Sec. 8. #Unequal territorial distribution of banking facilities.# Another aspect of this concentration of surplus money and available funds in the larger cities was the comparatively ample provision of banking facilities in the cities and in the manufacturing sections, and imperfect provision in the agricultural districts.  The whole financial system seemed designed to induce the poorer country districts to lend funds at low rates of interest to be used speculatively in cities, instead of enabling the richer districts, the cities, to lend to the rural districts for productive enterprise.  The rates of bank discount in different sections of our country have long been most unequal—­lowest in the largest cities, and highest in the rural South and West—­whereas in all parts of Canada, with a different system of banking, the rates have long been much more approximately uniform.

Indeed, our national banking development has been predominantly urban and commercial to the neglect of rural and agricultural interests.  National banks were (until 1913) forbidden to make loans on real estate, and this greatly “restricted their power to serve farmers and other borrowers in rural communities.”  There was “no effective agency to meet the ordinary or unusual demands for credit or currency necessary for moving crops or for other legitimate purposes.”  The lack of uniform standards of regulation, examination, and publication of reports in the different sections prevented the free extension of credit where most needed.  Finally, the methods and agencies for making domestic exchange of funds were, compared with other countries, imperfect and uneconomical even in normal times and could not “prevent disastrous disruption of all such exchanges in times of serious trouble.”

Sec. 9. #Lack of provision for foreign financial operations.# Not without its influence on public opinion was the consideration that we had “no American banking institutions in foreign countries.”  Many bankers and business men felt, as did the commission, that the time had come when the organization of such banks was “necessary for the development of our foreign trade.”  Foreign banks in South America and the Orient, handling American trade, were believed to favor their own countrymen rather than the interests of American merchants.  In contrast with the European nations with their centralized control of banking, we had “no instrumentality that” could “deal effectively with the broad questions which, from an international standpoint, affect the credit and status of the United States as one of the great financial powers of the world.  In times of threatened trouble or of actual panic these questions, which involve the course of foreign exchange and the international movements of gold, are even more important to us from a national than from an international standpoint.”