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6 1 S T C O N G R E S S \2d Session J S E N A T E / D O C U M E N T\ No. 408

NATIONAL M ONETARY COM M IS S ION

The Reichsbank1876-1900

W ashin gton : Go ve rnm ent Pr int ing Office : 1910

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NATIONAL MONETARY COMMISSION.

NELSON W . ALDRICH, R h o d e I s l a n d , Chairman.EDWARD B . VREELAND, N e w Y o r k , Vice-Chairman.

J U L I U S C. B U R R O W S , Michigan.E U G E N E H A L E , Maine.P H I L A N D ER C. K N O X , Pennsylvania.T H E O D O R E E. B U R T O N , Ohio.J O H N W. D A N I E L , Virginia.H E N R Y M. T E L L E R , Colorado.H E R N A N D O D. M O N E Y , Mississippi.J O S E P H W. B A I L E Y , Texas.

JESSE OVERSTREET, I n d i a n a .J O H N W. W E E K S , Massachusetts.R O B E R T W. B O N Y N G E , Colorado.S Y L V E S T E R C. S M I T H , California.L E M U E L P. P A D G E T T , Tennessee.G E O R G E F\ B U R G E S S , Texas.A R S E N E P. P U J O , Louisiana.A R T H U R B. S H E L T O N , Secretary.

A . PIATT ANDREW, Special Assistant to Commission.

Th is volume was pub lished in Germany under the auspices of theReichsbank in 1900, upon the occasion of the twenty-fifth anniversaryof that institution. Th e English translation has been prepared forthe National Monetary Commission by Dr. Frederick W. C. Lieder ofH arvard U niversity.

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C O N T E N T S .CHAPTER I . I n t r o du c t i o n : P age.T he G e r m a n m one t a r y a nd ba nk i ng s ys t e m be f o r e t he f ound i ngof th e Em pir e nReform of co inage an d pap er mon ey 15Prob lem s of ba nk ing r e form 17T h e B a nk A c t a nd t he R e i c h s ba nk 20Ge neral prov is ion s of th e B an k Ac t of M arch 14, 1875 22T h e R e i c h s ba nk 25E s t a b l i s h m e n t of t he R e i c h s ba nk 34

T h e R e i c hs ba n k a s t he c e n t r a l ba n k of G e r m a ny 36Bas i s e s tab l i shed by th e B an k Act 36Decrease in th e nu m be r of p r iv a te ba nk s of i s sue 38E x t e n s i on of t he R e i c hs b a nk ' s s y s t e m of b r a nc he s 40T h e R e i c hs ba nk a s t he l a s t r e s o rt of t he G e r m a n m o ne t a r ysys tem 41

CHAPTER I I . A dm i n i s t r a t i ve o r ga n i z a t i on :Orga niza t ion in genera l 42T h e m a i n ba n k 43B r a n c h e s t a b l i s hm e n t s 46I n t e r na l o r ga n i z a t i on 46Te r r i to r ia l d iv i s ion 53Sy s tem of con t ro l 58T h e staff 61L e ga l s t a t u s 6 1

Pr ep ara to ry t r a in ing an d c lass i fi ca tion 62S a l a r i e s a nd o t he r e m o l um e n t s 6 5Spec ia l r egula t ions 65CH A P T E R I I I . N o t e i s s ue :N o t e s t he m o s t i m po r t a n t l i a b i li t y of t he R e i c hs b a nk 6 8Lega l r egula t io ns conce rn ing no te i s sues of the Re ichsb ank 69Ind i r ec t l im i ta t ion s of no te s 69Regula t ions concern ing the acceptance of bank notes as am e d i u m of p a y m e n t 7 0Ob l iga tory r ed em pt io n of no te s 70

D e n o m i n a t i o n s 7 1R e c a l l a nd w i t hd r a w a l 72P r o t e c t i v e m e a s u r e s a ga i n s t c oun t e r f e it ba n k no t e s 723

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National M onetary CommissionCH A P T E R I I I . No te i s sue Con t inued . Page.De ve lo pm ent of no te c i r cu la t ion 74To ta l no te i s sue 74U nc o ve r e d no t e s 76

Cause of f luc tua t ion s of unc ove red note s 77Unc overed not es an d con t ing ent ( l imi t ) 81Re la t ion be tw een note s an d cover for no te s 82CH A P T E R I V . T r a ns f e r s a nd t h e c l e a r ing s y s t e m :T r a ns f e r s (Giroverkehr) 87Th e sys te m of t r ans fe r s 87

Re aso ns for th e r eorg aniza t ion of t r ans fe r s 88i n t r o du c t i o n of g r a t u i t ou s d i s t a nc e t r a ns f e rs 90Orga niza t io n of th e t r ans fe r sys te m 91Ex ten s ion of t r ans fe r s 93

P a ym e n t s by pe r s ons no t ho l d i ng a c c ou n t s 93Col lec tions for cu r r en t acco unt s 96Com pulsory dom ic i l ing of acce ptan ces 97Com pulsory en t r ie s on t r ans fe r acc oun ts 98F ur t he r r e gu l a t i ons f o r f a c i l i t a t i ng t he m a na ge m e n t o f

p r i va t e a c c ou n t s 99Ter r i to r ia l expan s ion of t r ans fe r s ( inc lus ion of sub -offices) 100The share t aken by d i f f e r en t voca t ions and by publ ic author i t i e s in t r ans fe r s 103

To ta l dev e lop me nt of t r ans fe r s 104D e ve l opm e n t o f t he b r a nc he s o f t he t r a ns f e r s y s t e m . _ 105Loc al dif ferences of de ve lo pm en t 107Increased use of t r ans fe r acco unt s n oT r a ns f e r a c c ou n t s a s w or k i ng c a p i t a l fo r t he R e i c hs b a nk . _ i nClea r ing hou ses 115Dut ies of a c lea r ing sys tem (A brechnungsverkehr) 115Es tab l i sh m ent a nd org aniza t ion of c lea r ing house s inG e r m a ny 1 1 6De ve lo pm ent of th e c lea r ing sys te m 119Dep os i t s an d dra f t s 120Acc eptan ce of dep os i t s , 120Draf ts 122Le t te rs of cred i t 124

CH A P T E R V . T he purc hase and co l lec t ion of b i l ls an d sec ur i t i e s :I m po r t a n c e of b i ll pu r c ha s e s fo r t he R e i c hs b a nk a s t he c e n t r a lb an k of issue 125Ge nera l pr inc iples 127

More th an one p a r ty l i ab le on b i ll 127C om pu l s o r y a c c e p t a nc e 1 28Cre di t ca pa ci t y of pa r t ie s 1 iable on bi l ls 128Co ntrol of cred i t 1294

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The Reichs bank, 187 6-1900CH A P T E R V . Th e pu rcha se and co l lec tion of b i ll s an d secur i t i e s Page .C on t i nue d .G e ne r a l p r i nc i p l e s C on t i nue d .Co nsid erat io n of th e bus iness na tu re of th e bi l l 130Modif icat ions 131Fur the r deve lopment of p r inc ip les in accordance w i th a l t e r edc i r cums tances 131D i s a d va n t a g e s t o t he R e i c h s ba nk of m u t ua l c o l le c t ions ofp r i v a t e ba n ks 1 32Co mp et i t ion of pr iva te ba nk s of i s sue 133In t r od uc t io n of a pr iv a te r a t e for th e Re ichs ban k 134G ra nt in g of cred i t to small bus in ess people 137

Bil ls f rom coo pe rat iv e socie t ies 138Extens ion of the ne twork of br anches and co l lec t ing d i s t r i c t s 139Acce ptances ob ta ine d gra t i s 140R e d uc t i on of t he m i n i m u m t i m e t h a t b i l ls ha v e t o r un a ndof the mi n im um ded uc t io n in d i scou nt ing 141R ep ea l of a severe obso lete provis ion 143

Precaut ions aga ins t the forg ing and misuse of domic i ledbills 144Bil l ho ldin gs of th e Re ich sb an k in t he bi l l c i rcu la t ion ofG e r m a ny 1 45Bi l l purchases of the Re ichsbank as a symptom of the economic

s i tua t ion 148Com pos i t ion of b i l l inv es tm ent s 149Loca l an d cons igned bi l ls 149Bi l ls purc hase d a t p r iv a te d i scoun t 150D e nom i na t i on 1 50A ve r a ge a m ou n t 1 51Average t ime to run r 152Per sons au thor ized to t ake c r ed i t accord ing to the i r voca t ionan d the ex ten t o f the i r c r ed i t 153Am ou nt of c r ed i t g r an ted 154T rad e _ 155I n d u s t r y 1 5 6Agr icul ture 157Co op erat iv e socie t ies 159

Pu rch as e of bi l ls in th e var io us econom ic div is ions of th eE m pi r e 1 6 0Prof i ts an d losses in dis co un ts 162Pu rch as e an d sale of foreign bi l ls 165Disco unt in g of secur i t i e s 169Collect ion of bi l ls , e tc . , received on com miss ion 170

CH A P T E R V I . L o m ba r d l oa ns ( l oa ns on c o l l a t e r a l ) :I m por t a nc e of l om ba r d l oa ns 1 73R e g u l a t i on of l om ba r d i nve s t m e n t s t h r oug h t he i n t e r e s t r a t e __ 1 755

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National Monetary Com missionC H A P T E R VI . Lom bard loans ( loans on col lateral)C ont inued. P age.

Organizat ion of the lombard system 176T he debtor 176

Sto cks and shares, bills , and pre cious me tals as d epos itedsecurity 177T est of the pledge with regard to its safety 177

De po sit in g of the pledge 178Merchandise as pledg es 179

T echnica l difficulties 179Leg al difficulties 182Special facilit ies in adv anc es on cereals, sugar, and sp irit s. 183

Lim its set for advan ces 184Legal and actua l lim its 184Dep reciation in valu e of pledge 186

Lom bard contract ^ 186Verif ication 186T erms on which advan ce is ma de 187

Minim um am oun t of loan s __ 189Loan certif icate (Pfandscheiri) used like a current acco unt 189Measures aga inst the improper use of the lom bard syste m on

the part of specu lators 191Lom bard loan s at suboffices 192

Mo vemen t of lombard holdings 192C omposit ion of lombard investm ents 195Lom bard loan s in different econo mic divis ions of th eE mpire 198P rofits and lo sse s ._ __ 201

C H A P T E R V I I . Discounts:P rel iminary remarks 202C oncept ion and importance of d iscounts 202Disco unts and note ta x 205Discoun ts and the mo ney market 207T he act iv ity of the R eichsbank from 1876 to 1900 208E conom ic develo pm ent of Germ any in the last quarter ofthe century 209Introduct ion and maintenan ce of the imperial s ta nd ar d.- 212C ompet it ion of private banks of issue 214

H istory of the discount pol icy of the R eichsbank 216Various periods of business act iv ity of the R eichsbank 2161876- 1879General econo mic situa tion 217E ffects of m one tary reform 218Beginning of gold pay me nts 221Limitation of working capital at the transforma

t ion of the P russ ian bank into the R eichsban k;protect ive measures of bank management , especially the reorga nization of transfers 223

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The Reichsbank, 1876-1900CH A P T E R V I I . D i s c oun t s C on t i nue d . P age.H i s t o r y of t he d i s c oun t po l ic y of t he R e i c hs b a nk C on t i nue d .V a r i ous pe r i ods of bus ine s s a c t i v i t y C o n t i nue d .1 876 - 1 879 C ont i nue d .

Abundance of money and decrease of d i scountsof th e Re ich sb an k f rom 1876 to 1879 225Dec rease of gold reserv e an d incre ase of m eta lho l d i ngs o f t he R e i c hs b a nk 227The war r ing f ac tor s in f luenc ing d i scounts and therap id dev e lop me nt of th e d i sco unt r a t e 2301 8 7 9 - 1 8 8 3

I n t r o d u c t o r y 2 3 1Economic advance and i t s in f luence on the de m an d for mo ney 232Concern for uphold ing the go ld s ta nd ard a f te r th eces sat ion of silver sales 233Advances f ree of interes t on del iver ies of gold andth e incre ase of th e pu rch ase pr ice of gold 236I n t r oduc t i on o f p r i va t e d i s c oun t a nd e xpe r i m e n t s

w i t h r e duc e d l om ba r d i n t e r e s t r a t e 238T he disc ou nt ra te f rom 1879 to 1883 2401 883- 1 888Eco nom ic depress ion 242D e ve l opm e n t of t he s t a t u s of t he R e i c h s ba nk 243M ovem ent of d i sco unt r a tes 2461 888- 1 890Gen era l econom ic s i tua t ion 248I n c r ea s i n g m o n e y d e m a n d a n d t h e R e i c h s b a n k . . 2 5 0M ovem ent of d i scou nt r a te s 2521 891 - 1 895Eco nom ic depress ion an d i t s causes 256D e v e l opm e n t of t he m on e y m a r ke t 258Con di t ion of th e Re ichs ban k 259M ove me nt of d i sco unt r a te s 262

1 895- 1 900E c ono m i c a dva nc e 26 3D e ve l o pm e n t of t he m on e y m a r ke t 266Con di t ion of th e Re ichsb ank 268Ba nk pol icy 271L i m i t a t i on of l om b a r d i nve s t m e n t s 272M ove me nt of d i sco unt r a t e in genera l 275Dis cou nt in 1895 275Dis co un t f rom 1896 to 1898 278Dis cou nt in 1899 280Dis cou nt in 1900 283R e t r o s pe c t 287

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National Monetary Com missionC H A P T E R V II I. Services performed for the f inance adm inistratio ns P age,

of the E mpire and the federal s tates :Lega l basis 293T he R e ichsbank rece ives and makes paym ents for the E m pir e . 293T he R eichsbank as the m edium for financial operat ions of federal state s 295Bu siness forms 296E ffect of the transfer sys tem of imperial and stat e tr ea su rie s.- 300Other services for f inance adm inistrations 302

C H A P T E R IX . R egulat ion of mo netary circulat ion:T he problem of regulat ing monetary circulation 304R egula t ion of currency with respect to i t s good condit ion 304

C ounterfeit coins 305Dam aged coins 305Wo rn coins 306T ests for coins . 306C ounterfeit and damaged imperial treasury notes (Reichs-

kassenscheine) and bank notes 306R egu lation of the local circulation of currency 307

Variou s dutie s of the R eichsb ank in the local regu lation ofcirculation 308

R edemp t ion of notes 308A cceptance of notes of private banks 308R edem ption of imperial treasury notes 309Issue of gold coins for divis ional mo ney of the E m pi re . 309Volun tary local regulat ion of c irculation by the R eich s

bank 310A cceptance of imperial treasury notes 311A cceptance of notes of private banks 311A cceptance and issue of d ivis ional mo ney - 312Us e of talers for large pa ym en ts 313

Lim itation s for suboffices of the R eichsb ank 314T he local regula tion of circulation 315

C H A P T E R X. C ustody and m anag eme nt of art ic les of valu e; purchase and sale of securit ies:C ustody and ma nagem ent of art ic les of value 318

C losed deposits 320Open deposits 324Dep osits of minors 332P urchase and sale of securit ies for the acco unt of patron s 333

C H A P T E R X I . T h e R e v is e d B a n k A c t {Banknovelle) of June 7 ,1899 ,as a result of previous development:

E xperiences with the German bank const itut ion 336T h e R e v i s ed B an k A c t 337Increase of the capital and reserve fund of the R eichs ban k 339

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The Reichsb ank , 187 6-1900CH A P T E R X I I . T he R e v i s e d B a nk A c t of J un e 7 , 1 899 , e t c . C on t ' d . p ag e .E x t e n s i on of t he t a x - fr e e no t e c on t i nge n t of t he R e i c hs b a nk . _ 343Binding of the d i scount r a te of p r iva te banks of i s sue to tha tof th e Re ichs ban k 340

R e gu l a t i ons w i t h r e ga r d t o t he p r i va t e d i s c oun t r a t e o f t heR e i c h s b a n k 3 4 9Dis t r ibu t ion of the ne t p rof i ts of the Re ic hsb ank be tw een

s ha r e ho l de r s a nd E m pi r e 351Loans on bonds i s sued by land c r ed i t ins t i tu t ions aga ins t loanst o c om m u na l c o r po r a t i ons 353W ithd raw al of no tes of the P russ ia n Ba nk 354R e c a p i t u l a t i on ._ 355

A P P E N D I X . L a w o f J u ne 1,1909, conce rn ing chan ges in the Ba nk Act_ 357

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C H A P T E R I .

I N T R O D U C T I O N .T H E GERMAN MONETARY AND BANKING SYSTEM BEFORE T H E

FOUNDING OF TH E EM PIRE.The newly established German Empire found in the

organization of the coinage, paper money, and bank-notesystem s an urg en t and difficult task . Pro bab ly in nodepartment of the entire national economic system werethe disadvantages of the political disunion of Germany soclearly defined as in this; in no economic department weregreater advantages to be expected from a political union.

Although the customs union (Zollverein) had happilyunited the greater pa rt of G erman y in a comm ercial union,similar at t em pt s in m one tary affairs had m et w ith bu tmodest success, and were absolutely fruitless in banking.

The inconvenience most complained of was the multiplicity and variety of the different coinage systems (sevenin all) in th e different state s, also th e wa nt of an a de qu ate ,reg ula ted circulation of gold coins. Th is deficiency h adits origin in th e establish m ent of the stan da rd . All German states had a silver standard with the single exception of the free city of Bremen, the monetary system ofw hich reste d on a gold basis . Gold coins were thereforein circula tion only to a limited ex te nt an d a t fluctuatingra tes . As a result of the general economic development,however, the need for a more convenient means of payment for larger amounts had considerably increased dur-

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National Monetary Com missioning the last tw o decades before th e foun datio n of th eEm pire . S i lver money became m ore and more burden some and inconvenient for such payments.

This need led to the circulat ion in alarming propo rt ions of pap er m oney not only of gove rnm ent pap ermoney but also of bank notes.

T rue , th ere existed in Ger m any no so-called " freedomof banking," and the establishment of banks of issue(Notenbanken) could take place only through governmentconcession. In reality , how ever, especially in a nu m be rof smaller s tates , numerous banks received an.extensiveand even unres tr icted r ight to issue no tes; t he aim ofthese banks from the outset was to extend into adjoiningGerman terr i tories , beyond the borders of the state forwhich they were l icensed, their business operations andtheir note issue.

Thus there existed in Germany before the foundationof the Empire 31 banks of issue, for which various regula t ions had been made by the var ious s ta tes , and thestatutes of which differed considerably from one another.

A large number of these banks was concerned withutil izing m ost extensively th e r igh t to issue no tes tha t is ,with putt ing as many notes as possible into circulat ion.Since notes for smaller sums were not so often returned forpayment to the place of issue as those for larger amounts,no t only the different govern m ents b u t also the ba nk sissued large amounts of small notes, down to notes for oneta ler .

Since the legal control of note issue was frequentlyinad eq uat e , m an y ban ks did no t provide sufficient coverfor notes. Besides, th e ba nk s of issue engaged to som e

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The Retchsbank , 187 6-190 0ex ten t in business which t ied up perm ane ntly th eirworking capital . This was not proper for ba nk s, th eliabilities of which consist of obligations, such as notes,falling due at all times.

Owing to the impossibility of bringing about uniformregulations for German banks of issue, several Germanstates at tempted through prohibit ive measures to keep outof their territory the notes of banks licensed by othersta tes. Th ese proh ibitions were no t strictly observed ingeneral trade , but were authori tat ive for al l public treasuries and were regarded by the public as great inconveniences.

The abuses in the currency and in the banking systemwere closely conne cted. Ne vertheless, th e reform w hichha d long been recognized as necessary could not be br ou gh tinto existence in its en tiret y at one stro ke. T he problemto be solved was so complicated that progress could bemade only step by step and by constant consideration ofthe close connection between the different parts of theentire work of reform. As long as a uniform G erm ancoinage system was wanting, as long as there were noproper provisions for a sufficient gold circulation, nothorough rearrangement of paper currency and the bankno te systems was possible. On the other han d, the abusesin the latter increased the difficulty of reforming the coinage. A rational bank consti tut ion is one of the mostimportant prel iminary condit ions for the maintenance ofan orderly m one tary system . Th e reorganization of thebanking system had to form the keystone of the wholework of reform and instill into the new order of things avital and progressive spirit .

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National Monetary Comm issionThe preliminary legal condition for a uniform mone

tary and banking reform was created by art ic le 4 of theCon sti tut ion of the N orth Germ an C onfederation of J ul y26, 1867, and the C onsti tut ion of th e Germ an E m pire ofApril 16, 1871, respectively, according to w hich th e following are subject to the supervision and legislation ofthe Confederation and of the Empire: (3) The regulation of coinage, weights, and measures, and the formulation of principles for the emission of funded and unfunded paper money; (4) general regulations for banking.T he re were still con siderable difficulties in t h e w ay ofan effective organization of the monetary and bankingsystems as long as the South German states did not belong to th e Confederation. Before th e foun dation of th eEmpire, therefore, the coinage question got only as far aspreparations for an inquiry , and these were dropped fora t im e in consequence of the war w ith Fra nce . Law swere decreed to prevent a further increase of paperm oney and ban k notes. T he law of M arch 27, 1870,concerning the issue of bank notes, prescribes that theright to issue bank notes can be conferred only by afederal law, and that , similarly, an extension of existingprivileges with respect to notes can be granted only bya federal law.

After the founding of the Empire, this law was promulgated as a law of the Empire, and went into force inBaden , Sou th H esse, W ur t tem berg , and Bavar ia on January 1 , 1872. W urt te m ber g and Baden , which h i the r tohad not had any banks of issue, established such institu t ionsthe W ur t temberg ische Notenbank a t S t u t t gart and the Badische Bank at Mannheimjust before

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The Reichs bank, 1876-1900th e law wen t into force. T he num ber of Ge rma n ban ksof issue was thus increased to 33.

T he law was originally intended to be valid only un tilJu ly 1, 1872. I t was subs equ ently found necessary, however, to prolong the period of validity three times.

A similar limitation was decreed with regard to theissue of government paper money by the law of June 16,1870, concerning the issue of pap er mo ney. La ter, thislaw was likewise promulgated as a law of the Empire,and made the further issue of paper money dependenton a federal law.

These two laws, passed merely to prevent existing conditions from becoming worse, were the only legislativemeasures adopted with respect to monetary and bankingaffairs during the period of the North German Confederat ion. Th e foundation of th e Em pire , which also broug htS ou th G erm any into the political union , gave t o legislation a g reate r freedom of action which was at oncetaken advantage of .

R E F OR M OF C O IN A G E A N D P A P E R M ON E Y .Immediately after the conclusion of peace with France,

the imperial government took up the question of coinage reform. T he law concerning th e m intin g of im perialgold coins was proclaimed as early as December 4, 1871;this law laid down fundamental principles with respectto the monetary sys tem, the s tandard , and the legalbasis of German coinage.

The consolidation of the German monetary system wascom pleted b y th e Coinage Ac t of Ju ly 9, 1873. Th is lawproclaimed the imperial gold standard , which was to

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National Monetary Com missiontake the place of all standards existing in the differents ta te s , as th e ult im ate aim of coinage reform, an d sett ledall details both for the future system and for the oneprovisionally permitted during the transit ion stage (duringwhich the large coins of the taler standard were to belegal tender in addition to the imperial gold coins), as tandard which was ca l led " imper ia l s tandard" to d istinguish it from the definitive imperial gold standard.

The Reichstag , on i ts own init ia t ive , added a concludingclause to th e Coinage A ct of Jul y 9, 1873. T his clause,s tr ic t ly speaking, did not touch upon coinage, but introduced drast ic regulat ions concerning bank notes andpap er m oney. I t provided th a t th e pap er m oney issuedby the various federal s tates should be withdrawn at thelatest b y Ja nu ar y 1, 1876, and t h a t i t be replaced, inaccordance with an imperial act to be framed, by imperial paper money. The regulation regarding banknotes reads as follows:

" All ban k notes not based on the imperial s tan da rd areto be w ithdraw n by Ja nu ar y 1 , 1876. After this da teonly notes for amounts of not less than 100 marks andbased on the imperial s tandard may remain in circulat ionor be issued."

The imperial act regarding the issue of paper money,which article 18 of the Coinage Act set forth, was promulgated on April 30, 1874, as an act concerning theissue of imperial treasury notes (Reichskassenscheine).I t replaced b y uniform imperial pap er mo ney, th e pap erm on ey wh ich ha d been issued in 22 different sta tes , forwhich a definite sum of 120,000,000 marks (against some

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The Retchs bank, 1876-1900184,000,000 marks in circulating paper money of thefederal sta tes) wa s fixed. T his sum was a t first increase d,however, by advances in imperial treasury notes to different s tate gove rnm ents , in order to facil i ta te th e withdraw al of their pap er m oney. T he rep aym ent was to bemade in fifteen years (December 31, 1890).

THE PROBLEMS OF BANKING REFORM.The sett lement of the paper currency question was

delayed by its close relation to the banking questionand by the many difficulties that prevented a satisfacto ry solution of th e lat ter . T he indiv idual ban ks of issuewere priv ate inst i tut io ns; their privileges w ith regardto the issue of notes represented well-earned privaterights . T he difficulty w as to brin g ab ou t an effectiverearrangement without injuring these privileges.

A direct abolition of these note privileges was, fromth e very beginning , entirely ou t of th e question . T heonly possible course was to decree uniform regulationsof a general nature , which would cause the banks tol imit duly th e nu m ber of their branches , to reduce theirno te circulat ion , and to provide ade qua te cover. T hedifficulty w as to m ak e th e m eas ure s sufficiently effectivewithout injuring the rightfully acquired privileges of thevar ious banks .

Public opinion and the great majori ty of experts inban king , however , favored th e view th a t ban king reform m us t no t be limited to such m easures. T he crisesof 1857 and 1866 had shown that banks of issue hadother duties than to satisfy private claims for credit;

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National Monetary Com missionthat they have to fulfill rather, side by side with theseclaims, im po rtan t functions in th e public interest . T hu sthey have, above al l , to supervise and regulate the entiremonetary circulat ion , from the point of view of the hometr ad e as well as in relation to foreign currencies. T heconviction gained ground that these tasks could befulfilled only from one centre , th a t a centralized m an agement was indispensable , and therefore that a centralb an k wa s necessary, which either stan ds alone or elsesurpasses all other banks of issue so that it exercises adominating influence.

These important functions had hitherto been fulfilledfor th e kingdom of Prussia by th e Prussian B ank . T helatter had in the year 1866 afforded a firm support to allcash and credit t ransactio ns a t a t im e when a num be r ofother banks of issue either limited or suspended their billpurch ases and th u s refused the ir services at a criticalm om en t in na tion al economic affairs. T he ac tiv ity ofthis bank was, however, confined chiefly to the kingdomof Prussia . I t did no t ha ve th e righ t of establishingbranches outside of Prussia; on the contrary , when in theyear 1865 the Prussian government wanted to pass anact empowering the Prussian Bank to establish branchesoutside of Prussia , the bil l was kil led by the Landtag,which imposed the condit ion that the uncovered note circulatio n should be limited t o 60,000,000 tale rs. W he n,after the war with France , i t was found necessary toestablish a branch bank in Alsace in order to meet theneed for credit caused by the liquidation of the branchesof the Bank of France , the authori ty for this s tep wasob taine d on ly by m ean s of a n em ergency decree of Ju n e

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The Reichsbank, 1876-190010, 1871, based on section 63 of th e Con stitution, whichbecam e law on Fe bru ary 26, 1872. In the same wa y i twas necessary to pass a special bill to allow the bank tomeet the wishes of the free city of Bremen for a branchestab lishm ent there (Act of J un e 15, 1872).

The conditions in Alsace-Lorraine and Bremen showedhow great was the necessity in states outside Prussia for aunion w ith a large cen tral ba nk . T he uniform economicsystem of the German Empire required a common centre ,where all cash and credit transactions could converge; aGerman Reichsbank, the highest duty of which shouldconsist in supervising and regulating the German monetary system, was looked upon as the natural final stepin Ge rm an m one tary and banking reform. T he regulatio n of existing b an ks of issue could only lim it existingabuses. T he Reichsbank, on the other han d, seemedto be th e living force necessary to carr y o ut, uph old,and develop further the new mo netar y and ban kingconst i tu t ion .

Under the condit ions then exist ing , the foundation ofan entirely new Reichsbank in accordance with this ideawas quite out of the question; only the transformation ofthe Prussian Bank into an imperial inst i tut ion could beconsidered. T he Pru ssian Ban k already held for th egreater part of Germany the posit ion which the newR eichsb ank was to hold for the whole of G erm any . AReichsbank in addit ion to the Prussian Bank would havebeen impossible.

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National Monetary Com missionTHE BANK ACT AND THE REICHSBANK.

Considerable difficulties, however, stood in the way ofthe conversion of the Prussian Bank into a Reichsbank,and these delayed the working out and introduction of aba nk bill . Fina lly, in Ju ly 1874, a bill w as laid before th eBundesrat which abandoned for the t ime being the idea ofa Reichsbank, an d was con tent w ith formulating guidingprinciples for the regulation of existing banks of issue.I t ad ded a clause forcing tho se ban ks of issue wh ich did n otwish to be restr icted to the terr i tory of their own state toagree th a t th e B und esrat could , on Ja nu ar y 1 , 1886,announce the withdrawal of their privilege of issuing notes.At this date the Empire was to have an entirely free handin a thoro ugh reorganization. T he B und esrat passed thisbill w ith bu t few alterat ions. On No vem ber 5 th e bill wasforwarded to the Reichstag.

At the very first reading (November 16, 1874) it wasclear th a t a large m ajori ty of th e H ouse regarded th eimmediate establishment of a Reichsbank as a necessaryprelim inary condition for ba nk ing reform. T he bill w asreferred to a committee, which in its first sitting (November 21,1874) resolved at once , by a vote of 13 to 4 , " t h a tthe committee does not consider a discussion of thebank bill desirable until a decision has been arrived atregarding the establishment and organization of theReichsbank. ' '

As an outcome of this decision the deliberations concerning the cessions to the Empire by the Prussian Bankled to th e desired result. Pruss ia declared itself r ea dy ,after the withdrawal of its invested capital of 5,720,400marks and of its share (9,000,000 marks) of the reserve

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The Reichs ban k, 1876-1900fund legally belonging to it on the dissolution of the bank,to cede to the Empire the Prussian Bank which was to betransformed into a Reichsbank, on the following terms:

i. Prussia was to receive a lump sum of 15,000,000marks as compensation for the net profits from the Prussian Bank of which it is now deprived.

2. The Reichsbank was to assume the obligation towhich the Prussian Bank was bound by the contract of1856 of paying to Prussia a yearly revenue of 1,865,730marks unti l 1925.3. A special unders tandin g w as to be arr ived at withregard to taking the real estate of the Prussian Bank.

4. The private shareholders of the Prussian Bank wereto have the right to exchange their shares for shares of thesame nominal value in the Reichsbank.

The proposals of Prussia were accepted by the Bundes-rat , and on this basis it was decided to transform thePrussian Bank into a Reichsbank. T he regulations inthe bill affecting the existing banks of issue (which, to dist inguish them from the Reichsbank, were now termedPrivatnotenbanken) were no t affected to an y app recia bleextent by the establishment of the Reichsbank.

In order to avoid the introduction of a new bill andto avoid another first reading a member of the Reichstagcommittee was induced to introduce formally as his ownmotion the modifications decided upon by the Bundesrat .The bill thus supplemented by the creation of the Reichsbank was accepted without radical changes both by thecommittee and, later , by the Reichstag in full sessionafter the second and third readings, and the act was published as the Bank Act of March 14, 1875.

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National Monetary Com missionGENERAL PROVISIONS OF THE BANK ACT OF MARCH 14, 1875.

T he fund am ental principles of th e Ba nk Act are asfollows:It contains, first , a number of general regulations asto the issue of no tes. T he right of issuing no tes can beobtaine d or extende d only thro ugh an imperial law. N oobligation is imposed to accept bank notes as payment inprivate transactions , and no obligation can be imposedfor"public treasuries by th e laws of an y pa rtic ula r st a te ;the circulation of foreign bank notes based on the standard of the Empire is prohibited; bank notes may onlybe for amounts of ioo, 200, 500, 1,000, and multiples of1 ,000 marks; the banks are obliged to redeem their notesat all t imes at their full nominal value; issuing banks arenot allowed to accept bills , nor to conclude on their ownaccount or that of others t ime transactions in goods andsecuri t ies; four t imes a month they must publish in theReichsanzeiger (Imperial Gazette) their assets and liabilities according to a detailed scheme, an exact balancesheet , and also within thre e m onth s after the end of thebusiness year a statement of the year 's profit and loss.

Among the measures which are binding for al l banks ,the so-called indirect contingent (indirekte Kontingen-tierung) of ban k n otes no t covered by cash (Barvorrat;see below and also note at foot of p. 80) is of especialim por tanc e. Fo r each existing ba nk of issue an d also forthe Reichsbank a certain sum was f ixed to which i t mightissue not es in excess of its cash hold ings. In case thissum be exceeded, a yearly ta x of 5 per cent on the excessis to be paid to th e im perial t reas ury . As cash m ay

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The Reichs bank, 1876-1900be reckoned " the amount he ld by the bank in currentGerm an coin , imperial t reasur y n otes , notes of othe rGerman banks, and gold in bullion or foreign coin, thepou nd fine to b e reckoned a t 1,392 m ark s. ' ' In casethe authority of a bank to issue notes expires, theamount to which the bank was formerly allowed to issueuncovered notes ( the bank's contingent) is added to thatof the Reichsbank.

The sum total of contingents was reckoned at385,000,000 marks, of which 250,000,000 marks made upthe share of the Reichsbank.

Through this system of note taxes an effort was madeto limit the issue of uncovered notes to an amount notdangerous for the Germ an m one tary system . In contrast to the English bank act , however , this safety wasnot to be obtained by means of an impassable limit norwas the elasticity of note circulation to be impaired.The rigid limitation of the uncovered note circulation ofthe Bank of England had on various occasions led toacu te crises. Th e fear th a t the ban k m ight reach thelimit of its note reserve and, as a result, be forced tosuspend credit , caused at critical periods a panic-likerun on the bank, since everyone endeavored to get asupply of ready money, either in coin or notes, by discou nting bills, etc. Th ree times it had been found necessary, in order to allay the panic, to ignore the limitationon uncovered notes.

These experiences caused German legislators to adopta new course. B ank s were allowed to exceed the legallimit assigned t o t he m (th at is , to exceed thei r no te " cont in ge nt" ) , b ut by m eans of the 5 per cent tax on th e

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National Monetary Comm issionexcess of uncovered notes, the banks were to be forced towo rk agains t a n excess of th e " co nti ng en t" by raisingthe ir rat e of discount to a t least 5 per c ent.

This system has become of great importance in thedevelopment of note issues in Germany.

The regulations thus far mentioned, with which al lbanks of issue were compelled to comply, were not,however, sufficient to attain the end aimed at in bankingreform. In order to bring mo re extensive me asures intoharmony with wel l -earned pr iva te r ights , the pr iva teissuing banks were allowed by the Bank Act the choice ofhaving their note circulat ion and their whole sphere ofbusiness str ic t ly confined to the terr i tory of that s tatewhich had conferred on them the r ight to issue notes , orof conforming of their own free will to a number of far-reaching regulations.

The new regulations provided special ly that the banksmust bind themselves to keep at a l l t imes a reserve covering at least one-third of the notes issued by them, andconsist ing of current German coinimperial t reasurynotes or gold in ingots or foreign coinand to hold goodcomm ercial bil ls for the rem ainder of the outsta nd ing note s.

The banks were also obliged to agree that notice ofrevocation of their right to issue notes might be givenfirst on Jan ua ry 1, 1891, an d the n a t intervals of ten yea rs.In this w ay legislation was t o b e ass ured a free ha nd infuture uniform regulations of banking.

Furthermore , regulat ions were framed concerning theplaces where bank notes were redeemable , the mutualacceptance of notes of those banks which conformed to

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The Reichs bank, 1876-1900the optional regulat ions , the accumulation of a reservefund, and the publication of the discount rate .

Certain measures of relief were provided for those bankswh ich would lim it their issue of notes to th e a m ou nt oftheir capital s tock.

These measures were for the most part already contained in the government bil l .

T H E RE IC H S B A NK .

To these were added the provisions concerning theReichsban k. Section 12 of th e Ba nk Act s ta tes :

"Under the name 'Reichsbank ' a bank is es tabl ishedunder the supervision and guidance of the Empire , withthe powers of a corporate body, and with the task of regulat ing the monetary circulat ion in the entire Empire , offacilitating the settlement of payments, and of utilizingavai lable capi ta l ."The capital stock of the Reichsbank was fixed a a t120,000,000 marks (instead of 60,000,000 in the case ofthe Prussian Bank); it was divided into 40,000 shares of3 ,000 marks each, each share bearing the name of theholder. I t was decided th a t the Em pire should not pu tany capital into the enterprise.

The well- tested consti tut ion of the Prussian Bank was,in all essential features, taken as the pattern for the const i tut ion given to the Reichsbank.

The supervision of the Reichsbank by the Empire isexercised thro ug h a council of curato rs (Curatorium) com-

a In conform i ty w i th the Rev ised Ba nk Act of Ju ne 7 , 1899 , the ca p i ta ls tock was b rou gh t up to 150 ,000 ,000 m arks by th e end of the yea r 1900by the i s sue of ne w shares , and wa s r a i sed to 180 ,000 ,000 m ark s by theend of the year 1905 (cf . p. 342).

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National Monetary Com missionposed of the Chancellor of the Empire, who is president,and four members, one of whom is designated by theEm peror and the o ther three by the Bu ndesra t . T hedirection of th e R eichsb ank is exercised by th e C hancellor and und er him by th e Reichsb ank D irectorate(Direktorium). A de pu ty can be appo inted in place of theChancellor. Th e Reichsba nk Direk torium is the adm inistra t iv e and executive , and , so far as the outside world isconcerned, the representat ive body of the Reichsbank (cf .p . 42). I t consists of a pres iden t, a vice-presiden t (since1887), a n d the required num ber of me mb ers (six) , who areapp ointe d for life b y th e Em per or upo n t h e nom inatio nof th e B un de sra t. T he officers of th e R eich sba nk hav e th erights and duties of civil serva nts of th e E m pi re; th eym ay no t own any shares in th e Bank . Th e accoun ts ofthe Reichsban k are aud ited by th e boa rd of accou nts(Rechnungshof) of the German Empire .As compared with the Empire , the par t taken by pr i va te shareholders in the m anag em ent of the B ank is verylimited. Th e m ain du ty of represen tat ives of t he shareholders is to help the managers of the Bank with expertadvice, and, in addition, to form a protection for largebanks of issue against the dangers which have arisen oftenenou gh from too close a con nec tion w ith th e financialadministrat ion of the country.

The shareholders exercise their part in the administrat ion of the Bank through the general meeting and througha commit tee (Zentralausschuss) elected in the generalmeet ing .

The general meeting of the shareholders is held annuallyin March, a t Berl in , in accordance with the Reichsbank

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The Reichsbank, 1876-1900Statute (cf . Laws, pp. 90-100 a ) , but it can also be convened in extrao rdina ry session at any t ime . This meetingreceives annually the report of the administrat ion , thebalan ce sheet, an d the sta tem en t of profit and loss, an dchooses th e m em bers of the c entral com m ittee; i t has alsoto decide all po ints relating to th e increase of c apita l stockand al terat ions of the statute .

The centra l commit tee is the permanent representa t ivebody of the shareholders over against the administrat ion.I t consists of fifteen m em ber s. All m em bers m us t be residents of the Empire , and at least nine of them must residein Berlin.

The central committee meets at least once a monthunder the chairmanship of the president of the Reichsbank Directorate; reports of the total business are la idbefore it monthly, and the views of the Directorate regarding the general state of business and proposals for anynecessary me asures are sta ted . T he opinion of th e central committee is sought on a number of questions, suchas the determination of the discount rate and the highestsum to which the funds of the Bank can be applied toloans on collateral. T he purc hase of securities for th eaccount of the Bank can take place only after the amountto which the funds of the Bank can be used for this purpose has been fixed with the consent of the central commi t tee .

Three deputies of the central committee, chosen for ayear from its members, exercise continuous special control over th e m anag em ent of th e Reichsbank . These

a German Imperial B anking L aws, published by N ational MonetaryCommission.27

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National Monetary Com missiondeputies are authorized to at tend with advisory powersall s i t t ings of the Directorate , and to examine the booksof th e Ba nk. Business transa ctions with th e trea sur y ofthe Empire or of the federal s tates , for which termsother than those general in banking are to be made,must be brought to the knowledge of the three deputies ,and on the motion of one deputy must be laid before thecentral committee; unless the majori ty of the committeedecide for the transactions in question , they must beabandoned.As in the case of the Reichsbank Directorate in Berl in ,the Bank Act arranged that the managing officials ofthe head branches (Hauptstelleri) to be founded in largerplaces other than Berlin, should have the assistance ofrepresentat ives of the shareholders; these are the distr ic tcommittees , the members of which are chosen by theChancellor of the Empire from the number of those shareholders living in, or in the immediate neighborhood of,the seat of the bra nch establishme nt. R epo rts of th ebusiness of the head branch are laid before the districtcom m it tee m onthly . Tw o or three mem bers are chosenby the committee from its own number to act as deputies(Beigeordnete) and to exercise a special and constant control over the business transactions of the head branches.

Through the cooperation of the Reichsbank authori t ies ,who are not interested in the financial profits of the Bank,with the representat ives of the shareholders , who arepractical business men, the Bank management is safeguarded, since it takes into consideration the interest of thepub lic; and at t he sam e t ime th e experience and businessknowledge of the shareholders, who are financially inter-

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The Reichs bank, 1876-1900ested in the success of the Bank, are utilized in the guidance of th e B ank . Th is ba nk organization, which strikesthe mean between a purely state bank and a purely privateone, has proved to be the best system according to theexperiences of m ost E uro pe an countries. On th e occasionof the deliberations, in the years 1889 and 1899, over therenewal of the privilege of the Reichsbank, the demandwas made for the transformation of the Reichsbank intoa state (government) bank, in that the Empire was toacquire all th e shares and so do away w ith the shareholdersand their cooperation in the administrat ion of the Bank.T he G ove rnm ent, however, as well as th e majority of th eReichstag, were on both occasions opposed to this demand.The representat ive of the governments of the variousstates stated distinctly, during the deliberations of thecom m ittee in charge of th e revision of th e B ank Ac t in1899, that the state governments were unanimous intheir decision "to oppose on political , economic, andfinancial gro und s th e transfo rm ation of th e R eichsba nkinto a s ta te bank."

The Reichsbank is endowed with important r ights toenab le it to fulfill t h e task s allotte d to it by th e B an kAct; the Bank also has extensive obligations.

The Reichsbank has, first , the right of issuing noteswith out direct l im itat ion , according to th e requirem entsof its bus iness . In dir ec tly , its issue of no tes is lim ited,first , by th e 5 per ce nt ta x on uncovered notes issuedin excess of the set limit (contingent); secondly, throughthe regulation that the Bank must always hold as security metal and imperial treasury notes for at least one-third of the note issue, and for the remainder discounted

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National Monetary Com missionbills fulfilling the conditions of the Bank Act (cf. p. 1255.).The Reichsbank must redeem its notes in current German coin at the chief office in Berlin immediately onpresen tat ion , and in th e case of branc h establishm entsas far as the ir stock of me tal and th e dem and for m one yallow. Th e Reichsb ank has , furthermore , th e r ight toes tabl ish branches anywhere in the Em pire ; the B und esra tis authorized to order the establishment of branches inspecified places.

The Reichsbank and i ts branches are , throughout theEmpire, free from all income and trade taxes.When a debtor for a loan on collateral (Lombard loan)

is in arrears, the Reichsbank has the right to sell thedead pledge (Faustpfand), w ithou t legal auth orizatio n orprocedure , and to deduct principal , interest , and costsfrom the proceeds.

On the other hand, a number of special obligations areimposed upon the Reichsbank in addit ion to the generaltask of regulating monetary circulation, etc. (cf. p. 304).

In accordance with section 22 of the B ank A ct , th e B an kis bound to receive , without compensation, payments forthe account of the Empire and to make payments toth e exte nt of th e Em pire 's balance. I t is a lso authorizedto unde rtak e the same transa ction s for th e state s of th eEm pire. This du ty has been extend ed by section 11of the Imper ia l Bank Sta tu te , which provides tha t theReichsbank shal l adminis t ra te gra tu i tously the ba lanceof the Empire , and shall keep and render accounts ofal l receipts and payments on the account of the Empire(cf. p. 293).

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The Reichs bank, 1876-1900The business which the Bank is allowed to carry on is

clearly defined. I t is confined to tra ns ac tio ns in preciou smetals; to the discounting of bills which have at mostthree months to run and on which, as a rule , three , but atleast two , persons know n to be solvent are l iable; th epurchase and sale of bonds of the Empire, of the federals ta tes , and of inland com mu nal corporations , which are dueat their face value at the latest in three months; the granting of collateral loans on portable pledges of a prescribedkind; trading in certain absolutely safe German securities;th e collection of comm ercial bills; the pur chas e a nd salefor patrons of precious metals and securities; the acceptance of noninterest-bearing and, under certain restrictions, of interest-be aring m oneys as deposits an d transfer(giro) ac co un ts; the custody and m anag em ent of artic lesof value.

Of great importance for the monetary standard is thedu ty impo sed upon th e Reich sbank in section 14 of th eBank Act of exchanging its notes for gold bullion at a fixedra te of 1,392 m ark s for th e po un d fine. As 1,395 m ar ksare coined out of a pound fine of gold, and the mints, inaccordance with the proclamation of the Chancellor of theEmpire on June 8, 1875, charge, for the coinage of gold onprivate accounts , 3 marks per pound f ine , the price whichthe Reichsbank is bound to pay for gold bullion corresponds to the sum for which the mints coin for privatepersons. A t th e m ints , however, a person delivering goldsuffers a loss of interest, as he must wait until the coiningis completed; at the Reichsbank, on the contrary , he getsth e valu e in note s im m ediately . As a result , all golddestined for monetary purposes is in reality delivered to

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National Monetary Com missionthe R eichsbank , and th e Reichsbank is the only pr iva teconcern which makes use of the free right of coining.

It follows of necessity that the demand for gold for consignments abroad must finally be covered from the bullionof th e central ban k. Consequen tly , th e widest conceivablecontrol over al l intern ation al relat ions of Ge rm an ba nk ing is assured to th e Reich sban k by section 14 of t h eB ank Act. T hrou gh this provision, in conjunction withthe private coinage r ight , the standard is connectedclosely with the Bank administrat ion and the condit ion ofthe money marke t .

Fur thermore , the Reichsbank must make known i tsrate of discount and the rate for loans on collateral (Lorn-bardzinsfuss).

I t is obliged to ta ke in pa ym en t at full nom inal valu e , inBerlin as well as at i ts branch establishments in townswith over 80,000 inhabitants , or at the seat of the issuingba nk , th e notes of those ba nk s complying w ith th e o ptionalprovisions of th e B an k A ct, as long as the issuing b an kpu nct ual ly fulfills its d u ty of redeem ing no tes. T heReichsbank, however , may make use of these notes onlyfor payments to that bank which has issued them, or forpayments in tha t p lace where the la t te r has i t s headquarters , or i t must present the notes for redemption.The notes of the Reichsbank , on the o ther hand , may beused a t will as pa ym en t by pri va te ba nk s of issue(Privatnotenbanken).

The Empire, finally, participates in the net profits ofth e Re ichsb ank . Concerning th e division of th e profits ,section 24 of the Bank Act provides as follows:

First , a regular dividend of \% per cent on the capitalstock is paid to the shareholders; then 20 per cent of the32

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The Reichsbank, 1876-1900remainder is allotted to the reserve fund, as long as thisdoes no t am ou nt to a qu arte r of th e capital stock. T heremaining port ion is divided equally between the Empireand the shareholders, in so far as the total dividend of theshareholders does not exceed 8 per cent; of the surplusstill remaining the shareholders receive one-fourth andthe Empire three-fourths.

By the act of December 18, 1889, proposing a change inthe Bank Act (cf. Appendix 2) ,a the initial dividend of theshareholders was reduced to 3 ^ per cent , corresponding tothe general decline of the interest rate of the Empire, andthree-fourths of the surplus was allotted to the Empire,provided the total dividend of the shareholders exceeded6 per cent .b

Section 41 of the Bank Act reserves to the Empire theright either to abolish the Reichsbank (first , on January 1,1891, then, however, every ten years after a preliminarynotice of one year) and to take over its real estate at thebook value, or to acquire the to tal shares of the Re ichsba nka t their nom inal valu e. In bo th cases th e reserve fund asshown by the balance sheet, in so far as it is not needed formeeting losses, goes in equal portions to the shareholdersand the Empire .

For a prolongation of the privileges of the Reichsbankthe consent of the Reichstag is necessary.a See pag e 445 of the Ge rm an ed i t ion of the Re ich sba nk volu me , a l so

note on page 56 of th i s t r ans la t ion .& T he R e v i s e d B a nk A c t (Banknovelle) of Ju ne 7 , 1899, cause d a fur the r

decrease in th e profi t s of the shareholde r s . Th is ac t p rovide s th a t a f te rthe firs t d iv idend of 3 ^ pe r cen t to the shareholder s and t he lega l por t io nto t he r ese rve fund , th r ee - fou r ths of the r ema in ing surp lus i s to go to th eEmpire and one- four th to the shareholder s ( c f . p . 353) .

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National Monetary Com missionAs the note privilege of those banks which conformed

to the optional provisions of the Bank Actall banks, infact , except the Braunschweigische Bankcan be revokedat the same t ime as th a t of the Reichsbank, legislat ion has ,every ten years , a free hand to adapt the Bank consti tution to altered conditions, and to consider any reformswhich appear to be necessary or desirable.

T H E ES T ABL IS H M E N T O F T H E RE ICH S BA N K .In order to establish the Reichsbank by transforming

the Prussian Bank into the form outl ined in the Bank Acta number of comprehensive administrat ive measures werenecessary. I t was special ly im po rtan t th at th e Prussiangove rnm ent revoke th e privilege of the Prussian B an kand conclude a contract with the Empire.

The privilege of the Prussian Bank was revoked, inview of the pending reorganization of banking affairs ,before th e end of the y ear 1871, accord ing to section 2of th e Prussian B an k Act of May 7, 1856. According tothe paragraph in question the shareholders were to receive the nominal value of their shares and, in addition,half of the reserve fund; the whole wealth of the PrussianBank went , on the other hand, to Prussia .

The Prussian Government received authori ty by a lawof M arch 27, 1875, to conclude w ith the imp erial government a contract concerning the cession of the Bank tothe Empire; the necessary authori ty was accorded tothe imperial government in the Bank Act of March 14,1875. The terms of the contract were f ixed by bothpart ies in agreement with those which, during the above-mentioned deliberations on the establishment of theReichsbank, had been proposed to the Bundesrat by the

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The Reich shank, 1876-1900Prussian Go vernm ent in Novem ber , 1874. T he contractconcluded between Prussia and the Germ an Em pire inaccordance w ith these t erm s w as ratified on M ay 17-18,1875. According to this contract the Empire took overth e Prussian B ank on Jan ua ry 1, 1876, w ith all i ts privileges and duties, in order to transfer them, in accordancewith th e Ba nk Act , to th e R eichsbank to be established.Th e cession was m ade in th a t t he head of th e PrussianBank, on January 1, 1876, assigned in writing the wealthof the latter to the Reichsbank Directorate for furthermanagement .

In accordance with the provisions of the contract between the Empire and Prussia, the necessary measures forthe establishment of the Reichsbank were provided byth e Ba nk Act and by the sta tu te decreed by the Em perorwith the consent of the Bundesrat , in accordance withsection 40 of the Bank Act.The capital stock of the Reichsbank was to be raisedfrom the invested capital of those shareholders of thePrussian Bank who would use the r ight , reserved tothem in the contract with Prussia , of exchanging theirshares for shares in the Reichsbank, and further, throughthe sale of the remainder of the new bank shares by theChancellor.

Only 81 shares of the Prussian Bank, representing243,000 marks, made no use of the privilege of exchange.In accordance with the contract with Prussia , the Reichsbank had to pay to the owners of these shares their invested capital and their share of the reserve fund.

Altogether, 20,081 shares, with a total nominal value of60,243,000 marks, were disposed of20,000 by public

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National Monetary Com missionsubscriptionthrough a proclamation of the Chancelloron M ay 24, 1875, an d 8 1, for which t h e privilege of ex change had not been used, by sale on the Bourse.

A rate of 130 was obtained in the sale; and the premium, to the total amount of about 18 ,000,000 marks , wasused in paying off the 15,000,000 marks to Prussia in accordance with the surrender contract , the remainder beingallotted to the reserve fund.

On December 31, 1875, the funds of the Prussian Bankwere transferred to the Reichsb ank Directorate by a decree of the Prussian minister of commerce, the former headof th e Prussian Ba nk. On Ja nu ar y 1, 1876, th e m ost impo rta nt features of th e new system w ere p ut into opera tion.

TH E REICH SBANK AS TH E CENTRAL BANK OF GERMANY.TH E B AS IS ESTAB LIS H ED B Y TH E B ANK ACT.

In th e bank con sti tut ion created by the Ba nk Ac t ofMarch 14, 1875, the principle of a central bank was established in so far as i t could be reconciled wit h th e w ell-earnedrights of th e existing 32 pr iv ate b an ks of issue (Privat-notenbankeri).

The predominance of the Reichsbank was assured by i tscapital , which, in comparison with that of the remainingbanks of issue, was extraordinarily large for the existingcondit ions , and further by the amount of i ts authorizedtax-free note contingent (JV otenkontingent), which considerably exceeded the sum of the entire remaining cont inge nts , and which was subsequ ently to be increased byth e contin gen ts of those b an ks th a t decided to issue nom ore note s. In case of a general dem and for m one y t h etax on excess notes was no effective restriction to the in-

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The Reichsbank, 1876-1900crease of notes of the Reichsbank beyond its authorizedlimit , as the Reichsbank did not hesitate to sustain lossesthro ug h the tax when public interest required an extensionof its no te emission. T he predo m inance of th e Reichsbank was also promoted by i ts r ight to establish branchesall over the Empire; for private banks of issue the establ ishment of branches outside their own part icular s tatewas coupled with severe conditions.

It was the business of the Reichsbank to put in practice,on this basis , the idea of a German central bank of issue.Since legislators favored such a development of theReichsbank, i t was in keeping with this fundamental ideato divert private banks of issue from note issues to otherbranches of banking (viz, deposits) , and to urge them torenounce voluntarily their privilege of issuing notes.

Besides, every adequate regulation of conditions forno te issue was bo un d to lead to such a result. T he restriction of business to lines compatible with note issues,principally to discounts an d loans on collateral , is prac ticable, w ith ou t too gre at a curta ilm ent of financialproceeds, only for a ba nk resting upon a com para tivelybro ad basis . This l imitat ion was prescribed, however ,for all ba nk s which would confine their opera tions tothe part icular s tate which had granted them the concession. Ce rtain facilities were gra nte d only to those ba nk swhich would restrict their note issue to the amount oftheir cap ital stock. B ut th e limitation of no te issues andthe confinement to one state deprived the banks in question of all importance as issuing banks in the Germanmonetary sys tem.

The note-tax system helped the intended developmentin two way s. Ba nks can not in norm al t imes, when37

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National Monetary Com missionthe rate of discount does not rise to 5 per cent, exceedtheir authorized contingent to any appreciable extentand for any length of time without suffering financial loss;even when the discount rate reaches 5 per cent the bankshave no interest in extending their uncovered circulat ionbeyond their contingents , for the interest on notes issuedbeyo nd the tax l imit is coun terbalanced by th e 5 percent ta x. Ev en when higher discount rates prevail , th eprofit resulting from excess note issues is comparativelysmall . In consequence of this , th e no te ta x has ha d t h eeffect , upon the whole, of keeping within limits the uncovered note issue of private issuing banks.

On the other hand, the fact that the entire cash holdings of banks are reckoned as cash reserve in calculat ing the uncovered note circulat ion and the note tax ,ha s caused ba nk s to encourage depo sits , for th e cashfrom deposits is cover for notes within the meaning of theBank Ac t .

DEC REAS E IN TH E NUMB ER OF PRIV ATE B ANKS OF IS S UE.H ow far th e development contem pla ted in th e Germ an

bank constitution has been realized is shown by the factth a t of th e 32* pr iva te ba nk s of issue which ex isted in1875 only 7 are still in existence. E ve n before th e B an kAc t w ent into force 12 pr iva te ba nk s of issue reno unc edthe ir privileges. Of th e priva te ba nk s of issue a t presen texist ing , only one, the Braunschweigische Bank, 6 has notconformed t o the optio nal provisions of t h e B an k Act.Its privilege runs until the year 1952.

o I n 1 910 on l y f ou r r e m a i ne d , t he B a nk of B a v a r i a , t he B a nk of S a xo ny ,t he B a nk o f W ur t e m be r g , a nd t he B a nk o f B a de n .& T he B a nk of B r a uns c hw e i g , t he B a nk of F r a n k f u r t , a nd t he B a nk f urS t iddeutsch land no longer i s sue no tes .38

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The Ret chs bank, 1876-1900In Prussia th ere exists only one ba nk of issue besides th e

Reich sbank, nam ely , the Ba nk of Frank furt ." W hereas al lother Prussian private banks of issue have lost their rightof issue , e i ther through voluntary renunciat ion or throughth e refusal on th e par t of the P russian Go vernm ent torenew the privilege upon its expiral , the privilege of theFrankfurt Bank on account of the competi t ion of theneighboring South German banks of issue was prolongedindefinitely, subject to revocal after one year 's notice.

T he remaining 5 priva te b ank s of issue t h a t hav e conformed to the regulations of the Bank Act are the following: T he Bayerische N otenb ank at M unich; the Sach-sische B ank a t D resden; the W urttem bergsc he No tenbank a t S tu t tgar t ; the Badische Bank a t Mannheim; theBank fur Siiddeutschland a a t Darmstad t .

Of these , the two first mentioned have managed to keepa comparatively exclusive field of activity, and haveestablished a large network of branch es, which, how ever,have been confined to the one state.

Th roug h the renunciat ion by 25 private ba nk s of issueth e no te co nting ent (authorized tax-free no te issue) ofth e Reich sban k has gradu ally been increased from250,000,000 marks to 293,400,000 marks, 6 while the sumtotal of the contingents of the private banks of issueamounts now to only 91,600,000 marks.

o T he B an k of Bra unsch weig , the Ba nk of F r ank fur t , an d the Ba nk f i irS i i dde u t s c h l a nd no l onge r i s s ue no t e s .&By th e Rev ised B an k A ct of Ju ne 7 , 1899 , i t ha s been r a i sed to450, 000, 000 (cf. p . 346) , an d by th e A ct of J un e 1 , 1909, to 550,000 ,000,w i th an agg rega te c i r cu la t ion of 618 ,000 ,000 m ark s , exc ept a t the end ofMa r c h , J u ne , S e p t e m b e r , a nd D e c e m be r , w he n t he c on t i ng e n t of t he

Reich sbank i s r a i sed to 750 ,000 ,000 , and the ag greg a te c i r cu la t ion to81 8 , 771 , 000 m a r ks .

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National Monetary Comm issionT H E E X T E N S I O N O F T H E R E I C H S B A N K ' S S Y ST E M O P B R A N C H E S .More important for the Reichsbank than this increase

was the immediate extension of its branches over allG erm any. H ow great was th e need outside Prussia forconnection with a central bank is shown by the manypetitions received in 1875 by the Prussian Bank fromth e provinces , especial ly from Sax ony. These peti t io nsdesired th e ' establishm ent of branche s before th e newba nk con sti tut ion wen t into force. T he same law ofM arch 27, 1875, which empowered th e Prussian Go vernment to surrender i t s bank , gave to the Pruss ian Bank ,which had formerly established branches by vir tue ofspecial laws only in Alsace, Lorraine, and Bremen, theright to establish branches over the entire Empire duringth e short t im e which i t s t il l had to exist as Prussia n B ank ,and use was at once made of this authori ty , not only forSaxo ny but also for H essen, Bad en, Brunsw ick, an dReu ss a . L. After Jan ua ry 1, 1876, th e rem ainder ofGermany was inc luded.

Of distin ct im po rtan ce, ho wev er, for th e position ofthe Reichsbank in the German banking sys tem is thefact that private banks of issue have, according to theirmanagement , ceased more and more to exercise a determining influence on the regulation of monetary affairsand on the international relat ions of our monetary system . T he fulfi llment of these im po rta nt task s becam emore and more a duty of the Reichsbank.

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The Reichs bank, 1876-1900T H E R E IC H S B A N K A S T H E LA S T R E S O R T O F T H E G E R M A N M O N E T A R Y

S Y S T E M .The Reichsbank is the last support of the German

ho m e m ar ke t. I t satisfies ou t of its own funds ev eryincreased demand for money by increasing its noteemission, even when this largely exceeds its tax-freecontingent; on the other hand, i t regulates the demandfor money and counteracts too great an extension ofno te circulation by fixing th e discount ra te . I t neitherdepends on other banks nor does it rediscount billsasdo priv ate ba nk s of issue for th e purpo se of diminishing its capital invested in bills and strengthening itsfunds by claims on third parties.

In the same way, the supervision of foreign relationsof German monetary affairs lies exclusively in the handsof th e R eich sba nk . I t end eavo rs to hold a sufficientgold reserve, out of which at all times foreign obligationscan be set t led without causing a shock to our s tandard.

In consequence of the provision of the Bank Act concerning the purchase of gold, the gold coming from abroadflows principally into th e Reichsb ank. By fixing itsdiscount rate , the Reichsbank exercises on domesticdemands for credit and on international gold movementsa cert ain steady ing influence. Th is was formally recognized by the private banks of issue as early as 1887 byan agreem ent in which they boun d them selves not t od i s c o u n ta at a rate lower than that of the Reichsbank,as soon as th e Re ichsb ank gives notice of a thr ea ten eddraining of gold.

H ow the R eichsbank h as sought to solve i ts problemsin detail will be described in the following pages.

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C H A P T E R I I .

T H E A D M I N I S T R A T I V E O R G A N I Z A T IO N .T H E OR G A N IZ A T IO N I N G E N E R A I , .

The well- tested administrat ive organization of thePrussian Bank was retained in i ts sal ient features uponth e establishme nt of th e Re ichsbank . T he deviat ions tosuit altered circumstances were mainly of a purely formalnature and only in isolated instances of material importance .

At the head of the Reichsbank stands the Chancellorof the Empire , who d irec ts the whole bank managementaccording to the provisions of the Bank Act and the BankSt a tu te . H e is inves ted not only wi th impo rtant specia lpowers which the act enumerates , part icularly in theauthority to issue orders and official instructions for theconduct of business, but also in the general provision thatth e Reichsban k D irektoriu m , which is directly und er theChancellor, m us t at all t im es obey his orders . H e is president of the Curatorium,, which supervises the Reichsbankon behalf of th e Em pire . In case of th e Cha ncellor 's un avoid able absenc e, he is rep rese nte d in all functions affecting the Reichsbank by a substi tute appointed by theEmperor .

Th e Reichsbank Direktor ium, which, under th e Chancellor, has immediate control of the Reichsbank, is designate d in the B ank Act as the man aging an d execut ivebod y. It s m em bers are th e official repres enta tives of th e

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The Reichsbank, 1876-1900bra nch directors are held in various town s unde r thechairmanship of the president, and here discussionsfollow concerning the general state of business andcredit , and the proposed changes in the administrat iveand technical organization.

The main Reichsbank office, in which central and localfunctions the lat ter limited to th e Berl in circuit arecom bined, is organized into th e following b ur ea us : T hecentra l bureau (Zentralbureau), compris ing the depar tmentof th e pre side nt; th e m ain bookke eping office (Haupt-buchhalterei) , wh ich controls the boo kkeeping of allbranches , set t les the accounts of branches with oneano ther, collects all book ed m ateria l , m akes th e finalentries on th e different acco unts, draw s up th e weeklyreports,01 and at the end of the year prepares the balancesheet; the archives (Archiv), which keep the books relating to ba nk shares ; the s ta t is t ica l dep ar tm ent (Statis-tische Abteilung), in which all statistics of any importance to the bank management are collected and arranged; t he Reichsbank main t reasu ry (Reichsbank-hauptkasse), w hich is also ch arged w ith th e care of th em on etary transa ction s of th e imperial t reas ury und er th eti t le of m ain imperial t reasu ry (Reichshauptkasse); thetransfer (Giro), discount, and collateral loan (Lombard)depar tments ; the col la tera l loan (Lombard) control office;the bureau for private closed deposits; lastly, the registration office (Registratur) , an d t h e co py ing office (Kanzlei).

a As the sep ara te r e po r t s of the branc hes , in order to g ive an acc ura t ep i c t u r e o f t he s i t ua t i on , a r e m a de up s i m u l t a ne ous l y i n c on t r a s t t o t heprocedure in o the r l a rge cen t r a l banks of i s suethe compi la t ion and publ ica t ion of the r e turns for the whole Re ichsbank can , on account of thegrea t d i s tance of many branches f rom Ber l in , t ake p lace on ly a f te r thelapse of several days af ter the c los ing of the books .

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National Monetary Comm issionA peculiari ty in th e adm inistra t ive system is th e secu

rities department of the Reichsbank main office (Kon-tor der Reichshauptbank fur Wertpapiere, cf. p. 324ft.).

A special auditing official has to receive all accountsof the Reichsbank , check them, and forward them to theboard of accountants (Rechnungshof) of the GermanEmpire , which then revises them according to section 29of the Bank Act.

B R A N C H E S T A B L I S H M E N T S .The central ization of bank note issues aimed at

by th e B ank Act a cen tral ization w hich in th e courseof t ime has really come about in many parts of Germany through the d isappearance of most banks ofissuepresupposes for the Reichsbank an extended andwell organized system of branches, so that it can fulfillits legal duties and satisfy the rightful claims of trade toa metal and note circulat ion suited to t imes and localrequiremen ts . T he Ba nk Act gave th e Reichsbank ther ight " to es tabl ish branches in a l l par ts of the Empire / 'and empowered the Bundesrat to order branches to beestablished in certa in places (sec. 12). T he R eich sba nkat i ts establishment needed only to extend the PrussianBank's network of branches over the whole Empire , andto arrange the network according to the development ofcommerce .

I N T E R N A L O R G A N I Z A T I O N .This applied above al l to the internal organization of

th e branch es of the Prussian Ba nk. T he m ain bran ches(Reichsbankhauptstellen) , branch offices {Reichsbank-

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The Reichs bank, 1876-1900stellen), suboffices {Reichsbanknebenstellen), and w arehouses(Warendepots) correspond to the Bankkontoren, Bank-kommanditen, Agenturen, and Warendepots of the Prussian Ba nk. T he pa st twenty-five years ha ve caused noessential changes in the old and tried organization exceptin the case of suboffices (Nebenstellen) .

No important differences exist between the Reichsbank-hauptstellen and the Reichsbankstellen, which by virtue oftheir rights are called in the official language by the common nam e " inde pen den t b ranch es tab l i shm ents" (selbst-standige Bankanstalten). They are empowered to carryon independently in the distr ic t assigned to them by theReichsbank Directorate all forms of business to which theRe ichsb ank is entitled in accordance w ith section 13 ofth e Ba nk Act. Th eir im portan ce is therefore th a t of commercial branch establishments , but only in an economicrespect. Legally their con stitutio n is specially arrang ed.Corresponding to their purpose of doing business independently, they possess with regard to external affairsunlimited r ights of representing th e Reichsban k. Inte rnally , they are part s of the R eichsbank system and are indirect connection with one another , a l though they do notsett le accounts directly with one ano ther. This take s placesolely thro ugh the m ain b ank . Ea ch bra nch is p u t incharge of two managing officials. The independentbranches must obtain the signatures of these officials , orof others appointed as their deputies , in order to bind theReichsbank legally.

Each main b ranch (Reichsbankhaupstelle) is underthe supervision of a commissioner appointed by the Emperor. Justiciar ies, who exercise nearly th e sam e func-

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National Monetary Com missiont ions , are appo inted for th e branc hes (Reichsbankstelleri).M oreover, th e m ain bran che s are distinguished frombranches by the fac t tha t the main branches have d is t r ic tcommit tees (Bezirksausschiisse) selected from th e sha reholders in accordance with section 36.

In only one respect are bran che s linked w ithin c ircuitsto th e m ain bran che s; in the determ ination of large norm alcredits for the more important firms in the circuit of thebra nch , a certain cooperation w ith th e depu ties of th emain branch takes place (cf. p. 129).The suboffices (Reichsbanknebenstellen) form the lowestinstance of the Bank's organism, and are directly subordina ted not to the Reichsbank Direc tora te but to the indepen den t branc hes. Th eir purpose is to cond uct withintheir respective circuits such business as is allowed to theReichsbank; but their field of operation is limited totheir distr ic t , when nothing to the contrary is expresslyarranged, so that their work consists only of purely localbusiness. Above al l , however , the y are comp letely depen dent on the branches imm edia te ly above them firs t ,because they stand, as a rule, in immediate official connection and on clearing-house terms only with the higherbranch office, and secondly because their transactions aredirectly subject to the approval of the higher office.Their intermediary activity finds expression in the facttha t no b i l l may be purchased by them which has notbeen previously laid before the higher office and acceptedby th e sam e for discount. This rule has gradu ally beenmit iga ted so tha t the h igher branch can name to the sub-office those persons and business houses from whom,

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The Reichs bank, 1876-1900w itho ut inquiry in each case , bil ls m ay be purchase dwithin the fixed limits of credit , with the reservation,however , that sanction may subsequently be refused.

Suboffices have been completely dependent throughout the past twenty-five years , though their powers havebeen exten ded in m an y part ic ulars . These extensionswere the necessary result of the perfection and popularization of arrangements with the Reichsbank, a lso of theincreasing requirements of economic development , but ,above all , of changes in the organization of the staff.One of the chief obstacles to the free development ofsuboffices was the necessity of limiting cash reserves toa certain am ou nt for th e sake of safety. W herev er oneofficer managed the business, only small balances couldbe kept on hand, determined by the amount of securi tydep osited b y th e official. In conseq uence of th is, requ es tsof the commercial world for an extension of business couldbe treated only with a certain amount of caution, asotherwise considerable sums might be sent back andfor th too frequ ently . Fo r sim ilar reaso ns th e subofficescould not be permitted to accept closed deposits nor toaccep t an d m ana ge collateral on loans (lombardierteEffecte)f however desirable this might appear in theinte rest of th e public. W here, how ever, th e volum e oflocal business justified the appointment of a second official , these considerations could, by virtue of the greatersafety thus guaranteed, be overlooked.

Similarly another circumstance stood in the way of am ore rapid developm ent. A t th e creation of th e Reichsbank most of the directors of suboffices were not officialstrained in banking, but agents , some of whom performed

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National Monetary Com missionthe duties of the office only as incidental work and received for it no fixed salary, but only a percentage of theprofits. I t wa s no t alwa ys possible to requ ire of the m ,without further ado, addit ional work in branches ofbusiness which yielded no immediate profi ta considerat ion which disappeared when the Bank, with increasingtrade , proceeded to replace gradually most of the agentsby tra in ed officials receiving a fixed sala ry. N at ur al lythe Reichsbank was also obliged, before it decided uponinnovations in suboffices, to await the lessons of experience in order to form an op inion as to w he the r t h eexis t ing arrangements were adequate to meet the newd e ma n d s .

Only in the course of development , therefore , could theReichsbank make use of its suboffices for the exerciseof im po rtan t functions , such as transfer trans actio ns(Giroverkehr), the cashing of interest coupons, and business with the treasuries of the different states.

Such a dev elopm ent too k place in the case of m ostsuboffices and led to the establishment of the preponderating and normal type managed by one officialan d term ed suboffice w ith a cash- an d limited tran sfer -d e p a r tme n t (Nebenstelle mit Kasseneinrichtung undbeschrdnktem Giroverkehr). The activity of the fewsuboffices w itho ut cash de pa rtm en ts is confined now ,as formerly, to the purchase of bills and to loans on collateral . I t is to be noted , however , th at in th e me anti m emany of them have rece ived cash depar tments , andha ve therefore entere d th e first-mentioned cate gor y.

B ut th e powers which could be gran ted to al l sub-offices possessing cash departments were not sufficient

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The Reichsbank, 1876-1900wh ere th e business was especially exten sive. Since 1883the Reichsbank crea ted as an exper iment , in a nu m berof such places, a new form of Reichsbank subofficesmanaged by two officials (Reichsbanknebenstellen milzwei Vorstandsbeamten). Th is new form ha d no t onlya complete transfer department as conducted by independen t branches , bu t a lso more independent dep ar tm entsfor collateral loans, sealed deposits , and increased cashreserves. Since th e m iddle of th e nineties, how ever, th eReichsbank has, after several unfavorable experiences,given up this plan , and has no longer appointed twoofficials for suboffices in plac es w ith ex te nd ed bu sin ess ,but has lef t the management to one director and givenhim one or more assistants intrusted special ly with them an age m en t of th e cash. Similar powers could be assigned to th es e suboffices. T heir ex ten de d tran sfer syste m (erweiterter Giroverkehr) is nearly equal to that ofth e inde pen den t bran che s. Only in official t ran sac tion sare a few restrictions still enforced w ith respect t o transfe rs,but these restrictions are no longer perceptible to the business wo rld. Also in oth er bran che s of ban kin g, as loanson collateral and sealed deposits , extended powers couldbe granted to them, ye t the Reichsbank has a lwaysavoided general schemes and has always been guidedby local requ ire m en ts. T his new form of suboffice inplaces with extended business has prevented a furtherincrea se of suboffices w ith two ma na gin g officials. T helat t er hav e, for th e most pa rt , been transformed intoindepend ent branches . Th e las t one , th a t in H ei lbronn ,wa s chan ged in 1900 into a suboffice w ith ex ten de dtransfer facilities.

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National Monetary Com missionThe subordinate branch es tabl ishments (Kommanditen)

at Coeslin , Insterburg , and Stolp , which were taken unaltered from the Prussian Bank, were similar to sub-offices w ith tw o m an ag ing officials. In con side ratio n oflocal requirements and wishes these inst i tut ions , whichwere endowed with somewhat greater powers , had notbeen transform ed into ord ina ry suboffices; on th e otherhand, their business was not yet considerable enough tojust ify their conversion into an inde pen den t bra nch . Th istransformation took place later , at Stolp in 1877, at Coeslinin 1899, and in Insterburg in 1900.

T he ind epe nde nt bran ches of Trier , Marienwerder ,an d Saa rbriicken , which un til 1891, 1892, an d 1890 h adbeen managed ei ther by the local Prussian governmenttreasuries (Regierungshauptkassen) or the Royal MiningDirec tora te (konigliche Bergwerks-Direction), w ere relics ofthe old administrat ive organization of the Prussian Bank.Accordingly the Reichsbank has to-day only three kindsof suboffices first , tho se havin g one m an ag er; secondly,those w ith one m anag er and one or m ore assistan ts (sub-offices w ith lim ited an d suboffices wi th ex ten de d tran sfersys tem s) ; and th i rd ly , those wi tho ut a cash de par tm en t(Kasseneinrichtung).

H ere m ust be ment ioned , as branch ins t i tu t ions connected with ma in branches and branches , th e few warehouses {Warendepots) exist ing only in th e north ern an deastern Prussian provinces , which serve practically onlyin the preparation and transaction of loans on collateral(cf. p. 181).

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The Reichs bank, 1876-1900T E R R I T O R I A L D I V I S I O N .

The exterior organization of