No. 3. Through the retirement of the banks issuing notes at the time of the Bank Act of 1844, the Bank of England has been able, under the provisions of the Act, to issue new notes against securities to the amount of £4,450,000, which brings its total issue up to £18,450,000. No. 4. In the statement above there is shown an issue of £48,612,645 in notes. If we deduct from this issue the £18,450,000, notes authorized to be issued against the government debt and other securities, we find the amount of notes uncovered - unsecured -to be £30,162,645, which is exactly the amount of gold coin and bullion on hand in the Issue Department. No. 5 represents the proprietors' advances in cash to the Government. This is the bank's capital the same as that of any other institution. No. 6. Reserve fund and undivided profits. This is not allowed to fall below £3,000,000, the excess being considered available for dividends. No. 7. Deposits made by the Government. No. 8. Deposits of banks, corporations, firms, and individuals. No. 9. Bills of exchange, etc. No. 10. Government Securities needs no explanation. No. 11. Same may be said of this. No. 12. Bank notes. No. 13. Needs no explanation, other than to say that these, together with the notes, constitute the real reserve of the bank held against deposits, and any changes are watched for with keen interest. Bank of France. Established during 1800 by Napoleon, after he became First Consul, who desired a financial institution that should not only be of service to the Government, but also subservient to it.1 It has one central, or head office, in Paris, but has branches or auxiliary offices in, or is connected with, all the principal cities and towns in the country. The governor and two subgovernors are nominated by the Government, but the general council, consisting of fifteen regents and three censeurs, are chosen by the stockholders, except that three of the regents must be selected from the treasury disbursing agents. The business of discounts and advances at all its offices is transacted at the same rates as in Paris, which regulates interest rates throughout the country. The Bank has never raised its rate of discount over 9% and the fluctuations in its rate have always been less violent and frequent than in the case of the Bank of England. From 1844 to 1900 the rate of discount of the former was altered 111 times, and of the latter, 400 times. The ownership in the Bank of France is represented by shares held by individuals, but is very largely under the control of the Government. It is the only institution in the country which can issue bank notes, which is done under the direction of the regents, who are responsible, and report to the Government. The only security behind the notes is the general assets and credit of the Bank, although, in case of necessity, the Government would sustain the bank with "The Modern Bank," A. K. Fiske. "Bank Rate and the Money Market," R. H. Inglis Palgrave. its credit. These notes are legal tender so long as they are redeemed in specie. The maximum limit of issue has been increased until now it stands at 5,800,000,000 francs.1 Although no special reserve is held, the Bank makes a point of retaining on hand a large amount of bullion and coin. It protects its gold reserve by charging a premium when it is demanded for export. From the fact that checks are still comparatively little used in that country, bank notes and specie are principally employed in making payments. This naturally results in the extensive use of bank notes throughout the country, and calls for a large issue on the part of the Bank of France, which is generally six or seven times the amount of the deposits. The Bank receives deposits of public money, and is, to a great extent, the Government's fiscal agent. Bank of Germany. The Imperial Bank of Germany; commonly called the Reichsbank. The King of Prussia in 1765 founded a State institution entitled The Royal Bank, which continued until 1846, when it underwent a change and became a bank of issue. On the 31st of December, 1875, it was succeeded by the Imperial Bank of Germany. This institution, like the Bank of France, is under governmental control, but its ownership is represented by shares in the hands of individuals. It is situated in Berlin, where it carries on a very large business, but also has branches forming a net work throughout Germany. It receives, holds, and disburses the government funds, discounts bills, both inland and foreign, which is a very large proportion of its business, receives deposits and issues circulation, but is compelled by law to retain in its vaults cash to the amount of one-third of its notes outstanding, which cash must consist of legal tender notes of the Empire, gold bars, or foreign coins of a prescribed weight and fineness. The remainder must be represented by discounted bills. Its notes are not legal tender, but must be paid in gold upon presentation at any of its branches. They have no prior claim upon the bank's assets, but are simply part of the general liabilities. There are three limitations placed upon the note issue; first, no more than 472,829,000 marks, which is called its "Kontingent," can be issued in excess of what is covered by the cash reserve; second, a 5% per annum tax on any excess above this limit; and, third, the one-third cash holding already mentioned.3 2 1 Law of February 11, 1906. This sum is subject to further increase, for as a smaller bank of issue in Germany goes out of business its " Kontingent passes to the Reichs bank, and so increases the latter's limit by whatever the limit was of the bank giving up. "Bank Rate and the Money Market in England, France, Germany, Belgium, and Holland, 1844-1900," R. H. Inglis Palgrave. All other banks throughout the Empire must agree in their discount rate with that of the Reichsbank when it is as high as 4% and when it is lower must not cut under it more than one-quarter of 1%. The rate of discount has been raised to 7% but once in thirty years December 19, 1899, to January 11, 1900— and has never exceeded that figure.1 Bank of Issue. Any bank authorized by law to issue money of its own in the form of "bank notes; to issue paper money to circulate as currency. National banks are such, and so formerly were State banks, which issued "State Bank Notes," until 1865, when Congress passed an act taxing such notes 10%, which resulted in their speedy retirement. Bankrupt. When one is unable to meet his debts as they fall due he may make a fair statement of his condition out of court in order to pay his creditors, and effect a settlement with them on what may seem to them the best obtainable basis, and, after accomplishing such a settlement, receive a discharge from them relieving the insolvent party from any further obligation to his creditors. But, when unable to make a satisfactory settlement, he may take advantage of what is known as the National Bankruptcy law and go through "bankruptcy," by giving up all his property to be divided among his creditors, by which method he compels them to make a settlement, and after the accomplishing of which, he receives a legal discharge, freeing him from further liability on account of any unpaid portion of the debts, providing, of course, he does not defraud his creditors by the concealing of property, of which, if afterwards discovered, the law would usually allow the creditors to take possession. "Involuntary bankruptcy" is brought about by the action of creditors; the "insolvent " person is forced into "bankruptcy." Voluntary bankruptcy" is brought about by the action of the debtor or the "insolvent." 3 1 Report of the Special Currency Commission of the Chamber of Commerce of the State of New York. (Oct. 4, 1906.) 66 2 The Italian word "banco," meaning a bench," gives us our word "bank." The Lombardy Jews occupied benches in the market-place, for the exchange of money and bills. If one failed, the people broke his bench, hence "bankrupt." "Under the present Federal law any person who owes debts, except a corporation, may be adjudged a bankrupt if he wishes to take advantage of the act. Such a proceeding is one of voluntary bankruptcy. Not every person, however, can be forced into bankruptcy by his creditors. A 'wageearner' cannot be, nor a person engaged chiefly in farming or the tillage of the soil.' Even in the case of a person not belonging to one of these excepted classes, he must owe debts to the amount of one thousand dollars or over; he must have committed an act of bankruptcy, and the aggregate Bank Statement. It is customary in many of the larger cities to issue at stated intervals, generally once a week, a tabulated statement of the condition of the banks which are members of the Clearing-House Association. At about 12 noon of the last business day of each week, the "New York Bank Statement" is issued to the public, and is awaited with great interest by financial men. Each bank in that city, national, State and trust companies, belonging to the Clearing-House Association, tabulates a statement giving the average of each item for the period covering all the preceding business days of that week and the last business day of the preceding week. Besides this, each bank furnishes a statement of its condition at the close of business on Friday. Saturday morning or Friday, if Saturday is a holiday - this tabulated matter is turned in to the Clearing-House Manager, who, in both instances, proceeds in a similar manner to obtain an average of each item for the combined statements. The bank statement, in its present form, enables one to readily obtain a good idea of the condition of the banking institutions of Greater New York, for, in addition to the statement of the Clearing-House banks, so-called, there is also published the reports of the State banks and trust companies in the same territory, with the exception of those institutions which are members of the Clearing-House and thus are reported in that statement. CLEARING-HOUSE MEMBERS' ACTUAL CONDITION of his property at a fair valuation must be insufficient to pay his debts, or he cannot be declared a bankrupt in an involuntary proceeding." Francis M. Burdick. NON-MEMBER BANKS AND TRUST COMPANIES' Bargain. Besides the ordinary meanings for this word, which are unnecessary here, it is used in London to indicate transaction between two members of the stock exchange. (See "London Stock Exchange Transactions.") Bargain Counter. When securities are for sale cheap they are "on the bargain counter." Bar Gold. London quotations of "bar gold " are frequently seen, as 77s. 9 d., meaning the open market price of gold in the form of bars of the British standard, which is 11-12 fine. The Bank of England is compelled by law to pay 77s. 9d. per ounce for all gold offered, the mint value being 77s. 10 d., which equals our own mint price per ounce of "fine gold" of $20.672. When in London the market price of "bar gold " falls below 778. 10 d. per ounce, gold imports are favoured to the extent of the difference. The more the price of gold advances in London, the greater must be the fall of "sterling exchange" in America to make gold imports permissible. |