61ST CONGRESS \ c^xrATT? /DOCUMENT 2d Session } SENATE * No. 593 NATIONAL MONETARY COMMISSION The German Great Banks and Their Concentration in connection with The Economic Development of Germany By DR. J. RIESSER Geheimer Justizrat and Professor at the University of Berlin Third edition completely revised and enlarged Washington : Government Printing Office : 1911 NATIONAL MONETARY COMMISSION. NELSON W. ALDRICH, Rhode Island, Chairman. EDWARD B. VREELAND, New York, V ice-Chairman. JULIUS C. BURROWS, Michigan. JOHN W. WEEKS, Massachusetts. EUGENE HALE, Maine. ROBERT W. BONYNGE, Colorado. PHILANDER C. KNOX, Pennsylvania. SYLVESTER C. SMITH, California. THEODORE E. BURTON, Ohio. LEMUEL P. PADGETT, Tennessee. HENRY M. TELLER, Colorado. GEORGE F. BURGESS, Texas. HERNANDO D. MONEY, Mississippi. ARSENE P. Pujo, Louisiana. JOSEPH W. BAILEY, Texas. ARTHUR B. SHELTON, Secretary. A. PIATT ANDREW, Special Assistant to Commission. TABLE OF CONTENTS. Page. JFACE XI PART I. [INTRODUCTION. The tasks of banks in the economic life of the na- tion i 1 . General considerations. ..<>, i 2. Special considerations 8 (a) The tasks of banks during normal times 8 (b) The tasks of banks during critical times 15 (c) The tasks of banks in time of war and in preparing for war (financial readiness for war and financial conduct of war) 21 PART II. THE FIRST PERIOD (FROM THE MIDDLE OF THE NINETEENTH CENTURY TO THE YEAR 1870). CHAPTER I. Sketch of economic conditions in Germany at the time of the establishment of the oldest existing credit banks 27 CHAPTER II. The German banks during the first period (1848-1870) . 44 Influence of the Credit Mobilier, its merits and defects 49 Differences between the Credit Mobilier form of organization and that of the German banks, founded during the first period, especially the Darmstadter Bank and the Disconto-Gesell- schaft 56 The A. Schaaffhausen'scher Bankverein 71 The Berliner Handelsgesellschaft 75 The Mitteldeutsche Kreditbank 77 Concluding remarks 83 PART III. THE SECOND PERIOD (FROM 1870 TO THE PRESENT DAY). CHAPTER I. (i) Table of events during the second period which influenced the development of German bank- ing 85 in 231868 National Monetary Commission CHAPTER I. (2) Sketch of the economic development of Germany Page. from 1870 until the present 87 Preface 87 Growth of population 88 Growth of national wealth 91 Progress of national income 92 Investment of national wealth 93 Changes in the distribution of incomes. . 96 Small and large scale industry 102 Population engaged in industry, com- merce, and agriculture 103 Progress of agriculture 105 Necessary imports, unfavorable balance of trade no Strengthening of the domestic market. . 113 The founding of stock companies 115 Production, consumption, imports, and exports of pig iron 120 Production of coal 122 Electro-technical industry 123 Chemical industry 125 Textile industry 128 Domestic industry 129 Development of facilities of communi- cation 130 Railroads 130 Postal facilities 131 Telegraph 132 Telephone 132 Merchant marine 133 Subsidies to navigation 134 The Hamburg - American Packet Steamship Company 135 The North-German Lloyd 136 Agreements with the International Mercantile Marine Company 136 Shipbuilding 140 Navigation on the internal water- ways 141 Currency: The Reichsbank 141 Cartels, Definition, development in Germany. Official inquiry 167 Steel Works' Union (Stahlwerksver- band) 174 IV Table of Contents CHAPTER I. (2) Sketch of the economic development of Germany Page, from 1870 until the present Continued. Preface Continued . Cartels, Definition, development in Germany. Official inquiry Cont'd. Struggle between the "mixed" and " pure " works 175 International agreements regarding the exportation of rails and girders . Concluding remarks [AFTER II. The (German great banks during the second period (1870 to the present) Section i. Introduction Section 2. The current (regular) banking business I. Debit operations of the credit banks (taking of credit) A. The deposit business 1 . General observations 2 . Deposits in foreign countries 3 . Deposits at individual Berlin great banks . . 4. Deposits at all German credit banks and at the Berlin banks B. Other debit operations of the credit banks The cheque system and its present use by Ger- man banks II. Credit operations of the German credit banks. (Lending of credit) A. Introduction 1. Observations on the granting of general bank credit 2. Observations on the granting of industrial credit in particular Objections to the methods used by the banks heretofore in lending credit. . . The proposal of Felix Hecht regarding the organization of a central institu- tion for long-term industrial credit . . . The current-account business. . .' C. The acceptance business 275 D. The discount business 289* E. The "lombard" (collateral loan) and "report" (carry-over) business 307 F. The brokerage business 323 G. The transformation, founding, issuing, syndicate and security business 336 i c The transformation and founding business . . 336 182 183 1 86 186 191 191 191 191 202 204 208 211 2I S 219 219 219 229 232 B. 240 259 / National Monetary Commission CHAPTER II. The German great banks during the second period Page. (1870 to the present) Continued. Section 2. The current (regular) banking business Continued. II. Credit operations of the German credit banks. (Lending of credit) Continued. G. The transformation, founding, issuing, syndicate, and security business Continued. 2. The issuing, syndicate, and security busi- ness 347 (a) The issuing business in general 347 (a) Methods used in the issuing business proper and its preliminary stages 348 (^9) The extent of the German issue business 358 (6) The issuing of industrial securities. . 364 (c) The floating of German State and Communal loans 377 (d) The floating of foreign securities 384 (a) Principles underlying the flotation of foreign secu- rities (see section 7) 384 (/?) Amount of foreign securi- ties issued in Germany . . 392 (e) Amounts of listed securites issued by each of the (6) Berlin great banks (see Appendices V and VI) 395 (/") The syndicate business 396 (g) The security business 402 The importance of a strong bourse 406 Sections. Bank groups and syndicates 407 (Section ^VPhe over-sea and foreign business of the German ^ -^ ,-*' credit business 420 \T*j Part taken by the banks in developing German over-sea import and export trade 420 The opening of branches in Hamburg, Bremen, and Lon- don, and the organization of over-sea and foreign banks, and of domestic subsidiary banks for over-sea and foreign business 432 1. Participations of the Deutsche Bank 432 2 . Participations of the Disconto-Gesellschaf t 440 3. Participations of the Dresdner Bank 445 4. Participations of the Darmstadter Bank 447 5. Participations of the Berliner Handelsgesellschaf t . 450 6. Participations of the A. Schaaffhausen'scher Bank- verein 452 7. Participations of the Nationalbank fur Deutsch- land 453 VI Table of Contents CHAPTER II. The German great banks during the second period Page. (1870 to the present) Continued. Section 4. The over-sea and foreign business of the German credit business Continued. III. The common subsidiary companies of the German credit banks for the promotion of over-sea and foreign business. 455 Section 5. General financial results of the German credit banks: Gross earnings and their composition; general ex- penses; net profits; dividends; writing off; reserves. 460 Section 6. Character of the business management and business development of each of the Great Berlin Banks 472 1. The Deutsche Bank 472 2. The Disconto-Gesellschaft 482 3. The Dresdner Bank 492 4. The Darmstadter Bank 498 5. The A. Schaaffhausen 'scher Bankverein 507 ^ rr ~ ^ 6. The Berliner Handelsgesellschaft 517 ^Section 7. .The so-called export capitalism. The investment of \t_ ^cr-^' German capital in foreign industrial and commercial enterprises and securities. The establishment of subsidiary banks exclusively for foreign business with special reference to its connection with the industrial export policy 527 Section 8. Reform proposals concerning bank deposits, and their justification 546 I. General observations 546 1 . " Safety of depositors ' ' a reason for reform proposals . 549 2. Particular proposals made with this end in view by Caesar Straus, Otto Warschauer, and Count von Arnim-Muskau 549 3. Reform proposals based on other considerations (Heiligenstadt) 553 4. Considerations on which the first-named reform pro- posals are based 554 (a) Supposed superiority of the English bank- ing system 555 (6) The alleged small own resources (share capital and surplus) of the German credit banks 559 (c) The liquidity of the resources of the Ger- man credit banks. Coefficient of li- quidity 561 II. Criticism of the individual reform proposals 573 i . The creation of a central private deposit bank or of a government deposit bank for the German Empire and of similar deposit banks for each of the German States 573 vn National Monetary Commission Page. CHAPTER II. The German great banks during the second period (1870 to the present) Continued. Section 8. Reform proposals concerning bank deposits, and their justification Continued. II. Criticism of the individual reform proposals Continued. 2. The granting of priority rights to depositors 577 3. The fixing of a legal ratio between savings deposits and the share capital 578 4. Legal regulations regarding the investment of de- posits 579 5. Depositing a certain portion of the private deposits at the Reichsbank 580 6. Publication of summary bank statements according to a legally prescribed form 589 7. Penalty for "banks and bankers who by public or written appeals, or through agents solicit deposits or savings " 597 8. A supervisory board 599 Concluding observations 600 PART IV. PROGRESS OF CONCENTRATION IN GERMAN BANKING DURING THE SECOND PERIOD (1870 TO THE PRESENT). CHAPTER I. Causes of the concentration movement 602 1. General causes 6 02 2. Special causes 606 CHAPTER II. Causes determining the extent and rapidity of the concentration movement 5 Section I. General causes gj, Section 2, Special causes 6 I4 I. The liquidation of banks during the seventies 614 II. The cartel movement in industry during the nineties. ... 614 III. Mistakes of (Stamp and bourse) legislation 618 Decline of the class of private bankers 619 IV. Special causes of the rapidity of the concentration move- ment during 1901-1904 5- - 1. The crises of the years 1873 an d 1900 635 2. The founding of the United States Steel Corpora- tion, February 23, 1901 5^0 3. The founding of the Steel Works' Union in Dusseldorf , March i, 1904 640 vm Table of Contents Page. CHAPTER III. Methods and forms of concentration 641 Section I. Outward course of development 641 A. The several (8) great banks (see Appendix VII) 641 B. The aggregate capital power represented by the great bank groups 642 I. The group of the Deutsche Bank 643 II. The group of the Disconto-Gesellschaft 644 III. The group of the Dresdner Bank 644 IV. The group of the A. Schaaffhausen'scher Bank- verein 645 V. The group of the Darmstadter Bank 645 Section 2 . General tendencies and forms of concentration 647 I. Scheme of general development 647 II. The two periods in the history of concentration 651 Tables regarding the general development of concen- tration within the 1. Great banks (see Appendix VIII, Tables 1-8) 1008 2. Allied banks (see Appendix VIII, Table 10) ion Section 3. The several ways and forms of concentration, their advantages and disadvantages 653 I. Local concentration 653 II. Concentration of capital and power 656 A. In a direct way 656 1 . By means of increase of capital 656 2. Through absorption of banking firms and fusions of banks 658 3. Through the creation of permanent communities of interest 664 The communities of interest in the mining re- gions (Upper Silesia and Rhineland-West- phalia) 666 (a) through the founding of subsidiary and trust companies 667 (b) through acquisition of shares 672 (c) through agreement 673 (d) through exchange of shares 677 B. In an indirect way, by means of decentralization of operations, viz, through the founding of 1. Commandites (silent partnerships) 680 2. Branches 684 3. Agencies 696 4. Deposit offices 699 IX National Monetary Commission PART vO Page. The mutual influence of concentration in banking and in industry . . 703 I. Industrial concentration and its principal causes 703 II. Influence of the banks and. banking concentration on indus- trial concentration 712 1. On industrial concentration, unaffected or but slightly affected by the formation of cartels 712 (a) the electro-technical industry 713 (6) the chemical industry 721 2. On concentration in industries with strong cartel tendencies (the mining and metallurgical indus- tries) 725 III. Influence of industry and industrial concentration on con- centration in banking 750 PART VI. The situation resulting from concentration; advantages and dangers of concentration; the outlook for the future 751 NOTES 785 APPENDICES. I. Bibliography 883 II. German credit banks founded during the years 1848-1856. . . . 892 III. German credit banks in 1872 893 IV. Representation of the great banks on the supervisory boards of stock companies 897 V. Value of securities issued at the Berlin Stock Exchange by the great banks during the years 1882-1908 921 VI. Value of securities issued at all German Stock Exchanges by the great banks during the years 1897-1908 959 VII. Development of concentration of the German great banks 982 VIII. Progress of concentration within each of the great banks and within the banks allied with them I0 o8 Notes to Appendices VII and VIII I0 i 3 1019 PREFACE. In publishing the third edition of the present book, which first appeared in 1905, the author has tried to com- ply with the general wish to avoid as much as possible the mere reproduction of the text of the ten lectures on which the early editions were originally based. Instead of this, the present edition marks the partial realization of the idea of the larger work which the author has con- stantly had in mind from the very beginning. The author has tried to fulfil the expectation and wishes of the critics (whose suggestions are always wel- come) to the best of his ability and so far as the time at his disposal permitted. The present edition has been completely reshaped and considerably enlarged as indi- cated in the title of the book although the fundamental features of the work and the particular treatment of the concentration movement have been retained. For this purpose it became necessary in the first place to enlarge on the description of German economic devel- opment from 1848 to 1870, and from 1870 up to the present day, in so far as this development exercised a determining influence on the growth of German banking. In the second place an attempt has been made, as far as existing material permitted, to present in nearly every chapter the separate development of each great bank, without, however, obscuring the picture of the general development. XI National Monetary Commission In a separate chapter a comprehensive view is given of the general management and development of the six great Berlin banks. Accordingly it also became necessary to present a systematic description of the most important debit and credit transactions of the banks. This per- mitted the generally desired and fully justified examina- tion of the question whether and to what extent the German great banks have actually fulfilled in the inter- ests of the community the important and numerous tasks set forth in the introductory chapter. In discussing the credit and debit business of the banks it became possible also to devote some space to the treat- ment of questions of technical methods and business pol- icy, which had been entirely kept out from the earlier editions. It will be found that the chapter (VIII) devoted to the analysis and criticism of the reform proposals in the field of bank deposits, which were discussed quite fully even in the first edition, has been greatly enlarged, for the rea- son that these proposals may be said to occupy at present the center of German banking discussion. A further reason was that in the meantime the views of the various experts have been published, as presented before the Bank Inquiry Commission, of which the author was a member. An analysis and appreciation of these views seemed there- fore pertinent. Another subject which had to be passed over lightly in the former editions though against the wishes of the author viz, industrial concentration and the influence which the concentration of banking exercises on it, has now been treated in greater detail. However, for lack of xn P r e f a c e space this chapter even now is limited to a study of this movement in a few typical and specially important branches of industry. Suggestions as to form have also been adopted as far as possible. Much discursive matter, hitherto contained in the notes, has been incorporated in the text. On the other hand large statistical tables, which formerly were part of the text, and thus broke up the continuity of presentation, have been removed to the end of the book in the form of appendices. A series of what I consider very important statistical appendices has been substituted for those printed in the earlier editions. For the preparation and checking of these tables I desire to express my best thanks to Dr. Berthold Breslauer, of Berlin, the editor of the statistical part of the Bank Archil). The tables showing the amount of listed securities issued by the six great Berlin banks constituting Appendices V and VI for the first time provide complete material based on official data concern- ing this important subject. Appendix VIII treating of the course of the concen- tration movement in the case of the eight greatest Berlin banks has been brought down to December 31, 1908. It is hoped that the book in its new shape will meet with the same friendly reception which has been accorded to its earlier editions and that it will be found a reliable reference work, equally free from fulsome commendation and from undue depreciation of the work of the German credit banks. ROME, April , 7909. xiir TRANSLATOR'S NOTE. Prof. Riesser's work, Die deutschen Grossbanken und ihre Konzentration, of which the present volume is a transla- tion, gives the most recent and fullest account of the development, present organization, and practices of the more important German so-called credit banks, par- ticularly the six largest banks, which, with the possible exception of one, may be said to have their central office in Berlin. The name credit bank, which has been retained in the translation, in no way characterizes the actual scope of activity of these banks, but is the term used in recent German banking literature to differentiate the commercial joint-stock and kindred banks without the note-issue privilege from other banks having a, more restricted and special field of operations, such as the mortgage banks, the mutual or cooperative banks, the savings banks, etc. The book abounds in technical legal and banking terminology, for which no exact equivalents in English exist. In numerous cases no translation was attempted. In other cases where the terms occur frequently through- out the volume, a choice of an English equivalent, though more or less arbitrary, had to be made. This applies particularly to the term Depositen, the definition of which the author declares to be impracticable. (See p. 196 et seq.) In German bank statements different meanings are attached to the term by various institutions , the only common feature being that interest is allowed on these "deposits." xv T r an s I at o r's No t e An important function of the German credit" banks is the financing of corporations and the selling to the public of the newly created securities of these corporations. Throughout* the volume this latter practice has been designated as the issuing activity of the credit banks. The success of these operations depends largely upon the " issue credit" of the bank i. e., the confidence of the investing public in the soundness of the securities offered by the bank. In several cases a literal translation of German technical terms seemed entirely proper, though such terms as pure and mixed works (p. 175), mine fur- naces, furnace mines (p. 369), heavy industry, and the like, even with proper explanations in the text, may be regarded by some as literary barbarisms. The proofs of the translation have been submitted to the author, who made several changes in the text which do not appear in the German original. The figures bearing upon American banking have been revised and brought up to date. Thankful acknowledgment is due to Dr. Robert Stein, of Washington, D. C., and Dr. H. G. Friedman, of New York City, for valuable help rendered to the translator. MORRIS JACOBSON. WASHINGTON, D. C., August, 1911. XVI THE GERMAN GREAT BANKS AND THEIR CONCENTRATION. PART I. INTRODUCTION THE TASKS OF BANKS IN ECONOMIC LIFE. (l) GENERAL CONSIDERATIONS. Walther Lotz, in his excellent book on the methods of floating securities (Die Technik des Emissiongeschdfts, 1890), makes the following statement (p. 60): "One of the most prominent financiers in Berlin once remarked to me that his profession was not affected by the social question, which was usually regarded as the most important factor in economic development, and that the speculative banks adopted a neutral attitude toward it." To my mind this statement proves that the Berlin financier in question has strangely misconceived the posi- tion and duties of German banking within the realm of " capitalistic economics." 1 To prove this in detail is neither the least nor the most unimportant aim of the present work. Within the range of capitalistic economics there is a whole series of important and special economic tasks devolving on banks and bankers. To begin with, the funds are capital in the popular sense of the word (that is, sums of money constituting com- 90311 n- National Monetary Commission ponent parts of wealth to be devoted to producing in- come) 2 which accumulate in the safes of banks and bank- ers. It is the bankers' profession and duty not only to take care of the capital, but to turn it to good account, i. e., to make it productive, particularly by placing it at the disposal of others for industrial and other purposes. 3 Banks have to receive the funds placed at their dis- posal for the purpose of investment and profitable utili- sation, and to direct them into proper channels through the granting of credit. The bank enters into relations on the one hand with the capitalist who entrusts to it his available money for productive investment and thus becomes its creditor, and on the other hand, with entrepreneurs and others who receive money for their ventures, and thus become its debtors. The part which a bank plays in its relations between capitalists and persons engaged in various enterprises is similar and as important as that of the trader who acts as independent middleman between producer and consumer, and who participates in the increase of values by trans- porting goods with or without intermediate manufacture from districts where supply is plentiful to districts where demand is great. The so-called regular or current banking business is con- fined to the acceptance and granting of such or similar credit (so-called credit and debit transactions). It in- cludes deposits, current accounts, bill, contango, lombard, and commission business. The tasks involve, as far as is practicable within such limits, the direct furtherance of the power of production of The German Great Banks all industries, including (after what has been said above) commerce, 4 and indirectly the furtherance of the pur- chasing power of all classes of the community. 5 They necessitate endeavors for the investment of surplus capital in a suitable and economic manner, and its utilisation for credit transactions. In the next place, banks and bankers have to provide for a sound and constant regulation of the circulation of money and the adjustment of money settlements in so far as these functions do not fall within the province of special public banks. They also have to provide for a banking organisation of the whole commercial system of payment, and above all for an increase of those forms of settlement which tend to take the place of cash: in par- ticular the employment of checks, transfers (giro), and bank clearing. 6 Finally, they have to establish organic relations between the systems of credit and payment, by using their credit to convert the claims of their cus- tomers in the shape of bills, checks, money orders, etc., into current paper, and thus into ready money, using this latter for the purpose of meeting payment on matured obligations. 7 The historical development of German banking, how- ever, has considerably enlarged the scope of these duties. The transformation effected since the middle of the nineteenth century in the whole system of communica- tions through the use of steam for ships and railways (see p. 34), and the revolution in many industrial branches, caused by the appearance of the steam engine, in con- junction with the creation of a large and unified German economic territory through the customs union of the Ger- National Monetary Commission man States (Zollverein, 1833), paved the way for the ex- pansion and world-wide aspirations of German industry, and thus gave the impulse to large-scale production in many branches of industry. Thus it became necessary that capital as well as credit should be devoted to the building of plants and works in sums and for periods hitherto seldom required, if produc- tion on a large scale was to be maintained and extended. This could only be made possible by the issue of shares or debentures. The joint stock company proving the most reliable ally of trade and industry, conducted on a large scale, it became necessary to transform private concerns into joint stock companies and to establish new industrial enter- prises in the shape of stock companies, whenever it was desired to increase the credit of existing private concerns, to enlarge or diversify production, or to enable domestic industry to enter into competition with foreign producers. The general public in Germany, whose funds were meager compared to those of England, was neither able nor willing at this juncture to participate directly or per- manently in such ventures as mentioned above. The private individual fought shy of investing his capital in enterprises, and, content with smaller interest, bought government securities. 8 Adequate assistance for the demands of capital and credit could not be expected from the existing note-issuing banks, 9 whose increase had long been advocated in the interest of increased facilities of payment, as the extent of their activity was naturally limited by their special functions. In the same manner private bankers, who at The German Great Banks that time were very powerful, at least in several centers (see below, p. 39), could supply only modest means for such purposes means which could neither suffice, nor be tied up for any length of time. In addition to this, the organisation of the banking business at that period was in general neither prepared for, nor adapted to operations of such a comprehensive and difficult nature (see below, p. 40). For these reasons such new and enormous demands could be met only by the creation of special organs, namely joint stock banks, which were called into exist- ence to satisfy these very requirements. In the natural course of things the banks gradually became the pro- fessional and expert intermediaries in meeting the new financial wants. This they were able to do only through continuous and systematic study of the money market, as well as of the markets for the newly created securities, especially among their own customers. Moreover, both the continuity of their existence and regard for their own issue credit (Emissionskredit) , i. e., the permanent ability of maintaining among the German public a market for new securities issued under their auspices, insured a per- manent interest on the part of these banks in the newly created undertakings as well as in the securities which they were instrumental in placing on the market. It is, therefore, too narrow a view, and consequently incorrect, to assume that ( 10 ) " the assistance of the numer- ous private bankers, equally conspicuous for intelligence and wealth, would have amply sufficed for all the tasks described above," and that the German credit banks grew up solely, or almost exclusively, because the general public National Monetary Commission 'rushed madly after the most speculative of securities,' and because of the endeavours made to cater as far as possible to this speculative craze for railway, mining, and foundry shares." It must, however, be acknowledged that these reasons did play a certain part in the matter, especially the desire of the smaller capitalists to par- ticipate indirectly in the industries promoted by the new banks by the speculative acquisition of shares in these banks ("speculating on speculation"). It has been said concerning Saxony, that although the number of private banks was large for the time in question, yet "their powers were inadequate to satisfy the credit requirements." 11 There is ample testimony to prove that this was not solely a local symptom, and a mere glance at the security issues made during that first period leaves the same impression. Moreover it is stated that it was just among private bankers of that period that "the necessity for concentration of capital was felt the most, and that a remedy was being looked for." 12 We know that the committees which in almost all German States were petitioning for concessions (in Prussia long in vain, as is well known) for the establishment of note issuing and credit banks, were composed for the most part of private bankers. 13 Schaffle 14 goes even further in the following statement published in a monograph about 1856: "When industrial development has reached the stage at which great industries are forced to acquire their capital largely through the gathering of small capitals, special economic organisations must develop on which special functions regarding the initiative in stock transactions The German Great Banks devolve. Banks for the promotion of such enterprises meet this need. " As long as these premises for the economic justification of speculative banks have not been scientifically refuted scientists should not allow themselves to be terrified by the mere catchword 'credit mobilier', like children by a bogy." In this manner then, according to historical development, the stock issuing, promotion, and conversion business in Germany became a regular banking business, i. e., a branch of the regular business of credit banks, which a't the same time carried on the so-called current business. On the other hand, in view of the relatively small amount of the available funds for bank investment proper, no attempts were made to establish special deposit banks, as under the circumstances but little profit could be expected from them. Even those persons who on principle are opposed to the whole capitalistic and industrial development as it mani- fested itself in Germany during the last decades, and who have no sympathy for this expansion of the regular busi- ness of the German banks, but rather deplore and find fault with it, will not be able to alter this course as long as the reasons exist which have led up to this development. I am convinced that these reasons will continue to exist for some time to come, owing to Germany's rapidly increasing population, her moderate wealth (at least in comparison to other countries) , also because of her inter- national position in trade and industry, a position attained with difficulty, but which it will be even harder to main- tain permanently. National Monetary Commission It will be seen by the description of the historical development of the sphere of activity of the German banks, that a proper and socially sound administration and organisation of the different departments of banking (especially of the last-mentioned branches), is one of the most important social problems. Moreover as there are as many social problems as there are spheres of social activity, and the various branches of banking are of the utmost importance in the economic life of the nation, the banking problem is closely interwoven with the majority of the other social problems, a fact which is in absolute contradiction with the statement of the eminent financier quoted by I^otz. 2 SPECIAL CONSIDERATIONS, (a) THE TASKS OF BANKS DURING NORMAL TIMES. The proposition last enunciated must be proved in detail by a discussion of the main directions of banking activity. It certainly does not lie within the power of the indi- vidual or the legislator, or even of the administration of the largest bank, to arrange matters in such a manner that only the best sides of the capitalistic system may pre- vail in economic life. It is, however, the most urgent and eminent duty of banks and bankers to endeavor, at least within the scope of their activity, and as far as is within their powers, to effect this as far as practicable, and to see that the profit and loss account of capitalistic economics is closed with a balance in favour of economic progress. Above all, they must promote all the economic interests of the nation, i. e., the interests of all producing classes The German Great Banks without distinction, in so far as the services and the credit required by them come within the sphere of bank- ing activity, and do not conflict with the necessary pre- mises of sound banking policy. These latter conditions are determinative of the kind and extent of support which the so-called " credit banks" are in a position to grant to agriculture. In the next place they have to keep the amount of credit to be granted within reasonable bounds, and to offer, as far as is within their power, the utmost opposition to an unsound demand for credit. The banks must therefore endeavor to obtain at all times a comprehensive and accu- rate insight into the general conditions of the branches of industry and trade chiefly dependent on them for sup- port, in order to be able to discriminate between necessary requirements and false hankerings after expansion and aggrandizement. They should also be able to intervene, or at least restrain and check, in cases where the form and extent of the credit received cause the fear of unsound development. Their duties toward the investment-seeking public are those of the honest broker, who, by reason of his expe- rience and expert knowledge, is able to draw attention to the advantages and dangers of investments, and par- ticularly to explain in a purely objective manner the dangers connected with securities yielding excessive inter- est or dividends. As regards acceptances, they ought to place their serv- ices at their customers' disposal only for economically sound purposes. They should keep the brokerage, the contango and deposit business within normal limits, and, National Monetary Commission as far as it is possible to divine the purposes aimed at, to operate in such a manner that these transactions may not become a cloak for reckless and unsound speculation. In the issue business they should take particular care not to burden the market by an overproduction of securi- ties or by the promotion of shaky ventures, for thereby they might not only cause heavy loss to the purchasers of such securities, but also inflict lasting and severe injury on their own issue credit. More especially they should transform only such under- takings into joint stock companies as are naturally suited to that particular form of commercial organisation. Be- fore deciding to promote or transform such undertakings, they should make very cautious estimates regarding the possible profits of these undertakings. In addition to this, they should investigate the financial position of the whole branch of industry, or business concerned, and, as far as possible, form an opinion as to its future prospects and risks. Finally, they should pursue not only a sound dividend policy, but also a proper economic policy; resist- ing the temptation of momentary profits, they should abstain from business that does not appear economically sound, or might be detrimental to the business interests of the nation. The problems which the German banks have to solve during ordinary times have become, step by step, more comprehensive, more difficult, and more important. The number of these tasks and the sphere of activity of the German banks have grown with the increasing size, consolidation, and power of the country. The banks, particularly the ' 'great banks, " were called upon to lend The German Great Banks intelligent support to the Reichsbank (founded in 1875-76) in its currency and discount policies, and in its endeavors to introduce and promote "giro," clearing, and check transactions, though this support was not always forth- coming to the full extent. Another task which fell to their lot and of which they can neither be said to have acquitted themselves quite satisfactorily was to support the land policy of the government and municipalities by means of the mortgage banks and real-estate companies which they had established against purely speculative and other undertakings which made no allowance for public interests. In countless ways, especially by an active par- ticipation in the organisation of state and municipal credit, they were called upon to make possible the accom- plishment of important state and administrative tasks, as well as to promote the growth of German towns and the development of German ports, railroads, and highways. They were called upon to organise German inland naviga- tion, as well as to provide for the development of the German railway system, and for the industrial utilisation of electric light and electric power. They had to assist by counsel and deed the business man crossing the seas as pioneer of German trade. It became their function to support the industrial export policy of the nation when it came to be considered in Germany an economic neces- sity, and to promote the economic development of the colonies, as well as of German cable communications by a series of undertakings not promising immediate returns. They had to strengthen our financial, and with it our political, influence abroad; nor was this done without many a bitter experience. For in this field they met the National Monetary Commission competition of the majority of the great powers in the underwriting of foreign loans, the promoting of foreign undertakings, and the opening of international business relations, with the disadvantage that their rivals had entered the field long before them. By assisting German navigation, and establishing German banks abroad, they imparted to the German name a renown previously un- dreamed of, thus extending by their activity the sphere of German business and political influence. Finally, by a cautious financial policy, they prepared our financial read- iness for war, a\id for the carrying on of war. How and to what extent German banks acquitted them- selves of all these tasks will be set forth in the following pages. Difficult and numerous as are the problems of external policy, those of internal policy are no easier. Success in the latter field became conditioned upon the recognition of two principles as the basis of all business activity. Furthermore these principles had to be observed under all vicissitudes, in the hurry of everyday life, in the pur- suit of business, and in the finding of ways and means for the carrying out of new and urgent tasks as they con- tinually crop up. These two principles are: The principle of the distribu- tion of risks, on the one hand, and the principle of the liquidity of assets on the other. Nearly all the mistakes made in German banking, and the reproaches leveled against it, can be traced back to the violation, or misconception, of these fundamental prin- ciples underlying every sound banking policy. The prin- ciple of the distribution of risks must be observed in almost 12 The German Great Banks all branches of banking activity ; not only in the granting of short or long credit, but also in the promotion, conver- sion, emission, and syndicate business. It implies, among other matters, that no single branch of current business shall be exclusively fostered in an excessive and unsound manner at the expense of others; that the entire amount of blank credit, granted after the most careful scrutiny, shall not bear an unsound proportion to the total of secured credit; further, that credit granted to a single undertaking, or branch of industry, shall not be too high; that in case of underwriting and share issues provision shall be made for a fitting distribution of par- ticipations; for there is always the possibility of a sud- den change in political and economic conditions, as well as of changes in the market which may affect particular cases. It therefore becomes necessary to bear in mind constantly the need of the diminution of risk, even in the most promising ventures and during the most favored state of the market. The securing and maintaining of the liquidity of the assets is another most essential task incumbent on a banker. Indeed, in view of the variety of claims made on the resources of bankers and banks, and of the multi- plicity of aims pursued by them, it is one of the most difficult problems of banking policy. It is all the more difficult, since the establishment of the right proportion of the so-called quick assets to the liabilities, especially to the obligations falling due at any time, or within a cer- tain period, does not always depend solely on the will and discernment of the Bank. Possibilities have constantly to be reckoned with; for instance, that the issue of new National Monetary Commission shares required to restore the necessary liquidity of the bank's resources after a great increase of business is im- possible during bad or critical times; that consequently its assets would be tied up just at the very moment when it might be called upon to relieve general embarrassment by proper intervention. It is, therefore, a matter of necessity to constantly con- trol the liquidity of the resources by frequent general inventories (Generaldispositioneri) as is done, for instance, with the greatest care, and at short intervals by the Ger- man ''great banks" in addition to the daily cash inven- tories (Kassendis position) , 15 further, to increase the amount of the quick assets by a proper composition of the security and bill holdings; to strengthen both the visible and invisible reserves; and to regulate with the greatest vigilance the extent of the obligations, as well as their proportion to the liquid resources. It may well be said that, on the whole, the German banks, or at least the greater part of them, and more especially the " great banks" have accomplished and are accomplishing a good deal in this respect. In this way the objections which are continually urged against the inclusion of the deposit business in our banks' spheres of activity are most effectively refuted, or reduced to narrow limits. For there can hardly be any question of 'dan- ger" when the deposits, and the other obligations due at short notice are balanced by more than ample security in the shape of the quickest assets, and if, in addition, special caution is exercised in the selection of the securities owned by the bank, as was the case with the Deutsche Bank, which on the last day of its fiscal year (December 31, The German Great Banks 1908) held among its assets some 40,900,000 marks of securities, acceptable for investment in trust funds. We shall have to go into this question later on in a more detailed manner. 16 (b) THE TASKS OF BANKS JDURING CRITICAL TIMES. If the sphere of activity of the banks, of which natu- rally only the most important features have been barely outlined, is exceedingly extensive even during normal times, necessitating great discernment, caution, knowledge, and experience, it follows that the extent and difficulty of such tasks becomes considerably augmented during and after those economic crises which all countries experience periodically. There will probably never be a permanent cessation of crises, any more than there will ever be permanent peace. However, just as it is the duty of diplomats and states- men constantly to reduce the possibility and probability of wars by the prudent removal, prevention, or mitiga- tion of all disturbances of the political equilibrium, so it is the duty of the directors of the great banks to prevent in an ever-increasing degree the breaking out of crises, to guard against a disturbance of the economic equilib- rium as much as can be done by external influence, and by a cautious and preventive business policy in all the above-mentioned spheres of activity. This implies to a continuously increasing degree an accurate knowledge of the internal conditions of indus- try, commerce and the exchanges, also of the financial and commodity markets, and the general international situation. National Monetary Commission This duty entails above all a keen perception of those symptoms which, like storm-petrels flying before the storm, act as signals to the experienced observer. Science, in modern times, with the aid of particularly delicate instruments, has been able to record earthquakes, and with accurate knowledge of the factors determinative of a change of weather (as contained in the reports of meteorological stations) to predict storms and give timely warning to those concerned. Similarly, undeterred by the course of contemporary events, experienced observers, with the help of modern scientific resources, and knowledge gained from former crises, ought to be able to read disturbances of equilib- rium as from an economic seismograph, and thus predict the approach of crises. The study of the history of crises 17 shows in the most striking manner that, provided the same causes exist, the effects are as similar as if one crisis had " copied " its predecessor, as a schoolboy copies his neighbor's essay, or as a legislator frequently copies the draft of his fellow-legislator's bill. Crises may be defined as lengthy and serious disturbances of the bases of either the pro- duction, supply, or market systems, of the payment and credit systems, or of the mutual relations of these systems. From the history of crises, 18 the knowledge of which I regard as indispensable to every director of a bank, it can be established with certainty that almost without excep- tion every crisis (stock exchange, credit, commercial, pro- duction crisis, etc.) is preceded by a more or less rapid rise of the rates for short-time credit, i. e., of the discount rates. 16 The German Great Banks It will also be noticed that the cause of such a rise in the discount rate is almost invariably an increase in the demand for credit, a demand far exceeding the available resources, which, wherever a central state note bank exists, finds expression in a great increase in the demands made on its funds. The banks, by virtue of their accurate knowledge of stock exchange conditions, of market quotations, of "reports" and "deports," and of the rates for daily and ultimo money, are best qualified to answer the ques- tion whether such an increase in the demand for credit is accompanied by a corresponding increase in stock- exchange speculation. They are also able to draw fairly accurate conclusions, from the extent and kind of bill, acceptance and current account credit required by their customers, as well as from the volume of their report and collateral accounts, as to the existence, or the ap- proach, of such excessive speculation as is likely to cause the outbreak of a crisis on the exchange. The greater their clientele the more reliable are such conclusions. The approach of an industrial or a commercial crisis can be perceived or inferred not only from general eco- nomic conditions, but also from a series of phenomena which take place in the field of bank transactions. The imminence of such crises can be inferred from the rapid growth of the claims made on the credit of the central note bank, and in view of the growing intimacy between industry and the banking world, from a series of occur- rences that become reflected in the internal bank man- agement, as well as in the impaired liquidity of the bank's assets and the decrease of available cash resources. 90311 ii- National Monetary Commission These symptoms need not manifest themselves in their entirety nor simultaneously. Some of these occurrences are: The increased credit demands, growing by leaps and bounds and becoming more striking each day, and the ex- cessive, and finally complete withdrawals of existing cash deposits. Further, the displacement of short-term credit by long-term credit; the rapid rise in the number of bills due that have to be extended; the constantly increasing offer of securities of an inferior and unsound nature from a banking standpoint. Other signs (though they are at first not easily recognised as such) are the demand by man- ufacturers of bank credit, especially of acceptance credit, not intended for current operating expenses but for pay- ing dividends, or for considerably augmenting fixed capi- tal, i. e., extension of plant, new machines, premises, etc. 19 Next, the continual demand for advances without any stated reasons, or for veiled purposes; the constantly growing delay in the receipt of payments due, and of the so-called "specifications" in industry (which only gradually become known to the bankers, and seldom to their full extent) ; the great and rapid changes, especially the sud- den rise of prices of raw materials and manufactures; finally, a superabundance of promotions, conversions, and flotations, and the wholesale establishment of subsidiary, affiliated, and trust companies. Although Helfferich 20 has proved (I venture to say with mathematical exactness), that in most cases (especially as regards the last German crisis) the amount of the gold production, gold imports and exports, never had the im- portance which Sombart ascribed to them; still, like the fluctuations of the rates of exchange and discount (bank 18 The German Great Banks and private discount), these factors should also be care- fully watched. Finally, important aids have recently been made avail- able which in a characteristic manner though with some limitations help to diagnose the approach of industrial or commercial crises. I have in mind the valuable reports first published in Germany by J. Jastrow, the editor of the Arbeitsmarkt and later continued in the Official Labor Gazette (Reichsarbeitsblatt). These reports give data regarding the labor market, especially the demand and supply at the public labor exchanges and the extent of unemployment. It was these reports I had in mind when I referred above to modern scientific auxiliaries. 21 Laxity in the observation and appreciation of such causes, especially if produced by ignorance of former crises at home and abroad, is one of the gravest and most fatal mistakes of which bankers can be guilty. It is the less excusable the larger the power and the capital of the bank, the wider the field of economic observation and the greater the influence which may be exercised by means of a prudent business policy. A deficiency in this respect prevents the bank manage- ment from taking measures at the proper time, i. e., before the outbreak of the crisis, and thus if not preventing a crisis, at least mitigating its severity. The extent, nature, and opportuneness of such measures above all serve as a reliable gauge of the efficiency, prudence, and foresight of a bank management. For, during a crisis, it is difficult, often impossible, to pursue a restrictive business policy, to collect outstanding debts, to call in credits, to decline to discount bills and National Monetary Commission acceptances; indeed such a policy is generally a serious mistake, likely to cause an increase of the extent and intensity of the crisis, for it may give rise to the disastrous notion that money and credit are not merely dear, but are not to be had at all. 22 What is required is a preventive policy, a cautious intervention before the outbreak of the crisis. To do this it is necessary to give opportune warn- ings against drawing bills, increasing engagements, and credit; to make seasonable reference to the above- mentioned indications of the probable approach of a crisis, while making provision at the same time for a slow and prudent though consistent increase in the liquidity of the bank's resources. Provided this is done, the bank can not only await quietly all dangers, but is also able to offer support and aid in the form of discreet help, or energetic and conspicuous intervention in order to prevent or at least lessen and mitigate the collapse of otherwise sound undertakings, temporary embarrassments of clients, and serious disturbances of the market. In this manner, the suddenness of the outbreak, as well as the extent, duration, and seriousness of a crisis are reduced. A further effect of such a policy is that the crisis is not followed by a period of lingering and latent depression, which is frequently worse than the crisis itself, and which renders recovery, i. e., return to normal condi- tions, much more difficult. It must be acknowledged, how- ever, that for persons standing in the midst of business and practical life, and who are frequently confronted by occur- rences of a contradictory nature, or difficult to fathom, it is far more difficult to perceive the approach of a crisis, than for critics, who ex post, or after the outbreak, can The German Great Banks easily review circumstances and symptoms that have then become clear and connected. BAs a general rule, however, threatening signs such as are described above (p. 17) as almost regular harbingers of a crisis, ought to be correctly diagnosed whenever they occur not singly, but as connected or mutually comple- mentary symptoms of a serious affection of the body economic. It is a nobile officium, especially of the great banks, to intervene after the outbreak of a crisis, not only where their own clients or interests are concerned, to lend their support, attempt reconstruction and thus to prevent or at least remedy a serious disturbance of the market by conspicuous and therefore especially efficacious action. It will always redound to the credit of the great Berlin banks and bankers that through their intervention imme- diately after the collapse of the Preussische Hypotheken- Aktienbank, of the Deutsche Grundschuldbank and of the Pommersche Hypotheken-Aktienbank, they prevented (with almost immediate and favorable effect) the absolute demoralization of the entire mortgage bond market, and that through the reorganization of these concerns 23 they reduced to a minimum the losses sustained in wide cir- cles on account of the securities issued by these establish- ments. 24 The same applies to their intervention during the catastrophe in Saxony. (c) THE TASKS OF THE BANKS IN TIME OF WAR AND IN PREPARING FOR WAR (FINANCIAL READINESS FOR WAR AND FINANCIAL CONDUCT OF WAR). 25 Banks have also to make timely provision (as far as possible) in times of peace for the eventuality of war. National Monetary Commission The marshaling of financial forces must correspond to that of military forces, and just as military mobilisation is made possible by careful plans made in times of peace, so too the marshalling of financial forces should be facili- tated by schemes likewise devised in times of peace. Weaknesses and gaps in the financial mobilisation may be paid for as dearly as mistakes in the tactical deploying of forces, for to both applies what I have said elsewhere, "that it is impossible without severe losses to evolve a battle formation in the face of the enemy." The most important preparation for financial mobilisa- tion consists in fashioning the credit system in such an elastic manner that in case of war it can cope with the agitated and suddenly increasing calls for credit. To meet this contingency, reserves must be created in time of peace : reserves of considerable extent which can be realised rapidly, i. e., mobilised. These must include on the one hand a considerable amount of domestic first- class securities, especially government and municipal bonds, which in war times can be pledged, if necessary or desired, at the "war lombard offices" (Kriegs-Lombard- Kasseri). On the other hand, they must include foreign Gold-valuten, i. e., bills and other claims receivable abroad in gold, and prime foreign gold securities negotiable on various foreign bourses, consequently possessing an inter- national market. 27 Through the realisation of these gold equivalents, and by calling in outstanding debts from abroad, i. e., by utilising these reserves (the value of which in such cases will be comprehended by the veriest layman), a panic will usually be averted. 22 The German Great Banks The enemy, however, may endeavor to aggravate a panic of this description by the sudden collection of out- standing claims, by an unlimited sale of our home securi- ties, and by other attempts to deprive Germany of gold. Attempts may also be made to dislocate our capital, bill, and security markets, and to menace the basis of our sys- tem of credit and payments. Such a panic might easily occur during the first few days after the declaration of war if the impetuous demand for ready cash and cash reserves (Angstreserven) 28 is not amply and imme- diately satisfied. The latter demand often leads to pre- cipitate withdrawals of giro and current account balances and of deposits, to the recall of credit, and to the precipi- tate sales of merchandise and securities. Accordingly, the banks must endeavor to terminate such conditions as rapidly as possible, as well as to stem the feverish demand for, and the collection of ready money from all depositories, and places of hoarding and storing, so that normal conditions are reestablished, under which all the expedients and substitutes obviating the use of cash will once more assume their normal importance for circulating purposes. Above all, the business policy described above (p. 20) as indispensable during a crisis, must be pursued in times of tension and agitation, which generally precede a war long before its outbreak. Among others, restrictive meas- ures, such as the withdrawal of credit, the refusal to accept bills, or to discount customers' bills, must be avoided. In the next place, interventions should be made in the mar- ket, and all means used for the gradual restoring of public confidence in the solid groundwork of our finance and National Monetary Commission credit systems. It is such confidence which underlies not only the acceptance of all cash substitutes (Geldsurrogate) , which abound to a far greater degree than ready money, but also the determination to fulfil all pending engage- ments, or at least to terminate them slowly and cautiously, as well as the resolution not to withdraw deposits, nor to flood the market with securities at extremely low rates, &c. The "great banks" should cooperate in all these direc- tions, not only by word or through influencing their clients, but by their own example, especially by exercising the greatest reserve in withdrawing their credit balances from the Reichsbank, and in presenting bills for re-discounting. Besides this, they should aid those ''financial precau- tionary measures" which come within their sphere of activity i. e., those measures which may be undertaken after the declaration of war in order to ease the market and credit demand and to maintain our gold standard, and the circulation of our bank notes. 29 In Germany, as I have endeavoured to prove elsewhere, 30 these tasks would be facilitated to some extent during the critical weeks immediately following a declaration of war by the amount of bullion likely to be at our disposal, which includes the "war treasure" of 120,000,000 marks in the Julius tower 31 at Spandau (this latter, however, would not go far) ; and by the further fact that the expenses of mobilisation, 32 as far as can be judged to-day, could be covered by the issue of bank notes. 33 Another gratify- ing consequence would be that during this particularly critical time the Government would not have to apply to the Reichsbank with extensive demands for cash; and further, that in so far as the State did not prefer to meet The German Great Banks its requirements by additional taxes, 34 it could await a calmer and more favorable condition of the money market for contracting loans to defray the cost of war. 35 The most important consequence of this fact is, that in negotiating such loans, 36 the cooperation and good offices of the " great banks " and great banking establishments can be counted on to a far greater degree, and with much more certainty than if the negotiations took place during the days immediately following the declaration of war, when the resources of the banks would be taxed to an extraordi- nary extent. It is impossible for the Reichsbank in Germany to execute smoothly and successfully its numerous and diffi- cult tasks in war time without the assistance of the great banks which form such an important factor in the whole economic organisation of the country. The latter, how- ever, must prepare in times of peace in the manner de- scribed above, if they are to render effective support during war time. On the other hand, it would be preposterous to demand of them complete " readiness for war," such as would exclude or paralyse the banks' capacities for doing their customary business. 37 During the stages of deliberation by the administration of the imperial treasury and the Reichsbank concerning the adoption of the sometimes extremely complicated financial measures for the maintenance of the German currency and credit systems, as well as for affording relief to the market, and facilitating money and credit transac- tions during war times, 38 the directors of the great banks and banking houses by reason of their practical experi- ence, their intimate acquaintance with the situation and the receptive capacity of the money market, particularly National Monetary Commission by reason of their exact knowledge of the requirements and capabilities of their clientele, should be amongst the first called upon to serve as a ''financial general-staff" to the imperial treasury and the Reichsbank. The above presents a broad outline at least of the most essential of the many and gradually increasing duties per- formed with untiring perseverance by the German banks. 39 In order to appreciate their achievements, it should be borne in mind that during the first period (1848-1870) their work and progress was greatly hampered by crises and European wars, by German political impotence and lack of unity, by our lack of capital, and the medley of German monetary and coinage conditions of those years. I shall now proceed to outline the growth of these duties during the two epochs of general economic devel- opment, and the development of the German banks (with particular reference to the great banks). These two clearly marked epochs extend from the middle of the nineteenth century to 1870, and from that year to the present day. As far as is possible without effacing or obscuring the picture of the general course of development of the Ger- man great banks, I shall endeavor to do what I omitted in former editions of this book, namely, to show in what manner, and with what success each individual great bank participated in the common work. Indeed, a thorough and proper appreciation of the course of development of each great bank will become possible only after detailed monograph studies of each of these shall have been published. 40 The most important works of reference used in this book will be found in the appendix. PART II. THE FIRST PERIOD (FROM THE MIDDLE OF THE XIX CENTURY TO THE YEAR 1870). CHAPTER I. SKETCH OF THE ECONOMIC CONDITIONS IN GERMANY AT THE TIME OF THE ESTABLISHMENT OF THE OLDEST EXISTING CREDIT BANKS. In 1848 the beginning of the period about to be dis- cussed about 200 years had passed since the end of the Thirty Years' War (1618-1648). Even then, however, Germany, which in consequence of her geographical position from remote ages presented a favorite battlefield for the whole of Europe, had not yet completely recovered from the thorough spoliation and devastation she had undergone. A re-establishment of her completely ruined trade and of her shattered fortunes was impossible during the period from 1648 to 1815, owing to a series of European wars. These were in particular the campaigns of Louis XIV, the Spanish War of Succession, the Seven Years' War, and the struggles against Napoleon. Those wars and campaigns were once more fought on German soil by pow- erful enemies, who like Louis XIV seized parts of the coun- try (for instance, Strassburg, 1681), and devastated anew other parts, such as the Palatinate and other Rhenish countries. During the latter years of that period (1806- 1815), the wars carried on with changing fortune against Napoleon I, which terminated with his dethronement and 27 National Monetary Commission banishment, prevented the beginning of recovery. It was only during the three decades of undisturbed peace (1815-1848), which preceded the economic epoch about to be described (1848^1870), that the German nation had time to recuperate and to engage in the first attempts to rehabilitate trade, industry, and agriculture. 1 Evidently, it is only possible to outline here the main points in the economic conditions of Germany brought about by this lengthy period of peace, and only in as far as they bear on the development and tasks of German banking. The population of Germany numbered at that time about 35,000,000, and was not more than that of France (34,500,000). Of capital there was but little; it was estimated that in Prussia there were 720 marks per head of the population, whereas the amount for England was 2,860 marks, according to an estimate made almost simultaneously (i845). 2 At that period England had almost completed her transition to a great industrial and manufacturing country, supplying more than half of the world's requirements. Her annual coal production at the beginning of the i9th century was about 10,000,000 tons, while that of Germany toward the end of the century was little more than 120,000,000 tons. In accordance with French example, serfdom, as well as the hereditary subjection of the peasants had ceased in the country during the first half of the iQth century, although its abolition was slow, especially in the east of Germany, where it had been firmly rooted for centuries. The aboli- tion of hereditary subjection did away not only with the obligation to furnish hand and team for the benefit of the The German Great Banks landlords, but what proved of even greater and increas- ing importance with the obligation on the part of the peasant to remain on the estate, or in the village belonging to the same. In German industry, despite modest attempts at reform undertaken by the legislation of the individual states, the system of guilds (Zunftwesen) was predominant. Only a few German States, e. g., Prussia (by the laws of 1810 and 1811) and Nassau, had abolished the obligation of craftsmen to join guilds, and to obtain certificates of ability (Befdhigungsnachweis), and had introduced, on principle, freedom of trade, an action against which a vigorous protest was launched by the craftsmen's "par- liament" sitting at Frankfort-on-the-Main from July 15 to August 1 8, 1848. Fairs continued to enjoy great importance in some towns even after 1850, at least for a number of special wares. 3 Trade was confined mostly to local markets and fairs. Delivery trade by sample had, however, started on a small scale. But the conditions for economic reform in most of the German States had already been created by the establishment in 1834 f the i German Zolherein. It may be justly said, that this 1 great Prussian innovation, which transformed the par- ticipant German States into a unified economic area, dealt the death blow to the mediaeval economic system in Germany. It was only then that a uniform economic policy became possible in the* participating States, a policy which soon asserted itself by its urgent demands for protection of new and growing industries against the overwhelming economic superiority of England. The average annual value of the imports into the territory included in the Zollverein for the period 1842- National Monetary Commission 1846 has been calculated by K. H. Rau (Grundsdtze der Volkswirtschaftslehre, 8 ed., part 2, p. 318) at 210,303,000 thalers, or about 630,000,000 marks, while the exports have been valued at 170,089,000 thalers, or about 5ia,ooo,ooo marks, which amounts should be used only with reservation. During the last decade of that period the exports rose quite considerably. Industry was still mainly of the so-called domestic type, and principally carried on in the country. This applies particularly to the manufacture of textiles (spinning and weaving). 4 In the country it was still customary to manufacture at home nearly all the personal requirements in the shape of clothing, linen, and other textile goods. Almost the whole of the German industry seemed to center at that time in the textile and mining industries, both of which were chiefly carried on in the country. 5 The number of workmen 6 employed in these industries exceeded by far the com- bined number of workmen employed in all other industries. The total number of workmen employed in the mining and smelting industries within the limits of the Zollverein (created on January i, 1834) about the middle of the nineteenth century was 60,800. 7 In Prussia there were 48,659 workmen employed in the same industries (average of the years 1848-1857), as compared with 101,908 accord- ing to the trade census of 1895. In 18^ the number of steam-engines employed in the industrial area comprised in the German Zollverein was not quite 500, whereas there were over ^^oooLsteam-engines at work in England about 1 8 10. According to the Prussian Statistical Annual (Preussisches Statistisches Jahrbuch), 8 there were in 1852 only 2,124 steam-engines, developing 43,051 horse-power, employed in the entire industry of Prussia, of which almost The German Great Banks half (according to number and power) belonged to mines and foundries; machine factories occupied only the fourth place in the list. In the Kingdom of Saxony 9 the number of steam- engines used for industrial and agricultural purposes amounted in 1846 to 197 only, with 2,446 horse-power. At the end of this period (1866), however, there were already about 92,000 motors (100,000 H. P.) in use in Germany, whereas in 1895 the total horse-power of all engines in use was 3,400,000, of which 2,000,000 horse-power was em- ployed in industry. In 1840 the whole German freight traffic (with the exception of ocean, town, and rural traffic) was calculated at about 2,000,000,000 ton -kilo- meters, whereas in 1900 it was estimated at 40,000,000,000 ton -kilometers, or almost twenty fold. 10 In 1860 the whole of Germany's industrial output equalled only about half that of France; whereas to-day she ranks second to England in Europe, and takes third place in the world, only the United States and England outranking her. About the middle of the nineteenth century the pro- portion to the total population of industrial workmen u (including those engaged in flour mills and all home indus- tries) amounted in Prussia to only 2.98 per cent. The enormous industrial growth that manifested itself shortly after the establishment of the Zollverein and . its economic measures was due not entirely to that organi- sation, but primarily to the construction of (private) railways, begun in 1835 with, the line between Nuremberg and Furth. This led at the outset to an almost feverish activity in the mining, smelting, machine, and kindred industries. National Monetary Commission As early as the middle of the last century there was quite a considerable demand for pig iron, chiefly by reason of the above-mentioned construction of railways. According to Oechelhauser 12 over 17, 500,000 quintals (Zent- ner) of pig iron were used in railway construction from 1836 up to the beginning of our period (1850). The home consumption, however, was not met by the home produc- tion. England had obtained a great start in the manu- facture of that material, 13 coke blast furnaces having been used as early as the eighteenth century in place of the expensive charcoal fuel almost universally in vogue in Germany during the middle of the nineteenth century. In the Siegerland not a single coke blast furnace existed at the beginning of the forties ; the first coke blast furnace in the Ruhr district was erected in 1847; moreover, the existing blast furnaces were not very efficient. 14 In 1847 the consumption of iron in the region comprised within the Zollverein amounted to 28 Zollpfund (=14 kilograms) per head of the mid-year population (Bering, loc. cit., p. 51), as compared with 309.8 pounds in 1899. The production of pig iron in 1850 was less than that of France, and even of Belgium; it amounted to 208,000,000 kilograms (1875, 2,029,000,000 kilograms). The output of coal amounted in 1850 to 5,800,000 tons, as against 109,220,000 tons in i9oo. 15 In the district of Siegen 38,880 tons of iron ore, valued at 124,974 thalers, were brought to the surface in 1850, as compared with 997,680 tons, valued at 11,857,779 marks, in i9oo. 16 In 1858 (according to Sering, loc. cit., p. 82) of the total number of blast furnaces in Prussia, 56.9 per cent The German Great Banks (1,328,429 Zentners) used charcoal, 37.2 per cent (1,527,989 Zentners) coke, 5.9 per cent (243,516 Zentners) coke and charcoal. Mineral fuel (coal) was not used be- fore 1844 except in Silesia, and even there only in small quantities. As a result the iron imports from Great Britain reached 52 and 55 per cent of the total German consumption up to the middle of the last century. This state of affairs underwent a change only with the rapid growth of the use of coal in Germany, and when the Zollverein aban- doned its free- trade policy by the imposition in 1844 f a duty on iron, which till then had entered free. It is due to the energetic support of the German credit banks that before long the following prophecy, contained in the business report of 1856 of the A. Schaaffhausen'scher Bankverein (p. 53), was fulfilled to the letter: "The iron and coal output of Westphalia, and the Rhineland, in the course of a few years, will not fall short of that of Belgium; in the more distant future it will com- pete successfully in the international market with that of England, provided one of the most important condi- tions for such competition namely, the construction of cheap means of communication receives proper atten- tion." . The following figures, giving the proportion of persons engaged in industrial pursuits, as compared with the entire population, apply to Prussia for the middle of last century (1843) : 17 Per cent. Agricultural population 60. 84 to 6 1. 34 Industrial population 23. 37 Persons employed in commerce o. 97 90311 ii 4 33 National Monetary Commission In 1846 there was only i person employed in trade and industry to every 12.2 inhabitants, though in 1850 the fig- ures were already i to every 8.5 inhabitants. In 1849 only 28 per cent of the entire population 18 of Prussia lived in towns, and the population of Berlin did not exceed 33 1 ,894 19 (exclusive of soldiers) in 1840, and not quite 500,000 in 1858, and gave employment to only 3,000 workmen in 1840, a number which rose, however, to 10,242 in i856. 20 In 1849 there were only 15 towns in Prussia the population of which exceeded 30,000. 21 Ex- cluding Berlin, the following now important industrial towns had the greatest number of inhabitants : Aix-la-Chapelle (about) 46, ooo Elberfeld (about) 35, ooo Crefeld (about) 30, ooo Chemnitz and Dtisseldorf each (about) 26, ooo Dortmund, Duisburg, Essen, and Solingen each (about) 22 7, ooo With the aid of foreign (English) capital, gas lighting was gradually adopted 23 after 1826 by the larger German towns (first of all by Hanover and Berlin) ; it was only after 1859 that petroleum became popular for lighting, especially among the middle classes. The construction of railways may be said to have started on a large scale only about the middle of the nine- teenth century. From 183^101842 only railways of short length and of merely local significance (between large towns) to a total length of 87 German miles had been constructed. These were the Nuremberg-Furth railway in 1835; the Berlin-Potsdam, and the Braunschweig- Wolfenbuttel railways in 1838; the Leipzig- Dresden line in 1839; the I/eipzig-Magdeburg, the Munich- Augsburg, the Mannheim-Heidelberg, and the Frankfort-Mainz lines in 34 The German Great Banks 1840; and in 1841 the Berlin- Anhalt, the Diisseldorf- Elberfeld, and the Cologne-Elberf eld railways. Up to 1 855 , the date when the credit banks appeared on the scene, only 7,800 kilometers of railways had been built, which, spread over the twenty years from 1835, meant only 390 kilometers of new line annually. On the other hand, inj[&65 > ten years later, almost double the amount of railway mileage (13,900 kilometers) was finished, or 610 kilometers of new line per year, a performance in which the credit banks had taken an active share. In 1875, or ten years later, there were no less than 27,981 kilometers of railways in operation, again a twofold increase. This corresponds to the enormous increase of capital invested in German railway construction during that period. At the beginning of the fifties the amount of this capital was stated as 140,000,000 thalers, in addition to 206,000,000 thalers preference shares, or a total of 346,- 000,000 thalers (1,038,000,000 marks); somewhat over a billion marks. 24 At the end of that period (1870) the invested capital amounted, according to Engel, to over 4,000,000,000 marks (4,072,167,621 marks), in which sum the preference shares are included. As far as the means of transit in Germany were con- cerned, so-called " Chausseegeld," or road toll, had in many cases to be paid to the end of the sixties, as a con- tribution toward highway construction and maintenance. In Frankfort-on-the-Main, for instance, this toll was only abolished on May 18, 1866. The highways in Germany had in 1857 a length of only 30,000 kilometers as against 150,000 kilometers in 1900. 35 National Monetary Commission The inland toll-gates in the majority of German States, however, had already been abolished in 1834-35 by the foundation of the Zollverein. This proved a great boon in the economic field. Equally beneficial in the legal field proved the adoption in the fifties and sixties by the various German States of uniform commercial legislation in the shape of the Allgemeine Deutsche Wechselordnung and the Allgemeines Deutsches Handelsgesetzbuch. As far as means of transport were concerned, steam- navigation made a modest beginning on the Weser in 1817 and on the lower Rhine and Elbe in 1818. During the middle of the nineteenth century, however, steam-navi- gation made more rapid progress. At the end of the fifties Germany had no less than 1 7 different independent postal administrations in addition to the Prussian- Austrian Postverein. 25 In 1867 theThurn and Taxis postal monopoly came to an end by transfer to Prussia. Up to 1844 fees for forwarding ordinary letters within the confines of Prussia went as high as 19 silbergroschen (i silbergroschen = -^ thaler, or about 2> cents). And it was considered great progress when an agreement was made in 1850 with Austria, whereby the cost of forward- ing letters weighing less than i lot (lot = about half an ounce) to the farthest of the three zones, or over 20 Ger- man miles (i German mile = 7, 420 metres), was fixed at 3 silbergroschen, or 9 kreuzer. It was only as a result of this agreement that, at the beginning of 1850, stamps were introduced in Prussia. Up to that time the fee for conveying letters had to be paid in ready money at the The German Great Banks post-office. Even during the forties the post-offices were only opened on certain days in the week. There were no postmen, not even in the towns, to say nothing of the country; so that letters had to be called for at the post- office. Letter-boxes were introduced for general use only after 1850. The slow development of postal facilities is best illus- trated by a statement of Karl Lamprecht (loc. cit., p. 143) that in Saxony, the ''land of the Leipsic fair," the postal regulations remained unchanged between 1713 and 1859. In Great Britain, on the other hand, uniform penny- postage had been introduced in 1840; uniform postage was introduced in Austria in 1861, and in the North German Federation only in 1868. The receipt of a letter, even as late as the middle of the last century, must have been regarded as quite an event, except by large mercantile firms, for there were only 1.5 letters per head of population in Prussia during 1842, and even in 1851, the beginning of the period under con- sideration, only about 3 letters annually. The telegraph system 26 was first opened for public us^ in Prussia (Aix-la-Chapelle) in 1843, in Bavaria ana Saxony in 1850, in Wurttemberg and Baden in 1851, in Hanover in 1852, and in Mecklenburg in 1854. "The charges of telegraphing were high and ill-arranged. According to the zone tariff of 1858, which on the face of it had already been reduced, it cost 2 gulden 6 kreuzers to send 20 words from Frankfort-on-the-Main to Nuremberg, or almost as much as to Amsterdam or Como (2 gulden 48 kreuzers) ; the shortest telegram to Bochum cost 4 gulden 12 kreuzers, almost as much as to Tilsit or Orsova (4 37 National Monetary Commission gulden 54 kreuzers.) " 27 In 1850 only 35,000 telegrams were sent in Prussia, as against 1,500,000 in 1865. Only 1 02 joint-stock companies of all kinds, with a total capital of 638,000,000 marks, or an annual average of less than 27,000,000 marks, were formed in Prussia between the years 1826 and 1850, that is in twenty-four years. 28 On the other hand, during the following nineteen years, the period from 1851 to the first half of the year 1870, 295 joint-stock companies, or almost three times as many, with a total capital of about 2,405,000,000 marks, 29 were formed in Prussia, making an annual average capi- tal of over 124,000,000 marks, or more than four times as much as in the preceding period. Among the German exchanges at the beginning of this period, the one at Frankfort-on-the-Main was the most influential for state loans and similar securities, whereas the Berlin exchange took the lead in railway securities, the amount of which, however, was not yet great. 30 | Sixty-three securities were quoted on the Berlin Stock Exchange in 1850 as against 309 in 1870, and 1,872 in 1900. At Frankfort-on-the-Main the first special organs dealing with financial and commercial questions were pub- lished, viz: The Aktiondr, on January i, 1854; the Frank- furter Geschdftsbericht, on July 21, 1856 (which, on August 27, 1856, became the Frankfurter Zeitung und Handels- blatt) . In the meantime, however (before the publication of the Frankfurter Geschdftsbericht), the Berliner Boersen- zeitung, with the Thursday supplement, the Berliner Boer sen- Courier, was published on July i, 1855, in Berlin. As far as the systems of coinage, money, and banks are concerned, the following details may be of interest: 38 The German Great Banks During the whole of the period under consideration, and to theJmaX adoption .of the common German coinage sys- tem in 1870, no less than 7 different kinds of coinage existed in the various German States, which, with the ex- ception of that of Bremen, were all based on the silver standard. Between the South German gulden and the North German thaler standards a fixed ratio had been established at the general coinage conference in 1838 (Dresdner Convention) , but solely for purposes of calcula- tion, 31 i. e., no State belonging to the convention was obliged to admit the circulation of the coins of any other State belonging to the convention. The variety of the systems of coinage and standards at home and abroad was doubtless one of the main rea- sons why bankers, who were called money changers at that time, in the centers of trade and traffic at least, formed a prosperous and well-filled profession. At the center of money changing for middle and south Germany, namely, the free town of Frankfort-on-the-Main, there were 109 private bankers in 1855, among a total of 1,131 firms; and toward the end of the period under discussion (1868-69), J 9 2 private bankers out of a total of 1,829 firms. 32 These private bankers, who in numerous cases carried on simultaneously commission business or com- mission and forwarding business, formed a very respected class, especially at Frankfort-on-the-Main, a long time before the period in question, having identified themselves/ with the general existing commercial interests. A most' striking proof of this is an occurrence which took place in 1810: "By the order of Napoleon (at the time of the Continental System) two French officials in Frankfort 39 National Monetary Commission confiscated 185 chests containing English goods, the prop- erty of Frankfort merchants, and burnt them in front of the gates of the town. Upon this the Frankfort bankers refused to continue the discounting of French bills, and caused thereby numerous failures in Strassburg, Nancy, Rheims, and other places." 33 Thereupon the Continental System was soon repealed in Frankfort-on-the-Main. What was true of Frankfort-on-the-Main, however, is not applicable to other towns and districts. In Stuttgart, for instance, there were in 1855 on ty J 4 firms (including the Royal Court Bank) which claimed to belong to the banking and discounting profession, and only one each in Heilbronn and Ulm. " These were, however, partly carried on in connection with other occupations, especially with the forwarding business." The modest position held by these firms appears best from the fact that in the indus- trial census taken in 1855 (no changes of importance took place between 1852 and 1855) 2 5 banking firms are men- tioned employing only a total number of 68 assistants. 34 In the whole Kingdom of Prussia (in the territory before 1866) the number of persons employed in the money and credit business during 1858 (after several years of economic prosperity), including principals and assist- ants, amounted only to about 1,800 (1,774), and these were distributed among 602 enterprises, so that there were 602 principals and 1,172 assistants, or about two assistants to each business. Of these 1,800 persons, 384 were employed in Berlin alone. 85 At the beginning of the period under consideration modern methods of payment and credit had not yet devel- 40 The German Great Banks oped, and the giro and current- account business was " almost unknown," with the exception of places like Hamburg, where special conditions prevailed. Even in a large commercial center such as Frankfort-on-the-Main, at the beginning of the fifties, numerous porters with small trucks laden with sacks and barrels of silver money could be seen moving about the streets "at any hour in the forenoon." 36 The discounting of bills was "seldom prac- ticed" 37 in Germany, except in chief trade centers and exchange towns, and a systematic fostering of the deposit business was still less in evidence, either at the credit banks (p. 73) or at the note-issuing banks existing at the beginning of the period. The amount of deposits at the Prussian Bank, for instance, totaled only about 22,740,000 thalers (equal to 68,220,000 marks) 38 in 1850, in spite of the inflow of capital which had taken place in consequence of the discovery of gold mines in California (1848) and in Australia (1851), and the simultaneous discovery of new quicksilver mines in Mexico. In other banks of issue the deposits were for the most part much smaller. 39 At the same time, however, powerful factors (mentioned above on p. 28) were making for progress. Above all, the era of peace that had prevailed in Ger- many for an unprecedented length of time (1815-1848) ^y had caused a relatively large accumulation of capital, which was seeking profitable investment. As early as 1844 the first industrial exhibition in the Zollverein area stimulated industry in numerous direc- tions. The international exhibition in London in 1851, at which the latest industrial progress and inventions were shown, exerted a powerful influence on Germany. A National Monetary Commission few years later (1856) a great revolution took place in the iron industry through the application of Bessemer's prin- ciple of turning pig iron into steel 40 without the aid of human power by inclosing the pig in pear-shaped cham- bers (converters) and by conducting heated air through it from powerful blast apparatuses a process adapted in 1865 by Martin to ore containing small amounts of phos- phorus and, in 1879, by Thomas and Gilchrist to ore rich in phosphorus. In the years 1834-1854 aniline colors were invented, and in 1868 alizarine colors. In 1840, lyiebig published his manual on chemistry and its use in agriculture, which laid the foundation of modern agriculture. From 1831-1840 to 1871-1880 constant progress, with few interruptions, was experienced in agriculture. In the old Prussian provinces during this period, the price of rye rose 69 per cent, that of wheat 60 per cent, and of barley 90 per cent; the selling price of land not less than 200-300 per cent; the rents of the Prussian domains increased from 4,500,000 marks, or 13.9 marks per hectare (i hectare = 2. 471 acres), in 1849, to 10,200,000 marks, or 35.6 marks per hectare, or an increase of 1 56 per cent. These rises were frequently out of proportion with the increases in the prices of agricul- tural products and in the productiveness of the area used for agricultural purposes, 41 As stated before, various industries, such as cotton spinning, at the beginning of this period introduced manu- facturing on a large scale (production on a large scale had commenced in the mining industry many years before). The large industries were, however, unable to attain a The German Great Banks dominant part in the whole of industry, in which home production still played a leading part. In the last decade of this period we can also perceive a tendency toward increasing the exports of industrial products the rapid development of which in the second period gradually caused a complete transformation in the character of the whole German economic organization. Hand in hand with the large increase of population, a serious transformation deeply affecting the whole of agriculture (which at this period was at the height of prosperity) had been gradually developing, which led to a considerable portion of the country's agricultural require- ments being met by foreign imports; whereas at the beginning of this period, the exports of important Ger- man agricultural products, with the exception of rye, considerably exceeded the imports. 42 (As early as 1860, the imports of rye exceeded the exports by 259,000 tons. 43 ) Industry, particularly the mining, machine construction, and metal industries, etc., received large orders owing to the rapid increase of railway construction, and was pro- tected and strengthened, to some extent at least, through the measures taken by the Zollverein against foreign importations. The expansion of industry, however, and with it the growing transition to large-scale industry (Grossbetrieb) , became an absolute necessity for the sup- port and employment of the population, which showed its greatest increase at the beginning of this period, and continued to grow in later years. Between 1816-1845 the population had increased from 24,800,000 to 34,400,000 (by about 9,600,000 or 38.7 per cent), whereas between 1845-1875 it had increased only 43 National Monetary Commission by 8,300,000, or 24.1 per cent, and between 1865-1895 only 31.8 per cent. This growth, noticed in most of the German States up to the middle of the last century, was almost entirely in favor of the rural population, though we must not lose sight of the fact that a great many of the industrial con- cerns (as has been already mentioned), (p. 30) were situated in the country. Loud complaints were heard almost everywhere at that time that "there were too many people in the country," and it was frequently stated with the greatest emphasis that the country was unable to support a population of that number, and ways and means should be devised to meet the new conditions. 44 As a matter of fact the population of the agricultural districts (especially those east of the river Elbe) increased in the period 1816 to 1877 nearly 91 per cent, while that of the industrial western and southern parts of Germany increased only somewhat over 23 per cent, whereas be- tween 1871 and 1900 the proportions were exactly the reverse (26 and 79 per cent). 45 It was under such economic conditions that the first German credit banks were established. CHAPTER II. THE GERMAN BANKS DURING THE FIRST PERIOD (1848-1870). I It is easy to realize at present the exceptionally strong influence exercised at the beginning of this period (about the fifties) by the very great and rapid development of the German railway system, above all on the mining and machine industries. In order to appreciate it, we need only recall the startling growth of the mining and machine 44 The German Great Banks industries, occasioned by the rapid development of the electrical industry during the second period, although quite different financial and banking conditions exist to- day. In both cases, however, the immediate conse- quences were serious crises (1857 and 1900), which were L brought on, however, in part by other causes. The mining and smelting industries were the first to / i undergo this transformation of which we have been i / amazed witnesses. 46 It is these industries which are mainly responsible for the spread of capitalism and the development of large-scale production, as well as the gradual and radical change in the general economic con- ditions of the country. 47 *j|^ The enormous demands of the newly constructed rail- ways for iron, coal, sleepers, locomotives, cars, etc., could not be met even approximately by the means at the dis- ? posal of the industry of those days. New undertakings of j all descriptions, and the enlargement of existing ones, were 'J necessary. Figures and requirements, however, were cal- culated at ten times the right amounts, as is the wont of reckless persons in agitated times, in whose minds the prospective profits are sure to assume gigantic propor- tions. Thus, at the beginning of our epoch, following the new railway enterprises, there arose in rapid succession, and in strange medley, a large number of other new joint- stock companies, especially in the fields of mining, smelt- ing-machine construction, and banking. The list of German credit banks founded during the first eight years of this period (1848-1856), and which were mostly provided with share capital ample at least for the period in question, will be found in Appendix II at the 45 r c National Monetary Commission end of this book. Among them the following were promi- nent at that time, according to the amount of their capital : (1) 1848: The A. Schaaffhausen'scher Bankuerein at Cologne, formed as the result of the reorganisation of the old banking firm of Abraham Schaaffhausen (which had been seriously affected by the troubles in 1848), with a capital of 5,187,000 thalers, or, in round numbers, 5,200,000 thalers = 15,600,000 marks, of which about 3,000,000 (3,199,800) thalers was immediately issued. (2) 1851: The Disconto- Gesellschaft in Berlin, which started however as a mere "credit partnership" (Kredit- gesellschafi) . In 1856 it was transformed into its present shape, namely, a joint stock company en commandite under the name of the Direction der Disconto Gesellschaft, with a capital of 10,000,000 thalers = 30,000,000 marks, which was issued in two instalments of 5,000,000 thalers each. (3) l8 53 : The Bank fur Handel und Industrie, which \ took up its headquarters at Darmstadt because no con- | cession could be obtained at that time for a joint-stock , banking company, either in the free town of Frankfort-on- < the-Main or in Prussia. The nominal capital amounted to 25,000,000 florins = 42, 750,000 marks, of which, however, only 10,000,000 florins = 17,100,000 marks was issued at first; it was only in the year 1856, when the Disconto Gesellschaft was transformed, that the Darmstadter Bank assumed the size first contemplated. (4) 1856: The Mitteldeutsche Creditbank at Meiningen, with a capital of 8,000,000 thalers (24,000,000 marks), of which, however, 3,000,000 thalers (9,000,000 marks) remained in the portfolio of the bank; in reality, there- The German Great Banks fore, the capital was made up of 5,000,000 thalers only, divided into 50,000 shares of 100 thalers each; moreover, of this amount 1,000,000 thalers were redeemed in 1859. (5) 1856: The Berliner Handelsgesellschaft with a share capital of 15,000,000 thalers (45,000,000 marks), of which only a small part was paid in at first, namely, 3,740,150 thaleFs; of this latter sum 800,000 thalers (4,000 shares of 200 thalers each) remained in possession of the company. In the four years (1853-1857) the paid-up share capi- tals of the railway companies newly formed in the various German States, which were almost exclusively in private hands (see p. 35), amounted to over 140,000,000 thalers, and that of the joint-stock banks (Bankaktiengesell- schafteri) to over 200,000,000 thalers (600,000,000 marks). Of 259 mining, foundry, steamship, machine-construc- tion, sugar, and spinning companies, etc., existing during this period, with a total capital of over 260,000,000 thalers (780,000,000 marks) , more than half were founded during the four years mentioned above (i853~i857). 48 During the one year, 1856, new joint-stock companies with a nominal capital of about 150,000,000 thalers were chartered in Prussia alone. In order, however, to comprehend properly the rush that took place just then, it must be remembered that during this whole period (about twenty years), from 1851 to the first half of 1870, only 295 joint-stock companies, with a total capital of about 2,405,000,000 (2,404,760,000) marks (see p. 38), were chartered. Of this total almost half, namely 1,020,000,000 marks (340,000,000 thalers), represented the capital of the rail- way and joint-stock bank companies founded in Prussia 47 National Monetary Commission during these four years (1853-1857). Of the total capital of 2,404,760,000 marks invested in Prussia in joint-stock companies during 1851-1870 (first period), 2 250,960,000 marks were invested as follows: Marks. Mines, foundries, and salt works 275, 410, ooo Banks 94. 650, ooo Insurance companies i5 8 > ,4 6o > o 00 / Railways i, 722, 440, ooo so that these four classes of industrial and commercial undertakings arjsorbed 92.7 per cent of the capital of all joint-stock companies founded in Prussia during the period in question. 49 During this great process of transformation, which took place in the same manner in all the other German States up to 1856, scarcely any. other aid could be called in than that of the Bank fur Handel und Industrie, founded in 1853, which we shall style in the future, after its head- quarters and conforming to public custom, the Darm- stddter Bank. For the Disconto Gesellschaft, founded in 1851, emerged from the narrow confines of a "mutual credit partnership" (auf Gegenseitigkeit beruhende Kredit- gesellschaft) only after 1856, while the attention of the A. Schaaffhausen'scher Bankverein was necessarily occu- pied during those years with strengthening the inner affairs of the firm of Abraham Schaaffhausen which it had taken over. The Darmstadter Bank, founded at the beginning of this process of transformation, purposely assumed the title of " Bank for Handel und Industrie." " It is in no way the task of the bank," it was stated in the first business report for 1853, "to pave the way for stock- jobbing operations, and to stimulate capitalists to The German Great Banks unproductive gambling on 'change. On the contrary, the ^ bank is expected to promote S9und and extensive under- takings by its own participations, and by investing out- siders' funds intrusted to its care. By means of its em- inent position and clear insight into the whole situation of German industry it is fitted to assist to the fullest extent of its powers in directing capital and the spirit of enterprise into the channels corresponding to the require- ments of the moment. Its offices at home and abroad are intended to facilitate export and the thousand and one other relations between German industry and the money market. It is the right and the business of the bank to receive the funds which some manufacturers may have available for the time being and supply them to other manufacturers who may require them. Through such a constant exchange it hopes to stimulate and promote industrial activity. Aside from the bank's participation in great industrial undertakings, it is likewise authorized to participate in the great creations and financial trans- actions of the governments, and to act as intermediary in the placing of securities of foreign governments." There is no doubt that part of this program, including the statutory regulations, 50 was influenced by the organi- zation and aims of the Credit Mobilier (Societe generate de Credit mobilier) founded in November, 1852, with a capital of 60,000,000 francs. This is particularly true of the debentures idea, 51 and the fixing of the amount of the capital. As a matter of fact among the founders of the Credit Mobilier was Abraham Oppenheim, of Cologne, one of the co-founders of the Darmstadt er Bank, while one of 90311 n 5 49 National Monetary Commission the higher officials of the Credit Mobilier (Hess) , was one of the first directors of the Darmstadter Bank. It may be of interest to note that the French estab- lishment alluded to, which was intended to put the Saint Simon ideas into practice under the direction of the Pereires, was heartily welcomed by the Government, as well as by the general public, as an institution likely to form a counterpoise to the excessive power of the pri- vate bankers, and more especially of the house of Rothschild. "The founding of the Contango Bank, or Credit Mo- bilier," says an article 52 published in Germany in 1856, was based on a genuine and true principle belonging entirely to our age. Enormous capitals had accumu- lated in the hands of several banking houses in different towns in Europe. They dominated all business through the enormous proportions of their capital. * * * They made their own conditions as though they held a monop- oly * * * NO limits can be discovered to these tend- encies. This monopoly can be broken only by opposing large capital with a still larger one, and this can be done only by the association of many small capitals. Thus on November 12, 1852, the Credit Mobilier Company was founded with a capital of 60,000,000 francs, in 120,000 shares of 200 francs each. The French Government desired simultaneously to ! weaken the Bourbonist and Orleanist aspirations, which were supposed to be represented by the house of Roth- schild, through the concession ofaBanqw Gouvernementale which among other things was to influence the quotations The German Great Banks of government stock of course in an upward direction only! Accordingly the Rothschilds (after co-operating in the beginning) formed a very powerful syndicate of private bankers as early as 1855 to fight the Credit Mobilier. __ __ It is principally the Credit Mobilier, its organisation, ~ its unparalleled growth and decline within the short period of fifteen years, that has influenced the public mind to such an extent that German banks almost with- out distinction, and even up to the present day, 53 are designated as Credit Mobilier banks. The formation and activity of that establishment form to a great extent 54 the subject of one of the most brilliant French novels, namely, "L'Argent," by Emile Zola. , This result was largely the work of contemporary writ- ers, who, impressed by the failure of the Credit Mobilier, naturally gave vent only to very adverse criticism. 55 A prominent place in this field belongs to the voluminous work by Ay card, 56 published during the year of the failure of the Credit Mobilier (1867). This book, containing 595 pages, which unfortunately was used and is still used con- stantly as an authority, is from beginning to end (and in this particular I quite agree with Plenge 57 ) nothing but a pamphlet. It is a clumsy work, overflowing with repeti- tions and exaggerations, which had its origin in the spite and jealousy of a small banker, whose small power of dis- cernment prevented him from perceiving side by side with the undeniable mistakes and faults of the Credit Mobilier the incontestable services which that institution had ren- dered to the economic progress of his country. National Monetary Commission The Credit Mobilier, which, according to the amount of its capital and the program outlined in its reports and in the statements of its managing directors, was never intended to be solely a flotation bank (Effektenbank) , at the very outset fixed its aims far too high, until they became almost fantastic. For this program (although it may have been the result of much forethought), was not one that could be carried out with the ordinary means of a bank, as it purposed an economic transformation on a grand scale of the entire railway, industrial, and credit systems. Further, the Credit Mobilier injured its own interests to a great extent (as was recognised when too late), through the distribution of excessive dividends (1855 over 40 per cent) , as well as by persistent adherence to its scheme of the issue of debentures, a matter generally impracticable within the compass of any bank, and espe- cially of one that had so many aims in view. That scheme, rightly enough, was never executed owing to the opposition of the Government. Thus it was debarred above all from gradually increasing its share capital 58 in accordance with its growing business, and from strength- ening its reserves in order to attain the liquidity of resources which is the sole justification and qualification for the pursuit of constantly increasing tasks. It is also true that through its precipitate procedure, and through the attempt to carry out simultaneously all parts of its program, which in turn necessitated constant and increased support of the Bourse, as well as through the flotation of a superabundance of new securities and companies, 59 the Credit Mobilier paved the way in no The German Great Banks inconsiderable measure for stock gambling, agiotage, and " share swindling pure and simple. The last-mentioned effect was largely due to the business reports, which were true paradigms of inadmissible concealments and puffing advertisements (justly denounced, at least in most cases, by Aycard, although he does so in endless repetition), which in turn caused the shares of the Credit Mobilier not without the influence of the institution itself at the very outset to become gambling stock of the very first rank. 60 The Credit Mobilier did not foster the regular customer business to any extent worth mentioning. The large amount of deposits (up to 145,000,000 francs), however, that were intrusted to its care by the large railway com- panies which it formed, were invested to a considerable extent in other railway shares, and industrial securities of all descriptions, as well as in its numerous subsidiary companies. 61 This circumstance, coupled with the enormous and permanent advances made to these subsidiary companies (especially to the Societe Immobiliere which it had founded), led to the complete immobilization of its share capital, and thereby to the downfall of the bank, which actually took place in 1867. Moreover, strong speculation on the part of the bank 62 itself, in the closest relation to the enormous amounts of the tied-up securities, took place, which resulted occasionally in considerable gains, but frequently and probably in the majority of cases, in great losses. On the other hand, however, it must not be forgotten^ that it was due above all to the boldness and tenacious / 53 National Monetary Commission energy of the Pereires that the enormous extension of French railways, and partly also of foreign lines, was brought about 63 in the period from 1850 to i86o, 04 when the Pereires were acting independently. This opened up new fields of activity to French industry, and gave it an undreamed of power, extension, and organisation. In addition it must be admitted in praise of the Credit Mobilier that, as Aycard himself is obliged to recognise, it continued^ to protect the enterprises it had founded and the securities it had issued, and that it was just the per- sistent exaggeration of this principle, which in itself is not reprehensible, that constituted the main though not sole cause of its downfall. This downfall, however, was not prevented by the con- trol on the part of the shareholders, a remedy recom- mended as most efficient in many quarters, and facilitated by the by-laws of the Credit Mobilier, according to which any 10 members at a general meeting by a written appli- cation could place any subject on the order of the day. Further (and this is not less important) , the downfall was neither prevented nor foreseen by the existing sub- stantial governmental control. No less important an authority than Adolf Wagner, 65 while under the first impression of the crisis of 1900, thought it necessary to propose for all German Banks a " State Control Bureau," an institution which in the case of the Credit Mobilier had existed from the very beginning in a form which partly met, and partly even exceeded the wishes of Adolf Wagner. The charter, dated November 20, 1852, contains 54 The German Great Banks the following regulations regarding the government con- trol which was by no means "an empty form:" 66 "ART. 3. La societe sera tenue de remettre, tons les six mois, un extrait de son etat de situation au Ministere de I'lnterieur, de 1' Agriculture et du Commerce, au prefet du Departement de la Seine, au prefet de police, a la chambre de Commerce et au greffe du Tribunal de commerce de Paris. " ART. 4. En outre, la Societ6 devra fournir au Ministre des Finances sur sa demande, ou a des epoques periodiques par lui de'terminees, les mmes etats presentant la situa- tion de ses comptes et de son portefeuille, ainsi que le mouvement de ses operations. "Les operations et la comptabilite de la Societe seront soumises a la verification des de'le'gues du Ministre des Finances, toutes les fois que celui-ci le jugera convenable. II sera donne communication a ces de'legue's du registre des deliberations, ainsi que de tous les livres, souches, comptes, documents et pieces appartenant a la societe. L,es valeurs de caisse et de portefeuille lui seront e*gale- ment represent e*es." [ART. 3. The Company shall transmit every six months abstracts of its condition to the Minister of the Interior, Agriculture and Commerce; to the prefect of the police, to the Chamber of Commerce and to the file office (greffe) of the Commerce Court in Paris. ART. 4. The Company shall furthermore furnish to the Minister of Finance, either upon demand or at intervals prescribed by him, statements of the condition of its accounts and portfolio, also of the movement of its opera- tions. 55 National Monetary Commission The operations and the books of the Company shall be subject to examination by the representatives of the Minister of Finance at any time he may deem proper. These representatives shall have access to the minutes of the deliberations, also to the books, stubs (souches), accounts, documents and other papers belonging to the Company. They shall also have power to ascertain the value of the cash and of the portfolio of the Company. J I trust that I have given above, though only in brief form, everything essential to form an opinion as to the growth and downfall, the faults and excellencies of the Credit Mobilier, without having omitted any of the im- portant points which formed the bases of Battler's 67 and Max Wirth's 68 criticisms. . I shall now take up the ques- tion whether and in how far it is correct to designate the German banks (especially those of the first period) un- reservedly as "Credit Mobilier" banks. 69 " fin the first place, as far as the by-laws are concerned on which the Darmstadter Bank (Bank fur Handel und In- dustrie) was founded, it may be asserted, that taken as a whole, i. e., as regards the large majority of its regulations, they are copied, not from those of the Credit Mobilier (which was founded the year before), but consciously, and in some cases literally, from the statutes of the A. Schaaff- hausen'scher Bankverein, established in 1848. Conse- quently, they rest essentially on a German, and not on a French foundation, and were the product of German business customs and views. This applies especially I can only refer to a few in- stances here to the most important part of the pro- gram, namely to Chapter III, in which the " sphere of v l The German Great Banks activity and the powers of the bank" (sec. 10) 70 are gone into minutely, and which is almost an exact copy of the corresponding paragraph in the Schaaffhausen by-laws (sec. 20). This is preceded, in the by-laws of both banks, by the following fundamental principle of sound banking policy (sec. 10, par. i of the by-laws of the Darmstadter Bank and sec. 20 of the Schaaffhausen Bank by-laws) : "The bank is authorised to carry on all kinds of bank- ing business that is, such business from which it can easily withdraw its money in case of need." The additional regulations of Chapter III of the by-laws* of the Darmstadter Bank are interesting. They were evidently made with regard to the needs of the times. 71 I have pointed out above that they were partly a reproduc- tion of the corresponding clauses in the Credit Mobilier's program. 72 They were lacking 73 in the Schaaffhausen Bank by-laws, which had been prepared five years earlier, and under different economic conditions. According to tliese regulations the bank was authorised: (i) To undertake all loans, or enterprises of a public ~\ nature on its own account, or partly on its own account, to assign or transfer them, to realise them, or to partici- pate in underwriting them, as well as to put in circulation bonds payable to names or bearer to the limit of its under- taking or participation. (k) To arrange for and effect the union, or consolidation "\ of various anonymous companies, as well as the transfor- ] mation of industrial undertakings into anonymous com- panies. 74 The programs of both of these two large banks belong- ing to the period under consideration 75 (the by-laws of the 57 National Monetary Commission Disconto Company were, in accordance with its origin as a credit partnership, if anything more restricted) were consequently neither fantastic, nor calculated to effect revolutionary changes. Naturally these pregnant differences in the by-laws and programs could hardly be noticed, far less appreciated, during the fifties. For|the situation of general economic conditions was almost identical at that time in France and Germany, in so far as similar causes (described above) produced similar results in both countries. In France, as well as in Germany, an impetuous rushing forward manifested itself from 1852-53 in all branches of industry, ^specially in the mining and machine industry, caused by the great haste with which railways were being con- structed. In both countries a vast number of promo- tions, transformations, and flotations came to the fore during a very short period; these, naturally, required the aid of the newly founded banks which perceived in such undertakings a rich source of gain. Added to this (and again as a result of the same causes, accompanied by the ever present and apparently irrepressible spirit of speculation in both countries), discount rates went up strongly in consequence of the excessive demand for cap- ital^ y The rate of discount of the Bank of France, which together with that of the Bank of England, was above all determinative for Germany at that time, stood at 3 per cent as late as 1852 (beginning with March), and that of the Bank of England at only 2 per cent during April- December, i852. 76 During the year 1853 the discount rate of the Bank of England gradually rose to 5 per cent between the 29th The German Great Banks September and the 2ist December. In 1855, between autumn and the end of December, it went up to 5^ per cent and 7 per cent, after some fluctuations again to 7 per cent at the end of 1856, next to 8 per cent beginning with October 19, 1857, to 9 per cent on November 5, and to 10 per cent on November 9, 1857, a sufficiently sure sign of an approaching storm. Similar conditions pre- vailed in the Bank of France, while the highest rate recorded by the Hamburger Bank in 1857 wa $ as much as 12 per cent. 77 A commercial and bourse crisis which was greatly -n intensified by severe commercial crises in England and the United States, broke out in 1857 simultaneously in , ' England, France, and Germany. The situation in the two last-named countries was bound to develop into a bourse crisis, even without the simultaneous commercial crises in the United States and England, in consequence of the excessive number of company promotions, transformations, and new issues, as well as through the collapse of the normal organisation of the credit and money market produced thereby. 78 The course of events on the Bourse was that which has been constantly recurring. First of all, professional speculators, upon learning at the Bourse of the universal improvement in the economic situation, found that the improvement was not sufficiently reflected in the bourse quotations, and by heavy and continued purchases, endeavored to bring about a lasting rise. It was only then, as is generally the case, that the general public, for the most part guided and influenced by the quotation list, took up the matter. Its opinion, however, is based 59 National Monetary Commission on slight practical knowledge. During times of a visible rise of the market its credulity is exceeded only by its hopes; it accepts the existing exchange quotations, how- ever high, as the basis for calculating the intrinsic value of securities, while these calculations grow more and more fantastic from day to day. As the economic development and the course on the bourses of both countries at that time proved nearly the same, and as the participation of the banks of both coun- tries in excessive and irrational promotions, issues, and flotations, above all in mining enterprises and railway building (which first gave rise to the crisis,) was only too obvious, the natural inference was drawn, that these banks were identical in character and kind. This conclusion, however, overstepped the mark. It is true that the banks dating from this period, endeavored from the very commencement to vindicate their right, and even duty, to promote commerce and industry in the most effective way, by participation in flotations, foun- dations, and transformations. The Darmstadter Bank in particular had contemplated from the very outset the creation of special "organs at home and abroad" 79 for this purpose. This bank accordingly 80 began, during the first years of its existence, to create such "organs" on a large scale. But it is equally true that attempts to found branches in the various German States were unsuccessful, chiefly be- cause of the opposition of the different governments, which gave home banks the preference over the branch estab- lishments of outside institutions. 81 Thus only an agency could be established in Frankfort-on-the-Main in 1854, 60 The German Great Banks which existed until 1864, when it was replaced by a branch. Only at Mainz, in the Grand Duchy of Hesse, where the headquarters of the bank were situated, did the bank succeed in opening a branch establishment as early as 1854, while in the same year a silent partnership (Kommandite) had been formed in New York (G. von Baur & Co.), which, in 1856 and 1857, was followed by the founding of further commandite connections in Berlin, Heilbronn, Mannheim, Breslau, and Leipsic, and in the sixties also in Hamburg, Stuttgart, and Vienna. 82 Accordingly the account " commandites, branches and agencies" stood in the books of the bank at 8,433,701.43 florins as early as 1856. The promotion of industry, however, was not the onlyTf ,*- aim that the banks had in view at that period. It had been emphasized at the very beginning that participation "in the great creations and financial transactions of the Governments" also formed an essential part of their program. This constituted a sphere of business activity which the Credit Mobilier had constantly neglected in favor of railway and industrial transactions, except in so - 1 far as the exigencies of its position as a " banque gouverne- mentale," a position which it aimed at and which it was intended to fill, necessitated a different attitude. In contrast to this all German banks, (especially those founded during the period under consideration,) fosj tered from the very outset this special branch, namely!, I public loan credit (state, provincial, and municipal) > and have attended to this branch of business effectively and successfully ever since. 61 National Monetary Commission In the following list the principal loan transactions of the Darmstadter Bank and the Disconto Gesellschaft, (the two most prominent banks of the period,) are given: 83 STATE AND MUNICIPAL LOANS. DARMSTADTER BANK. 1854 : Baden state loan. Bavarian state loan. 1858: Bremen state loan. Swedish state loan. 1860: Swedish state loan. 1 86 1 : Swedish mortgage loan. (Lottery) loan of the Canton Fribourg. 1862 : Worms municipal loan. 1864: Austrian state lottery (Rothschild syndicate). 1866: Bavarian state loan. Saxon state loan. Wiirttemberg state loan. 1868: Hessian state loan. Brunswick (railway) loan. Prussian 4 per cent state loan. Hamburg 4% per cent state loan. DISCONTO-GESEUvSCHAFT. 1859: Prussian (mobilisation) loan of 30,000,000 thalers, effected jointly with the leading Berlin banks and firms under the management of the Disconto-Gesellschaft, which was the origin of the so-called " Prussian Consortium (syndicate) " constituted during subsequent years. 1866: Four per cent Baden Loan (30,000,000 thalers), effected jointly with the Seehandlung, and the banking firm of W. H. Ladenburg & Sons, at Mannheim. Four per cent Bavarian issue of premium loan bonds (35,000,000 florins), jointly with the Royal Bavarian Bank and the banking house von Erlanger & Sons, Frankfort-on-the-Main. Brunswick loan (2,000,000 thalers). 1867: Four per cent Baden premium loan bonds (12,000,000 thalers). 1868: Four and one-half per cent Mannheim municipal loan (3,200,000 thalers) for the construction of the Mannheim -Karlsruhe Railway; effected jointly with the banking firms of W. H. Ladenburg & Sons and M. A. v. Rothschild & Sons in Frankfort-on-the-Main. Prussian state loan of 40,000,000 thalers and 5,000,000 thalers (Prussian syndicate under management of the Seehandlung). 62 The German Great Banks 1869: Danzig municipal loan. Prussian loans (agreement with Frankfort-on-the-Main) of 4,450,000 thalers and 550,000 thalers. * The German banks, following the example of the Credit Mobilier, also founded industrial companies as early J as this period. Thus the Darmstadter Bank undertook the promotion of the Wollmanufaktur Mannheim (paid- up share capital 400,000 florins), of the Wurttembergische Kattunmanufaktur (paid-up share capital 500,000 florins), of the Oldenburgische Ostindische Reederei (paid-up share capital 250,000 florins), the Kammgarns pinner ei und Weberei, Marklissa (paid-up share capital 300,000 florins) , the Ludwigshutte, near Biedenkopf (paid-up share capital 360,000 thalers, jointly with the Mitteldeutsche Kredit- bank), and participated in the transformation of the Maschinenfabrik und Eisengiesserei Darmstadt into a joint stock company (paid-up capital 200,000 florins), as well as in that of the Heilbronner Maschinenbaugesellschaft. \ The example of the Credit Mobilier in creating subsid- *| iary companies was also followed; thus the Darmstadter \ Bank on November 5, 1855, founded the Hessian Note- Issuing Bank, known as the Bank fur Suddeutschland, with a capital of 20,000,000 florins. Finally the Darmstadter v ^ Bank, like the Credit Mobilier, made it a business prin- ciple from the very outset to remain permanently inter- ested in the companies which it promoted, not only through permanent representation of its own directors on the board of managers, but also by the holding of a large number of shares, through which, however, severe losses J were frequently sustained. National Monetary Commission Thus it participated in the seven industrial and com- mercial companies which it promoted or transformed during 1856 (with a total capital of 1,580,000 florins) with about one- third of the combined share capital of these con- cerns (813,157 florins) . In contrast, however, to the Credit Mobilier, the German banks never consented to tie up I their capital during the period in question by unlimited advances to such subsidiary or affiliated companies. 84 Furthermore, during those first years of impetuous growth, some of them, like the Credit Mobilier, became interested too extensively and too rapidly in railway and |^ industrial securities and enterprises, though thereby they doubtless rendered great and permanent service to the nation. The list below is intended to give a detailed idea of the most important railway transactions in which the Darmstadter Bank and. the Disconto-Gesellschaft participated at that time. DARMSTADTER BANK. 1854: Austrian State Railway (taking over of shares). 1855: Extension of the Rhine Railway from Nymwegen to Bingen. Theiss Railway (taking over of shares). 1856: Financing the Bingen- Aschaffenburg Railway (via Mainz) and pro- moting the Elizabeth Railway (taking over of shares). 1859: Four and one-half per cent bonds of the Rhine-Nahe Railway (guar- anteed by State) 4,500,000 thalers, jointly with the Disconto- Gesellschaft. 1861: Preference shares of the Cologne-Minden Railway. Private sale of shares and bonds of the Hessian Ludwig Railway. 1862: Placing of bonds of the Livorno Railway. Conversion of the 4^ per cent Thuringian Railway preference shares Issue of 1,200,000 florin preference shares of the Hessian Ludwig Railway. 1863 : Preference silver shares of the Galician Carl-Ludwig Railway, exempt from taxation (Rothschild syndicate), of 6,000,000 florins. Five per cent preference shares of the Moscow-Riazdn Railway of 5,000,000 rubles, guaranteed by State. The German Great B a n Four per cent preference shares of the Hessian Ludwig Railway of about 3,000,000 florins. Silver preference shares of the Galician Carl-Ludwig Railway of 5,000,000 florins (Rothschild syndicate). 1866: Shares of the Hessian Ludwig Railway. Shares of the Magdeburg-Leipzig Railway Lit. B. Shares of the Altona-Kiel Railway. Preference shares of the Upper Silesian and South-North German Junction Railway (Reichenberg-Pardubitz) . 1867: Common and preference shares of the Fiinfkirchen-Bares Railway and construction of the line, as well as of the Siebenburgen and Franz Joseph Railway (Rothschild syndicate). First preference shares of the Magdeburg-Halberstadt Railway. Bonds of the Russian Kozlov-Woronezh and Poti-Tiflis Railway. 1868: Shares of the Hessian Ludwig Railway (1,000,000 thalers). Five per cent bonds of the Hessian Ludwig Railway (guaranteed by State, 4,000,000 thalers). Five per cent preference shares of the Hessian Ludwig Railway. Organization of the Alfold Railway (Rothschild syndicate). Construction of the Arad-Temesvar line (Rothschild syndicate). Shares and bonds of the Austrian North- West Railway. Shares of the Rhine Railway Lit. B. (5,000,000 thalers). 1869: Five per cent preference shares of the Berlin-Potsdam-Magdeburg Railway of 7,000,000 thalers. Five per cent preference shares of the Upper Silesian Railway of 13,305,000 thalers. Four and one-half per cent guaranteed shares of the Thuringian Railway Lit. C of 4,000,000 thalers. Shares of the Cologne-Minden Railway of 9,068,200 thalers. 1869-70: Purchase of the entire Brunswick railway system from the Bruns- wick government on behalf of a syndicate for 1 1 ,000,000 thalers, and an annual payment of 875,000 thalers for sixty-four years, and transfer of its management and of the further extension of lines to a special company. DISCONTO-GESEI/LSCHAFT. 1853: Five per cent bonds, guaranteed by the State, of the Moscow-Riazdn Railway of 5,375,000 thalers; jointly with the Darmstadter Bank, the banking firm of Sal. Oppenheim jr., & Co., and a St. Peters- burg house. 1856: Three and one-half per cent bonds of the Upper Silesian Railway Company. 1857: Four and one-half per cent bonds of the Cosel-Oderberg Railway (1,500,000 thalers). National Monetary Commission 1859: Four and one-half per cent State guaranteed bonds of the Rhine Nahe Railway of 4,500,000 thalers (jointly with the Darmstadter Bank). 1866-1868: Shares and bonds of the Bergisch-Markische Railway. 1867: First preference shares of the Nordhausen-Erfurt Railway. 1868: Shares of the Alsenz Railway. Five per cent bonds of the Charkoff-Krementshug Railway of 1,716,000 (jointly with J. H. Schroder & Co., London). In considering this great activity displayed by the banks of that time in the underwriting and issuing of securities, we must not forget that (as a glance at the list will show) Ghese operations were almost exclusively confined to first- lass securities, the introduction of which has proved of ;reat benefit to the German investment market. It must also be borne in mind that the whole task of carrying out the great development of the German railway system at that period was performed by means of German private capital (which was very small), and by the aid of banks, with a total share capital extremely limited in comparison to the magnitude of the undertakings. The German banks at that time (almost without excep- ] tion) when heavily engaged, took immediate steps to I restore the liquidity of their resources and the equilibrium * between their assets and liabilities, whereas the Credit Mobilier, greatly to its detriment, postponed such attempts till the year preceding its collapse. Thus the Darmstadter Bank, the capital of which had been paid up in full in the first series (10,000,000 florins in 1855) raised its capital to 25,000,000 florins, though the attempt made in 1857 to bring it up to the amount of 50,000,000 florins (provided for in section 4 of its charter) failed almost entirely by reason of the crisis of that year. 85 66 The German Great Banks Consequently the bank, up to 1864, pursued the course (justifiable from the economic point of view, though hardly from a business standpoint) of reducing the loans on current account from 4,500,000 florins (1857) to about 360,000 . florins (end of 1859), and of reducing also the "Lombard and covered credits" and the "loan and mortgage " accounts. The same course was followed with regard to the item "illiquid claims," always specified in the reports up to 1864 86 although the administration was doubtless perfectly aware of the serious objections to such reductions from a business point of view. The Disconto-Gesellschaft likewise resolved, as early as 1856, or about a year after its transformation into its present form, to raise its commandite capital from 10,000,000 thalers to 20,000,000 thalers. Owing to the crisis of 1857, however, this resolution could only be partly carried out, and was cancelled later on. 87 Like the Credit Mobilier, the German banks in the early years of their existence (1855 and 1856), mainly under the influence of the highly inflated quotations of their shares, made the great mistake of distributing excessive dividends, mstead of holding them down and using the surplus to t strengthen their inner position and reserves. Thus the Darmstadter Bank paid dividends of 10.66 per cent in 1855 and 15 per cent in 1856, and the Disconto-Gesellschaft 1 3^2 per cent in 1856 (10 per cent for nine months) . ThisV course naturally had to be atoned for, especially by ex- treme fluctuations of dividends during the next few years, , and by large decreases during bad years. The dividends of the Darmstadter Bank and those of the Disconto- 67 National Monetary Commission Gesellschaft during this period (up to, and including 1869) are shown in the following table: 88 Year. Darmstadter Bank. Disconto- Gesellschaft. iSsa Per cent. r y. 'Per cent. 1855 - - ioM i8s6 1857 -- 1858 r IS i8co 1860 , IX 1861 5 1862 6y a i \4 1863 r l^ bVa 1864 6 ft \t, 1865 6M 6 ^ 1866 A 1 A g 1867 . bYi 8 1868 8 1869 Q 14 o- For nine months. The average dividend rate of the Darmstadter Bank was : during the first decade of its existence (i 853-1 862) , 6 % per cent; during the second decade of its existence 1863- 1872), 8.7 per cent; 89 that of the Disconto-Gesellschaft during the first ten years (1856-1865) of its existence as a limited joint stock company (Kommanditaktiengesell- schaft) 6.55 per cent; during the second decade (1866- 1875), 13.15 per cent. 90 It should be said though, that neither bank neglected to increase its surplus, which, for instance, rose in the case of the Disconto-Gesellschaft from 16,600 marks in 1852 to 2,640,495 marks in 1860, and of the Darmstadter Bank from 39,109.8 florins in 1854 to 1,553,363.18 florins in 1868. In contrast to the Credit Mobilier, current account business was fostered during the period under discussion 68 The German Great Banks by both banks with the greatest care and success, although, J in the case of the Darmstadter bank, not to the same extent as the promotion and issue business. 91 The development of the current account business in the Disconto-Gesellschaft and the Darmstadter Bank during the period is shown in the tables below (pp. 70 and 71). The tables show that the deposits of the Disconto- Gesellschaft amounted on December 31, 1869, to 2,274,228 marks, and those of the Darmstadter Bank in 1869 (the end of this period) to 10,800,268.34 florins. It should be said, though, that this large amount was due to exceptional and temporary circumstances, discussed on pp. 73 and 74. The other banks to be considered in this connection, the activity of which during this period has remained almost unnoticed in literature, 92 likewise show on the whole a satisfactory development. 6 9 National Monetary Commission 1 13 Ov 10 1 3 2 is 3 Income fr( commissio Marks. M M M 5* ^ " ^00 .J. . M DO X) q o X3 ^. r>. S8i TJ- M 10 t Ov HI M CO i-c *s ES t e 10 5 10 M cs Cv o 1 ro 10 I ? Jfl S M cs P) co J3 <2 S D ^ K E 1 g CO ro 00 I 1 i 3 v c^ s n ^ S .S.M4S 5 r o TV C o 1O l^ C H N 2 >O M 5s I "SSS I' v. .c [ n - - IBS ^ H - H C, i >. ^ o v< 3 r, * M 3 1 - CO C -M*3 ' s s -5 < D v ) * 3 ^ ( O ^t ( o N * 3SS J* i 3 -( ( ) r^ prt 1 o f < s c s ( O f o M s I 1 . I [ ^ a o 00 1 i .12 2 e end of 00 CO u 00 CO 00 r^ 00 00 00 00 00 on 6? . 41 1859 674, 952. 58 7. 999. 386. 39 M , 289, 928. 70 1860 619, 384. 19 5, 674, 302. 57/4 , 292, 170. 48 1861 S7o 775 55 4, 670, 961 . 20 , 276, 218. 50 1862 .. . 935 > 795 37 % 3 , 701 , 974. 15 , 292, 170. 48 1863 -_- i, 228, 338. 14 2, 724, 939. 47 , 732, 989. 33 1864 736 860 42 2, 261, 145. 19 No data. 1865 816, 5 19. 45 2, 96l, 32O. 2O i, 183, 879. 18 1866 5 i i i 963. 36 3, 464, 719. 80 No data. 1867 828 939. 41 3 , 243 , 465 . 15 No data. 1868 . . 785, 450. 58 9, 136, 926. 28 No data. 1869 2, 244, 432. 41 7, 429, 533.03 10, 800, 268.34 The A. Schaaffhausen'scher Bankverein, founded in "> 1848 with a business capital of 5,187,000 thalers (see p. 46) (of which, however, only 3,199,800 thalers had been issued at the start), during the first years of its exist- ence 95 under the cautious and experienced management of W. If. Deichmann, Gustav Mevissen, and Victor Wen- delstadt succeeded in starting important industrial under- takings, as well as in establishing numerous industrial connections, especially in Rhenish Westphalia. Thus, for the purpose of mobilizing the industrial participations of the firm of A. Schaaffhausen, it took a considerable part as early as 1851 in the founding of the Hoerder Bergwerks- und Huttenverein, at Cologne, 96 in 1852 in the Coiner Ber giver kverein, 97 as well as in the establishment of the Colnische Baumw oils pinner ei und Weberei; the Col- nische Maschinenbau-Aktiengesdlschaft, the Coln-Musener National Monetary Commission Bergwerks-Aktiengesellschaft, and the Colnische Ruckver- sicherungs-Gesellschaft. "The board of directors," says the business report for 1852 (p. 3), "acted on the principle that the function of a great banking institution is not so much to start new branches of industry through extensive participa- tions, as to induce the capitalists of the country, by recommendations based on exhaustive investigations, to turn idle capital toward such enterprises, which, when properly launched, in response to existing requirements, and offering the guarantee of expert management, bid fair to yield reasonable profits." As early as 1851, the item "Participations in Industrial Enterprises" amounted to 434,706 thalers. Up to 1858 the following promotions were added to those already mentioned : The Concordia, Colnische Lebensversicherungsgesellschaft; theAgrippina, Colnische Transportversicherungsgesellschaft, and the Colnische Hagelversicherungsgesellschaft. The A. Schaaffhausen'scher Bankverein took part also in the foundation of the Bank fur Handel und Industrie (Darmstadter Bank), the Bank fur Suddeutschland in Darmstadt as well as of the Colnische Privatbank at Cologne. Further, it assisted at that time in the amalga- mation of the Rhenish, the Bonn-Cologne, and the Cologne-Crefeld railway companies into one unified system of railways, with a union railway station at Cologne. The development of the current account connections, mostly drawn from the industrial and commercial circles of the Rhineland and Westphalia, is shown in the following table: 72 i The German Great Banks Year. Debits in current account. Credits in current account. Number. Total amount. 98 Number. Total amount. 1852*9 472 604 643 632 636 665 653 613 614 616 619 651 Thalers. 624 590 611 630 639 621 639 622 675 676 708 692 Thalers. 1853 1854.. 1855 1856 1857 1858 1859 1860. ... 1861 L__. i86 2 _ 1863 . ... . 6.959.285.58 7,212,472 05 5.345.243-98 5,924, 497. 66 6, 270, 191 . 84 5, 661, 290. 25 5. 599, 028. ii 6.849,356.88 6. 555, 008. 56 1864 1865 1866 1867 8, 252, 631. 32 7,339.369-58 7,113 860 39 1868... 7.951. 485. 26 8,433.753.36 1869 As to deposits (it is important to establish this fact as 7 the result of a deliberate business policy) , no appreciable increase during the period under contemplation could be \ expected, owing to the principles adopted by the A. Schaaffhausen'scher Bankverein as well as by most of the other credit banks. ''According to the principles adopted after discussion^ with the Board of Managers," says the business report of the Bankverein for 1850 (Appendix 2 to the minutes of the general meeting, September 14, 1850) deposits are received only on condition that three, six, and twelve j months' notice be given before withdrawal. It is only because of these principles and the low rate of interest that the amount in hand is insignificant when compared with former years. In the interest of the perfect safety 73 National Monetary Commission of our institution we do not deem it advisable to endeavor to obtain an increase in the deposits through more attrac- tive terms; we much prefer to carry on the business with our own means, to the extent that such action is at all possible in the banking business and is in the interests of our correspondents." The deposits at the Bankverein at the end of this period (1869) amounted to 883,616.80 thalers. The dividends paid on stock Lit. B (according to section 10 of the statutes, the capital and fixed dividends' of 4^ per cent on stock Lit. A were guaranteed by the State) during this period amounted to: Per cent. 1 848-1 85 1 4 1852 6 1854-- 6^ 1855 9 1856 9 >/ioo 1857 9 1858 6 1859 6 1860 6 1861 6K 1 862 i 1863 7 i86 4 __ 7 # i86 5 __ yK i866__ ?K 1867 7 ^ i868__ 7 ^ 1869 8 i8 7 o__ 8 14 The profits of the business were thus quite satisfac- tory, 101 and the surplus funds amounted, as early as Decem- ber 31, 1857, to 320,388.63 thalers. The extension of the business by the establishment of branches, agencies, and commandites had been contem- 74 The German Great Banks plated as early as 1853 (business report for 1853, p. 3), and at the general meeting of September 29, 1855, a reso- lution was passed to add a paragraph (par. 82) to the by- laws, which read as follows: "The company is authorised to establish a branch in Berlin, as well as agencies and commandites abroad." This resolution, however, was not carried into effect, owing to the refusal of the Prussian Ministry of Finance and Trade to ratify the change of the by-laws. _ The Berliner Handelsgesellschaft, founded in 1856, de- voted itself successfully, from the very outset, to the fur- therance of the issue business (in accordance with section 2 of its by-laws, see note 73). Its nominal capital was 15,000,000 thalers, of which, however, only 3,740,150 thalers were paid up (1859, 3,786,200 thalers); of the lat- ter, again, 800,000 thalers (4,000 shares nominally at 200 thalers) remained in the portfeuille of the company. In 1856 it participated in the Carinthia Railway (merged in 1858 with the Lombard Railway), and in 1862 in the conversion of the 4^ per cent preference bonds of the Hamburg-Berlin-Potsdam-Magdeburg and Thuringia Rail- way; during 1867, in the flotation of the Baden 4^2 per cent state loan and 4 per cent premium loan, of the Magde- burg and Halberstadt original preference shares, and of the Thuringia Railway shares. Further, it negotiated the issue of the 5 per cent Kozlov-Voronezh and the 5 per cent East Prussian Southern Railway preference bonds. In 1868, when the commandite capital, which had been reduced meanwhile to 7,500,000 thalers (of which at that time 3,786,200 thalers had been issued), was paid up to the amount of 5,625,000 thalers, it participated in 75 National Monetary Commission the issue of the 4^ P er cent Upper Silesian preference bonds, the Russian Land-credit mortgage bonds, the Yeletz-Orel preference bonds, the 4^ per cent Prussian state loan of 1867 Lit. D. to the amount of 24,000,000 thalers, part of which was issued in 1868, and in addition arranged successfully for the public subscription and placing of the 5 per cent (state guaranteed) preference bonds of theShuya-Ivanovo, Kursk-Charkov, andCharkov- Azov Railway; of the 4>< per cent preference bonds of the Breslau-Schweidnitz-Freiburg Railway; of the /X per cent Roumanian Railway bonds, and of part of the first preference bonds of the Halle-Sorau-Gubener Railway. Finally, in 1869, it took a nominal part in the issue of the 5 per cent bonds of the Moscow-Smolensk Railway; of the 5 per cent preference bonds of the East- Prussian Southern Railway; of the 4^ per cent preference bonds of the Magdeburg-Cothen-Halle-Leipzig Railway; of the shares of the Breslau-Schweidnitz-Freiburg Railway, and of the Gotha premium mortgage debentures; it also had a secondary participation (unterbeteiligt) in the taking over of the original and preference shares of the Schlesische Zinkhutten, of the preference shares of the St. Petersburg- Baltishport Railway, and of the loans of the Italian Government raised on the church estates. The commissions on the current business amounted to Silber- Pfen- Tnalers. groschen. nige. 1857 1858 1859 J 4 T Q 1860 ' 1861 T o 1862 6i> 393 1863 1 6 10 i ii i 3 76 The German Great Banks Silber- Pfen- Thalers. groschen. nige. 1864 . 68, 106 22 1865 67,349 28 l866 82, 210 21 1867 78,735 16 1868 128, 034 26 1869. 134, 654 27 The dividends amounted Per cent. 1857 5'/6 1858 sX 1859 5 (About half of which was taken from the surplus fund.) 1860 4% 1861 5 (About half of which was taken from the surplus fund.) 1862 9 1863 8 1864 8 1865 8 1866 8 1867 8 1868 10 1869 10 All arrangements had been made, according to the business report of 1857, for the establishment of com- mandites in other towns, but the realization of these plans had to be postponed owing to the crisis. Only the banking firm of Messrs. Breest & Gelpcke in Berlin carried on business on account of the Berliner Handelsgesellschaft since January, 1857. This firm, how- ever, sustained large losses in 1863 through the failure of a large export firm at Danzig. The Mitteldeutsche Kreditbank 103 was founded in 1856 with a capital of 8,000,000 thalers, of which 3,000,000 remained in the portefeuille of the bank, while of the remaining capital of 5,000,000 thalers, 1,000,000 thalers were redeemed in 1859 (see p. 47.) This bank, as stated 77 National Monetary Commission before, should properly not concern us in this connection, as during the period in question it was a note-issuing bank. Its note issue amounted to 1,688,660 thalers in 1857 and to 4,000,000 thalers in 1868. At Frankfort-on-the-Main an "agency" (August Siebert) was established in 1856, which was transformed into a branch office in 1872. The Bank took an active part shortly after its founda- tion in a series of industrial, state, and railway transac- tions, which, however, were not always successful. Thus in 1856 it participated to the extent of one-third in the purchase of the Ludwigshutte, near Biedenkopf, which was transformed in 1858 (under the name of Oberschlesischer Huttenverein) into a joint-stock company with a capital of 600,000 florins. This operation caused serious losses to both partners (the Darmstadter Bank participated to the extent of two-thirds). The participation during 1856 in a cigar factory at Wassungen in the Duchy of Meiningen also terminated badly. On the other hand, it attained satisfactory results in its simultaneous participation in the Hochheim enterprise of sparkling wines (Burgeff & Co.), which was transformed into a joint-stock company in 1857; also in negotiating a \y z per cent Swedish loan (jointly with the Darmstadter Bank), and in a i co-florin lottery certificate loan, guar- anteed by the Austrian Government, as well as in taking over a preference loan of the Werra Railway (1,000,000 thalers), and in its participation in the establishment of the insurance society "Providentia," at Frankfort-on- the-Main. The German Great Banks It was interested in the development of the brown coal industry in the Nieder-Lausitz district from the very com- mencement of this industry; particularly in the Eintracht, Braunkohlenwerke und Brikettfabriken, and the Use, Bergbau-A ktiengesellschaft. In 1858 it participated in taking over the balance of theWerra preference shares of 250,000 thalers; a 4^ per cent loan of the city of Bremen; and the 4^ per cent preference shares of the Frankfort-Hanau Railway. In 1862 it took a leading part in the founding of the Deutsche Hypotheken-Bank at Meiningen. During the greater part of the period under considera- tion, it devoted itself to the regular (current) business. Its turnover amounted to IYear. At the main office. At the agency in Frankfort-on-the- Main. 1858 ___ _._ Thalers. 96, 095, 137. 01 Thalers. 84 818 800 50 1859 1860 6l 213 7O9 22 1861 57. 79o, 084. 68 1862 1863 .. 165 869 918 46 1864 J 59 529, 216. 46 1865 1866 138 819 867 94 1867 . i 19, 03 i, 959. 50 1868 166 972 868 90 1869 263, 770 732 68 . The commissions amounted to Thalers. 1857 58,067.39 1858 23,660.02 1 859 28, 962 . 48 l860 -- 34,930-77 1861 73,175.81 1862 206,847.58 79 National Monetary Commission Thalers. 1863 - 114,998.13 1864 - 115.046-66 1865 - 101,401.46 1866 76,664.87 1867 --- 73, 268. 79 1868 - 115,407.34 1869 - 146,407-43 The current account business showed the following results : Year. Credits. Debits. Number of accounts. Amount. Number of accounts. Amount. 1857 _ Thalers. 469, 268. 20 578,029.84 492, 810. 82 688, 059. 09 768, 511. 91 , 200, 912. 81 , 561,300.64 ,901,955-53 ,853.521.41 , 254, 1.10. 70 > 553,950. 14 , 588,034.88 ,947,910. 74 Thalers. i, 594, 721. ii i, 441, 089. oo 981, 676.98 1,642, 790. 67 2, 289, 436.34 2,673,483.57 2,879,205.88 3, 152, 198.46 2. 949, 646. 69 2, 990, 217.87 3, on, 208. 17 2,933.362.84 4,658,450.31 1858 1859 2IO 205 216 278 312 39 347 316 239 285 3i6 348 399 415 547 687 726 709 677 493 588 656 1860 1861 1863 1863 1864 1865 1866 1867 1868 1869 The following dividends were declared: Per cent. 1857 6 1858 6 1859 4 i86o_ A 1861 6 1862 7 1863 7 1864 7 J^ 1865 7 i866_ 6 1867 7 1868 1869 10 80 The German Great B a n The deposits increased from 490,599.54 thalers in 1858 to 756,465 thalers in 1869. The silent partnership (commandite) account stood, as early as 1858, at i ,103,1 1 1 thalers, without the commandites being named. It is only in the report for 1860 that a Berlin commandite is mentioned, namely, Messrs. A. Wolff - sohn & Co., whose place was taken by Messrs. G. Miiller & Co. in 1866. This commandite, simultaneously with the Frankfort Agency, was changed into a branch office in 1873- During 1869, 1870, and 1871 the original capital of the bank, which had been reduced to 4,000,000 thalers, was increased again to 8,000,000 thalers, and in 1872 to 16,300,000 thalers, equal to 48,900,000 marks. 104 The liquidity of the bank's resources was nearly always maintained, although energetic intervention was occasion- ally necessary. Thus, at the end of 1859 the bank owned securities to the value of 179,813.32 thalers; and succeeded in reducing the same during one year (1860) to 132,210.32 thalers, or by 47,603 thalers. The attitude of the banks during the crisis of 1857 was, ^ generally speaking, economically correct. The Darm- stadter Bank, for instance, could point out in its report for 1857 that during that year it was able to ease and mitigate the economic situation by retarding industrial promotions and by opportune interventions on the stock exchange; -, through which course, however, its holdings of securities - rose from 8,500,000 to 10,500,000 florins in 1858, and to 12,500,000 florins in 1859, causing considerable loss later on. During that year (1857) it was able to advance con- siderable sums to the Hamburg Senate, as well as to 90311 IT 7 Si L National Monetary Commission several banks, thus proving that it had seasonably and successfully strengthened the liquidity of its resources. The A. SchaafThausen'scher Bankverein also empha- sized in its business report for 1857 (p. i) that "its large available means had enabled it at the time of the crisis to continue to grant credit to its old solid clients, as well as to increase the same suitably wherever it appeared advisable. ' ' Similarly, the Berliner Handelsgesellschaft report for 1857 (p. 2) states: "During the crisis we have helped to smooth over difficulties by opportune assistance in numer- ous cases where a proper assurance was given that the assistance granted would be repaid." In all issue business and flotation activity, however, the banks at that time were not slow to perceive clearly the importance and necessity of the fundamental principle underlying all prudent banking policy, namely, the dis- tribution of risk; a principle which was adhered to by several banks in their issue transactions to an extent that often proved disadvantageous to their profits. In 1859 the Darmstadter Bank (probably for the first time) formed a "bank syndicate" 105 for the purpose of taking over several engagements which had to be settled in 1860 (especially the Rhein-Nahe Railway bonds), a proceeding emphasized in the business report of 1860 in the following words: "This form has its decided advan- tages, as it reduces risk and facilitates operations." 106 It must be admitted that the business reports 107 of that period left much to be desired as far as lucidity and con- ciseness are concerned (this was owing to the fact that a proper form had yet to be found) thus complaints, 82 The .German Great Banks both justifiable and unjustifiable, were not lacking. Nevertheless, it must be emphasized that hardly any one of them contained self -advertising commendation, and that frequently they contained warnings, 108 and that, for in- stance, Model (op. cit., p. 36) was able without any difficulty to compile the profit and loss of the Darmstadter Bank from 1853 to l8 5 6 , although a specified profit and loss account was attached to the reports only beginning with the year 1859. The business reports of the A. Schaaffhausen'scher Bankverein can also be described as thorough and exhaustive. On the whole, it may be said of the banks whose activity falls within the period under consideration that they made satisfactory progress in the organization and extension of business connections (Kundengeschdft) , and that they undertook, with growing success, state, financial, and railway transactions on a large scale, and to a far greater extent than industrial transactions. The words used by a specially competent expert, 109 in reviewing the activity of the Darmstadter Bank during the first period, apply equally to all the banks, at least to the most prominent of the period; namely, that they " rendered special service in the development of European state credit and in the execution of great railway construc- tions." After reviewing the great work performed by the Ger-v man credit banks during this first period a work executed gradually and gropingly, not without many faults and mis- takes, but neither without great and permanent success, although in the face of serious interruptions through y 83 National Monetary Commission European wars no and grave crises m it will be difficult to accept the view of A. Weber that German joint-stock banking may be said to have become a common form only in the beginning of the seventies (op. cit., p. 47). Neither can we adopt the extremely subjective view- point of Max Wirth, the South German contemporary critic, concerning the activity of the German banks during this period. In his book on commercial crises (p. 271) he places the fact that the Darmstadt er Bank participated in 1857 in the promotion of the North German Lloyd, under the heading "The requirement of industry and trade," following it up with an exclamation mark, and manifests indignation at the bank's promotion of the "Concordia Spinning and Weaving Works" (formerly S. Woller), still flourishing in Bunzlau und Marklissa, by referring to it as the " Promotion of worsted spinning works in far-away North Germany." 8 4 PART III. THE SECOND PERIOD (FROM 1870 TO THE PRESENT DAY). CHAPTER I. (i) TABLE OF EVENTS DURING THE SECOND PERIOD WHICH INFLUENCED THE DEVELOPMENT OF THE GERMAN BANK- ING SYSTEM. 1871-72 Termination of the Franco-German war; sudden influx of the war indemnity of 5,000,000,000 francs; irregular expansion of the German system of private railways, impetuous growth of production, rise of workmen's wages, of almost all prices, especially prices of raw material and mining products; strong speculative movement in all branches of commerce and industry; beginning of the industrial cartel movement. Establishment of provincial discount companies in Ber- lin, Hanover, Aix-la-Chapelle, Bernburg, Elberfeld, Ham- burg, Duisburg Ludwigshafen. 1871 Foundation of the Deutsche Bank, marking the commence- ment of a systematic development of the deposit busi- ness, of the industrial export policy of the credit banks, and of the concentration of German banking. 1873 Bourse and industrial crisis. 1874-1878. . .Economic depression. 1875 Foundation of the "Reichsbank" (began business January i, 1876). 1876 Bank discount rate falls to 3^ per cent in Berlin. 1877-1878. . . Russo-Turkish war. 1879-1882. . .Economic revival; formation of foreign railway companies, and the issue of foreign loans. 1879 Bank discount falls to 3 per cent in Berlin. 1879 The commencement of the conversion of German state rail- way and municipal bonds; reorganization of the German bank and coinage system, adoption of the gold standard; beginning of the state purchase of the German private rail- ways; treaty of alliance with Austria. 1883-1887. . .Depression in all fields; continuation of the issue of foreign securities. 85 National Monetary Commission 1887 Alliance with Italy. 1888-1890. . .Boom, large number of promotions, transformations, issues, bourse speculation, difficulties in meeting payments on the state loans of Argentina, Portugal, Greece, etc. 1891-1894. . .Depression and stagnation in all directions. 1891 Failure of several Berlin banking concerns. 1893 Foundation of the Rheinisch-Westfalisches Kohlen-Syndikat. 1893 Meeting of the bank inquiry commission. 1895 Commencement of an upward tendency; quotations of the 3 per cent Imperial consols rise to 100.30 and of the 3 per cent Prussian consols to 100.40; beginning of a systematic industrial policy of the banks; foundations, transforma- tions, issues; most of the great banks raise their capital. 1896-97 The upward movement intensified; brilliant development of the electro-technical industry; further extension of the German (state) railway system; increase of the Imperial Navy. 1897 Formation of the Rheinisch-Westfalisches Roheisensyndikat; fusion of interests (Interessengemeinschaft) between the Deutsche Bank on the one hand, and the Bergisch-Mar- kische Bank at Elberfeld, and the Schlesischer Bankverein at Breslau on the other, in order to promote an industrial banking policy (denoting the commencement of close rela- tions between the great banks and industry) which gave an impetus to concentration of banking. 1898-1900. . . Market*at its highest; rise of the average bank discount rate in Berlin to 5.33 per cent and of the private discount rate to 4.41 per cent (1900). Growth of money requirements through the predominance of cash transactions in bourse speculation instead of time bargains, as a result of the bourse law of January i, 1897. 1898 Outbreak of the Spanish- American war. 1 899 Transformations, new promotions, and issues show a new record. Outbreak of the Boer war. 1900 Quotation of the 3 per cent German Imperial consols falls to 86.74 ( as compared with quotations of 99.63 of the 2^. per cent British consols, and of 100.60 of the 3 per cent French rente). The Deutsche Bank takes over 200,000,000 marks of German Imperial and Prussian consols. 1900-01 Crisis, fall in quotation of mining securities (end of March to beginning of July); failure of the Pomeranian Mortgage Bank, of the Mecklenburg -Strelitz Mortgage Bank, of the Prussian Joint -Stock Mortgage Bank, of the Deutsche Grundschuldbank, the Dresdner Bank fur Handel und Gewerbe, the Leipziger Bank, and of many industrial 86 The German Great Banks undertakings especially in the electro-technical branch. Energetic intervention of the great banks, strengthening of the concentration movement; disposal to an American syndicate of 80,000,000 marks 4 per cent state treasury bills repayable in 1904 and 1905; maintenance of the low bank discount rate (3^ per cent) until the end of Sep- tember. 1901-1902. . .Continued large needs of money on the part of the Empire, the individual states, and municipalities, outbreak of the Chinese troubles; foundation of the United States Steel Corporation (1901). 1902-1906. . .Recovery; bank discount rate falls to 3 per cent (February, 1902), then increases to 4 per cent (October, 1902). Feb- ruary 9, 1904, outbreak of the Russian-Japanese war. 1904: Foundation of the Stahlwerksverband at Diisseldorf ; impetuous movement of concentration. 1905: Founda- tion of the Oberschlesischer St&hlwerksverband. 1907 American crisis; considerable rise of discount rates up to 7^ percent (average, 6.03 per cent). 1908 Termination of acute crisis in America; recovery; money be- coming available; fall of the bank rate from 7^2 per cent in January to 4 per cent in December; average 4.76 per cent. 1909 Money circulates more freely ; political troubles owing to conflict between Austria and Servia; bank -law amend- ment; in the last months of the year beginning of an improvement in some branches of industry, especially in the mining industry. (2) SKETCH OF THE ECONOMIC DEVELOPMENT OF GERMANY FROM 1870 UNTIL THE PRESENT. The result of the victory in the great Franco-German war was the creation of the German Empire in 1871. Unity was established gradually also in economic life. Weights and measures, the coinage and monetary sys- tems, 1 the constitution of law-courts, procedure, and law, 2 were unified by degrees, and the army and navy 3 linked firmly together for the protection of the gains attained. A central note bank (the Reichsbank) 4 was founded for the purpose of regulating the money circula- tion and facilitating payments. Furthermore, a supreme court for the Empire 5 was created. National Monetary Commission The right of free migration and free competition (rec- ognized as early as the sixties in the independent indus- trial legislation of the various German States) was intro- duced everywhere, at first through confederate and then through Imperial legislation. The epoch commencing in this manner represents one of the greatest economic revolutions that has probably ever taken place in any modern civilized state. It does not lie within the scope of this work to attempt to describe these changes exhaustively. The extent and the development of the problems, however, which had to be solved by the German banks during the period under consideration, could hardly be comprehended without a brief description of at least those chief factors of the economic development which had particular influence on the growth of German banking. It is only within such limits that I have attempted to sketch them in the fol- lowing outline. I will attempt to summarize the numerous important factors in this development under the following two heads : This development is characterized on the one hand by an enormous expansion in almost all directions of public and private activity, coupled with 6 a further shifting of the center of gravity of the whole economic fabric from agriculture to industry; and on the other hand, by the most intense concentration of forces, undertakings, and capital. The following will give a detailed illustration: The feverish rapidity of the economic development during the period in question must be attributed above all to the rapid growth of the population, for which sus- tenance and employment had to be found. The German Great Banks The population in 1816 amounted to about 25,000,000; at the beginning of this period (1870), to over 40,000,000; and in 1907 to 62,100,000 souls. During the last few years it has increased on an average by about 855,000 souls annually, as compared with an annual increase during recent years of about 373,000 in England and of only about 58,000 souls in France. It should be emphasized however that this enormous increase in the population of Germany is not due to an increase of births, which have decreased in proportion to the population during the last three decades. The increase is due principally to the very considerable decrease in mortality, i.e., owing to the fact that as a result of improved hygienic conditions the number of deaths in proportion to the population has decreased far more rapidly than the number of births. 7 Should this proportion change, an eventuality bound to take place sooner or later, and should the birth figures remain stationary or decrease to a considerable extent, a continuation of the increase in population hitherto recorded is out of question. Added to this, the excess of immigration, which occurred for the first time in the years 1895 to 1900," (and which still con- tinues) may change again into an excess of emigration which, from 1871 to 1895, amounted to about 2,500,000 souls. Finally, the increase in population may cease or the rate of increase may decline, if there should be a decline in the productivity of our national industry which has been both a result as well as a cause of the increase of population. At the beginning of this period (1871) about 64 per cent of the inhabitants of Germany lived in the country, and 8 9 National M on et ar y Commission about 36 per cent (as compared with only 28.04 per cent in Prussia in 1849) in the towns. In 1893, however, the percentage of country and town population was almost equal, and in 1905 the percentage of people living in the country amounted to 42.58 per cent only, whereas the percentage of those living in towns had risen to 57.42 per cent of the total population. 9 According to the census of professions, trades, and occu- pations taken June 14, 1895, 26,000,000, or 42.7 per cent of the population, were engaged in various professions, trades, and occupations 10 (either as a main or subsidiary means of gaining a livelihood) (erwerbstdtig im Hauptund Nebenberuf.) They were divided as follows : Of the total number, 20,770,875, or 40.12 per cent of the entire population, were engaged in various professions, trades, and occupations as a main source of livelihood (er- werbstdtig im Hauptberuf) , as compared with 17,632,008, or 38.99 per cent of the entire population, in 1882. According to the occupation census taken on the i2th of June, 1907, the main results of which were published in the " Reichsanzeiger " of February 10, 1909, No. 35, the number of persons thus engaged was 26,827,362, or 43.46 per cent of the entire population. These figures show an increase of 6,056,487, or 29.16 per cent, as compared with 1895, whereas the increase in 1895, as compared with 1882, amounted only to 17.80 per cent. The population of the chief industrial towns n had increased to an extraordinary extent up to the end of 1905, in comparison with the years 1843 or 1849. Thus, for instance: Aix-la-Chapelle to about 144,000, as compared with about 46,000; Chemnitz to about 241,000, as corn- The German Great Banks pared with about 26,000; Dortmund to about 175,000, as compared with about 7,600; Essen to about 229,000, as compared with about 7,000; Diisseldorf to about 253,000, as compared with about 26,ooo. 12 At the beginning of the period under consideration there were 8 towns, in 1905 as many as 41 towns, with over 100,000 inhabitants. Berlin, which about the middle of the nineteenth century numbered less than 500,000 inhabi- tants, in 1870, 774,000, in 1880 not quite 1,250,000, and in 1890 about i,5oo,ooo, 13 has passed beyond the second million since December, 1904. As stated by Ad. Wagner, 14 it seems at the present time as difficult to make a scientifically incontestable estimate of German national wealth, as it is to estimate the amount of income of the German nation or its annual savings. A brief consideration of the facts will make this clear. According to the most recent calculation made (1908) on the basis of what is relatively the most accurate method, taking as basis the Prussian supplementary tax (i. e., a direct property tax) , the wealth of Prussia amounted to 130 billion marks. Taking into account 15 the proportion of population (3/5) the German national wealth (given by Mulhall in 1895 in his " Dictionary of Statistics" as 7,500,000,000= 150 billion marks) is estimated at 216 bil- lion marks, or to avoid exaggeration at 200 billion marks. 16 Two years earlier (1906) the German national wealth was estimated by Evert 17 at 200 billion marks, by Ballod 18 in 1908 at 251 to 266 billions, by Steinmann-Bucher (i9o8) 19 at even 314 billions; and in a recent essay ("350 Milli- arden deutsches Volkvermogen," Berlin 1909) at 350 to 360 billion marks. Thus there is a difference of no less than National Monetary Commission 1 60 billion marks 20 between the highest and lowest (200 billion to 360 billion marks) estimates recently made, al- though most of them were based upon careful and con- servative calculations. Again, the result of the Prussian income tax assess- ment for 1907, chosen as a basis for estimating the Ger- man national income, gives a total income for the Prussian population (1907) of 17,990,000,000 marks (11,747,000,000 marks for taxpayers; 6,243,000,000 marks for nontax- payers). Calculated on the proportion of the population this would result in a German national income of 25 to 30 billion marks, and an annual income of 484 marks per head of the population. These figures, however, should be used with great reserve. 21 As a matter of fact Steinmann-Bucher calculates the present German national income (in his book " 350 Mil- Harden deutsches Volksvermogen," p. 102) as being much higher, namely, 35 billion marks, though the grounds on which he bases his estimate seem inadequate. The same remarks apply to any estimate of the annual German savings, i. e., the amounts by which the German national wealth is annually increased from the German national income. This amount Schmoller 22 has placed at 2 X to 3 billion marks, and it has been calculated by the author of the Grenzboten article already mentioned (p. 91) at 3.7 billion marks on the basis of an average annual increase of 1,700,000,000 23 marks in the value of property subject to the Prussian supplementary tax. It is plain that the same objections, or other no less serious, may be urged against all estimates for foreign The German Great Banks countries which have been made according to any of the above methods. 24 If, however, it be desired to give merely a general idea of the development of national prosperity in Germany during this second period, it may be pointed out among other things that the total income during 1907 of all physical persons in Prussia (including an allowance for non-taxpayers) amounted in round figures to 16 billion marks for a population of 38,421,000, while in 1896 the total income of these persons amounted to slightly over 10 billion marks, for a total population of 32,379,000. The increase of income was thus 56 per cent, while popu- lation increased during the same period only 1 7 per cent. The amount of property assessed for property taxes in 1905 amounted to about 82,500,000,000 marks, showing an increase of 17 per cent, as compared with 1899, when it amounted to 70,000,000,000 marks. The figures for the other German Federated States show a similar development. 25 If an attempt be made to ascertain the amount of German national wealth invested in Bourse securities (which would be especially appropriate in the present volume), equally great difficulties will be experienced, despite the material collected in regard to this subject on the occasion of the German finance reform bills of I9o8. 26 If the table compiled in the report of the Aeltesten der Kaufmannschaft von Berlin 27 be adopted, in which (according to the market report of June 30, 1906) the nominal and market values of the securities dealt in on the Berlin Bourse were estimated at about 92 y 2 and 94^ billion marks, respectively, it is evident that for our 93 National Monetary Commission purpose the figures are too high in one regard and too low in another. Too high, because in the table the total of securities bearing fixed interest includes the amounts withdrawn from the market during 1906 by repayment; further, because it does not contain the total amount of foreign securities in German hands, but only the amount of foreign securities listed at the Berlin Bourse. By far the larger portion of these securities, however, were never in German hands, as, for instance, Russian and Argentine government bonds, as well as Russian and American rail- way securities. 28 Another part of these securities, such as the Italian, Austrian, and Hungarian state securities, had passed or returned by the 3oth June, 1906, from German to foreign hands (especially to the countries of their origin) in consequence of conversions or of foreign demand. On the other hand, the results obtained by accepting the table as a basis, are in part far too low, as many of the securities are not quoted on the Berlin Bourse, but on other German exchanges. Other securities, such as the debentures of small industrial undertakings, are not quoted on any German bourse. The Deutscher Oekonomist 29 endeavors therefore to solve the problem in a different manner. It starts with the supposition that, according to the income-tax statistics in Prussia, the Prussian income derived from capital property has been valued (though far too low) at 1,610,000,000 marks, which, capitalized at 4 per cent, corresponds to 40,000,000,000 marks for Prussia, and assumes that of these 40,000,000,000 about 20,000,000,000 are invested in mortgages, thus leaving 94 The German Great Banks a balance of 20,000,000,000 for securities invested in Prussia, and accordingly about 30,000,000,000 for the whole of Germany. This method of calculation does not yield indisputable results, the more so, because no statistics exist regarding the total mortgages outstanding in Germany, the amount of which for Prussia is estimated at 20,000,000,000 marks. Thus every estimate must be more or less inaccurate. Moreover, every purely schematic application of Prussian to German general conditions is improper. As a matter of fact it is assumed in the above-men- tioned supplementary volumes to the German finance re- form bill of 1908 30 that in 1907 the German public held German public and quasi-public securities, as well as mortgage and municipal bonds of private mortgage banks, to the amount of about 35,500,000,000 marks; industrial bonds to the amount of 2,500,000,000 marks, and shares of an actual value of 6,750,000,000 marks, making a total of 44,750,000,000 marks of securities in German hands, or 14,750,000,000 marks more than the above-mentioned estimate of the whole amount of securities in German hands. As statistical details are lacking (especially the yield of the stamp duties), it is impossible to obtain a reliable estimate 31 of German investments held in the shape of securities of all kinds. On the whole, we may assume (on the strength of a number of data) that at least one- third of the national wealth is invested in securities. 32 According to the different estimates of the German na- tional wealth (200,000,000 to 360,000,000 marks: see above, pp. 91 and 92) it may be concluded that the 95 National Monetary Commission amount is between 66,000,000,000 and 120,000,000,000 marks, figures which present a wide margin, indeed. A similar conclusion may be based on the issue statistics, which, though somewhat incomplete, tend to prove that 1,200,000,000 marks, or about one-third of the annual savings of the nation, is invested annually in securities. Grave misgivings have been expressed, especially by Ad. Wagner, regarding the tendencies shown by the de- velopment of German incomes during the period under consideration. Wagner finds that it is in the main a development along plutocratic lines and favoring the interests of the money aristocracy, and he seems to think that the entire economic development of Germany is seriously menaced by " this constantly growing concentra- tion of income, evidenced not only in the case of some particularly rich persons, but also by a constant growth in numbers of the classes occupying a high and even the highest place in the economic scale. ' ' 33 In a study, breathing a high spirit of patriotism, 34 he has lately pointed out that about the middle of the nine- teenth century there were only about 100 persons with in- comes exceeding 100,000 marks in the territory correspond- ing to the confines of present-day Prussia, whereas in 1891 there were 1,400 to 1,500, in 1902, 2,800, in 1905, 2,900, and in 1907, 3,600 such persons. In another place he states that the national wealth and national income have increased out of all proportion in favor of the upper and of the highest classes, and not inconsiderably in favor of the lower classes (especially the working classes) , whereas the large middle class maintains its position with great difficulty in the list of taxpayers, and (as far as its share 9 6 The German Great Banks of the national income is concerned) is falling into a less favorable position from day to day. 35 A consideration of the facts will show that none of these misgivings can be deemed justified in all or even in their main points. In my opinion (see p. 113) the increase in the number of persons with incomes exceeding 100,000 marks in Prussia (of present extent), from 100 in the middle of the last century to 3,600 in 1907, is certainly a gratifying proof of our economic development. But if we consider the enormous growth of population in these 57 years, the increase of such incomes does not seem very considerable, but rather (relatively speaking) inconsiderable. As a matter of fact, a smaller growth in the incomes exceeding 100,000 marks might have suggested serious misgivings regarding the development of national pros- perity, in view of the fact that during these sixty years the entire standard of living, the entire consumption, and thus the household budget of the individual, has doubt- less increased to a very great extent. After all, we can see but little significance in the fact that it is just the uppermost grade of taxpayers (men- tioned by Wagner) which has considerably increased compared with the other classes, since those of its mem- bers who become wealthier must of necessity remain in that grade, there being no higher grade to which they could be transferred. Finally, it may be pointed out that during the period under discussion the number of those persons who have been moving upward from a lower to a higher tax grade 36 has been constantly increasing; further, that the relative 90311 ii 8 97 National Monetary Commission number (in proportion to the population) of non-tax- payers (i. e., persons in Prussia with incomes below 900 marks) who have been moving upward into the taxpaying class during this period has also been constantly on the in- crease. 37 This can be proved in detail. According to Schmoller, 38 in old Prussia the number of persons paying taxes on incomes exceeding 3,000 marks was as follows: Persons. 1852 43, 489 1867 72, 983 In Prussia of to-day: Persons. 1873 123, 284 1894 319, 317 1902 449, 74 1 This shows, certainly, an absolute increase in the number of taxpayers in Prussia (present-day area) 39 with incomes above 3,000 marks whose total taxable income (after legal deductions) has risen from 2,792,345,342 marks in 1892 to 5,156,245,432 marks in 1907. On the other hand, the income of persons subject to the income tax in Prussia (present area) belonging to the lowest grade (incomes between 900 marks and 3,000 marks) has risen from 2,911,981,421 marks in 1892 to 6,591.553,725 marks in I907. 40 Between the years 1907 and 1908 the group paying no income tax (incomes below 900 marks) decreased in the proportion of 5,555 to 5,242; the number of taxpayers in Prussia (with incomes exceeding 900 marks) increased 19.5 per cent between 1892-93 and 1898-99, whereas the population increased during the same period only 8.2 per cent. 41 98 The German Great Banks Furthermore, the returns of the Saxon income tax, under which until 1894 all persons receiving a minimum income of 360 marks were liable to taxation, give the following figures for every 100 persons assessed: 1879. 1894. Less than 3 oo marks . . .. . Per cent. 7 I Per cent. 5- 6 7 6 3 65 3 20. 9 31 i 2 8 5 g That is to say, the number of taxpayers in the lowest grades decreased, and the number belonging to the other groups increased considerably. Moreover, the -largest increase during the period mentioned took place in the middle group of taxpayers (800 to 3,300 marks), supposed by Ad. Wagner to be particularly endangered. Finally, the total taxable income of physical persons in Prussia has increased from 10,147,578,035 marks in 1896 to 15,873,- 774,007 in 1907. In the memorial of the Admiralty, dated December, 1905, entitled "Die Entwicklung der deutschen Seeinteres- sen im letzten Jahrzehnt," proof is furnished of the enor- mous upward movement of incomes in Prussia, in which not only the wealthy classes but also those with smaller incomes participated (900 to 3,000 marks) almost to the same extent. The increase of the national income by far exceeds the increase of population. 99 National Monetary Commission The fact that the classes with small incomes, which, by the way, are not solely composed of workingmen, had a large share in this upward movement, can also 42 be proved by the savings bank statistics. Of the 9,000,000 savings bankbooks 43 in existence in Prussia at the end of 1901, almost one-quarter were for amounts not exceeding 60 marks, about one-seventh for amounts from 60 to 80 marks, about one-eighth for amounts from 150 to 300 marks, and only one- thirtieth for amounts above 3,000 marks (at this stage depositors begin to invest their savings in securities.) . The number of savings bank books grew as follows : 44 Location. Year. Books. Per 100 in- habitants. Per cent. Wurttetnberg 1891 1896 424. 500 20.3 Prussia 1882 1897 7, 643, ooo 23-4 1904 10, 211, 976 27. 71 1906 11,095, 276 29.24 This number had doubled in Prussia during the time from 1882 to 1897 and trebled up to the end of 1906. The savings bank deposits totaled as follows : Location. Year. Amount. Marks. Wurtternberg 1896 190, ooo, ooo Prussia _ 1882 1897 4, 967, ooo, ooo 1904 7, 762, ooo, ooo 1906 8, 788, ooo, ooo 1907 9, 121, OOO, OOO The German Great Banks These deposits had almost trebled in Prussia between 1882 and 1906, and were more than five-fold at the end of 1907. In 1882 every eighth inhabitant of Prussia pos- sessed a savings bank book, and at the end of 1901 every fourth inhabitant. The amount of deposits increased in the German Empire from about 1,869,000,000 marks in 1875 to 13,889,000,000 marks in 1907, which denotes an increase during these thirty-three years of 643.05 per cent. From 1883 to 1907, or in twenty-five years, the deposits have increased from 3,187,000,000 marks to 13,889,000,000 marks, or four and a quarter times. Between 1883 and 1908, the deposits in the German credit banks have also increased considerably; in credit banks particularly, with a minimum capital of i ,000,000 marks each (which are of greater importance for the de- posit business 45 ), they rose from about 498,000,000 marks at the end of 1883 to about 2,746,000,000 marks at the end of 1908, an increase during these twenty-six years of more than four and a half times. It may be assumed that the greater portion of these bank deposits, about two-thirds, consists of working reserves of manufacturers and traders (doubtless includ- ing also the smaller ones), and of funds of capitalists de- posited temporarily, but destined for investment in secu- rities, mortgages, etc., and that only the smaller part (about one-third) represents savings deposits proper. The annual increase of the savings deposited with the 16,092 German cooperative credit societies (on January i, 1908) was estimated at 225,000,000 marks. 46 The ma- jority of the members belong most probably to the clasr of the smaller and smallest tradesmen. National Monetary Commission German foreign trade (i. e., special imports and exports) according to the memorial of the admiralty dated Decem- ber, 1905, entitled Die Entwicklung der deutschen Seein- teressen im letzten Jahrzehnt, rose from 7,300,000,000 marks to 12,200,000,000 marks in the decade from 1894 to 1904; the increase in weight was 60 per cent, and in value 66 per cent. During this period the* special trade of England in- creased 38 per cent, that of the United States 59 per cent, that of France 28 per cent, and that of Russia 23 per cent. Within the last twenty -five years German trade has exactly doubled. 47 The total number of establishments in trade and indus- try amounted, according to the census taken in 1895, to over 3,000,000, in which about 10,225,000 persons were at work. Of these 3,000,000 establishments, nine-tenths with about 4,750,000 persons only were small establishments, as against only 19,000 large establishments, with over 50 persons each; the latter, however, gave occupation to about 3,000,000 persons, or almost to 30 per cent of all persons engaged in trade and industry. As compared with the census of 1882, the proportion of large establishments to middle-sized and small establishments in i895/ 8 had increased 28.3 per cent in the mining and foundry in- dustries, 3.6 per cent in the chemical industries, and 2.2 per cent in the industry of illuminants. By far the majority of the 19,000 large establishments with about 3,000,000 persons belonged to industry proper. The average number of workmen, clerks, and other employees belonging to the trade insurance associations 102 The German Great Banks (Berufsgenossenschaften) in commerce and industry was, in round figures, as follows: 1886 3, 467. 00 1895 5, 341, ooo 1905 8, 036, ooo There were 124,074 steam engines (not including those used in agriculture and forestry) with 7,587,650 horse- power 49 at work in the German Empire in 1907, which, if the effective horsepower of a machine during a normal working day is computed as equivalent to the labor- power of 10 men, replaced the work of 75,000,000 men. Of these 124,074 (7,587,650 IP) steam engines, 27,921 (3,065,223 IP) belonged to the mining and foundry industries; the textile industry employed 11,039 steam engines (934,763 IP) and the machine industry 8,066 (891,088 IP) steam engines. According to the occupation census of 1895 the whole population of Germany was divided as follows: Agricul- ture, 35.74 per cent; industry and mining, 39.1 per cent; trade and transportation, 11.5 per cent. For Prussia alone the following comparative data may be given: 50 1843. 1895- 1907. Ptr cent. 60. 84-61. 34 Per cent. 36. 12 Per cent. 28. 59 Industry and mining 23-37 97 38.73 1 1. 39 42. 76 13. 17 The population of the Empire engaged in agriculture and forestry, which still numbered 19,250,000 persons in 1882 (19,225,455 souls, or 42. 5 per cent of the population), decreased in the thirteen years following (1882-1895), to 18,500,000 (18,501,307 souls, or 35.8 per cent), the whole 103 National Monetary Commission population increasing during the same period 14.48 per cent; that is to say, the decrease in agricultural popula- tion amounted to about 700,000 persons, or 3.77 per cent of the total population. Although the number of farms (landwirtschaftliche Betriebe) and the area utilised for agri- culture increased constantly during the thirteen years in question, the number of agricultural laborers diminished by over 254,000 persons. During the same period (1882-1895), the industrial population increased 26.12 per cent, and the commercial population as much as 31.62 per cent. Thus even the census of 1882 had made it evident that a reversal had taken place; the industrial minority of former times had become a majority, and the former agricultural majority had been turned into a minority. According to the census taken on June 12, 1907 (" Reichs- anzeiger" of February 10, 1909, No. 35), this condition has become very much more pronounced. The total number of persons engaged in agriculture (those making agriculture their main occupation, includ- ing house servants, and members of the family) has de- creased still further, the number being 17,681,176 souls. Of the entire population of the German Empire in 1882, 1895, and 1907 the distribution of the total population by occupations showed the following percentages: 1882. 1895- 1907. Agriculture (including gardening, stock breeding, forestry, and fisheries) ... Per cent. 42 5 Per cent. 35 8 Per cent. 28 6 Industry (including mining and the building trades) . Trade and traffic (including innkeeping and tavern keeping) 33-5 39-1 42.8 104 The German Great Banks The distribution by occupations of the population en- gaged in gainful occupations in the German Empire in 1882, 1895, and 1907 is shown in the following table: 1882. 1895. 1907. Agriculture (including gardening, stock breeding, Per cent. Per cent. Per cent. forestry, and fisheries) 43-4 36.2 32. 7 Industry (including the mining and building trades) . 33-7 36.1 37-2 Trade and traffic (including inn keeping and tavern keeping) 8.3 IO. 2 ii 5 Thus on the basis of the statistics of occupations it may be stated with perfect assurance (with certain reserva- tions to be set forth presently) , that of the German popu- lation more than two-thirds are no longer employed in agriculture. 51 It would, however, be entirely one-sided and incorrect (as has been pointed out by Oldenburg, Ballod, and especially by Traugott Muller, in a highly instructive article 52 ) to infer from these facts that Ger- man agriculture is on the decline, and that Germany's sole salvation lies in industry, especially in the export industry. It has already been mentioned 53 that both the number of farms (landwirtschaftliche Betriebe) and the area devoted to agriculture, 54 have increased during this period; and the same applies on the whole to stock raising, 55 as well as to almost all agricultural productions, especially those of fodder and potatoes. This increase was due chiefly to the steady improvement in the systems of culture and meth- ods of work, as well as to the constantly growing employ- ment of machinery driven by steam and electric power. Between 1882 and 189 5, for example, the number of steam plows in use increased from 836 to i ,696. and the number 105 National Monetary Commission of steam thrashing-machines from 75,690 to 259,364. On the other hand, the number of large distilleries increased fivefold since 1870 in the districts east of the Elbe (according to K. Lamprecht, op. cit., p. 187), in conse- quence of the introduction of the high-pressure boiler for steaming potatoes. The intensity of agricultural cultivation has also grown considerably, and likewise almost without exception the average crop yields. Thus, if the period from 1879-1888 be compared with the year 1899, an increase will be found to have taken place in the case of rye from 980 to i ,490 kilograms per hectare, in the case of oats from 1,140 to 1,720, and of potatoes from 8,100 to 12,290 kilograms. According to Ballod's essay on the economic develop- ment of Germany since 1870, the home production of all sorts of grains increased within the last two decades about 36 per cent, whereas the population increased only about 1 8 per cent. The net proceeds, however that is to say, the profit- ableness of agricultural undertakings, fell considerably in many parts of Germany mainly because of the great increase in the domestic cost of production, and of foreign competition having the advantage of lower cost of pro- duction, and cheap transportation by land and sea. An improvement in this regard has been noted only during the last few years, due in part to the greatly increased duties on agricultural products put in force by the latest commercial treaties. Until then, much to the detriment of the general economic interests in large parts of Ger- many, the condition of agriculture, affected as it was by a heavy fall in the prices of its chief products, 56 and the 106 The German Great Bank growing encumbrances on landed property, 57 had become quite precarious. This condition, naturally, influenced the amount of agricultural production 58 and, considering the great influence of agriculturists on the politics and legis- lation of Germany, brought about in some cases unnec- essarily results detrimental to other classes, without simultaneous advantages desired for and by agriculture. Finally, certain improvements in the agricultural credit system were introduced, partly by state aid, as in Prussia by the foundation of the Prussian Zentral-Genossenschafts- kasse (Central Bank for Cooperative Societies) (1895) and partly through the establishment of " Raiffeisen" loan societies, and the Schultze-Delitzsch loan and credit socie- ties. In this direction, i. e., of cooperative effort, much remains to be done. The granting of credit by the Reichs- bank, which in view of its own short-term obligations may grant short credit only, can be depended on by agriculturists only in exceptional cases in view of the greater length of time occupied by the process of agri- cultural production. Agriculture requires a system of credit adapted to its peculiar conditions of production. A permanent organisation for this purpose would benefit agriculture as much as the community at large, since the common good requires that not only the interests of the consumer but also those of the producer be guarded. In other directions, too, the injudicious use of the' above data (see pp. 104 to 106) may lead to false conclusions. In the first place, we must not lose sight of the fact that a considerable amount of economic activity which in our statistics is classed under the head of industry is either largely of an agricultural nature, for instance, the 107 National Monetary Commission manufacture of beet sugar and starch, distilling, brewing, milling, etc., or else closely connected with agriculture, such as baking, butchering, the manufacture of food and drinks, brickmaking, etc. 59 It must also be borne in mind that our statistics do not take into account those persons who, in addition to their main occupation were engaged in agriculture as a secondary occupation. According to Troeltsch (loc. cit. p. 121), the number of such persons in 1905 amounted to 3,700,000. Further, it must be remembered that although between 1882 and 1895 the number of independent producers in agriculture increased by 2.9 per 1,000, the number of de- pendent workers (abhdngige Arbeiter) decreased 16.1 per 1,000 during the same period, the agricultural labourers having turned to other occupations, mostly industrial, without returning and without being replaced. 60 Finally, the period under consideration witnessed the completion of a movement which set in during the earlier economic period (1848-1870), namely, the gradual devel- opment into independent branches of industry of a whole 1 series of occupations, such as spinning and weaving, origi- nally carried on as homework in the country, and there- fore classified under the heading of agriculture. These occupations no longer center in the country. In this manner the number of persons occupied in agriculture decreased statistically, without an actual de- cline of agriculture as such, and without a decrease of the number of persons actually employed in agricultural pursuits. 61 Care should therefore be taken not to overstretch the conclusions drawn from the figures showing the per 108 The German Great Banks centage (seepages 104 and 105) of persons in Germany fol- lowing agricultural, industrial, and trade pursuits, nor to pit against each other too sharply the two expressions "agrarian state" and ''industrial state," which as the result of indiscriminate use are assuming more and more the character of dangerous catchwords, suggesting that the two economic stages thus designated are essentially antago- nistic. It is only by avoiding these errors that a proper appreciation can be gained of the share of German agri- culture in the national wealth and production, in fact in the entire economic life of Germany. All these considerations, however, do not impair the correctness of the above statement (p. 88), namely, that the center of German economic life has been shifted more and more from agriculture to industry. 62 The causes of this fact are of very varied nature. The larger the growth and the rate of growth of the German population, the less German agriculture was able to employ and sustain it. It is true that, until the beginning of the period under consideration, German agriculturists exported consider- ably more of their products (especially grain, with the exception of rye), mainly to England, France, Holland, and Switzerland, than was imported from foreign coun- tries. 63 It is also an established fact that during the period in question the necessity of exchanging German manufac- tured products 64 for foreign products of the soil (more especially wheat and vegetal raw materials) became more and more pronounced. Furthermore, agriculture, despite great efforts and successes, was not able to increase in the same proportion and with the same rapidity as the popu- 109 National Monetary Commission lation. The deficit in agricultural production thus en- tailed, which despite all protective duties amounted as far back as 1898 to over 2,000,000,000 marks per annum, had consequently to be met by importation from abroad. Similarly, German manufacturers were quite unable to satisfy their requirements at home, especially of raw ma- terials, as the required raw products are not to be had at all in Germany, or, if the colonies be taken into account, only in insignificant quantities. Consequently a large portion, in some cases the largest portion of the require- ments of German industry, has to be procured by imports from abroad. The most striking instance of this is fur- nished by the textile industry occupying the first place in Germany's export trade, which has to obtain from abroad about nine- tenths of its raw materials (cotton, jute, silk). 65 The annual import requirements of foods and delica- cies, cattle as well as raw materials, and half -manufac- tured goods necessary in German agriculture and industry for further manufacture, or for direct use, could not be paid out of German national capital (Nationalvermogeri) unless the nation was to be gradually impoverished ; pay- ment had to be made in another way. An inconsiderable part of this payment is made to foreign countries in such German home-grown raw mate- rials as are not needed for home use. The greater part of the payment, however, is made in manufactured goods supplied to foreign countries which import into Germany food and raw materials, or, in other words, in exporting the results of German home labor in return for foreign products of the soil. 06 These manufactured goods consist The German Great Banks principally of woollen and cotton manufactures, sugar, machines, silk goods, coarse iron manufactures, chemical products, etc. In 1908 by far the larger part of our special exports consisted of manufactured goods, namely, 65 per cent. Raw material exported amounted to only 25 per cent, foods and delicacies to 10 per cent. The "industrialisation" thus characterized caused in the first instance by an increased population that had to be fed and employed, in its turn became the cause of a further increase of the population. It was intensified by the circumstance that simultaneously the indiistrial demand for means of production was constantly growing through "the displacement of organic by inorganic mat- ter," as Sombart has pregnantly characterized this recent technical development. The tree of the forest has to make room for the iron girder for building purposes, and is replaced by coal for purposes of fuel. Animal manure and animal labor are being displaced by chemical fertilizers (ground Thomas slag, potash, Chile saltpeter, etc.), by steam engines, and electric motors; through the discovery of aniline dyes fields sown in madder became free for other cultures. At the end of 1907 the special exports from the German Customs Union amounted to nearly 6.4 billion marks (6,389,860,000), and the special imports to about 8 billion marks (7, 664,000,000) 7 , whereas exports from the Ger- man Customs Union between 1842-1846 averaged, accord- ing to K. H. Rau, about 510,000,000 marks and imports about 630,000,000 marks, 68 National M on et ar y Commission The excess of imports for home consumption into Ger- many at the end of 1907 (more than half of which came from Great Britain, the United States, Austria-Hungary, and Russia) over German domestic exports (almost half of which were sent to the above-mentioned countries), or our adverse trade balance (Warenverkehrsbilanz) , amounted thus to almost 1,300,000,000 marks (1895: 800,000,000) . It will be found, however, 69 on comparing the import and export figures of 1907 with those of 1882, that on the whole the imports of 1907 have increased proportionately much more than the exports. 70 Of raw materials and half -manufactured goods the imports increased 200.1 per cent; and the exports only 77.5 per cent. Of manufac- tured goods the imports increased 222.1 per cent; and the exports only 183 per cent. The opposite tendency may be noted for the period before 1882, when the growth of imports was on the whole smaller than the growth of exports. Further, commencing with 1882, it will be found that, on the whole, the quantities of manufactured goods exported have formed a constantly decreasing portion of the total German industrial production. Finally, it will be found that the increase in German ' industrial production (in the most important branches) was greater after 1882 than the increase in the average number of persons employed; that since 1885 the increase in the number of gainfully employed persons has been greater than the increase of the general population, and on the whole 71 greater than the increase of production and of the quantity and value of the exports. 112 The German Great B a n All these factors warrant the conclusion that since about the beginning of the eighties the consuming power of the German nation, i. e., the home market, developed more speedily and vigorously than the foreign markets. 72 It can scarcely be doubted that this was due to the greater accumulation of capital during the same period that is to say, to the growing development of national prosperity. This growth raised the productive power of the indus- trial population on the one hand, and the purchasing power of the nation on the other, allowing at the same time a portion of the added available means to be utilized for the improvement of the German balance of payments. This improvement of the German balance of payments has been caused during the last twenty-five years, espe- cially through the acquisition of foreign securities, which rendered foreign countries "tributary" to Germany in so far as they had to pay her interest. Additional improve- ments have been brought about by the granting of long and short term credit to foreign countries, by the consid- erable growth of Germany's shipping, and by her partici- pation in foreign undertakings. The necessity and the benefit of these improvements, especially of the last named, will form the subject of a special chapter (Sec. VII of this part). There can be no doubt, however, that an unfavorable trade balance (Passimtat der Wirtschaftsbilanz) of a country is the less dangerous the more favorable its bal- ance of payments, for it can then more easily afford to let other countries "work for it" and supply it with raw material and food. 90311 n 9 113 National Monetary Commission During the last few years there have been noticed cer- tain though not absolutely indisputable indications that the German balance of payments, while not unfavorable throughout, yet evinces a certain tendency in that direc- tion. 73 This should serve as a warning to utilize the in- creasing accumulation of capital primarily, and to a greater degree than hitherto, for the strengthening of the home market ; or, in other words, to increase home production and purchasing power, particularly the agricultural production of foodstuffs and our colonial production of raw materials, and to employ our surplus funds only secondarily in the service of so-called " export capitalism." 74 Industrial, commercial, and banking circles must not forget that the strengthening of agriculture and its ca- pacity for absorbing industrial products forms one of the most indispensable means of strengthening the entire home market; on the other hand, the agricultural inter- ests should not overlook the fact that the most careful fostering of the export industry, within the limits essential for the strengthening of the home market, is in turn demanded in the interests of national economy. In my opinion the inferences to be drawn from the above for the German credit banks are clear. As re- gards the past, they have rendered effective service in promoting the development of the national economic forces by participating to a considerable extent in the strengthening of the home market, by increasing the productiveness and purchasing power of the nation, and by sharing in the above-described (p. 113) improve- ments of the German balance of payments. The favor- able effects of the activity of the credit banks should be 114 The German Great Banks admitted even by those persons who, in a spirit of exag- geration, hold the German credit banks responsible for everything unfavorable that has happened in the indus- trial and commercial development of Germany. On the other hand, as regards the future, the German credit bank? must aim at restraining ''export capitalism" still further than has been the case hitherto, particularly during the last few years, more especially at times when the home market according to all indications stands in need of available home capital. Furthermore, as far as it is practicable and in conformity with Germany's international economic and financial relations, they will have to shape the forms in which export capitalism is to operate, especially by fixing the dates of issue of foreign securities and the rates of interest with due regard to the interests of national economy, and of the domestic money and capital market. We shall resume now our review of the economic con- ditions of the period under consideration. As far as the formation of joint stock companies was concerned (vide, p. 38) only 102 companies, with a total capital of about 638,000,000 marks were founded during the twenty-four years between 1826-1850 as com- pared with 295 companies, with a total capital of about 2,404,760,000 marks, founded between 1851 and the first six months of 1870. At the end of 1908 the total number of companies founded in the German Empire since 1871 (including undertakings that had been transformed into joint stock companies) amounted to 6,249, with a share capital of 9,439,530,000 marks (vide, p. 119), or about billion marks. These figures do not include the large National Monetary Commission number of limited liability partnerships that had been established during the same period. During the years 1867-1873 no fewer than 1,005 German stock companies were licensed, and 682 were newly formed. From the second half of 1870 to 1874 there were founded 857 com- panies with a joint stock capital of 3,306,810,000 marks. The sudden influx of the 5 billion francs of French war indemnity caused a great abundance of money which let loose a veritable rage of speculation and enterprise. This overproduction of new undertakings, just as in 1857, was one of the main causes of the crisis of 1873. By Sep- tember, 1874, ou t of the above 857 companies, no fewer than 123 were in process of liquidation and 37 in the hands of receivers. 75 As compared with the capital stock of the companies founded between 1851 and 1870, the amount of capital of the stock companies founded in the principal trades and industries between 1870 and 1874 shows the following increases : 76 Building trades, about twenty - seven - fold (from 17,420,000 marks to 486,640,000) ; brewing, about twenty- four-fold; stones and earths, about nineteenf old ; banking, about ninefold (from 94,650,000 marks to 838,270,000 marks) ; metal working and machine construction, about sevenfold; agriculture, about fivefold; chemicals, fuel materials and illuminants, about fourfold, and sugar manufacturing, about twofold. In the mining industry, not mentioned in the above list, the number of companies founded between 1870 and 1874 was also quite considerable. In fact, as regards the abso- lute amount of capital newly invested during these years, 116 The German Great Banks 394,950,000 marks, this industry takes front rank. 77 But inasmuch as the share capital newly invested in this industry between the years of 1851 and 1870 reached the large total of 275,310,000 marks, the increase during the following period does not appear so striking. As the German railway system had already been con- structed to a considerable extent by the end of the for- mer period (1851-1870), the capital of newly created rail- way companies was considerably smaller in 1870-1874 (778,000,000 marks) than in 1851 to 1870 (1,722,000,000 marks) . In 1883, 1,311 joint-stock companies published their balance-sheets, showing a capital of about 3,918,000,000 marks. Among these, 128 companies (or about one-tenth of the total number) with a capital of 571,250,000 marks (or about one-seventh of the total capital) belonged to the mining industry. 78 During the subsequent period, the years 1889 and 1890, which were years of great industrial prosperity, are most notable for the large number of company flotations. In 1896 there were 3,712 joint-stock companies with a paid-up capital of 6,845, 760,000 79 marks. Their distribution 80 was as follows: 235 mining and foundry companies with a capital of 1,022,330,000 marks (or, including loans and reserves, 1,381,860,000 marks); 235 machine-building companies, 81 with a total capital of 324,720,000 marks; 259 textile-industry companies, with a capital of 414,910,000 marks; 378 brewing 82 companies, with a capital of 367,200,000 marks; 164 building com- panies, with a capital of 172,760,000 marks; 98 banking companies, each with a capital of more than 1,000,000 117 National Monetary Commission marks, and a total capital of 1,240,300,000 marks; 108 companies in the chemical industry, with a capital of 332,870,000 marks; 39 companies in the electrical industry with a capital of 195,610,000 marks. From 1897 to the year 1900, when the crisis broke out, there was again a flood of flotations. In these four years no fewer than 1,208 joint-stock companies were floated 83 with a capital of 1,730,000,000 marks, among them 53 banks with a total capital of 124,776,000 marks. In 1900 the total number of all German joint-stock companies amounted to about 5,400. It was ascertained that in the case of about 4,600 companies there was a paid-up capital of 6,800,000,000 marks, and together with loans and reserves, about 7,800,000,000 marks. 84 We have already proved in detail by the list of new companies founded between 1897 and 1900 what a super- abundance of flotations preceded the crisis of 1900, just as was the case before the crisis of 1873. Of the 4,000 joint-stock companies the year of whose flotation we are able to ascertain, more than i ,600 are found to have been founded in. the years 1890-1900. Nearly nine-tenths of all joint-stock companies belong to industry; the rest to the banking business, with the exception of 150 insurance companies, which, however, claim nearly a third of the share and debenture capital. The table 85 given below shows for each year the number and combined capital of the joint-stock companies floated since 1871. Their number amounted at the end of 1908 to 6,249 with a joint-stock capital of 9,439,530,000 marks, which, compared with 1900, represents an increase in joint-stock capital alone of nearly 2^/2 billion marks. 118 The German Great Banks Table of joint-stock company flotations, 1871-1908. Year. Companies founded. Joint-stock capital. Total. Average for each company. 1871 207 479 242 90 55 42 44 42 45 97 in 94 192 153 70 H3 168 184 360 236 160 127 95 92 161 182 254 329 364 261 158 8? 84 104 192 212 212 151 Marks. 758, 760, ooo 1,477, 73, ooo 544, 180, ooo 105 , 920, ooo 45, 560,000 18, 180, ooo 43, 520, ooo 13, 250, ooo 57, 140, ooo 91, 590, ooo 199, 240, ooo 56, 100, ooo 176, 030, ooo in. 240, ooo 53,470,000 103, 340, ooo 128, 410, ooo 193, 680, ooo 402, 540, ooo 270, 990, ooo 90, 240, ooo 79, 820, ooo 77, 260, ooo 88, 260,000 250, 680, ooo 268, 580, ooo 380, 470, ooo 463, 620, ooo 544,390,000 340, 460, ooo 158, 250, ooo 118, 430, ooo 300, 040, ooo 140, 650, ooo 386, ooo, ooo 474, 510, ooo 253, 790, ooo 162, 500, ooo Marks, 3,650,000 3, 850, ooo 2, 250, ooo i , 180, ooo 830, ooo 430, ooo 990, ooo 320, ooo i, 270, ooo 940, ooo i, 800, ooo 600, ooo 920, ooo 720, ooo 760, ooo 920, ooo 760, ooo I, 020, OOO I , I2O, OOO i, 160, ooo 560, ooo 630, ooo 810, ooo 960, ooo i, 560, ooo i, 480, ooo i , 500, ooo i, 400, ooo i, 490, ooo i, 300, ooo I, 020, OOO i, 360, ooo a 3, 570, ooo I, 350, 000 & 2, 020, 000 I, 220, 000 i, 260, ooo i, 080, ooo 1872 . 1873 1874 . . . 1875 1876 1877 . . j878 . . 1879 1880 . . j88i 1882 1883 1884 X 88s . 1886 1887 1888 . . . 1889 1890 1891 . . 1892 . 1893 1894 1895 . . 1896 . . . . 1807 1898 1899 . .... 1 903 1906 1907 * 6 1908 8 7 Total 6, 249 9.439,530,000 Transformation into a stock company of the Krupp firm, b Hohenlohe-Works Company (Limited) 40,000,000 marks. 119 National Monetary Commissio n The average dividend income 88 for the years 1870-1900 of shareholders in companies whose shares were quoted on the Berlin exchange may be seen from the following table: Gross income. Net 89 income. Coal industry Pei- cent. 7 65 Per cent. Iron industry Stone and earthen industry (building material, glass, china) . . Metal industry 9 Machine industry 5-82 7.62 8.86 5-34 5-39 7-75 4 18 Chemical industry. . 9 81 9 33 Electrical industry (18831900) 8.38 8.38 Spinning and weaving industry c 64 Brewing industry ... .... 6 44 Banking Life insurance 6.74 06. 70 a 1880-1900. The above explains why during the periods under consid- eration (especially during the years of great industrial development, 1886 to 1889 and 1895 to 1899) there has always been such a great demand for shares in industrial companies. This of course increased the over-production of enterprises, especially as large amounts of inert capital continued to be stirred since 1879 by the nationalization of the railways and the great conversions of state loans. As far as that branch of industry is concerned which played such an important part in the whole development of the first period, viz, the mining and smelting industry, the following details are noteworthy: The German output of pig-iron in 1870 amounted to only 23 per cent of the English output, the English iron industry having occupied the first place in the world up to 1890, since when the American iron industry took the 130 The German Great Banks lead. In 1880 the German output rose to an amount equivalent to 35 per cent of the English output, in 1890 to 59 per cent, and in 1900 to 93 per cent; the English production in the same year (1900) only equalled 63 per cent of the American output. 91 After the expiration of the fifties the German output of pig-iron exceeded the Belgian, and in 1880 the French output. (See p. 32.) From the beginning of the period under consideration to the end of 1907 the production of pig-iron in the Ger- man Empire (including Luxemburg) rose from 1,346,000 tons (1870) to 12,875,000 tons (1907). In 1907 the total output of France amounted to 3,589,000 tons, that of Great Britain and Ireland to 10,083,000 tons, whereas that of the United States amounted to no less than 26,194,000 tons. 92 The importance of the last item can be gauged by the fact that in 1875 Germany and the United States pro- duced about the same amount of pig-iron (in round num- bers, each 2,000,000 tons), whereas at the end of 1907 the production of pig-iron in the United States was more than double that of Germany (including Luxemburg) ; and, further, that between July 1903 and July 1907 the pig-iron output of the United States increased by no less than 140,000 tons per week, or 7,000,000 tons annually. 93 Despite the very considerable growth in Germany's output of pig-iron during the period under consideration, she was not able in the long run to meet her home con- sumption. Imports, especially from England, had to be relied on to an increasing extent, and in 1907 they totaled 443,624 tons. National Monetary Commissio n The pig-iron consumption in the German iron industry increased considerably during the last few years of the period in question (considering also the imports and exports of pig-iron and the pig-iron contents of machinery andiron manufactures imported and exported), namely, from over 6,500,000 tons (or 111.50 kilograms per head of the population in 1904) to 9,250,000 tons, or 147.60 kilograms per head of the population. 94 As far as the proportion of exports and imports is concerned, the same remarks apply as those made above (pp. 112 and 113) regarding the development of industry in general. In consequence of the great increase in home consumption, the iron exports despite the greatly in- creased output, could not grow permanently, falling from the high level of 480,575 tons attained in 1906 to 275,170 tons in 1907. The output of coal 95 increased in Germany during the second period from 26,398,000 tons in 1870 to 143,185,000 tons in 1907 (valued at 1,394,271,000 marks); the output in France amounted in 1907 to 36,168,000 tons; in Great Britain and Ireland (including lignite) to 272,114,000 tons, while that of the United States amounted to not less than 425,156,000 tons. In 1907 the output of German coal amounted thus to one-half the English output and to about one-third the output of the United States. The total value of all German mining products grew from 314,000,000 marks in 1871 to about one and three-quarters billion marks (1,844,920,000 marks) in 1907. 96 122 The German Great Banks The total production of the German electro-technical industry, the enormous growth of which, beginning with the middle of the nineties, exercised such a strong influence on the other industries, causing in the main the general over-production and the crisis of 1900, amounted as early as 1898 to 228,700,000 marks. Of this sum 211,100,000 marks, or 92.3 per cent, was represented by the value of articles belonging to the strong-current branch (which was hardly developed twenty years before), and only 17,600,000 marks by the value of articles belonging to the weak-current branch. In 1883 Emil Rathenau, being convinced at the Paris Exposition of 1881 of the far-reaching importance of the new invention, formed together with Siemens & Halske the first joint-stock company in the electric industry, under the name of the Deutsche Edisongesellschaft fur angewandte Elektrizitat. This company became inde- pendent of Messrs. Siemens & Halske in 1884, and de- veloped in 1887 into the existing concern of the All- gemeine Elektrizitdts-Gesellschaft. This firm was suc- cessful in improving the three-phased current to such a degree that in 1891 300 horsepower was transmitted, with very little loss of power, over a line of 175 kilometres to the exhibition at Frankfort-on-the-Main, a feat that made a great and permanent impression. In 1896, as has been pointed out (p. 118), as many as 39 electrical joint-stock companies existed, with a total capital of 195,610,000 marks, whereas in 1900 there were quoted on the German exchanges the shares of 34 joint-stock companies in the electrical industry, with 123 National Monetary Commission 436,000,000 marks capital (22 in Berlin alone, with 396,700,000 marks capital). The rate of dividend income of the shareholders of these 34 companies amounted, between 1883 and 1900, to 8.38 per cent. During the nineties, up to the crisis of 1900, feverish activity, coupled with an almost chaotic and incalcu- lable number of enterprises and forms of financing pre- vailed in the electrical industry, which in a very short time had gained, at home as well as abroad, a position of the highest importance. Eberstadt 97 quite truly remarks that at that time the great electrical companies "were simultaneously machine-construction factories, suppliers of energy, and financing institutions," and there was scarcely a form of management or financing which was not utilised in the nineties by the electrical industry. There were syndicates, subsidiary companies (Tochtergesell- schafteri), and trust companies, 98 the latter especially intended to relieve the banks of part of their enormous financial and other tasks connected with electrical under- takings," operating companies proper, 100 and manufactur- ing companies, as well as financing institutions, increases and reductions of capital, silent participations, comman- dites, issues, and sales in the open market, fusions, pooling of profits (Gewinngemeinschajteri) , buying of shares, separations and combinations, independent and syndi- cated enterprises abroad, conventions, syndicates and cartels at home and abroad. In short, a medley of under- takings which might well have led outside observers during those years to imagine that far more paper was The German Great Banks produced in the electric branch of industry than power and light. To-day, when a condition of relative quietness has set in and the early movement may be said in a sense to have terminated, it will be seen that the sphere of activity of the electro-technical industry, although only comprising a relatively small number of prominent companies (see Part V, sub. II, la), has extended very largely. Trade and industry headed by the mining industry, as well as a considerable number of secondary electric rail- ways, and more recently agriculture, absorb a constantly increasing amount of light and power. The change of standard railways from steam to electric railways, which is only a matter of time, will create new and profitable employment for the electro-technical industry. In 1907 the German exports of products of the elec- trical industry amounted to about 153,000,000 marks and the imports to about 8,000,000 marks. 101 In 1907 the electrical industry gave employment to 100,966 workmen, as compared with 54,417 in 1898. According to a circular inquiry made by the German home office in 1899, the total value of the products of the German electrical industry amounted to 228,700,000 marks, as compared with 45,000,000 marks in 1891, a fivefold increase in eight years. As regards the chemical industry, 102 according to Hiib- ner (" Jahrb. f. Volksw. u. Statistik," Vol. IJX, p. 146), 9 German chemical joint-stock companies, with a capital of 7,300,000 marks, existed during the period 1854 to 1859; in the seventies, however, their shares were no longer quoted on the stock exchange. 135 National Monetary Commission The enormous growth of the chemical industry and its dominant position in the world market date really from the beginning of the seventies. Beginning with the sum- mer of 1870 to the end of 1874, no l ess than 42 companies, with 42,000,000 marks capital, were formed. In 1883, according to the Deutscher Oekonomist (1885, p. 75), no less than 51 companies, with a total capital of 127,220,000 marks, published their balance sheets. In 1896 there were in existence 108 joint-stock com- panies, with a total capital of 332,890,000 marks, their number having thus doubled since 1883. The number of establishments in which more than 100 persons were employed, increased, between 1888 and 1898, from 156 to 247, or about 60 per cent in ten years. In 1902 there were 7,539 establishments in this indus- try employing 160,841 workmen with a total wage list of about 164,000,000 marks, as against 5,758 establishments with 110,348 workmen and a total wage list of 98,621,506 marks in 1894, and 4,464 establishments with 85,143 work- men and a total wage list of 67,300,000 marks in 1888. From 1882 to 1895, or in thirteen years, the number of workmen employed in the chemical industry increased 61 per cent. At the end of 1898 a total of 216,580 workmen and other employees in the German chemical industry were contributing to the obligatory insurance funds. The total wages and salaries of all workmen and employees, accord- ing to the Bericht uber die Verwaltung der Berufsgenossen- schaften der chemischen Industrie for 1908, page 3, amounted to 248,731,687 marks. The number of insured establish- ments was 8,699. 126 The German Great Banks According to the census of June 14, 1895, there were then in the chemical industry: Number. Employees. Small establishments (i to 5 Middle-sized establishments Large establishments (51 pe Total persons) 8.228 i, 781 376 l8. 122 25.993 7i, 116 (6 to <;o persons) rsons or more) 10,385 108 115, 231 The results of the latest census have not yet been pub- lished. I/arge establishments, while forming only a very small part of the total number, gave employment to almost two-thirds of all the workmen employed in the chemical industry. In 1907, 8,8 1 6 factories employing 207,704 hands figured in the lists of the state insurance authorities, i. e., belonged to the trade association of the chemical industry. 104 The total amount of wages and salaries paid to workmen and officials in the chemical industry amounted in 1907 to 230,223,733 marks. The imports into Germany of raw materials for use in the chemical industry and partly and wholly manufac- tured chemical products amounted in 1907 to 43,586,417 metric quintals of 100 kilograms each, valued at 552,414,000 marks, and the exports to 31,539,353 metric quintals, valued at 640,418,000 marks. 105 In 1907 the import trade decreased somewhat while the exports fell off considerably ; the only large increase being shown in the exports of artificial indigo. 106 A change in the English patent law directed against the predominance of the German chemical industry, and introduced on the ist January, 1908, provides that every 127 National Monetary Commission holder of a patent must manufacture his patented invention in England after four years' time from the date when the patent was taken out in that country. As this law was given retroactive force, and became applicable twelve months after it had been passed, many German chemical factories had to erect branch factories in England. This naturally increases total expenses, but on the other hand allows the goods manufactured in English branches of German chemical factories to enjoy preferential duties granted by some English colonies to the mother country. 107 It may, however, become necessary to make a corre- sponding change in the German patent law, so far as Great Britain is concerned. The ultimate result of the latest unpleasant move on the part of our English competitors may thus cause more harm than good to British industry, as was the case with the act which provided for the com- pulsory marking " Made in Germany " of imported articles of German manufacture. Further details regarding the concentration movement in the chemical industry are given below (Part V, sub. II, ib). The census of June 24, 1895, gives the following data regarding the number of establishments and average num- ber of persons employed in the textile industry : Number. Employees. Sfi&ll establishments (i to 5 persons) *93 358 258, 181 Middle-sized establishments (6 to 50 persons) _ 8,674 147, 477 I^arge establishments (5 1 persons and over) 3, 260 587 599 Total 205 292 993 2 S7 The very important position occupied by the textile branch in German industry is very evident from these 128 The German Great Banks figures, as according to the census of 1895 the total number of German establishments of all descriptions amounted to 3,144,977, employing on an average 10,299,269 persons. 108 Of the 450,000 to 490,000 home workers, counted in 1895, almost one-half belonged to the textile branch of industry, although the number of textile home workers had decreased by 90,000 persons between the years 1882 and 1895, and in various branches of the textile branch by one-fifth to three-fourths of the original number. Since, however, despite this great decrease of hand-loom industry in the textile branch (due principally to the growth of large-scale machine industry) , there was in 1895 a falling off of only 18,000 persons employed in home work in German industry as a whole, as compared with the number in 1882, it is evident that home work has not declined in many German industries, but rather increased. Ludwig Pohle 109 is quite right in calling special attention to this very interesting fact and to the above figures. The fact should also be emphasized that the number of home workers increased in the large towns from 3 1 ,000 to 71,000 between 1882 and 1895, having thus more than doubled during these thirteen years. 110 In the 3,144,977 establishments mentioned above as existing in the German Empire in 1895, the 10,269,269 employees were distributed as follows : m Number. Average number employees. Small establishments ( i to 5 persons) . 2, 934, 723 4 770 669 Middle-sized establishments (6 to 50 persons) 191, 301 Large establishments (over 5 o persons) _ . 18, 953 Total 3, 144, 977 90311" II- 129 National Monetary Commission The number of large establishments is relatively small, although between the years 1882, when they totaled 9,974, and 1895, their number had increased no less than 90 per cent. In view of this, the fact is particularly striking that almost one-third of all persons occupied in industry were employed in these large industrial estab- lishments. If we turn our attention to the enormous development of the means of communication during this period, taking the railways first, it will be seen (p. 35) that the network of German railways comprised 27,981 kilometers as long ago as 1875. As far as main lines are concerned, the Ger- man railway system was completed in the main during the eighties. In the second period (the one under considera- tion) the private German railways were acquired by the State, and the network of main and branch lines (standard gauge) in Germany 112 at the end of 1907 totaled 56,196 kilometers, including 51,871 kilometers of railways owned by the Government or managed on Government account, and 4,320 kilometers of private railways. 113 Of 53,822 kilometers in 1904, 33,734 kilometers belonged to the Prussian-Hessian Railway Union. 114 The capital invested in these standard-gauge main and branch lines amounted at the end of 1902, in round fig- ures, to 13^ billion marks, and at the end of 1907 to about 15^2 billions, or at the end of 1902 to 258,000 marks per kilometer, and at the end of 1907 to 277,100 marks per kilometer of railway line. At the end of 1906, 1,284,676,000 persons and 508,270,000 tons of goods 115 were conveyed by these railways. An average number of 20 railway journeys is 130 The German Great Banks thus shown for every inhabitant of Germany during the year. The total traffic receipts of the standard gauge railways amounted in 1907 to 2,745,000,000 marks, and the total expenses of operation to 1,894,000,000 marks. The sur- plus of traffic receipts over expenses of operation was thus 851,000,000 marks; the rate of profit on the capital in- vested amounted to 5.60 per cent, and the percentage of expenses of operation to traffic receipts (coefficient of operation) amounted in 1907 to about 69 per cent. The home requirements of the German railways for rolling stock alone amounted in 1907 to 288,000,000 marks. The requirements for operating material and superstructure of the German railways during the last fifty years, which were principally met by German mining, metallurgical, and machine construction industries, have been estimated at about 5 billion marks. 116 In addition to the standard-gauge main and branch lines, on April i, 1907, there were in operation 3,719.2 kilometers of public street railways (Kleinbahneri) and 8,99 : -9 kilometers of secondary railways (nebenbahnahnliche Kleinbahnen) , 117 To these must be added the narrow- gauge state and private railways (end of 1907, 2,100 kilo- meters), 118 besides sidings, mining, agricultural, and forest railways not used by the general public. As far as the postal service is concerned, it has been pointed out (p. 37) that in Prussia during 1851 only about three letters were received per head of population; in 1906, over 5^3 billion letters and post cards (5,393,300,000) were dispatched in the German Empire (including Bavaria and Wurttemberg) , averaging 86 letters per head of National Monetary Commissio n population. Printed matter (newspapers) , samples as well as parcels and articles of value are not included in the above total. 119 In 1904 the number of mail matter dis- patched averaged 115 per head of population, and in the same year there was one post-office to every 14 square kilometers of area and every 1,458 inhabitants. At the end of 1907 there were 40,083 post-offices in Ger- many; at the end of 1906 there was one post-office to every 1,530 inhabitants and 13.60 square kilometers. In 1882 one telegraph office did duty for every 133.7 square kilometers; in 1904 there was one for every 18 square kilometers, with a total of 35,100,000 telegrams, or an average of 0.65 telegram per head of population. At the end of 1907 the number of telegrams dispatched amounted to nearly 44,000,000, and the number received to 46,000,000. At the end of 1907 there was an average of 0.71 telegram sent per head of the population, and a like number received. On the same date there were 37,309 telegraph offices in Germany. 120 As to telephones, 121 which were adopted during the period under discussion, there were in Germany, at the end of 1907, 30,901 towns and villages, etc., provided with long-distance telephone offices (1899, 13,175). At the end of 1907 87,521 (1899, 1,964) places could com- municate with each other by telephone. Over 927,000,000 telephone conversations took place in 1903, and 1,466,000,000 in 1907. In 1907 there were 18.2 telephonic messages per head of the population. In Berlin alone there were in 1898 over 40,000 telephone call places, with 68,000 kilometers of line, over which 38,000 conversations were carried on daily. In 1904 there was one telephone 132 The German Great Banks office to every 23.5 square kilometers and 2,448 inhab- itants. The total value of all German merchant vessels amounted at the end of 1897 to about 300,000,000 marks, at the end of 1899 to about 5oo,ooo,ooo, 122 and at the end of 1905 to about 810,000,000 marks (as compared with 290,000,000 marks in 1895 and 426,000,000 marks in 1898). On the ist of January, 1908, Germany possessed 4,571 seagoing vessels (merchantmen) , with a carrying capacity of 2,790,435 net registered tons, and a total crew of 71,853 men. These 4,571 merchant vessels included 2,345 sailing vessels of 433,749 net registered tons, 304 tugs of 99,903 tons, and 1,922 steamships of 2,256,783 net tons regis- ter. 123 The net registered tonnage of the German merchant marine (steam vessels) has increased from 375,000 tons in 1884, to 2,257,000 tons (in round numbers) in 1908. 124 According to the memorial of the admiralty, dated De- cember, 1905, entitled "Die Entwickelung der deutschen Seeinteressen im letzten Jahrzehnt" (Introduction, p. VI), the shipping at German ports increased between 1893 and 1903 by over 52 per cent, or from 27,500,000 to almost 42,000,000 net registered tons. In 1907 it amounted to 56, 1 29,000 net registered tons. In the same memorial it is stated that Germany has been progressing about four times more rapidly in international sea traffic than in popula- tion, while the increase of trans-marine traffic in German ports has been almost six times as great. As far as sea-going steamships are concerned, the Ger- man merchant marine occupied in 1874 fourth place, 133 National Monetary Commission whereas the British, American, and French mercantile fleets took the first three places in the order named. In 1884, however, Germany caught up with the United States (the ocean fleet of which had decreased considerably by that time), and in 1889 France was outdistanced. In 1908 Germany, with a net tonnage of 2,328,000 tons, occupied the second position on the list, although possessing only 1 1 .2 per cent of the steamships of the world's mercan- tile marine. On the other hand, England, whose progress naturally was relatively smaller during that period, pos- sessed in 1908 no less than 10,350,000 net tons, or 50.2 per cent of the world's mercantile fleet of steamships, which latter amounted to 20,633,000 net registered tons. 125 As regards her sailing fleet, Germany between 1880 and 1901 occupied fourth place among the nations, owning in 1880 957,000 tons out of the world's sailing tonnage of 6,994,000 tons. In 1908 it occupied only sixth place, with 459,000 net tons register. The following are the figures for the other countries: 126 Tons. England i, 591, ooo United States i, 419, ooo Norway 667, ooo Russia 569, ooo France 510, ooo The officers and crews of the German seagoing ships (sailing vessels, tugs, and steamships) numbered on Jan- uary i, 1909, 72,450 persons, distributed as follows: Sea- men, 34,308; engineers, 23,201; and various, 14,941. m It is pleasing to note that subsidies were granted by Germany solely for the maintenance of regular lines of mail steamers of the North-German Lloyd and the Ger- The German Great Banks man East Africa Line (the Hamburg-American Line does not receive any subsidy) to eastern Asia, Australia, Africa, and New Guinea beginning with the year 1894. The amount paid in 1909 did not exceed the very mod- erate total of 7,440,000 marks, equal to 1.85 marks per registered ton. 128 These amounts include also the pay- ments for carrying the mails. As against this small amount Great Britain has been paying since 1902 to the Cunard Line alone a yearly sub- sidy of 150,000, besides granting to that company a loan of 2,600,000, bearing only 2^ per cent interest. The total subsidies granted by that country were not less than 34,000,000 marks (1.95 marks per registered ton). France spends 53,000,000 marks in subsidies (28.00 marks per registered ton), Austria-Hungary, 26,000,000 marks (26.70 marks per registered ton), and Japan, 28,500,000 marks (24.70 marks per registered ton). 129 The most prominent of the German shipping compa- nies are the following: i. The Hamburg- American Packet Joint Stock Com- pany, at Hamburg, founded May 27, 1847, with a capital of 300,000 marks (Hamburg currency), which has under- gone not less than sixteen increases from 1 853 to the present day. 130 This company began operations in 1848 with 3 sailing vessels, steamers between Hamburg and New York being introduced only in 1856. At the end of 1908 the company's share capital amounted to 125,000,000 marks, and its surplus amounted, on Jan- uary i, 1909, to 16,800,000 marks. 135 National Monetary Commission The amount of bonds issued was originally 55^ million marks. At the end of 1908 the outstanding bonds amounted to 76.4 million marks. The number of the company's ocean steamers amounted at the end of 1908 to 162, with a book value of 185,953,076 marks. 2. The Norddeutscher Lloyd, at Bremen, was founded in 1857, or ten years after the Hamburg Company, banks and banking firms participating to a considerable extent. Its original share capital amounted to 9,513,772 marks (28,643 shares, at 100 former Bremen gold thalers). In 1859 the company started a regular fortnightly service with four steamers between Bremen and New York. The company's share capital totaled 125,000,000 marks at the end of 1908, while its surplus funds have been used up by losses. Its bonded indebtedness originally amounted to 70 million marks. At the end of 1908 the bonds outstand- ing amounted to 76,034,700 marks. The company's ocean-going fleet numbered at the end of 1908 127 vessels (besides 2 schoolships) , with a book value of 189,114,000 marks. Between 1902 and 1903 these two companies 131 made essentially identical agreements 132 with the International Mercantile Marine Company, which was founded Jan- uary i, 1903, by American bankers and shipowners, with a capital of $120,000,000 (of which $60,000,000 were common and $60,000,000 preference shares), and which comprised nine American and English steamship lines. This company, which is named the " Morgan trust," after the originator of the association, is authorised to issue 136 The German Great Banks bonds to the extent of $75,000,000, of which $50,000,000 were issued at once. The contracts with the two German companies, which are almost identical in tenor, have been concluded for a term of twenty years, and contain a stipulation that either party has the right after the expiration of ten years to demand their revision; should a revision not be agreed to, a year's notice may be given for the termination of the agreement. These international agreements contain the following points : i. A demarcation of fields of operation: the right of traffic to and from all German ports is reserved to the German companies; the trust's ships may enter German ports only by their consent, whereas German ships, coming from New York, may enter English ports for the purpose of embarking passengers (each company 75 times yearly in any direction). The German companies' ships bound for South America, Mexico, and the West Indies, as well as those bound for such countries with which the trust maintains no service, may also touch at English ports. On the other hand, the German companies abandon in the main all claims to the Anglo-American freight business. Belgian ports (at which German ships had not called before) are not to be touched by the German companies* ships on their way to North America; the status quo forms the basis of the arrangement for calls by German or trust steamships at French ports. The German com- panies, however, are at liberty to increase their sailings from French ports at their own discretion. In case such 137 National Monetary Commission an increase takes place, the trust is entitled to an equal increase. Should any of the contracting parties desire to found a new line (permanent reservation is made expressly in favour of the newly instituted lines of the Hamburg- American Company between New York and the West Indies and between New York and eastern Asia) , notice of the intention must be submitted to the common com- mittee of supervision. This committee does not possess the right of veto, but the other contracting party has the right, in such a case, of participating to the extent of one-third in the proposed line (coasting lines excluded) . An agreement has been arrived at whereby the return tickets of cabin passengers on North Atlantic lines of the various companies are valid for all lines belonging to the combination. Negotiations were likewise pending for a common time-table for first-class steamships with alter- nating departures during the quiet season. These nego- tiations however, it seems, were not successful. The agreements contain 2. A reciprocal participation in profits whereby the German companies allow the trust annually a quarter of the amount of the dividends paid in excess of 6 per cent, whereas the trust pays to the German companies a quarter of the amount which they may lack in order to pay a dividend of 6 per cent. 3. An arrangement for mutual accommodation in cer- tain cases; i. e., each party before applying to outside com- panies must charter ships from the other party in the event its own tonnage is found insufficient ; also a provision 138 The German Great Banks to the effect that both parties under certain conditions are to support each other against outside competition. Both contracting parties bind themselves not to acquire, directly or indirectly, shares in each other's concerns. The evasion of this prohibition has been made more diffi- cult by the German companies in 1902 (after the conclusion of the agreement) by alterations in their by-laws to the effect that in certain questions of national importance resolutions may be passed only by a majority of three- fourths (in the Hamburg-American Company by four- fifths) , and at two consecutive general meetings, and that the members of the executive and supervisory boards must be Germans domiciled in Germany. The supervision of the proper execution of the agree- ment is placed in the hands of a committee consisting of an Englishman and an American belonging to the trust management and the directors-general of the two German companies. The agreements become null and void in case of war between Germany and Great Britain or the United States, or in case of war between Great Britain and the United States. In 1908 an agreement was arrived at between the Ham- burg American Steam-packet Company (Hapag) and the Woermann Line on one side, and the North German Ivloyd and the Hamburg Bremen Africa Line on the other side. (At first only till the end of 1912.) The agreement creates a limited community of interest between the companies involved and regulates the traffic to West Africa by excluding any independent action in connection with the West African traffic by any of the parties to the agreement. 139 National Monetary Commission Shipbuilding, which was promoted by German banks to a great extent, 133 became prosperous again only in the eighties. It was only about that time that the British practice of substituting iron for wood as the main mate- rial in shipbuilding, which began about 1860, was first followed by German shipyards. The ' ' Vulkan' ' at Stettin, the shipbuilding yards of Fr. Schichau at Blbing and Danzig, of Blohm & Voss at Hamburg, and of the " Weser " Joint Stock Company at Bremen stand at the head of German shipbuilding. In this industry the joint-stock companies showed in 1907 a total share capital of 54,000,000 marks and a debenture capital of about 25,000,000 marks. According to the occupation census of 1895, 22,731 persons were employed in German shipbuilding, a number which must have considerably increased during the last fourteen years. According to the data of the Germanischer Lloyd a total of 368,440 gross registered tons of shipping (seagoing steamships and sailing ships, river boats, other vessels, and war ships) were built during 1907, the figures for 1908 being 279,137 gross registered tons; a large part of Ger- man sea-going merchant vessels (up to 1905 about one- third) is still being built abroad. Germany's share in the shipbuilding of the world (mer- chant vessels exceeding 100 tons) as compared with Great Britain's has been as follows: Germany. Great Britain. 18921897 Per cent. 1 3 Per cent. 18981905 6? 4 1906-1907 13 8 60 3 140 The German Great Banks American shipbuilding (iron and steel vessels) in 1907-8 increased about sixfold as compared with 1892-1897. If we turn from sea navigation, with its enormous di- mensions, to inland navigation, which has developed con- siderably since the forties of the last century, it will be found that 14 new joint-stock companies were founded in this field during the eighties and six additional companies in the nineties. 134 The economic value of the German waterways was estimated in 1895 at over 1,500,000,000 marks. On December 31, 1907, there were 26,235 vessels, with a carrying capacity of 5,914,020 tons, occupied in inland navigation, including 22,923 without power of their own and 3,312 ships with power of their own (steamships and motor boats) , 135 The total length of navigable waterways was 13,748.6 kilometers. 136 In 1895, 22 per cent of the total traffic fell to the share of waterways and 78 per cent to that of the railways. The amount of traffic carried on each kilometer of waterway was 750,000 tons, and on each kilometer of railway 590,000 tons. I take it for granted that the large increase of the German navy during the period in question, which in its turn resulted in important orders to and great activity of various branches of German industry, is generally known. 137 We shall now take up the subject of currency (Zah- lungsverkehr) . Before the foundation of the German Empire there existed in Germany 31 banks authorised to issue bank notes; to-day there are only 4 private note banks (in 141 National Monetary Commission Bavaria, Saxony, Wiirttemberg, and Baden) in addition to the Reichsbank inaugurated on January i , 1876, in accord- ance with the law passed on March 14, 1875. The Reichsbank, 138 which took the place of the old Preussische Bank, is a bank under the supervision and management of the Empire, established with private means and constituting a corporate body (juristische Person) though not a joint-stock company. According to section 12 of the bank law it is allotted the task "of regulating the money circulation of the whole Empire, of facilitating payments, and of utilising available capital." The original capital, divided into shares (each bearing the name of the owner) , amounted at the time of founda- tion to 1 20,000,000 marks, and since the supplementary law of June 7, 1899, has reached the amount of 180,000,000 marks; the surplus funds amount to 64,814,000 marks. The management of the Reichsbank rests in the hands of the Imperial chancellor, and, subject to his authority, in those of the president and of the Reichsbank directors, who are appointed for life; supervision is carried on by a board of bank curators (curatorium) , consisting of the Imperial chancellor as chairman and four members. The cooperation in the management by the share owners (chiefly in an advisory capacity) is exercised through the general meeting, and through the central committee elected from its midst, which consists of 15 members and 15 alternates. The committee, which meets at least once a month, under the chairmanship of the president of the board of directors, receives monthly reports of the general business situation as well as proposals for measures that may be deemed necessary. (Sec. 32 .) Its expert opinion is 142 The German Great Banks also to be heard on a number of questions, such as the dis- count rates and the maximum amount to which the funds of the bank are to be applied to loans on collateral (see sec. 32 a-f) ; it elects 3 deputies, whose duty it is to exercise supervision over the management of the Reichsbank, and who are authorized to inspect the books of the bank, and to participate in the meetings of the board of directors (with advisory powers). No business with the Empire, or the German Federated States for which unusual terms are to be made, is to be transacted unless approved by a majority of the central committee. At the chief branches of the Reichsbank, established in large towns outside Berlin (Reichsbankhauptstelleri) , dis- trict committees are formed from among the shareholders, invested with the same functions as the central committee. The local committees in turn elect 3 deputies for the con- stant control of the business management of the local office. Over 500 various branches are in existence at the present day. The Reichsbank has the right to issue bank notes with- out direct limitation according to the requirements of its business. 139 Its right is only limited indirectly by section 17 of the bank law, which enacts that the bank must possess in bullion and Imperial treasury notes a minimum of one-third of the amount for which notes are issued, and for the remainder discounted bills fulfilling the re- quirements of the Bank Act (bankmdssige Wechsel) ; fur- thermore, that a tax of 5 per cent must be paid on the notes issued in excess of the cash reserve, i. e., bullion, treasury notes, and notes of other banks, and of its so-called tax-free contingent. (Sec. 9.) The latter 143 National Monetary Commission amounted, according to the Bank Act, to 250,000,000 marks, and since the liquidation of various private note issuing banks to 472,829,000 marks. The bank is bound to redeem its notes at all times " in German gold coin," 140 at the main office in Berlin on presentation, and at its branch offices in so far as the available cash and money require- ments permit." (Sec. 18.) In view of its power of issuing notes, i. e., obligations that may fall due at any moment, the Reichsbank is allowed to engage only in certain classes of transactions. It is confined to transactions in precious metals; to the discounting of bills running for not more than three months and for which 3 or at least 2 persons of known solvency are liable; the purchase and sale of imperial gov- ernment bonds, of the bonds of Federated States, or of domestic municipal corporations payable at their face value at the latest in three months; the granting of interest-bearing loans on collateral for a period not exceed- ing three months on movable pledges exactly defined by law (sec. 13, clause 3 a-c) ; the purchase and sale of Ger- man debentures, exactly denned by the Bank Act (sec. 13, clause 4 and 3b) (even if not due after three months) ; the collection of commercial bills, the purchase and sale of precious metals or of securities of all kinds on account of third parties (security being given in advance) ; the re- ceiving of interest and noninterest-bearing moneys on deposit and on giro account, with the proviso that the amount of the interest-bearing deposits must not exceed the limits of the combined capital and the surplus funds of the bank; finally, the custody and management of articles of value. 144 The German Great Banks The Reichsbank is required to publish from time to time the rate at which it discounts or advances money on \ collateral (sec. 15); like all other note banks (sec. 8), it' must publish the state of its assets and liabilities under date of the yth, isth, and 23d, and the last day of every month (at the latest five days after the above-mentioned dates). It must also publish within three months after the end of the financial year an exact balance sheet of its assets and liabilities, as well as a statement of its profit and loss for the year. All these statements must be published in the " Reichsanzeiger." From its foundation to the present day the Reichsbank has fulfilled all the tasks devolving on it under section 12 of the bank law in an almost exemplary manner. The details are well known and can only be summarized here. The Reichsbank has rendered service in the first in- stance in facilitating payments through the introduction on April 10, 1876, of "giro" transactions, the principle of which is that in lieu of payment in cash between the ' ' giro ' ' culslomers tF^ t>e made Ty^^iLiii^'UJg^ LU Ug' paid jrpnr the account of the pay or and transferring"^ to tHat" "bTTHe payee. " Gn"o~ T1 ^ansacftoiis""foTm f EeTmost simple method of settling claims and counterclaims at one and the same bank, namely, by transfer from one account to another. Since 1883 so-called compulsory clearance ("Verrech- nungs-Zwang") has been introduced for " giro " customers, according to which all claims of a " giro " customer arising out of bill or collateral credit granted by the Reichsbank are not paid in cash, but placed to the credit of his " giro " account. 90311 ii- ii 145 National Monetary Commission Since 1896 most of the imperial treasuries, as well as the state treasuries of Prussia and Baden, have opened "giro" accounts with the Reichsbank. The number of "giro" accounts increased from 3,245 in 1876 to 24,821 in 1908; aside from the governmental treasuries these accounts stand mostly in the name of large commercial and industrial concerns, 141 so that up to the present the "giro" transactions of the Reichsbank have partaken of a somewhat plutocratic character. Therefore, in the interest of the more economical use of cash as means of payment, the introduction of the postal transfer and check system on January i, 1909, must be welcomed, as largely extending the circle of firms and per- sons who settle their- claims and counterclaims by means of transfer. As the Reichsbank has also joined this postal transfer and check system, transfers can be made by firms possessing postal-check accounts to Reichsbank "giro" accounts of other firms by means of the Reichsbank postal-check account. In the same manner the possessor of a postal-check account, who likewise has a "giro" account at the Reichsbank, may have the amounts stand- ing to his credit in his postal-check account transferred to his "giro" account at the Reichsbank. Through this interlocking of postal check and Reichs- bank "giro" systems (which latter might be considerably extended) , and through a still greater fostering of the use of checks, whose ultimate liquidation, however, should be effected by transfer and clearance, rather than by cash payment, the present antiquated and unsatisfactory meth- ods of payment in Germany will be considerably improved, 146 The German Great Banks A great and necessary improvement would be brought about by suitable agreements with foreign postal savings banks, central note banks, and credit banks, whereby their transfer systems might be made to cooperate with the transfer systems of the German post-office and Reichsbank. A first step in this direction is the arrangement of Feb- ruary i, 1910, for the clearing of postal checks and trans- fers between the German postal administration and the postal savings bank administrations in Vienna and Buda- pest as well as the Swiss postal-check bureau. The " giro " transactions of the Reichsbank with private persons, private firms, and public treasuries in 1907 were as follows: Marks. Average 'amount of each account 24, 116 Average volume of transactions per account 10, 876, 564 whereas the total volume of "giro" transactions during 1907 amounted to 260,656,851,081 marks. 142 The number of postal-check accounts amounted at the end of November, 1909, to 23,847, with a total balance of 70,955,349 marks to the credit of persons and firms having such accounts. The means at the disposal of the "giro" department strengthen the operating resources of the Reichsbank or its power to serve the whole economic community by way of bill and loan transactions, and enable it to make the most rational use of its bank-note issue. At the same time the currency set free through the "giro" method of payments can be utilised for credit business. The "giro" business of the Reichsbank, which is re- stricted to its customers, should be supplemented by the 147 National Monetary Commission clearance system, which aims at discharging claims and debts (especially checks, bills, etc.) among a number of institutions and their clientele by means of balancing their accounts i. e., with the least possible use of cash. A clearance system [Skontrationsverkehr] of this de- scription, which has long been organised on a much larger scale abroad in the form of clearing houses, (especially in England and the United States) , was instituted in Ger- many as late as 1883, in which year the Reichsbank founded clearing branches [Abrechnungsstellen]. At the close of 1908, when there was a total of 17 clearing houses with 198 members, the amount of paper presented for clearing had increased to 10,531,271 from 1,979,012 in 1884, and the total sum cleared from 12,130,196,000 marks in 1884 to 45,960,854,400 marks in 1908. In the three foreign financial centers, the total value of clearances was as follows: 1884. 1907. France (Chambre de Compensation des Banquiers de Paris) . Marks. 3> 35S 4'5> ooo Marks. England (London Bankers' Clearing house comprising City, Country, and Metropolitan Clearing 118, 464, 479, ooo 260 081 929 ooo United States (Associated New York Clearing-house banks). . _ _ 143, 186, 557, ooo 1/43 366 165 106 ooo The small amount cleared at the German clearing houses at the present time as compared with the clear- ing houses of the two last-mentioned countries is due on the one hand to the gratifying circumstance that large payments in Germany are effected with outside places by means of "giro" accounts, or transfers on the books of 148 The G .e r m a n Great Banks the Reichsbank or post-office, and on the other hand to the less gratifying fact that payments in Germany are much less effected by means of checks which in turn would pass through the clearing houses. It should be stated, though, that the check law of March n, 1908, passed after protracted opposition, has removed a series of obstacles that have hitherto stood in the way of the development of the check system in Germany. The total turnover of the Reichsbank 144 amounted in 1908 to 305,244,504,000 marks, or, in round figures, 305 X billion marks, as compared with about 47 X billion marks in 1877 and about 142 billion marks in 1897; in these total turnovers, cash payments are superseded by "giro" transfers to a constantly growing extent. Thus the volume of giro transactions increased from 41 billion marks in 1886 to 188 billons in 1905, and it is due mainly to this circumstance that the Reichsbank has been able to operate with a relatively small amount of bank notes even in periods of increased business activity. The doubling of German bank-note circulation in 1907, as compared with the average for 1881-1885 despite the great increase in gold coinage and in the extent of the giro transactions, is a clear proof of the enormous growth of the requirements for means of payment on the part of the greatly increased population during the period under consideration. 149 National Monetary Commission s 1 . ... . (T o I * n a 1 w "8 ^ o o o o o o o o o o o o < .000000 i pq -*i O O O O O O 5 ( ^ CO vO in rf VO ro ( 3 3 D < 1-- N O M VO 0t 1 ?\ 1 1 ^ M Oi Ch 00* 00* ( 4 N 8 U 1 8 o o o o o o < o o o o o o < ( ) 1 pq " O O O O O O < < 1 1 ^ w vO 00 in * C >\ : ^ 3 Ll ^ W VO CN 0! 6 M ( o i I S 3 ^ a $ -* H 2 3 1 80 o o o o c O O O O O ( O < 1 H c 3 O ^ooooooc *i C g OOO ^f'tOOvOO! ) ) ) J J > B S IS M \o" to r^ Tf oo" "^ootowOHinr 3 f H d ! 5 | 1 ^ 3 ; H ^ ; ; 3 H ; i i 00 00 O\ O O O 00 00 00 00 <^ Ov I ' I-'E I til t^ 00 00 O O O oo oo oo oo oo o> o 1 150 The German Great Banks The reserves of the Reichsbank for the issue of bank notes amounted to Cash. Metal. Gold. Aver- age. High- est. Low- est. Aver- age. High- est. Low- est. Aver- age. High- est. Low- est. 1876-1880 Per cent. 85.0 Per cent. 104. 3 Per cent . 66. i Per cent. 77- i Per cent. 96. 3 Per cent. 62.4 Per cent. 34. o Per cent. 54. 4 Per cent. 22.5 18961900-- - _- 79. 5 102. 9 51.9 76.4 99- 4 49- 7 52. 4 71. 7 32.6 1908 72. 8 89. 4 49- 9 66.9 82.6 44. 2 51.5 65.6 32.0 As compared with this, the note issue reserves held by the banks of France and England were as follows : Bank of France. Bank of England. Metal. Gold. Metal. Gold. 1876-1888 - _ - Per cent. 87.8 84.! 76.3 Per cent. Per cent. 99-0 129. 9 120. 5 Per cent. 98.3 129. i 117. 7 18861900. - .-. .- _ - 52.0 56.2 1907 The proportion of reserves of the Reichsbank to bank notes and other moneys falling due daily (the giro assets in the first instance) was: Cash. Metal. Gold. Aver- age. High- est. Low- est. Aver- age. High- est. Low- est. Aver- age. High- est. Low- est. 1876-1880 66. 2 73 53- 2 60. o 69. 3 52.1 26 5 18961900 55 i 68 i 38 5 52 9 6c 7 36 8 36 i 1908 51.0 58. 2 38. 2 46. 9 53 7 33.8 36 i 42 6 151 National Monetary Commission This proportion in the case of the other two banks was as follows: Bank of France. Bank of England. Metal. Gold. Metal. Gold. 69.8 69. 7 65.8 46.5 44- 9 42. i 46. i 44-8 41. 2 43- i 48.5 1907 .. - -- - The average amount of gold in hand at the Reichsbank (current gold-coin of the Empire, bars, foreign coin, etc.) during the period in question was: Amount. Per cent of the total stock of bullion. 18761880 . . . . . .... .... Marks. 23 i , 593 , ooo 44 I 1881-1885 , 18861890 251, 092, ooo 43-5 63 6 18911895 61 i , 296 ooo 66. i 18961900 584, 091 , ooo 68. 6 693 561 ooo 73 8 1908 785, 195.000 77- i The amount of Reichsbank notes in circulation unse- cured 145 by cash 146 or metal 147 is rightly regarded as the real "elastic" part of the whole note issue, as it adapts itself very closely to the varying state of the market, and the requirements of the business community, the varying amounts forming a very reliable gauge of the state of and fluctuations in the demand for means of payment. The following tables may serve as illustration. 152 The German Great Banks -0 "3 5. SO 5^^0^ *-> t-\OOPIMO\000 c o '** w -t->-0 -00 MVOOOOO 1 So rt BgS +3 i r r i i I o\ ro oo to oo w t- CO 00 O\ Ov O 00 00 00 00 00 O\ a u q M H ' t "w?W?! IH* \* ^ ^ci ja ^Q ^Q* ^ bi Sf, fi fa ' fc fc fc .^ C O IH WOO COfOfJVO 1OIO |a| ^ooN^-voS ^^^r i ^I E 1 f 00 00 O\ ON O 00 00 00 00 00 O> H _u OS o v^>"> SfiPfillofifi ^iSS- i -i>; O^toOOt.rf^uvM i i mo'lilS^ h5)iiut-^Soo 00 <"> E Sr S* J ft M s* MM^^SJT^?^ i e^ 'Z!^ CO SSslSHI'S p > O O w> 00 00 ON ON CO 00 00 00 ON ON 1 1 1 1 1 1 \O MVO MVO MOt^CO l^-OOOO ONO\O O O O OOCOOOOOOOONONC7NON National Monetary Commission OlOOCIMlOMtO'O lljll 'OOOOCQ10N tot 1 MtorOOOO itOOt^ M rrw t^oo TJ-io<300 e , jo T3 1 01 r exceeded b_ CJ I B MOOt^NOwMfOto to t vo t^ >O o" O* M" 10 M M M a I Jj 1 1 O M o to O\ vo 00 00 00 O ON O 00 00 00 00 00 1 I s rt G oood'a'o.cJod PPGQwwQQP 1 1 >> U2 | -M 1 W T3 3 % "o ,:f2 o" w ^'^ "o vo o * 8 I o 1 |l||^|l|l?? O O>O 10VO OOOOOO MM M d N fO M x V g * u vOr^OvOtotOHtot^ 1 1 9 1 J 3 O so" o\ i/ M to oo" vo" 10 10 lOioOOO^o M OtoO MMM NtOTNOlO f j "o 2 tn a 3 o 1 ^ s | O 10 10 OO 00 Oi 0> O O oo oo oo oo o> o\ rt 1 o 1 1 1 1 1 1 *O MNO MVO MVOt^OO r^OOOO OO\O O O O 0000000000 O\CTiO\ T h e r m a n r e a t B a n In 1907 the greatest amount of gold in hand was 759,181,000 marks (on May 23), and the lowest amount 471,848,000 marks (on November 30). The average metallic reserve was : Marks. 1876 510,593, ooo 1880 _. - . _ _ . 562, 091, ooo 1881 . .__ 556,749,000 1885 . ....__ 586,131,000 1886 693,105,000 1890 801, 019, ooo 1895 1,011,763,000 1 896 89 1, 988, ooo 1 900 817, 137, ooo 1901 91 1, 41 1, ooo 1905 -__ 972,959,000 1908 i, 019, 065, ooo The differences (Spannung) between the official rate of discount and the private rate (market discount) averaged by four-year periods as follows: Berlin. Paris. ' London. Per cent. Per cent. Per cent. 1876-1880 i. 19 0.51 0.51 1881-1885 o 98 1886-1890 i 04 1891-1895 i. ii o-SS 1.03 1896-1900 o. 71 o. 09 o. 60 1905 .... o. 97 o. 90 o 35 1906 i. ii o. 28 O. 22 1907 1908 i. 23 o. 79 o. 70 155 National Monetary Commissio n The average rates of discount of the central Banks in Germany, France, and England since the institution of the Reichsbank was as follows Reichs- bauk. Bank of France. Bank of England. 1876 Per cent. 4. 16 Per cent. Percent. 1877 .. .... 4- 42 2 28 1878 4 34 7 78 1879 2 <;8 1880 4 24 4 4 2 8l 2 76 1881 : 4. 42 3 &4 3 48 1882 4 54 o go 1883 . . 4. 05 3 08 1884 2 06 1885 . . . 4.12 1886 3 28 1887 ... 3 4i * -28 1888 : 3-32 3 10 1889 . . . 3. 68 1890 . 4. 52 1891 . 3 ?8 1892 ..__ . . . 3 20 1893 1894 3 12 1895 1896 3 66 2 48 1897 -, gj 2 6^ 1898 1899 1900 * 06 1901 1902 . 1903 , 84 1904 . _ 1905 . _ 3 82 1906 3- oo 1907 _ 7 A& 1908.-. __ 03 In 1906 the rate of the Bank of France was 3.00, and that of the Bank of England 4.27; the rate in 1907 of the Bank of France was 3.46, and that of the Bank of England 156 The German Great Banks was 4.93; and in 1908 the rate of the Bank of France was 3.04, and the rate of the Bank of England was 3.01 per cent. The private rate of discount (market discount) averaged as follows : Berlin. Per cent. 1876 3.04 1877 3.17 | 1878 3.07 I 1879 2.60 1880 3.04 ! 1881 3.50 | 1882 3.89 | 1 883 3.08 1884 2. 90 1885 2.85 1886 2.16 j 1887 2.30 1888 2. II 1 889 2. 63 1890 3.78 l89I 3.02 1892 _. I. 80 1893 3.17 1894 1.74 1895 2.01 I 896 3.04 1897 3.09 1898 3.5S 1899 4. 45 1900 4.41 1901 3. 06 1902 2. 19 1903 3.01 1904 3. 14 1 905 2.85 1 906 4.04 1907 5.12 1908 3.52 Paris. Per cent. 2.25 1-75 2.00 2.25 2.50 3-75 3-38 2.56 2.42 2.46 2.23 2.42 2-75 2.65 2.64 2.58 1.83 2. 22 i. 77 1.63 1.83 1. 96 2. 12 2. 96 3- 17 2. 4 8 2-43 2.78 2. 19 2. 10 2.72 3- 40 2- 25 London. Per cent. 2.25 2.25 3-50 1-75 2.25 2.88 2-38 3- 00 2. 60 2. 04 2.05 2.36 2.38 2. 70 3-68 2.50 1. 47 2. 10 o. 97 o. 81 1-52 1.87 2.65 3-29 3-70 3-20 2.99 3-40 2. 70 2.66 4.05 4- 53 2.31 National Monetary Commissio n The average bill investments of the Reichsbank amounted to Marks. 1876-1880 356, 518,000 1881-1885 . ? 366, 955, ooo 1886-1890 463,214,000 1891-1895 554, 142, ooo 1896-1900 724, 438, ooo 1901-1905 839, 752, ooo 1906 989, 445, ooo 1907 i , 104, 537, ooo 1908 967, 729, ooo Since a central note bank always has to be in a position to redeem its notes (covered according to law in a special manner) on presentation, and to meet its other daily obligations (for which the mode of covering is not pre- scribed by law) , the general principle ought to be observed that, in so far as the law does not permit exceptions, its credit business must be strictly in keeping with its debit business, a principle which need not be so strictly main- tained by the credit banks. Accordingly a central note bank should grant short- time credit only, either by discounting short-term bills or by making short-time loans on collateral. The discounting of short-term bills ought to occupy the first place in the credit business of the Reichsbank, as the latter is bound under section 17 of the bank law to secure, by short-term bills, two-thirds of the notes it issues. The Reichsbank in the course of time has acquired a constantly growing percentage of the entire number of outstanding bills. It is thus able to extend its note cir- culation, as the short-term bills falling due provide it continually with the means of redeeming its bank notes. 158 The German Great Banks Collateral credit business at the Reichsbank is relegated to a secondary position, since collateral claims, for obvious reasons, 148 can not be used as reserve for notes. Never- theless, collateral credit (which is likewise granted for three months only) is normally less expensive to the debtor, although since 1896 the rate of interest on collateral loans has been i per cent higher than bank discount, for the reason that interest on loans on collateral is computed only for the actual duration of such loans, and that the debtor may repay at any time part or the whole of the loan. Lending money on merchandise has been discarded more and more in favor of lending money on securities. Thus at the end of 1908 only 5,390,100 marks were loans on merchandise, whereas 170,533,650 marks were loans on securities. The amount of loans on collateral, as a whole, rose almost constantly, as follows: Amount of loans on collateral made. Annual aver- age out- standing. 1904 - -- - - - - Marks. 1 957 4 1 1 820 Marks. 1905 1906 __ - . -- - -._- 2, 773 , 191 , 475 1908 (decrease of the total and of the annual average) _- 2, 8l2, 171,450 9i 397. ooo Apart from the possible difficulties of realisation, it involves greater risk for the bank to grant credit on collat- eral than bill credit, as the nature of the credit required cannot be recognised so easily as in the case of bills. In granting short-term credit it is incumbent on the Reichsbank administration to aim at regulating, through the interest or discount rate, the domestic demand for 159 National Monetary Commission short-term credit which concentrates at the Reichsbank and which is expressed to a great extent in its bill invest- ments. When credit is rendered more expensive by a high dis- count rate, which latter naturally influences immediately the rate on loans on collateral and, gradually, general interest rates throughout the country, excessive demands for credit at home, as well as excessive speculation, over- production, and overvaluation of goods and securities are restricted to a certain extent. Provided that the private rate of discount is high, and that exceptional circumstances (similar to those in 1907) do not intervene, a high Reichsbank rate of discount can also check, di- minish, or retard the outflow of gold to foreign coun- tries. 149 As a rule, however, it will not cause gold to be imported from abroad, unless domestic discount rates are raised far higher than those abroad, and private rates of discount are raised correspondingly and kept at a corre- sponding height. In all other cases "screwing up the discount rate" will not cause gold to flow in from abroad, but merely prevent temporarily a further increase in the foreign exchange rate, thus preventing or postponing the advent of the moment when the export of gold might become profitable. 150 Complaints have been made against the Reichsbank for having raised the bank rate (especially in 1907) without necessity, at "all events for having maintained it at an exorbitant height, thus severely injuring the interests of trade, industry, and agriculture. It was also stated that the Reichsbank was too obliging as far as credit demands were concerned, particularly 1 60 The German Great Banks toward the credit banks, and the average amount of its bill investments in 1907 (1,104,537,000 marks) and of its investments in collateral 151 (98,140,000 marks) were pointed to as a proof of the complaint. In particular at the so-called " heavy terms" (schwere T ermine) (the first day of the quarters; also the fortnights from Septem- ber 15 to 30 and December 15 to 30) it was said to have weakened its position unnecessarily by granting bill and collateral credit of too comprehensive a nature, and that it discounted a great number of financial, credit, and nominal bills (Leerwechset) i. e., such bills, as were not based upon real, bona fide commercial transactions. Finally it was urged that, because of its limited holdings of foreign bills, the Reichsbank was unable to exercise any appreciable, even if only temporary, pressure upon the rate of exchange, whenever this rate had gone beyond the "upper gold point," or tended in that direction; that it was therefore not in a position to pursue an independent foreign bill policy (Demsenpolitik) , which was demanded by the circumstances, or at least to support and supple- ment its discount policy by means of a corresponding foreign bill policy, even though subject to the same limitations as its discount policy. I consider that the proceedings of the bank inquiry commission instituted by the Government in 1908 at the instigation of the Reichstag, and the statements of the experts examined at that time, go to show that only the last mentioned objection can be sustained, and that only to a limited extent. 161 National Monetary Commission The amounts of foreign bills held by the Reichsbank since 1876 were as follows: Marks. 1876 1,672,000 1877 i , 873, ooo 1878 5,351,000 1879 3, 560, ooo 1880 9,584,000 1881 7,481,000 1882 5, 59> 00 1883 4, 004, ooo 1884 4. 6 3 i 1885 7,951,000 1886 16, 961, ooo 1887 7, 864,000 1888 3,316,000 1 889 3, 798, ooo 1890 5,420,000 1891 5, 306, ooo 1892 4,715,000 1893 4,113,000 1 894 2, 540, 000 1895 2,569,000 1 896 2,753, ooo 1897 2,411,000 1 898 4, 934, ooo 1899 19, 045, ooo 1900 26, 753,000 1901 26, 946, ooo 1902 22, 733,000 1903 24, 068, ooo 1904 22, 212, OOO 1905 33,093,000 1906 43,244,000 1907 44, 461, ooo 1 908 70, 88 1 , ooo On the other hand, as a result of the deliberations of the bank inquiry commission, it has been firmly established that, on the whole, the Reichsbank has not gone too far in the amount of credit granted, although it was considered advisable that in the future stricter principles should be observed in discounting bills, and that the discounting of 162 The German Great Banks long-term bills and the granting of any kind of permanent credit should, at least on principle, be abandoned. Neither could it be proved that the Reichsbank during 1907 had raised the discount rate arbitrarily. On the con- trary, the majority of the members of the bank inquiry commission, and of the experts examined, were of the opinion that the raise of discount rates was in the main only the natural and necessary consequence of industrial credit requirements, which in turn were not arbitrary, but for the greater part legitimate and necessary, and that had the discount rate not been raised, the situation of the Reichsbank would have been much worse, and the drain of gold much larger. As a matter of fact, the fixing of the discount rate by the Reichsbank has solely a ' ' declar- atory," and not a "normative" (konstitutive) significance. The majority referred to were decidedly of the opinion that, for the same reasons, the continued high rate of discount, although much to be regretted, was a necessity. In the course of the deliberations it became necessary even for the most outspoken advocates to abandon the view that the Reichsbank ought not to comply fully with the sudden and abnormally large demands for credit that arise at the so-called "heavy terms" (schwere T ermine), and which come principally from the credit banks. It will hardly be denied that the credit requirements at the so-called "heavy terms" are particularly legiti- mate and such as can not be deferred, and that these requirements are met at the time by the Reichsbank in the shape of short-term discount and collateral credit. These requirements are: the credit demands on the first day of each quarter, when, in accordance with German 163 National Monetary Commission custom, rents, mortgage interest, salaries, wages, interest payments, coupons, and frequently bills, etc., fall due, and between the i5th and 3Oth of September and December, the periods characterized by a similar natural increase of credit demands on the part of all business interests. The fact that the credit banks fall back to a very con- siderable extent on the Reichsbank just at those periods is a necessary consequence of their being the agents of the credit requirements of trade and industry, and that, accordingly, the assistance sought is mostly for the satis- faction of the above requirements i. e., the needs of third parties and only to a relatively small extent for their own uses. This does not prevent, however, the recognition of the fact that the credit banks (as may, however, happen under every system of banking) have frequently been too liberal in satisfying the credit requirements of trade and industry, and this not only in cases where operating credit was granted hi the shape of short-term credit, but also in cases where investment credit was concerned, which in the early stages may have worn the garb of operating credit and developed only little by little into permanent investment credit. Nor is there any doubt that the demands made on the money market, and above all, on the Reichsbank, were frequently increased by a superabundance of issues, promotions and transformations that were not always justified. As far as the resources of the Reichsbank were con- cerned, the majority of the commission proposed that these should be increased, though it was deemed advis- 164 The German Great Banks able to effect this increase by a gradual increase of the surplus instead of an increase of capital. In addition, it was considered advisable that section 2 of the bank law should be changed, and that, following the example of England and France, the bank notes issued by the Reichsbank should equally be declared legal tender. Naturally, the obligation of the Reichsbank to redeem its bank notes hi gold was to remain and, if possible, be even more sharply emphasised. The necessary proposals in these two directions are con- tained in the draft of a bill (art. i , par. 2 ; arts. 3 and 4) laid before the Reichstag hi February, 1908, and since made law, containing amendments to the bank act. (Entwurf eines Gesetzes betreffend Aenderung des Bank- gesetzes. Reichstag document, No. 1178.) The provi- sion, however, in force in England which I consider both necessary for and practicable in Germany, notwithstand- ing the argument to the contrary found on page 12 of the report of the bill according to which bank notes are not to be legal tender for payments made in its giro and bank- note transactions by the Reichsbank itself, has been un- justifiably omitted. Further, the draft authorises the -Reichsbank to buy checks, provided that two persons of known solvency are responsible for the same, an authority which the bank did not possess until then. This latter measure is also in accordance with the views of the majority of the members of the bank commission. On the other hand, the permission granted by article 5, Sec- tion III, of the act of June, 1909, to use checks (which in distinction to bills can not be accepted) as part of the note reserve seems to be of doubtful wisdom. Finally, National Monetary Commission article 2 of the act provides for an increase of the tax-free "contingent" of uncovered bank notes of the Reichsbank from the present amount (472,829,000 marks) to 550,- 000,000 marks, so that the bank will have to pay the 5 per cent tax merely on the amount by which its note circulation exceeds its cash reserve (see note 145) plus this note contingent of 550,000,000 marks. The system of a tax-free note contingent has thus been upheld, it having been proved that this factor has had no influence upon the discount policy of the bank. The Govern- ment and the majority of the commission were of the opinion that the passing of the bounds of the tax-free contingent was serving as a danger signal to the commer- cial public, although, as a matter of fact, from 1891 (before which date the bounds were never exceeded) till 1907 inclusive, this limit has been exceeded not less than 164 times. 152 The last-named fact may therefore be said to have brought about merely an increase of the tax-free note contingent. In concluding this review of the activity of the Reichs- bank during the period under consideration, it must be acknowledged that the regulation of our money circulation, and of our systems of payments, credit and currency, with which that institution had been intrusted, has been in good hands. In particular it may be said that by means of a circumspect discount policy, by opportune and energetic intervention in 1900 as well as in 1907, i. e., during the most critical periods, the bank has been of the greatest aid in preserving the German money market and the entire economic organisation from lasting disturbances of the gravest character. 166 The German Great Banks The above review of the most important factors which influenced the development of industry and banking in Germany during the period in question, would be quite incomplete without a brief reference to the. during this era, 154 and especially to those formed begin- ning with the period 1 8 73-1 8 75. 153 These combinations, developed to an enormous extent in German industry, and their growth was due in a great measure to the direct influence of the German credit banks. Cartels in the great majority of cases are either "necessity's offspring" or at least due to its influence or after-effects. 156 They are associations, founded by contract for certain periods of time, of independent enterprises belonging to kindred branches of industry or of branches of industry with nearly identical interests, 157 the individual members of the association retaining their independence but join- ing for the purpose of regulating production and sales according to common points of view and in the common interest. A sharp distinction must be drawn (at least outwardly and legally) between cartels and trusts, for the latter although following the same aims 158 represent permanent and organic combinations of undertakings which have sacrificed their independence, and do not always belong to the same branches of industry, but possess common interests. Cartels are formed principally in branches of industry which, like the mining and chemical industries, produce staple articles (vertretbare Artiket), and in large quanti- ties (Massengiiter). Their formation is rarest and most 167 National Monetary Commission difficult in branches of industry producing special articles, or which work up half -manufactured articles. Furthermore, cartels are formed most rapidly and easily in those industries engaged in the production of staple articles, which show an organic, local, or capitalist concentration into a limited number of large or "giant" concerns (Riesenbetriebe) ; this has been the case for some time in the mining industry, and more recently in the chemical industry. The formation of cartels is slowest and most difficult in cases where both conditions i. e., the production of staple goods, and a limited number of large works are lacking. It is more difficult and unwieldy where a con- siderable number of middle-sized, and small (and more- over scattered) works exist side by side with large concerns (Grossbetriebe) . The " necessity " for the formation of cartels in Germany was clearly recognized, especially during the crisis of 1873, as a result of the economic situation; by this means overproduction at home and ruinously cheap prices were to be terminated; this "necessity" likewise was the origin of the protective-tariff movement of the seventies, which was intended to ward off, or decrease foreign com- petition. The simultaneous introduction of a protective system of duties is by no means indispensable for the formation of cartels, at least not in the case of strongly developed industries, as may be seen in the case of Eng- land. It seems to be only an attendant feature, easily accounted for, in case of feeble industries, and which, in some degree certainly, is likely to promote the formation of cartels. 168 The German Great Banks It is quite correct, and has been conclusively proved by Bering, that at certain times, and under certain supposi- tions the iron industry in particular can not dispense with protective duties, and that well-organized cartels enable protective duties to become effective in favor of producers. More than this, however, can not be said; consequently the assertion that the organized iron or steel industries can attain their aims only "under the system of protect- ive duties " 159 is in my opinion incorrect. No official statistics existed up to the end of 1905 regard- ing the total number of cartels established in the German industry, consequently the figures found scattered here and there for earlier years must be accepted with reserve. In 1896 there are said to have been 250 cartels in the whole German industry, 160 one-fourth of which belonged to the iron and chemical industries, one-sixth to the earthen and stone industries, and one-ninth to the textile industries. According to investigations made in the iron industry, which, however, can not be regarded as exhaustive, 44 cartels (conventions, syndicates) existed in that industry in 1903. In the statistics contained in the Denkschrift uber das Kartellwesen (p. 24), laid before the Reichstag during December, 1905, the number of domestic cartels is stated to be 385, divided as follows: Coal industry, 19; iron industry, 62; metal industry (excluding iron), n ; chemical industry, 46; textile indus- try, 31; leather and india-rubber industries, 6; wood industry, 5; paper industry, 6; glass industry, 10; brick- making industry, 132; earths and stone industry, 27; 169 National Monetary Commission earthenware industry, 4; food and delicacies, 17; elec- trical industry, 2; miscellaneous, 7. About 12,000 works participated directly in these cartels (p. 25). Numerous complaints before, during, and after the serious crisis of 1900 among nonorganized branches of industry, as well as in wider circles, against the price policy pursued by the cartels, 161 led to serious charges against the cartel system, and ultimately, as usual, to its absolute condemnation as being positively detrimental to the public welfare. These complaints gave rise to an official investigation by the imperial home office, which lasted from November 14, 1902, to June 21, 1905. The memorial (Part I) elaborated in the same governmental department, and laid before the Reichstag on November 28, 1905, simply gives a review of the existing cartels in Germany. 162 In continuation of these investigations, it was pro- posed to bring out a compilation of the legal provisions and regulations applying to cartels at home and abroad, including also the most important decisions of the supreme tribunals. Further, the results of the official inquiry were to be tested in the light of specially prepared price statistics. The material was to be brought down to date "in all cases where the conditions determined in the investigation had changed," and, if necessary, the material gathered was to be supplemented ' ' through the extension of the investigation to other cartels." (See p. 1 8 of the memorial of 1905.) The first part of the memorial is accompanied by reprints "of all available by-laws (Statuten), company and delivery agreements, etc., and business regulations" 170 The German Great Banks pertaining to cartels " in order to afford an insight into the forms of organisation of the combinations" (pp. 18-19). In addition to the associations of producers, the memo- rial treats also of the associations of consumers and dealers. In conformance with the outlined program, Part II 163 of the memorial, laid before the Reichstag on March 25, 1906, contains the provisions of the German civil and penal laws, including the decisions of the supreme court of the Empire. Part III, submitted to the Reichstag on March 21, i9oy, 164 is devoted solely to a review of the cartels in the coal industry. Finally, Part IV, laid before the Reichstag on Novem- ber 3, I9o8, 165 deals with the foreign cartel laws, including those of the European countries, the United States, and the British Colonies (Australia, New Zealand, Canada, and Cape Colony) . This is not the place to discuss in detail the results of the official inquiries preceding the publication of the memorial, nor the inquiries themselves, which by no means exhausted all aspects of the subject, especially the important question of export bounties. It seems advisable, however, as the conclusions drawn from this inquiry are likely to occupy the attention of the legisla- tive authorities, to examine some of the questions more closely. It should be stated at the very outset that in Germany, as opposed to the United States, all the rail- ways are state property, and that any domination over the railway tariffs by the cartels is out of the question. According to my conviction, the official inquiry has established the following preliminary conclusions. 171 National Monetary Commission The charge brought against the Rhenish Westphalian Coal Syndicate of having raised prices too high and too rapidly during the years of greatest trade prosperity (Hochkunjunktur) viz, 1898-1900 was proved unfounded; as to the complaint that it did not reduce prices suffi- ciently and speedily enough after the crisis, no common ground for the conciliation of the divergent views could be found. 166 The opinion that it is bad policy, unpatriotic, and in- compatible with the public welfare to sell goods abroad at lower prices than at home can be regarded as refuted. In the event of overproduction at home, sales to foreign countries are generally 167 necessary in order to dispose of the surplus home production and to relieve the home market as far as possible, whereas the determination of price in such cases is governed chiefly by foreign compe- tition and prices prevailing in the international market. The aim of the seller being always to obtain the highest sale price possible, it may therefore be assumed as a general fact that the regrettable occurrence of foreign sales being effected frequently below home prices and even below cost is solely due to the causes just named. On the other hand, I am of opinion that the following charges have been proved: The cartels in -general, and especially those in the mining industry, frequently lacked all close touch and proper connection with each other, so that a common business policy was out of question, even if for these reasons only. A proper policy should at least have set itself the task of establishing a proper relation of prices for the products of the various industrial branches, especially a ratio of prices for raw materials, half-manu- 172 The German Great Banks factured wares, and finished commodities. Instead, the coal syndicate pursued its own price policy (which was certainly moderate throughout) without reference to the coke syndicate; the latter in turn pursued its less mod- erate price policy without reference to the pig-iron syndi- cate, 168 etc. Such a common business policy, moreover, was out of question, because (a) the cartel system (Kartellierung) never comprised the whole process of production, i. e., the production of the raw material, of the partially manufactured goods, and the finished article, but only a single part, or parts, of the process of produc- tion, and because, furthermore, (6) the syndicate contract frequently excluded a whole series of articles, as well as all foreign business, from the cartel's sphere of influence. It is clear, therefore, that the increase of prices fixed for Germany by the cartels of the raw-material industries benefited at first those cartels only, and that they were able to dispose of their home surplus in foreign markets at prices below those prevailing in these markets, and some- times even below cost. In the iron industry these facts caused considerable injury, in the first instance, to the cartels formed in industries following in the process of production, namely, the production of partially manufactured goods. These cartels in their turn endeavoured as much as possible to shift the injury to their consumers, the industries follow- ing in the process of production, i. e., the industries engaged in the further working up or finishing of the partial manufactures. Hence, it followed that the further an industrial branch was removed from the beginning of the productive process the more intensely it was injured 169 173 National Monetary Commission by the otherwise consistent (an sich naturgemasse) business policy of the raw-material cartels mentioned. The unorganised industry of the more highly finished products, therefore, was weakened and injured to a high degree, and to a twofold extent; by unrestrained domestic competition as well as foreign competition on the one hand, and by the enforced raising of home prices for raw materials and partially manufactured materials on the other. A considerable number of these evils which were cal- culated to counteract the essentially true purposes aimed at by the formation of cartels, and which would have led eventually to the disruption of the cartels, 170 have been removed at least for a certain number of industries by the formation, on March 30, 1904 (retroactive to March i), of the Steel Works' Union (Stahlwerksverband, Dusseldorf) , which united the Serni-Manufactures Producers' Associa- tion (the so-called Halbzeugverband) , the Girder Manufac- turers' Association (Trdgerverband) , and the Rail and Sleeper Combine, the total production of which, at the time of its foundation, amounted to 7,900,000 tons (of 1,000 kilograms). The advantage of this union, 171 which was extended on April 30, 1907, for a further term of five years, consists principally in uniting within its sphere of activity the whole German output of partially manufac- tured articles, and a very considerable portion of the roll- ing mills' output. Further advantages of the combination were the fact that all the works belonging to the union were so-called " mixed" works and that it comprised at least some of the mutually dependent cartels. The new combination has also taken in hand the export trade, and 174 The German Great Banks is endeavouring, in conjunction with the Rhenish West- phalian Coal and Iron Syndicates (by means of contractual arrangements), to regulate it in the common interest by fixing export premiums and establishing a special clearing house for exports . The export premiums , which amounted to 2.50 marks per ton, were abolished, beginning with July i, 1907. The union also has the avowed intention, carried into effect since by a series of measures, to harmonise as far as possible its own business policy, and more especially its price policy, with that of the cartels following or preceding it in the process of production. In particular its aim is to fix the prices of all syndicate products in accordance with the prices of the raw materials in such a manner as to par- take of the benefit of the customs duty while showing the utmost regard for the interests of the industries of the more highly finished products. 172 However, according to the memorials of February, 1908, 173 and June the 5th, 1908, presented by the "pure" Martin Steel Works (engaged in the production of crude steel only) and the "pure" rolling mills (which only roll steel and iron, but do not produce the iron and steel material) , to the Secretary of State for Home Affairs and to the Reichstag, the Steel Works' Union had shown no consideration for the interests of the finishing industry as evidenced in many instances. It was stated that the Steel Works' Union, with the object of suppressing the "pure" rolling mills, had systematically kept the home prices of half -finished material (the so-called "A" products of the syndicate) so high that the "pure " rolling mills not only had no profit, but at times a clear loss in the sale of 175 National Monetary Commission the products manufactured from this half-finished mate- rial. For, simultaneously with the rise of prices for the products "A" which they on their part could not manu- facture (as most of the members of the Steel Works' Union could) , but had to purchase there had been a fall in the selling prices of the products "B" of the Steel Works' Union, comprising iron plates and bar iron, the sole product of the "pure" rolling mills. The entire advantage of the Steel Works' Union de- pended on the duty-free importation of such raw mate- rials as coal and ore. As it imported the latter free of duty in those exceptional cases where it did not possess ore of its own, the mixed works (Thomas Steel Works) were able to keep the cost of their products below that of the other works. The superiority of the "mixed" works belonging to the Steel Works' Union, it was claimed, was therefore not based exclusively on the natural advantages of concen- tration, but chiefly or exclusively on the fact that these works, being able to obtain their material without duty, made a selfish and wrong use of the duty on imported pig iron, half -finished, and scrap iron for the benefit of the syndicate products and to the detriment of the "pure" works. In the opinion of the "pure" works, these duties were unnecessary, in view of the equally high cost of pro- duction abroad, especially in England. This superiority of the mixed works, the argument went on, rested on the further fact that although the cost of material to the pure works was enhanced by the amount of the import duty, the former made it impossible for the pure works to realize the benefit of the customs duty 176 The German Great Banks in the prices of their products by refusing to sanction the organization in a syndicate of the producers of finished iron, especially of rolled plates and bar iron. Under these conditions the "pure" Martin Steel Works and the "pure" rolling mills demanded at one time a suspension and early removal of the import duties on pig iron, half -finished iron, and scrap iron (cfr. memorial of 5th June, 1908), and at another (cfr. memorial of Febru- ary, 1908) the introduction of import certificates for pig iron and exported articles (i. e., for half -finished articles- bar iron, plates, and wire) , by which means they could at least secure to themselves the unhampered supply of ma- terial for articles to be exported. The Steel Works' Union pointed out in its answer to the above-mentioned memorials that the mixed works were at a considerable disadvantage as compared with foreign countries, both as to general conditions of production, especially cost, and as to the far smaller social burdens imposed abroad, particularly in England. A compensation could be found only in better technical arrangements, in savings in the cost of production and in a decrease of the cost of transportation. There could be no question of a systematic suppression of the "pure" works. This might be seen from the fact that the total sales of half -finished material amounted in 1907, to 1,200,000 tons, whereas the firms who had com- plained purchased only 340,000 tons, the production of which required the services of only 5,000 workmen of the Steel Works' Union's total labor force of 360,000 men. Added to this were the export premiums continually paid by the Steel Works' Union also to the above-mentioned 90311 ii 13 177 National Monetary Commission works, which helped them to tide over bad times, to say nothing of the ever -increasing deliveries of half-finished material to these works which were a matter of record. The cutting of prices of iron bars and plates very often emanated from the "pure" rolling mills, in fact it often exceeded the amount of the export bounties. It was a matter of regret that owing to objections of several members of the Steel Works' Union, and to other obstacles, the desired formation of bar iron and plate iron syndicates had not become possible. The removal of duties on half -finished material, pig iron, and scrap iron desired by the "pure" works would result merely in a dissolution of the Steel Works' Union. These duties were indispensable as a protection against the enormous power of the American steel combination against the advancing Russian iron industry, and, lastly, against the constantly growing British protectionist tendencies. The abolition of the duties mentioned would prove at the same time of general disadvantage to the whole home industry, and especially to the rolling mills, as it would entail the removal of the duties on iron bars and plates. For these duties acted chiefly as prohibitive duties, a fact disputed, however, by the "pure" rolling mills. Finally, in the opinion of the Steel Works' Union, the import certificates (for the export of articles worked up from imported pig iron or half-manufactures) , demanded by the "pure" works, were too rigid in character and could not be adjusted to varying market conditions. This pliability, however, was essential to their successful appli- cation. If the demand of their substitution for the export payments made by the syndicate were to be granted, they 178 The German Great Banks might easily assume the character of true export boun- ties, especially at times when home and foreign prices were equally high. As a sequence to this at times quite acrimonious contro- versy, the Steel Works' Union decided upon the reduction of the domestic price of half -finished material by 5 marks per ton (this came into force on the ist of July, 1908). But this did not help the "pure" works, since this reduc- tion of the price for half-finished material had been antici- pated, and accordingly the selling price of sheet and bar iron had fallen 10 to 15 marks per ton; that is, below the cost to the " pure " rolling mills. Since November 27, 1908, the prices on fashioned bar iron (Formeisen) have likewise been reduced for the first half of 1909 by 5 to 10 marks by a resolution of the Steel Works' Union. As no important improvement has taken place in the condition of the "pure" rolling mills, a condition which resembles in a striking manner the present condition of the private banking business with relation to the great banks, it will be necessary to consider the demands of these works. It may be noted in this connection that some of the great banks are found in their camp, at least with part of their interests, though the large majority of the great banks and by far the greater part of their inter- ests are doubtless identified with the Steel Works' Union. The carrying out of the plan to create bar iron and sheet iron syndicates (which it would appear has been re- cently supported even by the Government) would seem to be the most radical, and perhaps the only way of im- proving the doubtless precarious condition of the "pure" rolling mills. Such a plan should certainly be supported 179 National Monetary Commission by all means in the interests of German trade and industry. We must not forget, however, that the scheme to form a general sheet-iron syndicate was wrecked not only by the opposition of three South German members of the Steel Works' Union (de Wendel, Maxhutte, and Dillingen), but also by the opposition of a great number of Siegerland works. The formation of the wrought iron syndicate on the other hand seems to have come to grief owing to the opposition of various works, as well as to the demands of wholesalers who insisted upon being guaranteed a mini- mum profit for handling the products. Another plan would be the extension of the number of "pure" rolling mills by the erection of Martin works, which would make them independent of the supply of half -finished material from the Steel Works' Union. .It was on these grounds that the plan was strongly advo- cated in a memorial of the ' ' Association of crude iron and half -finished material consumers," which in the main sided with the "pure" rolling mills against the contentions of the Steel Works' Union. The construction and successful working of new Martin works presumes, however, the removal of the import duties (as desired by the "pure" rolling mills) on pig iron, half- finished products, and scrap iron. It is, however, very doubtful if the removal of duties would be in the interest of national industry, and even more so whether the change would prove of permanent benefit to the rolling mills themselves. In the first place I am not convinced that these import duties have been used in a selfish and wrongful manner 180 The German Great Banks by the Steel Works' Union in order to crush the "pure" rolling mills. On the contrary, it seems to me that even the strongest combination is hardly able in the long run to realize through its domestic selling prices the full pro- tective duties on the half -finished material, because in the main we export half-finished material. Certainly in periods of booms the influence of prices in the world markets will largely equalise the influence of duties and freights on inland prices. Even the average inland price for grain (the imports of which largely exceed the exports) has not always equaled the average foreign prices plus freight and duty. In the foreign markets the determining price factor as a rule and in the long run is mainly the condition of the international market as affected by supply and demand. Prices in the world market are quite independent of domestic prices and are the result of altogether different factors. There is no reason, therefore, why they should correspond to the domestic prices plus protective duties and the freight difference. I also share the opinion of the Steel Works' Union that once a breach has been made in the customs wall for iron such as the pure works desire by the removal of the duties from half -products and by the introduction of im- port certificates, the abolition of the remaining iron duties would necessarily follow. For it will be difficult in the long run to maintain free trade for the export business and to continue to make use of protective tariffs for other branches of the iron industry, such as pig iron, bar iron, sheet iron, and wire. It seems to me that much as the removal of protective duties may be desirable on principle the removal of the 181 National Monetary Commission duties on pig iron and half -products which, like the cartels, are the means not only of raising but maintaining the prices of domestic products, would be premature, for the reasons stated in the memorial of the Steel Works' Union and in view of present conditions. Nor can we be quite sure that at no distant date the raw material (Einsatz- material) of the Steel Works' Union now entering duty free (at least the ores) may not become subject to foreign export duties. Added to this is the fact that as long as the agrarian protective duties continue, the one-sided removal of the industrial protective duties would mean an unfair burden- ing of the industrial population, which would moreover be left unprotected against foreign competition. To return to the other purposes of the Steel Works' Union (Stahlwerksverband): The union endeavors, by a series of measures intended to insure regular work for syndicate undertakings, to reduce the cost of production, a matter which hitherto has not been influenced in the slightest degree by the syndi- cates. Finally, it has promoted the formation of dealers' associations, limited to certain districts, especially the Rhenish- Westphalian, the Middle-German, and the South German girder dealers' associations, the existence of which was at one time endangered through dissension, but which is now assured for another five years, dating from the summer of 1907 to June 30, 1912. The Steel Works' Union, by reason of its organisation and of its freer attitude toward the export trade, is in a position to pave the way for international agreements with the chief exporting countries. In fact it has suc- 182 The German Great Banks ceeded in bringing about such agreements, although only for a short period each. On November 28, 1904 (retro- active from October n, 1904), an agreement concerning the export of rails was arrived at between England, Ger- many, France, and Belgium, to begin with, for a period of three years (till March 31, 1908), and on November 24, 1904, an agreement was concluded between Germany, France, and Belgium with reference to the export of girders for the period of two and one-half years (until June 30, 1907). m Both agreements have been extended indefinitely and barring unforeseen incidents are likely to remain in force until June 30, 1912, the date of the expiration of the Steel Cartel agreement. The United States Steel Corporation (acting also for the Lacka wanna and Pennsylvania Companies), founded February 23, 1901, with a capital of $1,400,000,000, joined the International Rail Cartel later on. The Steel Corpora- tion does not comprise, as is frequently stated, the whole steel production of the United States, but so far "only" two-thirds of the American steel output, and controls about 1,500 miles of railway, or rather less than i per cent of the whole railway mileage of the United States. 175 We shall close the review of the period with this men- tion of the international agreements, which were initiated in Germany and in which up to the present German indus- try has been able to secure an eminently satisfactory posi- tion in accordance with its industrial achievements. This period is characterized not only by expansion and concen- tration in the fields of trade, industry, and particularly banking, but also by the greatest revolutions in the eco- nomic field; it marks the era of international trade, the National Monetary Commission precursor, and in part also the cause of the new era of "world" and colonial politics. It was a period of vast inventions and discoveries, which created perfectly new industries, and fundamentally transformed existing ones, and which imposed on the industries (often protected by high customs duties) great tasks in the international market, which were achieved to a considerable extent. The revolutionary character of this epoch, however, ex- pressed itself in two tremendous crises in the crisis of 1873 and that of 1900. This period marks the complete transformation of the character of German industrial organization, begun in the last decade of the preceding epoch. The new order, de- spite the partly sound, partly inadequate, arguments urged against it, possesses no doubt the great merit of having provided principally by increased export trade food and occupation for the enormously increased popu- lation, which, it was stated as early as the middle of last century, agriculture was no longer able to sustain. More- over, the view seems fairly justified, at least to a certain extent, that the recent growth of imports, which, as was pointed out above (pp. 112 and 121), in certain branches largely exceeded the simultaneous growth of exports, is a fair indication that the large increase of production during late years is due primarily to increased home demand. The following question, however, should not be sup- pressed in this recapitulation of the past and forecast of the future: What will happen if imports into Germany continue to increase greatly, and exports fall off consider- ably? This danger must be borne in mind as a serious eventuality, at least for some industries, a danger which may result from high protective duties likely to be 184 The German Great Banks introduced abroad, especially in America and the British Empire, as well as from existing German commercial treaties. As far as the latest commercial treaties are concerned they offer one gratifying advantage benefiting the whole community, namely, the assistance and support against foreign countries demanded by agriculturists and abso- lutely necessary in many directions and parts of the country. As a result of this support agriculture was able to recover its former vigor and prosperity by internal means, especially by a more vigorous and concentrated development of agricultural credit and cooperation. This development is highly desirable from the point of view of national interests, as it tends to reduce the necessity of foreign grain imports to the smallest extent possible. But inasmuch as only such governmental measures can be of general or permanent benefit in which consideration for the interests of one class of the community goes hand in hand with due regard for the interests of the com- munity as a whole, it is our earnest hope that the protec- tion of our home agriculture may not have been accorded at the expense of commercial and industrial development, or even of important branches of industry or industrial export branches. Much depends on the vigor of commerce, especially the vigor of industry, which must continue to advance and must not rest for a moment. Its further progress will depend, first and foremost, on the powerful and judicious support of those institutions but for whose constant and energetic cooperation the great economic achievements of the period could not have been attained, to wit, the German banks. 176 185 CHAPTER SE. The German Great Banks during the second period (1870 until the present) . SECTION I. (i). INTRODUCTION. The activity of the banks in the economic life of society has often been likened to that of the heart in the human body. This comparison is quite proper. For just as it is the function of the heart to regulate by means of certain organs the circulation of the blood, which through countless arteries and veins flows through the human body and returns to the heart, so, as was shown above, it is the function of the banks to regulate by certain economic measures the circulation of capital, which flows from them and returns to them, and which may properly be regarded as the life blood of the modern economic organism. The multiplicity and importance of the functions of the human heart can best be seen from a study of the functions of each part of the human body in the entire organism. In a like manner some idea of the tasks ful- filled by the German banks during the more recent period can be had from a discussion of those leading factors in the general economic development of the period, which were furthered by the banks, particularly through their activity in the credit field, by floating enterprises and issuing securities. Inasmuch as important phases of this activity have been described in the introduction and in the chapters devoted The German Great Banks to the early period of German banking, and as this activity has proceeded on the whole along the same lines, though on a larger scale, during the more recent period, it will be sufficient to point out merely the special tasks undertaken by the banks during this period. For only in this manner will it be possible to achieve our main purpose of presenting a complete picture of the influence and activity of the banks in the general economic development during the two periods. But in contrast with former editions of this book I shall endeavor in each of the subsequent chapters to describe, at least in outline, the share of each of the large banks in the common task. It will then be seen that, notwith- standing the similarity of the purposes and of the general development, each large bank has shown a peculiar char- acter and development, has pursued a peculiar business policy (cf . Sect. 6, below) and that this policy, even within the same bank, has shown numerous and at times radical changes depending on the change of management, times, and purposes. Before proceeding with our inquiry let us recall what amounts of capital were at the disposal of the German credit banks for the achievement of their tasks at the beginning of the present period. As stated before, of the total amount of about 2,405,000,000 marks which repre- sented the share capital of the stock companies founded in Prussia during the nineteen years' period of 1851-1870, the share of banking capital was 94,650,000 marks, that is to say, less than 100,000,000 marks, or about 5,000,000 for each year (cf. p. 48, supra). 187 National Monetary Commission In 1870 the capital of the large banks founded during the earlier period showed the following amounts: Bank fur Handel and Industry, 25,046,000 florins (42,936,000 marks). Disconto-Gesellschaft, 10,000,000 thalers (30,000,000 marks). 177 Berliner Handelsgesellschaft, 5,625,000 thalers (16,875,000 marks). A. Schaaffhausen'scherBankverein, 5, 200,000 thalers, (15,600,000 marks). Mitteldeutsche Kreditbank, 178 5,000,000 thalers (15,000,000 marks). In 1870 a Konzession was granted to the Deutsche Bank 179 with a capital of 5,000,000 thalers (15,000,000 marks). During the same year the Commerz- und Disconto- Bank at Hamburg was founded with a nominal capital of 30,000,000 marks, of which 15,000,000 marks were paid in. In 1872 the Dresdner Bank at Dresden was founded with a nominal capital of 8,000,000 thalers, equal to 24,000,000 marks, of which 40 per cent were paid in, i. e., 3,200,000 thalers (9,600,000 marks). In 1 88 1 under totally changed conditions the Nationalbank fur Deutsch- land was founded with a nominal capital of 45,000,000 marks, of which 20,000,000 marks were paid in. Further substantial increases of both the number and capital of the German credit banks followed in rapid succession during this period. As early as 1872 the com- bined capital of the then existing German credit banks (enumerated in Appendix III, at the end of the volume) exceeded 1,000,000,000 marks (1,122,113,000 marks). Of the total number, however, not less than 73 banks, with a capital of 432,500,000 marks, were compelled to wind up their affairs during the six years of business depression which followed the crisis of i873. 180 Here again I shall depart from the method followed in former editions. Following the usual classification of banking business into credit and debit transactions, I shall, as stated in the preface, take up the discussion of the principal credit and debit transactions (Aktiv- und 188 The German Great Banks Passi-v- Geschafte) of the German banks with particular reference to the great banks. At the outset the following general considerations should be emphasized. It is regarded as a fundamental rule both for banks of issue and for credit banks, which are not permitted to issue notes, that the charactei of their debit transactions shall determine the character of their credit transactions, 181 or, in other words, that a credit bank must not grant credit different in character from that which it receives. This proposition must in- deed be recognized also as the fundamental principle of credit banks, but it is to be understood in the sense that a credit bank, in proportion as it has procured moneys repayable on demand or within short or longer terms, or has contracted credit obligations which become due on demand or within short or longer terms, must invest the funds at its disposal in such a manner that it shall be in a position to meet its obligations at all times when they become due. At the same time, however, a bank may assume that, at least in normal times, not all the moneys due will be claimed simultaneously, just as a fire insurance company is justified in assuming that not all the insured houses will be destroyed by fire at the same time. No general and fixed rules can be laid down as to the percentage of the claims likely to be presented for pay- ment. Such a percentage can be estimated only on the basis of the experience gathered during a long time by the individual bank, with due regard to the experience of other banks and to its own peculiar character; in other 189 National Monetary Commission words, by using the care and precaution customary in business, and more especially in the banking field. The general practice of the German large banks is even more cautious, 182 since they dispose of their funds in such a manner as to be prepared at any moment to repay one- third of all outsiders' funds (fremde Gelder), irre- spective of whether they are payable on demand or after longer or shorter terms, by the aid of resources which may be regarded as being of first-class liquidity, i. e., cash, including bank notes, sight drafts, and checks, contango (Reports), bills, also the so-called "Nostro" credits, i. e., credits held with first-class domestic and foreign banks and banking firms. "Outsiders' funds" (fremde Gelder) include the deposits (Depositen), the credit balances on current account, and other balances not on current account, resulting from loan operations and other issue business, or from the coupon service, or from interest-bearing funds held until settlement day to the credit of domestic and foreign states, provinces, districts, communes, commercial and industrial concerns, of land banks, note banks, and other banks, insurance companies, administrations, corporations, institutions, foundations, and private capitalists. The liquid assets stated above include the so-called reports, which as a rule, or at least primarily, comprise only such as can be realized in the international market, as for instance those concluded in London and which become payable on an average within a fortnight (instead of the usual term of four weeks). Similarly bills mentioned among this class of assets must be such as can be used for international transactions. They may be in terms 190 The German Great Banks of German currency, since there is normally a large de- mand abroad for German prime discounts. Only in the second place do the banks resort for this purpose to short-term or shortly-due bills which may be rediscounted at the Reichsbank. 183 Such a constant readiness for the repayment of a third of all "outsiders' funds" (not only of deposits), must be regarded as more than sufficient, since never yet in the history of the German great banks has there been a case when payment of one-third of all the liabilities has been demanded suddenly without notice. Were the Reichs- bank to reckon with the possibility of a sudden presenta- tion of one- third even of its notes only, it could not maintain its present mode of calculating its liquid assets. As a matter of fact, there is no legal provision whatever for cash security, so far as the giro-claims of the Reichs- bank are concerned. SECTION 2. THE CURRENT (REGULAR) BANKING BUSINESS. i. THE DEBIT OPERATIONS OF THE GERMAN CREDIT BANKS (TAKING OF CREDIT). (A) THE DEPOSIT BUSINESS. (i) General observations. As stated before (see pp. 73 and 74), the German banks, during the first period, proceeded mainly on the principle of carrying on their business, as far as possible, with their own means. In the interest of their own security they did not deem it advisable " to bring about an increase in the amounts of deposits by granting more liberal terms." JDheir customary practice, therefore, was to accept deposits 191 National Monetary Commission repayable only after three, six, or twelve months' notice, on which, moreover, only a small interest was paid. The systematic fostering of the deposit business by the German banks, which in England is regarded as an essential element of banking, 184 is due to the initiative of the Deutsche Bank, which almost immediately after its foundation in 1870 began to devote itself energetically to this class of business. Already during the Franco-Prussian war, toward the end of 1870, the Deutsche Bank opened special deposit offices, at first in Berlin, then in a number of suburbs, also in Wiesbaden, Hamburg, Leipzig, and Dresden. In this manner manufacturers and capitalists were enabled to invest productively even the smallest available amounts (of not less than 10 thalers), while the Bank was in a position to use these deposits which became its prop- erty with the restrictions mentioned above 185 for certain business purposes, having been the first to reach the con- viction that, in view of the large demands and tasks pre- sented to the banks their credit business could no longer be transacted with their own means. Since, however, even the use of only a portion of the deposits for its own busi- ness, even with the observance of the required restric- tions, can be permitted only in case the remaining por- tion is adequately secured by most liquid assets (stets greifbare Mittel), the Bank at the same time took exem- plary precautions to provide for this form of securities and adopted a special organization of the deposit business, so arranged that the special division created for the pur- pose might, when necessary, be separated at any time and made independent. 192 The German Great Banks The opening of these deposit branches 186 on the one hand made it easier for manufacturers and capitalists to obtain bank credit; on the other hand it brought the Bank in contact with a constantly growing number of customers, whose financial standing was known and who formed a regular and steadily increasing circle of sub- scribers to the stocks and bonds issued by the Bank. Conditions in Germany, unlike those in England, pre- sented a number of serious obstacles to a vigorous growth of the deposit business. In the first place, the general custom in Germany among manufacturing and other circles is to keep on hand much larger amounts in cash than actually necessary. In the case of the smaller traders and manufacturers this is caused partly by the fact that often they have no regular bank connections. For this reason they keep idle at home the money needed to meet maturing obligations, and even much more, from sheer timidity, merely using so much of it as is required for their current business. The same and similar remarks apply to many capitalists, who, following old-time tradition, are often given to hoarding their cash resources in the most primitive fashion. To the extent, however, that the patent advantages of interest-bearing investment helped to overcome this tradi- tional inertia, it was the deeply rooted custom among large classes of the German population to turn over small sav- ings to the savings banks. The latter, in many cases, were older than the credit banks, and owed their origin to, and were identified with, local conditions. They were convenient for the deposit and withdrawal of money, even 90311" ii 14 193 National Monetary Commission in the smaller towns, besides being either public institu- tions or, at least, under state control. Finally, at the beginning of the seventies, the amount of available national wealth was relatively small. Since the deposit business presupposes large amounts of surplus funds, the establishment of special deposit banks would have proved unprofitable and was therefore out of the question, at least for a good while. Under these circumstances all that the German credit banks could do at first was to use their utmost care and efforts to prepare the ground for a gradually developing deposit business. It was utterly out of the question, in view of the then existing conditions and habits of the people, that the latter would take their savings to the credit banks in the same manner as to the savings banks. In fact, the deposit offices had to create their own deposi- tors. Their mode of procedure in this matter, allowing for certain differences of conditions, was not much unlike that of the English deposit banks during the early period. As pointed out before the Bank Inquiry Commission, the deposit offices extended credit to manufacturers and trad- ers, thus enabling them to pay their creditors through their intervention. The creditors quite often were induced not to draw the money due or to re-deposit it, receiving for it a higher than the customary rate of interest. After the connection had been made in this or similar manner, it followed, as a matter of course, that the persons to whom credit was extended, as well as those who shared in it, gradually came to deposit at the branch their cash funds and reserves and to transact there all their banking business. 194 The German Great Banks The new customer began to draw checks upon the deposit office, to discount there his commercial bills, to have the office attend to most of his payments, and lessen the risk in his import and export business. The office granted him acceptance credit, undertook the investment of his funds and the management of his property in secu- rities, gave him information and advice and procured for him advantages of all sorts. In this manner the deposit offices, which from the mere profits of the deposit busi- ness would never have been able even to defray their operating expenses, 187 and which therefore were equally interested in enlarging the scope of their business opera- tions, gradually assumed the character of so-called Wechselstuben (exchange offices) , engaging in all classes banking business, like the central parent bank, or its ordi- nary branches, except dealing in securities on own account and undertaking syndicate business (Konsortialgeschdfte) . This was carried so far that the new competition caused loud complaints among the private bankers affected thereby. It is thus seen that the origin of commercial deposits at the German banks is altogether different from that of the savings deposits at the savings banks. Sta- tistically this may be proved by the observation that the amounts of deposits increase or decrease in accordance with the general increase or decrease of credit operations. Equally different are the purposes for which deposits are made at the two classes of banks. l^he client of a savings bank, belonging almost exclu- sively to the middle and lower classes, has in mind an institution which shall permanently and securely keep and administer his savings deposits, and pay him the highest 195 ,d of L^ H- \ National Monetary Commission possible rate of interest. The client of a commercial bank, ' >elonging mainly to the middle and higher classes and >articularly to the commercial and industrial groups, as a ule has in mind the temporary deposit and utilization of. lis surplus funds, being therefore in most cases satisfied vith a low rate of interest until such time as he can invest hem permanently in securities, mortgages, or industrial nterprises ; moreover, he is particularly interested in turn- n&pyer the administration and use of these funds to the >ank which attends to his other banking business. With few exceptions the former has but one character. 188 He is a depositor of savings and nothing else. The latter has a Protean character; one day, in virtue of his deposit, he may be a creditor, some other day, in virtue of his cur- rent account or other connections with the bank, he may be a debtor. He may become creditor as well as debtor, for a thousand and one reasons. Thus, unlike the savings bank depositor, he is not presumed to exclude the right of hypothecation or detention of the deposit on the part of the bank. For this reason it is very difficult to give a definition of the German term "bankmdssige Depositen", since in Germany the term comprises not only what are known in England as current accounts, but likewise what are known there as " deposit accounts." As these various designa- tions are far from uniform and on the other hand are coterminous, it is almost impossible to obtain, for the various German banks, uniform and comparable data of " deposits " on a scientifically unobjectionable basis. For these and other reasons some banks have heretofore either failed altogether to give any separate account of their 196 The German Great Banks ,, .. .,.., ..-.- ...i........ , . , i . . i . i - -.,-....,- .._ . . . deposits, or have shown the latter combined with the so- called "creditors" accounts. This is true of the Darm- stddter Bank (which, however, has of late been giving sep- arate data for deposits), of the Berliner Handelsgesell- schaft, the Commerz- und Disconto-Bank, the Mitteldeutsche Kreditbank, and the Nationalbank fur Deutschland. Other institutions, such as the Deutsche Bank and the Dresdner Bank comprise among deposits on the one hand all " cred- itors" of their deposit offices and exchange offices a proceeding which can be explained only in view of the peculiar development of the German deposit business just described and on the other all those "creditors" who may have intrusted moneys to other offices of these banks upon receipt of so-called "Depositenquittungsbucher" (deposit receipt books) or else without such books but expressly designating them as "deposits." 189 The Disconto-Gesellschaft, while stating separately the " deposits " in its regular reports, as well as in its jubilee report of 1901 (p. 260), seems, however, to include under that head the current accounts of larger domestic and foreign firms and corporations, since the amounts of these deposits show oscillations which can not be explained ex- clusively by contemporary business conditions or the state of the money market. 190 On the other hand, its reports up to the year 1908 invariably grouped under the head of "creditors" instead of "debtors," the balances daily due (die tdglich fdlligen Guthaberi) , held at its deposit offices. It is plain both from the account of the development of the German deposit business and from the purposes for which these deposits are made and received, that, as was pointed out also at the third general convention of Ger- man bankers at Hamburg 191 (Sept. 5 and 6, 1907), only 197 National Monetary Commission an exceedingly small portion of the deposits of the German credit banks in my opinion less than one- third is made up of what may properly be called savings deposits. By far the larger portion not less than two- thirds if not three-fourths of these deposits represent "operating reserves" of traders 192 (cash on hand, reserve, etc.) or of funds of traders or capitalists temporarily deposited but destined for investment in securities, mort- gages, industrial enterprises, etc. This opinion is shared unanimously by other students of the question, including the experts heard in 1908 before the Bank Inquiry Commission. 193 Betweeri i^7Q T when the systematic fostering of the deposit business on the part of the German banks may be said to have commenced, and 1891, that is to say, during twenty-one years of the most intensive fostering of this branch of business, those banks which hold by far the larger part of the total deposits, namely, the 143 German credit banks having a capital stock of at least 1,000,000 marks each, had accumulated total deposits amounting to 386,000,000 marks . Nine years later, according to a compilation of the Deut- scher Okonomist, 118 of the largest German credit banks had accumulated 997, 000,000 marks of deposits; i. e., after thirty years of fostering of this branch of business, these banks had succeeded in attracting not quite i ,000,000,000 marks of deposits. After .another nine jyears,_on December 31, 1908, the |total deposits of all German credit banks reached about [2,750,000,000 marks, of which about 2,250,000,000 were [the share of the 1 43 German credit banks having a capital of at least i ,000,000 marks each. 198 The German Great Banks The large increase within the last nine years is due not merely to the growth in the volume of credit operations the prime cause of growing deposits and of the general prosperity, but above all to the large increase in the number of the deposit offices of the great Berlin and provincial banks, especially notable during those years. It is also due to the fact that owing to improvements of the bank statements and the more thorough work of the private statisticians, the statistics comprise now the operations of nearly all German credit banks, 413 in number, with all their branches, silent partnerships (Kommanditeri) , agencies, and deposit offices. In view of this circumstance and the fact that this total represents the result of nearly forty years of concentrated and consistent effort, even this result can not be regarded, either absolutely or relatively, as a great success. Hence the statement 194 made as early as 1 904 that there was "an unhealthy growth of deposits," seems entirely un- founded. This becomes especially apparent when the above total is compared with the total volume of the sav- ings deposits held by the German public and private sav- ings banks, which, on December 31, 1906, had reached a total of 13,250,000,000 marks, and by December 31, 1908, amounted probably to between 14,000,000,000 and 15,000,000,000 marks. To this should be added the savings and other deposits (jremde Gelder, less credit balances on current account) held by the 16,000 cooperative credit associations (Kredit- genossenschafteri) in city and country, which on December 31, 1906, amounted to about 2,000,000,000 marks, also the amounts accumulated in the note banks, people's 199 National Monetary Commission banks, and, since January i, 1909, in the check depart- ments of the post-offices 195 (which latter amount is likely to continue increasing but can not be considered in this connection) . It is perfectly improper either to calculate a percentage of growth for arbitrarily chosen periods or for unequal numbers of banks, or by comparing percentages to make the growth of deposits in the German credit banks appear considerably larger than in the savings banks or in the English joint-stock banks. Thus, for instance, the total deposits of 92 credit banks at the end of 1892, 408,000,000 marks, were taken as 100, and, compared with the total deposits of 118 credit banks at the end of 1907, 997,000,000 marks, an in- crease of 144 per cent was found. As against this increase the much smaller percentual growth of the same business at the English joint-stock banks between the years 1890 and 1900 was pointed out, the number of which had decreased during that period from 99 to 82 while their deposits had grown from 335,000,000 to 572,000,000 pounds sterling, or only 71 per cent. It is always easy to afford both to friends and oppo- nents a small satisfaction 196 of this sort by calculating percentages and proceeding in the one case i. e., of the German deposits from a low level, and in the other i. e., of the English deposits from the high level of 335,000,000 or 7,000,000,000 marks, since the per cent increase in the case of the English joint-stock banks, in view of the high level of their deposits from which the start is made, can, in the nature of things, be but small. It follows that the extent and gravity of the fallacies and 200 The German Great Banks blunders will differ merely according to the year which is chosen as the base of comparison. An even larger blunder is committed by those who calculate first the ag- gregate deposits of the savings institutions, credit banks, note banks, and cooperative credit societies, and then arrive at the " conclusion " that the percentual share held by the credit banks in the aggregate is constantly increasing, while that of the remaining institutions is constantly decreasing. This is a graver blunder for the reason that in this case figures of entirely different nature namely, of deposits in savings banks and those in credit banks and similar institutions are thrown together and the calculations of percentages are then based on the totals thus obtained. It is, therefore, not surprising that with such methods, which, however, often lead to important economic and legislative conclusions, startling though arithmetically correct results are obtained, showing a considerable per- centual decrease of deposits in savings institutions, while the absolute figures for these deposits show a continuous and almost regular increase to between 14,000,000,000 and 15,000,000,000 marks on December 31, 1908, for the country as a whole, as compared with 2,750,000,000 marks of bank deposits. By using equally fallacious methods it is quite easy to make the following totally different calculations: In 1891 i. e., sixteen years ago the German savings banks had about 5,250,000,000 marks of savings de- posits. 197 On December 31, 1906, they held 13,250,000,000 marks. The increase was, therefore, almost threefold. In the same year, 1891, the 143 German credit banks, 201 National Monetary Commission with a capital stock of at least 1,000,000 marks each, had 386,000,000 marks of deposits. On December 31, 1906, these deposits were 2,250,000,000; there was there- fore a much larger, almost sixfold, increase. If, however, instead of 1891 the year 1900 is chosen as a starting point, it is seen that the deposits of the Ger- man savings banks amounted then 198 to approximately 9,000,000,000 marks, as against only 997, 000,000, 199 that is, less than 1,000,000,000 marks deposited in the German credit banks. As compared with the above given figures for the end of 1906, the savings deposits are seen to have increased by about 4,000,000,000 marks, the deposits in the credit banks by much less i. e., only by about 1,500,000,000 marks. In other words, different results will be obtained by percentual calculations according as the level used as base of comparison is higher or lower. (2) Deposits in foreign countries. As compared with the aggregate absolute figures of deposits in the German credit banks of 2,750,000,000 marks on December 31, 1908, and approximately 2,500,000,000 on December 31, 1906, the corresponding aggregate for the English deposit banks (including the Scotch and Irish banks as well as the Bank of England) may be estimated at about 6,250,000,000 marks at the end of 1905. According to Edgar Jaffe 20 their current and deposit accounts (gesamte fremde Gelder) on that date aggregated 19,000,000,000 marks, while according to the London Economist of May 19, 1906, whose lower data we shall use as a matter of caution, they aggregated only 16,750,000,000 marks. If of this total 201 two-thirds is allowed for current accounts and only one-third which 202 The German Great Banks is too low rather than too high an estimate for deposit accounts (held against deposit receipts with seven, four- teen, and more days' notice), we arrive at approximately the above total of 6,250,000,000 marks i. e., an amount equal to the aggregate outsiders' funds (gesamte fremde Gelder) held at the end of 1906 by the larger German credit banks (with share capital of at least 1,000,000 marks each) . To these 6,250,000,000 marks of savings accounts should be added for Great Britain (exclusive of Ireland) deposits in the post-office savings banks and in the trus- tees' savings banks of about 21 6,500, ooo, 202 equivalent to about 4,500,000,000 marks making thus a grand total of 10,750,000,000 marks. These latter banks have to invest their available funds in British consols and pay a fixed rate of interest of 2% per cent. In the United States 203 the total amount of visible deposits of all kinds, including savings deposits, held by banks and private bankers on or about June 30, 1909, was about $14,100,000,000, or slightly in excess of 59,000,000,000 marks. Of the total, the note-issuing national banks held $4,898,500,000 (about 20,500,000,000 marks) while other banks and firms held 9,209,000,000 dollars (about 38,678,000,000 marks). Of this latter total, $3,713,000,000 (about 15,595,000,000 marks) rep- resented the deposits held by savings banks, $2,467,000,000 (or about 10^/3 billion marks) deposits in the state banks, about $2,836,000,000 (or 11,911,000,000 marks) deposits in the loan and trust companies, and about $193,000,000 (or 810,600,000 marks) deposits held by private bankers. The national banks are banks of issue; there is, however, 203 National Monetary Commission no central institution to rediscount their bills. A series of obligations 204 ) has been imposed upon the national banks by twelve acts, especially those of April 3, 1864, and of March 3, 1869, viz: (a) To hold a cash reserve of 25 per cent of their deposits in the reserve cities and of 15 per cent in the other cities. (6) To publish quarterly statements and balance sheets. (c) Not to assume obligations in excess of their total liabilities, less bank notes and deposits. (d) Not to loan to any single person a total amount in excess of one-tenth of their capital stock (a provision which, according to an inquiry made in 1900, about 40 per cent of all national banks circumvented by subdividing accounts, etc.). (e) To transfer 10 per cent of the dividends to a surplus fund, so long as the latter is below 10 per cent of the capital. (/) To make five reports each year to the federal comptroller of the currency. The latter, moreover, may examine the banks at any time and enforce the observance of his orders and of the legal provisions under penalty of closing the bank. The above comparison shows plainly that the volume of the German bank deposits even now is relatively small as compared with that found in England and in the United States. It also seems to be considerably below that held by the French banks. 205 (3) Deposits held by individual Berlin great banks. The following figures show the growth of deposits in some of the Berlin great banks which devoted themselves first and most energetically to the deposit business. 204 The German Great Banks (a) DEUTSCHS BANK. The amount of deposits (expressed in millions of marks) held by this bank were: 1872 1882 18 1892 62 IQO2 2 1 ! 187-2 7 188^ 22 I go T. 60 IQO7 2-27 1874. II 1884. 27 l8QA . 75 IQO4. 286 1875 . 12 1 88s . ^2 iSOS . 85 IQO5 "3.4.1 1876 14 1886. . . ^o l8Q6 . O"? 1006 181 1877 . ... IO 1887 . . ^8 l8Q7 IO2 IQO7 4.76 1878. Q 1888. . . . 47 I808. 122 IQO8 4.80 1870 . ... 12 1880 . . 47 l89Q. . 155 1880. . . n 1800. . . 52 IQOO. . IQI The number of deposit accounts at the Deutsche Bank rose from 3,867 in 1883 to 21,771 in 1895, the latest year for which the respective figures are available. It may be seen from the foregoing table, that the de- posits of the Deutsche Bank amounted to 8,000,000 marks at the end of the first year after its organization and equaled the amount of its capital in 1894, reaching the total of 489,000,000 marks on December 31, 1908, as against a capital on that date of 200,000,000 marks. The most remarkable feature about the above figures (espe- cially in view of the above mentioned wide extension of the term "deposits") is the almost uninterrupted growth, both absolute and relative, of the deposits as compared with that of the capital. The number of deposit accounts increased relatively much more than that of other accounts (including the current accounts, which numbered 230,203 at the end of 1908). The average size of the deposits at the Deutsche Bank has steadily decreased from 4,138 marks in 1883 to 2,570 marks in 1893 (no later data have been published). This goes to prove that the aim of attracting even the smallest 205 National Monetary Commission available funds is being more and more thoroughly at- tained. About two-thirds of the total deposits throughout the period have been held by the central office at Berlin. The number of deposit offices was 74 at the end of 1908, compared with 12 in 1895 and 44 in 1905. The rules regarding the deposit business at the Deutsche Bank are reprinted by Joh. Fr. Schaer. 206 The principal points, which in the main are typical for all the large banks, are as follows : (1) The minimum deposit must be 100 marks. (2) Each depositor, who does not stipulate a fixed term of repayment, receives an account book in his name, in which are entered all deposits. Bach deposit must be accompanied by a deposit blank, filled out by the depos- itor and handed to the cashier together with the amount deposited. (3) The account books, which, however, do not contain the amounts withdrawn by the depositor, must be pre- sented each quarter for balancing. (4) Deposits repayable at a fixed date are made against bank receipts. In case the amount to be withdrawn is 30,000 marks or over, written notice must be given before 1 2 o'clock of the preceding business day. The rates of interest paid on deposit are published by notices at the tellers' windows of the deposit branches and may be changed at any time; this change, however, does not affect rates on amounts deposited for a longer term if the change of the general rate is made prior to the stipulated date of repayment. 206 The German Great Banks Tl (6) DRESDNER BANK. The deposits of this bank show the following growth (in millions of marks:) 1876 ^ 2 i88s 6 6 1804. *o- / 20 6 3T"* IQO2 Q^ 2 1877 a O 1886 114. 1805 7T I IQO^. . . 108. 2 1878 . 2. Q 1887 IO 4. 1806 -70 1 8 IQOA. . 1^6. 7 1870 ^. 6 1888 . . . n. 8 1807 . 77. A IQCK . . 16^. 5 1880... . 4. O 1880. . 1^.1 1808 . SS. 2 iqo6. . IQQ. O 1881 1882 1883 5-7 4.8 5- i 1890 1891 1892 "5 13-7 15-3 1899.... 1900. . . . . 62. 9 94-5 1907.. 1908.. . . . 224. 8 ... 224.5 (c) DlSCONTO-GESELIvSCHAFT. The deposits of this bank show the following growth (in millions of marks) : 1872 *T? M 16 8 1882 21 O 1802 16 17 *> v ^ iqoi yc o 1877 64. 8 I88-*. 1^2 i Sen iq 7 iqO2 78 8 1874. ^6 5 1884. I c 2 l8Q4. 2q 8 iqo^ QI O 1875 Q 2 1 88s "^S 2 180^ ^4. I iqO4. IOO O 1876 1877 n-3 7 c 1886 1887. 18. 13 7.8 1896.. . 1807. 38.3 . ^4. O 1905.. iqo6 . 1 10. ICT A 1878 7. 2 1888 2O. 2 1898.. . 4^. 8 iqo7. 14-4. ^ 1870 8.0 1880. . H. 7 1800. . 4q. ^ iqo8. 218 s 1880.. Q. 7 1800. . 36. .S It should be noted, however, that in the case of the Disconto-Gesellschaft prior to 1 908 deposits included both "creditors on current account" and "deposits repayable upon notice. ' ' The above figures, as was pointed out before (p. 70 and note 94), show great variations, inexplicable by the mere change from prosperity to business depression during the respective years. Thus, deposits in 1872 show a total of 16,800,000 marks (exact figures 16,726,163 marks) , in the following year the total reaches 64,800,000 (exact figures 64,788,366 marks) . In 1874 tne total drops to 36,500,000 marks (36,502,613 marks) and in 1875 even to 9,202,000 marks. During the years of business recov- ery, 1878 to 1880, deposits did not rise above 7,000,000, 207 National Monetary Commission 8,000,000, and 9,000,000 marks; in the following years, 1 88 1 to 1888, they are considerably larger, though vary- ing a great deal. The exact figures for the latter period were as follows : Marks. l88l 19,784,613 1882 20, 952,001 1883 '. I3.2I6, 197 1884 15,215,781 Marks. 1885 35,256,915 1886 18,276,965 1887 7.761,959 1888 20, 205, 660 But inasmuch as up to the 1908 report the "daily due credits" were grouped not with "deposits" but with "creditors," it would be correct to include with " de- posits " the respective amounts, if these were known for the earlier years. The growth of deposits during the decade 1901-1908 on the whole shows but little oscillation. The deposit offices of the Disconto-Gesellschaft in 1908 numbered 1 1, as compared with i in 1895 and 8 in 1905. (d) DARMSTADTER BANK. The growth of deposits in this bank (in millions of marks) proceeded as follows: 1870 16. i 1880 . . . 6. i l8QO 10. q iqoo A "I 2 1871. . 22. 4 1881 18. 5 1801 n. 8 iqoi 46 8 1872. . 12. O 1882 20. o 1802 4. 4 IOO2 67 o 1873 1874. 27.3 16 4. 1883 1884 21. 2 2O 7 1893 i8Q4 207 10. 6 2Q 2 1903 iqO4 72.3 1 74. ^ 1875 12.8 1885.. 16.5 i8qs. . 36. 2 iqo">. 147 8 1876.. 9. I 1886 . . ic 2 1896 2Q 7 iqo6 148 I 1877. . I. O 1887 14 I 1807 -71 A TQO7 161 ^ 1878 1879.. 5-6 5-7 1888 I88q.. I 9 .I 10. 7 1898 l8qq.. 37-i 34.. q 1908 108.8 (4) Comparative growth of deposits in all German credit banks and in the Berlin banks. The growth of deposits during the last 20 years in all German credit banks with a capital of at least one million 208 The German Great Banks marks each, numbering at present 158, is shown by the following figures (in millions of marks) : 1889.. . 370. 98 1894... 486. 39 1899.. 812.96 1904. 1,565-96 1890. . . 408. oi 1895... 493. 26 1900. . 997.32 1905- 1,839.92 1891. . . 385.96 1896.. . 546. 42 1901. . 1,035. ii 1906. 2, 141. 12 1892.. . 389. 86 1897... 604. 39 1902. . i, 104. 13 1907. 2,423.69 1893... 377- 19 1898... 712.53 1903.. i, 261. 25 1908. 2,745.8! The corresponding aggregate figures (in million marks) for all Berlin banks were: 208 1889. .. 130.99 1894 . . 163. 69 1899... 338. 17 1904. 783.42 1890. .. 138.14 1895 . . 196. 13 1900. . . 414.64 1905- 883. 82 1891 . 105- 34 1896 .. 219.44 1901 . . . 447- 23 1906. . . 1,029.62 1892. . . 103. 25 1897. . . 228. 25 1902 . . . 501.22 1907. . . i, 158.71 1893. . . 119. 90 1898 330.39 1903- 578.24 1908. . . 1,246.97 Of the total deposits in the German credit banks about two-thirds constitute deposits in the Berlin great banks. This is due, on the one hand to the lack of zeal in fostering the deposit business shown by the other credit banks as compared with the Berlin banks (which have by far the larger number of deposit offices), and, on the other hand, to the general fact of the concentration of capital in Berlin. The five greatest Berlin banks on December 31, 1908, held the 7otto wing deposits: Marks. Deutsche Bank 489, 238, ooo Dresdner Bank 224, 575, 875 Disconto-Gesellschaft 218, 544, 301 Darmstadter, Bank 108, 814, 032 Schaffhausen'scher Bankverein 72, 335, 365 Total i, 113,507,573 Of these, the Dresdner Bank and next to it the Disconto- Gesellschaft, both of which opened their first deposit offices as late as 1896, come nearest to the Deutsche Bank in the successful cultivation of the deposit business. Of the total outsiders' funds (gesamte fremde Kapi- talieri) held by the 158 credit banks with a capital of at 90311 ii- 209 National Monetary Commission least 1,000,000 marks each, the following percentages are represented by deposits proper: At the end of Per cent. 1905 34-7 1906 33. 9 1907 36. 5 1908 37. o The corresponding percentages for the Berlin banks were: At the end of Per cent. 1905 - 27. 5 1906 27.5 1907 31-5 1908 38. 7 It should be noted, however, that during this period, in addition to the above mentioned banks, only the Darm- stadter Bank was carrying deposit accounts, while the JBerliner Handelsgesellschaft, the Mitteldeutsche Kredit- bank, the Commerz- und Disconto-Bank, and the National- bank fur Deutschland had no, such accounts. Of the total deposits reported at the end of 1907 for all banks with a capital of at least i ,000,000 marks each, 47 per cent (as against 39 per cent in 1895) fell to the share of the Berlin banks, and 41 per cent to the share of the Deutsche Bank, the Dresdner Bank, the Disconto Gesell- schaft, and the Darmstadter Bank. Between the years 1895 an d 1908 deposits increased relatively much more in the Berlin banks than in the pro- vincial banks, though deposits in the latter constitute a larger per cent share of their total " outsiders' funds" (fremde Kapitalien) than in the Berlin banks. 209 On the whole it may be said that (i) The distribution of dividends by the banks is be- coming steadier in proportion as their deposit business develops. 210 The German Great Banks (2) The floating and issue business is relegated to the rear in proportion as the deposit business conies to the front. (3) To a large extent it is the credit accorded to com- merce and industry by the German credit banks from their own means and their deposits that has caused the develop- ment of the productive powers of the commercial and industrial classes. It is this factor, combined with the increased productive power of agriculture, which made possible the remarkable growth of the purchasing power of all classes and callings of the nation. 210 This fact alone should suffice to keep us from adopting ill-considered " reform " propositions, equally hazy at times both as regards their underlying principles and their future effects. B. THE OTHER DEBIT-OPERATIONS OF THE CREDIT BANKS. Of the other debit-operations of the banks the greater o part need not be considered in this connection, since the \ L German credit banks do not issue bank notes, nor do * they (with the exception of the so-called mixed mort- ^ gage banks) issue mortgage bonds, or other bonds (Schuld- verschreibungen) , such as were intended to be issued by the Credit Mobilier. To some extent, however, the credit operations of the credit banks in the shape of bill rediscounts, bill accept- ances, of sales of drafts or in the line of current accounts, or in the form of mortgage and lombard credit, must be treated in the same manner in which these forms of credit are treated when taken by other institutions. 211 National Monetary Commissio n 5 The details of these operations will be discussed in sub- sequent parts of the volume. Itjs, how.ever, proper to e--at~4iis_rjla^^ in order to raise cash offer private long-term bills for rediscount & at most, and even this rather unwillingly, in foreign markets or to their own clients, but never at the bourse. Ordinarily, however, as will be seen below, money is ob- tained at the Seehandlung (Prussian State Bank) by means of the less conspicuous hypothecation of bills. The paper offered for rediscount to the Reichsbank either consists of short-term private bills, or else of such long-term bills as may shortly fall due. A very considerable portion of the bill holdings of the Reichsbank is probably made up of the rediscounted bills of the credit banks, particularly about the time of the 1 monthly and quarterly settlements, when the demands upon the banks on the part of the business community are especially heavy. It is also asserted though it would be difficult to prove it that in Germany just as in England, the credit banks resort to large-scale rediscounting operations at the jteichsbank and at other credit banks and banking insti- tutions shortly before the dates when their balance state- ments are issued, in order to be able to show the largest practicable figures under the heads of cash on hand, giro, and bank credits. It goes without saying that such assets are counterbalanced by corresponding liabilities of the banks in the shape of bill obligations of the rediscounting banks. There is also but little doubt that in times of money scarcity when German private discount rates w r ent up 212 The German Great Banks considerably, while money rates in foreign markets were comparatively low, some foreign capital, possibly even in considerable amounts, may have been obtained by the dis- \ counting of German bank acceptances. This seems to have taken place on a particularly large scale in 1899 at London and to have occasioned caustic remarks directed against this practice of boarding-out of finance bills 2n " made in Germany," a criticism which was repeated with little or no reason in 1908 regarding the then numerous American bills of like character, a subject which is discussed later on, on page 278. The practice of credit ba&ks of "boarding out^Jbills i. e., buying at home private bills and depositing them for ^ short terms in London or Paris whenever money rates are low abroad and high at home has nothing in common 212 with the cases above cited. This practice as a rule par- takes of the character of bona fide arbitrage transactions, based upon the differences of interest in the domestic and foreign markets. This is not infrequently done by the great banks, which in that case assume the risk of loss involved in an unfavorable turn of exchange rates, that may occur in the meantime. A rather different practice is presented by other re- , corded cases, 213 involving efforts of obtaining abroad the r lacking operating capital by means of a somewhat hidden and complicated hypothecation of bills, which do not seem to have been always of prime quality. Foreign banking houses, according to preceding agreements, are said to have taken from the German credit banks the " discounted bills indorsed by the latter and permitted themselves to be drawn on or else to have given their checks on Paris 213 National Monetary Commission or London. The foreign house was not expected to dis- pose of the bills, which were redeemed shortly before maturity, either by means of fresh bills or of short-term bills on Paris or London. The bills were returned bodily, the giro of the German bank was canceled, and the same bills were discounted at the Reichsbank five or ten days before maturity." It is patent that in such cases the German credit bank runs heavy risks if, during the interval, a financial crisis develops and as a result the renewal of the .operation is refused. Another practice is reported by Ad. Weber. 214 Accord- ing to him, credit banks at first, when granting credit to their clients, drew in turn upon the latter to their own order, disposed of the bills accepted by their debtors, and thus procured fresh money for themselves. According to Weber, this practice was quite common in eastern Ger- many as late as 1901. A similar procedure (in the shape of so-called solo bills Solawechsel) is reported by von Lumm 215 to have been quite common in Alsace-Lorraine. It is also stated 216 by Schar that larger and smaller bank- ing institutions will at times " take from their clients ficti- tious, i. e., indorsable lombard bills and have themredis- counted upon the additional strength of their indorse- ment" a statement which I am not in a position to verify. I judge, however, that none of the great banks were ever guilty of any of the above practices. Generally speaking, the practice of the mutual drawing of accommodation bills between credit banks may be regarded as very uncommon in Germany, although there has been no lack of assertions that the case of the City of 214 The German Great Banks Glasgow Bank, in England, was not without its German counterparts. That bank ''attempted to hide its enor- mous deficit, the result of excessive credits granted to a number of export firms, by accepting in increasing amounts drafts of these firms, also by taking over mere accom- modation bills drawn by these firms and passing them on for discounting. ' ' 217 Although not exactly in accord with our systematic arrangement, it may not be quite out of place to mention, in connection with the deposit business just discussed, that the credit banks often undertake the management of the financial transactions (Kassenfiihrung) of their depositors, by attending to their collections and paying their obligations on their current and check ac- counts and by representing them in giro, postal-transfer and clearance operations. Regarding the giro system used by the large industrial and commercial firms, which in Germany is at present concentrated in the Reichsbank, some data were given above (p. 147), where mention was made also of the postal- transfer business, instituted on January i, 1909. The latter institution fills a serious gap so far as the class of middle-sized and small traders is concerned, but is likely to be used in time to an increasing extent also by private capitalists and public treasuries. The current-account business of the credit banks with their customers is found discussed in detail below (see Section 2, II, B). We have but a few remarks to make on the subject of the bank-check business, as the latter does not come prop- erly under the head of credit, but under that of methods of payment (Zahlungsuerkehr.} Accordingly, it is treated here 215 National Monetary Commission only in so far as, like the "cash keeping " for depositors, it is one of the means by which the banks attract available funds for productive uses, thus bringing about an increas- ingly large concentration of credit at the banks by dis- pensing with cash for payment and making it available for the purposes of credit. This concentration of credit brought about by the check system, and in particular the agitation in its favor carried on during recent years in various ways with the consent and cooperation of the Government, including the passing of the check act, has been vehemently attacked by a recent writer, who takes the view that, by the " artifi- cial fostering of the check and deposit system," 218 funds which in his opinion without such fostering would "pos- sibly" (p. 20) or, "surely" (p. 21) have found their way into other channels (on this point see II, A, 2a) are directed to the banks, where they are turned into credit for large-scale industry (p. 19). Now, in point of fact the agitation for the adoption of the check system had been started long before the passage of the check act, and the recent considerable increase of deposits, on the basis of which alone checks may be issued, likewise antedates the passage of the check act. The above agitation was fully justified, in view of our downright naive methods of payment, 219 and of the crying need of reform in this field, tending to dispense with the use of currency which might thus become available for the purposes of credit. Since this purpose could be attained only very incompletely without the apex of the structure i. e., the transfer and clearing system the check act pro- vided for tax-free checks (now again abolished) only in 216 The German Great Banks case these checks were drawn upon such public or private institutions or concerns which, like banks and banking firms, as a rule participate in the transfer and clearing system, and therefore presented the best guarantee that the real purpose of the check system the redemption without the use of currency would actually be attained. As a matter of fact, not only private banks and banking firms, but, as is admitted by Lansburgh (pp. 13-14), like- wise public banks, credit associations, and even savings institutions (under certain conditions) , were authorized by the check act to honor tax-free checks drawn on them, 220 and surely it can not be said of the savings banks that they, like the cooperative societies, "deal, in the main, only with a definite narrow circle of persons." Despite the agitation, the use of checks in Germany is still insignificant, 221 even if the estimate of the Statistical Journal of the year 1902 may have been somewhat exag- gerated, according to which the liquidation of commercial transactions in Germany required from nine to fifteen times the amount of currency and bank notes that was required in Great Britain. Notwithstanding the large increase in the use of checks since that year, the general fact noted by the English pub- lication is only too true. It is difficult to give statistical data regarding the extent to which the check system is used in Germany. According to the 1 907 report of the Deutsche Bank, the number of checks paid during that year by the Berlin central office and by all its German branches, amounted to over 10,000 per day, while the total amount of these checks was about 5,000,000,000 marks for the year. The material obtained at the beginning of 1909, in answer 217 National Monetary Commissio n to an inquiry sent out at my request to all the German credit banks by the Central Association of German Banks and Bankers, can be used only in so far as the banks in their replies were able to give comparative data for the years 1900, 1903, and 1907, as well as to indicate sepa- rately their check business, and to present distinct figures of their giro business with the Reichsbank, which in the case of most banks is lumped with their cash business. Full information along these lines was furnished by 59 banks only, and the data furnished by even these institu- tions permit only of the general conclusion that their check business has grown to a considerable extent since 1900, both absolutely and relatively, when compared with the simultaneous growth of their cash business. This conclusion is confirmed by the following three tables, though it would not be quite safe to draw general con- clusions from these data, since conditions in Oldenburg and Mecklenburg are somewhat peculiar (see below Part IV, Chapter III, Sec. 3, II B 3). Mecklenburgische Hypotheken- und Wechselbank (Mecklenburg Mortgage and Note Bank). Number of check ac- counts. Amount to the credit of check depositors. Marks. 1901 1902 12, 4OO 1903 I 2 826 1904 13 445 23 78l OQ7 1905 . . 1906 1907 . . 15 189 1908 218 The German Great Banks Oldenburgische Landesbank (Oldenburg State Bank) . Amount to the credit of check depositors. Number of check books issued. Number of checks paid. 1900 Marks. 1901 , 179 101 647 8, 939 8^1 1903 . .... 405 878 1904 ,390, ooo 3 2 5 25, 970 915 098 671 36 458 7906 3. 243 , 347 43 066 1907 3 . 9S4i 464 ,326 5 1 > 191 1908. . . 4 172 598 Oldenburgische Spar- und Leihbank (Oldenburg Savings- and Loan Bank). Amount of deposits. Turnover. Number of checks paid. Marks. Marks. 19 752 327 1901 1902 i, 767,490 i, 958, 398 24,583,977 3 i , 242 , 725 18,659 22, 255 1903 1904 1905 1,930,392 2 , 348, 635 36.079,704 45 , 870, 731 27,686 27, 918 1906 2 232 684 1907 2, 352, 81 i 48, 850, 513 32, 299 1908 2, 972, 897 222 5 1 , 097 ,674 47, 319 II. THE CREDIT OPERATIONS OF THE GERMAN CREDIT BANKS (LENDING OF CREDIT). (A) INTRODUCTION. (i) Observations on the granting of general bank credit. In view of the rapid increase of population and the correspondingly rapid development of credit in Germany both during the first and second periods, it is not sur- prising that, except in a few directions, German banking 219 National Monetary Commission practice has not yet developed definite principles in the granting of bank credit. Generally speaking, the dis- position shown toward the banks has been that of cap- tious criticism rather than of friendly appreciation of what has been actually achieved. The critics should not, however, forget that even the oldest German credit banks date back no more than about sixty years, and that the greater part of these banks are not even 40 years old. And yet in this relatively short period of four to six decades our German credit banks have been obliged to occupy in the national economy the place held by the "maid of all work" in the private household. They were called upon to discharge almost simultaneously nearly all the tasks outlined in the introduction to this book, and which devolved upon them as the champions of the energetic and progressive classes in industrial life. Except such tasks as came within the sphere of special banks, such as the note banks, the provincial cooperative land mortgage associations (Landschaften) , the mortgage banks, or the cooperative societies, the credit banks had to take upon themselves all or nearly all the tasks which in England are apportioned as a rule under a strict division of labor among deposit banks (with a further subdivision between city, west end, and suburban banks), merchant bankers, colonial banks, and even bill and stock brokers. In the internal trade of the nation and in its commercial relations with foreign countries it was incumbent upon them not only to be at their posts, but ever to occupy the outposts, to ward off sudden hostile attacks upon the industrial forces of the nation, and to ensure their safe and uninterrupted progress. 220 The German Great Banks The failure of the banks, therefore, to develop clear, consistent, and organic principles for the regulation of credit transactions and the lending of bank credit can occasion no surprise, if we bear in mind the breathless, nerve-racking activity of the period and the competition among the numerous credit banks. It has been asserted that the banks are the " directing force of the spirit of industrial enterprise" of the nation. This claim, how- ever, whether made by the friends of the German banks or by its secret or open enemies, is greatly exaggerated. The banks can indeed exert an influence on the extent and the rate of speed of production, though not directly, but only indirectly. They can do so only to the extent that they assist with their credit in the development of production on a large scale, with its greater division of labor, its concentration and decentralization of estab- lishments. In the midst of industrial progress even the banks may not realize that production is too much accelerated. Excessive production does indeed lead to exaggerated demands for and in turn to excessive lend- ing of credit by the banks. But even if the mutual competition of the banks could be disregarded, it would be naive to suppose that the banks might suddenly decide to refuse credit to their great industrial customers, because they had come to the conclusion that production was excessive and overdone. When evidences of this are present, together with other symptoms that suggest an impending crisis, the banks in the first instance can do no more than communicate these fears and issue warnings to their clientele as a whole. Except under special condi- tions, the general restriction of credit is not to be expected, National Monetary Commission unless the general industrial situation, or the general condition of the banks, makes this step inevitable, for the sudden restriction of credit would prove ruinous not only to individual establishments, but might under given circumstances bring about a general panic. In a just appreciation of all the factors at work in our economic development we must not forget that while the banks are the pioneers and the greatest promoters in the accumulation of capital, the growth of capital has in turn been influenced and accelerated by the wonder- ful inventions made along technical and other lines during recent times. These considerations are in no way intended to deny the justice of the criticisms repeatedly and emphatically made with reference to the indiscriminate granting of credit. On the contrary, such criticism is beneficial so long as it is not too sweeping and does not reject the whole system on the ground that errors have been made in single cases, or makes the most serious charges against the administration of the "nation's wealth" by the banks. Nothing would be further from the truth or better calculated to call forth contradiction than to deny that many grave mistakes have been made, not only in the flotation of securities a branch of banking that has absorbed so much time and energy but also in those branches which are concerned with the facilitating of payments (Zahlungsverkehr) and the granting of credit. I have deemed it my duty to call attention conscientiously to these mistakes in every section of this book. On the other hand, nothing would be more one-sided than the The German Great Bank failure to recognize the natural causes of these errors. So long as mere human beings are at the head of such enterprises, errors, though sometimes different in character and direction, are bound to be made under any banking system. These can be avoided in part or lessened only gradually, as a result of the experience acquired under the system itself, as affected by local conditions. I do not regard it, however, as an error in the just- named sense that the German banks, as has been repeat- edly charged, have used their resources and their organi- zation in a one-sided and excessive manner in the interests of trade and industry, and too little in the interest of agriculture, a charge that in former times was often brought against the Reichsbank ( 223 ) . In an able address on the " Problems of the Money Market " ( m ) the president of the Prussian Central Bank for Cooperative Societies, Heiligenstadt, has pointed out that "agriculture in Germany was the last great branch of industry to adopt the modern methods of money and credit economy. In consequence it found the instrumentalities and institu- tions of the money market already firmly shaped. Agri- culture, therefore, can not well expect that, even if it were possible, trade and industry, or, in other words, all other business interests, should be subordinated to the special needs of agriculture." In fact, however, such subordination is possible only to a slight degree, and its scope is particularly limited in the case of the Reichsbank. As a note bank, the latter must see to it that its notes, or one large part of its short-time liabilities, and likewise its other short-time liabilities arising from its giro business, should be offset by corresponding credit business (Activ- geschdfte) i. e., short-term credit, granted by way of 223 National Monetary Commission discounting paper or making loans on collateral. Now the situation is essentially the same in the case of the credit banks. Agriculture requires long-term credit to conform to the extended period of production involved. Moreover the credit needed is such that the bank can not reimburse itself for it through the subsequent issue of stocks or bonds. On principle, therefore, the credit banks can make agricultural loans only to a limited extent. Not having an adequate knowledge of the basic conditions of agriculture, of the profitableness of such undertakings, or of the trustworthiness of the managers of such enterprises, the banks would find it almost impossible to allow them blank credit. In agriculture mortgage credit (Realkredit) must naturally play the leading part. Here, however, special organizations based on landownership must step in. For a number of years this has been done in an adequate meas- ure by the mortgage associations (Lands chaf ten) and similar public institutions, also by the banking institutions and loan banks established by the mortgage associations, the mutual credit societies (numbering about 1 6,000 225 ), and the mortgage banks for urban real estate on the one hand, and in Prussia the State Central Bank for Coopera- tive Societies on the other. The credit based on mort- gages and other real estate security which has been extended to German landowners must be estimated at present at least at 40,000,000,000 marks ($10,000,000,000) . The German credit banks have participated, both directly 226 and indirectly, in extending such credit by tak- ing part iii the establishment of mortgage banks, making temporary loans on personal security to agriculturists for 224 The German Great Banks a more or less limited period, to be repaid in fall or winter, 227 thus providing for the needs of planting and harvesting, or for the purchase of lean cattle and the acquisition of equipment and raw material for industries subsidiary to farming. This is particularly true of the provincial banks and notably of the very small banks, which thus seriously impaired the liquidity of their assets. It may be said that these operations fall essentially within the scope of the local banks, as these are in a better position to judge of the trustworthiness of borrowers on personal security, and to determine the probability of repayment of such loans. Nevertheless it has been demonstrated that "every year, during the season when young and lean cattle are purchased, many millions of marks are placed at the disposal of the trade by the Berlin banks, through the intervention of the local banks." 228 German credit banks have hithereto done little for the craftsmen and the small manufacturers and trades- men, except when the banks have been closely connected with the cooperative credit societies as in the case of the Dresdner Bank. The reason for this lies in the fact that on the one hand unsecured credit (Blankocredit) is naturally out of the question in most of these instances, and on the other hand no proper security can be furnished for personal credit (Personalcredit) which would more- over have to be in most cases long-time credit. Moreover German craftsmen, small business men, and petty traders have been reluctant to open bank accounts. Unable to maintain adequate balances, these classes are unwilling to subject themselves to what they presume would be bur- densome conditions. Moreover as checks have hitherto 90311 ii 16 225 National Monetary Commission been used but to a small extent and long book credit is customary in their business, the aid of the banks in making and receiving payments was not thought indispensable. As things stand, there is still much to be done through cooperative credit organizations in which the banks can help a good deal. The postal transfer and check system inaugurated January i, 1909, will prove particularly beneficial in this connection, as it will provide the craftsmen and small business men with a substitute for bank accounts, which few of them now have. It will induce them to accumulate with the post-office for use in making payments not only cash immediately needed for this purpose, but also such sums as may be required for that purpose in the more distant future. This will, how- ever, come about only gradually owing to the absence of any provision for paying interest on balances kept on de- posit with the post-office department. This is unfortunate, for it will retard the adoption of the new system. There is, however, one good feature in the nonpayment of interest, in that it will serve as an inducement to the depositor to use his deposits in excess of the irreducible minimum of 100 marks required, in paying off his debts at the earliest possible date. This would be a good beginning in the direc- tion of shortening among craftsmen and small business men the period for making payments, a highly desirable reform, heretofore often attempted in vain. The Reichsbank has now joined in the postal transfer system, and under treaties to be concluded both foreign private institutions and postal savings banks (see p. 147) are expected gradually to join in the system. This would lead to the happy result of bringing about the organic 226 The German Great Banks union which has heretofore been almost completely want- ing between the giro (transfer) business of the Reichsbank, ministering chiefly to the needs of the large industrial and commercial interests, and the postal transfer system, which, it is hoped, will meet in a large measure the needs of the craftsman and small business man. In concluding these general introductory remarks I wish to call attention to the following : I have repeatedly em- phasized the fact that the mighty rush in the development of our entire industrial life and of our system of bank credit was the absolutely inevitable consequence of the rapid increase of population. We must not, however, forget the point on which Adolph Wagner has often in- sisted, namely, that this growth of population was not only a cause but also an effect of the excessively rapid growth of our general industrial and credit systems, and that for this as well as other reasons, a less rapid progress would be highly desirable. On account of the natural causes pointed out above (p. 89) I have no doubt that this rate of growth in population will not prove continuous. In the same way, and from equally natural economic causes, there will undoubtedly come about a slackening in the pace of general industrial development, and with it in the expan- sion of our credit system, and the concentration of indus- try and banking. We are already beginning to feel this. Here, too, flood tide will of necessity be followed by ebb. This, however, absolves no one from the duty of help- ing to build up and maintain strong dams while the flood is rising, so far as it is possible and practicable to do so, in order to keep the turbulent waters from going beyond all bounds and inflicting irreparable damage. However, 227 National Monetary Commission these dams must be erected at the proper points, and built by experts possessed of the requisite theoretical knowledge and adequate practical experience. These dams should do no more than keep the river in its natural bed and un- less the conditions are exceptional and the reasons for a different procedure compelling, the dams should not be so constructed as to force the river to seek a new channel and in so doing destroy flourishing fields. I also wish to refute another view which has found fre- quent expression of late, and which was presented also be- fore the Bank Inquiry Commission. It is claimed that as a result of their connections with the banks and the system of bank credit, private concerns have to an increasing ex- tent abandoned the policy of investing their reserves, as formerly, in German Government securities. These reserves, it is contended, have been pressed by the banks into the service of German trade and industry 229 that is to say, have been put into channels which these funds " would not have chosen of their own accord." The official ap- pendices to the report on the Imperial financial reform bill of 1 908 23 have effectually removed every ground for such assertion, particularly as regards recent years. They demonstrate on the one hand that the German investing public have displayed an extraordinary and increasing willingness and power to purchase domestic securities offering safe investment and a steady, though relatively low, rate of interest, and on the other hand that both public and private institutions have absorbed but a " relatively small" part of public issues, at least as com- pared with similar institutions abroad. It is true that among these "domestic securities" there are included municipal loans and mortgage bonds, issued 228 The German Great Banks by German public and private institutions. Bearing in mind the considerable issues of securities by the Empire and the federal states, and the fact that comparatively little of this is in the possession of state or private institutions in Germany and foreign countries, 231 there can be no doubt that by far the greater part of the Imperial loans, and of the securities issued by the federated states is in the hands of the German public. The proportion so held, it appears, has not declined in the past decade; on the contrary, it has increased, and the increase has more than kept pace with the growth of wealth in the country. (2) Observations on the granting of industrial credit in particular. In the foregoing it has been pointed out that one reason for the failure of the credit banks to develop in this period firm and consistent principles to govern industrial credit lay in the fact that even now part of these banks date back only six decades, the rest only four decades, and that in this period they were called upon to discharge simul- taneously a multiplicity of tasks. Another reason lies in the fact that the German credit banks have developed very differently, each in its own way and along special lines. 233 In this there are advantages as well as disad- vantages. A further reason is, that German industry, though much older, did not begin its great expansion before the second period. German industry had still to learn slowly and gradually the fundamental principles governing the taking of credit as to kind, amount, and the right time in the same way as the banks had to evolve the fundamental principles 229 National Monetary Commission applying to the granting of credit. It can not be doubted, therefore, that through ignorance of correct principles, or an overestimate of the duration of a period of prosperity or as the result of a certain amount of megalomania or of competition, sins were committed on both sides, in borrowing as well as in lending. It can be demonstrated without much difficulty that in many instances indus- trial ventures took too much long-term credit from the banks, or took it at the wrong time, to put into improve- ments, extensions, or new construction, sometimes with- out stating these to be the purpose of the loans, and that the banks often accorded such credit to industrial ventures in too large amounts and at inopportune times, sometimes even after symptoms of an impending crisis were apparent. In a number of instances, and particularly before the panic of 1901 , it can be demonstrated that some banks had offered their credit unsolicited to industrial un- dertakings, or "thrust" it upon them, 233 or at least made it so easy to obtain that the existing mania, great as it was, for new construction and reconstruction, was further in- tensified. It should not, however, be forgotten that on the other hand at certain times the opposite charge has been made against the German credit banks that they were tying up their resources in stock-market speculation. "One of the worst results of the present situation," says Eberstadt (Der Deutsche Kapitalmarkt, Berlin, 1901, p. 115), "is that industry finds 'the tables all taken' and that the banks are positively in no position to furnish adequate credit for industrial needs." Finally it has undoubtedly often happened, as we shall explain more fully later, that German credit banks have 230 The German Great Banks lent their credit to industrial concerns according to the usual principles i. e., by granting short-term credit to industry in the same way as to commerce, a kind of credit well enough suited to commerce but as a rule entirely unsuited and too costly for industrial needs. Lastly, in consequence of the excessive decentralization of German banking, the banks in granting their credit have at times disregarded the principle of distributing the risk, giving too much credit to one industry, or one branch of industry, or even a single establishment. The Leipziger Bank went under because, with a capital of 48,000,000 marks, it had allowed loans to the extent of 93,000,000 marks to the Trebertrocknungsgesellschaft (company for the utilization of desiccated lees) . The Dresdener Kreditanstalt fur Handel und Industrie failed because it had extended too much credit to the Kummergesellschaft. Aside from these mistakes, however, the truth is that the capital available for commercial and industrial enterprises in Germany was not equal to the demand and capacity for industrial expansion existing for the most part independently of any stimulation by the banks. To this fact more than any other are to be at- tributed all the crises that have taken place. Had not the banks accumulated the available capital by accepting deposits, and made it serviceable for productive purposes, it is a question whether this maladjustment would not have been far greater, the results much worse, and the crises far more severe. If the reproaches cast on German banks would restrict themselves to the formulation of the charges just men- tioned, every objective critic of the German banking 231 National Monetary Commission system might readily admit their justice, the more so as it is scarcely imaginable that these or similar mistakes could have been avoided in any other banking system, where banks have had an equally short existence. 234 The injus- tice lies in the exaggeration which has unfortunately gone to great extremes and taken peculiar forms. This is par- ticularly unfortunate for the reason that the criticism is rarely accompanied by any proposals for reform, and still more rarely with any practicable proposals. In both direc- tions the climax is reached in a work bearing the some- what sensational title "The management of the nation's wealth." 235 I can not ignore this work, because the au- thor's views have been highly appreciated by those who are opposed on principle to the German banking system and who have used the author's arguments as grist for their own mills. It may be stated that the author was himself a bank official, though not indeed one of the bank directors who are treated with such scant indulgence in the above work and in his other work, entitled "The German Banking System." 236 That which is correct or partially correct in the book had been said before in a more thorough and better way by Heiligen- stadt and Bernhardt in the " Plutus " and elsewhere thus, for example, the statement that the banks have been too ready or too generous in granting credit to industry and that thereby they have increased the speed and extent of the process of Germany's "industrialization" a point that obviously can not easily be proven. 237 This is moreover expounded with endless repetition, and of course with the usual embellishments that the control of the "nation's wealth," the utilization of the 232 The German Great Banks national reserve funds (Betriebsreserve) , and the " general industrial development of Germany " ought not to be en- trusted to a "dozen men" (p. 24), the alleged perversity of whose banking policy is repeatedly emphasized. The substance of the other criticisms which Lansburgh makes is as follows: The capital accumulated in German credit banks through deposits he insists on nearly every page is not utilized in accordance with the wishes of the depositors. On the contrary, the short-term loans to the banks are to a considerable extent converted into long- time advances to industry, and accordingly into further industrial investments. It is, however, "not a question (p. 17) whether the credit or advances made by the banks are beyond cavil." In this connection the distrustful remark is merely made (p. 16) that it is impossible to tell from the bills what their character is. In another place, however (p. 15), it is expressly admitted that the " banks have up to the present followed sound principles in maintaining the proper liquidity of their resources;" furthermore (p. n) that "for economic and ethical reasons it is absolutely necessary that promotions and improvements should go on;" that "the banks, as a matter of fact, in determining the amount of capital to be invested in an establishment or branch of industry, are guided by its earning power" (p. 10), and finally that "provided due care is exercised in the make-up of the. different classes of investments," we may regard the conditions as sound (p. 15) "so long as the existing practice is continued of investing 40 per cent of the depositors' money in bills and the other 60 per cent in loans to customers." According to the author, however, 233 National Monetary Commission the criticism of a national banking policy should be pri- marily based upon considerations of general industrial interests rather than of private interests (p. 17). He therefore insists that bill credit and advances be granted only to such enterprises " as would have been granted such credit by the individuals who constitute the banks' creditors, if they had been disposing of their money independently, without the intervention of the banks." This (ibid.) would not yet mean that "every interest would come into its own, that agriculture would receive its proper share in the same way as industry, the govern- ment in need of funds, as well as the private individual seeking credit. At any rate, however, there would be nothing arbitrary about it." For, as stated in another passage (p. 20), "the depositor may have had in mind buying German bonds or mortgage bonds or acquiring an interest in a business enterprise. " In a still more prophetic manner, we are told on page 21, that "without the inter- vention" of the banks, the deposits "would surely have been devoted to different uses. They would have been invested in government bonds and would have become available to the government for other than purely indus- trial purposes. A part of the deposits would have gone to the small dealers, craftsmen, and agriculturists." As to these claims it w^ould really be sufficient to ask, How does the author know? It is, however, necessary to add that the author would surely have arrived at quite different conclusions if he had carefully investi- gated these points, and likewise his fundamental assump- tions which we shall examine now more closely, for upon 234 The German Great Banks closer examination it is hard to take his contentions seriously. As the author has properly observed, in an article 238 which appeared almost at the same time his pamphlet was published, the available resources are generally composed of "very many small sums of money, each of which taken alone would remain unproductive." These are made available for productive uses only because the credit banks have for decades persisted in the laborious work of bringing them together. As I have shown else- where, the intervention of the banks has made it possible for these small amounts to render to industry in general far greater service than could have been rendered by them singly in the hands of the depositors, each one trying to utilize his amount without the help of any intermediary. 239 Were it not for the intervention of the banks these amounts would have remained idle in the hands of the depositors, their small size making them unsuited for productive investment. As this money has become available only through .the activity of the banks, it is impossible to set up as a prin- ciple governing its management and investment that it should be used only for those purposes and undertakings for which the various creditors of the banks might have intended them, "had they acted independently and with- out the intervention of the banks in the disposition of their funds." It is more than likely that, had it not been for this intervention, they would in most cases have made no use whatever of their money, and least of all used it for industrial investment, but, following tradition, would 235 National Monetary Commission have let it lie idle and yielding no interest, a situation which even Lansburgh would scarcely think ideal. If nevertheless the ' ' wish of the individual depositors ' ' be accepted as decisive in the matter of investing their deposits, in spite of the fact that this wish is not commu- nicated to the banks, and can scarcely be divined by them, no one would seriously contend that the present situation would be improved and not rather be made much worse. For without being able to do so with abso- lute certainty the banks with their experience and expert knowledge can ascertain far more correctly than the indi- vidual depositors the conditions of the market for different sorts of investments, the general state of industry, the actual condition and the prospects of a given branch of industry, trade, or agriculture, and the trustworthiness of borrowers to whom bill credit or credit on current account is to be granted. 240 Morever, it is evidently wrong to assume that the depositors, if left to their own decision, " might" have or " surely" would have wished a different disposition of their deposits than that actually made by the banks. In the first place by far the larger part of the deposits in German credit banks is made up of the working re- serves of business men and of other temporarily available funds of capitalists in other words, of the funds of persons thoroughly capable of reading a bank balance sheet. In regard to the investment of deposits, these statements convey the information which Lansburgh, too, has been able to get from them. Thus it is certain that the ma- jority of depositors do not object to the way in which their deposits are invested, in particular to the investment 236 The German Great Banks in industrial credit in the shape of bills or of current accounts. Unless this were so, noting the condition appearing from the bank statement, they would betake themselves with their funds to cooperative credit societies, or to the savings banks in case they wished that the greater part of their deposits be invested in mortgages or if they regarded the savings banks as safer. It is highly instructive in this connection to note the prevalent opinion among the Federation of German Sav- ings Banks as voiced in the testimony given before the Bank Inquiry Commission by an expert, closely associated with the savings banks, that about one- third of the deposits in the savings banks are temporary in character, intrusted to the savings banks by persons belonging to the middle or even higher classes, " who know exactly why they deposit their money in the savings banks, even if only temporarily." The percentage is particularly inter- esting because it corresponds almost exactly to the pro- portion of the deposits in the credit banks which may be designated as "savings deposits." If this be so, and I have no reason to doubt it, it proves that, as a matter of fact, a large number of persons who are thoroughly familiar with financial affairs 241 prefer to put into the savings banks funds that are only temporarily available pending permanent investment funds better suited for deposit in credit banks. From this we may further infer that in intrusting such deposits to the credit banks, or in leaving them there, the class of depositors just mentioned, or those still better situated, do so with a full appreciation of the way in which these funds are invested. Nothing becomes, there- fore, of the assertion that were it not for the banks this 237 National Monetary Commission very class of persons would have turned their money over to the small dealers, craftsmen, and farmers, or to "the Government." Lansburgh himself admits it as true in a special case that the classes from which the deposit- ors of the bank are drawn know exactly what they are doing, for elsewhere 242 he remarks that "as an imme- diate result of every boom in industry and trade, part of the money deposited with the banks is withdrawn and invested in the most profitable branches of business." This is another reason why we cannot admit that through the activity of the banks " these savings are forced into investments which they would not have sought of their own accord " (p. 12). Finally, if it be true that the German credit banks have given their credit predominantly to industry and trade (we must not forget the latter, particularly the export and import trade) , it is a question whether, aside from a generous participation in government loans, this after all is not necessarily the chief sphere of operation for the credit banks. We have seen how mortgage and other land credit, with a constantly increasing specialization, has been widely extended and developed in a "truly exemplary way" (I/ansburgh, p. 5) to meet the needs of agricultural and urban real estate. Their credit wants, and particularly those of agriculture, are met by the cooperative credit societies, the land mortgage associations (Lands cha fieri) , 243 and the banks and other institutions which they have founded, the mortgage banks, and the Central Prussian Bank for Cooperative Societies, and other institutions of the same kind. We have also seen that, thanks to the 238 The German Great Banks 16,000 cooperative societies, almost the same may be said of facilities for credit on personal security (organized for the purpose) of craftsmen and small business men, and that through the postal transfer and check system an urgently needed improvement will be introduced in the facilities for making payments. We have furthermore given the reasons why dealings with the credit banks and bank credit are little adapted to the needs of these classes, and are therefore but little resorted to by them. What is the inevitable conclusion from all this so far as the banks are concerned ? Their domain is industry and trade (Lansburgh, p. 5) , though not their exclusive domain, as is evident from the fact that they have lent their credit to the State, the municipalities, etc. It has been clearly shown that it was not the banks that brought about the industrialization of Germany, but certain elementary economic causes working with irresistible force. It is equally certain that even under the least favorable circumstances the banks have stood by the Empire and the Federal States in raising funds. This alone proves that another of I^ansburgh's contentions is incorrect, namely, that as a result of the credit activities of the banks the reserves of individuals and private establishments are no longer invested in securities yielding a fixed income. The very opposite of this is proved by the appendices to the report on the imperial financial reform bill. Nothing, then, remains of all of Lansburgh's contentions, beyond the fact admitted on all sides that the industrialization of Germany has proceeded too rapidly. This is due to a number of causes (no one can determine in what 239 National Monetary Commission proportion) : to the rapid growth of population, the tre- mendous demand for credit made by trade and industry, occasioned in turn to a large extent by the justifiable struggle against foreign competition, and finally to occasional mistakes by the banks in granting credit. This may suffice in criticism of I^ansburgh's conten- tions. I shall now turn to the much better-grounded reason- ing and proposals of the late Felix Hecht, whose views, based on sound knowledge of the theory and practice of German banking, were recently made public 244 in connec- tion with his earlier treatment 245 of the subject. In this connection a welcome opportunity is offered to supplement these ''introductory observations" on indus- trial credit in a number of points. This at the same time justifies a more careful examination of Hecht 's proposals in this part of the book. Hecht 's proposals are in effect that there should be established a central institution for long-time credit which should issue debentures indorsed to bearer, and render assistance as nearly as possible to all branches of German industry. These debentures are to be issued either on the basis of securities taken over from the particular industrial establishments, or directly and without such underlying securities. They are to bear the indorsement and guaran- tee of the central institution. Bearing a higher rate of interest, maturing earlier (an amortization of 7 to 8 per cent as a rule being provided) , and being attended with greater publicity, 248 the debentures of the central institu- tion would, in Hecht's opinion, have great advantages over existing industrial bonds. Moreover, owing to the wider 240 The German Great Banks distribution of risks, the security of these obligations would be greater. In the first place the central institution would extend its activities to all kinds of industrial undertak- ings which might present an assured earning power. Furthermore, the earning capacity of these establishments could be investigated by it more carefully than by the credit banks. Unlike the credit banks, the central institu- tion could have at its command a large staff of technical and commercial experts, who would be in a particularly favorable position to accumulate a very large and valu- able stock of specialized experience. The supposed urgent necessity for establishing such an institution is based on the great difficulties which the credit banks encounter to-day in adopting a rational policy as regards the grant- ing of industrial credit. We must accordingly begin by testing the correctness of these premises. For this purpose it will be necessary to discuss the conditions and the general principles under- lying industrial bank credit, particularly as contrasted with commercial bank credit, in so far as these have not been adequately dealt with in these "preliminary consid- erations," and in my remarks in the Verhandlungen der Mitteleuropaischen Wirtschaftskonferenz (Transactions of the Central European Economic Conference) in Berlin (May 17 and 18, I9O9) 247 to which I refer the reader. With reference to this the following points maybe made: i . The technique of commercial credit, which has been generally well developed by the German credit banks, is not identical, as Hecht rightly maintains, with the technique of industrial credit. The latter is far from being as well developed by the German banks as the former. 90311 ii 17 241 National Monetary Commission (a) Whenever industrial credit is given, the creditor is obliged to make sure, throughout the continuance of the loan that the credit allowed has actually been used for the purpose for which it was solicited. This he is seldom in a position to do. In commercial credit, on the contrary, this is not necessary, or at least not to the same extent. Even when short- time industrial credit is given to serve as working capital, the creditor is at all times obliged to keep watch over it and to see that it is not used in a manner at variance with the purpose and character of the loan, by being put into permanent improvements, for this would mean the tying up of an equal amount of the bank's capital. Such supervision can be exercised only with great difficulty. (6) For this reason, also because of the resulting risk, which is greatly augmented by the lack of technical knowledge on the part of the bank, it is decidedly inad- visable for credit banks to participate directly to any large extent in industrial enterprises. The instances in which the banks became industrial entrepreneurs have for the most part not turned out to their advantage. Direct par- ticipation (not always voluntary) in the sense of taking over permanently stocks and bonds of the enterprise, is less objectionable in itself, but even this is likely to prove, under unfavorable conditions, a burden upon the bank's resources and may result in serious impairment of the liquidity of the bank's assets. (c) In commerce the general practice is to give short- time credit on personal security, well suited to com- mercial needs. It is necessarily renewed frequently or increased, or if not, a proportionately higher rate of com- 242 The German Great B a n mission is stipulated. But such credit is in many respects far too costly for industry, and often directly oppressive. In industry such credit is needed only for the transitory purpose of paying wages and salaries and obtaining the working capital required either regularly, at more fre- quent intervals, or only once a year, for freight and insurance premiums, for the purchase of raw material, and other means of operation. Even this short-term transitory industrial credit to provide for wages and working capital is not entirely conformable to the rules and requirements of short-term commercial credit, for here frequent renewals and increased borrowings are out of question. Still, as a rule it can be repaid more quickly than credit intended for capital outlays. Nevertheless it is objectionable for credit banks, for it often happens that it can not be taken out of current income, and thus tends to develop into permanent credit (Anlage-Kredit) , contrary to the intention of either party, or at least of the bank. In case payment is de- faulted at maturity, a suit-at-law is for the most part out of question, not only for business reasons, but also because such a suit might lead to far more serious consequences. (d) In view of the need for constant supervision with reference to the stipulated use of the loan (see remarks under section "a") which is far more urgent in industrial credit than in commercial credit, a stipulation that a given given industrial establishment should not deal with various banks and bankers would seem particularly proper. Hecht 248 and Ad. Weber 249 criticise the German credit banks on this ground, charging them with having fre- quently violated this principle, and pointing to the Ter- linden case, where no fewer than 14 banks and bankers 243 National Monetary Commission had suffered severe losses through ignorance of one another's action. This criticism is, however, unjustified. From personal knowledge of one of the contracts made with the Terlinden Company I know that with a view to supervision in this respect it was expressly agreed that the company should not deal with other banking establish- ments . Such an agreement , however , is entirely unavailing in the case of a dishonest debtor, and particularly one who falsifies not only the books but also the underlying records (letters, vouchers, etc.) . In that particular case the situa- tion would not have been easily revealed, even if the books had been audited, a step for which there was no occasion in the absence of any knowledge that the contract had been violated. Effective service in this direction could be rendered only by a central credit bureau established by the credit banks themselves to which they might report the names of the borrowers, and the amount and kind of credit granted, without stating the name of the creditor bank. It would, however, be exceedingly difficult to establish such an in- stitution, not only because of the mutual competition among the credit banks but above all on account of the imperative necessity of business secrecy. 2. The lending of short-term commercial credit is, gen- erally speaking, less hazardous than the granting of indus- trial credit. (a) Disregarding the cases where unsecured credit is allowed to a manufacturer, in which case the terms and conditions are the same as in commercial credit, and con- sidering the problem of secured loans, we are concerned primarily with secured credit given on the hypothecation of the factory and the grounds belonging to it property 244 The German Great Banks on which, as a rule, the mortgage banks will not lend. 250 (We may disregard here the comparatively few instances in which policies or securities are pledged.) Even where a first mortgage is offered, which is not always the case, the granting of the loan is not entirely unobjectionable. If it becomes necessary to sell at auction the mortgaged property, together with the machinery, at a time when it is idle, little more is likely to be realized on the factory and plant than the value of the material and the generally low common value of the ground. In any event, the property which serves as security for the loan does not represent the same value to every future purchaser. Credit ultimately secured by realty (Realkredit) may be based further on the issue by the industrial corpora- tion of interest-bearing bonds secured by mortgage. The flotation of such securities is, however, justified only "in the case of a business with an established earning power, which is independent of any particular management that may be in control for the time being". 251 Loans based on bonds not secured by mortgage represent of course nothing more than credit on personal security (Personalkredit) , and if no security of any kind is pledged, it is nothing more than unsecured personal credit. Such credit, however, should be granted only under the same conditions under which commercial loans are granted; that is, only after a careful investigation of the trustworthiness and efficiency of the management, the earning capacity of the business, as well as the profitableness and general market prospects of the particular branch of industry. (6) Industrial credit secured by lien on realty (Indus- trieller Realkredit), is particularly hazardous, when the 245 National Monetary Commission industrial establishment concerned does not fall within the scope of operation and experience of the creditor bank or of its branches. In such cases the investigation into the underlying security of the loan can not be made with an adequate technical knowledge of the business and the lack of it will cause losses much sooner and in larger amount than in the field of commercial credit. (c) Having failed to give sufficient attention to the above-mentioned conditions under which industrial credit may be given, the creditor bank is very frequently obliged to urge or bring about the reorganization of an establishment as a stock company in case the latter has not yet assumed that form. This involves risk for both parties, particu- larly when the change to the corporate form is to be made in the face of conditions which may unfavorably affect the market for the stock and bonds to be issued. Such conditions are the presence of strong or even over- whelming competition on the part of other corporations in the same line of business, the general, political, or eco- nomic situation, the immediate industrial outlook in the trade, or the character of the management. Very often the expediency, from the business point of view, of trans- forming a firm into a corporation does not receive suf- ficient attention in case of enforced reorganizations effected for the purpose of mobilizing long-term loans, or short-time credit which has gradually been diverted from temporary to capital outlays, contrary to the wishes of both parties, or, at least, of the lender; even less thought is given in such cases to the earning power of the future corporate enterprise, which is bound to be affected by the 246 The German Great Banks increased expense, or to the question whether the enterprise is at all adapted to the corporate form of organization. Where the main consideration in the formation of a stock company is the necessity of mobilizing a loan and liqui- dating or shifting it, the situation is particularly dangerous for the lender. On the one hand, the bank may be obliged to carry the newly issued stock and bonds for a long time, which will diminish its power to realize quickly on its assets and interfere with its freedom of action. On the other hand, if it succeeds in floating the securities it may impair seriously or even permanently its ability to float future issues (Emissionskr edit) . The same objections are present, though not with the same force, whenever a bank, for the purpose of mobilizing a long-term or standing loan, is obliged to urge or assist an existing corporation in the increase of its capital stock or in the issue of additional bonds, since in this case as well the bank is obliged to market the securities without much delay. On the other hand, there certainly were many cases of industrial enterprises that developed slowly and gradually and by the judicious aid of long-term loans reached a point where the condition of the enterprise, the prospective earning power of the additional plant or improvements, and the general industrial situation afforded sufficient evidence that the organization of a stock company or the issue of new stock or bonds was desirable and feasible. 252 In the meantime such an establishment can obtain the funds it may need in the shape of acceptance credit paying interest on no more capital than has actually gone into new construction or improvements. 247 National Monetary Commission 3. Under existing requirements for admission to the exchanges in Berlin, Hamburg, and Frankfort-on-the-Main industrial securities to be listed, must be in issues having a minimum par value of 1,000,000 marks ($250,000). On the smaller exchanges it is sufficient that the issues have a par value of 500,000 marks. As a result small concerns may often be obliged to dispose of their bonds among local circles merely without listing them on any exchange, which is often a difficult task, or else they may be forced to have recourse to short- time credit, which is not adapted to their needs, or even to get along without credit. The latter con- tingency would, of course, happen only in case the provin- cial banks or bankers failed to lend their assistance. Upon careful study of these considerations we must ad- mit that the central institution proposed by Hecht may prove beneficial in many ways. Hecht's view is that such a special institution would not prove a serious competitor to the credit banks, but would on the contrary develop a. field of usefulness of its own which would supplement their work in many ways. This is hardly correct, at least not so far as moderate-sized industrial establishments are concerned. On the other hand we can not admit the necessity of such a central institution. During the next decades great prog- ress will undoubtedly be made among the credit banks in the direction of the organic development of long-term in- dustrial credit, which Hecht found wanting. He himself, referring to the past, emphasized at the beginning of his monograph the fact that " during the last three decades the organization of credit in Germany has made unexpected progress." This advance in my opinion has occurred and 248 The German Great Banks will continue to occur not only in the field of commercial credit, but in that of industrial credit as well. 253 This is particularly true of the latter, for many of the obstacles which have hitherto stood in the way of the development and organization of industrial credit are of a general char- acter, and would have to be met by the proposed central institution in exactly the same way as by the credit banks, and perhaps under far greater difficulties. In the first place such an institution would not have at its command the experience of decades and the far-reaching connec- tions which the credit banks have. The credit banks will undoubtedly be in a position to avail themselves of the same experts whom the central institution might employ. This applies primarily to the trust and auditing companies which the banks have themselves established, and is at least equally true of those other organizations, which, according to Hecht, are to cooperate with the central insti- tution, like the federation and association of electrical engineers, the society of naval engineers, the association of German gas and water engineers, the association of Ger- man mechanical and railroad engineers, the federation of German mechanical engineers, the German association of mining engineers, and the association of German chemists. In many important points the central institution would, to say the least, have no advantages over the credit banks in making long-term industrial loans. On the other hand it" would be sure to make some of the same mistakes that have been made by the credit banks, and some of these on a much larger scale. If perchance it should avoid some of these mistakes, it is likely to com- mit other mistakes of possibly far more serious conse- quences to the industrial community. 249 National Monetary Commission To begin with, it is evident that in the desire to find a market for its obligations and to place them in competi- tion with existing securities it would have to make every effort to show large and continuous dividends. 254 It would therefore have to be exceedingly keen for business. As a result, during times of the high tide of prosperity it is likely to proffer loans unsolicited or to thrust funds upon industrial enterprises more often than was the case among the credit banks. Thus the abuse charged to the credit banks will prove still more serious in its effects on general industrial conditions and might lead to the lending of credit to establishments which would never have received it from the credit banks. A more apparent and graver danger lies in this that a special institution of this character can by no means be as familiar with the general industrial and financial condi- tions as the credit banks. And yet, in granting credit, this factor must be considered just as carefully as the special conditions obtaining in the industry or the branch of it concerned in the loan. It is to be feared that the central institution will not take the general business situation into consideration or will fail to give it due weight. Among the reasons assigned to prove the necessity for establishing a special institution of this character it is urged that industrial concerns are now forced by the banks to resort to short-term commercial credit, which is not adapted to their needs. As against this conten- tion, it may be asked whether the effect of such a special institution would not be to force establishments to seek long-term credit for purposes for which only short-term 250 The German Great Banks loans should be used, as, for example, for the purpose of procuring current working capital. I think this at least possible, and I am convinced that Hecht's charge (unjust in my opinion) of the "mechanical standardization of credit" (Schablonisierung des Kr edits) brought against the credit banks (see his "Memorial," p. 7) is likely to prove true to a greater extent in the case of a special institution of the kind proposed than it ever was in the case of the credit banks. 255 Again, as I shall show later in the course of this book, a special institution would undoubtedly introduce new and strong competition for the local provincial banks and private bankers that make a specialty of extending credit to the small and moderate-sized industrial establishments (in case where they do not obtain such credit from the cooperative societies) , particularly credit connected with the issue of sound industrial bonds in amounts of less than 1,000,000 marks or 500,000 marks, issues too small to be listed and dealt in on the exchanges (seep. 248). Attention is also called to another point the impor- tance of which Hecht by no means underestimates the need of having the underlying conditions for industrial credit investigated by persons and officers located where the establishment is situated. This need could not be met by such a central institution nearly as well as by our large banks with their numerous branches, agencies, silent partnerships (Kommanditen) , deposit banks, and allied institutions. Not having affiliations and subsidiary institutions, the necessity for local investigation would oblige the central institution to establish gradually all over Germany a far more extensive network of local branches 251 National Monetary Commission than those established or ever contemplated by the credit banks. The desirability of such a step is very doubtful, but unless this were done the facilities of the central insti- tution for obtaining accurate information and carrying on its investigations on the spot would be inferior to those of credit banks. A further point of criticism raised by the Frankfurter Zeitung of September 16 and 25, 1908, was that the bonds which it was proposed to issue would in effect have all the characteristics of bonds payable to bearer, without any governmental authorization therefor having been given or even requested. Another just criticism is to the effect that it ought to be shown "that the loans to be made with the proceeds of the sale of securities have back of them sufficient security to justify people to invest their savings therein," before "a new kind of obligation is introduced, which would shift to the public the risk of long-time industrial credit, formerly borne directly by the lender." It is contended that Hecht has not proved this point, for it is not enough to refer to the fact that the same objection was raised at one time against the mort- gage banks. The conditions are entirely different, both on account of the difference in the character of the secu- rity, and the state supervision to which the mortgage banks are subject, and the complete difference in legal status, a point which will be gone into further below. To this I may add the following. One of the advan- tages claimed for the central institution is that its bonds would be issued against loans of the most varied kinds, and resting on different kinds of security. Should this indeed be the case, and were the prospectus to give an account of 252 rn 7 The German Great Banks all the industrial enterprises concerned and in all the details demanded by the requirements for listing the securities, the complexity would be so great that it would be as diffi- cult to determine the real value of the bonds as to ascer- tain the actual condition of the central institution itself. Baron von Pechman (op. cit., p. 94) has properly called attention to the point that the credit to be given by the central institution would prove the less attractive to indus- trial concerns the shorter the period of amortization to which they would have to agree besides the 5 per cent interest and a high commission. And yet in enumerating the disadvantages of short-term commercial credit for industry, Hecht lays special stress, and very properly, on its costliness. Finally it must not be forgotten that Hecht 's project has long ago been realized abroad, even though only in the form of a provincial bank. However, that is the form which Hecht himself contemplated, at least at the start. Now this foreign bank has not met with any great degree of success. About ten years ago (1898) a special institution of the kind contemplated by Hecht was established in Austria the Bohemian Industrial Bank (Bohmische Industriebank) in Prague a provincial bank with the moderate capital of 12,000,000 kronen ($2,436,000). Of late (since 1906) it has had as one of its special purposes the flotation of bonds based upon industrial loans repayable in annual instalments. Up to the present the entire volume of its bonds, secured by mortgages, had not exceeded 16,639,000 kronen ($3,378,000). In September, 1906, it established a branch in Vienna, entering thus into direct 253 National Monetary Commission connection with the money market of Vienna. Lopus- zanski, secretary to the Ministry in Vienna, who gives an account of this bank, 256 withholds final judgment as to its merits, notwithstanding the reasonable length of time the institution has been in existence. Moreover in accordance with the provisions of a special enactment in Austria of December 27, 19O5, 257 governing the issue by the banks of certificates of funded indebtedness, three large institutions were given the privilege of issuing bank bonds (Reichsgesetz-Blatt 85. Stuck, Jahrg. 1905), based on industrial loans secured by mortgage. The lim- itation imposed is that the aggregate amount of the bonds must not exceed the total amount of the mortgages on the industrial property by which the loans are secured. The three institutions referred to are the Allgemeine Primle- gierte Oesterreichische Bodenkreditanstalt, the Wiener Bank- verein, and'the Zivnostenskd Banka in^Prague. Of these only the latter began to issue such bonds as early as 1908. Although four years have elapsed since the law was enacted it can not be said that there has been any great activity along the new lines. I do not believe in the practicability of the new venture. In view of our conditions in Germany, at any rate, I would not advocate the adoption of a law which would authorize banks to issue certificates of funded indebtedness, particularly as no great use of such a privilege is likely to be made in Germany, so far as can be foreseen. We may recall in this connection that the issue of such certificates of funded indebtedness was proposed by Pereire, and that provision was made for it more than 50 years ago in the charter of the Credit Mobilier and of the Darmstadter 254 The German Great Banks Bank. Everybody is agreed that it was fortunate that such issues were never made. As it is, the concentration and decentralization of the banks has led to a complexity and obscurity in the bank statements that is constantly increasing. The issue of certificates of funded indebted- ness based on diverse industrial undertakings, the standing of which can not be easily found out, would not tend to lessen this obscurity. Finally, certain weighty objections of a purely legal nature remain to be discussed. 258 The following are the only possible forms in which the bonds might be issued: I. BONDS SECURED BY MORTGAGE. 259 i. Supposing the central institution issues its own bonds, two cases are possible: (a) In consideration of a loan made to an industrial establishment, it might take bonds issued by the latter (and secured by mortgage) made out to the central insti- tution or to its order. On the basis of these bonds the central institution might issue its own bonds, depositing with a trustee as security the bonds of the establishment. (b) Another way would be this: The establishment issues bonds secured by mortgage in favor of a bank, which would make the loan in the first instance. Against these bonds indorsed by the bank the central institution would in turn issue its own bonds. In my opinion there can be no doubt that, inasmuch as the purpose of the central institution's "activity" is "di- rected" 26 exclusively or in part to the making of mortgage loans on the real estate of industrial establishments and to 255 National Monetary Commission the issue of bonds on the basis of the mortgages acquired, the institution would be a mortgage bank according to the wording, meaning, and purpose of article i of the mortgage- bank act of July 13, 1899. As such it must obtain a charter. As its sphere of business is not be to confined to any one of the Federated States, it must obtain its charter from the federated council (Bundesrat). This being so, the central institution would be subject to the limitations of the mortgage-bank act. In this respect it would make no difference whether the mortgage bonds issued by the various establishments receiving loans were bonds secured by a specific property or by the full assets of the institu- tions. These considerations apply to the two cases, (a) and (6) , because article i of the mortgage-bank act applies equally, no matter whether the mortgage is originally made out in favor of the central institution or the mort- gage is obtained by the central institution from a third party (cf. Komm. Bericht., p. i, sec. 5; par. i, No. i, ibid.). If this view is correct, the purpose of the bank, to make loans to industrial establishments and to issue bonds against them, would in these most important cases be almost completely nullified. Even if we follow Ernest Sontag 261 in rejecting Hecht's interpretation 262 of section 12, paragraph i, clause 2, of the mortgage-bank act, the policy of the mortgage banks, as shown in note 250, p. 827, would continue unaltered, according to which, with few exceptions, no loans are granted on industrial establishments . 2. Suppose now that the central institution does not issue its own bonds. We might then have a case where the bonds secured by mortgage would be issued by the 2S 6 The German Great Banks industrial establishment itself to the order of the central institution, and the latter would no more than indorse the bonds. It would make itself liable for them in the same way that a bank assumes liability for a bill. 283 In this case the mortgage-bank act would not apply, for it would not involve the issue of bonds by the central insti- tution against mortgage loans made by it or by some other party. The central institution would be acting only as an intermediary, guaranteeing the bonds issued directly by the various establishments. These securities, to be sure, would gain in value and become more readily marketable, for the reason that they had been passed on and indorsed by the central institution, but scarcely more than the industrial bonds floated by a well-known bank. On the other hand, so long as the bonds are issued by various borrowers, and merely indorsed by the central insti- tution, it would be impossible to combine and treat as one aggregate loan of i million marks the issues of, say, four establishments where each issue was for 250,000 marks. This does away with a second argument advanced in favor of the creation of a central institution, namely, that by combining a number of loans it would enable the securities of smaller establishments whose bond issues were for less than 1,000,000 marks to be listed and dealt in on the exchanges. II. BONDS NOT SECURED BY MORTGAGE. It might be thought that this difficulty could be obvi- ated in the following manner: The central institution would have the four establishments each issue in its favor 90311 ii 18 257 National Monetary Commission bonds for 250,000 marks, unsecured by mortgage. The institution might then in turn deposit these bonds with a trustee, and issue against them its own bonds to the amount of 1,000,000 marks. These could then be listed and traded in. The objection against this plan, however, is that, if one of these establishments should become bank- rupt, the claim based on these bonds would entitle the central institution to no greater a share in the assets of the bankrupt firm than would fall to the other non-preferred creditors of the establishment. In other words, if the industrial establishment becomes insolvent, the claims arising from the bonds which it has issued and pledged with the central institution are on a par with all other non-preferred claims against the establishment. There would thus be little inducement to the public to purchase such bonds, even if these should be admitted to the ex- change, which is doubtful. Should they be listed, it seems to me that the exchange accepting them would at least insist that, inasmuch as it might be erroneously assumed from the fact that the bonds were pledged to the central institution that they were secured by a preferred lien on the property (dingliche Sicherheit) , the absence of it should be expressly stated in the prospectus. This would, of course, spoil the market for such securities. The outcome of these legal considerations is as follows: i. In the case of an issue of mortgage bonds, the cen- tral institution, as such, could be active only in the case described under I 2. Here, however, it would serve pri- marily only the interests of the larger establishments. These are, as a rule, closely connected with the banks, and 258 The German Great Banks have hitherto received too much rather than too little credit. 2. As regards the issue of bonds without mortgage security there is no real necessity for adding further to a class of bonds which, contrary to what the purchaser generally believes, do not confer upon him any right of lien on the property (dingliches Recht) , the more so that it would be of no benefit to the small trader as such. 3. To allow the issue of bonds in cases I No. i a and b, there would be need for amending existing legislation in order to enable the central institution to avoid the neces- sity of obtaining a charter as a mortgage bank. In view of the existing superabundance of industrial bonds, there is no adequate justification for such amendment. Should the central institution enter upon a career as such, in spite of all the existing economic and legal objec- tions, it can not, in my opinion, look forward to a rapid or notably successful activity. (B) THE CURRENT ACCOUNT BUSINESS. 264 Current account transactions between the bank and its ^ o * clients are one of the main sources of the commissions earned by the bank in the general course of business. At * \ ^ . ' "' ' '* " ' " ' ' "' ' ' i^ m^~mm i IM.PT -tf-xV^ the same time the current account is the basis for the "^fs C,/ p v various relations by which both parties are gradually fc ; ^^ . .. i . . ^._. **kf * drawn into closer union. Through the current account^/. *< # ^ v - the bank serves in the first place in the capacity of " maid ' of all work" in the business household of its customers, performing a thousand and one services each for a small consideration. This menial position, as a rule, is, how- ever, only a temporary stepping stone in its progress to 259 National Monetary Commission a position of influence, at times even of dominance, and one offering great advantages of the most diverse kinds. For this reason the current account more than any other branch of business represents the field in which the various banks fight their competitive battles, particularly the battle for the industrial clientele. Once regular rela- tions are established through the current account, a direct road is opened to power and profit for the bank. This road leads past the various forms of loans, which of them- selves, especially the right to close the account, give a certain amount of influence to the bank. It leads further to increased power and profit through reorganizations, promotions, flotations of securities, consolidations and per- manent participations in industrial undertakings through stock ownership, or representation on the supervisory board, or both. Through these transactions it leads to the conquest of entire branches of industrial activity, to close affiliation with commanding industrial concerns, cartels, and syndicates, and marks the beginning of the supremacy of groups of banks. In the systematic development of the current account business in industrial districts, attained only gradually, and after much labor and trouble, we see at the same time a powerful lever in the systematic industrial policy of the banks. The successful carrying out of this policy tends also to establish, strengthen, and extend the supremacy of the banks over the private banking houses usually found in this field. The essential features of the current account business are the following : 260 The German Great Banks In the course of the current account transactions, the German credit banks first of all provide their customers with the facilities for making and receiving payments (Zahlungsverkehr). They receive payments, and make payments on their account, collect their bills, interest on mortgages, and claims. For such of their customers espe- cially as are engaged in foreign and over-sea trade, they draw bills, checks, drafts, and letters of credit. By putting their signature to the commercial paper of their customers they convert this paper into safe securities, negotiable everywhere. 265 They accept bills drawn upon them by their customers or clients of the latter. They place at the disposal of their customers the transfer facilities (Girouer- kehr) provided by the bank, its branch offices and affiliated banks, though this need is but seldom felt, in view of the giro facilities offered by the Reichsbank. They also provide foreign bills of exchange for such of their customers as need them for their foreign trade transactions. These have retained the character of instruments of payments to a far greater extent than the domestic bills. These foreign bills are held by the German credit banks not only for the convenience of their customers, but also to maintain the liquidity of their own assets. They keep them in their portfolios not indeed to the same extent as the Reichsbank, but never- theless in considerable amounts in order to be in a position to draw gold from abroad, in case of a money stringency or a panic. The amount of foreign bills is seldom reported in the statements of the German banks. The annual report of the Dresdner Bank for 1908 states that out of a total in bills of 248,666,816 marks (in 64,951 bills) on 261 National Monetary Commission December 31, 1908, there were bills in foreign currency to the actual value of 24,999,370 marks. In the same way the Disconto-Gesellschaft reports that on the same date, out of a total of 158,928,057 marks held in bills, there were foreign bills to the value of 18,347,484 marks. In 1903 more than half (54.5 per cent) of the bill portfolio of the Berliner Handelsgesellschaft was made up of foreign bills. To meet the wants of their customers, the German credit banks furnish surety bills (Wechsel-Avale) for their customers, more particularly in favor of the customs and railroad authorities to guarantee the payment of customs duties and railroad freight charges, on which deferred payment has been allowed. 266 They also undertake to collect foreign and domestic bills, deducting their expense and commission. However, under the terms of the current account, which are nearly always identical on this point, they do not assume responsibility in the case of foreign bills or bills on smaller places in Germany, for presenting them on time, or for having them protested. At the request of their customers they make remittances by telegraph in order to meet outstanding obligations in foreign countries. In their current account transactions they reduce, for their customers, the risks arising from export and import trade by discounting or loaning on the bills drawn by the exporter upon foreign purchasers. They allow the im- porter credit against which the foreign merchant may draw, and, on the delivery of the bill of lading, they put their acceptance on the bills of the foreign seller to the amount of the invoice, thus making it possible for these bills to be discounted. 262 The German Great Banks They allow their customers credit on current account for a considerable period of time, or they give them short-time credit on current account or independently of it, by discounting the bills of their customers or their clients, or by granting them loans on collateral or hi the shape of the so-called reports. In a few instances, following the example of the Deutsche Bank, they have begun lately to discount for their customers even out- standing business accounts. They accept securities and documents of their custom- ers for safe-keeping in their vaults, as a rule gratuitously in case a commission is paid on transactions on current account. In case they undertake at the same time to look after these securities, they charge an exceedingly small commission for this service. Under the latter head we have the following operations : The cashing of coupons as they become due and the pre- senting for payment of bonds drawn by lot, or repayable for other reasons; the collection of mortgages and tem- porary interest (Genussscheine) the drawing of incomes (Geltendmachung vonBezugsrechteri) ; the exchanging of con- verted securities or the presenting of such securities for stamping, in compliance with legal requirements. In the case of a reduction of capital they deposit the securities of their customers either for stamping or cancellation. They further secure new sheets of coupons with the talon (or certificate of renewal), they supervise the drawings (with certain reservations), they make additional pay- ments on securities not fully paid up, they pay assess- ments on mining stock, advance cash for coupons payable in terms of foreign money, etc. 263 National Monetary Commission In accordance with their general and current account regulations, the German great credit banks require a special order of the depositor of securities, in case of conversions, insurance, giving notice in the name of stockholders before the general meeting; 267 also in case of instalment payments on account of securities not fully paid, of assessments on account of mining stock, and in case of reductions of capital when an exchange of stock for a smaller amount of new stock is to be made (Zusammenlegung von Aktieri). According to Waldemar Muller, 268 the Dresdner Bank alone manages securities of customers aggregating in value to nearly 2,000,000,000 marks, not counting the securities held by its deposit offices. The German credit banks or their deposit branches and exchange offices (Wechselstuben) take care of sealed deposits in special fire- and burglar-proof boxes and vaults, with keys held by the bank and by the respective depositors, a function performed abroad, and particularly in England and Amer- ica, by special safe-deposit companies. In accordance with special rules German credit banks buy and sell securities on commission and make loans thereon, according to terms described more fully below, which are essentially the same for all the large banks. Ivoans on mining stock, where they are not completely barred, and on American railroad shares, are as a rule subject to special agreements. Customers having a current account with the credit banks may, if they wish it, open a check account. Balances on \ such accounts do not bear interest. On the other hand, \ the bank charges no commission on the turnover of such 264 The German Great B a n accounts. An accounting is rendered usually each quar- ter. Deposits of cash to this account, if made before 12 o'clock, are credited as of the date of deposit or the next business day; when made later, they are credited as of the business day next following. Cash paid out on this account is charged to the day on which it is paid. 269 German credit banks, mainly through their exchange offices and deposit branches, frequently act as interme- diaries for their customers in securing for them mort- gage loans, and often obtain for them or lend them.} directly money for building purposes. They make them- l selves responsible either in the form of surety or of de- posit of so-called "Aval-bills" to the customs or rail- road authorities for the payment of customs duties or freight charges, where credit has been allowed to theirf""""" customers; or for the proper fulfillment on time of con- tracts entered upon by their clients for supplies or work. At the wish of their customers and on payment of a moderate fee they insure securities left with them for deposit and care against reduction in value in case of drawings. They finance the reorganization into stock companies of business firms in which their customers are interested; also the organization of new stock companies. They underwrite the issue of newly created shares and bonds in a great variety of forms and on the most diverse terms. Finally, they supply or secure for their clients necessary or helpful information regarding new business connections which the latter may be contemplating and on the stand- ing of individuals or firms to whom credit is to be extended, also on foreign connections and markets. They grant or 265 National Monetary Commission obtain for their customers various advantages and facilities, both in their commercial relations and in their mutual intercourse, and notably in connection with the flotation of securities. As a result of the mutual competition of the banks, commissions on German current-account transactions have to-day fallen to a level lower than ever. This is very deplorable, for it may lead to the neglect of what is the mainspring of the banking business, the current- account transactions, and to the preferment of other more speculative branches of banking. A point has been reached where a great many services for which a charge is made abroad are performed in Germany gratuitously, and the commissions, where paid, are so slight that often they do not cover even in part the share of the general expense which these services involve. Thus as a rule the commission for the business done on current account is fig- ured on the larger side of the account, being one-half of i per mille for bankers and i per mille for others. For bill acceptances the commission is one-fourth of i per cent per quarter. As a rule this charge is remitted by most large banks in the case of their regular customers, who are allowed to issue time drafts on the bank. It is exacted only when they have no adequate funds on deposit in the bank on the day when the acceptance is made. 270 In the absence of a special understanding, interest is allowed on credit balances normally at a rate i per cent below the Reichsbank discount rate, and charged on debit balances at i per cent above the Reichsbank discount rate. Usually, however, provision is made for a maximum rate in the one case and a minimum rate in the other. 266 The German Great Banks Payments on current account are usually credited as of the same day or as of the next business day when they are made after 4 o'clock. Money paid out is always charged as of the day on which the payment is made. Bills collected are entered according to special agreement, bills discounted as of the day on which they are discounted. Where the debit balance on current account against a customer is not merely temporary or when the customer needs credit either at stated periods (seasonal credit) , at irregular intervals, or continuously, terms must be agreed upon as to the amount, the rate of interest, the security, the commission to be charged, etc. These are usually made in writing and mostly as soon as the account is opened. In the course of time and under the pressure of successive legislative enactments and new legal requirements, the banks have developed fairly uniform forms of contracts 271 for their "business and current account transactions." Naturally, however, reservations are made in regard to special terms affecting commission, interest, the amount of credit, and the conditions of repayment. Credit on current account is given only to classes of business to which bank credit is applicable, and is either unsecured (Blankokredit) or secured. The bank, how- ever, seeks always to find security against the risk it assumes in the character and extent of its current account transactions and in the differences that naturally appear among its current account clients. The common policy of the banks is to have as nearly as possible an equilibrium between the amounts it must provide for current account customers in the shape of advances or payments and the 267 National Monetary Commission active balances of the deposits of other current account customers, as well as deposits expected from them. 272 Under such conditions, comparatively little of the bank's own capital is tied up in current accounts. This safe- guards the bank's ability to realize quickly on its assets and secures to it freedom of action. While this favorable situation is not present every year, or in the case of every bank, yet, on the whole, and on the average for a number of years, the condition has been nearly approximated by the great German banks. In this connection Miiller 272 justly says : ' ' For this reason the customers most highly valued are those who , requiring credit during the buying season, not only repay the ad- vances during the selling season, but in addition accumulate balances to their credit. This is true of a large number of commercial firms and of many branches of industry, notably in Berlin. The seasons for various branches of business being different, a large bank with branches and connec- tions in all industrial centers of Germany enjoys the advantage of a proper distribution of its accounts among all branches of industry, and of the best possible adjust- ment of credit and debit accounts. Moreover, the periodic covering of loans exerts a reassuring influence, whereas loans that are running throughout the year require greater caution and constant vigilance." The magnitude of current account transactions appears from the following: At the end of 1908 the current accounts in the Deutsche Bank, including accounts in the deposit branches in Berlin and its suburbs, numbered I 7 I >35- At the end of 1907 the Dresdner Bank had 31,631 current account customers at its central office and 268 The German Great Banks 67,212 accounts in its exchange offices (Wechselstuben) , or, in all, 98,843. At the end of 1908 the number of accounts at the central office had risen to 35,542. The security for credit on current account, or for credit given on current account through acceptance, collateral loans, or bill discounts, consists as a rule of shares, bonds, merchandise, bills, or the outstanding accounts of the borrower, that is, of claims arising from the sale of mer- chandise and manufactures, or of raw materials, half- finished or finished products, belonging to the firm receiving credit, or of life-insurance policies, patents, mortgages, dwelling houses, factories, land, or sureties including secondary and counter sureties (Nach-und Ruckburgschafteri) and the like. Under normal conditions, whenever the banks exercise due caution and most of them do it may be shown that it is not the secured credit on current account but the unsecured credit which has proved the safest. German credit banks grant unsecured credit (Blanko- kredit) as a rule only after a study of the financial state- ment of the applicant for credit and a thorough investi- gation.^ his trustworthiness, his financial standing, and his business, which must present no obscurities to the inquirer, and when it is established beyond doubt that, so far as it is humanly possible to foresee, the loan will be repaid and repaid on time. This practice of granting un- secured credit is far more extensive in southern and cen- tral Germany than in northern Germany, but it is seldom granted to other than business men, at least not in consid- erable amounts, National Monetary Commission When security is demanded for a loan, it is a sign of some doubt on the part of the bank, excepting the cases when under general or special instructions of the board of supervisors or under orders from the central office, the executive officers of the bank or of the branch are forbidden to make any unsecured loans or to make them beyond certain amounts, or without special permission. Hence the demand frequently made for a separation in the bank statement of secured and unsecured loans can not be based on the assumption that such data would indicate to what extent the management was complying with the dictates of business prudence in demanding security, as such information would tell nothing regarding the character of the security which is the all important thing. Although mistakes have undoubtedly been made in giving unsecured credit, 274 the mistakes made in German banking practice, and for that matter also in the practice of foreign banks, in the lending of credit may be traced, so far as my experience goes, far less frequently to improper unsecured loans than to the facts pointed out in our ''introductory considerations." Among these have been excessive liberality and eagerness in lending credit, the giving to or even forcing upon establishments of long-time instead of short-time credit, violations of the principle, which should always be observed, of distributing risks, and, under the head of secured credit, the false choice or false distribution of collateral for which, however, the competition of other banks may often be responsible accepting, for example, as security second mortgages, mort- gages on building lots, unlisted or highly speculative secu- 270 t B e r m a n Lr r e a t nan rities, or, worst of all, accepting as ''security" shares and bonds of the company which was seeking credit. A practice equally dangerous is the accepting of securities as collateral at prices manifestly far higher than what they might be expected to bring at forced sale, and the like. I believe therefore that in general fewer dangers for the bank are involved in unsecured credit than in secured credit. The most questionable secured loans are those that have developed out of original unsecured loans. 275 The subject of unsecured credit arising from acceptances will be dealt with more in detail further on. Such credit is subject to its own rules and considerations. Satisfactory as this form of loan may be to a bank at any given moment, it can not be denied that to give a large or the largest part of its credit to customers, in the form of acceptances, may become a source of danger, for it may happen that just during a crisis when the bank needs all of its resources, it may be called upon to redeem its acceptances owing to the inability of the drawers to redeem the bills. The current account business, including the credit given on current account, presents considerable advantages for a credit bank, though in promoting this business there is need of the utmost attention and caution. Once devel- oped, however, it gradually yields regular earnings, which are of particular help during adverse times, insuring to the bank certain minimum dividends, and thereby affording the management a certain repose and assurance even when the more speculative branches of its business and more particularly the flotation of securities fail to bring adequate returns. 271 National Monetary Commission While it is true that the stability of dividends increases with the growth of the deposit business, the latter in its turn is influenced by an extension of the current account business. On the other hand, the increase of dividends is dependent mainly upon the expansion of the current busi- ness and particularly the business on current accounts. The proportion which interest 27e and commissions bear to the total gross profits may be seen from the following table. So far as commissions are concerned, only the smallest part is due to transactions on current account; by far the larger part comes from the banks' brokerage business. For 1908 the profit from the bill business is also included. The percentages are as follows: 1906. 1907. 1908. Per cew 400 33 1905 137 5,238 ,601 3 *43 848 1907 158 6,437 ,035 33 1908 169 6,605 ,891 28 For all the great Berlin banks, taken in the aggregate, - the ratio at the end of 1909 was 33 per cent; at the end of 1907, 34.5 per cent; at the end of 1908, 31 peiL____ ' cent. For the individual banks this ratio was as follows : 1906. 1907. 1908. Deutsche Bank Per cent. 28 Per cent. 34 Per cent. ^28 Disconto-Gesellschaft 47 ,8 Dresdner Bank Darmstadter Bank 42 24 4 22 37 27 Berliner Handels-Gesellschaft A. Schaaffhausen'scher Bankverein 34 30 41 36 39 22 National Monetary Commission The amount of acceptances of the six Berlin great banks (includinj^tl^ at the end )f each year was as follows: [In million marks.] Deutsche Bank. Dresdner Bank. Disconto- Gesell- schaft. Darm- stadter Bank. A. Schaaff- hausen'- scherBank- verein. Berliner Handels- Gesell- schaft. At the end of 1895 122 75 49 41 32 41 ^S3fl-. rr:..' 116 76 44 36 33 41 1897 130 99 47 35 31 43 1898 1899 128 142 117 I 22 53 61 34 40 46 1900 141 131 89 _.. ., 37 60 56 1901 142 IO4 85 3 7 5 7 62 145 I 14 103 54 46 1903 . . . 1 80 I 29 IOI 59 49 62 1904 185 149 142 70 81 64 1905 197 170 162 89 82 64 1907 1908 264 232 209 189 109 194 78 89 149 74 Acceptance credit increased almost continuously, nota- bly in the eighties and nineties, even as compared with the capital of the banks. 288 On this point reference may be made to the table printed on page 288. The differences as compared with the figures reported by Ad. Weber (Depositenbanken, p. 117) are explained by the fact that in this table surety bills (Avale) furnished by the banks, are included with acceptances. Large as the share of the mercantile acceptances must have been, there can be no doubt that relatively, as well . as absolutely, a very large proportion of the total accept- ance credit given by bankers in this period was made up of credit in the form of industrial acceptances of the doubtful sort described under 2b, and of the no less doubt- 286 The German Great Banks ful "speculative" acceptances described under 3. Least objectionable was the steady and by no means slight increase of German bank acceptances in oversea trade. Here they were used to provide reimbursement for ad- vances on merchandise in transit, the bank in these cases receiving documentary security, viz, bills of lading. For the Hamburg, Bremen, and London branches of the great banks, devoted primarily to oversea business, a regular correlation can be traced between the growth of that branch of business and the growth of acceptances. A diminution in speculative acceptances can be ex- pected only as a result of self-education in the banking profession. This, I feel sure, will be effectively aided by the voluntary publication, at regular intervals, of sum- mary balance sheets. In my opinion the view that credit in the form of acceptances and ' ' reports, ' ' could be made "subject to certain rules" 289 through legislation is not tenable. The table printed below (p. 288) , shows the amount of acceptances for the eight great banks of Berlin (the Commerz- und Disconto Bank and the Nationalbank are added) , and the amount of the acceptances of these eight banks relative to that in 1883, which is taken as 100. It also shows the relation of acceptances to their capital stock, their own business capital (das eigene werbende Kapital, capital plus surplus funds) and finally to their entire earning resources (das gesammte werbende Kapital) , i. e. their capital stock, surplus, deposits and credits on current account. 287 National Monetary Commission Amount of bills outstanding (acceptances including " avals" and checks) . 2 *> In percent- ages of the Year. In marks. In percent- ages of the figures of 1883. In percent- ages of the aggregate capital of the 8 great banks. In percent- ages of the aggregate capital and surplus funds of the 8 great banks. aggregate capital, sur- plus funds, deposits, and credits on current account of the 8 great banks. 1883 189, 795, 100 100. 61.2 53-3 " 26.6 1884 220, 532, ooo 116. 2 68.5 59-7 26. 9 1885 227, 229, 700 119.7 70. 4 61. 2 26. 5 1886 234,412,800 123-5 70. 4 60. 4 26.6 1887 245, 569,000 129. 4 69. 2 58.8 27.8 1888 254, 347, 500 134.0 69. 3 58. 5 2 K . I 1889 274,778. 100 144-8 63.5 52- i 23- 2 1890 254, 338, ooo 134-0 57.5 46.8 22.7 1891 248, 280, 300 130. 8 52-9 43- i 21.7 1892 299, 049, 800 157- 6 62.4 50. 9 25-8 1893 301, 806, 600 159.0 63.0 51-2 25-4 1894 354, 241, 200 186.6 ! 74. o 60. o 25-8 1895 452 919 300 238. 6 i T& T 63. 6 28. 6 1896 441, 416, 900 232. 6 74- 2 59- 9 26.7 1897 488,521,000 257-4 70.8 57-4 26, 9 1898 535,649,400 282. 2 70.5 57-0 25-1 1899 597.832, 100 315-0 73- 4 59-o 25-9 1900 670, 299, 500 353-2 82.2 66.0 27-8 1901 ! 627,917,300 330.8 77-o 61.7 25-2 1902 673, 741, 800 355-0 77-3 62.7 24-9 1903 ! 745 , 542, ooo 392. 8 84. 5 67.3 24. 4 1904. i 88e TIT- inn 466. 7 88. 7 69. 8 1905 i, 052, 922, 800 554-8 99-9 78.8 24.6 1906 i, 162, 922, 900 612.7 81. i 1907 * 275, 564, 600 672. i 114- 5 88.4 26.5 1908 i, 188, 077, 900 626. o 105. 7 81.4 23-5 The table reveals the same development which was noticeable with regard to the bill circulation, namely, that the amount of acceptances in 1903 had not only risen again to a point reached in 1889, but had even largely gone beyond it. In 1908 there was a considerable decline in the amount of acceptances of these eight Berlin banks. 288 The German Great Banks In conclusion it is of interest to note the ratio of bank acceptances issued by all German credit banks (with a capital of at least one million marks each) to the average bill circulation (in millions of marks). 291 Year. Average bill cir- culation, assum- ing an average period between date and ma- turity of 75 days. Bank acceptances on December 3 1 . Millions of marks. Per cent. l8gc 3,050 3,275 3.505 3.875 4, 187 4,660 4,595 4.301 4,453 4,640 5, 140 706 752 825 984 153 ,294 .136 .176 , 300 , 400 ,600 23 23 23 25 28 28 25 27 29 30 3i 1896. ... 1897 1898 i899 1900 1902 . . . 1903 1904 1905 (D) THE DISCOUNT BUSINESS. 292 German credit banks, like others of the same class, have a special motive for investing their own and their deposi- tor's funds in the bill discounting business, since they are at the same time banks of deposit, and thus are obliged to invest a large part of their deposits in securities matur- ing at an early date. As the various bills discounted become due on different dates, the outflow of cash is balanced by an assured inflow of cash to redeem bills, with a resulting increase in the cash reserve and the opportunity for new investments. The first rank in this line of investment is held by those bills that are regarded as prime discount bills throughout the German discount market. Such are the acceptances of the six foremost Berlin banks, namely, the Deutsche Bank, 903 1 1 u 1 1 20 289 National Monetary Commission Disconto-Gesellschaft, Darmstadter Bank, Dresdner Bank, Berliner Handelsgesellschaft, and the A. Schaaffhausen'- scher Bankverein, as well as two private banks in Berlin, Mendelssohn & Co. and S. Bleichroder. In a general way, bills of the above description are regarded as representative generic values, in the sense that the standing of the seller who places them on the market in any particular case has no effect on the terms of discount, that is to say, the rate and the commission, as would be the case with other bills offered for discount. However, since in the case of these prime bills the rate of private discount forms only the upper, not the lower limit, the statement just made does not imply that they may not occasionally be discounted below that rate. The second rank is held by those bills which are regarded as prime bills in the local markets of Berlin, Hamburg, and Frankfort-on-the-Main (in addition to those of the preced- ing class) and are discounted at the private rate, provided they fulfil the existing conditions of the bourse as regards time and amount, a condition which applies also to those of the preceding class. According to the regulations of the Berlin Bourse (similar ones prevail in Frankfurt-on-the-Main) , these prime bills (or private discounts) must be payable in Berlin or at a place where there is a branch of the Reichsbank, must be at least 5,000 marks in amount, and run not less than two nor more than three months. However, in fixing and quoting actual market rates of private discount, no difference is made between sixty-day and ninety-day bills and between "representative" and " nonrepresenta- tive" private discounts, a practice which to my mind is 290 The German Great Banks not correct. This quotation of the private discount rate is made in Berlin, not officially, indeed, but yet after a uniform fashion, by a private central agency, solely interested in the discount business and acting under instructions from those engaged in the business. 293 The rate of private discount prevailing at the bourse is oc- casionally underbid, as a result of competition, in the bill-discounting operations which take place outside of the bourse. The Reichsbank, however, does not buy bills in Berlin below the Reichsbank rate of discount. The acceptances of the largest mercantile establish- ments and industrial undertakings are not regarded as prime discounts. However, as noted in the previous chapter (p. 276), these firms do not generally regulate their obligations by means of their own acceptances, but, as a rule, by those of their banks. 294 Aside from these acceptances of the leading commercial and industrial firms just mentioned, which are of rare occurrence, the acceptances of most of the first-class and second-class provincial banks and bankers, while regarded as nonrepresentative bills in the above sense, are admitted to the benefits of the private rate of discount. In this case the terms of discount are fixed in accordance with personal and objective considerations, often quite incom- mensurable in their nature. If, for example, one of these banks, or even a bank not belonging to this class, allows in the opinion of the bourse, which is specially sensitive in this matter its credit to be unduly strained it is apt to be promptly reminded of this fact by finding the rate of private discount of its acceptances raised, even though but by one-sixteenth of i per cent, which thus occasionally 291 National Monetary Commission constitutes a very effective means of checking the over- loading of credit in the form of excessive acceptances. 295 Furthermore, with regard to this class of paper, and still more with regard to other discount material reaching the bourse and not admitted to the privilege of the private rate of discount, the principle holds that only those bills are discountable at private discount that would pass as "prime bills" even without the acceptance of a bank. Such, in fact, ought to be the policy of the banks them- selves in deciding whether a discount is to be made. 298 Though there be ample reason for recognizing the best commercial and industrial acceptances as "prime bills," yet the general discount trade gives a decided preference to the bank acceptance as being easier to negotiate, with the result that the commercial and industrial acceptances are being more and more displaced by bank acceptances. This is one of the factors that concurred in producing the result noted above under C (p. 279), that some 70 to 75 per cent of all the acceptances discounted by German credit banks and forming part of their bill holdings are bank acceptances, discounted by the banks at the rate of private discount. As these acceptances are payable in gold, they are in demand even among foreign firms and banks, especially note banks. These acceptances repre- sent the amounts granted by the credit banks on dis- counted bills, either to customers having a current account or to outsiders having no such account, as well as the foreign bills. Here also the policy is "to take care that .the terms of settlement, never exceeding three months in uration, shall be distributed over all the months of the I 'year, and, in particular, that relatively large amounts 1 292 The German Great Banks shall become due at the end of each quarter, when settle- ments are heavier " (die schiveren Quartalstermine.) 7 Th material in the shape of bills available for discounting i very large in Germany. The sum total of bills of exchange in Germany, put into circulation in the course of any one year, was calculated by W. Prion 298 for twenty-one years, from the proceeds of the stamp tax on bills of exchange as follows : [In millions of marks.] 1885.. . 12,060 1890 . . . 14, O2O I895. 15,241 1900 23, 204 1886.. . 11,826 1891. . . 14, 606 1896... 16, 386 1901 22, 965 1887. . . 12,065 I8 9 2. . . 14, 284 1897... 17.526 1902 21,505 1888.. . 12, 198 1893. . - H.585 1898. . . 19,374 1903 22, 266 1889. . . 13, 2O6 ,1894. . H 748 1899 -.. 20, 937 1904 23, 201 For 1905 the estimate was 25,506,000,000 marks, that is to say, the formidable figure of 25^2 billion marks, of which the Reichsbank bought 9,1 75,000,000 marks' worth, or 35.9 per cent. For 1905, on the basis of the stamp tax of 14,100,000 marks and a total amount of bills of 25,500,000 marks (deducting 10 per cent for rounding off), and assuming an average of seventy-five days for the circulation period of the bills, it is found that the average bill circulation was 5,100,000,000 marks (31 per cent of which were bank acceptances). 299 Accordingly for 1907 (stamp tax 19,700,000 marks, total amount of bills, less 10 per cent, in round numbers 31,500,000,000 marks) we get in round numbers the sum of 6 billion marks. It may be well, however, to caution the reader against drawing any general conclusions regarding the higher or lower economic development of a country from the larger or smaller amount of bills circulating in it. Such con- 293 National Monetary Commission elusions, though not infrequently made, are bound to be in most cases deceptive. The amount of bills circulating in a country is determined by an infinite variety of factors, such as the more or less pronounced "industrialization," the greater or less degree to which industry and commerce are habituated to bill credit, or to its complete or partial replacement by cash payments; the higher development and greater refinement or the greater or less costliness of the other forms of credit, such as the collateral and report business; the favorable or unfavorable state of the balance of international payments; the greater or less degree to which the population is habituated to the use of bank notes, etc. Were it not so, one would have to infer that the United States with its relatively small bill circulation, is backward in its economic development. On the other hand, from the fact that in France from 1876 to 1907 the average per capita bill circulation has increased con- siderably more than in Germany, one would have to infer that in France there had been an enormous and rapid economic development. Both conclusions would be wrong. France, for example, being a creditor nation (while Germany is a debtor nation), has a large favorable bal- ance of payments, since both the number of her popula- tion and her industrial activity, especially her export industry, have for some time been stationary, and the available resources of the nation are in large part invested in the form of savings deposits and government bonds, while commercial and industrial enterprises and stock companies attract them far less than in Germany. The favorable balance of payments is reenforced by the far 294 The German Great Banks greater amount of foreign securities in the possession of France, and by the receipts from the enormous influx of foreigners, especially in Paris and on the Riviera. Hence, before drawing general conclusions regarding any country, after ascertaining the amount of bills circu- lating in it, we shall have to examine its peculiar economic conditions and the peculiar organization of its systems of payment and credit, as we are trying to do in this book for Germany. This being premised, let us note the following: The amount of bills held by all the German banks, including note banks 30 and mortgage banks, 301 was as follows: 302 Business year. Number of banks. Amount of bills (in millions of marks) . Business year. Number of banks. Amount of bills (in millions of marks). 1883 1896 146 1884 1885 H3 113 ,246 , 248 1897 1898 150 156 , 190 360 1886 1887 116 115 , 277 ,364 1899 1900 164 165 . 946 . 087 1888 114 114 i 307 1901 171 776 1889 ,587 167 812 1890 61 136 ,503 1891 135 ,661 1904 1 75 3 081 1892 134 . 650 1905 182 3,507 1893 . . 611 188 1894 137 73 6 1907 203 1895 135 ,857 1908 214 4,310 We see from this that in the boom year 1899 tne amount of bills in all the banks (including note banks and mort- .gage banks) rose to 2,946,000,000 marks; that in 1900, immediately before the crisis, it even rose to 3,087,000,000 marks and that during the crisis of 1901 it fell to 2,776,000,000 marks. 295 I National Monetary Commission However, as early as 1903, as noted when speaking of the acceptance circulation of the banks, the amount of bills had again risen to 2,972,000,000 marks, having thus not merely equaled but even exceeded the amount of the greatest boom year, 1899. This was on the whole a normal and satisfactory development. Only an unhealthy increase in the amount of bills, not accompanied by a quiet and steady progress in economic development, would be a matter of regret. Finally, the amount of bills in the German credit banks alone (with a capital of at least i ,000,000 marks each) and the total amount of bills in the great Berlin banks alone, during the last eleven years, was as follows (according to the Deutscher Okonomist: 303 Year. Amount of bills in German credit banks (in million marks) . Amount of bills in the 6 great Berlin banks (in million marks) . 1898 055 660 1899 1900 ,327 .583 716 867 1901 . . ... . . ... . . . , 462 828 1902 ,483 859 518 865 1904 1905 1906. -773 , 995 447 1,075 , 231 466 1907 1908 . . T62i 742 ,509 In 1908 all the German banks together held bills to the amount of 4,300,000,000 marks, the German credit banks together more than 2,700,000,000, the six great Berlin banks in round numbers i,5Oo,ooo,ooo. 304 Assum- ing, for 1905, a total bill circulation of 5,100,006,000 marks 296 The German Great Banks and the bill holdings of the six great Berlin banks in the same year at about 1,000,000,000 (1,064,000,000) as against 1,231,000,000 marks, given in the above table, Prion estimates the share of those six great banks in the total bill circulation for 1905 at 20.8 per cent. On page 279 we noted that as a rule about 70 to 75 per cent of the bill holdings of the German credit banks consists of bank acceptances. In that connection we also discussed the various classes of these bank acceptances. In the Reichsbank the average amount of domestic bills was as follows: 1905, 775,723,000 marks; 1906, 946,201,000 marks; 1907, 1,060,076,000 marks. The latter amount was classified as follows : Amount. Per cent. Marks. (a) Commerce, transportation, and insurance . 187, 948, ooo 17- .73 (6) Banking and credit institutions (as central agencies for the credit demand of business) SS9.97S.ooo 52. 82 26 83 (d) Agriculture and allied trades . . . (e) All other credit users 16 647 ooo Total i, 060, 076, ooo IOO. 00 The profits from the bill brokerage business, that is to say, first and foremost the profits obtained from discount transactions, have not hithereto been always separately stated in the balance sheets of the German credit banks, but have in many cases been combined with the intefest earnings, or with the profits gained from trading in foreign bills and specie. (Demsen und S or ten) . Such, for example, is the practice of the Berliner Handelsgesellschaft. In England, on the contrary, according to Edgar Jaffe's investigations, 305 the amount of bills at the disposal of ( 297 National Monetary Commission banks for the purpose of discounting has shown an almost continuous decline. One reason for this is that the English deposit banks, which discount only for their customers, receive from them only a part of their bills for discounting and as a rule the less desirable part, while the larger part of the best bills is turned over by these customers directly to the bill brokers, so that the deposit banks are even obliged to buy from these brokers a part of the bills necessary for the investment of their funds. The deposit banks themselves also sell to the bill brokers all bills on foreign countries, as the banks themselves do not discount these. Another reason, already mentioned, why the amount of bills circulating in England has declined is, because, owing to the more advanced organization of the system of pay- ment and credit in that country, cash payment, at least among the largest firms, is tending more and more to take the place of bills, so that the very best commercial bills are progressively disappearing from the English money market. Similarly bills drawn by importers of raw material on the selling commission merchant, the so-called brokers' paper, are gradually dropping out of use, being in large measure replaced by collateral loans on the strength of warrants on merchandise stored. Finally, the number of bills drawn in England on for- eign countries is very small compared to the number of bills drawn by foreign countries on England (about i to 9) , because the prices of goods exported from England, owing to the larger market for London pound bills, are calcu- lated in pounds sterling, and payment accordingly is ordinarily made in the shape of a bill on London. 298 The German Great Banks As a result of all these conditions, the English banker wishing to invest his funds is limited in the main to the " domestic bills, steadily declining in number and quality, while his main interest in foreign bills lies in the accept- ance business." 306 As regards the English deposit banks, there was for- merly a great abuse in the granting of credit by acceptance of drafts, and as a consequence the acceptance business, too, has declined to such extent that it is to-day con- ducted only on a very modest scale and under the safe- guard of securities. Thus the acceptance business, even in so far as it is carried on against shipped goods that is to say, against bills of lading, etc. rests almost entirely in the hands of the so-called merchant bankers 307 and of the foreign banks, 308 while secured or unsecured loans in current account (loans or advances) constitute to-day the principal form of credit of the English deposit banks, which is granted exclusively to their regular customers. However, owing to the easy transition from short-term to long-term credit and the danger of tying up funds in the latter, the same difficulties and complaints arise in England as in the granting of industrial credit by our own credit banks. 309 In contrast with these English conditions, we saw that in Germany the bill circulation and the bill holdings of ; the banks, especially the credit banks, are very large, and] that of the total assets of the German credit banks in 1907! (as well as in 1895 and i896) L in round numbers, 53 peri cent appeared under the head of loans (Debitoreri) and 20 per cent under the head of bills. The rate of private discount resulting from supply and demand of short-term credit at home and abroad that 299 National Monetary Commission is to say, the rate of interest to be paid for short-term credit in the way of discounting of private bills is, of course, subject to frequent and wide oscillations. From it, in conjunction with other factors, especially the Reichs- bank discount and the exchange rates, important con- clusions may be drawn regarding the business conditions, especially the state of trade and industry. This is un- doubtedly true, even though, as we have seen, the bill acceptance is not merely a means of granting credit to trade and industry but serves also to a large extent to procure the means for bourse speculation. But while the rate of private discount corresponds in a general way to the condition of the money market at any given moment, the Reichsbank discount rate is determined not only by that consideration but also by the general economic situ- ation and by the task, incumbent on the Reichsbank, of regulating credit and protecting the money standard. It has been pointed out, and it must be admitted, that the difference between the official rate of discount estab- lished by the Reichsbank for short-term bill credit and the rate of private discount quoted in the open market in Berlin for short-term private bills has been almost uni- formly greater during this period than at any other Euro- pean money center. The differences were as follows: Year. Berlin. Paris. London. Vienna. 1876-1880 i. 19 0.51 0.51 o. 36 1881-1885 .98 43 64 5 * 18861890 i. 04 5 93 5 1891-1895 i . ii 55 i. 03 .38 7i . 09 .60 .26 19011905 . . . . I . OI .60 43 5 1906 i. ii 9i .28 .06 . 22 . 4O . 21 . 22 300 The German Great Banks It is also true that a difference of over 2 per cent between official and private discount occurred in Berlin seven times in the period 1895-1900 and nineteen times in the period 1903-1907, while no such difference was ever recorded in L,ondon and Paris. 310 In explanation of this phenomenon it was stated that this low rate of private discount, occurring in part simultaneously with a high rate of bank discount, was due to deliberate endeavors on the part of banking circles to lower the rate and to keep it low, for their sole benefit, in plain opposition to the official discount policy of the Reichsbank, even in cases where the Reichsbank raised the rate of bank dis- count, either to prevent an outflow of gold abroad or to draw foreign gold into Germany. It is not difficult to prove that the above-mentioned great difference between the rates of private discount and Reichsbank discount is not due to the cause alleged, though it is much more difficult to assign the true reasons for that phenomenon with even a comparative degree of probability. First of all, it is not true that the banks, and especially the great banks, are essentially interested in keeping the rate of private discount low by artificial means; on the contrary, being buyers of bills, in which they invest their funds, they are interested, like every buyer, in being able to deduct the largest possible amount of interest on these bills. 311 As a matter of fact, very large amounts of private bills are held not only by the great banks and the other credit banks but also by the Reichsbank and the other four note banks as well as by the mortgage banks, cooperative credit societies (Genossenschaften), 3 oi National Monetary Commission savings banks, insurance companies, commercial and in- dustrial enterprises, etc. This extensive participation of other buyers of bills clearly proves that a low rate of private discount does not always nor exclusively "benefit" the credit banks, let alone the great banks. On the contrary, it benefits, first and foremost, the commercial and industrial firms, which, profiting by that low rate, draw on the banks, while the banks are benefited only when, either in response to demand or of their own accord, they pass the bills on among their customers or into foreign countries. Thus a deliberate or intentional " thwarting" of the discount policy of the Reichsbank by the large banks by way of an artificial lowering of the rate of private discount is out of the question, especially since they may be in the market both as buyers and sellers of bills, the latter especially in case of orders on commission (Kommissionsauftrageri) . As a general rule, the large banks, having regard to the interest which they have to pay on the deposits held by them and the interest which they in turn draw for the credit which they grant on bills, collateral loans, and contango (Reports), are essen- tially interested in making the rate of private discount conform as closely as possible to the rate of bank dis- count, since their outlay on account of interest depends on the rate of bank discount, while the receipts in the way of interest depend on the rate of interest prevailing in the market. Prion 312 justly points out that the great banks, in calculating the interest on the advances granted by them, charge the lombard rate of interest of the Reichs- bank, and that when the difference between bank dis- 302 The German Great Banks count and private discount greatly exceeds the average, the customers have a strong incentive to profit by the cheaper acceptance credit, which would lead to an un- welcome increase both in the offer of bills and in the acceptance obligations of the banks. On the other hand, it is not to be denied that the great banks and other large discounting concerns exercise a certain influence on the fluctuations of the rate of private discount and its quotation at the bourse, seeing that in this field, as in others, they are in a position to compensate more or less the orders for the purchase or sale of private bills by means of the sums which they themselves invest in or withdraw from the private-bill business, and to bring only the remainder on the market. There are also exceptional cases in which the great banks, as well as governmental and municipal offices in Germany and abroad, are decidedly interested in keeping the rate of discount as low as possible, and may attempt, at any rate, by heavy offerings of cash or other measures, perhaps with the cooperation of all the large discount dealers (Gross- diskonteure) , to lower the rate of private discount or to keep it low, for example when the issue of public bonds, domestic or foreign, bearing a higher rate of interest is in contemplation. However, the success of such attempts will not depend solely on the power of the large discount dealers, even if acting in concert, since the discount market is intimately connected with the entire money market, and consequently the rate of private discount depends on a number of other factors, such as the rate of bank discount and its probable development, the foreign exchange rates, the rates of interest for call money and 303 National Monetary Commission monthly settlement loans, etc. In view of this, and the usually very large amounts of the bills marketed, a notable or long-continued artificial lowering of the rate of bank discount will be found impracticable, even with the cooperation of all the large discount dealers. In fact, if it were practicable, it would prove a very serious matter, especially on those occasions when it is above all desirable that the great banks should go hand in hand with the Reichsbank and lend their energetic support to measures which it deems requisite in the interest of the general economic well-being. If, for example, as a necessary and natural consequence of an unfavorable turn in the balance of international pay- ments, the foreign exchange rates (Demsenkurse) are so high that there is danger of an outflow of gold, especially of a withdrawal of foreign gold held on deposit in Germany, the raising of the official rate of bank discount will as a rule suffice to stave off for the time being or postpone the com- ing of the moment at which the exportation of gold begins to pay, unless indeed there be a demand for gold at any price, as from America in 1 907. This precaution, however, can accomplish its object only when, as is usually the case, the rate of private discount is simultaneously raised to, or maintained at a correspondingly high level, as indeed gen- erally happens. If in such cases the raised rate of bank discount consid- erably exceeds that of foreign bank discount, foreign coun- tries, as a rule, in order to share in the advantage of the high rate of discount in Germany, will temporarily in- crease their gold deposits in Germany, independently of the state of the balance of payments, so that in such case the 34 The German Great Banks raising of the bank discount rate may lead to a temporary gold importation from abroad; again, however, on the supposition that the private discount rate, too, rises to or is maintained at a correspondingly higher level. 313 In these cases, however, in which the prevention of a rise or of the maintenance of a high level of private dis- count rate would be especially dangerous, the great banks and other large discount dealers, as a rule, have no motive even to attempt the exercise of such an influ- ence, because the probability is that, when the raising of the bank discount rate is desirable in order to stimulate the importation of gold from abroad or to prevent the ex- portation of gold, the situation will generally be such that security issues are out of question. The real reason for the great difference between the rate of private discount and the rate of bank discount in Ger- many is probably to be sought, first and foremost, in the fact that in Germany, as contrasted with France, there is a relatively much larger number of persons or establish- ments, seeking to discount, whose competition in taking up good bills prevents the formation of a rate of private dis- count corresponding more closely to that of the Reichs- bank. A further reason may be found in the fact that the rate of private discount is made, at least in a general way, in conformity with the ratio of supply and demand exist- ing in the market. On the other hand, the rate of bank discount, while fixed by the Reichsbank with an eye to the regulation of credit transactions and the maintenance of the gold standard, depends in the foremost place on the favorable or unfavorable condition of our total 90311 ii 21 305 National Monetary Commission balance of payments, whose primary expression is to be seen in low or high exchange rates. However, another important factor must be considered. In Germany, whose trade and industry make far larger credit demands than is the case in France, this demand is satisfied, in the first instance, by a great multitude of credit banks, in the most diverse forms, a feature in which Germany again differs from France. Thus trade and industry in Germany, as regards their demand for credit, especially in so far as that demand is to be satisfied by the discounting of short-term bills, depend on the Reichsbank only in the second place. As soon as this condition changes that is to say, as soon as the absorbing power of the credit banks is exhausted, as may happen especially in boom periods the offer of short-term prime bills on the market will not be balanced by a corresponding num- ber of discount dealers. As a result, the rate of private discount will rise and thus the difference between it and the Reichsbank rate will grow less. This, it is true, will be the case only so long as the Reichsbank in its turn is not compelled to raise its rate of' discount in order to restrict the demand for credit made on it, especially active in boom times. In so far, however, as the credit banks, especially the great banks, do exercise an influence on the rate of private discount and the difference between it and that of bank discount, it is indeed their duty to aim at lessening this difference and to give their unstinted support to the dis- count policy of the Reiclubank, whose influence on the private discount market, one of the most important fields of credit granting, has doubtless been considerably dimin- 306 The German Great Banks ished through the concentration of the great banks. This is the very field in which it is desirable, in the interest of the general public, that the strict policy of dividends that is to say, of purely private interests be subordinated to public economic policy in cooperation with the Reichs- bank, the more so, as in this field some of the functions of the Reichsbank, viz, the regulation of credit, have to a con- siderable extent been transferred to the great banks. It must be acknowledged that the great banks and other great discount dealers have hitherto shown a de- cided disposition to be in the closest possible touch with the management of the Reichsbank. Even Prion bears witness that these banks occasionally are reluctant to buy treasury bills (Schatzanweisungen) , " especially when the Reichsbank, from motives of discount policy, desires to throw considerable sums on the market in order to influ- ence the rate of private discount." 314 (E) THE LOMBARD AND REPORT BUSINESS. 315 The lombard loan (loan on collateral), like the bill dis- count, affords to trade, agriculture, industry, and private capital the opportunity of personal credit, for short terms, sometimes also for longer terms, but it differs from the dis- counting of bills in this, that this personal credit is only granted nn^p^urity. The collateral may consist of merchandise, which in the import and export trade is replacecPby bills of lading. These the merchant or manufacturer pledges in order to obtain bank credit, which, as a rule, is cheaper than mer- chandise credit (Warenkre dit) . This bank credit he there- upon uses for a great variety of purposes. His object in 307 National Monetary Commission pledging the security and taking the loan may be, as we have seen, either to diminish his personal risk in over-sea transactions or to increase temporarily or anticipate the realisation of the working capital tied up in certain indus- trial or mercantile transactions. This form of credit- granting by the banks may give rise to the same dangers that we described above, in connection with the accept- ance and discount credit (transformation of the original short-term working credit (Betriebskredit) into investment credit (Anlagekredit) . Another purpose for which security is pledged is to avoid loss through the sale of merchandise at low prices at an unfavorable moment. The collateral may also consist of securities or bills, the latter^Belng in fact the only kind of pledges admitted in the lombard business of the bourse. Lombard loans may also be secured by insurance poli- cies (at surreladef^vaiue) or mortgages, the latter being the most common form in the case of lombard credit in the building trade, although involving some risk, since it is not always possible to realize on mortgages at any given time. Finally the collateral may consist of any other kind of paper and claims of all kinds. In all these forms of secured credit the first thing to be considered is the value of the collateral, the person of the borrower being only of secondary importance, which is not the case in ordinary discount credit. How- ever, even in the case of lombard loans the person of the borrower plays some part at the bourse, inasmuch as the amount of the loan, the amounts to be put up (Einschuss) , the interest to be paid, and the other conditions of the lombard business, in a word, the acceptance or rejec- 308 The German Great Banks tion of the paper offered, are not decided without ref- erence to the property of the borrower, his solvency and trustworthiness. On the other hand, in the lombard business of the banks, with their regular customers, aside from the value and quality of the pledge, and the duration of the loan, sometimes extending to as much as three months, the terms of the loan are mainly determined by the longer or shorter duration and degree of intimacy of the business connection, the amounts involved in past business transactions, and the commissions paid, as well as the other advantages which the bank has derived or expects to derive from this connection. For obvious reasons, even short-term lombard obliga- tions can not be regarded as liquid short-tennjinvest- ments to the same extent as ninety- day bills, and accord- ingly article 17 (44, No. 3) of the bank act prohibits the Reichsbank and the other four note banks from using these lombard obligations for their note reserve. They bear no indorsements, but only the name of the debtor, and in case of nonpayment at maturity they necessitate a forced sale of the objects pledged, which, in the case of merchan- dise, and even of securities, according to the state of the market, may lead to poor results or none at all, if there happens to be a simultaneous sale of the same kind of mer- chandise or securities, or a slack demand, or a general unfavorable condition of the market. 316 The fact that money thus advanced is tied up for the period agreed on is another circumstance tending to make it inadvisable for banks to invest large amounts of their depositors' funds in the lombard business. Further- more, the objects pledged can not be repledged, except 309 National Monetary Commission by special agreement, which is not customary. On the other hand, bills, or at any rate private bills, being readily transferable at any time at the bourse or elsewhere, repre- sent a method of short-term investment which is much more liquid, that is to say, more easily realizable. This difference must not be lost sight of in considering and estimating the liquid assets of banks. At any rate the investment of money in the lombard business as a rule is only for a short time, limited, in the practice of the Ger- man credit banks, to days, weeks, or a month, while credit in the way of bill discounting is as a rule granted for a longer period, since bank acceptances, in order to pass as private bills, must run two to three months. At the bourse three forms of lombard loans are dis- tinguished : i . Call money (Tdgliches Geld) , payment of which may be required at any time. These loans are mostly made by great banks or bankers, on collateral of securities or bills, and the rate of interest on them is determined by supply and demand of available call money and published each day. As a rule this rate of interest is below the rate of private discount charged on two-months' or three-months' loans, except at the end of the month and on other occa- sions of strong demand for money, for example, when instalments on securities issued become due. However, despite the difference of periods for which money is loaned, the amounts invested in lombard call money and in short- term private bills may constantly alternate and inter- change, according as the lender finds the rate of interest in the one or the other field more favorable for his purpose, thus making the rates interdependent. 310 The German Great Banks 2. (Ultimo \oa.ns\(Ultimogeld) , granted from the end of one month to the end of the next, usually at a rate of interest varying with the existing conditions of the money market, being as a rule lower than the rate of contango money and below the Reichsbank rate of interest on col- lateral loans, but higher than the rate of private discount. 3. Money loaned for a longer but fixed term, which at the Berlin bourse is as a rule furnished, first and foremost, by the Seehandlung (Prussian State Bank). That insti- tution, as a rule, grants lower rates of interest than the bourse. When the time the bills have to run agrees with the duration of the lombard loan, the Seehandlung, in discounting bills, charges the same rate of interest as in case of the fixed-term lombard loan that is to say, as a rule in both cases the rate of private discount. In this point, again, it differs from the bourse. On the other hand, the Seehandlung is more exacting than the bourse as regards the quality of the securities pledged and the standing of the borrowers. At the bourse, on the other hand, the rate of interest for ultimo collateral. loans is as a rule higher than the rate of private discount, but, except in case of strong demand, lower than the Reichsbank rate of interest on collateral loans. The latter, too, makes loans only on certain classes of paper (art. 13, No. 3b, of the bank act) , and the limit to which loans are allowed is considerably lower than at the bourse. The opportunity thus offered by the Seehandlung of obtaining favorable rates of interest is taken advantage of by the great banks, which are able to comply with the severe requirements of the Seehandlung as regards the standing of the borrower and the quality of the collateral. National Monetary Commission The usual requirement is that this collateral shall consist of domestic or foreign government bonds, or of mortgage bonds, but it may also consist of prime bills, which, having already been indorsed in blank by the banks or their customers when discounted, do not have to be indorsed again. Thus in the latter case, through a wholly unostentatious use of bills as collateral, a form of credit is created which the great banks normally use in preference to rediscounting private bills in the open mar- ket; normally, as we have seen, the great banks, when they cannot avoid a step of this sort, prefer to redis- count long-term private bills in foreign markets or among their own customers. Aside from the above-mentioned forms, in vogue in the lombard business at the bourse, the banks grant lombard \|loans f r longer terms, up to three months, in which the llombard rate of interest is fixed by agreement, usually higher than the rate of private discount. The ultimo money loaned in the lombard business of the bourse, against collateral in securities or bills, is used to a very large extent by speculators in securities, either to terminate or to prolong a speculation, provided, of course, that they possess such securities. If such is not the case, and the bull speculator (Haussier) is neverthe- less willing to continue the prolongation, he accepts the securities bought as per ultimo, obtaining the funds for the purchase price by a loan on collateral repayable on the last of the following month, for which he has to pay the usual rate of interest for ultimo loans on collateral, pledging the securities accepted and buying again the same securities as per next ultimo. This lombard rate 31* The German Great Banks of interest will, of course, be the higher the more active the bull speculation at the bourse. The bull speculator may use another method. Having to take up certain securities on the last of the month, he sells them to a third party (his bank) for delivery on the last of the month, receiving payment or being credited at the so-called settlement price (Liquidationskursus) . Atjthe same time he buys back the same securities from the third party at the same price, plus the so-called report money, as per ultimo of the next month. The amount of this charge has to be such that the bank shall be compensated for the month's delay in receiving back the purchase price of the securities pledged, so that it has to receive the interest for the intervening period. The rate of interest that is to say, the rate of the report money is determined by the market. value of each indi- vidual security or in percentages of the face value (accord- ing as the security itself is quoted in one way or in the other). On the other hand, the bear speculator that is to say, the person who, expecting a fall in quotations, has sold securities which he does not own, for delivery on the last of the month, but does not wish to procure them on the last of the month because the market, instead of falling, has risen, or is not in position to procure them because he has no money, proceeds as follows: He procures the securities to be delivered on the last of the month by buying them from a third party that owns such securities (his bank), to be delivered to him on the same date. The bank thereupon debits him with the purchase price and at the same time buys the papers 313 National Monetary Commissio n back from him for delivery on the last of next month, at the same price, with deduction of the monthly interest to be calculated according to the method above indicated (the so-called deport). The greater the scarcity of se- curities on the last of the month, and the greater there- fore the need for them on the part of the bear speculators, the higher will be, as a rule, the interest which the owners of the securities will require to be deducted (deport), which in such cases may thus be lower than the rate of lombard interest for ultimo loans prevailing at the same time. To the speculator, all these cases represent, economi- cally, a prolongation of his speculation; juridically, in the last two cases (report business) the combination of a cash sale with a purchase for delivery (report) or a cash pur- chase with a sale for delivery (deport). The lender in such case is simply dealing with two differ- ent methods of granting credit, that is to say, of investing such money as he may have at his disposal for the time being. In the report business he runs somewhat greater risk, because he has to furnish a sum of money exactly equal to the quoted value of the security, but then, as a rule, he draws somewhat higher interest, for as a rule the ' report money is higher than the rate for ultimo money in ithe lombard business, because the former includes a premium for risk. On the other hand, if the lender furnishes ultimo money on collateral in the shape of securities, he runs less risk a matter of special importance to the owner of investment- seeking funds because he is able to fix the amount of the loan on the securities according to their quality, not being The German Great Banks required to stake his money on them to the full amount of the market value. However, since the rate for ultimo money as a rule is lower than the_xate~ef- report money, he usually draws less interest than in the report business. From the point of view of both the speculator and the lender, either case represents either intentionally or at any rate in effect a fostering of speculation in securities, through the taking or granting of short-term credit. Hence the increase of the report business, especially in case of a boom, is as a rule a grave symptom of a decided increase in speculation. Accordingly, a writer, in the " Frankfurter Zeitung" justly finds no cause for con- gratulation in the fact that in the case of 10 banks in Berlin and Frankfurt the sums invested in the report business rose from 148,550,000 marks at the end of 1892 to 284,590,000 marks at the end of 1894, an increase of nearly 100 per cent, while from 1888 to 1889 the increase was only 55 percent (from 344,760,000 to 533,240,000 marks). The great banks as a rule will not act as brokers for those of their customers who wish to invest money in reports, because that would diminish the amount held in current account on which they have to pay but slight interest, while they themselves, as a rule, are able to make better use of their depositors' money in the way of the lombard, discounting or report business. On the other hand, so far as their own temporarily available resources are concerned, the great banks invest heavily in the two forms of short-term credit, that is to say, in ultimo loans, whose rate of interest influences also the rate of private discount, 317 and in report money. In particular, when the domestic rate of interest is higher 315 O x ^ g V v \\$r l x National Monetary Commission than abroad, the banks often invest very large sums of foreign capital in report loans, although in such cases the borrower has to assume the risk of a variation in the exchange rates. The tax on the report business to the full amount of the transaction stamp (Umsatzstempel) , based on the com- bined amounts of sale and purchase, led to the result that at the German bourses the ultimo loans have declined in importance in the lombard business, as compared with the report loan, especially since the rate of tax applying to the report business might also be applied to the case of the ultimo loan. This result was rather regrettable, all the more because lombard loans, unlike report loans, have not one and the same date of repayment, and because the pledges by which they are secured cannot as a rule be realized as easily as the securities of the report loans. Finally, the con- ditions of the report loans are typical, established once for all by the terms of the bourse, while the terms of lom- bard loans, as we have seen, have to be fixed by special agreement applying only to each individual transaction. Recently similar factors have been operative in the same direction. By the federal stamp tax law of June 3, 1906 (schedule 4a, sec. 4), the stamp, tax on the report business has been reduced to one-half of the former rate, the tax being based on the more highly appraised of the two transactions into which the report business is jurid- ically divided. On the other hand, the so-called im- proper lombard business (uneigentliches Lombardgeschdft) , in which the recipient of the securities may return other securities of the same kind, is, according to the practice of 3*6 The German Great Banks the revenue authorities, subject to the full tax according to the schedule. Only the taxing of the lombard business proper, of little importance at the bourse, in which the recipient does not enjoy the right referred to, is subject to the law of the individual States. In Prussia, accord- ing to the exemption clause to schedule 58 of the stamp- tax law of July 31, 1895, the documents certifying such lombard loans are exempt from tax, provided that they are repayable within at most a year and that the value of the security given is at least equal to the loan granted. I/ombard loans on the security of bills (which there- upon are not further indorsable) with the view of granting but not of securing credit play a very unimportant part among the operations of the great banks. The former bourse law naving absolutely prohibited the dealing in futures in the case of certain securities and greatly hampered it in the case of others, the cash busi- ness (Kassageschdft) has for years been the favorite sphere of speculation in securities at the bourse, the bankers of the medium and smaller class having to resort for that purpose extensively to call money in the lombard business in speculating either on their own or their customers' account. The terms usually charged on lombard business by the great banks are about the same as those of the Berliner Handelsgesellschaft, reprinted below from W. Prion's work. 318 They may, of course, be more or less modified in individual cases, the lender enjoying considerable lati- tude in this respect, since these terms merely state the maximum amounts of loans ("up to"). 317 National Monetary Commissio n If the market value of the securities no longer shows the margin agreed on as compared with the loanable value, a corresponding additional deposit (Einschuss) is to be furnished, either in cash or in securities. The dec- laration to be signed by customers in the case of a lom- bard loan (unless the conditions of the current account are deemed sufficient) has been reprinted by Friedr. L-eitner 319 and others. MAXIMUM AMOUNTS LOANABLE ON SECURITIES QUOTED AT THE BERLIN BOURSE. I. Up to nine-tenths of the quotation of the day: Bonds of the German Empire and of the German Federated States; mortgage bonds issued by Prussian mortgage banks and cooperative credit associations, as well as the bonds of German cities and Prussian counties (Kreise) ; bonds of German (other than Prussian) mortgage banks ; stock and debentures of nationalized railways ; bank notes of foreign states; gold and silver, in coin and in bars; debentures of German railways. II. Up to four-fifths of the quotation of the day: Bonds of foreign governments and cities; foreign railway bonds; foreign farm and real estate mortgage bonds ; German rail- way shares. III. Up to three-fourths of the quotation of the day: Foreign railway shares; bank shares. IV. Up to two-thirds of the quotation of the day : De- bentures of industrial concerns quoted at not less than 90 per cent. Shares of industrial concerns quoted at not less than 150 per cent; if the quotation is higher, the excess above 150 per cent is loaned on only to one-half the 318 The German Great Banks amount and with the restriction that the loan is not in any case to exceed 150 per cent of the face value. Secu- rities quoted more than 20 per cent below par are not accepted as collateral. Mining shares and securities not quoted at the Berlin Bourse are loaned on only under special agreement. According to the official statement submitted to the Bank Inquiry Commission under date of March 31, 1908, the sum total of lombard loans of the Reichsbank (on 5,650 pledge receipts) amounted to 255,687,100 marks, distributed as follows : Marks. 1. Agriculture and allied industries (249 receipts) i, 803, 300 2. Industry and trades 17, 853, 600 3. Commerce, transportation, and insurance 21, 562, 800 4. Banking and finance, viz. : (a) Joint-stock banks 32 99, 618, 900 (b) Other financial institutions . . . 88, 422, ooo 5. Public savings banks 12, 620, 500 6. Cooperative credit societies of all kinds 5, 108, 900 7. Private persons 5, 788, 700 8. All others (corporations, foundations, etc.) 2, 908, 400 Total 255, 687, loo The exhibit shows also how greatly, in the transactions of the Reichsbank, the lombard business is eclipsed by the discount business, a result due, no doubt, in part to the fact that lombard loans are not permitted to be used as reserve for notes. In 1907, as was shown (p. 297), the average of domestic bills held by the Reichsbank was 1,060,076,000 marks, while during the time from December 31, 1907, to April 7, 1908, the Reichsbank bought 1,389,357 domestic bills to the amount of 2,897,985,044 marks. 319 National Monetary Commission Unfortunately, in the German bank balances lombards have hitherto been for the most part combined with ' ' re- ports " (under the head " lombards and reports " or merely "lombards" or "reports") in one total. This is all the more incorrect, because, although both kinds of invest- ment represent as a rule forms of short-term credit, lombards occasionally run for longer periods (up to three months). Furthermore, although in many respects the two kinds of investment serve the same purposes, yet, as we saw, there are essential differences in these purposes as well as in the nature of the investments. As regards the composition of the " reports," such an ex- pert as Felix Hecht 321 has justly pointed out that they may include securities not easily realized, and furthermore se- curities issued by the banks themselves and sold on credit to their customers. However, the same may be true of the lombards. Again, in the balance sheets and reports of the credit banks (with the exception of some great banks) it has hith- erto to a large extent been the practice to make no differ- ence between lombard loans on merchandise relating almost exclusively to articles the prices of which are quoted in the market or at the bourse and lombard loans on securities, the latter including also securities not quoted at the bourse or securities issued by banks but not yet listed at the ^bourse. However, in the bimonthly summary balances since published by the great banks (beginning with Feb- ruary 28, 1 909), the "advances on merchandise and ship- ments " are separately stated, and hence it may be assumed that the same will be done hereafter in the annual bal- ance statements. At the same time the combination of 320 The German Great 'Banks "reports and lombards" into one item has been retained, probably on account of the practical difficulties that would be involved in their separation. Finally, some credit banks were accustomed formerly to record advances on merchandise under the head of " secured loans in current account" (gedeckte Debitor eri). Thus, in studying past records, we have to bear in mind that in the balance sheets of most banks the two items were lumped, and thus the growth of lombards and reports for the four great Berlin banks stated below (in millions of marks) can be traced only for the two items combined: DEUTSCHE BANK. 1870. . 2. 7 1880 26. 2 1800. 4O. 7 IQOO 6q 4. 1871 . . / 13. 2 1881 . ^2. S A ^yv^ . . . 1891 . T" / 26. I A V^V-rv- . . IQOI vy- ** 08 7 1872 A O *" 19.9 1882 O 1 ** O 29. 8 1892. . . 43-6 A v^V^ A . . I9O2 . . yw ^5 .. 184.6 1873 8.7 1883 30. 6 1893- 34-3 1903. . . . 184.0 > 1874 14. ? 1884. -24. 8 l8Q4. 69. 8 IQO4. IQO 4. XCJ /T- A 4" O 16. 4 A t-JOif. 1885 .... jij.. u II. 2 VT~ i8gs. 60.8 y vjij. . . I 90S ^ *|- . 238. 7 t 1876 ^2 2 1886 7 O 1806 68 Q y O 1906 . ~O^'* / 227 "^ iV_f y . . . l8q8 1 14 I A y w / 1008 *OT* V 222. I ***/** 1879 O O 34-8 1889 66. i A *_JV^*J . . . I8 99 . .. A AiJ.. A 103-5 A \^V^tJ . . DISCONTO-GESEU,SCHAFT ^y 1870 7.6 1880 24. 8 1890. . 31-9 I9OO. . .. S.. 68 ' 1871 8.4 1881 29.5 1891. . I4. 9 I9OI . . 31- as 1872 . 37-8 1882 . 12. S l8O2 114 IQO2 49 1873 O / 16. i 1883 * ^ ' \j 18. 2 * ^ V 1893- A A . f. 18. 6 A y\J4> . . 1903. . 580US 1874 14-5 1884 45-i 1894. - 48.6 1904.. 73 .6 1885 26. 8 l8qs . 36. o IQOS - 381 ot 1876". O 1886 31. 3 ^^o 1896. . " * o v ^ 23. 3 ;/ O 1006 . CY. 1877 2. I 1887 IO 2 1807 o o 27 4, ;7 IQO7 o / * 4.0' OI 1878 C -7 A tjtj ^ 1888 T.C. T. j.jy y . I8O8 * / T- y**/ IQO8 T-V v * S8 r ** / w 1870. . O O 14. 7 1880 T.A, 7 A <_jy CJ . * . T00 4.0 6 A yv^u . . i in P w f 3r* T^ / ;7 DRESDNER BANK. T.W. W tion 1873. . o. 4 1882 12. O I 8O I . . 21.6 Toon. pur- 1874 7 1883 15- I w :7 x * " 1892. . . . 33-0 I9OI . v^iank 1875? i. i 1884. IQ I 180^ 28 Q I9O2 . '"*' V 7f J.*V * ^ / O 1876. . 1.6 1.9 A UtJiJ- 1885 1886 *jr< * C. Q A U*-f ^ . . 1894.... 1895.... * w * V 54-2 49.9 1903. 1904. f acqui- 1877 J J 15-3 1878 2.7 1887 9-6 1896. . . . 42.3 1905.. . ibernia- 1879 1880 5-4 4. i 1888 1889 37-8 59-6 1897.... 1898. . . . 51-8 57-6 1906. 1907. Prussian 1881 22.5 1890 38.2 1899 73-8 1908 90311" II- 321 National Monetary Commission DARMSTADTER BANK. 1870 2 O 1880 . 10. 3 1800. . 27. 6 iqoo 27 6 1871 1872 . 7-9 14. 7 1881. . . 1882. . . 25.3 . . 24. 8 1891 .... 1892. . . . 22.7 . 27.6 1901 . . . iqO2 . . . . . 19.0 . ^8. q 187^ jc -J 188-? 31. 3 i8cn 24 I IQO7 77 Q 1874. Q 6 1884. ^4- 1804 30. =; IQO4 AC. 7 187=; IO. ^ 1885. . . . . 24. 6 l8qs . 31.4 iqCK 72 2 1876 1877 1878 1870. . 7.6 8.9 18.5 28.0 1886.. . 1887. . . 1888. . . 1880. . . . 22.9 . . 26. 8 39-7 . 41. O 1896 1897.... 1898. . . . l8qq. . 30.5 . 23. i 32-3 . }!. O 1906. . . 1907. . . 1908. . . 73-3 ... 48-5 ... 65.2 <_* For all the German credit banks (with a capital of at least 1,000,000 marks each), the lombards and reports during the last eleven years amounted to the following sums (in millions of marks) n 1898 668. 8 1899 736.8 1900. ct ]90i 597- 594- 1902 1903 1904 1905 691. 5 708. 2 773.9 970. 9 1906 1907 1908 1,099. 4 i, 162. 6 i, 348. 5 to At the six great Berlin banks the lombards and reports lomring the last eleven years amounted to the following Ams (in millions of marks) : '8 erto 415.6 463. i 302.0 1901 . 1902 . 1903. 294-3 432.0 443-o 1904 477.8 1905 588.3 1906 679.3 1907 594.4 1908 660. 8 encei , ^f the total assets the following amounts (in millions * i narks) were invested in lombards and reports: the la or cspr i8< 18 35- 19 D8. ^bourst Amount . Per cent. Amount . Per cent. Amount . Per cent. since '". Deutsche Bank 69 7 15 . 19 60. 7 10. 50 222. 12 ruary Disconto-Gesellschaft. . , ^resdner Bank v rmstadter Bank .... that the rliner Handels s e - 48.5 54-0 30.4 21 . I 15. 20 20. 08 15. 20 12. 93 36. o 49-8 31- 4 25 . o 9.67 14-77 15-09 12. 50 58. 10 II3-8 65- 29 53 4 6.5 10. 9 9-6 12 ance statei, 322 The German Great Banks (F) THE BROKERAGE BUSINESS (Kommissionsgeschdft). The brokerage business of the German credit banks, especially of the great banks, has never remained con- fined within the narrow scope assigned to the broker (Kommissiondr) by paragraph 383 of the Commercial Code (Handelsgesetzbucti) , according to which the term broker (Kommissiondr) designates exclusively a person who makes a business of buying and selling, in his own. name but for another's account, merchandise and securities. On the contrary, the German credit banks have from the beginning also engaged, in their own name and for other persons' accounts, in business not consisting of the purchase and sale of merchandise or securities, but which are nevertheless subject to the legal provisions regulating the brokerage business, according to the present Commercial Code (art. 406). As instances of such operations, the following may be enumerated: The payment of the indemnity to Spain by the United States for the cession of the Philippines, effected through the mediation of the Deutsche Bank, as set forth by Ad. Weber; 322 the cooperation of various great German banks in the preparation and execution of the nationalization of the private railways, first those of Prussia and later those of other German States, begun in 1879 an d continued for several years, a cooperation which was very extensive and not confined to the pur- chase of shares ; the cooperation of the Dresdner Bank and the A. Schaaffhausen'scher Bankverein in the acqui- sition of an adequate amount of stock of the Hibernia- Gesellschaft, undertaken at the instance of the Prussian 323 National Monetary Commission Government, and again not limited to the purchase of stock; the cooperation of the Disconto-Gesellschaft in the settlement of the French war indemnity in 1871-72; the mediation of the Disconto-Gesellschaft in the conversion of the stock of the Roumanian Railway Company into Roumanian government bonds (1879-1881); the reor- ganization of the Northern Pacific Railroad Company effected by the Deutsche Bank, partly on account of third parties, etc. In the main, however, the business carried on by the credit banks and especially the great Danks is the brokerage business proper, conducted on the bourse. The scope of this business has been enlarged by all the numerous factors tending toward an increase of power and concentration, some of which we have already mentioned, while others yet remain to be discussed. Such are especially the relations to industry, constantly growing more intimate, and the deposit offices estab- lished gradually in large numbers by all the great banks, with the exception of the strictly centralized Ber- liner Handelsgesellschaft. For although Waldemar Miil- ler 323 may be right in stating that the business of the deposit and exchange offices (W echselstuberi) , "so long as it was confined to the use of interest and the commis- sion business in securities, did not cover the considerable expenses for rent, personnel, etc.," yet the originators of these deposit offices acted on the expectation that the \makers of the deposits and the users of their safes would little by little tend to utilize the other facilities of the offices for arranging all their business and property mat- ters, especially investments of capital, that is to say, entrust them with the brokerage of their bourse transac- 324 The German Great Banks tions. This assumption, founded on the desires and wants of their clientele, has in the main proved well founded, as well as the further expectation that the clients of the deposit branches would also little by little become habitual and trustworthy customers for the securities issued by the central offices, their financial standing and solvency being well known to the local offices. The deposit branches have often been criticised as tend- ing to encourage to a considerable extent speculation in securities on the part of their customers, and to urge the participation of customers in bourse speculations, after the manner of " touting bankers" (Animierbankiers) . It would be difficult to prove the justice of this criticism. As a matter of fact, the central authorities of the great banks and of the other credit banks, in view of article 94 of the bourse law, as well as from an intelligent regard for their own interest, have from time to time issued the strictest instructions to the managers of their deposit branches and exchange offices to refrain from encouraging bourse speculation on the part of their customers or others. These instructions are periodically repeated. It can not be doubted, however, that, notwithstanding all instructions and warnings, certain managers of deposit branches have offended in this respect. This is likely to occur again, especially in the case of those managers who, besides their salary, draw a commission merely from the net profits of their deposit branches, a practice which it would be well to discontinue. It must not be forgotten, however, that the public and the customers themselves often dictate to the managers, and not only resent every exhortation or warning, but issue their orders in peremp- 325 National Monetary Commission tory form. It may also happen that the speculators, without the knowledge of the manager of one deposit branch, enter into speculative enterprises with other deposit branches and use the knowledge gained at one branch either to check the other or for conclusive action, beyond the control of the first manager. Withal, the aim of these deposit branches and exchange I offices must be to minister solely to the legitimate invest- \ment of funds and to the other needs of their customers, as they arise in the course of business, and to cultivate all the branches of the regular (current) bank business, with the exception of the security issue business and the security business for own account. To their credit it must be said that a growing portion of these establishments, especially the older ones, have been following the policy just commended. Extreme caution must be practiced in the investment business, both as regards the securities issued by the banks themselves and other securities. It can not be maintained that this caution has always- been sufficiently observed in the past. In particular it ought to be laid down as a principle that those persons who are compelled by their financial situation to follow anxiously every oscillation in quotations and who are severely affected by every diminution in interest income should not be advised to invest in dividend-paying securities, because these are subject to great fluctuations not only as to divi- dends but also as to the market value, corresponding to the fluctuating rate of dividends. On the other hand, those persons who insist on acquiring dividend-paying paper, either because of speculative tendencies or of their 326 The German Great Banks needs of seeking higher returns than are usually offered by government bonds and other securities bearing a fixed rate of interest, would do well at any rate to "mix," that is to say, to buy small amounts of safe stock of various industrial enterprises, in order not to stake everything on one card. The better returns in one branch of industry or in one company will then offer them a kind of insurance against diminished returns in other companies. The principle of the distribution of risk applies also to the private capitalist, and it is the duty of managers of deposit branches to exert their influence in this direction, whenever their advice is asked. Aside from these cases, it is the practice among the managers of the great banks, so far as I know, to instruct the managers of deposit branches and exchange offices, though not always with success, to abstain from all recom- mendations and advice beyond a mere statement of facts within their knowledge regarding the securities to be bought or sold, especially when such securities have been issued by the great banks themselves, since in such case the very fact of issue expresses the favorable opinion of the issuing bank. When customers ask for information, it is the branch bank manager's duty to point out to them, to the best of his knowledge, those factors which, after careful examination, he thinks will be apt to determine the intrinsic value, safety, prospective yield and market of the securities to be purchased or sold, including in the appropriate case, the conditions under which they are ad- mitted to trading at the bourses at home or abroad. He should on principle decline to utter any prognostications regarding the future development of the market value, no 3 2 7 National Monetary Commission matter how urgent the questions which are almost always addressed to him on this point. This caution is especially demanded in view of the fa'ct that the very shrewdest experts in the money market, possessing the most minute knowledge of the innumerable factors that influence the market value, profess to be unable to lay down any rule as the result of their experience, except that, as they say at the bourse, "it always turns out the other way." In the brokerage business at the bourse, the Berlin great banks 324 and a wide circle of other establishments are guided by certain "business regulations," which in the main are identical, as shown by the printed blanks. They embody the following principles: 1 . All orders given to the bank for the purchase or sale of bills, foreign bills of exchange (Valuteri), or securities are executed by the bank in its own name, unless the contrary is expressly agreed on, or unless the bank itself in the individual case makes an express statement to the contrary. 325 Any phrases used in the transaction, such as " I bought or sold for you," that might indicate an agree- ment with a third party, do not alter this rule. In each instance the bank has the right to charge, in addition to the commission, the regular expenses, especially the usual brokerage (Kurtage) and stamp tax. 326 2. Any bourse transaction undertaken by the bank for its customers is subject to the rules in force at the time in that kind of business at the domestic or foreign bourse where the transaction is to be executed, even when the business is transacted by the bank in its own name. The bank has the right to prolong term engagements 328 The German Great Banks made at the bourse, if it sees fit, or to cancel them entirely or in part, unless the customer gives explicit modifying orders regarding the pending engagement, which order must be received at the latest on the last but one exten- sion day the so-called day of premium declaration (Prd- mienerklarungstag) . The bank has the same right of can- cellation before this term, if the person giving the order fails, on demand, to pay such supplementary margin (Einschuss) as may be required (see No. 3, below, second paragraph) , 327 3 . In order to safeguard all claims against the customer through the current business connection, 328 as well as for any bill obligation that may be pending (unless a special arrangement has been made), the bank has the right of pledge or retention in regard to any securities, including interest coupons, annuity (Rentenscheine) and profit-share certificates, and all other valuable paper which may have come into its possession or keeping in the course of busi- ness or in any other way. 329 However, if such securities are turned over to the bank expressly in the name or on account of other persons, the bank possesses the right of pledge or retention in virtue of those claims only which may have arisen in connection with the respective securi- ties. 330 Securities deposited in German banks without being provided with a German stamp are not subject to the right of pledge and retention. 331 If the margin (Einschuss) or the balance due the bank, including any pending bill obligations, is not paid when due, a written demand for it is sent by registered mail. If this remains without effect, the bank, in order to satisfy its claims, has the right, without further warrant or period 329 National Monetary Commission of grace, to sell the pledges at any time and place in accord- ance with the provisions of articles 1221 and 1235 of the civil code. 332 Article 1237, section 2, and article 1238 of the civil code are not applicable to this case. Neither has the customer the right, according to article 1246 of the civil code, 333 to require any departure from the regular form of sale of the pledge. The demand just mentioned is deemed to have been delivered if it is sent by registered mail to the last address known to the bank, even if the letter comes back marked "Can not be delivered. " The acquisition of the pledged object by the broker him- self is permitted, according to article 400 of the commer- cial code, only in the case of goods which have a market or exchange price and in the case of securities which are officially quoted; the broker has to prove that the price ]f which he charged to the client is the market price pre- vailing at the time of the execution of the order; this time is the date ' ' at which the broker delivered the notice of the execution for forwarding to the client" (art. 400, sec. 2, paragraph 2 of the commercial code), a provision which, like a number of others (articles 387, 400, sees. 3b and 5; articles 401, 405, sec. 2), is intended to prevent the so-called "Kursschnitt" that is to say, speculation by the broker to the detriment of the client. As a wilful contravention of article 400, section 2, para- graph 2, is subject to penalty (according to article 95, sec. i , No. 2 of the bourse law) , most of the great banks have established a special bureau whose duty it is to see that the law is strictly observed by their representatives at 330 The German Great Banks the bourse. This or some other bureau also makes sure that the proper stamps are used. According to articles 3 and 4 of the law " relating to the duties of business men (Kaufleute) in the safe-keeping of securities belonging to third parties" of July 5, 1896 (the so-called bank deposit law) , the broker who carries out an order for the purchase of securities (of the kind specified in art. i) is bound to_send to his client within three days a list of the items purchased, with indication of the nomi- nal value, the numbers, and any other marks of distinction (Stuckeverzeichnis itemized statement) . According to the business regulations of the great banks, and most of the I German credit banks, however, the banks as a rule require L>*^ of their clients a written waiver of the sending of the item- ized statement in case the securities purchased have not \ been fully paid, and the client remains indebted to the broker for the rest, the purchased paper being left as pledge in the custody of the broker. The business regulations expressly state that the object of this waiver is to prevent the passing of legal title in the purchased securities to the client, which, according to article 4 of the bank deposit law, would be the effect (at the latest) of the sending of the itemized statement. As it is, however, the broker that is to say the bank retains title until the purchase price has beeaiully paid. Until this is done, the items purchased are not credited to the deposit account of the client and do not become his property. Accordin^lvjjjjey^age-^ftot kept, on behalf of the client, separate from the bank's own hold- ings or those of third parties, and are not entered in the deposit book according to their distinctive marks (art. i of the bank deposit law) . On the contrary, they are booked 331 National Monetary Commission by the piece without indication of number, this record be- ing often known in the great banks by the name of Account C (Konto C) , in contradistinction to the custody account, pure and simple, of the items belonging to the client (provincial banker) himself (Deposit Account A), and Deposit Account B. The latter comprises the items in regard to which the provincial banker (the client of the great bank) making the deposit or transmitting an order for purchase has made the declaration (in compliance with art. 8 of the bank deposit law) that the items are the property of others or that the purchase is to take place for the account of others. This Deposit B, therefore, is "not free;" that is to say, it does not serve the bank as security for all its claims against the provincial banker. In order that the broker (the central banker) may dispose of items booked under Deposit Account B, it is necessary in all cases, according to legal decision, that the client (the provincial banker) shall have declared, that he in turn had been given express consent to such disposition. According to article 3, section 2 of the banking law, the waiving of the requirement of an itemized statement (Stuckeverzeichnis) may be done by bankers in any form, even verbally, and once for all, but in the case of persons who are not bankers only expressly 334 in writing and only for each individual case. Only when the remainder of the purchase money has been paid, the purchased items, on demand of the client, are transferred from the item account (Account C) to the Deposit Account A. As regards the method of keeping securities booked under or transferred to Deposit Account A, the great 332 The German Great Banks banks as a rule adopt the arrangement by classes, that is to say, securities of the same kind but belonging to differ- ent customers are kept together, the items belonging to any particular customer being, of course, marked by bands bearing the customer's name and the nominal value of the items. This method of keeping by classes enables each item to be found more readily and is therefore preferred to the method of keeping all the securities belonging to one customer in a portfolio marked with his name. At the same time, for the purpose of having a check on the holdings, all banks carry both " living" account books, in which each customer has one account for all his securities, and a " dead " account book in which each class of securi- ties has an account, the names of the customers being entered under each class, with the items of that class standing in their names. In the case of mere safe-keeping of securities, or where an order for purchase is followed by safe-keeping, many pro- vincial banks and private bankers are in the habit of ob- taining from the customer an authorization to return secu- rities of equal value in place of those deposited or pledged, or to use them for their own (the bank's) profit. 335 Such authorization has to be made in conformity with article 2, section i of the bank deposit law, expressly in writing and for each individual case, only when the person in question is not a banker. The great banks, however, do not make a practice of obtaining such authorizations. The banks, although not required by law, regularly furnish a memorandum giving the issue numbers of the securities, generally by signing and returning one of the two slips (bordereaux) which accompany the order. 333 National Monetary Commission No perfectly reliable conclusions can be drawn from the balance sheets hitherto in vogue concerning the extent of the brokerage business of the great banks. On the one hand, the heading ' ' Commissions ' ' (Promswnen)~~cdvers not only the commissions derived from the brokerage business in its widest sense, but also in many cases all or part of the commissions derived from the discounting of bills, which really ought to be booked under the bill account, because these commissions are not always deducted from the particular bill entries, but are calculated only at the reckoning of the whole account (from the amount of the total transactions) , 336 Again, the commis- sions earned in the current account business are in many cases booked under the commission account, so that this account, homogeneous as it looks, is really a ' ' collective account. " What has been said here of the commissions earned through the discounting of bills holds true also of the purchase and sale of securities, the commissions due to the banker being either calculated from the total transac- tions of the account, on the larger side, or being at once added to or deducted from the calculated total amount of each individual statement. 337 In the former case the net profit in the way of commissions is transferred in one sum at the reckoning of the account to the collective account "Commissions;" in the latter case the commissions are booked in a separate account, but in that case, if a wrong impression is to be avoided, they have to be picked out singly and transferred to the commission ac- count. This distinction while of no importance as regards the question of the total amount of profit from the brokerage business, does exert an influence, of course, 334 T h e r m a n G r e a t B a n on the amount of commissions. Thus, for example, according to a resolution of the Stamp Union (Stempel- vereinigung) , the total transactions in dividend-paying securities are no longer carried in ordinary account, as was done so long as a commission was calculated only from the total transactions of that account (on the larger side) , but a special commission is charged, both for the purchase and for the sale of dividend-paying securities, which are booked in a separate account, the dividend-paying security account. With the reservations resulting from the above state- ments, an approximate idea of the extent of the broker- age business in the German credit banks may be gained from the following table, since a very large part of the commissions (Promsionen) booked on the commission account (Promsionskontd) is undoubtedly derived from the brokerage business proper. According to the Deutscher Oekonomist, 338 the German credit banks having a capital of at least i ,000,000 marks each showed the following totals (in millions of marks) : Ratio of Ratio of Commis- commis- Commis- commis- Year Gross profits sions (Pro-vi- sions (Pro- visionen) Year. Gross profits sions (Pro-vi- sions (Pro- visionen) sionen) . to gross sionen to gross profits. profits. Per cent. Per cent 1885 77.81 19.7 25-3 1897 179-37 40. 4 22.5 1886.... 78.69 20.5 26. o 1898.... 218.38 50-5 23- i 1887 80.97 20. 7 25-5 1899 261. 77 57-9 22. I 1888.... no. 48 24. 2 22. 1900.. . . 262. 02 60. o 22.9 1889.... 141. oo 32.1 22.8 1901 .... 258.40 58.9 22.8 1890.. . . 141. 04 32. 2 22.8 1902.. . . 256. 76 57-7 22.5 1891.. . . 112. IS 28.8 25-7 1903 253- 21 62.7 24-7 1892 in- 93 26.7 23-8 1904.. 273-SO 68.2 25-0 1893 no. 03 27.8 25-2 1905.. 330. 20 81.4 24-7 1894..-. 112. 29 28. i 25-0 1906. . . . 377-08 91-4 24-3 1895 ISO. 83 34-3 22.8 1907.. . . 382. 28 97-5 25-S 1896.... 158.93 35-4 22.3 1908.. . . 417-20 103.7 24-9 335 National Monetary Commission From this it appears that the commissions (Promsioneri) , with the exception of the years of depression of 1891 and 1892, kept on rising, very rapidly from 1885 to 1890, less rapidly but very steadily for the period following 1892; but since the total gross profits from 1885 on (with slight in- terruptions in 1891-1893, 1901 and 1903), also rose very considerably, the ratio of commissions to gross profits remained nearly uniform throughout the period 1885-1908, showing, in fact, a slight decline. At any rate, almost one-fourth of the gross profits 4 throughout that period resulted from commissions derived, no doubt, for the most part from the brokerage business (Kommissionsgeschdft) , 339 (G) THE TRANSFORMATION, FOUNDING, ISSUING, SYNDICATE, AND SECURITY BUSINESS? (i) The transformation and founding business. The objections to the German " mixed banking sys- tem ' ' are twofold. On the one hand it is urged that the deposits are not sufficiently secured by liquid assets, which implies a lack of soundness in administration. This point will be dealt with at greater length in section 8. On the other hand, it is pointed out that the transformation and founding business extensively conducted by the Ger- man credit banks involves grave dangers both for the credit banks themselves and for the community at large. This point we shall now proceed to discuss. In previous sections (pp. 4 and 5) we noted that the prompt undertaking of the transformation and founding business that is to say, the financing business proper 34 by the German credit banks, corresponded to an urgent 336 \ The German Great Banks need of the industrial and commercial interests of Ger- many. The very earliest German credit banks were created, first and foremost, for the purpose of promoting trade and industry, as indicated by the very firm name of the Darmstadter Bank: " Bank for Trade and Industry." The establishment in Germany of special banks of deposit was out of the question, mainly because, in view of the low level of prosperity of the population, such banks would not have yielded sufficient profits. Furthermore, in the very beginning of the volume we pointed out that the special nature of the transformation and founding business demands a vast amount of technical, business, and general economic knowledge and experience, which could only be accumulated little by little in the credit banks. The need for such experience, combined with the continuous watching of the money market and an accurate knowledge of the capital market, as well as of the factors connected therewith, such as the capacity of the market for taking up new securities and the con- ditions determining the market value of these securi- ties, etc., was of itself sufficient to create " special economic organs," which, to use Schaeffle's expression, were to perform "the special function of the initiative in the joint-stock industry. ' ' Moreover, the necessity of a division of labor, of combination and decentralization of establishments, of supplying the wholesale demand and of overcoming or warding off foreign competition, gave rise to industrial large-scale production, whose favorite form is the stock cunipaliy, because it 'obtains credit more easily than the individual entrepreneur, and on that account is more 23 337 National Monetary Commission susceptible of expansion. This was another reason why in Germany the task of transforming existing establish- ments into stock companies, or of founding new stock companies, fell to the share of the banks, as central reser- voirs of funds available for productive purposes, the stock companies themselves representing a concentration of small amounts of capital, each in itself insufficient for pro- ductive utilization. Large-scale industry and capitalism, bearing to each other the reciprocal relation of cause and effect, were thus enabled, by the aid of the German credit banks, to unite in an inseparable alliance, which impressed its character- istic stamp on the entire economic development of Ger- many during the two epochs under discussion. We saw (pp. 38 and 115) that in Prussia, up to the inter- vention of the credit banks, during the entire quarter of a century from 1826 to 1850, only 102 stock companies, with a combined capital of about 638,000,000 marks, were formed. In contrast with this, the first epoch here considered (more accurately the period terminating with the beginning of the second half of 1870), was marked by the founding of 295 stock companies with a capital of about 2,404,760,000 marks, due, first and foremost, to the activity of the German credit banks in the field of trans- formation and issue. But even this was merely the first puff of wind before the beginning of the storm. Beginning with the second half of the year 1870 up to 1874, 857 stock companies were formed in Germany, with a capital stock of 3,306,810,000 marks. This overproduc- tion in transformations^ 344 - and new flotations in these 338 The German Great Banks four and one-half years, as well as the great abundance of money and the fever of enterprise and speculation, were of course either created or at least reinforced by the sudden inflow of the 5,000,000,000 francs of the French war indemnity. Combined with other factors, that over- production was one of the most important causes of the great crisis of i873- 342 In the first epoch (from the middle of the nineteenth century to the year 1870), when industrial enterprises to a large extent lacked sufficient capital and energetic entrepreneurs, the banks, in many, perhaps the majority of cases, had to take the initiative in the work of trans- formation and founding. A natural incident of this proc- ess was that the banks often took a share, at times a very considerable share, in the transformed or newly founded enterprises through the purchase of stock or other direct participation. As noted above (p. 72), the 1852 report of the A. Schaaffhausen'scher Bankverein expressly states (p. 3) that it is the function of a large bank " to induce the 1 capitalists of the country to direct idle capital toward ^ those enterprises, which, when properly launched, in re- / sponse to real needs, and offering the guarantee of expert management, bid fair to bring adequate returns." It was that very bank, the oldest German credit bank, which as early as 1851 took a share in the founding of the Horder Bergwerks- und Huttenverein, in 1852 in that of the Coiner Bergwerks-Verein, the Colnische Baumwoll- Spinnerei, the Colnische Maschinenbau-Aktiengesellschaft, the Coln-Mtisner Bergwerks- Aktiengesellschaft, and the Colnische Baumwoll-Spinnerei und Weberei, wisely mak- ing choice of local enterprises in its near vicinity, which 339 National Monetary Commission it was in position to keep under steady surveillance. In this way it avoided those severe losses to which other banks, not equally cautious, were subjected at that time. Thus the Darmstadter Bank, shortly, before the crisis of 1857, took part in seven industrial enterprises which in 1856 it had transformed into stock companies or newly founded. These enterprises had a combined capital of 2,500,000 thalers, in round figures. Among them was a woolen and cotton factory, a spinning and weaving factory, a mining company, the Oldenburg-Bast Indian Shipping Company, and two machine factories. This permanent investment in stock meant afterward corresponding amounts permanently written off. In one case, that of the Mannheim woolen factory, the entire stock was lost. The Disconto-Gesellschaft in 1857 founded the Hein- richshutte mining and smelting works with a capital of about 1,750,000 thalers. In 1863, after heavy losses, it was found necessary to separate that enterprise from the Disconto-Gesellschaft and to place it in control of the business managers, with participation of the Disconto- Gesellschaft on a silent partnership basis. In 1872, the establishment was merged in the newly founded Dort- munder Union Aktiengesellschaft fur Bergbau- Eisen- und Stahlindustrie, which was destined to cause still greater trouble to the bank. The Mitteldeutsche Kreditbank suffered heavy loss through the acquisition of the Ludwigshutte at Bieden- kopf, which in 1858 had been transformed into a stock company under the name of Oberschlesischer Hiitten- verein, the share of the bank amounting to one-third of the stock. The same happened with the Wasungen cigar 340 The German Great Banks factory, in which the bank acquired a share interest in 1856. This initiative in the business of transformations and foundings, often dearly paid for by the banks, was largely reinforced and facilitated by the defective legislation of that time, which made practically no provision for the true indication nor the strict civil and penal responsibility of the persons concerned in the founding. It was only the new law (Novelle) of 1884 that denned the term " founder" (Grander), provided for the complete publicity of the founding process, and introduced strict civil and penal responsibility of the founders and their associates. The argument accompanying that law describes the pre- vious legal condition in words which deserve to be rescued from oblivion (pp. 87-88) : "The founding process was concealed; the true indication of the founders was not legally required; the leading pr-omoteES acted without any sense of responsibility and were exempt from any kind of control. The temptation to put private interest above that of the company to be established was too powerful. No person was appointed and no measures taken to guard the interests of the company. For a long time after its foundation the newly-formed company possessed no corpo- rate autonomy and remained defenseless in the hands of per- sons whose only object was their profit as founders. At the same time the public, which these persons, without any risk or responsibility, had in every possible manner sought to attract to a participation in the company, either formally organized or to be organized, had no reliable data whereby to form a correct estimate of the enterprise. In a number of the criminal proceedings that took place during the crisis just past [1873] it was not even possible to National Monetary Commission ascertain the names of the authors and publishers of the pros- pectuses by means of which the public had been invited to subscribe." So long as it was possible to start industrial transforma- tions and foundings under the screen of anonymity and freedom from any strict responsibility, there was of course also an opportunity for " industrial stock jobbery" ("indus- trlelle Ausschlachtungen") which Sattler, 343 with a some- what strange exaggeration, describes as the essence of trans- formation in general; and, above all, overcapitalization of the worst kind was the order of the day. There was no inquiry into the prices allowed for the property con- tributed (A p ports), nor into the compensations allowed for the founding and the preparations for it, nor into the intermediate profits made. The premium on the shares issued by the company did not flow into the reserve fund of the company, as it does now, but into the pockets of the original owners who were credited therewith on account of the property contributed by them (A p ports) . As, moreover, the names of the founders and the interme- diate profits were in nowise required to be published the transformation and founding business could not fail to become a special trade offering peculiar attractions. On the other hand, it is not surprising that of the 857 stock companies, with a capital of 3,306,810,000 marks, which, as we have seen, were established, in the time between the middle of 1870 and the beginning of 1874, that is to say, before the new Joint Stock Companies Law of 1884, not fewer than 1 23 were in liquidation as early as Decem- ber, 1874, and 37 were bankrupt (im Konkurs)*. 342 The German Great Banks As may be gathered from what has been said, the great banks in the first epoch very largely footed the bills for the transformations and foundings of that time. It must be further admitted that, after quickly earning the profits > often very large, from the transformation or founding, they did not leave the enterprises to their fate, as they might easily have done under then existing legislation, but retained a share in them, often to a larger extent than was compatible with the principles of liquidity. This was done not only in order to retain the necessary influence over the industrial enterprise, but also, as expressly stated in many reports of that time, in order to exercise a perma- nent supervision over the management of those enter- prises, a measure which was deemed indispensable in the interest of the issue credit of the banks, since the trans- formation or founding was in most cases followed by issues of stock or bonds. This was the main reason why it became customary even in the first epoch to appoint some of the directors of the credit banks as members of the supervisory boards of industrial enterprises. Even in the second epoch (1870 to the present date) there was no lack of instances of permanent direct par- ticipations of the banks in industrial enterprises, leading to the same untoward results as in the first epoch, though during this more recent period they have been the exception. Thus the Disconto-Gesellschaft involved itself in great loss and trouble ever since 1872 because of the foundation of the Dortmunder Union, and after 1890 because of its participation in the Internationale Druckluft- und Elek- trizitats-Gesellschaft (Popp) and in the Venezuela Rail- 343 National Monetary Commission way. The same happened to the Dresdner Bank by reason of the taking over of the Anglo-Deutsche Bank (1892) and the consequent participation in the Export and Warehouse firm (Export- und Lagerhaus-Gesellschaf t) J. Ferd. Nagel, which cost that bank about 2>^ million marks. The Deutsche Bank was for years involved in great difficulties and annoyances through the foundation of the Deutsch-Oesterreichische Mannesmann-Werke, estab- lished under its direction and with its participation in 1890, the bank having the presidency in the supervisory board. In 1900 the capital stock of that concern had to be reduced from 34,000,000 to 25,000,000 marks. In the case of the Berliner Handelsgesellschaft, which remained in the main a flotation bank even in the second epoch, the loss in 1873 arose not so much from voluntary participations in new foundations, in which it lost in round figures 158,000 thalers, or 1% per cent of its capital at that time, as from securities of newly founded companies that could not be disposed of that is to say, involuntary participations such as are apt to occur in the issue busi- ness. It suffered also exceedingly large losses through the founding of the German Local and Street Railway Company (Deutsche Lokal- und Strassenbahn-Gesellschaff) and the Petroleum Exploration Franchise and Oil Land Company (Petroleum-Bohr Gerechtsamen- und Oelland- Gesellschaff) , in 1880. It can not be doubted (see p. 242, under b) that the permanent assumption of large risks in enter- prises by credit banks is incompatible with the funda- mental principles of sound banking policy. Transgres- 344 The German Great Banks sions of this rule have almost always brought their own atonement, often of a cruel nature. For this reason the credit banks, during the second epoch, in order to avoid direct participation, have to a large extent resorted to the intervention of trust and finance companies for the pur- pose of exercising their promoting activity and for the financing of subsidiary banks. The reorganization of an existing enterprise is a less serious undertaking for a bank than a new foundation, because the earning capacity of the enterprise has already been tested for some time before transformation. On the other hand, it is more risky than a new foundation, if the transformation is compulsory. Such may be the case when the industrial enterprise is compelled to resort to this expedient for the purpose of canceling the bank credit granted to it. It may also happen that a bank which had granted to the enterprise long-term or short- term operating credit, which in default of repayment has little by little been transformed into permanent loans, is compelled to demand the transformation in order, first of all, to mobilize that credit in the form of stock, and then to realize on that stock as soon as the state of the market may permit. The special danger of such a compulsory transforma- tion, as noted in another connection (pp. 243 to 247), lies in this that under the pressure of necessity it is not pos- sible to give due consideration to the dangers that may arise from the transformation, in view of the overwhelming competition of other stock companies, or of the general politcal, economic, and business conditions, and the market conditions and prospects of the special branch of industry. 345 National Monetary Commissio n There arise the further questions, whether the enterprise is suitable for the form of a stock company, whether it can be made to pay in view of the greater running expenses which may with certainty be expected to result from the transformation, and, finally, whether a sufficiently capable management is on hand and can be permanently retained. All these questions are apt to receive insufficient considera- tion in the case of compulsory transformations, with dire consequences sooner or later. On the whole, however, the transformation and issue business during the second epoch proceeded much more quietly and conservatively than during the first epoch, the reason being that the banks had little by little acquired greater technical and business experience in this field, and were less and less required to take the initiative in foundings and transformations. That initiative was transferred to a constantly increasing extent to industry itself, which became more and more independent in pro- portion as it was enabled to determine the necessity and manner of investments of capital. In many cases also, as we have seen, foundings or transformations were occa- sioned, during the second epoch, in obedience to the requirements of the cartel policy, by purely technical con- siderations, as for example, the consolidation of a number of small competing enterprises into one large concern, the consolidation of different stages of the process of produc- tion in one establishment, the combination of iron fur- naces with coal mines and conversely, etc. Moreover, beginning with 1884, the intentional or cul- pably negligent overvaluation of property contributed (Apports) was made very difficult, the concealment of the 346 The German Great Banks names of the founders and their associates and of the founders' profits, or of profits made pending the organiza- tion, was rendered virtually impracticable under existing legislation, and the value of shares or compensations granted as an equivalent for property contributed or taken over was made subject to thrice-repeated audit by persons strictly liable civilly as well as criminally. These new conditions helped the industrial concerns to meet the crisis of 1900 infinitely better than that of 1873. But in addition, the new law of July 18, 1884 (art. i85b, Nos. i and 2), had placed the stock com- panies under obligation to establish a legal reserve fund, to which a certain part of the yearly net profits and the premiums on any new stock was to be transferred (see art. 262, commercial code). As a result, very consider- able reserve funds had been accumulated, especially by industrial companies, by the time the crisis of 1900 burst upon them, strengthening their financial status, and consequently also their power of resistance in critical times. 2. The issuing, syndicate , and security business. (a) THE ISSUING BUSINESS IN GENERAL. The issuing business is discussed in this place, because its development by the German credit banks has been such that it became a branch of the regular banking business from the very start, and because the issuing business in very many cases involves the granting of credit, though this is not implied in its nature. Accordingly it seems appropriate to discuss the issuing business in connection with the other credit business of the banks. 347 National Monetary Commission It was normally to be expected that the issuing business would grow in importance in Germany as a consequence of increasing prosperity, because the higher and middle classes in Germany have long been in the habit of invest- ing their available funds permanently either in enter- prises, participations, real estate, buildings and mortgages, or in securities. Bank deposits in Germany are made up mainly of the temporary investments of the available funds belonging to these classes and the operating reserves of the trading classes. By far the commonest form of permanent investment is in securities. () METHODS USED IN THE ISSUING BUSINESS PROPER, AND IN THE PRELIMINARY STAGES. The issuing business of the banks, which in Germany absorbs a very large portion of banking activity, is by no means one of those occupations in which large profits can be raked in without trouble and "without corre- sponding work." 345 On the contrary, it requires a vast amount of labor, sagacity, and caution on the one hand and of financial, economic, and mercantile knowledge on the other. In particular, those who conduct it must have a clear insight into the situation and prospective develop- ment of the money and capital market, the relation be- tween supply and demand in both markets, and into the working of those factors that may influence the rates of bank and market discount, the exchange rates, as well as the absorbing capacity of the ordinary and extraordinary circle of customers. Thus, even before underwriting the proposed issue, a careful and detailed examination is required, which pre- 348 The German Great Banks supposes a large amount of expert knowledge and practical experience. The decision whether the undertaking (that is to say, the financing) is advisable or not depends in each case not only on the examination of the intrinsic value of the securities to be underwritten, the reasonableness of the price demanded, and the solvency and trustworthiness of the debtor (state, commune, corporation, company, etc.), but on a large number of other important factors, which require close examination. 346 First and foremost, in accordance with the fundamental principles of banking policy, to wit, the distribution of risk and the maintenance of the liquidity of the assets which might be endangered by the tying up of funds for a considerable period, it is necessary to inquire whether a quick distribution of the proposed issue that is to say, a smooth and prompt completion of the financing and issuing business may be expected in view of the situation of the home market (occasionally also of foreign markets) , the general economic and political conditions, the existing and prospective ease or stringency of the money market, the known or probable issue of like or similar securities, some of which may bear a higher rate of interest, or be presented under better auspices, or correspond more closely to the existing favor or inclination of the public, etc. When the question of undertaking the issue has already been answered in the affirmative, tl\e fixing of the most advantageous conditions of underwriting and of payment requires the closest study and discussion. The very man- ner of underwriting will differ according to the situation of the money and capital market and according to the 349 National Monetary Commission periods for taking over and payment. In particular, these and a number of other factors have to be considered in order to decide whether it is advisable to underwrite the .entire amount in question unreservedly (in a lump or in partial amounts, to be determined by agreement) , or only out rcseryejjthe other ' * under option. ' ' In the latter case it becomes important to decide whether the prices of the * ' options ' ' may be the same for all the partial amounts to be taken up gradually, or whether the prices of the ' ' options ' ' may be graduated in a manner advan- tageous to the financing establishment, while the seller in such cases will frequently demand rising ' ' option ' ' prices. As regards the mode of payment and the periods of taking up and paying for the partial amounts assumed or to be assumed at option, the bank will have to try to secure the most advantageous conditions, having regard to the conditions of subscription that may afterwards be deemed practicable. If during the negotiations there occurs an unfavorable turn either in the financial situation of the debtor or in the money and capital market or in the political or gen- eral economic situation, and the bank while unwilling to undertake the issue desires to bind the other party, it may be found advisable to grant for the time being a certain credit to the party in question, and this will necessitate the determination of the conditions of payment of interest and principal. At the same time, however, the bank may either try to secure the right of preemption of the future loan, against which the credit is to be reckoned at a rate which is known to be seriously offered by a third party (which the bank will, of course, try to avoid as much as 350 The German Great Banks possible) , or an option on the entire future loan or a part of it, at a price or graduated prices to be determined beforehand. The manner of this graduation and the amount of the graduated prices may again give rise to protracted negotiations. f As regards the principle of the distribution of risk, the bank will Jiavejtp consider whether it is not already oyer- loaded with securities of the same kind, or even, if earlier issues of the same debtor have not been completely placed, or whether such overloading of the market with^ the same or similar securities exists or is to be expected. On the other hand, it is to be considered whether the risk of the underwriting may not be diminished by the forma- tion of an underwriting syndicate (Uebernahmekonsor- tiuni) or subsidiary participations (Unterbeteiligungen) . If the underwriting has been decided on, the juridical features of the contract may sometimes present serious difficulties, especially as regards the juridical form of the act of pledging demanded by the bank of property items intended to secure the loan. In that case foremost atten- tion must be paid to the law (possibly foreign law) pre- vailing at the place where the items pledged are located, and at the same time all the measures will have to be agreed on which are necessary and admissible in order to afford security also to the individual holders of the certifi- cates of partial indebtedness to be issued for example, the appointment of a representative, whose rights and duties will have to be defined. Again, it may be neces- sary that the so-called war clause be introduced, especially if a considerable period elapses before subscription, as is apt to be the case when the issue is to be made in different 35 1 National Monetary Commissio n countries simultaneously, so that official listing will have to be secured from several authorities. In virtue of this war clause the bank would have the right to withdraw from the contract in case any of the countries concerned becomes directly or indirectly involved in war. It must be borne in mind, however, that other unfavorable events may occur, and hence it will be advisable to endeavor to secure the insertion of a general withdrawal clause for example, to the effect that the bank has the right to with- draw in case the quotation for the leading government securities, such as German Imperial bonds or consols, shall have fallen below a certain point. Furthermore, the contract will have to provide that the debtor shall agree to furnish all documents, balance sheets, and other evidence required for the purpose of the subscrip- tion or demanded by the respective listing authorities (Zulassungsstelleri) ; to remit to the issuing house some time before maturity the amounts required for the payment of coupons or certificates drawn by lot, together with the commission due to the bank for this service, which also has to be specified; finally, to publish in designated peri- odicals those periodic notices which are legally required, in particular, statements of the number and designation of the securities which (in the manner agreed on that is to say, by lot or by free sale) shall become subject to re- demption. In regard to such redemptions, drawings, etc., the debtor will also have to agree to make these redemp- tions, as well as the payments on coupons, at the home of the underwriting bank, etc. After the underwriting has been agreed on, the,.,next thing t.n detfrmjne will be the price at which the issue is 352 The German Great Banks .to take place in order to complete the transaction as expe- ditiously as possible. On this point the following obser- vations may prove of value: A purely arbitrary fixation of the issue price is hardly ever practicable; on the contrary, the limits within which anything like a free determination of the issuing price is possible are, as a rule, decidedly narrow. In the case of shares or bonds of a new enterprise the lower limit is fixed by the price paid by the underwriter, with the addition of interest, stamp tax, fees and commis- sions, and a suitable profit. This profit, especially in the cases covered by article 41, section i, of the bourse law, 347 must also include a suitable premium against risk. The upper limit is defined by the market quotations of enter- prises of the same or similar nature, already listed at the bourse, and the price of which will correspond in the main and in the long run to the intrinsic value, the dividends distributed, and the prospective earnings. In the case of domestic state and communal loans the upper limit of the issuing price, unless determined by the debtor himself, will be fixed by the quotations reached by former loans of the same debtor or by corresponding loans of other states or communes enjoying about the same credit. It may happen, however, that these quotations are kept artificially low with a view to the impending new loan, or that they are merely nominal and could not be maintained in case of large transactions. The lower limit in this case, too, is the price to the underwriter, plus inter- est, stamps, fees, and a profit, which, if possible at all, varies in the case of domestic state and communal loans between one-eighth, one-fourth, and, in rare cases, one-half 353 National Monetary Commission of i per cent, while even in the case of foreign state loans a profit of three-fourths of i per cent is a rarity. The issue prices of securities offered for sale simulta- neously at several bourses at home and abroad have, of course, to be so fixed at home that a disturbance of the domestic sales through foreign sales during the period of subscription and for some time after is not to be appre- hended. In case of an issue of bonds of a debtor who is already represented by listed securities bearing a higher rate of interest, the holders of these may be tempted, immediately upon the publication of the new issue, to sell their old securities, if they can do so with profit, and to buy the new securities bearing a lower rate of interest, in case the price of issue is such that a rise may be expected. As this operation is apt to disturb and disorganize the whole market in these securities, it may be desirable to guard against it by an appropriate price of issue and by other conditions of subscription. It may, indeed, happen that in the issuing of securities the price has to be fixed at a higher figure than might nor- mally have been the case, especially when in time of a rising market, by reason of an actual or expected increase in the earnings of enterprises and the intervention of speculation, the entire level of quotations rises. This will of necessity have a marked effect on the premium on newly issued securities, especially on those issued in connection with an increase of capital of existing companies. 348 .. The time at which an issue (subscription) is to take place is of great importance as regards the question of under- writing in general and as regards the issue and the price of 354 The German Great Banks issue. It is to be ascertained whether the bank or market discount, which may be low at the time of the underwriting, or the pertinent foreign exchange rates, might not, through existing or impending causes, tend to become more unfa- vorable at the time for which the issue is planned. If the debtor desires the issue to take place at a certain time, per- haps coincident with the end of a quarter, when there is notoriously a strong demand for cash in the money market, it may be well to inquire whether it would not be better to fix the date at the beginning of the next quarter, for example, at the beginning of January, when, by reason of payments on coupons, of bills, salaries, mortgages, interest, rent, etc., there is wont to be greater ease in the money market. If this be not feasible, it remains to be considered whether the taking up of the securities should not at least be made easier for the subscribers or purchasers through a graduation of the periods of taking up and payment, or through facilities in the way of calculating the interest, etc., whether a larger bonus should be paid to the bankers whom it is proposed to interest in the placing of the securities, 349 whether the requirement of a cash deposit at the time of subscription should be waived, etc. Furthermore, steps should be taken, especially through a low price of issue, to prevent the market from being dis- organized, after the close of the subscription, by immediate realizations of so-called "concert subscribers" (Konzert- zeichner), that is to say, persons who, in expectation of a rise of the paper issued, subscribe solely for the purpose of selling their subscriptions at once on the bourse, no matter how insignificant the profit. One way of preventing this 355 National Monetary Commission is to give some kind of preferential treatment to those sub- scribers who are willing to agree not to sell the securities allotted to them for some months, but to deposit them with the issuing firm. Finally, as regards the time after the issue, especially when an underwriters' syndicate (Uebernahmekonsortium) has been formed, it remains to be considered up to what amount usually stated in the syndicate contract the securities shall be bought up in the market in order to pre- vent an immediate or premature fall of the quotation be- low the price of issue, in so far as this fall is not justified by the general situation or by the state of the bourse. According to the practice and banking etiquette pre- vailing in Germany, an issuing firm is not merely justified but positively in duty bound, by the requirement of the ' ' care of an ordinary issuing firm, ' ' to effect such pur- chases of its own issues. This practice can not be re- garded as an attempt to produce an artificial rise of quo- tations or to effect their artificial "regulation." There is always the danger that speculators may attempt, imme- diately or very soon after the issue, to depress the market value by speculative sales or realizations, while there may be no intrinsic reason for a decline. To guard against this, it is well to have some one in the market ready to take up these speculative securities, at least within certain limits. Of course this precaution must not be carried so far that speculators might be encouraged to speculate "on the back ' ' of this very syndicate which is ready to purchase. The execution of this part of the issuing programme thus requires special knowledge of the bourse and special cau- tion and alertness. 356 The German Great Banks The considerations here sketched have to be applied to a greater or less extent before, during, and after each issue. In addition, special difficulties may arise in certain cases, especially in connection with the underwriting of foreign loans, when care has to be used to insure against fluctua- tions in exchange, or against the thwarting of the issuing operation through arbitrage operations of domestic or foreign concerns, made possible by the condition of the market. At any rate, the multitude of factors to be taken into consideration in this field suffices to show how incorrect it is to suppose that this important branch of the activity of the German credit banks can be conducted without corresponding work, sagacity, and prudence. There have been cases in which the principles controlling the issue of foreign loans were not observed by German issuing firms, any more than by foreign firms, possessing much longer experience; but aside from these, it will have to be admitted that in the immense number of instances, especially in the second epoch, there were but very few cases in which the issues could be said to have been under- taken in a rash or otherwise questionable spirit. 350 The prospectuses published for the purpose of issue, which, it must be said, are for the most part read only afterward and only when something unfavorable has happened, have almost invariably contained, in conformity with the law, the data necessary for forming a judgment regarding the intrinsic value of the securities issued. They have also abstained from any undignified advertising, which for that matter would not be allowed by the authorities on whom the admission to the bourse depends. 357 National Monetary Commission The German credit banks know from their own expe- rience, or from that of other banks, that nothing is likely to injure the reputation of a bank so severely and so last- ingly among its customers and among the general public, as a failure to discharge in the most conscientious manner its duties in connection with the issue of securities. 351 (/3) THE EXTENT OF THE GERMAN ISSUE BUSINESS. According to the Deutscher Oekonomist, the market value of all the capital raised in Germany by way of issues since 1889 was as follows (in millions of marks) : i88o. . . . ,74.1 i8q4. I, 4.2O i8qq 2 6l2 IQO4. I QQ'Z 1800. . . . , 520 i8q=; IQOO I 777 3 iqo 1801 . . . . , 217 i8q6. . . . I, 8q6 IQOI I 62 ^ 1006 2 74.1 i8q2 016 1807 I QA.A. iqo2 2 I IO IOO7 2 I ^ S I8q3. . .. ,266 1808. . . .2. 4.O7 .1.66=; I008. . . . ?. /tie From 1883 to the end of 1907, there were issued in Germany securities to the selling value of 40,000,000,000 marks in round figures. For the years 1900-1907 both the Frankfurter Zeitung and the Deutscher Oekonomist have arranged the issues by classes of securities, in the tables reprinted in the fol- lowing pages. 358 The German Great Banks VO vj oO O* ON *"- O w fO 5 VO "2) tl 5 S ll **lv*?-ss ! HI NO NO 1 O MOO 10 ro 10 ro NO H oo' * N' M O> 00 NO O*> O t P. NO O H t-~ O M u O 1 * M TT M NO NO O ro ^J* H O rt'cd S > rOMMr^ w NO N ON p rf H t- H NO NO M 00 00 ro ON M 10 u 1 1 10 -4 O> ro NO H OIH M t- 1- H l~, H CO PI 00 O O 00 O t- Pi ^ M 00 4 00 ON H NO H O Market value o'o o'o IOOO > M > C?OO 1) ^ioo> r "5-fo V S o 1 >0 CO P ^ HI O 3 00 r- CO M ON 10 10 10 00 M >0 ro 6 * tO IO PI P M ON u 00 oi W 10 PO TT oo H t * t ON 10 ON M H oo 10 P) PI M t! lOONMOWHr^MON VO t ro M o f jjj PI Ooo O t^M r-oot^ U? O O NO 10 00 s> M ro W PI M ro IH PI PI H M ON vo O 00 vd 00 ^- N' NO H o' H " ci > 1 10 VO ON N l^ N 10 H NO VO ON -t -3- ON M 00 N t- t^ in oo IO > CO M J^ - N VO ON CO ^t vo ^ ON * 00 vo 00 1 vO M Market value. N vo 00 O CO H co vd 10 CO IO CO M M vO vo CO t^ O *O 00 H t^. ON O 00 C i (M t^. Oi ON M M n- CO vO M I 1 CtJ HO ON vo CO O M vO ON O O vo 10 00 CO 10 O O 10 CO oo vO IO oi d vd ci t~- f) 00 \O n vd N IO 06 8 CO H 9 CO H 10 w N H H |s CO H VO VO 10 5 00 vo 10 vo CO 00 IO O O ON vo (N H M 10 t- vo o vO vo 10 8 1^ H ^3- 10 * 2 M 1 ON OO t>- ON co NO O O vo O ON O vo ON CO oo vO T CO O\ H 00 1 . 10 H 1 ON 1 3 10 H ' ' : ||: : 8 i : 1 f I 1 : 'p H tt '. '. | J 1 I rt P "o 111 M ; '. z '. 1 o ; "rt 3 S 1 "^ ** S rt '"8 1 1 i 8 5 3 i J 1 1 1 1 J "rt g S >, ^ ^ -c 1 &* 3 ^^2 1 ^3 S w ^ "S5 ^fiS^sfia *~** . t ^ ^ *^ Jij H'*-*^ 3^^ ^ e 1 -|J ?3 illlilil 360 The German Great Banks t^ i* 11 NO co NO t NO M O 00 NO PI ON co t^ PI HI ON NO r* PI t^ t O t t ON 00 t- O f 10 t PI HI H PI * Ov 0\ 00 TroONO\f Os\O N M troO\r^*O tO fO \O 10 \O ' P! PI ro H! t N N i>. to ro lO t ro HI w "t vO PI ON >o ft 1 OMt^Tf . TT NO M NO O HI in PI 00 ON, NO NO S 8vOroOOHiO>vOt OOroOO\vOOOOH 0\ t^ > 01 I NO HI to f -Mi-trot t 10 O 00 l^ 00 NO 10 in N HI HI H oo HQvOHO OOrot 10 ro N 1^ 00 10 t ro w H Pt NO t^ oo t^H ON t l^ ON l^ NO 00 oo HCOO\P)OvOO\vOO S M t CO ON VO 00 ro t O 00 00 \O CO t w PI >o >o ON jj rf 8coO\O^O^Ot PI 1 oc OH oioodvo t^d vo*Ofom toOfoT t t^ OOioiOPl^HioO\ ^V}tO\PlHltHlO\ ro t O OO 00 00 IO iA fe ' o o Market value. OOO>lO(NlH'O ro M t 0\ t 1 CO vO O O\ H t O ON 'O t t 00 PI 10 O ON ^ O> H 10 vo PI P) 10 vo H M rr 10 t PI 10 H H 10 ON H PI 00 o a ij 1 I 8MVONNIOONOO t 10 co H ro t^. CO O O CO O\ O \O ro 00 00 00 t O 00 -HI oo oo o\ P! t \d 6\ PI 10 VO H H M . t PI O H H CO 0\ CT> O oo "S t^-tt^oo ttiOH o 00 N t^roroN * O\ vo H 0\ OJ a O t^O rooo iou->r^io 10 O\O PvO HlotroPl PI > iodr--J^H ro\O O P) CQOw^OcsOrot^Ov 10 0\ fOWvOOO O\coO\P) t ON A *o H CO >0 M M PI o s ::;:::::: .5 '- : : I : : :::; Q I- ; i- 1 : b : : : : I- : 1 : : -S ^ : J : o : : : ; : ; : '3 4 i a 1 ": 41 -s Class of secui 1 : :^- i | : : : -s-s-^ ;1 : t j j i ^ i ;. |IiS|5 ijj Illllfliil --acjafla^'S>''n ^ g . . 9 5 t, ^ 1 w t3H Os IO 00 so lOCOOO o oo so oo' 4 4 oo' co to \0 M 00 S 1 fc* Os 1 CO N "* CO CH N H CO N" * CO to 1^ "t W o 5 00 o* 11 M OS M ^fr O OS IH M t t^ CO s CO M Face value. N O O co O 00 O W O O \O N O T * 1-1 CO oo M CO w oJ IH 10 r- M H co N . 11 O 0\ t^ l^ 00 O CO ! H 1 OS IO IO O IO O O O * 00 \0 CO 10 1 O * N M CO 00 o Si ! g s : : : 1 1 If; -, kg 9 Class of j 42 M - III : : * 1 : 1 ^ I i ^ s llllllll I Grand total .... 362 The German Great Banks In these tables 352 the amounts of shares, bonds, and mortgage bonds set down are those officially reported in the market. It is important, however, to note that the following were omitted: Conversions; issues effected pri-\ vately, outside of the official market (which were only stated when they were advertised in public journals) ; mere introductions of securities already quoted at Ger- man bourses; finally, new securities which made no de- mands on the market, inasmuch as they were issued solely for the purpose of exchange against shares, etc., . of another enterprise. The figures given by the Frankfurter Zeitung are seen to differ from those of the Deutscher Oekonomist very considerably, both in the enumeration of the different classes of securities and in the amounts under the head of the same classes of securities. 353 A word of explanation is required in regard to the issues of foreign state loans (see article 2 n. G. 2d, below), noted in both tables, because on the authority of these tables the complaint has been made, even before the Bank Inquiry Commission, that these issues have evidently had a decided effect in making our balance of payment more unfavorable. The prospectuses thus far issued concerning the intro- duction of foreign securities at the bourse give no indica- tion of the amounts that have really been placed in Ger- many. On the contrary, according to the regulations for listing hitherto in force, the entire foreign loan, even if it was offered simultaneously in different places at home and abroad, had to be noted at the German bourse, for example, in Berlin, even when only, say, one-third of the entire loan was intended to be placed in Germany and 363 National Monetary Commission was so placed. It is true that, in virtue of this notation, the other two-thirds also had acquired ' ' the right of domi- cile in Germany, ' ' as one member of the Bank Inquiry Commission expressed it. However, the effect of this favors not only the foreign country, which in such case might throw on the German market the two-thirds placed in that foreign country, but it also favors Germany, because the one-third actually paid for in Germany may also be utilized abroad, if desired, since the conditions of listing at the foreign bourses are as a rule identical with those in Germany. If we were to change our regulations for listing, foreign countries would doubtless do the same, and the consequence would be that the foreign market would be closed to us as regards the part of the foreign loan placed in Germany, a result which might be attended with grave consequences in critical times and in time of war. Furthermore, in regard to the statements made in the tables, it is to be noted that foreign countries, if they expect a profit, also partake of the foreign loans placed in Germany. It must also be remembered that foreign securities always tend to return to the home country, as was extensively illustrated in the case of the Austrian, and in recent years also in the case of the Italian securities. How large a part of any foreign loan has been perma- nently placed in Germany can thus not easily be esti- mated, and this is the reason why the two tables (see note 353 on p. 837) differ so much. (6) THE ISSUING OF INDUSTRIAL SECURITIES. 354 The business of issuing industrial securities is the key- stone of the vast structure of the industrial relations between banks and industry, whose foundation is the The German Great Banks current-account business. The reverse process, namely the case in which the issue of new securities of an enter- prise transformed into a stock company becomes the bridge for a regular current account and credit business between the two parties, is of much rarer occurrence. The dangers to the banks arising from both classes of busi- ness are equally great, being perhaps even greater in the current-account business, for the simple reason that, as we saw, no fixed rules for industrial credit have yet been developed in the German banking business, assuming even that such rules could possibly be evolved. On the contrary, the technique of the issuing business, its premises and limits, have become more and more familiar to the German credit banks, often through sad experience. Then- details are thus well known, both as regards the issue of new securities of an existing enterprise to be transformed into a stock company (which, according to art. 41 of the bourse law can take place only one year after the entry of the company on the register and after the publication of the first balance sheet) , or those of a new enterprise, or, finally, those arising from an increase of capital, fusion, or reorganization. Of course the risk in the issuing business will be less when the bank acts merely as broker, that is to say, on account of the industrial enterprise, though in its own name. Speaking of reorganizations, it may be remarked that the German credit banks, especially the great banks, have rendered important service in that direction to distressed enterprises, as well as to the public in general, especially during the second epoch. After effecting the reorgani- zation, which often involved great expenditure of time, 365 National Monetary Commission capital and labor, and could only be carried out in the face of great difficulties and opposition, the banks, by staking their own issuing credit, restored the earning capacity of the reorganized enterprises and put an end to the prevailing disorder in the trading of shares, bonds, and mortagages. This was illustrated not only by -the reor- ganizations of the Berlin mortgage institutions, effected by the cooperation of all the great banks and banking houses of Berlin, after the collapse of 1901, but also by a series of other reorganizations, such as those of the Lothringischer Hiittenverein Aumetz-Friede and the Dif- ferdinger Gesellschaft (now Deutsch-IyUxemburgische Bergwerks- und Hiitten-Aktiengesellschaft in Bochum und Differdingen) . After their financial and technical reconstruction, these companies contributed materially toward raising the pig-iron industry of Luxemburg and Lorraine to its present commanding position. On the whole, however, the relations of the banks to jndustry take the slower way of current-account credit grid the many forms of short-term_crg^^ajbove_described , in which the temporary demand for operating credit is satisfied. Only little by little is the long-term credit de- veloped which finds its natural commercial expression in the issue of shares and bonds. By such an issue the connection between the banks on the one hand, as principal representatives of the capi- talist system of economic organization, and industrial pro- duction on the other hand, is drawn so tight that they are thereafter joined "for better or worse." Sooner or later this connection finds further expression in the appoint- ment of members of the bank directorate to the supervis- 366 The Great German Banks ory council of the industrial enterprises, while occasionally some "captains of industry" are appointed as members of the supervisory councils of banks. The former practice, ..as was pointed out elsewhere, is virtually caused by the necessity for the banks to maintain the influence which they have gained through the issue; also by a regard for their issue credit, which makes it the duty of the bank, according to the well-established and sound practice of German banking, to retain such permanent control. The converse practice that is to say, the appointment of lead- ing personalities of an industry as members of the super- visory boards of banks, where, as a rule, they have much less influence than the representatives of banks in the management of industrial companies is not merely an act of courtesy toward the latter, but also the manifestation of the mutual desire for an outward expression of the close business relations that have been established and the expression of a desire on the part of industry to main- tain the closest possible agreement in views and aims as regards the industrial policy of the banks. Appendix IV gives a statistical view of the extent to which such permanent contact between the two parties, in mutual desires, demands, and interests, has been estab- lished during the second epoch by the appointment of representatives of the great banks to the supervising boards of industrial companies. The table also shows the extent and degree of intimacy (manifested especially in the filling of the office of president) of the industrial relations of the great banks to the several branches of industry. 355 This form of "friendly" relations through the filling of positions on the supervisory board, it must be confessed, 367 National Monetary Commission was sometimes effected only after considerable unpleas- ant argument, as, for instance, when the Dresdner Bank gained two places on the supervisory board of the Laurahutte. 356 The slow and laborious work which often has to precede the moment at which the question of an issue becomes practical can not be too highly estimated as regards its economic value. The cautious forward movement, step by step and stage by stage, of a private industrial enter- prise or an industrial stock company, that may have been founded by the aid of a bank, toward higher and higher aims is aided by a gradually growing current-account and acceptance credit in proportion as the yearly surplus from operation does not suffice for the necessary reconstruction and additional construction. The burden of interest thus imposed on the enterprise is in the nature of things ac- commodated to the state of improvements or enlarge- ments of the time being. The larger and permanent investment credit subsequently granted to the strength- ened enterprise is merely the natural closing act of this process of healthy and organic development assuming the form of an issue of stocks or bonds. Examples of this may be found in abundance in the connections of every great bank with industrial enterprises especially in the mining, machinery, and electrical industries. On the other hand, the banks have found an especially important and extensive field of activity in the promotion of industrial combinations, consolidations, and fusions, which, as a rule, are carried out exclusively or preferably through the agency of issue credit. This tendency of the business policy of industrial enterprises, manifested in 368 The German Great Banks various ways even during the first epoch, became especially pronounced in the second epoch through the development of the cartels. Thus, as early as 1853 the Phonix Com- pany in I v aar, established as a stock company, arose from a combination of four iron furnaces and the Nassau iron- ore mines. In 1898, with the powerful aid of the banks, it absorbed the Westfalische Union. 357 Similarly, the Horder Verein, founded in 1852, decided in 1864 to under- take the introduction of the Bessemer process, and accord- ingly acquired a number of iron-ore mines (Kleineisen- steingruberi) . The possession of these, however, ceased to be a necessity when the Horder Verein, with the assist- ance of the banks, acquired in 1879 the Thomas and Gil- christ patents. 358 Again, the great increase in the number both of the so-called " furnace mines " (Huttenzecheri) that is to say, iron furnaces which acquired coal mines and of the so- called "mine furnaces" (Zechenhiitteri) that is to say, coal mines which acquired iron furnaces during the sec- ond epoch was in many cases rendered possible only by the aid of the issue credit of banks. The same was true of the so-called combined plants, which became necessary after the introduction of the Thomas process and which gave to them so great a superiority over the so-called "pure works" (reine Werke), whose condition became more and more difficult. In the same way the banks promoted the great number of fusions, whose object was either to get rid of trouble- some competition, to combine successive stages in the process of production, or to diminish the cost of produc- tion. 359 Such fusions were especially frequent in the min- 90311 n 25 369 National Monetary Commission ing industry; for instance, in the case of the Gelsenkirchen Mining Company and in the electrical industry, which from the very beginning was in close touch with the banking interest. The regular current-account connection of the banks with the great industrial establishments gradually led to the result that the influence of private banking houses, till then considerable, was crowded into the background, despite the long-continued business connection between these private banks and industry. The issue business of the banks, which required larger and larger capital and increasingly permanent investments that is to say, the assumption of a great and long-continued promoter's risk tended still more to weaken and eliminate the medium- and small sized private banking houses, a process which extended far beyond the limits of the individual indus- trial districts, and which was intensified and accelerated in a marked degree by the above-mentioned provision of the bourse law (art. 39, now 41). The assumption of fiscal agencies (Zahlstelleri) for the payment of dividends and interest on bonds and for the redemption of drawn bonds, though at times un- connected with any issue, may nevertheless be regarded as an incidental effect of the issuing business, tending to promote not so much the process of concentration as the profits of the banks, but at the same time leading occa- sionally to new current-account connections. Hence, so long as the requisite caution is observed, the fiscal agen- cies, combined with the positions on the supervisory boards, supply a means whereby the industrial connec- tions of the great banks may be measured. From the lists 370 The German Great B a n of the six great banks of Berlin for 1903-4 Otto Jeidels as- certained the following numbers of industrial fiscal agencies of these banks, which, however, are probably incomplete (especially as regards the Disconto-Gesellschaft and the Berliner Handelsgesellschaft) : 36 Number of fiscal agencies. 1 . Deutsche Bank 250 2. A. Schaaffhausen'scher Bankverein 211 3. Dresdner Bank 191 4. Darmstadter Bank 161 5. Disconto-Gesellschaft in 6. Berliner Handelsgesellschaft 95 As regards the class of industrial securities issued, it may be said that, as a rule, the issue of shares is preferred for obtaining the capital for permanent improvements, while the issue of bonds (redeemable by amortization within a fixed period) is preferred for obtaining the means for improvements of considerable duration, indeed, but yet terminating after the lapse of a certain time. It must, however, always be kept in mind that the issue of bonds, unlike the issue of stock, burdens the enterprise permanently with fixed interest charges, so that it re- quires great caution. According to Otto Jeidels, in the case of the six great Berlin banks above named, the issues of industrial bonds in the boom period of 1899 amounted to about one-fourth of all syndicate business (40 bond issues out of a total of 161 syndicate participations), and in 1901, the year of the crisis, as much as four-fifths of all syndicate participations (83 out of ioi). 361 According to the Deutscher Oekonomist, the actual capital raised by means of issues of German industrij shares was as follows (in millions of marks) : 37 1 National Monetary Commission 1892 .... 2.5 2 A 1897.. l8q8 ... 266 1902 . . . IQO^ . 184 IPS 1907 iqo8 431 1 894- 36 I8 99 . I9OO. ... 2 7 6 461 1904. . . 1905 . . . . 360 552 1806. . . 2I.V iqOI. 155 iqo6. . 6.S2 According to the table from the Deutscher Oekonomist, given above (pp. 360 and 361), the actual capital raised in the shape of German industrial bonds issued from 1900 to 1908 was as follows (in millions of marks) : 1900 178.77 1901 193-29 1902 .... 158. 10 1903. 1904. 64. 96 no. 14 1905... 115.24 1906. . . 183. 10 1907 172.79 1908 314 The foreign industrial bonds admitted to trading at the bourse from 1897 to 1907 amounted to a nominal value of 135,100,000 marks, of which 6,300,000 marks repre- sents the value of converted bonds (Statistisches Jahr- buch fur das Deutsche Reich, 29 Jahrgang, 1908, p. 238). The total number of industrial issues by the six great Berlin banks 362 in the nine years from 1895 to 1903 was as follows : 1895 1896 1897 1898 1899 1900 I9OI . 1902 1903. Deutsche Bank 10 i3 13 17 19 25 17 16 20 Disconto -Gesellschaf t IS 9 IS 21 23 26 19 14 9 Darmstadter Bank . . 8 7 10 27 IS 27 14 20 20 Dresdner Bank 25 i? 7 2S 3i 29 14 14 IS A. Schaaffhausen'- scher Bankverein. . 25 19 21 30 So 29 18 14 14 Berliner Handelsge- sellschaf t 16 16 24 24 23 22 19 15 ii Finally Jeidels endeavored to ascertain the geographic distribution 363 of the industrial relations of the great banks and the distribution^ by classes of industries, of the Industrial companies 364 connected with the banks., both ^ , fr^rn tjip data regarding their representation on the super- 372 The German Great Banks visory boards arid the fiscal agencies, though the latter method can yield no reliable results. There can be no doubt that the distribution of industrial relations is most regular in the case of the Deutsche Bank and of the Dis- conto-Gesellschaft, and next to them in the case of the Ber- liner Handelsgesellschaft and the Darmstader Bank, although the latter shows on the whole more South Ger- man and (as a consequence of the absorption of the Bres- lauer Disconto-Bank) , also Silesian industrial relations, which is also true of the Deutsche Bank. The industrial relations of the Dresdner Bank, naturally, are mostly with the Kingdom of Saxony, those of the A. Schaaffhau- sen'scher Bankverein with Rhineland and Westphalia. The distribution of the industrial relations by branches of industry is most regular in the case of the Deutsche Bank and the Disconto-Gesellschaft, both banks having extensive relations with foreign railway companies, and the Deutsche Bank also with electrical companies. In the case of the Darmstadt er Bank the relations to tramways and breweries predominate, in the case of the Berliner Handelsgesellschaft the relations to the "heavy indus- tries, "such as iron and other metals (schwere Industrie), electric companies, and tramway enterprises. Among particularly close connections during the second epoch we may mention the following: The Deutsche Bank with Siemens & Halske, the North German Lloyd, the Hamburg- American Steamship Com- pany, the Huldschinsky Works, the Deutsche Petroleum- Aktien-Gesellschaft, the German and Oversea Electrical Company (Deutsche-UeberseeischeElektrizitats-Gesellschaft) , the Electric Elevated and Underground Railway Com- 373 National Monetary Commission pany (Gesellschaft fur Elektrische Hoch- und Untergrund- bahneri) . The Disconto-Gesellschaft with the Gelsenkirchen Min- ing Company (Bergwerks-Aktien-Gesellschaft), which on January i, 1905, entered into community of interest rela- tions with the Red Earth Furnace Stock Company of Aachen (Aachener-Hutten-Aktien-Verein Rote Erde) and the Schalker Mine and Furnace Company (Gruben- und Hutten- Verein) the Dortmunder Union, the Aschersleben Potash Works, Ludwig Loewe & Co., the Machine Factory and Flour Mill Construction Works (Maschinenfabrik und Muhlenbau-Anstalt) Luther in Braunschweig. The Dresdner Bank with the Kattowitzer Mining Com- pany, Felten & Guilleaume, the German-Austrian Mining Company (Dentsch-Oesterreichische Bergwerks-Gesellschaft) , the Lauchhammer Stock Company and the Laurahutte. The Berliner Handelsgesellschaft with the General Electric Company (Allgemeine Elektrizitats-Gesellschaft) the Harpen Mining Company (Harpener Bergbau-Gesellschaft) , the Hibernia, the Consolidation Mining Company (Berg- werksgesellschaft Consolidation) , the Upper Silesian Iron Industry (Oberschlesische Eisenindustrie) , the Upper Sil- esian Coke Works (Oberschlesische Kokswerke) , the Accum- ulator Works, Limited (Akkumulatoren-Fabrik Aktien- Gesellschaft) in Berlin. The A. SchaafThausen'scher Bankverein with Aumetz- Friede, the Harpen Mining Company (Harpener Bergbau- Gesellschaft) , the Hoesch Steel Works (Stahlwerk Hoesch) , the Bochum Union (Bochumer Verein absorbed in 1907 by the Phonix) , the Phonix, the Hoerder Mining and Fur- 374 The German Great Banks nace Company (Berg-werks- und Hutten-Vereiri), the Inter- national Exploration Company (Internationale Bohrgesell- schaft), the Hercynia Company (Gewerkschaft Hercynia). The Darmstadter Bank with the German-Luxemburg Mining and Furnace Company (Deutsche-Luxemburgische Bergwerks- und Hutten-Aktien-Gesellschaft) , and the Peace- ful Neighbor (Friedlicher Nachbar), the A. Riebeck Works (A. Riebeck 'sche Montanwerke Aktien-Gesellschaft in Halle), the Company for Brewing Industry (Aktien- Gesellschaft fur Brauindustrie) , Griesheim-Elektron Chem- ical Works (Chemische Fabrik Griesheim-Elektron), and the Chemical Works formerly H. and E. Albert (Chemische Werke normals H. and E. Albert (Biebrich). The representatives of the banks on the supervisory boards of the industrial companies have always taken special care to fulfill one very effective part of the " advi- sory function " 365 of the supervisory board, viz, to provide for the disposal of the products of the industrial com- panies in question to suitable industrial enterprises on which the banks were able to exercise 'some influence. As regards industrial issues, Eberstadt 366 first ascertains the net amount received by any particular industry from the issues undertaken in its behalf, which amount he calls net capital claim \Kapitalreinanspruch\ (net capital receipts [Kapitalreinempfang] would be a more correct term) consisting of the nominal value plus the (purchase- price) premium or minus the agio ; whatever goes beyond that "net claim" or "net receipts," as a result of a rise in the market value, he regards as pure ' ' speculation, ' ' due to the "gambling propensity of the public" (p. 15). 375 National Monetary Commission In this way, of course, he arrives at enormous ' ' speculative amounts. ' ' How false this view is may be seen at once from the fact that the quotations of any particular day, mostly based on insignificant transactions, can not be regarded as a measure even for large amounts, let alone the entire stock, and because the "speculators" very largely reinvest the profits of their speculative sales in industry. Above all, however, the statement is untrue because the quotation depends first and foremost on the varying intrinsic value of the securities, that is to say, on the condition of the enterprises in question, and does not depend on the * ' gambling propensity ' ' either solely or even in large part. 367 It is because he disregarded the above considerations that Bberstadt was able to arrive at the conclusion (p. 42) that from January i, 1895, to April i, 1900, nearly 1,000,000,000 marks, that is to say, for the average of that period about 186,500,000 a year, were employed solely for ' ' speculative purposes ' ' in stock, mining and smelting enterprises alone (he does not even include " Kuxe, ' 'i.e., mining shares) . In contrast with this, he estimates the ' ' demand for capital by industry ' ' for the same period and for the same branches of industry at only about 419,500,000, or about 80,000,000 marks a year. The latter statement is as erroneous, and moreover as misleading, as the former. The demand for capital in the mining industry, as we had repeated occasion to note in speaking of the economic development during that epoch, falls far short of the amounts supplied by issues, which in bad years are only possible to a limited degree or not at all. On the contrary, it is supplied also by way of 376 The German Great Banks current-account, discount, acceptance, report and collat- eral credit, etc., to a much larger extent than is indicated by Eberstadt. It is, of course, difficult to ascertain the amounts thus placed at the disposal of industry in general and of the mining industry in particular, either for the period as a whole or for each year, since the amounts in question are not separately booked. Certain it is that they always played a great part. The most summary comparison between the demand for short-term credit, recorded on a previous page for a number of in- dustries, with the amounts of credit granted during that period, suffices to show that the issues alone came no- where near covering that demand, and that the banks throughout that period granted industrial credit 368 to the utmost possible limit, occasionally even to a degree incom- patible with a sound distribution of risk. 389 As regards the financing of shares arid bonds of real estate companies (Terraingesellschaften) , it may be said that in this direction the great banks have hitherto, in many, perhaps most cases, not pursued any far-sighted economic aims, and that to a large extent they have not concerned themselves with the great questions of land policy. (c) THE FLOATING OF GERMAN STATE AND COMMUNAL LOANS. In describing the development of the German banks during the first, epoch (1848 to 1870), we saw that all the great banks then in existence regarded it as an essential part of their program and business policy to take part in the business of floating state loans. State- 377 National Monetary Commission ments to this effect are found in some of the early annual reports of these banks. 370 On page 62 we gave a review of the most important state and communal loans, which were taken over during the years 1854 to 1869 by the Darmstadter Bank and the Disconto-Gesellschaft, i. e., the two leading banks of that period. Success in this field was achieved, however, as is expressly stated in the jubilee report of the Disconto-Gesellschaft 371 in the face of decided " opposition on the part of the old-established and well-known private banking houses, which until then had held a monopoly of the financial business and in every manner attempted to ward off the invasion of the new banking companies." The banks in many cases won in this struggle only by showing a far greater liberality toward the individual States and communes in the fixing of the terms of loans and in reducing the hitherto cus- tomary rates of brokerage. 372 As a result numerous state loans were taken over even during the first period, as for instance, loans contracted by Prussia, Bavaria, Saxony, Wurtemberg, Baden, Brunswick, Hamburg, Bremen, Austria, etc., as well as municipal loans offered by Danzig, Worms, Mannheim and others. As early as 1859 a Prussian mobilization loan of 30,000,000 thalers was taken over by the Disconto-Gesellschaft in conjunction with other then existing Berlin banks and banking houses, this joint operation being the forerunner of the " Prussian jsyndicate " (Preussenkonsortium) subsequently formed under the leadership of the Seehandlung (Prus- sian State Bank). This syndicate became effective in 378 The German Great Banks 1868, when it took over Prussian loans to an amount of 45,000,000 thalers. In the following year it took over ad- ditional Prussian loans to a total amount of 5,000,000 thalers, made necessary by the annexation agreement (Rezess) with the erstwhile free city of Frankfort-on-the- Main. Between the years 1868 and 1901 the Disconto- Gesellschaft, the Darmstadter Bank, and other credit banks, as well as a number of private banking houses, at times with the partial cooperation of the Seehandlung, took over and issued 255,000,000 marks of Bavarian State loans alone. As regards the war loan of August 3 and 4, 1870, amounting to 120,000,000 thalers, its issue was effected without the cooperation of the banks by means of a national subscription at the rate of 88 per cent. The jubilee report of the Disconto-Gesellschaft mentions on page 35 that at the preliminary negotiations regarding this loan, held in the Prussian ministry of finance, the two representatives of German banks and banking firms present declared "that the success of this loan could be assured only in case it was issued at a rate of 85 per cent." The report continues: "This rate was recommended upon the plain business consideration that the issue price would have to be fixed on a parity with the market prices then quoted for similar Prussian state securities. The authorities, however, reckoned only with the prevailing national sentiment and, disregarding the actual conditions of the money market, fixed the subscription price at 88 per cent. The result was that the nominal amount subscribed on the two subscription days, August 3 and 4, did not exceed 379 National Monetary Commission 68,000,000 thalers, which at the subscription price of 88 per cent yielded a net amount of only 60,000,000 thalers." 373 In October, 1870, a funded federal loan of 20,000,000 thalers was issued with better regard for the condition of the money market. In November, 1870, and January, 1871, additional war loans totaling 142,000,000 thalers were issued in the form of 5 per cent treasury bills, payable in five years. These loans were taken over and placed by a German syndicate of banks and banking houses with the collaboration of English banks. No use was made of the last war credit of 120,000,000 thalers (law of April 26, 1870) because of the receipt of part of the French war indemnity. Between 1871 and 1880 no less than 640,000,000 Prus- sian and 142,000,000 Imperial loans were taken over and ^issued by the Prussian syndicate and by the other syndi- cate for the loans of the Empire. The total amount of public loans underwritten and placed by syndicates of banks and banking houses on behalf of Hanseatic towns, and the States of Wurttemberg, Saxony, and Hessen reached nearly 1,000,000,000 marks. After 1880, notwithstanding the successful experience had with the old method, it was thought that in order to prevent the growth of a monopoly of banks and banking houses it would be feasible to place a large portion of newly issued Prussian and other State loans with the various applicants by way of competitive subscription (im Wege freier Begebung). The result was in the main merely a considerable depression in the market and of the prices of German State bonds. 380 The German Great Banks In February, 1899, the Deutsche Bank alone took over * 75,000,000 marks of 3 per cent Imperial bonds and 125,- 000,000 marks of 3 per cent Prussian consols. In September, 1900, the entire amount of 80,000,000 marks of 4 per cent treasury bills, payable in 3^ to 5 years, was awarded to the New York banking house of Kuhn, Loeb & Co. This measure was strongly criticized, notwithstanding the fact that the German money market as a result was greatly relieved by the influx of gold from abroad. The amount of German communal loans issued during this period in which the Disconto-Gesellschaft partici- pated and this for 40 cities only, specified in the jubilee volume, page 42 up to the end of 1900, was, in round figures, 300,000,000 marks, while the amount of mortgage bonds of cooperative land credit associations (landschaft- liche Pfandbriefe) and provincial and district loans (Pro- mnz- und Kreisanleiheri) issued during that period with the cooperation of the Disconto-Gesellschaft reached almost 1,000,000,000 marks. Combining domestic State and communal loans issued during the last 15 years of the second period, we find the following totals, according to the Deutscher Oekonomist: Net amounts realized (effective Betrage) in millions of marks. 1894 295 i895 139 1896 160 1897 167 1898 261 i99 660 1900 420 1901 799 1902 733 1903 526 1904 575 1905 687 1906 985 1907 972 1908 i770 The net amounts of German state loans only, as distinct from German communal loans, issued yearly during the important period 1900 to the end of 1908, according to the 381 National Monetary Commission statements of the Frankfurter Zeitung, printed above on pages 359 and 361, as well as of the Deutscher Oekono- mist, were in thousands of marks : Year. Figures of the Year. Figures of the Frankfurter Zeitung. Deutscher Oekonomi st . Frankfurter Zeitung. Deutscher Oekonomist. 1900 1901 1902 172, 500 506, oio 532, 820 343,36o 283,870 200, 400 505,570 536, 400 317,630 335,640 1905 1906 454,68o 668,970 541, 060 i, 079, ooo 429, 660 638, no 546, 220 I. 258,990 1907 1908 1904 This is not the place to discuss the causes of the enor- mous growth in the yearly issues of state loans. Suffice it to say that the constant pressure weighing on the market of imperial and state loans already issued or about to be issued has been one of the main causes of the low market prices of German imperial and state issues, prices which in no way corresponded to their intrinsic value. Neither did the reduction of the interest rate from 3^ to 3 per cent tend to commend these securities to German investors, who were used to a higher interest rate paid by various solid industrial securities and in most cases could not afford such a low yield on their capital. The German communal loan issues during the same period are given in the following table, which states in par- allel columns the data of the Deutscher Oekonomist and those of the Frankfurter Zeitung. The latter, however, includes under the same head loans issued by cities and provinces : 382 The German Great Banks Net amounts realized (effective Betrdge} on German communal loans during 1900-1908. [In thousands of marks.] Year. Figures of the Year. Figures of the Deutscher Oekonomist. Frankfurter Zeitung. Deutscher Oekonomist. Frankfurter Zeitung. 1900 1901 220,350 293. 580 318, 160 352,050 1905 1906 257,400 347,000 425, 440 5H.7IO 418,450 429,790 496, 660 606, 430 1903 1904 208, 560 239, 480 340,480 216, 770 1908 A comparison of the annual amounts of communal loans with those of state loans discloses the striking fact that the former differ in size but little from the latter. There is no doubt that many of our communes have become obsessed during the recent period, especially during the last decades, by a sort of mania of greatness. As Waldemar Miiller 374 says, " Every mayor thinks he has failed to live up to the requirements of his office if he does not borrow a million every couple of years for slaughterhouses, sewers, the construction or purchase of electric plants and city railways, nay, even for paving and schoolhouses, the expenses for which ought to be de- frayed out of current revenues." At all events, considering the large amounts added to German communal loans almost every year, of which by L-- -~" far the larger portion has been taken over and emitted by the German banks, it can not be seriously contended that in this field the German banks have not taken suffi- cient care of the "domestic market." 383 National Monetary Commissio n (d) THE FLOATING OF FOREIGN SECURITIES. (a) Principles underlying the -flotation of foreign securities. In section 7 of this part (p. 527 and foil.) an attempt is made to answer the question, whether the so-called "export capitalism" is to be regarded as necessary, admissible, and unobjectionable on general principles, and in particular beyond the amount required to compensate for the ex- cess of imports over exports. 375 In that section, however, the above question is discussed and answered only as a matter of principle, while in the present chapter we are concerned with the question, what special principles are to govern the issue of foreign securities, and what limits are to be drawn in this field. In my opinion the three fundamental requirements for a sound policy in this regard are as follows : (1) The issue of foreign securities in the domestic market, like the establishment of branches of domestic enterprises and participations abroad, is permissible only after the domestic demand for capital has been fully Jatisfied, since the first duty of the banks is to use the Ivailable funds of the nation for increasing the national jproductive and purchasing power and for strengthening fthe home market. (2) International commercial dealings as well as inter- ' national flotations ought to be but the means for attaining J national ends and must be placed in the service of national labor. (3) Even when the two foregoing conditions have been fulfilled, the greatest, care will have to be used in selecting the securities to be floated. Our experience in 384 The German Great Banks the eighties with Argentine, Greek, Portuguese, Chilean, Servian, and similar securities proves the paramount necessity of drawing a sharp distinction between individual countries and securities. It may be granted that so far as the eighties are con- cerned, when we entered that particular field in competi- tion with other nations, we obtained, in the main, only those foreign loans which the other countries, with their old established international relations, either had left to us or at least did not seriously contest, and that for these reasons our choice was confined within rather nar- row limits. At present, when as the result of slow, careful, and labor- ious efforts, our financial relations with foreign countries have improved to a gratifying extent, we must more than ever be careful to underwrite as a rule only securities of such countries as possess what may be called a rich and extensive "hinterland," either in the shape of good colonies or of large provinces presenting a hopeful field for agricultural, industrial, and commercial enterprise, or countries which possess strong reserves in other shape and are thus in a position to endure and speedily emerge from hard times. Furthermore, whenever practicable and in so far as we are not bound by previous engagements toward foreign countries, the time and amounts of underwriting as well as the interest rates on foreign loans should be fixed with due regard to the economic and financial conditions pre- vailing at home. In particular (barring those previous engagements just mentioned), in times of industrial prosperity, a proper regard for the discount policy of the 90311 ii 26 385 National Monetary Commission Reichsbank and for our balance of payments 37e should induce our banks to show the utmost conservatism in the flotation of foreign securities and in the granting of long-term credits to foreign countries, a principle which has not always been sufficiently observed by the German credit banks. Still, in criticising the methods used here- tofore, we must bear in mind that, when a foreign coun- try, possibly after a long interval, applies to us for urgently required funds, at a time deemed opportune to itself, it is only in the rarest instances that we shall be in a position to say that the time is not opportune for us and that the applicant had better call at some other time. Such a procedure might result not only in spoiling our relations to the respective foreign country, but eventually in the loss of our entire position in the international market. Furthermore, in cases where the purpose of the loan permits it, such pressure as we are able to exert should be brought to bear in order to provide in the loan contract that any orders for works and contracts, the expense of which is to be defrayed by the loan, be placed in Germany, in the interest of our industry. As the jubilee report of the Disconto-Gesellschaft justly remarks (p. 45), it was "precisely the action of the banks in underwriting foreign loans and introducing them to the German market that proved so signally effectual in pro- moting the development of German industry." Thus, among other things, the Russian, Austrian, Hungarian, Portuguese, and Roumanian railway loans oLthejaineties, as well as the financing of the Venezuelan, Anatolian, and Bagdad railways, the constructions at the Iron Gate, the long-continued work carried on by the Shantung Railway 386 The German Great Banks and Mining Companies, have brought to German indus- try a large number of lucrative orders. In other cases, however, as a result of political and competitive con- ditions, all efforts to secure a participation of German industry have failed, though on some particularly oppor- tune occasions, as for instance, that of the Kongo Rail- way, 377 the banks insisted, as a condition of their own financial cooperation, that German industry be given a share in the work. On the whole, despite painful experience, we have to agree with Schmoller's general conclusion 378 that, in order to maintain and strengthen her position in the world markets, Germany will have to increase rather than re- strict her foreign financial business, provided, of course, the above stated general and special requirements are observed. Other countries have had just as bad if not a worse ex- perience in this field ; moreover it goes without saying that the mastering of all the difficulties in this field requires an apprenticeship. This point seems to have been largely overlooked by Sartorius Freiherr von Waltershausen in his otherwise valuable work entitled "The economic sys- tem of investments of capital abroad." 379 The sugges- tions made in that book are largely notwithstanding his denial the mere expression of a strong and, in my opin- ion, wholly groundless lack of confidence in the manage- ment of our banks as hitherto conducted, which, I main- tain, have on the whole achieved great results in the in- terest of the nation, notwithstanding some occasional faults and errors. Moreover, some of his suggestions, in my opinion, are in a large measure impracticable. 387 National Monetary Commission This is true in the first place of the suggestion that inas- much as there exists no suitable representation of the in- terests of purchasers of securities, the protective com- mittees representing foreign bondholders whose interests are endangered should interfere in a preventive capacity (op. cit., p. 310 et seq.) by carefully advising their con- stituents before the purchase of newly issued securities. This suggestion was thoroughly punctured by Kaemmerer, who points out that such an organization the lack of which the author deplores does already exist in the shape of our banks. For it can not be said that the banks advise their customers against their own better knowledge in questions of purchase of securities, underwritten by them or by other banks, or that, as a rule, they are not far more expert in this field than the members of any protective committees. 380 Moreover, according to our legal provi- sions, the very purpose of the prospectuses is to exhibit the main points underlying the intrinsic value of the securities. As a rule this is done, but the trouble is that, as a rule, nobody reads them. The people who are specu- lating on a rise of securities neither read prospectuses nor do they listen to the counsel or warnings of third parties, let alone protective organizations. A like criticism applies to the proposition (op. cit., p. 305) that the underwriters, in order to become perma- nently interested in state and communal issues, should be legally required to retain permanently some part, even though but a small part, of the issue (one-half to 2 per cent according to a graduated scale) and to de- posit it, say, at the Reichsbank. The author may rest 388 The German Great Banks assured that not only bankers will "shake their heads" at such a proposition (op. cit., p. 30). It reminds one of the other proposition that the banks should redeposit at the Reichsbank part of the deposits entrusted to them by their customers. If this keeps on we may arrive at an ideal state in which all the capital or the greater part of it is redeposited and thus made safe. It is true that this will insure the fullest degree of liquidity, se- curity, and proper management, but the only trouble will be that one will no longer be able to do any busi- ness. Do the critics really believe that it suffices to turn the knob of legislation or to draw up a few govern- mental regulations in order to attain the proper manage- ment of our banks in regard to which, for that matter, the critics are by no means agreed? Vestigia terrent, in no other field, as was repeatedly shown, have state con- trol and legal interference proved such dismal failures, as in that of banking. Though I am anything but an advocate of laissez-faire principles, I have too exalted a conception of the State and its attributes to wish to see it exposed to further chances of tests of this kind, which as a rule can only result in humiliation. Notwithstanding this criticism of the individual pro- posals of the author, it gives me pleasure to acknowledge that fundamentally, i. e., so far as the prerequisites and aims of the issues of foreign loans are concerned there seems to be no difference of views between us. I may say that these fundamental principles were formulated by me in the main as early as 1906 in the second edition National Monetary Commission of this work, prior to the appearance of Waltershausens' book. My aim in the above discussion was merely to prove that in this department of banking, as well as in others, the lessons and experience of the past may enable us to draw correct conclusions regarding the future and to dis- courage outsiders from proposing all sorts of impracti- cable reform measures. On the other hand, granted that in consequence of the issue of " exotic" securities, German investors suf- fered considerable losses during the eighties, especially from 1886 to i889 381 it seems to me rather immaterial whether the data regarding the amount of these losses are exact or perhaps, for various reasons, inexact. As Ad. Weber has pointed out, hardly a single investor bought at the highest price and sold at the lowest price; furthermore, the calculation disregards the large number of those who bought these securities for speculative purposes only and who disposed of them after the con- siderable rise in the market (of 10 per cent and more) which in many cases followed immediately after their issue. It may also be pointed out that the table of the Deutscher Oekonomist, reproduced by Ad. Weber (op. cit., p. 133) contains securities which had not been under a cloud (notleidend) even for a single day, such as the Lisbon municipal loan. In the same manner I do not ascribe any decisive importance to the unquestionable fact noted by Schmoller in the well-known introduction to the Proceedings of the Bourse Inquiry Commission (p/XXV) that against the losses should be placed the 39 The German Great Banks gains of about a billion marks which had accrued to Ger- many from investments in American and Russian secu- rities alone, made during the period from 1860 to i892. 382 However, with a view both to the past and to the fu- ture, it is necessary to note that the time at which those issues took place was characterized by an abundance of money, caused by a preceding period of economic de- pression which lowered the value of money and the rate of discount. This was also the period of railway nation- alization and of actual or threatened conversions. 383 The combined effect of these factors was to start an impetu- ous desire on the part of the investment-seeking public for securities yielding a higher rate of interest. In this connection it is interesting to recall the fact recorded in Gilbart's book above cited, 384 that in England, also mainly as a result of a plethora of available capital and the resulting low interest rate, as early as the years 1822 to 1825, inclusive, there were issued foreign, mainly "exotic," loans, totalling 25,994,511, i. e., over half a billion marks within four years, 385 which later on gave occasion for many a sad experience. It is true that among these loans there is found a 5 per cent Prussian loan of 3,500,000 issued in 1822, a 3 per cent Danish loan of 1825 to the amount of 5,500,000, and a 5 per cent Russian loan of 1822 amounting to 3,500,000, but the rest, i. e., the greater part, were essentially "exotic values," viz, 5 per cent loans of Australia, Brazil (2), Greece (2), Mexico, Portugal, and Spain (2), and 6 per cent loans of Buenos- Aires, Chile, Colombia (i), Guate- mala, Mexico, Peru (2), etc. There had also been in 391 National Monetary Commission England a considerable reduction of the interest rate on a large proportion of British consols, which doubtless had long been foreseen, viz, in 1823 the conversion of 135,- 000,000 of 5 per cent into 4 per cent consols, and in 1825 the conversion of 80,000,000 of 4 per cent into 3% per cent consols. (ft) Amount of foreign securities issued in Germany. The combined effective amounts of all foreign issues (except issues of foreign shares of stock), viz, the issues of foreign state and communal loans, railroad bonds, etc., since 1894, i. e., for the last fifteen years, according to the Deutscher Oekonomist, were as follows: 1804 . . Million marks. . 338 1808. . Million marks. . 8oi IQO2 . Million marks. A A C IQO6 Million marks. I4Q i8qs . . . ^oo 1800 2O^ IQCn IQQ IQO7 I2O 1806. . . 480 I OCX) i8<; IQO/t 186 IQO8 2O"\ 1807 . . . 608 IQOI . . . IQQ IQCK . . . 874 .... nj$ The combined value of the foreign securities listed at the German bourses from 1897 to 1907 according to the Statistisches Jahrbuch fur das Deutsche Reich (vol. 29, 1908, p. 228), shows a total of 28,957,700,000 marks, of which 8,224,600,000 marks represents the value of con- verted securities. This leaves a net value for newly listed securities of 20,733,100,000 marks. The majority of these foreign securities were listed simultaneously at foreign bourses. The 29,000,000,000 marks or thereabouts of listed foreign securities show the following distribution: 392 The German Great Banks [In thousands of marks face value.] Class of securities. Total amounts. Conversions (included in total). i. State loans 19, 896 300 6 583 600 a. Provincial and municipal loans 3. Mortgage bonds of Landschaften (cooperative land, credit associations) and kindred institutions. 699,900 754 500 54,ooo 4. Mortgage bonds of real estate credit banks 5. Bank shares 332, 700 8,600 8 600 6. Bank debentures 7. Railroad shares 2, 680, 3OO 8. Railroad debentures 9. Industrial shares 10. Industrial debentures Total a Transformations. The effective value of foreign state and communal loans alone according to the Deutscher Oekonomist was as follows : 1804 Million marks. . IQS 1898. . Million marks. 278 IQO^ Million marks. AOO 1906 Million marks, e c 1895 . . . 98 i8oq . . . . . . IO2 I QO7 78 1896. . . 26A IQOO 171 IQO4. QQ 1908 1 60 1807. . . 231 IQOI . . 4.2 IQO^ . For the period comprising the largest activity in the issue of foreign securities, viz, the years 1886-89, tne nominal value of these issues shows the following totals: Marks. 1886 516, 400, ooo 1887 456, 300, ooo 1888 696, ioo, ooo 1889 749, ioo, ooo It appears thus that during these four years the nominal value of foreign issues offered to German investors was in excess of 2,417,000,000 marks, 386 or 45 per cent of the nom- inal value of 5,431,000,000 marks of issues of all kinds. The many serious objections to these figures are found 393 National M on et ar y Commission stated in a previous chapter (see above pp. 363). It may suffice to mention here that as a matter of fact a con- siderable part of these issues was not placed in Germany and therefore not paid by the German public. If the above-given figures of the Deutscher Oekonomist (see pp. 360 to 362) are used, which comprise all classes of foreign issues including foreign shares (the amount of which does not figure in the above table) , we obtain for the period 1900-1908 the following totals: Effective amounts. r.ooo marks. 275, 270 I9OI 2 IO, 830 1902 453,500 1903 241,670 1904 232, no 1,000 marks, 1905 1,108,490 1906 22O, 650 1907 152, 66O 1908 228, O2O 1900. . . ooo marks. 777 I IO 1901 IQO2. . , 623, 140 i 10 690 lOO 1 ? . 665 8OO IQOA.. . OQC;. 070 The effective amounts of both domestic and foreign securities issued during the same period are stated above on pages 360 and 362 by the same authority as follows: 1,000 marks. 1905 3. 190,680 1906 2, 741, 480 1907 2,2II,92O 1908 3,415,820 A comparison of these two sets of figures proves that the German banks, partly as the result of their experi- ence with a part of the foreign loans issued during the eighties, have become much more careful in issuing such loans. As a matter of fact the amounts of foreign securities issued during 19001908, as given in the above trble, in most cases are not quite one-half and in some cases even much less than one-half the corresponding amounts for 1886-1890. 394 The German Great Banks It also appears from the table just given that the amount of foreign securities issued during the year 1907, 152,660,000 marks, when as a result of the American crisis there was a great money scarcity in Germany as well, fell much below the like amount in 1906, 220,650,000 marks, while the amount for 1908 represents but one-fifth of the corresponding amount for 1905. During the high-tide period of the issue of foreign securities (1886-1889), as stated before, the proportion of these issues to the total issues effected in the country was no less than 45 per cent. In 1905 the proportion was only a little above one-third, in 1906 a little less than one- tenth, and in 1907 only about one-fifteenth of all issues effected in Germany during the same years. The above figures prove likewise that during the very years which we found to have been characterized by a particularly gratifying increase in the productive and purchasing powers of the nation, the "export of capital" from Germany has considerably abated, and that during these years the banks have been acting in accordance with the principle laid down above (p. 384, No. i) for the regulation of foreign issues in general. In so doing they were partly influenced, to be sure, by the high rate of discount, "obeying necessity, not their own impulse." (e) AMOUNTS OF LISTED SECURITIES ISSUED BY EACH OF THE GREAT BERUN BANKS. Appendix V at the end of the volume contains exact information regarding all securities issued by each of the six great Berlin banks and admitted to the privilege 395 National Monetary Commission of being traded in and quoted at the Berlin bourse during the years 1883 to 1908. Appendix VI gives similar information for the securities emitted by the six great Berlin banks and admitted to like privileges at all German bourses during the years 1897 to 1908. For earlier years than 1897 official data were available for the Berlin bourse only. (/) THE SYNDICATE BUSINESS (Konsortialgeschdft) . As stated above (p. 349) the two essential requirements of any sound banking policy are the liquidity of the resources and the distribution of risks with regard to persons, funds involved, time and place, even in the case of the most promising undertakings and the most bril- liant market condition, when there is every prospect for a speedy and smooth transaction of the business, As a necessary consequence of these two requirements, when a bank contemplates the underwriting of a business of some magnitude, it tries to strengthen itself by alli- ances, because there is always the possibility of a change in the political and economic weather conditions, and in the prospects and constellations bearing on each particular transaction. Accordingly we noted that in 1859 the German credit banks, probably for the first time, formed two bank syndicates. The first was organized by the Darmstadter Bank for the liquidation of several engagements, which fell due in 1860, especially of the Rhine-Nahe bonds. The 1860 report of the bank makes special mention of this agreement in the following terms: " This form has decided advantages, since it diminishes the risk of the individual 396 The German G r e 'a t Banks participants and facilitates the accomplishment of the common task. ' ' The second syndicate was formed by the Disconto-Gesellschaft for the purpose of underwriting a part of the loan of 30,000,000 thalers required for the mobilization of the Prussian Army and gave the first impetus for the subsequent formation of the so-called Prussian syndicate (Preussen-Konsortium) . The members of such syndicates, as a matter of course, are under obligation to fix or bind their quota for the / common use of the syndicate during the term of the I syndicate agreement, which is fixed, but may be extended by unanimous resolution. The execution of the common operation is intrusted, as a rule, to a syndicate manager or managers, whose action is subject to the approval of the executive board of the syndicate, or, if the latter be small, of the other syndicate members, as regards all measures of importance or such as exceed the normal course of the syndicate business. In most cases the maximum amount of underwriting that may become necessary is fixed beforehand. This maximum may, however, be exceeded, as a rule, by majority vote or by assent of the executive board in case the management of the syndicate deems it necessary or profitable. The frequent allotting of subsidiary or secondary par- ticipations (Unterbeteiligungen) by the individual mem-^ bers of the syndicates may be caused by considerations of greater liquidity and of better distribution of risk. But quite often such action may be due to mere business con- siderations, when it is desired by such courtesies to acquire a claim to reciprocal treatment on the part of the favored domestic or foreign houses, or else to reciprocate a similar 397 National Monetary Commission courtesy already received. Very frequently this action is a means of conferring a favor on customers regarded as specially valuable, or of indemnifying certain customers for participations which had yielded poor profit or been terminated with a loss. Such " subparticipants " (Unter- \beteiligte) acquire no rights against the syndicate, but only against the member of the syndicate by whom the sub- sidiary allotment is made. The latter is under obligation of keeping them informed and accounting to them and to fulfill toward his subsidiaries everything " required by com- mon honesty with regard to commercial etiquette" (par. 157 of the Civil Code) and conversely to abstain from doing anything that might conflict with this principle. An important class of syndicates are the so-called guarantee syndicates (Garantiekonsortieri) which are formed by several banks in the interest of industrial or commercial undertakings, in order to assure the success of an increase of capital. In such cases the legal priority right of the old stockholders may be excluded the syndi- cate offering them the new shares at the price they were taken over by the syndicate (zum Uebernahmepreis) plus a certain surcharge. If the legal priority right remains, the guarantee syndicate agrees to take over those shares which are not accepted by the old shareholders. In many cases the acceptance of syndicate participations is by no means voluntary. Whenever there are permanent groups (e. g. for Asiatic, Russian, Austro-Hungarian business or for business in the domain of the electrical industry) , any bank belonging to the group is bound to accept its par- ticipation quota in the underwriting or issue unless there 398 The German Great Banks is a special arrangement which is rarely the case- whereby it is free to abstain from a particular operation of the group. The obligation remains even when a bank objects to the particular operation as a whole or to any of its features, to the time, or, what is* not less important, the price, or to any other terms of the issue. Since the formation of syndicates and the ceding of subsidiary participations may be a feature of every under- writing and issue transaction and is of daily occurrence in connection with an immense number of finance operations of this sort, it would serve no useful purpose even were it practicable to attempt to state the number and amounts of syndicate operations and participations during the first and second periods. Such an attempt would be futile for several reasons: In the first place until recently such syndicate partici- pations of the banks were often lumped in the bank reports with " securities owned, " which was decidedly wrong from the accounting point of view. Only in the summary reports (Rohbilanzeri) of the great Berlin banks, published since the end of February, 1909, has this practice been discontinued. On the other hand, certain amounts, prop- erly coming under the head of " syndicates" were often booked with "securities," and vice versa. The true prin- ciple would be to book under the head of " syndicates " all those participations which call for additional installment payments or which are not at the disposal of the bank, while securities allotted to the bank as a result of a syndi- cate participation either without the above restrictions, or when these restrictions no longer apply, should go under the head of "securities." Finally, in many cases, the 399 National Monetary Commission items "syndicates" and "securities" are either not speci- fied at all or only insufficiently specified in the balance sheets. The mere enumeration of the syndicate partici- pations loses all interest and value, unless combined with information showing the distribution of risks with regard to persons, funds involved, time and place, which is, however, impracticable from the business point of view. Neither is it practicable, as will be shown more fully in section 8, to carry out the suggestion of giving a state- ment of the installments remaining due and unpaid at the end of the year on account of syndicate participations, since, for obvious reasons, the amounts of these obliga- tions may not be known to the syndicate management itself and at all events could, in most cases, not be ascer- tained on the 3ist of December. For these reasons I am in a position to give only a few numerical data; and even these data must be used with caution because of the shortcomings found until recently in the accounting methods of our banks. The number and amounts of syndicate participations of the Deutsche Bank in State, communal, and railroad securities, as well as in " shares and bonds of various companies," during the crisis year 1900, and the years immediately preceding, i. e., during the period 1897 to 1901, inclusive, were as follows: 387 Year. Number of participa- tions. Amounts in thou- sands of marks. 1897 107 30, 220 1898 33 920 1899 146 29, 810 32 080 1901 . . 179 33. 870 400 The German Great Banks The syndicate account of the Dresdner Bank for the years 1896-1900 was composed as follows: 388 [Amounts in million marks.] 1896. 1897. 1898. 1899. 1900. Number. Amount. Number. | < Number. Amount. Number. 8 < Number. Amount. i. State securities, land mortgage bonds, and preference bonds (Pri- oritaten) 12 8-7 14 6.9 9 4-9 9 6-9 6 1-3 2. Shares and bonds of railways and other transportation enter- prises 3 Bank shares 10 10 3-8 4.98 5 9 9 4-5 10 8 4- 9 3-8 13 7 6. 2 3-i I 2 7 4.8 5-3 4. Securities issued by real-estate companies (Terraingesellschaf ten ) . 5 2. 19 5 i. 4 6 2. I 7 2-3 5 2. 4 5. Industrial and insur- ance companies; over- sea enterprises Total 23 8.18 24 10. 9 35 l6. 3 50 20. 8 46 2. 4 60 27^85 57 24.6 68 32.0 86 39^3 76 16. 2 According to the summary reports of seven great Ber- lin banks as per June 30, 1909, the syndicate participa- tions of these banks 389 on that day showed the following L - figures, as compared with corresponding figures under date of December 31, 1908. [Amounts in thousands of marks.] June 30, 1909. Dec. 31. 1908. Deutsche Bank Disconto-Gesellschaft 23, ooo 48, 500 36,840 64, 430 Dresdner Bank . . ... Darmstadter Bank 44.900 46, 840 Nationalbank fur Deutschland Commerz- und Disconto-Bank 31.800 13 , 900 33.290 1 2 I3O Syndicate participa- tions. 90311 II 27 401 National Monetary Commission (g) THE SECURITY BUSINESS. The security transactions of the banks may be said to be partly voluntary, partly involuntary in character. \ The voluntary transactions of this class include the investment of the liquid bank resources in correspond- ingly liquid investment securities i. e., such as can be speedily realized and, secondly, speculative security trans- actions. The latter may assume the form of the per- fectly legitimate though largely speculative report and arbitrage transactions, or that of regular bourse specu- lation, or finally that of acquiring securities for the pur- pose of obtaining a temporary or permanent influence on industrial undertakings. The involuntary security transactions of the banks comprise (i) the holdings of such securities as the bank is unable to dispose of, including securities either issued by the bank itself or turned over to it as its share of syndi- cate participations, (2) the purchase of securities immedi- x. ately after their issue, for the purpose of preventing an undue depression of their market value. Generally speaking, considerable security holdings are not regarded as a favorable sign, although during critical periods large holdings of this class may represent an increased proportion of particularly liquid assets, or a special reserve for deposits. Thus, for instance, the Deutsche Bank in its 1908 report mentions holdings of 32,000,000 marks in treasury bills and defends this course as proper and correct. As a rule, however, excessive holdings of securities will be interpreted to mean either that the times have not been propitious for the issue business of the bank, or that it maintains excessive 402 The German Great Banks speculative engagements, or that it is involved to an excessive extent in speculative transactions on its own account a line of business which can be regarded as per- missible only to a very limited extent or, finally, that it has been unable to find sufficiently profitable employment for its funds. It is for these reasons that a large propor- tion of the writing off done by the banks occurs under the head of securities' account. In accordance with sound banking policy the investment securities include also foreign securities, payable in gold and dealt in at several bourses, which are therefore of an international character. During critical or warlike pe- riods such securities form a valuable reserve and increase the banks' capacity for intervention and action. But, as stated above, a large portion of these holdings may be com- posed of shares of stock, through the possession of which the bank intends to exercise temporary or permanent in- fluence upon an undertaking either by shaping the decis- ions of a given general meeting of stockholders, or by "controlling" it outright, or by obtaining representation on its supervisory board. Of all the German banks the Darmstadter Bank is prob- ably the one that since its foundation and up to the present time has published more detailed statements regarding the composition of its security holdings 390 than any other bank. The Darmstadter Bank gives the following groups: (i) German public securities, real estate mortgage bonds, and railway debentures; (2) foreign state and communal bonds, first mortgage bonds of foreign railways, and bonds of German industrial undertakings; (3) stock shares of 403 National Monetary Commission German and non-German industrial and mining concerns; (4) bank shares; (5) sundry holdings. The Deutsche Bank groups its security holdings under the following four heads: (i) State and communal bonds, mortgage bonds and railway bonds ; (2) shares of railroads, banks, and industrial concerns; (3) bonds of industrial concerns; (4) sundry holdings. The Dresdner Bank distinguishes among its security holdings only three groups, viz: (i) State bonds, mortgage bonds, railway and industrial bonds; (2) shares of banks, railroads, other transportation companies, and insurance concerns; (3) shares of industrial corporations. It would therefore be of but little value to give figures of securities held by the various banks, since, as was re- marked on page 399, the account " securities owned" in many cases appears understated, inasmuch as a certain portion of the securities, properly belonging under that head, is booked under the head of " syndicate participa- tions." On the other hand, it is equally true that securi- ties which properly belong under the head of " syndicate participations ' ' are at times found booked under the head of "securities owned." A similar shifting is frequently ; noticed between the account "securities owned" and that "permanent participations in other banking institut- ions and concerns," if the two accounts are separated at all. The bimonthly summary statements, now published by a number of banks, separate the two accounts. During the period of great activity preceding the crisis of 1901 the account "securities owned" showed a large increase over that shown for the previous years. Thus the Dresdner Bank showed the following changes 404 The German Great Banks (in millions of marks) under that head for the years 1896-1900: 1896 1897. 1898. 1899. 1900. Group I 9- 9 9-8 15 12.8 16. i 2 7 4. 9 2. 9 6. i 6. 5 Group III 5- 8 8.7 8.2 19 10. 7 This table shows a considerable increase largely in the amount of industrial shares held. In the case of the Darmstadter Bank the like account for the period 1896-1902, classed by its five groups, shows the following changes (in millions of marks) : 391 1896. 1897- 1898 1899 1900 1901. 1902. Group I Group II 1.8 1 . 4 i-3 . 9 I. I 4.8 5-9 3- 2 I. 2 3- i 4 2. 3 4.4 3 3 Group III 5 i 3 9 3- 3 5- 4 5- 4 4 8 9 4 Group IV Group V 2.6 i 1-9 i 1-9 . 7 1.7 i 1-7 . 9 1.6 . 7 2-9 .8 The summary balance sheets (Rohbilanzeri) of the undermentioned banks published under date of June 30, 1909, show the following figures (in millions of marks) for the account "securities owned, " though without detailed grouping, as compared with the figures for the end of the preceding year. 392 Situation on June 30. 1909. Situation on Dec. 31, 1908 Deutsche Bank Disconto-Gesellschaft Dresdner Bank . Si-3 23.8 55.68 29. 49 Darmstadter Bank A. Schaaffhausen'scher Bankverein Nationalbank fur Deutschland 5I-S 43-0 26 <; 47- 77 42-33 Commerz-und Disconto-Bank 31-8 33-39 405 National Monetary Commission In closing this chapter the following points regarding the investment and issue activities of the banks must be emphasized : The successful accomplishment of the important and various tasks devolving upon the banks, becomes possible only when there is a strong bourse i. e., an organization of the utmost strength and elasticity during normal times and of the utmost power of resistance during critical and bad times. It is only through the concentration of the converging streams of offers, demands, and news that resultant prices will present a fairly accurate picture of underlying conditions. But this function of balancing offer and demand can be performed by the bourse in a satisfactory manner only in case there can be enlisted for permanent as well as temporary service sufficient amounts of capital to be used in transactions, which, like trading in futures, prevent as much as practicable violent and sudden variations in the quotations of securities and are apt to give timely warning of impending disturbances of the financial equilibrium. As Schmoller puts it in his Gsundriss, Volume II, page 37, in the security market the option business represents " a more refined technique of the modern business for future delivery;" it is " an instrument of increasingly correct calculation of future probabilities, a means of controlling the most important elements of price formation" and a form of business, "which may be improved, regulated, and placed on a higher moral level but can not be dispensed with." The same author very properly says, on page 493 of the same work: "Every improvement in the organization of the market has in view a more correct price formation, while any lessening of 406 The German Great Banks extreme price variations results in the lessening of the damages caused by crises." It is often said that the strength of a bourse lies in the fact, that in times of general business prosperity it will register invariably a strong upward movement of values notwithstanding all obstacles caused by fiscal and bourse legislation. But such a view is due to imperfect knowl- edge and excusable only on that ground. Economic laws are superior to governmental laws. No bourse or fiscal law can prevent altogether the upward movement of busi- ness, nor a corresponding advance of values which is merely emphasized by speculation of concerns sharing in that advance. This error is the more regrettable, because the need of a strong bourse is felt more and more in view of the . impending grave competitive struggle. Now, the strength of a bourse is shown precisely in the fact, ' ' that during prosperous periods it is successful in preventing impet- uous and excessive advances of values, during bad times in averting excessively rapid and sudden declines in val- ues, and during a crisis in preventing the unreasonable discouragement of the public and thus an undue depre- ciation of values. ' ' (Memorial of the Zentralverband December, 1903, p. 35.) It is only necessary to recall the disastrous 9th of February, 1904, the date of the outbreak of the Russian- Japanese war, in order to get a clear idea of a strong bourse and its reverse. SECTION 3. BANK GROUPS. The subject of this chapter are not those bank groups, which are formed as the result of the permanent clustering 407 National Monetary Commission of a number of so-called " concern-banks" (Konzern- bankeri) around a leading bank, representing a permanent community of interest and action of the banks concerned and embracing the entire field of banking operations. These "grorrpirrg'g'af e~ tHe result of concentration tendencies and will be discussed at length in a subsequent chapter. Nor will the discussion of this section take in the so- called ' ' syndicates ' ' (Konsortieri) which, as was pointed out above, are formed with the view of distributing the risk, of preserving the liquidity of resources and in the in- terest of smoother and more rapid performance of a single given financial operation. It has been shown that when- ever the risk or the engagements assumed are especially large, syndicates composed of a shifting number of bank- ing firms are constantly formed for each given case either under the name of a "guarantee-syndicate" or "loan- syndicate." The bank groups, which are to be discussed in the pres- ent chapter, are permanent combinations, formed by certain banks and banking firms for certain operations or classes of operations, and involving a more or less close alliance among the individual banks. Among the reasons of such formations the following may be mentioned: i. In the beginning of the first period they were the only means of enabling the new banks to share in the participation of domestic and foreign loans in compe- tition with the powerful private houses, especially the Rothschilds, who until that time had an almost uncon- tested monopoly in that field. This was the occasion which gave rise to the so-called Preussenkonsortium 408 he German Great Banks (Prussian syndicate) for the underwriting and issue of the Prussian consols, to a somewhat differently composed group, formed during the second period, to underwrite the loans of the German Empire and to the so-called Rothschild group for undertaking the issues and kindred operations of the Austro-Hungarian Government. (a) The Prussian syndicate, as already stated, owes its origin to a syndicate of large Berlin banks and banking houses formed in 1859 under the leadership of the Dis- conto-Gesellschaft on the occasion of the Prussian army mobilization loan of 30,000,000 thalers. 393 It took a lead- ing part in the loan operations of the sixties and seven- ties, continuing its activity to the most recent years in \\, floating most of the Prussian state loans. This arrange- ment, however, was by no means exclusive, as the Prus- sian Government during the eighties, also during most recent years, in order to prevent a monopoly, repeatedly appealed to the market direct. On other occasions the Government would dispose of portions of its loans to individual banks and banking houses, although the per- manent effects of such a policy on the market were rather unfavorable. Sometimes a member of the group would underwrite singly an entire imperial or Prussian loan. The latter mode was followed in May, 1900, when the Deutsche Bank undertook the issue of 200,000,000 marks of German imperial bonds and Prussian consols. The Prussian syndicate, as at present (in 1909) con- stituted, is headed by the Royal Seehandlung (Prussian main bank), and after the elimination of defunct firms includes the following banks and banking houses: 409 National Monetary Commission Bank syndicate for Prussian state loans. Konigliche Seehandlung (Prussian main bank). Bank fur Handel und Industrie. Berliner Handelsgesellschaft. S. Bleichroder. Commerz- und Disconto-Bank. Delbruck, Leo & Co. Deutsche Bank. Direction der Disconto-Gesellschaft. Dresdner Bank. F. W. Krause & Co. Mendelssohn & Co. Mitteldeutsche Kreditbank. Nationalbank fur Deutschland. A. Schaaffhausen'scher Bankverein. Sal. Oppenheim, jr., & Co., Cologne. Lazard Speyer-Elh'ssen, Frankfort- on-the-Main. Jacob S. H. Stern, Frankfort-on-the- Main. L. Behrens & Sohne, Hamburg. Norddeutsche Bank, Hamburg. Vereinsbank, Hamburg. M. M. Warburg & Co., Hamburg. Allgemeine Deutsche Creditanstalt, Leipzig. Rheinische Creditbank, Mannheim. Bayerische Hypotheken- und Wech- selbank, Munich. Bayerische Vereinsbank, Munich. Konigliche Hauptbank, Nuremberg. Ostbank fur Handel und Gewerbe, Posen. Wurttembergische Vereinsbank, Stuttgart. (6) The bank group for underwriting the loans of the Empire, as at present constituted, is headed by the Reichsbank, and after the elimination of various defunct firms includes the following banks and banking houses: Syndicate for Reichsbank. Konigliche Seehandlung (Prussian main bank). Bank fur Handel und Industrie. Berliner Handelsgesellschaft. S. Bleichroder. Commerz- und Disconto-Bank. Delbruck, Leo & Co. Deutsche Bank. Direction der Disconto-Gesellschaft Dresdner Bank. F. W. Krause & Co, imperial loans. Mendelssohn & Co. " Mitteldeutsche Kreditbank. Nationalbank fur Deutschland. A. Schaaffhausen'scher Bankverein. Sal. Oppenheim, jr., & Co., Cologne. Lazard Speyer-Ellissen, Frankfort- on-the-Main. Jacob S. H. Stern, Frankfort-on-the- Main. L. Behrens & Sohne, Hamburg. Norddeutsche Bank, Hamburg. Vereinsbank, Hamburg. 410 The German Great B a n M. M. Warburg & Co., Hamburg. Allgemeine Deutsche Creditanstalt, Leipzig. Rheinische Creditbank, Mannheim. Bayerische Hypotheken- und Wech- selbank, Munich. Bayerische Vereinsbank, Munich. Konigliche Hauptbank, Nuremberg. Ostbank fur Handel und Gewerbe, Posen. Wurttembergische Vereinsbank, Stuttgart. (c) In Austria there has existed since 1848 a close relationship of the financial administration of the Govern- ment with the Vienna house of Rothschild, which until 1855, when the Osterreichische Kreditanstalt was added, conducted practically all the financial operations for the government. It was only in 1864 that the Disconto Gesellschaft, at the head of a syndicate of German bank- ing houses, entered into competition with the Rothschild house and the Kreditanstalt, and was allotted, out of a total silver loan of 70,000,000 florins, the portion of 23,500,000 florins. It was this successful competition which brought about the entrance of the Disconto-Gesell- schaft into the group known subsequently as the Roth- schild syndicate. During the following years a number of other banks and banking houses joined, including the Allgemeine Osterreichische Bodenkredit-Anstalt of Vienna, the Ungarische Allgemeine Kreditbank, and the Bank fur Handel und Industrie. The latter institution, as early as 1854, na( ^ joined the Rothschild firm in under- writing a loan for the Government of Baden, and in 1862, that is to say, much earlier than the Disconto-Gesell- schaft, had participated in an issue of 83,000,000 florins of the Austrian 5 per cent 1860 lottery loan by the Roth- schild firm and the Kreditanstalt. Later on the group was joined by the banking houses of S. Bleichroder, Sal. Oppenheim, jr., of Cologne, and Mendelssohn & Co., and 411 National Monetary Commission during the most recent period for state loans by the Austrian Postal Savings Bank. The Rothschild syndicate represents to-day a firm organization for the common management not only of Austro-Hungarian finance operations of a public char- acter, but also of all other finance operations which it cares to undertake in either of these two countries. It is composed at present of the following concerns : Rothschild group. Direktion der Disconto-Gesellschaft. Osterreichische Kreditanstalt fur Handel und Gewerbe. M. Wodianer. S. M. von Rothschild, Vienna. Ungarische Allgemeine Kreditbank in Budapest. S. Bleichroder. Bank fur Handel und Industrie. de Rothschild freres, Paris. N. M. Rothschild & Sons, London. Allgemeine Osterreichische Boden- kredit-Anstalt, Vienna. Sal. Oppenheim, jr., Cologne. Mendelssohn & Co. Osterreichische Postsparkasse (for state loans). (2) The organization in 1890 of a group for Asiatic busi- ness was the natural consequence of the founding, in 1889, v -by a number of large banks and private banking houses, of the Deutsch-Asiatische Bank. A great many difficulties had to be overcome before this bank could be founded. In the first place there was the nearly always successful tactics of the Chinese negotiators in charge of the national finance and railroad business of playing off against each other the individual competitors in the various countries. On the other hand, for a long time no concerted action with English banking circles nor even of German banks with each other could be attained, the latter having formed two separate groups under the leadership of the Disconto-Gesellschaft and of the Deutsche Bank respec- 412 The German Great Banks lively. The organization of the Deutsch-Asiatische Bank and the formation a year later of the Syndikat fur Asiatische Geschafte (syndicate for Asiatic business) put an end to the competitive struggle between those two groups. Inasmuch as independent action of other Ger- man banks had but little chance in the future, united action of German interests became assured not only with reference to Chinese, but also all Asiatic financial opera- tions, the new powerful syndicate, led by the Disconto- Gesellschaft, undertaking the common planning and man- aging of loans and advances to the central governments, provinces, and railroad companies in China, Japan, and Korea and the organizing of railroad and mining com- panies in China. The structure of this syndicate is, how- ever, somewhat loose, as it is left to each member to keep aloof from any individual transaction. 394 The successful activity of this syndicate was frustrated for the time being by the outbreak in the nineties of the Chinese- Japanese war. In March, 1896, the syndicate suc- ceeded for the first time, with the gratifying cooperation of the English Hongkong and Shanghai Bank, in taking over 8,000,000 of the total Chinese loan of 16,000,000. An agreement was also reached with the English bank for future common action in Chinese business on the basis of equal participation, resulting, soon afterwards, in 1898, in the common taking over of the remainder of the Chinese war indemnity to Japan in the shape of a 4^ per cent loan of another 16,000,000. Since then the Asiatic syndicate has managed success- fully a number of other financial transactions. 413 National Monetary Commission (3) The formation of groups for the permanent common handling of other domestic state loans as for instance, the underwriting of the Bavarian and Baden loans and of for- eign state and railroad loans (such as Swiss, Argentine, Mexican, Russian, Roumanian, Portuguese, etc.) occurred more frequently during the second period. These groups, however, if we except the Russian group headed by Mendelssohn & Co., did not attain the same solidity of structure and consequent exclusive power as the group formations mentioned in paragraph 2. Their origin was often due to a combination into one group of syndicates, originally opposing each other, or to the subsidiary banks of a great bank combining into a single-issue group for cer- tain underwriting purposes. The same remarks apply to group formations for the taking over of municipal loans, as, for instance, of Cologne, Hamburg, Frankfort-on-the- Main, and Munich. In the latter case the groups are composed of local houses, strengthened in some cases by the joining of friendly outside banks. However, these groups show frequent changes of membership, since they were never strong enough to completely shut out competition. As this chapter is devoted exclusively to the discus- sion of permanent bank groups, no specific mention is made of those syndicates which, originally formed inde- pendently of each other, for the taking over of state or municipal loans, frequently coalesced into one group for a single transaction, in order to do away with mutual out- bidding. Such transitory combines may be characterized as mere price conventions. 414 The German Great Banks On the other hand, syndicates originally formed as societates unius rei, for instance, for the taking over of a municipal loan, may gradually coalesce into solid and permanent group formations. During the second period, particularly, it became more and more customary to main- tain the combination after the first successful cooperation in case the character of the transaction was such that its recurrence at regular intervals might confidently be ex- pected. This was unfortunately true of municipal loans, the recurrence of which could be predicted with almost mathematical certainty. In such cases each party of the syndicate felt at first only morally bound to refrain from independent bidding or from joining another syndicate, but to either suggest or await an invitation to a meeting of the syndicate, unless it had informed beforehand the management of the old syndicate of its contrary decision. The management of such syndicates, unless a change was expressly provided for, as a rule remained unchanged for subsequent transactions. (4) A large number of bank groups originated during the second period as a result of the changed relations of the banks to industry as set forth in previous chapters. In this field the formation of groups, while due to designed industrial policy, had become more pronounced and definite since the nineties, and in turn caused a more refined differentiation and growing intensification of this policy. The principal cause was, however, the enormous demand for capital by industry in general, and the electro- technical industries in particular. Accordingly we find such bank groups closely allied with the so-called " heavy " 415 National Monetary Commission ^industries (mining, iron and steel) as well as with the "light" industries, especially the electrical industry, breweries, secondary railways, and petroleum enterprises. Until about 1900 there had been formed, to correspond with the seven combinations of electrical undertakings to be discussed later on, seven bank groups, each back- ing the respective industrial combination and attending to the issue business of the industrial combination as well as to its other financial operations. In particular the Siemens & Halske stock company was backed in 1900 by a group of n banks headed by the Deutsche Bank; the combination formed under the leadership of the Allgemeine Elektrizitatsgesellschaft (A. E. G.) was backed by a bank group consisting of 8 banks headed by the Berliner Handelsgesellschaf t ; the combination known as the Union-Elektrizitatsgesellschaft (U. E. G.) was backed by a bank group headed by the Disconto-Gesell- schaft, etc. In the same year the so-called "Loewe-Gruppe" (i. e., the group of industrial undertakings controlled by the firm IvUdwig Loewe & Co.) was backed by the same six banks and banking houses which stood behind the Union-Elec- trizitatswerke. This banking syndicate, formed at first for purposes of common underwriting, subsequently con- / ducted also the other financial operations of the indus- trial group. 395 It appears that since the nineties the ever increasing extension of the plant and the annexing of a number of hitherto independent concerns made it impos- sible to have the largely increased demands for capital met either by the original firm or by any single banking institu- tion, the latter partly for the reason that a number of bank- 416 The German Great Banks ing institutions were simultaneously interested in several enterprises of the electro- technical industry. In the field of secondary railways (Kleinbahnen) sev- eral groups were formed. One of them is headed by the Berliner Handelsgesellschaft, which founded the West- deutsche Eisenbahngesellschaft. Another is headed by the Darmstadter Bank, which organized the Sud- deutsche Eisenbahngesellschaft at Darmstadt; a third, headed by the Nationalbank fur Deutschland, is backing the Allgemeine Deutsche Kleinbahngesellschaft und ver- einigte Eisenbahn- Bau- und Betriebsgesellschaft at Berlin (General German Secondary Railway and Consolidated Railway Construction and Operation Company). The object of the first group was to assist the firm of Lenz & Co., engaged in the construction and operation of secondary railways; that of the second group, to assist the similar enterprises of the firm Herrmann Bachstein; while the group headed by the Dresdner Bank has founded trust companies for the floating of German and Austro-Hungarian railway securities (Zentralbank fur Eisenbahnwerte) , also the firm Orenstein & Koppel (now consolidated with the firm Arthur Koppel) , engaged in the construction of field and secondary railroads. In the field of the petroleum industry the two foremost groups are those headed by the Deutsche Bank and by the Disconto-Gesellschaft. These organizations are the expression of the industrial enterpreneur activity of the great banks, an activity which during this period has for good reasons been slackening. The aim is to counterbal- ance the monopoly position in the petroleum market of the American and Russian producers. 90311 ii 28 417 National Monetary Commission In 1903 the Deutsche Bank became interested on the one hand in the Roumanian petroleum company Steaua Romana by taking over a large portion of newly issued stock and by having one of its directors made chairman of the supervisory board, and, on the other, in the Galician petroleum company "Schodnica. " Subsequently, on January 21, 1904, together with the Wiener Bankverein, the Darmstadter Bank, the National- bank fur Deutschland, the Mitteldeutsche Kreditbank, and the banking firm of Jakob S. H. Stern in Frankfort-on- the-Main, it founded in Berlin the Deutsche Petroleum Aktiengesellschaft (with a share capital of 20,000,000 marks), into which it merged its participations in the Roumanian, Russian, and Galician, also in some Hanover petroleum enterprises. The new company soon after made an agreement with the Petroleum-Produkten- Aktien- gesellschaft in Hamburg for the transportation of the Roumanian petroleum. About the same time (1903) the Disconto-Gesellschaft, together with the firm of S. Bleichroder, participated in the petroleum industry company " Bustenarii ' ' and in an- other large Roumanian petroleum company, the ' ' Telega Oil Company (Limited) , ' ' which made an agreement for the transportation of the petroleum with the Shell Trans- port and Trading Company, which in turn owned shares of a nominal amount of 2,600,000 marks, out of a total nominal capital of 3,000,000 marks in the Petroleum- Produkten- A ktiengesellschaft. In 1905 the Roumanian petroleum refining company ' * Vega ' ' and the ' * Society for the Development of the Roumanian Petroleum Industry Credit Petrolifer ' ' were 418 The German Great Banks organized, the first under the combined auspices of the Disconto-Gesellschaft, S. Bleichroder, and the Com- pagnie Industrielle des Petroles at Paris, for the purpose of refining crude petroleum. In the same year the Dis- conto-Gesellschaft group merged its Roumanian petroleum participations in the " Allgemeine Petroleum-Industrie- Aktiengesellschaft" founded by it with a capital of 17,000,000 marks. A third group, headed by the Dresdner Bank, and com- prising the A. Schaaffhausen'scher Bankverein, the Inter- nationale Bohrgesellschaft, and several industrial and banking firms, founded in Roumania a third petroleum company under the name of the " Petroleum- Aktiengesell- schaft Regatul Romana, ' ' with a capital of 24,000,000 lei (francs) . In 1906 the European Petroleum Union, with a capital of 37,000,000 marks, was founded by Russian petroleum producers, closely connected with the crude-oil produc- ing firm of Nobel Brothers in St. Petersburg and the banking house de Rothschild Freres in Paris, in company with the Deutsche Bank and other (Russian, Roumanian, and Galician) petroleum interests, with the object of con- solidating the various European selling organizations controlled by them. In all the above-described cases special care was taken to distribute the risk by the formation of groups, to mobilize the participations by the organization of stock companies, with the view, undoubtedly, of disposing of at least part of the participations as the companies grew in strength, and of retaining only an amount required for the continuance of permanent influence. 419 National Monetary Commission The industrial-bank groups are thus seen to differ from other bank groups in that they represent a combination of the industrial entrepeneur activity which as matter of principle it would be better to leave to industry itself with that of bank financing proper and a special banking I initiative (Bankinitiati-ve) . It is the latter that has caused the unprecedented growth in Germany of some new industries, such as the electro-technical, or the crea- tion of hitherto nonexisting industries, such as the petroleum industry. SECTION 4. THE OVER-SEA AND FOREIGN BUSINESS OF THE GERMAN CREDIT BANKS. 396 I. THE PART TAKEN BY THE BANKS IN DEVELOPING GERMAN OVER-SEA IMPORT AND EXPORT TRADE. As stated before, a special section (Sect. 7) will be devoted to the discussion of the question whether, to what extent, and under what circumstances the so-called " ex- port capitalism" i. e., the investment of German capital in foreign enterprises, businesses, and securities, particu- larly the founding of subsidiary companies destined ex- clusively for over-sea business, is necessary and proper. For the present we will merely note the fact that the Ger- man great banks, since the beginning of the second period, devoted themselves energetically to the promotion of our industrial and commercial relations with over-sea coun- tries. We shall attempt now to describe briefly the com- mercial objects of this activity and the gradual develop- ment of this part of German banking policy. The earliest formulation of this policy, which extends far beyond the previous limits of German banking, is 420 The German Great Banks found in paragraph 2 of the charter of the Deutsche Bank. There can be no doubt that the founders of that institu- tion, in view of the general economic position of Germany, regarded this as their foremost aim and a necessary and true policy, for its execution was stated to be part of the program of the new bank in the following terms: The object of the company is the transaction of all sorts of banking business, particularly the fostering and facilitating of commercial relations between Germany, the other European countries, and over-sea markets. The purpose of this program was to fill a gap in the organization of German credit and banking clearly per- ceived by the founders and more particularly by the early managers of the bank. This "bold stroke" and the eco- nomic insight disclosed can not be appreciated too highly. 397 The Deutsche Bank has followed its ambitious pro- gram 398 with the utmost vigor and tenacity, preparing its future success by a number of deliberate and far- sighted measures. The activity of the Deutsche Bank as an intermediary on behalf of import and export trade was soon taken up also by the Disconto-Gesellschaft, which in many lines of bank- ing activity during this period showed a degree of devel- opment as large, or nearly as large, as the Deutsche Bank. Previously, German industrial and commercial interests in foreign, especially over-sea countries had to fall back almost exclusively upon the intermediary of English and, in some cases, French banking institutions. For while bills in terms of German currency had no foreign market, English bills particularly, had almost boundless and unlim- 421 National Monetary Commission ited circulation, since English banks were represented in one form or another in all parts of the world. As the first result of its activity, the Deutsche Bank secured for German commerce and industry a firm posi- tion in the world market, and introduced German bills into the channels of over-sea commerce where they were almost unknown up to that time. This was especially difficult at the beginning of the period, when the gold standard did not yet exist in Germany, for bills in terms of the multifarious German currencies (see p. 39) were unknown and disliked in international business, (which is transacted mainly by means of bills,) and were there- fore subject to higher rates of discount than the Condon sterling bills. 399 In order therefore to improve these conditions, the first requisite was to open credit at London to the Ger- man importer and exporter. This the Deutsche Bank attempted to do at first through an agency of its own at that place. When this attempt failed, through difficulties of formal nature, the bank acquired an interest in the Ger- man Bank of London, Ltd., without, however, attaining fully the desired object. On the other hand, the German exporter and importer was to be given an opportunity 400 "to obtain such credit in Germany by the introduction of German currency bills in over-sea markets and by offers to buy the bills drawn on German exchange centers." The Deutsche Bank at- tempted to attain both these objects by establishing in 1872, i. e., before the introduction of the German gold standard, branches in Yokohama and Shanghai which were to buy bills drawn on Germany, so that the Ger- 422 The German Great Banks man exporter, who had calculated the selling price of his goods in marks, might be paid abroad in marks, while the importer might credit the foreign seller at the bank with the amount of the invoice in marks and meet pay- ment in marks upon bills subsequently drawn by the seller. Both branches in eastern Asia had to be closed in 1874, i. e., after an existence of barely two years, mainly because the continuous depreciation of silver had diminished the invested capital. Similarly the I/a Plata bank, opened in 1872 by the Disconto-Gesellschaft and taken over by the Deutsche Bank in 1874, had to be liquidated in 1885. But in the meantime the Deutsche Bank opened branches in German centers of over-sea trade one in Bremen (in 1871) and another in Hamburg (in 1872). In the same year a silent partnership (Kommandite) in New York was formed. By 1871, in order to obtain the means required for these enlargements of its business, its capital had been doubled from 5,000,000 to 10,000,000 thalers. Finally, in 1873, it succeeded in opening in London a branch of its own, whose business operations soon assumed considerable proportions. The clients of the bank, who imported goods from over-sea markets, were now in posi- tion to draw their bills either in marks on Germany (Berlin, Bremen, Hamburg) or in pounds sterling on lyondon, as it appeared to them more advantageous in accordance with the respective discount and exchange rates in the two countries. Thus the first and most diffi- cult stage in this development was successfully passed. It must be said that even the program of the Deutsche Bank was regarded with little favor in banking and 4*3 National Monetary Commission bourse circles. The sentiments prevailing among these circles at that time are accurately reflected in a South German newspaper, which has been used by Model as the only journalistic source not only as regards this subject but also in discussing the activity of the banks during the earlier period. This paper 401 stated, not more than four weeks before the foundation of the Deutsche Bank, that the houses which were chiefly interested in the projected bank were "not regarded as able" to manage an institution of this class "in accordance with modern requirements" and "that its founders would save them- selves from a splendid fiasco if they were to take over their own shares, since there was absolutely no sympathy for the project in Berlin." The same paper, in speaking of the doubling of the share-capital in 1871, stated that there was no need for such an increase, "even if it were true that the bank intended to establish silent partnerships in the regions peopled by the Riff pirates, Kaffirs, and Blackfoot Indians." After the initial failures, when the branches in Eastern Asia had to be closed (in 1874), the following remarks were made: ' ' The Deutsche Bank, in closing its branches in Shanghai and Yokohama, confesses its inability to execute its original high-sounding program, since it was primarily founded for the purpose of freeing German commerce in foreign countries, particularly in China, Japan, and the East Indies, from the tutelage of English and French bankers. The question of liquidation of the bank is now being seriously debated; at all events, a re- duction of its capital would seem to be advisable." 424 The German Great Banks A still sharper criticism of the Deutsche Bank by the same paper in 1875 reads as follows: " One of those bank- ing establishments, which has anything but fulfilled its program, and whose right to exist can only be based on the fact that, though long moribund, it still manages to exist, is the so-called Deutsche Bank in Berlin. ' The Deutsche Bank, however, has not allowed itself to be diverted from its path either by its early failures or by criticism. Mainly through its branches and agency in Bremen, Hamburg, and London, it fostered the over -sea business consistently and with ultimately brilliant success. In a subsequent chapter we shall relate the attempts of the Deutsche Bank, and after it of a number of other banks, to lend their energetic and ever-growing support to German import and export trade by means of branches as well as through the founding of subsidiary banks. The principle which may be said to have dominated their entire activity has been correctly formulated by Emil Herz 402 as follows : ' ' The part of the confidential adviser in business (der wirtschaftliche Vertrauensmann) both at home and abroad must be taken by the banker. ' ' As soon as German trade felt certain of banking sup- port in its import and export activity on the part of the branches of the banks in the great centers of oversea trade (Hamburg, Bremen, London), or of the German subsidiary banks working hand in hand with the parent banks in Germany, it naturally emancipated itself from the foreign intermediaries by enlisting the usually much cheaper services of the German banks and their branches or of their subsidiary banks. 425 National Monetary Commission Let us first take the case of the exporter. 408 He sells his goods as a rule on long terms for delivery at over-sea places, where after possibly several months' sailing they are paid by the buyer only when unloaded and then only by means of the buyer's acceptance. Through his con- nection with a German bank the exporter is now enabled to turn over his bill of lading to that bank with an order to deliver the same to the buyer through its over-sea connection, say its subsidiary bank, after payment of the amount of the bill or after acceptance of the draft, the latter in case the goods have been sold on longer terms. In case of nonpayment, of which he is to be advised by cable, the order further provides that the goods are to be insured and stored at the over-sea place of destination at the expense of the seller. In such cases the exporter is usually able to procure at least part of the purchase price, and thus fresh operating capital, long before the arrival of the goods, the bank granting him an advance upon the floating goods. This advance is made upon the pledging by indorsement of the bills of lading, which secure the delivery of the goods at the point of destination and upon the transfer of the accompanying insurance policy either according to fixed loan terms or according to such terms as may have been agreed upon on the particular occasion. These advances vary between 40 and 75 per cent of the invoice, a copy of which is to be handed to the bank. It goes without saying that such advances are granted as a rule only on such goods which are not easily subject to the risk of decay, waste, breakage, loss of weight, or leakage. 426 The German Great Banks Provided the documents are genuine and the exporter's personal credit is good up to the amount advanced, the bank, when taking the above precautions, will run but little risk. The risk will naturally be greater, in case the advance is made on goods which are not yet definitively sold. In the latter case, when, for instance, the exported goods are directed to the oversea representative of the domestic export firm, who is to try to sell them only upon arrival, the loan will be made as a rule by a subsidiary institution of any of the German banks (as for instance the Deutsch-Ueberseeische Bank, the Deutsch-Asiatische Bank, the Bank fur Chile und Deutschland, etc.) . These banks, at the request of the oversea agent of the domestic exporter, who turns over to them the bills of lading, will receive and store the goods upon arrival at destination, and in turn will honor the bills drawn upon the German exporter's oversea representative who takes the goods from the storehouse and gradually makes good the credit on the drafts as he sells the goods. In such cases the loan transaction is particularly risky when the agents order too large a stock and thus cause a reduction in the price of the export goods, which may be even intensified, in case the banks have to under- take the forced sale of the goods after failure of the subse- quent payments. In these cases the bank may suffer loss if the recipient of the advance proves of insufficient solv- ency, or the pledged goods of insufficient value. Besides granting advances upon merchandise the banks render assistance to the export trade in various other ways. They will, for instance, give him reimbursement (rembours) credit (see p. 428, below) against the documents 427 National Monetary Commission by attaching their acceptance to the draft of the seller, who is thus enabled to discount it at the private rate. The bank may also accord its acceptance to the domestic exporter on the basis of bank credit, extended not by him to the foreign buyer, but by the latter to him, the bank being ordered by the foreign buyer to accept the drafts of the domestic exporter up to a certain amount, against receipt of the shipping documents, which order is usually confirmed by the bank to the exporter (' ' confirmed letter of credit ' ') . However, the most prominent function of the branches of the German banks at Hamburg, Bremen, and London, also of the oversea banks, is the financing of imports from oversea countries, especially of raw materials. 404 This is done in the following manner: The domestic buyer of the article (importer) procures in the first place from his German bank a "draft" credit (Trassierungs- kredit) in the form of ' ' rembours ' ' credit up to approxi- mately the amount of the invoice in favor of the over- sea seller of the article (wool, cotton, grain, rice, coffee, ore, etc.), with the understanding, that the seller, or the latter's bank, shall have authority to draw upon the bank of the importer to the extent of the purchase price. The bank will accept the foreign bill, which the oversea seller or his bank will send to it after the load- ing of the goods, or have presented to it for acceptance by a German banking connection, only in case a full set of the bills of lading together with insurance policy, invoice, description of weight and quantity and, if need be, the certificates of origin, are turned over to it. 405 In this way the delivery of the goods to the bank is assured, 428 The German Great Banks as are also the identity of the article and the terms of sale, as described by the importer, as well as the fact that the particular transaction is a real, bona fide commercial transaction, corresponding to the importer's statement. After the bank has accepted the bill, which as a rule runs for thirty or one hundred and eighty days after sight, the seller is enabled to discount it either abroad or at an- other German bank, the first bank having to honor its acceptance on maturity. In case the importer, as is normally the case, has resold the goods to another domestic buyer, the goods must be forwarded to this new buyer. In that case the bank will have to deliver to its customer the shipping and other accompanying documents, for the purpose of forwarding them to another trusted party. This does away with its collateral security, and up to the time of payment or the remittance of a draft by the buyer the bank has to grant blank credit, which, however, is usually of but short dura- tion. When this remittance is received, the bank dis- counts it, credits the amount to the importer as per date of maturity, and as a rule finds itself in possession of the cash a good while before maturity of its own acceptance. In case the buyer has not resold the goods, they are stored after their arrival in Germany, under the super- vision of the bank or of its representative, the bank receiving a new security in the shape of the storehouse certificate, the bill of lading having been delivered to the master of the vessel at the time of unloading. In the case of these import transactions the granting of credit may likewise be required, as for instance when the German importer has to pay at once, at the time of 429 National Monetary Commission loading abroad, the purchase price for the goods bought. In such case his German bank accords him "reimburse- ment" credit (Rembourskredit) by ordering its oversea affiliation to pay the purchase price upon receipt of the documents, the importer returning the purchase price upon arrival of the goods, or in case of sale to a third party (see above) on return of the documents. Finally, if the importer has sold the goods to another country, prior to their shipment, his German bank will for- ward the bills of lading to its affiliated bank in that country and order it to hand the documents to the buyer or his bank upon payment of the purchase price or against acceptance. It is in this manner that transactions relative to the importation of cotton from America, of wool from Aus- tralia, Cape Colony or Argentina, of grain from Russia or America, of rice from eastern Asia, of copper from America, of ores from Spain and Sweden, are effected to an annual aggregate amount of several billions of marks. 406 As the underlying documents and declarations are exam- ined with extreme care (much more needed in this than in other classes of business transactions) the settlement is made as a rule without any hitch, since, as Waldemar Miiller justly remarks, the bank in granting the combined reimbursement and acceptance credit, runs a risk only in case the documents happen to be forged, or if after the goods are handed to the importer " in trust " (zu treuen Handeri), the latter as well as his buyer fail at the same time. Against such emergencies the banks may take some, though not always sufficient precautions. 407 430 The German Great Banks Loans on merchandise collateral may be combined with "reimbursement transactions" ("Remboursgeschdft") in case the importer or his foreign agent desire to lay in abroad a stock of raw materials. In the latter case, upon receipt of the acceptance the goods are held insured in store at the disposal of the bank by its shipping agent (to whom the documents are sent) until such time as the client has released them in total or in part by remitting the corresponding amount of the purchase price. It is clear that the ' ' reimbursement ' ' business can be successfully handled only by first-class banking houses whose acceptances are known as prime bills abroad as well as at home, and are therefore taken without question, even in larger amounts. For such bank acceptances are to be preferred per se to the acceptance of the commercial house which receives the goods, and usually also for the additional reason that they can be realized at the private rate of discount. As a rule these banks and banking houses will grant such credit in terms of German currency; only in exceptional cases, as in some countries of South America, Asia, and Australia such credits will be in terms of pounds sterling and bear the acceptance of their London agency. 408 Since as the result of continuous efforts mark bills have gained a respected position in foreign markets alongside of sterling bills, British aid and intervention is no longer required in nearly the same proportion to settle the bal- ance of payments on account of German imports and exports. The time may be said to have passed, at least in the majority of cases, when German exporters, in order to collect their foreign claims, and foreign exporters when 431 National Monetary Commission selling goods to Germans, had to draw on Condon, or when German importers had to settle the credits of their sellers via London. When the Deutsche Bank made its first efforts to gain for mark bills an equal standing as compared with sterling bills, it had not merely to struggle against foreign lack of confidence and the competition of the English banks, it also became the object of attack on the part of domestic banking and other interests on the ground that, as a result of the above-described fostering of our oversea import and export trade, in accordance with its program, its accept- ance account at times became so greatly swelled as to exceed, and sometimes even greatly exceed, the amount of the share capital of the bank, even after the large increases of its capital during the later period. But as was shown above, the acceptance business for the promotion of oversea commerce, which is transacted chiefly by means of international bills, contains no excessive elements of risk, provided only due caution is observed. Hence in criticising the extent of the acceptance accounts of our banks, regard should be had not so much to the quantity as to the quality of the drafts which the banks accept. II. THE OPENING OF BRANCHES IN HAMBURG, BREMEN, AND LONDON, AND THE ORGANIZATION OF OVERSEA AND FOREIGN BANKS, AND OF DOMESTIC SUBSIDIARY BANKS FOR OVERSEA AND FOREIGN BUSINESS. (j) Participations of the Deutsche Bank. In the preceding chapter we saw how the Deutsche Bank opened branches first at Bremen (1871), and Ham* 432 The German Great Banks burg (1872), the German centers of oversea commerce, and London (1873), with the view of fostering German oversea import and export trade. These branches were to serve, so to say, as advanced posts for the observation, exploration, and winning of new territory by the German banks. (a) In 1886 the Deutsche Bank organized in place of the above-mentioned La Plata Bank, which had to be liquidated in 1875, the Deutsche Ueberseebank (effective July i, 1887), with a paid-up capital of 6,000,000 marks (10,000,000 nominal), for the purpose of fostering com- mercial relations with South America, especially Argen- tina. This bank in turn was superseded on June 17, 1893, by the Deutsche Ueberseeische Bank, 409 founded in Berlin with a capital of 20,000,000 marks, and increased in 1909 to 30,000,000 marks. 410 The bank has had a continuously prosperous career, as may be seen by the rate of dividends paid: l8Ql Per cent. ... .6 l8O7 . Per cent. 8 1901 . . Per cent. 8 IQCK Per cent. 8 1804. 7 l8Q8 . . 8 IQO2 . . . 8 IQO6 180^ l8QQ g IQOT, 8 IQO7 1806. . . Q IQOO . . . 8 IQO4.. . . 8 1008. . . o The number of its branches totals at present 2 1 , of which 8 are in Chile (Santiago de Chile, Antofagasta, Concepci6n, Iquique, Temuco, Valdivia, Osorno and Puerto-Montt) , 4 in Argentina (Buenos Aires, Bahia Blanca, Cordoba, and Tucuman), 4 in Peru (Lima, Callao, Trujillo, and Are- quipa), 2 in Bolivia (La Paz and Oruro), i in Uruguay (Montevideo), i in Ecuador (Guyaquil), and 2 in Spain (Madrid and Barcelona) . The firm name of the branches in foreign countries reads: Banco Alemdn Transatldntico. 90311 ii 29 433 National Monetary Commission The former branch of the Deutsche Ueberseeische Bank in the City of Mexico was merged, in 1906, with the Mexi- kanische Bank fur Handel und Industrie (see below under "m"), founded with the cooperation of the Deutsche Bank. In turn the Deutsche Ueberseeische Bank ab- sorbed the firm Guillermo Vogel & Co., in Madrid, in which the Deutsche Bank had previously held a silent partnership interest (Kommandite) . (b) In March, i889, 411 the Deutsche Bank, in conjunc- tion with the Dresdner Bank and other institutions, with the view of fostering German commercial relations with Turkey, founded the Anatolian Railway Company (5o- ciete du Chemin de fer Ottoman d'Anatolie), with head- quarters at Constantinople, which, having acquired before December 31, i892, 412 a small railway opposite Constanti- nople, undertook to extend it from Haidar-Pasha, near Constantinople, to Ismid (92 kilometers) , thence to Angora (486 kilometers) and from Eski-Shehir to Konia (445 kilometers). The capital of the company was at first 45,000,000 and subsequently 60,000,000 francs. (c) In the same year (1889) the Deutsche Bank, jointly with the Wiener Bankverein, acquired the share interest held by Baron von Hirsch in the Actiengesellschaft der Orientalischen Eisenbahnen (Oriental Railway Company), founded in 1879 with a capital of 20,000,000 Austrian gold florins and operating 1,563 kilometers of railways, 413 and with it the concession for the Macedonian line Saloniki- Monastir. This concession it ceded to the Societe du Chemin de fer Ottoman Salonique-Monastir, founded Feb- ruary 5, 1891 (with headquarters at Constantinople), with a share capital of 20,000,000 marks and debentures of 60,000,000 francs. 434 The German Great Banks In North America the Deutsche Bank maintains very active business connections, resulting in numerous finan- cial transactions and underwriting of American public securities, treasury bonds, various railway bonds, and other railway transactions. The temporary depression in the price of Northern Pacific securities caused, for the time being, grave anxiety to the bank, which was terminated by the reorganization of the railroad, effected under its auspices. At first (beginning with October 15, 1872) the bank secured a silent partnership interest in the banking firm of Knoblauch & Lichtenstein, in New York, 414 amounting to $500,000 currency (1,845,000 marks), but as a result of financial losses of that firm it had to reduce its par- ticipation to $400,000 (1,680,000 marks), 415 while the liquidation of the firm, which took place October 15, 1882, caused even a loss of about 700,000 marks. 416 In 1890 the Deutsche Bank, mainly because of its con- nection with many American railroads, especially the North- ern Pacific Railroad Company, instituted, in conjunction with Frankfort and American houses, the Deutsch-Ameri- kanische Treuhand-Gesellschaft (German-American Trust Company) at Berlin, with a nominal share capital of 20,000,000 marks, whose main object was to issue its own debentures on the basis of solid American securi- ties to be purchased by it, and, in the second place, to represent the interests of holders of securities issued by American enterprises which had become insolvent. When the first object of the company, mainly in view of the precarious financial situation in the United States, was found to be unrealizable, the capital of the company was 435 National Monetary Commission at first reduced to i ,000,000 marks. 417 Later on, by the by-law (Statut) dated December 9, 1901, the company was reconstructed under the new name of Deutsche Treu- hand-Gesellschaft. While the second of the above-named purposes still remained one of the objects of the recon- structed company (whose capital was increased to i ,500,000 marks) , its principal function became the examination of the accounts of stock companies and the undertaking of trustee operations and those of pledge holding. Its activ- ity in these fields has proved eminently satisfactory. In 1889 the Deutsche Bank, with the view of promoting commercial relations between Germany and Eastern Asia, participated in the founding of the Deutsch-Asiatische Bank at Shanghai, with a capital of 7,500,000 taels. (See III, par. i, below.) (d) With the view of executing the financial part of the tasks of the Anatolian Railway Company, there was founded at Zurich in 1890, with the participation of the Deutsche Bank, the Bank filr Orientalische Eisenbahnen, with a nominal capital of 50,000,000 francs of common shares (Stammaktieri) and 13,000,000 francs of preferred shares (Vorzugsaktieri). 418 The debenture capital since May, 1907, amounts to 30,000,000 francs. (e) In 1894, with the view of fostering commercial relations between Germany and Italy, the Deutsche Bank participated in the founding of the Banca Commerciale Italiana at Milan, the present capital of which is 105,000,000 lire. (For particulars, see III, par. 2.) (/ ) Between the years 1898 and 1904 the Deutsche Bank, together with other banks and firms, participated 436 The German Great Banks in the founding of the Deutsch-Atlantische, Ost-Euro- paische und Deutsch-Niederldndische Telegraphen-Gesell- schaft, and the Norddeutsche Seekabelwerke (North-German marine cable works). In 1908 it took part in the found- ing of the Deutsch-Sudamerikanische Telegraphen-Gesell- schaft. (See pp. 458 and 459, No. 6.) (g) In 1899 the Deutsche Bank cooperated in the launching of the Schantung-Bergbau- and the Schaniung- Eisenbahngesellschaft (Shantung Mining and Shantung Railway Companies) founded by a number of German banks and firms. See pp. 458 and 459, No. 6.) (ti) When in 1901 the Anatolian Railway Company was granted the concession for the extension of its lines from Konia to Bagdad and the Persian Gulf, 419 that company, in conjunction with a number of Turkish, German, Austrian, French, Swiss, and Italian firms, founded the Imperial Ottoman Bagdad Railway Company. 420 During 1 905 a controlling interest in the railroad between Mersina and Adana was acquired in behalf of the Bagdad Rail- way, the first portion of which, from Konia to Burgulu, was opened for traffic October 25, 1904. In the spring of 1908, "after four years of laborious negotiations," 421 the required state guarantees were at last secured for the further construction of the Bagdad Railway over the Taurus and Amanus mountains to Syria and upper Meso- potamia as far as El Helif near Mardin (840 kilometers from the last point reached by the Bagdad Railway in 1908, 1,738 kilometers from Constantinople, and about 1,155 kilometers from Bassora on the lower Shatt-el- Arab) , ' ' assuring thus the furtherance of this great undertaking. ' ' 437 National Monetary Commission (i) In 1904 the bank founded the Ost-Afrikanische Gesellschaft (Bast- African Company), with headquarters in Berlin, a colonial company with 21,000,000 marks of nominal capital, the Empire guaranteeing a minimum interest return of 3 per cent and repayment at the rate of 1 20 per cent. (k) In 1904-1905 the Deutsche Bank participated in the founding of the Deutsch-Ost-Afrikanische Bank with a capital of 2,000,000 marks and central office at Berlin, which is both a credit and note issuing bank for the Ger- man colony of Bast Africa. (See III, sec. 3, below.) (/) In December, 1905, the Deutsche Bank, in con- junction with the Deutsche Ueberseeische Bank, the banking house of Lazard Speyer-Bllissen in Frankfort- on-the-Main and the Schweizerische Kreditanstalt, with the view of promoting German commercial relations with Central America, founded the Zentral-Amerika-Bank, Aktiengesellschaft, with central office at Berlin and a capital of 10,000,000 marks, of which 25 per cent was paid in for the time being. But, as the company was unable to secure the state concession for the transaction of banking operations for its proposed branch in Guate- mala, the original object of the enterprise was changed in 1906, so that the present name reads Aktiengesellschaft fur uberseeische Bauunternehmungen (" Company for over- sea building enterprises")- Its present object has thus been considerably narrowed. Dividends paid during 1905 to 1908 were: o, o, 5, and 4 per cent. (m) In 1906 the Deutsche Bank, in conjunction with the banking house of Speyer & Co. in New York, with the view of promoting German commercial interests in 438 The German Great Banks South America and more especially in Mexico, founded the Mexikanische Bank fur Handel und Industrie (Banco Mejicano de Comercio e Industria), with its main office in New York. This bank, as stated above, assumed the business of the Banco Aleman Transatlantic in Mexico; its nominal capital is 10,000,000 pesos, the term of its concession is forty years; the dividends paid in 1907 and 1908 were at the rate of 6 per cent. As regards the foreign participations of the Deutsche Bank in Europe it may be stated that (n) The bank had entered into a silent partnership as early as January i, 1873, with the Paris banking house of Weissweiller & Goldschmidt 422 by a participation (Kommanditeinlage) of 1,000,000 francs, but this partici- pation was reduced to 500,000 francs as early as 1876, and terminated soon after, owing to the liquidation of that firm. (0) In 1877 (Oct. i) the Deutsche Bank entered into a silent partnership with the Vienna banking house of Giiterbock, Horwitz & Co. by a participation of 750,000 florins (1,290,000 marks), which was, however, repaid December 31, 1883. 423 (p) In 1895 the Deutsche Bank formed a silent part- nership with another Vienna banking firm, Rosenfeld & Co., but subsequently organized a group of German and Austrian banks for the purpose of participating in Aus- trian and Hungarian business. (q) In 1895 the Deutsche Bank entered into a silent partnership with the Madrid firm Guillermo Vogel & Co. 434 The latter, as mentioned above, was taken over in 1906 by the Deutsche Ueberseeische Bank. 439 National Monetary Commission (r) The bank became interested in the mining business in the early nineties by a participation in the firm Ad. Goerz & Co., of Berlin and Johannesburg. Almost all the other great banks followed the example of the Deutsche Bank in developing and extending for- eign and oversea relations, some of them rapidly and energetically, others hesitatingly and to an inconsiderable extent. The bank which did so most rapidly and exten- sively was the Disconto-Gesellschaft. (2) PARTICIPATIONS OF THE DISCONTO-GESELLSCHAFT. This bank as early as 1873 had participated in the founding of the I^a Plata Bank, subsequently transferred to the Deutsche Bank. (a) In 1880 the Disconto-Gesellschaft cooperated in the reconstruction of the Deutsche Handels- und Planta- gen-Gesellschaft der Sudseeinseln (German Commercial and Plantation Company of the South Sea Islands). The capital of this company was 2,750,000 marks. During 1883-1887, at the instigation of Ad. von Hansemann, it cooperated in the organization and founding of the Neu-Guinea-Kompagnie (with a capital of 6,000,000 marks) . (6) In 1887 the Disconto-Gesellschaft, in conjunction with the Norddeutsche Bank, founded the Brasilianische Bank fur Deutschland* 25 with main office in Hamburg and a capital of 10,000,000 marks, for the promotion of commercial relations between Germany and Brazil. This bank has at present (1908-9) five branches (in Rio de Janeiro, Sao Paulo, Santos, Porto Allegre, and Bahia). The rates of dividends were as follows : 440 Th e r m a n G r e a t B a n Fiscal year ending June 30 Dividends. Fiscal year ending June 30 Dividends. 1890 Per cent. Per cent. 9 1891 10 1901 8 1892 16 6 1893 'i 6 6 1894 8$ 1904 8 180? 1896 1906 IO 1897 1898 1908 IO 1899 12 (c) In 1889 the Disconto-Gesellschaft participated in the founding of the Deutsch-Asiatische Bank, 426 organized by seven Berlin banks with the view of fostering German trade with eastern Asia (cfr., p. 455, No. i). Particulars regarding this bank are found further below. (d) In 1890 the Disconto-Gesellschaft entered into silent partnership connections (Kommandite) with the banking firm of Ernesto Tornquist in Buenos Aires, and the Antwerp firm H. Albert de Bary & Co., allied with the former, the aggregate participation being 2,187,000 marks. The latter firm was transformed in 1900 into the stock company "Compagnie Commerciale Beige, anciennement H. Albert de Bary & Co.," with a share capital of 5,000,000 francs, the Disconto-Gesellschaft continuing its partici- pation through ownership of stock. 427 (e) In 1894 it cooperated in the formation of the Banco, Commerciale Italiana (see below, p. 456, No. 2). (/) In 1895 the Disconto-Gesellschaft, together with the Norddeutsche Bank, and in cooperation with several business houses having trade connections with Chile, founded the Bank fur Chile und Deutschland 428 at Ham- burg with a capital of 10,000,000 marks. This bank has 441 National Monetary Commission now nine branches in Valparaiso, Santiago, Concepcion, Temuco, I v a Paz, Oruro, Antofagasta, Victoria, and Valdivia. Its dividends show the following development : 1896, o per cent; 1897, 5 per cent; 1898, 2 per cent; 1899-1901, 7 per cent; 1902-6, 8 per cent; 1907, 4 per cent; 1908, 8 per cent. (g) In 1897 the Disconto-Gesellschaft in conjunction with the firm of S. Bleichroder, founded the Banca Generala Romano, 429 in Bucharest for the promotion of German-Roumanian trade relations. The bank has now (1909) two branches in Braila and Craiova, and an agency in Constanza. 430 Its capital is 10,000,000 francs (I/ei). Its rates of dividends were as follows: 1898, 6 per cent; 1899, 5 per cent; 1900, 7 per cent; 1901, 8 per cent; 1902-3, o per cent; 1904, 6 percent; 1905, 8 percent; 1906-8, 9 per cent. (h) In 1898 the Disconto-Gesellschaft participated in conjunction with a number of domestic and foreign firms in the founding of the Banque Internationale de Bruxelles for the promotion of German-Belgian trade relations. The nominal capital of the new bank was 25,000,000 francs. It paid the following rates of dividends : 1899, 6 per cent; 1900, 4 per cent; 1901-3, o per cent; 1904, 4 per cent; 1905-8, 5 per cent. (i) In 1899 the Disconto-Gesellschaft participated, in conjunction with a number of German banks and bank- ing houses, in the founding of the Shantung Railroad and Shantung Mining companies (particulars for which are given below). During the period 1898-1904 and again in 1908 it took part also in the organization of several telegraph and cable companies (see below, pp. 458 and 459, No. 6). (k) In 1900 the Disconto-Gesellschaft founded the Otavi Mining and Railroad Company with a capital of i ,000,000 marks, which was increased to 20,000,000 marks as early 442 The German Great Banks as May 12, 1903, for the purpose of constructing a railway between Swakopmund and Tsumeb. Through the com- pletion of a branch line between Onguati and Karibib a junction was effected in 1906 with the main line Swakop- mund- Windhuk. 431 (/) In 1904 it founded the East African Railroad Com- pany, with a share capital of 21,000,000 marks. A minimum dividend of 3 per cent on this capital, as well as a redemption price of 120 per cent, have been guaranteed by the Empire. (m) In 1 904-5 the Disconto-Gesellschaft took part in the establishment of the German-East African Bank, with the main office at Berlin and a branch at Dar-es-Salaam, which acts as a credit and note-issuing bank for the German East African colony. (ri) In 1905 the Disconto-Gesellschaft, together with the firm of S. Bleichroder, the Norddeutsche Bank, and several Bulgarian firms, for the purpose of fostering Ger- man-Bulgarian trade relations, established the Banque de Credit (Kreditna Banka) at Sophia, with a nominal capital of 3,000,000 francs (lev). (o) In the same year (1905) the Disconto-Gesellschaft in conjunction with the firm C. Woermann at Hamburg, established the Deutsche Afrika-Bank with a capital of 1,000,000 marks. This bank opened branches in 1904 at Swakopmund, Windhuk, and Luderitzbucht and took over the business at those places of the Damara and Namaqua Trading Company (Limited) which had been founded in 1904 by the above-mentioned firm. (p) By the taking over of stock in 1905 the Disconto- Gesellschaft became interested in the General Mining 443 ' National Monetary Commission and Finance Corporation (Limited) in London, founded by the Dresdner Bank in conjunction with Albu Broth- ers, with a capital of i ,250,000. The investment did not prove profitable, as may be inferred from the fact that the value of this stock as carried on the books of the company had to be reduced considerably several times. (q) In 1906 the Disconto-Gesellschaft in conjunction with a number of German banks, banking houses, and firms took part in the foundation of the Kamerun Rail- road Company. (See below, p. 458, No. 5.) It is noteworthy that to the end of the nineties the Disconto-Gesellschaft adhered to the principle of strict centralization in the internal management of its affairs. In particular it discountenanced the opening of branches for the promotion of over-sea trade. It should be said though, that it had been represented for years at Ham- burg by the Norddeutsche Bank, with which it had become closely allied during the first period. It was only in 1900 that the Disconto-Gesellschaft, in view of the considerable growth of its own over-sea connections, decided upon the opening of a branch in London, followed in 1903 by the opening of another branch in Bremen. It may be also noted that as early as 1888 the Disconto- Gesellschaft, together with the Norddeutsche Bank entered into an agreement with the firm Friedr. Krupp, which had obtained a state-guaranteed concession for the construction of the Great Venezuelan Railroad between Caracas and Valencia with a total length of 180 kilo- meters, by which it took over the construction of that road 432 . The transaction, while resulting in considerable The German Great Banks contracts and orders for German industry, caused the bank numerous long-continued troubles and annoyances of all kinds. Finally, it should not be overlooked that the Disconto- Gesellschaft, as a member of the Rothschild Syndicate, participated in a large number of Austro- Hungarian state, railroad, and other finance transactions, took part in 1887 and 1888 in the emission of Argentine loans, and partici- pated in a number of finance and loan operations in behalf of the Finnish, Russian, and Roumanian Governments and railroads. (For particulars see App. V and VI.) (3) PARTICIPATIONS OF THE DRESDNER BANK. (a) With the view of promoting its foreign, particularly its over-sea relations, the Dresdner Bank founded the fol- lowing branches: 1892, one in Hamburg; 1895, one in Bremen, and 1901, one in London. (6) In 1889 the Dresdner Bank participated in the founding of the Anatolian Railway Company, also of the Company for the Operation of the Oriental Railroads (see above, i b and c) , and in the establishment of the Deutsch- Asiatische Bank. (See below, p. 455, No. i.) In 1891 it took part in the founding of the Bank for Oriental Rail- roads. (See above sub. id.) (c) In 1894 it participated in the founding of the Banca Commerciale Italiana. (See below, p. 456, No. 4.) (d) In 1899 it took part in the founding of the Shantung Mining and Shantung Railway companies. (See below, pp. 458 and 459, No. 6.) (e) In 1904-5 it participated in the founding of the German West- African Bank. (See below, p. 457, No. 4.) 445 National Monetary Commission (/) In 1905 it entered into a close alliance with the banking house J. P. Morgan & Co., of New York, London, and Paris 433 , for the purpose of common action in the field of international finance and issue operations and of extending the German market for American securities. This alliance led to the common participation of the two parties in the now liquidated Sovereign Bank of Canada at Montreal. (g) About the end of 1905 the Dresdner Bank, in con- junction with the A. Schaaffhausen'scher Bankverein and the Nationalbank fur Deutschland, with the view of pro- moting trade relations with the Orient, especially with Turkey, Greece, and Egypt, founded the Deutsche Orient- bank stock company in Berlin, with a share capital (now fully paid-in) of 16,000,000 marks 434 and two branches in Constantinople and Hamburg, taken over from the Banque d 'Orient in Athens. Since then additional branches have been opened in Alexandria, Brussa, Cairo, Kalamata, Smyrna, and Casablanca (Morocco). Divi- dends in 1906 were 4 per cent, in 1907, 4 per cent, and in 1908, 4 per cent. (h) About the same time (end of 1 905 435 ) the Dresdner Bank, with the view of promoting German commerce with South America, founded jointly with the A. Schaaff- hausen'scher Bankverein the Deutsch-Sudamerikanische Bank stock company, with the main office at Berlin, and a nominal capital of 20,000,000 marks, divided into 4 series of 5,000,000 marks each. This bank has at present (1909) 3 branches (in Hamburg, Buenos Aires, and Mexico). In 1908 it entered into close relation with the above-men- tioned Sovereign Bank of Canada in Montreal (capital 446 The German Great Banks $2,000,000), severed however in 1908 by reason of the liquidation of the Canadian bank. No dividends have as yet (i. e., for the years 1906, 1907, and 1908) been declared by the Deutsch-Sudamerikanische Bank. (i) In 1906 the Dresdner Bank participated, in con- junction with several German banks, banking houses, and commercial firms, in the founding of the Kamerun Rail- way Company. (See below, p. 458, No. 5.) (k) It became interested in the mining business by par- ticipating, in company with the Disconto-Gesellschaft, in the General Mining and Finance Corporation, London, which had been founded by it jointly with Albu Brothers, with a capital of 1,250,000. The Dresdner Bank also participated in the emission of the 1905 Chinese state loan, in the 5 per cent loan of the Tehuantepec National Railway Company, and in two (4-X P er cent and 4 per cent) Japanese gold loans. (For particulars, see Append. V and VI.) (4) PARTICIPATIONS OF THE DARMSTADTER BANK. The Darmstadter Bank up to the present has not established any branches for the promotion of over-sea trade. But as early as 1854 it acquired a silent partner- ship interest (Kommandite) the first of similar inter- ests in the New York firm E. vom Baur & Co. This firm, however, went into liquidation about the end of i885. 436 In 1900, jointly with the Bankers' Trading Syndi- cate of London its own creation which in turn was closely allied with the banking house S. Japhet & Co. and the Nordwestdeutsche Bank (subsequently the Deutsche Nationalbank, Kommanditgesellschaft auf Aktien) of 447 National Monetary Commission Bremen, it took the first steps for the promotion of foreign business. In 1906, with the view of extending business relations with the United States, it founded, in cooperation with other German and American banking firms, the Amerika- Bank, a stock company in Berlin, with a capital of 25,000,000 marks, divided into 5 series, of which 5,000,000 marks were fully paid in, and the rest to the extent of 25 per cent, while 10 per cent premium on the shares, i. e., 2,500,000 marks, was placed into the reserve fund. However, this bank went into liquidation in 1909, and its shares were taken over by the Darmstadter Bank. The Darmstadter Bank participated in the launching of the following organizations for the promotion of over-sea commercial relations: (a) 1889: In the founding of the Deutsch-Asiatische Bank. (See below, p. 455, No. i.) (6) 1 898-1 904 and 1 908 : In the founding of several tele- graph and cable companies. (See below, pp. 458 and 459, No. 6.) (c) 1899: In the founding of the Shantung Mining and the Shantung Railway Companies. (See below, ibid., No. 6.) (d) 1906: In the founding of the Kamerun Railway Company. (See below, p. 458, No. 5.) Its own foreign, though not over-sea connections, were quite numerous even during the first period. (a) As early as 1857, for the purpose of promoting busi- ness with France, it formed a commandite in Paris. The latter, after excellent results, had to be liquidated in 1871, owing to the unfriendly sentiment then prevailing. In 448 The German Great Banks 1873 a new commandite was established, which, however, went into liquidation shortly after, in 1877. (6) In 1870 a commandite was formed in Vienna (Dutschka & Co.), which was liquidated in 1902. Its clientele was taken over by the Wechselstuben-Aktien- gesellschaft Merkur in Vienna, which in 1908 had a capital of 20,000,000 kronen ($4,060,000) and 9 branches. There is a close alliance between this institution and the Darm- stadter Bank. (c) In 1871 it founded for the promotion of trade between Germany and the Netherlands the Amsterdamsche Bank in Amsterdam, 437 with which it has since main- tained the most intimate relations. Simultaneously, for promoting trade with Belgium a commandite was formed in Brussels. (d) In 1873-74 the bank formed a commandite in Milan. 438 (e) In 1877 the Darmstadter Bank, jointly with other firms, founded the Ungarische Escompte- und Wechslerbank in Budapest. (/) In 1 88 1 it founded the Wurttembergische Bankan- stalt, formerly Pflaum & Co., in Stuttgart (share capital, in 1909, 10,000,000 marks), which in turn formed in the same year a contractual community of interest the earliest union of this class with the Wiirttembergische Vereinsbank. (g) In 1890 it acquired a commandite interest in the banking house Marmorosch Blank & Co. in Bucharest. In conjunction with the Berliner Handelsgesellschaft it trans- formed that firm into a stock company under the name of the Banca Marmorosch Blank & Co., Societate Anonima 90311 ii 30 449 National Monetary Commissio n (effective January i, 1905), whose capital amounts at present to 10,000,000 lei ($1,930,000). (ti) In 1898 it founded, in conjunction with a number of domestic and foreign houses, the Banque Internationale de Bruxelles, with a capital of 25,000,000 francs. It also became interested in the mining business through the acquisition of shares of the Consolidated Mines Selec- tion Company and of the African Venture Syndicate founded in 1903. During the second period it participated in all the Austrian and Hungarian emissions of the Rothschild group, and together with several other banks and banking houses took part in the emission of Portuguese state, municipal, and railroad securities, which latter operations for several years proved a source of great trouble and financial losses. It also shared in the emission of the 5 per cent Chinese state loan, the 4^ and 4 per cent Japanese loans of 1905, and other finance ocerations, for which see Appendices V and VI. (5) PARTICIPATIONS OF THE BERLINER HANDELSGESEIV!,- SCHAFT. The Berliner Handelsgesellschaft participated in the founding of the following companies for the promotion of German oversea interests: (a) 1889: Deutsch-Asiatische Bank. (See below, p. 455, No. i.) (b) 1 898-1 904 and 1 908 : Several German cable companies and cable works. (See below, pp. 458 and 459, No. 6.) (c) 1899: Shantung Railway and Shantung Mining companies. 450 The German Great Banks (d) 1906: Kamerun Railway Company. Among its foreign, other than oversea connections, the following may be mentioned: It had a share in the founding of the following institu- tions : (e) 1872: Sckweizerischer Bankverein in Basel with a share capital of 50,000,000 francs. (/) 1898: Banque Internationale de Bruxelles (jointly with several other firms) . (g) 1904-5: Banca Marmorosch Blank & Co., Societate anonima in Bucharest (jointly with the Darmstadter Bank). (h) 1908: Stock company formerly Andreevics & Co. in Belgrade, with a share capital of 4,000,000 francs (jointly with the Pester Ungarische Commerzialbank) . Moreover the Berliner Handelsgesellschaft maintains close relations to the stock company Labouchere Oyens & Co. Bank in Amsterdam (capital 6,000,000 florins) and since 1903 to the New York banking house, Hallgarten &Co. It also took part 439 1887 : In the founding of the Dutch South African Rail- road Company in Amsterdam. 440 1889: In the acquisition of the Egyptian railroad system. 441 1894: In the founding of the Banca Commerciale Ita- liana. 1894: In the founding of the Compania Sevillana de Electricidad in Sevilla and the Compania Barcelonesa de Electricidad in Barcelona. 451 National Monetary Commission 1897: In the founding of the Bank fur elektrische Unternehmungen in Zurich. 1898: In the founding of the Aluminium-Industrie- Ak- tiengesellschaft in Neuhausen (Switzerland). 1898: In the founding of the Deutsch-Ueberseeische Elektrizitdtsgesellschaft (German Oversea Electric Com- pany). 1899: In the establishment of the Deidsch-Ostafrika Linie (German East Africa Steamship Line) . 1903: In founding the Deutsch-Chinesische-Eisenbahn- gesellschaft. 4 * 2 1904: In founding the Deutsche Kolonial-Eisenbahnbau- und Betriebsgesellschaft (German Colonial Railroad Con- structing and Operating Company) for the execution of railroad and port constructions in the German colonial possessions. Since April, 1905, it has been operating under a lease contract the Usambara railroad in German East Africa. In conjunction with the firm Lenz & Co. it has contracted with the Imperial Government for the construction of the railroad Luderitzbucht- Kubub . The Berliner Handelsgesellschaft took a prominent part in the underwriting of all Russian, Chinese, and Japanese loans emitted in Germany during the second period. It also emitted several Servian state and railroad loans. (For particulars see Append. V and VI.) (6) PARTICIPATIONS OF THE A. SCHAAFFHAUSEN'SCHER BANKVEREIN. Although the main strength of this institution from the start has been due to the promotion of domestic rather 452 The German Great Banks than foreign business, it participated also in the founding of the following concerns engaged in the foreign field: (a) 1889: Deutsch-Asiatische Bank. (See below, p. 455, No. i.) (b) 1894: Banca Commerciale Italiana in Milan. (See below, p. 456, No. 2.) (c) 1898-1904 and 1908: A number of telegraph com- panies and cable works. (See pp. 458 and 459, No. 6.) (d) 1898: Banque Internationale de Bruxelles. (e) 1899: Shantung Mining and Shantung Railway Companies. (See below, pp. 458 and 459, No. 6) (/) I 95 : Deutsche Orient-Bank in Berlin, jointly with the Dresdner Bank (see above sub. 3, g) and the National- bank fur Deutschland. (g) 1905: Deutsch-Sudamerikanische Bank, stock com- pany, in Berlin, jointly with the Dresdner Bank. (See above sub. 3, h.) (h) 1906: Kamerun Railway Company, jointly with several other banks. (See below, p. 458, No. 5.) (7) PARTICIPATIONS OF THE NATIONALBANK FUR DEUTSCH- IvAND. This bank took part in the founding of the following institutions : (a) 1889: Deutsch-Asiatische Bank. (See below, p. 455, No. i.) (b) 1895: Credito Italiano in Rome. The present share capital of the institution is 75,000,000 lire ($14,475,000); its branches number at present 17. 453 National Monetary Commission (c) 1899: Shantung Mining and Shantung Railway companies. (See below, pp. 458 and 459, No. 6.) (d) 1904: Banque d' Orient, established by it in Athens. (Share capital, 10,000,000 francs; branches in Saloniki and Smyrna.) (e) 1905: Deutsche Orientbank, stock company, in Ber- lin, founded in conjunction with the Dresdner Bank (see above, sub. 3, g) and the A. Schaaffhausen'scher Bankve- rein. This bank was detached from the Banque d' Orient and took over the latter's branches in Berlin, Hamburg, and Constantinople. Additional branches have been opened since in Cairo, Alexandria, Brussa, Kalamata, Saloniki, Smyrna, Tangier, and Casablanca. Since 1905 the Deutsche Orientbank has maintained a community of interest with the Deutsche Paldstina-Bank in Berlin, founded in 1899 by the banking firm Von der Heydt & Co., for the promotion of trade with Palestine and the Levant. The latter bank took over the assets and liabilities of the Deutsche Paldstina und Orient-Gesell- schaft (Limited) in Jerusalem, with a capital of 5,000,000 marks. It has now 4 branches (in Jaffa, Jerusalem, Beirut, and Hamburg) , and in turn founded a subsidiary company, the Levante-Kontor (Limited) , with a branch in Constantinople. The dividends on its preferred stock show the following rates : 1800 Per cent, o IQO4 Per cent, O IQO^i c IQOI c 1 906 '. 6 IQO2 A IQO7 6 IQOI. . 1008. . 6 454 The German Great Banks (/) 1909: The bank took part in the increase of capital of the Credit Mobilier Francais. III. THE COMMON SUBSIDIARY COMPANIES (Tochter- Gesellschaften) OF THE GERMAN CREDIT BANKS FOR THE PROMOTION OF OVER-SEA AND FOREIGN BUSINESS. The following subsidiary institutions were founded jointly by a large number of German banks and banking houses to assist German trade and industry in gaining new markets and to preserve and expand existing markets or to develop our colonies. i. In 1889 there was founded for the promotion of our trade in eastern Asia the Deutsch-Asiatische Bank" 3 at Shanghai, which at the end of 1908 had twelve branches in Berlin, Hamburg, Tientsin, Tsingtau, Hankow, Hong- kong, Calcutta, Tsinanfu, Peking, Yokohama, Kobe in Japan, and Singapore. The share capital amounts to 7,500,000 Shanghai taels, fully paid in. The follow- ing great banks participated in its founding : The Deutsche Bank, Disconto-Gesellschaft, Dresdner Bank, Darm- stadt er Bank, Berliner Handelsgesellschaft, A. Schaaffhau- sen'scher Bankverein, and Nationalbank fur Deutschland. By grant (Konzessiori) dated July 6, 1906, based on par- agraph 3 of the law regarding the colonies and the imperial decree regarding the issue of bank notes in the colonies, dated October 30, 1904, the Deutsch-Asiatische Bank was given the right for a period of fifteen years to issue bank notes in denominations of i, 5, 10, and 25 Mexican dollars and of i, 5, 10, and 25 taels through its branch offices located in the German possession of Kiauchau and in China. The dividends 444 paid were as follows: 455 National Monetary Commission 1880 Per cent. O 1809.. Per cent. 6 1890 2 V 2 IQOO 7 1891 o IQOI 7 1802 o IQO2 . . 9 180-1 c IQOV . IO l8QA 7 I QO4- . . . IO 1 8CK 8 IQO^ II 1806 10 IQO6 q 1807 6 IQO7 8 1808 . . . 10 1908. . sy 2 2. In 1894, for the promotion of our trade with Italy, there was founded the Banca Commerciale Italiana** 5 in Milan. Among the participants there were the same great banks, except the Nationalbank fur Deutschland, which was interested in the Credito Italiano. The capi- tal of the Banca Commerciale Italiana at the end of 1908 was 108,000,000 lire. It has now 35 branches, among them one recently opened at Constantinople. The dividends paid were as follows: Per cent. IQO2 Per cent. 8 1896 6^ IQO^ 8 1807 7 IQOA 8 1898 7;^2 1800 . 8^< 1006 . . . Q IQO7 IQOI . . 8 IQ08 . . . For the promotion of trade with Tunisia the Banca Commerciale Italiana in turn founded in 1907 the Banca Commerciale Tunisina with the head office at Paris. During the same year it also participated in the increase of capital of the Banco Commerciale Italiano in Sao Paulo, Brazil, whose firm name has been changed since to the Banco Commerciale Italo-Brasiliano (capital 5,000 contos). In 1908 it founded in Constantinople the Societd Commer- 456 The German Great Banks dale per I'Oriente (share capital, 3,000,000 lire) for the promotion of trade between Italy and Turkey. 3. During 1904-5 the Deutsch-Ostafrikanische Bank"* was founded with the head office at Berlin, a nominal capital of 2,000,000 marks and branches at Zanzibar, Mombassa and Dar-es-Salam. This institution acts both as an ordinary and a central note bank for the German colony of East Africa. 447 In its latter capacity it is to regulate the money market, to facilitate payments within the colony and to make remittances between the colony on the one hand and Germany and other countries on the other. It has also been granted the privilege of issuing bank notes in terms of rupees in accordance with business demand up to the threefold amount of its capital with minute provisions regarding the reserve for its note circulation. 448 Among the institutions participating in its foundation there figured also the Deutsch-Ost- afrikanische Handelsgesellschaft (German East African Trading Company) which had been organized in the same colony likewise with the cooperation of German banks. Among the great banks which took part in the founda- tion of the East-African Bank we find the Deutsche Bank and the Disconto-Gesellschaft. 4. During 1904-5 the Deutsch-Westafrikanische Bank" 9 was formed, a colonial company with a capital of 1,000,000 marks and its main office at Berlin. At the end of 1908 it had three branches (in Hamburg, Lome in Togo, and Duala in Kamerun). Its function is to act as a bank in the colonies of Togo and Kamerun, i. e., to regu- late the money market and to facilitate payments in these colonies ; also to facilitate remittances between these colo- 457 National Monetary Commission nies on the one hand and Germany and foreign countries on the other. The Deutsch-Westafrikanische Bank does not possess, however, the privilege of note issue. 45 It may be noted that the participants in its foundation include besides the Dresdner Bank and several commercial firms, also the Deutsch-Westafrikanische Handelsgesellschaft (Ger- man West African Trading Company) which operates in the same colony. 5. The year 1906 witnessed the foundation of the Kam- erun Railroad Company for the construction of a railway from Duala to the Manenguba Mountains with a capital of 5,640,000 marks preferred and 11,000,000 marks common stock. In accordance with act of May 4, 1906, the Ger- man Imperial Government guarantees a 3 per cent yearly dividend on the common stock, besides the redemption of the capital at the rate of 120 per cent. (Reichsgesetz- blatt, 1906, p. 525.) Of the great banks the following took part in the foundation of the company : Berliner Handels- gesellschaft, Darmstadter Bank, Disconto-Gesellschaft, Nationalbank fur Deutschland, Norddeutsche Bank and the A. Schaaffhausen'scher Bankverein. Among the founders figure also the banking firms S. Bleichroder, von der Heydt & Co. in Berlin, Wilh. Schlutow in Stettin, M. M. Warburg & Co. in Hamburg, also the commercial firm C. Woermann in Hamburg, and the Aktiengesell- schaft filr Verkehrswesen (Stock Company for transporta- tion enterprises). 6. Again in the interests of national policy all the banks and firms concerned in the foundation of the Deutsch- Asiatische Bank took part also in the launching of the following enterprises. In all these cases there could be 458 The German Great Banks no thought of the speedy realization of the capital tied up in these enterprises. 1898: Land-und Seekabelwerke A. G. (Stock Com- pany for land and sea cable works) in Cologne - Nippes (share capital 6,000,000 marks). 1 899 : Schantung-Bergbau-Gesellschaft (Shantung Mining Company) in Berlin, with a share capital of 6,000,000 marks. 1899: Schantung-Eisenbahn-Gesellschaft (Shantung Rail- way Company) in Berlin, with a share capital of 54,000,000 marks. 1899: Deutsch-Atlantische Telegraphen-Gesellschaft, Stock Company in Cologne, with a share capital of 24,000,000 marks. 1899: Norddeutsche Seekabelwerke (North German Sea cable works) , stock company in Cologne-Nordenham, with a share capital of 6,000,000 marks. 1 899 : Osteuropdische Telegraphen - Gesellschaft (East- European Telegraph Company) , stock company in Berlin, with a share capital of i ,000,000 marks. 1904: Deutsch-Niederldndische Telegraphen-Gesellschaft (German-Dutch Telegraph Company), stock company in Cologne, with a capital composed of 7,000,000 marks of stock and 7,250,000 marks of bonds. 1908: Deutsch-Sudamerikanische Telegraphen-Gesellschaft A. G. (German-South American Telegraph Stock Com- pany), in Berlin, with a capital composed of 4,000,000 marks of stock and 7,800,000 marks of bonds. 1907: A number of German banks participated in the establishment of the State Bank of Morocco. At the end of the nineties there were in existence only 4 German over-sea banks. In 1903 their number was 6, with 32 branches, while at the beginning of 1906 there were 459 National Monetary Commission as many as 13, possessing a combined capital of fully 100,000,000 marks and about 70 branches. But even these achievements appear rather unimportant when compared with those of other countries in the same field. Thus, for instance, England, in 1904, had 32 colo- nial banks with head offices in London and 2,104 in the colonies, besides 18 (30 in 1907) other British foreign banks with 175 branches. 451 France in 1904-5 had 18 colonial and foreign banks with 104 agencies; Holland 16 over-sea banks with 68 branches. SECTION 5. GENERAL FINANCIAL RESULTS OF THE GERMAN CREDIT BANKS; GROSS EARNINGS AND THEIR COMPOSITION; GENERAL EXPENSES; NET PROFITS, DIVIDENDS, WRITING OFF, AND RESERVES. The financial results of all German credit banks (with a share capital of at least 1,000,000 marks) for the years 1885 to 1908, inclusive, their number, and the dividends paid by them, are summed up in the following table : 452 Year. Number of banks. Gross earn- ings, in thousands of marks. Net earn- ings, in thousands of marks. Dividends. Amount of, in thou- sands of marks. Rate of (per cent). 1885 7i 7i 7i 7i 93 92 95 94 93 96 94 Q8 77,8io 78,690 80, 970 no, 480 141, ooo 141, 040 112, ISO III, 930 no, 030 112, 29O 150-330 I<8. Q70 56, 140 57,i8o 57, 740 75.390 no, 500 98,300 74, 140 76,850 71, 770 85, no in, 920 1 18. 3 so 46,430 47,170 48, ooo 58,970 81, 920 79,630 63, 070 61, 230 59.740 68,620 83,550 02. 600 6.41 6.43 6-53 7- 79 8.77 7.60 6. ii 5-80 5-72 6. 49 7.61 7.66 1886 1887 1888 1889 1890 .... 1891 1892 1893 1894 1895 1896. . 460 The German Great Banks Year. Number of banks. Gross earn- ings, in thousands of marks. Net earn- ings, in thousands of marks. Dividends. Amount of, in thou- sands of marks. Rate of (per cent). 1897 102 1 08 116 118 125 122 124 12) 137 143 158 169 179,370 218,380 261, 170 262, 020 258, 400 256, 760 253, 210 273,500 330, 200 377,080 382, 280 417, 230 134,690 162, 800 195,470 185, 270 152, 640 156, 170 170, 560 189, 780 224, 730 255,530 255.380 261,010 101, 830 126,360 148, 560 140, 520 no, 520 120, 510 130,880 145,540 168, 540 186,880 190, 720 194, 820 7-63 7.86 8. 12 7.19 5-66 6. 19 6. 59 7-25 7-75 7.88 7-45 7- 41 !898 1899 1901 1902 1904 1905 1906 1907 1908 It may be seen from this table that the German credit banks have paid an annual dividend below 6 per cent only three times during the last twenty-four years, namely, for the years of depression, 1892 and 1893, when the rate went down to 5.80 and 5.72 per cent and for the crisis year 1901, when the rate was as low as 5.66 per cent. Even for the years 1902 and 1903 following the crisis the average dividends exceeded 6 per cent, while for each of the last five years the average has been in excess of 7 per cent. During the years of the high crest of business activity, 1889 and 1899, average dividends in excess of 8 per cent were paid, viz, 8.77 and 8.12 per cent. These are exceedingly satisfactory and moreover stable results. It is further seen that the average 1907 dividends of 7.45 per cent show a decline since 1906, when the average was 7.88 per cent, notwithstanding the fact that the average discount rate of the Reichsbank in 1907 stood at 6.03 per cent, as against only 5.15 per cent for the 4 6i National Monetary Commission preceding year. This may serve as an additional argu- ment against the contention that the banks are interested in a high bank rate. The truth is that whatever advan- tage they may derive from the higher interest rates on current account, this advantage is as a rule more than compensated by the fact that in such times emissions are either out of question or else made quite difficult; that in addition the security business is less profitable, that the value of the security holdings is shrinking, necessitating corresponding amounts to be written off, and that at such time losses under the head of debit accounts are also inevitable. A continuous high bank discount rate is therefore as a rule not favored by the banks. If it is considered that the operating capital of a bank includes also the surplus funds and that therefore in calculating the dividend rates the former must also be reckoned, the following results for the last seven years are obtained, according to the Deutscher Oekonomist: 453 [Amounts expressed in thousands of marks.] 1902. 1903. 1904. 1905. Share capital on which dividends i 948 476 I 984 642 Surplus at the beginning of the year 380, 211 391 , 362 400, 372 448, 380 Total of capital and surplus (Gesamtes eigenes Kapi- tal) 2,328,687 2, 376, OO4 2, 405, 508 2,623,695 Dividends, amount of 120, 512 130,881 I4S-5H 168,536 Rate of dividends calculated on the basis of capital and surplus per cent 5 51 6. 05 6. 40 Rate of dividends calculated on the basis of capital only per cent . . 6.19 6. 59 7- 2 S 7. 75 462 The German Great Banks 1906. 1907. 1908. Share capital on which dividends are earned 2,371,781 2,559,202 2,627,855 Surplus at the beginning of the year 586 750 Total of capital and surplus (Gesamtes eigenes Kapi- tal) 2 , 85 I , 342 3 , 113,613 3 , 214, 605 Dividends, amount of 186,884 190, 722 194,829 Rate of dividends calculated on the basis of capital and surplus per cent 6 12 6 06 Rate of dividends calculated on the basis of capital only. . . per cent. . 7.88 7-45 7-41 It appears that on an average more than i % P er of the dividends is to be imputed to the surplus funds. It is hardly possible for an outsider to calculate the return to the banks themselves on the capital invested, since neither the average amounts of capital employed during a given year nor the interest paid by the banks are known. For the same reason it is impossible to calculate the profits of the various business branches of the banks. Neither are the net returns to the holders of bank shares identical with the dividends received by them, in case a premium was paid, when the shares were purchased. For the period 1871 to 1900 the average income from dividends derived by shareholders of German credit banks amounted to 6.74 per cent; for 18801900 to 6.84 per cent, while the net income of shareholders for the last ten years was 6.70 per cent. 454 For the year 1908 the returns on various shares from the shareholders' point of view 455 that is, the net returns to shareholders were as follows: 463 National Monetary Commission Banking, 7.7 per cent; insurance, 19.3 per cent; chemical industry, 15.7 per cent (large-scale chemical enterprises, 11.5 per cent); mining, smelting, salt works, etc., 9.5 per cent; textile industries, 9.4 per cent; elec- trical industry, 8 per cent; secondary railways (Klein- bahneri) and street railways, 4.3 per cent. The average dividends of the 1 4 Berlin banks 45e were invariably higher than those of other banks, as may be seen from the following table, which gives the compara- tive figures for the last seventeen years: Year. Average dividends paid by- Year. Average dividends paid by All German banks with a capital of at least Berlin banks. All German banks with a capital of at least Berlin banks. 1,000,000 marks each. 1,000,000 marks each. 1892 Per cent. 5-8o 5-72 7-49 Per cent. 6.03 5-73 8. 14 1901 1902 Per cent. 5-66 6. 19 6. 59 Per cent. 5- 75 6.72 7- 23 1893 1894 1903 1895 1896 7.61 7.66 7.63 7.86 8.12 7-19 8.29 8.48 8.45 8.45 8-59 7.61 1904 7-25 7-75 7.88 7-45 7-41 8.15 8.72 8.77 7-93 8.06 1897 1906 l8q8 1899 1908 1900 We may reiterate here what we stated in the earlier part of the volume, viz, that the rate of dividends increases with the increase of the current business of the bank, while the steadiness of the dividends increases with the increase of its regular deposit business. On the other hand there is no basis of fact for the notion of a recent writer, 457 according to which the profits of the bank increase in proportion to their combined capital and 464 Th e r m a n G r e a t E a n k surplus, a fact which he regards of the utmost economic interest. As a matter of fact, the reverse is true : With the progressive growth of profits that is, with the growth of business, especially their current business the banks, in accordance with sound business policy, have been increasing their capital. Of the total gross profits_ojMthe German banks (with, a_ capital of at least 1,000,000 marks each) almost one- quarter is due to commissions earned chiefly in the broker- age business. According to the Deutscher Okonomist the gross profits, commissions, and the proportion of com- missions to gross profits show the following figures: 1884 71 1885 71 1886 71 1887 71 1888 71 1889 93 1890 92 1891 95 1892 94 1893 93 1894 96 1895 97 1896 98 1897 102 1898 108 1899 116 1900 118 1901 125 1902 122 1903 124 1904 129 1905 137 1906 143 1907 158 1908 169 Number of banks. Gross profits (1,000 marks). 83 , ooo 77,800 78, 700 80, 900 no, 050 141, ooo 141 , ooo 112, OOO III, 900 no, ooo 112, 200 150,300 158,900 179,400 218, 400 261, 800 262, ooo 258, 400 256, 700 253, 200 273.500 330, 200 377,000 382, 300 417, 200 Commissions (1,000 marks). 19, 900 19, 700 20, 500 20, 700 24, 200 32, too 32, 200 28,800 26, 700 27,800 28, 100 34.300 35.400 40, 400 50, 500 57.900 60, ooo 58,800 57.700 62, 600 68. 200 81,400 91,400 97. SOD 103, 700 Proportion of commis- sions to gross profits. Per cent. 24.0 25-3 26. o 25-5 22. O 22.8 22.8 25-7 23-8 25-2 25-0 22.8 22.3 22.5 23- I 22. I 22.9 22.8 22.5 24. 7 25.0 24.7 24.3 25-5 24.9 90311" II- -3 1 465 X s National Monetary Commission The gross profits of the Berlin banks show the following figures (in million marks) : 1897 98-8 1898 126.8 1899 144-5 19 139-9 1901 131-6 1902 138. 2 i93 140- 4 1904 152. 6 1905 190. 7 1906 201.9 1907 201. 3 1908 458 196.0 According to a calculation of the Kolnische Zeitung 459 the total gross profits of 57 German banks in 1903 originated as follows: From bills and interest, 48 per cent; from commissions, 25 per cent; from issues and participations, 22 per cent. For the years 1905-1908 the profits from commissions and interest constituted the following proportions of the total gross profits: (a) for all banks: 71 per cent, 75 per cent, 86 per cent, and 76 per cent; (6) for 9 Berlin banks: 67 per cent, 71 per cent, and 78 per cent. Of the gross profits of the Berlin great banks the follow- ing proportions were derived from commissions and interest: 1906. 1907. t9o8. Deutsche Bank Disconto-Gesellschaft Per cent. 69 64 Per cent. 73 68 Per cent. 70. 6 61.4 Dresdner Bank . . . 79 88 84 8 Darmstadter Bank Berliner Handelsgesellschaft 55 69 66.6 82 9 A. Schaaffhausen'scher Bankverein 77 88 84.4 The assertion has been made that as early as 1894 all the banks except the Darmstadter Bank, and in 1905 all the banks, except the Disconto-Gesellschaft and the Darm- stadter Bank derived sufficient earnings from their current 4 66 The German Great Banks business, that is, the specie, coupon, and bill business, interest and commissions, also from their commandites, to fully pay their dividends. This assertion made by I^oeb (see Model-I/)eb op. cit. p. 152) is erroneous, as the author fails to deduct from the above earnings the corresponding expenses of operation. These expenses 461 for all German credit banks with a capital of at least 1,000,000 marks each were as follows (in million marks) : Year. Million marks. Year. Million marks. Year. Million marks. 1883 12.4 1893 26 9 66 <; 1884 13 . 5 1894 26. 2 I9O3 1885 1895 1886 14. 8 1896 32 8 90 8 1887 15. 6 1897 37.0 I9O6 . . 1888 . 1898 45 8 1890 1891 22.8 1899 53-3 r Q 8 1908 134.5 1892 24. o 1901 64.2 It is seen that during the course of concentration the cost of operation has been steadily and largely increasing. In 1908 it constituted about 32 per cent of the gross earn- ings of all the larger banks, compared with 31 per cent in 1907, 28 per cent in 1906, 27 per cent in 1905 and only 18 per cent in 1895. For the 9 Berlin banks the cost of operation in 1908 amounted to not less than 66,800,000 marks, as against gross earnings of 196,000,000 marks, that is, 34 per cent, as against 32 per cent in 1907, 30 per cent in 1906, and 28 per cent in 1905, the individual banks showing proportions more or less favorable than the averages just given. For the 6 Berlin great banks the cost of operation for 1908 was 55,900,000 marks; that is, 33 per cent of the 467 National Monetary Commission gross earnings, the figures for each of these banks being as follows (in million marks) : 1907. 1908. Gross earnings. Cost of operation. Gross earnings. Cost of operation. Deutsche Bank . . 53-6 27.8 31-5 17.8 14. o 18.0 20. 8.5 9-8 7-6 2- 5 3-4 55-0 29. o 31-0 19-3 14-7 I8. 3 21.4 8.9 10. 5 8.2 3-9 3-0 Disconto-Gesellschaf t Darmstadter Bank Berliner Handelsgesellschaf t A. Schaaffhausen'scher Bankverein .... The most noteworthy facts brought out by the table is the relatively small cost of operation in the case of the Berliner Handelsgesellschaft, due to its continued strong centralization, and the relatively high cost of operation in the case of the Deutsche Bank, due undoubtedly to its strong decentralization. The amounts written off by all German credit banks (with a capital of at least i ,000,000 marks each) prior to the fixing of the clear profits were as follows (in million marks) : Year. Million marks Year. Million marks. Year. Million marks. 1883 1892 8. 2 1901 Si 6 1884 3 7 1893 IO. O 1902 24. o 1885 6 6 1894 8 3 1886 1887 4-7 1895 1896 9.0 1904 II. 1888 8 2 1897 2 5 1906 12. O 5 4 1898 5.8 1907 < 62 4O. 2 1890 1891 6.7 8 9 1899 1 900 10. 7 12.8 1908 35- i This table does not include the amounts written off prior to the fixing the gross earnings by reducing the valua- 4 68 The German Great Banks tion of particular assets (so-called silent reserves). The specially large amounts written off in 1901, viz, 51,600,000 marks, are due to the crisis of 1900-1901. According to the Deutscher Oekonomist, the surplus funds showed the following total amounts and proportions to the share capital: Data for all banks. Data for the Berlin banks. Year. Capital stock (in thousands of marks.) Surplus (in thousands of marks.) Propor- tion of surplus to capital stock. Capital stock (in thousands of marks.) Surplus (in thousands of marks.) Propor- tion of surplus to capital stock. Per cent. Per cent. 1885 723,950 93, 240 12. 90 326, 740 55,o8o 17.00 1886 733 , 690 99, 270 13. 53 332, 750 CO C2Q 18. oo 1887 758, ooo 107, 900 14. 23 351,75 Oy J *** 67, 140 19. oo 1888 772, 400 i 15, 320 15. oo 368, 180 74, 030 22.11 1889 98 I , 450 156 , 060 15. 90 473 , I 20 103 820 1890 ,054,330 187,880 17.82 507,450 119, 650 23.58 1891 , 053, 210 191, 720 18.20 481, 240 117,910 24. 50 1892 05 7 , 090 200, 310 18. 95 AQA "?QO I 23 I 8O n A <\? 1893 , 046, 170 196,330 18.77 *ty*tt oy u 486, 400 117.560 ^4 y * 24. 17 1894 , 067, 520 199, 820 18. 72 534,200 120, 49O 22. 56 1895 , 134, 820 210, 620 18.56 626,860 142, 460 22. 73 1896 , 240,310 235, 250 19. oo 656,570 153,040 23-32 1897 , 418, 090 270, 750 19. 10 758,o8o 172,320 22. 73 1898 , 688, 170 33, 37o 19. 60 926, 530 2O2 , 860 2 1 . 9O 1899 ,906, 250 373,930 19.61 , 019, 920 225,540 22. II 1900 ,959,550 390,930 19.95 , 019, 920 230, 680 22. 62 1901 ,959, 290 380, 210 19.40 , 015, 800 223,730 22. 13 1902 ,980, 590 391,300 19- 75 , 022, 800 239,890 23-45 1903 , 989, 960 4OO, 37O 2O. 12 , OI9 , 4OO 243 3 10 23- 87 1904 ,066, 540 448,380 21.68 , O?!, 200 278,950 26. 04 1905 , 223,580 479,500 21. 50 , 136, 700 294, ioo 25.80 1906 ,432, 140 554,410 22. 70 ,175,440 333, 750 28.30 1907 ,572, 890 ^86 7^0 22. 80 209 100 344 8 50 28 *?o 1908 , 646, 610 O ou t / O^ 607, 070 22. 9O ,178, ooo 342,890 29. 10 A very material part of the surplus funds does not come from the business profits, but represents chiefly amounts paid in by the stockholders in the shape of premiums and 469 National Monetary Commissio n placed with the surplus funds in accordance with the pro- visions of paragraph 262 of the Commercial Code (formerly article 185, b, sees, i and 2 of the Aktiennovelle (corpora- tion share act) of July 18, 1884. The surplus funds grew according to the above table in the case of all banks with a capital of at least 1,000,000 marks each from 12.90 per cent in 1885 to 22.90 per cent in 1908, and in the case of the Berlin banks from 17 per cent in 1885 to 29.10 per cent in 1908. On an average, the surplus funds grew more rapidly than the capital stock. During the year 1900, when the surplus funds in all the banks amounted to nearly 20 per cent (19.95) an d i n the Berlin banks to nearly 23 per cent (22.62), the surplus funds in other enterprises (according to Ed. Wagon, op. cit., p. 170) were: Per cent. In the wood industry 8. 89 In building companies 10. 87 In the brewery industry 1 7. 07 In the coal industry 20. 48 In the machinery industry 22. 94 In the chemical industry 23. 38 In the rubber industry 27.15 In the paper industry 27. 16 I must say, however, that this very favorable develop- ment of the surplus funds of the banks is due to the excel- lence of our corporation laws rather than to the excellent policy of our banks, as Ed. Wagon would have us believe. 463 At all events it is due chiefly to the relatively large surplus funds that the German banks and industrial com- panies were able to pass through the crisis of 1 900 relatively well, in strong contrast to the crisis of 1873, and that their recovery after the crisis took so little time. It is seen that 470 The German Great Banks the surplus funds of the German banks compare quite favorably with the surplus funds accumulated in the most important branches of industry. It must, however, be borne in mind, that, like the industrial corporations, our banks have endeavored to accumulate so-called " silent reserves" in addition to the legally prescribed surplus funds as shown in the balance sheets. These "silent reserves" can be traced chiefly to the extremely cautious and conservative modes of valuing the assets of the institutions before the gross earnings are calculated. The fairly steady progress of the former period (1848- 1870) contrasts with the rapidity with which Germany's whole economic life and, with it, German banking are advancing in the present period, in about the same way as the speed of the mail coach of the times of the Holy Roman Empire of the German nation, contrasts with the flight of the modern automobile, which while it speeds along, overcoming all obstacles, corners, and surface difficulties, endangers at times both the innocent pedes- trian as well as the occupants. Just as in the case of the automobile, so in the case of German banks, public safety and real progress are safeguarded only when the persons in charge combine great technical skill with the greatest virtue of persons in control, that of keeping within bounds. Not only private but also public interests are at staKe. With the power and the influence of the large enterprises grows also the responsibility of the managers, as well as the necessity of supplanting the indiscriminate choice of means by wise self-restraint of the leaders. It is not without significance that a distinction is made 471 National Monetary Commission between banks proper and private banking concerns, and that the bank employees are spoken of as bank officials. They are, in fact, employees of enterprises which by reason of their functions and development "can not be regarded as purely private undertakings" 464 and toward which the regulations of private law are becoming less and less applicable. SECTION 6. THE CHARACTER OF THE BUSINESS MAN- AGEMENT AND BUSINESS DEVELOPMENT OF EACH OF THE GREAT BERLIN BANKS. Before describing in the next chapter the concentration movement in German banking during the second period, I shall attempt to characterize summarily the particular methods of management and operations of each of the great Berlin banks, as shown in previous chapters, in connection with their various activities. THE DEUTSCHE BANK. i . The distinct merit of the management of the Deutsche Bank, which was founded only in the beginning of the second period, is that from its very inception is showed a clear insight both into the needs of the hour as well as of the more distant future. Accordingly its policy has been to make timely and proper provisions for these more distant needs, so that the bank was hardly ever taken unawares by unexpected happenings and in its actions and policies was almost never influenced by untoward developments. The bank was thus never compelled to make sudden changes in its policy, dictated by the pressing needs of the moment, and in all its activities presents a picture of safe, quiet, and steady progress. 472 The German Great Banks 2. There are three main directions in which the above- mentioned qualities of management are brought out most clearly and brilliantly, and in which the Deutsche Bank has become a model for German banking as a whole: (a) The Deutsche Bank, immediately after its creation, adopted as an integral and essential feature of its banking policy, the systematic fostering of the deposit business through the establishment of deposit offices, (which num- bered 74 at the end of 1908), thereby effecting the con- centration of a part of the available funds of the nation in the credit banks for productive investments and uses. The amount of its deposits increased from 4,800,000 marks at the end of 1871 to 74,800,000 marks in the year 1894 and reached the total of 779,500,000 marks at the close of 1908. (b) It was first among the banks to recognize the ne- cessity for the German credit banks, of following a syste- matic industrial policy, and immediately upon recogni- tion of this necessity it took the proper practical steps in line with its new policy. In the year 1897 a community of interests formed simultaneously with the Bergisch-Markische Bank in Elberfeld and with the Schlesischer Bankverein in Breslau, both of which had long been active in the chief industrial districts of Rhineland- Westphalia and Silesia, secured to the Deutsche Bank, with one stroke, a firm foundation for permanent industrial connections in these districts. (c) Although other banks had made scattered efforts along the same lines, the Deutsche Bank was the first to recognize the need of a systematic fostering of industrial exports by the German credit banks and proceeded to lend 473 National Monetary Commission its support to that policy with an energy undaunted either by difficulties or occasional failures. Soon after its crea- tion it established branches in Bremen, Hamburg, and London , followed later by the creation of subsidiary companies in foreign countries or for the foreign trade , such as the Deutsch-Amerikanische Treuhand-Gesellschaft, (1890) the Deutsche Ueberseeische Bank (1890), the Deutsch-Ostafrikanische Bank, (7904-5), the Central- Amerika-Bank (1905), and the Mexikanische Bank fur Handel und Industrie (1906). The same and even larger purposes were served by the founding of the Anatolische Eisenbahn-Gesellschaft (1889), the Betriebsgesellschaft der Orientalischen Eisenbahnen (1889), the Bank fur Orientalische Eisenbahnen (1891), the Kaiserl. Ottomanische Eisenbahngesellschaft (1903), the Bagdad-Bahn (1903), and the Deutsch-Ostafrikanische Bank (1904-5). In all its activities abroad the Deutsche Bank was governed by the viewpoint which I endeavored to express in another part of this book (Sec. 7) in the words: "The skirmishes of the political advance posts are fought out on financial ground" (Die politischen Vorpostengefechte werden auf finanziellem Boden geschlagen) . This is shown best by the bank's activities in Turkey, in the case of the Anatolian and the Bagdad railways, etc. It was the above-mentioned lines of policy which caused the Deutsche Bank (as we shall see in the next Part, IV) to develop a strong tendency toward con- centration, particularly by decentralizing its operations. In this connection the bank quite frequently and suc- cessfully availed itself of opportune moments for prompt 474 The German Great Banks and energetic action, even at times when other banks preferred to follow a cautious and waiting policy. For instance, on the same day when the business and bank- ing world was shocked by the news that the Leipziger Bank had closed its doors the Deutsche Bank announced the opening of a branch in Leipzig. The beginnings of concentration date back to the seventies, when the Deutsche Bank participated in a number of bank liquidations, which will be discussed in detail later on. This action proved the source of considerable profits, and, what was more important, resulted at the same time in the gain of a large clientele of the first order in various sections of the Empire. It also gave the bank an opportunity to obtain a firm foothold in southern Germany by founding in Frankfort- on-the-Main, one of the leading financial centers, a branch of its own on the ruins of the Frankfurter Bank- herein. By constantly extending the network of communities of interest and by the conclusion of friendly agreements (Freundschaftsvertrdge) on the basis of the "most- favored treatment," it steadily increased the concentra- tion and through it extended its sphere of activity and influence. With each further phase of concentration the bank also increased the domain of its current-account, bill, contango, acceptance, and emission business. This can be seen very plainly from a comparison of the table below (p. 480), which shows the earnings from its various lines of business, with the table showing the progress of concentration (Appendix VII). The bank recognized from the very beginning, even while it was 475 National Monetary Commissio n planning large activities abroad, that the fostering of the deposit and the regular business must always constitute the backbone of a German credit bank, and it took no step in its concentration development which did not involve also a vigorous advancement in this direction. The systematic development of its industrial policy began with the "bold move" of 1897. During the first two decades, however, the bank did little or nothing toward extending its industrial connections through the founding or transforming of industrial enterprises. At that time it sought to improve these connections rather through expanding its current-account and acceptance business. When in 1890 it followed the example of the other banks by founding the Deutsch-Oesterreichische M annesmannrohrenwerke (German-Austrian Mannesmann Tube Works), this "step from its straight path" did not prove profitable. Since the nineties, however, the German Bank has shown but little difference from the other banks as regards its industrial, founding, transforming, credit, and emission business, 465 although, generally speaking, it shows far less activity than the other banks in the field of industrial promotion proper. It was only recently that it entered upon this line of activity on a large scale by financing, with apparent success, a number of petroleum companies. (See above, p. 418 and following.) It should be said that the Deutsche Bank was also in advance of most other banks, in adhering the more strictly to the principles of distribution of risk and liquidity of resources the more it extended its sphere of activity. 476 The German Great Banks Increases of capital for the purpose of restoring the liquidity of its resources were never resorted to at a time when the liabilities had already grown to dangerous proportions as compared with the liquid assets of the institution, but were secured beforehand, when such an unfavorable change was to be reasonably expected as the natural consequence of the normal growth of business. Such increases often proved unpleasant surprises to stock- holders and speculators, causing unjustified apprehension of decreased earnings. As a result of the mutually interdependent business policies described above, the Deutsche Bank has shown a greater steadiness in the development of its dividends as well as its surplus funds than any other bank. This is proven by the table below, taken from the report of its operations for 1908. Its surplus funds, as shown in its balance sheets (exclusive of the no doubt considerable "silent reserves"), amount at present to 51 per cent of the capital stock of 200,000,000 marks, the latter having grown from an original capital stock of 15,000,000 marks in 1870. With reference to earnings from the current business and the extent of its oversea business, the Deutsche Bank takes first rank. Its acceptance account as a result of its large oversea business often reached proportions which were deemed excessive in some quarters. The bank undertook the underwriting and emission on a large scale of German state and communal loans. It had a leading part in the emission, among others, of the loans of the following states: Argentina, Bosnia, Bulgaria, Chile, 477 National Monetary Commission China, Mexico, Spain, and Turkey (for particulars see Append. V and VI). It took up in their entirety the German and Prussian loans of 1899, amounting altogether to 200,000,000 marks. The bank repeatedly suffered losses through the specu- lations of the managers of its branches and commandites; thus in 1882 through the speculations of the managers of its New York commandite, in 1897 through the specula- tions of the manager of an exchange office (Weeks elstube) of the Hamburg branch, and in 1891 through the specu- lations and embezzlements of a Berlin official, which necessitated a writing off of 1,000,000 marks. The losses in the current-account business have been relatively small, and in view of the large surplus have had no appreciable effect on the bank. On the other hand, like the other banks, it had to write off repeatedly serious losses on account of partici- pations and industrial business. Under this head fall the losses due to the liquidation of its early branches in Shanghai and Yokohama, of its commandites in New York and Paris; the Argentine participations and emis- sions, the Deutsch-Amerikanische Treuhand-Gesellschajt (German- American Fidelity Company) , the Mannesmann- undertaking; also losses occasioned through its partici- pations and connections in the United States, especially with the American railways, such as the Northern Pacific Railroad Company. The successful reorganization of this road is due primarily to the energy and sagacity of the Deutsche Bank. The standing which the German mark bills attained in foreign markets, and which constituted the first stage 478 The German Great Banks in the increasing independence of our export trade from foreign intermediaries, is primarily the work of the Deutsche Bank and in the second place that of the D iscont o-Gesellschaf t . The German Bank participated and as a rule took a leading part in all the joint enterprises of the large banks, initiated for the advancement of the foreign and espe- cially the oversea relations of Germany, as, for instance, in the founding of the Deutsch-Asiatische Bank (1889), the Banco, Commerciale Italiana (1894), the Banque In- ternationale de Bruxelles (1898), the Schantung-Bergbau und Eisenbahn-Gesellschaft (1899), the telegraph and cable companies of the years 1898 to 1908, and the Kamerun-Eisenbahngesellschaft ( 1 906) . The following table shows in detail the development of the Deutsche Bank: 479 National Monetary Commission Statistical re-view of the develop End of calendar year Cash, coupons, bills, bank credits, con- tango, treasury bills and securities. Credits on current account and deposits. Debits on current account, advances on merchandise, etc. Acceptances. (a) Secured. (b) Unsecured. Marks. Marks. Marks. Marks. Marks 1870. . . . 5, 680,689 2,352,265 3, 237, 181 2 , 158, 120 2,463, 740 1871 .... 22, 739, 225 22 , 922 , 080 n, 742, 210 7,828, 140 7, 600, 918 1872 .... 41 , 602 , 899 38, 671, 172 27,842,441 18, 293, 382 23, 512, 090 1873- ... 72,854,311 50, 727,055 25, 184,925 12,487,373 30,269,944 1874..-. 81, 435, 860 56,977,289 17, 521,326 17,447,623 37,614, 960 1875..-. 72, 117, 806 43, 547, 190 24, 555,468 17, 091, 166 42,475, 164 1876. . . . no, 373, 161 96, 454,424 35,312, 592 16,328,058 41,038,337 1877- ... 65, 103, 158 41, 546,656 41,310,408 13, 400, 531 38,836,891 1878 73, 577, 426 48, 471, 197 42, 776, 959 13, n7,797 44,032,363 1879 92,679,843 68,585,210 56, 035, ooo 14, 178, 119 48, 205,643 1880 85,896,970 63, 938, 491 49,490,850 16,349,525 45,834, 592 1881. ... no, 913, 709 92, 471, 665 64, 282,435 21, 235, 646 54, 216, 214 1882 106, 236, 471 84, 705, 101 66, 649, 401 19, 184, 402 46, 140,476 1883. . . . 129, 277, 138 107, 724, 165 80, 060, 464 28,096, 181 69, 048, 298 1884 149,917, 199 122, 280, 372 8s,72 5 ,6 I 8 36, 503,597 83,658,784 1885 164, 517, 101 132, 414,350 91, 567, 60 i 27, 876, 166 80, 942, 605 1886.... iS9, 531.662 137, 809, 036 91, 567,364 26, 820, 749 82, 753,414 1887. . . . 175,801, 987 159, 040, 048 95,685, 222 30, 173, 948 88,821, 789 1888.... 208, 419, 928 185,939,718 106, 626, 950 42,527,464 93, 912, 184 1889 217, 646, 924 217, 322, 621 139, 041, 615 40, 600, 115 105, 801, 771 1890. . . . 234, 758,079 203, 247", 700 115, 164, 961 34, 061, 711 101, 076, 473 . 1891. . . . 248,828, 238 200, 297, 992 86, 918, 718 28,086,866 85,007, 988 1892. . . . 252,553,545 205,848, 449 103,378, 662 29,898,397 96,093,677 1893 247, 762, 714 214, 453, 616 105, 769,429 36,691, 151 96,325,332 1894. - - - 285, 869, 072 250, 630, 525 110,958,904 33, 983,676 93,865,465 1895- 296, 959, 088 295,845- 950 177, 124,944 46, 937, 481 122,496,507 1896 314, 997,810 287,217,599 154, 761,993 45, 006, 718 116, 646, 487 1897- 378,777,898 359, 7i8, 954 182, 405, 232 58, 666, 995 130, 511, 769 1898 436,939,357 444, 068, 368 203, 112, 894 61,992, 295 128, 340, 214 1899. . . . 453,857,134 479,947, 2ii 232, 196, 609 72, 764,087 141,883,555 1900. . . . 486, 153,982 531, 166, 114 244,553,839 71,806,556 141, 131, 301 1901 .... 573.593,263 630, 259, 107 254,245,936 72, 492, 174 142, 420, 917 1902 .... 674,679,032 720, 476, 427 264,996, 941 71 , 060, 603 145.301,506 1903. . . 722,163,979 789,374,38i 314,525,405 77,324, 283 179, 808, 067 1904. . . 840, 004, 989 893,594,072 334,315,096 96, 022, 215 185, 083, 202 1905. . . . 931,983,038 1,064,340,143 382,712,175 117, 181,085 197,843,098 1906. . . . i, 029, 740, 885 1,250,744,129 473, 181, 109 160, 243, 675 226, no, 088 1907 .... 1,024,584,737 1,264,405,721 509, 798, 132 177,054, 188 263,537,867 1908. . . . 1,014, 205, 572 1,268 816,252 515,652,163 160,947, 532 231, 948, 426 480 The German Great Banks tnent of the Deutsche Bank. Syndicate participa- tions. Capital stock. Surplus. K6 Dividends. Aggregate turn- over during year. End of calendar year Marks. Marks. 15 , ooo, ooo Marks. 36, 215 Per cent. 5 Marks. 239, 342, 864 1870 830,932 1,738,834 1,894, 900 i, 090, 216 2, 494, 231 30, ooo, ooo 45,000,000 161, 972 {703,611 1,308.987 2,341,569 3,434,506 4 411 581 8 8 4 5 3 6 951,445.036 2,891. 276,883 3, 765. 140,668 5, 509, 149,588 5. 512,596,634 7,132 497 077 1871 1872 1873 1874 1875 1876 i, 267, 186 3, 798, 1 13 4,857,429 5, 472, 928 6 f>Ya 7.325,231.848 7, 129, 850, 865 i877 1878 6, 646, 742 9 8,834 737 806 1879 6, 942, 299 14,375. 726 14, 740,480 16, 146, ooo i i , 302, 239 \ 60,000,000 I 7, 776,419 J 9-354,059 \ 13, 816, 131 14,381,884 15 , 309, 710 10 io& 10 9 9 10,484,497. 746 12,898,953,540 12,054,513.781 13, 205, 456,803 I 5> 650, 971 , no 1880 1881 1882 1883 1884 8 773 322 15 748 039 9 15. 147 999 465 1885 20,886, 257 23 , 549, 785 16, 212, 611 16, 659, 769 9 9 16, 180, 649, 366 18, 062, 819, 201 1886 1887 21,493,311 29, 710, 209 [ 75,000,000 J 23,108,580 1 23,852,467 9 10 23,381,792,352 28, 125, 250,988 1888 1889 1890 26 901 840 25 162 756 9 2 5 559 236 637 1891 20,799,573 21 , 794, 852 25.592,561 26, 025 , 280 8 8 25.331.274.743 29, 152 , 668, 706 1892 1893 13 847 627 26 590 882 9 31 617 185 805 1894 30,938, 125 33,882,758 31,634, 568 35,868,442 > 100,000,000 150, ooo, ooo [ 38,634,390 1 39,651, 027 45,275.637 46, 458, 129 10 10 1C loK 37,900,537,501 35,497.085,015 37,913.360,703 44,395.084,329 1895 1896 1897 1898 1899 35 056 687 u 49, 773 486 885 35.505,516 32,355.392 33,058,426 23,563,873 35 367 911 160, ooo, ooo i 80, ooo, ooo 50,642,845 55, 283, 295 59,030,455 76,662,853 78 398 560 ii ii ii 12 12 51, 815, 610, 701 56,783,415.833 59, 640, 106, 144 66,897, 131. 338 1901 1902 1903 1904 45,341,545 53, 427, 886 200, 000, 000 100, 000,000 101 , 831 , 917 12 12 85.590,594,109 91,611, 054, 053 1906 1907 36, 841 , 129 I 2 1908 90311" II- -32 481 National Monetary Commission THE DISCONTOGESElvIvSCHAFT. The Disconto-Gesellschaft was founded at first as a Kreditgesellschaft (credit partnership) by the later-day Prussian Minister of Finance, David Hansemann, and in 1856 transformed into a Kommanditgesellschaft auf Aktien (limited stock company), under the firm name Direktion der Disconto-Gesellschaft. As we showed above, this bank, as early as the first period (1851-1870), took a leading part in the fostering of the current-account business and in the underwriting and emission of German state and communal loans and railway shares. Until the year 1900, however, i. e., for nearly fifty years, this company apart from commandite participations adhered strictly to the policy of strict business centraliza- tion. It was only through the fostering and extending of over-sea relations that it came to establish in 1900 a branch in London. In 1901 the liquidation of the banking house M. A. von Rothschild & Sons in Frankfort-on-the- Main led to the opening of a branch in that city. During the second period it was prominently connected, as a member of the Rothschild syndicate, with all the under- writing and issue business conducted by this group, especially the state loans and the railway enterprises in Austria and Hungary, also with the issue of Russian, Roumanian, Chinese, and Japanese loans. It fostered industrial relations even during the first period with relatively good success, though refraining as a rule from speculative excesses. In so far, however, as it permitted itself to be led into financing and managing industrial enterprises, it had to suffer the same, and at 482 The German Great Banks times, even worse experience than the other banks, as, for instance, in the case of the taking over of the Heinrichshutte (Heinrich Smelting Works) in 1857; the founding in 1872 and the subsequent development of the Dortmunder Union; the Grosse Venezuela-Eisenbahn- Gesellschaft, the Internationale Druckluft- und Elektrizitdts- Gesellschaft (Popp), founded in 1890, and the blasting works at the Iron Gate in Hungary taken over from the firm G. Luther. Between the years 1891-1894 the Disconto-Gesellschaft had to write off losses of about 10,000,000 marks on account of its industrial and other participations. On the other hand, in 1873 it founded the Gelsenkirchener Bergwerksgesellschaft (G. Mining Co.), which became one of the most prominent concerns in the mining industry. Adolph von Hansemann, who at that time was one of the general partners of the Disconto-Gesellschaft, and its most talented manager, became the chairman of the supervisory board of the new mining company. In this way the bank secured numerous connections with indus- trial undertakings and cartels. These connections became even more important when on January i, 1905, a com- munity of interests was formed between the Gelsenkirchener Bergwerksgesellschaft, the Aachener Hutten-Aktien-Verein Rote Erde (Aix-la-Chapelle Smelting Company Rote Erde) and the Schalker Gruben- und Hutten-Verein (Schalke Mining and Smelting Company) . The Disconto-Gesellschaft actively and successfully participated in the organization of the Rhenish- West- phalian Coal Syndicate, which was finally accomplished in 1893, after many grave obstacles had been overcome. 483 National Monetary Commission In the eighties and nineties it effected a number of issues for the August Thyssen Mining and Smelting enterprises, especially the Schalker Gruben- und Hutten-V erein and the Gewerkschaft Deutscher Kaiser. In 1874 it participated in a syndicate formed under the leadership of the Seehand- lung (the Prussian State Bank) for the underwriting and issuing of a 5 per cent loan of 10,000,000 thalers for the Krupp Works. This operation deserves special mention because, on this occasion, for the first time in Germany, the loan took the form of fractional bonds secured by blanket mortgage and provided for common representa- tion of the holders of these bonds, which since then has become the common form of such obligations. 467 The Disconto-Gesellschaft maintains close relations with the Rheinische Stahlwerke (since 1877), the Stumm Works in Neunkirchen, the Aktiengesellschaft Gute Hoffnungs- Hutte (Gute Hoffnung Smelting Company) in Oberhausen, the Bochumer Verein fur Bergbau und Gusstahlfabrika- tion (Bochum Mining and Cast Steel Manufacturing Com- pany) and the Kattowitzer Aktiengesellschaft fur Bergbau- und Huttenbetrieb (Kattowitz Mining and Smelting Com- pany) , the latter founded with a capital stock of 16,000,000 marks through the reorganization of the mining and smelt- ing properties of the von Tiele-Winckler estate. The Disconto-Gesellschaft through its connections with Herm. Schmidtman and the Schmidtman mining and other enterprises, especially the potash works in Aschers- leben, stands in close relation to the potash industry. In the field of machinery construction it is closely related to the Schichau ship yards in Elbing and Danzig, the Henschel Machine Works in Cassel, the Saxon Machine 484 The German Great Banks Works (formerly Richard Hartmann) in Chemnitz, the Berlin Machinery Construction Company (formerly L. Schwartzkopff) and the machine and milling machinery works of G. Luther in Brunswick. The Disconto-Gesellschaft has always taken a prominent interest in the business operations of the I^udwig lyoewe Company and in all the enterprises founded by this com- pany, a managing partner of the Disconto Bank serving on the supervisory board of each of these undertakings. Thus it participated in the administration and the security issues of the Deutsche Wafjen- und Munitions fabriken (German Arms and Ammunition Works) in Berlin and Karlsruhe, the Union-Elektrizitdts-Gesellschaft (Union Electric Company) , which took over the electrical department of the Ludwig Loewe Company, the Gesellschaft fur Elektrische Unterneh- mungen (Corporation for Electrical Enterprises), etc. It also cooperated in a large number of stock and bond issues of the firm of Siemens & Halske. In the sphere of insurance it maintains close relations to the Aachener und Munchener Feuerver sicker ungs- Gesellschaft (Aix-la-Chapelle and Munich Fire Insurance Company), the Lebens- und Feuerversicherungsbank (I/ife and Fire Insurance Bank) in Gotha, the Lebensversiche- rungs-Gesellschaft Nordstern (Northern Star Life Insurance Company), which was organized in 1881 in Berlin, etc. It participated in the financing of minor and secondary rail- ways (Klein- und Nebenbahnen) only through its close relations to the Westdeutsche Eisenbahn-Gesellschaft. In the sphere of real estate business proper the Disconto- Gesellschaft participated only occasionally, assisting in the parcelling of some land tracts. 485 National Monetary Commission In more recent times the Disconto-Gesellschaft de- veloped an energetic activity in the petroleum field. (See above, p. 418 and following.) Finally, the Disconto-Gesellschaft has been very active in the sphere of mortgage and agricultural credit. In 1864 it participated in the founding of the Erste Preus- sische Hypotheken-Gesellschaft (First Prussian Real Estate Mortgage Company), which was later (Mar. 4, 1870) taken over by the Preussische Zentral-Bodenkredit-Aktien-Gesell- schaft; and in 1895 in the organization of the Landbank, which was intended to encourage domestic colonization and to promote German landed interests and agriculture in the eastern provinces. The presidency in the supervisory board of the new institution was taken by the managing partner of the Disconto-Gesellschaft, Ad. von Hansemann. The picture so far presented of the industrial and kin- dred activities of the Disconto-Gesellschaft, while unusually varied and animated, does not, however, vary materially from the general picture of the activity of the other great banks in the same field. As regards concentration the Disconto-Gesellschaft, as we shall show later in greater detail, was active as early as 1871, when it organized the Promnzial-Disconto- Gesellschaft in Berlin, which in turn became the parent institution of a large number of other provincial discount banks. We shall explain later the reasons why this first step necessarily failed. The failure caused the Diseonto- Gesellschaft to refrain for a long time from founding any subsidiary institutions. It was only in 1880 (Feb. 13) that the Disconto-Gesellschaft participated in the recon- struction of the Handels- und Plantagen-Gesellschaft (Com- 4 86 The German Great Banks mercial and Plantation Company) of Samoa, more par- ticularly in the organization of the Neu Guinea-Kompag- nie and in the preliminary negotiations during the years 1883 to 1885. By assuming certain obligations this com- pany, on May 17, 1885, obtained a special charter giving it the rights of territorial sovereignty; also the exclusive privilege to acquire landed property. These activities were followed in rapid succession by the organization of the Brasilianische Bank fur Deutsch- land (Brazilian Bank for Germany) in 1887, the estab- lishment of commandites in Buenos Aires and Antwerp (1890), the founding of the Bank fur Chile und Deutsch- land (1895), the Banca Generala Romana (1897), the Otavi- Minen- und Eisenbahn-Gesellschaft (Otavi Mining and Railway Company) (1900), the Banque de Credit in Sophia (1905), the Deutsch-Ostafrikanische Bank, and the Deutsche Afrika-Bank in 1905. Aside from this, the Disconto- Gesellschaft participated in all the enterprises undertaken jointly by the large banks, thus, in the founding of the Deutsch-Asiatische Bank (1889), the Banca Commerciale Italiana (1898), the two Shantung companies (1899), the telegraph and cable companies (1898-1908), and the Kamerun-Eisenbahn-Gesellschaft ( 1 906) . From what has been said it appears that the special characteristics of the Disconto-Gesellschaft were the extensive and far-sighted assistance rendered by it to industrial exports, as well as to all foreign, particularly oversea commerce; also the fostering of the regular bank- ing business, especially the current account business, begun in the first period and developed with great skill and success during the second period. 487 National Monetary Commission The results in the various lines of operations, while very considerable, are not so steady as those of the Deutsche Bank. This is particularly brought out in the presenta- tion, by ten-year periods, of the current account figures, as found in the jubilee report (1901) of the Disconto- Gesellschaft. During the first nine years (beginning with 1852) the debits on current account amounted to 32,000,000 marks in round numbers. At the close of the decade they showed a decline in 1869 to about 29,000,000 marks, though rising again in 1870 to 30,500,000 marks. The next decade since 1871, starts with the greatly in- creased figure of nearly 93,000,000 marks; at the close of 1880 the amount had fallen again to 49,000,000 marks. In the decade following we see the figures rapidly rise from 53,000,000 marks in 1881 to 112,000,000 marks in 1885, and then again decline to 82,500,000 marks in 1890. Beginning with 1901, however, we find, with the excep- tion of a few small interruptions, an almost steady growth of the debits on current account, which reached a total of 294,000,000 marks at the close of the fiscal year 1908. The figures of credits in current account show a similar fluctuation. In 1860 they were about 13,000,000 marks, in 1865 they had fallen to 10,500,000 marks, while the closing year of the decade, 1870, showed a decided in- crease to 39,000,000 marks. In 1877 the amount had declined to 29,000,000 marks, in 1880 it had risen to 55,000,000 marks, and in the next decade, in 1885, again the maximum figure up to that time was shown, namely, 154,000,000 marks, which, however, declined at the close of the decade (1890) to 90,000,000 marks. 488 The German Great Banks Similarly, beginning with 1891, and with much smaller fluctuations than before, a steady growth of the credit figures is shown, the statement for December 31, 1908, indicating a total of credits on current account of 235,000,- ooo marks. In the discussion of the deposit business we gave the reasons why the deposit business of the Disconto-Gesell- schaft showed similar and at times even greater fluctu- ations. We may disregard the first period because at that time, as we have shown (p. 73), there was no sys- tematic fostering of the deposit business. In 1870 the total deposits amounted to 3,500,000 marks only. The new period begins, however, with 15,000,000 marks deposits (1870), which rapidly grew to nearly 65,000,000 marks in 1873, but dropped to 10,000,000 marks in 1880. Similar fluctuations occurred in the following decade, which began in 1881 with 20,000,000 marks. By 1887 the amount had declined to 8,000,000 marks, while at the close of the decade (1890) a total of 36,500,000 marks was reached. The next decade again starts with only 17,000,- ooo marks, but, beginning with 1895, when the Disconto- Gesellschaft, with the view of systematically fostering the deposit business, opened deposit offices, the amount in- creased steadily to 48,000,000 marks in 1900. According to its 1908 statement, in which, however, the deposits are calculated in a different manner, (p. 207) , the deposits of the Disconto-Gesellschaft amounted to 218,500,000 marks. Similar fluctuations are observed in the case of the com- missions, which in 1870 amounted to about 1,000,000 48g National Monetary Commission marks. From 1,333,000 marks in 1871 they increased to 4,660,000 in 1872, declined to 1,500,000 in 1876, rose to 4,500,000 in 1900 and to 6,500,000 marks in 1908. The dividends on the commandite capital of the Dis- conto-Gesellschaft in the second period (those of the first period were shown on p. 68) were as follows: Year. Per cent. Year. Per cent. Year. Per cent. 1871 24 1884 1 1 1897 10 1872 27 1885 1898 1873 ... . 14 1886 10 1899 10 1874 12 1887 10 1900 9 187? 1888 12 1901 8 1876 4 1889 14 1902 8X 1877 1890 8K 1878 6% 1891 8 1904 8% l87Q 1892 6 1880 1893 6 1906 9 !88i 11^3 1894 8 1907 9 1882 loM 1895 1908 g 1883 . ioM 1896 10 There is no other German credit bank whose annual dividends ever came near the dividends of 24 and 27 per cent, which the Disconto-Gesellschaft was able to dis- tribute in the years 1871 and 1872. The capital stock of the Disconto-Gesellschaft on De- cember 31, 1908, amounted to 170,000,000 marks, while the surplus amounted to 57,500,000 marks, or 33.88 per cent of the capital stock. The manner in which the current banking business of the Disconto-Gesellschaft has increased is illustrated statistically in its Jubilee Report of 1901 (p. 25) by the amount of correspondence carried on in this branch of business. 490 Th e r m a n r e a t B a n Year. Letters received. Letters sent. 1852 1870 1880 85.800 2O4, 877 87,513 2O8 24O 1890 1900 The Disconto-Gesellschaft from the start was promi- nently connected with the Prussian Syndicate and subsequently with the Rothschild Syndicate, thus par- ticipating in the Prussian, Austrian, and Hungarian state loans. It was likewise a member of the syndicate organized for handling the Russian and Italian state loans and those of the German Empire. It took a leading part in the financial operations of the Chinese Govern- ment and participated to a very large extent in the issue of Brazilian and Argentine loans. It was also the leading member of the bank syndicate which handled the various Roumanian state and railway loans (for particulars see Append. V. and VI). In reviewing the activities of the Prussian and the Rothschild syndicates as well as the other great inter- national financial operations of the German banks during the second period, the jubilee volume of the Disconto- Gesellschaft contains the following remarks: "The small proportion of failures in carrying out the numerous enter- prises of the last half of the nineteenth century * * * is a lasting glorious testimony to the honest and efficient management of the financial business of this period." A considerable part of this fully deserved praise may be claimed by the Disconto-Gesellschaft. 491 National Monetary Commission THE DRESDNER BANK. The Dresdner Bank, which was founded in 1872 and in 1 88 1 transferred its center of activity to Berlin, by the establishment of a branch there, claims our special interest in a number of directions. It achieved remarkable success in the deposit business within an unprecedentedly short period, although it was not until 1896 that it followed the example of the Deutsche Bank in establishing deposit offices. At the close of 1908 it was conducting an extensive deposit business by means of its 1 6 branches and 44 deposit offices. Its deposits grew within less than twenty years from less than 3,000,000 marks in 1875 to 94,000,000 at the end of 1894, and reached an aggregate of 224,000,000 marks at the close of 1908, or fifteen years later. It thus overtook the Disconto-Gesellschaft in this branch of business, although the latter had been in this field a much longer time. In the same rapid and brilliant manner it managed to develop its regular business, the first extensive increase of which, just as in the case of the Deutsche Bank, dates back to the seventies, when it participated in the liquida- tion of 4 Saxon banks. Its further growth is due largely to the founding of branches, the absorption of a large number of banks and private banking concerns, and the establishment of numerous communities of interest. Its branches numbered 16 at the close of 1908, this being the second largest number for any German bank. It also managed to secure a strong foothold in southern Germany by taking over in 1904 the banking house von Erlanger 492 The German Great Banks & Sons at Frankfort-on-the-Main with its extensive rami- fications, in the place of which it established a branch of its own. In the same year it secured a large clientele among the membership of the mutual credit societies by taking over the Deutsche Genossenschaftsbank S or gel, Parri- sius & Co. For this new business it established a special mutual credit department. The credits on current accounts rose from 4,000,000 marks in 1873 to 95,000,000 marks in 1894 and 371,000,000 marks in 1908; the debits from about 9,000,000 marks in 1875 to about 95,000,000 marks in 1894 and 445,000,000 marks in 1908. As a result of great alertness and liberal commission and interest terms, the bank succeeded in securing a large number of customers wherever it ob- tained a footing, first among the circles of Saxon industry, and soon after among wider circles. Its clientele increased considerably through the absorption in rapid succession of a number of banks and private banking houses, and later through the entering of community-of -interest relations with other banks in Rhineland- Westphalia and in Silesia, by following the example of the Deutsche Bank. The number of industrial undertakings, for which it acts as fiscal agency (Zahlstelle) , is exceeded only by that of the Deutsche Bank. Since 1892 it also undertook the systematic promotion of foreign and oversea business, by establishing, just as the Deutsche Bank, though not in the same order of time, branches in Hamburg (1892), where it absorbed the Anglo-Deutsche Bank, next in Bremen (1895) and finally also in London (1901). 493 National Monetary Commission Moreover, as early as 1889 it participated in the forma- tion of the Anatolian Railway Company and the Company for the Operation of Oriental Railways (Betriebsgesellschajt der Orientalischen Eisenbahneri) , of the Deutsch-Asiatische Bank, and the Deutsch-Afrikanische Bank. In 1891 it took part in the foundation of the Bank fur Orientalische Eisenbahnen, in 1894 in the organization of the Banca Commerciale Italiana, in 1899 in the establishment of the two Shantung companies, and during the period 1898- 1908 in the organization of the Deutsche Telegraphen- Gesellschaften und Kabelwerke, in the establishment of the Deutsch-Westafrikanische Bank (1904-5) and of the Kamerun-Eisenbahngesellschaft in 1906. About the end of 1905, jointly with the A. Schaaffhau- sen'scher Bankverein (with which it had entered in 1903 into community-of -interest relations, now practi- cally dissolved) and the Nationalbank fur Deutschland, it established the Deutsche Orienibank, and about the same time, in conjunction with the first-named institu- tion, the Deutsch-Sudamerikanische Bank. It also promoted and fostered with growing success the over-sea "rembours" business (see p. 428), without, however, attaining in this field, as well as in the general field of international connections, nearly as favorable results as the Deutsche Bank or the Disconto-Gesellschaft. In various ways it sought to extend its continental foreign connections. Thus, with the view of promoting business in Austria- Hungary, it entered into close rela- tions with a number of Vienna banks. In order to gain a foothold in the Italian and Swiss markets, it par- ticipated in the foundation of the Banca Commerciale 494 The German Great Banks Italiana and founded the stock company Speyr & Co. in Basle. In the field of " minor," i. e., urban and interurban railway enterprises (Kleinbahn-Unternehmungeri) the Dresdner Bank manifested considerable activity by found- ing the Central Bank for railway securities (Centralbank fur Eisenbahnwerte) and the Continental Railway Con- struction and Operation Company (Kontinentale Eisen- bahnbau- und Betriebsgesellschaft) in Berlin; also by partici- pating in the Orenstein & Koppel Works for field and "minor " railways. In 1898 it took a prominent part in the formation of the Central Bank for railway securities (Centralbank fur Eisenbahnwerte), a trust company, which issues bonds of its own on the basis of Austro- Hungarian and German railway securities acquired by it. Since 1909 it has been financially interested in the Oren- stein & Koppel Works for field and " minor" railways, Berlin, amalgamated with and successors to the former firm Arthur Koppel. According to Otto Jeidels (op. cit., p. 137), the number of industrial emissions under the auspices of the Dresdner Bank for the years 1895-1903 compares as follows with those of the other great banks: Dresdner Bank, 220; A. Schaaffhausen'scher Bankverein, 187; Berliner Handels- gesellschaft, 170; Disconto-Gesellschaft, 151; Deutsche Bank, 150; Darmstadter Bank, 148. In the electro-technical industry the Dresdner Bank from the very beginning participated jointly with the Disconto-Gesellschaft and the Darmstadter Bank in the firm L,udwig Loewe & Co. and its subsidiary companies. After the absorption by the Allgemeine Elektrizitdts- 495 National Monetary Commission Gesellschajt of the Union-Elektrizitats-Gesellschaft, one of the Loewe creations, the bank became a member of the A. E. G. syndicate. The bank from the outset maintained and fostered close relations to the bourse. It is this circumstance and the peculiar composition of its security holdings which caused the ofttimes undeserved criticism that this bank, more than any other great bank, showed speculative tendencies. It was also pointed out that the bank had considerable participations in gold-mining enterprises and that its debit accounts were at times largely composed of accept- ances for which the bank stood sponsor. Fault was found occasionally also with the extensive participations of the bank in real estate corporations, though its operations in this field were always effected with great skill and success. The Dresdner Bank owned considerable real estate in Wilmersdorf (Berlin) , was interested in the Moabit (Berlin) and the Hanover real estate companies (Moabiter Terrain-Gesellschaft, Hannover sche Immobilien-Gesellschaft) ; also in the Park Witzleben (Berlin) Real Estate Stock Company. It founded in 1893 the Berlin Real Estate Company (Berlinische Boden-Gesellschaft) and in 1898 the Kurfurstendamm Real Estate Company (Boden- Gesellschaft Kurfurstendamm). Among its larger losses there figures one of about 2,500,000 marks, caused to its Hamburg branch through engagements with the export and storehouse company J. Ferd. Nagel, which engage- ments, however, had been acquired from the Anglo- Deutsche Bank. The bank distributed the following dividends: 496 The German Great Banks Year. Per cent. Year. Per cent. Year. Per cent. 1873 i 5 j88s 7 S 1897 9 6 1886 7 1898 .... 9 1875 !887 7 1899 9 1876 1888 8 1877 6 5 1889 4 1878 1890 6 1879 9 1891 7 1903 7 1880 g 1892 T 1 A 1881 1893 8^ j882 8 1894 8 1906 SK 1883 8 1895 8 1907 7 1884 1896 8 1908 . 7^ A gratifying percentage of these dividends is derived from the profits yielded by the regular or current business. 468 The share capital of the Dresdner Bank has been raised nine times from 9,600,000 marks in 1872, the year of its foundation, to 70,000,000 in 1904, the first increase taking place as early as 1878. In 1909 its share capital amounted to 180,000,000 marks (increased to 200,000,000 marks by 1910) while its reserves totaled 51,500,000 marks that is, 28.61 per cent of the share capital. The bank took a large part in the underwriting and emission of securities. In the international issue field it succeeded particularly in the emission of Mexican railway loans; it also participated, jointly with the Darm- stadter and other banks in the emission of Portuguese securities. (See App. V and VI.) During most years, however, it managed to keep its syndicate participations within moderate limits. On the other hand, its security account shows large holdings of industrial shares, which were often used rather skilfully to support its industrial policy. 90311 ii- -33 497 National Monetary Commission On the whole it may be said that the Dresdner Bank has succeeded in very short time in gaining the permanent favor of a large clientele because of the skill and alertness of its management. THE DARMSTADTER BANK. Among the great banks the Darmstadter Bank during the first, and largely also during the second period took special care in guarding most carefully the liquidity of its resources and the principle of the distribution of risk, at times even refusing to engage in operations that might impair in any way the liquidity of its resources. If en- gagements of this sort were unavoidable, it showed the utmost endeavor to liquidate as soon as practicable its long-term engagements. This was the reason why soon after its foundation it passed quite successfully the crisis of 1857, and was able during that time to render effective aid both to its clients as well as to various corporations and other banks. From the outset its reports contained many more par- ticulars regarding its operations than those of almost any other bank. This is especially true of the information given regularly up to 1900 regarding the composition of its security holdings and its syndicate participations. 469 It was shown before that during the first period it took a most prominent part in the construction of the German private railways, in the underwriting of a large number of state and communal loans, and in promoting the rapidly developing industry. It may be said that during the first period, and to a large extent even in the beginning of the second period, it was almost exclusively a bank for 498 The German Great Banks industrial promotions and only to a small extent a bank for the emission of state, communal, and railway securities. During the first epoch the bank, or at least its central office, made but few systematic efforts to develop its. cur- rent-account business. Its industrial connections origi- nated during those years mainly from its emissions of industrial securities, mainly industrial shares, which the bank from the outset retained in large blocks, thus preserv- ing a permanent influence on the administration of the enterprises. This policy, while frequently the cause of heavy losses, on the other hand enabled the bank to keep a constant watch over those industrial undertakings which it had founded or transformed into stock com- panies. We showed above that during the single year 1856 it founded seven industrial companies, in which it retained a permanent participation extending to about one-third of the entire share capital, or about 800,000 florins. Since these holdings resulted not from emissions, but from promotions, it may be said that it engaged designedly in entrepreneur activity, the risks of which, it is true, were somewhat lessened by its continuous regard for the liquidity of its resources, but which, nevertheless, were quite apparent. Neither did it make systematic efforts to foster the deposit business during the first period and even during a considerable part of the second period, for general rea- sons similar to those which are stated in the 1850 report of the Schaaffhausen'scher Bankverein. (See pp. 73 and 74.) The bank proposed to carry on its business, as far as practicable, with its own means, and in the interest of the safety of the institution did not regard it expedient 499 National Monetary Commission to "bring about an increase of deposits by holding out more attractive terms." It was shown, however, that in the beginning of the second period its deposits amounted to about 11,000,000 florins, as against only 2,000,000 marks in the case of the Disconto-Gesellschaft and about 2,500,000 marks in the case of the A. Schaaffhausen'scher Bankverein. This relatively large amount most likely resulted from its close connections with various railway companies, such as the Hessian Ludwig Railroad Com- pany, and from the credits on current account of large corporations and firms. It was only in 1900, or much later than the other banks, that the Darmstadter Bank resolved upon the founding of deposit offices and thus upon a systematic fostering of the deposit business. But meanwhile the other banks had gained a considerable start and secured a growing number of permanent and reliable investors for the se- curities emitted by them and, what is more important, an ever-enlarging circle of current- account depositors. To the credit of the bank it may be stated that it re- frained from issuing long-term bank obligations. The charter of the Darmstadter Bank, following the model of the Credit Mobilier, provided for the issue of such bank obligations which, secured indirectly by the newly cre- ated industrial enterprises, were to combine the scat- tered small capitalist forces in the launching of large enterprises. The Darmstadter Bank as a rule kept aloof from exces- sive speculative dealings, except in a few cases, when it was subjected to particularly vehement criticism. Thus during the first period it lost heavily, having like many 500 The German Great Banks other banks become involved in speculative contango and share transactions, which about the same time, i. e., in 1857, were compensated by improper profits from the trading in its own scrip (Berechtigungsscheine) , the so- called Darmstddter Enkel. 470 Even during the earlier period the bank took a con- siderable part in the foreign business in Italy, Belgium, and more particularly in Austria-Hungary, where in the beginning of the sixties, jointly with the Rothschilds and the Kr edit anst alt, it had engaged in Austrian state and railroad finance operations, though joining the Rothschild syndicate only some time later. As a result of these and similar financial operations it felt constrained as early as 1855 to have its capital of 10,000,000 florins fully paid up (only 4,000,000 florins having been paid in up to that time), and to increase it to 25,000,000 florins in 1856. On the other hand, in 1857, when, according to the by-laws adopted, the capital was to undergo a fur- the'r increase to the maximum of 50,000,000 florins, the increase was effected only to the infinitesimal extent of additional 46,000 florins, a larger issue being headed off by the crisis of that year. The function of its offices in Frankfort-on-the-Main (agency opened in 1854) and in Mainz (branch opened in 1854) was to foster more largely than could be done by the central office in Darmstadt the bill and draft busi- ness and especially the current-account business. Until the eighties and even later the bank was extremely con- servative in granting acceptance credit, so much so that during the middle of the seventies the acceptance obli- National Monetary Commission gallons of the Berlin office and of the branch at Frank- fort-on-the-Main amounted to only a few million florins. For the promotion of domestic and more especially foreign business relations, a large number of commandites were founded, which did not, however, justify expecta- tions, as they proved to be in advance of the time. As early as 1854 the first commandite in New York was formed with the firm G. vom Baur & Co., in 1857 the first commandite in Paris, and in 1867 a commandite in Vienna with the firm Dutschka & Co. The establish- ment of other commandites was planned in London, -St. Petersburg, Prague, and even in Smyrna and Const anti* nople, but these plans failed of realization partly because of the unpropitious times, partly also because of legal difficulties. At all events the Darmstadter Bank may claim to have proceeded first designedly in this field in accordance with the program laid down in its very first report for the year 1853, which stated among others "that the bank's organs both at home and abroad were to facilitate the export trade as well as the innumerable relations of German industry to the money market." How far-reaching the plans of some people were even in those early days may best be seen from the fact that in 1856 two of the founders and members of the supervisory council of the Darmstadter Bank Gustav V. Mevissen and Abraham Oppenheim quite seriously sounded the Disconto-Gesellschaft whether it would not be advisable to organize jointly a central bank for foreign commandites with a capital of about 100,000,000 thalers, whose function it should be "to prevent in the future the scattering of the capital of those German banks which strove after foreign 502 The German Great Banks commandite connections and to bring about the most competent possible representation of their interests." 471 With the view of decentralizing its business, the bank from the early years until the nineties preferred the com- mandite system to the establishment of branches. This is largely accounted for by the unsatisfactory experience it had had with some of its branches founded about the end of the fifties and the beginning of the sixties. In 1863, "in order to reduce the number of institutions whose operations might lead to direct commitments of the bank, " it thought it necessary to transform its branch at Mainz into a commandite. It was only in 1 890 that it parted with this principle by opening a branch at Han- over, shortly afterwards followed by another in Strassburg (in Alsace). At that time it still had 8 commandites in Heilbronn, Mainz, Dresden, Halle, Mannheim, Bucharest, Berlin, and Neustadt, while in 1909 this number had fallen to 3. The average rate of dividend for the period 1854-1862 was 6}^ per cent. Between 1863-1872 the bank took over independently many German and foreign, including several Russian and Italian state bond issues, and participated in other similar transactions. Its main activity, however, con- sisted in the financing and the construction of the German and Austro-Hungarian railway systems, among others the financing of the Gotthard Railway. During that period it also founded a number of subsidiary banks (Tochterbankeri) ; for instance, the Amsterdamsche Bank (in 1871), the Suddeutsche Bodenkreditbank, the Sud- deutsche Immobilien-Gesellschaft, the Ungarische Escompte- 503 National Monetary Commission und Wechslerbank in 1877, and the Deutsche Gold- und Silber-Scheide-Anstalt, preceded by the foundation of the Hessian Note Bank (Bank fur Suddeutschland) . The average dividend for the period 1863-1872 amounted to 8.7 per cent. During the following decade, 1873-1882, after safely passing through the crisis of 1873, finance operations in Austrian and German railway, state, and communal securities were effected, while beginning with 1879 the conversion of German state, railway, and municipal debentures was started, which attained increasingly large proportions in the following years. The average rate of dividends for that decade (1873- 1882) was 8^ P er cent. As a result of the state purchase of the railroads in Germany and Austria the finance transactions with large railway companies greatly diminished. Instead, the bank, first among the great banks, during the decade 1883-1902, in conjunction with the railway constructing and operating concern Herrmann Bachstein, undertook on a large scale the construction, operation, and financing of the so-called minor railways (Kleinbahneri) , in the first place in Hesse, Baden, and Thuringia. The same period witnesses the founding by the bank of several industrial companies and the participation in the underwriting of a number of state and communal issues and in the fusion of the Jura-Berne-L,ucerne Railway with the Swiss Western Railway. During these years the bank jointly with a number of other banks and banking firms took over the issue of the Lisbon municipal and Portuguese state loans. Apart from the Lisbon municipal loan, interest on which 504 The German Great Banks has been regularly paid, the other loans proved a source of great losses and annoyance to the bank and greatly hampered its subsequent activity, inasmuch as the bank felt in honor bound to mitigate, as far as practicable, the consequences of the defaults on the part of the State and railways, with regard to the holders of the state and railroad securities. The average rate of dividends during that decade (1883-1892) was below yX per cent. During the following decade (1893-1902) its activity became concentrated chiefly in the field of minor rail- ways. In 1895 it took a leading part in the founding of the Suddeutsche Eisenbahngesellschaft. This company amalgamated the small railways which had been com- pleted by that time and on the whole were then in a fair financial condition. The bank also had a hand in a number of state and municipal issues and of industrial real estate transactions. About the end of the decade the bank derived con- siderable profits from a number of reorganizations of sev- eral banking and industrial concerns such as the Deutsche Grundschuldbank, the Preussische Hypotheken-Aktien- bank, the Pommersche Hypothekenbank, and the mining and iron works Differdingen-Dannenbaum, also from taking over in 1902 the Bank fur Suddeutschland and the Breslauer Disconto-Bank. About the same time it en- tered into a community of interest with the Osibank fur Handel und Gewerbe in Posen. Notwithstanding all these multifarious activities the average dividend rate for the decade was but per cent. 505 National Monetary Commission During the most recent period the bank paid special attention to the fostering of the current-account and deposit business. Its efforts in this field proved emi- nently successful, so much so that by skilful management it was able to restore the liquidity of its resources, which had become temporarily impaired. As a member of the Loewe group it participated in all the enterprises of that combination. It also took part in a number of state and municipal loans as well as in several industrial issues. In 1905 it established community-of-interest relations with the Bayerische Bank fur Handel und Industrie. The number of its deposit offices at the end of 1908 was 39, exclusive of 7 agencies. In 1900 it strengthened its foreign connection? by the founding of the Bankers' Trading Syndicate in London , in 1902 by entering into close relations with the Wechsel- stuben-Aktiengesellschaft Merkur in Vienna, and in 1903 by establishing community-of-interest relations with the Nordwestdeutsche Bank in Bremen. During the years 1904-5 it participated in the transformation of its former commandite in Bucharet into a stock company, which assumed the firm name Banca M armor osch Blank & Co., Societate anonima. During the same period it absorbed the banking firm Rob. Warschauer & Co., which had important foreign business connections, especially in Russia, and in which it had held a silent-partnership interest since 1898. In 1889 the bank participated in the founding of the Deutsch-Asiatische Bank; in 1898, jointly with other domestic and foreign institutions, it took a prominent part in the founding of the Banque Internationale de Bruxelles. 506 The German Great Banks During the years 1898-1908 it cooperated in the launch- ing of the German Telegraph and Cable companies, in 1899 in the founding of the two Shantung companies, and in 1 906 in the organizing of the Karne'run Railway Com- pany. In 1906, jointly with several domestic and foreign banks, it founded the Amerika-Bank for promoting busi- ness relations with the United States. This institution, however, was placed in liquidation in 1909. It may be said in conclusion that the Darmstadter Bank from the very beginning acquired a high standing among large circles. Its management, while not always following a uniform business policy, adhered, however, almost steadily to the principle laid down in paragraph 10 of its first by-laws. 472 As a result, it continued to enjoy public confidence in an undiminished degree, at first in southern Germany and subsequently in the whole country, even during times which proved critical for many commercial undertakings and banks. THE A. SCHAAFFHAUSEN 'SCHER BANKVEREiN. 473 This institution is the oldest German credit bank. Its foundation dates back to the year 1848, when it super- seded the banking firm A. Schaaffhausen, which at that time had become involved in financial difficulties. The capital of the reorganized institution was fixed at 5 , 1 87,000 thalers, of which, however, only 3,199,800 thalers were paid in. As the firm A. Schaaffhausen had maintained extensive industrial connections in Rhineland- Westphalia, the new institution was in a more favorable situation than the other present-day great banks, which were able to 507 National Monetary Commission acquire a steady clientele only after years of laborious efforts. Its primary task was to maintain and develop the connections of the old and well-renowned banking firm, whose clientele it had taken over, by means of trans- forming industrial undertakings into stock companies or otherwise to mobilize the industrial participations in which the capital of the old firm had been tied up, and to liqui- date them as soon as the profitableness of the under- takings and general business and market conditions would permit such action. On pages 71 and following we enumerated a long list of transformations and new foundations, effected by the A. Schaaffhausen'scher Bankverein during the years 1851- 1858: We mentioned there that from the outset the far- sighted and expert management of the institution recog- nized clearly "that the permanent success of the Bank- verein was inseparable from the prosperous growth of Rhenish industry in all its branches . ' ' Subsequent develop- ment fully proved the soundness of its position. The A. Schaaffhausen'scher Bankverein has grown great with the surprisingly rapid and strong development of the Rhenisch- Westphalian industry, which until the most recent period has been furnishing the very core of its industrial clientele. The careful fostering of the current-account and under- writing business was a natural corollary of its industrial connections and the necessity to extend and strengthen these connections. The same can not be said of the deposit business, to which the Bankverein paid no systematic attention during the first period for general reasons men- tioned in the chapter relating to the Darmstadter Bank. As a matter of fact, its total deposits about the end of the 508 The German Great Banks first period, in 1869, amounted to 883,616 thalers only. The founding of branches, agencies, and commandites contemplated as early as 1853 did not at first materialize. Neither did the bank succeed, as it then intended, in open- ing a branch in Berlin, as such action presupposed a change of its by-laws, for which the then required state sanction could not be obtained. The Bankverein passed through the crisis of 1857 without being compelled to cancel any outstanding credits. During the first epoch, while manifesting great activity in the founding and transforming business, it figured to a relatively small extent in the underwriting field, though participating in numerous syndicates organized during that period by other banks. Even during the second period the Bankverein was an "industrial" rather than an "emission" bank. At the same time it was careful enough not to permit any undue swelling of its acceptance account. Having its central field of activity in the domain of the rapidly developing Rhenish- Westphalian industry, its importance during the second period as an industrial bank became preeminent. Owing to its old-established industrial .connections, it continued during all stages and changes of business, not- withstanding severe competition, as the foremost industrial counsel, financial aid, and agent in the execution of the ofttimes ambitious schemes of a number of industrial establishments. Foremost among the latter is the Harder Bergwerks- und Huttenverein, founded as a stock company in 1852, whose rapid growth up to 1873 an ^ financial troubles after 1873 claimed the energetic support of the Bankverein up to the reorganization of the concern by 509 National Monetary Commissio n the Bankverein jointly with the firm of Deichmann & Co., of Cologne. It was only after some time and the general improvement of the business situation that this operation led to a series of profitable emissions and other transac- tions. Even at present a director of the Bankverein is the chairman of the supervisory council of the Horder Verein, while, in turn, the general director of the latter is a member of the supervisory council of the Bankverein. Close relations were established with a number of large industrial concerns, such as the Harpener Bergbaugesell- schaft, the Bochumer Verein, the Phoenix and the Hoesch steel works. This necessitated the increase of the re- sources of the bank, and thus fostered its concentration tendencies. Both in the interest of successful industrial issues as well as for other reasons to be considered later closer relations with the leading bourse center became necessary. It was only in 1891, however, that the Bank- verein established such relations by opening a branch in Berlin. Notwithstanding this action, the Bankverein by no means became a Berlin great bank. It preserved its essential character of a Rhenish great bank, though its importance at the new center grew, as a matter of course, with the absolute and relative growth of the branch, in contradistinction to the Darmstadter Bank, which by shifting its center of activity from the commercially unim- portant town of Darmstadt to Berlin became to all intents and purposes a Berlin great bank, the more so as with the further growth of its business its clientele gradually ceased to be exclusively or mainly south German. In proportion as the tasks of the Bankverein in the field of industrial credit and issues grew in size and number it had to increase in comparatively rapid succession its paid-in 510 The German Great Banks capital from 9,600,000 marks to 36,000,000 in 1880, to 60,000,000 in 1895, and to 145,000,000 at the end of 1905. During the second period it joined the concentration movement by the opening of branches, which numbered 10 at the end of 1908, and of deposit offices, the number of which increased to 13 during the same time; also by the establishment of a subsidiary bank (Tochterbank) , the Westfalisch-Lippische Vereinsbank, Aktiengellschaft in Bielefeld, and finally by the absorption of several banks and banking houses. It has only one commandite (in Dresden) , and after the dissolution of the community of interest with the Dresdner Bank maintains such relations at present only with the Pfdlzische Bank in Ludwigshafen (1901) and the Mittelrheinische Bank in Coblenz (1903). From what has been said heretofore it may be seen that the Schaaffhausen'scher Bankverein possesses no extensive international connections. This probably was one of the main reasons which induced it to establish the community of interest with the Dresdner Bank, which maintains a large number of such connections. This community of interest became effective January i, 1904, for a term of thirty years, but was essentially terminated January i, 1909. One result, however, of the temporary combination was that the Bankverein had to take part in the common foreign enterprises of the other great banks, such as the Deutsch-Asiatische .Bank, the Banca Commerciale Italiana, and to take even a leading part in the establishment of the telegraph and cable companies. It also participated in the founding of the Banque Internationale de Bruxelles, the Shantung companies, and the Kamerun Railway Com- pany, and jointly with the Dresdner Bank in the founding National Monetary Commission of the Deutsche Orient Bank and the Deutsch-Sudameri- kanische Bank. The special domain of the Bankverein is, however, the industrial field, especially that of the Rhenish-Westphalian district. It is particularly interesting and instructive to observe the various types of relations, as were shown by the example of the Horder Verein, which the bank formed during the second period. The bank as a rule and with good reasons avoided permanent large participations in industrial enterprises. Its holdings of the stock of the Internationale Bohr-Gesell- schaft (International Exploration Company) at Krkelenz devised to continue indefinitely can hardly be regarded an exception, since it needed this stock to support its industrial policy in various directions, 474 as, for instance, the maintenance of its influence in the second coal syndicate, the penetration into various mining branches in Germany and foreign countries, especially in Belgium, and, finally, for the purpose of developing the Roumanian petroleum business, entered into jointly with the Dresdner Bank. (See above, p. 419.) These latter connections brought it into contact with Silesian industrial interests, likewise interested in the Roumanian petroleum fields. The result was a new combination in 1904, which included, beside the interests named, also the Dresdner Bank, the International Exploration Company, and became known as the Petro- leum Stock Company Regatul Romana. The Bankverein also took a leading position in the group of the Elektrizitats-Gesellschaft normals Schuckert & Co. until 1898, when it withdrew, having failed in its efforts to bring about the amalgamation of the above group with The German Great Banks the Loewe group. It was only in 1903 that a combination with the Siemens & Halske group was effected. Since 1898 the Bankverein participated in all the enterprises and transactions of the Loewe group, viz, the British Thomson- Houston Company, the Benrath Machine Works, the stock company Boehler Bros. & Co., etc. The A. E. G. (Allgemeine Elektrizitats-Gesellschaff) group and its activity assumed larger proportions in 1904 by the accession of the banks forming the I^oewe group, after the taking over of the U. E. G. (Union Elektrizitats-Gesellschaff) by the A. E. G. As a result of its connection with the Dresdner Bank, the Bankverein was brought into contact with various transportation companies, in the first place with the Great Berlin Street Railway Company. It also became connected with the Aktiengesellschaft fur Verkehrsivesen (Stock Company for Transportation Enterprises) Lenz & Co., and the Bank fur Deutsche Eisenbahnwerte (Bank for German Railway Securities). It was these corpora- tions which for several operations brought about the joint action of the Bankverein with the close ally of the Lenz & Co. concern, the Berliner Handelsgesellschaft. Jointly with the latter it founded in 1895 the Westdeutsche Eisen- bahngesellschaft, which, in turn, organized the Vereinigte Westdeutsche Kleinbahn Aktien-Gesellschaft (United West German Minor Railways Stock Company) with a capital of 6,000,000 marks, and in 1896 the Bank fur Deutsche Eisenbahnwerte with a capital of 10,000,000 marks. Through its current-account business the Bankverein as a matter of course came to arrange for and undertake the transformation into stock companies of industrial 90311 ii 34 513 National Monetary Commission undertakings of its customers. Under this head fall the transformation of the firm Carl von Born into the Hutten-Aktiengesellschaft normals Carl von Born at Dort- mund in 1896; of the firm Bucklers & Jannsen into the Dulkener Baumwollspinnerei A . G. (Duelken Cotton Spin- ning Stock Company) ; of the firm Burtscheid, Ulrici & Co. in Dulken into the Rheinische Webstuhlfabrik A. G. (Rhenish Weaving Looms Manufacturing Stock Company) , in 1897; and of the firm Mannstaedt & Co. into the Kalker Walzwerk (Kalk Rolling Mills) Mannstaedt & Co. in 1898. Other operations of the Bankverein originating in the same manner were: A commandite interest acquired hi the firm C. Luckerath (Limited), cloth dealers, the trans- formation of the Siegrheinische Gewerkschaft (Sieg-Rhine Mining Concern (Limited), into a stock company (1897); the transformation of the Selbecker Bergwerksverein into a limited mining company (Gewerkschaft) ; the taking over in 1901 of the bankrupt worsted spinning works, Eitorf, Karl S chafer & Co., and its immediate transformation into the Worsted Spinning and Weaving Works Eitorf Stock Company, and the reorganization of the machine tool factory, de Fries & Co., stock company, in Heerdt near Dusseldorf. In the same class belong the amalga- mation of two friendly concerns into the United Steel- works von der Zypen and the Wissen Iron Mills Stock Com- pany, and the union of the works of two of its current- account customers into the Eschweiler-Koln Eisenwerke Aktien-Gesellschaft. 475 In 1 904 the Bankverein, in the inter- ests of its clients, the Kolnische Maschinenbau-Aktien- gesellschaft in Cologne- B ay enthal, for the purpose of settling the deficit in its balance sheet, purchased jointly 514 The German Great Banks with other firms certain grounds owned by the works and transferred them to a newly formed real estate company. 476 In connection with the operations just described, a number of other transactions were effected partly in the interests of the bank itself, partly in the interests of friendly business houses, as for instance, the sale of its participation in the above-mentioned Hutten-Aktiengesell- schaft normals Carl -von Born in Dortmund to the likewise mentioned Horder Verein. i The number of industrial issues of the Bankverein during the years 1895-1903 amounted to 187, as com- pared with 220 effected by the Dresdner Bank, 170 by the Berliner Handelsgesellschaft, 151 by the Disconto- Gesellschaft, 150 by the Deutsche Bank, and 148 by the Darmstadter Bank. Among the 187 industrial issues of the Bankverein 103 were those of industrial bonds. 477 The number of companies for which the Bankverein ef- fected industrial issues during the period 1895-1903 was 207, compared with 181 served in this manner by the Dresdner Bank, 154 by the Disconto-Gesellschaft, 149 by the Berliner Handelsgesellschaft, 140 by the Darmstadter Bank, and 139 by the Deutsche Bank. It is seen that in this field the Bankverein attained the highest record. Of the various industries the Bankverein has been in closest touch with the mining and smelting industries. As shown above, it maintained particularly intimate re- lations with the Horder Verein in Dortmund, also with the Lothringischer Huttenverein Aumetz-Friede in Kneut- tingen, which it reorganized in 1901 and again in 1903, and which was amalgamated in the same year with the Fentscher Hutten-Aktienverein. The indirect consequence National Monetary Commission of these close relations was that the Aumetz-Friede works ordered its machinery from a client of the Bank- verein, the Cologne Machine Construction Stock Company, a practice which is often found among customers of the same bank. The Bankverein maintained also close rela- tions to the Harpen Mining Company, which it had founded jointly with the Berliner Handelsgesellschaft, the iron works Phoenix in Laar, the Hosch Steel Works, and the Bochumer Verein, and through its connections with the firm Spaeter & Co., part owners of the Rombacher Hut- tenwerke, with the latter works. By reason of the above-named and other close connec- tions with the Rhenish- Westphalian industry, the lead- ing element in the coal mining and metallurgical indus- tries of the country, the Bankverein came to play a most important part in the development of the industrial cartels. Thus in 1899 it opened a syndicate office (Syndi- kats-Kontor) with a capital of i ,000,000 marks, which was to undertake the representation of industrial combinations and syndicates. The Steel Works' Union was formed after hard struggles mainly for the reason that the Bankverein held the majority of stock of the Phoenix Works and was thus able to force a resolution in the general meeting of stockholders to join the union against the wishes of the director of the works. In conclusion, it may be said that the A. Schaaffhau- sen'scher Bankverein from the start to the present day was the leading institution in the Rhenish- Westphalian industrial region. When in the course of development the policy and management of these industries began to exercise a considerable influence on the other German 516 The German Great Banks industrial districts, the Bankverein in its capacity as the leading institution in a special branch of business gained also an influential position among the great German banks. THE BERUNER HANDELSGESELLSCHAFT. The Berliner Handelsgesellschaft which was founded in 1856, was organized as a stock company " en commandite " for the reason that the latter form of organization did not require a state concession in Prussia. At the time of its organization its capital stock amounted to 15,000,000 thalers (45,000,000 marks) of which, however, only 3,740,150 thalers were paid in. Since the first period it has been a prominent flotation bank (Emissionsbank) with the result that in the matter of issuing and placing securities it may boast of methods technically equal if not superior to those used by any other bank. As shown above (p. 75 and following) it participated during the first period in the underwriting of a large number of domestic and foreign state and railway loans, including the issue of Russian railway bonds. In section 2 of its constitution it was expressly stated that its activities should comprise especially "industrial and agricultural enterprises, mining, smelting, the con- struction of canals, highways, and railways, as well as the creation, fusion, and consolidation of joint stock companies and the issue of stock or bonds of such companies." Although during the earlier period it ventured but com- paratively little into the industrial field and conducted neither a current-account nor a deposit business, yet it succeeded in earning large and almost steadily increasing 517 National Monetary Commission gains from its business of reorganizing and floating enterprises and from its operations in the underwriting and issue field. Its dividends in the first period were as follows : Tgc7 Per cent. sK 1864. . Per cent. 8 1858 sK i86s. . 8 l8^O 5 1866 8 i860 sX 1867. . 8 1861 c 1868 10 1862 Q 1860 IO 186-?. . . 8 Negotiations for the establishment of " commandites in other localities," provided for in the by-laws and men- tioned in the report for 1857, had to be abandoned on account of the crisis of i857. 478 Among serious losses which the Handelsgesellschaft suffered during that period may be mentioned that of 150,000 thalers on account of the Dessauer Kreditanstalt, or more correctly, the latter 's New York commandite, besides a loss growing indirectly out of the failure of an export firm in Danzig. This failure involved the banking house of Breest & Gelpcke, of Berlin, which was con- ducted on account of the Berliner Handelsgesellschaft since January i, 1857. No difficulties were experienced by the bank during the crisis of 1857. During the second period the bank devoted itself systematically and with correspondingly good results also to the current-account business, though keeping aloof from the deposit business. It also took a leading part during the first years in the foundation and transformation of industrial enterprises. These operations, while a source of rich returns, naturally resulted also in some losses. In 1871 it was able to increase its capital to 10,500,000 thalers. Its attempts at 518 The German Great Banks enterpreneur activity at the beginning of the second period proved, however, disastrous, as mentioned on a previous occasion. The construction of the Muldetal Railway, which was financed by the bank, consumed, according to the report of 1876, a large part of its available resources. This necessitated a call for the payment of 30 per cent on the new stock. The dividends during the first thirteen years of the second period were as follows: Per cent. 1870 9 1871 1872 1873 6; 1874 7 1875 5 Per cent. 1877 o 1878 o 1879 5 1880 5*4 1881 6 1882. . . o 1876 o I The losses occasioned by the Muldetal Railway enter- prise caused the passing of dividends during the years 1876 to 1878, which in the year 1872 were as high as 12% per cent; in fact, they caused even a deficit. In 1878, after the sale of the railway to the Saxon government, which entailed a loss to the bank of 6,500,000 marks, its capital stock, which had grown to 15,000,000 thalers (45,000,000 marks), was reduced to 30,000,000 marks, and the profits from this operation were devoted to the creation of a large special reserve fund for pending industrial business. 479 During the following years, 1879 and 1880, the bank was able again to pay dividends of 5 and $% per cent, respectively. During the year 1 880-81 the bank again suffered on account of its participation in two industrial enterprises, viz: The Deutsche Lokal- und Strassenbahngesellschaft 519 , National Monetary Commission (German Local and Street Railway Company) and the Petroleum-Bohr- Gerechtsamen- und Olland- Gesellschaft (Petroleum Drill Privilege and Oil Land Company), as well as on account of extensive speculations in shares of the bank's own capital and in Russian paper currency by one of the partners of the institution. The losses resulting from these operations necessitated in 1882 a reduction of the capital stock from 30,000,000 to 20,000,000 marks. The above-mentioned speculation alone entailed a loss of 8,250,000 marks. There is no doubt that many present-day economists, who on such occasions as well as after every general crisis demand government intervention, including official supervision, control, and inspection, or restrictive legis- lation, would at that time have seen the only salvation in the carrying out of similar demands with regard to the Berliner Handelsgesellschaft and for that matter to all German credit banks. But there is likewise no doubt whatever that such measures would have caused only further disaster, and would have prevented or restricted the splendid development of German banking, which was so very essential to the interests of the nation. In this respect, as in many others, the practical wisdom of the English, resulting from greater business experience, and finding expression in the maxim, "Not measures, but men," has proved far more successful. Splendid results followed the inauguration of a new management by careful as well as skilful partners (of whom one is still on the board of management) and the adoption of a business policy based on new principles, and this notwithstanding the fact that confidence in the 520 The German Great Banks bank, which had been almost completely lost, had to be regained by the new partnership. Even for the first year after the reorganization (1883) a dividend of 7 per cent could be declared, and ever since, with the exception of slight interruptions from time to time, due to general economic conditions, the Berliner Handelsgesellschaft has been following a career of con- tinuous and increasing success. Its dividends during the following years were as follows: 1883. . Per cent. 7 1806 . . Per cent. 1884. 1807 1885 8 1898. . 1886 1800 Ql4 1887. . IQOO 8 1888 10 IQOI . 7" 1889. . 12 IQO2 . . lY* 1800. . ^A IQCK . . ' 8 1801 nil IQO4. 8 1892 6 IQCK 180^ 5~ 1906 1804. 7 IQO7 180.5 . . 8 1008. . On December 31, 1908, the "commandite" capital of the Berliner Handelsgesellschaft was 110,000,000 marks, while the surplus amounted to 34,500,000 marks, or 31 per cent of the capital stock. The debits on current account amounted to 192,250,000 and the credits to 206,250,000 marks. The peculiar character of the Berliner Handelsgesell- schaft among the other great Berlin banks grew out of its relations to: 1. The electrotechnical industry. 2. The so-called "heavy" industries, especially mining and smelting enterprises. * 521 National Monetary Commission 3. The street railways and minor steam railways. It was particularly in the first-mentioned field that the Berliner Handelsgesellschaft developed a many-sided and fruitful activity. The great success achieved by the Allge- meine Elektrizitdts-Gesellschaft (General Electric Company) was due as much to the marvelously efficient management of its general director, Emil Rathenau and his associates, as to the intelligent and skilful financial cooperation of the Berliner Handelsgesellschaft. The latter, as the chief financial adviser of the General Electric Company, proved as successful as did the Deutsche Bank in the case of the firm of Siemens & Halske. The Handelsgesellschaft undertook a large number of financial transactions of all sorts as a result of its connect- ion with the General Electric Company. Aside from the numerous issues which it carried through for the General Electric Company and other concerns which were either allied with or subsidiary to it, such as the Berliner Elek- trizitdtswerke , I may mention its organization of separate electrical companies in Seville and Barcelona (1894), * n Warsaw and Bilbao (1896), the foundation of the Bank fur Elektrische Unternehmungen in Zurich (1897); the Deutsche Ueberseeische Elektrizitdtsgesellschaft (German Transmarine Electrical Company) in Berlin, and the Aluminium-Industrie- A ktiengesellschaft (Aluminum Manu- facturing Company) in Neuhausen (1898), the Elektro- Chemische Werke (Electro-Chemical Works) in Bitterfeld and Rheinfelden (1896), which were consolidated in 1899 and, finally, the Elektrizitdts-Lieferungs-Gesellschaft (Elec- tric Light and Power Company), etc. 522 The German Great Banks After the Union-Elektrizitats-Gesellschaft (U. E. G.) was taken over by the General Electric Company in the year 1904, the bank group which financed the General Electric Company was strengthened by the alliance with the bank group which financed the Loewe enterprises (viz, the Disconto-Gesellschaft, the Dresdner Bank, the Darmstadter Bank, and the A. Schaaffhausen'scher Bank- verein). This group thus represents an enormous power alongside that of the bank group headed by the Deutsche Bank, which finances the Siemens & Halske concerns and the newly organized limited stock company (G. m. b. H.) of the Siemens-Schuckert Works, which grew out of a combination in 1 903 of some of the Siemens-Halske works with the Schuckert Company. This latter combination presents many points of contact and common interests with the groups mentioned. The Berliner Handelsge- sellschaft is, moreover, represented in the syndicate for handling the Siemens & Halske securities. In the " heavy" industries, especially in mining and smelting, the Berliner Handelsgesellschaft also played an important and at times even the leading part alongside the A. Schaaffhausen'scher Bankverein. Together with this institution, it is largely interested in the Harpener Bergbaugesellschaft (Harpen Mining Company), is closely connected with the Rombacher Huttenwerke (Rombach Smelting Works) , and wields an important influence in the Ruhr coal district through its intimate connection with the Konsolidation and the Hibernia mining companies. In conjunction with the banking house of S. Bleichroder and other banks, it succeeded in preventing the acquisition of the Hibernia mines by the Government. 523 National Monetary Commission The Berliner Handelgesellschaft, furthermore, is well connected with the Upper Silesian iron and coal district through its close business relations with the Oberschlesische Eisenindustrie-A ktiengesellschaft Caro-Hegenscheidt (Upper Silesion Iron Company Caro-Hegenscheidt) and the firm Emanuel Friedlander & Co. in Berlin, one of the two sales agencies of the upper Silesian coal combination. Finally, in the field of street and minor railway enter- prises the activities of the Berliner Handelsgesellschaft had a particularly wide scope. It assisted the General Electric Company in 1895 by the founding of the Leipzig Street Railway Company and through the issue of the securities of the Karlsruhe, Breslau and Stettin street railway companies and those of the Allgemeine Lokal- und Strassenbahngesellschaft (General Local and Street Railway Company). Like the Darmstadter Bank, but at a later date, it undertook also the promotion on a large scale of minor railways (Kleinbahnen) . In this field its relations with the Stettin Railway Con- struction and Transportation Concern, Lenz & Co. were as close as those of the Darmstadter Bank with the firm Herrmann Bachstein. In view of its own former disas- trous experience and that of other large banks, it began its activity in this field by organizing in 1895, in conjunc- tion with the A. Schaaffhausen'scher Bankverein, a trust company at Cologne, known as the Westdeutsche Risen- bahngesellschaft (West German Railway Company), which took the place of the Handelsgesellschaft in the operating and financing of the Lenz enterprises. In 1896 another trust company, the Bank fur Deutsche Eisenbahnwerte (Bank for German Railway Securities) was organized, 524 The German Great Banks while the Badische Lokaleisenbahnen-A. G. (Baden Local Railway Company) was founded to take over a part of the Lenz railway system located in Baden and the Ostdeutsche Eisenbahngesellschaft in Bromberg (in 1899) to take over another part of that system. In 1899 the Vereinigte Westdeutsche Kleinbahn-Aktiengesellschaft (United West German Minor Railway Company) was founded, which controlled as separate enterprises a large part of the rail- roads of the West German Railway Company. In 1901 the Handelsgesellschaft founded, alongside the older limited company, lyenz & Co., a new Aktiengesellschaft fur Verkehrswesen (stock company for transportation), with a capital of 10,000,000 marks, which took over all the shares of the former company. The Berliner Handelsgesellschaft engaged, in a large measure, also in speculative dealings in urban land tracts (Terraingeschaft) . We saw above (in the discussion of the A. Schaaff- hauen'scher Bankverein, page 515) that with reference to the number of industrial issues effected during the years 1895 to 1903, the Berliner Handelsgesellschaft ranked third, with 170 issues (as against 220 effected by the Dresdner Bank and 187 by the A. Schaaffhausen'scher Bankverein) . It ranked fourth if the number of financed companies is considered, this number being 149. It is also represented by its managing partners on the supervisory boards of a large number of industrial cor- porations. The international connections of the Handels- gesellschaft are extensive and of a high order. The com- pany took a leading part in the formation of the Deutsch- Asiatische Bank in 1889 and of the Banca Commerciale Italiana in 1894. It a l so participated during the years 525 National Monetary Commission 1898 to 1904 and in 1908 in the organization of all the German telegraph and cable companies, in 1899 in the organization of the two Shantung companies, and in 1906 in the founding of the Kamerun Railway Company. Among its connections in the countries of continental Europe we may note the following institutions in the foundation of which it took part : Sckweizerischer Bankmrin in Basle (1872), the B cinque Internationale de Bruxelles (1898), the Banca M armor osch Blank & Co., Societate anonima in Bucharest (1904-5) and the banking company, formerly Andreevics & Co., in Belgrade (1908). Since 1905 it has been operating the Usambara Railway in German East Africa, and in conjunction with the firm of Lenz & Co. it is engaged in -the construction of the railway from Luderitzbucht to Kubub. It participated, in some cases most prominently, in all of the Russian, Chinese, and Japanese bond issues effected during the second period and emitted several Servian state and railway loans. (See App. V and VI.) The prominent place among the large Berlin banks attained by the Berliner Handelsgesellschaft proves in a striking way the truth established by years of experience that the fate of banks as well as of industrial and com- merical enterprises depends chiefly upon the ability and trustworthiness as well as the energy and farsightedness of the management. 526 r he German Great Banks SECTION 7. THE SO-CALLED EXPORT CAPITALISM THE IN- VESTMENT OF GERMAN CAPITAL IN FOREIGN INDUSTRIAL AND COMMERCIAL ENTERPRISES, AND SECURITIES. THE ESTABLISHMENT OF SUBSIDIARY BANKS (ToCHTER- BANKEN) EXCLUSIVELY FOR FOREIGN BUSINESS, WITH SPECIAL REFERENCE TO ITS CONNECTION WITH THE INDUSTRIAL EXPORT POLICY. 480 (A) In a previous part (sec. 4, sub. i) it was shown that the development of the foreign, and especially the over-sea banking business during the second period, 481 which was started by the energetic activity of the Deutsche Bank represents the outcome of a well-designed business policy 482 on the part of the great German banks which is directly and inseparably connected with the general industrial export policy. In order to judge whether this business policy has been proper, necessary, or desirable from the point of view of the public welfare, we must bear in mind the facts presented in Part III, Chapter I, page 87 et seq., bearing on the development of the general economic conditions in Germany during the second period (1870 to the present time). We saw that German agriculture and forestry during this period were not in a position to supply the domestic demand by their own products. We also know that in view of the large and continuous growth of our popu- lation, notwithstanding the best efforts and zeal, this deficiency in the domestic supply could not be made up by the application of more intensive methods in agricultural production or by the extension of the culti- vated area. Our deficiency in agricultural products, 527 National Monetary Commission therefore, had to be made up to an increasing extent by the foreign importation of foodstuffs. Moreover, German industry was not in a position to supply its needs at home, especially in the matter of raw materials, and was compelled on the whole i. e., apart from single branches to supply the demand for raw materials largely and, in some instances almost exclu- sively, by importation from abroad. It is self-evident that we can not pay in cash for these very large imports of agricultural products and raw mate- rials used in manufacture without impairing our national capital resources. These imports must be paid, there- fore, in some other way; and this is unavoidable, because we need these imports for the existence of our agricul- ture and our industry that is, for the sustenance and the employment of our population. Such payment has been made thus far in an unimpor- tant degree by the exchange of such raw products as we do. not need for home consumption, but mainly by export- ing manufactured products 483 to the countries from which we import foodstuffs and raw products. 484 The necessity for these exports of manufactured prod- ucts is thus growing in proportion to the increasing defi- ciency in the supply of domestic foodstuffs and raw mate- rials. Under present conditions, therefore, especially in view of the constantly increasing population, our indus- trial export policy can not be said to have been a device arbitrarily adopted, and therefore one eventually to be abandoned. Nor is it an end in itself, but on the contrary a means, indispensable to our entire economic existence, 485 of paying to a very material extent for our absolutely necessary imports. 528 The German Great Banks As stated before, the German banks regarded it as one of their chief functions actively to support both at home and abroad domestic industry 486 and the export policy adopted by the latter by promoting energetically German foreign commerce. In connection with this general policy they came to establish branches in foreign countries and to organize for the foreign business special subsidiary banks both at home and abroad, which, it is true, in many cases proved at the same time the means of securing new and profitable business. They also cooperated with the government policies regarding the colonies, navigation, canals, the navy, and cable connections, all of which bore the closest relations to the above business policies. It is plain, therefore, that the activities of the banks in all these fields were of national importance. For upon the successful discharge of the above functions depends not only the maintenance and the extension of our influ- ence and our importance abroad, but, what is more, our entire economic existence. It may be said that for some time at least the necessity of this development from the point of view of the com- mon national interests did not appeal to wide circles, especially to those classes which were injuriously affected by this development. For it goes without saying that in i the course and as the result of the industrial export move- !ment, as in the case of any other fundamental economic i change, serious disadvantages manifested themselves. ^With the steady growth of population the industrial ex- port policy continued to be emphasized more and more until about 1882, when it may be said to have reached its point of culmination. During all these years agriculture, 90311 ii 35 529 National Monetary Commission notwithstanding all its importance to the economic well- being of the nation, received but scant support, losing much of its former strength, means, credit, and labor. It is that policy which is partly responsible for the fact that the percentage of population engaged in agriculture decreased from about 61 per cent of the entire popu- lation in Prussia in the middle of the past century to 28.6 per cent of the entire German population in 1907, while at the same time the population engaged in commerce and industry increased from about 24 per cent (in the middle of the past century in Prussia) to 56 per cent of the Ger- man population engaged in gainful occupations in 1907. The latter circumstance has contributed materially to the enormous growth of the manufacturing towns (up to 17 and 1 8 times the figures for the middle of the past century) . (B) The above-mentioned activities represent, how- ever, only part of the functions of the banks in this field. For as was made clear from the statistical compilations, which were closely scanned by the banks as well, notwith- standing all efforts in the fields of industry and foreign trade, only part, though quite a considerable part, of our imports of foodstuffs and raw materials could be compen- sated by means of exports of manufactures and similar' products. After deducting the value of our exports ofi manufactures there still remained a very considerable balance in favor of the foreign countries. The excess of imports for consumption over domestic exports at the close of 1907, as we saw above (p. 112), amounted, in round figures, to 1,300,000,000 marks. To this extent, there- fore, the balance of trade was against us. 53 The German Great Banks Now, there is no doubt that the claim that an unfavor- able balance of trade in itself is disastrous for a country can not be maintained as a general proposition, since nu- merous countries may be cited which show an unfavorable balance of trade, but which with a particularly favorable balance of payments, enjoy the utmost prosperity. These are the countries which utilize the available surplus of large capital accumulations, derived from their industrial, agricultural, or colonial successes, for the improvement of their balance of payments. The more favorable the bal- ance of payments of such a country the less perilous will be an unfavorable balance of its trade. In other words, the more favorable its balance of payments becomes, the less a country may hesitate to let other countries "work for it," that is to say, permit itself to be supplied by other countries with raw materials and foodstuffs, even though as a result of such a policy its balance of trade may be- come unfavorable. For Germany the problem presented itself of compensating the unfavorable balance of trade by the utmost practicable improvement of our balance of payments, in order to escape ultimate disaster through a constant accumulation of unfavorable trade balances. In this respect, as well, there was no choice of means. The problem was primarily one of creating debits in our favor on the part of those countries which had a favorable balance in their trade with us, 487 debits at least large enough to counterbalance the credits due them from us by reason of the excess of their sales over their pur- chases in their trade with us. In the case of industrially- developed countries, the activities accomplishing this result develop to a considerable extent automatically, National Monetary Commission i. e., as natural consequences of the industrial relations to the less developed foreign countries, and to a smaller extent, as the result of fixed plans and designs. Foreign countries may become our debtors (i) Through business operations which we carry on in and with foreign countries, which include exchange, arbitrage, and commodity transactions with these coun- tries undertaken either for speculative purposes, to secure payment, or to attract gold from them, and through serv- ices which we render those countries, or through mercan- tile, industrial, or transportation enterprises which we establish in the foreign countries or in which we partici- pate. The German enterprises established in foreign Euro- pean countries, which were mentioned in section 4, sub. II (p. 432 et seq.) , include the foreign branches of the Ger- man banks, such as the Deutsche Bank, the Disconto- Gesellschaft, and the Dresdner Bank in London. The foreign German participations include the ownership by German banks of stock in foreign banking institutions, such as the ownership by the Comnierz-und Disconto- Bank of shares in the London and Hanseatic Bank, by the Dresdner Bank of stock in the General Mining and Finance Corporation (Limited) in London, etc. Accord- ing to the report of the Central Federation of German Banks and Bankers (Centralverband des Deutschen Bank- und Bankiergewerbes) of December, 1903 (concerning the effects of the stock exchange act and the stock ex- change tax act) , since the stock exchange act of January i, 1897, went into effect, numerous time transactions and other dealings of the German public in (American) rail- 532 The German Great Banks way stock and in mining shares transacted in many foreign countries, particularly in London, Paris, and New York, have to be considered in which, to escape the German tax on securities, the securities to a large extent remained abroad. According to the inquiry of the central federation (see above report, p. 48), which was only par- tially successful, the securities (for the most part probably of the classes above mentioned) 488 which the 1 8 largest banks and banking houses of Berlin, namely, the members of the so-called Stempelvereinigung, had in foreign deposi- tories on December 31, 1902, on their own and outside accounts amounted to 602,268,000 marks, while the value of securities which only 149 other German (provincial) banks and bankers had at the same time in foreign depositories amounted to 454,151,000 marks. According to Paul Dehn 489 the total investments of French capital in foreign countries in the middle of the year 1902, according to official investigations, amounted to 24,000,000,000 marks (30,000,000,000 francs). 480 Dehn further states: 491 "It is reported that the English draw annually 1,000,000,000 marks in interest from American securities which they hold, from plantations, factories, constructions, etc., which they have instituted and with which they pay for the foodstuffs which they import from the United States." According to an address of Sir Edgar Speyer before the Institute of Bankers, made on June 7, 1900, on "Some aspects of national finance," the total amount of British working capital invested in foreign countries was estimated to aggregate 2,500,000,000 or 50,000,000,000 marks. According to Helfferich, 492 the former director of the Credit Lyonnais, Germain, estimated 533 National Monetary Commission that during recent years France invested annually about 1,500,000,000 francs in foreign securities. (2) Through our acquisition of foreign securities the interest or dividends on which are to be paid by foreign countries, or the capital amounts of which we are to receive when they become due, or when the securities are sold abroad. It may be objected that these investments in the first place require means which must be drawn from domestic sources and which go abroad (as, for instance, when a for- eign loan is taken up at home) in consequence of such investments, and that in the beginning at least we become debtors of the foreign country, while any improvements in this balance begin to show only later from the earnings of our investments, and that, for the time being, our bal- ance of payments is not improved but rather made more unfavorable. But while there are doubtless cases where this argument is effective, yet in the majority of cases the amounts which we invest abroad that is, which we have to pay to foreign countries in gold are paid out of the earn- ings on other foreign securities which are in our possession or through the sale or exchange of other foreign securi- ties, or else are paid with goods which we furnish to the foreign countries, it being as a rule agreed, when loans are made to foreign countries, that our industries shall be favored with the contracts and orders for the payment of which the loans were contracted. A portion of the securi- ties which have been taken up eventually find their way back to the foreign countries, or other changes in the international balance of payments may take place with which we must also reckon. Such changes happen con- 534 The German Great Banks tinually and daily through the importation and exporta- tion of securities. Absolutely no information exists as to the course in time or the volume of these movements, although such data only would enable us to perceive more fully the significance of the imports and exports of mer- chandise and specie, i. e., of the international commercial exchanges. 493 In so far as the German banks, either on their own account or as intermediaries, have been active in both directions named, and granting that they have observed the necessary care and foresight in preventing or arrest- ing a dangerous decline in those earnings of our foreign investments, which might be applied to improving our unfavorable balance of payments, they have undoubtedly rendered valuable service, absolutely essential in the in- terests of our national economy. The following important limitations, however, must be made: The undertaking of or participation in foreign invest- ments is practicable only when there is a considerable surplus of capital at home and permissible only after the domestic demand for capital is fully met. Even if these conditions exist such investments are not to be favored, when in the long run they result in the strengthening of foreign industry and the enhancing of foreign competition against our domestic trade and industry. Such participations of German capital in foreign coun- tries comprise chiefly banks, manufacturing, colonization, plantation, mining, light, power, and railway undertak- ings and other land and water transportation enterprises. The earnings from these participations increase the credit side of our balance of payments only to the extent that 535 National Monetary Commission they exceed the earnings of foreign investments in Ger- many. The latter are chiefly gas works and street and local railway enterprises. One of the important, if not the most important, item in the balance of payments is represented by the credits which we grant to foreign countries in our commercial dealings with them. Since these amounts can be obtained only from the books of the individual concerns which grant these credits, it follows again that a total of the item in question can at best be but approximately estimated. On the other hand domestic enterprises and participa- tions abroad, in so far as they do not merely benefit foreign industry, are to be regarded favorably as a rule, especially when proper care is used in their selection, when, in the main at least, they are conducted on domestic account, and when they are either intended or suited to extend the domestic sphere of influence and to serve as a basis for larger activity of domestic industry. These factors do not affect immediately the balance of payments, though sooner or later they are bound to find expression in ponderable items in our necessarily inexact balance of payments. The above considerations, it is true, do not justify foreign investments, whenever and in so far as the earn- ings from our foreign investments and enterprises exceed the amounts required to pay for our excess of imports. As a matter of fact the returns from our foreign invest- ments by far exceed the latter amount (see below, p. 545). But we must always reckon with the possibility that our domestic exports may decline, while our imports will remain the same, or even increase. This would result in a steadily growing adverse trade balance, which 536 The German Great Banks might become the more portentous the smaller the credit items in our balance of payments, i. e., our foreign in- vestments which render the foreign country tributary to us, and the returns from which can be used to counter- balance the debit items in our trade balance. Further- more, unless we render foreign countries tributary to us to an increasing extent, the time might come when, with the growing importance of their own home mar- ket, these countries would no longer be constrained to furnish us with their foodstuffs and raw materials. As it is, these exports or the money equivalent thereof go to meet their obligations toward us in the shape of profits and interest. A large decline of our imports would also tend to de- stroy our industry, and thus our export trade, which fur- nish food and employment to our population, and which, as it is, is greatly jeopardized by the growth of imperi- alistic and protectionist tendencies in countries which are at present our principal customers. (C) It is clear even from what has been said that our foreign investments, as a whole, must necessarily go beyond the lowest limits set by our adverse trade bal- ance. But for a number of special classes of invest- ment, the returns from which serve to improve our balance of payments, the necessity and utility is proven by other important and cogent reasons, which retain their validity, even if the above general considerations be regarded of insufficient strength. (a) As regards the German insurance business in foreign countries, it is desirable for the domestic in- surance business for the reason, among others, that by extending the scope of the business a broader distribu- 537 National Monetary Commission tion of the risks is effected in time and place. 494 The returns from the foreign business of the German in- surance enterprises naturally increase the credit side of the balance of payments only in so far as they are not counterbalanced by the earnings of foreign insurance companies in and on account of Germany. 495 (6) The oversea banking business makes it possible for our domestic exporters and importers, as well as for our general commercial activity in foreign countries, to dis- pense with foreign intermediaries for their financial transactions and credit needs. Through the financing of the foreign business of our merchants German bank acceptances have been introduced to foreign markets, with the result that the ofttimes considerable earnings of foreign concerns in this field have been turned into German channels and have thus become available for improving our balance of payments. Thus, for instance, as late as 1888, according to consular reports, the com- mercial exchanges between Germany and Chile valued in the aggregate at 60,000,000 marks yielded about 500,000 marks of profits to British bankers, merely because all acceptances by means of which these ex- changes were effected had to be liquidated in the British market. 496 In the excellent "Tabellen zur Wahrungstatistik " 497 (tables regarding currency statistics) of the Austrian Ministry of Finance an estimate is mentioned according to which out of the total value of the oversea trade of the European Continental countries more than 6,000,000,000 marks is yearly drawn on England. According to estimates of the British board of trade, which relate to the year 1898, 538 The German Great Banks bankers' and other commissions aggregated in that year 18,000,000 pounds sterling (that is, about 432,000,000 marks) . The over-sea banking business, furthermore, opens up possibilities for the investment of the domestic surplus capital (see above, p. 92). This annually growing surplus increases the demand for investment opportunities, which can not be 'met fully by the issue of domestic state, com- munal, and other loans. Our foreign banks are also in a better position to obtain timely information regarding more important contracts, works, and government orders about to be awarded or regarding the impending issue of foreign loans, and are thus able to lend much more effective assistance to German concerns seeking the awards. Through their connections with the foreign markets they are also in a position to call the attention of foreign purchasers to German firms and, vice versa, to bring to the notice of German manufacturers and traders suitable representatives and purchasers in the foreign countries. Under the same head come also the profits of domestic banks from trading in foreign securities and returns from other foreign business. Against these earnings have to be set, as elsewhere, the corresponding earnings of foreign banks from German business, including the commissions paid to foreign fiscal and disbursing agencies on account of our coupons and bonds, loan conversions, talon renewals, etc. There is no means of estimating even approximately the volume of the foreign business, including dealings in foreign securities effected by our banking institutions, nor 539 National Monetary Commission of the returns from this business in the shape of interest, commissions, etc. They include chiefly the earnings from underwriting, emitting, converting, unifying, and rehabil- itating foreign state, railroad, and private securities; from the financing of foreign operations and enterprises, from the granting of credit to foreign firms, institutions, enterprises, concerns, and individuals by way of current account, bills and other credit operations ; profits from the loaning of domestic securities abroad, from the foreign bill busi- ness, including brokerage and remittances; from the for- eign trade in specie, also earnings of interest, commissions, and brokerage in international commercial transactions; profits from the purchase of foreign bills of exchange and the accumulation of credits (payable in gold) abroad; 498 from services in connection with the payment of foreign coupons, from the redemption of drawn or otherwise matured debentures, the delivery of new coupon sheets, as well as the talon renewals of foreign securities. (c) The earnings of the German merchant marine from oversea shipping also constitute an important factor in our balance of payments . The above-mentioned ' ' Tabellen zur Wahrungsstatistik" prepared by the Austrian Ministry of Finance, estimate the freight receipts of the Austro- Hungarian merchant marine in the foreign trade at 60,000,- ooo crowns and the credit accruing therefrom to the inter- national balance of payments of the country at 30,000,000 crowns. 499 It is unnecessary to demonstrate that the ser- vices of our merchant marine in the oversea trade have proved of immense value in the development of our export trade and have contributed largely to increase our prestige among foreign nations, our national power and influence, as well as our financial strength. 540 The German Great Banks (d) Furthermore, we must take into account the earn- ings on account of foreigners traveling in Germany, which are, however, more than fully set off by the corresponding foreign earnings on account of Germans travelling abroad. (e) Other items in the balance of payments are: The charges of domestic railways for carrying goods in transit to foreign countries; the excess charges for the mu- tual renting of railway cars; clearance balances re- ceived in the international postal, passenger, telegraph and telephone services; the expenditures of foreign vessels in the home ports (minus our own payments in foreign ports) ; the charges for the construction of vessels on foreign account in our dock yards and our claims from the sale of domestic vessels to foreigners ; the claims arising from the international exchange of patents and copy- rights; the claims of members of the liberal professions, i. e., technical experts, teachers, physicians, actors, musicians, etc., engaged abroad; the claims resulting from the ownership in foreign countries of land and mort- gages, from liquidated inheritances and from marriage con- tracts concluded abroad, and, according to Ad. Soetbeer, 600 also the extraordinary payments 501 which one country must make to another as the result of political relations or events (war indemnities, subsidies, pensions, cost of administration) . Finally, an important factor in the balance of pay- ments is presented by (/) The investments of home capital in foreign securities, the utility and necessity of which are based on a number of weighty reasons besides those mentioned above. Any attempt to liquidate the very considerable adverse balance of our trade with foreign countries by means of 541 National Monetary Commission cash remittances instead of the interest and dividends on foreign securities or the sales of such securities would prove to be very expensive. It would lead to serious disturbances in the money market, at times even to crises, and might endanger in a large measure our cur- rency and credit systems. Besides we need proper foreign securities, i. e., such as are payable in gold to secure our financial readiness for war (see p. 22 et seq.) as a necessary means of compensation against eventual withdrawals of large foreign credits. We need them, furthermore, in order to be able to draw gold from abroad to satisfy the urgent and pressing needs for credit and instruments of payment which usually occur in the last days preceding and the first days following a declaration of war, 502 as well as to meet the violent demand for cash, which is apt to occur at such times during a temporary loss of confidence in any form of currency except gold. The holdings of such international securities which can be realized at the various international bourses present, therefore, the best protection against the excessive fall during warlike times in the quotations of our domestic securities and against the weakening or glutting of our own stock exchanges. In this connection it must be remembered what impor- tant political results have been brought about by the grant- ing or refusing of loans to foreign states and to what extent the home government may use for political purposes its power of permitting or prohibiting the issue, official listing, and pledging of foreign securities, especially at times when the foreign state, either because of the closing 542 The German Great Banks or overstocking of other foreign markets, is confined to our exclusive assistance and when it is in our power to inflict great damage on it by our refusal or prohibition. The skirmishes of the political advance posts are fought on financial ground, though the selection of the time and the enemy as well as the manner in which these skirmishes are to be fought depends upon those responsible for the direction of our foreign policy. Much more than ever before we Germans will have to bear in mind that industrial contracts, commercial enter- prises, and capital investments are conveying from one country to another not only capital and labor but also political influence. Dehn very properly shows how French capital, for instance, has rendered pioneer services to the French foreign policy in Tunis and Morocco, in Turkey and Greece, and, above all, in Russia, while Sombart goes so far as to characterize "the whole Franco-Russian alliance as a bankers' creation" (Bankiergebilde), 503 an assertion which is rather extreme. In the same vein, Georg v. Siemens, in his article on "The National Impor- tance of the Bourse" (in the Nation, Oct. 6, 1900), calls attention to the great political advantages which we gained in Italy, after political discord had grown up between Italy and France, when we immediately placed at Italy's disposal our capital and stock exchanges, and that the battle between Russia and England about Persia was primarily fought "on financial ground." In more recent times we witnessed the beginning of better political relations between France and Italy, brought on primarily through financial reconciliation, par- ticularly the taking over a few years ago by a French 543 National Monetary Commission banking group of a large amount of stock in the Banca Commerciale Italiana, created at the start without the cooperation of French capital. We saw only recently that the French Government threatened to withdraw the listing privilege from the Turkish state bonds unless certain contracts were awarded to French industry. The British Government sought to prevent in every way the granting of a banking concession in Persia to the German Orienibank for fear that such a grant might lead to a diminution of its own political influence. The taking over of loans for China and Japan became an object of contention among all great nations, for the well-known reason that financial influence merely paves the way for political influence. France and England are competing in Spain and Portugal and nearly all the great powers in Turkey to gain political influence by means of financial aid. Notwithstanding some painful experience in Argentina, the English banks and capitalists have been tenaciously lending financial support to the efforts of their Government to maintain and strengthen the British politi- cal sphere of influence in that part of the world. In Canada and Mexico and in Central and South America the Ameri- cans are systematically planning by investments of capi- tal and all sorts of financial measures to drive out both European political interference and European commerce. In view of the above facts and considerations, the ques- tion whether issues of foreign securities even beyond the amount required to balance the excess of our foreign imports are economically correct in principle must be answered in the affirmative. 544 The German Great Banks The presumptions under which, in each individual case, the issue of foreign securities is permissible and unob- jectionable from the national point of view have been discussed in detail above (p. 384 et seq.). (D) With regard to the volume of the foreign invest- ments of home capital, 504 the report of the Reichs-Marine- Amt of December, 1905, on Die Entwickelung der Deut- schen Seeinteressen im letzten Jahrzehnt (the development of German marine interests during the last decade) gives, on the basis of consular reports, the following estimates. The latter, of course, are based in turn upon estimates more or less accurate of others furnished to the consuls at their respective seats. (a) The amount of German capital invested in foreign undertakings, plants, business enterprises, and partici- pations is estimated at 7,700,000,000 to 9,200,000,000 marks, equivalent to an income, reckoned at an average of 6 per cent, of 462,000,000 to 552,000,000 marks. Concerning this estimate the report remarks as follows (Introduction, p. XI): "In these amounts (7,700,000,000 to 9,200,000,000 marks) the current German merchandise credits, which amount to at least one-fourth to one-third, perhaps even to one-half, the amount of the yearly German exports that is, to 1,500,000,000 to 2,750,000,000 marks are included only in part, and the same is true of the credits frequently advanced on account of imports." We have already remarked above that there are no means of even estimating the total credits granted by us to foreigners in international trade, and the same is true of our charges for services of all sorts rendered by us. 90311 IT 36 545 National Monetary Commission (b) The amount of foreign securities in the possession of German holders is estimated at least at 16,000,000,000 marks (ib., introduction, pp. XII, and 169), equivalent to an income of 800,000,000 marks, reckoned at 5 per cent. Accordingly the total amount of our foreign capital investments for the year 1905 may be estimated at a minimum of 24,000,000,000 to 25,000,000,000 marks (with yearly earnings of about 1,352,000,000 marks) an amount which very likely falls considerably short of the true amount. (See note 20, p. 803.) As a matter of fact, as was illustrated before in a few important instances, the true volume of the foreign invest- ments of domestic capital in the main fields, on account of the lack of safe statistical bases, can not be estimated even approximately. This is shown strikingly and in great detail by the "Tabellen zur Wdhrungsstatistik 5 prepared in the Austrian Ministry of Finance, especially in the chapter dealing with "earnings in foreign countries" (Erwerbstdtigkeit ausser Landes), although the subject is treated in the report with the utmost care and thoroughness. SECTION 8. REFORM PROPOSALS CONCERNING BANK DEPOSITS AND THEIR JUSTIFICATION ( 50e ). I. GENERAL OBSERVATIONS ( 506a ). It was pointed out in an earlier chapter how the German banks developed hand in hand with the scanty means of the German people and in accordance with the demands of German trade and industry. In England a different development took place, which, while in equally close touch with English requirements and the given 546 The German Great Banks concentration in the fields of distribution, credit, and national wealth all of which was entirely lacking in Germany led from the outset to a sharp differentiation between the deposit banks and other banks. This is sufficient ground for a large number of Germans, who are wont to underrate domestic as compared with foreign achievements, to point to the English system as the only true one, and to demand its unrestricted adoption at home. Similar views are, however, held in certain nota- ble scientific quarters. It is particularly Adolph Wagner who has been advocating for a long time a reform along English lines, based in his case upon scientific conviction, which, as is well known, is least apt to change under the influence of mere practical experience. To my mind it was a fortunate fact that the German banks, from the very start, placed themselves at the particular service of trade and industry. But at all events it will be granted that this was due to the histori- cally given German conditions and requirements. As a result of this connection the banks have taken a consider- able part in the splendid industrial and commercial development of the country, which is characteristic of the last decades. Starting at a time when domestic agri- culture was no longer in a position to provide sufficient food and work for the greatly increased population the German banks contributed indirectly toward transform- ing Germany from an agricultural country, if not into an exclusively industrial and commercial country at least into one where these two economic interests are of pre- ponderant importance. This is sufficient to arouse against the banking interest all those who detest the whole trend 547 National Monetary Commission of "industrialization." The charge is made against the banks that through their deposit system they deprive agriculture of considerable funds, which they use instead for the support of industry, especially of the export indus- tries. Political circles sharing these views are supported in this campaign by the extremists on the opposite side i. e., the social democrats, who oppose the banks as the most powerful and dangerous representatives of movable capital. A regrettable feature of German banking in common with other industries is the gradual ousting of small enter- prises by large-scale enterprise. This development has caused a number of members and spokesmen of the "middle classes" (in this case the smaller bankers for instance, Caesar Straus) 'to attack the German banks on the ground that they were pursuing an altogether wrong course. Notwithstanding the heterogeneity of political and economic views and the great variety of motives and mutually exclusive purposes of those who have been advocating "reform" in the field of deposits during the last few decades, there is unanimity on one point, namely, . that "something must be done" that in some way or other the funds flowing to the banks should be diverted in a larger degree to agriculture, or "national economic ends," to use the more popular catchword. As soon,, however, as practical proposals are called for, various cur- rents and parties appear with often obscure and contra- dictory demands, despite the fact that the several parties and assailants very often contrive to veil their true ends and purposely move in separate columns with the view, however, of combined attack. Moreover, each time a 548 The German Great Banks crisis occurs, an event which can hardly ever be avoided in economic life under any banking system, there appear on the scene any number of patented critics or persons who have become experts overnight, who, to say the least, try to impress the public that had the German banking system been intrusted to their care it would lave worked faultlessly, and who use such favorable occasions to prove their capacity of " saving the country " 3y means of the most radical proposals. i. SAFETY OF DEPOSITORS A REASON FOR REFORM PROPOSALS. The majority of known reform proposals hitherto made are based on the following considerations: The German banking system, which, unlike the English system, combines the issuing of securities and speculating activity on own and outside accounts with the receiving of money deposits endangers, of necessity, the safety of the deposits. These are intrusted to the banks with the confidence in their absolute security. The banks, lowever, use them in providing the means for their own enterprises and for speculation in securities on out- side account. 507 In Germany the detrimental effects of such a system have already become evident in a marked degree through overspeculation, excessive security issues, 508 crises, 509 and bankruptcies, which have caused great losses to depositors. 2. THE PARTICULAR PROPOSALS, MADE WITH THIS END IN VIEW BY C^SAR STRAUS, OTTO WARSCHAUER, AND COUNT VON ARNIM-MUSKAU. We are therefore urged to adopt the British banking system. The latter, it is said, provides for a strict division of the field arid for the complete divorce between 549 National Monetary Commission stock exchange and deposits, and thus guarantees the safety and prudent administration of the moneys de- posited. In other words, it is imperative to effect a complete separation between the deposit business and the issue and flotation business. This is the general trend of the proposals of the late Caesar Straus, a former private banker in Frankfort -on-the-Main, and of Otco Warschauer. Straus advocates the establishment of a central deposit bank for the whole German Empire by private means, but under government supervision, with a capital of 60,000,000 marks, of which 25 per cent, that is, 15,000,000 marks, is to be paid in; the bank to maintain branches in all important trade and money centers and to transact business in other places through the intermediary of the Reichsbank. 510 Warschauer advocates the establishment of a Reichsde- positenbank (Imperial Deposit Bank) with a share capital of 50,000,000 marks, of which 50 per cent, that is, 25,000,000 marks, is to be paid in. Alongside this imperial institution, deposit banks for the individual States might be founded, which would bear the same relation to it as the present private note banks do to the Reichsbank. 511 The proposed institution, just as the Reichsbank, should follow a plan of decentralizing its operations through the opening of a large number of local offices in the various confederated States. He presages for the proposed central deposit bank, the deposits oi which, in his opinion, would reach the total of at least* 1,000,000,000 marks, a dividend of 21 to 22 per cent ("an extremely low estimate," as he expresses himself). The German Great Banks Judging by the average profits of the London stock banks, he assumes as "extremely probable" a dividend in the long run of 1 2 per cent. The above prediction may pos- sibly explain the fact that, according to Warschauer, the proposed deposit banks are to be permitted to acquire first-class mortgages as well as to advance money on industrial securities and bank shares, to be sure with the limitation that only "first-class securities" are to be considered. This he thinks will cause a gradual defection of depositors from the credit banks. The latter, in his view, represent merely private interests with no claim to special protection by the Empire, and through their alertness will undoubtedly soon find new and perhaps even more profitable fields of operation. 512 At the same time both Warschauer and others before and after him made a number of substitute proposals to be applied to those of the existing banks which receive deposits. Most important among these are the following: The proportion of deposits, in so far as they are savings deposits, 513 to the share capital in other words, the maximum amount of deposits a bank might be permitted to receive should be fixed by law at about 200 per cent of the share capital, as against 50 per cent, which is the legal maximum for mortgage banks, since the smaller the working capital the less secured were the rights of the creditors. Furthermore, the principle of publicity should be adopted more largely than heretofore with regard to " savings deposits" (Spareinlagen) , which should be stated separately in the balance sheets either by all 514 banks, banking associations with limited liability, and National Monetary Commission mutual credit societies, 515 or by such professional deposi- taries, who receive the funds of the general public to the extent of 50 per cent over and above their own invested capital, who carry on a notation and speculation busi- ness, or who participate in industrial undertakings, 516 which would again be inclusive of all present-day banks and even bankers. All of them should be held to publish quarterly (as proposed by Count v. Arnim-Muskau before the Bourse Law Committee under date of March 10, 1896) or monthly reports, the form of which should be fixed by law, and which should also state the percentage of savings deposits to share capital. These summary balance sheets should state: (a) The total amounts of undertakings or flotations on own or outside account. (b) The total liabilities on the date of the statement on account of participations or undertakings of any kind whatever. (c) The amounts of stock held apart from securities of other classes. (d) The amounts used for contango or collateral credit. (e) The total liabilities incurred through the hypothec- ation or "carrying over" (Reportierung) of securities and participations owned by the bank or through the hypothe- cation or "carrying over" of securities and participations owned by outsiders. Other proposals include the demand, either that the savings deposits, as in the case of the national banks in the United States, should be granted a prior lien as over 552 The German Great Banks other creditors 517 or else that a certain percentage of the deposits should be invested in a special manner to be prescribed by law. 3. REFORM PROPOSALS BASED ON OTHER CONSIDERATIONS. Under this head comes the recent proposal made by Heiligenstadt, the president of the Prussian Zentral- genossenschaftskasse (Central Bank of Mutual Credit Societies). Without desiring to prejudice further neces- sary legal enactments, and pointing to American regula- tions, he demands that at least a beginning of legal regu- lations be made by requiring that "whoever makes a profession" of lending or administering moneys shall maintain at the Reichsbank a cash reserve of i to 2 per cent of all funds held on current account or deposit. 518 This proposal, which was advocated on nearly the same grounds also by two experts before the bank in- quiry commission, is not based on the claim that the German credit banks do not present sufficient safety for their deposits, but primarily on the consideration that mainly through the fault of the banks, the proportion in German trade and commerce as a whole of invested capital to the necessary liquid working capital and the proportion of the liquid assets of the banks to their liabilities, which represent their working capital, is un- sound and should be improved. At the same time, and perhaps even in the first place > the proposed reform, together with other measures, advo- cated by him, is intended, as Heiligenstadt expressly states, 519 "to strengthen the operating resources of the 553 National Monetary Commission Reichsbank" and to raise it to the position of "steward of the national reserve," with the view of providing greater security for the constantly increasing deposits on current-account and other bank deposits. 520 It is probably in this sense that the resolution of the Tax and Economic Reform Association (Vereinigung der Steuer- und Wirtschaftsreformer) dated February 13 and 14, I9o6, 521 is to be interpreted, in which the imperial chan- cellor is requested ' ' to provide for the legal regulation of the modes of securing the deposits at the Reichsbank ( ! ) and other banks, especially in view of the growing pro- portions of the giro and deposit business ever since 1875, that is, the year of the foundation of the Reichsbank. So far as the Reichstag is concerned it confined itself until the present to point out the presumed insecurity of the deposits by passing on June 17, 1896, the following resolution, proposed by one of its committees: Whereas the professional use by banks and business men of current account- and other deposits urgently demands protective measures in the interests of the depositors, the Chancellor is requested to inquire into the subject with the view of ascertaining how such measures can best be taken, to examine the principles underlying the present draft and the accompany- ing report, and to lay before the House as soon as practicable a bill in regulation of the matter. 4. CONSIDERATIONS ON WHICH THE FIRST-NAMED REFORM PROPOSALS ARE BASED. Before proceeding to a critical discussion of the individ- ual reform proposals, it seems proper to inquire whether reforms in the field of bank deposits that is, protective measures in the interests of depositors are at all neces- sary or even urgent in the present state of affairs or in view of past experience. It is such measures that are 554 The German Great Banks advocated in the first batch of proposals, mentioned on page 550 and following and in the Reichstag resolution. (a) SUPPOSED SUPERIORITY OF THE ENGLISH BANKING SYSTEM. It has been asserted repeatedly that the English banking system, with its division of labor between deposit banks proper and other banks engaged also in the flotation and underwriting business, necessarily presents a larger degree of security for depositors, as compared with the German "mixed" system. For the underwriting and flotation business, it is argued, as is amply proved by the experi- ence of the various countries, carries with it great dangers, which in the case of the regular banking business do not exist at all, or at least, only to smaller extent. As a matter of fact, however, it has been incontestably proven, especially by Ad. Weber and Edgar Jaffe that it is precisely the English deposit banks not to mention the most recent experience of the American note banks which despite their theoretic superiority have in practice shown the most serious evils and abuses. It is true, that the English joint -stock companies, conforming to theory, have abstained in a direct way from flotations and the underwriting business as well as from bourse speculation. But this very fact causes another great evil, namely, that the banks have never shown any interest in the newly founded companies or in the securities issued by these companies, while it is a distinct advantage of the German system, that the Ger- man banks, even if only in the interests of their own issue credit, have been keeping a continuous watch over the development of the companies, which they founded. 555 National Monetary Commission On the other hand the English banks have been promoting stock exchange speculation, company flotations and se- curity issues to an alarming extent by their practice of placing at the disposal of the larger jobbers and dealers their daily surplus money against the hypothecation of se- curities of all kinds. 522 This went so far that the Journal of the Institute of Bankers referring to this practice in its issue of October, 1899, page 409, used the following strong terms: "Nearly the whole of the professional speculation on the Stock Exchange is carried on with bank money." Among the securities hypothecated during the last decade there was an enormous number of gold-mine and American railway shares, which during critical times can either not be realized at all or only at great sacrifice; thus it is just in critical times that the joint-stock banks have had to fall back for assistance on the Bank of England. 628 During critical times therefore the joint- stock banks have to depend upon the "single-reserve system," that is, upon a system, which even English authorities have long ago condemned as inadequate and dangerous, the more so as the Bank of England in turn is lending out the funds deposited with it. 524 It is these large sums, indirectly placed at the disposal of the stock exchange and speculators, which in the state- ments of the joint-stock banks constitute the largest part of the item "money at call and short notice." 525 In Germany these sums would figure under the head of "Reports and Lombards," whereas Caesar Straus, strangely identified them with the item " Kupons und Sorten" (coupons and specie) of the German balance sheets, and therefore regards them as perfectly harmless. 528 SS6 T German Great Banks It is these amounts loaned by the deposit banks and looking so innocent in the summary balance sheets, which are mainly responsible for the conditions, which Edgar Jaffe' 527 characterizes in the following caustic ex- pressions : Nowhere are there so many swindling promotions as on the London Stock Exchange, nowhere else has the general public lost such enormous sums. On the other hand it is also a fact 528 which I believe to have amply proven in another work of mine, 529 that during the great crises, through which England, like other countries, has had to pass, an alarmingly large number of deposit banks have failed. It may also be shown that in other respects as well the much- vaunted merits of the English joint- stock banks are but illusory. The paid-up capital of the English deposit banks is extremely small, both taken by itself as well as in proportion to the liabilities. In 1904 it amounted for 87 deposit banks to 65,250,000 pounds sterling in round figures, equal to 1,305,000,000 marks, or an average of only 15,000,000 marks per bank. On the other hand the proportion of surplus funds to the paid-up capital, but not to the total liabilities is shown to be exceedingly high, ranging between one-half to two-thirds and even up to i op per cent. This is the sole cause, why even with small gross profits the banks have been able to declare the high dividends 530 (on their paid-up capital, of course) to which Warschauer refers, though advocating a much larger paid-up capital for his proposed Imperial deposit bank. Finally Jaffe 531 showed that "with the exception of a small number of the very best banks, which have a cash- reserve of 5 to 10 per cent, the English deposit banks kept 557 National Monetary Commission no amounts on hand, which may be regarded as reserves in the above sense. ' ' In view of the large amount of time deposits and deposits on current account and the small paid-up capital of the English deposit banks, Jaffe rightly considers it impossible to class under this head the item "money at call" (contango and other loans to bill- brokers and on exchange), since a portion of the money lent out on the stock exchange could not be realized in the event of a panic. Neither can the item "cash" (i. e., cash on hand plus credits at the Bank of England), the only one that might be regarded as reserve, be classed as such in its entirety, since part of it is absolutely necessary for the daily use of the banks themselves. But even this, he emphasizes expressly, is probably too favorable a picture, since, according to his experience, a large number of the English deposit banks and some of the largest banks are the worst offenders in this regard in order to make the item "cash on hand" appear as large as possible in their public statements, withdraw from the market large amounts at the end of each month and particularly at the end of each half year. 532 It may be said, though, that this state- ment no longer holds true for the most recent time, since under the pressure of public opinion and following the example of the leading institutions, nearly all the English deposit banks maintain at present reserves in the above sense which amount from 10 to 15 per cent of the liabili- ties. It may thus be seen how far the practical operation of the English system justifies the enthusiasm for it as a model to be adopted by us. 558 The German Great Banks We shall now take up the discussion of the reform pro- posals, which start with the assertion that the German banks do not accord sufficient security to their depositors, and examine the validity of the underlying assertions that in Germany, as distinct from England, the propor- tion of share capital and reserves to liabilities, also the proportion of liquid assets to immediately or shortly due liabilities, is far too small; further, that deposits are used in Germany for syndicate business and stock speculation, and finally that the combination of the deposit business with the underwriting and issuing business has caused great injury to the public. We shall start with the first and most prevalent charge. (6) THE ALLEGED SMALL, OWN RESOURCES (SHARE CAPITAL AND SURPLUS) OF THE GERMAN CREDIT BANKS AS COMPARED WITH THEIR LIABILITIES. The 169 German credit banks with a capital each of i ,000,000 marks and over, of which nearly all are holding deposits (totaling about 2,750,000,000 marks) separately mentioned in their balance sheets, show under date of December 31, 1908: Marks. Share capital 2, 646, ooo, ooo Surplus 607, ooo, ooo Total own resources 3, 253, ooo, ooo As against these items there stand- Marks. Credits on current account, including acceptances 4, 510, ooo, ooo Deposits 2, 746, ooo, ooo Or total liabilities 7, 256, ooo, ooo In other words, the own resources of these 169 banks con- stituted almost one-half of their total liabilities, including acceptances and deposits, whereas in England the paid-up 559 National Monetary Commissio n capital constituted only about 10 per cent of deposits of all kinds (fremde Gelder). The 2,746,000,000 marks of deposits in the German credit banks were more than fully covered by the share capital and the surplus. 534 As far as the eight great banks are concerned, the pro- portion between deposits of all kinds (liabilities) to share capital and to share capital plus surplus, or to the bank's own operating capital (eigenes werbendes Kapital) , may be seen from the following table: Banks. Share cap- ital (1,000 marks) . Share cap- ital plus surplus, i.e., own op- erating capital (l.OOO marks) . Deposits (Fremde Gelder) (1,000 marks) . Liabilities in per cent of the Share capital = 100. Capital plus surplus = 100. 200, 000 180, ooo 170,000 154, ooo 145, ooo no, ooo 85, ooo 80, ooo 301, 831 231,50 227,593 184,358 179, 157 144, 500 97, 702 92, 820 i, 274,648 599,643 463.551 395, 122 297,440 209, 103 210, 179 184,458 637 333 273 257 205 190 247 229 422 259 204 214 166 145 215 198 Dresdner Bank Disconto-Gesellschaf t Bank fiir Handel u. Industrie. Schaaffhausen'scher Bankve- Berliner Handels-Gesellschaft. Comm.-u. Discontobank Nationalbank fiir Deutsch- land It goes without saying that the own resources of the German credit banks have grown far less than the liabil- ities, for it must be borne in mind that during periods of depression, when only small dividends were paid, fresh issues of stock were altogether out of question. At all events, there was no inducement then for working with excessively large capital on which no adequate returns could be expected. 560 The German Great Banks The surplus funds alone of all credit banks steadily increased from 12.90 per cent of the share capital in 1885 to 22.90 per cent in 1908, amounting then to 607,070,000 marks. In the case of the Berlin banks these percentages grew from 17 per cent in 1885 to 29.10 per cent in 1908. It is my opinion, however, that this splendid showing is due not so much to the superiority of our banking methods, as is thought by Ed. Wagon, 535 as to the excellence of our corporation laws. These surplus funds contribute at present more than iX per cent of the divi- dend earnings of all the banks and 1.73 per cent (as against 1.87 per cent in 1906) of the dividend earnings of the Berlin banks. It should be stated, though, that while the share capi- tal and surplus are "guaranties," and while the increase in their size improves the financial condition of the bank and diminishes the danger of bankruptcy, yet they, as well as the part of the debits which is not required to meet the claims of creditors, are on the main guaranties for the stockholders. (c) THE LIQUIDITY OF THE RESOURCES OP THE GERMAN CREDIT BANKS COEFFICIENT OF LIQUIDITY (Liquiditdtsschlussel). The guaranties for the creditors, especially for the depositors, are represented in the first place by those assets in which the capital of the bank is invested, since the creditors must have assurance not merely of the sol- vency of the bank, but even more so, that their demand claims will be paid upon presentation and that the other claims which are due on stated terms will be met when due. In other words, the security of the creditors, especially of 90311 ii 37 561 National Monetary Commission the depositors, depends primarily upon the amount of liquid assets which the bank possesses and the mode of their investment. 536 The liquid assets for securing the demand and short- term liabilities must be large enough and of such a kind that the bank may be able to pay without delay those liabilities, the presentation of which might be expected during a crisis. The question as to what percentage is likely to be presented for payment during a crisis can be answered only according to rules of probability, 537 differ- ing according to circumstances (time, state of the mar- ket, etc.), which are learned only from practical experi- ence, change with it, and can not therefore be fixed by law. Similarly only experience during a long period can teach what kind of assets may be regarded in a general way as liquid assets, though it is much easier to deter- mine those which can not be so regarded. It is perfectly obvious, therefore, that there is no fixed method of calculating the degree of liquidity applicable at all times and places and to all institutions. Any method may and will be objected to in one point or another. There is the further drawback that the manner in which the balance sheets are drawn up have varied greatly, at least until the most recent period. Moreover, there is no means of telling to what extent the various items which, like bills, contango, advances on collateral, may be regarded generally as liquid assets, contain amounts that are not liquid, and inversely, to what extent an item which, as a rule, does not come under the general head of liquid assets does not comprise, in any concrete instance, consols or other securities which can be quickly realized under all circumstances or at least during normal times. 562 The German Great Banks Finally, in calculating the degree of liquidity, exact and correct results may be obtained only if a distinction is made between the daily liabilities, including commer- cial deposits, and those which fall due after some time, since it is only the former which require security by means of quick assets, while the latter may be properly secured by those assets which will be realized on some future date. 538 After these preliminary remarks we may state that, according to the method most commonly used in calcu- lating the liquidity of bank resources, the liabilities include the following items: Credits on current account, including acceptances, Deposits (Depositen), Claims to net profits, undivided at the end of the busi- ness year; while the liquid assets include: Cash on hand, Contango and loans secured by collateral (the two, however, appearing in most balance sheets under one common head), Bills, Securities. Debits on current account are not included among the liquid assets. There is no doubt that this method, which is followed by the daily press, especially the Frankfurter Zeitung, and special periodic publications, as the Deutscher Oekon- omist, is extremely schematic, as no distinction is drawn in the case of credits on current account and deposits between those claims which are daily due and those which 563 National Monetary Commission fall due at a later date. Nor is it borne in mind that as a rule, even during critical times, the majority of the clients will forward to the bank at maturity funds to secure the payment of their acceptances. The scheme is also faulty for the reason that it includes among liquid assets all securities an altogether too optimistic an assumption while it excludes all debits on current account, notwith- standing that even during critical times a great number of the debtors may be expected to pay up their due debts within reasonable time after demand. All these faults of classification are, however, of no serious account, since the errors are not only in favor of greater liquidity (as, for instance, when securities are included among the liquid assets) but also against it 539 (as, for instance, when all debits on current account are excluded from among the liquid assets and all accept- ances are included among the liabilities), and thus com- pensate each other to a certain extent; also because the same methods of calculation are used in the comparison of the more recent with the older balance sheets. This can be proved arithmetically by changing slightly the schedule so as to avoid the errors named, for instance, by omitting acceptances from the liabilities or consider- ing them only to the extent of one-third of the total, by including at the same time among the liquid assets debits on current account to the extent of one-half or one-third of the total, and by including not the total securities, but only one-third or 10 per cent of that total. It will be seen that even with such a change of the schedule very similar results will be obtained. 564 The German Great Banks According to the customary schedule the coefficient of liquidity that is, the proportion of the immediately available or quick assets to all liabilities, without dis- tinction between those daily due or those maturing after some time 540 has been as follows since 1893: For all German credit banks. For the Berlin banks. For all German credit banks. For the Berlin banks. 1893 Per cent. 85 Per cent. 88 1901 Per cent. 70 Per cent. 70 1894 81 83 1902 72 76 jgoe 73 1903 67 71 1896 73 75 1904 66 70 1897 75 79 1905 62 65 1898 76 1906 61 63 1899 73 78 1907 60 63 1908 62 64 The proportion has grown constantly worse during the last fifteen years (except for the years 1896, 1897, and 1902) up to 1907, and it is mainly this fact which supplies grist to the mills of the heterogeneous elements opposing our present banking system. There can be, however, no doubt that this falling off can be traced on the one hand to the strong concentration movement in banking and industry, particularly characteristic of this period, and on the other to the unexpectedly large demands of industry and the accompanying growth of speculation. It would not be difficult to trace in detail the influence of the above factors through the growth of debits on current account and the long-term credits. The working of the first factor, particularly in the shape of the so-called com- munities of interest, is discernible in the increase of the 565 National Monetary Commission permanent participations ; the two last factors are mainly responsible for the growth of debits on current account and of acceptances. The expectation seems, however, justified that with the abatement of the concentration movement and the strengthening of the numerous branches, agencies, etc., founded by the banks during the period, all of which make large demands upon the parent institutions until they are able to stand on their own feet, these items will show some reduction. An adverse change in industrial activity may contribute to the same result while causing a similar reduction of the bank dis- count and general interest rate. The picture presented by the balance sheets of the banks must necessarily reflect that of the entire national economy, since the banks are the cash keepers of the nation. It is, therefore, hardly in accord with the truth to speak of or object to the banks as the "leaders of national enterprise" or of domestic economic activity. As it is the above table shows that the proportion of the quick assets of the banks to their liabilities or the coeffi- cient of liquidity of their resources even for the worst year of the period (1907) was 60 per cent for all credit banks, taken as a whole, 541 and 63 per cent for the Berlin banks. That is to say, the liabilities of the Ger- man credit banks to the extent of almost two-thirds of the total were secured 542 by liquid resources. 543 The coefficient of liquidity in 1907 for 11 great Berlin banks has been calculated by Heinemann in an article in the Nation (No. 32, dated May 7, 1898) at 61 per cent, while for 1 906 544 (by disregarding the item of securities) 545 he reckons it at a little over 50 per cent. Similarly A. Kop- 566 The German Great Banks pel, writing for the Plutus of May 26, 1906, figures out a decrease of liquidity for the 5 largest banks from 75 per cent at the end of 1890 to 50 per cent at the end of 1905. In this calculation he fails, however, to include securities among the assets, while including among the liabilities even the so-called Avale (i. e., bank sureties for the pay- ment of railway freights, excise, and import duties). An article of the Frankfurter Zeitung, dated April 4, 1907 (No. 93), discussing the coefficient of liquidity for 45 >anks (9 Berlin great banks and 36 provincial banks, each of them with a minimum capital of 10,000,000 marks), with a total nominal capital of 2,198,800,000 marks, fol- lows the customary method (without, however, considering the net profits) and places this coefficient at 67.8 per cent for the 8 Berlin great banks, arriving thus at the same proportion of two-thirds security for the outstanding liabilities. Finally, the Deutscher Oekonomist of November 23, 1907, page 561, by using the customary method of calcu- lation, but omitting acceptances from the liabilities and securities from the liquid assets, places the coefficient of liquidity on December 31, 1906, for 143 banks, with a minimum capital of 1,000,000 marks each, also at about two-thirds (credits on current account and deposits, 6,304,000,000 marks; cash on hand, bills, and loans on collateral, 4,043,000,000 marks). Almost the same result would have been attained by reckoning in the case of these 143 banks the acceptances among the liabilities at the ratio of one-third of the total and placing with deposits and net profits the credits on current account at the ratio of one-half of the total, i. e., by considering 567 National Monetary Commission merely the immediate liabilities (as distinct from those maturing after some time), according to the average ratio between the two and by including among the liquid assets; besides cash on hand, bills, and loans on collateral, including contango, also one-third of the securities, but excluding from the liquid assets any debits on current account. The amounts thus obtained are 7,394,000,000 marks of liabilities, as against 4,406,000,000 marks of quick assets. These results tally fairly well with the coefficient of liquidity of 62.76 per cent, which Waldemar Mueller as- sumed for 45 banks with a minimum capital of 10,000,000 marks each, at the Hamburg bankers' convention, although he counted among the liquid assets one-half instead of one- third of the securities and omitted the net profits, but, on the other hand, placed among the liabilities all credits on current account. By excluding the total of acceptances from the liabilities, which I regard, however, as improper, he obtained an even higher coefficient of liquidity of 81.92 per cent. It will hardly be denied that the coefficient of about two-thirds obtained by the various methods, even for the worst year, unless the methods used were altogether arbi- trary, is sufficiently satisfactory, although in this regard conditions in the English banks, for reasons already stated, are far more favorable. But even for the German credit banks the coefficient would be far more favorable if we compared their quick assets merely with their imme- diate liabilities. This, however, is impracticable, at least for the present, since the balance sheets of many banks contain no information on that point. 568 r he German Great Banks The composition of the liquid assets may likewise be regarded, on the whole, as satisfactory. On December 31, 1908, cash on hand in all banks amounted to 537,500,000 marks, 546 i. e., almost to 8 per cent of the 7,256,000,000 marks, the combined credits on current account and deposits, exclusive of acceptances. In England, as we saw, even the best joint-stock banks show a cash reserve of only 5 to 10 per cent, whereas the majority of the banks have no amounts which may be regarded as reserves in the sense used by Edgar Jaffe. In the case of the German banks, the item cash is supple- mented by the bill holdings, which on an average 547 present a very satisfactory amount, amounting to 2,742,400,000 marks, on the above date, so that on December 31, 1908, the items cash and bills alone constituted 3,279,900,000 marks, as against deposits of 2,745,800,000 marks. The statement was made and assiduously propagated in the foreign press that part of the funds entrusted to the banks, and even part of the deposits, are being used in syndicate operations or speculation. This is refuted by the mere fact that at the end of 1908 the combined total of the items securities, mortgages, and syndicate partici- pations in the case of the above-mentioned 143 (169 in 1908) credit banks, with a minimum capital of 1,000,000 marks each, was 1,298,052,000 marks, or less than one- third of the combined capital and surplus funds of these banks, viz, 3,253,673,000 marks. 548 About two-thirds more of this amount would therefore have to be invested in this manner before there could be any talk that outsiders' funds, not to speak of deposits, were invested in specula- tive securities or participations. 569 National Monetary Commission The above, it is hoped, will afford sufficient proof that neither the amount nor the composition of the liquid resources, nor the coefficient of liquidity afford any cause for demanding the "reform" of our banks for the sake of increasing the security of the deposits. Finally, the statement, that the combination of the deposit business with the promoting and issuing business has led to grave losses, is correct only to the extent that in a number of failures of credit banks as well as cooperative credit societies and private banking firms depositors have also suffered. So far as private firms were concerned, these failures were brought about by the criminal acts of the bank management, which had no connection whatever with promoting or issuing transactions. Similar expe- rience, only on a larger scale, was had with the English deposit banks and is not likely to be avoided through any legal regulations. The figures of such losses as given by Otto Warschauer 549 brought down to the year 1907 by the managing partner of the Disconto-Gesellschaft, Dr. Arthur Salomonsohn, were presented to the bankers' convention at Hamburg. 550 These data, the accuracy and completeness of which will hardly be doubted, relate to nine credit banks, nearly all of them with very small capital, and two other institutions, the Hannover scher Hypothekenverein and the Spar-und Vorschussbank, in Dresden, which either at the opening of bankruptcy proceedings or before were coop- erative societies. The total losses sustained by depositors by reason of all these failures during the fourteen years between 1894 and 1907 are calculated at about24,ooo,ooo marks. It is rather difficult to ascertain the proportion The German Great Banks which these losses bore to the total deposits of the German credit banks. It would not be correct to compare the total losses with the amounts due to the depositors on December 31 of each of these fourteen years, since the amount for each successive year includes those for the preceding years. Even if only the amount for December 31, 1906 (2,700,- 000,000 marks) , were taken the total would be altogether too small. For what we are concerned with are the total amounts deposited during each year, and these naturally will be much larger in view of the withdrawals, which are especially heavy during the last months of the year. This maximum amount of 2, 700, 000,000 marks represents, therefore, a total far below the actual amounts deposited. On the other hand, the total loss of 24,000,000 marks, as estimated by Salomonsohn is probably far too high, since according to his explanation the claims of the depositors were figured from the last bank statements preceding the failures. In many cases, however, the opening of bankruptcy proceedings is preceded by a run, during which part of the deposits is repaid. It is plain, therefore, that the amount of deposits of which only part represents savings deposits is estimated too low, while the losses are estimated too high. But even if we accept both figures without change and divide the total loss of 24,000,000 marks by the total deposits of 2,700,- 000,000 marks it will be seen that the average loss on all bank deposits in the German Empire during the fourteen years from 1894 to 1907 was about nine-tenths of i per cent; in other words, of every 100 marks deposited during the fourteen years, from 1894 to 1907, not quite 90 National Monetary Commission pfennigs was lost. This period includes the crisis years of 1901 and 1906, during which the German banks and banking system, on the whole, proved their utmost sound- ness despite all difficulties and dangers. It is true that subsequently, in 1907 and 1908, new important cases occurred, when banking institutions which were receiving deposits failed and the depositors suffered losses. Accord- ing to my own inquiries these cases include 29 private banking establishments, n registered cooperative credit societies with limited liability, i industrial bank, i savngs and credit bank, 2 loan and credit societies, i people's bank, not registered as a limited credit society, and only 2 credit banks, viz, the Solinger Bank in Solingen and the Banner Bank fur Handel und Gewerbe in Bonn. 551 After the foregoing discussion it would seem rather unreasonable to maintain that deposits are being used for syndicate participations or speculative operations or that "grave losses" have been caused to German deposi- tors by our banks and banking system, and to demand in the same breath the introduction of special deposit banks or special safeguards, the more so, as failures have by no means been Tare even among the special deposit banks in England. It is not surprising that the constant reitera- tion of such statements, hurtful to German credit abroad, in the long run finds a loud echo in foreign countries, which are only too anxious for such news, and that even the lyondon Economist could treat his readers in a recent issue to the news that the German banks were "investing their deposits in mortgages." 552 572 The German Great B a n II. CRITICISM OF THE INDIVIDUAL REFORM PROPOSALS. I. THE CREATION OF A CENTRAL PRIVATE DEPOSIT BANK OR OP A GOV- ERNMENT DEPOSIT BANK FOR THE GERMAN EMPIRE AND OF SIMILAR DEPOSIT BANKS FOR EACH OF THE GERMAN STATES. In order to bring German banking into conformity with the English model, Caesar Straus proposes the crea- tion of a private central deposit bank and Otto War- schauer the establishment of a government deposit bank for the German Empire alongside of a series of deposit banks for the individual States. In view of the above discussion and the German and English experience in this field, the change does not seem justified in the interests of greater security for the depos- itors. Furthermore, the proposed changes are either impracticable or dangerous. Straus's idea of a central (einheitliche) deposit bank is impracticable, even if only for the reason that neither the German great banks, nor the other banks or bankers, are likely to join in the foundation of such a central bank, since, being more con- servative in their business views, they believe that, con- trary to Warschauer's calculations, such a bank for the present and a considerable time to come is not likely to prove profitable. The idea is impossible of realization, also, because the Reichsbank, for obvious reasons, will never agree to trans- act the business of the deposit bank in those places, where the former only, but not the latter, may have branches of its own. If I am rightly informed the pro- posal met with scant favor at the time, just in the last- mentioned quarter. 573 National Monetary Commission For various reasons the Warschauer proposal of an imperial special government deposit bank, either singly or in conjunction with like banks for the individual States, is likely, at least for the time being, to share the same fate. 553 In the first place our authorities would hardly disregard the reasoning that it would not do to substitute bodily a foreign credit system, which owes its develop- ment to special local conditions, for a domestic system, which is no less the result of peculiar conditions at home. It will also be recognized that our banks have had a con- siderable share in the brilliant economic development during the last decades, and that, therefore, any attempt to paralyze their activity is likely to inflict grave injury on our national industry. There will be the more hesi- tation about making the change when it is borne in mind that the coming decades will undoubtedly bring a very severe struggle for our national industry against foreign competition, in which the unimpaired assistance of our banks will be needed more than ever before. Nor is it likely that there will be much sympathy with any plan that is likely to diminish the "highly appre- ciated" and always welcome ability of our banks to con- tribute their share of taxation. In the case of the Reichs- bank, which has had to pass through a severe struggle with the competing note banks, there would be the additional danger that the newly established state de- posit banks might interfere with and thwart its discount policy. That such a danger exists, is shown by conditions in England, 554 where the Bank of England's own bill business has been declining for some years past, and where the bank, owing largely to competition with the 574 The German Great Banks large deposit banks, is compelled to discount bills at the prevailing market rate, which in most cases comes nowhere near the official discount rate. It may also be shown that the Bank of England no longer controls the market for loans on collateral, as the large deposit banks find it possible to supply the market with vast amounts for such loans and are thus in a position to oppose successfully any increase of the discount rate which the Bank of Eng- land might deem expedient. Thus it has come to pass that of all the functions devolving upon it, and of which no one can be eliminated without injury to the commu- nity, the Bank of England exercises successfully only one, viz, the regulation of the currency. This also proves the error of the writers who hold 555 that "no conflict of interests between the Reichsbank and a private central deposit bank need be feared," that, on the contrary, "they have common Interests," and that both institutions, with the Reichsbank as "the leading institution," would "cooperate in maintaining and sup- porting the proper monetary circulation " of the country. The establishment of state deposit banks would, more- over, involve a radical change for the worse, and not for the better, of the entire German banking system. It is not likely that the German credit banks will re- sort to any measures of self-protection during the early stages, believing, no doubt, that for some time at least, their deposit business will not be seriously endangered by the fresh competition. Should, however, the founding of government deposit banks, or even a more energetic quest after deposits on the part of the Seehandlung and other state institutions, come to be regarded as a serious danger 575 National Monetary Commission to their own deposit business, the credit banks would, as a matter of course and of self -protection, have to enter the competitive struggle with all the means at their disposal. In such a case they would proceed to transform, as far as practicable, their present deposit departments into separate deposit banks or to found new ones, and in either case take over or keep the control, 556 management, and shares of the new deposit banks. We should then have an imperial deposit bank, deposit banks for the individual States, and a large number of competing private deposit banks, all of which, including the state and private banks, would be compelled to cover the country with a network of branches. Sooner or later all these institutions, possibly in conjunction with the then surviving state note banks, would be found seriously hampering, if not entirely blocking, the discount policy of the Reichsbank. 557 This, contrary to Ad. Weber (op. cit., p. 262), we regard by no means as a "cum pos- terior." Such a picture of the future is by no means ex- aggerated, if we are to judge by English experience. Warschauer's proposal is based upon the erroneous view that our banking system is inferior to the English system and must give place to the latter. In order to refute his views, it may suffice to state that for a long time the English have been energetically demanding a reform of their own banking, while pronouncing our system su- perior to their own, until their usual keenness of percep- tion became blunted by the agitation which had sprung up in our own midst. As late as July, 1906, the following expressions were used in an article on "The future of international banking," which appeared in the Bankers' Magazine (No. 748, p. 51): 576 The German Great Banks 11 In Germany we find a banking policy which, though in minor points borrowed from other countries, differs essentially from all others in giving full expression to the national genius. It is as scientific and thoroughly coor- dinated as English banking is unscientific and haphazard. German banking does not stand aloof from industry and commerce, as ours does. The three are all closely asso- ciated. They have a common understanding and a strong sentiment of solidarity." This is a foreign opinion. 558 In Germany the mere fact that a hen is laying golden eggs suffices to call forth in many quarters the desire to have it killed. In view of the above considerations and the negative attitude assumed by the imperial chancellor at the open- ing of the deliberations of the bank inquiry commission toward the proposals to change by law our existing mixed banking system, it would seem unnecessary to repeat again the arguments propounded in the second German edition of this work (pp. 155-160), that the profits of the new central deposit bank, at least during the early period, would most likely be very moderate and not, as Warschauer believes, 21-22 per cent (!), or at least 12 per cent. 559 2. THE GRANTING OP PRIORITY RIGHTS TO DEPOSITORS. It was shown above that our past experience does not justify the demand that priority rights be granted to depositors. Such a demand, even if better founded, could hardly be conceded, as such a preferment of depos- itors to other creditors of the bank, who may have en- trusted their cash to the bank in current account or 90311 ii 38 577 National Monetary Commission otherwise, would be a death blow to the credit of the banks. It may be also argued against it that the very conception of deposits is not fixed either in theory or in practice and still less defined in law with regard to their manifold and constantly varying relations to credits on current account, contango, etc. 560 3. THE FIXING OF A LEGAL RATIO BETWEEN SAVINGS DEPOSITS AND THE SHARE CAPITAL. The objection to a fixed ratio between share capital and deposits "in so far as they are savings deposits" is directed mainly against Warschauer, 561 who advocates a scheme similar to that legally prescribed for our mort- gage banks. This scheme would be unacceptable even if the words "in so far as they are savings deposits" were omitted. As a matter of fact, while it might have been desirable to fix such a ratio in the case of the mortgage banks, which are engaged in what may be called the standard business of issuing mortgage bonds, such or other regulations would be ill adapted to the credit banks with their innumerable and constantly varying business relations. Warschauer's proposal is based on the premise that the share capital (he wrongly disregards entirely the surplus funds) ought to bear a certain ratio to the deposits, whereas it was demon- strated above that the foremost protection of the creditors, including depositors, are the liquid assets 582 and not the capital (and surplus), and that in Germany large share capitals are required mainly in view of the diversity of business transacted by our banks. This view is shared in England, to which our opponents are in the habit of turning for their authority. 578 The German Great Banks 4. LEGAL REGULATIONS REGARDING THE INVESTMENT OF DEPOSITS. Proposals were made by certain experts who appeared before the bank inquiry commission of 1908, to the effect that those modes of investment of deposits which were found correct and had been carried out at that time by most of the great banks should be made the basis for legal regulation, as it was intolerable that the " adminis- tration of the national wealth" 563 should be entrusted to 10 or 12 persons without any legal safeguards. This remark occurs frequently in banking literature and in other connections. Accordingly a legal regulation is demanded requiring that a certain proportion of the deposits is to be invested in German government bonds, the price of which would thus incidentally be raised. As an alternative it is proposed that about one-third or 35 per cent of the deposits in savings banks, cooperative societies, and credit banks be required by law to be invested as follows : Twenty per cent in bills of exchange in accordance with the Reichs- bank regulations, i. e., provided with three signatures and running for a term not exceeding three months, and 15 per cent either in other bills, in accounts at " giro " banks, and in loans on collateral not exceeding a term of three months on securities quoted at a German bourse (excepting the bank's own shares or those of a " concern" bank, or such securities as have been put on the market by the institu- tion in question within three years preceding) , or in Ger- man state loans or German imperial government bonds, or finally, in first mortgages. Against this it may be urged that even if the above demand were complied with, the depositors, having no 579 National Monetary Commissio n exclusive lien on these securities, would run the same risk as they do now in the case of bankruptcy or crisis, the only difference being that believing themselves guar- anteed by law against all losses they would have all the more reason to complain. Unlike the mortgage banks and insurance companies, whose business moves along beaten paths, the German credit banks engage in an immense variety of compli- cated enterprises. Hence no regulations of the kind above described could be applied to them without injury to the special activity of each bank and of the credit business in general. It seems impossible to imagine how any set of regulations, suitable for all times, places, and conditions, could be devised to determine the manner in which the working capital is to be invested. At any rate, the attempt to do so would be a very risky under- taking. Moreover, it is more than doubtful whether any manner of investment could be legally prescribed that would under all circumstances guarantee the liquidity of the investments. 5. DEPOSITING A CERTAIN PORTION OF THE PRIVATE DEPOSITS AT THE REICHSBANK. Heiligenstadt's proposal 564 that the credit banks should be required to deposit one to two per cent of the average annual amount of all their credit items in cash at the Reichsbank represents a totally different and broader standpoint. The proportion was raised to 5 per cent by some experts of the bank inquiry commission, who in all other points adopted bodily the proposal and its argument. Starting with the alleged fact that on an average only 50 per cent (between 1895 and 1905 only 37 per cent) of 580 The German Great Banks the annual national economic working capital ("volks- ivirtschaftliches Betriebskapital ' ') placed in the hands of the banks between 1886 and 1895 was used for working purposes in the shape of cash, bills, and loans on collateral (p. 83 loc. cit.), Heiligenstadt concludes that the balance (i. e., during the latter period 63 per cent) of the money belonging to the creditors or depositors was used for pur- poses of investment; in other words, that an excessive part of the nation's working capital was converted into investment capital through long-term credit or otherwise. The above proposal was therefore considered justified, inasmuch as the increase of the capital of the Reichsbank (the regulator of the money circulation and of the credit business) would be the best means to keep an adequate portion of German working capital permanently liquid for working purposes (p. 87) and to take the power of decid- ing the mode of employment of capital, at least to a certain degree, out of private hands (p. 85). Thus the proposal is said to be intended, first and fore- most, to strengthen the working capital of the Reichs- bank (p. 98, under X), and at the same time to prevent the banks from tying up an excessive proportion of their resources and thus endangering the security for their liabilities (p. 95). The supporters of this proposal described the sum to be deposited in cash at the Reichsbank as "the national working reserve," or "iron reserve" (" eiserne Reserve") which would enable the Reichsbank to issue three times the amount in bank notes, the security for which could not be withdrawn, and by which the nation could be constantly supplied with liquid working funds. 581 National Monetary Commission When subjected to analysis, both the premises on which these views are based and the aims, as well as the con- clusions arrived at, prove untenable. As regards the premises, the facts set forth on previous pages of the present work suffice to disprove the assertion that German credit banks are in the habit of tying up an excessive part of their resources (p. 83), and thereby endanger the security of their liabilities. On the con- trary, we saw that all the liabilities of the German credit banks are covered almost up to two-thirds of their amount by liquid resources, whereas the law requires that even bank notes payable on sight may be covered by cash reserves only up to one- third of their amount. Heiligenstadt's -method of calculating the coefficient of liquidity (p. 83) is altogether too unfavorable. I can not see on what ground cash, bills, and even loans on collateral, are by him considered only partly as liquid means, con- tango and securities being omitted entirely. 565 As regards the purpose aimed at by the proposal, it is not clear how the Reichsbank (in the event of its note- issuing power being increased by the 2 per cent or 5 per cent of fresh cash funds to be furnished by the banks) will be able to keep these funds in any more liquid form than that in which they are furnished by the banks; for the banks would have to withdraw these very cash funds from their most liquid resources, namely, cash balances, bills, loans on collateral, etc. The same cash funds would thereupon be invested by the Reichsbank in practically the same form, namely, in bill discounts and loans on collateral, for which it would issue its notes. 582 The German Great Banks Most probably, however, no fresh cash would flow into the Reichsbank at all in this manner. The banks would deduct from their "giro" account (which almost always exceeds the contemplated "iron reserve") and place to the credit of the Reichsbank whatever amount they might be required to deposit, just as they would probably do in case of a direct increase of the Reichbank capital in which they were to participate. Nor can it be maintained that even in this case the Reichsbank, by reason of the sums placed to its credit, would become possessed of a permanent security for a threefold issue of bank notes. A permanent deposit, or "iron reserve," is out of the question for the reason that the sums which, it is supposed, can not be withdrawn from the Reichsbank directly can be withdrawn indi- rectly in the form of larger loans, through bills, discounts, or loans on collateral, or through deductions from the giro balances exceeding the minimum deposit. During a crisis and Heiligenstadt's proposal is essen- tially intended for times of crisis, since for times of pros- perity no reform proposals are needed very many de- posits will be withdrawn from the banks, and they will themselves be forced to withdraw from the Reichsbank at least a part of their 2 to 5 per cent reserve. But even if this were not the case, the Reichsbank in time of crisis, in order to prevent a run or bankruptcy, would have no other means than to put in circulation all or part of the "national working reserve," whereas in times when money is plentiful this reserve would prove a useless ballast. 583 National Monetary Commission This brings us to a question which is by no means unimportant, namely, whether the 2 to 5 per cent reserve at the Reichsbank should bear interest or not. If it is to yield interest, then all the grave reasons become valid that may be urged against the acceptance by a central note bank of interest-bearing deposits, and which have caused the most prominent of these banks, upon repeated deliberation, to refrain from accepting in- terest-bearing deposits. This attitude is mainly dictated by the consideration that, if the central note bank does not wish to bear the loss involved in the payment of such interest and it is hard to see why it should bear such loss with indifference it would be compelled to seek lucrative business in the form of discounting and loans on collateral, and possibly just at a time when it ought to employ all the resources at its command to combat an excessive demand for credit throughout the country, es- pecially by raising the discount rate. On the other hand, if the 2 to 5 per cent reserve is not to bear interest, that would mean a considerable loss for the credit banks carrying those reserves. They, too, would of course not regard that loss with indifference, but would be compelled to reimburse themselves in one way or another, especially by paying their depositors less inter- est a decidedly undesirable result. Furthermore a still more undesirable result in normal times they would have less funds to place at the disposal of the credit business. An increased demand in the money market being thus met by a diminished supply, the result would be a rise in the rate of interest. Finally and this would be the most undesirable result of all the banks, judging by past ex- 584 r he German Great Banks perience, would probably dimmish their noninterest-bear- ing cash reserves necessary for their liquidity by an amount corresponding to their share in the "national working re- serve" carried at the Reichsbank. The ultimate result would be that the liquidity of the banks, and with it of the body economic, would be im- paired to exactly the same extent that Heiligenstadt intended to improve it. In substance, if not in form, this proposal amounts to the same thing as the proposals which the Reichstag com- mittee, for good reasons, had rejected on the occasion of their deliberations on the stock-company bill of iSS/j.. 568 These proposals, which aimed at prescribing a special mode of investing the legal reserve funds in cash, or in trust- fund securities, were revived in 1901 in an article in the Gegenwart by Imperial Bank Director Doctor Vosberg. They are, however, liable to serious objections, at any rate so far as the joint-stock banks are concerned; and the same objections, therefore, apply also to the proposals now under discussion. 667 If the banks were compelled to keep their surplus in cash, or to maintain a cash reserve at the Reichsbank, they would have to withdraw this sum from their fully employed working capital (for the suggestion that only surplus capital is to be withdrawn is absurd) , to wit,' such assets, as the bill holdings, securities, etc. Thus they would be compelled either to restrict their business operations, i. e., to call in credit previously granted and refuse to grant new credit, a proceeding which might lead to a crisis, especially in industry; or they would have to attempt to make good this deficiency 585 National Monetary Commission in working funds by the issue of fresh shares, which course, if successful, would lead to a fresh strengthening of con- centrative tendencies and, furthermore, to a fresh with- drawal of ready money from the market to an amount equal to the total value of the share issues. If the attempt to issue fresh shares proved unsuccessful, the calamitous state would continue, namely, the injury to trade and industry, which were to be protected by the proposals in question. In many cases, however, the issue of fresh shares would not be possible, because the deposit of ready money would either lead directly to a curtailment of busi- ness transactions, and hence of dividends, or would create the fear of such curtailment, the result in either case being a fall in the market value of the shares. If the banks, despite the curtailment of business, en- deavored to obtain satisfactory dividends which is neces- sarily the aim of the business management of every joint- stock company they might easily find themselves com- pelled to resort to hazardous transactions, particularly to force the founding and issue business more than ever. Since, moreover, after the deposit of the guaranty re- serve, they would possibly and even probably pay less regard to their liquidity, that liquidity, as well as the quality of their investments, might in the event of a run turn out to have been impaired to a greater extent than ever. If, however, securities were deposited instead of cash, most of the banks, being compelled, in case of a run, to sell the deposited securities, might not be able to do so at all or only at a great loss. If these happened to be trust-fund securities their market value would become unduly depressed during the time of panic. 586 The German Great Banks Heiligenstadt's proposals would thus deprive the busi- ness community of productive capital in two ways through the deposit of a cash reserve at the Reichsbank and through the issues of shares that might become neces- sary. Some of the supporters of the proposals have already raised the amount of the proposed reserve from 1-2 per cent to 5 per cent; in fact, the amount would be variable at pleasure in an upward direction. I assume that this amount is to be deposited at the Reichsbank, without the creditors having a lien that is to say, a right of segregation of these deposits (Absonderungsrecht) in case of failure of the credit banks. If this be the case, the Reichsbank, as has been pointed out, would have to part with this cash reserve in the case of a run, which might result in the claims of other creditors than the de- positors being satisfied, on the principle of " first come first served," and the depositors might be turned away empty handed. If this is not to be the case, that is to say, if all creditors are to be given a lien on the cash reserve, or the right of segregation, then the Reichsbank, according to general regulations, would not be permitted to part with this reserve in case of a run, so that the failure which the cash reserve was intended to ward off would in that very case become inevitable. It is also clear from the above that the practical con- sequences of these proposals would be directly opposed to the efforts, recently made with such commendable zeal, of expanding the check and transfer system, and thus dispensing with the use of ready money in payments and making it available for credit transactions. 587 National M o n et ar y Commission Again, it should be borne in mind that a cash reserve, even of 5 per cent of all credit accounts at the Ger- man credit banks, that is to say, about 200,000,000 to 250,000,000 marks, could in nowise influence "the ratio of working capital to invested capital" in German trade and industry to any appreciable extent. Fur- thermore, while Heiligenstadt's proposal lays special stress on the strengthening of the working resources of the Reichsbank, a bill (since then disposed of) "to change the bank act" (No. 1178 of Reichstag documents) ad- mitted that the Reichsbank's own means had sufficed hitherto for the purposes they were intended to serve, and that consequently there was no need of increasing them. Accordingly provision has been made merely for a gradual increase in the working resources, by a gradual strengthening of the surplus. Lastly, it must not be forgotten that the Reichsbank will, as a matter of fact, be placed in possession of considerable and increasing working resources, through an agreement by which it undertakes the administration of the sums which the postal administration collects through the postal transfer and check systems. The fact that Heiligenstadt began by proposing a reserve of i to 2 per cent, that the experts before the bank inquiry commission afterward thought a reserve of 5 per cent appropriate, and that since then one of these experts has felt prompted to raise the proportion to 10 per cent, 568 ought to suffice to demonstrate the inept and dangerous nature of all these proposals. For why stop at 10 per cent? Someone is sure to turn up, whether inside or outside the Reichstag, who, with "holy 588 The German Great Banks zeal " and with perfectly incontestable logic, will declare even the 10 per cent insufficient, for it is obvious that 50 per cent at the Reichsbank are a far better safeguard than 10 per cent. The banks, to be sure, would in that case fare like the donkey who was just getting accustomed to live without food when he died. My attitude toward the proposals here discussed, as well as toward any reform proposals in the banking busi- ness, is based on the fundamental principle that all those proposals are to be condemned which, without being of any appreciable benefit to the community as a whole, are injurious to so important and necessary a factor in German national economy as the banks. In the same way I am opposed to those proposals which do more harm than good to the community at large, or which are obscure in their motives and aims, and of whose consequences no estimate can be formed. On the other hand, I should not a priori be opposed to measures the execution of which would impose certain sacrifices on the banks, pro- vided such proposals promise to result in notable benefit to the whole community and thus perhaps in indirect advantages to the banks. 6. THE PUBLICATION OF SUMMARY BANK STATEMENTS (ROHBILANZEN) ACCORDING TO A LEGALLY PRESCRIBED FORM. Such a benefit to the general public and to the banks is put forward as an argument for the publicity proposals, especially that of Count Arnim-Muskau. 569 Though not worded to that effect, yet the meaning of this proposal, in view of the nature of the German banking business, amounts to this, that all banks and merchants who as a part of their business accept deposits to amounts exceed- ing on an annual average half (?) of their liable capital 589 National Monetary Commission shall be under legal obligation to publish summary state- ments on the first of every quarter. These statements, it is proposed, are to conform to a legal schedule, a draft of which is given, and are to be published at the latest on the first of the following month in newspapers publish- ing official communications. I do not believe that such statements would fulfill the purpose of adequately enlightening the general public, and especially the depositors, as to the condition of the bank to which they have entrusted or intend to entrust their deposits, no matter what schedule may be adopted. If the schedule goes into minute details, it will as a rule not be read any more than long prospectuses. If it does not go into details, but merely gives " total amounts" for the various items, as is natural, and as is in fact contem- plated in the Arnim proposal, it will be read, but will seldom fulfill its purpose of enlightenment, since it will leave the reader in the dark on those very points that are of the greatest importance as regards the soundness of the banks. In particular, if the statement draws a distinction be- tween the secured and unsecured debit accounts, the essential point will be the kind of security given in the individual case, whether a mortgage on improved rural or urban real estate, a factory, or unimproved ground, and whether the mortgage is first or second, whether securi- ties have been deposited, and if so, what is their qual- ity, whether bond has been given, and if so, what is the financial standing of the bondsmen, etc. On all these points the balance sheet will fail to enlighten the reader. Neither will it be possible to gather from it the 590 The German Great Banks composition of the various items, such as the security and syndicate accounts. In particular, it will be impossible to tell whether the securities, bills, contango, loans on collateral, debits on current account enumerated in the statement are good or bad; and yet the quality of the assets is the main point, the quantity being of secondary importance. Further, acceptances may quite properly have been substituted for book credit, and vice versa. Business discretion, which is an imperative necessity, will of itself forbid the publication of details, but even if such publication were attempted it would simply cause the statement to remain unread. This is precisely what took place with the prospectuses, the publication of which was vehemently demanded some time ago in the interest of public enlightenment. If they are too long they are never read, except long after their publication, for the purpose of constructing a claim for indemnity when the market value of the securities has greatly declined. Further " total amounts " fail to indicate the most dan- gerous cases of credit granting, which have so frequently caused banks to fail 570 in England as well as in Ger- many I need only refer to the Leipziger Bank for instance, the case in which a bank has granted excessive credit to one and the same person, firm, company, or institution, or to one and the same branch of industry. The obligation imposed on American note banks never to grant individual credit beyond a certain portion (one- tenth) of their share capital, does not take sufficiently into account the situation and status of each bank. It is, therefore, on the one hand, too schematic, while on the other hand, as experience has shown, it can easily be evaded. 591 National Monetary Commission Experience has proved, moreover, that the most dis- graceful failures, such as those which took place in Eng- land, particularly in time of crisis, occurred among those very deposit banks that had published their statements. The collapse frequently occurred immediately after such publication, perfectly legal in form, without anyone being able to gather from these documents even the slightest hint of the impending crash. Space does not permit all the details of the Arnim proposal to be discussed here. I should only like to make the following remarks in reference to the oft- repeated demand for a statement of all assessments due on account of participations. Even the managers of a syndicate are often unable to foretell the amount of these assessments with any degree of certainty. Such is the case with the liquidation of long-term engagements resulting from the taking over of railways or factories or other establishments, with the rehabilitation of distressed or wrecked undertakings, with international business whose management and central offices are located abroad. Again, there are cases in which it is utterly impossible at the time of publication of the statements to foretell the amount to be ultimately invested in an enterprise (per- haps h, fonds perdu) or the date of maturity and the amount of subsequent assessments, or a case of par- ticularly frequent occurrence the amount of the repur- chases (Ruckkdufe) which have to be undertaken so often and to such extent even after the syndicate business proper is ended. Syndicate assessments are like house- hold budgets; those expenses that could not be foreseen at the time the estimate was made are the very ones that 592 The German Great Banks crop up most frequently and are surest to disturb the whole forecast. 571 Finally, summary statements may be misleading, be- cause frequently losses to be written off and other deductions (Rucklageri) can only be ascertained in the course of the business year or at or even after its close, just before the drawing up of the annual balance sheet; and yet the necessity and amount of these items are of essential importance in gauging the bank's position. Again, in a summary bank statement credit and debit items appear without anything to show whether a creditor is at the same time a debtor, and vice versa, and whether compensations must accordingly be allowed for to a large extent. 572 But while I do not believe that the periodical publica- tion of summary statements can contribute much toward the enlightenment of the public regarding the true condi- tion of a bank, yet I will not dispute the beneficial effect of the public criticism that may be elicited by such publi- cations. The comparison of statements of different banks, published simultaneously, would afford a far broader and more reliable basis for such criticism than can be expected of a single statement. I also regard these publications as a very excellent means of self -education for the banks. Their mutual criticism, based on the published statements, may grad- ually lead to uniform or approximately uniform principles of business management, especially regarding the manner and extent of credit granting, and gradually to an under- standing concerning some lines, at least, of business policy. This understanding might thereupon develop in 593 National Monetary Commission all these directions into firm and sound traditions, which hitherto have largely been lacking. For theoretical and practical reasons I should also con- sider it a very desirable and beneficial result if these periodical statements should lead to uniformity in their compilation, and gradually also to uniform annual bal- ance sheets. This would facilitate the comparison of the balance sheets of all the credit banks, a matter which at present is attended with great difficulties. Finally, it must not be forgotten that every new device which enables us, unswerved by the current of phenomena, to read, as it were, from a barometer, the present and the near future of economic conditions must naturally restrict the limits of error, which in this matter are necessarily so wide. Summary statements of credit banks, 573 published periodically, would serve that purpose, just as does the publication of the condition of the Reichsbank, or of the fluctuations of the Reichsbank discount (official) rate and of private discount rates, of the demand for labor at the German labor exchanges, as well as the publication regard- ing the revenue from the stamp tax, from which the amount of bills in circulation at any moment can be ascertained, and of the receipts from railway traffic, from which the existing condition of industry can best be gauged. These publications supplement each other. Despite the undeniable and considerable advantages which the periodical publication of summary bank state- ments thus affords, I am decidedly opposed to the legal enforcement of such publication. My objections are based on what seem to me the following cogent reasons: In the first place, I consider it an ill-advised step on the part of the legislator to give rise to the belief (which 594 The German Great Banks would naturally gain ground among wide circles of the general public) that from a publication of this kind, which has never yet been adopted in England, depositors could gain a clear idea as to the status, and therefore as to the soundness, of the bank to whose charge they have entrusted or intend to entrust their deposits. This belief would be an erroneous one, no matter what form of publi- cation might be adopted, and it is not becoming or incumbent on the legislator to aid in propagating such errors. Cases like those of the L-eipziger Bank and the Marienburger Privatbank would most probably have occurred under the same management, even if those banks had published summary statements. As a matter of fact, they did publish most handsome annual balance sheets, which were, moreover, accompanied by a "business report." My second reason, which to my mind is decisive, is that a compulsory legal regulation of this kind can not be con- ceived without a legal schedule for drawing up the state- ment. In fact, a multitude of such schedules have already been suggested by competent and incompetent persons. Now, a legal schedule, unalterable for a series of years, is an absurdity, for the business spheres of banks are con- stantly changing, and accordingly the schedule would of necessity be subject to constant changes, dictated by practical experience. A schedule drawn up by the bank themselves to-day would of necessity be different from one drawn up ten years ago and from one that might be drawn up ten years hence. If ever the impotence of legislation in any field was evident a priori, it is in this field, where the business in 595 National Monetary Commission question does not proceed in a stereotyped and automatic manner, as is in the main the case with note-issuing banks, insurance companies, and mortgage banks. The latter are, on that account, much more susceptible of govern- ment regulation, which our German habit, the result of centuries of drill, still prompts us to regard as the last resort (ultimum refugium) in all cases demanding a remedy. In the third place, practical experience, in Germany especially, has abundantly shown that legislative ca- pacity and skill are as yet imperfectly developed among us, especially in economic matters. Such matters as the publication of bank statements or the deposit of cash reserves for the security of deposits, which to the layman seem self-evident, urgently necessary, and simple in execution "simple solutions are always seductive to simple minds" are in reality exceedingly difficult and complicated. Hence it is to be feared that the advocates of these proposals, starting from the most diverse premises and pursuing the most diverse purposes, would carry them into execution in a form which can not fail to lead to the gravest embarrassments, as experience has repeat- edly proved.. Above all, there is imminent danger as illustrated by the very wording of the Arnim resolution that, aside from credit banks, not only savings banks and mutual credit societies would be compelled to pub- lish statements, but also private bankers, which, to my mind, is utterly inadmissible, for deposits are entrusted to a private banker not so much in consideration of the amount of his private means, but in consideration of his supposed integrity. To compel him to publish a state- ment of his financial position would injure and paralyze 596 The German Great Banks him in the competition within the private banking pro- fession. Legislators should under all circumstances guard against ill-advised measures likely to cause injury to and to hasten the suppression of the small bankers and thus repeat the mistakes of the Bourse law. Impressed with these considerations, I heartily wel- comed the decision of the Berlin great banks to publish voluntarily (beginning with 1909) at the end of February, April, June, August, and October (in December the annual statement is issued) summary statements according to a schedule discussed and agreed on among them which essentially corresponds to the schedule of the " Deutsche Bank." This example has been followed to a great extent by the joint-stock banks, and will doubtless in time become the universal practice. During the early deliberations of this question I pointed out that whatever schedule was chosen, it would be sure to be criticized. However, it is not easy to conceive a schedule which would not be condemned by some critics, no matter whether it was drafted by the banks or by other critics. 7. PENALTY FOR "BANKS AND BANKERS WHO BY PUBLIC OR WRITTEN APPEALS OR THROUGH AGENTS SOLICIT (anreizeri) DEPOSITS OR SAVINGS." On the occasion of the passing of the bank-act amend- ment of 1909 the Reichstag petitioned the imperial chancellor for a bill to ward off the danger caused by banks and bankers who by public or written invitation or through agents solicit (anreizeri) the public to "invest with them their deposits or savings." According to the debate in committee, the bill aims at the suppression of low-class or touting bankers 597 National Monetary Commission (Winkel-oder Animierbankiers) , or of business men who have no claim to the name "banker," but who, by prom- ises of specially high rates of interest or other advantages, entice the public to hand over to them their savings, while the persons making these promises are neither able, nor in many cases willing, to return the deposits. 574 Certainly these are the only cases in which there exists any danger for the public, and some of these cases may at once be eliminated from the discussion. If a written invitation to open an account is issued by a business man who at the time of invitation is not willing to return the deposit, nor likely to be able to do so at that or some future time, it should be considered as an attempt to defraud. Under the law relating to unfair competition, the Central Union of Bankers and Banks at Berlin ("Central- "verband des Deutschen Bank- und Bankiergewerbes zu Berlin") established for the protection of banking and bankers' interests, is empowered to proceed against persons who by their occupation are not entitled to call themselves " bankers," with a view to enjoining them from making public use of that designation. I am in a position to state that such action has been taken on several occasions. 575 But neither these sham bankers (Nicht-Bankiers) nor savings banks, whose resources, as we have seen, are often far from liquid, are aimed at in the badly worded Reichstag resolution, which only demands that steps be taken against banks and bankers. Besides this the two absolutely different terms "deposits" and "savings" are once more lumped together. Furthermore, the resolution recommends that legal action 598 The German Great Banks be taken even when the invitation to invest deposits. (?) or savings (meaning, probably " in vestment of funds in the form of deposits or savings ") (zur Anlage von Depos- iteri) is not made publicly, provided it be in writing. But such a written invitation, which certainly is one form of "solicitation," may under certain circumstances become the duty of a bank or banker in a case where through negligence or ignorance a customer whose busi- ness they look after leaves money deposited without interest. Moreover, as the word "solicit" (anreizen) used in the resolution is extremely elastic, having received the most diverse interpretation both in theory and in practice, I do not believe that the measure proposed in the Reichs- tag resolution can lead to any practical results. It is hard to say which is the graver mistake, to enact penal laws whose effect far exceeds the desired and economic- ally correct purpose or such as are rendered nugatory in practice. 8. A SUPERVISORY BOARD. I am equally unable to approve the idea of a govern- ment board of supervisors recently advocated in many quarters, especially by Obst. Such an institution has never yet afforded protection against fraudulent manipu- lations, while on the other hand it is very apt to lull the public into a feeling of security which such a board, from its very nature, is not able to provide. Even though pos- sessed of the most thorough expert knowledge, such a body would not be in position to obtain a sufficiently correct estimate of the quality of the assets of a bank, to say nothing of the fact that no bank can be expected to allow 599 National M on et ar y Commission its competitor who might be called upon to act as expert adviser to the board to gain an insight into its business. 576 The experience of all countries and at all times in regard to the natural inadequacy of state supervision (see note 23 on p. 789, also pp. 54 and 601) should serve as a warn- ing against any repetition of such experiments. Herewith ends the discussion of the reform proposals hitherto made. In obedience to the prevailing tendency in Germany and to the current of the times, nearly all these proposals aim at some intervention by the State or by legislation, which, as far as deposit banks are con- cerned, has always been most decisively condemned in England, the very country which is assumed to be the pattern for Germany to follow in this matter. Although I am by no means an adherent of the defunct Manchester theory, I must confess that in this important, compli- cated, and difficult question I share the opinion expressed fifty years ago by a prominent authority in this very mat- ter, an opinion which unfortunately . has not lost its actuality and correctness: "The unfortunate system of tutelage has never yet stood the test of practice. It merely leads from step to step, and when it has once been adopted, there is nothing in which the State does not think itself called upon to interfere in the interest of its citizens and for which the latter do not look hopefully and imploringly to the State, while they themselves limit their activity to complaints." The man who wrote these words in 1857 was no other than Adolph Wagner. 577 I frankly admit that I find this confession written during his younger years more con- 600 The German Great Banks vincing than his later views and proposals, which, I regret to say, are quite different. No State measures will avail against a criminal or negligent treatment of deposits, especially no legal regu- lations nor any supervisory board, such as Wagner pro- posed some years ago while under the immediate impres- sion of the crisis of 1901, that is to say, at a time least suitable for judicial and matured proposals. 578 I feel convinced that the German banking community did not in any way deserve such a manifest vote of censure for a vote of censure it was ; there is no use in blinking the fact. The one thing that is essential above all in this matter is the honesty, trustworthiness, and efficiency of the bank managers. In the United States 579 the Comp- troller of the Currency, who may order an investigation of the national banks by special examiners, declared in his official report for 1895 (p. 57 et seq.) that as a rule the examiners detect mistakes, defects, and crimes only after the failure has occurred, and that no supervision by outsiders can serve as a substitute for the honesty and competency of bank managers. 580 601 PART IV. THE PROGRESS OF CONCENTRATION IN GERMAN BANKING DURING THE SECOND PERIOD (1870 TO THE PRESENT). CHAPTER I. CAUSES OF THE CONCENTRATION MOVEMENT. I. GENERAL CAUSES. 1 As was shown in the first part of the volume, the German banks entered upon the present period with very limited capital. The question therefore remains to be answered: By what means have they managed to meet the ever-increasing duties imposed upon them by the tremendous industrial development of this period? In a general way the answer is as follows: The same factors which we have shown above to have been domi- nant in the general economic development of the period appear again in the development of banking, viz, the expansion and concentration of capital, resources, and industrial enterprise. These two factors appear to the superficial observer to be mutually exclusive. In fact, however, they are related to one another as cause and effect. Concentration, a child of the capitalist system, is pe- culiar neither to modern development nor to German conditions. It is as old as the capitalist system itself and equally international. It appears with practically all its concomitants in the activities of the state as well as in private industry. 002 The German Great Banks As proof of its age we may quote one of many exam- ples. As early as ''the last quarter of the fifteenth and the first quarter of the sixteenth century there took place a concentration of capital invested in mining with a rapidity scarcely equaled in our time." 2 Certain forms of concentration such as the combination in one enter- prise of successive stages of industrial production may be traced back to the very beginnings of large-scale industry. Its international character is evident from its appear- ance in England and America, in France and Belgium in the same or even in a more pronounced form than in Germany, 3 both in industry and in banking. It is present equally in public and in private industrial activities. This is but natural, for the same causes are at work in both spheres even if not to the same extent. Above all there is the necessity for uniform management of all industry from one center. Thus the postal system was united practically under one authority after all the original enterprises, systems, and regalia had been abol- ished. In the same way the railroads passed out of the control of the innumerable private companies, to be op- erated, in the first place independently by the various States. Ultimately, after passing through intermediary stages, they may be operated by the Imperial Govern- ment or form part of an imperial railroad union. Even now, there are some unmistakable signs of a movement in that direction. Thus, for example, there is the Prus- sian-Hessian Railroad Union, entered into by two States, and the agreements regarding the joint use of operating material among a number of the States of the Imperial Federation. 603 National Monetary Commission A similar development is shown in the absorption of capital, industrial enterprise, and labor forces by large cities; in the ever-increasing migration of rural laborers to the cities during this period; in the great increase of the urban population, particularly in the industrial cities; in the conflict between commerce and industry on a large scale and the retail trade, house industry, and handi- craft, between large and small industrial establishments; in the ascendancy of "mixed" over "pure" establish- ments; of commercial distribution on a large scale, in- cluding department stores over the small retail trade; of the large landowner over the small peasant proprietor, the large flour mill over the small milling establishments, etc. 4 The difference in this period has been only in the in- tensity and rapidity with which the tendencies toward concentration have manifested themselves. This has been the result of certain factors which completely revo- lutionized the conditions and scale of production and marketing, to wit: The extension and greater reliability of the means of transportation as well as the great dis- coveries and inventions which revolutionized entire in- dustries and imposed new tasks on them or created new industries. It was inevitable that the movement toward expan- sion and concentration during this period should have proceeded with particular rapidity in German industry, which at that time was developing by leaps and bounds. This applies also to the German banking system, united for / weal and woe with German industry by a thousand and one ties, due to its current-account, check, giro, and credit business, and to the banks' activities in the fields 604 The German G r e a t Ban ks of flotation of securities, organization of firms into cor- porations, the rehabilitation of companies, consolidations, and loans. 5 The main reason of this development was that the German banks, with scarcely an exception, appeared on the scene organized as stock companies or in the kindred form of stock companies " en commandite." The stock company is the keenest and surest, and hence the favorite weapon which the capitalist system can use in its struggle for concentration. In itself the stock company represents a form of concentration, viz, the union of small and scattered units of property, in most cases too small to be fitted for productive uses, into a single mass of capital suited and intended for industrial or pro- ductive purposes under single management. The facility with which the shares can be marketed or transmitted by inheritance, the probability of a longer term of existence for the corporation, owing to the far greater degree to which it is independent of the personality of the entrepreneur as compared with other forms of business organization, and finally the absence (at least in theory) of any limitation on the amount of dividends that may be expected on the combined capital all these elements give the corpora- tion great power to attract available capital. More than any other form of business organization, the stock com- pany has the means of satisfying its needs for credit and for expansion by capital increases. The ease with whic additional capital can be secured naturally stimulates the tendency toward capital increases. This tendency grows in constantly increasing ratio by reason of what may be regarded as an economic law in the realm of industry, trade, and banking alike, according to which a twofold 605 dj "i National M o n et ar y Commission increase of capital means more than a twofold increase of production and sales. 6 For this reason the tendency toward capital increases is enhanced by this very growth of capital. 2. SPECIAL CAUSES. As stated above (p. 383) the period under consideration was characterized by an unforeseen, suddenly developing demand for capital on the part of the state and communes and particularly industry and trade. This demand natur- ally made itself felt in the two important fields of bank- ing activity, viz. that of national and international clear- ings and payments, and mainly in that of credit. It became, therefore, an imperative necessity for the banks to strengthen and extend the exceptionally weak foun- dation of capital and credit with which they had entered upon this period. Accordingly, the available funds of the country were forced under great pressure to the central institutions of credit the banks which served, so to speak, as the dis- tributing reservoirs for the collection of the resources of capital and credit. From there, as from a higher altitude, it was easiest to survey the extent of the general needs, to calculate the proper mode of distribution of the avail- able resources and to direct them more readily and quickly into the various channels below. In other words, the concentration of banking capital brought about in the first place through an increase in the capital stock of the banks meant the progressive accumulation in the banks of the funds needed for industrial credit. In this field concentration became especially urgent, on account of the imperative necessity for distributing and 606 The German Great Banks minimizing risks 7 a principle which can be applied most thoroughly where business is conducted on a large scale. There are a number of purely technical factors which work in the same direction. When the banks are relieved by central banks of issue of the task of providing the necessary currency, they concentrate their activity in the field of credit. The latter has the unmistakable tendency to increase much faster than the cash resources on which it is based. Moreover, the difficulty of securing these resources, especially by way of capital increases, grows more rapidly than the demand for credit. This is because the ability of a bank to increase its capital depends not only on the dividends which it has been pay- ing and on the market value of the old shares, mainly though not exclusively determined by these dividends, but also on the condition of the money market. The value of bank stock, like that of industrial securities, fluctuates with variations in industrial prosperity and the prospect of dividends. At a critical moment it may easily happen that no market, or only a very limited mar- ket, can be found for new issues and for new bank stock in particular, as the market may be paralyzed by blundering legislation or by the fact that new issues had been made in excessive amounts or in too rapid succession. Furthermore, there are special technical or business limitations on a bank's ability to increase its capital. Hard times are never entirely absent, and these affect the profits from the flotation of securities as well as from the regular banking business. Under such conditions it may become difficult for abnormally large stocks of capi- tal to earn adequate dividends, though we may question 607 National Monetary Commission the remark made to the writer in 1 889 by the head of one of the largest private banking firms, that in the long run, with their larger capital, the banks could not earn more than the current rate of interest a pessimistic view, which has since been proved to be entirely groundless. There being thus limits differing, of course, with par- ticular circumstances beyond which the banks' own capital can not be increased, it becomes evident that the banks must attract outside funds for use in their expand- ing business. The accession of these funds enables the banks to do more than merely increase the earnings of the business i. e., the rate and, what is more, the steadiness of dividends. In establishing special deposit offices for the purpose of attracting available funds the banks are able to increase the size of their clientele, particularly among the investing class, to greatly extend their capacity to float securities on their own or outside account, and to place them securely and permanently among customers whose circumstances and reliability are accurately known. Every successful flotation of securities tends in turn to increase the bank's power through its psychological effect, which in this matter counts for a good deal. Every in- crease in the power of the bank tends to augment largely the tendency toward concentration. It also serves to enlarge the volume of the bank's business. Furthermore, the bank gains the custom of the provincial bankers, who form such an important part of the clientele of the Berlin banks. These as well as other customers naturally pre- fer to deal with those banks from which they are likely to derive, in addition to the ordinary benefits, the largest financial advantages in connection with the issue of 608 The German Great Banks securities, either by being allotted subsidiary participa- tions, by being designated as offices for the receiving of subscriptions or instalment payments, or by being given special bonuses. To accomplish successfully the flotation of securities presupposes very large capital resources on the part of the bank undertaking the operation, for it must be in a posi- tion to carry for a long time unsold securities without detriment to its other business. The flotation of securi- ties promotes concentration in another direction. Every issue of securities naturally seeks a center where a strong stock exchange offers the best prospects for the ready and permanent sale of the securities. Accordingly, from the very beginning of this period, Berlin was preferred to all other places, because from 1870 to the time when it was greatly weakened by the stock exchange act (Jan. i, 1897), the Berlin bourse greatly surpassed all other Ger- man exchanges in strength that is, in its ability to absorb securities in good times and in its power of resistance in bad times, and was able to exert a great and at times de- cisive influence on the other markets, especially those of London and Paris. This gave to the Berlin banks another advantage over the other banks. Besides, they were first to attract out- side funds, particularly in form of deposits. In this they were successful partly for general reasons and partly as a result of the system of deposit offices which they had inaugurated. Thus the business of issuing securities again stimulated concentration of capital in the me- tropolis that is, in the Berlin banks. This increased power to float securities of necessity proved important in a number of ways in the international 90311 ii 40 609 National Monetary Commission business of the banks. For in the case of large inter- national operations in the issue field the preference is naturally given to those banks which by previous success in that field have proved their power to issue and dispose of securities. Whenever the German market is resorted to in the quest for a larger sale of securities a practice which has become less and less frequent since the end of the nineties owing to wrong legislation, which impaired the power and importance of our exchange the bank that will naturally be favored above all others is the one that shows the greatest strength both by reason of the large number of its customers and the extent of its business. The same or similar considerations will hold in other instances, where it is not so much a question of extending the market for the securities, of giving them a wider cur- rency, or of facilitating arbitrage transactions, as a ques- tion of the successful and prompt accomplishment of tasks dependent on international cooperation, such as the conversion of large amounts of securities which have been listed and placed in many countries. In such cases preference will again be shown for the bank which has given evidence that it is likely to prove a valuable ally for the successful liquidation of the business in hand because of its demonstrated ability to float successfully its own issues, and of its large circle of cutomers, extensive international connections, and the large amount of coupon redemptions on account of the loan in question. As the number of issues and the amounts involvec increase, it becomes more and more necessary and advan- tageous for the banks to follow a policy of expansion anc simultaneous concentration, so as to be in a position to 610 The German Great Banks meet all the demands of the domestic and international security market. This involves the flotation and sale of securities on a large scale and can be done successfully only by powerful establishments, whose extensive busi- ness operations and exact knowledge of the character and financial standing of their large clientele enable them to dispose of securities permanently and securely by placing them "in strong hands." 8 Such banks free themselves and their domestic or foreign associates of the very unpleasant necessity of having to intervene and to take up securities thrown back on the market immediately after they have been issued. Similar phenomena may be observed where the banks have built up an extensive bill business. The bills of customers flow most abundantly toward those banks which have learned first how to extend their industrial and commercial connections. With the growth of these connections there goes a simultaneous concentration of capital and an expansion of operations which in turn leads to still more extended business connections, also to con- stantly increasing activity in the international money market, and thereby to business in foreign bills of exchange. The processes here involved are both cause and effect of progressive concentration. The same is true of the acceptance business of the banks. The extent of these transactions, as we have seen, has been largely increased by the development of oversea ' relations (cf. supra, sec. 4, I-III). These in turn lead to the establishment of branches or the founding of special banks abroad, of commandites, or other connections of various kinds. This serves largely to increase the tend- ency toward concentration, for it is but natural that in a 6n National Monetary Commission foreign market particularly the acceptances of a well- known large bank with extensive capital should be taken and circulate for larger amounts and on more favorable terms than the acceptances of a small bank unknown abroad. When provincial bankers or traders want bank accept- ances their preference will be not merely for those banks which can offer better terms or other conveniences, and in addition further favors outside of acceptances, but rather for those banks whose acceptances can be dis- counted with the least difficulty at the private rate, regardless of the number of bills and their amount. The development of clearing and giro methods 9 likewise makes for concentration in the sense that this service becomes of greater value in proportion as the connections of the bank extend and the number of cus- tomers benefited by that service increases. The latter moreover presupposes the carrying of a minimum account, the amount of which has been considerably increased during recent years. 10 For after all the giro, check, and clearing methods constitute merely a system of making payments through the banks which, while carried on without the transfer of cash, nevertheless rests on the presence of a cash reserve. 11 Aside from the special economic causes enumerated, as making for expansion and concentration in German banking, we must refer also to such influences which were not purely economic or commercial in nature, but were due to other external motives such as etiquette, competition, and so forth. 612 The German Great Banks Thus quite often a bank would feel impelled to follow suit after another bank had led, as for example in estab- lishing a branch at the identical place where it had been established by another bank, though not in the same order. 12 In determining the amount by which the capital should be increased banks would be guided not merely by consideration of their needs, but also by the determination not to be outdone in the capital increase by a competing bank. CHAPTER II. CAUSES DETERMINING THE EXTENT AND RAPIDITY OF THE CONCENTRATION MOVEMENT. SECTION I. GENERAL CAUSES. The extent to which concentration may go in banking is a priori unlimited. In theory at least there are no bounds to capital in this field. Here concentration meets with less resistance and fewer technical difficulties and obstacles of the kind likely to be met with in industry, for instance, when it is intended to enlarge the plant or estab- lishment. On the contrary, banking capital not only permits but even incites constant and continuous expan- sion and concentration. This inherent tendency of bank- ing capital grows with the increase of the country's wealth, i. e., with the growth of capital available for productive use. It is strengthened in proportion as this productive capital comes to be distributed among increasingly larger strata of the population. Nor is there any such powerful counterweight to this tendency of capital as there is in trade, where business on a small scale still predominates and offers very serious resistance to the progress of large- scale enterprise. The situation is also different from that 613 National M on et ar y Commission in industry, where, at least at times and in some branches, the cartels have to a certain extent done more to help and maintain than to hamper the existence of small and weaker establishments . SECTION 2. SPKCIAIy CAUSES. Both the intensity and the rapidity of the movement toward concentration are greatly enhanced whenever special causes, operative in banking to a greater degree than elsewhere, remove existing obstacles in the way of the movement, or introduce new factors which initiate this development with great suddenness, or cause it to develop more powerfully and rapidly than might other- wise have been the case. In such instances the movement toward concentration precipitates itself headlong like a flood and proceeds with awful violence, as if all contriv- ances for stemming the tide had been swept away and all dams had been destroyed by some natural catastrophe. In both directions just mentioned there have been at work during the last period three factors of particular impor- tance. I. The liquidation of banks (Entgrundung) , which set in after the panic of 1873. The course of this movement is described more fully below (p. 636 and following). II. The cartel movement in industry, which had begun as early as the seventies, but became most noticeable in the nineties. In this connection the most important events were the formation of the Rhenish-Westphalian Coal Syndicate in 1893 and of the Rhenish-Westphalian Pig Iron Syndicate in i897. 13 The psychologic effects of the formation of these com- binations were felt all over Germany, and not the least 614 The German Great Banks among banking circles, which naturally were first to appre- ciate the commercial advantages of the new development. In the first place, it was universally assumed that the concerted action of these syndicates would soon put an end to reckless cutting of prices at home and to competi- tion abroad and usher in a period of prosperity in the mining and smelting industries and with it also in bank- ing. But in order to win the struggle both within and without, and also to be prepared for the boom period which was believed to be imminent, large funds were needed. These funds had to be provided in the first place by the banks, which, as many financial reports in those days kept emphasizing, were in duty bound to stand by industry in its struggles. On the other hand, the banks might naturally expect decided business advantages from the development of more intimate relations with indus- try, and particularly with the mining and smelting in- dustries in Rhenish- Westphalia and Upper Silesia. Furth- ermore, the assumption seemed justified that, with con- stantly increasing operations, the mining industry would not content itself with the capital and credit which the banks heretofore connected with the industry were able to supply, although some of these, like the A. Schaaff- hauseri'scher Bankverein, had from the start made the mining industry their special field. Intimate relations with the mining industry and particularly with the newly created coal and iron syndicates in the Rhenish- West- phalian and Upper Silesian districts held out the hope of profitable business both in the fields of current account and credit; they also promised a large influx of available funds, and in addition increased power and influence in various directions. 615 National Monetary Commission It was these reasons primarily which prompted the Deutsche Bank in 1897, the year in which the Rhenish- Westphalian Pig Iron Syndicate was organized, to carry out at one swoop a plan which had probably been con- ceived as early as 1893, the year of the formation of the Rhenish- Westphalian Coal Syndicate, whereby the bank secured a firm foothold in both the Rhenish Westphalian and Upper Silesian districts. This was the establishing of communities of interest on the one hand with the Bergisch- Markische Bank in Blberfeld, a bank with an old and well- established standing in Rhenish Westphalia, having nu- merous branches and old-time connections with industry in general and mining in particular, and, on the other hand, with the SMesischer Bankuerein, which had like- wise developed extensive and highly -profitable industrial connections in Upper Silesia. In this manner the Deutsche Bank achieved the purposes which had prompted it to enter upon these communities of interest with a skill equalled only by the large scale of the operations involved. Only after some time did the other banks follow suit, and then with more or less energy and success. Competition set in for the creation in one way or another of close indus- trial connections, as we shall have occasion to point out more fully in a subsequent chapter. As coming under the head of the cartel movement, we may mention here the fact, already pointed out in another connection, that in 1897 the A. Schaaffhausen'scher Bank- verein organized a limited-liability company under the firm name of theSyndikatskontor desA. Schaaffhausen'schen Bankvereins G. m. b. H., which was to serve as the sales agency and clearing office primarily for the Federation of 616 The German Great Banks German Wire Rope Manufacturers (Verband Deutscher Drahtseilfabrikanten) , but later also for other syndicates, car- tels, and combinations. Moreover, many banks which had not yet secured a firm position in this respect now began gradually to obtain representation on the supervisory boards of those mining and smelting companies which had large influence in the management of the important syn- dicates. Gradually the Dresdner Bank, Deutsche Bank, and Darmstadter Bank obtained representation on the board of the Harpener Bergbau-Aktiengesellschaft and be- came members of the bank group identified with that company, and the first two entered the board of the Gel- senkirchener Bergwerks-Aktiengesellschaft and joined the group of banks connected with the latter concern. The Dresdner Bank joined the board of the consolidated Konigs- und Laurahutte and the group of banks which stand behind that concern. The Deutsche Bank attained the same position with regard to the Konsolidation Berg- werks-Aktiengesellschaft at Schalke, the Phoenix, etc. In- versely, representatives of large industrial interests, espe- cially persons of great influence in the mining industry, joined in increasing numbers the supervisory boards of the large banks. Thus at the end of December, 1908, repre- sentatives of industrial interests appear on the boards of the banks in the following numbers : Bank fur Handel und Industrie 4 Berliner Handelsgesellschaft 15 ( 14 ) Deutsche Bank 4 Disconto-Gesellschaft 4( 15 ) Dresdner Bank 1 1 ( 16 ) A. Schaaffhausen'scher Bankverein 19 On the other hand, the intimate relations with the large banks and their extensive resources served as a new 617 National Monetary Commission stimulus for various industrial establishments to extend their operations and influence in their respective districts, to establish more firmly their position as against other establishments, groups, and particularly cartels, as well as within the cartels, by way of combinations, consolida- tions, and fusions of all sorts. In this way concentration in banking, which had been greatly influenced both in the extent and rapidity of its progress by developments in industry, and particularly by the formation of cartels, in turn helped to bring about concentration in industry. III. Mistakes of legislation. The stamp and stock- exchange laws. The rapidity of the movement toward concentration was heightened by the heavy burdens imposed on the trading in securities by the imperial stamp acts of April 27, 1894, and June 14, 1900, and by the stock-exchange act of June 22, 1896, which entered into force on January i of the eventful year 1897. i. As early as 1884, when it was proposed to impose a percentage tax on stock transfers (as was done by act of May 24, 1885), it was pointed out by experts that the effect would be "to monopolize the banking business in the hands of a few powerful concerns." 17 Nevertheless the policy once entered upon was con- tinued. The imperial stamp tax of April 27, 1894, doubled the existing tax on transfers (increasing it from one-tenth to two-tenths per mille) and prescribed that the tax should no longer be levied as before on every full thousand marks, but also on any additional frac- tion of a thousand marks. It left, however, transactions of less than 600 marks exempt as heretofore. 618 The German Great Banks The act of June 14, 1900, not only abolished this ex- emption, 18 but increased substantially all the rates of the stamp tax on securities, raised the stamp tax on the final certificate of transfer (Originalschlussnote) of shares and bonds of foreign corporations to three-tenths per mille, and introduced a tax on the issue and transfer of mining stocks (Kuxe). Under the act of October i, 1885, the provincial banker, who had forwarded his customer's order to a central banker on the stock exchange, was at least permitted under certain circumstances to hand over the original transfer certificate to his customer without paying a new tax. However, the provincial banker could not avail himself of this relief unless he was willing to disclose the name of the central banker to his customer. Accordingly until a more practicable method was introduced by the act of April 27, 1894, the provincial banker had to affix a stamp also to his own certificate to the customer. The result was an increase in the expense of the business, to which there had to be added the commission of the pro- vincial banker and the commission and brokerage fees of the central banker, which at the time were more equitable and in accord with the trouble and the general expense involved than they are at present. The direct result was that, in order to save expense, the customers of the provincial bankers, in spite of all efforts on the latter 's part, began to deal directly with the central banker or with the branches established in the district by the great banks. This trend assumed ever larger pro- portions when the banks started to propose to their customers to participate in the issue of securities as well 619 National Monetary Commission as to hold out to them more favorable terms and lower commissions with the view of attracting orders in the field of security business. There were further defects in the stamp-tax legislation which contributed to bring about a reduction in the rates of brokerage. The banks to an increasing extent were able to offset against one another within the bank the large number of buying and selling orders that came pour- ing in from customers. As long as this procedure of offsetting orders continued to be exempted from taxa- tion they were able to gain at least the equivalent of the entire stamp on every transaction settled within the bank. Owing to this profit, they were able to cut lower and lower the rate of commission for their services until it reached the unprecedented rate of one-half per mille, a rate which nowhere comes near a reasonable compensation for the trouble, expense, and risk involved, and which probably is not found in any foreign country. These "compensa- tory transactions" became subject to taxation only three and a half years after the stock exchange act went into effect under section 12 of the imperial stamp tax law of June 14, 1900. In other words, they remained untaxed until the extensive increases in bank capital, which had been made as a result of the stock exchange legislation, and the large number of branches and deposit offices which had meanwhile been established, made it seem hopeless for the smaller provincial bankers ever to over- come the lead which the banks in the meantime had gained on them. Moreover, the increase in the stamp tax rendered it impossible for the smaller private banker, or at least for 620 The German Great Banks a large proportion of them, to engage in what had been in former years important and lucrative branches of business. Under this head comes speculation in daily exchange quotations. This consists in taking advantage of fluctu- ations in the daily quotation of securities. Its effect is to bring about more stable and uniform quotations by eliminating small variations in the daily quotations. This function of the banker has ample business justifica- tion and renders a valuable service in the formation of prices. However, as the margin of profit is small it can not stand a tax of three-tenths per mille. 19 Under the same head comes the so-called arbitrage business. This consists in taking advantage of variations existing on different exchanges in the quotations of domestic securities and of so-called international securi- ties dealt in also on foreign exchanges. This activity serves to a great degree to equalize and establish a uni- form level for prices of securities and, moreover, renders valuable economic service in facilitating the settling of our international balance of trade and payments. 20 Furthermore, a part of what had been the business of the private banker was now taken from him partly as a result of the tax burden imposed and partly in conse- quence of the provisions of paragraph 8 of the bank- deposit law of July 5, i896, 21 and of the restrictive stock exchange legislation to be discussed below. I refer to trading in foreign securities. This part of the business went to foreign countries and came to be attended to by foreign bankers in place of our own bankers. As a result of all this the brokerage business in securities left to the smaller private bankers fell off from year to year and 621 National Monetary Commission became progressively less profitable. The only way to increase profits, given the ruling low rates of commission, was to increase the scale of operations. This, however, was out of the question, since the bulk of the business now went more and more to the banks, and primarily to the Berlin banks and their branches. 2. We can not enter here upon the extent of the injury inflicted by the stock exchange legislation on the German bourses, and indirectly also on the strength and com- petitive power of German banking. On this point I must refer particularly to the discussion and the data con- tained in the two memorials of the Centralverband des Deutschen Bank-und Bankiergewerbes (Central Union of German Banks and Bankers) of June, 1901, and De- cember, I903. 22 Here only a particular aspect of the question can be dealt with, namely, to what extent this legislation tended to hasten the movement toward concentration. The prohibition of "future" dealings in securities, affecting large and very important classes, particularly mining and industrial securities, and the extensive limi- tations on "future" dealings in other securities, 23 ac- complished but little more than the bringing to the fore of cash dealings in the stock exchange business. The result was that since 1897 "a larger amount of cash was made necessary for the same amount of transactions and that the total requirements of currency on the part of the German business community was increased still fur- ther just at a time when the volume of business showed extraordinary gains." 24 622 The German Great Banks The smaller private bankers were naturally in no posi- tion to meet with their own funds the increased require- ments of ready money for cash transactions, neither could they afford to tie up their funds in this way. On the other hand, as soon as the stock exchange legislation was proposed the banks foresaw that the restrictions of future dealings would necessitate the use of larger amounts of cash. 25 Accordingly, when the law went into effect, and even before, they largely increased their capital and available funds without difficulty, 26 and as a result were able to draw to themselves even more effectively than before the custom of the private bankers. Granted even that the tendency toward unification and toward operation on a large scale is common to all branches of industry, and that, judging by the experience of foreign countries (except the United States for the time being), sooner or later the position of the private bankers as a class would gradually have become weakened as a result of the general concentration tendencies 27 there can be no doubt that the provisions of the stamp tax and the stock exchange legislation did much to hasten this movement, or, in other words, to accelerate and aggravate the decline of the economic power of private banking. 28 In judging of this development the main question is whether there has been an essential decline, and not whether there has been a decrease in numbers. It is only the former question which may claim economic and scien- tific interest. There may be a decline of a profession in spite of an increase in the number of persons or establish- ments belonging to it. 29 This is particularly so when the increase is only the natural and proportionate result of the 623 National M o n et ar y Commission general growth of population or when the gain is due to numerous accretions, though all insignificant in point of capital, while the losses, though small in number, involve a large exodus of capital. Again, a prof ession may be highly flourishing and improv- ing in position and influence, even when the number of indi- viduals or establishments is declining. This has happened frequently abroad, notably in England and France, where the number of banks decreased because of the absorption of a large number of small concerns by large establish- ments, which have thereby increased their power. 30 It is, therefore, unscientific to base any general conclu- sions merely on an observed increase or decrease of abso- lute numbers without making a most careful analysis of the underlying causes. It is self-evident that we do not mean to deny that an absolute numerical decrease or in- crease in the. number of establishments or persons may go hand in hand with the decline or advance of the particular class, but this is not necessarily so. This much by way of preface. We may now take up Ernst Loeb's data. 31 According to the table prepared by him, during the period 1892-1902 the decade including the great boom period of 1898-1900 the number of private bankers rose from 2,180 to 2,564. In all, there was an increase of 380 for the whole of Germany. Even if there were no doubts of the accuracy of the statistics, they would prove very little. An increase so small as not to be proportionate, either to the growth in population during this period or to the eco- nomic progress of the decade mentioned, would tend to confirm rather than to refute the view that the class, as a 624 The German Great Banks whole, had been on the decline, even though there might be no falling off in absolute numbers. As a matter of fact, however, the table, in my opinion, is not correct; in fact, it is out of question that it be so. In the Deutsches Bankierbuch, on the basis of which the table is prepared, the names of extinct firms or of firms which have gone out of business are frequently continued for some time. This is easily comprehensible. More- over, as Loeb himself admits (op. cit., p. 248), a large number of persons who appear in the table as bankers are either brokers or curb dealers (Remisiers). For Ber- lin alone this is true of at least 93 names as early as 1896, and of more than 120 at present. In Frankfort-on-the- Main there were between 30 and 50 names of persons who style themselves bankers, but who are, in fact, merchandise dealers engaged in the grocery or other trades, who do banking only incidentally and as occasion offers. This view is confirmed by the investigations made by the Central Union of German banks and bankers among 154 official trade bodies. 32 The returns made are surely not ' ( consciously falsified as to facts and figures in order to mislead public opinion." 33 The answers of 115 of the trade bodies cover both the newly organized establishments and those that had retired from business. The answers show that in the districts of these 115 cham- bers of commerce for the years 1891-1896, or before the stock-exchange law was enacted, the number at the close of the period as compared with the number at the begin- ning was 65 more for banks and 32 less for private bankers. In both cases branches are included. For the years 90311 ii 41 625 National Monetary Commission 1897-1902, however, the number of banks and their branches at the end of the period was 207 greater than at the beginning, whereas the number of private bankers, including branches, was at the close of the period 125 less than at the opening. There seems thus to have been, also, an absolute decline in numbers. As has been explained before, without a detailed examination of the phenomena under discussion, no con- clusive scientific proof can be attached to the absolute figures. Relative numbers are, however, much more important when and in so far as they permit of definite conclusions. In this respect even Loeb 34 calls atten- tion to the fact that for the ten-year period 1892-1902, in which, as he thinks, there has been an absolute increase by 380 in the number of private bankers, the growth of the banks, both in number, in capital, and in the number of branches and deposit offices, has been incomparably greater. The number of joint-stock banks grew in this period from 379 to 616, the number of branches (even if we disregard the branches of the Berlin banks) from 73 to 264, while even in the briefer period from 1894 to the end of 1899 the amount of their capital stock had grown from 449,000,000 to 871,000,000 marks. 35 The decline of private banking, 36 in part absolute and in part relative, is more striking in comparison with the rapid strides toward concentration among the banks. It is, moreover, marked by a variety of other phenomena. In the first place it is notable that in Berlin, the seat of the greatest stock exchange, there was a great decline in the absolute number of private bankers. According to Loeb 37 the decrease was from 538 in 1892 to 370 in 1899. In the other larger cities the number appears 626 The German Great Banks either to have remained stationary or to have increased somewhat. More important, as showing the decline of the private bankers as a class, is the relative number of those par- ticipating in the giro business. As these statistics include only the better class of private bankers, they give evidence not only of the numeric but also of the more serious qual- itative decline of the private bankers as a class. Number participating in the giro business within the German Empire. At the end of Banks and their branches. Private bankers and their branches. !876 130 974 1896 . ... 413 I, 496 These figures are very eloquent. They prove an enor- mous growth of giro accounts for the period from the beginning of 1877 to the close of 1890. It is seen that the number of accounts of banks and their branches had increased by only 73, while those of private bankers and their branches had grown by no less than 439. On the other hand, in the period affected first by the stock exchange legislation and later by the imperial stamp-tax legislation of June 14, 1900 the period from the begin- ning of 1897 to the end of I9O2 38 the giro accounts of the banks and their branches had increased by 214 and those of private bankers and their branches by 29 only. 39 L/ittle as this increase is, nearly all of it is to be ascribed primarily to banking in the large cities, to which this bus- iness has drifted along with business in general. It shows 627 National Monetary Commission a tremendous speed of the movement of concentration, notably in these six years, and a corresponding decline during the same period in the position of private bankers as a class. In view of the notorious outcome of the entire develop- ment, it may be doubted whether it is still worth while at this time to differentiate and contrast the rate of growth of the Berlin banks for this period with that of the provincial banks. The clearly established fact is that the same concentration which went on among the large banks took place also among the provincial banks, though the rapidity of this movement was not the same for the provincial banks in the various parts of the country. Thus, for example, during the years 1893-1900, inclu- sive the period when with the exception of the Bergisch- Markische Bank (to be sure the most important of these banks), the Rhenish -Westphalian banks had not yet become "affiliated" the 12 most important banks of the district increased their capital from 107,000,000 to 350,- 000,000 marks, or about 226 per cent. 40 The following statistics compiled from the returns in the memorial of the Centralverband, under date of December, 1903, show that as contrasted with the average for the period 1883-1890 the average capital and surplus funds (werbende Kapitalien) had increased as follows: Between t he years 1891-1896. 1897-1902. 22 institutions at that time independent of the Berlin great Per cent. 14 9 Per cent. 10 Berlin great banks 43- 7 153- 2 628 The German Great Banks After a large part of the provincial banks had become "affiliated" with the several Berlin great banks, there can be no question but that their striking growth in capital, number of branches, etc., was naturally affected in a large degree by their connection with the great banks. On the other hand, since 1905 and as a result of the very rapid growth of the great banks and their chains of banks out- side of Berlin, the provincial banks which had not become affiliated with the great banks sought to extend their sphere of operations, with a view to maintaining their independence and field of action. This was particularly the case during 1906 and 1907, when the process of con- centration among the great banks had become arrested. I shall call attention here only to a few striking examples. Thus in central Germany the Magdeburger Bankverein, founded in 1867 as a stock company en com- mandite under the firm name of Klincksiek, Schwanert & Co., incorporated under the above name in 1897 with a capital of 1 5 ,000,000 marks, had on December 30, 1 908 , seven branches (in Aschersleben, Burg near Magdeburg, Dessau, Hildesheim, Nordhausen, Peine, and Stendal). In 1909 a branch at Braunschweig was added. It also has a deposit office (in Greussen) and a commandite (G. Vogler in Qued- linburg). It has absorbed the following banking firms: 1905, S. Frenkel, Nordhausen; 1905-6, Herzfeld & Buchler, Aschersleben; 1906, H. Bach, Nordhausen; 1907, Gebriider Dux, Hildesheim; 1907, Friedrich Franz Wandel, Dessau; 1908, I. Wertheimer, Peine (1909, Otto Weibezahl, Braunschweig) . Since 1907 it has been intimately connected with the Disconto-Gesellschaft. A director of this bank is a mem- ber of the supervisory board of the Bankverein. 629 ' National Monetary Commission Thus between 1905 and the close of 1909 alone the Magdeburger Bankverein absorbed seven banking firms for the purpose of establishing branches. The Magdeburger Privatbank of Magdeburg and Ham- burg (founded 1856, capital stock 36,000,000 marks, sur- plus about 4,000,000 marks) has Thirteen branches (Dessau, Eisenach, Bisleben, Erfurt, Halberstadt, Halle-on-the-Saale, Langensalza, Miilhausen in Thuringia, Nordhausen, Sangerhausen, Torgau, Weimar, Wernigerode a. H.). Twenty-eight deposit offices (Aken a. E., Bismark in the Altmark, Burg near Magdeburg, Calbe a. S., Egeln, Eilenburg, Finsterwalde N.-L., Frankenhausen, Garde- legen, Genthin, Helmstedt, Hettstedt, Merseburg, Neu- haldensleben, Oschersleben, Osterburg, Osterwieck, Perle- berg, Quedlinburg, Schonebeck a. E., Sondershausen, Stendal, Tangerhutte, Tangermiinde, Thale i. H., Witten- berg (district of Halle) , Wittenberge (district of Potsdam) , Wolmirstedt) . One commandite (Ascherslebener Bank, Gerson Kohen & Co., Kommanditgesellschaft in Aschersleben) . The Magdeburger Privatbank has absorbed the following banks and banking firms: 1905. Nordhauser Bank, Nordhausen; Wilhelm Hauffe, Eilenburg; Julius Elkan, Weimar; Tobias Fricke, Garde- legen. 1906. F. W. Quensel, Sangerhausen; Diskonto-Gesell- schaft, Hettstedt. 1907. F. Unger, Erfurt; Wittenberger Spar- & lyeihbank, Registered Mutual Society (Limited), Wittenberg; Paul Thiele, Merseburg; Eislebener Bankverein, Ulrich, Zickert 630 The German Great Banks & Co., Eisleben; Kreditbank Eisenach (Incorporated), Eisenach (capital, 1,500,000 marks); Vereinsbank Miil- hausen (Thuringia) with a branch in Langensalza (capital 2,100,000 marks); Torgauer Bank, Torgau (capital, 1,000,000 marks) ; Sangerhauser Bankverein, Sangerhausen (capital, 898,000 marks) ; Wernigeroder Kommanditgesell- schaft auf Aktien (stock company en commandite) Fr. Krumbhaar, Wernigerode, with a branch in Osterwieck i. H. (capital, i, 500,000 marks) ; Wechslerbank, Hamburg (founded 1872; capital, 7,500,000 marks). 1908. Erfurter Bank Pinckert, Blanchart & Co., Erfurt (capital 3,008,100 marks); A. Sonnenthal, Dessau; Vor- schuss- & Sparverein, Weimar, Registered Mutual Society (Limited) , continued under the name Thuringische Landes- bank, A. G. Weimar, which in 1908 absorbed theGewerbe- und Landwirtschaftsbank G. -m. b. H. Jena. 1909. Dresdner Bankverein, Dresden (founded in 1887; capital 21,000,000 mark). This bank had absorbed the following: 1887, Weimarische Filialbank, Dresden; 1890, the branches of the Geraer Bank in Dresden, Chemnitz, and Leipzig; 1900, Hch. Wm. Bassenge & Co., Dresden, continued under the old firm name. This firm in turn has branches in Meissen (1904) and a deposit office in Lommatzsch; 1907, Ernest Petasch, Chemnitz, and Krober & Co., Meissen. In addition to the branches growing out of these banks and firms which had been taken over, the Dresdner Bank- verein has branches in Wurzen, Kamenz, and Sebnitz, and a deposit office in Oederan. After the consolidation (effective January i, 1909) the Magdeburger Privatbank adopted the firm name of 631 National Monetary Commission Mitteldeutsche Privat-Bank A ktiengesellschaft and increased its capital stock to 50,000,000 marks. Thus since 1905 the Magdeburger Privat-Bank (now Mitteldeutsche Privatbank), for the purpose of establish- ing branches and deposit offices, absorbed 8 private bank- ing firms and 1 2 banks. In southern Germany the following banks have been in the forefront of the concentration movement. The Bayerische Vereinsbank in Munich (capital 45 ,000,000 marks). It has 12 branches Augsburg, Bad Kissingen, Bayreuth, Erlangen, Kempten, Kitzingen, I^andshut, Nuremberg, Passau, Regensburg, Straubing, and Wiirz- burg. It also has 2 deposit offices in Munich. It has absorbed the following banks and banking firms: 1885-86, Joseph von Hirsch, Munich; 1891-92, Guggenheimer & Co., Munich; 1898-99, Adolph Bohm, I^andshut; 1905, Stiglmeier & Bohm, Straubing; Gregor Oehninger Sohn & Co., Wiirzburg; 1906-7, Franz Eglauer, Passau; 1907-8, Niirnberger Bank in Nuremberg, Lauf, Erlangen, Schwabach, and Hersbruck; Wurzburger Volksbank, Wiirzburg; Friedrich Feustel, in Bayreuth and Kissingen; Leyherr & Co., Augsburg; F. S. Euringer, Augsburg; August L,eipert, Kempten. Thus since 1885 the Bayerische Vereinsbank absorbed 10 banking firms and 2 banks. The Bayerische Handelsbank in Munich increased its capital in 1906 from 27,171,800 marks to 33,963,800, and in 1908 to 35,600,000 marks. Between 1906 and 1908 it established branches in Ansbach, Immenstadt, Bayreuth, Hof, Gunzenhausen, Lichtenfels, Munchberg, Nordlingen, Neuberg on the Danube, Markt-Redwitz, Mindelheim, 632 The German Great Banks Regensburg, Rosenheim, Schweinfurt, and Wiirzburg. Earlier it had established a branch at Kempten (in 1 899) , and branches at Bamberg, Kronach, Kulmbach, Mem- mingen, and Aschaffenburg in 1905. For the purpose of establishing or enlarging branches it took over the follow- ing banking establishments: 1899. Ignaz Wolfsheimer, Kempten. 1905. Hermann Hellmann, Bamberg and Kronach; F. L. Bauer, Kulmbach; L. Ullmann & Sohne, Kempten; Gewerbebank Memmingen. G. m. b. H. (Limited), Mem- mingen; Heinrich Mayer, Memmingen; Wolf S. Gutmann, Ansbach; M. Wolfsthal, Aschaffenburg. 1906-7. A. Krauss, Bayreuth and Munchberg; Schul- ler & Co., Bayreuth and Hof. 1907. Hans Mayer, Lichtenfels; Ludwig Rosenf elder, Nordlingen; Fr. H. Miller, Mindelheim; Max de Crignis, Neuberg on-the-Danube. 1907-8. Wilhelm Frank, Gunzenhausen. 1908. Haymann & Co., Regensburg; Richard Kirch- ner, Wiirzburg; Kreditbank Rosenheim A. G. (capital 1,000,000 marks) ; I. Gutmann, Ansbach. Thus the Bayerische Vereinsbank absorbed since 1899 17 banking firms and 2 banks. In western Germany among others the Barmer Bank- verein of Barmen absorbed the Banner Privatbank , the Westfdlische Bankkommandite Ohm, Hermekamp & Co. (now the Niederdeutsche Bank), and the Godesberger Bank. The Rheinisch-Westfalische Disconto-Gesellschaft in Aix- la-Chapelle (capital 80,000,000 marks), which we omitted from the chain of banks belonging to the Disconto- 633 National Monetary Commission Gesellschaft for the reasons given on p. 673 (regarding it as an independent provincial bank) has now 17 branches at the following places: Bielefeld, Bochum, Bonn, Cob- lenz, Cologne, Dortmund, Diisseldorf, Godesberg, Giiters- loh, L4ppstadt, Maria-Gladbach, Neuss, Neuwied, Reck- linghausen, Remscheid, Traben-Trarbach, and Viersen. It has, besides, 7 deposit offices 3 in Cologne and i in each of the towns of Kalk, Kreuznach, Malmedy, and Ratingen, and 2 commandites , Delbriick, I/eo & Co., Berlin, and M. W. Koch & Co., Frankfort-on-the-Main. It has absorbed the following banks and firms: Establishments. Year. Capital. Bank fur Rheinland and Westfalen Koblenzer Bank x Groethuysen & Linxweiler, Viersen Kolnische Wechsler-und Kommissionsbank Neuwieder Bankverein Bochumer Bank, Bochum (with branches in Dortmund and Recklinghausen) Westfalische Bank, Bielefeld, Lippstadt, and Gutersloh Otto Lohmann, Bielefeld Diisseldorfer Bank, Diisseldorf Johann Ohligschlaeger (Limited), Aix-la-Chapelle Zulpicher Volksbank, Ziilpich Remscheider Kredit-und Sparbank Unnaer Bank in Unna Cref elder Bank in Crefeld (continued as a branch) Volksbank, Erkelenz Hardy & Co. (Limited), Berlin 1901 1901 1902 Marks. 8,334,000 2, ooo, ooo 1905 1906 1907 1908 1909 12, 000, 000 I, 000, 000 5, ooo, ooo IO, OOO, OOO 5, ooo, ooo 5, 500, ooo 750,000 3 , ooo, ooo The Rheinisch- Westfalische Disconto-Gesellschaft has formed communities of interest with the following banks: Capital (marks). Eschweiler Bank i , ooo, ooo Durener Bank 8, 500, ooo This bank absorbed in 1905 the Euskirchner Volksbank and the Julische Volksbank and established branches at Euskirchen and Jiilich. a 600,000 marks paid in. 634 The German Great Banks Volksbank Geilenkirchen-Hunshoven 315, ooo Oberbergische-Bank, Ohl 42 i, 505, ooo Eupener Kreditbank 500, ooo Herf order Discontobank 2, 500, 800 Bunder Bank. SECTION 4. SPECIAL CAUSES OF THE RAPIDITY OF THE CON- CENTRATION MOVEMENT DURING 1901-1904. TJie concentration movement proceeded with an un- usual degree of rapidity in the years following 1870 and again during the years 1901-1904, inclusive. The earlier period, characterized by the establishment of so-called provincial banks, 43 is at present of no more than his- toric significance. It was during the latter period partic- ularly that concentration assumed striking and at times even uncanny dimensions. While even before this the movement had advanced quite rapidly, these four years witness a record speed in this development. The progress in concentration was greatly accelerated by the influence of psychologic factors, as is so often the case in this sphere of business. I. THE CRISES OF 1873 AND IQOO. The general observation may be made that every crisis is followed by a marked strengthening of existing tenden- cies toward concentration and by an increased rapidity of the movement in that direction. After every crisis, which results in the annihilation and sweeping away of many undertakings, the weaker estab- lishments which were able to survive in halfway sound condition only through assistance of some sort realize that they can achieve permanent safety only by merging with other establishments. This is particularly true of 635 National Monetary Commission those establishments which have broadened their base of operation during the prosperous years before the panic by enlarging their business or increasing their capital to a point where they cannot make full and rational use of their plant or capital while business is at a standstill. Wallich 44 properly points out, therefore, that the move- ment of concentration which set in in German banking during the boom period 1870-1872 proceeded at a more rapid pace immediately after the crisis of 1873, as a result of the liquidation or "disestablishment" of banks, which was carried out by stronger banks. While the latter fre- quently saved from total collapse weaker banks that had fallen into sore straits, and at any rate made it easier for them to realize their assets, they made sure at the same time of taking over valuable existing business connections, fiscal agencies, etc., and thus largely increased their power and influence. It was in this manner and with this purpose in view that the Deutsche Unionbank during the period 1871-1874 undertook the liquidation of four banks, the Deutsche Bank during the period 1873-1876 the liquidation of the Allgemeine Depositenbank, and of the Elberf elder Disconto- und Wechselbank, also of the just-mentioned Unionbank, which paid the extreme penalty for tying up its resources in the above operations. The Dresdner Bank during the years 1873-1878 undertook the liquida- tion of four banks, viz, the Dresdner Handelsbank, Sack- sischer Bankverein, Sachsische Kreditgesellschaft, and Thur- ingische Bank in Sondershausen. Lastly, in 1875, the Wurttembergische Vereinsbank undertook the liquidation of the Stuttgarter Bank. 636 The German Great Banks Soon after this (from 1876 and on into the eighties) the Deutsche Bank carried on the liquidation of four other banks the Berliner Bankverein, the Berliner Wechsler- bank, the Frankfurter Bankverein (which resulted in the establishment of a branch in Frankf ort-on-the-Main) , and the Niederlausitzer Bank in Kottbus. In 1876 the state- ment of the Deutsche Bank contained an item of 6,500,000 marks of "securities" chiefly of banks in liquidation, which it had bought up cheaply. During the same period the number of its accounts on which it had to pay com- missions had increased from 855 to 1,354. The establishments that had weathered the crisis with their own resources, without being obliged to resort to out- side help, were mainly those that had been able to strengthen their resources greatly before the crisis through the con- centration and consolidation of their business and capital. Outsiders usually learn of this for the first time during the panic, and those establishments which have failed to do so in time now hasten to follow the example set by the successful establishments. On the other hand, those banks which have been able not only to survive the panic, but also to extend assistance to others, come out of the panic with renewed spirit of enterprise. Moreover, during a panic they are able, at relatively small cost and with the prospects of more than average profits, to satisfy their ambition for expansion by making suitable investments. The result is liquidation or absorption of the concern seeking assistance, at all events, however, permanent de- pendence upon the assisting bank. According to the memorial of the Centralverband des Deutschen Bank- und Bankiergewerbes, during 1901-2, i. e., during and after the 637 National Monetary Commission panic, no fewer than 41 branches were established by banks, mostly in place of private banking firms that had been absorbed. During the same brief period 116 bank- ing firms had gone out of business. Moreover, quite an array of larger banks might be cited which had been able to preserve their independence during the boom period, but which by adverse circumstances were forced to seek the aid of one of the great Berlin banks and to resign part of their former independence according to the looser on closer relationships established, being thus made to pay a heavy tribute to the crisis. 45 In 1903 the " permanent participations " of the Deutsche Bank amounted, in round figures, to 57,000,000 marks (as against 50,000,000 in 1899), those of the Disconto- Gesellschaft to 58,000,000 marks (as against 51,000,000 marks in 1899). Confidence plays a notably large part in banking, and after every crisis general confidence naturally turns, above all, to those institutions which have displayed energy, insight, and power in going to the rescue of other institu- tions or in intervening energetically on the stock exchange. On the other hand, there is a loss of confidence, often thor- oughly unjustified, in other institutions that is to say, in the smaller banks and private bankers. In other cases the safety of the securities left on deposit with those insti- tutions may be brought into question, particularly if events like those which took place in Berlin during the fall of 1891 are of a nature to disturb, even only tempora- rily and in isolated instances, public confidence in the safety of the institutions. 6 3 8 The German Great Banks Owing to such causes, the concentration movement re- ceived a great impetus from the prompt and effective intervention of the large banks on the occasion of the col- lapse in 1901 of the Pommersche Hypotheken Bank (Pomer- anian Mortgage Bank) , the Preussische Hypothekenaktien- bank (Prussian Mortgage Bank, Incorporated), and the Deutsche Grundschuldbank (German Real Estate Mortgage Bank). A similar effect was produced by the notably energetic intervention of the Deutsche Bank, which an- nounced the opening of its own branch in Leipzig on the very day, June 25, 1901, when the Leipziger Bank sus- pended payments. 2. THE FOUNDING OF THE UNITED STATES STEEL CORPORATION, FEBRUARY 23, I 9 OI. During those years (from 1901 onward), and again in 1904, the record year in the rapidity of the concentration movement, other important events exerted a profound psychologic influence. It is no exaggeration to say that few events during the second epoch (1870- 1905) occupied the thoughts and stirred the feelings of the widest circles so strongly as the founding of the United States Steel Cor- poration on February 23, 1901, with the enormous capital of 1,100 million dollars. The Germans had either overlooked or ignored the fact that this event simply marked the culminating point, pro- visional at that, in a concentration movement which had begun in the United States with great energy as early as 1 88 1 in many lines of industry, mainly in the form of trusts. The "law of the large numbers" has rarely pro- duced so great an effect as in this case. Not until this 639 National Monetary Commission culminating event took place were Germans of all classes, far beyond banking circles and the industrial circles directly concerned, made aware that Germany would have to prepare for a struggle destined to grow more and more severe, a struggle which threatened to be defensive rather than offensive and in which Germany's chances were not likely to be improved by her far inferior capital resources. In the face of this situation it seemed urgently necessary to accelerate the movement of concentration. This neces- sity became the more apparent in view of the peculiar form of American industrial combinations, the trusts, which involves complete control of the associated enter- prises and of their business management, permitting a reduction in the cost of production, an effect which the German cartels had almost completely failed to attain owing, for one thing, to the autonomy of the enterprises included in the cartels. 3. THE FOUNDING OF THE STAHLWERKVERBAND (STEEL, WORKS* UNION) IN DUSSELDORF, MARCH I, 1904. Such a reinforcement of the concentration movement seemed demanded both in the field of industry, represent- ing the most advanced and exposed part of the battlefield, as in the field of German banking, the auxiliary of industry. Thus under the fresh impression of the event that had oc- curred in the United States, the long-continued and labo- rious efforts to establish the Steel Works' Union in Dussel- dorf were, on March i, 1904, brought to a successful issue and hailed far and wide as an auspicious result. This was followed, on January i, 1905, by the founding of the Upper Silesian Steel Works' Union (Oberschlesischer Stahlwerkver- band).* 6 All these developments in the United States 640 The German Great Banks and in Germany in their turn gave a new impetus to the movement of concentration in German banking. This movement proceeded by leaps and bounds during those years, especially in 1904, to a large extent at the expense of the smaller banks. CHAPTER III. METHODS AND FORMS OF CONCENTRATION. SECTION I. OUTWARD COURSE OF DEVELOPMENT. A. THE SEVERAL GREAT BANKS. The outward development of the Berlin great banks, 47 of which as many as ten were usually enumerated even as late as 1903, is represented in tabular form at the end of this book in Appendix VII. From that tabular state- ment the following data may be gathered as regards the present number of the great banks : The 54,000,000 marks of capital of the Mitteldeutsche Kreditbank has been considerably surpassed by that of several provincial banks. Thus the Allgemeine Deutsche Kreditanstalt has a capital of 90,000,000 marks; the Rheinisch-Westfalische Disconto-Gesellschaft, 80,000,000 marks; the Rheinische Kreditbank, 75,000,000 marks; the Bergisch-Markische Bank, 75,000,000 marks; the Barmer Bankverein, 60,000,000 marks; the Essener Kre- ditanstalt, 60,000,000 marks. The capital of the Com- merz- und Disconto-Bank (85,000,000 marks) and of the Nationalbank fur Deutschland (80,000,000 marks) was also surpassed by that of the Allgemeine Deutsche Kredit- anstalt and was equaled in 1908 by that of the Rheinisch- Westfalische Disconto-Gesellschaft, and even surpassed in 1909, when it reached 95,000,000 marks. Thus beginning 90311 ii 42 641 National Monetary Commission with January i, 1905, and ranging them solely by the amount of the capital, the term great bank being assumed, as usual, to imply a minimum capital of 100,000,000 marks, only the following six banks can be grouped under that term: Capital (marks). 1 . Deutsche Bank 200, ooo, ooo 2. Dresdner Bank 180, ooo, ooo 3. Disconto-Gesellschaft 170, ooo, ooo 4. Bank fur Handel und Industrie 154, ooo, ooo 5. A. Schaaffhausen'scher Bankverein 145, ooo, ooo 6. Berliner Handelsgesellschaft no, ooo, ooo But if we place the limit at 80,000,000 of capital, we shall now have to include in the list of great banks also the Rheinisch-Westfalische Disconto-Gesellschaft (80,000,000, since 1909, 95,000,000 marks), the Allgemeine Deutsche Kreditanstalt (90,000,000 marks), the Commerz- und Disconto-Bank (85,000,000 marks), and the Nationalbank fur Deutschland (80,000,000 marks). With 80,000,000 as the limit, the term "Berlin great banks" would include not only the six above enumerated, which have their home office or at any rate their financial center of gravity in Berlin, but also the Commerz- und Disconto-Bank and the Nationalbank fur Deutschland, so that the total number would be eight. Of all these banks the Berliner Handelsgesellschaft only has strictly adhered to the principle of absolute centrali- zation; it has neither branches, nor commandites, nor deposit offices, nor communities of interest. 48 B. THE AGGREGATE CAPITAL POWER REPRESENTED BY THE GREAT BANK GROUPS. At the present time the five largest Berlin banks, together with their domestic communities of interest either through the ownership of stock or through contract, and 642 Th e r m a n G r e a t B a n the domestic communities of interest of the latter (count- ing only capital and surplus funds, but not deposits), form the following groups, whose capital power is given as per December 31,1 908 : I. The group of the Deutsche Bank. Including: 49 Capital. Surplus. The Deutsche Bank itself Marks. Marks. Also the following: i. Bergisch-Markische Bank in Elberfeld 2. Schlesischer Bankverein in Breslau 3. Hannoversche Bank in Hannover Together with: (a) Osnabriicker Bank in Osnabriick . . . (b) Hildesheimer Bank in Hildesheim . . 4. Duisburg-Ruhrorter Bank in Duisburg 5. Essener Kreditanstalt in Essen a. d. R Together with the Westfalischer Bankverein in Minister 75, ooo, ooo 30, ooo, ooo 22, SOD, OOO 14, 500, ooo 8, ooo, ooo 12, 000, 000 60, ooo, ooo 8 ooo ooo 23,014,53^ II, OOO, 000 4, 100, ooo 3,775,000 2, 20O, OOO 247,152 18, 176, ooo 6. Siegener Bank fur Handel und Gewerbe in Siegen . 7. Sachsische Bank in Dresden . 8. Essener Bankverein in Essen a. d. R 9. Oldenburgische Spar- und Leihbank in Ol- denburg 15, ooo, ooo 2, 200, 000 10. Privatbaiik zu Gotha ii. Mecklenburger Hypotheken- u. Wechsel- bank in Schwerin Together with the Mecklenburgische Spar- bank 3, ooo, ooo xa. Rheinische Kreditbank in Mannheim With the Mannheimer Bank in Mannheim And the Suddeutsche Bank in Mannheim . . . 75, ooo, 800 I, 000, 000 io, 529, 176 IOO, OOO Total 588 900 800 197 957 2 95 Total capital and surplus combined . . 786 858 095 Adding the "friendly (befreundete) banks" (see Append. VII, p. 993), the share capital of the group is increased by 212,500,000 marks, the surplus funds by 46,038,260 643 National Monetary Commission marks, making a total of 258,538,260 marks, so that the total power of the group rises to 1,045,396,355 marks. II. The group of the Disconto-Gesellschaft. Including: 51 Capital. Surplus. Marks. Marks. The Disconto-Gesellschaft itself i 70, ooo, ooo 5 7 SQ2, 611 Also: i. Norddeutsche Bank in Hamburg 50, ooo, ooo IT * c; c ooo 2. Allgemeine Deutsche Kreditans talt in Leipzig . . 90, ooo, ooo 1 x O J J VW 37,850, 751 Together with: (a) A. Busse & Co. in Berlin 2 , OOO, OOO 129, 070 (6) Vogtlandische Bank in Plauen i. V. . . 5, 500, ooo 3,606,689 (c) Oberlausitzer Bank in Zittau 2, 700, 000 735-000 (d) Vereinsbank in Zwickau 4, 500, ooo 2,318, 800 3. Banner Bankverein in Barmen 59 , 836 , 200 To 825 ooo 4. Suddeutsche Disconto-Gesellschaft, Mannheim. 31, 250, ooo 2, 219, 716 Subsidiary institutions (Tochter-Gesellschafteri) : 5. Bayerische Disconto- und Wechselbank in Nuremberg I 2 , OOO, OOO 179,474 6. Bank fiir Thiiringen vorm. B. M. Strupp, stock company in Meiningen, capital 10,000,000 marks, of which paid in IO, OOO , OOO i 49 o 18 Total 437 786 200 6 Add surplus 126, 96 1,129 Grand total 564 , 747,329 III. The group of the Dresdner Bank. Including: 52 Capital. Surplus. Marks. Marks. The Dresdner Bank itself i 80 , ooo ooo Also: i. Markische Bank in Bochum 9, ooo, ooo i , 060, ooo 2. Rheinische Bank in Essen 21, 000, 000 i, 350, ooo 3. Oberschlesische Bank in Beuthen 2, 5OO, OOO 445,000 4. Wiirttembergische Landesbank in Stuttgart. . 8, ooo, ooo 273,605 5. Oldenburgische Landesbank in Oldenburg, 3,000,000 marks, paid in 40 per cent= I , ZOO, OOO 677,313 6. Mecklenburgische Bank in Schwerin, 5,000,000 marks, paid in 40 per cent = 2 , OOO , OOO 388, 662 Together with the following: (a) Rostocker Gewerbebank, A.-G. in Rostock 980, ooo T millions) possessing incomes below 900 marks; a little more than one-fourth of the total national income, or 6,500,000,000 marks, belonged to that part of the earning population (3^3 millions) possessing incomes from 900 to 3,000 marks; and not quite a quarter of the total national income, or 5,750,000,000 marks, belonged to that part of the earning population (one-third million) pos- sessing incomes exceeding 3,000 marks. 38. Grundriss, II, pp. 460-461. 39. Volume III of the Appendix to the German finance reform bills of 1908: Materialien zur Beurteilung der Wohlstandsentwicklung Deutsch- lands im letzten Menschenalter (No. 1043 of the Parliamentary publica- tions of 1908), pp. 14-15; according to the Reichsanzeiger of February n, 1909, the assessed taxable income of this group amounted to 5,450,975,235 marks. 40. Ibid. 41. Walter Troeltsch, Uber die neuesten Veranderungen im deutschen Wirtschaftsleben, p. 144. At the same time it remains true that, as already mentioned (footnote 33) in Prussia in 1908 there were still about 18,000,000 souls, or 47.22 per cent of the population of about 38,000,000, exempt from taxation, and that of the balance, 16,000,000, or 42.54 per cent, were assessed in the lowest income tax group (with incomes exceeding 900 marks and below 3,000 marks). 42. With the (rather unimportant) reservations made on p, 17 of the Materialien zur Beurteilung der Wohlstandsentwicklung Deutschlands im letzten Menschenalter, already cited several times. 43. Allowance has to be made, of course, for the fact that one person may have several savings bank books. 44. For the period between 1891-1897 see Walter Troeltsch, Ueber die neuesten Veranderungen im Deutschen Wirtschaftsleben, p. 197; for 1904 and 1906, Statistisches Jahrbuch f. d. Preuss. Staat fiir 1908 (Berlin, 1909), p. 144; for 1907 the "Materialien" quoted in note 42. 806 T h e German Great Banks 45. In 1908 there were 169 credit banks with a capital of at least 1,000,000 marks each. 46. See p. 21 of the "Materialien," quoted in note 42. 47. That is, from 1880 till the end of 1905. 48. Statist. Jahrbuch. f. d. Deutsche Reich (twenty-ninth year, 1908), pp. 46-47, and H. v. Scheel, Die Deutsche Volkswirtschaft am Schlusse des 19. Jahrhunderts (Berlin, 1900, Puttkammer & Miihlbrecht), p. 91. 49. Materialien zur Beurteilung der Wohlstandsentwicklung Deutsch- lands, pp. 46-47. According to Von Halle (loc. cit., pp. 48-49) the total amount of power developed by engines in all the works in Germany in 1895 was only about 3,500,000 horsepower. 50. For 1843 see above, p. 33, for 1895 and 1907 see the Statist. Korre- spondenz of February 3, 1909 (Year XXXV), p. 2. 51. For the census of occupations of 1895 see Paul Voigt, Deutschland u. der Weltmarkt, Preussische Jahrbucher, vol. 91 (January and April, 1898), p. 271. 52. Geh. Ober.-Reg.-Rat Dr. Traugott Miiller, Industriestaat oder Agrarstaat? Ein Beitrag zur wirtschaftlichen Wertschatzung der deut- schen Landwirtschaft (in Mentzel and von Lengerke's Landwirtschaft- licher Hulfs- und Schreibkalender, 55th year, 1902, Part II, pp. 55-85). 53. See Statistisches Jahrbuch f. d. Deutsche Reich (29th year), 1908, P- 2 7 : 555 8 >3 I 7 agricultural establishments in 1895 (last census published), as compared to 5,276,344 in 1882. 54. Ibid., 43,243,742 hectares (i ha = about 2% acres) in 1895 as com- pared to 40,178,681 in 1882. 55. Ibid., p. 39, tab. IV: Live stock in the Federal States according to the census of 1907. The figures show that the number of sheep de- creased from 24,999,406 at the beginning of 1873, to 9,692,501 at the end of 1900, and 7,681,072 at the end of 1907, whereas the number of horses increased from 3,352,231 at the beginning of 1873 to 4,195,361 at the end of 1900, and to 4,337,263 at the end of 1907; cattle increased from 15,776,702 to 18,939,692 at the end of 1900, and 20,589,856 at the end of 1907; pigs from 7, 124,088 to 16,807,014 at the end of 1900, and to 22,080,008 at the end of 1907, or more than threefold. 56. While the average prices of wheat rose about 60 per cent, of rye about 69 per cent, and of barley about 90 per cent in the old provinces of Prussia in the periods 1831-1840 to 1871-1880, they fell again (see Troeltsch, loc. cit., pp. 32 and 36) despite high corn duties, which were introduced in 1879, raised in 1887, but reduced again by the commercial treaties of 1892 and 1894. Compared to the prices of 1876-1880 the prices of wheat in Prussia fell during 1881-1885 10 per cent, 1886-1890 20 per cent, 1896 36 percent; the prices of rye, 1881-1885 4 per cent, 1886-1890 15 per cent, 1896 29 per cent; the prices of barley, 1881-1885 7 per cent, 1886-1890 17 per cent, 1896 21 per cent 57. According to Troeltsch (loc. cit., p. 44), in the agricultural com- munes of Prussia there was an increase of registered mortgages amounting 807 National Monetary Commission to 190,000,000 marks per annum, or a total increase of 2,100,000,000 marks, between 1896 and 1907. The indebtedness of the farmers of 126 Wurttemberg rural communities increased 40 per cent between 1874 and 1894. In this connection Troeltsch establishes the fact, frequently cor- roborated elsewhere, that 80-90 per cent of the mortgage debts were due to the fact that persons acquiring an estate (by purchase or inherit- ance) were compelled, either by insufficiency of capital or by excessive demands of co-heirs to incur excessive obligations. This evil was aug- mented by overestimation of land values, due to an unhealthy develop- ment in the prices of land. 58. Much can and must yet be done to increase agricultural production; on the one hand, by the agricultural exploitation of the heaths that still exist in considerable size, especially in the northwest of Germany; and on the other hand, by the drainage and cultivation of the moors that cover some 500 German square miles, 400 of which could be reclaimed for purposes of agricultural cultivation. This work, however, can not be carried out without a considerable extension of the present railways and canals. Unfortunately, however, the building of the latter is often opposed by agriculturists themselves. (See Max Schinkel in the steno- graphic reports of the Bank Inquiry Commission, points III-V of the question sheet, p. 77.) 59. This, of course, ought not to be carried too far, as it may lead to endless sophistries in favour of agriculture, such as are presented by some authors (see Traugott Miiller, loc. cit., p. 61), who include even railway, postal, and telegraph enterprises under agricultural undertakings, the em- ployees consequently being classified under the heading of " those engaged in agriculture as a secondary occupation." 60. In direct contrast to trade, industry, etc., in which the number of independent persons decreased 12.6 per 1,000 during the same period, and the number of persons in a dependent position increased 30.5 per 1,000. 61. See Ludwig Poble, loc. cit., p. 22; also his Deutschland am Scheide- wege (Leipzig, B. G. Teubner, 1902), p. 43 seq. 62. The statement frequently made, that agriculture, and agriculture only, creates new values, is incorrect. "Values" that are completely new can not be produced by agriculture either, since at any rate such seed as is not produced by national agriculture forms the basis of that activity to the same degree that raw materials form the basis of industrial activity. Thus in agricultural as well as in industrial activity (different as they may be in detail), the process is always one of transformation or refinement, which in both cases merely increases the value of preexisting material. If, therefore, agriculture and industry are included in the "productive occupations," trade should be included therein by the same right, since its value-increasing activity consists in the transfer of goods from dis- tricts where the supply is great to districts where the demand is great, independent of whether the goods meanwhile undergo additional manu- facture or not. (See, among other authors: Richard Ehrenberg, Der 808 The German Great Banks Handel, seine wirtschaftliche Bedeutung, seine nationalen Pflichten und sein Verhaltnis zum Staate, Jena, Gustav Fischer, 1887.) 63. Ludw. Pohle, loc. cit., p. 23. Max Sering, Handels- und Machtpo- litik, Stuttgart, 1900 (J. G. Cotta Nachflg., vol. II, p. 5), does not go nearly so far, when he points out that "as early as the beginning of the fifties, Germany imported more rye, and since the middle of the seventies more wheat, than she supplied to foreign countries." In 1860 the excess of rye imports amounted to some 259,000 tons. 64. Werner Sombart, Deutsche Volkswirtschaft, 2nd ed., p. 411. 65. Huber is right when he says (loc. cit., p. 109), regarding the German textile industry, that the whole export trade depends on the oversea supply of wool and cotton. 66. See Werner Sombart, Die Deutsche Volkswirtschaft, 2nd ed., p. 447: "The piece de resistance of the German exports consists to-day of high-class manufactured goods, containing great labor value (Arbeitswert) and little land value (Bodenwert). Germany, consequently, pays in an increasing measure for foreign soil with home labour." 67. Statist. Jahrb. f. d. Deutsche Reich of 1909, Appendix, page 153. The special trade exports comprise, since March i, 1906, the exports from the customs area (Wirtschaftsgebiet), including domestic produce (exported under the supervision of the customs authorities and subject to excise or stamp duties), such as beer, spirits, salt, sparkling wines, playing-cards tobacco, and sugar; as well as the exports from the customs area, after further manufacture for home account. The customs area in the sense of these new statistics comprises the German Empire (without Heligoland and some communes in Baden), the Grand Duchy of Luxemburg, and the Austrian communes of Jungholz and Mittelberg. The imports for home consumption comprise, on the one hand, the imports into the free commerce of this customs area, directly or with cockets, including imports from free districts, bonded warehouses, etc., as well as the imports of goods for shipbuilding, etc., and the supplies of foreign goods for German ships outward bound; on the other hand, merchandise imported into the customs area for the purpose of being further manufactured for home account (ibid., p. 124). 68. If it were possible to compare the figures given by Rau with the present-day official import and export statistics (which in the absence of agreement of geographic areas, of bases and methods of calculation is impossible) it would appear that German export trade, as well as German import trade, had increased between 1842 and 1907 thirteenfold, while the population of Germany has not even doubled during the same period. 69. See Appendix, Volume III, to the Imperial finance reform bill of 1908: Materialien zur Beurteilung der Wohlstandsentwicklung Deutsch- lands im letzten Menschenalter (p. 52). 70. Only in the case of food and cattle was there a decrease in exports, namely, by 20.2 per cent, while the imports increased 131.7 per cent (ibid.). 809 National Monetary Commission 71. For details, see page 43 of the Appendix, Volume III, to the Impe- rial finance reform bill of 1908. 72. Ibid., pages 37-38 and 53. 73. A permanent adverse balance of payment is altogether impossible that is to say, it would mean bankruptcy. 74. In that case, and in that case only, will Ludwig Pohle's fears prove unfounded (loc. cit., p. 26), that "the increase in the absorptive capacity of the home market denotes a constant growth of Germany's dependence on foreign countries, instead of an increase in her economic independence. 75. Engel, in Zeitschrift des Statist. Bureaus, Berlin, 1875, vol. 4, p. 356. 76. W. Sombart, Der moderne Kapitalismus, II, p. 16. 77. Engel, loc. cit., p. 457 et seq. 78. Deutscher Oekonomist, 1885, 2istFeb., p. 72. 79. Van der Borght's essay: " Aktiengesellschaften" in the Handwor- terbuch der Staatswissenschaften (Jena, 1899, Gust. Fischer), Vol. I, pp. 192-193. 80. With reference to the distribution by the different branches, see par- ticularly Ed. Wagon, "Die finanzielle Entwicklung deutscher Aktien- gesellschaften von 18701900" (Jena, 1903, Gust. Fischer), especially pp. 41 et seq., 56 et seq., 62 et seq., 73 et seq., 107 set seq. 8 1. As late as 1883 there were only 104 machine building companies, with 193,240,000 marks capital. 82. From 1870-1874, fifty-nine brewery companies, with a capital of 72,000,000 marks, were founded (Ed. Wagon, loc. cit., p. 107). 83. Deutscher Oekonomist, 1901, 26th January, p. 45. 84. See v. Halle, loc. cit., p. 94. 85. See Deutscher Oekonomist for 7th Jan., 1905; 6th Jan., 1906; and 1 8th Jan., 1908. 86. According to information collected by the Imperial Statistical Office the figures were 217 companies, with a capital of 260,700,000 marks. 87. These figures are based on material collected by the Imperial Sta- tistical Office. 88. Ed. Wagon, loc. cit., pp. 166-167. (The rate of dividend, however, is reduced in case the stock was bought above par.) 89. For the interpretation of "net income," see Ed. Wagon, loc. cit., p. 12; Dividend income, minus the losses given in the balance sheets, or those arising from liquidations and failures. 90. From 1872-1900, exclusive of machine factories and railway-supply factories. 91. See L. Glier, Zur neuesten Entwickelung der amerikanischen Eisen- industrie, in Schmoller's Jahrbuch fur Gesetzgebung, etc., 27th year, No. 3, p. 229-230. 92. Statist. Jahrb. f. d. deutsche Reich, 29th year, 1908. Appendix, p. 30*, table 19. In 1908 the German output of pig iron amounted to only 11,805,000 tons (ibid., 3oth year, 1909, Appendix, p. 28*, tab. 20). 810 The German Great Banks 93. L. Glier, Zur gegenwartigen Lage der amerikanischen Eisenindus- trie, in Conrad's Jahrbiicher, 3d series, vol. 31, p. 591 (Feb., 1908). 94. Henry Voelcker, Eisen u. Stahl, in the magazine "Die Weltwirt- schaft," ed. by v. Halle, Year III, 1908, Part II, p. 78. According to the Imperial statistics the consumption amounted in 1904 to 166.1 kilograms, and in 1906 to 197.8 kilograms per capita. These statistics, in calculat- ing the consumption, subtract the exports of pig iron, but not the exports of iron manufactures, and thus arrive at a larger consumption figure per capita. 95. See Ludwig Pohle, Die Entwickelung des deutschen Wirtschaftslebens im letzten Jahrhundert, Appendix p. 145; Statist. Jahrb. f. d. Deutsche Reich, 29th year, 1908, Appendix, p. 29*, tab. 18 (for the period 1887- 1907); for value see E. Jiingst, "Bergbau," in the magazine "Die Welt- wirtschaft," ed. v. Halle, Year III, 1908, Part II, p. 61. The German coal production in 1908 amounted to 148,537,000 tons (Statist. Jahrb. f. d. Deutsche Reich, 3oth year, 1909; Appendix, p. 27*, tab. 19). 96. E. Jiingst, loc. cit., p. 60, and Statist. Jahrb. f. d. Deutsche Reich, 30th year, 1909, p. 97. 97. Rud. Eberstadt, Der Deutsche Kapitalmarkt, Leipzig, 1901, p. 64. 98. Thus in 1894 the Gesellschaft fur elektr. Unternehmungen Berlin (affiliated with the Union-Elektr.-Ges., Loewe-Group) ; 1895, die Akt.- Ges. fur elektr. Anlagen u. Bahnen, Dresden (Kummer); Kontinentale Gesellschaft fur elektr. Unternehmungen (Schuckert); Bank fur elektr. Unternehmungen, Zurich (Allgem. Elektr. -Ges.) ; 1896, Deutsche Ges. f. elektr. Unternehmungen, Frankfurt a. M. (Lahmeyer); Schweizerische Ges. fur elektr. Industrie (Siemens & Halske); 1897, Elektrische Licht-und Kraftanlagen A.-G. (Siemens & Halske), Aktiengesellschaft fur Elektrizi- tatsanlagen (Helios); 1898, Elektra, Dresden (Schuckert). 99. On this and the preceding subjects, see Friedr. Fasolt, Die sieben grossten deutschen Elektrizitatsgesellschaften, ihre Entwicklung und Unternehmertatigkeit Dresden, 1904; also Jos. Loewe, Die elektrotech- nische Industrie in: Storungen im deutschen Wirtschaftsleben, Vol. Ill, pp. 77-155 (publications of the Verein fur Sozialpolitik, Vol. CVII), 1903; Ed. Wagon, loc. cit., p. 73 et seq.; Max Jorgens, Finanzielle Trustgesell- schaften (Stuttgart, 1902, J. G. Cotta Nachf.), p. 116 et seq.; H. Hasse, Die A. E. G. (Heidelberg, Winter, 1903). 100. 1896, "Siemens" Elektrische Betriebe G. m. b. H. (Siemens & Halske); 1897, Elektrizitatslieferungsgesellschaft (Allgem. Elektrizitats- gesellschaft) ; 1898, Bayerische Elektrizitatswerke A.-G. (Helios); Sud- deutsche Elektrizitatswerke (Kummer); A.-G. Siiddeutsche elektrische Lokalbahnen (Kummer); 1900, Elektrizitats-Werke-Betriebs-Aktiengesell- schaft (Kummer). All these companies (1896-1900) were organized in boom time, when the general public took considerable interest in the shares of such establishments. 10 1. These figures (taken from E. Budde, Elektrotechnik, in the serial Die Weltwirtschaft, ed. v. Halle, year III, Part II, 1908, p. 88). The details 8n National Monetary Commission here given from the Monatliche Nachrichten iiber den auswartigen Handel Deutschlands would seem to require considerable revision according to the Statist. Jahrbuch f. d. Deutsche Reich, 2gth year, 1908, pp. 157-158 (thus, for instance, the value of the incandescent lamps exported during 1907 amounted to 10,478,000 marks and not to 8,382,000 marks, etc.). 102. See Ed. Wagon, loc. cit., p. 62; Geh. Ober-Reg.-Rat Gust. Muller, Die chemische Industrie, Leipzig, 1909, B. G. Teubner. As far as the fol- lowing statements have been taken from the reports on the administration of the chemical trade association we must not forget that this association, which was established on the basis of the accident insurance act of the 6th of July, 1884, requiring the employer to insure his workmen against acci- dents happening to them while in his employ, includes many minor trades which are not, strictly speaking, chemical. These are the illuminant, fat, soap, and oil trades; also the salt works, so far as they do not belong to miners' associations (Knappschaftsverbande) established under the laws of the several States. In addition to these are the roof felt and roofing- paper factories, manufacturers of rubber and gutta-percha goods, the pre- serving works, with the exception of those chiefly occupied in preserving wood; finally, the artificial mineral -water trade. (See Gustav Muller, loc. cit., p. 27.) 103. Statist. Jahrb. f. d. Deutsche Reich, 29th year, 1908, p. 47. 104. See Richard Brauer, Chemische Industrie, in the annual Die Welt- wirtschaft, ed. v. Halle, Year III, 1908, Part II, p. 91. 105. The totals given by Richard Brauer, loc. cit., p. 91, are incorrect as they are stated in metric tons of 1,000 kilograms instead of metric quintals of 100 kilograms. Moreover, his import and export figures seem to include articles which are either used not exclusively or not at all in the German chemical industry. 106. Ibid., p. 91. 107. See Rich. Brauer, loc. cit., p. 92. 108. Statist. Jahrb. f. d. Deutsche Reich, 29th year, 1908, p. 47. 109. Ludwig Pohle, Die Entwicklung des deutschen Wirtschaftslebens im letzten Jahrhundert, p. 70 seq., especially pp. 72-73. no. Loc. cit., p. 77. in. Statist. Jahrb. f. d. Deutsche Reich, 29th year, 1908, pp. 46 and 47. 112. This includes State railways, railways administered on account of the State, and purely private railways. 113. Statist. Jahrb. fur das Deutsche Reich, 29th year, 1908, p. 113. 114. Statist. Jahrb. fur das Deutsche Reich, 1906, p. 66. At the end of 1903 this network comprised 52,814.2 kilometres (ibid., 1905, p. 62); 949,290,000 travellers and 390,741,000 tons of goods were conveyed on the standard gauge main and branch lines during 1903 (ibid., 1905, p. 64, tab. 2 d ). 115. Statist. Jahrb. f. d. Deutsche Reich, 3Oth year, 1909, p. 115, tab. 2 d . 116. W. Sombart, Deutsche Volkswirtschaft, 2nd ed., p. 267. 117. Statist. Jahrb. f. d. Deutsche Reich, 3oth year, p. 118. 812 The German Great Banks 1 1 8. Ibid., p. 117, tab. 3. 119. Ibid., p. 112, tab. i b . 1 20. Ibid., p. 112, tab. i b , and p. in, tab. i a . 121. Ibid., p. in. 122. According to the memorial presented to the Reichstag on the occa- sion of the naval bill of 1899, entitled "Die Steigerung der deutschen Seeinteressen von 1896 bis 1898," which contains the above estimate, the total value of the German merchant marine had increased from 1896 to the end of 1899 by 66% per cent. The sum required to replace the German merchant marine in case of its loss might therefore be estimated in 1 899 at least at 750,000,000 marks (p. 147). A further increase of 14 per cent of steamships took place during the next year, sailing vessels decreasing by 3 per cent. The value of the German mercantile fleet at the end of 1900 might therefore be estimated at 640,000,000 to 650,000,000 marks. Accord- ing to the memorial of the Imperial Admiralty quoted above, dated December, 1905, the value of the German merchant marine at the end of 1905 amounted to 810,000,000 marks, as stated in the text, while the cost of replacing it would considerably exceed 1,000,000,000 marks. Accord- ing to the Handbuch der deutschen Aktiengesellschaften, ed. 1904 to 1905, I and II, the following number of German joint-stock shipping companies existed at the end of 1903: One hundred and five joint-stock companies with a share capital of 415,019,000 marks, and outstanding bonds of 127,824,000 marks. The amount of share and loan capital of the joint- stock companies in Hamburg and Bremen alone amounted, according to the memorial of the admiralty (December, 1905) quoted above, to 443,000,000 marks, against 273,000,000 marks at the end of 1899. 123. Statist. Jahrb. f. d. Deutsche Reich, 1908, p. 108. 124. See Emil Fitger, Ein Jahrzehnt in Schiffsbau, Reederei und See- schiffahrt, Berlin, Leonh. Simion Nachfolger, p. 22. 125. See the memorial of the admiralty, December, 1905, already quoted, p. 94; Ernst von Halle, Die Entwicklung und Bedeutung der deutschen Reederei (Handels- und Machtpolitik, Vol. II, pp. 129-174, Stuttgart, J. G. Cotta's Nachf., 1900); and Reederei u. Schiffahrt, in the annual Die Weltwirtschaft, ed. von Halle, year III, 1908, part I, Internat. Uebersichten, p. 83 seq. 126. See Emil Fitger, loc. cit., pp. 49, 55, and 56-61. 127. Statist. Jahrb. fur d. Deutsche Reich, Joth year, 1909, p. 140, tab. 13. '128. See Emil Fitger, .oc. cit. pp. 61, 64-68. 129. See B. Huldermann, Subventionen der auslandischen Handels- flotten (Berlin, 1900, Ernst Siegfr. Mittler & Sohn), p. 39. 130. It raised its capital in 1853, 1865, 1867, 1868, 1870, 1871, 1872, 1874, 1875 (in 1877 the capital was reduced), 1887, 1888, 1897, 1898, 1899, 1900, and 1905. 131. Regarding the development of other large German shipping com- panies see W. Sombart, Die deutsche Volkswirtschaft, 2nd ed., Appendix National Monetary Commission 26, p. 544. Among the other German shipping companies are the following : Deutsche Dampfschiffahrtsgesellschaft Kosmos; Deutsche Levante-Linie ; Deutsch-Ostaf rika-Linie ; Hamburg-Sudamerikanische Dampf ergesellschaf t ; Deutsch-Australische Dampf ergesellschaf t ; Woermann Linie; Hamburg- Bremer Af rika-Linie ; Dampfschiffsgesellschaft Argo; Dampfschiffsgesell- schaft Hansa; Dampfschiffahrtsgesellschaft Neptun; Dampf schiffsreederei Union. 132. The following is taken from Karl Thiess, Organisation und Ver- bandsbildung in der Handelsschiffahrt (Berlin, 1903, Ernst Siegf. Mittler & Sohn). 133. The following details are taken in the main from Emil Fitger, loc. cit., p. 26. 134. W. Sombart, Die deutsche Volkswirtschaft, 2nd ed., p. 284, and Appendix 25 (Organisation of inland navigation in the main centres); p. 543- 135. Statist. Jahrb. f. d. Deutsche Reich, 3Oth year, 1909, p. 129. 136. Of the total length, 2,437.77 kilometres were navigable by vessels of 1.75 meter draft; 3.082.12 kilometres by vessels of 1.50 meter draft, 7,064.07 kilometres by vessels of i meter draft; 599.40 kilometers by vessels of 0.75 meter draft; 1,182.83 kilometers by vessels of less than 0.75 mete? draft. See Statist. Jahrb. f. d. Deutsche Reich, 1904, p. 74. See ibid., 1905, p. 71, for corrections as to vessels. These corrections have been introduced in the text. Statist. Jahrb. f. d. Deutsche Reich, 1906, p. 75 gives the same figures, while in the volume for 1908, p. 100, the total length of the navigable waters is given for the 3ist of December, 1902, as 13,793.4 kilometers. 137. v. Halle, loc. cit., p. 78. On pages 128-129 of the same work are found details on the status of the imperial navy in 1900. 138. See the Jubilee memorial published by the directorate of the Reichs bank: "Die Reichsbank 1876-1900," Gustav Fischer, Jena (cited below as the jubilee memorial of the Reichsbank), as well as the statistical tables submitted to the Bank Inquiry Commission of 1908, and the Statist. Jahrb.- f. d. Deutsche Reich, 29th year, 1908, pp. 229-234, and Internationale Uebersichten, pp. 70-75*; Karl von Lumm, Die Stellung der Notenbanken in der heutigen Volkswirtschaft (Berlin, 1909, J. Guttentag); Louis Katzen- stein, Die dreissigjahrige Geschaftstatigkeit der Reichsbank, Berlin, Leon- hard Simion Nachf., 1906. Regarding the questions submitted to the Bank Inquiry Commission of 1908, see principally: Die Verhandlungen der Bank-Enquete-Kommission, items I-V of the question sheet, Berlin, 1909* For the rest, Friedr. Koch, Der Londoner Goldverkehr; (Stuttgart & Berlin, 1905); E. Schmalenbach, Der Reichsbank- Ausweis (Zeitschr. fiir handels- wissenschaftliche Forschung, ed. Schmalenbach, year I, 1906, No. 3, pp. 77-92; Heiligenstadt, Der deutsche Geldmarkt (in Schmoller's Jahrb., vol. 31, pp. 7 1 seq.) ; Arthur Feiler, Die Probleme der Bankenquete (Jena, Gustav Fischer, 1908), Ferdinand Bendixen, Das Wesen des Geldes (Leipzig, 814 T h e German Great Banks Duncker & Humblot, 1900); Magnus Biermer, Die deutsche Geldverfas- sung (Giessen, 1908); Hermann Schumacher, Die deutsche Geldverf as- sung u. ihre Reform (in Schmoller's Jahrb., Vol. XXXII, p. i seq; R. Koch, Der Kredit bei der Reichsbank (Zeitschrift f. Handelswissenschaft und Praxis, year I, No. 4, July, 1908, pp. 115-118); Heymann, Reichsbank und Geldverkehr (Berlin, 1908); A. Arnold, Die Bedeutung der Giro- Guthaben fur die Bankpolitik (in Bank-Archiv, year VI, No. 5, p. 155 seq.) ; Edgar Jaff6, Die Ursachen der letzten Geldteuerung und die Bankenquete (Deutsche Wirtschaftszeitung, 4th year, No. 13, p. 582 seq. and No. 14, p. 626 seq.). 139. The bank notes, according to article 3 of the bank law, were issued up to 1906 in series of 1,000 marks and 100 marks, whereas under the Imperial law of February 20, 1906, series of 50 and 20 marks were allowed, the amount of which, however, according to the declaration made in the Reichstag, remains at present limited to 300,000,000 marks. 140. According to the text of the Supplementary Bank Law of the ist July, 1909. (Formerly it read: "in exchange for German legal tender money.") 141. The 19,416 private giro accounts carried on March 31, 1908, included 6,366 accounts belonging to commerce, transport, and insurance; 7,763 accounts belonging to industries and trades; 369 accounts belonging agriculture and allied trades; 936 accounts of joint-stock banks; 2,31 accounts of bankers and financial businesses of all descriptions. 142. The total turnover in 1908 amounted to 269,946,259,800 marks. 143. Exclusive of the other clearing houses existing in 113 towns, the total turnover of which amounted in 1907 to 249,258,000,000 marks. 144. That is the turnover in receipts and expenditures in the giro, transfer, deposit, bill, and collateral loan business, in discounted and col- lected securities, and in other business of every description transacted with authorities and private persons. 145. As far as Germany is concerned it is incorrect to speak of unsecured bank notes, for bank notes without any security whatever do not exist there. (Article 17 of the bank law). 146. Cash in the sense of article 9 of the bank law consists of metal (Metallvorrat, see note 147), treasury notes of the Empire, and bank notes of the four note-issuing banks. 147. "Metal in hand" consists, according to articles 9 and 17 of the bank law, of current German money, gold in bars or in foreign coins, the pound fine (German) being calculated at 1,392 marks. 148. Concerning these reasons, see my remarks before the Bank Inquiry Commission of 1908, on points I-V of the question sheet (Berlin, 1909), P- 259- 149. As a rule a continued outflow of gold into foreign countries can only take place when the balance of payments is unfavorable to Germany and the quotations on foreign bills threaten to surpass the upper gold point or have surpassed it, so that the export of gold becomes remunerative. (Se National Monetary Commission my statements in the Proceedings of the Bank Inquiry Commission, Berlin, 1909, p. 71.) 150. See my statements in the Proceedings of the Bank Inquiry Com- mission, p. 70. 151. Highest amount (December 31, 1907), 364,297,700 marks; lowest amount (January 23, 1907), 54,090,000 marks. The figures for December 31, 1907, include a lombard loan of 67,630,200 marks to the Preussische Zentral-Genossenschaftskasse. 152. The quota has been exceeded in 1881-1885 ny e times by a total of 92,795,000 marks; 1886-1890 ten times by a total of 585,771,000 marks; 1891-1895 four times by a total of 253,598,000 marks; 1896-1900 seventy- one times by a total of 8,184,274,000 marks; 1901-1905 thirty-two times by a total of 4,229,393,000 marks; 1906 seventeen times by a total of 3,547,485,000 marks; and 1907 twenty-five times by a total of 5,376,670,000 marks. During 1907 the note circulation of the Reichsbank exceeded its quota by more than 58,000,000 marks on an annual average; on December 31, 1907 (a very abnormal year), the excess above the quota of notes exempt from taxation attained the record amount of 625,974,363 marks. 153. The literature of cartels is so extensive that it is almost impossible to survey it. In an appendix to the second edition (German) of this book a list of the most important cartel literature from 1883-1905 was given. 154. Menzel (Report at the general meeting of the Verein fur Sozial- politik, 1894, p. 31 seq., and "Die Kartelle und die Rechtsordnung," p. 12 seq.) shows that associations for the limiting of competition, and for the monopolizing of certain branches of trade, industry, and transportation existed as far back as mediaeval and ancient times. He refers to the two constitutions, 473 A. D. and 483 A. D., in the times of the Roman Empire (Cod. lib. 4. Tit. 59) under the title "On monopolies, and illicit agreements of traders, also on prohibited and unlicensed agreements of tradesmen, employers, and bath-keepers." The constitution of Emperor Zeno, 483 A. D., deals with monopolies not only in food (especially corn) but also in articles of common use and labor. In the legislation of the ancient German Empire, the Imperial decrees of 1512, 1524, 1530, and 1532, and the imperial police regulations of 1548 and 1577, provide severe penalties for "Monopolia und schadlichen Furkauf," (monopolies and harmful sale). " However, they do not appear to have met with any notable degree of success." (Report, p. 34; separate edition, p. 14.) The Gewerbeordnung does not contain any clause for cartels similar to article 152 regarding labor contracts. 155. As early as 1862 the cartel of Rhenish tin-plate factories, as well as the Cologne tin-plate combine, were in existence. To them was added, in 1863, the German rail combine. The beginning of the German salt works cartel dates from 1868, the potash syndicate from 1870 (Bucher in the Publications of the Verein fur Sozialpolitik, LXI, pp. 141-142). 816 T h e German Great Banks 156. Consequently (as opposed to Sonibart, Deutsche Volkswirtschaft, 2nd ed., p. 344), the fact that many cartels were formed only after crises, and to some extent at the beginning of more prosperous times is only a seeming deviation from this rule. Brentano (Proceedings of the Verein fur Sozialpolitik, LXI, p. 176) calls the cartels "a product of necessity." He says: "The necessity of cartels is rooted to-day in the constant growth of fixed, untransferrable capital in distinction to the predominant liquid capital of former times." He does not fail to point out, however, that this, of course, refers only to the cartels of producers and not to the cartels of traders. 157. See among others Stieda, Schriften des Vereins fur Sozialpolitik, LXI, p. 5; Kleinwachter, Die Kartelle (1883), p. 126, and in the Hand- worterbuch der Staatswissenschaften, 2nd ed., Jena, 1900, vol. V, p. 39; Jos. Grunzel, Uber Kartelle (1902, pp. 8 and 12). 158. See especially P. F. Aschrott, Die amerikanischen Trusts als Wei- terbildung der Unternehmerverbande, in Braun's Archiv fur soziale Gesetzgebung und Statistik (1889), vol. II, p. 383-418, and Jeremiah W. Jenks, Die Trusts in den Vereinigten Staatenvon Amerika (Conrad's Jahrb. f. Nat.-Oek. und Stat., 3rd. series, vol. i, p. i seq., 1891). 159. Tariff measures, however, in so far as they are intended to check an abusive business policy on the part of the cartels that is, by reducing or moderating import duties on cartel products, or by introducing export duties on cartel products are always a two-edged sword, since they react in other directions, and a doubtful as well as questionable weapon, because they strengthen foreign competition. Some of these objections (although not all) apply to the combating of an incorrect cartel policy by means of railway tariffs, i.e., through facilitating the importation of competing prod- ucts through lower freight rates, and rendering the exportation of cartel-made articles more difficult through higher freight tariffs. Other restrictive means in the economic field would be the promoting of competitive concerns, the acquisition of such undertakings by the State, or the endeavor to obtain as decisive an influence as possible on the price policy of cartels through state participation in cartel undertakings. (This experiment was to have been made in the well-known " Hibernia" case.) A further means would be the promotion of cartels of consumers. A "smaller remedy" for relieving the finishing industry (" weiterverarbeitende Industrie") somewhat from the pressure of raw material cartels by means of duty-free importation of articles destined for re-exportation after they have undergone a finishing process exempt from customs duty ("zollfreier Veredlungsverkehr") is of service only to export industries, and then only to an inconsiderable extent. 160. See von Halle, loc. cit., p. 47. 161. Some of these complaints can only be remedied by combinations of consumers, which in the face of the cartels of producers are becoming more and more an urgent economic necessity, as well as by the better organization of the distributing and commission agencies. 90311 ii 53 817 National Monetary Commission 162. Reichstag Publications, nth legislative period, II session, 1905-6, No. 4. 163. Ibid., nth legislative period, II session, 1905-6, No. 351. 164. Ibid., 1 2th legislative period, I session, 1907, No. 255. 165. Ibid., i2th legislative period, I session, 1907-1909, No. 1019. 1 66. It is exceedingly interesting to note that these two charges have also been brought against the United States Steel Corporation founded in 1901. Glier demonstrates convincingly in his treatise "Zur gegenwartigen Lage der amerikanischen Eisenindustrie," written in February, 1908 (Conrad's Jahrb., Ill series, vol. 35, p. 587 seq.), that the corporation displayed great moderation in the fixing of prices of manufactured prod- ucts during the first boom (1901 to 1902-3), although the prices for foundry raw iron which the corporation neither produced, bought, nor sold, rose by about 34 per cent (pp. 599-601); it held, however, tenaciously to its high prices (a proceeding approved of by Glier) during the period of reaction (1903-4), for a reduction in price would not have caused a greater demand. 167. Although the United States Steel Corporation during the last crisis refrained in the main from selling to foreign countries and endeavored to bring about a recovery solely through enormous limitations of output, the chief reason for such procedure was that foreign markets at the time were not capable of absorbing goods even at the lowest .prices. Subsequent events have proved, however, that this policy was not able to restore a healthy tone to the American market, so that in the event of another crisis a different policy may be pursued by the Americans. 1 68. See the remarks of Director Mannstaedt in the "Verbal delibera- tions" (" kontradiktorische Verhandlungen") concerning German cartels, Part 6, "Verhandlungen liber den Halbzeugverband am 2. und 3. Decem- ber 1903," p. 465. I consider these remarks to be as correct as they are important. 169. That the so-called "mixed" ("gemischt") works suffered less than the "pure" ("reine") works, and the reasons therefor, are well known. 170. The Rhenish- Westphalian and the Siegerland Pig Iron syndicates ceased to exist, for the time being at any rate, on January i, 1909, certain difficulties preventing their prolongation ; on the other hand, a plate-glass sale combine was formed among a number of Siegerland works. As regards the Upper Silesian Pig Iron Syndicate, see note 171. The manufacturers of pig iron in Rhineland and Westphalia are therefore in the same position they were before the nineties, namely in a state of free competition. Neither has a prolongation of the Lorrain-Luxemburg Pig Iron Syndicate hitherto proved feasible. 171. For what follows see Volcker, L'Etat actuel de 1'industrie side- rurgique allemande et son organisation (Revue Economique Internationale, vol. Ill, No. 4, December 15-20, 1904, p. 727 seq.), and J. Kollmann, Der Stahlwerksyerband (in the "Nation" 22d year, Nos. 18-22, February 4-25, 1905). Meantime hearings ("kontradiktorische Verhandlungen") have taken place in the Imperial Office of the Interior regarding the Stahl- 818 T h e German Great Banks werksverband-Akt.-Ges. at Diisseldorf, and the Oberschlesischer Stahl- werksverband (Limited) in Berlin. Most of the Upper Silesian Works, quitting the last-mentioned union in April, 1907, entered the Diisseldorfer Stahlwerksverband, and subsequently founded, on June 27, 1907, the Oberschlesische Stahlwerks-Gesellschaft (Limited) in Berlin for the com- mon sale of the products B which had been released (freigegeben) by the Diisseldorfer Stahlwerksverband. 172. Further, the shortening of the time of payment for domestic buyers to fifteen days after delivery (foreign buyers have to pay immediately after presentation of bills of lading), and the limitation of discount for domestic buyers (no discount is allowed to foreign customers) will exercise a favor- able influence if really carried out, not only on the Stahlwerksverband itself but far beyond its domain. On the other hand, a great and serious defect in the organization of the Stahlwerksverband consists in its placing on the market (at present) only 3 groups of its products, whereas the bal- ance (products B), principally coarse and fine sheet iron, wire, bar iron, and pipes, are sold by the works themselves at their own prices; the products, however, are alloted among the different works according to a fixed quota. Products B cause keen competition among the various works, with the exception of rolled wire, for which there is a special syndicate, whereas for the drawn wire manufactured from the rolled wire, a price convention has been established since the beginning of January, 1909. 173. "Die Unzulanglichkeit der heutigen Schutzzollgesetzgebung fur die Eisenindustrie." 174. In the rail cartel, the English share was fixed at 53.50 per cent, the German share at 28.83 P er cent, and the Belgian at 17.67 per cent. The accession of the French works (later on) caused the total to be raised to 104.8 per cent for the first year, to 105.8 per cent for the second year, and to 106.4 per cent for the third year, in which the French participated to the extent of 4.8, 5.8, and 6.4 per cent respectively during the three years. Germany's share, after the accession of the American works, amounted to 21 percent. In the girder cartel (from which the English kept aloof) 73.45 per cent was allotted to the Germans, 15.05 per cent to the Belgians, and 11.50 per cent to the French; the latter, however, were to receive a larger quota were the French exports to exceed those of 1903. 175. See L. Glier: Zur neuesten Entwicklung der amerikanischen Eisenindustrie, in Schmoller's Jahrbuch f. Gesetzgebung u. Verwaltung, 28th year, No. i, p. 150 seq.; earlier articles see ibid., 27th year, No. 3, p. 229 seq., and No. 4, p. 43 seq. 176. Sombart (Deutsche Volkswirtschaft, 2nd ed., p. 203) also says: " Doubtless a good share of the growth of German economic activity may be ascribed to this interest taken by banks and bankers in productive economic activity, hampering as it may have been for the development of the banking business proper (?). Banks have been directly the promoters of the spirit of enterprise in Germany; they have been pacemakers for industry and trade." 819 National M on et ar y Commission 177. The statement made by Paul Wallich (loc. cit., pp. 6, 25) that in the beginning of 1870 the Discontogesellschaft had the largest capital and the Darmstadter Bank the next largest is thus seen to be erroneous. 178. The capital of the Mitteldeutsche Kreditbank originally (in 1856) amounted to 8,000,000 thalers, of which 3,000,000 remained in the hands of the institution, while in 1859 1,000,000 thalers' worth of the bank's own stock was redeemed. In 1869, that is to say, near the end of the first period, the paid-up capital of 4,000,000 thalers was increased by 1,000,000 to a total of 5,000,000 thalers, equal to 15,000,000 marks. 179. This was the last Konzession granted to a domestic bank, since the concession system was abolished soon after. 1 80. Compare Max Wirth, Handbuch des Bankwesens, 3d ed. Cologne, 1883, p. 377. It may be noted in this connection, that this book, though frequently quoted as an authority, is in many points superficial and unrelia- able. In particular, the author's judgments and conclusions are largely biased by his strong prejudice against the credit banks and should there- fore -be accepted with caution. For that matter, the author's own text under the heading "German private banks" comprises, all told, about 5 pages (pp. 376-379 and 398-399); the rest is statistical material. 181. Compare, for example, Georg Schanz, article "Banken" in Elster's Worterbuch der Volkswirtschaft, Vol. I, p. 310. 182. Compare Waldemar Miiller, Die Organisation des Kredit-und Zah- lungsverkehrs in Deutschland, in Bankarchiv, Vol. VIII (1909), Nos. 7, 8 and 9. 183. Ibid. 184. In English banking literature the term "banker" is applied to a person who obtains outsiders' funds for the purpose of circulating them for profit; in case a person loans his own capital, he is regarded as a capi- talist or a merchant, but not a banker. 185. On this point see among others Ad. Wagner in Schonberg's Hand- buch, I, p. 437; Adolph Neumann-Hofer, Depositengeschafte und Deposi- tenbanken (Leipzig, C. F. Winter, 1894), p. 39 et seq.; M. Schraut, Die Organisation des Kredits (Leipzig, Dtmcker & Humblot, 1883), p. 32. 1 86. Since May 31, 1879, deposits at the Reichsbank, in conformity with the well-grounded practice of most other central banks of issue, no longer bear interest. As a result deposits repayable after notice have become quite insignificant. At the end of 1900 they amounted to only 319,881 marks, as shown in Table 43, p. 337, of the jubilee memoir of the Reichs- bank (1876-1900). On the contrary, the other deposits (on giro account, exclusive of giro balances of the imperial and state treasuries) at the end of 1908 amounted to 285,303,000 marks. 187. Compare Waldemar Miiller, loc. cit. (Bankarchiv, 8th year. No. 8, p. 1 1 6.) 1 88. It is true that, according to a statement by an expert before the bank inquiry commission, a certain percentage of the funds deposited at the savings banks (reported to be as much as one-third of the total) likewise 820 The German Great Banks bear the same character of temporary deposits. But, if this be so, it means that these very depositors, who are said to belong to the middle and higher classes, by taking these funds to the savings institutions and not to the banks, deliberately intend to give to these funds the character of saving deposits and not of bank deposits. 189. Compare Waldemar Miiller. (Bankarchiv, 8th year, No. 8, p. 117.) 190. Compare Deutscher Okonomist, July 28, 1900, p. 466, and Decem- ber 2, 1905 (23d year, No. 1197, article Das Depositengeschaft der deut- schen Banken); also Robert Franz, "Die deutschen Banken im Jahre 1907" (reprint from the Deutscher Oekonomist, Berlin, 1908), p. 14; and Waldemar Miiller, in Proceedings of the Third General Convention of German Bankers at Hamburg, Sept. 5 and 6, 1907, p. 107. 191. Proceedings of the Third General Convention of German Bankers, pp. 107, 115; Deutscher Okonomist, July 28, 1900, and Dec. 2, 1905; Rob. Franz, Die deutschen Banken in Jahre, 1906, p. n; also Caesar Straus, Unser Depositengeldersystem und seine Gefahren, Frankfurt, 1892, p. 5, who states that "up to the present time it was in the main large industry and the wholesale trades which were the depositors of the German bankers," i. e. the same classes that take part in the giro business of the Reichsbank. 192. They also include the so-called hoards (see Ad. Wagner, loc. cit., p. 61, et seq.), that is to say, quantities of precious metals which have not yet found employment, and the amounts held ready for the purpose of liquidating international payments, or for the arbitrage business. 193. The report of the A. Schaaffhausen'scher Bankverein for the fiscal year 1907 gives the total amount of deposits as 72,335,365 marks and adds that "of these deposits invariably by far the larger part consists of interest-bearing funds turned over to us for long terms, varying for the most part from six months to one year." 194. Otto Warschauer in Conrad's Jahrbiicher, 3d series, Vol. XXVII, p. 480 (1904). See however the correct reasoning by the same author on p. 35 of his book: Physiologie der deutschen Banken, which appeared only one year before. 195. The total amount to the credit of clients in the check departments of the German post office was 70,955,349.88 marks on Dec. i, 1909. 196. This explains, among other things, Lansburgh's discovery (Das deutsche Bankwesen, p. 8) that in the case of the smallest joint-stock banks, with a capital up to 100,000 marks per bank, the amount of out- siders' moneys, i. e., deposits and credit accounts, exceeds their own capital about thirty-one times, while in the case of the large banks, with a capital of over 10,000,000 marks each (except the large Berlin banks) the ratio is only 2 to i. Hence he infers that it is not the larger capital, but publicity, that attracts deposits to the joint-stock banks, inasmuch as an increase of capital is accompanied by a percentual decrease of outsiders' moneys. 197. According to the "Materials bearing on the development of pros- perity in Germany during the last generation" (Appendix III to report 821 National Monetary Commission on the imperial finance reform bill of 1908, No. 1043 of Reichstag docu- ments) pp. 1 8 and 19. 198. Statistisches Jahrbuch fur das Deutsche Reich, 1903, p. 187. 199. Ad. Weber, Depositenbanken und Spekulationsbanken. Leipzig, Duncker und Humblot, 1902, p. 82. 200. Edgar Jaffe, Das englische Bankwesen, 1905, p. 135. 201. Verhandlungen des III Allgemeinen Deutschen Bankiertages, p. 96. 202. On not less than 11,117,700 accounts. 203. For 1905 data see Paul Marcuse's Beobachtungen iiber das Noten- bankwesen in den Vereinigten Staaten von Amerika, Berlin, 1907, p. 123. 204. Frequent references are made by German writers to these enact- ments (especially regarding the cash reserve) in advocacy of laws and regulations to govern the German bank deposit business. These refer- ences are entirely unwarranted, for the American regulations mentioned in the text (p. 204) were intended to regulate not the deposit business of the National banks, but solely their note operations. (See Neumann- Hofer, loc. cit., p. 35.) 205. I have no means of verifying the data of Le Figaro of May 20, 1906, according to which at the end of 1905 the 25 largest credit banks held 5,000,000,000 francs of deposits (the meaning of the term is not quite clear), an increase of more than 3,500,000,000 francs over the corresponding amount in 1885, when 1,159,005,000 francs were reported. In Austria, on the other hand, no systematic fostering of the deposit business appears yet to have commenced. According to an address by Karl Morawitz, president of the Anglo-Austrian Bank, before the Austrian Economic Society (Bank Archiv, Year VI, no. 5, p. 64) the deposits in all Austrian credit banks amounted in 1895 to only 250,000,000 kronen ($50,750,000), while the deposits in the savings banks totalled about 5,000,000,000 kronen ($1,015,000,000). 206. Joh. Fr. Schar., Die Bank im Dienste des Kaufmanns (Leipzig, 1909, G. A. Gloeckner), pp. 122-126. 207. Deposits in the Darmstadter Bank since 1894 comprise all daily- due liabilities. 208. Data taken from Deutscher Oekonomist, which up to 1908 in- cluded among the Berlin banks the following institutions: Deutsche Bank, Disconto-Gesellschaft, Darmstadter Bank, Dresdner Bank, A. Schaaff- hausen'scher Bankverein, Berliner Handelsgesellschaft, Commerz-und Disconto-Bank, Nationalbank fur Deutschland besides five institutions of totally different character viz: Bank des Berliner Kassenvereins, Berliner Maklerverein, Amerika Bank (now liquidated), Deutsche Ueberseeische Bank and Deutsche Treuhandgesellschaft (German Trust Company). Since 1908 the five banks last named no longer figure among the " Berlin banks" in the compilations of the Deutscher Oekonomist. 209. Data taken from Robert Franz, Die deutschen Banken im Jahre, 1906, p. n, und im Jahre, 1907, p. 14. 822 The German Great Banks 210. Compare, among others, Ad. Wagner, Beitrage zur Lehre von den Banken (Leipzig, 1857, Leopold Voss), p. 70: "The banks by means of credit on the basis of deposits may raise the purchasing power of a country." 211. Compare Rud. Eberstadt, Der deutsche Kapitalmarkt (Leipzig, 1901, Duncker & Humblot), p. 117 et seq. 212. Compare Felix Hecht, Die Mannheimer Banken 18701900 (Leip- zig, 1902, Duncker & Humblot), pp. 39, 40. 213. See Felix Hecht, loc. cit., p. 40. 214. Ad. Weber, Die Rheinisch-Westfalischen Provinzialbanken und die Krisis, loc. cit., p. 342. 215. K. v. Lumm, Die Kntwicklung des Bankwesens in Elsass-Lothrin- gen, 1901, p. 165. 216. Joh. Fr. Schar, Die Bank im Dienste des Kaufmanns, p. 136. 217. Edgar Jaffe, Das englische Bankwesen, p. 143. 218. Alfred Lansburgh, Die Verwaltung des Volksvermogens durch die Banken. Reprint from "Die Bank" (Berlin-Charlottenburg, 1908), p. 13 et seq. 219. The money circulation through the German post office, which is still carried on to a large extent by means of cash-shipments, amounted in 1907 to 13,500,000,000 marks, i. e. to about 37,000,000 marks daily. The money required by the mortgage business, which until recently was also on a cash basis likewise reaches enormous amounts. Thus in Prussia alone the yearly amount of mortgages recorded averages about 4.5 billion marks, while the amount of mortgages cancelled each year is about 2.3 billion marks. 220. Recently many savings banks have made efforts to extend their activity along commercial banking lines by introducing the check system (in accordance with article 2, sec. i of the check act). In particular the tenth assembly of the Union of Baden Savings Banks, which met at Miill- heim, Baden, on November 10, 1908, adopted resolutions, recommending the use of checks in the case of saving deposits, and proposing even the establishment of regular current accounts including the granting of credit. See the order of the Prussian minister of finance, dated April 20, 1909. 221. See especially Siegfried Buff, Der gegenwartige Stand und die Zukunft des Scheckverkehrs in Deutschland (Munich, 1907, E. Reinhardt). 222. In addition, 14,497 checks were redeemed which were not booked on check account, making a total of 61,816. 223. Gamp, Der landwirtschaftliche Kredit und seine Befriedigung (The needs of agricultural credit and how to meet them). Berlin, 1883. 224. Verhandlungen des Kgl. (Preuss.) Landes-Okonomie-Kollegiums, 1906, p. 17. 225. The most important institutions for agricultural credit are the following: The Imperial Federation of Agricultural Cooperative Societies of Germany (Reich sverband der deutschen landwirtschaftlichen Genossen- schaften in Deutschland) and its cooperative agricultural bank at Darm- stadt, with about 11,896 cooperative credit societies, savings and loan 823 National Monetary Commission banks, belonging in 1906 to the federation and its sub-federations; the General federation of cooperative rural societies for Germany (Generalver- band landlicher Genossenschaften fur Deutschland [E. V.]) at Neuwied with 4,159 cooperative credit societies, savings and loan banks belonging in 1906 to the federation and its sub-federations; the Bavarian state Fed- eration of agricultural loan associations and other agricultural coopera- tive societies (Bayrischer Landesverband landwirtschaftlicher Darlehns- kassenvereine und sonstiger landwirtschaftlicher Genossenschaften) with unlimited liability at Munich, with 2,259 cooperative societies, savings and loan banks in 1906; the Federation of agricultural cooperative societies of the Grand Duchy of Baden at Karlsruhe (Verband landwirtschaftlicher Kreditgenossenschaften im Grossherzogtum Baden), with 384 cooperative societies, savings and loan banks in 1907; the Federation of Wurttemberg cooperative societies (Verband wiirttembergischer Kreditgenossen- schaften) at Ulm, with 90 cooperative societies in 1907; the Federation of cooperative societies of the Provinces of Posen and West Prussia (Ver- band der Erwerbs- und Wirtschaftsgenossenschaften in den Provinzen Posen und Westpreussen) at Posen, with 225 cooperative societies in 1907; and in part of course also the (Schulze-Delitzsch) General federation of German cooperative societies (Ltd.) founded on self help (Allgemeiner Verband der auf Selbsthilfe beruhenden deutschen Erwerbs- und Wirt- schaftensgenossenschaften), with 917 cooperative societies in 1907, the members of which constitute about one-third of the total membership in all (about 16,000) cooperative credit societies. For details on the above see "Materialien zur Beurteilung der Wohlstandsentwicklung Deutschlands im letzten Menschenalter " (Data bearing on the progress of prosperity in Germany during the last generation), vol. Ill of the Appendices to the Imperial Finance Reform Bill, of 1908, pp. 21-27. 226. See Lansburgh, loc. cit., pp. 31-32. 227. Waldemar Miiller, Die Organisation des Kredit-und-Zahlungs- verkehrs in Deutschland (The organization of the system of credit and payment in Germany) in Bank-Archiv, Vol. VIII, 1909, No. 7, p. 99. 228. Waldemar Miiller, ibid. As regards the Reichsbank, according to the returns made to the bank inquiry commission, there were in the entire German Empire 70,480 firms and individuals entitled to credit in its bill business. Of these (a) merchants and trading companies constituted 41 per cent, or in all 29,020 firms and individuals for the entire German empire; (b) manufacturers and industrial companies constituted 31 percent or 21,887 firms and individuals in the Empire; (c) land owners and estab- lishments engaged in agriculture and the manufacture of agricultural products 14 per cent, 9,589 firms and individuals in the Empire; (d) co- operative societies of all kinds i per cent or 883 firms and individuals in the Empire; (e) capitalists (Rentner), artisans, and similar tradesmen 13 per cent, or 9,101 firms and individuals in the Empire. According to the same official returns, the loans on collateral security made by the bank and outstanding on Dec. 31, 1907 (on 5,666 collateral certificates) amounted 824 The German Great Banks to a total of 364,297,700 marks. Of this total, 1,972,200 marks were loaned to agriculture and allied rural industries (on 249 collateral certificates). 229. Thus among others Lansburgh in an article in "Die Bank" pub- lished separately under the title "Die Verwaltung des Volksvermogens durch die Banken" (The administration of the national wealth by the banks), p. 26, which I shall have occasion to notice later. 230. Materialien zur Beurteilung der Zusammenhange zwischen dem offentlichen Schuldenwesen und dem Kapitalmarkt (material to elucidate the connection between the public debt system and the capital market). Appendices to Imperial finance reform bill of 1908, Part IV, No. 1087 of Reichstag Documents, p. 249. 231 . "According to competent estimates," foreign countries had absorbed by the middle of 1908 no more than 400,000,000 marks of imperial bonds and only between 80,000,000 and 105,000,000 marks of Prussian consols. (Ibid, p. 247, II.) 232. See Felix Hecht, Die Mannheimer Banken, 1870-1900, Leipzig, Duncker & Humblot, 1902, p. 23: "Each credit bank . . . wants to be studied by itself." 233. Thus Felix Hecht, Lehren der Krisis (Lessons of the Crisis) (Sept. 15, 1903), loc. cit, p. 140. The same author asserts however in his paper before the general meeting of the Mitteleuropaischer Wirtschaftsverein, Sept. 15, 1908 (Publications of the Verein, No. 6, p. 75) that the German tendency to engage in extensive oversea commerical and industrial enter- prises has "undoubtedly" taken much German capital from domestic industrial enterprises and from legitimate domestic credit." 234. Adolph Weber justly says: " No country has had so rich or so bitter an experience in the results of unsound credit-granting as England." (Depositenbanken und Spekulationsbanken, p. 109.) 235. Alfred Lansburgh, Die Verwaltung des Volksvermogens durch die Banken (reprint from "Die Bank," Beiiin-Charlottenburg, 1908). The merit of this book is that it has facilitated the study and appreciation of the smaller banks, with a capital of less than 1,000,000 marks down to 100,000 marks, and even of the smallest banks with a capital of less than. 100,000 marks, by supplying careful statistics (Tables IV and V and explanatory notes, which in the main are to the point). It should be said, however, that in this field Der Deutsche Oekonomist (mentioned by the author on p. 24) had already done valuable preliminary work, though limited to the capital stock and the deposits (fremde Gelder) exclusive of reserves. Adolph Weber, in Die Rheinisch-Westfalischen Provinzialbanken und die Krisis (the Rhenish- Westphalian Provincial Banks and the Crisis), 1903, p. 362-371, which Lansburgh does not mention, was, so far as I know, the first to study the activities of the small banks of this district in detail and with valuable results. By supplying the omissions of the Okonomist and by analyzing the small banks of all Germany, on the basis of their balance sheets and their activity, Lansburgh has performed a valuable service, par- ticularly from the social standpoint. We must not forget however, that 825 National Monetary Commission the deposits (fremde Gelder) in all these small banks amount to no more than 4 per cent of the deposits of all credit banks. In his later work, containing about the same material, the title "The German Banking System" is inappropriate and misleading, for the entire text covers only 63 pages, of which 12 are devoted to the small banks (pp. 22-23). Since the author admits this in his preface, he ought to have adopted a more appropriate title. In passing I wish to note that I do not share the author's opinion (p. 7) that there are in Germany 6,000 private bankers. According to my estimate the (purely) private bankers number about 4,000. 236. Especially on page 55 of the reprint from the periodical "Die Bank" (Berlin-Charlottenburg), mentioned in note 235. 237. The first point is not regarded by Lansburgh as a very serious reproach, as is evident from his remarks on p. 8: "The old controversy as to whether Germany is to be an agricultural or an industrial state, has long ago been answered by the general development of things. No political upheaval can reverse this development. That would be a misfortune." His wish is solely that the process should go on without shock by way of evolution and not of revolution, and that the available funds of the nation should not be thrust into industry by sheer force. In this he is entirely right. 238. Die Bank, No. 6, June 1908, p. 543. 239. Riesser, Scheckverkehr und Scheckgesetz (Check Circulation and Check Legislation), No. 4 of the " Veroffentlichungen des Mitteleuropa- ischen Wirtschaftsvereins in Deutschland," Berlin, Putkammer und Muhl- brecht, 1907. 240. The causes which compel the German credit banks to extend cur- rent account credit preferably to trade and industry, and only to a slight extent to craftsmen, small traders and agriculturists, have been mentioned briefly before (p. 223 and following). 241. The number of such persons would thus be counter-balanced in a remarkable way by the number of persons who according to the complaints heard in savings banks circles, have been won away from them by the credit banks, one third of whose total deposits are claimed to be made up of "saving deposits." 242. "Die Bank," June, 1908, p. 544. 243. See Herman Mauer, Das landschaftliche Kreditwesen Preussens (The Prussian System of Cooperative Land Credit), (Strassburg, Karl J. Triibner, 1907); Felix Hecht, Die Landschaften und landschaftsahnlichen Kreditinstitute in Deutschland (the Agircultural Credit federations, and similar organizations in Germany), Vol. I, Statistics (Leipzig, Duncker & Humblot, 1908). 244. Die Organisation des langfristigen gewerblichen Kredits (in the Publications of the Mitteleuropaischer Wirtschaftsverein, No. 6, pp. 59-86.) 245. Die Mannheimer Banken, 1870-1900, Leipzig, Duncker und Hum- blot, 1902. Lehren der Krisis. Paper read at the general meeting of the 826 The German Great Banks Verein fur Sozialpolitik, 15 September 1903 (Vol. CXIII of the publications of the Verein fur Sozialpolitik), and monograph on "Die Organisation des gewerblichen langfristigen Kredits (The Organization of long-time industrial credit), 1908. 246. A larger degree of publicity, as for instance the more frequent publication of summary balance sheets (Rohbilanzen), while practicable per se, is not likely to throw much more light on the condition of the institution 247. Berlin, Puttkammer & Miihlbrecht, 1909, p. 340361. 248. In "Die Lehren der Krisis," p. 141, and in the monograph on "Die Mannheimer Banken," p. 45 249. Ad. Weber, Die rheinisch-westfalischen Provinzialbanken, in the Publications of the Verein fur Sozialpolitik, Vol. CX, p. 344. In this monograph long before Lansburgh, the activity of the small banks in the Rhine country and Westphalia has been treated in great detail and duly appreciated, pp. 362-371. 250. So far as we can foresee, this policy of the mortgage banks (except in a few instances where loans are made on warehouses) is not likely to be changed, even if it be true that the mortgage bank act (art. 12) does not stand in the way of loans on factories, as Ernst Sontag tried to prove (Die Griindung einer Industrie-Hypothekenbank [The Establishment of a mort- gage bank for Industry]. Kattowitz, Gebr. Bohm, 1909). The mortgage banks are not likely to regard factories as easily marketable risks nor must they underestimate the risk that the buildings may remain idle and yield no return. 251. Waldemar Miiller (Bank-Archiv No. 7, Jan. i, 1909, p. 98). 252. See Otto Jeidels, Das Verhaltnis der deutschen Grossbanken zur Industrie (The relation of the great German banks to industry) Leipzig, Duncker und Humblot 1905, p 34. In just such cases however, the central institution proposed by Hecht would not be authorized to inter- vene (Veroffentlichungen des Mitteleuropaischen Wirtschaftsvereins, Berlin, 1908, vol. 6, No. 5, p. 79). 253. We may readily suppose, for instance, that the repayment in annuity form of long-time industrial loans granted by the credit banks may be made a normal part of the contract in the same way as is proposed in connec- tion with the central bank. 254. The question of the profitableness of the enterprise (Veroffent- lichungen, p. 85) which Hecht prefers to leave untouched would of course be largely affected by the greater or smaller amount of capital stock; but on this point, too, Hecht has nothing to say. 255. This is also the opinion of Karl Diehl, Der Bau einer neuen Organi- sation des langfristigen industriellen Kredits (Plan for a new organization of long-time industrial credit), in the Bank-Archiv of March 15, 1909, Vol. VIII, No. 12, p. 190. The article contains a number of other perti- nent criticisms of the proposed central institution. See also Frankfurter Zeitung (Abendblatt) of Sept. 25, 1908, and the criticisms of Bank Director 827 National Monetary Commission Freiherr von Pechmann, in the Veroffentlichungen des Mitteleuropaischen Wirtschaftsvereins, No. 6, pp. 86-95 ; also A. M. Ernst Sontag, op. cit 256. Eugen Lopuszanski, Einige Streiflichter auf das osterreichische Bankwesen (Some side-lights on the Austrian bank system) in Volks- wirtschaftliche Wochenschrift of Al. Dorn, Vol. L, No. 1305, Dec. 31, 1908, P- 437- 257. See Veroffentlichungen des Mitteleuropaischen Wirtschaftsvereins, No. 6, p. 75. 258. It is to be noted, however, that in the transactions of the Mit- teleuropaische Wirtschaftskonferenz in Berlin, May 17 and 18, 1909, Hecht himself to all appearances assumed the necessity of legislative regulation of the matter, which he evidently had not contemplated before. 259. Security in the shape of a guarantee or a life insurance policy pledged is of little practical consequence in connection with the bonds discussed above, so that we may safely ignore such cases here. Loewy (Rawitsch) is of a different opinion (Bank-Archiv, Vol. VIII, p. 241, et seq.); on principle he is in favor of the idea of a central institution. 260. The law (art. i) becomes applicable the moment it is found that the object of the activity of the enterprise is actually directed to this end. It makes no difference whether this object of the undertaking is specifically indicated in the charter or by-laws or not; otherwise it would be very easy to make article i of the mortgage bank act inoperative, by simply omitting to mention in the charter or by-laws this object of the undertaking. 261. Ernst Sontag, op. cit. 262 Veroffentlichungen des Mitteleuropaischen Wirtschaftsvereins, No. 6, p. 66. 263. See Felix Hecht, Denkschrift iiber die Organisation des gewerb- lichen langfristigen Kredits, p. 10. 264. See Siegfried Buff, Das Kontokorrentgeschaft im deutschen Bank- gewerbe (current-account transactions in German banking). J. G. Cot- tasche Buchhandlung Nachf., Stuttgart & Berlin 1904 (issued as No. 60 of the Volkswirtschaftliche Studien, edited by Brentano & Lotz). 265. See Joh. Friedr. Schaer, Die Bank im Dienste des Kaufmanns (the bank and its service to the merchant), Leipzig, G. A. Gloeckner, 1909, p. 19. 266. In its very first annual report (1853) the Darmstadter Bank stated that in accordance with the instructions of the government of the Grand Duchy of Hesse, the authorities of the customs department granted credit on customs duties to all merchants on their bills provided with the guar- antee (Aval) of the bank. 267. We do not agree with Joh. Fr. Schaer's view (loc. cit., pp. 23-24) that under the provisions of the law governing bank deposits, "the bank having the care of securities, is entitled to represent the shares at. ' 1 -^ gen- eral meeting, unless the depositor has signified his wish to the contrary" (see Riesser, Kommentar zum Bankdepotgesetz, 2d ed., Berlin, 1906, Otto Liebmann, p. 42, sec. 3, d, /?). On the contrary the bank must not assume 828 The German Great Banks to represent the shares unless specifically authorized by the depositor, for such representation involves a "disposition" of the shares, limited though it be, to which the bank taking care of the securities is not entitled. The authorization need not however be made out in this case in the form prescribed in article 2 of the bank deposit law. 268. Bank-Archiv, Jan. 15, 1909, Vol. VIII, No. 8, pp. 114-15. 269. Substantially the same description is given by Joh. Friedrich Schaer, loc. cit., p. 46, B, a. 270. For the Deutsche Bank see circular (No. 4) reprinted by Joh. Friedr. Schaer, loc. cit., p. 130. 271. The terms for current accounts of the Disconto-Gesellschaft, the Dresdner Bank, and the Berliner Handelsgesellschaft, in the form in which they were in force immediately before 1904, are reprinted in Siegfr. Buff, loc. cit., pp. 110-125. 272. See Waldemar Miiller, Bankarchiv, Vol. VIII, No. 8, p. 115, and Joh. Fr. Schaer, p. 74, No. i. 273. Bank-Archiv, Vol. VIII, No. 8 (Jan. 15, 1909), p. 115. 274. See Ad. Weber, Die rheinisch-westfalischen Provinzialbanken und die Krisis, loc. cit., p. 342. 275. See Felix Hecht, Die Katastrophe der Leipziger Bank (The col- lapse of the Leipziger Bank) in "Storungen im deutschen Wirtschaftsleben wahrend der Jahre 1900 ff." (Disturbances in German economic life dur- ing 1900 and the following years), Vol. VI, Geldmarkt-Kreditbanken, p. 384)- 276. In balancing a current account the interest is figured thus: The interest-bearing amounts (the result of multiplying the capital by the number of days and dividing by 100) are first determined, (in Berlin the month is considered as thirty days) and entered on the credit or debit side according as the customer is to be credited with interest or to be debited therewith. The current account is usually kept by double entry and bal- anced daily as far as practicable. 277. See Otto Jeidels, loc. cit., p. 33. 278. See Otto Jeidels, loc. cit., p. 169-171, for an account of the distri- bution by localities and industries of the industrial corporations with which the large banks are connected, either through the appointment of representatives on the supervisory boards of the corporations or by serv- ing as their fiscal offices for the payment of interest and dividends or the redemption of bonds when mature. In spite of his declaration to the contrary, Jeidels overestimates the importance of such fiscal agencies. 279. Robert Franz, Die deutschen Banken im Jahre 1908, (German banks in 1908), p. 22. 280. Even such an arrangement could but seldom be made with the German retailer. Contrary to the custom prevailing in France, he will, as a rule, not allow himself to be drawn upon nor does he give bills. Never- theless he demands long terms of credit and settlement without being 829 National Monetary Commission willing to obligate himself, as in the case of bill credit, to make payment at the end of the period. 281. In England, too, bills of this kind drawn on foreign countries are not discounted by the banks. (See Edgar Jaffe, Das englische Bankwesen [the English banking system] p. 142.) They are at once sold to foreign bill brokers. For other particulars see Jaff6, pp. 123 and 124. 282. According to the Jubilee Report of the Reichsbank (p. 78), this practice explains why the average value of the bills reaching the Reichsbank rose from a minimum of 1,421 marks in 1878 to a maximum of 1,936 marks in 1900. The amounts drawn on banks and bankers are nearly always for very large sums. However in proportion as the large banks are making their way into the provinces by means of their branches, discounting there also the bills of small borrowers, the average amount of the bills discounted declines. 283. Edgar Jaffe, loc. cit., p. 124. 284. Walther Lotz, Die Technik des Emissionsgeschafts, Leipzig. Duncker & Humblot, 1890, p. 58. 285. Heiligenstadt, in the Proceedings of the Bank Inquiry Commission of 1908 on points 1-4 of the question sheet (Berlin, 1909, Imperial Printing Office), p. 25. 286. Under the old stock exchange law, in case of speculation on a cash basis the following method was often resorted to among provincial banks and private bankers. The customer engaged in speculation would make part payment on the securities bought for him and left on deposit with his bank or banker. The balance of the purchase price, which was to be paid at once, would be obtained by having the bank or banking estab- lishment draw on another banking institution, or else, in order to cover up the true character of the bill as a finance bill, the person on whose account the securities were bought would draw on a provincial bank or private banker, that is on his own banker, who w r ould thereupon discount his own acceptance. See W. Prion, Das deutsche Wechseldiskontgeschaft. (Bill discounting in Germany), Leipzig, Duncker & Humblot, 1907, p. 42. 287. See among others Der Deutsche Oekonomist of Aug. 4, 1900, p. 476, July 29, 1905, p. 414, and Rob. Franz, Die deutschen Banken im Jahre, 1907, p. 15 & 1 6. For the Berlin banks, during 1894-1899 the amount fluctuated between one-half and two-fifths. (See Ernst Loeb, loc. cit., p. 267.) 288. Ad. Weber, Depositenbanken, etc., p. 117. 289. Schmoller, Grundriss, II, p. 493. 290. The separation of the acceptances from the avals was not practi- cable because of difficulties in the technique of accounting, the two items appearing combined in the balance sheets of many banks. 291. See W. Prion, loc. cit., p. 53. 292. vSpecial literature : W. Prion, Das deutsche Wechseldiskontgeschaft. Hit besonderer Beriicksichtigung des Berliner Geldmarktes (The German bill discounting business. With special reference to the Berlin money 830 The German Great Banks market). (Leipzig, Duncker und Humblot, 1907.) No. 127 of Staats- und Sozialwissenschaftliche Forschungen, edited by von Schmoller and Bering. An excellent work. 293. This fact, repeatedly established at the hearings of experts before the bank inquiry commission, is also affirmed by W. Prion (loc. cit., p. 32). 294. See W. Prion, loc. cit., p. 61, where he mentions that Hamburg has a quotation for the private discount of prime bills and a special quotation for commercial bills, the margin between them amounting to one-fourth to one-eighth of i per cent ; and the same is true of London, where there is a difference of one-half of i per cent between the quotation of bank bills and of trade bills. 295. This device, hardly perceptible to outsiders, of raising the rate of private discount in individual cases, even though the amount be trifling, may thus be used by the Bourse as a warning signal. In the case of an excessive straining of credit on the part of some bank, it may perform within banking circles the same functions and exert the same influence as the ruder and ostentatious means of a general raise of the official rate of bank discount, in case of a general overstraining of credit. 296. See W. Prion, loc. cit., p. 33. 297. Waldemar Miiller, loc. cit. (Bank-Archiv., Vol. 8), No. 8, p. 117. 298. Loc. cit., p. 51. 299. W. Prion, loc. cit., p. 53. 300. The number of note banks was as follows : 1883-1886,18; 1887,17; 1888, 16; 1889, 14; 1890, 13; 1891-1893, 9; 1894-1900, 8; 1901, 7; 1902-1904, 6; 1905-1908, 5 (Reichsbank, Bayerische Notenbank, Sach- sische Bank, Wurttembergische Notenbank, and Badische Bank). 301. The number of mortgage banks varied between 24 in 1883, 39 i n 1900-1902, and 40 in 1903-1908. 302. See Rob. Franz, Die deutschen Banken im Jahre, 1907, p. 12, and Rob. Franz, Die deutschen Banken irn Jahre, 1908, p. 14 That enumera- tion, however, includes only credit banks having a capital each of at least 1,000,000 marks, while in the case of mortgage banks no such restriction is made. 303. The amounts of bills held by the six great banks of Berlin vary somewhat from those given by W. Prion, loc. cit., p. 208 (514, 559, 671, 697, 742, 740, 914, 1017 million marks). 304. In regard to the figures given above, it is to be noted that in conse- quence of the circulation of bills between central banks and branch banks, certain items have doubtless been counted several times. 305. Edgar Jaff, Das englische Bankwesen, p. 124 and pp. 141-144. 306. Edgar Jaffe, loc. cit., p. 125. 307. Edgar Jaffe, loc. cit., p. 145. 308. The acceptance commission at the foreign banks is one-half per cent. 309. Edgar Jaffe, loc. cit., pp. 148-151. 831 National Monetary Commission 310. It is to be noted that the official discount in London represents a minimum rate of discount, whereas the official rate of discount of the German Reichsbank has rather the meaning of a maximum rate of dis- count, so that the two are not strictly comparable. Furthermore, the Bank of England, unlike the German Reichsbank, reserves the absolute right to decline to discount even "legitimate" bills when not convenient, so that, especially in times of overstrained credit, and when the Bank is planning a raise of discount, it does not discount all the bills presented. Finally, the Bank of England, unlike the German Reichsbank, discounts only the bills of regular customers. Nevertheless the variations in the rates of discount in Germany and England run entirely parallel. How- ever, the rate of discount in England has invariably been higher than in Germany during the last fifty-six years, the proportion during that time being as 100:122. (On an average the difference is 0.63 per cent.) See the exceedingly instructive work by Joh. Fr. Schaer, Zahlungsbilanz und Discont (Berlin, 1908, S. Simon), pp. no and in. On pp. 101 and 102, on the basis of statements by Karl Waidmeyer, general secretary of the Austro-Hungarian Bank, are given the average rates of official discount in England, France, Germany and Austria-Hungary from 1852 to 1907, that is to say, for fifty-six years, the years of crisis being noted, while on p. 107 are given the averages of the official discount of the last five decades for the same countries. The differences in the figures of the rates of discount in Germany as compared with those of England, France and Austria- Hungary, are due, in the foremost place, to the difference of the economic situation and of the balance of payment, as well as to the differences in the organization of the money markets and banks. 311. See W. Prion, loc. cit., pp. 74, 75. 312. Loc. cit., p. 75. 313. See my statements before the bank inquiry commission (Trans- actions of the full commission, under Numbers I-V of the question sheet, Berlin, Ernst Siegf. Mittler & Sohn, 1904), pp. 70, 71. 314. Loc. cit., p. 55. 315. See W. Prion, loc. cit., pp. 77-95. 316. My own views, coinciding with the above, were set forth in the proceedings of the bank inquiry commission, under Numbers I-V of the question sheet (Berlin, 1909), p. 259. By a misprint, the word nickt (not) was omitted in the phrase "je nach den Verhaltnissen des Geld- oder Warenmarktes uberhaupt nicht zu einer Realisierung fiihrt" ("is not realized on, in accordance with the conditions prevailing in the money market or the commodity market"). 317. See W. Prion, loc. cit.. p. 93. 318. Loc. cit., p. 78. 319. Friedr. Leitner, Das Bankgeschaft und seine Technik, Frankfurt- am-Main, 1903, J. D. Sauerlander, publisher, pp. 259-260. 320. Lombard loans to banks and others (bankers and other financial concerns) are greatly influenced by the demands of commerce, industry 832 The German Great B a n and other lines of activity, which demands are largely concentrated in the banks, and are particularly heavy at the close of the year and at other customary dates of settlement (schwere T ermine). As an illustration of this influence it may be mentioned that on December 31, 1907, the total amount of lombard loans of the Reichsbank (in 5,666 pledge receipts) was 364,297,700 marks, distributed as follows: To joint-stock banks (on 497 pledge receipts) 163,100,300 marks, to other money and credit institutions (on 916 pledge receipts) 125,399,000 marks. It is also interesting to note the proportion of lombard loans granted to joint-stock banks and those to private banks, etc., at the two dates of comparison (March 31, 1908, and December 31, 1907). Before the meeting of the bank inquiry commission and to some extent during its proceedings, there was some talk of compelling the Reichsbank to establish a certain limit which must not be exceeded in the discounting of bills and the granting of lombard loans on dates of settlement (schwere T ermine), especially at the close of each quarter, the aim being to improve the condition of the bank. In the course of the proceedings this demand was dropped. In fact, the close of the quarter is precisely the time at which the most legitimate demands of commerce arise, which must be met almost entirely by the granting of short-term credit, a task which the Reichsbank can not shirk, since the very purpose of its existence is "to facilitate payments," while another, though not equally essential part of its functions is "to promote the utilization of available funds" (art. 12, sec. i of the bank act). On this point Waldemar Miiller justly remarks: "To grant credit and issue notes in times of business calm, no central bank of issue with the privileges of the Reichsbank is needed; even so defective a note bank system as that of the United States suffices for that purpose. It is in times of heavy demand and in times of crisis that the bank has to prove itself equal to the task assigned to it by the bank act" (Bank-Archiv, Vol. 8, No. 9, Feb. i, 1909, p. 130). 321. Felix Hecht, Die Mannheimer Banken, p. 40. 322. A. Weber, Depositenbanken und Spekulationsbanken, p 97. 323. Waldemar Miiller, Die Organisation des Kredit- und Zahlungs- verkehrs in Deutschland (Bank-Archiv, 15 January, 1909, Vol. 8, No. 8, p. 116). 324. The portion of the rules and regulations of the Deutsche Bank coming under this head is reproduced in Joh. Fr. Schaer, Die Bank im Dienste des Kaufmanns, pp. 128 and 129. 325. This is the reverse, quite compatible with the principles of juris- prudence, of the provision of art. 405, sec. 2 of the Commercial Code, which, it is to be noted, is merely declaratory in its nature. It declares that, when the broker announces the execution of an order without ex- pressly stating that he himself is liable for it, this is equivalent to the statement that he has closed the transaction with a third party on account of his client. 90311 ii 54 833 National Monetary Commission 326. This is self-evident from art. 403 of the Commercial Code. 327. Until the new Bourse Law went into effect, it was customary to add the following: "Transactions relating to securities with fixed date of delivery are subject to special provisions." 328. This is an extension of arts. 397 and 369 of the Commercial Code. 329. That is to say, not merely "on account of all demands on current account in the brokerage business" (art 397, Commercial Code). 330. This addition corresponds to art. 8 of the bank deposit law of July 5, 1896, which requires that the broker (local banker) who transmits for safe-keeping securities, the property of a customer, to a central banker, or transmits to such banker an order, received from a customer, to purchase securities, shall declare to the central banker that the securities belong to a third party or that the purchase is to be made on account of a third party. The consequence of this is that the central banker can exercise the right of pledge and retention only in virtue of claims that have arisen in connec- tion with these securities (in particular as regards any remnant of the pur- chase price), but not in virtue of all claims which the central banker has against the provincial banker in connection with any other business The latter was the case before the enactment of the Bank Deposit Law, when the provincial banker deemed himself authorized to leave the central banker in ignorance of the fact that the transmitted papers belonged to a third party or that the ordered purchase was to be made on account of a third party. If thereupon the provincial banker became bankrupt, the central banker enforced his right of pledge or retention in virtue of all his claims on the provincial banker, with the consequence that the client of the provincial banker as a rule found that his right of exemption became illusory. 331. This addition, referring to art. 2 of the imperial stamp law of June 3, 1906, is intended to exclude the joint liability of the bank for the stamp- ing of the securities in accordance with the law. In virtue of this pro- vision, while the pledging of foreign securities comes under the definition of a "business" (between living persons) liable to stamp dues, the same is not true of the deposit of such securities made without any right of pledge. That is the reason why the conditions provide that in the case of unstamped foreign securities the right of pledge and retention, which otherwise would be created, is excluded. 332. Arts. 1 22 1 and 1235 of the Banking Code read as follows: Art. 1221 : If the pledge has a bourse or market price, the holder of it may sell it at free sale at the current price through a broker legally authorized to make such sales, or through a person authorized to make public auction sales. Art. 1235: The sale of the pledge is to be made by way of public auction. If the pledge has a bourse or market value, the provision of art. 1221 applies. 333. Art. 1246 of the Banking Code says If, according to equity, the interests of the parties concerned would be better served by a method of sale of the pledges different from that provided in arts. 1235 to 1240, either of these parties may demand that the sale shall take place according to this 834 e r m a n Great Bank JSii other method. If an agreement is not reached, the decision shall be made by the court. 334. Concerning the meaning of the word " ausdrucklich " (expressly), see Riesser, Das Bankdepotgesetz, 26. edition (Berlin, Otto Liebmann, 1906), p. 49, note i, and pp. 26 and 27. Bruno Buchwald, on p. 172 of his exceed- ingly valuable book "Die Technik des Bankbetriebs" (5th ed., Berlin, Julius Springer, 1909, p. 172), reproduces a printed blank containing the words: "and I confer on you the rights provided in section i, article 2 of the deposit law of July 5, 1869." It is to be noted that this blank is not conformable to the law. The law requires an express authorization, that is to say, the authorization itself must make it clear that the giver thereof was well aware of its contents and meaning. 335. However, to guard against an incorrect practice, such as seems to obtain in many places, it must be pointed out once more that, even where such authorization has been given to the banker, he is required to safeguard the customer's securities in accordance with the provisions of art. 2 of the bank deposit law so long as he has not made use of the authorization (see Riesser, loc. cit., p. 33 under b). 336. See Bruno Buchwald, loc. cit., pp. 131, 149. 337. See Bruno Buchwald, loc. cit., pp. 149, 352. 338. See Rob. Franz, Die deutschen Banken im Jahre 1908, pp. 24-25. 339. See Ad. Weber, Depositenbanken und Spekulationsbanken, p. 102 340. See Rob. Liefmann, Beteiligungs- und Finanzierungsgesellschaften (Jena, 1909, Gust. Fischer), who justly insists that this financing business is to be sharply distinguished from the issue business (p. 84 et seq.). The former consists in procuring the funds, belonging to the bank or to the public, required for the operations of transformation or original founding, and I may add in assuming the functions of intermediary in these oper- ations. 341. The ratio of transformations to original foundings (which are com- bined in the table of companies founded, see p. 119), was stated by van der Borght for the period 1895-1907 at about 50 per cent (Jahrbucher fur Na- tional-Oekonomie und Statistik, 3d series, Vol. XV). 342. See p. 115 and following of the present work for an account of the increase in the capital of stock companies founded in the four-and-a-half -year period 1870-1874, as compared with the capital of stock companies founded in the period 1851-1870. 343. Heinrich Sattler, Die Effektenbanken (Leipzig, 1890), p. 21: "The operations of transformation may be briefly designated as industrial job- bery (industrielle Ausschlachtungsgeschdfte)." 344. Engel, in Zeitschrift des Statistischen Bureaus (Berlin, 1875), Heft 4, P- 356. 345. See Ad. Wagner's preface to Heinrich Sattler' s scientifically rather unimportant work, Die Effektenbanken (Leipzig, C. F. Winter' scche Ver- lagshandlung, 1890). In that preface, Wagner displays with startling dis- tinctness his attitude toward the credit banks, which afterward prompted his 835 National Monetary Commission various extreme proposals. "The fat dividends," he says in the preface, p. VIII, " may in some cases havfe been earned by these banks honestly, but on the whole they owe their high figure principally to the exploitation of the heedlessness, inexperience and greed of that portion of the population which engages in gambling at the bourse." (Compare with this statement the sources of bank dividends, as stated in the present work!) Again: "Social legislation concerns ... all those economic relations where there is danger of exploitation, and where profits, incomes, fortunes, often of gigantic dimen- sions, are developed without corresponding 'labor,' at the expense of the persons exploited, though the latter may in many cases share in the blame." 346. Walther Lotz, Die Technik des deutschen Emissionsgeschafts (Leip- zig, Duncker & Humblot, 1890). A fundamental work. 347. Art. 41, sec. i of the Bourse law reads as follows: "The stock of an enterprise transformed into a stock company or into a stock company en commandite shall not be admitted to trade at the Bourse before the expira- tion of one year from the date of the entry of the name of the company in the trade register and before the publication of the first annual balance sheet, with statement of profit and loss. In special cases this period may be abridged or dispensed with by the government of the State (art. i)." 348. According to the table of Der Deutsche Oekonomist, reproduced on p. 268 of Ernst Loeb's work, Die Berliner Grossbanken in den Jahren 1895 bis 1902 etc., the premium on newly issued stock in the years 1896-1900, inclusive, was as follows: Bank stock, 35.3, 53.5, 36.7, 30.6, and 26.5 per cent, industrial stock, 36.1, 66.7, 67.7, 66.9, and 55.2 per cent. 349. A " bonus" (Bonification) is the remuneration paid to a bank before or at the time of issue by the party issuing securities solely for services in promoting the sale of the securities, that is to say, a function which has absolutely nothing to do with the quality of the bank as broker for its clients. This "bonus" therefore represents a special remuneration for a special kind of banking activity, consisting in this that the banker undertakes, to the best of his ability and on the ground of his special knowledge of customers, to see that the securities issued are placed in good hands, that is to say, perma- nently. This function should not be, and in fact can not be, performed by any one but a banker. Hence it is absurd to say that he is bound to pay this bonus to his clients, that is to say, the buyers of the securities, and still less, that he acts "fraudulently" (dolos) in failing to state the fact that he received a bonus and to share it with others, as was decided by the Imperial Court (I Civil Senate) in a judgment rendered Dec. 10, 1904. 350. How ill-advised it is to draw rash conclusions in regard to the man- ner of issue from a temporary decline in quotations, is illustrated by the table printed by Ad. Weber (loc. cit, p. 155), in which the list of "Stock companies of inferior quality" includes the Jura-Simplon railway, which has since then been nationalized. 351. See Walther Lotz, loc. cit., p. 71. 352. The two tables are reprinted on pp. 278 and 279 of the proceedings of the bank inquiry commission of 1908 (Proceedings of the full commis- 836 The German Great Banks sion, Numbers I-V of the question sheet, Berlin, Ernst Siegfr. Mittler & Sohn, 1904), as appendix to pp. 65 et seq. 353. The Frankfurter Zeitung enumerates the bonds thus: "German and foreign mortgage bank bonds (estimated)" and "Other bonds;" the Deutscher Oekonomist, on the contrary, discriminates between mortgage, railway and industrial bonds, both in the case of the German and of the foreign bonds. The Frankfurter Zeitung gives railway stock and tram- way stock in a single item, while the Deutscher Oekonomist separates them. The table of the Frankfurter Zeitung lacks the item " Insurance stock," which receives special notice in the Deutscher Oekonomist at least in the case of German securities. The table of the Frankfurter Zeitung contains separate statements regarding foreign securities only in the case of govern- ment loans, while the table of the Deutscher Oekonomist gives these sepa- rate statements throughout. Finally, there are great differences in the amounts. Thus for example the nominal amount of the foreign govern- ment loan issues during 1905 given in the table of the Frankfurter Zeitung differs from that given in the Deutscher Oekonomist by not less than 142,000,000 marks (Frankfurter Zeitung, nominal amount 724,000,000, Deutscher Oekonomist 866,000,000 marks) in a single group of securities. In 1907 the market value of all issues, according to the Frankfurter Zeitung, was in round figures 1,842,000,000 marks, while according to the Deutscher Oekonomist it was 2,135,000,000 marks, again a difference of nearly 300,000,000 marks. 354. Based largely on Otto Jeidels, Das Verhaltnis der deutschen Gross- banken zur Industrie, Leipzig, Duncker & Humblot, 1905. 355. Regarding positions in the supervisory councils as a "consequence of concentration in the banking and particularly in the issuing business," see Franz Eulenburg, Die Aufsichtsrate in den deutschen Aktiengesell- schaften (Conrad's Jahrbiicher, series 3, Vol. XXXII, Lieferung i, pp. 109 et seq.). 356. Otto Jeidels, loc. cit., p. in. 357. Otto Jeidels, loc. cit., p. 44. 358. Ibid, p. 51. 359. For example, in the case of the fusion of the Huldschinsky Smelt- ing Works with the Upper Silesian Railway Supply Co., 1904. 360. Loc. cit., p. 127. 361. Loc. cit., p. 55. 362. Otto Jeidels, loc. cit., p. 139. 363. Loc. cit., p. 169, Tables I and II. 364. Loc. cit., pp. 170, 171, Tables III and IV. 365. See Riesser, Zur Aufsichtsratsfrage (Berlin, Otto Liebmann, 1903, reprint from the Jubilee publication of the Juristische Gesellschaf t zu Berlin in honor of Richard Koch), pp. 296 et seq. 366. Rud. Eberstadt, Der deutsche Kapitalmarkt (Leipzig, Duncker & Humblot, 1901). 837 National Monetary Commission 367. See Ad. Weber, loc. cit., p. 171. Ruhland, indeed, continues to deem it appropriate, without any regard to the objections raised, to say (Vol. Ill of the "System der Politischen Oekonomie", Berlin 1908, p. 146): "According to an investigation by Eberstadt, the market value of German industrial securities was enhanced by speculation during the period from January i, 1895, to April i, 1900, by 75 to 100 per cent above their issue price." 368. Ernst Loeb, (loc., cit. p. 271) assumes that one-half to three-fourths of the credits booked under loans (Debitoren) were granted in behalf of commerce and industry, a statement which it would be difficult to verify. 369. In refutation of Eberstadt see also Franz Eulenburg, Die gegen- wartige Wirtschaftskrise, Symptome und Ursachen, in Conrad's Jahrb., Ill series, Vol. XXIV, p. 381; Heinemann in Conrad's Jahrb. (1902), III series, Vol. XX, p. 128; and Ernst Loeb, in the Schriften des Vereins fur Sozialpolitik, Vol. CX (Die Storungen imdeutschen Wirtschaftsleben, 1903, Vol. VI), p. 270. 370. See for instance the report of the Darmstadter Bank for 1853. 371. Page 29. 372. Jubilee report of the Disconto-Gesellschaft, p. 29. 373. Concerning other mistakes made in connection with the issue of that first war loan, see Riesser, Finanzielle Kriegsbereitschaft und Kriegs- fiihrung (Jena, Gustav Fischer, 1909) p. 102 et seq. Nevertheless the blame for this poor result has until very recently been laid not on the finan- cial administration, which established those conditions against the express warning of the representatives of the banking business, but on the whole body of German banks and bankers. 374. Loc. cit., Bank-Archiv, Vol. 8, No. 8 (of Jan. 15, 1909), p. 118. 375. The compensation is effected for the most part by exports. 376. I greatly prefer the term "balance of claims" (Forderungsbilariz), proposed by Sartorius Freiherr von Waltershausen in lieu of the term ''balance of payments" (Zahlungsbilanz), on pp. 73 et seq. of his book " Das volkswirtschaf tliche System der Kapitalanlage im Auslande," which will be discussed on a subsequent page. 377- Jubilee report of the Disconto-Gesellschaft, p. 127. 378. Bourse inquiry commission, list of proposals rejected or withdrawn, p. 21. 379. Sartorius Freiherr von Waltershausen; Das volkswirtschaftliche System der Kapitalanlage im Auslande. Berlin, 1907, Georg Reimer. 380. Bank-Archiv of Sept. i, 1908, Vol. 7, No. 23, p. 357. 381. The issues in question were in the main Argentine, Greek, Portu- guese, Chilean, and Servian Government loans, a Buenos- Aires municipal loan, Brazilian, Dutch-South-African, and Mexican railway loans, in the issue of which, in one case or another, all the great banks without exception, together with a number of other banks and banking firms, took part to a greater or less extent. Certain of these securities declined rapidly almost as soon as issued, which led to sharp criticisms of the issuing firms. See the 838 The German Great Banks table of the Deutscher Oekonomist, reproduced by Ad. Weber, loc. cit, p. 132. This table, however, should be used with caution. 382. Even Siemens' calculations (see Deutscher Oekonomist, Sept. 14, 1901, p. 529), correct as they are, can not be regarded as pertinent from the point of view here represented. A more important circumstance is the fact pointed out by Rob. Liefmann (Conrad's Jahrbucher, series 3, Vol. XXVII, p. 172), as well as in the present work, that a large part of the issues of foreign loans is often sold not in German but in foreign markets. 383. Ad. Weber, loc. cit., p. 134, note 3. 384. The History, Principles and Practice of Banking, London, 1901, I, p. 64 (see ibid., p. 181). 385. Only one 5 per cent Prussian loan of 5,000,000, included in the table, dated back as far as 1818. 386. Ad. Weber, Depositenbanken und Spekulationsbanken, p. 132. In contrast with these numerical data, taken from the Deutscher Oekonomist, there is a statement, also found in the Deutscher Oekonomist (July 22, 1899, p. 527), which puts the figure as low as 1,973,000,000, a good deal less than the 2,417,000,000 mentioned in the text. 387. Ad. Weber, loc. cit., pp. 128-129. The figure given for 1900 does not quite agree with the corresponding figure given by Ernst Loeb, Die Ber- liner Grossbanken in den Jahren 1895 bis 1902, p. 121, which gives also the real estate participations (Terrainbeteiligungen). These are stated as fol- lows, from 1897 to 1901: 3, 3, 8, 8, n. 388. Ernst Loeb, loc. cit., p. 161. 389. For the time being the Berliner Handelsgesellschaft does not pub- lish any summary balances. 390. See for example the data from the balance sheets of the Darmstadter Bank for the end of 1899 and 1900, reproduced by Ad. Weber, loc. cit., p. 163. 391. See Ernst Loeb, loc. cit., p. 171, and for the preceding table, p. 161. 392. No figures are available for the Berliner Handelsgesellschaft, since this bank does not yet publish any summary reports. 393. See Jubilee report of the Disconto-Gesellschaft, pp. 29, 33, and fol- lowing. 394. See Jubilee report of the Disconto-Gesellschaft, pp. 84 and 85. 395. For particulars regarding the creation and development of the firm Ludwig Loewe & Co., and of the Loewe group, see Otto Jeidels, p. 243 and following. 396. See Richard Rosendorff, Die deutschen Banken im uberseeischen Verkehr (in Schmoller's Jahrb., 1904, Vol. XXVIII, No. 4, pp. 93-134). Same author, Le developpement des Banques Allemandes a L'Etranger (Revue Economique Internationale, T. I. Sept. and Oct., 1906). Same author, Die Deutschen Ubersee-Banken und ihre Geschafte (in Blatter fur vergleichende Rechtswissenschaft und Volkswirtschaftslehre, Vol. Ill, 1908, Nos. 7, 8). J. Hellauer, Die Zahlungsvermittlung der englischen Banken im Uberseehandel. Vienna, 1904. Emil Kerz, Deutschlands auslandische 839 National Monetary Commission Banken (Annalen des Deutschen Reichs, Vol. 39, 1906, No. i, p. 48 and fol- lowing). R. Hauser, Die deutschen Ubersee-Banken (Jena, 1906). Anton Paul Briining, Die Entwicklung des auslandischen, speciell des iiberseeischen deutschen Bankwesens (Berlin, 1907, Puttkammer & Miihlbrecht). Andre E. Sayous, Les Banques Allemandes et le Commerce d'outremer, in Bul- letin Mensuel de la Federation des Industriels et des Commercants Francais, 5th year, No. 52 (January, 1908, Part I). Same author, ibid., No. 70, July, 1909, p. 404 and following) : Pourquoi et comment il faut former en France des Banques d'exportation. L'exemple des banques allemandes d'outre- mer. Georges Diouritch, L'expansion des Banques Allemandes a I/Etran- ger, Ses Rapports avec le DeVeloppement ficonomique de 1'Allemange (Paris, 1909, Arthur Rousseau). 397. An appreciation has been attempted in my obituary on the occasion of the untimely death of Dr. George v. Siemens, the gifted and lamented president of the Deutsche Bank (Bank-Archiv., ist year, No. 2, Nov., 1901). 398. For a discussion of the manner in which banks had to intervene and did intervene on behalf both of importers and exporters, see, among others, Richard Rosendorff, Die deutschen Banken im iiberseeischen Verkehr (Schmoller's Jahrbuch fur Gesetzgebung, etc., Vol. XXVIII, No. 14, pp. 93- J 34)> also p. 426 and following of this volume. 399. See Report of the Deutsche Bank for 1871, p. 3. 400. See Report of the Deutsche Bank for 1871, p. 4. 401. The following citations are taken from Model, loc. cit., pp. 107, 109, and 117. The above remarks are not intended as a reproach to the news- paper in question ; but the sentiments prevailing at that time in banking and bourse quarters, and which are merely found reflected in that paper, are of more than purely historical interest. 402. Emil Herz, loc. cit., No. i, p. 48 et seq. 403. The German oversea banks engaged in this line of business (the so-called "Inkassogeschaft," i. e. the collection of bills, bills of lading, etc.) have special so-called " Inkasso tariffs " See, for instance, the Inkasso tariff of the Deutsche Orient bank reproduced by Rich. Rosen- dorff, Die deutschen Ueberseebanken und ihre Geschafte, reprint, pt. 24-46. 404. See Waldemar Miiller, Die Organisation des Kredit- und Zah- lungsverkehrs in Deutschland, Bank-Archiv, vol. 8, p. 115 et seq. 405. In case of the so-called "option shipments," by the terms of which the article may be offered for sale at different places during trans- portation, "option bills of lading" are given. 406. Waldemar Miiller, loc. cit., p. 116. 407. Thus, for instance, the banks, for the purpose of securing their advances, cause both the sender and consignee to sign declarations, accord- ing to which the goods and their proceeds remain hypothecated with the bank, not only so long as the documents are in the hands of the bank, but also subsequently, so that the consignee obligates himself to hold at the disposal of the bank the documents or the goods themselves (if deliv- 840 The German Great B a n ered to him), to keep separate accounts regarding the goods and their proceeds, not to merge the proceeds with other receipts and assets, and to deliver these proceeds to the bank at the earliest possible opportunity, (letter of hypothecation). The person who receives the goods, when informed of these stipulations through the bank by the grantee of the advance must make a corresponding declaration (letter of lien), and it is only after such a declaration and the giving of the acceptance that he receives the documents 408. Waldemar Muller, Bank-Archiv, vol. 8, No. 8 (Jan 15, 1909), p. 115. 409. For particulars regarding the charter of the Deutsche Ueber- seeische Bank, commercial and railroad conditions in Argentina, the achievements of the various branches of the bank, the turnover and the results attained by these branches see Ant. Paul Briining, p. 45-80, and Georges Diouritch, loc. cit., pp. 497-549. 410. We frequently come across the erroneous view, adopted to some extent in the literature of the subject, (see for instance Georges Diouritch, loc. cit., p. 501), that, under the Argentine laws of that time, the increase of capital of the old bank (the Deutsche Ueberseebank), which was intended in 1891 because of the large growth of the business of the bank, could be affected only after its liquidation and the organization of a new bank, which was take over the assets and liabilities of its predecessor As a matter of fact, the old bank, too, was a German corporation, so that an increase of capital would have had to be effected in accordance with German and not with Argentine laws. The true cause, evidently, was that for various reasons it was desired to endow the bank with a large capital. According to German law this could only be done by fully paying up the capital of the old bank, which the managers were not willing to do, preferring to found a new institution with a larger capital, of which for the time being only a part had to be paid up 411. Ad (b) and (c) see Anton Paul Briining, pp. 14, 15. 412. Report of the Deutsche Bank for 1892, p. 4. 413. Report of the Deutsche Bank for 1890, p. 4. 414. Report of the Deutsche Bank for 1872, p. 4. 415. Report for 1883, p. n. 416. Report for 1883, pp. 3, n. 417. For particulars see Rich. Rosendorff, Treuhandgesellschaften und ihre Funktionen, in Conrad's Jahrbiicher, 1906, No. 5, pp. 608 et seq.; also Walter Nachod, Treuhander und Treuhandgesellschaften (Tubingen 1908, H. Laub'sche Buchhandlung) pp. 88 et seq. 418. Report of the Deutsche Bank for 1892, p. 4. 419. Report of the Deutsche Bank for 1901, p. 5. 420. Report of the Deutsche Bank for 1903, p. 7. 421. Report of the Deutsche Bank for 1908, p. 8. 422. Report of the Deutsche Bank for 1873, p. 10. 423. Report of the Deutsche Bank for 1883, p. 1 1. 424. Report of the Deutsche Bank for 1895, p. 4. 841 National Monetary Commission 425. Report of the Disconto-Gesellschaft for 1887, p. 5. For particulars regarding balance sheets of the Brasilianische Bank fiir Deutschland for the years 1889 to 1905 see Rich. Rosendorff, Le developpementetc. p. 42 and -43, also Georges Diouritch, loc. cit, pp. 550-598. 426. Report for 1889, p. 9. 427. Report for 1890, p. 8, and 1900, p. 13. 428. For particulars regarding the balance sheets of the Bank fiir Chile und Deutschland for the years 1896-1904 see Rich. Rosendorff, Le develop- pement etc. (Oct., 1906) pp. 44, 45 and Georges Diouritch, pp. 599-621. 429. Rosendorff 's statement, loc. cit., p. 33, that the bank was founded in 1892, is a misprint. 430. For particulars regarding the activity of the bank, see, among others Georges Diouritch, loc. cit., p. 684-690. 431. Report of the Disconto-Gesellschaft for 1900, p. 10, and 1905, pp. 13-15- 432. Report of the Disconto-Gesellschaft for 1888, p. 8. 433. Report of the Dresdner Bank for 1905, p. 6. 434. Report of the Dresdner Bank for 1905, p. 6. 435. Report for 1905, p. 6. The Dresdner Bank on that occasion noted that it would during the coming years regard it as one of its principal tasks "to enlarge and properly develop the foreign business relations, especially in oversea lands with which Germany has active trade connections. " 436. Report of the Darmstadter Bank for 1885, p. 16. . 437. Report of the Darmstadter Bank for 1871, p. 2. 438. Report for 1873, p. 16. 439. See Anton Paul Briining, pp. 32, 33. 440. Report of the Berliner Handelsgesellschaft for 1887, p. 8. 441. Report for 1889, p. n. 442. Report for 1903, p. 10. 443. For particulars see, among others, Georges Diouritch, p. 624. 444. The absolute amounts in the balance sheets of the Deutsch-Asiatische Bank from 1891 to 1904 are given by Rich. Rosendorff, Le Developpement des Banques Allemandes a 1'Etranger, pp. 38, 39. For further particulars see Georges Diouritch, pp. 669-690. 445. For particulars see Georges Diouritch, pp. 669-677. 446. For particulars see Georges Diouritch, pp. 738-753. 447. See Rich. Rosendorff, Neuordnung des Deutsch-Ostafrikanischen Miinzwesens, in Finanz-Archiv of Schanz, Vol. XXII, No. i, and Schmol- ier's Jahrbuch, Vol. XXX, No. 2, p. 170. 448. See art. 8 of the charter (Appendix i to the Deutscher Reichs-und Koniglich Preussischer Staatsanzeiger, Mar. 3, 1905, No. 54). Furthermore the bank is obliged, according to article 13 of the charter, to publish a state- ment of its assets and liabilities on the last of every month, at its own cost, in a periodial designated by the governor of the German East African protectorate. 449. For particulars see Georges Diouritch, loc. cit., pp. 754-760. 842 The German Great B a n 450. Nevertheless, according to art. 42 of its charter, published in Appen- dix i of the Deutscher Reichs- und Koniglich Preussischer Staatsanzeiger, February i, 1905, No. 28, it is obliged to publish a statement of its assets and liabilities on the last of every month, at its own cost, in the Reichsan- zeiger, according to a schedule prescribed in art. 42, sec. 2. 451. Memorial of the imperial Admiralty on "Die Entwicklung der deutschen See-Interessen im letzten Jahrzehnt," Dec. 1905, p. 175. In regard to France, see Rich. Rosendorff, Die franzosischen Kolonialbanken (Bank-Archiv, 1904, Vol. 3, No. 10, pp. 172-174). In regard to the several British colonial and foreign banks, as well as the several French and Dutch colonial banks, with their branches, capital and dividends, see Rich. Rosen- dorff, Le Developpement etc., pp. 49-51, and Diouritch, loc. cit., appendix to p. 283. 452. See Deutscher Oekonomist, No. 1127, 436; No. 1179, p. 415; and Rob. Franz, Die deutschen Banken im Jahre 1908, p. 18. 453. See Robert Franz, Die deutschen Banken im Jahre, 1906 (p. 14), im Jahre 1907 (p. 21), and im Jahre 1908 (p. 26). 454. E. Wagon, Die finanzielle Entwicklung deutscher Aktiengesell- schaften von 1870-1900 (Jena, 1903, Gustav Fischer), p. 46. 455. See Vierteljahrshefte zur Statistik des Deutschen Reichs, Ergan- zungsheft zu 1909, II: Die Geschaftsergebnisse der deutschen Aktiengesell- schaften im Jahre, 1907, 1908, pp. 15, 16. Concerning the methods of cal- culation, see E. Moll, Die Rentabilitat der Aktiengesellschaften (Jena, 1908, Gustav Fischer). 456. Including, in addition to the 6 great banks, the following: National- bank fur Deutschland, Commerz- und Disconto-Bank, Mitteldeutsche Kreditbank, Bank des Berliner Kassenvereins, Berliner Maklerverein, Amerika-Bank, Deutsch-Ueberseeische Bank, and Deutsche Treuhand- Gesellschaft. Beginning with 1909, the Deutscher Oekonomist no longer enumerates the five last-mentioned institutions among the "Berlin Banks" (Deutscher Oekonomist, Aug. 28, 1909, Vol. XXVII, No. 1391, p. 529), a commendable change, since these institutions are managed on a totally dif- ferent basis. 457. Rud. Steinbach, Die Verwaltungskosten der Berliner Grossbanken (Schmoller's Jahrbuch, Vol. 29, No. 2, p. 85). 458. In conformity with the new and correct practice of the Deutscher Oekonomist, only the nine credit banks properly so called are here included. 459. Of April 3, 1904, reprinted by Otto Jeidels, loc. cit., p. 129. 460. In 1908 the gross profits from interest, bills and commissions have been combined. 461. On this point see Rud. Steinbach, Die Verwaltungskosten der Berliner. Grossbanken (Schmoller's Jahrbuch, Vol. 29, No. 2, pp. 71-110, and No. 3, pp. 141-179): Ad. Weber, loc. cit., p. 213; Heinemann, Die Berliner Grossbanken an der Wende des Jahrhunderts (Conrad's Jahr- bucher, series III, Vol. XX, p. 86 et seq.); Frankfurter Zeitung, No. 91, April i, 1903, and No. 93, April 3, 1903 ( ' Betriebskosten der Banken"); 843 National Monetary Commission Deutscher Oekonomist, Aug. 2, 1902; Rob. Franz, Die deutschen Banken im Jahre 1907, p. 18, and im Jahre 1908, p. 25. If all the banks were included, the proportion of operating expenses to gross profits would be still more unfavorable, since the above figures of the Deutscher Oekonomist do not include the directors' fees (Tantiemen), which though constituting part of the cost of operation are enumerated separately. 462. In 1907 and 1908, reserves and amounts written off are combined. 463. Ed. Wagon, loc. cit., p. 146. 464. These words are found in my opening address as chairman of the First General Congress of German Bankers, in Frankfort-on-the-Main (See transactions of the Congress of Sept. 19 and 20, 1902, published by the Centralverband des Deutschen Bank- und Bankiergewerbes, Berlin, 1902, p. 2). 465. Compare Otto Jeidels, loc. cit., p. 105. 466. It is to be noted that the surplus is here calculated not as per Decem- ber 31 of the year given but as per Jan. 2 of the year following. 467. Jubilaumsbericht der Disconto-Gesellschaft, p. 172. 468. Compare Ernst Loeb, Supplement to Model, loc. cit., p. 152. 469. See Otto Jeidels, loc. cit., pp. 114-117. 470. See Model, loc. cit., p. 58. 471. Jubilaumsdenkschrift der Disconto-Gesellschaft, pp. 204-205. 472. "The bank is authorized to conduct all kinds of banking business, and therefore to conduct business of such nature that it can withdraw its money from that business at any time it may be needful." 473. For some unaccountable reason, Model, in his work "Die grossen Berliner Effektenbanken " (1896) failed to mention the A. Schaaffhausen'- scher Bankverein, although it ranked even then among the great Effekten- banken, and, having established its Berlin branch in 1891, might properly be numbered among the Berlin great banks. 474. Compare Otto Jeidels, loc. cit., p. 113. 475. See Otto Jeidels, loc. cit., pp. 112, 123. 476. Ibid., p. 210. 477. See Otto Jeidels, loc. cit., p. 137. 478. For the following discussion See Model, loc. cit., p. 91 et seq. 479. Report of the Berliner Handelgesellschaft for 1878, p. 2. 480. See A. Sartorius Freiherr von Waltershausen, Das volkwirtschaft- liche System der Kapitalanlagen im Auslande, Berlin, Georg Reimer, 1907. 481. During the first period the Darmstadter Bank, as we learned above (p. 49), included in its program the creation of agencies both at home and abroad, whose purpose was to be to foster exportation and the innumerable relations between German industry and the money market. But for this the time was not yet ripe (partly because of the scarcity of German capital at that period), and thus the Darmstadter Bank had soon to abandon its ambitious plans (see p. 60 above and note 82 on p. 798) just as the Deutsche Bank had for a while to give up its East Asiatic agencies opened soon after its foundation. 844 The German Great Banks 482. Otto Jeidels must have overlooked the close connection between this phase of banking and the so-called "export industrialism" or, at least, he did not attach sufficient importance to it, when in his excellent book on the " Relation between the great banks of Germany to industry" (p. 270), he deplores the "lack on the part of the banks, of a general industrial policy serving the economic interests of the nation as a whole," and con- tends (p. 197) that with the further evolution of capitalism the banks are driven "to exert their activity abroad," by the growing necessity to find opportunities for profitable investment in foreign countries for unemployed German capital. This argument, while possessing a certain weight, is not decisive. 483. The exports by sea constitute a large share of the total exports, amounting in the same year, according to the special report of the Ad- miralty (introduction p. v), to 64 per cent of the total exports. 484. According to the report of the imperial Admiralty of Dec. 1905 on the "Development of the German marine interests in the last decade" (introduction, p. v), of the total imports in 1904 almost 73.9 per cent arrived by sea. 485. See Paul Voigt, loc. cit., p. 273. 486. In the middle of the last century, as stated above (p. 44), industry was called upon to provide sustenance and employment for the rapidly increasing population which could no longer be supported by agriculture alone. 487. The expression "feeding countries" (Nahrungsstaateri) is too nar- row, because we are dependent upon foreign countries for other things besides food-stuffs. 488. Thus von Halle's description (loc. cit., p. 70), "Earnings of German capitalists from foreign securities and loans, bought and sold in Germany" is too narrow. 489. Paul Dehn, Weltwirtschaftliche Neubildungen (Berlin, Allgem. Verein fur deutsche Literatur, 1904, p. 41). 490. See Journal officiel de la Republique Francaise, XXIVe annee, Sept. 25, 1902, and the oft-mentioned Denkschrift des Reichsmarineamts of December 1905, pp. 188-222. 491. Loc. cit., p. 247. 492. Das Geld im russisch-japanischen Kriege (Berlin, Ernst Siegfr. Mittler & Sohn, 1906), p. 217. 493. See the very instructive report of Leon Say to the French National Assembly, made on Aug. 5, 1874, translated in the publication of the Cen- tral verband des Deutschen Bank- und Bankiergewerbes: "The payment of the French war indemnity of 187071 in Strassburg, Alsace" (Berlin, J. Guttentag, 1906, p. 83). 494. See report of the Reichsmarineamt of Dec. 1905, introduction, p. XI. 495. For particulars regarding the foreign business of German private insurance companies, see the report just mentioned, pp. 179-187. 845 National Monetary Commit sio n 496. Report of the Reichsmarineamt of December 1905, p. 171, note i. 497. 2d ed., pt. II, No. 3, sec. 13: Daten zur Handelsbilanz (Vienna, 1904), p. 780, note 2. 498. The total amount of Austro-Hungarian gold claims against foreign countries was estimated by the Neue Freie Presse of Mar. 29, 1903, at 400,000,000 crowns. 499. The estimates of income from these freight receipts differ greatly. According to estimates of von Halle (loc. cit., p. 201), based upon Wor- mann's calculations, it amounted in 1897 to 200,000,000 marks annually, and would therefore amount at present to about 300,000,000 marks. Rud. Arnold (Die Handelsbilanz Deutschlands, Berlin, 1905, Franz Siemen- roth, p. 185) estimates it at a much lower figure. W. Lotz (Einiges iiber den Ausgleich von Soil und Haben in Weltverkehr, Bank-Archiv, Vol. i, No. 6, p. 93) on the other hand also estimates the German freight receipts from oversea shipping at 200,000,000 to 300,000,000 marks. The freight receipts of the British merchant marine from its oversea trade alone are estimated at 1,800,000,000 marks annually. (Grunzel, System der Handels- politik, 1901, p. 584.) 500. Ad. Soetbeer, Bemerkungen iiber die Handelsbilanz Deutschlands (in Hirth's Annalen, Vol. 75, p. 731 et seq.). This is probably the work in which the expression Zahlungsbilanz (balance of payments) was first used (No. 8, p. 735) in contradistinction to Handelsbilanz (balance of trade). 501. Compare with the above the report by Ignatz Gruber, (Vienna) on statistics of the international balance of payments, presented to the International Statistical Institute (loth session, London, July 31 to Aug. 15, 1905). 502. See Riesser, Finanzielle Kriegsbereitschaft und Kriegsfuhrung, p. 2 et seq. 503. Die deutsche Volkswirtschaft im 19 Jahrhundert, 2d ed., p. 184. The amount of Russian State securities (including railway securities guar- anteed by the state) disposed of in France is estimated at 10,000,000,000 to 13,000,000,000 francs. 504. The table compiled by Rud. Arnold on pages 169-171 of his book "Die Handelsbilanz Deutschlands von 1889-1900" (Berlin, Franz Sie- menroth, 1905) is entirely" incomplete, as he himself admits. Large additions may be made to it from the data contained in the book of Axel Preyer " Uberseeische Aktiengesellschaften und Grossbetriebe" (Leipzig, Th." Grieben's Verlag, 1905), which, however, does not relate solely to German undertakings and excludes small enterprises. 505. 2ded., part 2, No. 3, sec. 13: "Data on the balance of payment," (Tables 224-458). Vienna, K. K. Hof- und Staatsdriickerei, 1904. 506. This chapter is a summary of the views which I advocated as a member of the bank bill commission of 1908 and at the examination of experts. 846 The German Great Banks 5060. See Otto Warschauer, " Das Depositenbankwesen in Deutschland, mit besonderer Beriicksichtigung der Spareinlagen " (Conrads "Jahrb." Third series, Vol. XXVII, p. 433-487). 507. Caesar Straus, "Unser Depositengeldersystem und seine Gefahren," (Frankfort-on-the-Main, Carl Jiigel, 1892). 508. Loc. cit., p. 17. 509. Loc. cit., p. 26. 510. Loc. cit., pp. 38-39. 511. Otto Warschauer, "Das Depositenbankwesen in Deutschland," in Conrads' Jahrbiicher," third series, Vol. 27 (1904), p. 473 et seq., 477, 481. 512. Loc. cit., pp. 480-481. 513. Loc. cit., p. 482. 514. Otto Warschauer, pp. 483-484. 515. With unlimited liability. According to Warschauer, credit corpora- tions with limited liability should be forbidden to accept deposits (loc. cit., p. 484). 516. See resolution of Count von Arnim in the Bourse act commission of Mar. 10, 1896, the text of which has been reproduced by Ad. Weber loc. cit., p. 259-60 and by others-. According to that resolution, regula- tions are to be issued by which banks and business people engaged solely in the deposit business are to be prohibited from engaging in contango, speculative, founding and issuing business (except trust-fund issues) as well as from participating in such business and in any issues not expressly permitted. They are moreover to be compelled to publish monthly summary statements, the form of which set forth in the resolution is to be legally prescribed. 517. See, among others, Otto Warschauer, loc. cit., p. 486 (Bill No. 3). 518. C. Heiligenstadt, "Der Deutsche Geldmarkt," in Schmoller's Jahrb. Vol. 31, No. 4, p. 98. 519. Loc. cit, p. 98, X. 520. Loc. cit., p. 99. 521. Reprinted in " Handel und Gewerbe," Mar. 24, 1906, i2thyear, No. 24, p. 470, and elsewhere. 522. Edgar Jaffe, in Transactions of the Third General Congress of German Bankers (Allgemeiner Deutscher Bankiertag), p. 99. 523. In such cases the bank usually assists only the stock brokers, not the joint stock banks themselves. 524. Ed. Jaffe, "Das Englische Bankwesen," p. 204, note i. 525. Ed. Jaffe, in Transactions of the Third General Congress of German Bankers (Allgemeiner Deutscher Bankiertag), p. 99. 526. Caesar Straus, loc. cit., p. 31. 527. Loc. cit., p. 99. 528. According to J. W. Gilbart, "The History, Principles and Practice of Banking," ed. 1901, London, I, p. 310, 311, et seq.; II, p. 342, 361, et seq. 847 National Monetary Commission 529. See second (German) edition of this book, pp. 12-14 (foot-note). Thus for instance during the crisis of 1857 the first banks to fail were the Borough Bank of Liverpool with liabilities of 1,200,000, the Western Bank of Scotland, which only a year before had paid a 9 per cent dividend and which had 101 branch offices. The last-named bank had advanced 1,603,000 to four firms which became insolvent, although its total capital only amounted to 1,500,000; furthermore, an item of 260,000 figured in its published balance sheets as good assets, which the managers themselves (according to notes discovered) had marked as irrecoverable. The Derwent Iron Co. alone owed the bank no less than 750,000 and had deposited as "security" (in addition to a land mortgage) 250,000 of its own deben- tures, which were nothing more than notes of the directors forming the company. None of these facts, of course, could be ascertained from the published statements. In 1858 occurred, among others, the failure of the Northumberland and Durham District" Bank of Newcastle with 1,256,000 deposits just after it declared a 7 per cent dividend at the semiannual meeting of its shareholders; the directors pleading that, since so many of the shareholders lived on their dividends, they had not the heart " to face the shareholders without paying a dividend!" In 1864 no less than 27 joint stock banks failed, and another large number followed in 1866, including the Joint Stock Discount Co., the Barneds Bank of Liverpool with liabilities amounting to 3,500,000, the Bank of London, the Consolidated Bank, the Agrar and Mattermans Bank, the English Joint Stock Bank, the Imperial Mercantile Credit Co., the European Bank, etc., etc. In the crisis of 1878 the City of Glasgow Bank was the first of the deposit banks to fail; it had lent 4,000,000 to 4 firms, and had published false balance sheets in 1877. A series of other banks followed. Compare O. Glauert, " Depositenbil- dung in England u. in Deutschland" (Conrad's Jahrb. 3rd series, Vol. VII, p. 808): "From 1814 to 1816, 240 agricultural banks suspended payment, and 70 within the first six weeks of 1826." See also Edgar Jaffe, loc. cit., pp. 196-197. According to Karl Mamroth, " Die schottischen Banken," (Conrad's Jahrb., 3rd series, Vol. XXIV, No. i, p. 43, note 139) n banks of issue failed in Scotland between 1804 and 1842. 530. Edgar Jaffe, "Das englische Bankwesen," pp. 204-205, and p. 202. 531. Loc. cit, pp. 204, 205. 532. In England this "doctoring" of the balance sheets is called "window dressing." Edgar Jaffe, loc. cit., p. 205. 533. Edgar Jaffe in Transactions of the Third General Congress of German Bankers (Allgemeiner Deutscher Bankiertag), p. 96. Ad. Weber, loc. cit., p. 231. The reserve funds alone of all the 82 English deposit banks amounted to about 31,000,000 = 68 per cent of the paid-up capital, but only about 4.% per cent of their liabilities. 848 The German Great Banks 534. The published balance sheets of the 13,912 cooperative societies connected with the Prussian Central Cooperative Society (Preussische Central Genossenschaftskasse] showed that at the end of 1905 their own resources amounted to 54,625,382 marks, the deposits to 758,514,000 marks. The proportion consequently was 93:7, i. e., the deposits were about thirteen times as much as their own means. For 1,002 cooperative societies with limited liability the proportion of deposits to own resources at that period, was 88:5. 535. Ed. Wagon, "Die fmanzielle Entwicklung der deutschen Aktien- gesellschaf ten, " (Jena, Gustav Fischer, 1903), p. 146; see p. 470. 536. See Edgar Jaffe, p. 198. 537. See Ad. Wagner, "Beitrage zur Lehre von den Banken," Leipzig, 1857, pp. 166-170, and p. 61. 538. On the other hand, however, it must be remembered that if in time of crisis a demand is made on a bank for immediate payment of money which according to existing agreement is only due within a short time, it can not afford to refuse except in case of necessity, and even then for the most part not without risk. A different opinion, at least apparently, is expressed in Der Deutsche Oekonomist of Nov. n, 1905; 23d year, No. 1194, p. 566). 539. Lansburgh, loc. cit., pp. 36-38, refers to other sources of error, namely, that both the capital and cash accounts, and the other balance sheet items are considerably influenced by the reciprocal relations of the banks, so that frequently the same amounts are necessarily counted twice, even three times. Consequently, the immediately available assets are frequently lower than they appear in the balance sheet, for instance, when according to the example given (p. 36) a provincial bank passes on its ready cash to a central bank. In this case the amount passed on figures in the balance sheet of the provincial bank as a bank credit, and in the balance sheet of the central bank as cash, and in case the central bank, as is often done, books its giro account at the Reichsbank as cash, the sum in question will figure for the third time as the central bank's cash balance at the Reichsbank. This inconvenience may in part be done away with by placing in the balance sheet of the Central Bank the amount passed on to it by the provincial bank not only among the cash holdings, that is to say among the assets, but also among the debit items, that is to say, amorrgTEe liabilities. /540. As long ago as Sept. 5, 1907, in my report at the Third General Congress of German Bankers at Hamburg (Transactions p. 22; and re- print published by Leonh. Simion Nachfolger, Berlin, 1907, p. 32), I espe- cially emphasised the fact that a permanent falling off in the liquidity of bank balances would constitute "one of the most serious drawbacks" of the concentration in the banking business. 541. The degree of liquidity of individual credit banks may of course be more or less favorable than the average for all banks, even decidedly so. 90311 ii 55 849 National Monetary Commission 542. In regard to the liquidity of the Austrian joint stock banks, Dr. Eugen Lopuszanski, secretary to the Ministry, Vienna, in a treatise entitled : ^'Einige Streiflichter auf das Oesterreichische Bankwesen," in the Volkwirtschaftliche Wochenschrift, von H. Dorn, vol. L. No. 1305, Dec. 31, 1908, p. 442, writes as follows: "The liquidity, in as far as it is exhibited by the ratio of the so-called liquid assets (cash, discounts, loans on collateral, and contango) to the total of creditors, deposits and acceptances, amounted at the end of 1883 to about 65 per cent, and at the end of 1907 to about 45 per cent." This comparison shows a considerable decrease in the liquidity of the Austrian joint stock banks. But even the present percentage of 45 per cent is comparatively favorable. 543. I wish to emphasize once more that, in reference to the liquidity of the assets, the greatest difference may exist among different banks, without being noticeable in any balance sheet or summary statement. 544. Conrads Jahrb. Ill series. Vol. 34, No. 5, Nov. 1907, p. 588; cf. loc. cit., Vol. XX, pp. 86-97. 545. See his article in Conrads Jahrb. Ill series, Vol. XX, p. 90, in which he calculates that on Dec. 31, 1899, in n Berlin Banks the imme- diately available assets constituted only 57 per cent of the liabilities. However, he includes neither the loans on collateral, which for those banks amounted to about 463,000,000 marks on the date mentioned, nor the securities which in 1898 amounted for the same banks to 714,500,000 marks, but solely cash, specie, bank credits, bills and contango. This is not consistent, for the same objections that may be made against the mmediate availability of the loans on collateral (which by the way at that time included also the Bourse contango) can be made against the con- tango, (which was regarded by Heinemann as immediately realisable), nay even against the bills, which likewise cannot always be realised at a moment's notice. 546. See Robert Franz, "Die Deutschen Banken im Jahre 1908," p. 549. 547. Some banks, it is true, hold no doubt large amounts of bills due to industrial long-time investments. 548. See Rob. Franz, Die Deutschen Banken im Jahre 1908 (Reprint from the Deutscher Oekonomist, Berlin, 1908), p. 549. 549. Loc. cit., p. 468-470. 550. Transactions, p. 118. 551. The compilation given in the "Tag" of Apr. 17, 1908, entitled "Die hauptsachlichsten Bank- und Bankierinsolvenzen 1906-1907," is utterly unreliable. Even the title is misleading, inasmuch as the table deals only with a single credit bank, the Marienburger Privatbank, a joint stock company with limited liability, with losses to depositors amounting to 6,600,000 marks, as already noted in the above-mentioned table by Dr. Salomonsohn. The firm of Messrs. Haller, Sohle & Co., despite its title "Hamburger Bank," was no Bank, but merely a private banking ev e ;tablishment. On the other hand, while the list purports to be essen- 850 T h e German Great Banks tially a statement of losses of deposits, it quite unwarrantably includes brokers' firms, as well as a whole series of banking establishments which either had no deposits, or whose depositors sustained no losses. One firm had simply gone into liquidation because it was taken over by a bank (without even a shadow of danger to depositors) ; another firm, alleged to have lost 672,000 marks, could not be traced even with the assistance of the chambers of commerce. 552. See Deutscher Oekonomist, Jan. 18, 1908, 26th year, No. 1308. 553. At the beginning of the Bank Inquiry of 1908, the Imperial chan- cellor expressly stated through Herr Wermuth, the Under Secretary of State, that no division between pure deposit banks and banks transacting miscellaneous business was contemplated. 554. See Edgar Jaffe, "Das Englische Bankwesen," pp. 170-178. 555. Caesar Straus, loc. cit., pp. 38-39; Otto Warschauer, loc. cit., p. 474. 556. This effectually disposes of the assertion by the former bank official Lansburgh (loc. cit., p. 55) to the effect that the German bank managers are opposed to deposit banks solely on the ground that they are not likely to yield to them (the managers) sufficient profit. This direct attack on the probity of all German bank managers does not become any more excusable by the fact that Lansburgh (ibid.) starts with the idea "that a deposit bank is far more profitable than a bank dealing in securities," an idea which, in view of the present absolutely and relatively small German national wealth, is utterly erroneous. This is not and never was the attitude of the mana- gers of German credit banks. They are ready to establish deposit banks immediately they become convinced of the propriety of such a step, or as soon as legal enactments or the measures taken by State institutions or deposit banks shall force them to do so. 557. See O. Glauert, loc. cit., p. 815; Reichsbank President Koch in Bank-Archiv, 4th year, No. 5, March, 1905. The statement that the tasks of the Reichsbank have of late been rendered more difficult by the "con- centration of the credit banks influencing the open market" would apply in a still greater degree to the proposed Reichsdepositenbank, and to any private, or non-Federal state banks, except that the effect of the latter would be not merely to hamper but even to thwart the discount policy of the Reichsbank. 558. See Edgar Jaffe "Das Englische Bankwesen," pp. 170-178. See also an essay entitled "La haute Banque allemande," in "La chronique industrielle, maritime et coloniale," Jan. 6, 1905, p. 3: "Thanks to the support and aid lent to it by high finance, German industry has in a short time undergone a gigantic development. There can be no doubt that without this alliance, without this union of its industrial and financial forces, the Empire would not have achieved the wonders which we have witnessed." See also Ad. Weber, loc. cit., p. 257, citing various opinions including those of Anatole Leroy-Beaulieu and of an English expert, who speaks of German banks as follows: "They are virtually the pioneers of the home National Monetary Commission and foreign trade of the German Empire" (see Frederick J. Fuller and H. D. Rowan, "Foreign competition in its relation to banking" in the Journal of the Institute of Bankers, Vol. XXI, Part II, p. 55). Even Andre' E. Sayous, who as a rule has little to say in favor of the manage- ment of the German banks, and who in his book, Les Banques de Dep6t, les Banques de Credit et les Societes financieres (Paris, 1901, L. Larose), pp. 292, 293, goes so far as to assert that a serious panic, even one of no great severity, "would force nearly all the German banks to suspend payment," nevertheless concludes the 3d chapter of that book with the words: "Be this as it may, while the French banks have accentuated the economic stagnation of our country, the German banks have had a con- siderable share in the brilliant industrial and commercial expansion of Germany." 559 I pointed out there, among other things, that, so far as human foresight goes, there was no reason to expect that the Reichsdepositen- bank would receive deposits to the extent of at least 1,000,000,000 marks, the amount on which Warschauer bases his calculation of the chances of profit unless the funds collected by the postal cheque offices were assigned to it. Even assuming this, the business expenses must be deducted from the gross profits, which at first could hardly exceed i per cent. As the expenses of the German credit banks absorb 31 per cent of their gross profits (see Rob. Franz, "Die Deutschen Banken in 1907," p. 78), and in the case of Berlin banks even 33 per cent, the net profits would scarcely amount to more than one-fourth to one-half of i per cent on the interest-bearing deposits, and the dividends would amount to about 5 to 6 per cent, according to the amount of the share capital. Even this would only be reached gradually. Further, I pointed out that the analogy with the English deposit banks, whose dividends had led Warschauer to make his estimate, did not hold. In the first place, in England the paid- up share capital, on which dividends are to be paid is, in contrast to the reserves, absolutely and relatively trifling in amount (in 1904 for 87 deposit banks an average of 15,000,000 marks per bank), while the turnover and deposits are extremely large, 6,250,000,000 marks (see p. 202). More- over, deposits accepted in London with or without the condition of two weeks' notice bear interest only at \]4 per cent below bank discount, and this applies to only such deposits that have been at the bank's disposal for at least one month, the minimum amount of deposit at any time being 10. I have misgivings concerning the use to be made of "first-class" industrial securities and bank shares for loans on collateral up to 30 per cent of their market value, a device admitted by Warschauer manifestly to increase the lucrativeness of the proposed institution. At his demand I will explain that these misgivings are based on the fact that dividend- paying securities are subject to great fluctuations in quotation and, in critical times, can either not be sold at all or only at a great sacrifice, while on those very occasions the margin is with difficulty kept up and the repayment of advances can not be readily expected. Further, the 852 The German Great B a n practice which Warschauer is disposed to admit would lead to the very evil for which the English deposit banks are blamed, namely, the use of deposits for Bourse speculation. Finally, as regards the "acquisition of first mortgages" by deposit banks pure and simple, which Warschauer even deems "advisable" (geboten), I do not regard it as a desirable investment, at least to a considerable extent, since these banks have to be ready at any time to repay call deposits or short-term deposits, and it may be difficult to realize even on first mortgages. 560. Nor can the advocates of this idea appeal to the fact that according to Roman law the creditors of noninterest-bearing deposits possessed a prior right in the case of bankruptcy of a banker (argentarius), which Papinian expressly states was introduced for the benefit of the whole community (Utilitate publica receptum see 1. 17, sees. 2, 3, 8 D, 16, 3), for modern business methods allow of no comparison with those of the argentarius. 561. Among the arguments raised against it, see Deutscher Oekonomist, 22d year, No. 1127, p. 432 (July, 1904), "Suggestions have been made relating to the proportion between deposits and share capital. This, however, is pure word-play without any value; for on the one hand the reserves are property of the bank, just as apt to be called upon to cover liabilities as the share capital, and on the other hand the assets are se- curity for all liabilities, and not merely for the deposits. To establish a definite proportion between share capital and deposits would have a pur- pose only in case there were no other liabilities than the deposits. That is the condition of the Savings Banks, which of course is totally differ- ent from that of ordinary banks." 562. See Deutscher Oekonomist, July 13, 1904 (22d year, No. 1127)^.432. 563. This remark, though often repeated, is a gross exaggeration, to say the least, intended, or at least apt, to scare the timid. The national wealth certainly does not consist merely of deposits, bills and current account balances, which for all those banks that had at least 1,000,000 marks capital each amounted at the end of 1908 to about 7,250,000,000 marks. Of these banks only the largest are managed by 10 to 12 man- agers, just as State and private industrial and agricultural concerns. On the contrary the national wealth, estimated at present to be between 216,000,000,000 to 360,000,000,000 marks, consists of a great number of enormous items, such as the savings deposited in savings banks and coop- erative societies to the amount of about of about 14,000,000,000 marks, of the vast amounts, totaling about 40,000,000,000 marks, invested in mortgages and mortgage bonds, etc. Nevertheless, I do not underrate the great power and responsibility of the heads of our great banks, as this book will show. 564. In Schmoller's Jahrbuch," vol. 31, No. 4, Der Deutsche Geld- markt," pp. 72-95, 565. Heiligenstadt very properly omits debits on current account from the list of immediately available assets. In giving his reasons for this 853 National Monetary Commission omission, he makes, however, the surprising statement (p. 82) that " With a view to aiding the enlargement of commercial and industrial enterprises and enabling them to complete their works, the banks grant credit to these enterprises, in the form of current account credit, quite regularly, and to an increasing degree as the money market becomes less favorable (!). This is done in the hope and with the purpose of restoring the liquidity of such loans by the issue of shares and debentures, when the money market becomes more favorable." It is hard to imagine how the banks could have pursued such a business policy. What really occurred occasionally was that certain credits which were, originally working credits were, through the debtor's inability to pay, gradually transformed into investment credit (Anlage-Kredit) very much against the will of the creditors; or, that credit which was really intended to be used for investment was applied for as working credit (Betriebskredit), or finally, that during good times (or such as were considered good) the long-term credit, that is to say, investment credit, necessary for finishing works already begun, or for extending existing works, so as to make them profitable even in critical times, was granted in the hope and expectation that the debtor would soon be able to get clear of it in the form of debentures, or shares. Lansburgh probably goes too far when he says that the credit granted to industrial companies is "distinguished" from all other credit in that it can be cast off at almost any period desired ("Die Verwaltung des Volkvermogens durch die Banken," [separate reprint] pp. 9-10). During many years of practical experience in banking I have not met with a case where a bank or bank director in his sound senses granted credit regularly during bad times and even " to an increasing degree as the market becomes more unfavorable," with the idea of restoring its liquidity by issuing shares and debentures at a more favorable season, and I do not believe that such banks or bank directors could remain in business very long. It may not be amiss to point out that credit banks have, on the other hand, been frequently reproached with the opposite policy of having constrained manufacturers to adopt the generally unsuitable and far too expensive short-term personal credit with quick and frequent renewals, although in the case of improvements, rebuilding, and the erection of new works, long term credit, irredeemable for many years, or at least credit repayable in instalments, is more suitable. 566. See: Commission report, p. 26 "* * * that it would be out- right unbusinesslike, especially in the case of industrial companies, to oblige them to withdraw money for the reserve funds from their business and invest it independently, whereas they may perhaps be compelled to borrow the necessary capital at a higher rate of interest. * * *" 567. See "Deutscher Oekonomist," Dec. 28, 1901, (Vol. XIX, No. 993). 568. George Bernhard in "Plutus," Apr. 24, 1909, p. 306. 569. Reprinted among others by Ad. Weber, loc. cit., pp. 259, 260. 570. See Felix Hecht, " Die Katastrophe der Leipziger Bank," (Storungen im Deutschen Wirtschaftsleben wahrend der Jahre 1900 ff, published by 8 5 4 The German Great Banks the Verein fur Socialpolitik, Vol. 6, Geldmarkt, Kreditbanken, p. 373, et seq.): "At the end of 1900 the Leipziger Bank, according to its balance sheet, held bills amounting to 37,798,570.67 marks. But this balance sheet does not show that about 12,000,000 marks of these bills were pledged to the "lottery loan fund" (p. 384). 571. As an additional argument against the demand for a statement of the "total of moneys employed for contango transactions and loans on collateral," the following may be urged: Nothing is gained, least of all the object aimed at, by showing the extent to which the bank has favored speculation, as the contango and loans on collateral may comprise quite different engagements and advances on goods. Neither can the kind, number and above all the quality of the securities deposited at the bank as guarantees be ascertained from the statement demanded, although these are the most essential points; and matters would not be greatly altered if the "total amount" nothing else is possible of the guarantees were also published. 572. Doctor Salomonsohn in Transactions of the III General Congress of German Bankers, p. 116. 573. In regard to this see the very appropriate remark by Eugen Lopus- zanski in his treatise " Einige Streiflichter auf das Oesterreichische Bank- wesen (In the "Volksw. Wochenschrif t " of Alex. Dorn, Vienna, Dec. 31, 1908, Vol. LX, No. 1305, p. 433): "While banking, outwardly, forms only a limited part of the national economy, yet by reason of its organic arrange- ment and purpose it is best fitted, through its condition at any given moment, to exhibit the interaction of the forces and the results of the movement of the national economy, in a cross section, as it were, of the economic organism." 574. See the essay: "Spargelder" in the "Neue Politische Correspon- denz" of May 21, 1909. 575. Such a case is mentioned by the "Neue Politische Correspondenz" of May 21, 1909. 576. See "Aelteste der Berliner Kauf mannschaf t " in the Berl. Borsen- Zeitung, No. 264, June 9, 1909; Alfred Loewenberg in the "Tag," No. 198, Aug. 25, 1909, and especially Koch in the "Zeitschrift fur Handelswissen- schaft und Handelspraxis," Vol. II; p. 38 et seq., who justly points out, that the proposal to increase the personnel seems rather strange at a time when everbody is studying how to reduce the number of employees. 577. In his book "Beitrage zur Lehre von den Banken," Leipzig, 1857 P- 159- 578. Ad. Wagner, "Bankbriiche u. Bankkontrollen," in the Deutsche Monatsschrift fur das gesamte Leben der Gegenwart (ibid. Lohmeyer) Year I, No. i (Oct., 1901), pp. 74-85, and No. 2 (Nov., 1901), pp. 248-258, especially p. 255. See on the other hand the Deutscher Oekonomist of Oct. 19, 1901, and Nov. i, 1902, and R. Rosendorff, "Bankbriiche u. Bank- Kontrollen," in Hirths "Annalen des Deutschen Reichs," 1902, No. 3, pp. 182-197. 855 National Monetary Commission 579. Paul Marcuse, loc. cit., p. 136. 580. The fact, noted by Obst, that, according to the report of the Comp- troller of the Currency of Sept. 23, 1908, the majority of the presidents of the national banks have declared themselves satisfied with the supervision hitherto exercised by the "national bank examiners," does not necessarily mean that this method has served its purpose; it may mean something totally different. Part IV. 1. See Hermann Schumacher, Die Ursachen und Wirkungen der Kon- zentration in deutschen Bankwesen (Causes and Effects of Concentration in German Banking) in Schmoller's Jahrbuch, Jan. 27, 1906, Vol. XXX, No. 3, pp. 884, et seq. Paul Wallich, Konzentration in deutschen Bank- wesen (Concentration in German Banking), Stuttgart and Berlin, Cotta, 1905. Julius Steinberg, Die Konzentration in Bankgewerbe (Concentra- tion in Banking), Berlin, Franz Siemenroth, 1906. Adolf Weber, Die Konzentration in deutschen Bankwesen (Concentration in German Bank- ing), Krit. Blatter, f. d. ges. Sozialwissenschaften, Vol. II, No. 7, pp. 299- 303. Edgard Depitre, Le mouvement de concentration dans les Banques Allemandes (The concentration movement among German Banks), Paris, Arthur Rousseau 1905. Otto Warschauer, Die Konzentration im deut- schen Bankwesen (Concentration in German Banking), Conrad's Jahr- biicher, 3d series, Vol. XXXII, pp. 145-162. Andre Sayous, La concentra- tion de trafic de banque en Allemagne, Journal des Economistes Jan. 15, 1899. 2. W. Sombart, Der moderne Kapitalisnms, Vol. I, p. 407. 3. For a description of the movement of concentration in banking abroad see the very excellent accounts in the Vossische Zeitung of Jan. 26, 27, 28, and 31, 1905. (They cover Austria-Hungary, Great Britain, France, Belgium, and the United States.) Use has been made of these articles in various parts of the following discussion. 4. On this point the. best references are the different sections (lec- tures) of the classic work of Karl Biicher, Die Entstehung der Volkswirt- schaft (The Evolution of Economic Society), Tubingen, Laupp'sche Buch- handlung, 1901, and particularly the following sections: IV, Die gewerb- lichen Betriebssysteme in ihrer geschichtlichen Entwicklung, (The Indus- trial Systems in their Historical Evolution), pp. 175 et seq.; V, Der Niedergang des Handwerks (Decline of the Handicraft System), pp. 215 et seq.; VII, Arbeitsvereinigung und Arbeitsgemeinschaft (The Combina- tion and Concentration of Labor); IX, Arbeitsgliederung und soziale Klassenbildung, p. 283 et .seq. ; (The Division of Labor and the Development of Social Classes) pp. 367 et seq. 5. In order to avoid duplication we must refer to the abundant material given on this point in what is now Part III, Chap. Ill, sees, i and 2 (See above pp. 191 to 407). See also the valuable work of Otto Jeidels, Das Verhriltnis der deutschen Grossbanken zur Industrie, mit besonderer Beriicksichti- 856 The German Great Banks gung der Eisenindustrie " (The Relation of the German Great Banks to Industry, with special reference to the iron industry 1 ), Leipzig, Duncker & Humblot, 1905. 6. But this does not necessarily mean the doubling of profits. 7. See Hermann Schumacher, op. cit., pp. 5-6. The requirements of sound principle is that customers receiving large amounts of credit from a bank should be obliged to confine their entire banking business to the bank advancing its credit, in order that the bank may be in a position to keep posted on the business of the borrower. This requirement can not be readily enforced owing to competition, but so far as it is practicable, it is in a large measure lived up to by the banks. Unfortunately as the Ter- linden case has proved, the observance of this obligation by the customer* can not be readily controlled. So long as there is no central credit agency, such a clause in the contract must remain a lex imperfecta. Owing to practical difficulties, such an agency has not yet been established, although a few attempts have been made. 8. This too is a function of the bank floating securities, or of the banks interested in selling the stocks or bonds in connection with an issue of securities. For this activity exclusively, as distinguished from the banker's work as broker, he receives a "bonus." The bonus represents thus a -special compensation for a special service performed by the banker. The service consists in the obligation assumed by the banker to make every effort, and to utilize his special knowledge of his clientele with a view to placing the securities issued in good hands, that is to say, where they will be held permanently. This is a duty that should be done by no one else but the banker and can not be done by any one else. It is therefore unreason- able to require him to divide the bonus with his principal, the purchaser of the securities. Neither can it be said, as the court (Reichsgericht, I Zivilsenat) has held in a decision of Dec. 10, 1904, that he is acting with fraudulent intent, in case he fails to inform the purchaser of the bonus received by him, or in turn fails to let the purchaser share the benefit of this bonus. 9. See K. Fleischhammer, Zentralisation im Bankwesen in Deutschland, Schmoller's Jahrbuch f. Gesetzgebung, Verwaltung und Volkswirtschaft, vol. 25, No. 2, pp. 241 et seq. 10. See No. 12 of the Bestimmungen fur den Giroverkehr der Reichs- bank. (Rules relating to Giro Business of the Reichsbank.) According to No. 10 of these rules money deposited for giro transactions does not bear interest. 11. Helfferich, Der deutsche Geldrnarkt 1895-1902, p. 44. 12. It seems that similar occurrences have taken place also in England, (See Edgar Jaffe, Das Englische Bankwesen, p. 190), also in Austria. In 1899 the Anglobank established a branch in Aussig, and in the same year a branch was established by the Wiener Bankverein. In 1901 the Nieder- oesterreichische Escomptegesellschaft acquired the branch of the Bohmi- sche Escornptebank in Trautenau, and in the same year a branch of the 857 National Monetary Commission Anglobank was opened in that town. There are many other such exam- ples which may be found in the Prager Tageblatt for Oct. 12, 1905, No. 281, in the article entitled "Die Konkurrenz im Oesterreichischen Bankwesen." 13. The Rhenisch-Westphalian Pig Iron Syndicate came to an end on Jan. i, 1909, as has been noted above (see note 170, p. 818) and likewise The Lorraine-Luxembourg and the Siegerland pig iron syndicates. For details consult the above discussion. 14. Among them are the general directors of the following mining and iron companies: Harpener Bergbau- Aktiengesellschaft, Oberschlesische Eisen- dustrie-Aktiengesellschaft, Bergwerkgesellschaft Hibernia, Konsolidation, Bergwerks-Aktiengesellschaft zu Schalke, Prager Eisenindustrie in Wien, Hohenlohe Werke. 15. Among them are the general director of the Gelsenkirchener Berg- werks-Aktiengesellschaft, and as representatives of shipping circles the general directors of the Hamburg- American Line, and of the North German Lloyd. 1 6. Among them are a former director of the firm of Friedrich Krupp, and a general director of each of the following mining and smelting com- panies: Laura Hutte, Bismarkhiitte, Schlesische Aktiengesellschaft fur Bergbau und Zinkhiittenbetrieb in Lipine, and the Kattowitzer Aktien- gesellschaft fiir Bergbau und Eisenhuttenbetrieb. 17. See Frankfurter Zeitung of May 26, 1884, No. 147. 1 8. The new tax provision was particularly oppressive for the buyer since the tax was paid in every case on multiples of 1,000 marks. 19. See Centralverbands-Denkschrift of December, 1903, pp. 32-34 and the Verhandlungen des II Allgem. Deutschen Bankiertages (Proceedings of the Second General Convention of German Bankers) at Berlin, May 1 6 and 17, 1904, p. 58 (Mommsen), pp. 73-74 (Arons), pp. 83-84 (Franck), and the Frankfurter Zeitung of May 31, 1901. 20. See Centralverbands-Denkschrift, pp. 42 et seq. and the Proceedings of the First General Convention of German Bankers at Frankfort-on-the- Main, Sept. 19 and 20, 1902, pp. 58-59 (von Pflaum), and Dr. Alfred Meyer, Die deutschen Borsensteuern 1881-1900 (German Stock Exchange Taxes), Stuttgart and Berlin, J. G. Cotta'sche Buchhandlung Nachf. 1902, pp. 55 et seq. 21. See Riesser, Das Bankdepotgesetz voin 5, Juli 1896. Aus der Praxis und fur die Praxis, insbes. des Handelsstandes, erlautert (The Bank Deposit Law of July, 1896, based on its practical application, and explained for practical use, for special use of the commercial classes). Berlin, Otto Liebmann, 2d ed. 1906, pp. 67 et seq. 22. For a discussion of the economic injury resulting from the stock exchange law, see among others, Riesser, Die Notwendigkeit einer Revision des Borsengesetzes vom 22 Juni i896/Jan. i, 1897 (The Need for a Revision of the Stock Exchange Law of June 22, 1896, effective January i, 1897), Berlin, 1902, Leonhard Simion Nachf.; and Stand und Aussichten der Borsengesetzreform (Position and Prospects of the Stock Exchange Reform 858 The German Great Banks Legislation, Berlin, 1907, Leonhard Simion Nachf.) and works mentioned in note indicated by one asterisk (*) in the aforementioned Centralverbands- Denkschrift, p. 17. Reference may be made to the following economic literature of more general character: Franz Eulenburg, Die gegenwartige Wirtschaftskrisis, vSymptome und Ursachen, Conrad's Jahrbiicher, 3d series, Vol. XXIV, p. 382 ; Helfferich, Der deutsche Geldmarkt 1895-1902, op. cit., p. 27; Ad. Weber, Depositen- banken und Spekulationsbanken, p. 7; Rud. Eberstadt, Die gegenwartige Krisis, ihre Ursachen und die Aufgaben der Gesetzgebung, Berlin, 1902, K. Hoffmann, p. 33; v. Halle, Amerika, seine Bedeutung fur die Weltwirt- schaft und seine wirtschaftlichen Beziehungen zu Deutschland, insbeson- dere zu Hamburg (America, Its vSignificance in the Economic Life of the World, Its Economic Relations to Germany and Particularly to Hamburg), published by the Hamburger Borsenhalle, 1905, particularly p. 31 : " Under the ill-advised stock exchange laws of the last ten years, there has been no proportionate progress even in participation in the financial operations of the various States." See also Otto Warschauer, Die Reform des Borsen- gesetzes in Deutschland in Conrad's Jahrb. f. Nationalokonomie und Statistik, 3d series, Vol. XXX, No. 4, Oct. 1905, pp. 433-469. 23. These limitations became applicable to both "legitimate" as well as "illegitimate" dealings in futures. 24. Helfferich, op. cit., p. 27. 25. See among others the annual report of the Deutsche Bank for 1895 and that of the Dresdner Bank for 1896. 26. See the article in the Frankfurter Zeitung of Nov. 15, 1904, No. 318 entitled Borsengesetz und Bankenanschwellung (Stock Exchange Legisla- tion and the Growth of the Banks). This article shows in two tables the growth that has taken place in the case of 10 Great Berlin banks and 20 provincial banks contrasting their situation in 1896 and again in 1903 with their position in 1884. 27. As early as the beginning of the seventies the "provincial" banks established were based almost entirely on private banks which had been transformed or absorbed, as for instance the Provinzial-Disconto-Gesell- schaft, the Provinzial-Gewerbebank in Berlin, the Stiddeutsche Provin- zialbank in Stuttgart, the Prov. Wechslerbank in Breslau, the Prov. Maklerbank in Berlin and the Allgemeine Deutsche Filialen-Kreditanstalt in Leipzig. The idea of these provincial or union central banks was ahead of its time, and for that reason failed in most instances. As regards England, see Edgar Jaffe, Das Englische Bankwesen, p. 192; 1844-1875; Gradual Consolidation of Joint Stock Banks in London and the Provinces as a result of the absorption and supplanting 01 private banking firms; 1878-1890, consolidation of the provincial banks and the formation of large institutions; some of the latter gaining a foothold in London; 1890-1896, almost total supplanting of private banking firms in London as well. The great provincial banks have become consolidated in London. J. W. Gilbart, op. cit. (ibid., 1901), p. 423 mentions the fact 859 National Monetary Commission that as early as 1836 no fewer than 138 private banking establishments had merged with deposit banks. The number of private bankers in England and Wales declined from 448 in 1837 to 261 in 1858, to 226 in 1878, to 144 in 1891 and to 100 in 1896. With reference to Austria, the Neues Wiener Tageblatt said as far back as September 13, 1903, that the private banker "has disappeared even more rapidly than in Germany, we have well nigh reached the final stage in that process." According to the Berliner Tageblatt (of May 27, 1904, No. 265), not a single private banker remained in Crefeld out of 20 that had once been in business there. For the disadvantages resulting from the decline of the profession of the private banker see Frankfurter Zeitung of Jan. n, 1905, " Aktienbanken und Privatbankiers " and the Central verbands-Denkschrift of 1903, p.p. 39 et seq. In the United States, private bankers until quite lately were still numer- ous (numbering in 1902, 4,188), in spite of the exceptional growth in number of joint-stock banks, which increased from 9,338 in 1892 to 13,684 at the close of 1903 (Vossische Zeitung, Jan. 31, 1905), and in spite of the fact that here too bank consolidations have played a great part. (In 1901, 27 national banks were absorbed by other national banks, in 1902, 46). The special report of the U. S. Monetary Commission gives under date of Apr. 28, 1909, the total number of private banks as 1,497, as compared with 6,888 national banks and 11,292 state banks on the same date. This number is exclusive of 642 mutual savings banks, 1,061 stock savings banks, and 1,079 loan and trust companies. The total number of corporate and private banks, including those which had failed to report to the Com- mission, is estimated at about 25,000. 28. See below for a discussion of the question, whether the resultant severe depression and the lack of vitality occasioned by it, was justified to the extent observed. (Part VI, p. 751). 29. As an example we may cite the increase in small landholdings (less than two hectares) shown by the census of 1895. These form 58 per cent of all agricultural holdings. In 1895 they amounted to 3,236,367, as against 3,061,831 in 1882. (Statist. Jahrb. f. d. Deutsche Reich fur 1904, p. 24.) 30. In consequence of mergers, the number of London banks (exclusive of colonial and so called foreign banks) decreased from 115 in 1885 to 77 in 1901. (See Schmoller, Grundriss II, p. 232.) 31. Op. cit., pp. 198-247. See, however, his study, Die Wirkungen des Borsengesetzes auf das Bank-und Borsengeschaft (Effect of the Stock Exchange Law on the Business of the Banks and Stock Exchanges) in Conrad's Jahrb. 1897, 3d series, Vol. XIII pp. 725 et seq. 32. Centralverbands-Denkschrift for December, 1903, p. 37, and Table XV, p. 68. 33. These were the terms used by Eschenbach at the general convention of the Verein fur Sozialpolitik in 1904 (Verhandlungen, p. 286) in con- 860 The German Great B a n tro verting those who held that there had been a "relative decline," as well as an absolute diminution in the number of private bankers. Eschenbach himself seems to admit that there had been a relative decrease, but does not attribute it to the stock-exchange law. In my opinion there is not much difference between these two views; according to the above data both views would seem sufficiently founded. 34. Op. cit, p. 248. 35. Op. cit., p. 263. 36. Paul Wallich (op. cit., p. 13) calls attention to another circumstance which tended to drive private firms out of the banking business to an increasing extent the establishment of branches of the Reichsbank in the Provinces. This caused severe competition to the private bankers along the most legitimate lines, even in such places where joint stock banks had not yet made their influence felt. This competition of the Reichsbank, it is claimed, was particularly severe in the eastern part of the Kingdom of Prussia, for the reason that the Reichsbank rates for discount and Lombard loans, uniform for the entire Empire, were much lower than the rates charged before the advent of the Reichsbank, and thus caused an enor- mous lowering of interest rates in the respective sections of the country. 37. Op. cit., p. 248. The Centralverband was unable to obtain abso- lutely accurate figures on this point, as the Denkschrift reports. More important, however, is the testimony of the author, who is a private banker in Berlin. A large proportion of the private firms still in existence have continued their business, in order not to deprive of a livelihood employees who had served them for many years. The business of many of these firms, however, no longer represents any considerable amounts. Julius Steinberg (op. cit., p. 9) did not assert, as the Deutscher Oekonomist of December 23, 1905, wrongly assumed, that "generally speaking the number of private bankers had not declined, but on the contrary had increased somewhat " This assertion he made only for some German large cities; on the other hand, for the stock exchange centers of Berlin and Frankfort - on-the-Main he showed a decrease. 38. See Julius Steinberg, op. cit., p. 9. The figures reprinted here, taken from the giro-accounts of the Reichsbank and continued to 1904, do not give a clear picture, for the reason that no distinction is made between the provincial banks which had remained independent and* the private banking firms. 39. I call attention here again to the fact that the decline of private banking like the concentration in banking, was, in my opinion, only hastened by the stock-exchange law and not caused by it. Even without the stock- exchange law, the movement toward concentration so clearly seen in en- tirely different fields, and in foreign countries as well as in Germany, would have set in, though perhaps not with such intensity and rapidity. We have here only one phase in a great and universal process of economic evolution. Concerning England, Edgar Jaffe tells us (Inaugural-Dissert, p. 33) that of the old private banking firms that belonged to the clearing house (40 in 861 National Monetary Commission 1810) only 13 retained their membership in 1873 and 3 in 1900. However, English conditions can not be used for comparison, for the reason that, as Jaffe reports, (Das Englische Bankwesen, p. 93) in the closing decades of the nineteenth century, no new members were admitted to the clearing house, not even banks. 40. According to Ad. Weber, Die rheinisch-westfalischen Provinzbanken und die Krisis (Schriften des Vereins f. Sozialpolitik CX, and Storungen im deutschen Wirtschaftsleben etc. Vol. VI, pp. 326, 327). The inference made there that the capital stock of these banks increased during this period relatively more rapidly than that of the large Berlin banks cannot be accepted as correct without further evidence. In the first place com- parison is made with only 6 of the 10 great Berlin banks then in existence. As a matter of fact these banks increased their capital stock during these seven years "only" from 428,000,000 million marks to 705,000,000 marks or "only" about 64 per cent whereas the increase for the other banks is 226 per cent. In the second place, all these large banks had previously made large additions to their capital beginning with 1885. 41. For other calculations see the article in the Frankfurter Zeitung for May 6 and 7, 1903, Nos. 125 and 126, Konzentration im Bankgeschaft, and for Nov. 15, 1904, No. 318, Borsengesetz und Bankanschwellung. If the period for 1890-1901 is taken, a different picture is obtained. See W. Christians, Die Entwicklung der deutschen Aktienbanken von 1890- 1901 in Bank-Archiv., vol. 2, No. 4 Jan. 1903, pp. 53 et seq., and particu- larly p. 56. (Appeared also as reprint). 42. The Oberbergische Bank with the cooperation of the Rheinisch- Westfalische Disconto-Gesellschaft was consolidated November n, 1907, with the Gummersbacher Volsbank into a new corporation, the Oberber- gische Kreditanstalt in Ohl (capital 2,000,000 marks, with branches in Halver and Gummersbach). 43. See Paul Wallich, op. cit., pp. 16-24. The chief example is the Provinzial-Discontogesellschaft, organized by the Disconto-Gesselschaft in 1871 with a nominal capital of 30,000,000 marks but liquidated as early as 1878. 44. Die Konzentration im deutschen Bankwesen, pp. 34-38. 45. Quoted from Paul Wallich, op. cit., p. 131. 46. Die Diisseldorfer Stahlwerksverband was concluded until June 30, 1912. As to the Oberschlesischer Stahlwerksverband see note 171, pp. 818-819. 47. In alphabetic order. The share capital and reserves, unless other- wise stated, are given as reported on Dec. 31, 1908. 48. Next to it, even now, among the Berlin banks, in point of centrali- zation, is the Nationalbank fur Deutschland, which has no branches nor communities of interest, but 17 deposit offices and one commandite (The Mitteldeutsche Kreditbank has no communities of interest, but has 5 branches, 3 commandites, 22 deposit offices and 2 agencies). 49. See Appendix VII, p. 982. 862 The German Great B a n 50. As regards the calculation of the full share capital, and of the surplus, see note p. 58 below. 51. See Supplement VII, p. 994 et seq. The Deutsch-Bulgarische Bank in Sofia is not included, because it is a foreign bank, nor the Revisions- und Vermogensverwaltungs-Aktiengesellschaft, because it is not a bank proper. 52. See Supplement VII, p. 999 et seq. 53. See Supplement VII, p. 1005 et seq. The Ostbank fur Handel und Gewerbe in 1905 absorbed the Ostdeutsche Bank Aktiengesellschaft vormals J. Simon Wittwe & Sohne in Konigsberg, formerly one of the "concern" banks of the A. Schaaffhausen'scher Bankverein, and thus belongs now to the Schaaffhausen group. It formerly maintained community of interest relations with the Bank fur Handel und Industrie (Darmstadt er Bank), as set forth in Supplement VII, p. 984 under 2, and hence can not be here enumerated again. 54. See Supplement VII, p. 982 et seq. 55. The Bromberger Bank fur Handel und Gewerbe, formerly mentioned here as having a community of interest with the Ostbank, has meantime been absorbed by the latter. 56. See, however, note 7, p 1013. 57. It might also be proper to include the Wurttembergische Vereinsbank (share capital 30,000,000 marks), since there is a community of interest between it and the Wurttembergische Bankanstalt. (See Supplement VII). 58. I have here purposely left unnoticed the fact that the linking together of banks is in many cases effected by means of an exchange of shares, rendered possible through an increase of the capital of the annexing bank. Thus where the share capital both of the annexing and the annexed bank is taken at full value, there is often, though not always, an excessive, but by no means necessarily a double, reckoning of share capital, as a mere matter of arithmetic. There may also be cases in which the same capital is counted twice or even three times, to wit, when the annexation is effected not through exchange but through acquisition of stock (without increase of capital). It may be that all or part of the capital of the provincial bank which is annexed by a central bank by the latter method is counted once more among the "per- manent participations" of the central bank. On the other hand, among the "permanent participations" of the provincial bank there may be found once more the share capital, or part of it, of other banks, which the pro- vincial bank in its turn has annexed by means of acquisition of shares, if it has allowed these banks to continue as separate stock companies. This attitude, which I deliberately took in the first edition, I have decided to maintain after renewed reflection, especially since every other method of calculation would lead to errors at least equal and generally much larger in amount, which can only be avoided by omitting the summing up of the items into a total. In case of an exchange of stock, it is generally impracticable, owing to lack of data in the reports, to ascertain how many shareholders of the 863 National Monetary Commission annexed bank have availed themselves of the offer to exchange their stock for stock of the annexing bank. This is strikingly proved by the laborious and detailed calculation which Ernst Loeb, in his oft-cited work "Die Berliner Grossbanken in den Jahren 1895-1902 " had to make (pp. 101-103), in order to ascertain, with only partial success, how many shareholders of the Bergisch-Markische Bank and the Schlesischer Bankverein availed themselves of the offer of exchange made in 1897 by the Deutsche Bank. Still less is it possible, in most cases, to ascertain how many of the shares received in exchange remained permanently in possession of the annexing bank, and how many were sold. Thus any estimates that may be made in this matter are almost entirely baseless. Similarly, in the case of mere acquisition of shares, the balance sheets furnish no definite data for exact figures, since the "permanent participa- tions" are mostly stated merely in the aggregate. Thus, aside from a few exceptions, it is impossible by this method to ascer- tain the exact sum which would have to be deducted from the share capital of the annexed banks, in order to obtain an accurate result. The same objection, however, applies to the method proposed by some, which consists in ascertaining the book values of exchanged shares from the balance sheets or reports of the annexing banks, the reason being that these book values in most cases can not be ascertained from the sources in question, and it would of course be unscientific to adopt this method where it is possible, and another method in other instances. Moreover annexations have occurred within one and the same group either through exchange of shares or through other methods of acquisition of shares, that is to say, without any increase of capital on the part of the annexing bank. This leads to differences within the various groups, which, if taken into account in the calculation, would result in a totally false pic- ture of the relative power of the several groups. Finally and this is perhaps the most important point the aim is not to ascertain the capital of the several groups but their capital power, and this can hardly be represented in any other way than by a statement of the share capital and reserves, unless we are prepared, with Otto Jeidels, (loc. cit., pp. 91-93) to take a further step and include in the calculation the entire earning capital, that is to say, current account credits and deposits. If the object is simply to represent the capital power, which in fact is the only point of interest, the statement of the full share capital and reserves is justified by the consideration that, from the outsider's point of view, the sphere of influence of a bank, its credit and business power, are embodied in this share capital and reserves. Indeed, as rightly pointed out by W. Christians (in the Deutscher Oekonomist, Dec. 2, 1905, 23d year, No. 1197, p. 597), the fact that, for example, the entire capital of the Norddeutsche Bank is held by the Disconto-Gesellschaft, which in turn has passed over to the shareholders of the Norddeutsche Bank 50,000,000 marks of its total capital of 170,000,000 marks, does not justify the statement that the total capital of the Disconto-Gesellschaft now amounts only to 120,000,000 864 Th German Great Banks marks, and the united capital of the two banks only to 170,000,000, not 220,000,000 marks. This would be so if we admitted the principle that the shares of the annexing bank turned over for the purpose of exchange should not be counted together with the shares of the annexed bank. Even after the operation of exchange, the capital power of the two banks is equal to the sum of the share capital and reserves of both, as has been admitted by the Deutscher Oekonomist, not only in the above-cited article of Dec. 2, 1905, on the capital power of the bank groups (loc. cit., p. 597) but even earlier (in No. 1178, July 22, 1905) as well as by Julius Steinberger (op. cit. p. 7) and Otto Jeidels (op. cit., pp. 91-92). However, the whole question becomes rather immaterial when we con- sider the sums involved. The aggregate capital and reserves of the five groups of banks, as set forth above, is in round numbers 2,000,000,000 marks. The significance of this total will not be greatly changed by adding or deducting a few million marks. For shares recurring as securities or permanent participations in the balance sheets of other institutions, Wallich (op. cit., pp. 138-139, Table XIV) deducts 64,000,000 in the case of the Deutsche Bank group, 75,000,000 in the case of the Disconto-Gesellschaft group, 15,000,000 in the case of the Dresdner Bank group, and 22,000,000 in the case of the Darmstadter Bank group, making a total of 176,000,000. As a matter of fact, these figures represent in part arbitrary assumptions, as do those of Lansburgh (op. cit., p. 35) who assumes a like total of 500,000,000 marks for all the banks. 59. In this point I differ from Otto Jeidels, op. cit., p. 91-93. 60. One of the factors promoting the concentration of capital, as we have seen, is the formation of syndicates or groups. However, this factor does not belong here, since its professed aim is not concentration but quite different objects, to wit, the distribution of risk on the one hand and the facilitating of the issuing function on the other. 61. In the Kritische Blatter fur die gesamten sozialen Wissenschaften, Vol. II, No. 7, p. 300. 62. See tables given by Jeidels, op. cit., pp. 172-173. 63. According to the table given by Jeidels (p. 603 et seq.), the follow- ing banks were represented during 1905 in the supervisory boards of compa- nies belonging to the chemical and textile industries: Number of boards on which represented. In the chemical industry. In the textile industry. Deutsche Bank 9 7 5 6 3 21 5 5 2 6 Darmstadter Bank Dresdner Bank 90311 II 56 865 National Monetary Commission 64. Depositenbankwesen und Scheckverkehr in England, p. 259. 65. In addition to the economic factors, there are psychologic factors that play a part in this movement, the significance and strength of which, particularly in the field of concentration, we have repeatedly pointed out in the text. Such factors are "the craving for individual freedom" (W. Sombart, Der moderne Kapitalismus II, p. 237), ampler room for indi- vidual exertion, wider aims, etc., and, later on, the attraction of a human conglomeration, of a vast traffic, of the facilities for learning the latest in economic and political matters, etc. 66. Apart from those banks which were satisfied with being repre- sented in Berlin by the inadequate method of silent partnership connections (commandites} with Berlin banking houses (see Paul Wallich, op. cit., p. 56, Table VIII.) 67. The Breslauer Discontobank of Breslau had likewise founded a branch in Berlin in 1896, which was however taken over in 1902 by the Bank fur Handel und Industrie. 68. This is the same process that may be observed in France in the case of the Paris branch of the Credit Lyonnais. 69. This is the view of Rudolf Eberstadt, Depositenbanken und Scheckverkehr in England, pp. 251 and 259, note 2. 70. For France see Andre Sayous, Die Konzentration des Bankverkehrs in Frankreich in the Bank-Archiv, vol. Ill, No. 8, of May 3, 1904, Table I, p. 129. 71. Edgar JafT6, Das englische Bankwesen, p. 30. 72. Edgar Jaffe, loc. cit., p. 192. 73. Thus the capital of the Joint Stock Banks in Great Britain during the years 1900-1905, rose from 76,000,000 to 79,500,000, in round figures, while their number fell from 83 to 62. 74. See above, p. 605. 75. See p. 607 and following of the text and notes thereto. 76. The several capital increases of the Darmstadter Bank during the second epoch were as follows: Up to 1880 to 60,000,000 marks, up to 1889 to 80,000,000 marks, up to 1898 to 105,000,000 marks, up to 1902 to 132,000,000 marks, up to 1904 to 154,000,000 marks. (The last-named figure has been maintained to date.) 77. The several capital increases of the Berliner Handelsgesellschaft during the second epoch were as follows: Up to 1880 to 30,000,000 marks (in 1882 reduced to 20,000,000 marks), up to 1886 to 30,000,000 marks, up to 1887 to 40,000,000 marks, up to 1889 to 50,000,000 marks, up to 1891 to 65,000,000 marks, up to 1896 to 80,000,000 marks, up to 1899 to 90,000,000 marks, up to 1903 to 100,000,000 marks, up to 1908 to 110,000,000 marks. (The last-named figure has been maintained to date.) 78. The several capital increases of the Disconto-Gesellschaft during the second epoch were as follows: Up to 1880 to 60,000,000 marks, up to 1889 to 75,000,000 marks, up to 1898 to 115,000,000 marks, up to 1899 to 130,000,000 marks, up to 1902 to 150,000,000 marks, up to 1904 to 170,000,000 marks. (The last-named figure has been maintained to date.) 866 The German Great Banks 79. The several capital increases of the A. Schaaffhausen'scher Bank- verein during the second epoch were as follows: Up to 1880 to 36,000,000 marks, up to 1891 to 48,000,000 marks, up to 1895 to 60,000,000 marks, up to 1897 to 75,000,000 marks, up to 1899 to 100,000,000 marks, up to 1904 to 130,000,000 marks, up to 1908 to 145,000,000 marks. (The last- named figure has been maintained to date.) 80. The several capital increases of the Mitteldeutsche Kreditbank during the second epoch were as follows: Up to 1880 to 30,000,000 marks, up to 1897 to 36,000,000 marks, up to 1899 to 45,000,000 marks, up to 1905 to 54,000,000 marks. Assuming an original capital of 5,000,000 thalers (=15,000,000 marks) instead of 8,000,000 thalers (since 3,000,000 thalers remained in the port- folio of the bank), a nearly fourfold increase within the period may be figured out. 81. In Austria the earning capital (share capital plus surplus, accept- ances, deposits and credits on current account (Kreditoren) of all Austrian joint-stock and provincial banks (Landesbanken) at the end of 1902 was in round figures 7,500,000,000 crowns, of which, it is true, the Austro- Hungarian Bank was credited with about 2,432,000,000 crowns, and the Kreditanstalt with 494,000,000 crowns. Out of 60 banks, 6 possessed in the aggregate more than 60 per cent of the total capital. At the end of 1908, the following Austrian banks, which since 1905 have also greatly increased the number of their branches, showed the following share capitals : Capital at end of 1908. Capital in year of foundation. Year of founda- tion. i K K Priv Kreditanstalt fur Million crowns. Handel und Gewerbe. 2. K. K. Priv. Osterreichische Boden- kreditanstalt. 3 K K Privilegierte Osterreichische 45 7,200,000 crowns 1864 1880 Landerbank. 1869 5. Anglo-Osterreichische Bank 6. Niederosterreichische Bscomte- gesellschaft. 7 Unionbank 60 60 7 12,000,000 crowns 10,461,000 crowns 2 ooo ooo crowns 1853 1853 1870 a Beginning with 1864 only 60,000,000 florins. The great Hungarian banks, too, have recently increased their share capitals very considerably (in part also the number of their branches), in particular the following: i, Ungarische Allgemeine Kreditbank, capital increased to 60,000,000 crowns; 2 Osterreichisch-Ungarische Commercial- bank, capital increased to 42,000,000 crowns; 3, Ungarische Escomte- und Wechslerbank, capital increased to 40,000,000 crowns. 867 National Monetary Commission In France, the following increases of share capital took place between 1870 and the end of 1908: Credit Lyonnais (with 43 agencies in Paris, 9 in the suburbs of Paris, 174 in French provincial towns and in Algeria), from 20,000,000 to 250,000,000 francs; Comptoir national d'Escompte de Paris (with 35 bureaux de quartiers in Paris, 14 agencies in the suburbs and 150 agencies in the provinces), from 50,000,000 to 150,000,000 francs; Credit industriel et commercial (with 30 succursales in Paris, 3 in the suburbs and i agency in London), from 15,000,000 to 100,000,000 francs; Societe generate pour favoriser etc. (with 88 succursales, agencies and bureaus in Paris and suburbs, 637 agencies in the provinces, and one agency each in London and Saint Sebastian, Spain), from 60,000,000 to 300,000,000 francs. 82. The several increases of the Deutsche Bank were: Period ending 1880 to 45,000,000, 1 88 1 to 60,000,000, 1888 to 75,000,000, 1895 to 100,000,000, 1897 to 150,000,000, 1902 to 160,000,000, 1904 to 180,000,000, 1905 to 200,000,000 marks; amount unchanged since then. 83. The several increases of the Dresdner Bank were: Period ending 1880 to 15,000,000, 1 88 1 to 24,000,000, 1883 to 36,000,000, 1887 to 48,000,000, 1889 to 60,000,000, 1892 to 70,000,000, 1895 to 85,000,000, 1897 to 110,000,000, 1899 to 130,000,000, 1904 to 160,000,000, 1907 to 180,000,000 marks, 1910 to 200,000,000 marks. 84. The several increases of the Commerz- und Disconto-Bank were: Period ending 1883 to 40,000,000, 1897 to 50,000,000, 1904 to 85,000,000 marks; amount unchanged since then. 85. The several increases of the National bank fur Deutschland were: Period ending 1883 up to 24,000,000, 1899 (after reduction to 21,000,000 and to 18,000,000) to 27,000,000, 1890 to 36,000,000, 1895 to 45,000,000, 1898 to 60,000,000, 1905 to 80,000,000 marks; amount unchanged since then. 86. See also p. 629 and following for list of banks and private banking firms absorbed by provincial banks which remained independent. For example, the Rheinisch-Westfdlische Disconto-Gesellschaft in AacJien (Aix- la-Chapelle) alone absorbed a total of 7 banks and 2 private banking con- cerns (4 banks and i private banking concern being absorbed in a single year, 1905); see p. 633 et seq. 87. In 1909 the Disconto-Gesellschaft set up a branch in Mainz, to take the place of the bankingfirm of Bamberger & Co. in Mainz, which it had absorbed. 88. In 1909 the Deutsche Bank, without absorbing any banking estab- lishment, set up a branch in Constantinople, in order to foster and develop the manifold relations to Turkey. 89. Paul Wallich (loc. cit., p. 59 et seq.) says that fusion was "the char- acteristic form of concentration" in German banking in the period 1880- 1895. I am unable to share that view, even as regards the period named. Concerning a bank which ceased to exist not long after its establishment, it soon became a common saying at the Bourse that the shares were bought and sold "per disappearance." 90. Such is the case of the Berliner Bank, which had been unable fully to attain its purpose, namely to attract the credit business of the class of small traders. 868 The German Great Banks 91. Such is, for example, the case of the Hessische Notenbank under the firm name of Bank fur Siiddeutschland, which, by reason of the new bank- ing law, was no longer able to attain its aims as fully as had been intended and was in fact requisite. Paul Wallich (loc. cit., p. 78) reports the absorp- tion of six other former note banks by credit banks. Here must also be mentioned the absorption, in 1905, of the Braunschweigische Kreditanstalt (share capital, 6,750,000 marks) by the Braunschweigische Bank (share capital, 10,500,000 marks), the latter absorbing in 1906 also the banking firms of Hermann Schoof in Helmstedt and Hugo Rennau in Schoningen. 92. See article: " Zwangsf usionen " in the Berliner Tageblatt (Handels- zeitung) Jan. 15, 1906. 93. Thus in the case of the absorption of the Anglo-Deutsche Bank by the Dresdner Bank in 1892. 94. Rudolf Kberstadt, Depositenbankwesen und Scheckverkehr in Eng- land, op. cit., p. 249. Edgar Jaffe (loc. cit., pp. 190-191) thinks on the contrary that " the movement has been slackening since the beginning of the new century." 95. Edgar Jarfe", loc. cit., p. 191. 96. Karl Mamroth, Die schottischen Banken, p. 10, note 38. 97. Vossische Zeitung, Jan. 31, 1905; see Charles J. Bullock, Concentra- tion of Banking Interests, in Atlantic Monthly, Aug. 1903. 98. See C. Stegemann, Die Entwicklung des franzosischen Grossbank- betriebes (Minister in Westfalen, Theissing, 1908), pp. 22-23, 2 ^, 39- 99. See p. 869, note 57. 100. This refers solely to the share capital, not to reserves nor to deposits of all kinds. 101. The Rheinisch-Westfalische Disconto-Gesellschaft (share capital 80,000,000 marks, 17 branches, see p. 633), which was enumerated in this connection in earlier editions, and which is particularly active in the mining region of the Rhineland and Westphalia, I no longer include in the group of the Disconto-Gesellschaft for reasons stated on p. 673. 102. The Westdeutsche Bank vormals Jonas Cahn in Bonn, having in 1904 been absorbed by the A. Schaaffhausen'scher Bankverein, can of course not be separately mentioned. For the same reason the Niederrhein- ische Kreditanstalt vormals Peter & Co. in Krefeld (fused in 1904) has to be omitted. 103. Georg Tischert, Filialsystem und Zentralisation im Bankwesen (Bank-Archiv May 1903, No. 8, pp. 119-120). 104. Paul Wallich, Die Konzentration im deutschen Bankwesen, 1905, pp. 17-24 and Table II, p. 19. 105. Jubilaumsbericht der Disconto-Gesellschaft (Jubilee report of the Disconto-Gesellschaft), p. 208. The practice of setting up independent provincial banks at the locality of the parent bank was probably prompted by considerations similar to those which as early as 1864 had led the Darm- stadter Bank to transform its branch in Mainz into a commandite, "in order to limit the number of institutions that might directly commit the bank." 869 National Monetary Commission 106. See above (Part 3, chap. 2, par. 4, under II). 107. In the first period (1848-1870) and at the beginning of the second period the Darmstadter Bank took the lead in establishing subsidiary companies (Tochtergesellschaf ten) . 1 08. See Supplement VII. 109. In the case of the domestic subsidiary companies (Tochtergesell- schaf ten), which, as appears from the above remarks, have of late been established in somewhat larger number, several institutions have occa- sionally established them by joint action, in order to lessen some of the disadvantages here described. no. The formation of trust companies was also greatly promoted by paragraph 39 (now 41) of the stock exchange act. in. For details the reader is referred to Max Jorgens, Finanzielle Trust- gesellschaften (Stuttgart and Berlin, J. G. Cotta Nachfolger, 1902); Robert Liefmann, Beteiligungs- und Finanzierungsgesellschaften, (Jena, Gustav Fischer, 1909) p. 369 et seq. 112. Even in these cases, however, the "closer connection" means for the most part that the bank whose shares are acquired becomes more or less subject to the will and guidance of the bank acquiring them. Such connections might be more properly called "communities of protection" (Schutzgemeinschaften) than "communities of interest" (Interessenge- meinschaften). A very peculiar kind of community of interest is represented by the connection established in 1905 between the Imperial Bank of Agricultural Credit Societies (Landwirtschaftliche Reichsgenossenschaftsbank) in Darm- stadt and the Prussian Central Bank of Credit Societies (Preussische Zentralgenossenschaftskasse). The former, which was by far the weaker, was permitted to acquire shares of the latter to the amount of 1,000,000 marks, in exchange for which it surrendered to the latter the business with the Prussian Credit Societies (union deposit offices), this surrender being deemed an equivalent for the acquisition of the shares. 113. See Frankfurter Zeitung No. 216 (Aug. 6, 1905), where the view is expressed that the estimate of 2,000,000 marks as the amount of shares of the Rheinisch-Westfalische Disconto-Gesellschaft held by the Disconto- Gesellschaft is rather high. For details concerning the Rheinisch-Westfalische Disconto-Gesellschaft see above, p. 633. 1 14. A similar condition exists in the case of the Schlesische Handelsbank Aktiengesellschaft in Breslau (formerly Perls & Co.), whose share capital at its foundation or rather transformation in 1905 was acquired in part by the Berliner Handelsgesellschaft and in part by the Disconto-Gesellschaft. 115. See Otto Jeidels, p. 261. 1 1 6. In the first edition of the present work I had pointed out that differences regarding the business management and the common policy would be apt to arise. The Berliner Jahrbuch fur Handel und Industrie (1908, Vol. I, p. 261) states, I do not know on what grounds, that such 870 The German Great Banks differences did manifest themselves in the classic instance of the Dresdner Bank-Schaaffhausen alliance, one case occurring as early as 1904 in regard to the Hibernia nationalization plan, another in 1908 in regard to the occurrences connected with the International Exploration Company Erke- lenz, whose shares were owned for the most part by the A. Schaaff- hausen'scher Bankverein. It is to be noted that industrial communities of interests, too, have sometimes been terminated, mostly through the fusion of the contracting parties. Such was the case with the community of interest entered into in 1904 for five years between the Bismarckhiitte and the Oberschlesische Eisenindustrie Aktiengesellschaft in Gleiwitz; the oft-mentioned community of interest entered into in 1904 for thirty-one years between the Schalker Gruben- & Hiitten-Verein, the Gelsenkirchener Bergwerks-Aktien-Gesellschaft and the Eisenhuttenwerk Rote Erde Aktiengesellschaft Aachen, which were fused in 1907; the community of interest entered into in 1905 for thirty-five years between the firm Arthur Koppel and the Aktiengesellschaft fur Feld- und Kleinbahnbedarf vormals Orenstein & Koppel in Berlin. In this case, too, the aliance terminated in fusion, the former firm being merged in the latter, and the combined enter- prise assuming the firm name of Orenstein & Koppel, Arthur Koppel Aktiengesellschaft. 117. This view has been substantiated since the first edition of this book in 1905, while in industry numerous communities of interest have meantime been entered into, such as the great communities of interest in the chemical industry described on pp. 72 1 et seq. See Henry Volcker, Vereinigungsformen und Interessenbeteiligungen in der deutschen Gross- industrie, in Schmoller's Jahrb. fur Gesetzebung, Band XXXIII, Heft 4, p. 1 1 et seq. 1 1 8. Report of the Bergisch-Markische Bank for 1897, p. 3. 1 19. Paul Wallich (loc. cit., p. 102) rightly refers also to the difficulties from the standpoint of taxation, citing a passage from Jorgens, Finanzielle Trust- gesellschaften, p. 75 : " Double taxation, which is likely to occur in the case of a stock company, inasmuch as the tax is laid on the income or profits first of the company and second of the shareholder, is apt to become triple taxation when one stock company owns the other." Again Wallich justly remarks (loc. cit., p. no) that "in banking, the permanent participation represents, in principle, the same degree of improvement on the stock company as the stock company does on individual enterprise." However, I am unable to agree with the argument he advances in support of the last-mentioned thesis, because, to my mind, the modern stock company is characterized by the fact that (contrary to the opinion expressed by Wallich, loc. cit., p. in) the stockholder (aside from exceptional cases), while possessing an "interest in the undertaking," does not possess an "undertaker's interest," especially since it is not the individual stockholder but the aggregate of the stockholders that has to be regarded as the undertaker. Now this aggregate, though perhaps not possessing the capacity to undertake, which even the physical undertaker may lack, 871 National Monetary Commission certainly has the will to undertake, as appears from the very fact that it does not dissolve the enterprise but carries it on, or rather causes it to be carried on. Hence the assertion recently made (for example by Ad. Gott- schewsky in his interesting and stimulating work " Ueber die Aktienform der Unternehmung," in Schmoller's Jahrb. 31 Jahrg. i Heft, p. 199 et seq.), that in the case of a stock company there is no undertaker at all, must be regarded as erroneous. 1 20. Toward the end of 1904 the number of commandites had decreased by two (see ist ed., p. 211). 121. See Jubilee Report of the Disconto-Gesellschaft, pp. 204-205. 122. See Report of Darmstadter Bank, 1871, pp. 12-13. 123. See Model, pp. 75-76. 124. See Loeb, cited by Model, p. 168. 125. However, on looking into the details, we find that the conditions are entirely different. Among the great banks, the Dresdner Bank has the largest number of branches (14). 126. To this must be added 4 branches of the Westfalisch-Lippische Vereinsbank, a subsidiary company of the A. Schaaffhausen'scher Bank- verein, mentioned in Supplement VII, and 3 branches of the Bayerische Disconto- und Wechselbank, also 2 branches of the Revisions- und Ver- mogens-Aktien-Gesellschaft, as well as 8 branches of the Bank fur Thiir- ingen vormals B. M. Strupp, Aktien-Gesellschaft, making a total of 17 branches. This does not change the general statement nor the average number of branches per allied bank (Konzernbank) . 127. In the United States the obstacles are mainly of a legal nature. In Austria, too, with the exception of the Oesterreichisch-Ungarische Bank, which is a note bank, the great banks have hitherto had a rela- tively small number of branches. The Oesterreichische Kreditanstalt at the end of 1904 had only 7 branches, the Wiener Bankverein 4, the Oester- reichische Landerbank 2. The three last named, however, had a number of exchange offices (Wechselstuben). In 1905 the branches began to mul- tiply. According to the Prager Tageblatt, December 27, 1905, there were in Bohemia alone, at the end of 1905, not less than 31 branches and agencies of Bohemian banks and 27 branches and agencies of Vienna banks, besides 54 branches and sub-offices (Nebenstellen) of the note bank (Oesterreichisch- Ungarische Bank). In 1905-6 the Wiener Bankverein alone established branches in Marienbad, Karlsbad and Pilsen, which were to be followed by others in Bozen and Meeran and in Constantinople, and this movement continued in subsequent years. 128. Depositenbanken und Spekulationsbanken (1902), p. 62 et seq. 129. Rudolf Eberstadt, Depositenbankwesen und Scheckverkehr in England, p. 248. 130. In the case of England, however, it is advisable to use the term banking offices (Bankstellen) rather than the term branches, since the London "branches" at any rate in many cases resemble our deposit offices rather than our branches. 872 The German Great Banks 131. Edgar Jaffe, Das englische Bankwesen, p. 189. See preceding note. 132. For the period up to 1903 see Andre A. Sayous, Die Konzentration des Bankverkehrs in Frankreich, Bank-Archiv, 3 Jahrgang, No. 8, May 1904, pp. 129-132, especially Table I: Number of agencies and branches of French credit institutions in Paris and vicinity (p. 129); and Table II: Number of agencies and branches of the French credit institutions in the province (p. 130); also Vossische Zeitung of Jan. 28, 1905. 133. See Karl Mamroth, Die schottischen Banken, loc. cit., p. 20 et seq. 134. See, however, note 130 on p. 872. 135. The words "in large part" were added in deference to an objection raised by C. Hegemann in his paper Die Entwicklung des franzosischen Grossbankbetriebes (Minister in Westfalen, 1908, Theissing), p. 27. The objection must be regarded as well-grounded. However, he himself states (p. 94) that the French branches of the credit institutions are merely instru- ments to carry out the orders of the central bank. 136. This is probably the reason why Andre" A. Sayous, in the paper mentioned in the above note 132, combines agencies and branches. 137. Our Reichsbank, too, had at the end of 1908 487 banking offices (Stellen) (in 1903 379). See Verwaltungsbericht der Reischsbank fur das Jahr 1909, page 16. In Scotland the number of branches rose very decid- edly in 1854, because the stamp tax on bank notes was reduced from 5 pence to i penny (Karl Mamroth, loc. cit., pp. 19-20). 138. Quoted from Somers, The Scotch banks and system of issue, Edin- burgh 1873. (See Karl Mamroth, loc. cit., p. 27). 139. Die Berliner Grossbanken in den Jahren 1895-1902 etc., p. 114. 140. For details see Edgar Jaffe", Das englische Bankwesen, pp. 184-85. 141. Ad. Weber, Depositenbanken und Spekulationsbanken, p. 41. 142. The income tax depends on the legislation of the various states. The legislation of Prussia, for example, provides that stock companies having their main office in Prussia and branches in another German state are taxed in Prussia on that part of their total income which is derived from the business operations of the establishments located in Prussia. Similarly, stock companies having their main office outside of Prussia but possessing branches in Prussia are subject to the Prussian income tax on that part of their total income which is derived from establishments located in Prussia. 143. Loc. cit., p. 112. 144. On this account, agencies, as contrasted with branches, would doubtless play a very prominent part in Germany also, but for the peculiar reasons mentioned in the text. From a business point of view it would be good policy to begin with the easier form, the agency, and develop it gradually, as business increases, into the more substantial and important juridical form, the branch. With this view some banks, for example the Pfalzische Bank, have established branches which they called "agencies" 873 National Monetary Commission or " deposit offices" or " deposit and exchange offices " (Wechselstuben), but which had to be recorded as branches. 145. Of the remaining "agencies," the majority are agencies only in name, being entered in the trade register as branches. See preceding note. 146. Most of the sums in question are in fact deposits, because in Meck- lenburg, Oldenburg, Schleswig-Holstein and Alsace-Lorraine, more than elsewhere in Germany, especially so far as the rural population is con- cerned, it is customary to keep available funds in the banks as deposits instead of investing them. These sums are sometimes quite large and are often kept in the bank for a long time. 147. See for example Ad. Wagner, Beitrage zur Lehre von den Banken, Leipzig, Leopold Voss, 1857, p. 164 et seq., and above, pages 189 and following, also notes thereto. 148. Grundriss zum Studium der politischen Oekonomie 4th ed., Jena, 1902, Gustav Fischer, p. 149. 149. Concerning an earlier period see Ad. Wagner, loc. cit., pp. 70-71 and others. 150. Edgar Jaffe, Das englische Bankwesen, p. 189. 151. Hans Gideon Heymann, loc. cit., p. 132. Part V. i . For details see W. Sombart, Der moderne Kapitalismus, I, pp. 553-569 ; Hans Gideon Heymann, Die gemischten Gewerke im deutschen Gross- Eisengewerbe (Stuttgart and Berlin, 1904, J. G. Cotta'sche Buchhandlung Nachf.), pp. 21 1 et seq. and 280 et seq. 2-. Kontradiktorische Verhandlungen iiber deutsche Kartelle, Heft 5, Supplement I, pp. 102 et seq. 3. Hans Gideon Heymann, loc. cit., p. 211. 4. From an earlier period the following example may be cited : The A. Borsig machine works, which as early as 1847 had built a puddling and rolling mill as an adjunct to the machine works, thereupon leased coal and ore mines and in the sixties erected in Upper Silesia other puddling and rolling mills, " thus developing from a " machine factory" into a great mixed steel plant, through the systematic annexation of establishments supplying the raw material and half-finished manufactures. ' ' (Hans Gideon Heymann, loc. cit.," pp. 186-187). A multitude of other examples from recent times are found in the volume of Henry Voelcker cited on p. 871, note 117. 5. For details concerning these highly interesting developments, which however are beyond the scope of the present book, the reader is referred to the following works : Robert Liefmann, Die kontradiktorischen Verhandlungen iiber deutsche Kartelle (Conrad's Jahrbiicher, 3 Folge, Band XXV, p. 638 et seq.), 1903. Idem, Die Verhandlungen iiber die Roheisensyndikate und den Halbzeug- verband in der deutschen Kartellenqute (Conrad's Jahrbiicher, 3 Folge, Band XXVII, p. 525 et seq.), 1904. 874 The German Great Banks Idem, Kartelle und Trusts (Stuttgart, Ernst Heinrich Moritz), 1905; see especially p. 99 et seq. : Die Weiterbildung der Kartelle. Idem, Krisen und Kartelle (Schmoller's Jahrb. Jahrg. 1902, p. 66 1 et seq. and Schriften des Vereins fur Sozialpolitik, Bd. CXIII, p. 261 et seq. Idem, Die Weiterbildung der Unternehmungsformen unter dem Einfluss der Kartelle (Deutsche Wirtschaftszeitung, i Jahrgang, Nr. 2, 3 and 4, January and February 1905). von Landmann, Die amtlichen Erhebungen uber das deutsche Kartell- wesen (Annalen des Deutschen Reichs, 1904, Ns. i, 2 and 4). Hans Gideon Heymann, loc. cit. See also Kontradiktorische Verhandlungen uber deutsche Kartelle, Heft 1-8, Berlin 1903 and 1904 (Franz Siemenroth), especially the reports of Regierungsrat Voelcker on the Rhenish- Westphalian Coal Syndicate, H. I (session of 26-27 Feb- 1902) pp. 25-47 and p. 275 et seq. note (List of syndicate coal mines acquired by other coal mines or smelting works), and Heft 5 : Report on the cartel movement in the German iron industry (also published separately), and Supplement I: Betriebsvereinigungen in der deutschen Eisenindustrie, page 102 et seq. 6. See Robert Liefmann, Die kontradiktorischen Verhandlungen etc., p. 544- 7. Ibidem, pp. 642-645. 8. It is well known, of course, that some individual electrical firms, for example the A. E. G. (Allgemeine Elektrizitats-Gesellschaft) have for many years kept large balances in their banks. 9. Completely absorbed by the Elektrizitats- Aktien-Gesellschaf t vormals W. Lahmeyer & Co., the absorption taking effect on September i, 1902. In May 1905 the manufacturing section of the Aktiengesellschaft vormals W. Lahmeyer & Co. was united with the firm Felten & Guilleaume Carlswerk Aktien-Gesellschaf t in Muhlheim am Rhein, which for that purpose increased its share capital from 36,000,000 to 55,000,000 marks. The united com- panies bear the name "Felten & Guilleaume-Lahmeyer Werke Aktien- Gesellschaf t.'' 10. In 1898 the Schaaffhausen'scher Bankverein left the Schuckert group and joined the Loewe group (Union-Elektrizitatsgesellschaft). 11. Particular mention may be made here of the remarkable progress recently achieved in the production of dyes, perfumes, artificial silk, the extraction of nitrogen from the air, the manufacture of new explosives, of materials needed in aerial navigation, the discovery of prophylactic, anaes- thetic and soporific remedies, and last but not least the transmutation of metals, and even of elements, or substances formerly regarded as elements. 12. The discussion here follows in the main L. Mueffelmann, Les ententes dans 1'industrie chimique Allemande (Revue economique internationale, Vol. Ill No. 4 December 15 to 20, 1904, pp. 882-890); a few errors are here corrected. 13. Besides those enumerated in the text mention should be made of the Farbwerk Muhlheim formerly A. Leonhardt & Co. in Muhlheim; Kalle & 875 National Monetary Commission Co. in Biebrich (now part of the combined Hochster Farbwerke-Cassella) ; K. Oehler in Offenbach on-the-Main (now absorbed by the Chemische Fabrik Griesheim-Elektron} . 14. See Otto Jeidels, op. cit. pp. 123-125, where illustrations are also given. See also p. 125. 15. Op. cit., p. 122. 16. Hans Gideon Heymann, op. cit., p. 43. 17. Ibid., p. 4, 62. 18. Ibid., p. 72. 19. Ibid., pp. 85-94. 20. Ibid., pp. 107-8 21. Ibid., p. 119. 22. Ibid., p. 199. 23. Ibid., p. 204 24. See Ludwig Eschwege, Revolutionierende Tendenzen im deutschen Eisengewerbe (Revolutionizing Tendencies in the German Iron Industry) in die Bank, Apr., 1909, pp. 313-318 and "Ladon" in the Zukunft, Apr. 3, 1909, p. 26. 25. Thyssen keeps aloof from the great banks that have hitherto been dominant in the Lorraine-Luxemburg district, neither has he developed closer relations to the Darmstadter Bank, which founded the above mentioned works or to the A. Schaaffhausen'scher Bankverein which reorganized, financed and improved the technical outfit of the Lorraine furnace com- pany Aumetz-Friede (This company was merged in 1903 with the Fentscher Huttenaktienverein and the Gewerkschaft Crone.) Stinnes too at first had only a few minor bank connections in this dis- trict, chiefly through his directorship in the Mittelrheinische Bank and his relations to Spaeter & Co. This may have been the reason why he gladly availed himself of the opportunity in 1901 to secure a strong position in this district by entering the directorate of the Deutsch-Luxemburgische Bergwerks- und Hutten-Aktiengesellschaft. Part VI 1. For certain reservations to be made here see above, p. 527 et seq. and particularly pp. 535 and 536. 2. For the future there is a possibility of combinations, which would at least lead to a saving of taxes. 3. Conditions in England are evidently similar. For these see John Cockburn Macdonald, The Economic Effects, National and International, of the Concentration of Capital in Few Controlling Hands. (The Institute of Bankers, Oct., 1900, Vol. XXI, pt. VII, pp. 371-3.) 4. Finanzielle Trustgesellschaften, p. 75. 5. With reference to his activity as a curb broker (coulisse) and in the arbitrage field see above pp. 620-621. 876 The German Great Banks 6. Thus Karl Biicher says (Die Entstehung der Volkswirtchaft, 3d ed., 1901, p. 229): Concentrated demand cannot be met by scattered produc- tion. Progress of concentration in demand must be accompanied by progress of concentration in industrial production, the latter causing the disappearance of the craftsman. 7. Karl Biicher, op. cit., p. 235. 8. Otto Jeidels is mistaken in his opinion with reference to these and the majority of listed bonds, that "industrial bonds yield only a small return." (Op. cit., p. 55). The opposite is usually the case. 9. This has happened in England, too, but only in a few cases. (See Barclay etc.) In France there has been formed from among the private bankers the "Syndicat des Banquiers de la province francaise," and the Banque de 1' Union Parisienne (Mallet freres, Vernes et Cie., de Neuflize et Cie, etc). The former publishes an organ of its own, "La France economique et financiere." In Germany similar combinations have been proposed, among others by Julius Kohen (Aschersleben), in the Plutus for July i, 1904, "A Bankers' Association for Cooperative Buying," and by Ludwig Eschwege in Die Hilfe of July 3, 1904, No. 27. 10. See W. Sombart, Die deutsche Volkswirtschaft, 2d ed., p. 191. 11. According to the excellent and exhaustive report (published also as reprint) made by the manager of the Centralverband des Deutschen Bank- und Bankiergewerbes, Wittner, Counsellor-at-law in Berlin, to the Third General Convention of German Bankers at Hamburg in September 1907, a schedule was prepared for the purpose of gathering statistics of salaries paid to German bank employees, also regarding the living conditions of these employees and their families, and 38,000 copies of this schedule were sent to about 4,000 banking institutions and firms. The data of these schedule were worked up by the Central Verband. Of the total number sent out, 24,146 or about 65 per cent were returned filled out by 1,247 establishments having 24,146 employees, distributed as follows 264 joint stock banks with 16,391 employees, 708 private banks with 5,938 employees and 275 cooperative banking institutions with 1,817 employees. 12. Memorial on the investigation into the economic condition of salaried employees in private establishments instituted during Oct., 1903, by the organizations of salaried employees and transmitted to the Reichstag March 14, 1907. 13. According to an article on Banking and Exchanges by Henry Crosby Emery, professor of political economy at Yale University there was recently established in the United States the International Banking Corporation with a capital of $7,000,000, with the intention of having a bank with American managers and employees, and American customers. It was, how- ever, impossible to find Americans trained for the positions, and "today all the branch managers are Englishmen," (in Ernst v. Halle, Amerika, seine Bedeutung fur die Weltwirtschaft und seine wirtschaftlichen Bezie- hutigen zu Deutschland, insbes. zu Hamburg, Verlag der Hamb. Borsen- 877 National Monetary Commission halle 1905, p. 344) In these matters it is not always true that where there is a will, there is a way. 14. As an illustration of most recent occurrence I refer to the day of the outbreak of the Russo-Japanese war. 15. This and the following quotations are from Riesser "Die Notwendi- gkeit einer Revision des Borsengesetzes," Berlin, 1901, Leonhard Simion, PP- 42, 43- 1 6. See Ernst Loeb in the Nationalzeitung of Apr. 18, 1904, No. 244. 17. Thus for example Eschenbach in the Proceedings of the Verein fur vSozialpolitik of September 16, 1903, Schriften, CXIIT. 1 8. See above p. 97 et seq. The proportion of the population assessed for the income tax was in 1904 37.1 percent of the total population; in 1903, 35.9 per cent, and in 1896 only 29.3 per cent. 19. Thus Ludwig Pohle, Deutschland am Scheidewege (Germany at the Parting of the Roads) Leipzig, B. G. Teubner, 1902, p. 199, Cf. also his polemic (ibid., pp. 197-198) against Dietzel's theory that wages and the prices of grain have a tendency to vary in opposite directions, a view w r hich lam neither able to share. 20. In his very interesting rectoral address of Jan. 26, 1910, on "The Development of the Iron Industry in Germany," (p. 10) Muthesius cites the official reports of the Krupp consumers' institution. According to these reports " there, has been no increase worth mentioning during the last twenty years in the prices of the leading commodities entering into the cost of living." However this very gratifying statement must be used with caution, for conditions there are undoubtedly out of the ordinary. , 21. Walter Troeltsch "tiber die neuesten Veranderungen im deutschen Wirtschaftsleben" (On some recent changes in German Economic Life) Stuttgart, 1899, p. 145. 22. Ibid., p. 147-148. 23. The well-known Hibernia case has been considered as one of such excesses, for the reason that the decline of the government offer was brought about by a coalition of banks, which bought up the stock. This is however a one-sided and incorrect interpretation. We must not forget that among those who favored the government's offer there were two great banks, viz. the Dresdner Bank, and the A. Schaaffhausen'scher Bankverein. Further- more, even in the absence of the concentration movement a coalition of banks might be formed for a specific purpose. Moreover, any one of the allied great banks was sufficientl} powerful by itself to buy up enough shares to bring about the refusal of the government's offer. 24. Max Sering says, "The question of supplanting our imports by domestic production, must be answered absolutely in the negative. If this is so, we must export on a scale, that will enable us to pay for those articles (" Handels- und Machtpolitik, Vol. II, pp. 38-39 Stuttgart, J. G. Cotta's Nachfolger, 1900). Sering goes somewhat too far, at least as regards tropi- cal products, for these we may hope to draw in increasing quantities from 878 The German Great B a n our colonies. It may also prove possible to reduce considerably our imports of agricultural products. 25. Thus the cartels may be required to submit their by-laws and certain kinds of resolutions (as for example those relating to export premiums) also to answer inquiries and to publish certain infofmation. Schrnoller's proposal, that they be required to submit all of their more important reso- lutions, would prove impracticable owing to the indefmiteness of his formula, if for no other reason. See paragraph 7 of the report made to the general meeting ot the Verein fur Sozialpolitik in Mannheim, Sept. 27, 1905, reprinted in Schmoller's Jahrbuch fur Gesetzgebung etc. vol. 29, No. 4, pp. 326 et seq., and particularly p. 362). 26. On this point cfr. the very instructive section in Paul Wallich, Liquidation of Banks (" Entgrundungen), op. cit., pp. 34-48. 27. Schriften des Vereins fur Sozialpolitik, LXI, pp. 183-184. 28. Heinrich Waentig, Industriekartelle und Trusts und das Problem ihrer rechtlichen Regelung (Industrial Cartels and Trusts The Problem of their legal regulation) Schmoller's Jahrb. f Gesetzgebung etc., vol. 25 1901, No. 4, p. 19. 879 APPENDICES. 90311 ii 57 88 1 APPENDIX I. BIBLIOGRAPHY. A. NATURE AND DEVELOPMENT OF THE CREDIT BANKS. [To page 26.] 1870. Ad. Wagner, Banken und Bankwesen in H. Rentsch, Handworterbuch der Volkswirtschaf tslehre, 2 . Ausgabe, p. 80-9 1 . 1880. Felix Hecht, Bankwesen und Bankpolitik in den siiddeutschen Staaten, 1819 bis 1875 (Jena, Gust. Fischer). 1890. Walther Lotz, Die Technik des deutschen Emissionsgeschafts (Leip zig, Duncker und Humblot). - Heinr. Saltier, Die Effektenbanken (Leipzig, C. F. Winter'sche Ver- lagshandlung). 1891. Karl v. Lumm, Die Entwicklung des Bankwesens in Elsass-Loth- ringen seit der Annexion (Staatsw. Studien, herausg. v. Elster, Bd. Ill, Heft 7). 1896. Paul Model, Die grossen Berliner Effektenbanken (aus dem Nachlass des Verfassers herausg. und vervollstandigt von Ernst Loeb) (Jena, Gust. Fischer). B. Banck, Geschichte der sachsischen Banken mit Beriicksichtigung der Wirtschaftsverhaltnisse (Berliner Diss.). 1898. Andr Sayous, Concentration du trafique de banque en Allemagne (Journal des Economistes, v. 15, Dec., 1898). Id., Les banques allemandes en cas de crise ou de guerre (Revue d'Economie politique, v. 1898). 1899. Nasse u. Lexis, article: Banken, in the Handworterbuch der Staats- wissenschaften, 2d ed., Vol. II, p. 132 ff. 1900. Ernst Heinemann, Die Berliner Grossbanken an der Wende des Jahrhunderts (Conrad's Jahrb., 3. Folge, Bd. XX, p. 86-97). 1901. Andre" Sayous, Les banques de dp6t, les banques de credit et les society's financieres (Paris, 1901, L. Larose). Die Disconto-Gesellschaft 1851-1901. Denkschrift zum sojahrigen Jubilaum (Berlin). 1901. H. Fleischhammer, Zentralisation im Bankwesen in Deutschland (Schmoller's Jahrbuch fur Gesetzgebung, Verwaltung u. Volks- wirtschaft, 24. Jahrg., p. 241-269). 1902. Ad. Weber, Depositenbanken und Spekulationsbanken (Leipzig, Duncker & Humblot). - Felix Hecht, Die Mannheimer Banken 1870-1900 (Schmoller's staats- und sozialw. Forschungen, Bd. XX, Heft 6). 883 National Monetary Commission 1903. Otto Warschauer, Physiologic der deutschen Banken (Berlin, Wilhelm Baensch). Ernst Loeb, Die Berliner Grossbanken in den Jahren 1895-1902 und die Krisis der Jahre 1900 und 1901 (Schriften des Vereins Mr Sozialpolitik, Bd. CX, und Storungen im deutschen Wirtschafts- leben, Bd. VI, p. 81-319). Joh. Plenge, Griindung und Geschichte des Credit mobilier (Tubingen, Verlag der H. Laupp'schen Buchhandlung). Ad. Weber, Die Rhein.-Westfal. Provinzialbanken und die Krisis (Schriften des Vereins f. Sozialpolitik, Bd. CX; Storungen im deutschen Wirtschaftsleben, Bd. VI, p. 321-372). Rich. Ehrenberg, Deutsches Bankwesen. Ruckblicke und Ausblicke (Deutsche Rundschau, 29. Jahrg., Heft 5, Febr. 1903, p. 295-301). 1904. Emil Herz (Ludwigshafen a. Rh.), Die Banken der Pfalz und ihre Beziehungen zur Pfalzer Industrie (Hirth's Annalen des Deutschen Reichs, 1904, No. i, p. 43-55 and No. 2, p. 113-145). Siegfried Schreiber, Schilderung des sachsischen Lokalbankwesens (Inaugural -Dissertation). Leipzig, Druck v. Oskar Brandstetter. . Rich. Rosendorff, Die deutschen Banken im uberseeischen Verkehr (Schmoller's Jahrb., Bd. XXVIII, Heft 4, p. 93-134). Alfred Salzmann, Ursprung und Ziel der modernen Bankentwicklung, Dresden (Dissert.). 1905. Ott6 Jeidels, Das Verhaltnis der deutschen Grossbanken zur Indus- trie, mit besonderer Beriicksichtgung der Eisenindustrie (in den staats- und sozialwissensch. Forschungen v. Schmoller u. Sering, Bd. XXIV, Heft 2, Leipzig, Duncker & Humblot), especially Abschnitt II, Die Entwicklung der Grossbanken. Albert Blumenberg, Die Konzentration im deutschen Bankwesen (Inaug. -Dissert., Leipzig, Aug. Hoffmann). Edgard Depitre, Le mouvement de concentration dans les banques allemandes (Paris, Arthur Rousseau). , 1905. Julius Steinberg, Die Konzentration im Bankgewerbe (Berlin, Franz Siemenroth). Paul Wallich, Die Konzentration irn deutschen Bankwesen (in den Munch. Volkswirtschaftl. Studien, herausg. von Lujo Brentano u. Walther Lotz, 74. Stuck), Stuttgart u. Berlin, J. G. Cotta'sche Buchhandl. Nachf. 1906. Herm. Schumacher, Die Ursachen und Wirkungen der Konzentra- tion im deutschen Bankwesen (in Schmoller's Jahrb., Bd. XXX, . Heft 3, p. i-33i). Arthur Feiler, Das Bankwesen (in v. Halle: Die Weltwirtschaft, I, Jahrg. 1906, I. Teil, p. 116-140, und ib., Jahrg. 1907, I. Teil, p 118- 136). F. von Pritzbuer, Bank-Kredit- und Griindungsverhaltnisse (ib., I, Jahrg. 1906, II. Teil, p. 189-200; ib., Ill, Jahrg. 1908, II. Teil, p. 173-178). 884 The German Great Banks 1906. Richard Rosendorff, Le Developpement des banques allemandes & l'6tranger (Revue conomique Internationale, Sept. and Oct., 1906). Georg Schanz, Banken (Worterbuch der Volkswirtschaftslehre von Ludwig Elster, 2. Aufl., 1906, p. 309-323). 1907. Robert Franz, Die deutschen Banken irn Jahre 1906 (Sonderabdruck aus dem Deutschen Oekonomist). 1908. Rudolf Kaulla, Die Organisation des Bankwesens im Konigreich Wurttemberg in ihrer geschichtlichen Entwicklung (Stuttgart, Ferdinand Enke). Robert Franz, Die deutschen Banken im Jahre 1907 (Sonderabdruck aus dem Deutschen Oekonomist). - Paul Wallich, Das Bankwesen (in v. Halle, Die Weltwirtschaft, III, Jahrg. 1908, I. Teil, p. 42-49). 1908-9. Andre E. Sayous, Les banques allemandes et le commerce d'outre- mer in " Bulletin mensuel de la Federation des Industriels et des Commercants francais, " vol. 5, No. 52 and No. 70 (under the title: "Pourquoi et comment il faut former en France des banques d' exportation. L/exemple des banques allemandes d'outre-mer"). 1908. Alfred Lansburgh, Das deutsche Bankwesen (Berlin, Bankverlag, 1909). 1909. Georges Diouritch, L' expansion des banques allemandes & 1' Stran- ger (Paris, Arthur Rousseau). Rob. Liefmann, Beteiligungs- und Finanzierungsgesellschaften (Jena, Gustav Fischer, 1909). 1909. Herm. Levy, Monopole, Kartelle und Trusts in ihren Beziehungen zur Organisation der kapitalistischen Industrie (Jena, Gustav Fischer, 1909). Robert Franz, Die deutschen Banken im Jahre 1908. 1909, B. METHODS OF BANKING. I. GENERAL, TREATISES AND HANDBOOKS. Kurzgefasstes 1871. Alois Bischof, Das Geld-, Kredit- und Bankwesen. Lehrbuch. Pest. 1883. Max Wirth, Handbuch des Bankwesens, 3. Aufl., Koln. 1891. Bernhard Gerothwohl, Das Bank-Geschaft, Ein Handbuch fur Kaufleute und Kapitalisten, 2d ed. of " Das Bankgeschaft nach Einfiihrung der Markrechnung," Frankfurt a. M. 1894. Hans Belohlawek, Handbuch des Bank- und Borsenwesens. Lehr- und Hilfsbuch, Stuttgart. 1897. Bondi, Die Berufspflichten des Bankiers auf Grund der neuesten Gesetzgebung. 1901. Andre E. Sayous, Les banques de dep6t, les banques de credit et les societ6s financieres, Paris. Jacob Kautsch, Handbuch des Bank- und Borsenwesens fur Bank- beamte, Kaufleute, Kapitalisten, sowie fur den Selbstunterricht, 2. Aufl., Berlin. 885 National Monetary Commission 1901. Henry Warren, Banks and their customers, 4th ed., London. 1903. R. Beigel, Handbuch des Bank- und Borsenwesens, Leipzig. F. Leitner, Das Bankgeschaft und seine Technik, Frankfurt a. M. - Joh. Fr. Schar, Technik des Bankgeschafts, Berlin. 1904. Buchwald, Die Technik des Bankbetriebes. Ein Hand- und Lehrbuch des praktischen Bank- und Borsenwesens, Berlin (5. Aufl., 1909). 1905. L. Voigt und A. Doerr, Handelsbetriebslehre, 2. Teil, Bankgeschaft und gewerbliche Unternehmungen ; Leipzig. 1908. Georg Schweitzer, Leitfaden des Bank- und Borsenwesens, Leipzig, 1909. Bastian, Banktechnisches fur junge Juristen und Volkwirtschaftler. Bankbeamte und Kaufleute, Stuttgart. Joh. Fr. Schar, Die Bank im Dienste des Kaufmanns, Leipzig. II. BOOKKEEPING, CORRESPONDENCE, INSPECTION. In addition to those mentioned under I: 1903. Brosius, Lehrbuch der Bankbuchhaltung, Leipzig. Muntendorf, Defraudationsschutz, Briinn. Forges, Die Kontrolle bei der Manipulation und Buchfiihrung in Banken usw., Wien. 1904. Spielmann, Lehrbuch der Bankkorrespondenz, Berlin. 1905. Romer, Die Biicherrevisionspraxis in Deutschland und England, Berlin. 1908. Julius Chenaux-Repond, Einfuhrung in die Bankbuchhaltung, Stuttgart. - Schmidt, Die Bucher- und Bilanzrevision, Wien. Beigel, Theorie und Praxis der Buchfiihrungs- und Bilanzrevision, Dresden. 1909. Schwatzer, Lehrbuch der Bankkorrespondenz, Wien und Leipzig. III. CURRENT ACCOUNTS. 1884. J. A. Levy, Der Kontokorrentvertrag. Herausgegeben von Riesser, Freiburg i. B. und Tubingen. 1893. Greber, Das Kontokorrentverhaltnis, Freiburg i. B. und Leipzig. 1897. Franz Kammer, Der Kontokorrentverkehr, Miinchen. 1901. A. C. Widemann, Theorie und Praxis des Bankkontokorrents (3. Aufl.), Basel. 1902. Josef Mohr, Der Kontokorrentverkehr, Berlin. 1904. Siegfried Buff, Das Kontokorrentgeschaft im deutschen Bank- gewerbe, Stuttgart. J. K. Kreibig, Die Kontokorrentlehre, Wien. 1905. Karl Ziegel, Die hauptsachlichsten Methoden des Kontokorrent- rechnens. 1906. A. Bergmann, Praktische Kontokorrentlehre Karlsruhe. 1907. Schmidberger, Das Kontokorrent. Seine Technik und seine rechtliche Bedeutung, Frankfurt a. M. 886 The German Great Banks IV. DEPOSITS, CHECKS, GIRO, AND CLEARING SYSTEMS. i. Descriptive literature. 1 88 1. Carl Berger, Katechismus des Girowesens, Leipzig. 1883. Georg Siemens, Die Lage des Scheckwesens in Deutschland. Referat, Berlin. R. Koch, Abrechnungsstellen in Deutschland und deren Vorganger, Stuttgart. 1884. W. Howarth, Our Clearing System and Clearing Houses, London. 1884. v. Stieglitz, Wesen und Vorziige des Depositen- und Scheckverkehrs, Berlin. 1886. Heinrich Rauchberg, Der Clearing- und Giroverkehr. Ein statis- tischer Beitrag zur Kenntnis des volkswirtschaftlichen Zahlungs- prozesses, Wien. 1888. Franz Bubenik, Die Technik des Giroverkehrs bei der osterreichisch- ungarischen Bank, Wien. 1889. Hanausek, Der Scheck im Giroverkehr der osterreichisch-ungarischen Bank, Wien. 1894. Adolf Neumann-Hofer, Depositengeschafte und Depositenbanken. Theorie des Depositenbankwesens, Leipzig. 1896. J. Kanit, Die Technik des Giroverkehrs, Wien. 1897. Heinrich Rauchberg, Der Clearing- und Giroverkehr in Oesterreich- Ungarn und im Auslande, Wien. 1898. Schinckel, Reichsbank und Giroverkehr, Hamburg 1899. Georg Obst, Theorie und Praxis des Scheckverkehrs, Stuttgart. 1900. Bank des Berliner Kassenvereins 1850-1900. Denkschrift zum i. October 1900. 1901. Dunker, Geldersparende Zahlungsmethoden im heutigen Baiik- verkehr Deutschlands, Miinchen. 1907. S. Buff, Der gegenwartige Stand und die Zukunft des Scheckverkehrs in Deutschland, Miinchen. 1908. Proebst, Die Grundlagen unseres Depositen- und Scheckwesens. 2. Literature on the subject of the German Check bill. 1908. Riesser, Bemerkungen zum vorlaufigen Entwurf eines deutschen Scheckgesetzes, Berlin. Hoppenstedt, Der Scheckgesetzentwurf von 1907, Berlin. 3. Commentaries and annotated editions of the text of the Check Act of March n, 1908. 1908. Apt., Berlin. - Buff, Stuttgart und Leipzig. - Henschel, Berlin. Kuhlenbeck, Breslau und Leipzig. - Lessing, Miinchen. - Merzbacher, Miinchen. Schiebler, Leipzig. 887 National Monetary Commission 4. Monographs on the new Check Act. 1908. Conrad, Handbuch des deutschen Scheckgesetzes, Stuttgart. Breit, Pflichten und Rechte des Bankiers unter dem Scheckgesetz, Leipzig. Helbing, Der Scheckverkehr nach dem neuen Recht, Stuttgart. V. BIU, DISCOUNTING. 1901. Eduard Deimel, Der Diskontmarkt, 2. AufL, Leipzig. 1907. W. Prion, Das deutsche Wechseldiskontgeschaft rnit besonderer Beriicksichtigung des Berliner Geldmarktes, Berlin. Heiligenstadt, Der deutsche Geldmarkt in Schmoller's Jahrb., Bd. xxxi, p. 1539. VI. REGULAR BANK CREDIT. 1882. W. Schaefer, Der gewerbliche Kredit. Vom privatokonomischen Standpunkte fur Techniker und angehende Industrielle dargestellt. Leipzig und Heidelberg. 1883. M. Schraut, Die Organisation des Kredits, Leipzig. 1891. H. Jacoby, Die Krediterkundigung nach ihrer wirtschaftlichen und nach ihrer rechtlichen Seite, Berlin. 1895. W. Schimmelpfeng, Kaufmannische Erkundigung, Berlin. 1902. Eugen Sutro, Die kaufmannische Krediterkundigung, Leipzig. 1904. Herzf elder, Das Problem der Kreditversicherung, Leipzig. 1909. Hecht, Die Organisation des langfristigen industriellen Kredits (Veroffentlichungen des Mitteleuropaischen Wirtschaftsvereins in Deutschland, Heft 6). VII. SAFEKEEPING OF OUTSIDERS' SECURITIES, SAFE DEPOSIT VAULT BUSINESS. 1892. Julian Goldschmidt und Lesse. Zur Reform des Bankdepotwesens. Zwei Vortrage, Berlin. 1896. F. Lusensky, Gesetz betr. die Pflichten der Kaufleute bei Aufbewah- rung fremder Wertpapiere, Berlin. 1897. W. Frhr. v. Pechmann, Das Reichsgesetz iiber die Pflichten der Kaufleute bei Aufbewahrung fremder Wertpapiere etc. vom 5. Juli 1896, Erlangen. - Riesser, Das Bankdepotgesetz vom 5. Juli 1896. Aus der Praxis und fur die Praxis. 2. vollig umgearb, Aufl., 1906, Berlin. 1899. Franz Schweyer, Die Bankdepotgeschafte in geschichtlicher, wirt- schaftlicher und rechtlicher Beziehung, Miinchen. 1903. Wettstein, Das Kassenschrankgeschaft, Bern. 1908. Gumbel, Der Stahlkammerfachvertrag der deutschen Banken, Berlin. VIII. SECURITY BROKERAGE BUSINESS. 1895. A Endemann, Das moderne Borsenkommissionsgeschaft im Effek- tenverkehr, Berlin. 1899. James Breit, Der Selbsteintritt des Kommissionars nach dem neuen deutschen Handelsgesetzbuch 888 The German Great Banks 1908. Weidemann, Das Kommissionsgeschaft. Systematische Darstellung der Bank- und Warenkommission, Rostock. 1909. James Breit, Das Recht der Effektenkommission (im Zentralver- bandskommentar zum Borsengesetz, see under ix). ix. STOCK EXCHANGE BUSINESS. I. Descriptive literature. 1876. Willy Becker, Die. praktische Arbitrage, Berlin. 1882. Alfred Junckerstorff, Die Arbitrage. Miinz- und Wahrungsverha.lt- nisse. Das Pramien- und Stellagegeschaft, Berlin. 1883. Isidor Szkolny, Theorie und Praxis der Pramiengeschafte, Frankfurt a. M. 1897. Eugen Hiilsner, Die Borsengeschafte in rechtlicher und volkswirt- schaftlicher Beziehung, Berlin. - Adolf Wachtel. Pramien-, Stellage- und Nochgeschafte, Wien. - Heinrich Brosius, Die Geld-, Wechsel- und Effekten-Arbitrage, Leipzig. - Andre" E. Sayous, Etude e"conomique et juridique sur les bourses allemandes de valeur et de commerce, Paris. 1899. Mayer, Die Effektenborse und ihre Geschafte, Wien. - Georg Bernhard, Der Verkehr in Wertpapieren. Ein Handbuch fur alle Interessentenkreise, Berlin. 1901. Robert Stern, Die Arbitrage im Bank- und Borsen verkehr, Leipzig. 1903. Paul Wiener und Walter Stoerk, Praktische Arbitragerechnungen, Leipzig. 1908. Max Furst, Pramien-, Stellage- und Nochgeschafte, Berlin. - Bronzin, Theorie der Pramiengeschafte, Leipzig und Wien. Schneider-Dahlheim, Usancen der Berliner Fondsborse, 14. Aufl., Berlin. 1909. Swoboda, Die Arbitrage in Wertpapieren, Wechseln, Munzen und Edelmetallen. Handbuch des Borsen-, Miinz- und Geldwesens samtlicher Handelsplatze der Welt, 13. Aufl., neubearbeitet und tvermehrt von Max Furst, Berlin. Saling's Borsen- Jahrbuch 1908-09. Ein Handbuch fur Bankiers und Kapitalisten, 32. Aufl., Berlin, Leipzig, Hamburg. 2. Literature on stock-exchange legislation and reform. 1895. Gustav Cohn, Beitrage zur deutschen Borsenreform, Leipzig. 1896-97. F. J. Pfleger und L. Gschwindt, Borsenreform in Deutschland, Stuttgart. 1898. Wiedenfeld, Die Borse in ihrer wirtschaftlichen Funktion und in ihrer rechtlichen Entwicklung vor und unter dem Borsengesetz, Berlin. 1900. Riesser, Die handelsrechtlichen Lieferungsgeschafte, eine Kritik der Rechtsprechung des Reichsgerichts, Berlin. 889 National Monetary Commission 1902. Verhandlungen des I. Allgemeinen Deutschen Bankiertags zu Frank- furt a. M. Frankfurt a. M. Riesser, Die Notwendigkeit einer Revision des Borsengesetzes, Berlin. 1902. N. Miiller, Differenztheorie und Borsengeschafte, Berlin. 1903. Denkschrift betr. die Wirkungen des Borsengesetzes vom 22. Juni 1896 und der durch das Reichsstempelgesetz vom 14. Juni 1900 eingefiihrten Borsensteuererhohung. Herausgegeben vom Zen- tralverband des Deutschen Bank- und Bankiergewerbes, Berlin. G. Wermert, Borse, Borsengesetz und Borsengeschaft, Leipzig. 1904. Verhandlungen des II. Allgemeinen Deutschen Bankiertags zu Ber- lin, Berlin. 1904. Neukamp, Differenzgeschaft und Borsentermingeschaft in der Gesetzgebung und Rechtsprechung. Herausgegeben vom Zentral- verband des Deutschen Bank- und Bankiergewerbes, Berlin. 1907. Verhandlungen des III. Allgemeinen Deutschen Bankiertages zu Hamburg, Berlin (Referate von Riesser u. Warburg). Riesser, Stand und Aussichten der Borsengesetzreform, Berlin. 3. Commentaries and annotated text editions of the Stock-Exchange Act. 1908. Apt, Trumpler, Weissbart, 5. Aufl., Berlin. 1908. Hemptenmacher, 2. Aufl., Berlin. 1909. Rehm, Trumpler, Dove, Neukamp, Schmidt-Ernsthausen, Breit, herausgegeben vom Zentralverband des Deutschen Bank- und Bankiergewerbes, mit Vorwort von Riesser, Berlin. X. THE SECURITY-ISSUING (EMISSION) AND FINANCING BUSINESS. 1890. W. Lotz, Die Technik des deutschen Emissionsgeschafts. Anleihen Konversionen und Griindungen, Leipzig. 1902. Max Jorgens, Finanzielle Trustgesellschaften, Stuttgart und Berlin 1905. E. Leist, Die Sanierung von Aktiengesellschaften, Berlin. 1907. G. S. Freund, Die Rechtsverhaltnisse der offentlichen Anleihen, Berlin. 1908. E. Wolff und F. Birkenbiehl, Die Praxis der Finanzierung bei Errich- tung, Erweiterung, Verbesserung, Fusionierung und Sanierung von Aktiengesellschaften, Berlin. C. PERIODICALS AND NEWSPAPERS. Die Bank, Berlin (ed. Lansburgh). Bankarchiv, Zeitschrift fur Bank- und Borsenwesen, Berlin (ed. Riesser). Bankbeamtenzeitung, Berlin. The Bankers', Insurance Managers' and Agents' Magazine, London. The Bankers' Magazine, New York. Bankers' Magazine and Statistical Register, New York. Berichte iiber Handel and Industrie Berlin. 890 The German Great B a n Berliner Borsencourier. Berliner Borsenzeittmg. Berliner Jahrbuch fur Handel und Industrie. Berliner Tageblatt. Blatter fur Genossenschaftswesen, Berlin. Busch's Archiv fur Theorie und Praxis des allgemeinen deutschen Handels- rechts. Deutsche Monatsschrift fur Handel, Schiffahrt und Verkehrswesen (Ro- stock). Der Deutsche Okonomist, Berlin. Deutsche Wirtschaftszeitung, Berlin. Deutsches Handelsarchiv, Berlin. Deutsches Handelsblatt, Berlin. L'Economiste europden, Paris. L'Economiste francais, Paris. Finanzarchiv (Schanz), Stuttgart. Frankfurter Zeitung. Hamburger Borsenhalle. Hamburger Korrespondent. Hamburger Nachrichten. Handel und Gewerbe, Berlin. Hannoverscher Kurier. Internationaler Volkswirt, Berlin. Jahrbuch fur Gesetzgebung, Verwaltung und Rechtspflege (Holtzendorff), Leipzig. Jahrbiicher fur Gesetzgebung, Verwaltung und Volkswirtschaft (Schmoller), Leipzig. Jahrbiicher fur Nationalokonomie und Statistik (Conrad), Jena. Journal des Economistes, Paris. Journal of the Institute of Bankers, London. Kolnische Zeitung. Kolnische Volkszeitung. Merkur, Berlin. Monatsschrift fur Aktienrecht und Bankwesen, Berlin. Monatsschrift fiir Handelsrecht und Bankwesen, Berlin. Moniteur des Interts materiels, Bruxelles. Neue Freie Presse, Wien. Pester Lloyd. Plutus, Berlin. Preussisches Handelsarchiv, Berlin. Reuter's Finanz-Chronik, London. Die Sparkasse, Berlin. Vierteljahrshefte zur Statistik des Deutschen Reichs, Berlin. Vierteljahrsschrift fiir Staats- und Volkswirtschaft (Frankenstein), Leipzig. Vierteljahrsschrift fiir Volkswirtschaft, Politik und Kulturgeschichte, Berlin. 891 National Monetary Commission Volkswirtschaftliche Wochenschrift (Dorn), Wien. Vossische Zeitung. Wochenschrift fur Aktienrecht und Bankwesen, Berlin. Zeitschrift des Konigl. Statistischen Bureaus, Berlin. Zeitschrift fur das gesamte Aktienwesen, Leipzig. Zeitschrift fiir das gesamte Handelsrecht, begriindet von Goldschmidt, Stutt- gart. Zeitschrift fiir die gesamte Staatswissenschaft, Tubingen. Zeitschrift fiir die deutsche Volkswirtschaft (Schuck), Berlin. Zeitschrift fiir Kapital und Rente, Berlin. Zeitschrift fiir Literatur und Geschichte der Staatswissenschaften, Leipzig. Zeitschrift fiir Handelswissenschaft und Handelspraxis, Leipzig. APPENDIX II. Credit banks founded during the years 184.8-1856. [To page 45.] Location. Designation. Year of found- ing. Paid-up share capital at end of 1857. Berlin Disconto-Gesellschaft 185 1 - Marks. Do Breslau Berliner Handels-Gesellschaft Schlesischer B ankverein 1856 1856 II, 220, 000 Coburg Darmstadt (Berlin) Coburg-Gothaer Credit-Gesellschaft. . . . v Bank fiir Handel und Industrie 1856 X 8c ? i, 700, ooo Dessau ... Creditanstalt fur Industrie und Handel i8<;6 Eisleben Hamburg Eislebener Disconto-Gesellschaft Norddeutsche Bank 1856 1816 600, ooo Do Vereinsbank . i8<6 Cologne Leipzig . . A. Schaaffhausen'scherB ankverein. . . . Allgemeine Deutsche Creditanstalt 1848 1856 15, 561,000 Muhlhausen (Alsace) . . Oldenburg . Comptoir d'Escompte de Mulhouse. . . . 1854 1845 800, ooo Strassburg (Alsace) . . . Strassburger Bank (Stahling) 1852 2, 400, OOO Total 14 banks. 183, 140, ooo 892 The German Great B a n APPENDIX III. German credit banks in i8j2.o> [To page 188.] Location. Designation. Year of founda- tion. Paid-up share capital at end of 1872. Aix-la-Chapelle Do . Aachener Bank fur Handel u. Industrie. . Aachener Discontogesellschaft (Rheini- 1872 7,000 marks. 2,400 Aschaffenburg sche). Bankverein Aschaffenburg. Augsburg Augsburger Bank T Qi- T Barmen Berlin Barmer Bankverein, Hinsberg, Fischer &Co. Allgem Bau- u Handelsbank 1867 I 2 f OOO Do ... Allgem Deutsche Handelsgesellschaft Do Berliner Bank Do Borsenbank fiir Maklergeschafte Do Berliner Bankverein Do Borsen-Handels-Verein .... 600 Do Do Centralbank fiir Industrie u. Handel .... Commissions- u Maklerbank l87l 22, 500 Do Berliner Commerz- u "Wechselbank Do Deutsche Bank l87O Do Deutsche Handelsbank 1869 Do Deutsche Unionbank . . . Do Disconto-Gesellschaft 1851 Do Deutsche Genossenschaftsbank, Sorgel, 1865 7i 500 Do Do Parrisius & Co. Gewerbebank, H. Schuster & Co Generalbank fur Maklergeschafte 1863 1872 18, ooo 3 ooo Do Hamburg -Berliner Bank . 1872 Do Do Berliner Handelsgesellschaft Internationale Handelsgesellschaft 1856 1871 31.500 5, 250 Do Berliner Lombardbank .... 1871 i, 500 Do Berliner Maklerbank Do Maklervereinsbank 1871 2, 4OO Do Preussische Creditanstalt 1872 15, ooo Do Do Provinzial-Disconto-Gesellschaft Provinzial-Gewerbebank 1871 1872 18, ooo 6, ooo Do Vereinsbank, Quistorp & Co 1870 7, 500 Do Wechselstuben A.-G 1872 4, 500 Do. . Berliner Wechslerbank . . 1871 IS, 000 oSee Deutscher Oekonomist of January 27, 1906 (Vol. XXIV, No. 1205), which includes, however, note banks, mortgage banks, the so-called Baubanken, Handels- banken, and Produktenbanken, which are omitted from the above list. The latter includes, on the other hand, the so-called M ' aklerbanken (brokers' banks). This made necessary a number of changes in the table of the Deutscher Oekonomist The dates printed in heavy type indicate that the respective banks were founded during the fifties of the nineteenth century. 893 National Monetary Commission German credit banks in 1872 Continued. Location. Designation. Year of founda- tion. Paid-up share capital at end of 1872. Beuthen (Upper Sile- sia. Bielefeld Oberschlesische Bank fur Handel u. In- dustrie. Westfalische Bank Braunschweiger Creditanstalt 1872 1868 1871 1,000 marks. 3.000 6, ooo Bremer Bankverein 1871 Do Deutsche Nationalbank 1871 Breslau Breslauer Discontobank 1870 Do Breslauer Maklerbank 1871 Do Provinzial-Maklerbank 1872 2, 4OO Do Maklervereinsbank 1872 Do Breslauer Wechslerbank 1871 Do Provinzial-Wechslerbank 1872 Do .... Schlesischer Bankverein 1856 22 500 Do Schlesische Vereinsbank 1872 7, 200 Bromberg Ostdeutsche Wechslervereinsbank 1872 Cassel Hessische Bank 1871 Chemnitz Chemnitzer Bankverein 1871 3 , ooo Coburg Coburg-Gothaer Credit-Gesellschaft 1856 Bank fur Rheinland u Westfalen 1871 Do Rheinische Effektenbank 1872 Do Cologne (Berlin) Cologne Cottbus Rheinisch-Westfalische Genossenschafts- bank. A. Schaaffhausen'scher Bankverein Kolner Wechsler- u. Comm.-Bank Niederlausitzer Bank. . 1872 1848 1871 1871 I, 500 48, ooo 3. ooo Cref eld Bankverein von Gebr. Peter & Co .... 1862 Danziger Bankverein 1871 Darmstadt (Berlin) Bank fur Handel u Industrie . . . 1853 Dessau Creditanstalt fur Industrie u. Handel 1856 I 800 Dresden (Berlin) Dresdner Bank 1872 Dresden Dresdner Handelsbank 1872 Do Dresdner Wechslerbank 1872 6 ooo Do .... Sachsischer Bankverein 1872 Do Sachsische Creditbank 1871 Do Sachsische Discont(Lomb )-Bank 1868 Eisleben Eisleber Disconto-Gesellschaft . 1856 Elberfeld Bergisch-Markische Bank 1871 8 100 Do Elberfelder Disconto- u Wechslerbank 1872 Do Elberfelder Handels-Gesellschaft 1872 i , 200 Emden Emder (Genossenschafts) Bank 1867 167 Erfurt Thuringer Bankverein 1871 4. 500 Essen. . Essener Creditanstalt . . 1872 0,000 894 The German Great Banks German credit banks in 1872 Continued. Location. Designation. Year of founda- tion. Paid-up share capital at end of 1872. Frankfurt a. M Frankfurter Bankverein 1870 1,000 marks. Do Deutsche Creditbank . . 1872 ,000 Do Deutsche Effekten- u. Wechselbank 1872 Do Deutsche Handels-Gesellschaft 1872 12,000 Do Deutsche Vereinsbank 1871 9,oo Do Osterreichisch-Deutsche Bank 1871 Do Frankfurter Wechslerbank 1871 Freiberg i S Vorschussbank 1870 Geestemiinde . . . Geestemiinder Bank 1872 Gera Geraer Handels-Creditbank 1872 Gorlitz Griinberg in Silesia . . . Halle . .... Gorlitzer Vereinsbank Niederschlesischer Kassenverein Hallescher Bankverein 1872 1868 1866 2, 40O 3.000 Do Hallesche Creditanstalt 1872 2 IOO Hamburg Waaren-Creditanstalt . . 1871 Do Anglo-Deutsche Bank 1871 Do Bankverein in Hamburg 1872 9 ooo Hamburg (Berlin) Commerz- u Disconto-Bank 1870 Internationale Bank 1870 1 8 ooo Do Norddeutsche B ank 1856 45, ooo Do 1856 Do Maklerbank 1871 I 2OO Do 1872 Hanover Hannoversche Disconto- u. Wechslerbank . 1872 4, 800 Kiel Kieler Bank 1872 2, 4OO Konigsberg (Prussia) Konigsberger Vereinsbank 1871 4, 200 Leer 1872 900 Leipzig Allgemeine Deutsche Creditanstalt 1856 30, ooo Do Communalbank des Konigreichs Sachsen. 1871 600 Do F Schonheimerscher Bankverein 1872 3, ooo Do Leipziger Disconto-Gesellschaft 1872 9, 600 Do Leipziger Vereinsbank 1871 8, 400 Do Leipziger Wechslerbank . . . 1872 3. 15 Do Leipziger Wechsler- u. Depositenbank . . . 1872 2, 400 Lubeck 1871 1 , 500 Do Vorschuss- u. Sparverein 1864 72 1867 3, ooo Do Magdeburger Wechsler- u. Discontobank . 1872 2, 4OO 1871 4, 800 Do Rheinische Creditbank 1870 12, OOO Miihlhausen i Thurin- 1872 I, 200 gia. 895 National Monetary Commission German credit banks in 1872 Continued. Location. Designation. Year of founda- tion. Paid-up share cap ; tal at end of 1872. Miihlhauseni. Alsace. . D Banque de Mulhouse 1871 1864 7,000 marks. 4,800 Munich Bayerische Handelsbank 1869 5 100 Do Bayerische Vereinsbank 1869 9, ooo Do 1872 Vereinsbank . . . . 1871 Oldenburg Oldenburger Spar- u. Leihbank 1845 I, 200 Posen . . Bank fur Landwirtschaft u. Industrie. . . . 1870 2, 269 Do Ostdeutsche Bank 1871 Do Ratibor Rostock Provinzial Wechsler- u. Discontobank . . . Oberschlesischer Creditverein Rostocker Vereinsbank 1871 1871 1871 3,ooo i, 800 3 , ooo Do Rostocker Gewerbebank 1872 Stettin Stettiner Vereinsbank 1871 4, 500 Do. ... Stettiner Maklerbank 1872 i 200 Strassburg i. Alsace. . . Do Strassburger Bank (Stabling) Bank fur Hlsass und Lothringen ...;.... 1852 1871 2, 4OO Stuttgart Stuttgarter Bank 1871 7, 200 Do Siiddeutsche Provinzialbank 1872 Do Do Wurttemberger Commissionsbank Wiirttemberger Vereinsbank 1872 1869 600 6, 800 Wernigerode Wernigeroder Comm -Gesellschaft A -G 1865 Wismar Vereinsbank 1868 375 Zittau Oberlausitzer Bank 1871 4 800 Zwickau Zwickauer Bank 1872 I, 200 A total of 139 banks with a combined capital of 1,122,113,000 marks, of which, how- ever, a considerable portion disappeared a short time after. 896 The German Great Banks APPENDIX IV. Representation of the great banks on the supervisory boards of stock companies. [To page 367.] BANK FUR HANDEL UND INDUSTRIE. Seats on the supervisory board. Class of industry. Two (vice-chairman) . One. . One One (chairman) .... One One One. . One. . One. . One (vice-chairman) .... One (vice-chairman) .... One (chairman) Oae. . One One (vice-chairman) , One (chairman) One One. . One. One. One One Two (vice-chairman) 90311 II 58 MINING, SMELTING, AND SALT WORKS. Deutsch-Luxemburgische Bergwerks- u. Hutten-Gesell- schaft in Bochum. Heldburg, A.-G. fur Bergbau, bergbauliche und andere industrielle Erzeugnisse, Hildesheim. Harpener Bergbau A.-G., Dortmund. Holzverkohlungs-Industrie, Konstanz. Internationale Kohlenbergwerks-A.-G., Cologne. "Phonix," A.-G. fur Bergbau und Hiittenbetrieb, Horde. Rheinische A.-G. fur Braunkohlenbergbau u. Brikett- fabrikation, Cologne. A. Riebeck'sche Montanwerke, A.-G., Halle. Saar- u. Mosel-Bergwerks-Gesellschaft, Karlingen. STONES AND EARTHS. A.-G. fur Glasindustrie vorm. Friedr. Siemens, Dresden. Annawerke, Chamotte- u. Tonwaren, Oeslau. Glashiitte Schreiber A.-G., Furstenberg a. O. Stralauer Glashiitte A.-G.. Berlin. METAI, WORKING. Berliner Metallwarenfabrik H. A. Jtirst & Co. A.-G. Berlin. Deutsche Gold- u. Silber-Scheideanstalt, Frankfort-on- the-Main. MACHINE AND INSTRUMENT MAKING. Adlerwerke vorm. Heinrich Kleyel A.-G., Frankfort-on-the Main. A.-G. Mix & Genest, Telefon- und Telegraphen-Werke, Berlin. A.-G., Maschinenbau-Anstalt vorm. Venuleth & Eden- berger, Darmstadt. Allgemeine Elektrizitats-Gesellschaft, Berlin. Deutsche Niles, Werkzeugmaschinen-Fabrik, Oberschon- weide. Deutsch-Uberseeische Elektrizitats-Gesellschaft, Berlin. Deutsch - Siidamerikanische Telegraphen - Gesellschaft, Cologne. Elektrizitatswerke Homburg v. d. H. 8 97 National Monetary Commission Representatian of the great banks on the supervisory boards of stock com- panies Continued . BANK FUR HANDEL UND INDUSTRIE Continued. Seats on the supervisory board. Class of industry. One . . . One One (vice-chairman) One One One (chairman) One One One (vice-chairman) .... One (chairman) One One (vice-chairman) One One (vice-chairman) One One (vice-chairman) One (chairman) .... One (vice-chairman) One. . One. One (chairman) One One (chairman) One One One (vice-chairman) One.. MACHINE AND INSTRUMENT MAKING Continued. "Fenstra," Fabrik fur Eisenkonstruktionen und Brucken- bau, Diisseldorf. A.-G. Kortings Elektrizitatswerke, Berlin. Lech-Elektrizitatswerke, Augsburg. Ludw. Loewe & Co., Berlin. Maschinenbau-Gesellschaft, Heilbronn. "Phonix," A.-G. fur Stuhl-, Herd- u. Ofenindustrie in Oberhausen. Veithwerke, A.-G., Sandbach, Automobil- und Fahrrad- fabrik. CHEMICALS. Bayerische Stickstoffwerke in Munich. Chemische Werke, vorm. H. und E. Albert, Biebrich. Chemische Fabrik Griesheim, Elektron, Frankfort- on-the-Main. ILLUMINANTS, SOAPS, FATS, OILS, VARNISHES. Deutsche Petroleum A.-G., Berlin. Frankfurter Gasgesellschaft. TEXTILES AND LEATHER. I. P. Bemberg, Oehde (Buntfarberei). Gruschwitz, Textilwerke, Neusalz. Eduard Lingel, Schuhfabrik A.-G., Erfurt. Vereinigte Kunstseidefabriken, Frankfort-on-the-Main. Wurttembergische Kattunmanufaktur, Heidenheim. PAPER. Albrecht & Meister, A.-G., Berlin. A.-G. fur Buntpapierfabrikation, Aschaffenburg. WOOD AND CARVING INDUSTRY Holzindustrie Herm. Schiitt, Czersk. FOODS AND DRINKS. Aktien-Zuckerfabrik, Gr.-Gerau. Aktien-Zuckerfabrik Wetterau, Friedberg Altmunster Brauerei, Mainz. Continentale Wasserwerks-Gesellschaft, Berlin. Deutsche Bierbrauerei, Berlin. Gebr. Stollwerck, A.-G., Cologne-on-the-Rhine. Konservenfabrik Job. Braun, Worms. The German Great Bank Representation of the great banks on the supervisory boards of stock com- panies Continued . BANK FUR HANDEL UND INDUSTRIE Continued. Seats on the supervisory board. Class of industry. One One One One One (chairman) Three (chairman) One Two (chairman) One One One Two One One Two (vice-chairman) One One (chairman) One Two (chairman) One (vice-chairman) One (chairman) One One One (chairman) One One (chairman) One.. . One (chairman) Two (chairman) One One One One (vice-chairman) One (vice-chairman) One (chairman) One.. . COMMERCIAL ENTERPRISES. Bank des Berliner Kassenvereins, Berlin. Bank fiir Brauindustrie, Berlin. Berliner Hypothekenbank. Berg- u. Metallbank in Frankfort-on-the-Main. Boden-A.-G. am Amtsgericht Pankow. Boden-A.-G. Berlin-Nord. Borsigwalder Terrain-Ges. Berlin. Breslauer Disconto-Bank in Breslau. Deutsch-Asiatiscke Bank in Berlin. Deutsche Treuhand-Gesellschaft, Berlin. Gesellschaft fiir elektrische Unternehmungen, Berlin. Immobilien-Verkehrsbank, Berlin. Kolnische Hausrenten-A.-G. Neue Boden-A.-G., Berlin. Ostbank fiir Handel u. Gewerbe, Posen. Preussische Pfandbriefbank, Berlin. Reiniger, Gebbert & Schall A.-G., Erlangen. Siiddeutsche Bodenkreditbank, Munich. Siiddeutsche Immobilien-Gesellschaft, Mainz. Terrain-A.-G. Berlin-Mariendorf, Berlin. Terrain-Gesellschaft, Berlin u. Vororte, A.-G. Vereinsbank, Wismar. Westliche Boden-A.-G., Berlin. Wittenauer Boden-Gesellschaft, Berlin. INSURANCE. "Allianz," Versicherungs-Gesellschaft, Berlin. Deutsche Lebensversicherungsbank, Berlin. "Industrie," Versicherungs-A.-G., Berlin. TRANSPORTATION. Dessauer Strassenbahn-Gesellschaft. Frankfurter Lokalbahn-Akt.-Ges. Grosse Berliner Strassenbahn. Kameruner Eisenbahn-Gesellschaft, Berlin. Luftschiffahrt A.-G., Frankfort on the Main. "Midgard," Deutsche Seeverkehrs-A.-G., Nordenham. Santa Catharina-Eisenbahn-Gesellschaft, Berlin. Suddeutsche Eisenbahn-Gesellschaft, Darmstadt. Westdeutsche Eisenbahn-Gesellschaft, Cologne. 8 99 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . BANK FUR HANDEL UND INDUSTRIE Continued. Seats on the supervisory board. Class of industry One. One. One. One. One. One. FOREIGN COMPANIES. Amsterdamsche Bank. Banca Marmorosch Blanck & Co., Bucharest. Consolidated Mines Selection Company, London. Gesellschaft fiir elektrische Beleuchtung vom Jahre 1886, St. Petersburg. Societe Generate Beige d'Entreprises Electriques, Brus- sels. K. priv. Wechselstuben-A.-G., "Mercur," Vienna. BERLINER HANDELSGESELLSCHAFT. One One One (vice-chairman) One... One (vice-chairman) One (director) One One (chairman) .... One One One (chairman) .... One (vice-chairman) One.. . One One One One Qne (chairman) .... One. One (vice-chairman) One One (vice-chairman) . One.. . MINING, SMEI/TING, AND SALT WORKS. Bergwerks-Gesellschaft, "Hibernia," Herne. "Bismarckhutte" in Bismarckhiitte. Eisenhiitte Silesia, Paruschowitz in Oberschl. Frankfurt, Finckenheer, Braunkohlen, A.-G. Charlotten- burg. Gewerkschaft, "Viktoria" Liinen, Dortmund. Gewerkschaft Giinthershall, Gollingen. Harpeiier Bergbau-Gesellschaft, Dortmund. Hohenlohe-Werke in Hohenlohehiitte, Upper Silesia. Kaliwerke Sarstedt. Kaliwerke Friedrichshall in Schude. Kraft, Bergbau, A.-G., Leipzig. Oberschlesische Kokswerke, Berlin. Planiawerke, A.-G. fiir Kohlenfabrikation in Plania b. Ratibor. A. Riebecksche Montanwerke in Halle a. S. Rombacher Hiittenwerke, Rombach. Schantung Bergbau-Gesellschaft, Berlin. Schlesische Kohlen- u. Kokswerke in Gottesberg i. Schl. Vereinigte Lausitzer Glaswerke, A.-G. Weisswasser. STONES AND EARTHS. Breitenburger Portland-Cementwerke, Hamburg. METAL, WORKING. Aluminiumindustrie Neuhausen. Eisen- und Stahlwerk, Bethlen-Falva. Oberschlesische Eisenindustrie in Gleiwitz. Rhenania, Emaillierwerke, A.-G., Diisseldorf. 900 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued. BERLINER HANDELSGESELLSCHAFT Continued. Seats on the supervisory board. Class of industry. One One One One... One (chairman) .... One (vice-chairman) , One One One (vice-chairman) One One (chairman) .... One (chairman) .... One (vice-chairman) One.. . One Two (vice-chairman) . . Two (vice-chairman) . . Two (vice-chairman) . . One. One One One (vice-chairman) (vice-chairman) Two (vice-chairman) . . One One One One One One One One (chairman) .... (vice-chairman) METAL WORKING continued. Rheinische Stahlwerke, Meiderich. Russische Eisenindustrie, Gleiwitz. Vereinigte Deutsche Nickelwerke, Schwerte. Westfalische Drahtindustrie, Hamm in Westphalia. MACHINE CONSTRUCTION AND INSTRUMENT MAKING. Akkumulatorenfabrik, Berlin- Allgemeine Elektrizitats-Gesellschaft, Berlin. Benrather Maschinenfabrik, Berlin. Berlin- Anhaltische Maschinenbau, Berlin. Berliner Elektrizitatswerke, Berlin. Deutsche Nileswerke, Oberschoneweide. Elektrotechnische Werke, Berlin. Kraftubertragungs-Werke, Rheinfelden. Julius Pintsch, Berlin, Elektrizitatswerk. Stettiner Maschinenbau, "Vulcan," Stettin. CHEMICALS. Bayerische Stickstoffwerke, Miinchen. Chemische Fabrik, Lindenhof, C. Weyl, A. -G., Mannheim. Dellarocca, Chemische Fabrik, A.-G., Berlin. Riitgerswerke, Charlottenburg. ILLUMINANTS, SOAPS, FATS, OILS, VARNISHES. Deutsche Continental-Gasgesellschaft, Dessau. FOODS AND DRINKS. Leipziger Bierbrauerei, Reudnitz. W. A. Scholten, Starke- und Syrupfabrik, A.-G., Bran- denburg. Zuckerraffinerie Tangermiinde. BUILDING TRADES. Wilhelm Bruch, Kanalbau- A. -G. , Berlin. COMMERCIAL ENTERPRISES. A.-G. fiir Erwerb- u. Verwertungsindustrie, Neuhof Bahnhof Jungfernheide, Boden-Gesellschaft, Berlin. Bank fiir deutsche Eisenbahnwerte, Berlin. Bank fiir elektrische Unternehmungen, Zurich. Berliner Maklerverein, Berlin. Deutsch-Asiatische Bank, Berlin. Deutscher Eisenhandel, A.-G., Berlin. Deutsche Hypothekenbank, Berlin. 9 OI National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . BERLINER HANDELSGESELLSCHAFT Continued. Seats on the supervisory board. Class of industry. One Three (director) One (chairman) One One Two (chairman) One One. . One (chairman) One One One One. . Two (director and chair- man). One (vice-chairman) Two (vice-chairman) One. . One. One. Two One. One. One. Two. One. One. One. One. One. Two. One. One. One. COMMERCIAL, ENTERPRISES continued. . Diamanten-Pacht-Ges., Berlin. Handelsgesellschaft fiir Grundbesitz, Berlin. Industriegelande Schoneberg, A.-G., Berlin. Liquidationsverein fiir Zeitgeschafte, Berlin. Ostbank fiir Handel u. Gewerbe, Posen. Papierfabrik Koeslin, A.-G., Koeslin. Preussische Hypotheken-Aktienbank, Berlin. Reichsbank, Berlin. TRANSPORTATION ENTERPRISES. A.-G. fiir Verkehrswesen, Berlin. Braunschweig-Schoninger Eisenbahn, Braunschweig. Brohlthal Eisenbahn-Gesellschaft, Cologne. Capito & Klein, A.-G., Benrath. Deutsche Kolonial-Eisenbahn- u. Betriebs-Gesellschaft, Berlin. Kamerun-Eisenbahn-Gesellschaft, Berlin. Leipziger elektrische Strassenbahn, Leipzig. Ostdeutsche Eisenbahn-Gesellschaft, Konigsberg. Westdeutsche Eisenbahn-Gesellschaft, Cologne. FOREIGN COMPANIES. A.-G. Hadeland, Bergwerk zu Grua (Norway). A.-G. "Elektrizitat," Warsaw. Banca Marmorosch, Blank & Co., Bucharest. Banque Andreewitch & Co., A.-G., Belgrade. Banque Internationale de Bruxelles. Bohmische Montanges., vorm. fiirstlich-Fiirstenbergische Montanwerke, Vienna. Gesellschaft der Metallfabriken, vorm. B. Hantke, War- saw. A. Gorz & Co., London. Kraftwerk Laufenburg in Laufenburg, Switzerland. Labouchere, Oyens & Co., Bank, Amsterdam. Norge Erz-Bergbau, Ges. zu Hakedal (Norway). Oesterreich. Alpine-Montan-Gesellschaft, Vienna. Prager Eisenindustrie, Vienna. Schantung-Eisenbahn-Gesellschaft, Tsingtau, China. Schweizerische Metallbank in Basle. Siiddeutsche Donau-Dampfschiffahrts-Gesellschaft, Vi- One. . Ziiricher Eisenbahn-Bank, Zurich. 902 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued . COMMERZ- UND DISCONTO-BANK. Seats on the supervisory board. Class of industry. One One One (vice-chairman) One One, One One One One One (vice-chairman) Two (chairman) . . . . One One One, One One One One Two (chairman) Two (chairman) One One. . MINING, SMEI/TING, AND SALT WORKS. Mecklenburgische Kali-Salzwerke, Jessenitz. STONES AND EARTHS. Portland-Cementfabrik "Germania," A.-G. in Lehrte. "Teutonia," Misburger Portland-Cementfabrik, Hanover. METAL WORKING. Stanz- u. Emaillierwerke vorm. Carl Thiel & Sohne, A.-G. in Liibeck. Berliner Gusstahl- u. Eisengiesserei, A.-G., Berlin. MACHINE AND INSTRUMENT MAKING. A.-G. Gorlitzer Maschinenbauanstalt u. Eisengiesserei. Continental Gesellschaft fur elektrische Unternehmun- gen, Nuremberg. Diisseldorfer Maschinenbau-A.-G. vorm. J. Lohenhausen. Elektrizitats-A.-G. vorm. Schuckert & Co., Nuremberg. Leipziger Werkzeugmaschinenfabrik vorm. W. v. Pittler. Maschinenbauanstalt u. Eisengiesserei vorm. Th. Fldther, Gassen. Maschinenfabrik fur Miihlenbau vorm. C. G. W. Kapler Berlin. CHEMICALS. Chemische Pabriken Harburg-Stassfurt, vorm. Thorl & Heidtmann, A.-G., Harburg. TEXTILES. Norddeutsche Jutespinnerei u. Weberei, Hamburg-Har- burg. POODS AND DRINKS. Barmbecker Brauerei-A.-G., Hamburg-Barmbeck. Brauerei "Germania," A.-G., Berlin. Norddeutsche Zuckerraffinerie, Frellstedt. BUILDING TRADES. A.-G. Berliner Neustadt in Liquid, in Berlin. COMMERCIAL ENTERPRISES. Credit- u. Sparbank in Leipzig. Grundstiicks-A.-G. in Berlin. Lichtenberger Terrain-A.-G. Revisions- u. Vermogensverwaltung, A.-G., Berlin. 903 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . COMMERZ- UND DISCONTO-BANK Continued. Seats on the supervisory board. One One (vice-chairman) One One. One. Ofle One (chairman) One. One. One. Class of industry. COMMERCIAL, ENTERPRISES Continued. Terrain-Gesellschaft am Teltowkana! Rudow-Johannis- thal. Terrain-Gesellschaft Munchen, Friedenheim. Waren-Commissionsbank in Hamburg. INSURANCE ENTERPRISES. " Industrie"-Versicherungs-A.-G., Berlin. "Nordstern," Unfall- u. Altersversicherungs-A.-G., El- berfeld. TRANSPORTATION ENTERPRISES. Bergische Kleinbahn-A.-G. in Elberfeld. Reinickendorf - Liebenwalde - Schonebecker Eisenbahn- A.-G. Vereinigte Elbschiffahrts-Gesellschaften, A.-G. in Dresden. HOSTELRY AND TAVERN ENTERPRISES. Kaiserkeller, A.-G., Berlin. FOREIGN COMPANIES. Santa Catharina-Eisenbahn-Gesellschaft, Berlin. DEUTSCHE BANK. One (chairman) One (vice-chairman) . One.. One One One (vice-chairman) , One One One One (vice-chairman) One. One One, One (vice-chairman) MINING, SMELTING, AND SALT WORKS. Bleichert'sche Braunkohlenwerke, Neukirchen. Bochumer Verein fur Bergbau u. Gussstahlfabrikation. Continentale Wasserwerks-Gesellschaft, Berlin. Deutsche Mineralol-Industrie, A.-G., Berlin. Essener Bergwerksverein "Konig Wilhelm." Essener Steinkohlenbergwerke. Gelsenkirchener Bergwerks-A.-G. Gewerkschaft Wilhelmsschacht, Gnaudorf-Boma. Harpener Bergbau-A.-G., Dortmund. Konigsborn, A.-G., fiir Bergbau, Salinen- u. Solbadbe- trieb. 'Phonix," A.-G. fiir Bergbau und Hiittenbetrieb, Horde. Rombacher Hiittenwerke. Otavi, Minen- u. Eisenbahn-Gesellschaft, Berlin. STONES AND EARTHS. Steingutfabrik Sornewitz, Meissen. 904 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued . DEUTSCHE BANK Continued. Seats on the supervisory board. Class of industry. One One (vice-chairman) One (chairman) .... One (vice-chairman) One (chairman) One One One One One Two (i chairman, i direc- tor). Two (chairman) One One. . One One (vice-chairman) One (chairman) .... One One One One (vice-chairman) One One One Two One One (chairman) . One. One Two (chairman) . One (chairman) . One. . METAL WORKING. Aluminium-Industrie, A.-G., Neuhausen. Hirsch, Kupfer- und Messingwerke, Halberstadt. Reichelt, Metallschrauben-A.-G., Ftirstenwalde. MACHINE CONSTRUCTION AND INSTRUMENT MAKING. Akkumulatorenfabrik Berlin- Hagen. Bayerische Elektrizitatswerke, Miinchen. Benrather Maschinenfabrik, Berlin. Bergmann, Elektrizitatswerke, Berlin. Berlin-Anhaltische Maschinenbau-Gesellschaft. Berliner Elektrizitats-Werke. Chemnitzer Werkzeugmaschinenfabrik. Deutsche Ueberseeische Elektrizitats-Gesellschaft, Ber- lin. Elektrische Licht- u. Kraftanlagen, Berlin. Fabrik fur photographische Apparate, Dresden. J. Frerichs & Co., Osterholz, Maschinenfabrik u. Schiffs- werft. Carl Hamel, Schonau, Maschinenfabrik. Kraf tiibertragungswerke , Rheinf elden. Mannesmannrohren-Werke. Markische Maschinenbau-Anstalt, Wetter. Maschinenfabrik Augsburg-Niirnberg. Oberschlesische Eisenbahnbedarfs-A.-G., Friedenshiitte. Orenstein & Koppel, Berlin, A.-G. fur Feld- und Klein- bahnbedarf. Jul. Pintsch A.-G., Berlin, Maschinenfabrik u. Beleuch- tungs-Gesellschaft. Rheinisch-Westfalisches Elektrizitatswerk, Essen. F. Kiippersbusch & Sohne, A.-G. Siemens & Halske, Berlin. Ernst Schiess.Werkzeugmaschinenfabrik, Dtisseldorf. Voigt & Haeffner, A.-G., Frankfort on the Main. CHEMICALS. J. D. Riedel, Berlin, Chemische Fabrik. ILLUMINANTS, SOAPS, FATS, OILS, AND VARNISHES. Deutsche Continental-Gas-Gesellschaft, Dessau. Deutsche Petroleum-A.-G., Berlin. Europaische Petroleum-Union, Bremen. F. Thorls, Vereinigte Harburger Olfabriken. 905 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . DEUTSCHE BANK Continued. Seats on the supervisory board. One One One (vice-chairman) One. . One One (vice-chairman) One. One (chairman) .... One One One One (chairman) One. . One (chairman) .... One (vice-chairman) Two (chairman) . . . . One One (chairman) .... One One (chairman) .... One One (president) .... One Six (director) One One (vice-chairman) One. . Class of industry. TEXTILES. Allgauer Baumwollspinnerei u. Weberei. Baumwollspinnerei "Germania," Epe. Bremer Wollkammerei. Bremer Tauwerkfabrik A.-G., vorm. C. H. Michelsen, Grohn. Schlesische Textilwaren, Methner & Frahne, Landeshut. Vereinigte Glanzstoffabriken, Elberfeld. PAPER. Paul Suss, Luxuspapierfabrik, Dresden. RUBBER. Vereinigte Berlin-Frankfurter Gummiwaren. FOODS AND DRINKS. Aktien-Muhlenwerke Stockau-Reichertshofen-Mauching. Zuckerfabrik Frobeln. Wasserwerk fur das nordliche westfalische Kohlenrevier, Gelsenkirchen . BUILDING TRADES. Gesellschaft fiir den Bau von Untergrundbahnen, Berlin. Internationale Baugesellschaft, Frankfort on-the-Main. ART INDUSTRY. Kunstdruck- u. Verlagsanstalt, Wetzel & Naumann, Leip- zig. Moritz Prescher Nachf., A.-G., Leutzsch, Kunstdruckerei. COMMERCIAL, ENTERPRISES. Bergisch-Markische Bank, Elberfeld. Berliner Maklerverein. Bodengesellschaft am Hochbahnhof Schonhauser Allee, Berlin. Borsenhandelsverein, Berlin. Deutsche Treuhand-Gesellschaft, Berlin (Revisions- Gesellschaft). Deutsche Handels- u. Plantagen-Gesellschaft, Hamburg. Deutsche Kolonial-Gesellschaft fiir Siidwestafrika. Deutsche Hypothekenbank, Meiningen. Deutsche Ueberseeische Bank, Berlin. Deutsche Vereinsbank, Frankfort on-the-Main. Essener Bankverein. Essener Kreditanstalt. Q06 The German Great Banks Representation of the great banks on the supervisory boards of stock com panics Continued . DEUTSCHE BANK Continued. Seats on the supervisory board. Class of industry. One One (chairman) One One One (chairman) , One One (chairman) One One (delegate and member of the central committee). One One One (chairman) One One. . One One. . One .... One (vice-chairman) One. . One One One One (vice-chairman) One One One (vice-chairman) . One (vice-chairman) . One One One. . COMMERCIAL ENTERPRISES continued. Hannoversche Bank. Mecklenburgische Hypotheken- und Wechselbank Schwerin. Mecklenburgische Sparbank, Schwerin. Neu-Bellevue, A.-G. fur Grundstiicksverwertung, Berlin. Neu-Westend, A.-G. fur Grundstiicksverwertung, Berlin. Norddeutsche Kreditanstalt, Konigsberg. Preussische Bodenkredit-Aktienbank, Berlin. Privatbank, Gotha. Reichsbank, Berlin. Rheinische Kreditbank, Mannheim. Sachsische Bank, Dresden. Schlesischer Bankverein, Breslau. Suddeutsche Bank, Mannheim. Schoneberg-West, A.-G. fur Grundstucksverwertung. Berlin. Terrain-Gesellschaft am Teltowkanal, Rudow-Johannis- thal, A.-G. Wilmersdorfer Terrain-Gesellschaft "Rheingau," Berlin. INSURANCE ENTERPRISES. Allgemeine Versicherungs-Gesellschaft fur See-, Fluss- u. Landtransport, Dresden. "Allianz," Versicherungs-A.-G., Berlin. "Atlas," Deutsche Lebensversicherungs-Gesellschaft, Ludwigshafen. Kontinentale Versicherungs-Gesellschaft, Mannheim. Mannheimer Versicherungs-Gesellschaft. Sachsische Riickversicherungs-Gesellschaft in Dresden. Transatlantische Giiterversicherungs-Gesellschaft in Ber- lin. "Union," Allgemeine Versicherungs-Gesellschaft, Berlin. TRANSPORTATION ENTERPRISES. A.-G. "Weser," Schiffswerft, Bremen. Deutsch-Australische Dampfschiffs-Gesellschaft, Ham- burg. Gesellschaft fur elektrische Hoch- und Untergrundbah- nen, Berlin. Elektrische Strassenbahn, Barmen-Elberfeld. Norddeutscher Lloyd, Bremen. Ostafrikanische Eisenbahn-Gesellschaft, Berlin. 907 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . DEUTSCHE BANK Continued. Seats on the supervisory board. Class of industry. Two (chairman) Two (chairman) Two (vice-chairman) . One (vice-chairman) . One (vice-chairman) . One Two (chairman) One One (chairman) One Two (vice-chairman) . . Three (vice-chairman) . Two (chairman) FOREIGN COMPANIES. Anatolische Eisenbahn-Gesellschaft, Constantinople. Bagdad Eisenbahn-Gesellschaft. Bank fur elektrische Unternehmungen, Zurich. Bank fiir orientalische Eisenbahnen, Zurich. Betriebsgesellschaft der orientalischen Eisenbahnen, Vienna. Compania Barcelonesa de Electricidad. Eisenbahn-Gesellschaft Mersina-Adana. A. Goerz & Co., Ltd., London. Gesellschaft fiir elektrische Beleuchtung, St. Petersburg. National Bank of South Africa, London. Socie'te' du Chemin de Fer Ottoman Salonique-Monastir. Societ du Port de Haidar-Pascha, Constantinople. Steaua Romana, A.-G. fiir Petroleumindustrie, Bucharest. DIRECTION DER DISCONTO-GESELLSCHAPT. One (chairman) One One One One Two (chairman) Three Three One Two Two One (chairman) . Two. . One. . One.. One. One. MINING, SMELTING, AND SALT WORKS. Bochumer Bergwerks-A.-G., Bochum. Continentale Tiefbohrgesellschaft, Halle. Deutsch-Luxemburger Bergwerks- u. Hiitten-A.-G., Bo- chum. Diamanten Regie-Gesellschaft. Eschweiler Bergwerksverein. Gelsenkirchener Bergwerks-A.-G., Gelsenkirchen. Gewerkschaft Braunkohlengrube, Borna. Gewerkschaft Christoph Friedrich. Hiistenen Gewerkschaft. Otavi Minen- und Eisenbahn-Gesellschaft, Berlin. "Phonix," A.-G. fiir Bergbau u. Hiittenbetrieb, Laar. "Union," A.-G. fiir Bergbau, Eisen- u. Stahlindustrie. Dortmund. Zinkhtitten- und Bergwerks-A.-G. vorm. Dr. A. Lowitscb & Co., Kattowitz. STONES AND EARTHS. A.-G. fiir Betonbau Diss & Co., Diisseldorf. Porzellanfabrik Kahla. METAL WORKING. Neuwalzwerk, A.-G., Bosperde. Rheinische Stahlwerke, Meiderich. 908 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued . DIRECTION DER DISCONTO-GESELLSCHAFT Continued. Seats on the supervisory board. Class of industry. One One One (vice-chairman) One (vice-chairman) Three . . One., One. One. One (vice-chairman) One One (chairman) Two Two . . One (chairman) Three.. One. Two One Two (vice-chairman) Two One One One One Four (r vice-chairman, i chairman). Two (vice-chairman) One Four (i chairman and i director). One One One One... MACHINE CONSTRUCTION AND INSTRUMENT MAKING. Allgemeine Elektrizitats-Gesellschaft, Berlin. Bergmann, Elektrizitatswerke, Berlin. Berliner Maschinenbau-A.-G., Berlin. Deutsche Ueberseeische Elektrizitats-Gesellschaft, Berlin. Maschinenfabrik u. Miihlbau-Anstalt H. Luther, Braun- schweig. Rheinisch-Wevstfalische Elektrizitatswerke, Essen. Sachsische Maschinenfabrik, Chemnitz. Turbinia, Deutsche Parsons Marine A.-G. CHEMICAL INDUSTRY. Anglo - Continent, vorm. Ollendorffsche Guano- Werke, Hamburg. Berliner Benzinwerke, Lichtenberg. Dynamit-A.-G., Hamburg. Internationale Wasserstoff-Gesellschaft. Kaliwerke, Aschersleben. ILLUMINANTS, SOAPS, FATS, OILS, VARNISHES. Allgemeine Elektrizitats-Gesellschaft, Berlin. Allgemeine Petroleumindustrie, Berlin. POODS AND DRINKS. Freiherrlich v. Tucher'sche Brauerei, Nuremberg. COMMERCIAL ENTERPRISES. Allgemeine Deutsche Kreditanstalt, Leipzig. Bank des Berliner Kassenvereins, Berlin. Bank fur Thiiringen vorm. B. M. Strupp, Meiningen. Bank fiir Chile und Deutschland, Hamburg. Barmer Bankverein, Hinsberg, Fischer & Co., Barmen. Bayerische Disconto- und Wechselbank, Nuremberg. Bayerische Revisions- und Vermogens-A. G., Munich. Berliner Maklerverein. Brasilianische Bank fur Deutschland, Hamburg. Busse & Co., Berlin, Bankgeschaft. Deutsche Afrika-Bank, Hamburg. Deutsche Asiatische Bank, Shanghai u. Berlin. Deutscher Eisenhandel, A.-G. Deutsche Grundkreditbank, Gotha. Deutsche Hypothekenbank, Meiningen. Deutsch-Ostafrikanische Bank, Berlin. 909 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . DIRECTION DER DISCONTO-GESELLSCHAFT Continued. Seats on the supervisory board. Class of industry. One One (chairman) One Two (unlimited partners) . . One One One One (member of the central committee) . Three One Two (vice-chairman) Two (vice-chairman) One... One. One. One. One.. One.. One. . . Two. . One. . . One. One One One (chairman) Two One (chairman) One One One Two. . COMMERCIAL ENTERPRISES continued. Konigsberger Terrain-A.-G. Landbank, Berlin. Magdeburger Bankverein. Norddeutsche Bank, Hamburg. Oberlausitzer Bank, Zittau. Preussische Zentral-Bodenkredit-A.-G., Berlin. Preussische Hypotheken-Aktieubank, Berlin. Reichsbank, Berlin. Revision, Treuhand-A.-G., Berlin. Heinrich Aug. Schulte, A.-G., Dortmund. Stahl & Federer, A.-G., Stuttgart. Siiddeutsche Disconto-Gesellschaft, Mannheim. Terrain-Gesellschaf t B erlin-Siid westen. PLANTATION COMPANIES. Deutsche Kolonisationsgesellschaft fur Siidwestafrika. Neu-Guinea-Compagnie. ENTERTAINMENT ENTERPRISES. Berliner Eispalast-Gesellschaft, Berlin. INSURANCE ENTERPRISES. "Nordstern," Lebensversicherung in Berlin. "Nordstern," Unfall- und Altersversicherung in Berlin. TRANSPORTATION ENTERPRISES. Brothaler Eisenbahngesellschaft, Hennef. Deutsch-Chinesische Eisenbahn-Gesellschaft. Deutsche Ostafrika-Linie, Hamburg, Dampfschiffahrts- Gesellschaft. Grosse Leipziger Strassenbahn. FOREIGN COMPANIES. Banca Commerciale Italiana, Milan. Banque de Credit, Sofia. Banca Generala Romana. Banque Generale Roumaine, Bucharest. Compagnie Generale des Tramways de Behire, Brussels. Compagnie du Chemin de Fer du Congo. Compagnie industrielle des Petroles, Paris. Compagnie Internationale d'Orient, Brussels. Concordia, Rumanische Petroleumindustrie, Bucharest. 910 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued . DIRECTION DER DISCONTO-GESELLSCH A FT Continued. Seats on the supervisory board. Class of industry. One (chairman) One One One One One One Two (i chairman, i director) One. . One. Two. One. FOREIGN COMPANIES continued. "Credit Petrolifer," Gesellschaft zur Forderung der Ent- wicklung der rumanischen Petroleumindustrie. Deutsche Niederlassungs-Gesellschaft, Tientsin. Elektrische Strassenbahn, Valparaiso. General Mining and Finance Corporation, Johannesburg. Grosse Venezuela-Eisenbahn. Ostafrikanische Eisenbahn-Gesellschaft. OsteuropaischeTelegraphen-Gesellschaft. Schantung-Eisenbahn -Gesellschaft, Tsingtau. Societ^ Financiere de Transport et d'Entreprises Indus- trielles, Brussels. Societe Generate Beige d'Entreprises electriques. "Vega," Rumanische Petroleum-Raffinerie. Warschau-Wiener Eisenbahn-Gesellschaft. DRESDNER BANK. One One . . Two (vice-chairman) One One One One Three (chairman) One ; One. . One One. . One One (vice-chairman) . . . One. . MINING, SMELTING, AND SALT WORKS "Bismarckhtitte" in Bismarckhutte. Deutsch-Luxemburger Bergwerks- und Hiitten-Gesell- schaft in Bochum. Deutsch-Oesterreichische Bergwerks-Gesellschaft, Dres- den. Gelsenkirchener Bergwerks-A.-G. in Gelsenkirchen. Internationale Kohlenbergwerks-Gesellschaft, Cologne. Miilheimer Bergwerksverein in Miilheim a. R. "Phonix," A.-G. fur Bergbau u. Hiittenbetrieb, Horde. Saar- u. Mosel-Bergwerks-Gesellschaft zu Karlingen. Schlesische Zinkhiitten-A.-G. in Lipine. Vereinigte Konigs- u. Laurahutte, A.-G. f. Bergbau u. Huttenbetrieb, Berlin. STONES AND EARTHS. Porzellanfabrik Ph. Rosenthal & Co., A.-G. in Selb. Sachsisch-Bohmische Portland-Zementfabrik, A.-G., Dres- den. METAL WORKING. Gebr. Bohler & Co., A.-G.. Berlin. A.-G. Lauchhammer in Lauchhammer, Eisenwerk, Sachsische Gussstahlfabrik in Dohlen bei Dresden. National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . DRESDNER BANK Continued. Seats on the supervisory board. Class of industry. One One One One One One One One One (vice-chairman) One (chairman) One One (chairman) One One (vice-chairman) One (chairman) One (vice-chairman) One. . One, One One One One One One (chairman) One (chairman) One Two (vice-chairman and chairman). Two (chairman) Two (chairman) Two (director) One. . MACHINE CONSTRUCTION AND INSTRUMENT MAKING. Allgemeine Elektrizitats-Gesellschaft zu Berlin. Ascherslebner Maschinenbau-A.-G. in Aschersleben. Balcke, Tellering & Co., A.-G. in Benrath. Deutsche Waffen- und Munitionsfabriken in Berlin. Deutsch-Uberseeische Elektrizitats-Gesellschaft in Berlin. Felten & Guilleaume-Lahmeyerwerke, A.-G., Miilheim. Kraftubertragungswerke in Rheinfelden. Kohl, M., A.-G. in Chemnitz. Ludw. Loewe & Co., A.-G., Berlin. Maschinenbau-A.-G. Markt-Redwitz vorm. H. Rockstroh. Norddeutsche Seekabelwerke in Koln-Nordenham. Orenstein & Koppel, A.-G. fur Kleinbahnen etc. Rheinisch-Westfalische Elektrizitats-A.-G. in Essen. Wanderer, Fahrradwerke vorm. Winkelhofer & Janicke in Schonau. CHEMICALS. Gehl & Co., A.-G. in Dresden. TEXTILES. Erdmannsdorfer A.-G. fiir Flachsgarn-Maschinenspin- nerei u. Weberei. Vereinigte Strohstoffabriken, Dresden. PAPER. A.-G. Kartonnagenindustrie in Loschwitz bei Dresden. FOODS AND DRINKS. Aktien-Bierbrauerei zu Reisewitz bei Dresden-Lobtau. Sachsische Malzfabrik in Dresden-Plauen. COMMERCIAL ENTERPRISES. Allgemeine Boden-A.-G. zu Berlin. Banque de Mulhouse in Miilhausen i. Els. Baubank fiir die Residenzstadt Dresden. Berlinische Boden-Gesellschaft, Berlin. Berlinische Boden-Credit-A.-G. Berlin. Berliner Maklerverein, Berlin. Bodengesellschaft Kurfiirstendainm, Berlin. Centralbank fiir Eisenbahnwerte, Berlin. Deutsche Orientbank, A.-G., Berlin. Deutsche Sudamerikanische Bank, Berlin. Eisenbahnbank, Frankfort on-the-Main. 9 I2 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued. DRESDNER BANK Continued. Seats on the supervisory board. Class of industry. One One (vice-chairman) One Two (vice-chairman) One (chairman) Two (chairman) One One One. Two Two (vice-chairman and chairman). Two Two (vice-chairman) One Two (chairman) One One One. . One, One. One, One (chairman) Two (chairman) One (vice-chairman) .... One (chairman) One (vice-chairman) .... One One (chairman) One (chairman) One (chairman) One (vice-chairman) .... One. . COMMERCIAL ENTERPRISES -continued. Eisenbahn-Rentenbank, Frankfort on-the-Main. Gesellschaft f iir elektrische Unternehmungen, Berlin. Markische Bank, Bochum. Mecklenburgische Bank, Schwerin i. M. Norddeutsche Lagerhaus-A.-G., Berlin. Preussische Pfandbriefbank, Berlin. Rheinische Bank in Essen. Rheinisch-Westfalische Boden-Credit-Bank, Cologne. Sachsische Boden-Creditanstalt in Dresden. A. Schaaffhausen'scher Bankverein, Cologne. Schmargendorfer Boden-A.-G. Schwarzburg, Hypothekenbank in Sondershausen. Schwarzburg, Landesbank in Sondershausen. Terrain-Gesellschaft Berlin-Siidwesten. Terrain-Gesellschaft am Centralviehof, A.-G. Terrain-Gesellschaft Dresden-Slid. Terrain-Gesellschaft Park Witzleben, Berlin. Wiirttemberg. Landesbank, Stuttgart. INSURANCE ENTERPRISES. "Allianz," Versicherungs-A.-G., Berlin. "Deutscher Anker," Pensions- und Lebensversicherungs- A.-G., Berlin. Magdeburger F'euerversicherungs-Gesellschaft. TRANSPORTATION ENTERPRISES. Berlin-Charlottenburger Strassenbahn, Berlin. Continental Eisenbahn-Bau- und Betriebs-Gesellschaft, Berlin. Deutsch-Atlantische Telegraphen-Gesellschaft, Cologne. Deutsch - Niederlandische Telegraphen - Gesellschaft, Cologne. Dux-Bodenbacher Eisenbahn, Vienna. Gross Berliner Strassenbahn, Berlin. Lausitzer Eisenbahn-Gesellschaft, Sommerfeld. Osteuropaische Telegraphen-Gesellschaft, Berlin. Sachsisch - Bohmische Dampfschiffahrts - Gesellschaft, Dresden. Strasseneisenbahn-Gesellschaft in Hamburg. Westliche Berliner Vorortbahn, Berlin. 903 1 1 1 1- -59 913 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . DRESDNER BANK Continued. Seats on the supervisory board. Class of industry. One (vice-chairman) One One One. . One One One.. One (chairman) One.. HOSTELRY AND TAVERN ENTERPRISES. Deutsche Eisenbahn-Speisewagen-Gesellschaft, Berlin. A.-G. vorm. Speyr & Co., Basle. Bank f iir Orientalische Eisenbahnen in Zurich. Betriebs-Gesellschaft fiir Orientalische Eisenbahnen Vienna. Belgische Eisenbahnbank, Brussels. Deutsch-Asiatische Bank, Shanghai. Gen. Mining and Finance-Comp., Ltd., Johannesburg, London. Gewerkschaft "Brucher Kohlenwerke" in Teplitz. Schweizerische Gesellschaft fiir nordamerikanische Werte in Basel. NATJONALBANK FUR DEUTSCHLAND. One. One. One. One. One. One. One. One (chairman) One. . One. One, One. One. One. One. One. One (vice-chairman) MINING, SMELTING, AND SALT WORKS. Alkaliwerke, Ronnenberg, Hanove*. Bergbau-Gesellschaft "Teutonia," Hanover. "Bismarckhiitte" in Bismarckhiitte. Deutsch-Luxemb. Bergwerks-u. Hiitten-A.-G. inBochum. Kamerun-Bergwerks-A.-G., Berlin. Lothringer Hiittenverein Aumetz-Friede. Oberschlesische Eisenindustrie, A.-G. f. Bergbau u. Hiittenbetrieb in Gleiwitz. Oberschlesische Zinkhiitten, A.-G. in Kattowitz. "Phonix," A.-G. fiir Bergbau u. Hiittenbetrieb, Duis- burg. Rheinische A.-G. fiir Braunkohlen- u. Brikettindustrie in Harrem und Koln. Schantung Bergbau-Gesellschaft in Berlin. Styrumer Eisenindustrie A.-G. in Liqu., Oberhausen. Zechau-Kribitzsche Kohlenwerke "Gliickauf," A.-G., Zechau i. S. STONES AND EARTHS. A.-G. fiir Asphaltierung u. Dachbedeckung vorm. J. Jeserich, Charlottenburg. "Adler," deutsche Portland-Cementfabrik, A.-G., Berlin. Oberschlesische Schamottefabrik friiher "Didier" A.-G. Gleiwitz. Schomburg, H., & Sohne, A.-G., Berlin. 914 The German Great Banks Representation of the great banks on the supervisory boards of stock com- panies Continued . NATIONALBANK FUR DEUTSCHLAND Continued. Seats on the supervisory board. Class of industry. One. One. One. One. One. One. One. One. One. One. One. One. One, One. One. One One One One One One One Two (chairman). One, One. One One One One (vice-chairman) One One. . METAL WORKING. Eisengiesserei A.-G. vorm. Keyling & Thomas in Berlin. K. Kastner, A.-G. in Leipzig. Schwelmer Eisenwerk Miiller & Co., A.-G., Schwelm. MACHINE CONSTRUCTION AND INSTRUMENT MAKING. A.-G. H. F. Eckert in Berlin-Friedrichsberg. Allgemeine Elektrizitats-Gesellschaft in Berlin. Berliner Elektrizitatswerke. Brandenburgische Carbid- u. Elektrizitatswerke, Berlin. Breslauer A.-G. fur Eisenbahnwagenbau in Breslau. Deutsch-Niederlandische Telegraphen - Gesellschaf t, Co- logne. Deutsche "Niles"-Werkzeugmaschinenfabrik, Berlin. Deutsche Ueberseeische Elektrizitats-Gesellschaft, Berlin. Deutsche Waffen- u. Munitionsfabriken, Berlin. F. Dippe, Maschinenfabrik, A.-G. in Schladen a. Harz. J. Frerichs & Co., A.-G. in Osterholz. Kraftiibertragungswerke Rheinfelden. Ludw. Loewe & Co., A.-G., Berlin. Oberschlesische Eisenbahnbedarfs-A. -G. Friedenshiitte, Upper Silesia. G. Sauerbrey, Maschinenfabrik, A.-G., Stassfurt. Schlesische Elektrizitats-Gesellschaft, Breslau. Telefonfabrik, A.-G., vorm. Jul. Berliner zu Hannover. Waggonfabrik, A.-G., Rastatt. CHEMICAI,. Chemische Fabrik Honningen, vorm. Walther Fulda & Co. Chemische Werke vorm. Dr. Heinrich Byk, Berlin. ILLUMINANTS, SOAPS FATS, OILS, AND VARNISHES. Celle-Wietze, A.-G. fur Erdolgewinnung in Hannover. Deutsche Mineralolindustrie, A.-G., Berlin. Deutsche Petroleum-A.-G., Berlin. LEATHER. Leipziger Gummiwarenfabrik vorm. Jul. Marx, Heine & Co. FOODS AND DRINKS. Aktien-Brauerei Friedrichshain, Berlin. Berliner Bockbrauerei, Berlin. Bierbrauerei, A.-G., vorm. Gebr. Hugger in Posen. Bierbrauerei A. Schitferer, A.-G. in Kiel. 915 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued. NATIONALBANK FUR DEUTSCHLAND Continued. Seats on the supervisory board Class of industry. One, One. One. One. Two, One. . One. . One. . One. . One. One. One. One. One. One Two (vice-chairman). Two (director) One One Two One One One Two (chairman) One One One One One One. . One. FOODS AND DRINKS continued. Breslauer Aktien-Malzfabrik, Breslau. Deutsche Bierbrauerei, A.-G. in Berlin. Rositzer Zuckerraffinerie, Rositz (S.-A.). BUILDING TRADES. Tiefbau- u. Kalteindustrie, A.-G., vorm. Gebhardt & Koenig, Nordhausen. "Union," Baugesellschaft auf Aktien in Berlin. ART INDUSTRY. A.-G. H. Gladenbeck & Sohn, Bildgiesserei, Berlin. R. W. Dinnendal, A.-G., Kunstwerkerhutte bei Steele. Kunstanstalt B. Gross, A.-G. in Leipzig. H. Schott, A.-G. in Rheydt. COMMERCIAL ENTERPRISES. A.-G. fur Montanindustrie, Berlin. Bank fur Brauindustrie, Berlin. Berliner Maklerverein, Berlin. Boden-A.-G. Berlin-Nord, Berlin. Boden-Gesellschaft an der Kreisbahn Berlin-Nordost, Berlin, Deutsch-Asiatische Bank, Berlin. Deutsche Orientbank, A.-G., Berlin. Deutsch-Siidamerikanische Bank, Berlin. Deutsche Treuhand-Gesellschaft, Berlin. Gesellschaft fur elektrische Unternehmungen, Berlin. Handelsstatte "Bellealliance," A.-G., Berlin. Industriegelande Schoneberg, Berlin. Neue Boden-A.-G., Berlin. Norddeutsche Creditaiistalt, Konigsberg i. Pr. Norddeutsche Immobilien-A.-G., Berlin. Preussische Pfandbriefbank, Berlin. Rheinisch-Westfalische Boden-Creditbank, Cologne. Stansdorfer Terrain- A.-G. am Teltowkanal, Berlin. Teltower Boden-A.G. zu Berlin. Terrain-A.-G. Miinchen Nord-Ost, Munich. Terrain-Gesellschaft am neuen Botanischen Garten Berlin. INSURANCE ENTERPRISES. "Deutscher Anker," Pensions- u. Lebensversicherung Berlin. T 1 L The German Great Banks Representation of the great banks on the supervisory boards of stock panics Continued. NATIONALBANK FUR DEUTSCHLAND Continued. Seats on the supervisory board. Class of industry. One One One One One One (vice-director) One One One. . One One. . One One One. . One One, One TRANSPORTATION ENTERPRISES. Deutsch-Siidamerikanische Telegraphen-Gesellschaf t , Co- logne. S. Eichelbaum, Transport-A.-G., Breslau. Grosse Berliner Strassenbahn. Kamerun-Eisenbahn-Gesellschaft zu Berlin. "Midgard," Deutsche Seeverkehrs- A. -G. in Bremen. Niederlausitzer Eisenbahn-Gesellschaft, Berlin. Osteuropaische Telegraphen-Gesellschaft, Cologne. Santa Katharina-Eisenbahn-Gesellschaft, Berlin. Schantung-Eisenbahn-Gesellschaft, Tsingtau. PLANTATION COMPANIES. Guatemala-Plantagen-Gesellschaft, Hamburg. Osma-Rochela-Plantagen-Gesellschaft, Hamburg. FOREIGN COMPANIES. Bank fur elektrische Unternehmungen in Zurich. Credito Italiano, Genoa. Compagnie Metallurgique Franco-Beige de Martagnea, Brussels. Orientbank, A.-G., Athens. Rumanische A.-G. fiir Industrie "Konigreich Rumanien," Campina. Ungarische Lokaleisenbahnen-A.-G. in Budapest. A. SCHAAFFHAUSEN'SCHER BANKVEREIN. Two (chairman) . One One (chairman) One One One One (chairman) One One Six (chairman) Two (chairman) MINING, SMELTING. AND SALT WORKS. Bergwerks-Gesellschaft "Aller Nordstern" m. b. H, Gr.-Hauslingen. Bergwerks-Gesellschaft 'Gliickaufsegen" in Horde. Bergwerks-Gesellschaft "Trier" m. b. H. in Hamm. Deutsch-Luxemburg. Bergwerks- u. Hiitten-A.-G. in Bochum. Eschweiler Bergwerksverein in Eschweiler-Pumpe. Gelsenkirchener Bergwerks- A.-G. Gewerkschaft der Zeche Blankenburg in Hammerthal a d. Ruhr. Gewerkschaft "Zukunft", Cologne. Harpener Bergbau-A.-G. in Dortmund. Internationale Bohrgesellschaft Erkelenz. Internationale Kohlenberg werks- A.-G., St. Avoid. 917 National Monetary Commissio n Representation of the great banks on the supervisory boards of stock com- panies Continued . A. SCHAAFFHAUSEN'SCHER BANKVEREIN Continued. Seats on the supervisory board. Class of industry. One (chairman) One. . One One One One. . One One (vice-chairman) .... One. . One (vice-chairman) One (vice-chairman) One (chairman) . . One. . One One One One Two (chairman) One (chairman) One One One (vice-chairman) One (chairman) One. . One, One, One, One MINING, SMEI/TING, AND SALT WORKS continued. Lothringer Hiittenverein Aumetz-Friede in Kneuttingen i. L. "Phonix," A.-G. fur Bergbau u. Hiittenbetrieb, Duisburg- Ruhrort. Rheinische Wasserwerks-Gesellschaft, Cologne. Rombacher Hiittenwerke, Cologne. Sieg-Rhein. Hiitten-A.-G. zu Friedrich Wilhelmshiitte. Vereinigte Stahlwerke v. d. Zypen & Wissen Eisenhiitte, Cologne-Deutz. Zechau-Kriebitzsche Kohlenwerke "Gliickauf," A.-G., Zechau (S.-A.). STONES AND EARTHS. A.-G. fur Rhein.-Westfal. Cementindustrie in Beckum. Weseler Portland-Cement- u. Tonwerke in Wesel. METAIy WORKING. Eschweiler-Koln. Eisenwerke, A.-G. in Eschweiler. Faconeisen-Walzwerk L. Mannstaedt & Cie., Kalk, near Cologne. Schwelmer Eisenwerk Mullet & Co., Schwelm (West- phalia). Stahlwerk "Krieger," A.-G. in Dusseldorf. MACHINE CONSTRUCTION AND INSTRUMENT MAKING. Allgemeine Elektrizitatsgesellschaft in Berlin. Anker-Werke, A.-G.,vorm.Hengstenberg & Co., Bielefeld. Bergmanns Elektrizitatswerke, A.-G., Berlin. Deutsche Waffen- und Munitionsfabriken, Berlin, de Fries & Co., A.-G., Dusseldorf. Gasmotorenfabrik ' Deutz." Gesellschaft fiir elektrische Unternehmungen. Kottbuser Maschinenbauanstalt u. Eisengiesserei, A.-G. Maschinenbauanstalt Humboldt, Kalk, near Cologne. A.-G. Maschinenfabrik "Deutschland" in Dortmund. Waggonfabrik A.-G., vorm. P. Herbrandt & Co., Cologne- Ehrenfeld. Waggonfabrik, A.-G., Uerdingen. Walther & Co., Commandit-Gesellschaft auf Aktien, Delbriick, near Cologne. Werkzeugmaschinenfabrik Gildemeister & Co., A.-G., Bielefeld. Weyersberg, Kirschbaum & Co., A.-G. fiir Waffen u. Fahrradteile in Solingen. 918 The German Great B an k Representation of the great banks on the supervisory boards of stock com- panies Continued. A. SCHAAFFHAUSEN'SCHER BANKVEREIN Continued. Seats on the supervisory board. Class of industry. One (vice-chairman) One. . Two (chairman) One (vice-chairman) One Two (chairman). . . . One (chairman) .... One Two (chairman). . One One (chairman) One (chairman) One (vice-chairman) . One (chairman) One (vice-chairman) . One Three Two (vice-chairman). Two One One (chairman) Two One (chairman) One One One Two (vice-chairman). One One (vice-chairman) . CHEMICAL,. A.-G. fur chemische Industrie in Gelsenkirchen-Schalke. Chemische Fabrik Honningen, vorm. Walther Feld & Co., A.-G. ILLUMINANTS, SOAPS, FATS, OILS, AND VARNISHES. Deutsche Mineralol-Industrie, A.-G., Cologne. TEXTILES. Diilkener Baumwollspinnerei, A.-G. in Dulken. Kref elder Teppichfabrik, A.-G., Krefeld. Rhein. Kunstseidefabrik, A.-G., Cologne. Schollersche und Eitorfer Kammgarnspinnerei, A.-G. Breslau. FOODS AND DRINKS. Rositzer Zuckerraffinerie in Rositz. BUILDING TRADES. A.-G. fur Briickenbau, Tiefbohrung u. Eisenkonstruk- tionen in Neuwied. Rhein. Baugesellschaft, Cologne. Tiefbau u. Kalteindustrie, vorm. Gebhardt & Konig, Nordhausen. ART INDUSTRY. W. Hagelberg, A.-G., Berlin (Art prints). COMMERCIAL ENTERPRISES. A.-G. fur Rhein.-Westfal. Industrie, Cologne. Alexanderwerk, A. v. d. Nahmer, A.-G. in Remscheid. Allgemeine Boden-A.-G. in Berlin. Bank fiir deutsche Eisenbahnwerte in Berlin. Deutsche Orientbank, A.-G., Berlin. Deutsch-Siidamerikanische Bank, A.-G., Berlin. Dresdner Bank in Dresden. Diisseldorfer Baubank in Diisseldorf. Kolner Verlagsanstalt u. Druckerei, A.-G., Cologne, Mittelrhein. Bank, Koblenz. Neue Boden-A.-G., Berlin. Oldenburg. Landesbank. Ostbank fiir Handel u. Gewerbe, Posen. Preussische Pfandbriefbank, Berlin. Rheinische Bank, Essen on-the-Ruhr. Rhein.-Westf. Boden-Creditbank, Cologne. Schwarzburg. Hypothekenbank in Sondershausen. 919 National Monetary Commission Representation of the great banks on the supervisory boards of stock com- panies Continued . A. SCHAAFFHAUSEN'SCHER BANKVEREIN Continued. Seats on the supervisory board. Class of industry. One One Two (chairman). One, One One One One One (chairman) . . One (vice-chairman) One One One (chairman) .... One (chairman) .... One (vice-chairman) One (vice-chairman) One (vice-chairman) One (chairman) .... One (chairman) .... One (chairman) . One One One (vice-chairman) One One One. . COMMERCIAL ENTERPRISES continued. Schwarzburg. Landesbank, Sondershausen. Treuhand-Vereinigung, A.-G., Berlin. Westfalisch-Lippische Vereinsbank in Bielefeld. INSURANCE ENTERPRISES. "Rhenania," Versicherungs-A.-G. in Cologne. TRANSPORTATION ENTERPRISES. A.-G. fiir Verkehrswesen in Berlin. Badische Lokaleisenbahnen-A.-G. in Karlsruhe. Berlin-Char lottenburger Strassenbahn, Berlin. Braunschweig. Landeseisenbahn-Gesellschaft. Braunschweig - Schoninger Eisenbahn - Gesellschaft in Braunschweig. Brohltal-Eisenbahn-Gesellschaft, Cologne. Grosse Berliner Strassenbahn, Berlin. Kamerun-Eisenbahn-Gesellschaft zu Berlin. Moselbahn-A.-G. in Trier. Modrath-Liblar-Briihler Eisenbahn-A.-G., Cologne. Rinteln-Stadthagener Eisenbahn-Gesellschaft in Rinteln. Schlesische Dampfer-Compagnie in Breslau. Schlesische Kleinbahn A.-G. in Kattowitz. Vereinigte Westdeutsche Kleinbahn -A.-G., Cologne. Westdeutsche Eisenbahn-Gesellschaft, Cologne. Wurttembergische Nebenbahnen-A.-G., Stuttgart. FOREIGN COMPANIES. Banque Internationale de Bruxelles in Brussels. Foraky Soc. au Beige de 1'Entreprise de Forage et de Foncage, Brussels. Rumanische A.-G. fiir Industrie, Konigreich Rumanien. Schantung-Eisenbahn-Gesellschaft in Tsingtau. Societa Italiana Langen & Wolf, Milan. Societe Francaise de Forage et de Recherches Minieres (Brevet Raky), Paris. 920 he German Great Banks APPENDIX V. TOTAL VALUE OF SECURITIES ISSUED AT THE BERLIN STOCK EXCHANGE BY THE GREAT BANKS DURING THE YEARS 1882-1908. BANK FtfR HANDEL UNI> INDUSTRIE. Total value of securities issued at the Berlin stock exchange during the years 1882-1908. [To page 395.] Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued jointly with other banks and great banks. & 1882 Marks. Marks. Marks. Marks. 1883 I i, 600, ooo 20, ooo, ooo 1884 12, 850, OOO 1885 1886 1887 ?i. 757. 200 IO, OOO, OOO 209, 512, 800 10, OOO, OOO 75,380,800 1888 87 852 800 1889 1890. 1891 1892 1893. 1894 1895 1896. 19,873. 500 39,000,000 40, 234, 525 I IO, OOO, OOO 1897 1898 112, 386, OOO 2 I, 7SO, OOO 14, 703 , ooo 125, ooo, ooo 1899. . 1900 8 200 ooo 83 , 139 500 247, 400, ooo 1901 1902 1903 284, 050, ooo 30, ooo, ooo i , 250, ooo 3, 434, 609, 074 1904 I 97 7 2 3 57o 1905 80, 250, ooo 2 1 , 4OO, OOO 820, 6 1 i , ooo 1906 1907 . . . i 18, ooo, ooo 9, 750, ooo 6, 584, 065 , 232 1908 9, 3 10, ooo 136, 2OO, OOO 3 , 300, ooo 565 , 600, ooo a Only those years are given during which issues were made. b Including private banking firms. 921 National Monetary Commission Value of securities issued and listed at the Berlin stock exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks. & 1882 Marks. 4, 500, ooo Marks. Marks. Marks. 1884 1886 1887 IO, OOO, OOO 1888 1889 4, 040, ooo 1890 1891 1892 1893 1894 1895 1896 13, ooo, ooo 16, 280, 700 39,034-525 10, 000 f 000 1897 98, 250, ooo 1898 1899 21 , SOO, OOO .- 7. 500, ooo 4,939, 5oo 27, 700, ooo 1901 1902 1903 1904 1905 9, ooo, ooo 1906 9,017,20 ,000,00 1908 . . . 7,000,000 2,250,000 24,500,00 190,000,000 FOREIGN PUBLIC SECURITIES 1886 51 , 757 200 1887 1888 ' 1889 74, 20,00 1890 28 1891 1893 34, 650, 400 50, 750,000 1895 1896 1898.., ^ I . OOO. OOO o Only those years are given during which issues were made. & Including private banking firms. 922 The German Great Banks Value of securities issued and listed at the Berlin stock exchange during the years 1882-1908 Continued. FOREIGN PUBLIC SECURITIES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great batiks.6 1900 Marks. Marks. Marks. Marks. 1901 102,000,000 1902 1903 280, ooo, ooo 1904 . 1905 1906 1907 . 80, ooo, ooo 48, 480, ooo 28, 350, ooo 1908 GERMAN MORTGAGE BONDS. 1888 30, ooo, ooo 1889 IO, OOO, OOO 1896 20, ooo, ooo 1897 i 15, ooo, ooo 1898 55 i 300 ooo 1900 . 1902 1903 26, 040, 700 10, 000, 000 20, ooo ooo 1904 1905 1906 25 , ooo, ooo FOREIGN MORTGAGE BONDS. 1896 1807 5 i , ooo, ooo GERMAN RAILWAY SHARES. 1896 i , 800, ooo 1897 i , 250, ooo 1898 1000. . , 13,150,00 I, 200, 000 a Only those years are given during which issues were made. & Including private banding firms. 9 2 3 National Monetary Commission Value of securities issued and listed at the Berlin stock exchange during the years 1882-1908 Continued. GERMAN RAILWAY SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks.*" Marks. i i , 450, ooo Marks. Marks. Marks. 2 , OOO, OOO 14, 297, ooo 4, 024, ooo II, 000, 000 1908 FOREIGN RAILWAY SHARES. 1888 1890 49, 600, ooo 1892 5 , 600, ooo GERMAN RAILWAY BONDS. !888 2, 500, ooo 1890 1897 5 , 700, ooo 2, 500, 000 3, ooo, ooo 5,500,000 4, ooo, ooo 5, ooo, ooo 4, 500, ooo 1906 7, ooo, ooo FOREIGN RAILWAY BONDS. 1882 1883 6, 500, ooo 1884 1885 209, 512, 800 39,437 75, 380, 800 876,489, 740 in, 288, 750 31, 175, 020 52, 800, ooo 16, ooo, ooo IOO, OOO, OOO 100. OOO. 000 1886 1889 20, 000, 000 16, ooo, ooo 16, ooo, ooo 1890 1891 1892 ... 1893 1894 i8g<;. . a Only those years are given during which issues were made. & Including private banking firms. 924 The German Great Banks Value of securities issued and listed at the Berlin stock exchange during the years 1882-1908 Continued. FOREIGN RAILWAY BONDS Continued. 1901 Marks. Marks. Marks. Marks. 87, ooo, ooo 1,687,500 1906 1907 42, ooo, ooo GERMAN STREET RAILWAY BONDS. 1896 7, 500, ooo BANK SHARES. 1882 6, ooo, ooo 1889 20, 000, 000 3 , ooo, ooo 16 200 ooo 1896 . . 16, ooo, ooo 1897 1898 28, ooo, ooo 8, ooo, ooo 17, ooo, ooo 24, ooo, ooo 1899 . . 1901 52, ooo, ooo 4, ooo, ooo 1904 12, 500, 000 16, ooo, ooo 33, 250,000 20, 000, 000 8, ooo, ooo 22, 000, 000 19, ooo, ooo 3, 400, ooo 3 , ooo, ooo 3, ooo, ooo 18, ooo, ooo 1906 1907 1908 INDUSTRIAL SCARES. 1888 19, ooo, ooo 1889 1891 7,000, ooo 12, 000, 000 3, 600, ooo 4, ooo, ooo 3, ooo, ooo 13, ooo, ooo 4, 800, ooo 1892 1893 I, 000, 000 1,358, 400 3, 592, 800 5, 006, ooo 2, 944, ooo 2, 436, 000 30, ooo, ooo 1897 1898.. 9, 750, ooo 20, 000, 000 a Only those years are given during which issues were made. & Including private banking firms. 9 2 5 National Monetary Commission Value of securities issued and listed at the Berlin stock exchange during the years 1882-1908 Continued. INDUSTRIAL SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1899 Marks. Marks 29 ooo ooo Marks. 2 OOO OOO Marks. 1900 5, 200, ooo 2, 500, 000 48, 700, ooo 1902 1903 25,675,000 4, 050, ooo I, 000, 000 5 , ooo, ooo i, 500, ooo i , 250, ooo 28, ooo, ooo I 2 , 5OO, OOO 10 625 , ooo 3 ooo ooo 1905 26, ooo, ooo 250, ooo i , 400, ooo 80, 3 i i , ooo 1907 1908 5, ooo, ooo 30, ooo, ooo 7, 500, ooo 43 , ooo, ooo INDUSTRIAL BONDS. 1883 1884 II, 600, 000 x889 I I , OOO, OOO 1892 6 1893 1895 I , 2OO, OOO 1898 1900 1901 1902 26, ooo, ooo 23 , ooo, ooo 1903 I , OOO, OOO 1904 1905 14, ooo, ooo IO, OOO, OOO 4, 500, ooo 1906 1907 1908 a Only those years are given during which issues were made. & Including private banking firms. 926 The German Great Banks BERLINER HANDELS-GESELLSCHAFT. Total value of securities issued at the Berlin Stock Exchange during the years 1882-1908. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued jointly with other banks and great banks.& 1883 Marks. 35, 730, ooo Marks. Marks. 12, OOO, OOO Marks. 1884 35, 486, 380 14, 225, ooo 196, 043, 82O 1885 60, 975 ooo 1886 1887 1888 57.975.00 173. 015, i 7, 900, ooo 16, ooo, ooo 519, 249, 720 21, 000, 000 48, 645, ooo 96, 726, 500 1889. . ... 62, 198, 600 204, ooo, ooo 1890 1891 3, 716, ooo 3, 600, ooo 7, ooo, ooo 473, 770, ooo 1892 15 , ooo, ooo 14, 600, ooo 40, 400 ooo 1893 1894 i , 050, ooo 8, 313 ooo 6, ooo, ooo 7, ooo, ooo 14, 350, 800 117, ooo, ooo 1895 13, 025 , ooo 42, ooo, ooo 62, 233 , ooo 1896 1897 339.936,520 25, 848, ooo 4, 800, ooo 29, 350, ooo 55, 056, 600 65, 685, 500 172, 236, ooo 288, 760, ooo 1898 13 , 980, ooo 69, 700, 500 40, 700, ooo 313 t 598, 500 1899 1900 19, 600, ooo 10, 500, ooo 85, ooo, ooo 15, 200, 000 85, 198, ooo 28, 500, ooo 155, ioo, ooo 104, 300, ooo 4, ooo, ooo 54, 200, ooo 235, ooo, ooo 1902 1903 171, 508, 800 10, 225, ooo 73, 300, ooo 63, ooo, ooo 22, 350, OOO 16, ioo, ooo 478, 800 ooo 3, 396, 623, 974 1904 19, ooo, ooo 35, 500, ooo 38, 250, ooo 65, ioo, ooo 1905 1906 28, 350, ooo 21, 173, 750 112, ISO, OOO 69, ioo, ooo 5, ooo, ooo 604, ooo, ooo 254, 309, ooo 1907 1908 8, ooo, ooo 18, ooo, ooo 73, 296, ooo 69, 910, ooo 24, 920, ooo 62, ooo, ooo 6,591.435.232 438, 920, ooo o Only those years are given during which issues were made. & Including private banking firms. 927 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued jointly with other banks and great banks.** 1883 Marks. Marks. Marks. Marks. 1888 40, ooo, ooo Z 889 3, 500, ooo 1890 1891 450, ooo, ooo 1893 1891 50, ooo, ooo 1894 . . . IO, OOO, OOO 1895 3 , 500, ooo 10, 500, ooo 2, OOO, OOO 1897 2, 750, ooo 1899. . . 6, ooo, ooo 15, 700, ooo 14, ooo, ooo 3 , ooo, ooo 1904 27, ooo, ooo 1906 26, ooo, ooo 1907 9, 796, ooo I 2, OOO, OOO 20, ooo, ooo 1908. . T, , OOO, OOO 60, ooo, ooo 8<;, ooo. ooo FOREIGN PUBLIC SECURITIES. 1884 1886 492, I 29, 720 1887 1888 304, 620, ooo 1889 170, 520, ooo 1890. . 148 906, 944 1892 i i , 250, ooo 1895 1896 1898 287, 786, 520 46, 406, 500 1902 ... . 393 ooo, ooo 1903 3i 399> 3 2 3 > 974 1905 1906 28, 350, ooo 1907 1908. . , 127, 500, ooo a Only those years are given during which issues were made. & Including private banking firms. 928 The German Great B a n Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. GERMAN MORTGAGE BONDS. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.* 1892 Marks. Marks. Marks. Marks. 1894 1895 74, i ,00 1896 20, ooo, ooo 20,000,00 1898 25,000,00 1899 70, ooo, ooo 1901 1903 40, ooo, ooo 1904 15, ooo, ooo 1905 1907 . . . 1908 FOREIGN MORTGAGE BONDS. 1883 7, 425 , ooo 1886. 1887 13 975 ooo 1893 10, 600, 800 1902 6, 750, ooo 1904 i i , 250, ooo 1906 GERMAN RAILWAY SHARES. 1883 1884. i, 905, ooo I 2, OOO, OOO 1889 3 , 150, ooo 1891 1895 3 , ooo, ooo 1896 3, 650, ooo 1897. . 3, 500, ooo 1898 6, 500, ooo 1800 i i , 050, ooo 8, 500, ooo 8, 600, ooo 1902 600, ooo 1903. . 3, 725,000 o Only those years are given during which issues were made. & Including private banking firms. 90311' 929 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-iQoS- Continued. GERMAN RAILWAY SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.b Marks. i , 500, ooo Marks. Marks. Marks. 5 , 300, ooo IOO8 4, 210, ooo I I,OOO, OOO FOREIGN RAILWAY SHARES. 1883 25, 486, 380 i88s 51 , 975 , ooo 1888 144, ooo, ooo 1889 1892 1894 GERMAN RAILWAY BONDS. 1885 3 , ooo, ooo t 886 1893 i , 050, ooo 1894 2, 638, OOO 1895 4, 275 , ooo 1896 1897 1898 1899 i, 830, ooo 10, 000, OOO 1900 14 ooo ooo 1901 1902 1903 i , 500, ooo 1904 1907 a Only those years are given during which issues were made. & Including private banking firms. 930 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN RAILWAY BONDS. Year." Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1883 Marks. 8, 400, ooo Marks. Marks. Marks. 1884 1885 1886 1887 149, 040, ooo 1889 18 7,2 ,500 1890 1891 3 ,ooo,( 1892 9,770,00 1893 32,000,00 1894 60 o o 1895 . . . 8*21 'ooo 1896 1897 36 955 500 1898 1899 1900 1902 170, 158, 800 1 906 I 687 5OO GERMAN STREET RAILWAY SHARES. 1896 BANK SHARES. 1886 1889 1891 . I, $00, 000 1892 3 , ooo, ooo 1895 5 , ooo ooo 9, 500, ooo 3 , ooo, ooo 1896 10, ooo, ooo 40, ooo, ooo 1897 3 498 ooo 25, 500, ooo 1898. . 7, 500, ooo 8,000, ooo o Only those years are given during which issues were made. 6 Including private banking firms. 93 1 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. BANK SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks. b 1899. Marks. IO, OOO, OOO Marks. Marks. 5 , ooo, ooo Marks. 1903 4, ooo, ooo 1905 16, ooo, ooo 1907 1908 INDUSTRIAL SHARES. 1884 6, ooo, ooo i , 500, ooo 1885 1886 10, 600, ooo I , 2OO OOO 1887 !888 17. 900, ooo 19, ooo, ooo 1889 1890 1891 3 , 600, ooo I , OOO, OOO 1892 . . 1893 1894 1895 3 > 75o ooo 1896 12 , I5O, OOO 4, 800, ooo 3 , ooo, ooo 1897 1898 1899 . . 3, 250, ooo 6, 294, ooo 10, 000, 800 40, 798, ooo 1900 1901 1902 3, ooo, ooo 15, 200, 000 18, 200, ooo I , OOO, OOO 6, ooo, ooo 25, 700, ooo 5, ooo, ooo 29, 050, ooo 1904 I , OOO, OOO I I , OOO, OOO 35, ooo, ooo 1906 I9O7 10, 250, ooo 4, ooo, ooo 17, 800, ooo 9, ooo, ooo IS2, 200, 000 55 , 870, ooo 1908 Only those years are given during which issues were made. b Including private banking firms. 932 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. INDUSTRIAL BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. b 1884 Marks. 2, 000, 000 Marks 14, 225 , ooo Marks. Marks. 1887 1891 ooo, 1892 ,000,00 1893 1894 4, ooo, ooo 1895 8 5,000,000 1896 ii,4 3,oo 1897 IO, OOO, OOO 26, 600, ooo 28, 730, ooo 1898 1899 . . 0,700,00 20,000.000 1900 7, 500, ooo 1901 1902 SS. ooo, ooo 1903 ,000,000 1904 4, 500, ooo 17,300,00 1905 ,000,00 1906 4, 800, ooo 20,347, 500 1908 i6i'2o'ooo DEUTSCHE BANK. Total value of securities issued at the Berlin Stock Exchange during the years 1882-1908. Year." Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with 'other banks and great banks. & 1882 Marks. Marks. Marks. Marks. 35, 782, 560 1883 14 400, ooo 2, 6OO, OOO 15, ooo, ooo 1884 1885 323, 405, 080 6, 980, ooo 22O, 6l2, 8OO 17, 400, ooo 1886 I, 678 966, 538 1887 1888.. 69, 460, ooo 78,354, 600 210, 000, 000 100, 000, 000 16, ooo, ooo 5, ooo, ooo 7,000, ooo 85, 734, 200 a Only th ose years are given during which issues were made. & Including private banking firms. 933 National Monetary Commission Total value of securities issued at the Berlin Stock Exchange during the years 1882-1908 Continued . Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 !889 Marks. 71 , ooo, ooo Marks. 547, 132, 048 Marks. 59, 446, 397 Marks. 321 , 080, ooo 1890 1891 135, 116, 800 34, 320, ooo 34, 910, 400 3 , ooo, ooo 401,306, 944 572 , 400, ooo 1892 1893 136, ioo, ooo 10, 600, ooo 366, 750,000 64, 750, ooo 1895 1896 180, 243, 600 I i 433 . 080 ooo 35,450,000 IO, OOO, OOO 18, 500, ooo 27 , 600, ooo 33, ooo, ooo 178, 550, ooo 1897 67 , 655 , ooo i i , 700, ooo 6, 500, ooo 65, 800, ooo 1898 171, 379, 480 68, 406, 500 21, 998, 400 116, 198, 400 1899 329, 430, ooo 77 , 500, ooo IO, OOO, OOO 606, 430, ooo 1900 455. 747, ooo 81 378,800 74, 591, 200 241 , 700, ooo 41, 228, ooo 119, 320, ooo 133, 350, ooo 183 , ooo, ooo 1902 144, 530, ooo i 18, 300, ooo 65 , 772, ooo 388, 050, ooo 59, 500, ooo i 10, 650, 800 3 , 209, 204, 490 710, 269, 800 80, 887 , ooo 691 , 038, 408 130, ioo, ooo 1905 635, 947, 900 235 , 687, ooo 109, 092, ooo 829, 900, ooo 737 543 , 800 259, ioo, ooo 250, i 25 , ooo 234, 950, ooo 1907 227, 963 , 600 370, 270, ooo 97, 265 , ooo 6, 603, 235, 232 1908 22O, 064, 9OO 72, 900, ooo 6, 308, 030, ooo Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year. Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks.& Z 882 Marks. Marks. i , 500, ooo Marks. Marks. 1886 1887 !888 9, 854, 200 40, ooo, ooo 1889 7 ooo, ooo 1890 1891 38, 500, ooo 235 , ooo, ooo 1892 1893. . I , OOO, OOO I, IOO, 000 342, 500, ooo 25 , ooo, ooo a Only those years are given during which issues were made. b Including private banking firms. 934 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. GERMAN PUBLIC SECURITIES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks.& 1894 Marks. 21 , SOD, OOO Marks. Marks. Marks. 1895 6, ooo, ooo 3 , ooo, ooo 1896 47 , ooo, ooo 1897 8, 950 ooo 1898 6, 500, ooo 4, ooo ooo 1899 1900 208, 200, ooo 48, 200, 000 7, 500, ooo 5 , ooo, ooo 3, 228, ooo 10, 000, OOO 59, ooo, ooo 1902 1903 I 2, 3OO, OOO II, 873, 200 42, ooo, ooo 3, 500, ooo 1,272, ooo I , OOO, OOO 74, ooo, ooo 69, 865, ooo 1905 1906 1907 28, ooo, ooo 42, 400, ooo 58, 937,000 75, 500, ooo 3, 952, ooo 20, 000, 000 60, ooo, ooo 44, ooo, ooo 1908 52, 575, ooo 123, 654, 900 29, ooo, ooo 73, ooo, ooo FOREIGN PUBLIC SECURITIES. !883 14, 400 ooo 1884 1885 .... 1886 1887 16, ooo, ooo 14, 400, ooo i, 626, 966, 538 1888 . . 45, 734 320 X 889 21, 6OO, OOO 294, 132, 048 5 i , 546, 397 148 906 944 1891 . ... 34, 610, 400 1892 ii 250 ooo 1895 1896 1898 1899 116, 767, 080 46, 406, 500 51,000, ooo 463, 080, ooo 242, 250, ooo 3, i2i, 539, 490 1904 651, 219, 408 678, 300, ooo 173, 400, ooo 6, 481, 565, 232 a Only those years are given during which issues were made. & Including private banking firms. 935 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. GERMAN MORTGAGE BONDS. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. & 1886 Marks. Marks. Marks. Marks. 1888 i ( 500, ooo 1892 1894. . . . 1895 3 . 453 . 600 4, 450, ooo 1896 1899 5, ooo, ooo 70, ooo, ooo IO, OOO, OOO 1900 45, ooo, ooo IO, OOO, OOO 1901 . 1902 1903 46, ooo, ooo 10, 000, 000 60, ooo, ooo 1904 25 , ooo, ooo 1906 1907 1908 50, ooo, ooo 10, 000, 000 60, ooo, ooo FOREIGN MORTGAGE BONDS. 1885. 1886 6, 375 , ooo 1887 1895 1896 I IO, 5OO, OOO 1898 1899 i i , 250, ooo 1902 1903 45 , ooo, ooo 1904 1905 56, 250, ooo GERMAN RAILWAY SH^ LRES 1889 2, 2OO, OOO 1891 i8o Including private banking firms. 937 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN RAILWAY SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.fr Marks. Marks. Marks. Marks. 9 FOREIGN RAILWAY BONDS. 1882 35. 782, 560 1884 1885 209, 512, 800 1886 1887 1888 1889 1890 46, 200, 000 169, ooo, ooo 293, 080, ooo 13 ,000,00 1896 i 176, 730, 800 GERMAN STREET RAILWAY SHARES. 1896 I, 2OO, OOO GERMAN STREET RAILWAY BONDS. 1894 16 ooo, ooo BANK SHARES. 1888 20, ooo, 400 1889 1891 300, ooo i, 500, ooo 1892 3 ooo ooo 1804. . 5, .s oo, ooo 36, 500, ooo a Only those years are given during which issues were made. & Including private banking firms. 938 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. BANK SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1895 Marks. 5, ooo, ooo Marks. 2. OOO, OOO Marks. Marks. 1896 93, 249, 200 1897 4 ,250,00 1898 24, 201 , 600 25,500,00 1899 17, 880, ooo 1900 18, ooo, ooo 1901 1902 9. 252 , ooo 1903 18. 400, ooo 1904 44, 750, 800 1906. 71,316 ooo 34, ooo ooo 1907 23 , 999, 600 1908 BANK DEBENTURES. 1891 INDUSTRIAL SHARES. 1883. 1884 i , 980, ooo 1885 1887 1888 1889. 1890 3 , 316, 800 1 7, 400, ooo 1891 1892. . . i , 600, ooo 1893 1894 15 , 500, ooo 1895 1896 12, 150, 000 i , 500, ooo 4, 700, ooo 2, OOO, OOO 3 , ooo, ooo 1897 8, 705 , ooo 10, 500, ooo 1898 7 810 800 4, ooo, ooo 18, 998, 400 37, 198, 400 1899 34, 600, ooo 91, 850,000 a Only those years are given during which issues were made. & Including private banking firms. 939 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. INDUSTRIAL SHARES Continued. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. *> Issued jointly with other banks and great banks.& igOO Marks. 7, 385 , ooo Marks. 6, 700, ooo Marks. 5, ooo, ooo Marks. 34, 750, ooo 38, 068, 800 18, 200, ooo 750, ooo 5 , ooo, ooo IQO2 7, 600, ooo 4, 500,000 29,050,000 1903 10, 100, ooo 10, 000,000 I, 000, 000 5, 000,000 27,5 19, ooo 2, 4SO, OOO 30, 219, ooo 19, ooo, ooo 1905 18, 423, 500 21 , 235 , OOO 59, 250,000 36, 800, ooo 5, ooo, ooo 13 , 225 , ooo 68, 100,000 162, 300, ooo IQO? 1908 10, 000, 000 74, 400, ooo 44, ooo, ooo 34, 700, ooo 15, ioo, ooo 3, 900, ooo 42, 670, ooo 66, 780, ooo INDUSTRIAL BONDS. t 883 15, ooo, ooo 1884 5, ooo, ooo 6, 600, ooo !886 I , OOO, OOO 1888 1889 1890 I, 000, 000 I , 2OO, OOO 1891 3 , ooo, ooo I 2, 500 OOO 1892 i , 500, ooo 5 , ooo, ooo 1803 1894 3, ooo, ooo 20, ooo ooo 1895 3 , ooo, ooo 15 , ooo, ooo 1896 1897 6, 500, ooo 1898 8, ooo, ooo 5 , ooo, ooo 20, ooo, ooo 1899 24 ooo ooo 1900. 6, ooo, ooo 23 , ooo, ooo 29, ooo, ooo 1901 16, ooo, ooo 55 , ooo, ooo 1902 . . 12, 528, OOO i 7, ioo, ooo 1903 1904 35, 125, ooo I, 000, 000 8, 650, 800 9, 600, ooo 12, 800, 000 8, ooo ooo 1905 1906 38, 650, ooo i i , 500, ooo 13, ooo, ooo 5 7, 800, ooo 8, 740, ooo 7, 500, ooo 15, 200, OOO 1907 1908 II, 000, 000 4O, 2OO, OOO 46, 470, ooo 27, 500, ooo 20, 000, 000 41, 500, ooo 168, 250, ooo a Only those years are given during which issues were made. & Including private banking firms. 940 The German Great Banks mSCONTO-CESELLSCHAFT. Total -value of securities issued at the Berlin Stock Exchange during the years 1882-1908. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.& Issued jointly with other banks and great banks.& 1882 . . Marks. Marks. Marks. Marks. 1883 42, 55O,OOO . 2O,OOO,OOO 5,7 2,5 1884 I3 ? OOO,OOO 1885 . 1886 1887 46,328,OOO 16,000,000 65,250,000 48,645,000 1888. 1889 1890 65,205,400 148,392,048 x> 3i5> 738 680 924, 869, 360 1891 . . 1892 9? 500,000 8, 100,000 66,987, 5OO 1893 1894 . 1895 1896 104,807,000 7,500,000 182,730,000 198,219,000 1897 315,960,000 1898 1899 67, 680, 900 185, 724,000 27,251,600 41, 100,000 632,690,784 357, 200,000 417,813,280 67, 500,000 1900 122,610,000 23,031, 200 204, 200, ooo 240, 450, ooo 1901 49,464,600 179,000,000 89,400,000 561, 600,000 516,492,000 1, 505, 349, 500 1903 213, 615, 188 32, 213,000 159,850,000 3, 214,824, 590 1904 169,000,800 64,937,000 231,337,000 21, 5OO,OOO 487, 77I>33O 585,540,570 I, 141, 250,000 1906 23,322,340 172, 500,000 8,000,000 218,559,000 1907 1908 53,499,600 333,796,000 165,000,000 92,550,000 61, 700,000 6,575,015,232 531,820,000 Only those years are given during which issues were made. b Including private banking firms. 941 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.& Issued jointly with other banks and great banks.fr 1882 Marks. Marks. Marks. Marks. x883 15 , ooo, ooo 1884 2, OOO, OOO 1885 x886 5, ooo, ooo 1888 1890 ii , 500, ooo 235, ooo, ooo 1891 3 ooo, ooo 458, ooo ooo 1892 7 500 ooo 342, 500, ooo 1893 I 2 , OOO, OOO 50, ooo, ooo 1894 32, ooo, ooo IO, OOO, OOO 1895 1896 36,357,000 3, 500, ooo 6, 230, ooo i 15 395 ( 700 IO, OOO, OOO 3 ooo, ooo 1897 18 552 500 2 , 7SO, OOO 40, ooo, ooo 1898 1899 7 500, ooo I 2 , OOO, OOO 1900 8, ooo, ooo 7, 500, ooo 1902 42, ooo, ooo 138, ooo, ooo 408, 317, ooo 1905 15, 488, ooo 23 , 937 , ooc 474, ooo, ooo 1906 26 ooo ooo 1907 1908 127, 296, ooo 25, ooo, ooo 20, 000, 000 FOREIGN PUBLIC SECURITIES. 1882 1883 118, 560, ooo 4, 050, ooo !884 i 2, 800, ooo 1886 1887 1888 7, 128, ooo 18, 009, 250 54, ooo, ooo 238, 500, ooo 34 418 825 1889 . . 148 392 048 i 081 561 680 76, 500, ooo 1890 1891 . 1,425,887,664 206 400, ooo 1892. . 36, 187, loo Only those years are gi ven during which issues were made, fr Including private banking firms. 942 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN PUBLIC SECURITIES Continued. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks." 1893 Marks. Marks. Marks. Marks. 1894 1895 1896 1897 1898 ,900,000 1899 1900 1901 1,200,00 1902 61 600 212,500,000 1903 1 8 0' 1904 . 1905 . . 1907 1908 553 GERMAN MORTGAGE BONDS. 1887 1891 1892 1893 JO, OOO OOO 1894 1895 20, ooo, ooo 1896 1897 678 139 500 1898 1901 22, 4OO, OOO 1903 150, ooo, ooo IO, OOO, OOO 1908 a Only those years are given during which issues were made. & Including private banking firms. 943 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN MORTGAGE BONDS. Year.i Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks.* 1886 Marks. Marks. Marks. ii 250 ooo Marks. !887 20, ooo, ooo ii, 377, 090 r888 7, 800, 300 !889 26, 775 ooo 1891 3 , 400, ooo 1892 180^ 1896 1897 51 , ooo, ooo 1898 1900 13 , 931 , 200 1904 34, ooo, ooo GERMAN RAILWAY SHARES. 1883 i , 500 ooo 1890 i , 500, ooo 1891 1894 i , 938, ooo 1896. 1897 1898 1899 1900 1901 6, ooo, ooo 9, 200, ooo 1904 1906 . . . 1908 GERMAN RAILWAY BONDS. 1888 1894 I , 2OO, OOO !896 6, ooo, ooo 1897 1898... IO. OOO. OOO Only those years are given during which issues were made. b Including private banking firms. 944 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. GERMAN RAILWAY BONDS Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. & Marks. Marks. Marks. Marks. 1899 25,000,000 1900 42,000,000 7,000,000 I 9oi 1,560,000 9,500,000 I 9S 5, ooo, ooo 4, 500, ooo 1907 500, ooo FOREIGN RAILWAY SHARES. 1885 37, 120, ooo 1888 4,800,000 6,913,890 1891 36, ooo, ooo 8, ooo, ooo 1892 5, 600, ooo 1897 243, 210, 000 1898 273,013, 280 1899 126,000,000 190 27, ooo, ooo 1901 214, 992, ooo 1903 56, 522,688 1904 42,000,000 1905 2, loo, ooo, ooo 105, ooo, ooo FOREIGN RAILWAY BONDS. 1882 6,500,000 85,782,560 1883 16, ooo, ooo 20, ooo, ooo 1884 39, 437, 200 1885 160,445,260 75,380,800 1886 15,200,000 16,000,000 48,645,000 1887 190, ooo, ooo 67 , 286, 500 1888 92, ooo, ooo 1889 22,450,000 207,402,000 848,369,360 1890 46, 515, 600 III, 288, 750 1891 21,374,000 1892 52, 800, ooo 1893 16, ooo, ooo 1894 1 25,957,000 160,000,000 o Only those years are given during which issues were made. b Including private banking firms. 90311" II- 945 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN RAILWAY BONDS Continued. rgqc Marks. Marks. Marks. Marks. 158, 219, ooo 56, 736, ooo I. 687, 500 1896 . . 1906 GERMAN STREET RAILWAY BONDS. l8Q4 16, ooo, ooo 7, 500, ooo !896 BANK SHARES. 1887 1889 16, 500, ooo 1891 15, ooo, ooo 1892 1894 4, 500, ooo 1895 41 , 500, ooo 1896 14, 500, ooo 10, 500, ooo 28, 250, ooo 18, ooo, ooo 8, ooo, ooo 17 , ooo, ooo 1897 6, ooo, ooo 1898 1899 24, 500, ooo 4, ooo, ooo 9,000, ooo 1900 27, 510, ooo 24, ooo, ooo 1902 36, 500, ooo 1903 7, 713,000 6, ooo, ooo IO, OOO, OOO 9, ooo, ooo 16, ooo, ooo 8,000, ooo 33, 600, ooo 1904 30,000, 800 30, 834, ooo i, 008, ooo 21, 999, 600 12, 50O, OOO 16, ooo, ooo 23, 250, ooo 20, ooo, ooo 1905 1907 1908 INDUSTRIAL SHARES. 1882 1888 1889 1890. . . 2, IOO, OOO 12. 000. 000 3 . d 99O. ooo 1908 209, 734, 400 278, 154, 900 Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks.& 1883 Marks. Marks. Marks. Marks. 1890 . . . 12, OOO, OOO 235,000, ooo 1891 508, ooo, ooo 1892 12, OOO, OOO 340,000, ooo 66 500, ooo 25 , ooo, ooo 1894 I, OOO, OOO 10, OOO, 000 1895 1896 II, IOO, 000 106, ooo, ooo 4, ooo, ooo 48,000,000 180? 20, ooo, ooo 29,000,000 1898 1899 17, ooo, ooo 4, 000,000 5, ooo, ooo 75, ooo, ooo 112, 000, 000 15, 700, ooo 50,000,000 1901 15, ooo, ooo 118, ooo, ooo 9, 800, ooo 17,000, ooo 416,000,000 1903 29, 142, ioo 35,000,000 54,904,900 460,317,000 5 , 652, 400 67,000, ooo 3, 200, 000 60,000, ooo i 18, 154, 900 65,000,000 a Only those years are given during which issues were made. & Including private banking firms. 949 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.*> 1888 Marks. 10, 400, ooo Marks. Marks. Marks. 1889 1891 1892 1894 1895 117, 748, ooo X 896 1898 1899 1901 13, 691, 250 1902 . 1905 77, 520, ooo 1907 1908 199,834,400 142, 800, ooo 6,481,565, 232 GERMAN MORTGAGE BONDS. 1885 7, ooo, ooo 1889 15, 718, 200 1 1891 ' '1 1892 ,000 1894 1895 1896 30, ooo, ooo 1897 1899 1900 1901 15 , ooo, ooo 1902 1903 1904 30, ooo ooo I2O, OOO, OOO 1905 1906 15, ooo ooo ' 1907 1908 50.000,00 Only those years are given during which issues were made. b Including private banking firms. 95 Th German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN MORTGAGE BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks.b Marks. Marks. Marks. Marks. 1895 6, 075, ooo 1896 9,000,000 17,000,000 1905 67, 500, ooo GERMAN RAILWAY SHARES. 1894 i , 200, ooo 1896 i, 800, ooo 1906 40, ooo, ooo GERMAN RAILWAY BONDS. 1899 25,000,000 1900 4, ooo, ooo 1901 1,839,000 1905 ii, 900, ooo 1906 4, 500, ooo 1908 4, ooo, ooo FOREIGN RAILWAY SHARES. l882 12, 92O, OOO 1890 2,740,060 1900 48, ooo, ooo 1901 80, ooo, ooo 1904 25, 500, ooo 1905 25, ooo, ooo 15, 300, ooo FOREIGN RAILWAY BONDS. 1883 10, 000, 200 1884 26,413,200 20, 400, OOO 1891 29, 499. 900 16, 320, ooo 1892.. 15,000,000 12,000,000 1893 6 4, ooo, ooo a Only those years are given during which issues were made. & Including private banking firms. 951 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN RAILWAY BONDS Continued. Year, a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks. *> Marks. Marks. Marks. Marks. 1894 32, 640, ooo 1895 32, 640, ooo 1896 48, 948, ooo 1906 I, 687, 500 GERMAN STREET-RAILWAY SHARES. 1894 4, 275,000 1895 3,000,000 1896 8,650,000 1897 i, 350, ooo i, 250, ooo 1898 6, ooo, ooo 1899 26,000,000 1900 I, 200, 000 1902 23,000,000 1904 14, 297, ooo 1906 500, ooo GERMAN STREET-RAILWAY BONDS. 1894 16, ooo, ooo 1896 7, 500, ooo 1897 2, 500, 000 1900 3 , ooo, ooo 1901 5, 500, ooo BANK SHARES. 1883 12, OOO, OOO iSS? 12,000,000 1889 16,800,000 68,000,000 1891 300, ooo 50, 400, ooo 1892 10,000,000 1894 32, ooo, ooo 1895 15,000,000 a Only those years are given during which issues were made. & Including private banking firms. 952 The German Great Banks Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. BANK SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 1896 Marks. Marks. Marks. Marks. 1897 78, ooo, ooo ,000,00 1898 9, 600, ooo 1899 29, 600, ooo ,000,00 1901 1903 7, 713 , ooo 1904 41 , ooo, ooo 1905 . i ,500,00 1906 io, 500, ooo 22 , IOO, OOO 1907 20, 600, ooo 25, 500, ooo INDUSTRIAL SHARES. 1886 320, ooo 31 966 800 1887 2 , OOO, OOO 1888 1889 1890 1891 io, 500, ooo 3, 360, ooo 4,000,000 3, 500, ooo 750, ooo 1892 140, ooo 1893 . 3, 750, ooo 1894 1895 600, ooo 3, ooo, ooo 4 750 ooo 6, ooo, ooo 6, ooo, ooo 1896 2 8OO OOO 8, 800, ooo 15 , ooo, ooo 36, 200, ooo 1897 1898 1800 4, 850, ooo 2,001,600 21, 200, 000 29, ooo, ooo 1900 . ... 20, 734, 400 9, 200, ooo 53, 700, ooo 1902 28, ooo, ooo 1903 5 700, ooo i, 260, ooo 18, 500, ooo 1904 . . 20, 193 , ooo io, 950, ooo II, 000, 000 28 195 ooo 60, 750, ooo 49, 800, ooo 1906 4, 700, ooo 79, 315, 200 5, ooo, ooo 91, 750, 750 41 , 250, ooo 1908 2 , 9OO, OOO 23 , ooo, ooo 31, 800, ooo a Only those years are given during which issues were made, b Including private banking firms. 953 National Mo n etary Commit s i o n Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. INDUSTRIAL BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued joitly with other banks and great banks. * 1888 Marks. Marks. Marks. Marks. x889 I 2 6OO OOO 1892 6 ooo ooo 1893 34, ooo, ooo 1895 1896 i, 250, ooo 7, 500, ooo 1897 2,5OO,OOO 1898 1900. . . . 40,000.00 1901 4 ooo ooo 35.ooo.oo 45.500,00 1903 3 . 1904 3, 200 ooo 1905 * 1906 1907 1908 82, 500,000 33.970,000 43 , ooo , ooo 17, 147.500 *7.500, OOO 171. 320, ooo A. SCHAAFFHAUSEN'SCHR BANKVEREIN. Total value of securities issued at the Berlin Stock Exchange during the years 1882-1908. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. ft Issued jointly with other banks and great banks.b 1890 Marks. Marks. Afar**. Mmrkt, 1891 1892 1893 18, ooo, ooo 19. 980, ooo 3,000. ooo 346,000, ooo 1894 1895. . . . 36, 189,000 12, OOO, OOO no, 500,000 1896 8 8 15,500,00 1897. . i 8o ooo 5.050.00 1898 17. ,0,00 1899 5,000,000 23.000.00 1900. . . 45. 700. 000 18. 600. ooo I 2. 5OO. OOO I 7O. 4CO. OOO a Only those years are given during which issues were made. 6 Including private banking firms. 954 T h G e r m a n Great Banks Total value of securities issued at the Berlin Stock Exchange during the yean 1882-1908 Continued. Year.* Ittued exclusively by the bank. totted jointly with oth-r srr^t bank*. Issued J55M. jointTwuh '-/.-r bttfe CP 1901 Marks. Jforts, Mark*. Afar*/. 1902. .... 21,000,000 101,500,000 1903 8 600 ooo 20,000,000 76,000.000 1904, 30,000,000 37.000,000 1905 *3> 179,000 60,000,000 68,797,000 1906 290, 297, 770 30,000,000 749,600,000 1907 , . 468,4 600 '40,359,000 1908 31.520,000 105,500,000 216,870,000 securities issued and listed at the Berlin Stock Exchange during the years 1882-1908. GERMAN PUBLIC SECURITIES. Year.* Issued exclusively by the bank. Issued jointly with orh'rr er^t banks. Issued jointly with other banks.* Issued jointly with other bank* sse? 1891 Mark,. Marks. Marks. Afw*. 1892 1894 2,500,000 3,000,00 1895 1896 2,500,00 1897 1898 20, 000. 000 1899 1900 15.700.000 1901 1902 23, 000,000 1903 1904, . 1905 1906 1907. . 1908 | FOREIGN PUBLIC SECURITIES. 77,625,170 I 678,300,000 ; Only those years are given during which 955 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. GERMAN MORTGAGE BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1894 Marks. 20, ooo, ooo Marks. Marks. Marks. 1895 80, ooo, ooo 1897 20, ooo, ooo 1898 60, ooo, ooo 30 ooo ooo I9O4 I IO, OOO, OOO 1907 1908 45, ooo, ooo 60, ooo, ooo 50, ooo, ooo 1907 1908 45, ooo, ooo 60, ooo, ooo 50, ooo, ooo GERMAN RAILWAY SHARES. ^98 5, ooo, ooo 5, ooo, ooo 5, ooo, ooo 9, 200, OOO 14, 297, ooo 4, 024, ooo II, OOO, OOO 1899 1904 1908 FOREIGN RAILWAY SHARES. 60, ooo, ooo 1904 15, 300, ooo 1906 I, 687, 500 GERMAN RAILWAY BONDS. 1898 10, 000, OOO 13, ooo, ooo 9, 500, ooo II , 9OO, OOO 4, 500, ooo 1900 1901 1905 1906 a Only those years are given during which issues were made. & Including private banking firms. 956 The German Great B a n Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. FOREIGN RAILWAY BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.& Issued jointly with other banks and great banks. 6 1894 Marks. Marks. Marks. Marks. BANK SHARES. 1892 1894 12, OOO, OOO 4, ooo, ooo 4, 500, ooo 1895 12, OOO, OOO 4, ooo, ooo 30, ooo, ooo S, 500, ooo 34, 800, ooo 600, ooo 25, ooo, ooo 8, 750, ooo 35, 200, ooo 7, 500, ooo 1896 1897 2, 2SO, 000 8, ooo, ooo 6, ooo, ooo 9, ooo, ooo 1898 1899 1901 6, ooo, ooo 24, ooo, ooo 12, 500, OOO 16, ooo, ooo 16, 250, ooo 20, OOO, 000 1904 1905 6, 500, ooo 22, 100, 000 1907 INDUSTRIAL SHARES. 1890 1892 , 00,00 1893 16, 980, ooo 1894 1895 3, 689, ooo 8, 500, ooo 3, ooo, ooo 12, OOO, OOO 6, ooo, ooo 1896 33, 620, ooo 4, 800, ooo 750, ooo 1897 74, 058, 600 370, ooo 1898 1899 1900 35, 150,000 15, 700, ooo 8, 280, ooo 18, 600, ooo 15 200 ooo 2, 500, 000 9, ooo, ooo 43, 250, 250 1903 1904 3, 600, ooo 12, 784, OOO II, 400, 000 25 , 400, ooo 25, ooo, ooo 21 , OOO, OOO 1906 1907 1908 25, 300, ooo 4,684,600 104, 415, 200 51, ooo, ooo 22, 7OO, OOO 1,000, ooo i, 520, ooo 89, 500, ooo 20, 500, ooo 34, 550, ooo o Only those years are given during which issues were made, b Including private banking firms. 957 National Monetary Commission Value of securities issued and listed at the Berlin Stock Exchange during the years 1882-1908 Continued. INDUSTRIAL BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued jointly with other banks and great banks.& 1892 Marks. 4, 500, ooo Marks. Marks. Marks. 1893 1894 6, ooo, ooo iSo"? !896 3, 250, ooo 1897 5, ooo, ooo 1898 1899 12, OOO, OOO 1902 3 , ooo, ooo 1904 1906 1907 57,300, ooo 24,397,500 1908 a Only those years are given during which issues were made. & Including private banking firms. 958 The German Great B a n APPENDIX VI. TOTAL VALUE OF SECURITIES ISSUED AT ALL GERMAN STOCK EXCHANGES BY THE GREAT BANKS DURING THE YEARS 1897-1908. BANK FttR HANDEL UNT> INDUSTRIE. Total value of securities issued at all German stock exchanges during the years 1897-1908. [To page 396.] Year.* Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.b Issued jointly with other banks and great banks.& 1897 Marks. 421 , 644, ooo Marks. Marks. Marks. 1898 1899 1900 31 , 600, ooo ,700,00 187 815 700 1903 421 , 374, 700 II 9O6 8OO 1,0 9. 1904 54, 509, ooo 44, ooo, ooo 203 250, ooo 1907 14, 550, ooo 190, ooo, ooo 9, 750 ooo 1908 Value of newly issued securities listed at all German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year.* Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.* 1897 1898 Marks. 287, 500, ooo Marks. Marks. 24, 703,000 Marks. 20,000, 000 6, ooo, ooo 1899 26, 500, ooo 7, 500, ooo 4, 939, SOD 27, 700, ooo 1900 2, 3OO, OOO 3, ooo, ooo 3.639, So 57, 500, ooo 14, 500, ooo i, 079, ooo 28, ooo, ooo 1902 i, 050, ooo 6, ooo, ooo 8, 500, ooo 17, ooo, ooo 1903 13, ooo, ooo 10,656, 800 26,960, ioo Only those years are given during- which issues were made. Including private banking firms. 959 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years i8gj-igo8 Continued. GERMAN PUBLIC SECURITIES Continued. Year.a Issued exclusively by the bank. Issued jointly with other great banks. - Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 Marks. Marks. Marks. Marks. 1904 16,000,000 35,000,000 405,317,000 1905 12,500,000 12,000,000 387,000,000 1906 2,000,000 50,000,000 9,017,200 44,000,000 1907 5,000,000 42,500,000 2,250,000 438,500,000 1908 6,000,000 67,000,000 1,133,325,000 FOREIGN PUBLIC SECURITIES. 1898 46,406,500 377,400,000 I90O 102 , 000, 000 I9OI 226, 191, 250 1902 i, 166, 599, 500 1903 280,000,000 3,383,148,974 1904 90, 426, 570 1905 678, 300, ooo 1906 80,000,000 48,480,000 28,350,000 1907 6, 481, 565, 232 1908 191, 760, ooo GERMAN MORTGAGE BONDS. 1897 115,000,000 1898 85,300,000 1900 20,000,000 75,000,000 1902 66, 040, 700 30, ooo, ooo 1903 124,324,700 20,000,000 1904 21,500,000 25,000,000 1905 65,000,000 20,000,000 1906 45,000,000 25,000,000 95,360,200 1907 io, 750, ooo 1908 30, ooo, ooo FOREIGN MORTGAGE BONDS, 1897 51, 000,000 1904 34, ooo, ooo Only those years are given during which issues were made. b Including private banking firms. 960 The German Great Banks Value of neivly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. GERMAN RAILWAY SHARES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.& Issued jointly with other banks and great Marks. Marks. Marks. Marks 1897 1,250,000 19, 800, ooo 1900 I, 200, 000 1902 11,450,000 2,000,000 I9 4 14,297.000 1906 4 024 000 II, OOO, OOO GERMAN RAILWAY BONDS. i 8 97 5,700,000 2,500,000 1898 7, 500, ooo 1900 i, 300, ooo 3> ooo, ooo 1901 5, 500, ooo 1902 , 4> ooo, ooo 1905 10, ooo, ooo 5, ooo, ooo 1906 7, ooo, ooo 4, 500, ooo 1908 4, ooo, ooo FOREIGN RAILWAY BONDS. 1898 48, ooo, ooo 1899 48, ooo, ooo 1901 80, ooo, ooo 1906. . I, 687, 500 1907 42, ooo, ooo BANK SHARES. 1897 16,200,000 1898 78,101,000 8,000,000 1899 i, 500, ooo 17. ooo, ooo 1900 3,000,000 I9 OI 24, 000, 000 1902 52, ooo, ooo 1903 4, ooo, ooo a Only those years are given during which issues were made. & Including private banking firms. 90311" II- 961 National Monetary Commissio n Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. BANK SHARES Continued. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. & 1904 Marks. Marks. Marks. Marks. 1906. 1907 1908. . 3, 400, ooo 20, ooo, ooo INDUSTRIAL SHARES. 1897 2, 944, ooo 1898. 2, 936, 000 9, 500, ooo 9, 750, ooo 29, ooo, ooo 5, 200, ooo 2, OOO, OOO 2, 500, 000 20, 000, OOO 74, ooo, ooo 48, 700, ooo 1899 1900 1901 1902 . 41, ooo, ooo 30, 675, ooo 4, 050, ooo 19, 009, ooo 33, ooo, ooo 49, 500, ooo 5, 150, ooo 6, 810, ooo I, 000, 000 5 , ooo, ooo 3, ooo, ooo i, 450, ooo 96, ooo, ooo IO2, OOO, 000 24, 2OO, OOO 2, 750,000 i, 250, ooo 28, ooo, ooo 12, 500, OOO 25, ooo, ooo 80, 311, ooo 173, 589, ooo 43, ooo, ooo 54, 530.000 1903 1904 1905 1906 i, 400, ooo 7, 500,000 3, 300, ooo 1907 1908 INDUSTRIAL BONDS. 1898 1899 1900 1901 35,000,00 1902 . 6 4,000,000 23,000,00 1903 , 1904 . 1905 , ,500,009 1906 . 17,000,000 1907 I , OOO, OOO 3 , 500, ooo 1908 a Only those years are given during which issues were made. & Including private banking firms. 962 The German Great Banks BERLINER HANDELS-QESELLSCHAFT. Total value of securities issued at all German stock exchanges during the years 1897-1908. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.& Issued jointly with other banks and great banks.& 1897 Marks. 25, 848, ooo 13. 980, ooo 19, 600, ooo 10, 500, ooo 4, ooo, ooo 171, 508, 800 io, 225, ooo 19, ooo, ooo 28, 350, ooo 21, 173, 750 8, ooo, ooo 18, ooo, ooo Marks. 2 9. 350, OOO 69, 700, 500 85, ooo, ooo 15, 2OO, OOO 54, 200,000 73. 3o, ooo 63, ooo, ooo 35,500,000 112, ISO, OOO 69, 100, ooo 73, 296, ooo 69, 910, ooo Marks. 65.685,500 40, 700, ooo 85, 198,000 28, 500, ooo Marks. 288, 760, ooo 313.598.500 155. 100, OOO 104,300, ooo 235, ooo, ooo 478, 800, ooo 3,396,623,974 65, ioo, ooo 604, ooo, ooo 254,309, ooo 6,591,435. 232 438, 920, ooo 1898 1899. . . 1900 1901 22,350, ooo 16, 100, ooo 38, 250, ooo 14,000, ooo 1903 1905 . . . 1906 1907 24, 920, ooo 62, ooo, ooo 1908 Value of newly issued securities listed at all German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year, a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. & 1897 Marks. Marks. 2, 75O OOO Marks. Marks. 1899 1900 14, ooo, ooo 1901 3 , ooo, ooo 1902 12, OOO, OOO 1903 3 , ooo, ooo 1905 8, ooo, ooo 24, ooo, ooo 26, ooo ooo 1907 9, 796, ooo 12, OOO, OOO 20, ooo, ooo 1908 3, ooo, ooo 60, ooo, ooo 85, ooo, ooo o Only those years are given during which issues were made. & Including private banking firms. 963 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 !&g8 Marks. Marks. 46, 406, 500 Marks. Marks. 66, 300, ooo 393 ooo ooo 28, 350, ooo 1908 127, 500, ooo GERMAN MORTGAGE BONDS. 1898 20 ooo ooo 1899 70, ooo, ooo 20, ooo, ooo 1903 40, ooo ooo 1904 15, ooo, ooo 1905 75, ooo ooo 1907 IO, OOO, OOO 1908 FOREIGN MORTGAGE BONDS. 1902 1904 ii , 250, ooo 1906 GERMAN RAILWAY SHARES. 1897. 3, 500, ooo 6, 500, ooo ii, 050, ooo 8, 600, ooo 1898 I , 400, ooo 1899 2, IOO, OOO 8, 500, ooo 600, ooo 1902 1903 3 , 725 , ooo 1904 5, 300, ooo 4, 024, ooo II, 000, 000 1906 1908 a Only those years are given during which issues were made. & Including private banking firms. 964 The German Great Banks Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. GERMAN RAILWAY BONDS. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. b Issued jointly with other banks and great banks.b 1897 Marks. Marks. Marks. Marks. 1898 i, 830, ooo 1899 ' 1900 1901 4, ooo, ooo 1902 4,000,000 1903 i, 500, ooo 1904 2, OOO, OOO 1906 4,300,00 1907 2, OOO, OOO 00,000 FOREIGN RAILWAY BONDS. 1897 1898 3,210,000 1899 . 1901 1902 170, 158, 800 1906 1907 BANK SHARES. 1897 1898 1899 7, 500, ooo IO, OOO, OOO 5, ooo, ooo 8, ooo, ooo 8, ooo, ooo 1903 4, ooo, ooo 12, SOO, OOO 16, ooo, ooo IO, OOO, OOO 20, 000, 000 1908 8, ooo, ooo a Only those years are given during which issues were made. b Including private banking firms. 965 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. INDUSTRIAL SHARES. Year. Issued exclusively by the bank. Issued , jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 1897 Marks. 12, 3SO, OOO Marks. Marks. Marks. 1898 1899 7, 500, ooo 8, ooo, ooo 9,398,000 91, 850 ooo 18, 200 ooo 1902 I , OOO, OOO 29 050 ooo 1903 . .... 5,000 ooo IO, OOO OOO 1904 I, OOO, OOO I I , OOO, OOO 1906 10, 250, ooo 17, 800, ooo 1907 4, ooo, ooo 9, ooo, ooo 55, 870 ooo 1908 INDUSTRIAL BONDS. 1897 IO, OOO, OOO 26, 600, ooo 1808 1899 1900 1901 1902 7. 500, ooo 16,000, ooo 29, ooo, ooo 55, ooo, ooo 1903 6, ooo, ooo 4, 500 ooo 1905 6, 500, ooo 1906 4, 800, ooo 1908 21, 5OO, OOO I, OOO, OOO 161,320, ooo o Only those years are given during which issues were made. & Including private banking firms. 9 66 The German Great Bank DEUTSCHE BANK. Total -value of securities issued at all German stock exchanges during the years 1897-1008. Year.** Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.6 Issued jointly with other banks and great banks, b 1897 1898 Marks. 103, 955, ooo 258, 279, 480 Marl*. II, 700, OOO 68, 406, 500 Marks. 27, 950, 000 247, 149, 480 Marks. 65, 800, ooo 1899 347 i 33 ooo 1900 476, 497 , ooo 74. 59i . 200 61 , 228, ooo 217, 030, ooo 140, 500, ooo 172, 632 ooo 1903 656, 134, 040 736 019 800 60, 750, ooo 82 887,000 131, 566, 300 843 338,408 3, 221, 204,490 688, 797, 900 235 , 687, ooo 129, 842, ooo i > 346, 550, ooo 1906 762, 043, 800 262 763 600 267, 037, ooo 370, 270, ooo 291, 125,000 107, 915, ooo I. 555.674,856 7, 100, 435 , 232 1908 241, 945, ooo 221, 264, 000 3 18, 900, ooo ii 315, 865, ooo o Only those years are given during which issues were made. & Including private banking firms. Value of newly issued securities listed at all German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year." Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.6 Marks. Marks. Marks. 2, 450, 000 Marks. 24, 000,000 3 , ooo, ooo 7, 500, ooo 10, 000, 000 48, 200, ooo 5 , ooo, ooo 3, 228, ooo 59, ooo, ooo 1901 13,310,000 13, 800, ooo 172, 500, ooo 45, ooo, ooo 94, 570,000 5 , 272, ooo 42, ooo, ooo 388, ooo, ooo 1903 11.873, 200 17, 600, ooo 3, 500,000 20, 937, ooo I, 000, 000 3 , 800, ooo 81,865,000 448,317,000 28, ooo, ooo 58, 937,000 3, 952, ooo 450, ooo, ooo 42, 400, ooo 83, 437.ooo 32, ooo, ooo 1,321, 720, 600 59, 464, ooo i 25 , ooo, ooo io, 165, ooo 481, 500, ooo 1908 52, 575, ooo 123, 654, 900 245, ooo, ooo I, 016,325, ooo Only those years are given during which issues were made. & Including private banking firms. 967 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 t8 9 8 Marks. i 16, 767 , 080 Marks. 46, 406, 500 Marks. 86, 551.080 Marks. 423 , 806, 500 463 , 080, ooo 7, 818, 750 66.300 ooo 85, 860, ooo 4, 387, 500 3 , 121, 539, 490 798, 219 408 216 960, ooo 698 700, ooo 1906 75, 850, ooo 173 , 400, ooo 142 800, ooo 6 481 565 232 1908 64, 260, ooo GERMAN MORTGAGE BONDS. 1898 1899 5,000 ooo 70 ooo. ooo IO OOO. OOO 1900 55. ooo. ooo IO OOO, OOO 30, ooo. ooo 35 , ooo ooo 1902 IOI. OOO, OOO IO, OOO OOO 60, ooo, ooo 126 000,000 45, ooo. ooo 29, ooo ooo 1906 45 ooo ooo 15 , ooo, ooo 50 ooo ooo 1907 80 ooo, ooo IO, OOO, OOO 60, ooo, ooo 1908 FOREIGN MORTGAGE BONDS. 1898 8, 100, ooo 1899 . 1900 13 > 93 1 200 1902 33, 750, ooo 1903 45, ooo ooo 1904 67, 500. ooo 1905 a Only those years are given during which issues were made. & Including private banking firms. The German Great Banks Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. GERMAN RAILWAY SHARES Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks.fr Issued jointly with other banks and great bahks.& 1897 Marks. Marks. Marks. Marks. 1898 5, 400, ooo ' 1899 1900 1901 i , 800, ooo 1902 26'oo'ooo 1906 i , 700 ooo , 1908 4, 210, ooo GERMAN RAILWAY BONDS. 18 1899 5, ooo, ooo 900, ooo 23 , 650, ooo I9O3 2, OOO, OOO 4 300, ooo IO, OOO, OOO FOREIGN RAILWAY SHARES. 1800 52, 500, ooo 48, 960, ooo 9 80, ooo, ooo 9 105 , ooo, ooo 1905 BANK SHARES. 25, 500,000 S2 ' 00> 6oo 8, ooo, ooo 1800. . 20, 880,000 o Only those years are given during which issues were made. b Including private banking firms. 969 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. BANK SHARES Continued. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. b Marks. 18, ooo, ooo Marks. Marks. Marks. 24, ooo, ooo 10, 252, ooo 44 750, 800 12, 5OO, OOO 1905 109, 500, 800 4, 500, ooo 14, 400, ooo 16, ooo, ooo 72, 816 ooo 34, ooo, ooo 13, 500, ooo 6, 250, ooo 1908 INDUSTRIAL SHARES. 1897 1898. 7 810 800 4, ooo, ooo 36, 498, 400 37 198 400 1899 39, ooo, ooo 91 , 850, ooo 1900 4901 1902 44, 518,800 18, 200, ooo 750, ooo 5, ooo, ooo 1903 1904 10, 100, 000 29, 669, ooo ii, 250, ooo 2, 45O, OOO I, 000, 000 30, 969, ooo 5, ooo, ooo 26, 600, ooo 1905 20, 273 , 500 59, 250 ooo 1906 25 , 235 , ooo 36, 800, ooo 22 , 225 , OOO 162 300 ooo 1907 . 1908 75, 950, ooo 35 , 900, ooo 18, 900, ooo INDUSTRIAL BONDS. 1897 1898. 3, 500,000 8, ooo, ooo 5, 500,000 6, ooo, ooo 5, 000,000 6, 500, ooo I, 100, 000 20, 000, OOO 24, ooo, ooo 29, ooo, ooo 55, ooo, ooo 20, 700, ooo 12, 800, 000 9, 400, ooo 7, 500, ooo 15, 200, OOO 44, 700, ooo 168, 250,000 1899 1900 1901 36, ooo, ooo I, 000, 000 30, 500, ooo 13, ooo, ooo 57, 800, ooo 46, 470, ooo 27, 500, ooo 43, ooo, ooo 12, 528, 000 36, 925, ooo 6, 500, ooo 38, 650, ooo 15, 500, ooo II, 800, 000 40, 2OO, 000 16, ooo, ooo 15, 178, 800 10, 350, ooo 8, 740, ooo 1903 1904 1905 1906 . 1907 20, 750, 000 1908 . a Only those years are given during which issues were made. b Including private banking firms. 970 The German Great Banks mSCONTO-GESELLSCHAFT. Total -value of securities issued at all German stock exchanges during the years 1897-1908. Year.* Issued exclusively by the bank. ^Issued jointly with other great banks. ^Issued jointly with other banks. & Issued jointly with other banks and great banks. & 1897 Marks 711, 692 ooo Marks. Marks. Marks. 1898 3 5 '^ 6o ' 1899 1900 122, 6lO, 000 23, 031, 200 204, 200, 000 240, 450, ooo 1902 172 ooo ooo 5 1,492,000 1903 213, 615, 188 32 213 ooo 1905 2, 193 ,222 OOO 1906 93, 022, 340 1 80 43 7, ooo 25 942 2OO 1908 137. 850, ooo Value of newly issued securities listed at all German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year.* Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.& 1897 Marks. 18, SS 2 , 500 Marks. 2, 75O, OOO Marks. 40, ooo, ooo Marks. 1898 1899 4, ooo, ooo 7, 500, ooo 6, ooo, ooo 12, 000, OOO 1900 8, ooo, ooo 7, 500, ooo 1901 6, 275,800 169, ooo, eoo 67, ooo, ooo 10, 000, OOO 138, ooo, ooo 9, 500, ooo 64, 960, roo 1904 94, ooo, ooo ii. 937. ooo 30, ooo, ooo 408,317.000 1905 15, 488, ooo 23, 937, ooo 31, 500, ooo 474, ooo, ooo 26, ooo, ooo 127, 296, ooo 25, ooo, ooo 434, ooo, ooo 1908 43, 200,000 106, ooo, ooo 7, ooo, ooo 1,133.325,000 a Only those years are given during which issues were made. & Including private banking firms. 971 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 1897 Marks. Marks. Marks. 286, 900, ooo Marks. 1898 1899. 357, 200 ooo 1900 151 , 200, ooo IO2 OOO OOO 1901 . 1902 561 , 600 ooo 1903 1904 1907 . . ... 1008 GERMAN MORTGAGE BONDS. 1897 1898 31 ooo ooo 1900 IO, OOO, OOO 30 ooo ooo 1901 , . . . 22, 4OO, OOO 1902 70, ooo, ooo 30, ooo ooo 1903 150, ooo, ooo IO, OOO, OOO 1904 66 ooo ooo 1906 1908. FOREIGN MORTGAGE BONDS. 1897 . . 1898. 1 1900 1907 o Only those years are given during which issues were made. & Including private banking firms. 972 The German Great Banks Value of newly issued secureties listed at all German stock exchanges during the years 1897-1908 Continued. GERMAN RAILWAY SHARES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.6 1897 Marks. Marks. Marks. Marks. 1898 1899 1900 6, ooo, ooo 1901 i, 560, ooo 1904 1906 3, 199, 200 1908 GERMAN RAILWAY BONDS. 1897 1898 2,500.000 1899 25, ooo, ooo 1900 1901 i, 560 ooo 1905 9,500,00 1906 5,000,00 1907 500, ooo 4,500,00 1908 FOREIGN RAILWAY SHARES. 1897 1898 1899 1900 .... 126, ooo, ooo 1901 1903 56 522 688 1904 . . . 1905 2, IOO, OOO, OOO 105, ooo, ooo 1906 I 687, 500 BANK SHARES. 1897 1898 6, ooo, ooo 9, ooo, ooo 18, ooo, ooo 8, ooo, ooo 1890. . , 4, ooo, ooo 17,000, ooo a Only those years are given during which issues were made. & Including private banking firms. 973 National Monetary Commission Value of newly issued secureties listed at all German stock exchanges during the years 1897-1908 Continued. BANK SHARES Continued. Year.a Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. & Marks. Marks. Marks. Marks. 1902 36, 500, ooo 7, 713, ooo IO, OOO, OOO 1904 30, ooo, 800 9, ooo, ooo 12, 500, OOO I9S 30, 834, ooo 16, ooo, ooo 16, ooo, ooo 1906 3, 508, ooo 6,000, ooo 8, 000,000 23, 250, ooo 1907 21, 999, 600 33, 600,000 20, 000, 000 INDUSTRIAL SHARES. 1897 1898 1899 15, ooo, ooo 12, 180, 900 II, 751, 600 5, ooo, ooo 24, 800,000 1900 1901 31, ioo, ooo 4, 768, 800 9, ioo, ooo 5, ooo, ooo 52, 750, ooo 1902 1903 3 , ooo, ooo 5, ooo, ooo 1904 1905 27, ooo, ooo 14, 900, ooo 50, ooo, ooo 6, 200, ooo 5, ooo, ooo 41, 250, ooo 1907 1908 4, 500, ooo 126, ooo, ooo 58, 450, ooo INDUSTRIAL BONDS. 1897 21, 6OO, OOO 1898 1899 1900 1901 1902 6, ooo, ooo 27, 500, ooo 2, SOD, OOO 10, 000, 000 IO, OOO, OOO 35, ooo, ooo 45, 500,000 1903 1904 1905 ,000,00 1907 3,000,000 1908 o Only those years are given during which issues were made. & Including private banking firms. 974 The German Great Banks DRESDNER BANK. Total value of securities issued at all German stock exchanges during the years Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1897 1898 Marks. 85, 350, ooo Marks. Marks. 82, ooo, ooo Marks. 23. 750, OOO 1 1899 101 , 700, ooo 44,700,00 142,900,00 1902 59, 546, 900 136, 122 , 4OO 458, 270, ooo 1906 65 , 55 1 , 400 32O, 415 , 2OO 662, 400, ooo J > SOQ, 72O 806 1908 210, 734, 400 280, 654, 9OO 32, 500, ooo Value of newly issued securities listed at all German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1897 Marks. i, 750, ooo Marks. Marks. 20, ooo, ooo Marks. 20, OOO.OOO 1898 75 , ooo, ooo 1899 1900 10, 000, 000 13 , ooo, ooo 5, ooo, ooo 112, OOO, OOO IS, 700, ooo 50, oo'o, ooo 15, ooo, ooo i 18, ooo, ooo 9, 800, ooo 17, ooo, ooo 14, ooo, ooo 3, ooo, ooo 37, 280, ooo 416, ooo, ooo 54, 904, 900 6, ooo, ooo 48, 779, ooo 6, 200, 000 460,317.000 1905 5, 652, 400 IO, OOO, OOO 67, ooo, ooo 81, 500, ooo 16, 500,000 562, 400, ooo 443, 000,000 i, 277, 720,600 25 , 500, ooo 63, 720, ooo 12, 000, 000 460, 000,000 1908 7, ooo, ooo 118, 154, 900 29, 500, ooo 955, 000,000 a Only those years are given during which issues were made. 6 Including private banking firms 975 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks. 6 1898 Marks. Marks. Marks. 51 , ooo, ooo Marks. 1800 463, 080, ooo 13, 691 , 250 242, 250, ooo 1905 7, 875, ooo 77, 520,000 142 , 800, ooo 698, 700, ooo 6, 481 , 565 , 232 1908 199,834,400 64, 260, ooo GERMAN MORTGAGE BONDS. 1800 30, ooo, ooo 30, ooo, ooo 25 , ooo, ooo 35 , ooo, ooo 15 , ooo, ooo 95 , ooo, ooo 95 , 360, 200 1907 1908 55, ooo, ooo 60, 750, ooo FOREIGN MORTGAGE BONDS. GERMAN RAILWAY SHARES. GERMAN RAILWAY BONDS. 1898 1899 25, ooo, ooo 6, 479, ooo 8,839,000 1901. . o Only those years are given during which issues were made. & Including private banking firms. 976 The German Great Banks Value of newly issued securities listed at the German stock exchanges during the years 1897-1908 Continued. GERMAN RAILWAY BONDS Continued. 1903 i , 500, ooo 7, ooo, ooo 1905 1906 II, 900, OOO 13,504, 256 1008 4, ooo, ooo 2, 000, OOO FOREIGN RAILWAY SHARES. 48, ooo, ooo 25 , 500, ooo 80,000,000 I9O5 25, ooo, ooo 15.300,000 FOREIGN RAILWAY BONDS. I, 687, 500 GERMAN STREET RAILWAY SHARES. i, 350, ooo i, 250, ooo 6, ooo, ooo I , 2OO, OOO 1901 I, 000, 000 26, 795,000 14, 297, ooo 500, ooo 9 GERMAN STREET RAILWAY BONDS. 1897 2, 500,000 3,ooo,ooc 5,500,ooc a Only those years are given during which issues were made. 6 Including private banking firms. 90311 J i 63 977 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. BANK SHARES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. 6 Marks. Marks. Marks. Marks. 1898 l899 29, 600, ooo 7, 713, ooo 41 , ooo, ooo 25 , ooo, ooo 12 , 5OO, OOO 1905 300, ooo 6, 500, ooo 22 , IOO, OOO 16, ooo, ooo 6, 250, ooo INDUSTRIAL SHARES. 1897 i , 750, ooo 2, 060, OOO 1898 8 851 600 1899 7, 850, ooo 40, 100, ooo 29, ooo, ooo 1900 . 25 , 134, 400 9, 200, ooo 53 , 700, ooo 600 ooo 1902 1903 i, 500, ooo 7, 460, ooo 19, 200, ooo i, 250, ooo i , 260, ooo 28, ooo, ooo 23 , 500, ooo 1904 20, 193 , ooo 10, 950, ooo 18, 600, ooo 1905 28, 195, ooo 9 550, ooo 6 1 , 950, ooo 79> 3 1 5 < 2 2, 2OO, OOO 5 , ooo, ooo 49, 800, ooo 1907 1908 5, 720, ooo 37, ooo, ooo 3, ooo, ooo 41, 250, ooo INDUSTRIAL BONDS. 1897 2 SCO, OOO 1898 1899 12, 000, 000 40, ooo, ooo 1900 1901 4, ooo, ooo IO, OOO, OOO 2, 500, 000 2, 5OO, OOO 35, ooo, ooo 45 , 500, ooo 1902 16, ooo, ooo 3 , ooo, ooo 1904 . . . 9 700 ooo 20, ooo, ooo 1905 1906 I, 600, 000 10, 000, 000 4, ooo, ooo 6, ooo, ooo 1907 1908 3, ooo, ooo 33.970,000 45, 500, ooo 27, 500, ooo 171, 320, ooo Only those years are given during which issues were made. & Including private banking firms. 97 8 The German Great Banks A. SCHAAFFHAUSEN'SCHER BANKVEREIN. Total -value of securities issued at all German stock exchanges during the years 1897-1908. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. & Issued jointly with other banks and great banks. & 1897 1898 Marks. 127, 558, 600 Marks. I I , OOO, OOO Marks. 17, 870, ooo Marks. 20, 000, 000 1899 1900 85,450,000 45, 700, ooo 27, 780, ooo 18, 600 ooo 1,350,000 29, 700, ooo 30,450,00 1902 1903 46, ooo, ooo i i, 600, ooo I I , OOO, OOO 43, 400, ooo 26, ooo, ooo 76, ooo, ooo 1904 39 284 ooo 1905 1906 20, 550, 000 60, 500, ooo 290, 297, 770 185, 815 , 200 31, 250, ooo 31, ooo, ooo 749, 600, ooo 184, 684 600 1908 5, 100, ooo 238, 320, ooo 30, ooo ooo <* Only those years are given during which issues were made. & Including private banking firms. Value of newly issued securities listed at German stock exchanges during the years 1897-1908. GERMAN PUBLIC SECURITIES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. 6 Issued jointly with other banks and great banks.* 1897 Marks. 3,500,000 Marks. 4, ooo, ooo Marks. 17, 500, ooo Marks. 20, 000, OOO 1800 7, 500, ooo 15, 700,000 10, 000, 000 40, ooo, ooo 2, 500, 000 15,000, ooo 5, ooo, ooo 1902 23,000, ooo 6, ooo, ooo 26, ooo, ooo 30,000, ooo 50, ooo, ooo 39. 779. 00 408, 317, ooo i 8, ooo, ooo 10, OOO, 000 30,000, ooo 2 OOO OOO 30, ooo, ooo 41, 220, 000 30, ooo, ooo 1908 . ... 96, 500, ooo 30, ooo, ooo 65, ooo, ooo a Only those years are giv)n during which issues were made. & Including private banking firms. 979 National Monetary Commission Value of newly issued securities listed at all German stock exchanges during the years 1897-1908 Continued. FOREIGN PUBLIC SECURITIES. Year.c Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks. *> Issued jointly with other banks and great banks. & Marks. Marks. Marks. Marks. 1905 77, 625, 170 678,300,000 GERMAN MORTGAGE BONDS. l897 20, OOO, OOO j 1898 60,000,000 1900 30,000,000 I9O2 20, 000, 000 I 1903 ! 20, 000, OOO 1904 no, ooo, ooo 1905 165,000,000 15,000,000 1907 45,000,000 50,000,000 1908 60, ooo, ooo GERMAN RAILWAY SHARES. 1898 5, ooo, ooo 5, ooo, ooo 1899 5, ooo, ooo 1900 9, 200, ooo 1904 14, 297, ooo 1906 4, 024, ooo 1908 n, ooo, ooo FOREIGN RAILWAY SHARES. 1901 60, ooo, ooo 1904 25, 500, ooo 1905 15,300,000 1906 I, 687, 500 GERMAN RAILWAY BONDS. 1898 10,000,000 10,000,000 1900 13, ooo, ooo 1901 9, 500, ooo 1904 3 , 680 , ooo 1905 i . 250, ooo 1 1 , 900, ooo 1906 4, 500, ooc a Only those years are given during which issues were effected. & Including private banking firms. 980 The German Great Banks Value of newly issued securities listed at German stock exchanges during the years 1897-1908 Continued. BANK SHARES. Year.o Issued exclusively by the bank. Issued jointly with other great banks. Issued jointly with other banks, 6 Issued jointly with other banks and great banks.6 1897 Marks. 30, ooo ooo Marks. Marks. Marks. 1898 5 , 500 ooo ' 1899 34, 800, ooo ,000,00 1901 1904 25 , ooo ooo 1905 8, 750, ooo I 00,000 1906 ,000,00 1907 180, ooo ooo ,250,00 INDUSTRIAL SHARES. 1897 74, 058, 600 370 ooo 1898 1899 2 9, 589, ooo 40, 650, ooo 16, 044, ooo 8, 280 ooo 9, 750, ooo 1901 4, 200 ooo 1902 3, ooo, ooo 8, ooo ooo 1904 1905 12, 784, 000 4, 800, ooo 25 , 400, ooo 5,872, 600 I , 62O, OOO 21, OOO, OOO 22, 4OO, OOO 1906 1907 1908 4, 684, 600 3 , 100, ooo 51, ooo, ooo 22, 7OO, OOO 3,470,000 20, 500, OOO 34, 550, ooo INDUSTRIAL BONDS- 1807 1898 2, 5OO, OOO 1800 25, ooo, ooo 16, ooo, ooo 3, ooo, ooo 26, ooo, ooo 6, ooo, ooo 12,000, 000 30, 500, ooo 4, ooo, ooo 3, ooo, ooo IO, OOO, OOO 6, ooo, ooo 57, 300, ooo 24,397. 500 17 700, ooo 15, ooo, oco 1908 2, 000, 000 59, 120, ooo 106, 320, ooo o Only those years are given during which issues were made, b Including private banking firms. 9 8l APPENDIX VII. THE DEVELOPMENT OF CONCENTRATION OF THE GERMAN GREAT BANKS. 1 I. BANK FUR HANDEX UND INDUSTRIE IN DARMSTADT. [Founded in 1853. Capital, 154,000,000 marks. Surplus. 30,250,000 marks.] [To page 641.] Branches (7). Frankfort on-the-Main since 1864 (agency as early as 1854); Berlin since 1871; Hannover since 1900; Strassburg since 1901; Halle and Stettin (with deposit office Bollwerk) since 1906; Leipzig (with deposit office Leutzsch) since 1908. Commandites 2 (4). Riimelin & Co. in Heilbronn; Wingenroth, Scherr & Co. in Mannheim; Schmitz, Heidelberger & Co. in Mainz, Fuld & Co., Pforzheim. Deposit offices (51). Since 1900, viz, 16 in Berlin; 2 in Charlottenburg; i each in Halensee, Gross-Lichterfelde W., Zehlendorf, Kottbus, Forst (Lausitz), Frankfort - on - the - Oder, Greifswald, Guben, Lahr (Baden), Offenbach-on-the-Main, Prenzlau, Spremberg (Mark), Stargard (Pomer- ania). Establishments (Niederlassungeri) (5). In Freiburg -in- the -Breisgau, Giessen, Landau (Pfalz), Neustadt (Haardt), Quedlinburg. Agencies (7). In Alsfeld, Butzbach, Herborn, Pasewalk, Sangerhausen, Senftenberg, and Sorau. The Darmstadter Bank has founded or participated in the founding of the following subsidiary institutions (Tochtergesellschaften). 3 1871. The Amsterdamsche Bank in Amsterdam (share capital 6,000,000 florins.) The Bank fur Handel und Industrie is represented on the supervisory board by three members of its own managing board. 1 88 1. The Wiirttembergische Bankanstalt, formerly Pflaum & Co., in Stuttgart (share capital 10,000,000 marks). Since 1881 it has had a contractual community of interest with the Wiirttem- bergische Vereinsbank in Stuttgart, founded in 1869 (share capital 30,000,000 marks; branches in Heilbronn, Reutlingen, and Ulm; commandites in Ellwangen, Esslingen, and Gerabronn). The two banks share up to 1930 profits and losses pro rata of their share capital, L e., in the proportion of i to 3. 4 The Bank fur Handel und Industrie is represented on the supervisory board of the Wiirttembergische Bankanstalt by two members of its own managing board. - 982 The G e r man Great Banks 1889. The Deutsch-Asiatische Bank in Shanghai, with 12 branches in Berlin, Hamburg, Tientsin, Tsingtau, Hankow, Hongkong, Cal- cutta, Tsinanfu, Peking, Yokohama, Kobe (Japan), and Singapore, share capital, 7,500,000 Shanghai taels, fully paid up (jointly with other firms). This bank has the privilege of note issue by its establishments situated within the check districts of Kiauchau and in China. The Bank fur Handel und Industrie is represented on the supervisory board. 1894. The Banca Commercial Italiana in Milan (share capital 105,000,000 lire) jointly with other German, Austrian, and Swiss firms. Number of branches 33 (in Italy). The Bank fur Handel und Industrie is represented on the supervisory board. 1898. The Banque Internationale de Bruxelles in Brussels (share capital 25,000,000 francs, fully paid up) jointly with other German and foreign firms. The Bank fur Handel und Industrie is represented on the supervisory board. 1900. The Bankers' Trading Syndicate in London (capital 100,000). 1904-5. The Banca Marmorosch Blank & Co., Societate anonima in Bucharest, formerly a commandite of the bank (share capital 10,000,000 lei) jointly with the Berliner Handelsgesellschaft. 1906. The Amerika-Bank Aktien-Gesellschaft (capital 25,000,000 marks in five series, of which 5,000,000 are fully paid up and the remaining 20,000,000 marks to the extent of 25 per cent). 6 The Darmstadter Bank has absorbed the following banks and banking firms: 1900. The banking firm Gust. Maier & Co. in Frankfort on-the-Main. 1901. The banking firm H. Oppenheimer in Hannover. 1901. The banking firm Otto Davisson in Hannover. 1901. The banking firm Bernhard Lillienthal in Gustrow. 1902. The Bank fur Siiddeutschland in Darmstadt (share capital 15.672, 300 marks). 1902. The Berlin office of the Breslauer Discontobank. 1904-5. The banking firm Robert Warschauer & Co. in Berlin. 1905. The banking firm Philipp Nicolaus Schmidt in Frankfort-on- the-Main. 1906. The banking firm Hermann Arnold & Co., banking comman- dite, in Halle-on-the-Saale. 1907. The banking firm Ed. Loeb & Co. in Neustadt a. d. H. and Landau. 1907. The banking firm Max Klette in Prenzlau. Through stock ownership the Darmstadter Bank maintains communi- ties of interest with the following institutions: i. Since 1902 with the Breslauer Discontobank in Breslau (share capital 25,000,000 marks) which has 10 branches in Glatz, Gleiwitz, Gorlitz, Kat- 983 National Monetary Commission towitz, Lauban, Myslowitz (Upper Silesia), Oppeln, Ratibor, Zabrze (Upper Silesia), and Ziegenhals. This bank also has: Three deposit offices in Breslau. One agency in Habelschwerdt. It absorbed the following firms and banks: 1888. Perls & Co. in Gleiwitz. 1900. Landsberger & Co. in Kattowitz. 1905. L. Silberberg in Myslowitz. 1905. L. Reymann in Oppeln. 1905. The Zabrzer Discontobank Kochmann & Co. in Zabrze. 1908. The banking firm Karl Schubert Nachf. in Gorlitz. Two members of the managing board of the Bank fur Handel und Indus- trie have seats on the supervisory board of this bank. 2. Since 1902 with the Ostbank fur Handel und Gewerbe in Posen (share capital 18,000,000 marks), which has 9 branches, viz, in Allenstein, Brom- berg, Danzig, Graudenz, Konigsberg, Landsberg a. d. W., Memel, Stolp i. P., and Tilsit). One commandite, viz, R. Damme in Danzig. Two agencies, viz, in Culm (Western Prussia) and Schwerin a. W. Twenty-two deposit offices, viz, in Braunsberg, Danzig, Gnesen, Hohen- salza, Insterburg, Kaukehmenin Eastern Prussia, Konigsberg in Prussia (2), Konitz, Krotoschin, Lissa in Prussia, Lyck in Eastern Prussia, Marienburg, Marienwerder, Osterode, Posen (3), Rastenburg, Rawitsch, and Schneide- miihl. One exchange office (Wechselstube) in Neu-Skalmierschiitz. It absorbed the following banking firms and banks: 1898. The banking firm Heimann Saul in Posen. 1899. The banking firm C. W. Quilitz in Landsberg a. d. W. 1905. The banking firm Ostdeutsche Bank, formerly J. Simon Wwe. & Sohne in Konigsberg (share capital 10,000,000 marks) which in turn had absorbed the banking firms J. Simon Wwe. & Sohne in Konigsberg in Prussia, and M. Friedlander in Bromberg, and had two branches, one in Tilsit and one in Danzig. 1906. The Bromberger Bank fur Handel und Gewerbe (capital 2,000,000 marks), founded by the Ostdeutsche Bank The former took over the Bromberg branch of the Ostdeutsche Bank and absorbed the following firms: 1901. Franz Lietz in Inowrazlaw. 1908. Hermann Kiister in Stolp i. P. 3. Since 1903 with the Deutsche Nationalbank, stock company en com- mandite (formerly the N ordivestdeutsche Bank, stock company en comman- dite, in Bremen). Share capital, 33,000,000 marks. This bank has Eight branches, viz, in Bremen, Bremerhaven, Dortmund, Lehe, Minden, Mulheim-on-the-Ruhr, Oldenburg, and Osnabriick. 984 The German Great Banks Eleven deposit offices, viz, in Bremen-Neustadt, Blumenthal in Han- nover, Cloppenburg, Delmenhorst, Hohenkirchen, Jever, Liibbecke, Norden- ham, Rinteln, Vechta, and Vegesack. It absorbed the following banking houses and banks: 1901. Georg C. Mecke & Co. in Bremen. 1905. The Vegesacker Bank Schild & Co. in Vegesack, near Bremen, with branch in Blumenthal (Hanover). 1905. The Oldenburger Bank (share capital 2,000,000 marks) with 6 branches in Atens-Nordenham,- Cloppenburg, Delmen- horst, Hohenkirchen, Jever, and Vechta. 1906. The Deutsche Nationalbank in Bremen (share capital 1,500,000 marks). 6 1906. The Mindener Bankverein (share capital 4,500,000 marks), with 2 branches in Liibbecke and Rinteln. 1906. The Leher Bankverein Bischoff & Co. in Lehe. 1908. Gerh. Miihlenbeck in Mulheim-on-the-Ruhr. 4. Since 1905 with the Bayerische Bank fur Handel und Industrie (for- merly Bayerische Bank} in Munich (share capital 8,000,000 marks). 7 This bank has Four branches, viz, in Bamberg, Fiirth, Nuremberg, and Wiirzburg. One exchange office (Wechselstube) in Nuremberg. The bank has absorbed the following houses: 1905. The banking firm Gutleben & Weidert in Munich. 1907. The banking firm Erdmann & Frankenau in Nuremberg.- 1908. The banking firm Gerh. Miihlenbeck in Mulheim-on-the-Ruhr. The Darmstadter Bank is represented by three members of its managing board on the supervisory board of the Bayerische Bank fur Handel und Industrie. Since 1904 the Bank fur Handel und Industrie has maintained contrac- tual business connections with the Vereinsbank in Wismar, which took over the former deposit office of the Bank fur Handel und Industrie in Rostock (share capital 1,500,000 marks, with 59 agencies in Mecklenburg); likewise since 1902 with the Wechselstuben-Aktiengesellschaft Merkur in Vienna (share capital in 1908, 20,000,000 kronen, with 9 branches), which took over the clientele of the former commandite of the bank (Dutschka & Co.). The former is represented on the supervisory board of the Vienna institution by two members of its managing board. II. BERLINER HANDELSGESELLSCHAFT, BERLIN. [Founded in 1856.] Capital en commandite, 110,000,000 marks. Surplus (in round figures), 34,500,000 marks, equal to 31.63 per cent of the share capital. Branches. None. Commandites. None. Deposit offices. None. 985 National Monetary Gommissio n Has absorbed 1901. The banking firm Breest & Gelpcke in Berlin, which in 1891 had taken over the Internationale Bank (capital 40,000,000 marks). Participated in the founding of the following subsidiary companies (Tochtergesellschaften) : 8 1872. The Schweizerischer Bankverein in Basle (share capital 50,000,000 francs). 1889. The Deutsch-Asiatische Bank. 1894. The Banca Commerciale Italiana in Milan. 1898. The Banque Internationale de Bruxelles, Brussels. 1904-5. The Banca Marmorosch Blank & Co., Societate anonima in Bucharest (jointly with the Bank fur Handel und Industrie). III. COMMERZ- UNO DISCONTO-BANK IN HAMBURG. [Founded in 1870.] Share capital, 85,000,000 marks. Surplus, 12,801,555 marks. Branches. Three, viz, in Berlin, Hannover, and Kiel. Deposit offices. Fifty -four, viz, 10 in Hamburg, i each in Wandsbeck and Altona-Ottensen, 29 in Berlin, 2 each in Charlottenburg and Schone- berg, i each in Wilmersdorf, Friedenau, Rixdorf, Weissensee, Halensee, Neumiinster, Potsdam, Spandau, and Eberswalde. Commandites. Two, viz, J. Drey fuss & Co. in Frankfort on-the-Main, S. Kaufmann & Co. in Berlin. The Commerz- und Disconto-Bank has absorbed the following institutions: 1904-5. The Berliner Bank in Berlin (share capital 42,000,000 marks). This bank had 14 deposit offices, viz, Berlin, 9; Char- lottenburg, i, Schoneberg, i; Spandau, i; Eberswalde, i ; Neustrelitz, i Commandites, i (S. Kaufmann & Co. in Berlin). It had absorbed 1889. The Berliner Handelsbank, E-- G. in Berlin. 1889. The banking firm A. Russ jun. in Berlin. 1907. The banking firm B. Magnus in Hanover. The Commerz- und Disconto-Bank founded as its sub- sidiary company (Tochtergesellschaft) : 1905. Jointly with the Disconto-Gesellschaft, the Revisions- und Vermogensverwaltungs- Aktiengesellschaft, Berlin (share capital 1,000,000 marks), with 4 branches in Hamburg, Hof, Leipzig, and Munich. 986 The German Great Banks Since 1872 it maintains a community of interest 9 through share owner- ship (19,302 shares, at 10 paid in, 193,020) with the London and Han- seatic Bank, Ltd., in London (total capital is made up of 40,000 shares). Since 1904 it has maintained friendly relations with the Kredit- und Sparbank in Leipzig (share capital 10,350,000 marks) which had ab- sorbed 1888. The Kredit- und Sparbankverein in Leipzig. 1897. The banking firm Franz H. Moschlers Sohne in Altenburg and had a commandite interest in the banking firm Schirmer & Schlick (in liquidation) in Leipzig. IV. DEUTSCHE BANK IN BERLIN. [Pounded in 1870.] Share capital, 200,000,000 marks. Surplus (in round figures), 102,000,000 marks. Branches. Nine, viz, Bremen since 1871; Hamburg, since 1872; London, since 1873; Frankfort on-the-Main, since 1886, when the Deutsche Bank took over the assets and liabilities of the Frankfurter Bankuerein; Munich, since iSSg; 10 Leipzig and Dresden, since 1900; Nuremberg, since 1905; and Constantinople, since 1909. Commandites. Two, viz, Rosenfeld & Co., Vienna, and, since 1905, G. E. Heydemann in Bautzen with branches in Lobau and Zittau. n Deposit offices, Seventy-seven, viz, Berlin, 27; Charlottenburg, 6; Schoneberg, 2 ; Rixdorf , i ; Steglitz, i ; Wilmersdorf , 2 ; i each in Friede- nau, Weissensee, Spandau, Wiesbaden, Deuben, Meissen, and Augsburg; Hamburg, 14; Leipzig, 7; Dresden, 9; Munich, i. The Deutsche Bank founded or took part in the founding of the follow- ing subsidiary companies (Tochtergesellschaf ten) : 12 1889. The Deutsch-Asiatische Bank (jointly with other domestic and foreign concerns). (See above, p. 983.) 1890. The Deutsche Treuhand-Gesellschaft in Berlin (share capital, 1,500,000 marks) (former firm name: Deutsch-Amerika- nische Treuhand-Gesellschaft). 1890. The Deutsche Ueberseeische Bank in Berlin, which took the place of the Deutsche Ueberseebank, founded in 1886 (share capital 20,000,000 marks.) (See above, p. 433, sub a.) Twenty-two branches, viz, in Santiago de Chile, Val- paraiso, Antofagasta, Concepcion, Iquique, Temuco, Val- divia, Osorno, and Puerto Montt, in Chile; Buenos Aires, Bahia Blanca, Cordoba, and Tucuman, in Argentina; Mexico City; Lima, Callao, Trujillo, and Arequipa, in Peru; La Paz and Oruro, in Bolivia; Montevideo, in Uruguay; Madrid and Barcelona, in Spain; Guayaquil, in Ecuador. 1894. The Banca Commerciale Italiana in Milan (jointly with other domestic and foreign concerns). (See above, p. 983.) Thirty-three branches in Italy. 987 National Monetary Commission 1904-5. The Aktiengesellschaft fur uberseeische Bauunternehmungen, Berlin, which operated until 1906 under the firm name of the Deutsch-Ostafrikanische Bank (jointly with nine other German firms, including the Deutsch-Ostafrikanische Handelsgesellschaft); share capital, 2,000,000 marks. (See above, p. 438, sub /.) 1905. The Zentralamerika-Bank, Aktiengesellschaft in Berlin (jointly with the Deutsche Uberseeische Bank, the banking house Lazard Speyer-EHissen in Frankfort-on-the-Main, and the Schweizerische Kreditanstalt}. Share capital, 10,000,000 marks, of which for the time being 25 per cent has been paid in. 1906. The Mexikanische Bank fur Handel und Industrie (Banco Mexi- cano de Comercio Industria) in Mexico (jointly with the banking house Speyer & Co. in New York) ; share capital, 16,000,000 pesos; the bank took over the business of the Banco- Aleman Transatlantic in Mexico; the concession runs for forty years beginning with March 19, 1897. (See above, p. 439, sub m.) The Deutsche Bank has absorbed the following banks and private bank- ing firms: 13 1886. Frankfurter Bankverein. 1901. Menz, Blochmann & Co., Dresden. 1905. H. Chr. Schmidt, Hamburg. 1906. Buhler & Heymann, Munich and Augsburg. Through stock ownership, the Deutsche Bank has communities of inter- est with the following banks u (for which the date of affiliation and share capital are shown) : Share capital (marks). 1897. (i) Bergische Markische Bank, Elberfeld 75, ooo, ooo (2) Schlesischer Bankverein, Breslau 30, ooo, ooo (3) Hannoversche Bank, Hanover 22, 500, ooo 1898. (4) Oberrheinische Bank, Mannheim 20, ooo, ooo 1902. (5) Duisburg-Ruhrorterbank, Duisburg 12, ooo, ooo 1903. (6) Essener Kreditanstalt, Essen-on-the-Ruhr. . 60,000,000 1904. (7) Siegener Bank fur Handel und Gewerbe, Sie- gen i. W 4, ooo, ooo (8) Sachsische Bank, Dresden 30, ooo, ooo (9) Essener Bankverein, Essen-on-the-Ruhr. . . 15,000,000 (10) Oldenburgische Spar- und Leihbank, Olden- burg 4, ooo, ooo (i i) Privatbank zu Gotha 10, ooo, ooo 1905. (12) Deutsch-Ostafrikanische Bank, Berlin, with a branch in Dar-es-Salam 2, ooo, ooo 988 The German Great Banks (1) Bergisch-Markische Bank, share capital 75,000,000 marks, has 17 branches, viz, Aix-la-Chapelle, Barmen, Bocholt, Bonn, Coblenz, Diissel- dorf (in combination with a deposit office), Duisburg, Hagen, Cologne, Kre- feld, Maria-Gladbach, Paderborn, Remscheid, Rheydt, Solingen, St. Johann- Saarbriicken, Trier ; 8 deposit offices, viz, Bad Neuenahr, Bernkastel, Cues, Cronenberg, Diisseldorf-Wehrhahn, Goch, Hilden, Schwelm, Warburg; 3 commandites, viz, Hiiser & Co., in Solingen; Max Gerson & Co., Ltd., in Hamm and Soest; D. Fleck & Scheuer, in Diisseldorf. It has absorbed the following banks and private bankers: 1895. R. Jacobi, Cologne; J. H. Brink & Co., Elberfeld; Salomon Philipp, Ruhrort. 1898. The Rernscheider Bank, Ruhrort (capital stock, 2,000,000 marks); Hiiser & Co., Solingen. 1901. A. & C. Sohmann, Krefeld; Goldschmidt & Co., Bonn. In the same year the Bergisch-Markische Bank undertook the liquidation of the firms Beckerath & Heilmann in Krefeld and Rob. Suermondt & Co. in Aix-la-Chapelle. 1902. Barmer Handelsbank, Barmen. 1904. Paderstein'scher Bankverein, Paderborn und Warburg (share capital, 5,000,000 marks); Lazard, Brach & Co. (Kommanditgesellschaft) in St. Johann-Saarbriicken ; Trierer Bank, Trier (share capital, 2,000,000 marks); A. Molenaar & Co. (Kommanditgesellschaft auf Aktien, Krefeld (share capital, 1,260,000 marks); this bank dele- gates two of its officers to serve on the supervisory board of the Deutsche Bank, and the Deutsche Bank in turn delegates two of its officers to serve on the board of A. Molenaar & Co. (2) The Schlesischer Bankverein of Breslau (capital stock, 30,000,000 marks) has 13 branches, located as follows: Beuthen (in Silesia), Glatz, Gleiwitz, Glogau, Gorlitz, Hirschberg (in Silesia), Konigshutte, Leob- schiitz, Liegnitz, Neisse, Rybnik (in Upper Silesia), and Sprottau and Waldenburg (in Lower Silesia). Two deposit offices, both in Breslau, and three commandites, Georg Fromberg & Co., Berlin, Richard Vogt & Co., Frankenstein (Silesia), and Hugo Scherzer (Schweidnitz) . It absorbed in 1905 the Hirschberg branch of the banking house Abraham Schlesinger, and in 1906 the banking firm Gebriider Herzberg, Breslau. At the close of 1905 it established friendly relations with the Ober- schlesischer Credit- Verein of Ratibor, and the Niederlausitzer Kredit- und Sparbank at Kottbus. It has a branch in Guben and an agency in Weiss- wasser O.-L. The latter has absorbed the banking house of Wilhelm Wilke in Guben, and earlier the Kattowitzer Bankverein. The Schlesischer Bankverein is represented on the supervisory board of the Deutsche Bank by a member of its own executive board. The Deutsche Bank delegates 989 National Monetary Commission two of its executive officers to the supervisory board of the Schlesischer Bankverein. (3) The Hannoversche Bank, Hanover (capital stock, 22,500,000 marks), has 5 branches, located as follows: Celle, Hameln, Harburg a. E., Liineburg, and Verden; 2 deposit offices one at Linden and the other in Stade. Com- mandites, none. 15 The Hannoversche Bank absorbed in 1906 the banking firm of A. Leh- mann in Verden. Jointly with the Hildesheimer Bank and the Osnabriicker Bank it established a subsidiary, the Braunschweiger Privatbank, A.-G., with an authorized capital stock of 6,000,000 marks, of which 3,000,000 is paid in. This was formerly the banking firm of Ludwig Peters Nach- folger of Brunswick, commandite of the Hildesheimer Bank, and was transformed in 1905 under its present name. Through stock ownership it has communities of interest with the (a) Osnabriicker Bank and (6) the Hildesheimer Bank. (a) The Osnabriicker Bank, in Osnabriick (share capital 14,500,000 marks), which has also founded the Quakenbriicker Bank, has 1 1 branches, located as follows: Aurich, Emden, Esens, Herford, Leer, Lingen, Meppen, Miinster, Norden, Salzuflen, Weener. It has 13 agencies and has absorbed the following: 1905. The Ostfriesische Bank, in Leer and Weener; capital stock, .3,000,000 marks. This institution has been retained as a branch bank of the Osnabriicker Bank under its former name and in 1907 absorbed the banking firm of R. Van Hoorn, of Leer in Ostfriesland. Marcus D. Ganz, a banking firm in Herford which has been continued as a branch of the Osnabriicker Bank under the name of the Herforder Bank. 1906. Harlingerlandische Bank Eyben, Bode & Jansen, in Esens (Ostfriesland). 1907. The Emder Bank, Emden (with a branch in Weener); capital stock, 1,000,350 marks. Carl Krecke, in Salzuflen. 1908. The Volksbank Arenberg-Meppen and the banking firm Langschmidt & Sohn, Lingen. (6) The Hildesheimer Bank, in Hildesheim (capital stock, 8,000,000 marks), has two branches (one in Gottingen and one in Goslar), two deposit offices (Harzburg, Langspringe), and 3 commandites, Joseph Kayser & Co. in Einbeck, M. Falck in Einbeck, and M. Katz in Duderstadt It has ab- sorbed the following: 1886. M. Davidsohn, Hildesheim. 1886. Schiff & Traube, Hildesheim. 1905. Benfey & Co., Gottingen. The Deutsche Bank is represented on the supervisory board of the Hannoversche Bank. (4) The Oberrheinische Bank (formerly Koster & Co.) in Mannheim which was merged in 1904 with the Rheinische Kreditbank. It had 9 990 T h e German Great Banks branches, located as follows: Heidelberg, Karlsruhe, Freiburg i. B., Rastatt, Bruchsal, Baden-Baden, Strassburg i. E., Miilhausen i. E., Basle. It had a deposit office in Ludwigshaf en ; 2 commandites, in Baden-Baden and Rastatt, and had absorbed the following banking firms: 1883. Koster & Co., Mannheim. 1896. C. Schwarzmann, Strassburg. 1898. Christian Mez, Freiburg; R. Nicolai & Co., Baden-Baden and Rastatt; F. S. Meyer, Baden-Baden. 1903. Ed. Koelle, Karlsruhe. Through ownership of stock the Oberrheinische Bank and the Deutsche Bank had a community of interest with the Suddeutsche Bank, in Mannheim. (5) The Duisburg-Ruhrorter Bank, in Duisburg 10 (capital stock, 12,000,000 marks) has 4 branches. In Diisseldorf it had a branch since 1897 under the name of the Niederrheinische Bank, Zweiganstalt der Duisburg-Ruhrorter Bank. The other branch was established by taking over the Homberger Volksbank, with offices in Oberhausen and Ruhrort. (6) The Essener Kreditanstalt in Essen-on-the-Ruhr (capital stock, 60,000,000 marks) has 16 branches, located as follows: Bocholt, Bochurn, Dortmund, Duisburg, Duisburg-Ruhrort, Gelsenkirchen, Iserlohn, Miilheim (Ruhr), Miinster i. W., Oberhausen, Recklinghausen, and Wesel. Eight agencies, as follows: Altenessen, Dorsten, Hamborn, Herne i. W., Homberg, Schalke, Witten, Wanne. Three commandites, viz, Ernst Osthaus in Hagen, C. Basse in Ludenscheid, and J. A. Rolling in Buer. It has absorbed the following: 1895. Levi Hirschland, Essen. 1902. Kreditbank, Recklinghausen. 1903. S. Hanf, Witten. 1905. The Iserlohner Volksbank (capital stock, 1,000,000 marks). 1905. Poppe & Schmoelder, Wesel. 1906. The Westfalischer Bankverein (capital stock, 8,000,000 marks), Miinster (with a branch in Bocholt). 1908. Albert Heinrich Rost, Miinster. 1909. The Duisburg-Ruhrorter Bank, Duisburg. (7) The Siegener Bank fur Handel und Gewerbe in Siegen i. W. (capital stock, 4,000,000 marks). The Deutsche Bank is represented on its super- visory board. (8) The Sachsische Bank, Dresden (capital stock, 30,000,000 marks), has 8 branches, located as follows: Annaberg, Chemnitz, Leipzig, Meerane, Plauen i. V., Reichenbach i. V., Zittau, and Zwickau. (9) The Essener Bankverein of Essen-on-the-Ruhr (capital stock 15,000,000 marks), grew out in 1899 of the banking firm Rebling & Rehn. It has 3 branches, viz, Borbeck, Bottrop i. W., and Oberhausen; 2 deposit offices (Altenessen and Essen-Riittenscheid), and i commandite, the bank- ing house Ferdinand Klostermann in Hattingen. The Deutsche Bank is represented on the supervisory board of the Essener Bankverein. 991 National Monetary Commission (10) The Oldenburgische Spar- und Leihbank 17 in Oldenburg (capital stock, 4,000,000 marks) has 6 branches, viz, Brake, Delmenhorst, Jever, Lohne, Nordenham, Varel, Wilhelmshaven, and i deposit office at Ovelgonne. (n) The Privatbank zu Gotha (capital stock, 10,000,000 marks) has 3 branches Erfurt, Leipzig, and Weimar. The Deutsche Bank is repre- sented on its supervisory board. (12) The Deutsch-Ostafrikanische Bank in Berlin has a branch in Dar-es-Salam. The Deutsche Bank is united with (a) the Mecklenburgische Hypotheken- und Wechselbank and (6) the Rheinische Kreditbank in a community of interest, based on agreements and exchange of representatives on the supervisory boards. (a) Since 1897 it has been allied with the Mecklenburgische Hypotheken- und Wechselbank in Schwerin 18 (capital stock, 9,000,000 marks). This institution has a branch in Giistrow and 63 agencies (62 in Mecklenburg and i in Ratzeburg). Through ownership of stock it has a community of interest with the Mecklenburgische Sparbank (capital stock, 3,000,000 marks), with a branch in Rostock, an office in Schoneberg, and 79 agencies in Mecklenburg. The Deutsche Bank has, moreover, a direct interest in the Mecklenburgische Sparbank. The latter has an interest in the Meck- lenburgische Treuhandgesellschaft m. b. H. in Schwerin. The Mecklenburgische Hypotheken- und Wechselbank delegates one of its officers to represent it on the supervisory board of the Deutsche Bank, and the latter delegates one of its executive officers to serve on the board of the Mecklenburgische Hypotheken- und Wechselbank. (6) The community of interest with the Rheinische Kreditbank in Mann- heim (capital stock, 75,000,800 marks) dates from 1904. This bank has 13 branches, located as follows: Baden-Baden, Freiburg i. B., Heidelberg, Kaiserslautern, Karlsruhe, Konstanz, Lahr i. B., Miihlhausen i. K., Offen- burg, Pforzheim, Speyer, Strassburg i. E-, and Zweibrucken. It has 3 deposit offices ( i in Bruchsal and 2 in Mannheim). Since the absorption of the Oberrheinische Bank it has two agencies i in Neunkirchen (district of Trier) and i in Rastatt; 2 commandites: G. F. Grohe-Henrich & Co. in Saarbriicken and B. Burger & Co. in Wolfach. It has absorbed the following banks and banking firms: 1871. Joseph Sautier, Freiburg i. B. 1874. Pfalzer Bankverein, Mannheim; Gebriider Zimmermann, Heidelberg. 1897. G. Miiller & Kons., Karlsruhe and Baden-Baden, Franz Funck (formerly Gebriider Wolff), Baden-Baden. 1898. The Kaiserslauterer Bank, formerly Bocking, Karcher & Co. 1899. The Ortenauer Kreditbank, Offenburg. 1899. Kaufmann, Engelhorn & Co., bank commandite, Strassburg i. E. ; Ed. Strohmeyer, Baden-Baden; the Lahrer Kredit- bank, Karl Bader & Co. 992 The German G r e ** Ban 1901. The Mannheimer Bank, A.-G. (capital stock,. ms: 1903. Gebriider Kapferer, Freiburg i. B. 1904. The Kredit- und Depositenbank, Zweibriicken (capital hiv. 1 " 4,000,000 marks). 1905. The Oberrheinische Bank (capital stock, 20,000,000 marks). with its branches, deposit office, commandites, and commit nities of interest as given on page 990, No. 4. 1906. A. Sulzberger, Konstanz; Julius Kahn & Co., Pforzheim (for- merly the commandite of the Wiirttembergische Vereins- bank). 1907. The Gewerbebank, Speyer. Through stock ownership the Rheinische Kreditbank has been united in a community of interest since 1901, with the newly organized Mannheimer Bank (capital stock, 1,000,000 marks) and since 1904 with the Suddeutsche Bank in Mannheim (capital stock, 10,000,000 marks), with a branch in Worms. This community of interest, however, it shares with the Deutsche Bank, both banks being represented on the supervisory board of the Sud- deutsche Bank. The Rheinische Kreditbank elects two of its officers to serve on the super- visory board of the Deutsche Bank, and the latter delegates two members of its executive staff to serve on the supervisory board of the Rheinische Kreditbank. Finally the Deutsche Bank maintains friendly relations with the follow- ing institutions : (a) The Anhalt-Dessauische Landesbank, of Dessau. This bank has 6 branches, located as follows: Ballenstedt, Finsterwalde, Kothen, Torgau, Wittenberg, Zerbst, and 6 deposit offices (Coswig, Dahme, Jessnitz, Kirchhain N.-L., Raguhn, and Rosslau in Anhalt). It has abandoned its Berlin branch. In 1908 it took over the Raguhner Gewerbebank, and the deposit office in Jessnitz of the banking firm Paul Schauseil & Co. of Halle. (b) The Braunschweiger Privatbank, of Brunswick. It has deposit offices in Wolfenbiittel and in Braunschweig (the latter took the place of the bank- ing house Louis Bremer & Co., of Brunswick, absorbed by the Braunschweiger Privatbank in 1909). (c) The Braunsckweigische Bank und Kreditanstalt, of Brunswick. It has 3 deposit offices, viz, Goslar, Blankenburg, and Oschersleben, and 8 commandites. It absorbed in 1908 the Blankenburger Bank and the banking firm C. Uhl & Co. in Brunswick, and in 1909 the firm F. Heine, of Oschersleben, transforming the latter into a deposit office. (d) The Chemnitzer Bankverein, of Chemnitz, with its branches and 3 agencies. (e) The Danziger Privat-Aktienbank in Danzig, with 3 branches, 6 deposit offices, 7 agencies, and 2 commandites. In 1900 it absorbed the banking firm Ernst Poschmann in Danzig. 90311 ii 64 993 National Mon et ary Commission (10) The Oldesche Kreditanstalt in Konigsberg (Prussia); capital stock, stock, 4,ooo,Qs: It has a branch in Danzig (which has deposit offices in Ivoh.O } Dliva, and Zoppot), Posen (with deposit office), and Stettin ywith deposit office); deposit offices in Konigsberg, Briesen i. W., Elbing, Insterburg, Thorn, Culmsee, Gumbinnen, Kolberg, and Tiegenhof, besides a number of agencies. (g) The Magdeburger Privatbank, Magdeburg (for details, see p. 630). (A) The Bayerische Handelsbank, Munich (for details, see p. 632). (i) The Bayerische Vereinsbank, Munich (for details, see p. 632). (;') The Commerzbank, Lubeck. (k) The Lubecker Privatbank, Liibeck. (/) The Deutsche Vereinsbank, Frankfort-on-the-Main. This bank ab- sorbed in 1908 the firm Gebriider Schuster, of the same city. V. THE DlSCONTO-GESELLSCHAFT. (Direktion der Disconto-Gesellschaft, Berlin.) [Founded 1851 (present organization since 1856).] Share capital, 170,000,000 marks. Surplus, 57,592,611 marks, equal to 33.88 per cent of its share capital. Branches. Four, located as follows: London, 1900; Frankfort-on-the- Main, 1901; Bremen, 1903; and Mainz, 1909. Commandites. One, Ernesto Tornquist & Co., Buenos Ayres, since 1889. Deposit offices (dating from 1895}. Sixteen, of which n are in Berlin, 3 in Charlottenburg, i in Friedenau, and i in Wiesbaden. It has established or participated in the establishment of the following subsidiary companies: 19 1880. The Deutsche Handels- und Plantagengesellschaft der Sudsee- inseln, Hamburg, capital stock, 2,750,000 marks (a reorgan- ized company). 1883-86. The Neu-Guinea-Kompagnie, capital stock, 6,000,000 marks. 1887. The Brasilianische Bank fur Deutschland, Hamburg (capital stock, 10,000,000 marks, jointly with the Norddeutsche Bank). The institution has 5 branches, located as follows: Rio de Janeiro, Sao Paulo, Santos, Porto Allegre, and Bahia. 1889. The Deutsch-Asiatische Bank, Shanghai. It was organized by the Disconto-Gesellschaft jointly with German and foreign concerns, and has a paid-up capital stock of 7,500,000 Shanghai taels. It has 12 branches, located as follows: Berlin, Hamburg, Tientsin, Tsingtau, Hankow, Hongkong, Calcutta, Tsinanfu, Peking, Yokohama, Kobe (Japan), and Singapore. 994 The German G r e a a n 1894. The Banco, Commerciale Italiana, Milan, . ms . 105,000,000 lire (jointly with German and fort- firms) 33 branches in Italy. 1895. The Bank fur Chile und Deutschland, Hamburg, capital stock 10,000,000 marks, of which 25 per cent or 2,500,000 marks has been paid in (jointly with the Norddeutsche Bank). It has 9 branches, located as follows: Valparaiso, Santiago, Concepcion, Temuco, Antofagasta, Victoria, and Valdivia, in Chile, and La Paz and Oruro in Bolivia. 1897. The Banca Generala Romana, Bucharest, capital stock, 10,000,000 lei. It has 2 branches, in Braila and Grajova, and an agency in Constantza. 1 898. The Banque Internationale de Bruxelles, capital stock, 25 ,000,000 francs. (See p. 442, letter h.} 1900. The Compagnie Commerciale Beige, anciennement H. Albert de Bary & Co., Societ anonyme a Anvers, capital stock, 5,000,000 francs. 1905. The Bayerische Disconto- und Wechselbank, Nuremberg, capital stock, 12,000,000 marks (jointly with the Bayerische Hypo- theken- und Wechselbank, Munich). This bank has 15 branches, located in Augsburg, Bam- berg, Bayreuth, Hersbruck, Hof, Kempten, Kitzingen, Kulmbach, Lauf, Regensburg, Roth i. B., Schwabach, Schweinfurt, Uffenheim, and Wiirzburg; 4 deposit offices, in Neumark (Oberpfalz), Pfaffenhofen-on-the-Iler, Roth- enburg-on-the-Tauber, and Weissenburg. It has absorbed the following banking firms: 1905. G J. Gutmann, Nuremberg; P. C. Bonnet, Augsburg; Friedrich Gunthert, Wurzburg; Jonas Nordschilds Nachf., Schweinfurt; Con- rad Arnold, Lauf and Hersbruck. 1906. Klunk & Gerber, Hof; Jos. S. Schmid, Barn- berg; Max Feichtmeyer, Regensburg; Fried- rich Grieninger & Sohn, Uffenheim and Rothenburg; M. Oettinger Sohne, Neumarkt (Oberpfalz). 1907. Julius Leisser, Wurzburg; S. Schwabacher Nachf., Bayreuth and Kulmbach. 1908. G. W. Loos, Weissenburg; Hans Schmitt, Bam- berg; Siegmund Edenfeld, Wurzburg; Abrell & Deffner, Kempten; Jonas Nordschild, Schweinfurt-on-the-Main. 1909. August Ahammer & Co., Weissenburg a. D., merged with the bank's deposit office at the same town. 995 National Monetary Commission (10) The OP i . I'he Revisions- und Vermogensverwaltungs-Aktien-Gesellschaft Lr . ' (Audit and Trust Company) name changed in 1909 to "Re-vision," Treuhand-Aktiengesellschajt, Berlin. Capital stock, 1,000,000 marks, increased to 2,000,000 in 1909. The institution has 3 branches (Cologne, Dresden, Leipzig,) jointly with the Commerz- und Disconto - Bank. The former branch at Munich was in 1907 made a separate institution with a capital stock of 400,000 marks under the name of the Bayerische Revisions- und Vermogensierwal- tungs-A ktiengesellschaft. 1905. The Bank fur Thuringen, formerly B. M. Strupp A.-G., in Meiningen; capital stock, 10,000,000 marks, of which 7,500,000 marks is paid in. This bank was established jointly with the former banking house of B. M. Strupp, the Mitteldeutsclie Kreditbank, and the Allgemeine Deutsche Kreditanstalt. It has 12 branches, located as follows: Apolda, Eisenach, Frankenhausen a. Kyffhauser, Gotha, Hildburghausen, Jena, Neustadt on the Orla, Possneck, Ruhla, Saalfeld, Salzungen, and Sonneberg. It has ab- sorbed the following firms: 1905. B. M. Strupp. Meiningen, with branch offices in Gotha, Hildburghausen, Salzungen, Ruhla, and Jena. 1906. Hermann Lobe, Meiningen; the Meiningen branch of the Mitteldeutsche Kreditbank; J. G. Bohme & Sohn, Apolda; Richard Eberlein, Possneck. 1907. Severus Ziegler, Eisenach; Nikol. Martin Scheler & Sohn, Saalfeld. 1909 The Bankverein Frankenhausen. 1906. The Deutsch-Afrika Bank, capital stock 1,000,000 marks. It has branches in Swakopmund, Windhuk, and Liideritzbucht, and an agency in Santa Cruz. 1906. The Banque de Credit (Kreditna Banka), Sofia, capital stock 3,000,000 gold leva (francs), of which 1,000,000 gold leva has been paid in, jointly with S. Bleichroder and the Nord- deutsche Bank. . The Stahl & Federer Aktiengesellschaft, Stuttgart, capital stock 10,000,000 marks. It has 3 branches, located in Heilbronn, Reutlingen, and Pfullingen. It has absorbed the following firms: 1907. I. Gumbel, Markt in Heilbronn; Emil Ruoff, Reutlingen. 1908. Johannes Rieger, Pfullingen. It has a community of interest with the Gewerbebank in Ulm. 996 The German Great Banks The Disconto-Gesellschaft has absorbed the following firms: 1904. J. Schultze & Wolde, Bremen. 1906. Eugen Schlieper & Co., Berlin; Gebr. Neustadt, Frankfort-on- the-Main. 1907-8. Meyer Cohn, Berlin. 1909. Bamberger & Co., Mainz. This firm had on November, 1908, absorbed the firm Gebriider Oppenheim, of Mainz. Through stock ownership, the Disconto-Gesellschaft has been united in a community of interest with the following institutions: 1895. Norddeutsche Bank, Hamburg. 1901. Allgemeine Deutsche Kreditanstalt, Leipzig. 1904. Barmer Bankverein, Hinsberg, Fischer & Co., Barmen. 1904-5. Siiddeutsche Disconto-Gesellschaft, Mannheim; Geestemimder Bank, Geestmunde. 1 . The Norddeutsche Bank, Hamburg, capital stock 50,000,000 marks, cash contributions of "complementary" partners (Komplementare) 1,200,000 marks, ordinary surplus 5,120,000 marks, special reserves 6,235,000 marks. It has i branch in Altona; 6 deposit (giro) offices, 5 of which are in Ham- burg and i in Harburg; and i commandite, Ephraim Meyer & Sohn in Hanover. It absorbed in 1904 the banking firm of W. S. Warburg, in Altona. 2. The Allgemeine Deutsche Kreditanstalt, Leipzig; capital stock, 90,000,000 marks; surplus, 37,850,751 marks. It has 21 branches, located as follows: Altenburg, Annaberg, Bautzen, Bernburg, Chemnitz, Dresden, Freiberg, Gera, Glauchau, Greiz, Grimma, Leopoldshall, Limbach in Saxony, Mark- ranstadt, Meerane, Oschatz, Pirna, Riesa, Schkeuditz, Schmolln, Zittau, and, since 1909, Meuselwitz. It has 1 5 deposit offices (9 in Leipzig and suburbs, 6 in Dresden and sub- urbs), but no commandites. It has absorbed the following banks and firms: 1873. Lingke & Co., Altenburg. 1901. Becker & Co., Leipzig and Greiz. Before that time the Dis- conto-Gesellschaft had had an interest in this firm. 1902. C. F. Blaufuss, Gera. 1903. Giinther & Rudolph, Dresden. 1905. Vereinsbank, Grimma (capital stock, 500,000 marks); Erngt Berndt, Annaberg; C. G. Lochmann, Wwe. & Sohn, Oschatz; Kunath & Nieritz, Chemnitz. 1907. Ketzscher & Andreae, Pirna; Bernburger Bankverein Wich- mann & Co., Bernburg and Leopoldshall (Stassfurt) ; Ferdi- nand Heyne, Glauchau; Ludwig & Co., Freiberg (Saxony). Through stock ownership the Allgemeine Deutsche Kreditanstalt is united in a community of interest with the following banks: The V ogtldndische B&nk, Plauen i. V. (capital stock, 5,500,000 marks), with branches in Auerbach and Falkenstein i. V., Klingenthal i. S., and Reichenbach i. V. ; Busse & Co., Berlin; Bayerische Disconto- und Wechsel- bank in Nuremberg; Bank fur Thuringen, formerly B. M. Strupp, Meiningen. 997 National Monetary Commission Since 1904-5 the Oberlausitzer Bank, in Zittau (capital stock, 2,700,000 marks, branch at Neugersdorf), and the Vereinsbank, in Zwickau (capital stock, 4,500,000 marks). The shares of the Allgemeine Deutsche Kredit- anstalt, which had to be given in exchange for the shares of these institu- tions, were obtained primarily from the holdings of the Disconto-Gesell- schaft. On the supervisory board of the Oberlausitzer Kreditanstalt both the Allgemeine Kreditanstalt and the Disconto-Gesellschaft are represented. 3. The Banner Bankverein Hinsberg, Fischer & Co., Barmen (capital stock, 59,836,200 marks), has 17 branches, located as follows: Bielefeld, Cologne, Crefeld, Dortmund, Diisseldorf, Hagen, Hamm, Iserlohn, Lennep, Liidenscheid, Maria-Gladbach, Ohligs, Osnabriick, Remscheid, Rheydt, Soest, and Solingen. It has 5 deposit offices, located as follows: Barmen-Rittershausen, Hohen- limburg, Uerdingen, and 2 in Diisseldorf. It has absorbed the following banks and firms. 1 1898. The Gladbacher Bankverein Quack & Co., Maria-Gladbach. 1900. Leffmann Stern, Hagen. 1902. The Diisseldorfer Bankverein (capital stock, 9,000,000 marks). 1904. The Dortmunder Bankverein, which had acommandite inter- est in the banking house Balcke & Co., and had branches in Hamm and Soest. 1905. A. W. Dreyer, Wwe., Bielefeld; Wallach & Emanuel, Iserlohn; N. Blumenfeld, Osnabriick; The Cref elder Gewerbebank, Crefeld (capital stock, 2,000,100 marks); the Liidenscheider Bank, formerly Ludenscheider Volksbank (capital stock, 1,250,000 marks). 1906. Albert Simon & Co., Kommanditgesellschaft, Cologne. 1907. The Lenneper Volksbank, Lennep. 1908. The Bonner Privatbank, Bonn. The Disconto-Gesellschaft delegates one of its managing partners to serve on the supervisory board of the Barmer Bankverein, and the Barmer Bankverein in turn delegates one of its directors to serve on the supervisory board of the Disconto-Gesellschaft. 4. The Suddeutsche Disconto-Gesellschaft, Mannheim (capital stock, 31,250,000 marks), has 4 branches, located as follows: Freiburg i. Br., Lahr i. B. Landau, and Pforzheim; i deposit office, in Heidelberg; 6 agencies, in Annweiler, Bergzabern, Edenkoben, Germersheim, Mullheim i. B., and Neustadt i. Schw. ; and i commandite, viz, E. Ladenburg in Frankfort on-the-Main. It has absorbed the following firms: 1904-5. W H. Ladenburg & Sohne, Mannheim. 1906. Weil & Benjamin (Kommanditgesellschaft), Mannheim; Stosser-Fischer, Lahr; J. M. Bernion, Landau. 1908. Jacob Baer, Bruchsal. 998 The German Great B a n The Disconto-Gesellschaft is represented on the supervisory board of the Siiddeutsche Disconto-Gesellschaft, and one of the partners of the firm E. Ladenburg, has entered the supervisory board of the Disconto-Gesell- schaft. Finally, since 1907, the Disconto-Gesellschaft is on friendly terms with the Magdeburger Bankverein, of Magdeburg (capital stock, 15,000,000 marks) (see above, p. 62 9) . This became manifest in the election of a director of the Disconto-Gesellschaft to a place on the supervisory board of the Magdeburger Bankverein. VI. DRESDNER BANK, DRESDEN. [Founded 1872.] Capital, 180,000,000 marks. (200,000,000 marks since 1910.) Surplus, 51,500,000 marks. The Dresdner Bank has 27 branches, located as follows: Altona, Augs- burg, Bautzen, Bremen, Biickeburg, Kassel, Chemnitz, Detmold, Dresden, Emden, Freiburg i. B., Frankfort-on-the-Main, Fiirth, Greiz, Hamburg, Hanover, Heidelberg, Leer, London, Liibeck, Mannheim, 20 Meissen, Munich, Nuremberg, Plauen i. V., Wiesbaden, and Zwickau. It has i commandite, viz., the exchange office (Wechselstube) Bosse, Keil & Co., Berlin, formerly the commandite of the Deutsche Genossenschafts- bank Sorgel, Parrisius & Co. Since 1895 its deposit offices have grown to 57 in number 23 in Berlin, 2 each in Charlottenburg, Schoneberg, Friedenau, and Gross-Lichterfelde; i each in Pankow, Steglitz, Wilmersdorf, Rixdorf, Tempelhof, and Altona; 4 in Dresden, i in Frankfort-on-the-Main, 1 1 in Hamburg, i in Linden near Hanover, 2 in Nuremberg, and i in Wiesbaden. In 1909 there were added branches in Eschwege and Fulda. The Dresdner Bank has cooperated in the establishment of the following subsidiaries: 21 1889. The Deutsch-Asiatische Bank (with other firms). (See p. 983.) 1894. The Banca Commerciale Italiana (with other firms). (See p. 983.) 1904. The Deutsch-Westafrikanische Bank (established jointly with the Deutsch-Westafrikanische Handelsgesellschaft. (See p. 457, sub 4.) The capital stock of this company is 1,000,000 marks. The bank is a colonial company, having its office in Berlin, and branches in Hamburg, Lome, and Duala. Its purpose is to regulate the currency circulation and facilitate pay- ments both within the German colony of West Africa, and in its relations with foreign countries, and to carry on banking in accordance with its charter. 1904. Speyr & Co., A.-G., Basle (capital stock, 15,000,000 francs). 999 National Monetary Commission I95- 22 The Treuhand Vereinigung, A.-G., Berlin (capital stock, 1,000,000 marks), with a branch in Dresden and an office jointly with the A. Schaaffhausen'scher Bankverein in Cologne. The Deutsche Orientbank, A.-G., Berlin, capital stock, 16,000,000 marks, established jointly with the National bank f iir Deutschland, see pages 446 and 454. 1906. The Deutsch-Sudamerikanische Bank, A.-G., Berlin, capital stock, 20,000,000 marks, established jointly with the A. Schaaffhausen'scher Bankverein. The Dresdner Bank has absorbed the following banks and firms: 1872. Michael Kaskel, Dresden. 1873. The Sachsischer Bankverein, capital stock, 5,250,000 marks. 1877. The Sachsische Kreditbank, capital stock, 9,000,000 marks. 1891. R. Thode & Co. 1892. The Anglo-Deutsche Bank, Hamburg, capital stock, 12,300,000 marks. 1895. The Bremer Bank, Bremen, capital stock, 20,000,000 marks. 1896. S. E. Wertheimber, Nuremberg and Fiirth. 1898. Alexander Simon, Hanover; W. J. Gutmann, Nurem berg. 1899. The Niedersachsische Bank, Biickeburg, capital stock, 6,000,000 marks. 1904. The Deutsche Genossenschaftsbank Sorgel, Parrisius & Co., Frankfort on-the-Main and Berlin, capital stock, 30,000,000 marks. Through stock ownership this bank had a community of interest with the W urttembergische Landesbank of Stuttgart, capital stock, 8,000,000 marks, with 2 branches (Ulm and Heilbronn) and i deposit office (Cannstatt). The Wurttembergische Landesbank had absorbed thef olio wing firms: 1899. Breunig & Fischer, Stuttgart. 1900. Albert Schmidts Nachfolger, Heil- bronn, and had a commandite interest in the Wechselstube Bosse, Keil & Co., in Berlin. In taking over and continuing the business of the Genos- senschaftsbank (Bank for Cooperative Credit Societies), the Dresdner Bank instituted special cooperative credit de- partments with cooperative society advisory councils in Ber- 1000 The German Great Banks lin and Frankfort-on-the-Main in order to minister to the business of the German industrial and agricultural coopera- tive societies. 1904. Von Erlanger & Sohne, Frankfort-on-the-Main, ab- sorbed by the Dresdner Bank jointly with the A. Schaaffhausen'scher Bankverein. Through stock ownership, this firm had a community of interest with the following banks: 23 (a) The Oldenburgische Landesbank, Oldenburg, capital stock, 3,000,000 marks, of which 40 per cent, or 1,200,000 marks, is paid up. This bank has 7 branches and 43 agencies. (6) The Mecklenburgische Bank, Schwerin, capi- tal stock, 5,000,000 marks, of which 40 per cent, or 2,000,000 marks, is paid in. It has a branch in Neubrandenburg and 54 agencies and has in turn a community of interest with the following banks: Rostocker Gewerbebank, A.-G., Rostock, capital stock, 980,000 marks, with 26 agencies. Neuvorpommersche Spar- und Kreditbank, A.-G., Stralsund, capital stock, 1,000,000 marks, with 26 agencies. The Dresdner Bank and the A. Schaaffhau- sen'scher Bankverein are both represented on the supervisory board of the Mecklenburgische Bank. (c) The Landgrdflich-Hessische konzessionierte Landesbank, Homburg v. d. H., capital stock, 1,000,000 marks, with 2 branches (Nauheim and Friedberg). (d) The Schwarzburgische Landesbank, Sonders- hausen (capital stock, 2,500,000 marks, of which 1,000,000 marks are paid in), with 6 branches, located as follows: Arnstadt, Ilmenau, Rudolstadt, Saalfeld, Suhl, Weida. The Dresdner Bank and the A. Schaaffhausen' scher Bankverein are represented on the supervis- ory board of this bank. 1906. Ed. Kauffmann & Fehr, Freiburgi. B. 24 ; Ernst Heyde- mann, Meissen; C. H. Reinhardt, Bautzen. 1907. Paul von Steffen, Augsburg. 1908. M. Kapeller, Munich; Eduard Bauermeister, Zwickau; Kahl & Oelschlagel, Dresden, whose business was then in process of liquidation: Mauer & Plaut, Kassel. 1001 National Monetary Commission 1909. David. M. Kahn, Eschwege; F. Wallach, Fulda. Through stock ownership 25 the Dresdner Bank has a community of interest with the following banks since the dates given: 1903. (i) The Mdrkische Bank, Bochum, capital stock 9,000,000 marks. (2) The Rheinische Bank, Essen (formerly Mulheim- on-the-Ruhr), capital stock 2 1,000,000 marks. 26 1904. (3) The Oberschlesische Bank, Beuthen, capital stock, 2,500,000 marks. (4) The Wurttembergische Landesbank, Stuttgart, capi- tal stock, 8,000,000 marks. (5) The Oldenburgische Landesbank, Oldenburg, capi- tal stock, 3,000,000 marks, of which 1,200,000 marks are paid in. (6) The Mecklenburgische Bank, Schwerin, capital stock, 5,000,000 marks, of which 2,000,000 marks are paid in. (7) TheLandgrdflichHessische konzessionierte Landes- bank in Homburg v. d. H., capital stock, 1,000,000 marks. (8) The Schwarzburgische Landesbank, 27 Sondershau- sen, capital stock, 2,500,000 marks, of which 1,000,000 marks are paid in. (1) The Mdrkische Bank, Bochum, has 9 branches, located. as follows: Arnsberg, Beckum, Castrop, Dortmund, Gelsenkirchen, Langendreer, Minister i. W., Recklinghausen, and Witten. It has 2 agencies, in Buer and Oelde, and i exchange office at Wanne. It absorbed in 1898. The banking firm Albert Lauffs, Bochum. 1899. The Herner Bank, Herne, capital stock, 1,000,000 marks. (2) The Rheinische Bank, Essen (formerly in Mulheim-on-the-Ruhr),has 4 branches at Mulheim, Duisburg, Meiderich, and Dinslaken, and i exchange office at Hochfeld. It has absorbed the following firms: 1897. Gust. Hanau, Mulheim-on-the-Ruhr. 1905. Herm. Thate, Meiderich. 1906. Dietrich Schroter, Dinslaken. 1907. Fr. H. Moeschlers Sohne, Meerane (i. S.). The Dresdner Bank is represented on the supervisory board of the Rheinische Bank. (3) The Oberschlesische Bank, Beuthen, has 2 deposit offices (exchange offices), i in Konigshiitte and i in Tarnowitz. (4) The Wurttembergische Landesbank, Stuttgart, has 2 branches (Ulm and Heilbronn) and i deposit office (in Kannstadt), had a community of interest with the Deutsche Genossenschaftsbank until 1904, and since then with the banks formerly affiliated with the banking house von Erlanger & Sohne (see p. 1001), i. e., with the following: The German Great Banks (5) The Oldenburgische Landesbank, Oldenburg, with 8 branches and 43 agencies. (6) The Mecklenburgische Bank, Schwerin, which has a branch in Neu- brandenburg and 50 agencies, and has a community of interest with the (a) Rostocker Gewerbebank, A.-G., Rostock, capital stock, 2,000,000 marks, with 50 agencies, and the (6) Neuvorpommersche Spar- und Kreditbank, Stralsund, capital stock, 1,000,000 marks, with 26 agencies. (7) Landgrdftick Hessische Konzessionierte Landesbank, Homburg v. d. H., with two branches (Nauheim and Friedberg in Hesse). (8) Schwarzburgische Landesbank, Sondershausen, with 6 branches. Between 1903 and the end of 1908 the Dresdner Bank was united by agreement with the A. Schaaffhausen'scher Bankverein in a community of interest. The A. Schaaffhausen'scher Bankverein, of Cologne, has a capital stock of 145,000,000 marks. The contract was in substance as follows: The community of interest was to run from January i , 1 904, for thirty years. The two companies were not merged, but the business of both was conducted jointly, the net profits were pooled, and then divided in proportion to the capital stock of each, including surplus funds as shown by the balance sheets. Only such sums as had been permanently put into the surplus were to be counted i. e., amounts definitely set aside as surplus, and not funds set aside to cover particular risks. The annual profits were pooled under the following conditions: Each company was to keep its own profit-and-loss account, regardless of its com- munity of interest. From the gross profits each bank was to deduct first all the general expenses and the amounts required to be written off or set aside for surplus funds by statute or by the by-laws, and then the amounts of compensation shown by the books as due to the general manageual staff, the managers of the branches, to other officials and members of the super- visory board, the bonuses to employees, and a suitable amount for deprecia- tion on bank buildings. The remaining net profits were to go into a com- mon fund, to be divided on the basis indicated above. After the share of the profits due to each bank had been determined, each institution was to prepare independently its own final balance sheet and profit-and-loss account, in accordance with statute and its by-laws. Whatever amount one bank might have to pay to the other was to be entered as profit or loss in the profit-and-loss account of either bank, de- creasing by so much the amount of net profits of the bank making payment, and increasing by so much the net profits of the bank receiving payment. The computation o the actual allowances (Tantiemen) to the members of the managerial staff and o the supervisory board were thus to be based not on the amounts shown by the provisional profit-and-loss statement, but on the final determination of net profits. The pooling applied only to the annual profits, but not to losses. In this case the accounts of either company showed a net loss for the year, loss, unless made up by the share in the profits of the other company, 1003 National Monetary Commission was to be covered from its surplus or in some other manner, in order that the net profits of the following year might not be reduced by any losses carried over from the preceding year's account. In order to insure unity of management and the pursuance of a common policy, the following pro- visions were made and carried into effect: (1) Either bank was to be represented by two of its executive officers, and three members of its supervisory board on the supervisory board of the other bank. (2) For the preliminary consideration of important transactions the supervisory board of either bank was to elect from its midst a standing committee, composed of an equal number of members, who were to be joined by two persons, normally executive officers, of the other company. (3) These two committees combined were to form a council of delegates (Delegationsrat). Aside from passing upon questions involving differences of opinion, this council was to approve the provisional balance sheet and profit-and-loss statement drawn up by each bank with the view of arriving at the joint profits, to pass upon the division of the common fund, and par- ticularly to determine what sums were to be written off or set aside for sur- plus funds before computing profits. The increase of capital by either company was made dependent on the approval of the council in the sense that any increase of capital stock made by either bank without such approval was to be disregarded in apportioning the annual profits, and furthermore that such an increase was to give to the other bank the right to withdraw from the agreement. It was further agreed that whenever experience showed that a modifica- tion of the terms of the agreement became necessary in any respect, any change was to be approved by at least two-thirds of all the members of either supervisory board, in the same way, as when the original agreement was made. The community of interest, as a matter of fact, came to an end on Jan- uary i, 1909, although the annual report spoke only of a "modification." " Provision was however made " for the continuation of the existing inti- mate relations and the mutual representation on both boards under a new agreement. For data regarding the Mitteldeutsche Kreditbank, see note 28 on page 1016. VII. NATlONAIvBANK FUR DEUTSCHLAND, IN BERLIN. [Founded in 1881.] Share capital, 80,000,000 marks. Surplus, 13,220 ooo marks. Branches. None. Commandites (2). Erttel, Freyberg & Co. in Leipzig and, since 1905, Born & Busse in Berlin. Deposit offices (17). Fourteen in Berlin and i each in Charlottenburg, Potsdam, and Steglitz. 1004 The German Great B a n Jointly with several other concerns the bank founded the following subsidiary companies (Tochtergesellschaften): 29 1889. The Deutsch-Asiatische Bank. (See p. 983.) 1895. The Credito Italiano in Rome (share capital, 75,000,000 lire), with 17 branches. Jointly with the Banque Nationale de Gr&ce, it founded: 1904. The Banque d' Orient in Athens (share capital, 10,000,000 francs) ; branches in Saloniki and Smyrna. 1905. Jointly with the Dresdner Bank and the A. Schaaff- hausen'scher Bankverein, it founded the Deutsche Orientbank Aktiengesellschaft in Berlin, which took over the former branches of the Banque d' Orient in Hamburg and Con- stantinople. 30 Deposit offices, 3, including Stamboul and Pera. Additional branches have been opened in Cairo, Alexandria, Brussa, Kalamata, Constantinople, Saloniki, Smyrna, Tangier, and Casablanca (share capital, 16,000,000 marks). Has a community of interest since 1905 with the Deutsche Paldstinabank in Berlin (share capital, 5,000,000 marks), founded in 1899, with 5 branches in Haifa, Jaffa, Jerusalem, Beirut, and Hamburg; founded in turn as its subsidiary (Tochtergesellschaft) the Levante-Kontor, G. m. b. //., with office in Constantinople. The Nationalbank fur Deutschland absorbed the following banking firms: 1898. Jacob Landau in Berlin. 1904. S. Lange in Berlin. 1907. Born & Busse in Berlin, which since 1905 was conducted as a commandite of the bank in conjunction with other partners. 31 VIII. A. SCHAAFFHAUSEN 'SCHER BANKVEREIN, IN COLOGNE-ON-THE-RHINE [Founded in 1848.] Share capital, 145,000,000 marks. Surplus, 34,157,125 marks. Branches (io). 32 Berlin (since 1891), Bonn, Cleve, Crefeld, Duisburg ) Dusseldorf, Neuss, Rheydt, Ruhrort, and Viersen. Commandite Philipp Elimeyer in Dresden, since 1898. Deposit offices (75). Cologne (3), Godesberg, Charlottenburg, Schoneberg, Potsdam, Diilken, Emmerich, Grevenbroich, Kempen, Krefeld, Moers, Odenkirchen, Wesel. Founded or took part in the founding of the following subsidiary com- panies (Tochtergesellschaften) , 33 1889. The Deutsch-Asiatische Bank jointly with other domestic and foreign concerns. (See p. 983.) 1898. The Banque Internationale de Bruxelles jointly with other concerns. (See p. 442, letter /*.) 1005 National Monetary Commission 1900. The Westfdlisch-Lippische Vereinsbank, A.-G., in Bielefeld (share capital, 7, 000,000 marks) . The latter has 4 branches, viz, in Detmold, Herford, Lemgo, Minden; 2 deposit offices, Oeynhausen and Rinteln on the Weser. It absorbed the following banking firms: 1900. Katzenstein & Sohne, Bielefeld. 1900. Gebriider Siekmann in Herford. . Salomon & Oppenheimer in Detmold and Lemgo. 1904. Jointly with the Dresdner Bank, the Stock Company Speyr & Co. in Basle (share capital, 15,000,000 francs). 1905. Jointly with the Dresdner Bank, the Treuhand-Vereinigung, Aktiengesellschaft,\n Berlin (share captal, 1,000,000 marks). . Jointly with the Dresdner Bank and the Nationalbank fur Deutschland, the Deutsche Orientbank, A ktiengesellsch-aft, in Berlin (share capital, 16,000,000 marks), with branches in Constantinople and Hamburg, taken over from the Banque d'Orient, and additional branches in Alexandria, Brussa, Cairo, Kalamata, Saloniki, and Smyrna. 1906. Jointly with the Dresdner Bank, the Deutsch-Sudamerika- nische Bank, Aktiengesellschaft, in Berlin (share capital, 20,000,000 marks). (See p. 446.) The A. Schaaffhausen'scher Bankverein absorbed the following banking firms and institutions: 1903. The banking firm A. & L. Camphausen in Cologne-on-the- Rhine. 1904. The Westdeutsche Bank, formerly Jonas Cahn, in Bonn (share capital, 8,000,000 marks). Originated from the transformation in 1896 of the banking firm Jonas Cahn in Bonn, and took over in 1898 the banking firm Solmitz & Cohen in Cologne-on-the-Rhine. 1904. The Niederrheinische Kredit-Anstalt, formerly Peters & Co., in Crefeld (share capital, 21,000,000 marks) with twelve branches, in Duisburg, Rheydt, Ruhrort, Neuss, Emmerich, Mors, Grevenbroich, Odenkirchen, Viersen, Wesel, Cleve, and Kempen-on-the-Rhine. 1904. Jointly with the Dresdner Bank, the banking house von Erlanger & Sohne in Frankfort-on-the-Main. (See p. 1001.) 1908. The banking firm Blumberg & Gollmick in Berlin. The A. SchaafThausen 'scher Bankverein maintains community of interest relations 34 with the following institutions : I. Through ownership of shares: (i) Since 1901 with the Pfdlzische Bank in Ludwigshafen (share capital, 50,000,000 marks). Branches, 16, viz, in Alzey, Bamberg, Bensheim a; d. B., Darkheim a. d. D., Frankenthal, Frankfort-on-the-Main, Kaiserslautern, Landau (Palatinate), Mannheim, Munich, Neustadt a. d. H., Nuremberg, Pirmasens, Speyer, Worms, and Zweibriicken. Agencies, 4, viz, in Donau- 1006 The German Great Banks eschingen, Gemersheim, Griinstadt, and Osthofen (Rhenish Hesse). Ex- change and deposit offices, n, viz, Frankfort-on-the-Main, 4; Munich, 3; Lambrecht, i ; Lampertheim, i ; Landstuhl, i . Absorbed the following banks and banking firms : 1886. The Volksbank in Ludwigshafen. 1894. The banking firm Joh. Franck in Worms on-the-Rhine; the banking firm Louis Dacque" in Neustadt a. d. H. 1895. The Deutsche Unionbank in Mannheim (founded in 1873 with a capital of 6,000,000 marks) and in Frankfort-on-the-Main, which in turn had absorbed the banking firm Gebr. Sonne- berg in Frankfort-on-the-Main. 1896. The banking firm J. F. Haid in Speyer. 1897. The banking firm Miiller & Weyland in Landau; the banking firm Karl Weyland in Landau ; the banking firm Hermann Menner in Landau; the banking firm Zweibriicker Bank, Lehmann, Miiller & Co., in Zweibrucken. 1898. The banking firm Bloch & Co., in Munich and Nuremberg; the banking firm Seb. Pichler's sel. Erben in Munich; the banking firm Reichard & Glaser in Frankenthal. 1899. The Vorschussverein in Bamberg; the Vorschuss-verein in Alzey. 1900. The banking firm Markus Levy in Worms-on-the-Rliine. . The Volksbank in Bensheim. 1908. The banking firm Baruch Bonn in Frankfort-on-the-Main. The Volksbank in Germersheim. (2) Since 1903 with the Mittelrheinische Bank in Coblenz (share capital, 20,000,000 marks). Branches, 3, viz, in Duisburg, Meiderich, and Metz. The Mittelrheinische Bank maintains community of interest relations with the following institutions: The Mulheimer Bank in Mulheim-on-the-Ruhr, founded in 1889 with a share capital of 9,000,000 marks (number of branches, 3, viz., in Hamborn, Oberhausen, and Sterkrade) ; the Dorstener Bank in Dorsten, and the Mdr- kischer Bankverein in Gevelsberg. A director of the A. Schaaffhausen'scher Bankverein and a former direc- tor of the Bankverein, at present a director of the Rheinische Bank, have joined the supervisory board of the Mittelrheinische Bank. (3) Since 1905 with the Ostbank fur Handel und Gewerbe in Posen, a con- stituent of the Darmstadter Bank group (see p. 984, No. 2), with a share capi- tal of 18,000,000 marks, which absorbed in 1905 the Ostdeutsche Bank votm. J. Simon Ww. & Sohne (share capital, 10,000,000 marks), with which the A. Schaaffhausen'scher Bankverein had been maintaining community of interest relations. II. By agreement: The A. Schaaffhausen'scher Bankverein maintained a community of interest with the Dresdner Bank from 1903 to January i, 1909. (The tenor of the earlier agreement is stated above on p. 1003 under the head of 1007 National Monetary Commission the Dresdner Bank.) Since then as a result of a new understanding there exist merely "intimate business relations" which find expression in the fact that " provision has been made for the mutual representation on the supervisory boards of either institution." APPENDIX VIII. PROGRESS OF CONCENTRATION WITHIN EACH OF THE GREAT BANKS AND WITHIN THE BANKS ALLIED WITH THEM (KONZERNBANKEN). Data for the eight Berlin great banks TABUS i. End of year Number of establish- ments (main office and branches) in Ger- many. Deposit and ex- change offices in Germany. Command- ite con- nections with banking houses in Germany. Permanent participa- tions in German joint stock banks. M Sum total of institu- tions. 189? 18 !896 20 27 63 1902 87 16 1905 46 149 I 2 241 1908 69 264 Data for each of the great banks, TABLE 2. Darmstddter Bank. x8o< 1896 1900 3 4 8 1902 8 1905 %6 37 21 38 r 39 4 ^6 1908 g . Berliner Handelsgesellschaft. 1895 1896 1900 1902 I 1905 1908 1008 The German Great Banks Data for the eight Berlin great banks Continued. TABLE 4. Commerz- und Disconto-Bank. 1896 I 3 3 3 4 I I 2 6 8 3i 66 2 S 26 54 1902 1905 2 2 1908 6 TABLE 5. Deutsche Bank. 1895 5 5 5 7 8 10 12 12 I? 35 44 73 17 i? 27 47 64 116 1896 5 5 n 3i 1905 I 2 1908 TABLE 6. Direktion der Disconto-Gesellschaft. 1895 i i i 2 "3 6 i i i 5 8 16 i i 3 3 ft, 20 3 " 3 5 10 ll 42 1896 1900 1902 (45) 1908 . . TABLE 7. Dresdner Bank. 1895 4 6 10 ii I4 28 7 10 27 32 48 105 1896 4 17 21 24 57 1902 I I 48 g 19 1908 90311 II 65 1009 National Monetary Commission Data for the eight Berlin great banks Continued. 8. Nationalbank fur Deutschland. End of year Number of establish- ments (main office and branches) in Ger- many. Deposit and ex- change offices in Germany. Command- ite con- nections with banking houses in Germany. Permanent participa- tions in German joint stock banks.35 Sum total of institu- tions. 1895 9 2 12 1896 1900 13 1902 1905 (49) 16 1908 9. A. Schaaffhausenscher Bankverein. 1 1895 2 1896 * 2 1900 1902 4 1905 . . 61 10 1908 II IS I 12 39 In the subsequent table (10) a comprehensive picture of the progress of concentration is given for those provincial banks which are allied with one of the five Berlin great banks, each of which, as we saw, is at the head of a bank group. The 41 banks which are part of the community-of-interest systems of the great banks the so-called Konzernbanken, exclusive of subsidiary banks (Tochterbankeri) show the following development: 1010 The German Great Banks TABLE 10. Group (Konzern) of Branches. Agencies. Commandites. e o p Have absorbed. Communities of interest by ownership or ex- change of stock. Private bank- ing houses. Banks. I. BANK FUR HANDEI, UND INDUSTRIE CDARMSTADTER BANK) , 52 i. Breslauer Discontobank 2. Ostbank fur Handel und Gewerbe 3. Nordwestdeutsche Bank 10 9 8 4 i 2 i 3 22 II I 8 2 2 2 5 6 3 3 8 2 I 2 3 i 63 2 4 4. Bayerische Bank fur Handel und Industrie II. DEUTSCHE BANK." i. Bergisch-Markische Bank 2. Schlesischer Bankverein 3. Hannoversche Bank i? 13 5 ii 2 4 13 3 3 3 S i 4 13 8 2 (a) OsnabriickerBank. . . (6) Hildesheimer Bank. . 4. Duisburg-RuhrorterBank. . . 5. Essener Kreditanstalt. 3 5 3 6. Siegener Bank fur Handel und Gewerbe 7. Sachsische Bank 8 3 6 i 8. Essener Bankverein I 2 i 9. Oldenburgische Spar- und Leihbank 10. Emder Bank ii. Privatbank zu Gotha 12. Mecklenburger Hypotheken- u. Wechselbank, with the. . Mecklenburgische Spar- bank 3 i i 13 i 63 79 2 i 2 I I 3 6 13. Rheinische Kreditbank 65 . . . . III. DlSCONTO-GESELLSCHAKT. 56 i. Norddeutsche Bank 9 I 7 2 IOII National Monetary Commission TABLE) 10 Continued. Group (Konzern) of Branches. Agencies. Commandites. Deposit offices Have absorbed. Communities of interest by ownership or ex- change of stock. Private bank- ing houses. Banks. 2. Allgemeine Deutsche Kredit- anstalt 27 4 IS ii i 6 (6) Vogtlandische Bank . . (c) Oberlausitzer Bank. . . (d) Vereinsbank in Zwi- 3 Barmer Bankverein 17 4 5 i 5 6 7 4. Stiddeutsche Disconto-Gesell- schaft 6 I IV. DRESDNER BANK." i Markische Bank. 9 4 2 i i 2. Rheinische Bank 3. Oberschlesische Bank 2 4. Wiirttembergische Landesbank 5. Oldenburgische Landesbank. . 6 Mecklenburgische Bank. . . . 2 8 i 43 5 26 26 3 (a) Rostocker Gewerbe- bank, Aktiengesell- schaf t (6) N e uvorpommer'sche Spar- und Kredit- bank 7. Landgrafl. Hessische konzess. Landesbank 8. Schwarzburgische Landesbank V. A. SCHAAFFHAUSEN'SCHER BANKVEREIN. 58 i. Pfalzische Bank 6 16 3 3 4 II ii 6 2. Mittelrheinische Bank, with the MulheimerBank. . 3 Total 241 325 18 102 89 43 69 16 1012 The German Great Banks NOTES TO APPENDICES VII AND VIII. 1. In alphabetical order. The amounts of share capital and surplus, unless otherwise specified, are as per Dec. 31, 1908. 2. In the case of commandites, i. e. firms in which a bank has a silent- partnership interest, account is taken here of the commandite interests in banking firms. 3. No account is taken of institutions such as the Bank fur Brauindustrie (founded in 1899, share capital 7,000,000 marks) which are financing insti- tutions, but not banks proper ; for the same reason no mention is made of the Siiddeutsche Bodenkreditbank in Munich, founded in 1871 by the Bank fur Handel und Industrie, which is represented on its supervisory board, and of the Siiddeutsche Immobiliengesellschaft in Mainz, on the supervisory board of which the parent bank is likewise represented. 4. In the beginning of 1906 the two institutions, with the cooperation of the administration of the royal private fortune, transformed the Konigliche Wurttembergische Hofbank, hitherto conducted as a partnership (offene Handelsgesellschaft), into a limited company with an original capital of 10,000,000 marks. In 1908 the three institutions jointly transformed the banking firm Doertenbachels in Stuttgart into a limited company with an original capital of 4,000,000 marks. In 1908 the Wurttembergische Vereinsbank took over the banking firm Schlack & Fritsch in Aalen. 5. In addition a premium of 10 per cent, equal to 2,500,000 marks, has been paid in, which constitutes part of the legally prescribed surplus. 6. This bank originated from a transformation of the banking firm Hincke, Bliithe & Meininghaus and had branches in Blumenthal (Han- nover), Dortmund, Osnabriick, and Vegesack. 7. According to its balance sheet as per Mar. 31, 1905, the Bayerische Bank had a capital of 9,000,000 marks and a surplus of 76,210 marks (13,044 marks of reserve) when the firm was transformed into the Bayer- ische Bank fur Handel und Industrie. The capital was reduced to 8,000,000 marks by an exchange of stock at the rate of 9 old shares for 8 new ones. The 1,000,000 thus set free, together with the existing surplus and the undivided profits for the period Apr. i to Dec. 31, 1905, was used to form the new surplus and to cover losses to be written off. With the change of firm the business year was changed to conform with the calendar year period. In the general meeting of Nov. 20, 1905, the capital was raised by 12,000,000 marks, so that at present it amounts to 20,000,000 marks. Of the 12,000,000 marks of new shares 1,000,000 were taken over at the rate of 1 10 per cent by the Darmstadter Bank, 6,000,000 were used in taking over the good will of the firm Gutleben & Weidert, while 5,000,000 serve to strengthen the operating resources of the bank. 8. No account is taken in this connection of the enterprise founded in 1904-5 under the firm name of the Deutsche-Kolonial-Eisenbahnbau-und Betriebsgesellschaft. Its object is the construction and operation in the German colonies of railroads, minor railways, and harbor facilities. Since 10x3 National Monetary Commission Apr. i, 1905, this company has been operating as a lessee the Usambara Railroad in German East Africa; in 1905 it commenced, for account of the Imperial Government, the construction of the Liideritzbucht-Kubub Rail- way (about 130 km.) in German Southwest Africa. Neither is any account taken here of the Bank fur deutsche Eisenbahnwerte, founded in 1906 (capital 10,000,000 marks, of which 25 per cent was paid in; bonds, 5,000,000 marks). 9. No account is taken here of the Bank fur Bergbau und Industrie, the shares of which are partly owned by the Commerz-und Disconto-Bank, for the reason that the former is a financing company. 10. The Munich branch opened in 1906 deposit offices in Munich and Augsburg, while taking over the banking firm Bahler & Heymann in Munich and Augsburg; the Dresden branch opened in 1907 a deposit office in Meissen, and in 1908 one in Radeberg (Saxony). 11. The former commandite Guillermo Vogel & Co. in Madrid has been transformed into a branch of the Deutsche Ueberseeische Bank (see supra. P- 439)- 12. No account is taken here of institutions, such as the Bank fur elektrische Unternehmungen in Zurich, founded in 1895 with a capital of 33,000,000 francs, and the Bank fur orientalische Eisenbahnen in Zurich, founded in 1896 with a share capital of 50,000,000 francs, both of them being financing institutions and not banks proper. 13. In addition the Deutsche Bank undertook the liquidation of the Berliner Bankverein (1875) and of the Deutsche Unionbank (1876), taking over at the same time their customers. See Deutscher Oekonomist, Jan. 27, 1906; vol. 24, No. 1205, p. 35. With reference to the La Plata Bank, see above pp. 423 and 433. 14. With reference to the acquisition of shares, a notable instance is the taking over of about 3,000,000 marks of newly issued shares of the Anhalt- Dessauische Landesbank of Dessau in 1905, the capital stock of which was increased by this issue to 12,000,000 marks (see p. 993, sub. a). In 1906 the shares of the Braunschweigische Privatbank and of the Wurttember- gische Vereinsbank were newly acquired, while the share holdings in the Niederlausitzer Kredit-und Sparbank were increased. 15. The firm of David Daniel, of Celle, which had formerly been a com- mandite of the Hannoversche Bank, was made a branch of that bank, which relinquished its commandite interests in the firms of Menz, Bloch- mann & Co., Dresden; H. J. Kledwig & Reibstein, Gottingen; and Reibstein & Co., Miinden. 1 6. The Duisburg-Ruhrorter Bank became a branch of the Essener Kreditanstalt in the middle of 1909. 17. The Deutsche Bank in 1904 (effective Jan. i, 1905) took over a new stock issue of 1,000,000 marks (nominal) of the Oldenburgische Spar- und Leihbank. Unlike the old shares, these have not thus far been listed on the stock exchange 1014 The German Great Banks 1 8. Under the direction of the Mecklenburgische Hypotheken-und Wechselbank, there was founded in 1906 the Mecklenburgische Treuhand- gesellschaft m. b. H. (share capital, 1,000,000 marks), with office inSchwerin. 19. Among stock acquisitions for the last few years we mention 300,000 marks nominal of new shares of the Geestemtinder Bank, in 1906 an issue by which the capital of this bank was increased to 1,300,000 marks, and 300,000 marks of shares of the Bayerische Bodenkreditanstalt of Wurzburg. 20. The Mannheim branch in 1906 opened a deposit office in Freiburg i. B., which took the place of the firm of Ed. Kauffmann & Fehr, acquired by it. 21. We disregard here institutions, which the Dresdner Bank helped to organize, such as the Bank fur orientalische Eisenbahnen in Zurich, or the Zentralbank fur Eisenbahnwerte in Berlin, capital stock 6,000,000 marks, these being financing institutions, but not banks proper. For the same reason we ignore the General Mining and Finance Corporation Limited, of London, capital 1,250,000, an institution in which the Dresdner Bank is heavily interested. 22. For an account of the Deutsche Orientbank founded jointly by the Dresdner Bank, the A. Schaaffhausen'scher Bankverein, and the National- bank, see p. 1005 under the head of Nationalbank fur Deutschland. 23. The permanent investments in the stock of the Eisenbahnbank, and the Eisenbahnrentenbank of Frankfort-on-the-Main are here ignored, as these are financing institutions, but not banks proper. 24. See above note 20. In addition, the Dresdner Bank in 1906 took over all the assets of the Zwickauer Gewerbebank, which went into liquidation. 25. I assume that there exists at least an agreement of regulating the mutual relations of the Dresdner and the affiliated banks, numbered 5 to 8, inclusive. 26. In 1905 10,000,000 marks additional stock was issued, raising the former capitalization to 21,000,000 marks. Of the new issue the A. Schaaffhausen'scher Bankverein took 6,000,000 at par as a permanent participation. At the same time on July i, 1905, it handed over the busi- ness of its branch in Essen to the Rheinische Bank. A former director of the A. Schaaffhausen'scher Bankverein took over the management of the Rheinische Bank and members of the board of managers (Vorstands- mitglieder) of the Schaaffhausen'scher Bankverein took seats on the supervisory board of the Rheinische Bank, as did also the chairman of the supervisory board of the Mittelrheinische Bank. The Rheinische Bank in turn took over in 1906 2,000,000 marks nominal of stock of the Bank- verein Gelsenkirchen of Gelsenkirchen (with a branch in Wattenscheidt), in the establishment of which it had shared. 27. .The banks, numbered 5 to 8, may perhaps better be regarded as affiliated with the Dresdner Bank by contract rather than through stock ownership. In the case of these banks the community of interest is based 1015 National Monetary Commission for the time being on permanent stock holdings of the Dresdner Bank, and not upon the mutual exchange of stock. 28. The Mitteldeutsche Kreditbank, Frankfort-on-the-Main, founded 1856, capital stock (since 1905) 54,000,000 marks; surplus (approxi- mately), 6,400,000 marks. It has 6 branches, located as follows: Berlin, Essen, Fiirth, Giessen, Nuremberg, Wiesbaden, and 3 commandites Meyer & Diss, Baden-Baden, the Kommanditgesellschaft Bernard Wein- mann, Munich, and Weiss Herz & Co., Mayence. Since 1899 it opened 22 deposit offices (13 in Berlin and Charlottenburg, i in Pankow, 4 in Frankfort-on-the-Main, i in Hochst, i each in Marburg, Offenbach, and Wetzlar. It has 2 agencies (in Biidingen and Butzbach). It has absorbed the following firms; 1898, B. Berle, Wiesbaden. 1899, S. Pflaum & Co., Nuremberg & Fiirth. 1906, Arthur Andreae & Co., Frankfort-on-the-Main; Aron Heichel- heim, Giessen; Moritz Heertz, Wetzlar; Hermann Wertheim, Marburg. 1907, North, Kammeier & Co., Essen (formerly a commandite of the Mitteldeutsche Kreditbank). 1909, Otto Goebel, Fulda (acquired to serve as a deposit office). Gebr. Fiirth & Co., Hanau (acquired to serve as a branch). In conjunction with the Disconto-Gesellschaft, the Allgemeine Deutsche Kreditanstalt, and the former banking firm of B. M. Strupp of Meiningen (see p. 996), the Mitteldeutsche Kreditanstalt established as a subsidiary the Bank fur Thuringen formerly B. M. Strupp A. G., Meiningen (share capital 10,000,000 marks, of which 5,000,000 marks were paid in.) The latter has twelve branches (in Eisenach, Franken- hausen, Gotha, Hildburghausen, Jena, Neustadt (Orla), Ruhla, Sal- zungen, Saalfeld, Sonneberg, Apolda, and Possneck. It has absorbed the former Meiningen branch of the Mitteldeutsche Kreditbank, the banking firms B. M. Strupp and Hermann Lobe at Meiningen (the latter since January i, 1906), also the banking firms J. G. Bohme & Sohn at Apolda, and Richard Eberlein at Possneck. 29. No account is taken here of the Bank fiir elektrische Unternehmungen in Zurich, founded in 1895 with the cooperation of the Nationalbank. 30. In the same year (1905) the Wiener Bankverein opened a branch in Constantinople. 31. In 1907 the Nationalbank took over the clientele of the dissolved firm Strauss, Thalmessinger & Co. in Berlin. 32. The former branch in Essen passed over since July i, 1905, to the Rheinische Bank (see p. 1015, note 26). 33. No account is taken here of institutions such as the Bank fiir Deutsche Eisenbahnwerte (share capital, 10,000,000 marks), founded by the A. Schaaffhausen'scher Bankverein in conjunction with other concerns, the former being a financing institution, but not a bank proper. 34. See at>ove p. 1015, note 26, regarding the relations of the A. Schaaff- hausen'scher Bankverein to the Rheinische Bank. 10x6 The German Great Banks 35. No account is taken here of the German oversea banks, nor of the mortgage and brokers' banks. Institutions in which several great banks participate are counted in the table only once. 36. Moreover 6 agencies; no branches in foreign countries. 37. The deposit office in Rostock has been taken over by the Vereins- bank in Wismar. 38. The Bucharest commandite has been transformed (in 1904-5)^0 a stock company, but does not figure in the table for the reason that it is a foreign bank. A new commandite, Fuld & Co. , in Pforzheim, was founded in 1905; the commandite in Dresden, on the other hand, was relinquished in 1905. 39. No account is taken here of the permanent participations in foreign stock companies: The Wechselstuben-Aktiengesellschaft Merkur, in Vienna, the Banca Marmorosch Blank & Co., in Bucharest, and the Bankers' Trading Syndicate, in London. 40. No account is taken here of the permanent participation in the Lon- don andHanseatic Bank (19,302 shares, atio, paid in, equal to 193,020), the latter being a foreign company. 41. Moreover an agency in London. 42. Moreover two commandites in foreign countries of which no account is taken here. 43. Account is taken only of participations in the shape of stock owner- ship (see above, p. 988 et seq.). No account is taken in this and the other tables of communities of interest, concluded in turn by each of the 13 allied banks (Konzernbanken). The former are shown on p. ion and for each of the bank groups in Table 10, last column. Neither is any account taken of the participation in the Zentralamerika-Bank Aktiengesellschaft, although it has its main office in Berlin. 44. Moreover an agency in London. 45. One commandite in a foreign country. 46. No account is taken of the stock participation in the Rheinisch- Westfalische Disconto-Gesellschaft. 47. Moreover an agency in London. 48. No account is taken of the stock participation in the Eisenbahnbank and Eisenbahnrentenbank in Frankfort-on-the-Main, which are financing institutions but not banks proper, nor of the stock participation in the foreign stock company, Speyr & Co., in Basle, etc. Neither do the figures include the stock participations in the Orientbank and in the Deutsch- Sudamerikanische Bank, though the latter has its central office at Berlin. 49. No account is taken of the stock participation in the Deutsche Orientbank, although the latter has its main office in Berlin. 50. The communities of interest entered into by the absorption of the banking house von Erlanger & Sohne (see above p. 1001, sub. a- d) have been enumerated under the head of the Dresdner Bank, which took them over jointly with the A. Schaaffhausen'scher Bankverein. No account is taken here of the stock ownership in the Deutsche Orientbank and the Deutsch-Sudamerikanische Bank. 1017 National Monetary Commission 51. The branch Essen has been dropped (taken over by the Rheinische Bank). 52. The Darmstader Bank group includes also the domestic subsidiary company, Wiirttembergische Bankanstalt vorm. Pflaum & Co., which has a contractual community of interest with the Wurttembergische Vereinsbank. 53. In 1905 the Ostbank fiir Handel und Gewerbe absorbed the Ost- deutsche Bank vorm. J. Simon Wwe. & Sohne in Konigsberg. The latter had 2 branches and had absorbed 2 private banking firms. 54. No account is taken here of domestic subsidiary companies (Tochter- gesellschaften) doing business within the country and belonging to the Deutsche Bank group, viz, the Deutsche Treuhand Gesellschaft and the Braunschweiger Privatbank Aktiengesellschaft in Brunswick, founded in 1905 by the Hannoversche (Osnabriicker und Hildesheimer) Bank through the transformation of the banking firm Ludwig Peters Nachf. 55. The Oberrheinische Bank (vorm. Koster & Co.), taken over in 1904 by the Rheinische Kreditbank, had 9 branches, 2 commandites, one deposit office, had absorbed 6 private banking firms, and jointly with the Deutsche Bank had a community of interest through stock ownership with the Siiddeutsche Bank in Mannheim. 56. The Rheinisch-Westfalische Disconto-Gesellschaft (share capital 80,000,000 marks) is no longer included among the Disconto-Gesellschaft group. At the end of December, 1905, it had 14 branches, 2 commandites, 3 deposit offices, had absorbed 2 private banking firms and 7 banks, and has communities of interest through stock ownership with 5 other banks. The Disconto-Gesellschaft group has been augmented by the accession of the following domestic subsidiary companies: The Bayerische Disconto- und Wechselbank in Nuremberg with 3 branches and 4 deposit offices, which has absorbed 5 private banking firms (see p. 995); the Bank fiir Thii- ringen vorm. B. M. Strupp, Aktiengesellschaft in Meiningen, which has 8 branches and in turn has absorbed 4 private banking firms as well as the Meiningen branch of the Mitteldeutsche Kreditbank (see p. 996) ; and the Revisions- und Vermogens-Verwaltungs-Aktiengesellschaft in Berlin with 2 branches (see ibid.). 57. The Dresdner Bank group comprises also the domestic subsidiary company. Treuhand- Vereinigung, Aktiengesellschaft, in Berlin (see p. 1000). The Deutsche Genossenschaftsbank Sorgel, Parrisius & Co., taken over by the Dresdner Bank, had absorbed 2 private banking firms (see above, p.iooo). 58. The Ostdeutsche Bank vorm. J. Simon Wwe. & Sohne in Konigsberg (which had 2 branches and had absorbed 2 banking firms), taken over in 1905 by the Ostbank fiir Handel und Gewerbe in Posen (which belongs to the Darmstadter Bank group) no longer belongs to the A. Schaaffhausen'- scher Bankverein group. The Ostbank fiir Handel und Gewerbe belongs now simultaneously to the Darmstadter Bank and to the Bankverein groups. 59. The smaller number of communities of interest (16 instead of 20, given as per Dec., 1904, on p. 2 1 1 of the first edition of this work) is accounted for by the elimination of the 6 communities of interest of the Rheinisch- Westfalische Disconto-Gesellschaft and the accession of two new ones. 1018 INDEX. A. Schaaffhausen'scher Bankverein. See Schaaffhausen 'scher Page. Bankverein. Aachener Hiitten-Aktienverein Rote Erde 483, 733-734 Absorption of provincial banking concerns by the great banks, causes ' 658-660 Acceptances : Amounts for all the larger credit banks and share of the total bill circulation of these banks 289 Amounts for each of the great banks 285 Amounts held by German banks 279 In wholesale trade and industry 277 Per cent share of total loans of the larger credit banks 285 Renewal of industrial acceptances, and dangers to the banks . 283 Speculative, used by bankers for stock exchange operations . . 284 Replaced by cash dealings 277 Use in over-sea trade 287 Accommodation bills 213, 214 Actiengesellschaft der Orientalischen Eisenbahnen 434, 445, 494 Agencies of banks: Disadvantages 696 et seq. Distinguished from branches 696 Number 697, and Appendix VIII Agreements among German shipping companies 139 Agreements, international, between German and American ship- ping companies 137 et seq. Agreements, international, for the mutual clearing of postal checks and transfers 147 Agricultural credit and the Reichsbank 107 Agricultural credit, special organizations for the granting of 224 Agricultural population, relative decrease of 104, 105, 108 Agriculture : Growth of population, and deficit in agricultural production. . 109, no Improvement and growth of 105, 106 Protection of 106 Aktiengesellschaft fur Anilinfabrikation in Treptow 721 Aktiengesellschaft fur iiberseeische Bauunternehmungen 438 Aktiengesellschaft fur Verkehrswesen 513, 525 Allgemeine Deutsche Kreditanstalt, capital 641 Allgemeine Elektrizitatsgesellschaft group 715 Allgemeine Elektrizitatsgesellschaft group, affiliated banks 416, 717 Allgemeine Elektrizitatsgesellchaft absorbs]the Union Electric Co. . 718 1019 National Monetary Commission Page. Allgemeine Elektrizitatsgesellschaft, formation 714 Allgemeine Lokal- und Strassenbahngesellschaft 524 Amerika-Bank 448, 507 Amsterdamsche Bank 449, 503 Anatolian Railway Co 434, 445, 474, 494 Andreevics & Co. in Belgrade 451, 526 Arbitrage business 621 Assets, quick, proper proportion to liabilities 13 Avale (surety bills) 262, 265 Badische Anilin-und Sodafabrik 721 Bagdad Railway: Participation of the great banks 437, 474 Balance of payments: Credit items 532 et seq. Credits granted to foreign traders 536 Earnings from oversea shipping 540 Investments in foreign securities and enterprises. . 534, 536, 541 et seq. Minor credit items 541 Oversea banking 538 Tourists' expenditures 541 Improvement of , main causes 113 Banca Commerciale Italiana. . . . 436, 441, 445, 451, 453, 456, 487, 494, 511, 525 Banca Commerciale Italiana, branches 687 Banca Commerciale Tunisiana 456 Banca Generala Romana: Capital, dividends, and branches 442, 487 Banca Marmorosch Blank & Co 449, 450, 451, 506, 526 Banco Mejicano de 2omercio e Industria. See Mexikanische Bank fur Handel und Industrie. Bank acceptances See Acceptances. Bank checks: Inquiry of the Central Association of German Banks and Bankers 2 18 Means of concentration of credit at the banks 215, 216 Use of 217 Bank clearances in principal financial centers, 1884 and 1907 148 Bank employees as affected by concentration in banking 765 et seq. Bank employees, number 765-766 Bank employees, salaries 769-770 Bank employees, social insurance 768-769 Bank employees, standing and prospects 766-768 Bank fiir Chile und Deutschland. Capital, branches, and divi- dends 441, 487 Bank fiir Deutsche Eisenbahnwerte 513, 524 Bank fiir Handel und Industrie. See Darmstadter Bank. Bank fiir Orientalische Eisenbahnen 436, 445, 474 Bank fiir Siiddeutschland (Hessian 1^:3 Bank) 504 1020 The German Great Banks Page. Bank fiir Thuringen 671 Bank notes: Average circulation of leading banks 150 Note reserves of leading banks of issue 151 Bank of England discounts at the market rate, to meet the com- petition of the joint-stock banks 574-575 Bank statements, periodic publication may lead to more uniform methods in their compilation 594 Bank syndicates: Definition and origin 408 For the underwriting of domestic and foreign loans 414 Group for Asiatic business ' 412 Group for Russian loans 414 Industrial groups 415 Prussian syndicate, history and present composition 409 Rothschild syndicate, history and present composition 412 For underwriting the loans of the Empire, composition of 410 Bankers' Trading Syndicate (London) 447, 506 Banking business, regular or current, definition of 2 Banking, private, in Germany before 1870 39, 40 Banks: Advisers of the investing public 9 Functions of public or national character, performed by n Issue of securities 10 Leading functions 2 et seq. Part played in the industrial progress of the nation 221 Regulators of credit ) 9 Transforming private concerns into stock companies 10 Of issue, in Germany , 141-142 Banque de Credit at Sophia, Bulgaria 443, 487 Banque d'Orient i 454 Banque Internationale de Bruxelles 442, 450, 451, 453, 506, 511 Banner Bankverein: Capital 641 Concentration 633 Bayerische Bank fiir Handel und Industrie 506 Bayerische Disconto- und Wechselbank 670 Bayerische Handelsbank, concentration 632-633 Bayerische Vereinsbank, concentration 632 Bergisch-Markische Bank 473, 616, 641, 646 Berliner Handelsgesellschaft, founding 47 Amount of acceptances held at the end of 1895 to 1908 286 Business operations prior to 1870 75 et seq. Capital 517 et seq. Connections in New York and Amsterdam 451 Dividends 77, 518-521 102 1 National Monetary Commission Berliner Handelsgesellschaft Continued. Page. Foreign participations 525, 526 Increase of capital stock 657 Industrial connections 374 Industrial issues effected 525 losses 344, 5*8, 5*9> S 2 o Participations 450, 451 Railway business 519, 524 Ratio of own resources to liabilities 560 Relations to the electro-technical industry 522 Relations to the "heavy" industries (coal, iron, etc.) 523 Scope of activities, as defined in its constitution 517 Berufsgenossenschaften. See Trade insurance associations. Bills: Amount held by the Reichsbank 158, 297 Amount held by all credit banks 295 Amount held by the larger credit banks 296 Amount held by the six great Berlin banks, 1898 to 1908 296 Amount outstanding and relation to the resources of the eight Berlin great banks, 1883 to 1908 288 Decline in the amount of bills discounted by English banks. . 297, 298 Number increases during boom periods 282 Per cent share of the assets of the credit banks invested in bills . 274-275 "Boarding-out" of finance bills 213, 278 Bochumer Verein 510 Bohemian Industrial Bank 253 Borsig works 737 , 738 Bourse : Importance of a strong bourse for the security business . . . 406 Brasilianische Bank fur Deutschland: Capital, dividends, and branches 440, 441 Braunschweiger Privatbank 671 Branch banking: Differences between Germany and other countries 687-688 Difficulties of effective supervision 693 In England and Wales 684-685 In France 686 In Germany Advantages and drawbacks 688 et seq. Causes of slow development 695 General instructions by the home office 692-693 In Scotland 686, 688 Branch banks. Relations to the central office 689 et seq. Brokerage: Lowering of rates due to legislation 620 Brokerage business: Definition of, in the German Commercial Code 323 Extent 334 1022 The. German Great Banks Brokerage business Continued. Page. General rules followed by the banks 328 Of German banks. Important instances 323 Right of pledge or retention 329 Waiver of itemized statement 331 Cable and Telegraph Companies: Participation of the great banks. 437, 442, 448, 450, 453, 459, 494, 57> 5 11 ? 5 26 Call money 310 Capital invested in banking during the period 1851-1870 187 Capital of the large banks in 1870 188 Capital, per capita distribution in Prussia and England about 1845, estimated 28 Capital, popular conception of 1-2 Capital power of the great banks 642 et seq. Cartel inquiry, 1902-1905 170 et seq. Cartels: Causes of formation 168 Criticism of price policy 172 et seq. Definition 167 Distinction from trusts 167 Number of, by industries 169 Cassella & Co. : Fusion with the Hochst Dye Works 708, 721 et seq. Cash on hand at German credit banks 569 Census of occupations, 1882 and 1895. Comparative results 102 Central-Amerika Bank 474 Centralbank fur Eisenbahnwerte 495 Central bank for foreign commandites proposed 502, 680 Central credit bureau : Difficulties in the way of organizing such an institution 244 Central institution for long-term credit: Objections to 251 et seq. Check accounts 264 Chemical industry: Combinations in the 721 et seq. General scheme of development. 752-753 Growth of 125, 126 Cities, population of principal, about 1850 34 City of Glasgow Bank 214, 215 Coal output, growth of, in principal countries 122 Coal, production of, in 1850 and 1900 32 Coal syndicate, renewal through the influence of the banks 735 Coinage, systems of, in Germany, before 1870 39 Combination of iron and steel works with mining concerns, instances 706 et seq. 'Commandites, advantages and disadvantages 681 et seq. Commercial treaties: Favorable effect upon domestic agriculture. . 185 1023 National Monetary Commissio n Commerz- und Disconto-Bank : Page. Capital 641 Increase of capital stock 658 Ratio of own resources to liabilities 560 Commissions earned by the larger banks, and ratio to gross profits. . 335 Communities of interest Among German banks 664 et seq. Between banks in Rhineland-Westphalia 666 Between banks in Upper Silesia 666 Means of effecting 667 et seq. Community of interest through exchange of stock: Advantages. . 678 Companies, joint stock: Average dividends of shareholders during 1870-1900 120 Distribution by industries, of companies founded during 1870- 1874 116, 117 Flotations 1871-1908 118-119 Growth of 115-118 In Prussia before 1850 and after 38 Comptoir National d'Escompte: Agencies and branches 686 Concentration movement: Harm likely to be done by legislative interference 778 Importance of the joint-stock-company form of organization . 605 et seq. Of provincial banks 628 Universal aspects 602 et seq. Successive stages 751 et seq. Concentration of banking: Advantages 754 By agreement^ Disadvantages 674-677 By means of fusion 660 et seq. By means of increase of capital 656 et seq. Causes 606 et seq. Commandites 680 et seq. Dangers 758, 759 Disadvantages 764 Drift toward Berlin of provincial banks 653 et seq. Effects of commercial crises 635 et seq. Effects on the bank employees 765 et seq. Effects on the stock exchange 771-772 Formation of cartels in the nineties 614 Fostered by legislation : 618 et seq. Importance of bank fusions in British banking 662-663 Importance of the notation business 608 et seq. In France 664 In Germany has not reduced cost of operation 757~758 In the United States 664 Inherent tendency toward concentration in banking capital . 613 et seq. 1024 The German Great Banks Concentration of banking Continued. Page. Limitations to the increase of capital stock 607 Liquidations of banks after the panic of 1873 614, 636 et seq. Local at Berlin 653 et seq. Prospective development 753~754 Through absorption of banking firms and fusion 658 et seq., Appendix VIII Through acquisition of shares 672 Through agreement 673 Through communities of interest 664 et seq. Through exchange of stock 677 Through the founding of branches 684 et seq., Appendix VIII Through the founding of deposit offices 699 et seq. Through the opening of agencies 696 " Concern " banks 658-659 Consuming power, growth of 113 Corporation, factor in the concentration movement 751 Credit: Amount of, granted on rural and urban real estate in Prussia . . 224 Central institution for long-term credit, as proposed by Felix Hecht 240 et seq. Discrimination by the banks in favor of trade and industry, as against agriculture 223 Excessive demand for, preceding a crisis 17 Lack of general principles shown by the banks in the granting of 222, 229, 230 Long-time industrial 241 et seq. Secured versus unsecured 269, 270, 271 Credit banks: Aggregate capital in 1872 188 Amounts written off, 1883 to 1908 468 And industrial credit 242 Attitude toward the small traders 225 Coefficient of liquidity 565 Commissions 465 Credit extended to agriculture by 224, 225 Dividends, 1885-1908 460 et seq. Expenses of operations, 1883-1908 467 Gross and net earnings, 1885-1908 460, 461, 465 Opposition to their business policy 547-548 Ratio of liabilities to own resources 559 et seq. Review of adverse criticism of the 232 et seq. Surplus funds, 1885-1908 469 Credit Lyonnais, agencies and branches 686 1025 National Monetary Commission Credit mobilier: Page. Attitude toward subsidiary companies 53~54 Causes of failure 52 Character of business reports 53 Dividend policy 52 Government control 54 et seq. Origin and program 49 et seq. Credito Italiano 453, 687 Creditor industries 712-713 Crises: Bffectsof commercial crises on concentration of banking. . . . 635 et seq. Definition of 16 Intervention of banks after the outbreak of 20-21 Prognostication of 16 Symptoms of approaching 17 et seq. Of 1857 59 Of 1857, attitude of banks 81 et seq. Of 1873 Failures and liquidation of companies 116 Failures and liquidation of banks 188, 636 Current account business: Advantages to the banks 271 et seq. Calculation of interest 266 Commissions charged by German banks 266 Importance in the general banking business 259 et seq. Index of business conditions 272 Leading features 261 Leading to concentration in banking 273 Methods of the credit banks in securing an approximate equi- librium between credits and debits 267, 268 Number of accounts at the Deutsche Bank in 1908 268 Number of accounts at the Dresdner Bank in 1907 and 1908 . . 268-269 Current account credit, security for 269 Customs Union, German. See Zollverein. Darmstadter Bank: Absorption of provincial banking concerns 660 Amount of acceptances held 1895 to 1908 286 Amount of loans on collateral, including reports 322 Business policy 67 et seq., 498 Capital 66, 645 Classification of securities held 403 Commandites 60-61, 448, 449, 503, 680 Commandites in New York, Paris, and Vienna 502 Communities of interest 506 Deposits 69, 71, 208 1026 The German Great Banks Darmstadter Bank Continued. Page. Distinguished from the Credit Mobilier 56 et seq., 68 Dividends 67-68, 503 et seq. Early flotations and transformations 340 Early program of 48, 49 Increase of capital stock 657 Foreign business 501 Foreign connections 506 Industrial connections 375, 493 Interest receipts from commandite investments 683 Losses from foreign business 504-505 Member of the Rothschild syndicate 412, 450 Offices in Krankfort-on-the-Main and Mainz 501 Origin 46 Participation in African mining business 450 Participation in railway transactions before the seventies 64, 65 Railway business during recent years 503 Ratio of own resources to liabilities 560 Subsidiary banks 503-504 Underwriting of State and municipal loans before 1870 62 Group, capital power 645 Debtor industries 712-713 "Deports" 313* 3*4 Deposit bank, central : Impracticability of the scheme proposed by Caesar Straus 573 et seq. Deposit banks, imperial and State: Criticism of the Warschauer proposal 574 et seq. Deposit business: Obstacles to growth in Germany 193 Rules of the Deutsche Bank 206 Deposit offices: Advantages 700 Growth of 699, Appendix VIII Organization 699 Promotion of speculative dealings in securities 325 Depositen. See Deposits. Deposits: Alleged unsafety of 549 Deposits at All Berlin banks, 1889-1908 209 Cooperative credit associations 199 Credit banks, character and composition of 236 et seq. Credit banks, growth of 101, 198 et seq. English banks 202 et seq. German cooperative credit societies, annual increase 101 German savings banks, character and composition of 195, 199, 237 German savings banks, growth of 100 1027 National Monetary Commission Deposits at Page. The Darmstadter Bank, 1870-1908 208 The Deutsche Bank, 1871-1908 205 The Discontogesellschaft, 1871-1908 207 The Dresdner Bank, 1875-1908 207 Deposits: Central deposit bank proposed by Caesar Straus 550 Character of funds intrusted to the credit banks 197, 198 Comparative growth of, at German and foreign banks 200 (Depositen.) Difficulty of definition 196 Fostering of, by the Deutsche Bank 192 Granting of a prior lien to depositors dangerous to the credit of the banks 577 Heiligenstadt 's proposal of the maintenance of a minumum cash reserve at the Reichsbank by the deposit banks 553 In the United States 203 Lack of uniform classification by the great banks 197 Losses of, through failure of banks 570 Management by the credit banks (Lansburgh 's criticism) 233 Objections to Heiligenstadt 's proposal of an "iron reserve" at the Reichsbank 580 et seq. Objections to legal regulation of the modes of investing deposits 579 Objections to the requirement of a fixed ratio between de- posits and the share capital 578 et seq. Proposals regarding greater publicity 551 et seq. Proposed limitation of deposits 551 Proposed monthly or quarterly bank statements 552 Proposed separation between the [deposit and the notation and issue business 550 Reform proposals in the field of 549 et seq. Reichsdepositenbank proposed by Warschauer 550 Solicitation of 597 et seq. Deutsch-Amerikanische Treuhand-Gesellschaft 435, 474 Deutsch-Asiatische Bank '. 436, 441, 445, 448, 450, 453, 455, 487, 494, 5 6 > 5"> 5 2 5 Deutsch-Luxemburgische Bergwerks- und Huttenaktiengesell- schaft 729 Deutsch-Ost-Afrikanische Bank 438, 443, 457, 474, 487 Deutsch-Sudamerikanische Bank 446, 453, 494, 512 Deutsch-Westafrikanische Bank 445, 457, 494 Deutsche Bank: Absorption of provincial banking concerns 660 Amount of acceptances, 1895 to 1908 286 Amount of deposits, 1871-^1908 205 Amount of loans on collateral, including reports 321 1028 The German Great Banks Deutsche Bank Continued. Page. Branches, business of 691 Branches in Bremen and Hamburg 423 Branches in Yokohama and Shanghai 422 Character of management 472 Commandite in New York 423, 435 Commandites in Paris, Vienna, and Madrid 439 Deposits at the central office and at the branches 692 Classification of securities held 404 Communities of interest. 473, 616 Early criticism of its business policy 423 et seq. Efforts to introduce foreign bills of exchange in terms of Ger- man currency '. 422 Experience with its commandites in New York and Paris .... 682 Export policy 473 Fostering of the deposit business . 473 Increase of capital stock 658 Industrial connections 373 Industrial policy , 473 Liquidation of banks 637 Losses 478 Losses from the founding business and participations 344 Number and amount of syndicate participations 400 Number of current accounts in 1908. 268 Number of deposit offices 206 Opening of deposit offices 192 Ratio of own resources to liabilities 560 Participation in African mining business 440 Payment of the indemnity to Spain for the cession of the Philippines to the United States 323 Permanent participations in 1899 and 1903 638 Policy of promoting oversea trade 42 1 Recent practice of discounting outstanding accounts of its customers 263 Relations to the petroleum industry 417 Reorganization of the Northern Pacific Railroad Co 435, 478 Representation in London 422, 423 Rules regarding the deposit business 206 Statistical view of development, 1870 to 1908 480-481 Group. Capital power 643-644 Deutsche Afrika-Bank 443, 487 Deutsche Handels- und Plantagen-Gesellschaft der Siidseeinseln. . 440, 486 Deutsche Orientbank 446, 453, 454, 494, 511, 512 Deutsche Palastina-Bank 454 Deutsche Treuhand-Gesellschaft 436 Deutsche Ueberseebank, founded by the Deutsche Bank, 433 1029 National Monetary Commission Page. Deutsche Ueberseeische Bank, dividends and branches 433 et seq. Disconto-Gesellschaf t : Absorption of provincial banking concerns 660 Amount of acceptances, 1895 to 1908 286 Amount of deposits, 1871-1908 207 Amount of foreign bills 262 Amount of loans on collateral, including reports 321 Branches in London and Bremen 444 Capital during the first period 67 Commandites in Buenos Aires and Antwerp 441 Community of interest with the Norddeutsche Bank 664 Current-account business 488 Deposits prior to 1870 70 Deposit business 489 Dividends 67,68,490 Early flotations 340 Financing of the Great Venezuelan Railroad 444 General business policy 482 et seq. Growth of deposit offices 208 Increase of capital stock 657 Industrial connections 374 Industrial policy 482 Losses from the founding business and participations 343 Member of the Rothschild syndicate 445, 482 Mortgage credit 486 Origin 46 Participations in railway transactions before the seventies 65, 66 Relations to the petroleum industry 418 Ratio of own resources to liabilities 560 Underwriting of State and municipal loans prior to 1870 62, 63 Disconto-Gesellschaft group : Capital power 644 Discount policy of the Bank of England thwarted by the compe- tition of the joint-stock banks 575 Discount rates : Causes of the relatively large margin between the German official and private rates 301 et seq. Connection between the official rates and the rates of exchange . 305, 306 Differences between official and private rates at leading money markets 1876-1907 300 High rates and gold imports 304, 305 Movement during the years 1852-1857 58-59 Official and private at Berlin, Paris, and London 1876-1908. 155, 156, 157 Rise of, a symptom of an approaching crisis 17 Discounting of outstanding accounts by the Deutsche Bank 263 Distribution of risk, principle of 12 et seq. Domestic public securities : Investments of the German public in . . 228, 239 1030 The German Great B a n Page. Dortmunder Union 734, 736, 737 Dresdner Bank: Absorptions of provincial banking concerns and their trans- formation into branches 660 Agreement with the A. Schaaffhausenscher Bankverein 674, 1003 Alliance with J. P. Morgan & Co 446 Amount of acceptances held at the end of 1895 to 1908 286 Amount of deposits 1875-1908 207 Amount of foreign bills held by the 261, 262 Amount of loans on collateral, including reports 321 Branches in Hamburg, Bremen, and London 445, 493 Capital 497 Classification of securities held 404 Community of interest with the A. Schaaffhausen'scher Bank- verein 494, 674, 1003 Deposit business 492 Dividends 496-497 Growth through establishment of branches and absorption of banking firms 492-493 Increase of capital stock 658 Industrial connections 374 Issues of industrial securities 495 Liquidation of banks 636 Losses 496 Losses from the founding business and participations 344 Number and amount of syndicate participations 401 Number of current accounts 268, 269 Ratio of own resources to liabilities 560 Real estate business 496 Relations to the electrotechnical industry 495, 496 Relations to the petroleum industry 419 Dresdner Bank Group : Capital power 644-645 Dresdner Kreditanstalt: Cause of failure 231 Duisburg-Ruhrorter Bank 677 Dutch-South African R. R. Co 451 Electro-technical industry: Dependence on the banks 713 et seq. General scheme of development 752 Groups in 1900 715 Growth of 123, 124, 125, 713 et seq. Value of output ' 714 Elektro-Treuhand-Gesellschaft 718 English banks: Drift of provincial banks toward London 655 Essener Bankverein 677 1031 National Monetary Commission Page. Essener Kreditanstalt 641, 646 Exchanges in Germany before 1870 38 Export capitalism, limitations of 115 Export trade : Bank credit 426 Exports of German capital necessary to improve the national balance of payments 531 Exports of industrial products: Necessary to compensate in part for the imports of food stuffs and raw materials 1 10, 1 1 1, 528 Farbenfabriken vormals Friedrich Bayer & Co 721 Farbwerke vormals Meister, Lucius & Bruning 721 (See also Hochst Dye Works.) Finance bills 278 et seq. Fiscal agencies for industrial companies 370 Flotation business: Early abuses 341 Policy of the great banks 343 Flotation of stock companies before 1870 and after 338 Foreign banking business: Chief operations involved 540 Foreign banks of England and the acceptance business 299 Foreign bills: Amount held by the Disconto-Gesellschaft 262 Amount held by the Dresdner Bank 261, 262 Foreign investments of British capital 533 Foreign investments of French capital 533~534 Foreign investments of German capital : Estimated amount 545 Limitations 534~535 Necessity for constant increase of 537 Foreign participations of the great banks 532 Foreign securities owned in Germany, estimated amount 546 Foreign trade: Growth of 102, in Larger growth of imports than of exports 112 Freight traffic in Germany in 1840 and 1900 31 " Fremde Gelder " (outsiders' funds) : Composition of 190 Fusions among English banks 662-663 Fusions among Scotch banks 662 Fusions forced, cases of 661, 662 Fusions of banking concerns: Reasons for 661 " Futures, " dealing in, legal restrictions of 622 Gelsenkirchener Bergwerksgesellschaft 483, 617, 729, 734, 745 Combination with the Rote Erde and the Schalker Gruben- und Hiittenverein 712 Increase of capital 747-749 1032 The German Great Banks Page. General Electric Co. (Allgemeine Elektrizitatsgesellschaft) 522 General Mining & Finance Corporation (Ltd.) 443, 444, 447 German banking: View of, in the Bankers' Magazine 57^-577 German Luxemburg Mine & Smelting Co. : Suit against the coal syn- dicate 735 Great banks : Coefficient of liquidity 565 Development Appendix VII, p. 982 Expansion toward the Provinces 655 Ratio of liabilities to own resources 560 Representation of industrial interests on the boards of the banks 617 Representation on the supervisory boards of stock companies. 366 (Appendix IV, p. 897) Hamburg- American Steamship Co 135, 136 Haniel family, mine ownership 743, 744 Hannoversche Bank 643, 646 Harpener Bergbaugesellschaft 510, 523, 617 " Heavy Terms " (Schwere Termine) 161 Helios group : Affiliated banks 715,717 Hendschel works 707, 710-711, 737 Hibernia Mining Co. : Acquisition of stock for the Prussian Gov- ernment by Great Banks 323, 324, 523, 729-730 Hoechst Dye Works: Community of interest with Leopold Cas- sella & Co 708, 721 et seq. Hoerder Bergwerks-und Hiittenverein 509 Fuses with the Phoenix 707-708 Hoesch Iron & Steel Works 510, 734 Combination with the Westf alia Mines 706 Import duties on iron and steel, and the independent producers . 176 et seq. Import trade, bank credit 428 Incomes in Prussia 93 Income, national, estimates of 92 Incomes, private, distribution of, in Prussia 96 et seq. Incomes, private, distribution of, in Saxony 99 Industrial concentration fostered by cartels 709 Forms 704 et seq. Influence on concentration in banking 703 et seq. Industrial credit: Distinct from commercial credit 241 et seq. In Austria 254 Leading to involuntary reorganization of the borrowing concern by the lending bank 246 Organic development by the credit banks 249 Purposes for which sought 243 Secured by mortgage 244 et seq. National Monetary Commission Page. Industrial export policy supported by the great banks 529 Industrial flotations by the joint-stock banks before 1870 63 Industrial production: Growth of, since 1882 112 Industrial relations of the great banks 373 Industrialization and growth of population in Industrialization of Germany, causes of rapid 239, 240 Industrials: Number of issues of industrial securities by the great banks .*. 515 Industry and the credit banks 230 Interest: Calculation of, on current accounts 266 Interest and commissions : Per cent share of total profits of the great banks 272 International Mercantile Marine Co 136, 137 Internationale Bohr-Gesellschaft (Erkelenz) 512, 736 Investments in foreign securities: Financial and political advan- tages 541 et seq. Iron and steel: Import duties on, and the independent pro- ducers 176 et seq. "Iron reserve " at the Reichsbank, proposed by Heiligenstalt . . 580 et seq. Issues of industrial shares, 1892-1908 37*~37 2 Issues of industrial bonds, 1900-1908 372 Joint-stock banks in England : Business policy criticized 555 Inadequate cash reserve 558 Promote speculation 556 Small capital 557 Joint-stock banks in Germany, origin due to the general industrial development 5 Joint-stock companies floated before 1870 and after 338 Kamerun Railroad Co 444, 447, 448, 451, 453, 458, 494, 507, 526 Konigs-und Laurahiitte 617 Konsolidation Bergwerks-Aktiengesellschaft at Schalke 617 Kontinentale Eisenbahnbau-und Betriebsgesellschaft 495 Kreditna Banka. See Banque de Credit at Sophia. Kummef group : Affiliated banks 7 15, 7 18 La Plata Bank 423, 440 Lahmeyer group 715 Affiliated banks 717 Landschaften 224 Leerwechsel (nominal bills). See Finance bills. Leipziger Bank: Causes of failure 231 Liabilities, composition of 563 Liquid assets of banks, composition of 190, 563 Liquidation of banks as the result of the crisis of 1873 636 1034 The German Great Banks Page. Liquidity, coefficient of 561 et seq. Liquidity, coefficient of, for all German credit banks 565 Liquidity of assets, principle of 12 et seq. Liquidity of resources of the credit banks, causes of the decrease of . 565 Listing of securities, minimum issues, listed at leading bourses. . . 248 Lloyds Bank: Branches 663, 685-686 Loewe group 416, 485 Loans: Carried by the larger credit banks, and ratio to their capital. . 274 Of German States and municipalities, amount of, 1894-1908. . 381-383 Per cent share of the assets of the larger credit banks invested in loans 274 Per cent share of the assets of the (Berlin) great banks invested in loans 275 Loans on collateral : Amount and distribution of, granted by the Reichsbank in i9 8 - 3*9 Customary terms 318 For fixed term, granted by the Seehandlung 311 Kinds of security 307, 308 Not part of the note reserves of the banks of issue 309 Loans on collateral including reports: Amount of Outstanding at all the larger credit banks 322 Outstanding at the Darmstadter Bank 322 Outstanding at the Deutsche Bank 321 Outstanding at the Disconto-Gesellschaft 321 Outstanding at the Dresdner Bank 321 Outstanding at the six great Berlin banks 322 Ratio to total assets of the great banks 322 Lombard business. See Loans on collateral. London & County Banking Co. (Ltd.): Fuses with the London & Westminster Bank (Ltd.) 663 London & Westminster Bank (Ltd.): Fuses with the London & County Banking Co. (Ltd.) 663 London City & Midland Bank 662-663 Branches 685 London County & Westminster Bank (Ltd.) 663 Lorraine-Luxemburg district, increasing importance 740 et seq. Luxemburg- Lorraine Pig Iron Syndicate 729, 730 Magdeburger Bankverein 673 Concentration 629 Magdeburger Privatbank, concentration 630 Fusion with the Dresdner Bankverein 661 Mecklenburgische Hypotheken-und Wechselbank, check business . 2 18 National Monetary Commission Page. Merchant bankers in England, and the acceptance business. . . . 299 Merchant marine, growth of 133, 134 Principal shipping companies 135 et seq. Ship subsidies 134, 135 Mexikanische Bank fur Handel und Industrie 434, 438, 439, 474 Mitteldeutsche Kreditbank, business operations prior to 1870. . 77 et seq. Capital 641 Dividends, 1857-1869 80 Early flotations and transformations 340 Increase of capital stock 657 Origin 46-47 Mitteldeutsche Privatbank 63 1-632 Mittelrheinische Bank 677 "Mixed" versus "pure" works in the steel industry 175 et seq. "Mixed" versus "pure" works, struggle between the, and attitude of the banks 728 Moselle Canal : Opposition by the iron interests in the Saar district . 732 Nationalbank fur Deutschland, capital 641 Increase of capital stock 658 Participations 453 Ratio of own resources to liabilities 560 Nationalization of industry as a whole impracticable.... 776-777 Navigation, inland 141 Neu Guinea Kompagnie 440, 487 Norddeutsche Bank 444, 644 North German Lloyd 136 Oberschlesische Eisenbahnsbedarfs-Gesellschaft 739 Oberschlesische Eisenindustrie Aktiengesellschaft Caro-Hegen- scheidt 524 Occupations, distribution of population by 103 et seq. Oldenburgische Landesbank, check business 219 Oldenburgische Spar- und Leihbank, check business 219 Organic matter, displacement by inorganic matter (Sombart). ... in Osnabriicker Bank 646 Ostafrikanische Gesellschaft 438, 443 Ostbank fur Handel und Gewerbe 646 Otavi Mining & Railroad Co 442, 443, 487 Over-sea business, profits of the banks from 538-539 Over-sea shipping, earnings of the merchant marine 540 Participations: Impossibility of foretelling assessments due on account of 592 Patent laws, British and German industry 127, 128 Petroleum industry: Financial relations to the great banks. . . . 417 et seq. Phoenix 510, 617, 734 Acquisition of coal mines 711 Combination with the Nordstern mines 706 1036 The GermanGreat Banks Page. Phoenix Continued. Fusion with the Hoerder Mining & Smelting Co 707-708 Induced to join the Steel Works' Union by the banks 727 Pig iron : Consumption and exports, growth of 122 Consumption in the Zollverein during 1847 an< ^ I &99 32 Growth of output in principal countries 120, 121 Production of 1850 and 1875 32 Population, distribution by city and country 89-90 Growth, in Germany between 1816 and 1895 43, 44, 89 Growth, in large cities 90, 91 Growth, in the industrial and rural districts, respectively. ... 44 Of France about 1848 28 Of Germany about 1848 28 Of Prussia, distribution by principal occupations in 1843 33 Part engaged in gainful occupations 90 Postal facilities, development of 36, 131 Postal transfer and check system, benefits to the small traders 226 Joined by the Reichsbank : . . 146 Prime discounts 277, 289 Private bankers, smaller: Existence threatened by concentration in banking 759 Legitimate economic functions 760 Private banking, decline of 623 et seq. Private banking business: Transformation into joint-stock concerns. 762-763 Private discount rate 289, 290 Property assessed for taxation, value of 93 Prosperity, growth of, evidence of 775~7?6 Provincial bankers, adverse legislation 619 Provincial banks 668 et seq. Drift toward Berlin 653 et seq. Prussian syndicate 378, 409 Prussian war loans of 1870-71 379, 380 Public ownership and operation of industry as a whole undesirable . 776-777 Railway, first German 31 Railways: Capital i sted in up to 1870 35 Construction of, and demand for iron 32 Development of 130, 131 Extension of, 1835 to 1875 34, 35 Secondary. Bank groups 417 Raw materials: Necessity of increasing imports no Regatul Romana . . 512 Reichsbank and the postal transfer and check system 146, 226 Average amount of bills held 158 National Monetary Commission Reichsbank and the postal transfer and check system Continued. p age . Business operations, permitted by the bank act 144 Capital and surplus 142 Clearance system 148 Criticism of its discount policy 160, 161, 163 Giro-transactions 145, 146, 147 Gold reserve 152 Holdings of foreign bills 161, 162 Increase of the tax-free "contingent" of unsecured notes 166 Issue of unsecured notes 153, 154 Loans on collateral 159 Management 142 Metallic reserve, 1876-1908 155 Note issues 143, 144 Notes declared legal tender 165 Reports of conditions 145 Strengthening of the resources by increasing the surplus 588 Turnover 149 Rembours-credit in export trade 427 * In import trade 430 " Reports." See Loans on collateral. Representation of industrial interests on the boards of the great banks 617 Rheinisch-Westfalische Disconto-Gesellschaft 654, 673 Capital 641 Concentration 633-635 Rheinische Kreditbank : Capital 641 Rheinische Stahlwerke: Combination with the Zentrum mines. . . 706 Rhenisch-Westphalian coal syndicate 483 Reorganizations of distressed concerns by banks 365 Report business: Taxation of 316 Report money 313 Report transactions : Increase of index of increased speculation ... 315 Reserve fund, legal provisions 347 Rohbilanzen. (See Summary bank statements.) Rombacher Hiittenwerke 523 Roumanian petroleum business 512 Ruhr district: Purchase of coal mines by ironworks 734 Saar district : Industrial conditions 740 Sachsische Discont-Bank, fused with the Dresdner Bankverein. . . 661 Savings, annual, estimates 92 Savings banks, deposits in German, growth of 100 Schalker Gruben- und Hutten-Verein 483, 484 Schaaffhausen 'scher Bankverein: Amount of acceptances held at the end of 1895 to 1908 286 Branch in Berlin 509, 510 1038 The German Great Banks Schaaffhausen 'scher Bankverein Continued. Page. Community of interest with the Dresdner Bank 494, 511, 674, 1003 Communities of interest, other 511 Concentration through the opening of branches and the estab- lishment of subsidiary banks 511 Connections with the mining and smelting industries 515 Deposits during early period 73 Dividends, 1848-1870 74 Early development 71 et seq. Early flotations 339 General business policy 508 Increase of capital 510, 511,657 Industrial business and reorganizations 514 Industrial connections 374 Issues of industrial securities 515 Origin 46 Participations 452 et seq. Participations in the common foreign business of the great banks 511 Railway business 513 Ratio of own resources to liabilities 560 Schaaffhausen 'scher Bankverein group, capital power 645 Schlesische Handelsbank 671 Schlesischer Bankverein v 473, 616 Schuckert Electric Co 512 Schuckert group: Affiliated banks 715, 717 Schweizerischer Bankverein 451, 526 " Schwere Termine " (heavy terms) 161 Seehandlung: Loans on collateral for fixed terms 311 Securities held by German investors in 1907: Estimate 95 et seq. Securities: International movement of 534~S3S Value of, listed at the Berlin Exchange 93 et seq. Security account: Classification adopted by the great banks. . . 403 et seq. Security business: Amount of securities owned by the great banks, classed by principal groups 405 Voluntary or involuntary 402 Security issues: Amount, 1889-1908 358 Amount of foreign securities issued in Germany, 1894-1908. 392 et seq. " Concert subscribers" 355 Distribution by principal classes 359 et seq. By the banks, factor in causing industrial consolidations and combinations 368 et seq. By the banks, preliminary work and negotiations 348 et seq. 1039 National Monetary Co mm is sio n Page. Security issues Continued. By the banks, special legal features of contract 351 By the great banks, listed at all German stock exchanges. Appendix VI-959 By the great banks listed at the Berlin Stock Exchange. Appendix -921 " Exotic" values 390 Foreign loans, issued in England, 1822-1825 391 Principles to govern financing of foreign issues 384 State and municipal loans, financed by the great banks. . . 378 et seq. Underwriters' syndicates 356 Upper and lower limits of issue price 353 Waltershausen's reform proposals regarding foreign business, and criticism of these proposals 387 et seq. Shantung Mining and Railway companies: Participation of the great banks 437*442, 445> 44$, 45> 453> 454, 459> 487, 494, 57> 5 11 , 5 2 6 Shipbuilding, growth of 140 Ship subsidies. See Merchant marine. Sieg district: Influence of the banks on the iron industry 732 Siemens & Halske group, affiliated banks 416, 715, 716 Siemens-Schuckert combination 718 Silent partnerships. See Commandites. Societe generale : Agencies and branches 686 Sovereign Bank of Canada 446 Spaeter & Co 747 Specialization jn German banking 649-650 Speculation, excessive, preceding a crisis 17 Stahlwerksverband. See Steel Works' Union. Stamp-tax legislation fostering concentration 618 et seq. Steam engines, number and horsepower of, employed in industry . 103 Steam engines and motors, about 1850 and in 1895 30 Steel Works' Union and the International Girder Cartel and the International Rail Cartel 182, 183 Business policy 174 et seq. Formation 640 Memorials presented by the " pure " works against the .... 175 et seq. Organization 174 Part of the A. Schaaffhausen 'scher Bankverein in forming the . 516 Stinnes, Hugo: Industrial affiliations 742 et seq. Relations to the banks 745-746 Stock exchange: Weakening of, as result of concentration of banking. 77 J -77 2 Stock-exchange legislation fostering concentration of banking. . 618 et seq. 1040 The German Great Banks Page. Subsidiary banking establishments, disadvantages 671 Subsidiary companies, in Germany, of German banks 667-668 Siiddeutsche Eisenbahngesellschaft 505 Summary bank statements: According to a prescribed scheme, criticism of 590, 594 et seq. For all deposit banks, proposed by Count Arnim-Muskau . . . 589 Voluntary, beneficial effect of 593 Of the Berlin great banks 597 Supervisory board : Governmental supervision of banking opposed . 599-601 Surplus funds in banking and industry 470 "Syndicate" account lumped with " securities " 399 Syndicate participations of the great banks 400, 401 Syndicates: Early instances 396 Subsidiary participations * . 397 Syndikatskontor des A. Schaaffhausen'schen Bankvereins 616, 726 Telegraph service, growth of 132 Telegraphs in Germany, beginnings of 37 Telephone service, growth of 132, 133 Terlinden Co 244 Textile industries, recent development of 128, 129, 130 Thyssen, August: Industrial activity and affiliations 741 et seq. Industrial operations 711 Relations to the banks 745 Trade insurance associations (Berufsgenossenschaften), growth of membership 102, 103 Transformation of existing concerns by the banks 345 Treuhand-Bank fur die elektrische Industrie, A. G 719 Trust companies 672 Ultimo loans 311 Ungarische Escompte- und Wechselbank in Budapest 449, 503-504 Unification of Germany in the commercial field 36 In the economic field 87 et seq. Union Elektrizitatsgesellschaft group 715 Affiliated banks 416, 717 United States Steel Corporation, effect on the concentration move- ment in Germany 639-640 Joins the International Rail Cartel 183 Upper Silesian coal convention 738 Upper Silesian district: Part taken by the banks in forming indus- trial combinations 737 et seq. Upper Silesian Steel Works Union, formation 640 90311 ii 67 1041 National Monetary Commission Page. Vereinigte Westdeutsche Kleinbahn-Aktiengesellschaft 525 Wages in German industry, movement of 773~774 War, business policy of the banks immediately preceding and during 22 et seq. War clause in issue contracts 351 War, financial preparation and readiness for 24 Maintenance of the German currency and credit systems dur- ing 25 Treasure 24 Wars, European, effect upon the economic development of Ger- many 27 Wealth, national, estimates 91 et seq. Wechselstuben (exchange offices) 195 Westdeutsche Eisenbahngesellschaft 513, 524 Westfalisch-Lippische Vereinsbank (Bielefeld) 511, 670 Westfalische Union 737 Workmen, number of, engaged in mining and smelting about 1850 and 1895 30 Wiirttembergische Bankanstalt, Stuttgart 449 Community of interest with the Wurttembergische Vereins- .bank 664 Zentral-Amerika-Bank 438 Zollverein : Establishment of 29 Foreign trade, 1842 to 1846 29-30 1042 v US .T P{ RETURN LOAN PERIOD 1 2 3 4 5 6 ALL BOOKS MAY BE RECALLED AFTER 7 DAYS DUE AS STAMPED BELOW r>ec ^ FEB 8 2001 ^/T^/^ OCT i i 2005 rvu^i ^3 RECEIVED BY Ji -tt A 1 UTODISCCIRC WAV 23 ^94 CIRCULATION DEPT, MAY 021995 jA^i^a 199 ' JnnJLw isJCJvj AUTO DBC CIRC .IAN < 1 ay.ECEIVED MAR 3 1995 JUL i: 1993 JUL 1 K 1993 vWL * ** Jwuw ^.^J-i W T UNIVERSITY OF CALIFORNIA, BERKELEY FORM NO. DDO, 5m, 3/78 BERKELEY, CA 94720 s U.C. BERKELEY LIBRARIES