statement by, 356; office of, in Iowa Bankers Association, 370 Bleakly, John L., recommendation of, con- cerning bank reports, 188; refusal of, to permit Iowa State banks to join Fed- eral reserve system, 208 Bloomington (Muscatine), paper published at, 3 Bloomington Herald, party prejudice of, 8 Blue sky legislation, support of, by Iowa Bankers Association, 202; proposed amendment of, 380 Blue sky stock, sale of, 342 Bolshevism, support of, 261 Bonds, deposit of, as security, 77, 145; purchase of, 109, 115, 128, 129, 130, 145; sale of, by national banks, 132; investments of savings banks in, 140; banks for sale of, 325-329; storage of. 343 ; work of bankers in handling of, 349, 350 Bonson, Richard, presence of, at meeting of Board of Directors, 102 Booth, C. H., appointment of, as bank commissioner, 84; presence of, at meet- ing of bank commissioners, 99 Borrowers, insurance for, 253, 254 Borrowing, reasons for, 311, 312 Boster, J. W., application of, for bank charter, 100 Boston (Massachusetts), money from, 128; clearing system in banks of, 219 Boundaries, changes in, 41 Boyd, W. R., article by, 264 Boys' clubs, promotion of, by bankers, 346 Bradford and Rhodes' Bank Directory, statistics given in, 180 Branan, Mr., application of, for bank char- ter, 100 Branch, J. H., address by, 352; office of, in Iowa Banlcers Association, 370 Branches of State Bank of Iowa, organiza- tion of, 85 ; subscriptions to stock of, 87; number of, 87; provisions concern- ing, 87, 88, 89, 90, 91, 92, 93; liability of stockholders of, 88; management of, 89, 90 ; reports of, 90 ; description of notes of, 98 ; applications for, 99, 100, 436 HISTORY OF BANKING IN IOWA 105, 106; list of, 101, 133, 134; as- sessments on, 104; supervision of, 106, 107; accounts of, 107; aid of, to State, during Civil War, 108, 109; conversion of, into national banks, 118, 134; tablo showing combined financial condition of, 119, 120; profits of 121, 122, 123 Bribery, charges of, concerning Miners' Bank, 25-27 "Brindle-pup" currency, 60 Brooklyn (New York), building association formed at, 230 Brooks, J. T., office of, in Iowa Bankers Association, 370 Brownsville (Illinois), branch bank at, 400 Brownsville (Nebraska), bank at, 62 Bryan, B. S., failure of, 52 Bryan, P. Gad., appointment of, as bank commissioner, 79 Building and loan associations, definition of. 229; origin of, 229, 230; history of, 229-266; number of, 230, 231, 232, 233, 234; legislation concerning, 231; types of, 232, 236; capital of, 236; member- ship in, 236, 237; issue of shares of, 237-239; distribution of profits of, 239- 241, 242, 243, 244; expenses of, 240; losses of, 240, 241; withdrawal of mem- bers of, 241-244; plan of making loans employed by, 244-247; penalties of, for non-payment of loans, 247, 248; repay- ment of loans to, 247-251 ; rates of in- terest charged by, 249, 250, 251; loans of, to farmers, 251-253; insurance for borrowers from, 253, 254; management of, 254-256; officers of, 254-256; re- strictions on, 256, 257, 258, 259, 260; State supervision of, 256-260 ; reports made by, 257, 258, 259, 260; securities furnished by, 259; benefits from, 260- 262; taxation of, 264, 265; estimate of, 265, 266 Building and loan leagues, organization of, 263, 264 Burglars, rewards for apprehension of, 375, 376 Burglary, protection against, 375, 376; in- surance for, 379 Burlington, meeting of legislature at, 14, 19, 36; early bank in, 49; early import- ance of. 49; scrip of, 66; branch of State Bank at. 101 ; incorporation of banks at, 136; meeting of bankers at 370 Burlington Branch of State Bank, organ- ization of, 101; charges against. 111; conversion of, into national bank, llrf; profits of, 122 Burlington Uawkeye, The, suspension of publication of, 4 Burlington Savings Bank, incorporation of, 136; records of, 402 Burns, Wm. J., agency, employment of, by Iowa Bankers Association, 375, 377 Burrows and Prettyman, business activ- ities of, 66, 67; scrip issued by, 66, 67, 69 Burton, Pinley, and Company, early bank of, 50 Bush. L. H., statement by, 285, 286 Business training, advantages of, 262; em- phasis on, by banks, 344, 345 Butter, price of, 4 Calderwood, M. H.. office of, in Iowa Bankers Association, 370 California, law of, relative to private banks. 167; prohibition of banks in, 390 Callanan. James, banking interests of, 64, 65 Camanche, application from, for branch of State Bank, 99, 100 Canada, money from, 128 Canfield Bros., Investment Bankers (Cedar Rapids), mention of, 422 Capital, amount of. 75, 79, 80. 81. 87, 129, 134. 137, 146. 153. 154. 155, 156, 167, 173, 174, 175. 236, 289, 294, 295, 297, 427; requirements of. 79, 80, 81, 87, 129, 134 137, 138, 146, 151, 152, 153, 154, 155, 156, 158, 159, 161, 167, 223, 236, 289, 294, 295, 297; statistics of, for Iowa national banks, 149, 150; report on. 185; freedom of, from taxation, in Federal reserve system members, 221, 222 Capital Issues Committee, support of, by bankers, 381 Capital stock, levy for, 151 Capitol (Iowa City), cost of, 388 Carpenter, Cyrus C, recommendation of, concerning savings banks, 138 Carpenter, H. M., office of, in Iowa Bank- ers Association, 370 Carpenter, S. D., part of, in banking busi- ness, 52 ; trip described by, 55 ; bank de- scribed by, 56; comment by, on bank failures, 68 CarroU, B. F., circular from, relative to bank reserves, 176; statement by, con- cerning bank reports, 187, 188; recom- mendation of, concerning bank examina- tions. 196 INDEX 437 Carroll, failure of First National Bank at, 178 Casady, P. M., presence of, at meeting of Board of Directors, 102 Casady, Simon, office of, in Iowa Bankers Association, 370 Cash reserve, requirement of, 152, 153, 157, 217, 339; lowering of, 207, 217 (see also Reserve) Cashiers checks, use of, 177 Cassady, Myers, and Moore, early bank of, 54 "Catamount" money, 6 Cattell, J. W., recommendation of, concern- ing banking law, 165; recommendation by, concerning examination of banks, 192 Cattle, prices of, 5; loans on, 316, 320- 325, 347; number of, 320 Cattle loan companies, activities of, 320- 325; types of, 321, 322; business of, 322, 323, 324; list of, in Iowa, 421 "Cattle Paper", address on, 324 Cedar Falls, application from, for branch of State Bank, 106; failure of First National Bank at, 178 Cedar Rapids, early banks of, 52, 53; banik notes circulated in, 64 ; application from, for branch of State Bank, 105, 106; clearing house association in, 175, 176, 177; reserve requirements of banks in, 217; organization of buUding and loan association at, 231; rate of interest charged by building and loan association at, 250; statistics concerning Morris Plan company at, 307, 309, 311, 312; profits of banks in, 357; cost to, of en- tertaining bankers, 367; meeting of bankers at, 370; investment bankers at, 422 Cedar Rapids Morris Plan Company, occu- pations and nationality of borrowers from, 312; losses of, 312, 313; profits of, 313; directorate of, 314 Central Iowa Joint Stock Land Bank (Des Moines), charter to, 295 Cereals, production of, in Iowa, 46 Chariton, failure of First National Bank at, 178 Charleston, attempt to establish bank in, 35 Charruaud and Nichols, early bank of, 51, 52 Charts, 147, 164, 170 Chase, Salmon P., national currency ad- vocated by, 127, 128, 129; disappoint- ment of, in number of national banks, 131 Chassell, E. D., opinion of, relative to joint stock land banks, 296; debate by, 299 Chattel mortgages, taking of, 314 Checking accounts, handling of, 336 Checks, collection of, 218, 219, 220, 221; use of, 336, 337, 338 Chicago (Illinois), location of reserve bank of seventh Federal reserve dis- trict at, 206; profits of Federal Reserve Bank at, 210; bankers conference at, 216; meeting at, 263; joint stock land bank at, 295 ; investment banks in, 325, 326 Circulating notes, payment for, 17 Circulation, decrease in, 2 ; importance of, to early banks, 12, 13; prohibition of issue of, 48; limitation on, 95, 96, 97, 98, 143, 144; retirement of, by State Bank, 114-118; restriction on, 143, 144; profits on, 144, 154; increase in amount of, 146, 148; tax on, 184; issue of, 336 City scrip, use of, 65, 66 Civil War, financial effects of, 96; aid of State Bank in, 108, 109 Clark, Ezekiel, appointment of, as bank commissioner, 84 ; election of, as chair- man of Board of Directors, 99 ; presence of, at meeting of bank commissioners, 99; papers surrendered by, to new direc- tors, 102; financial assistance offered by, 108 Clark, Sam, application of, for bank char- ter, 100 Clarke, James, attitude of, toward State organization, 41 Clarke, Wm. Penn, argument of, in favor of banks, 44; prophecy of, 68 Clay, Henry, United States Bank sup- ported by, 1, 7 Clay, John, and Company, business of, 321 Clayton Act, freedom of State banks from, 222 Clayton County, petition from, concerning Miners' Bank, 28 Clearing house associations, account of, 175-177; exchanges in, 176 Clearing system of Federal reserve banks, 218, 219, 220, 221, 226 Clearings, amount of, 219 Cleveland (Ohio), meeting of United States League of Local Building and Loan As- sociations at, 233, 234 Clinton, application from, for branch of State Bank, 100; clearing house associa- tion in, 175, 176; organization of first building and loan association at, 231 ; meeting of bankers at, 370 438 HISTORY OF BANKING IN IOWA Clinton County, petition from, concerning Miners' Bank, 27; early bank in, 51 Code of 1S51, provision in, prohibiting banks, 48 ; adoption of sections of, by Nebraska, 61 Code of 1873, provisions in, concerning banks, 137, 138, 143, 150, 186, 192 Code of 1897, provisions in, concerning banks, 151, 152, 157, 159, 160, 187; building and loan association defined by, 229 Coins, lack of, 6; kinds of, 60, 61 Collateral security, use of, by State Bank branches, 93 Collection, activities of early banks in, 56 Colleges, purchase of mortgages by, 282, 283, 284 Colorado, law of, relative to private banks, 167 Commercial banks, farm mortgage business of, 275-278 Commercial enterprises, promotion of, by banks, 345, 346 Commercial paper, investments in, by sav- ings bank, 140; discount of, 338-341 Commissioners, Board of, of State Bank, applications rejected by, 100, 101, 105; adjournment of, 101, 102 Committee of the Whole, debate in, 73 Community, relation of banks to, 333-361 Comptroller of the Currency, creation of oflSce of, 129; study of banking issued by, 133; reports to, 155, 168, 175, 176, 183, 184, 187, 188, 189, 190, 195, 196, 357, 358; examination of banks by, 190, 191, 192; petition to, relative to new- banks, 201; proposal to abolish office of, 210; interest rates reported by, 335; bank applications rejected by, 409 Congress, attitude of, toward Miners' Bank of Dubuque, 10 Connell, John, premium allowed to, on gold deposit, 123 Constitution of 1844, drafting of, 36-41; defeat of, 41 Constitution of 1846, significance of vote on, 35; provisions in, concerning banks, 41-44, 47; banking prohibited by, 43, 44, 46, 47; ratification of, 43, 44; sig- nificance of vote on, 47 ; dissatisfaction with, 70 Constitutional convention of 1844, debate of members of, over banking, 36-41 Constitutional convention of 1846, election of delegates to, 41, 42 ; debate in, on banking, 47 Constitutional convention of 1857, meet- ing of, 71; composition of, 71; debate in, over banks, 71-74 Cook, Ebenezer, opinions of, concerning banks, 40; banking interests of, 62; demonstration against, 69 Cook, Sargent, and Cook, early bank of, 52 ; bank stock owned by, 63 Cook, Sargent, and Downey, early bank of, 51; bank stock owned by, 63 Cook and Sargent, early bank of, 49 ; land agency of, 50; branch bank of, 50, 51; bank building of, 50, 130; bank stock owned by, 63 ; suspension of, 68 ; dem- onstration against, 69 Coolbaugh, W. F., financial support of- fered by, 108 Coolbaugh and Brooks, early bank of, 49, 50 Cooley, D. N., office of, in Iowa Bankers Association, 370 Cooperative banks, 230 Copeland, Mr., application of, for bank charter, 100 Copeland, H. D., opinion of, concerning regulation of private banks, 166 Corbin, Austin, position of, as bank presi- dent, 50 Corey, M. L., debate by, 299 Corn, price of, 5; production of, 46, 320; prize for, 346 Corning, failure of First National Bank at, 178 Corporation scrip, use of, for money, 66-88 Corporations, discussion of, in constitu- tional convention of 1844, 36; article on, in Constitution of 1844, 40, 41; char- ters granted to, by legislature, 47, 48; general law on, 47, 48 Correspondent banks, advantages of, 222, 223 Corwin, O. M., address by, 305 Council, dinner for, 368 Council Bluffs, branch of Greene and Weare bank at, 52 ; early banks in, 53 ; bank conditions at, 60 ; circulation of bank notes at, 64 ; application from, for branch of State Bank, 99, 100; branch of State Bank at, 101; clearing house association in, 175, 176, 177; land office at, 275; meeting of bankers at, 370 Council Bluffs Branch of State Bank, or- ganization of, 101; profits of, 122 Counterfeit money, use of, 4, 128 Counties, debts of, 326 County agents, bankers in favor of, 346, 380 INDEX 439 County bankers associations, organization of, 372, 373 County recorder, articles of incorporation to be filed with, 151 County scrip, use of, 65, 66 Credit, necessity of, 92, 93; creation of, 338, 339 Crimean War, effect of, 46 Criminal bureau, creation of, 376 Crisis of 1920, service of Federal reserve system during, 213-217 Crop Estimates, Federal Bureau of, report of, 269 Culbertson and Reno, early bank of, 51 Cummins, A. B., address by, 367 Currency, lack of, 2, 3; quality of, 6; general state of, 58-61; kinds of, in Iowa, 59, 60; substitutes for, 61-69; opposition to illegal forms of, 69 ; atti- tude of State Bank toward, 110-114; importance of, 124, 125; need of uni- formity of, 127, 128 ; demand for addi- tional, 144; issue of, 227 Curtin, E. J., opinion of, concerning regu- lation of private banks, 166, 167; office of, in Iowa Bankers Association, 370 Customers, courtesies to, 359, 860 Dairy products, production of, in Iowa, 46 Dam at Iowa City, pay of workmen on, 5 Darling, J. N., cartoon by, 177 Dart, William S., appointment of, as bank commissioner, 84 ; presence of, at meet- ing of bank commissioners, 99 Davenport, F. E., and Company, contract with, 378 Davenport, George L., appointment of, as bank commissioner, 79 Davenport, financial conditions at, 4; at- tempt to establish bank at, 35; railroad to, 46; early bank in, 49, 50; bank notes circulated in, 63 ; corporation scrip issued at, 66 ; kinds of money in, 69 ; mob in, 69 ; application from, for branch of State Bank, 100; branch of State Bank at, 101, 397; meeting of State Bank directors at, 117, 118, 123; first national bank established in, 130; sale of bonds by First National Bank of, 132; incorporation of banks at, 136; clearing house association in, 175, 176, 177; statistics concerning Morris Plan company at, 307; investment company at, 326, 422; entertainment provided by, for Iowa Bankers Association, 366, 367; tour of, 367; meeting of bankers at, 370 Davenport, First National Bank of, presi- dent of, 50 Davenport Branch of State Bank, profits of, 122 Davenport Business Men's Association, use of rooms of, 366, 367 Davenport Outing Club, open house at, 367 Davenport Savings Institution, incorpora- tion of, 136 Davis, Timothy, testimony of, concerning Miners' Bank, 23, 24, 25 Dayton (Ohio) plan of Mutual Home Asso- ciation of, 237, 238, 239 Dayton plan of issuing shares, 237, 238, 239 Debenture bonds, 279, 280, 282 Debenture companies, operations of, 278- 280; dissatisfaction with, 297 Debt, amount of, in Iowa, 326 Decorah, failure of First National Bank at, 178 ; investment bankers at, 422 Delaware County, petition from, concern- ing Miners' Bank, 28 Delaware County Bankers Association, or- ganization of, 372 Darning, J. K., address by, 364; recep- tion by, 368; office of, in Iowa Bankers Association, 370 Democrats, attitude of, toward United States Bank, 1, 7; attitude of, toward banks, 8, 36, 39, 42, 43, 47; attitude of, toward Miners' Bank, 33, 34; num- ber of, in convention in 1857, 71; finan- cial support offered by, 108; guarantee of bank deposits favored by, 329; nick- name for, 385 Depositors, protection of, 151, 158; losses of, 177, 178, 179, 181, 182 Deposits, scarcity of, 56; regulation of, 90; limitations on, 139, 161; statistics of, for Iowa bank, 149, 150, 173, 214, 334, 335; withdrawal of, from savings banks, 157; decline in, for Iowa, 174; guarantee of, 329, 381, 424; interest on, 335; checking on, 336; creation of, 336, 337, 338, 339 Des Moines, early banks at, 52 ; branch of Greene and Weare bank at, 52 ; circula- tion of bank notes in, 63, 64; applica- tion from, for branch of State Bank, 100; branch of State Bank at, 101, 397"; clearing house association in, 175, 176, 177; reserve requirements of banks in, 217; bad reputation of building and loan associations at, 235; interest rate of building and loan association at, 250; meeting at^ 280; joint stock land banks 440 HISTORY OF BANKING IN IOWA at, 295; facts concerning Morris Plan company at, 307, 313; investment com- pany at, 328, 422; profits of banks in, 357; meeting of bankers at, 365, 366, 367, 370; headquarters of Iowa Bank- ers Association at, 369, 371; cattle loan companies at, 421 Des Moines Branch of State Bank, organ- ization of, 101; representative of, 102; conversion of, into national bank, 118; profits of, 122 Des Moines County, petition from, con- cerning Miners' Bank, 27 Des Moines County Savings Bank (Bur- lington), incorporation of, 136; records of, 402 Des Moines Joint Stock Land Bank, char- ter to, 295 Des Moines Morris Plan company, profits of, 313 Des Moines Register and Leader, cartoon in, 177 De Soto (Nebraska), Bank of, incorpora- tion of, 64; value of notes of, 64 Detroit (Michigan), certificates of deposit in bank at, 16, 17; specie deposit in bank at, 18, 19 Dewey, Mr., comment by, on counterfeit money, 128 Dexter, Seymour, opinion of, relative to building and loan associations, 233, 234 "Diamond Contracts", 260 Dillon, G. D., testimony of, concerning Miners' Bank, 17, 386, 387 "Diminishing Term Policy", 253 Dinwiddle, J. M., report by, 364; services of, for Iowa Bankers Association, 364, 365; services of, as Secretary of Iowa Bankers Association, 369, 371 Directors, Board of, of State Bank, per- sonnel of, 86; appointment of, 86; votes of, 86; compensation of, 86, 104; duties of, 86, 87, 102, 103, 104, 105, 106; reports by, 90, 91; worn notes burned by, 98, 99; meeting of, 99, 100, 101, 102, 103, 104, 105, 117, 118; officers of, 103; decision of, concerning note re- demption, 110, 111; attitude of, toward national banking system, 115, 116 Discount, rate of, 18, 213, 216; unimpor- tance of, in early banks, 56; function of banks in relation to, 338-341 Discount rates, increase in, 213; publica- tion of, 226 Dividends of branches of State Bank, 121, 122, 123 Domestic building and loan associations, number of, in Iowa, 232, 234; field of, 234; fees for, 235, 236 Domestic exchange, provision for, 342, 343 Domestic-local building and loan associa- tions, number of, in Iowa, 232 234; field of, 234; reincorporation of, 268, 259 Downey, H. D., banking interests of, 62 Drainage bonds, approval of, for savings banks, 156 Dubuque, Julien, mines of, 10 Dubuque, lead mines at, 10; application of citizens of, for bank charter, 10 ; history of Miners' Bank of, 10-34; early banks in, 49, 50; application from, for branch of State Bank, 100; branch of State Bank at, 101, 397; clearing house association in, 175, 176; failure of Commercial Na- tional Bank at, 178; meeting of bankers at, 211, 364, 370; reserve requirements of banks in, 217; profits of banks in, 357; petition signed by residents of, 886; population of, 397 Dubuque Branch of State Bank, organiza- tion of, 101; representative of, 102; money loaned to State by, 109; profits of, 122 Dubuque County, memorial circulated in, concerning Miners' Bank, 27; petition from, concerning Miners' Bank, 28 Dubuque Herald, comment in, concerning war work of State Bank, 109 Duton, J. W., appointment of, as bank commissioner, 84 Easton, J. D., office of, in Iowa Bankers Association, 370 Eaton, Geo. P., offer of, concerning Fort Madison branch, 107 Edge Act, foreign trade promoted by, 315 Edgington, Edward T., appointment of, as bank commissioner, 85; presence of, at meeting of bank commissioners, 99 Editor's introduction, vii Edwards, J. L., office of, in Iowa Bankers Association, 370 Edwardsville (Illinois), branch bank at, 400 Eighth Federal farm loan district, 288, 289 Elkader, First National Bank at, 351 Ely, John, address by, 391 Emerson, J. H., argument of, concerning banks, 74 England, loan associations in, 229, 230 English coins, use of, in Iowa, 60, 61 Epperson, Frank, office of, in Iowa Bank- ers Association, 370 INDEX 441 Equitable Life Insurance Company of Iowa, vice president of, 283, 285 Estherville, clearing house association in, 175 Everson, Norman, early bank of, 53 Examination of banks, 190-196 Excess profits tax, opposition of bankers to, 381 Exchange, functions of early banks rela- tive to, 55, 56; premium on, 68; profits on, 220, 221; business of banks in, 342, 343 Executive Council, building and loan asso- ciations to be approved by, 256, 257, 259 Fairfield, early bank in, 53 Fales, J. T., testimony of, concerning Miners' Bank, 24, 25 Farley, Mr., mention of, 25 Farm credit corporations, purpose of, 314, 315; discussion of, 314-318; bonds of, 315, 316; debentures of, 317 Farm demonstrators, bankers in favor of, 346 Farm land, value of, in Iowa, 268-270 Farm Land Mortgage and Debenture Com- pany of Cedar Bapids, prospectus of, 278; business of, 279 Farm loan associations, relation of, to Fed- eral land banks, 289, 290, 293, 294 Farm Loan Board (see Federal Farm Loan Board) Farm loan registrar, mortgages held by, 292; bonds in care of, 295 Farm loans, 251-253 Farmi Management of the United States Department of Agriculture, Office of, sur- vey by, 269 Farm mortgage bankers, associations of, 267; statement to, 286 Farm Mortgage Bankers Association of America, secretary of, 299 ; suit brought by, 300 Farm mortgage banking, 267-305 Farm mortgage banks, proposed State, 287 Farm mortgage companies, 275, 280-282 Farm mortgages, statistics of, 270-274; amount of, 271, 272, 273, 274; early history of, 274-276; purchasers of, 275, 282-284; interest rate on, 284, 285; foreclosures of, 286, 287; banks to have charge of, 287 Farm products, marketing of, 317 Farm property, table showing value of, 268 Farm sales, assistance of bankers at, 347, 348 Farmer-banker conferences, 212, 216 Farmers, difficulties of, in early Iowa, 2, 3, 4; dissatisfaction of, 216; loans to, 251- 253, 290, 291, 340; banking connec- tions of, 278, 337; accounts kept by, 345; attitude of, toward bankers, 352; banks owned by, 356 Farmers Branch of the State Bank (Maquoketa), charter of, 101 Farmers Loan and Trust Company (Sioux City), connection of, with joint stock land bank, 298 Farms, size of, 45, 46, 274; operation of, 271, 272; assistance in purchase of, 347 "Feasibility of State Control and Examina- tion of Private Banks, The," paper on, 166 Federal Cattle Loan Company (Des Moines), mention of, 421 Federal cooperative bank, proposal for, 264 Federal District Court (Kansas City), case tried in, 300 Federal farm loan banks, purchase of bonds of, 300, 301 Federal Farm Loan Board, organization of, 288; duties of, 289, 290, 292; decision of, 298; order of, 300; legislation asked by, 300, 301 Federal Farm Loan Bureau, expenses of, 290 Federal farm loan districts, 288, 289 Federal farm loan system, establishment of, 267, 288; plan of, 288-294; tax ex- emption of, 298-303; effects of, 303-305 Federal home bureau, proposal for, 264 Federal Land Bank of Omaha, capital of, 289; stock of, 289; loans by, 291, 293, 303; organization of, 293; president of, 293; officers of, 299 Federal land banks, plan of, 289; capital of, 289, 290; stock of, 289, 290; govern- ment subsidy to, 290; loans by, 290, 291, 301; interest rates of, 291, 292, 303, 304; bonds issued by, 292, 293; legal difficulties of, 300; constitutionality of tax exemption for bonds of, 299, 300, 301, 302, 303 Federal Reserve Act, passage of, 129, 204, 205, 206; restrictions removed by, 134, 148; provision in, relative to examina- tions, 191, 192; opposition to, 205, 206; provisions of, concerning member- ship, 207; amendments to, 207, 208, 216, 222; criticism of, 209, 210; praise of, 211; provisions of, 224, 225, 227; loans on real estate permitted by, 276, 277 442 HISTORY OF BANKING IN IOWA Federal Reserve Bank of Chicago, Iowa served by, 206; president of, 212; re- discount service of, 215, 216, 324; dis- count rates of, 216; part of, in farmer- banker conferences, 216; participation of officers of, in conference, 216; reserves in, 217; efforts of, to secure par clear- ings, 219, 220, 221; collection of checks by, 220; assistance of, in sale of war bonds, 349 Federal reserve banks, examination of, 192; branches of, 206; deposits in, 207, 208; State banks given right to pur- chase stock of, 208; cost of operation of, 210; profits of, 210; clearing account with, 219; earnings of, 222; beginning of operation of, 227; fi.nancial statements requested by, 345 Federal Reserve Board, Iowa banks listed by, 169; supervision of, over State bank members, 207, 208 ; notice of with- drawal sent to, 208; Governor of, 212, problem of, relative to discount rates, 213; assistance of, to Iowa banks, 217; policy of, relative to trust company pow- ers, 224, 225; war work of, 227, 228 Federal Reserve Conmiittee, formation of, 212 Federal reserve system. State banks in, 152, 153; savings banks in, 157; estab- lishment of, 204, 205, 206; organiza- tion of, 206; membership in, 207-209, 212; changes in, 207, 208, 381; defects of, 209; attitude of Iowa bankers to- ward, 209-212, 304; praise of, 212, 228 ; service of, during post war crisis, 213-217; reserve requirements in, 217; advantages and disadvantages of State bank membership in, 217-223 ; redis- count service of, 218, 341; clearing and collection system of, 218, 219, 220, 221, 343; tax-free capital stock of banks in, 221; right of withdrawal from, 222; effect of, on Iowa banking, 226- 228 ; benefits of, during World War, 227, 228; deposits in banks in, 331; issue of circulating medium by, 336 Felkner, Henry, minority report offered by, 26, 27 Fenton, W. T., office of, in Iowa Bankers Association, 363 Fidelity insurance, amount of, 379 Fiduciary powers, provision of, for loan and trust companies, 161, 162; exten- sion of, to national banks, 224, 225 Fiduciary services of banks, 343 Fifteenth General Assembly, saving^s bank law enacted by, 138 Fifth Legislative Assembly, attitude of, to- ward Miners' Bank, 24 Financial Age, editor of, 209 Financial statements, requests for, 345 Fines, use of, by building and loan associa- tions, 247 "Finn BiU", debate on, 165, 166 First Joint Stock Land Bank of Ohicago, loans by, 295 First Joint Stock Land Bank of Minneap- olis, charter to, 295 First National Bank of Davenport, presi- dent of, 50; establishment of, 130, 131; activity of, in sale of bonds, 132; aux- iliary of, 136 First National Bank of Ida Grove, failure of, 177, 178 First National Bank of Iowa City, estab- lishment of, 131; activities of, 132 First National Bank of Lyons, 51 First National Bank of Sioux City, restora- tion of, 177, 178 First National Bank of Washington (Iowa), organization of, 118 First National Bank of Washington (D. C), first national bank notes engraved for, 130 Florence (Nebraska), Bank of, charter of, 62 ; history of, 62, 63 ; circulation of notes of, 63, 64, 69; redemption of notes of, 69 Florida, banks prohibited in, 390 Fontanelle, Bank of, owners of, 62 ; circu- lation of notes of, 64 Ford plant, labor turn-over at, 261 Foreclosures, record of, 286, 287 Foreign building and loan associations, number of, in Iowa, 232, 234; field of, 234; restrictions on, 235; fees of, 235, 236; securities required of, 259 Foreign coins, prohibition of, as legal ten- der, 6 ; prevalence of, in Iowa, 60, 61 Foreign exchange, provision for, 342, 343 Fort Des Moines, branch bank of Cook and Sargent at, 50; early banks at, 52 Fort Dodge, branch of Greene and Weare bank at, 52; land office at, 53, 275; de- scription of bank at, 55; offer of bank of, for deposits, 56; circulation of bank notes of, 64; clearing house association in, 175; meeting of bankers at, 363, 370 Fort Madison, first bank of, 51; branch of State Bank at, 101 Port Madison Branch of State Bank, or- INDEX 443 ganization of, 101 ; aid given to, 106, 107; profits of, 122 Fort Madison National Bank, establish- ment of, 51 Fourth Legislative Assembly, investigation of Miners' Bank by, 21, 22, 23, 33 Fowler, C. M., address by, 367 Fractional currency, limitations on, 97, 98 Frankford (Pennsylvania), building asso- ciation at, 230 Free banking, national, 143, 144 Free Banking BUI, introduction of, 75; passage of, 75 Free banking law of 1858, history of, 74- 82; unpopularity of, 133; repeal of, 135 Free banking plan, protection of notes in, 94 Free banking system, adoption of, 58, 127 Fremont (Nebraska), joint stock land bank at, 295 Fremont Joint Stock Land Bank, loans by, in Iowa, 295 French coins, use of, in Iowa, 60, 61 Frontier banking in Iowa, description of, 45-69 Furniture, prices of, 5 Furs, storage of, 344 Galena (Illinois), branch of Bank of Illi- nois at, 10 Galena Branch of Bank of Illinois, money loaned by, 386 Gallaher, Ruth A., acknowledgment to, XII Gallatin, Albert, definition of banking given by, 390 Gatling, William J., appointment of, as bank commissioner, 84; election of, as secretary of the Board of Directors, 99; presence of, at meeting of bank commis- sioners, 99 Gear, John H., recommendation of, con- cerning private banks, 165 General Assembly, power of, concerning banks, 71, 72 ; general banking law en- acted by, 74, 75, 81 General banking law of 1858, passage of, 74, 75; vote on, 75; provisions of, 75-80; opinions concerning, 80-82; re- peal of, 82 Georgia, money from, 128 "German", elimination of, from bank titles, 181 German Savings Bank of Davenport, in- corporation of, 136; size of, 160 Germans, attempt of, to charter new banks, 201 Gifts, distribution of, by banks, 360 Gillette, E. H., election of, to Congress, 145 Girls' clubs, promotion of, by bankers, 346 Gold, increase in, after 1850, 6; premium on, 123 Goodrich, Mr., application of, for bank charter, 100 Gower, J. H., Brothers and Company, early bank of, 51; offer of, for deposits, 56 Graham, Thomas A., appointment of, as bank commissioner, 79 Grain, loans on, 316; prizes for, 346 Grant, Judge, arbitration by, 69 Graves, J. K., financial assistance offered by, 108 Green, J., application of, for bank charter, 100 Greenback movement, growth of, 144, 145 Greenback party, success of, 145 Greenbackers, election of, to Congress, 145 Greenbacks, redemption of State Bank notes in, 110, 111; status of, as legal tender, 113; demand for, 144 Greene, Joseph, early banking business of, 51 Greene, Weare, and Benton, bank of, 53 Greene, Weare, and Rice, early bank of, 52 Greene and Stone, bank of, 49 ; store of, 51 Greene and Weare, branches of, 52, 53 ; bank of, 52, 62; success of, 68; disso- lution of, 391 Greenville, robbery of bank at, 376 Greenwich (England), building associa- tions at, 229, 230 Gresham's law, operation of, in Iowa, 113 Grimes, James W., revision of Constitution favored by, 71; message of, concerning banks, 74 Grinnell, J. B., application of, for bank charter, 100 Grinnell, application from, for branch of State Bank, 100; failure of First Na- tional Bank at, 178 Griswold, failure of First National Bank at, 178 Group organization of Iowa Bankers Asso- ciation, 371, 372; officers of, 372 Guarantee Mortgage and Finance Com- pany (Des Moines), mention of, 422 Guarantee of deposits (see Deposits, guar- antee of) Hall, J. C, Burlington scrip defended by, 66 Hall P. W., election of, as Secretary of Iowa Bankers Association, 371 Hamlin, H. J., address by, 367 444 HISTORY OF BANKING IN IOWA Hammell, Ralston, and Company, applica- tion of, for branch of State Bank, 100 Haunan, Chas. R., oflSce of, in Iowa Bank- ers Association, 370 Hannibal Journal, comment of, concerning financial conditions, 5 "Hard Money Times", 5 Harding, "W. P. G., appearance of, before Iowa Bankers Association, 212, 366 Harrison, E. H., appointment of, as bank commissioner, 84 ; presence of, at meet- ing of bank commissioners, 99 Hatch Brothers, advertisement of, 64 Hay, price of, 5 Haymaker, K. V., loans to farmers advo- cated by, 252 Hedge, Thomas, appointment of, as bank commissioner, 79 Hedrick, D. H., statement by, 356 Hefner, George, minority report offered by, 26, 27 Heinsheimer, D. L., office of, in Iowa Bankers Association, 370 Helsell, F. H., office of, in Iowa Bankers Association, 370 Hempstead, Stephen, opposition of, to banks, 37, 38, 70, 71 Henderson, M. V., Jr., appointment of, as Superintendent of Banking, 198; par- ticipation of, in conference, 216 Henriques, J. E., office of, in Iowa Bank- ers Association, 363, 364 Herron Brothers, early bank of, 50 Hinsch, C. A., Federal Reserve Act praised by, 211 Hogan, D. P., bill sponsored by, 287,288; office of, in Federal Land Bank of Omaha, 293; argument of, 297 Hogs, prices of, 5; production of, 320 Homan's Bankers Almanac, data given in, 133 Home Building and Loan Association of Waterloo, profits paid to withdrawing members of, 243; loans by, 246 Home loan banks, proposal for, 264 Home owning, advantages of, 261 Homes, movement for better, 349 Homestead associations, 230 Hooke, F. Howard, opposition of, to Fed- eral Reserve Act, 209, 210 Horses, prices of, 5 Hosford, A. P., early bank of, 53 Hubbard, Mr., application of, for bank charter, 100 Hubbard, Ackley, office of, in Iowa Bank- ers Association, 370 Hughes, Thomas, testimony of, in legis- lative bribery case, 26 Hunt, C. W., position of, as vice president of Iowa Farm Credit Corporation, 317 Hunt's Merchants' Magazine, money de- scribed in, 128 Huxford, E. D., office of, in Iowa Bankers Association, 370 Ida County, cattle business in, 324, 325 Ida County Bankers Association, organiza- tion of, 372 Ida Grove, failure of First National Bank at, 177, 178 Idaho, law of, relative to private banks, 167 Illinois, free banking system in, 58 ; bank notes of, 59, 60, 128; banking laws of, 81, 82; State bank of, 83, 124, 400; number of banks in, 168, 169; number of building and loan associations in, 230; value of farm land in, 269; pur- chase of mortgages in, 283; rate of in- terest in, 304; production of corn in, 320; production of hogs in, 320; sec- retary of bankers association in, 369 ; banks prohibited by, 390 Illinois Bankers Association, joint meet- ing with, 367 Illinois Joint Stock Land Bank (Monti- cello, Illinois), loans by, 295 Immigration, increase in, 45 Income Tax Short Course, bankers at, 346 Income taxes, exemption of Federal land bank bonds from, 292, 293; increase in, 302 ; assistance of banks in computa- tion of, 346, 382 Incorporations, article on, 73 (see also Corporations) Incorporations, Committee on, petition re- ferred to, 35; report of, 36, 37, 42, 71 Independent Treasury, establishment of, 127 Indian wars, land warrants to soldiers of, 54 Indiana, free banking law of, 58; bank notes of, 59, 60, 128 ; State bank in, 72, 73, 83, 85, 105, 124, 125, 400; policy of banks of, 112; law of, relative to pri- vate banks, 167; number of building and loan associations in, 230; farm loans in, 251 Industrial Finance Corporation, organiza- tion of, 308; attempt of, to operate in Iowa, 309; stock owned by, 313 Industry, post war boom in, 213 Ingham, S. R., banking interests of, 64, 65 INDEX 445 Ingwersen, J. H., Federal reserve system supported by, 212; office of, in Iowa Bankers Association, 370 Institute of Banking, work of, 382 Insurance, promotion of, by bankers, 345, 346 ; amount of, held by Iowa Bankers Association, 379 Insurance companies, purchase of mort- gages by, 282, 283, 284; interest on mortgages held by, 285, 303, 304 Insurance department of Iowa Bankers Association, 378, 379 Insurance for borrowers, 253, 254 Insurance for Morris Plan companies, 308, 309 Interest, rates of, 91, 246, 247, 249, 250, 251, 252, 284, 285, 291, 292, 303, 304, 310, 330, 340; payment of, on deposits, 335 Internal Revenue, Commissioner of, re- ports from private banks required by, 133 Investment, business of early banks in, 56 ; activities of banks in promoting, 341, 342 Investment bankers, use of name of, in title, 326; list of, in Iowa, 422 Investment banks, creation of, for farm mortgages, 267; field of, 325-329; statis- tics of, 327, 328; securities handled by, 327, 328 Investment securities, sale of, on install- ment plan, 260 Investment service of banks, 341, 342 Iowa, early settlements in, 1 ; population of, 1, 45, 353; review of economic con- ditions in, 1-9; pioneer conditions in, 2, 3; agricultural conditions in, 3, 4; settlers in, 4 ; prices in, 4, 5 ; interest of people of, in banks, 7, 8, 35; organiza- tion of Territory of, 19; failure of, to pay debt to Miners' Bank, 31; defeat of Constitution of 1844 in, 41; boundaries of, 41; admission of, 44; immigration to, 45 ; frontier banking in, 45-69 ; agri- cultural resources of, 45, 46; descrip- tion of kinds of money in, 58-61, 91; aid of State Bank to, 109, 110; na- tional banks in, 130-132, 149, 150; number of banks in, 133, 168-175, 353, 361; banking legislation in, 135, 136, 138-142; laws of, concerning savings banks, 138-142, 155, 156, 157, 158, 159, 160; amount of circulation in, 144; type of savings banks in, 154; restric- tion on use of word "bank" in, 168; examination of banks by, 192, 193, 194, 195, 196; placing of, in seventh Fed- eral reserve district, 206; credit to banks in, 215, 216, 217; number of building and loan associations in, 230, 231, 232, 234; bad reputation of national building and loan associa- tions of, 234, 235; law of, relative to fines, 247 ; supervision of, over building and loan associations, 256-260; value of farm land in, 268-270; rank of, in per capita wealth, 270, 351:!; farm mortgages in, 270-274, 283; placing of, in eighth Federal farm loan district, 289; number of farm loan associations in, 294; taxation of mortgaged prop- erty by, 302; interest rates in, 303, 304; production of corn in, 320; cattle in, 320; cattle loans in, 321, 323, 324; in- vestment banks in, 325-329; debt of , 326; attitude of, toward postal savings banks, 330; loans in, 339, 340; number of municipalities in, 354; profits of banks in, 356-359; debt of, to Miners' Bank, 388; prohibition of banks in, 390; ques- tion of deposit insurance in, 424 Iowa, Territory of, establishment of, 36 Iowa Agricultural Experiment Station, survey by, 269 Iowa Bankers Association, first President of, 55 ; attitude in, concerning regulation of private banking, 165, 166, 167; list published by, 168, 169; resolution by, concerning reports from banks, 187; banking department supported by, 197; opposition of, to new enterprises during war, 200, 201 ; blue sky bills supported by, 202; attitude of. toward Federal re- serve system, 206, 209, 210, 211, 212; farmer-banker conferences held by, 212, 216; investigation by, of clearing meth- ods, 221; farm credit corporations spon- sored by, 314; attitude of, toward trade acceptances, 339; interest of, in invest- ments, 342 ; farm accounting promoted by, 345; prize offered by, 346; income tax conference sponsored by, 346, 382; interest of, in schools, 348 ; sale of bonds promoted by, 349 ; resolution for pre- paredness adopted by, 350; history of, 362-382; organization of, 362; constitu- tion of, 362, 363; officers of, 362, 363, 364, 368-370, 371; membership in, 362, 363, 364, 365, 366, 368, 382; growth of, 363-366; programs of, 363, 364, 365, 366; attendance at meetings of, 363, 364, 365, 366, 427; presence of women at, 366;- social features of, 366-368; 446 HISTORY OF BANKING IN IOWA contribution of, toward entertainment, 367; joint meetings of, 367, 368; list of presidents of, 370; places of meetings of, 370; group organization of, 371, 372; county associations in, 372, 373; rela- tions of, with American Bankers Asso- ciation, 373, 374; jirotective service of, 374-377; activities of, on behalf of mem- bers, 374-382 ; time lock expert employed by, 378; insurance department of, 378, 379; legislative committee of, 380, 381; legal department of, 381, 382; activities of, for general welfare, 382 ; growth of, 382 ; opposition of, to guarantee of de- posits. 424 "Iowa boys' corn contest", prize in, 346 Iowa Building and Loan League, address to, 252; plan presented to, 253; organi- zation of, 263 Iowa Capital Reporter, opposition of, to banks, 8, 43 ; charges of bribery made by, 25, 26; editors of, 26, 27; charges of, against Miners' Bank, 30 Iowa City, paper published at, 3 ; pay of workmen at, 5 ; opposition to proposed bank at, 8 ; attempt to establish bank at, 35 ; constitutional convention at, 36, 42, 71; Democratic convention at, 47; branch bank of Cook and Sargent at, 50 ; early banks at, 51, 52; exchange busi- ness of bankers at, 56; offer of banks in, for deposits, 56; bank notes circu- lated in, 63; scrip of, 65, 66; head office of State Bank at, 85, 99; branch of State Bank at, 85, 100, 101, 397; meet- ing of bank commissioners at, 99 ; meet- ing at, of Board of Directors of State Bank, 102, 117, 123; establishment of First National Bank at, 131 ; activities of First National Bank at, 132; clearing house association in, 175, 176; interest rate of building and loan association at, 250; cost of improvements at, 388 Iowa City Branch of State Bank, organiza- tion of, 101; representative of, 102; ar- rival of first notes at, 104, 105; United States bonds sold by, 109; conversion of, into national bank, 118; profits of, 122; premium allowed by, for gold deposit, 123 Iowa City National Bank, organization of, 118 Iowa Corn and Small Grain Growers Asso- ciation, exhibit of, 347 Iowa Farm Bureau Federation, farm credit corporations endorsed by, 314 Iowa Farm Credit Corporation, organiza- tion of, 316; capital of, 316; stock of, 316; control of, 316, 317; officers of, 316, 317 Iowa Farm Mortgage Association, data se- cured by, 270; organization of, 280; members of, 281; meeting of, 285; dis- cussion before, 296; resolution of, on tax exemption, 298, 299; joint meeting with, 368 Iowa Investment Corporation (Waterloo), mention of, 422 Iowa Joint Stock Land Bank of Sionz City, charter to, 295; plan of organiza- tion of, 298 Iowa Loan and Trust Company of Des Moines, business of, 279 Iowa Standard, The, description of agricnl- tural conditions printed in, 3, 4, 5; financial difficulties of, 4; attitude of, concerning banks, 7, 8; party prejudice of, 8 ; attitude of, in bribery incident, 27; comment in, on Constitution, 43, 44 Iowa State College of Agriculture and Me- chanic Arts, record books furnished by, 345 ; corn growing contest promoted by, 346 Iowa State National Bank of Sioux City, president of, 54 Iowa Sun, extract from, 4 Isett and Brewster, early bank of, 51 Jackson, Andrew, opposition of, to United States Bank, 1, 7 Jackson County, memorial circulated in, concerning Miners' Bank, 27, 28; at- tempt to establish bank in, 35 Jackson County Bank (Michigan), notes of, 16, 18 Jayne, Henry, rural credit bill opposed by, 287,288 Jesup, F. S., and Company, early bank of, 50 Jesup and Stimson, early bank of, 50 Jewelry, storage of, 343 Johnson County, address to electors of, 44 Joint stock land banks, interest rates of, 292 ; relation of, to Federal farm loan system, 294; account of, 294-298; loans made by, 294-303; formation of, 294, 295; capital of, 294, 295, 296, 297; bonds issued by, 295; list of, in Iowa, 295; business of, 295, 296; de- fects in law for, 296, 297, 301; tax ex- emption features of, 297, 298. 300, 301, 302, 303 Joliet, coming of, to Iowa, 1 INDEX 447 Ealida Venture (Ohio), quotation from, concerning banks, 8 Kansas, law of, relative to private banks, 167; farm loans in, 251; debenture com- panies in, 278; losses of farmers in, 286 Kansas City (Missouri), cattle business at, 320, 321 Kentucky, bank notes of, 59, 60, 128; policy of banks of, 112 Keokuk, early bank in, 49, 51; applica- tion from, for branch of State Bank, 100; branch of State Bank at, 101, 397; incorporation of bank at, 136; failure of First National Bank at. 178 Keokuk Branch of State Bank, organiza- tion of, 101; representative of, 102; charges against. 111; conversion of, into national bank, 118; profits of, 122; ref- erence to, 397 Keokuk Loan and Building Association, or- ganization of, 231 Keokiik Savings Bank, incorporation of, 136 Kinley. David, investigation by, 337 Kirkwood, S. J., opinion of, concerning banking law, 80, 81, 82; amendments to banking law vetoed by, 81; influence of, in organization of State Bank, 86; ap- plication by, for bank charter, 100; presence of, at meeting of Board of Di- rectors, 102; election of, as president pro tem of State Bank, 102; aid of State Bank to, during Civil War, 108; finan- cial assistance of, to State, 108; recom- mendation of, concerning State Bank notes, 113; State Bank notes burned by, 116; service of, in closing of State Bank, 117 Knapp and Eaton, early bank of, 51 Knorpp Cattle Loan Company (Kansas City), business of, 321 Knox, Comptroller, reports of, 144 Labor, United States Commissioner of, re- port of, on building and loan associa- tions, 231, 233, 234, 240, 245 Labor, United States Department of, re- port of, on building and loan associa- tions, 230; home bureau sponsored by, 264 Lafayette (Indiana), bank at, 105 Lake, Benjamin, appointment of, on Board of Directors of State Bank, 86; pres- ence of, at meeting of Board of Direc- tors, 102 Lake Michigan, "wild cat" bank near, 59 Land, difficulties in purchase of, 3 ; specie payments required for, 6 ; sale of, 54, 55; speculation in, 54, 55, 68; price of, 213, 268-270; pioneer loans on, 267; purchase of, 347 (see also Real estate) Land warrants, use of, by bankers, 54, 55, 284 Langworthy, Mr., application of, for bank charter, 100 Langworthy Brothers, bank of, 49, 50 Large, John J., office of, in Iowa Bankers Association, 370 Larrabee, William, advice of, to bankers, 351 Law Guarantee and Trust Society, Lim- ited, organization of, 279 Leach, S. M., office of, in Iowa Bankers Association, 370 Lead mines at Dubuque, 10 Leavitt, John H., early bank of, 53 Leavitt and Johnson National Bank (Wa- terloo), establishment of, 53 Le Claire, Antoine, picture of, on bank notes, 98; application of, for bank char- ter, 100 Lefifler, Shepherd, letter to, concerning Miners' Bank, 26 Legal clerk, employment of, in Banking Department, 199 Legal department of Iowa Bankers Asso- ciation, 381, 382 Legal tender, foreign coins not included in, 6 ; Treasury notes given value of, 110; State Bank notes accepted as, 113 Legislation, interest of Iowa Bankers As- sociation in, 380 Legislative Assembly of Iowa, investiga- tions of Miners' Bank by, 19-29; repeal of charter of Miners' Bank by, 30-34 Legislative committee of Iowa Bankers As- sociation, work of, 380, 381 Legislature, special corporation charters not to be granted by, 47, 48 (see also General Assembly and Legislative Assem- bly) Le Mars National Bank, failure of, 178 Lewis, Walter, affidavit by, concerning Miners' Bank, 386 Liabilities, reports concerning, 185 Liberty bonds, purchase of, 213, 312; sale of, 331, 349, 350; storage of, 344 Life insurance companies, farm mort- gages purchased by, 273, 274 (see also Insurance companies) Lincoln, Abraham, national currency ap- proved by, 129 Lincoln (Nebraska), joint stock land bank at, 295 448 HISTORY OF BANKING IN IOWA Lincoln Joint Stock Land Bank, loans by, 295 Liquidation, 213, 216 Live stock, prices of, 5 ; promotion of, by bankers, 346, 347 Live Stock National Bank of Siotix City, loan company associated with, 321 Lloyd, O. G., report of, on Iowa land values, 269 Loan and trust companies, banking activi- ties of, 160; supervision of Auditor of State over, 160; number of, in Iowa, 160, 171; development of, 160-163; trust funds of, 161; regulations of, 161, 162; powers of, 161, 162, 163; capital of, 174; interest paid by, 335; dividends of, 357, 358 Loan shark methods, 305 Loans, limitations on, 91, 92, 93, 152, 159; amount of, 174, 214, 215; plan of, by building and loan associations, 244-247; security of, 245 ; repayment of, to build- ing and loan associations, 247-251; rules of. 291, 293; ways of making, 339, 340; rates of interest on, 340 Lobdell, Charles E., decision explained by, 298 Local building and loan associations, field of, 233, 234; number of, 234 Lockwood, E., counting room of, 13 Loco-foco, origin of name of, 385 Loco-foco paper, quotation from, 8 Locomotive, first, in Iowa, 46 Logansport (Indiana), bank at, 105 Long. Frank J., meeting called by, 280 Los Angeles (California), meeting of bank- ers at, 365 Losses of building and loan associations, 240, 241 Louisiana, building and loan associations in, 230 Lowe, Ralph P., bank law proclaimed by, 75, 84 ; opinion of, concerning banking law, 80, 81; picture of, on bank notes, 98 ; recommendation of, concerning State Bank, 109, 110, 112, 113 Loyer, J. W., employment of, as time lock expert, 377, 378; fees of, 378 Lucas, Robert, messages of, concerning State government, 36; political experi- ence of, in Ohio, 85, 86; picture of, on bank notes, 98 Lucas, W. v., recommendation of, concern- ing private banks, 165 Lyons, early bank of, 51; First National Bank of, 51 ; application from, for branch of State Bank, 99 (see also Lyons City) Lyons City, branch of State Bank at, 101; establishment of national bank at, 131 Lyons City Branch of State Bank, organi- z.Ttion of. 101; suit against, concerning redemption of notes, 111; profits of, 122 McCarthy, C. C, recommendation of, con- cerning examinations of banks, 196 McCord, J. H., office of, in Iowa Bankers Association, 370 McDougal, J. B., membership of State banks in Federal reserve system urged by. 211. 212 McFarlane, Hutton, and Patrick, company organized by, 278 McGregor, branch of State Bank at, 101; application from, for branch of State Bank, 105, 106 McGregor Branch of State Bank, organi- zation of. 101; profits of, 122 McHenry, W. A., part of, in organization of Iowa Bankers Association, 362; of- fice of, in Iowa Bankers Association, 370 McHugh, John, office of, in Iowa Bankers Association, 370 McKee. D. H., address by, 278, 279; meet- ing called by, 280; office of, in Iowa Bankers Association, 370 Macklot, Mr., application of, for bank char- ter, 100 Macklot, Corbin, and White, early bank of. 52 Macklot and Corbin, early bank of, 50 McNett. Wm., address by, 352, 353 McNider, C. H., office of, in Iowa Bankers Association, 370 Maine, currency from, 128 Managers, farms operated by, 272, 273 Manning, Calvin, address by, 352 Manufacturing, increase of, in Iowa, 46 Maquoketa Branch of State Bank, 101 : profits of, 122 "Marble Bank" building, use of, by First National Bank of Davenport, 130 Marion, circulation of bank notes at, 64 Marquette, coming of, to Iowa, 1 Mar.shalltown, meeting of bankers at, 370 Martin. Charles H., office of, in Iowa Bank- ers Association, 370 Maryland, bank notes of, 59, 60 Mason City, clearing house association in, 175; investment company at, 326, 422; meeting of bankers at, 370 Masonic Temple (Davenport), use of, for meetings, 366 INDEX 449 Massachusetts, banking laws in, 38, 88; building and loan associations in, 230; law of, relative to fines, 247 Mather, Thomas, Miners' Bank owned by, 24 Membership in Iowa Bankers Association, kinds of, 368; fees for, 368 Merchandise, bill relating to bulk sales of, 380 Merchants Branch of State Bank (Daven- port), charter of, 101; representative of, 102; conversion of, into national bank, 118 Merchants Insurance Company (Burling- ton), incorporation of, 136; records of, 402 Merrick, H. S., meeting called by, 280 Merrill, Samuel, recommendation of, con- cerning savings banks, 138 Messenger, George H., report made by. 190; appointment of, as Superintendent of Banking, 198; charter refused by, 201 Mexican dollars, use of, in Iowa, 61 Mexican War, land warrants to soldiers of, 54, 284 Meyer, Henry, banker described by, 351 Michigan, money of, 6, 7, 128; condition of banks in, 16, 17, 18, 189; experi- ment of, with State bank, 83 Michigan bank commissioners, report of, 16, 189 Midland Mortgage Company of Cedar Rap- ids, success of, 419 Military service of Iowa bankers, 350 Miller, Edmund, early bank of. 53 Miller, Homer A., office of, in Iowa Bank- ers Association, 370 Miller, Samuel F., presence of, at meeting of Board of Directors, 102; financial assistance of, 108 Mills, C. B., office of, in Iowa Bankers Association, 370 Miners' Bank of Dubuque, assets of, 6; granting of charter for, 10; articles of incorporation of, 10, 11; restrictions on, 10, 11, 12, 13; capital of, 10, 12, 13, 14, 16; establishment of, 10-13; history of, 10-34; management of, 11; officers of, 11, 12, 13, 14; opening of, 13, 14; notes of, 13, 386; investigation of, by Wisconsin legislative committee, 14-19; second legislative investigation of, 15-19; report concerning, 17, 20, 23, 24; specie problems of, 17, 18, 19, 20, 22, 23, 24, 29, 30; financial statements of, 17, 18, 19, 20, 21, 22, 23; investigation of, by First Legislative Assembly of Iowa, 19, 20; investigation of, by Fourth Legisla- tive Assembly, 21, 22, 23; change of ownership of, 23, 24; opinions of, 23, 24, 25; investigation of, by Fifth Legis- lative Assembly, 24-27; attempt to repeal charter of. 24-27, 50; petitions concern- ing, 27, 28; opposition to, in Sixth Leg- islative Assembly, 27-29; attempts to re- peal charter of, 28, 29, 30-34, 386, 387; charges against, 30 ; failure of Iowa Ter- ritory to pay debt to, 31, 388; decision of courts concerning repeal of charter of, 32; closing of, 32; resume of history of, 32-35 ; party alignment in opposition to, 33, 34, 124; purpose of, 126 Minnesota, rejection of bank notes of, 112; bad reputation of national building and loan associations of, 234, 235 ; debenture company in, 279; secretary of bankers association in, 369; prohibition of banks in, 390 Mississippi, law of, relative to private banks, 167 Mississippi River, early banks in towns on, 49-51 Missouri, bank notes of, 59, 60, 128; ex- periment of, with State bank, 83; law of, relative to private banks, 167; sale of farm mortgages of, 282; secretary of bankers association in, 369; organisa- tion of bankers in, 371 Missouri River, early private banks in towns on, 53, 54 Mobley, M.. testimony of, concerning Min- ers' bank, 24 ; censure of, in bribery case, 26; appointment of, as cashier of Miners' Bank. 30; early bank of, 50 Moline (Illinois), tour of, 367 Money, scarcity of, 2, 4 ; kinds of, 4, 6. 7 ; substitutes for. 61-69; need of uniform- ity of, 127, 128 Moneys and credits, taxation of, 265, 302, 303 Montana, cattle loans in, 321, 325 Monticello (Illinois), joint stock land bauk at, 295 Morgan, James M., exoneration of, in brib- ery case, 26 Morgan, Pierpont, reference to, 50 Mormons, settlement of, near Council Bluffs, 53 Morris, Arthur J., company organized by, 307 Morris Plan companies, purpose of, 306, 307, 318;. organization of, 307; list of, in Iowa, 307, 308; association of, 308; 29 450 HISTORY OF BANKING IX IOWA insurance department in, 308, 309 ; loans by, 309, 310, 311, 312; interest rates of, 310; reasons for borrowing from, 311, 312; losses of, 312, 313; ownership of, 313; dividends of, 313; management of, 313; lowii laws relat- ing to, 313, 314; taxation of. 313, 314; comi>etitors of, 314 Morris Plan company at WasUiugton, D. C. losses of, 312 Morris Plan Insurance Society, organiza- tion of, 308 Mortgage and Debenture Company, Lim- ited, organization of, 279 Mortgage bankers, opposition of, to Federal farm loan system, 298; opposition of, to tax exemption, 299 Mortgage banking, early history of, 274-276 Mortgaged farms, statistics of, 271, 272 Mortgages, foreclosure of, 240, 247, 248. 286, 287; on farms, 270-274; value of, 273, 274; interest rates on, 284, 285, 303, 304; giving of, as collateral, 292; sale of, 297; taxation of, 302; value of, to tenants, 347 Mount Pleasant, application from, for branch of State Bank, 100; branch of State Bank at, 101. ;!97; population of, 397 Mt. Pleasant Branch of State Bank, organ- ization of, 101; representative of. 102; investigation of, 107; profits of, 122 Mullally, P., addre.'is by, 352 Municipalities, debts of, 326; numbers of, in Iowa, 354 Murray, W. J., appointment of. as Super- intendent of Banking, 198 Muscatine, early bank in, 49, 51; applica- tion from, for branch of State Bank, 100; branch of State Bank at, 101, 397; clearing house association in, 175, 176 Muscatine Branch of State Bank, organi- zation of. 101; representative of, 102; reorganization of. 106; charge against, 111; profits of, 122 Muscatine County, address to electors of, 44 Mutual Home Association of Dayton, Ohio, plan of, 238, 239 Mutual savings bank, plan of organization of, 154 Myers. J. K., killing of, 376; income for widow of, 376 Nash, Ohio State Senator, speech by, con- cerning banks, 7 National and State Bankers Protective As- sociation, conference held by, 221 National Association of Morris Plan Bank- ers, organization of, 308 National bank notes, status of, as legal tender, 113 National Banking Act, effects of, 82, 114, 115, 135; adoption of. 114, 115, 129; amendments to, 143, 148 National banking system, origin of, 127- 130 (see also National banks) National banks, establishment of, 50, 114, 115, 130-132; conversion of State Bank branches into, 118; notes of, 126, 145 146, 148, 154, 336; origin of system of 127-130; capital of, 129, 134, 146, 149 150, 155, 156, 174, 427; powers of, 129 130, 223-225; deposit of bonds by, 130 protection afforded by, 131; number of 131, 146, 148, 149, 150, 153, 164, 170 171, 204; disadvantages of, 134, 144 development of, in Iowa, 143-150; ap jjortionment of notes of, 143, 144; pres tige of, 146; comparison of, with State banks, 146, 147; assets of, 146, 147, 149, 150, 427; deposits in, 149, 150, 334, 335; use of word "State" in title of, 150, 151; relation of trust com- panies to, 163, 224, 225; statistics con- cerning, 172, 215; failures of, 177, 178 size of, 181; reports from, 183, 184 187; examination of, 190, 191, 192; ob ligation of, to .join Federal reserve sys tem, 207; redi.scounts of, 215; reserve requirements of, 217; loans on real es- tate permitted to, 223, 224, 276, 305; interest paid by, 335; earnings of, 357, 358, 359 National building and loan associations, sta- tistics of, 233, 234 National currency associations, power of, to issue currency, 205; formation of. 227 National farm mortgage association, organ- ization of, 281 National Monetary Commission, report of, 160, 168, 174. 177, 205; creation of, 205; investigation by, 337 National State Bank of Burlington, claim of. to being oldest Iowa bank, 49, 50 ; organization of, 118 National State Bank of Des Moines, organi- zation of, 118 National Surety Company of New York, in- surance contract with, 378, 379 Nebraska, attitude of. toward banks, 61, 62, 64; bank notes of, 61-64, 128; law of, prohibiting national building and INDEX 451 loan associations, 234, 235; farm loans in, 251; debenture companies in, 278; losses of farmers in, 286; placing of, in eighth Federal farm loan district, 289; cattle loans in, 321, 325 Nebraska, Bank of, incorporation of, 62 ; circulation of notes of, 63, 64; value of notes of, 64 Nebraska City (Nebraska), bank at, 62 Nebraska-Iowa bank notes, account of, 61-64 Negotiable note, decision relative to, 381 Nemaha Valley Bank, incorporation of, 62 Nevada, per capita wealth of, 270 New England, bank notes of, 59, 128 ; mu- tual savings banks in, 154; sale of mortgages in, 283 New Hampshire, sale of mortgages in, 283 New Jersey, law of, relative to private banks, 167; number of building and loan associations in, 230 New York, bank notes of, 59, 60, 128; stocks to be sold at, 77; banking laws of, 88, 127, 167; clearing system in banks of, 219; number of building and loan associations in. 230; Morris Plan Insur- ance Society in, 308; organization of bankers in, 371 New York Clearing House, report of, con- cerning national banks, 131, 132 Newbold, J. G., recommendation of, con- cerning private banks, 165 Newspapers, financial difficulties of, 4; bank advertisements in. 360 Newton, early bank of, 52 Noble, Mr., application of, for bank char- ter, 100 Nollen, H. S., statement by, concerning mortgages, 283 Nollen, John, reminiscences of early bank- ing given by, 362 Norfolk (Virginia). Morris Plan company organized at, 307 North Carolina, money from, 128 North Dakota, prohibition of private banks in, 167, 168; debenture companies in, 278; losses of farmers in, 286 North Liberty, banks in. 354 North west prn Banker, The, discussion in, 287, 299 Northwestern Mutual Life Insurance Com- pany of Milwaukee, loans by, 285; fore- closures on mortgages held by, 286 Note holders, protection of, 183, 336 Note issue, provision concerning, in case of State Bank, 94-99; monopolization of, by national bajiks, 126; regulation of, 134; importance of, 135; profits from, 145 Notes, collection of, by banks, 56 Notes and references, 385-430 Oats, production of, in Iowa, 46 O'Brien, Michael, opposition of, to banks, 37 Officer and Pusey, bank of, 53 Ohio, bank notes of, 59, 60; State bank in, 72, 83, 85, 124, 400; influence of, on Iowa, 85, 86; banking laws of, 94; pol- icy of banks of, 112; number of build- ing and loan associations in, 230; law of, relative to fines, 247; farm loans in, 251, 252; organization of bankers in, 371 Ohio Life Insurance and Trust Company, failure of, 68 Omaha (Nebraska), branch of Greene and Weare bank at, 52 ; success of building and loan associations at, 251, 254; Fed- eral land bank at, 289 ; joint stock land bank at, 295 Oregon, law of, relative to private banks, 167; prohibition of banks in, 390 Osage, circulation of bank notes at, 64 ; clearing house association in, 175, 176 Osborne, Mayor, address by, 351 Osceola, failure of First National Bank at, 178, 179 Oskaloosa application from, for branch of State Bank, 99. 100; branch of State Bank at, 101, 397 Oskaloosa Branch of State Bank, organiza- tion of, 101; representative of, 102; charge against. 111; profits of, 122 Otto. Helen, acknowledgment to, Xll Ottumwa, meeting of bankers at, 370 Overdrafts, prevalence of, in Iowa, 361 Ownei-s, farms operated by, 271, 272, 273 Ownership of banks, 355, 356 Oxford Provident Building Association (Philadelphia, Pennsylvania), organiza- tion of, 230 Pacific City, application from, for branch of State Bank, 100 Palmyra (Illinois), branch bank at, 400 Panama Exposition, trip to, 346 Panic of 1837, effects of, 2 Panic of 1857, effects of, 68, 69, 275, 286 Panic of 1873, effects of, on amount of cir- culation, 144 Panic of 1907, effects of, 176, 181, 204, 329 Paper money, doubtful value of, 6, 7 ; ef- 452 HISTORY OF BANKING IN IOWA feets of, 70, 71; issue of, 74 (see also Bank notes and Greenbacks) Papers, storage of, 343 Parker, George S., office of, in Iowa Bank- ers Association, 370 Parsons, Charles, early bank operated by, 49. 51 Patterson, William, letter to, concerning Miners' Bank, 26 Pawn brokers, activities of, 306, 307 Pearson, Mr., appointment of, as cashier of Miners' Bank, 23 Peasley, Francis J. C, early banking busi- ness of, 49 ; commission business of, 49, 50 Pella, early bank at, 51 ; failure of First National Bank at, 178 Pennsylvania, bank notes of, 59, 128; num- ber of building and loan associations in, 230; law of, relative to fines, 247; or- ganization of bankers in, 371 Permanent plan of issuing shares, 237, 238, 239 Perpetual Building and Loan Association of Waterloo, profits paid to withdrawing members of. 243 ; loans by, 246 Perpetual Building Association of Clinton, organization of, 231 Perpetual Savings and Loan Association of Cedar Rapids, organization of, 231 ; dis- tribution of profits of, 240; withdrawal of members from, 242, 243 ; loans made by, 246 Personal credits act, opposition of bankers to, 381 Personal property, taxation of, 302, 303 Peters Joint Stock Land Bank (Omaha), charter to, 295 Philadelphia (Pennsylvania), suburb of, 230 Pike County (Missouri), prices in, 5 Pioneer banks, functions of. 54-57 Pioneers, lack of money among, 2, 3 Platte Valley Bank, incorporation of, 62 ; value of notes of. 64 Polk County, District Court of, case tried in, 65 "Poor Richard and his Brother", com- munication by, 3 Popular attitude toward banks, change in, 351-353 Population of Iowa, growth of, 45, 353 Pork, price of, 4 Post notes, redemption of, 18; issue of, 386 Postal savings banks, opposition of bank- ers to, 304; demand for, 329; effect of, on business, 330; interest paid by, 330; business of, 330, 331, 332; number of, 331; depositors in, 332 Postal savings funds, deposits for, 152, 158 Postal savings law, passage of, 329 Postal savings system, opposition of bank- ers to. 330 Potatoes, production of, in Iowa, 46 Potter, E. G., appointment of, as bank com- missioner, 79 Potter, L. F., office of, in Iowa Bankers Association, 370 President of State Bank of Iowa, election of, 102; duties of, 103; compensation of, 103 Presidents of Iowa Bankers Association, list of. 370 Price, Hiram, description by, of issue of scrip, 67, 68 ; design for bank notes se- lected by, 98 ; burning of old notes de- scribed by, 99; presence of, at meeting of Board of Directors, 102; election of, as President of State Bank, 102, 103; financial assistance of, during Civil War, 108; record of meeting signed by, 118 Prices, examples of, 4, 5, 46 Primary functions of banks, discussion of, 333-341 Primary roads, improvements of, 328, 348 Private bankers, bonds required of, 167 Private banking, history of, in early Mis- sissippi River towns, 49-51 Private banks, establishment of, in early Iowa, 48-54, 133, 134; credit given by, 92; number of, 92, 132, 133, 153, 163 164, 169, 170, 171, 181; account of, 132-135, 163-168; data from, 133; capi- tal of, 133, 174; advantages of, 134 135, 166; size of, 163; need of State supervision over, 163, 165, 166, 167 development of, 163-168; failures of 165, 179, 180; restrictions on names of 168; prohibition of new, 201, 202, 203 380; farm mortgages held by, 275; de posits in, 334; interest paid by, 335; di vidends of, 357, 358; definition of, 405 Profits of banks, amount of. for branches of State Bank, 121123; distribution of, by building and loan associations, 239- 241 ; data on. 356-359 Profits of building and loan associations, division of. 241, 242, 243, 244 Protective service of Iowa Bankers Asso- ciation, 374-377 Public debt, amount of. in Iowa, 326 Public improvements, interest of bankers in, 349 INDEX 4r33 Public we^are, activities of Iowa Bankers Association for, 382 Publicity for banks, 359-361 Pusey, W. H. M., bank conditions de- scribed by, 60 Quigley, Mr., mention of, 25 Quinton, Richard, opposition of, to banks, 38 Railroad, first, in Iowa, 46 Rand McNally and Company, statistics of banks, given by, 169 Real estate, owning of, by banks, 93, 130; loans on, 134, 146, 223, 225, 276, 277, 305 ; investments in, by savings banks, 140, 156; use of, as security, by build- ing and loan associations, 245, 246, 247 Real estate business, relation of early banks to, 54, 55 "Red dog" money, 6, 74, 128 "Red-horse" currency, 60 Redfield, F. G., position of, as treasurer of Iowa Farm Credit Corporation, 317 Rediscounts, amount of, 214, 215; privi- lege of, 218, 223, 317, 341 Remey, John T., office of, in Iowa Bankers Association, 370 "Report of the Select Committee of the States on the Currency", discussion of, 7 Reports from banks, number of, 183, 184, 185, 186, 187, 188, 189; penalty for not furnishing, 187 Republicans, number of, in convention ii\ 1857, 71; financial support offered by, 108; opposition of, to Federal Reserve Act 205, 206; postal savings law en- acted by, 329; opposition of, to deposit insurance, 424 Reserve, requirements of, for State banks, 152, 153; requirements of, for savings banks, 157; amount of. 214; interest on. 222 ; requirements of, for national banks, 225; bill concerning, 380 (see also Cash reserve) Reserve cities, deposits of banks in, 207, 208; profits of banks in, 356, 357 Retrenchment and Reform, Committee on, appeal to, relative to bank charter, 200, 201. 202 Reynolds, Arthur, Federal Reserve Act sup- ported by, 206; office of, in American Bankers Association, 374 Reynolds, George, office of, in American Bankers Association, 374 Roads, bonds for, 326, 328; interest of bankers in, 348, 380 Rock Island (Illinois), meeting of bankers at, 367 Uockiugham, flour mill at, 66 Rogers, Thomas, opposition of, to Miners' Bank, 24; i)etition presented by, 28 Root, A. C, early bank of, 51 IJupert, Benjamin, appointment of, as trus- tee of Miners' Bank, :!1 Rural credit law, proposed, 287, 288 Rural credits, proposed system of, 287, 340 Russell, John, report concerning banks published by, 186 Safety deposit business, 343, 344 Safety fund, use of, in State Bank branches, 94, 95 St. Joseph Cattle Loan Company, business of, 321 St. Louis (Missouri), prices at, 4, 5 St. Louis Cattle Loan Company, business of, 321 St. Louis Gas Light Company, purchase of Miners' Bank by, 23, 24; bankruptcy of, 26 Sanford. H. W., banking activity of, 55 Saunders, R. C, employment of, in pro- tective work, 375, 377 "Savings", restriction on use of, in bank titles, 141, 162, 165 Savings accounts, encouragement of, by national banks. 225 Savings and loan associations, origin of, 229, 230 Savings banks, capital of, 80, 138, 155, 156, 158, 159, 174, 380; number of, 137, 141, 142, 146, 153, 154, 155, 156, 159, 160, 164, 170, 171; establishment of, 138; laws concerning, 138-142, 155, 156, 157, 158, 159, 160; deposits in, 139, 334, 335; government of, 139, 157, 158, 159; investments permitted to, 140; supervision over, 141; statements from, 141; reorganization of, 143; assets of, 146, 147, 172, 173; types of, 154, 155; development of, 154-160; advantages of, 155, 156; investment of funds of, 156; property owned by, 156, 157; cash re- serve fund of, 157; withdrawal of de- posits from, 157; replacement of capital stock of, 158; surplus funds of, 158; directors of, 159; limitations on loans by, 159; size of, 160; similarity of trust companies to, 162 ; statistics on resources of, 169; reports required from, 186, 187; right of joining Federal reserve system given to, 208; loans of, 214; re- serves (5f, 214, 217; relation of, to na- 454 HISTORY OF BANKING IN IOWA lional banks, 276; real estate invest- ineiits of, 377; purchase of mortgages by, 282, 28:), 286; investments of, in finance corporations, :!15; interest paid by, 3:i5; dividends of, ;!57, :!58 Schanke and Comi)any (Mason City), busi- ness of, 326, 328, 422 Scholte and Grant, early bank of, 51 School districts, debts of, 326 School fund, legal tender for, 113 Schools, interest of bankers in, 348 Scott County, attempt to establish bank in, 35; corporation in, 66 Scrip, use of, for money, 65-68 Secondary banking functions of banks, 341-344 Secretary of Iowa Bankers Association, election of, 363; salary of, 364; duties of, 368; permanent service of, 369; of- fices for, 369; names of, 371 Secretary of State, filing of articles of in- corporation with, 136, 137, 151; report of banks to, 186 Secretary of the State Bank of Iowa, elec- tion of, 102, 103; duties of, 104; com- pensation of, 104 Serial plan of issuing shares, 237, 238, 239 .Settlers, arrival of, in Iowa, 1, 4 Seventh Legislative Assembly, repeal of charter of Miners' Bank voted by, 30- 34; attitude of, toward banks, 35 Shade, Chas., office of, in Iowa Bankers Association, 370 Sliambaugh, Benj. F., editor's introduction by, VII ; acknowledgment to, xii Shareholders, liability of, 139; right of, to vote, 254 Shaw, Leslie M., mortgage sales by, 283 Shawneetown (Illinois), branch bank at, 400 Sheep, prices of, 5 Sherman, Buren R., recommendation of, concerning private banks, 163, 165; rec- ommendation of, concerning banking de- jjartment, 197 Sherman, Hoyt, history of early banks given by, 49, 55, 56, 59 ; banking in- terests of, 62 ; appointment of, on Board of Directors of State Bank, 86; design for bank notes selected by, 98 ; pres- ence of, at meeting of Board of Direc- tors, 102 ; election of, as secretary pro tem of State Bank, 102 ; sketch of busi- ness career of, 390 Sherman, Hoyt, and Company, eai-ly bank of, 52 Sherman, John, influence of, in adoption of national banking act, 129 Shields, .John G., appointment of, as trus- tee of Miners' Bank, 31 ".Shinplasters", dissatisfaction with, 97, 128 Silver, coins made of, 6 Silverware, storage of, 343 Sioux City, branch of Greene and Weare bank at, 52; land office at, 53, 275; banks at, 53, 54, 55; offer of banks in, for deposits, 56 ; circulation of bank notes of, 64 ; application from, for branch of State Bank, 100; clearing house association in, 175, 176, 177; fail- ure of First National Bank at, 177, 178; failure of Sioux National Bank at, 178; reserve requirements of banks in, 217; joint stock land bank at, 295, 298 ; prof- its of banks in, 357; meeting of bank- ers at, 370 Sioux City Bond and Mortgage Company, mention of, 421 Sioux City Cattle Loan Company, organi- zation of, 321, 322; business of, 322, 323, 325; mention of, 421 Sioux City Clearing Hoxise, organization of. 175; exchanges in, 176, 177 Sixth Legislative Assembly, opposition of, to Miners' Bank, 27-29, 33 Slagle, C. W., appointment of. as bank commissioner, 84 ; presence of, at meet- ing of bank commissioners, 99 Smith, S. F., office of, in Iowa Bankers Association, 370 Smith, W. T., presence of, at meeting of Board of Directors, 102 ; financial sup- port offered by, 108 Social features of Iowa Bankers Associa- tion, 366-368 Solomon, Daniel H., motion by, 74 "Some Mistakes in Banking", address on. 365 South Dakota, law of, relative to private banks, 167; debenture companies in, 278, 279; losses of farmers in, 286; placing of, in eighth Federal farm loan district, 289; cattle loans in, 321, 325 Southern States, bonds of. 58, 95 Spanish coins, use of, in Iowa, 6, 60, 61 .Special election, vote at, on bank bill, 75, 84 Special types of banking, 306-332 Specie, lack of, 5, 6 ; amount of, in Miners' Bank, 17, 18, 19, 20; payments in, 17, 18, 337, 338; requirement of, in land sales, 55; reserve of, in branches of INDEX 455 Slate Bank, 95, 96, 119, 120; require- ment of, for taxes, 112 (see also Specie payments) Specie Circular of 183C, 55 Specie payments, suspension of, by Miners' Bank, 20, 21, 22, 23, 24, 25, 28, 29, 30, 31, 33; suspension of, 96, 113; sub- stitutions for, 110, 111 Specie Resumption Act, passage of, 144 Speculation, increase in, 2 Spirit Lake, bankers' convention at, 351, 363, 370 "Spite banks", denial of charters to, 200, 201 Springer, Francis, letter to, concerning Miners' Bank, 26 "State", restriction on use of, in titles of banks, 150, 151, 160, 162, 165 State bank, proposal for, 36, 37, 71, 72, 73, 75 State Bank notes, high standing of, 111- 114; status of, as legal tender, 112, 113; hoarding of, 113; reduction of, 116, 117; burning of, 116, 117, 118 State Bank of Iowa, branches of, 50, 51, 52, 64, 85, 87, 88, 89, 90, 91, 92, 93, 99, 100, 101, 104, 105, 126, 134, 397; president of, 67; recommendation for, 71; objection to name of, 73; interest of S. J. Kirkwood in, 82 ; authorization of, 83, 84; experience of other States used as guide for, 83, 84; history of, 83-125; vote on, at popular election, 84; com- missioners of, 84, 85; provisions of charter of, 84-99; liability of stock- holders of, 88; reports of, 90; in- terest rates of, 91; notes of, 94-99, 104, 105, 110, 111-118; burning of notes of, 98, 116, 117, 118; organization of, 99- 106; first meeting of Board of Directors of, 101, 102, 103; officers of, 102, 103, 104, 105, 106; supervision of branches of, 106, 107; aid of, to State, during Civil War, 108, 109; purchase of State and Federal bonds by, 109; deposits of State money in, 109, 110; financial statement of, 110, 119, 120; relation of, to national system, 114, 115, 116, 118; retirement of circulation of, 114-118; closing of business of, 117, 118, 135; profits of, 121-123; summary of work of, 123, 124, 125; freedom of, from political difficulties, 124, 125; success of, 127; reference to, 133; real estate security not accepted by, 267, 275, 305 State banking laws, lack of, 135, 136 State banks, quality of circulation of, 2; number of, 2, 135, 137, 146, 153, 154, 164, 170, 3 71; tax on notes of, 82, 114, 115; system of, 126-142; Iowa laws concerning, 135, 136,143,150,151,152, 153, 154; establishment and status of, 135-138; reports by, 136, 137, 184, 185, 186, 187, 188, 189; provisions concern- ing, in Code of 1873, 137, 138; capital of, 137, 146, 151, 152, 153, 154, 155. 156, 174, 427; comparison of, with na- tional banks, 146, 147, 222 ; assets of, in Iowa, 146, 147, 427; titles of, 150, 151; development of, 150-154; filing of articles of incorporation by, 151 ; state- ments from, 151; government of, 151, 152; loans by, 151, 214; cash reserve of, 152, 153, 214, 217; relation of, with Federal reserve system, 152, 207, 208, 209, 211, 217, 218, 219, 220, 221, 222; number of directors of, 159; statistics on resources of, 169, 172, 173; failures of, 179; examination of, 192, 193, 194, 195, 196; real estate investments of, 277; investment of, in finance corpora- lions, 315; deposits in, 334; interest paid by, 335; dividends of, 357, 358 State Central Savings Bank of Keokuk, organization of, 118 State Historical Society of Iowa, scrip in possession of, 65; fractional currency belonging to, 97 State National Bank of Keokuk, organiza- tion of, 118 State rural credit law, proposal for, 287, 288 State University of Iowa, income tax con- ference held by, 346, 382 Statehood, movement for, 36 Stevens, Andrew J., money circulated by, 64, 65 Stevens, A. J., and Company, banking in- terests of, 65; responsibility of, for bank notes, 65 Stevens, L. E., office of, in Iowa Bankers Association, 370 Stimson, Mr., digest by, 135 Stock, payment for shares of, in building and loan associations, 248 Stock, live (see Live stock) Stock, State Bank, distribution of, 87; transferability of, 88 Stock quarantine, need of money during, 227 Stock savings banks, plan of, 154; number of, 155 Stockholders,- liability of, 29, 40, 75, 76, 456 HISTORY OF BANKING IN IOWA 78, 88, 150, 152, 160, 295; number of, 355, 356 Stocks, deposit of, as security, 77, 80; fraudulent, 213, 342 Stone. Mr., work of, for Muscatine Branch of State Bank, 106 Storm Lake, failure of First National Bank at. 178; meeting of bankers at, 370 Stuart, robbery of bank at, 376 "Stump-tail" currency, 60, 128 Sturges, Solomon, and Son, closing of ac- counts with, 107 Suudblad, John, killing of. 376; fund for family of, 376 Supervision of banking, 183-203 Supreme Court of Iowa, decision of, con- cerning Miners' Bank, 32 ; decision of, relative to negotiable notes, 381 Supreme Court of the United States, de- cision of, relative to trust company pow- ers. 224; decision of, relative to tax ex- emption of Federal farm loan system, 300, 301, 302; tax exemption case de- cided by, 300, 305 Surplus fund, authorization of, 158 "Swindling", motion to substitute, for "banking", 80 Tables, 119, 120, 122, 149, 150, 171, 173, 174. 176, 178, 232, 268, 271, 272, 307, 311, 357, 370 Taft, William H., postal savings law signed by, 329 Tammany Hall, meeting at, 385 Tarbell. Mr., verdict for, 65 Taxation, reports for purposes of, 133; amount of, for building and loan asso- ciations. 264. 265; exemption of bonds of Federal land banks from, 292; ex- emption of joint stock land bank bonds from, 297, 298; exemption of Federal farm loan system from. 298-303 Taxes, activities of banks in collection of, 56, 346; specie required for, 112; legal tender for, 112, 113 Taylor, Richards and Burden, early bank of, 50 Tekama (Nebraska), Bank of, incorpora- tion of, 64 Tenants, farms operated by, 271, 272. 273 Terminating plan of issuing shares, descrip- tion of, 237, 238, 239 Texas, farm loan associations in, 294; farm loans in. 303 ; live stock produc- tion in, 320; organization of bankers in, 371; banks prohibited by, 390 Thirty-seventh General Assembly, banking department created by, 197 Thomas, E. H., and Company, early bank of, 51 Thompson's Bank-Note Reporter, publica- tion of. 59 Thrift, inculcating habit of, 261, 262 Time lock expert, employment of, 377, 378 Tipton, early bank in, 53 Titus, G. M., meeting called by, 280 Tobacco, price of, 5 Toledo (Ohio), meeting at, 264 Towner, H. M., opposition of, to Federal Reserve Act, 206 Towns, number of banks in, 354 Township scrip, use of, 65, 66 Toy, James F., opinion of, concerning joint stock land banks, 298, 299 Trade acceptances, use of, 226, 309, 339 Treasurer of the United States, deposit of securities with, 152, 158; reports to, 184 Treasury, Secretary of the, membership of, in Federal Farm Loan Board, 288; stock subscribed by, 289 Treasury Department, currency bureau in, 129; home bureau in, 264; purchase of farm loan bonds by. 300, 301 Treasury notes, making of, legal tender, 110, 113 Tremain, G. L., money borrowed by, 55; address by, 324, 351 ; tribute to, 363 ; death of. 363; office of, in Iowa Bankers Association, 363, 370 Troops, expenses of, during Civil War, 108 "Trust", use of, in name of corporation, 162 Trust companies, assets of. in Iowa, 147; statistics on. in Iowa. 173; right to join Federal reserve system given to, 208 ; relation of. to national banks, 276; in- vestments of. in finance corporations, 315; deposits in, 334 (see also Loan and trust companies) Trust company powers, extension of, to na- tional banks. 224, 225 Trust departments, establishment of, 343 Tuthill. W. H.. early bank of, 53 Union BuUding Association (Greenwich, England), establishment of, 229, 230 United Cattle Loan and Live Stock Com- pany (Des Moines), mention of, 421 United States, number of State banks in, 135; building and loan associations in, 230 United States League of Local Building and Loan Associations, meeting of, 233; INDEX 457 organization of, 263 ; home bureau spon- sored by, 264 United States Supreme Court (see Supreme Court of the United States) Usury, provision concerning, 256 Utah, law of, relative to private banks, 167 Vandalia (Illinois), bank at, 400 Van Valkenberg, A. S., decision of tax ex- emption case by, 300 Vaults, care of valuables in, 343, 344 Vermont, sale of mortgages in, 283, 286 Vice President of State Bank of Iowa, duties of, 103, 104 Viele, S. D., State Bank notes burned by, 116; service of, in closing State Bank, 117 Vigilance committees, 375 Vinton, circulation of bank notes at, 64 Virginia, bank notes of, 59, 60, 128 Wage earners, need of, for loans, 306, 307 Wallard, Mr., mention of, 25 Walworth, George H., attack on Williams by, 27 Wapello, application from, for branch of State Bank, 100 Wapello scrip, samples of, 65 Waples, F. C, mention of, 25; list fur- nished by, 281 War activities of banks, 349, 350 War Finance Corporation, support of, by bankers, 381 War of 1812, land warrants to soldiers of, 54, 284 Ward and Bryan, early bank of, 52 Warehouses, bonding of, 316 Warner, Frank, position of, as Secretary of Iowa Farm Credit Corporation, 317; election of, as Secretary of Iowa Bank- ers Association, 371 Warrants, marketing of, 109 Washington, early bank in, 53; application from, for branch of State Bank, 99, 100; branch of State Bank at, 101 Washington (D. C), gold-settlement fund kept at, 219 Washington Branch of State Bank, organi- zation of, 101; conversion of, into na- tional bank, 118; profits of, 122 Waterloo, early banks in, 53 ; application from, for branch of State Bank, 100, 106; clearing house association in, 175, 176; building and loan associations at, 243, 246, 250; meeting of bankers at, 263, 367, 370, 422; statistics concern- ing Morris Plan company at, 307, 311, 312 Waterloo Building and Loan Association, distribution of profits of, 240; with- drawal of members from, 242, 243 ; loans by, 246 Wealth, amount of, in Iowa, 353 Weare, George, description of bank of, 53, 54 Weare, John, bank of, 53, 54 Weare, John, Jr., trip of, to Fort Dodge, 55 Weare, Finch, and Company, early bank of, 52 Weaver, James B., election of, to Con- gress, 145; nomination of, for Presi- dent, 145 Webber, J. F., meeting called by, 280 Weed, Chester, presence of, at meeting of Board of Directors, 102; election of, as President of State Bank, 102; diffi- culty of, over specie payments, 112 Weeks, John, Federal Reserve Act sup- ported by, 209 Weiser, C. J., Investment Banker (De- corah), mention of, 422 West, description of money in, 58-69, 128; national banks in, 131 West of Scotland, American Investment Company, Limited, operation of, 279 West Union, bank case appealed from, 201 Western Exchange, Fire and Marine Insur- ance Company, banking activities of, 61, 62 Western Stage Company, scrip issued by, 68 Wheat, price of, 4, 5; production of, in Iowa, 46 Whigs, attitude of, toward United States Bank, 1, 7; attitude of, toward Miners' Bank, 33, 34; attitude of, toward banks. 36, 39, 42, 43, 44 White-Phillips Company (Davenport), men- tion of, 422 Whiting, Timothy, presence of, at meeting of Board of Directors, 102 Whitney, N. R., work of bankers in sale of war bonds described by, 350 "Wild cat" banking, evils of, 47, 59 'Wild cat" money, 6, 74, 113, 114, 128 Williams, Elias H., appointment of, on Board of Directors of State Bank, 86 Williams, Henn, and Company, early bank of, 53 Williams, Jesse, testimony of, in legisla- tive bribery case, 26; attack on, 27; loan secured by, 388 Wilson, Judge, trustees appointed by, 31 458 HISTORY OF BANKING IN IOWA Wilsou, Woodrow, inauguration of, 205; Federal reserve system supported by, 211 Wisconsin, banking law of, 58, 81, 82; notes of, 59, 60, 128; purchase of mort- gages in, 283; secretary of bankers asso- ciation in, 369; prohibition of banks in, 390 Wisconsin, Territory of, application to leg- islature of, for bank charter, 10; in- vestigation of Miners' Bank by, 14-19 ; adjournment of legislature of, 19 Women, presence of, at meetings of Iowa Bankers Association, oGG Wool, loans on, 316 World War, effect of, on banking re- sources, 169, 181, 210, 211; benefits of Federal reserve system during. 227, 228; services of bankers during, 349, 350 Wyoming, placing of, in eighth Federal farm loan district, 289; interest rates in, 303, 304; cattle loans in, 321, 325 Yeomans, S. P., land office in charge of, 54 THIS BOOK XSB^.gy^w'-"''""'^ ^N INITIAL F^, ^u^-o S ^ V. .«=QESSED FOR P^'^^ !:^c PENAUTY WIUU BE ^S^^^^^THE DATE DUE. ^J^/JoURTH THIS BOOK ON THE ^^^^^ O'lJ" ^tS DAY WIUU INCREASE TO ^^ ^^^ SEVENTH DAY AND TO S1-" ____== OVERDUE. I^l00m-7,'39(402s) TU U007J GENERAL LIBRARY - U.C. BERKELE I BaDoaT7«=jfls «S£'9t^T^« 491501 UNIVERSITY OF CALIFORNIA LIBRARY .?•