[Footnote 8:  See above, ch. 4, sec. 5.]

[Footnote 9:  See below, sec. 10.]

[Footnote 10:  Including, now, some Federal Reserve bank notes secured by United States bonds.]

[Footnote 11:  In some cases, as during the bank restriction in England, 1797-1821, bank notes become inconvertible—­practically political money.]

[Footnote 12:  Payment of interest on credit balances reduces the motive to withdraw for investment elsewhere any such excess, and mingles in the depositor’s thought monetary and investment motives.]

[Footnote 13:  In the United States in 1914 there were individual deposits reported in banks other than savings banks to the amount of about $13,400,000,000

In national banks ..................................  $6,000,000,000

In state banks .....................................   3,250,000,000

In loan and trust companies .......................... 4,000,000,000

In private banks .....................................   150,000,000

Nearly all these were doubtless demand deposits (what proportion were time deposits we have no data for determining), and were available as immediate purchasing power for the depositors.  The total money (other than bank notes) in the commercial banks of the country was hardly 11 per cent of this amount.  In that year the total amount of money of all kinds in circulation (and in banks) in the United States (outside the Treasury), including gold and silver and certificates represented by bullion in the treasury, United States notes of all kinds, and national bank notes, was about one fourth of the amount of these individual deposits in commercial banks.  This may suggest the enormous influence that banking has in determining the average efficiency of the circulating medium of the country.]

[Footnote 14:  See above, sec. 3.]

CHAPTER 8

BANKING IN THE UNITED STATES BEFORE 1914

Sec. 1.  The First and Second Banks of the United States.  Sec. 2.  Banking from 1836 to 1863.  Sec. 3.  National Banking Associations, 1863-1913.  Sec. 4.  Defects of our banking organization before 1913.  Sec. 5.  Lack of system.  Sec. 6.  Inelasticity of credit.  Sec. 7.  Periodical local congestion of funds.  Sec. 8.  Unequal territorial distribution of banking facilities.  Sec. 9.  Lack of provision for foreign financial operations.  Sec. 10.  The “Aldrich plan.”

Sec. 1. #The First and Second banks of the United States.#

A knowledge of the history of banking is helpful to an understanding of the present banking system in our country.  The form of our present banking system has been affected by various economic and political events which will be sketched here in broad outline to give a background for our present study.