Deutsche Bank

“ Unlike the French, who invest their savings small and large in national loans, the Germans neglect even their own national loans, preferring the higher returns for their investments from the innumerable industries launched in modern Germany; so pronounced is this form of investment, that a director of the Deutsche Bank has warned his countrymen, that every month’s profits are no sooner gained than they are put out again in new enterprises, either by the individuals themselves, or by the banks in which they are deposited. ”

“ A considerable business is done on the exchange, chiefly in local industrial shares, and the financial institutions number some fifty banks, among them branches of the Reichs Bank and of the Deutsche Bank. ”

“ The Société Generale was organized in 1822 and is therefore one of the oldest, if not the oldest, joint stock bank of the Continent. The general plan of the famous Deutsche Bank of Berlin, which planted the German commercial flag everywhere, and which provided a large part of the bone and sinew of the Teutonic world-wide exploitation campaign, was based upon it. With finance as with merchandising, the German is a prize imitator. ”

“ To me it seems clear that, in the one case as in the other, the basis of recovery must be the value in dollars of the thing lost at the time of the loss. In this respect, a simple debt payable in marks and an obligation to deliver goods in Germany stand upon the same footing. In either case, the injured party is entitled to have in the money of this country the value of what he would have obtained if the contract had been performed at the stipulated time, Lord Eldon, in Cash v. ”

“ Commercial banks are unique among financial institutions in that they alone are permitted by law to accept demand deposits. This distinctive power gives commercial banking a key role in the national economy. For banks do not merely deal in but are actually a source of, money and credit; when a bank makes a loan by crediting the borrower's demand deposit account, it augments the Nation's credit supply. ”

“ To Germans this seems very strange; a large part of the public cannot keep a banking account, and when it is in a position to do so either expects high rates of interest or keeps no permanent balances and pays no commissions. Under such circumstances there is no sense, from a business point of view, in the shoemaker, who has no banking account, accepting a check, which he has to cash, instead of ready money; for the shoemaker has to take an unprofitable walk, and the bank has to examine the check, pay and book it, and in some cases notify by letter the customer of its payment. ”

“ In Continental Europe, particularly Germany, they do to a much greater extent. Criticism has been made of our American commercial bankers, as contrasted with German bankers, that the former are parasites, who insist on sure things, and refuse to take chances with other business men in the development of industry. To the present writer, our banking system seems to be rather a more developed system than that of Germany, in that the "division of labor" has gone further with us, and risk-bearing and the manufacturing of bank-credit have been more sharply differentiated. ”

“ In Germany, business is largely done upon credit, and especially so by small concerns and individuals, who possess no extended bank credit nor available collateral, and hence are not in position to make use of the Reichsbank or other commercial banks, or the Darlehnskassen. ”

“ Publications of the National Monetary Commission, Senate Document No. 508, 61st Congress, 2nd Session, pp. 117-271.
[185] In order to facilitate its giro business and reduce the friction to a minimum, the Reichsbank has special printed forms prepared for the various kinds of transactions, the use of which is made compulsory on the public. For a simple transfer of money from one customer to another, whether they be in the same town or in different places, the "red check" is employed, which is filled out by the party making the transfer and handed in to the bank. ”

“ Can the national banks be called a monopoly? Monopolies are exclusive, and national banking is free to any person in the land who has money to invest. There is, then, a monopoly of which everybody can become a party and beneficiary. There are at present 208,000 shareholders in the national banks in the United States. More than one-half of them hold shares to the amount of $1000 and less. They are presumably people of limited means, who have thus invested their little surplus. And any five of you, if you can raise the necessary capital, may, under the laws, organize a national bank. ”

“ But banks do need a substantial margin of liquidity, to protect the rest. They get it from stock exchange collateral loans, and from ownership of listed and easily marketable bonds, primarily. They get part of it from true commercial paper. Thus, the director of a country bank in Iowa told the writer that banks in his section—where banks owned in large measure by farmers, and dealing largely with farmers, are very numerous and important—make a regular practice of buying, through brokers, a considerable amount of notes of outside merchants. They do this to protect themselves. ”

“ An institution might have been established with large capital, and a monopoly of the right of note issue, authorized to act as government fiscal agent, and to deal with the general public. Such an institution would presumably in the course of time have become a central bank, the main reliance of other banks in emergencies. In order to avoid competition with existing banks, the act provides that the receipt of deposits by the Federal Reserve Banks, and their normal lending operations shall be confined to those banks which subscribe to the capital and maintain balances with them. ”

“ Because of this necessary instability bankers watch most carefully the tendencies of the money market, and necessarily reduce their loans for safety when any anxious pressure begins. For the same reason legitimate banking is limited to short time loans—on demand, thirty, sixty, ninety days—the shorter being the safer. Laws sometimes prohibit a bank from dealing in any other business, where a stock of goods must tie up funds, or from speculation in real estate, which confines capital more certainly. ”

“ In consequence all our credit system depends on the Bank of England for its security. On the wisdom of the directors of that one joint-stock company, it depends whether England shall be solvent or insolvent. This may seem too strong, but it is not. All banks depend on the Bank of England, and all merchants depend on some banker. If a merchant have £10,000 at his banker's and wants to pay it to some one in Germany, he will not be able to pay it unless his banker can pay him, and the banker will not be able to pay if the Bank of England should be in difficulties and cannot produce his "reserve." ”

“ If, on the other hand, his business is unexpectedly large, giving opportunity to make bigger profits and creating the need for more capital, he will find the bank ready to increase his line of credit, provided the manager is satisfied that business conditions and prospects warrant expansion. Under no circumstances, however, must the customer of a bank seek to raise funds elsewhere unless he first gets the consent of his bank. If he sells his notes in the open market, he must do it with the [Pg 429] full knowledge of his bank or run the risk of being placed upon the "black list." ”

“ The banks in consequence have less to lend to the brokers, who are then bound to apply to the Bank of England, which compels them to discount their bills at its own terms, and the rate in the outside market, of course, advances. ”

“ We have seen how the large joint-stock banks, by developing their system of branches, literally smothered the private banker; and the smaller companies, which possess but few branches, are now being forced to amalgamate with the larger for the same reason. If, therefore, a man has a large advance from a small provincial banking company, it may occur that, just when he is anxious to discount more bills or to increase his overdraft, the bank will be unable to accommodate him ”

“ They have put capital within their reach at reasonable rates.
These banks also have their central point. In 1864 the German Co-operative Societies’ Bank was founded to centralize the work of the local Schulze-Delitzsch banks and to bring the money market within their reach. It was not itself co-operative, and never confined its business to the co-operative banks. Beginning in a very small way, by 1903 it had attained a capital of a million and a half sterling and a yearly business of £154,000,000, of which £28,000,000 was specifically with co-operative credit societies. ”

“ They also greatly economize in the use of money by saving cost of counting and of transfer, and by securing against losses. If the system offered no more advantages than this safe and ready use of good money, the banks would be practically indispensable. But they have a still greater use in a safe extension of credit. The perfection of system in banking makes it possible for one who habitually fulfils his promises to purchase anywhere in the world on the shortest notice with the simple guaranty of credit in the bank where he does business. ”

“ The complaint is that the Eastern States have an undue amount of national-bank circulation, and therefore enjoy in a measure a monopoly. I admit this to be true. I will not discuss here the system of banking in all its aspects, but I will inquire how far the establishment of more national banks of issue in the West and South will remedy the real evil complained of—which evil consists in a lack of loanable capital there. If the remedy proposed is to serve any good purpose at all, then the establishment of new national banks of issue must increase the available amount of loanable money. ”

“ They hold the ultimate reserve of the country, and they must discount out of it if no one else will: if they declined to do so there would be panic and collapse. As soon, therefore, as the withdrawal of the German money reduces the bankers' balances, there is a new demand on the Bank for fresh discounts to make up those balances. The drain on the Bank is two-fold: first, the banking reserve is reduced by exportation of the German money, which reduces the means of the Bank of England; and then out of those reduced means the Bank of England has to make greater advances. ”

“ Competition among banks exists at every level price, variety of credit arrangements, convenience of location, attractiveness of physical surroundings, credit information, investment advice, service charges, personal accommodations, advertising, miscellaneous special and extra services-and it is keen; on this appellees' own witnesses were emphatic. [45] There is no reason to think that concentration is less inimical to the free play of competition in banking than in other service industries. ”

“ In Chapter II, on the choice of a banker, an attempt was made to show why a customer should select a strong institution whose working resources are plentiful, and whose reserve of liquid assets is large enough to enable it to meet a drain of deposits during a run or a panic. The shareholder who guarantees the customers of a bank against loss to a limited extent will naturally take care that he is a partner in a company which maintains an adequate reserve of cash and securities as an insurance fund against those accidents which are quite beyond the control of the most able board of directors. ”

“ A National Bank is forbidden to lend more than ten per cent. of its combined capital and surplus to any one firm or individual. "But the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed." Also no National Bank can lend on its own stock as security. ”

“ And the amount of the funds held by commercial banks is very large indeed; demand deposits alone represent approximately three-fourths of the money supply in the United States. [49] Since a bank's assets must be sufficiently liquid to accommodate demand withdrawals, short-term commercial and industrial loans are the major element in bank portfolios, thus making commercial banks the principal source of short-term business credit. Many other services are also provided by banks, but in these more or less collateral areas they receive more active competition from other financial institutions. ”

“ Some believe that retail CBDC is more attractive than deposits and may lead to financial disintermediation, narrow banking, and credit squeeze, while others argue that easy availability of CBDC can enhance the transmission of policy rates to the money and credit markets. ”

“ A. Principally with the Dresdner Bank, because they get interest upon it.
Q. Do they pay interest on deposits?
A. They pay an average of 4 per cent., which may be considered as an almost permanent rate. The money they get is in most cases money for a long period. They have to compete with the savings banks.
Q. Are the small societies at all in competition with the Reichsbank, where they have a branch?
A. No. There is no competition. They do a business which the Reichsbank would not do. They give credit to people who would not suit the Reichsbank, because they could not give the guarantee. ”

“ The reason for the competitive disadvantage of most lending institutions vis-a-vis banks is that only banks obtain the bulk of their working capital without having to pay interest or comparable charges thereon, by virtue of their unique power to accept demand deposits. The critical area of short-term commercial credit, see pp. ”

“ That crises still degenerate on occasion into panics in America, but not in England, France, or Germany, arises primarily from differences in banking organization and practice. In each of the three European countries, the banking system as a whole is so organized by the prevalence of branch banking and the existence of a central bank that reserves which bear a small proportion to the aggregate demand liabilities of all the offices can be applied when and where they are most needed. ”