BANKS AND BANKING 582 



agent the commercial paper which it is buying. 

 AB an additional security it must maintain ti 

 gold reserve of forty per cent of the face value 

 of the notes. 



Besides making the currency more flexible, 

 the law of 1913 extends the privileges of 

 national banks. With the approval of the Fed- 

 eral Reserve Board any national bank whose 

 capital and surplus total $1,000,000 may estab- 

 lish branches in foreign countries. Any reserve 

 bank may also buy and sell in the open market, 

 either at home or abroad, various kinds of com- 

 mercial paper. Another notable feature is 

 that the banks in the United States are for the 

 first time allowed to recognize the peculiar 

 needs of agriculture. A Federal Reserve Bank 

 may discount ordinary commercial paper for 

 ninety days, but it may discount for six months 

 any paper issued for agricultural purposes. 

 National banks everywhere, except in New 

 York, Chicago and Saint Louis, may make 

 loans on farm mortgages for a period not 

 exceeding five years. Such loans must not 

 exceed twenty-five per cent of the bank's cap- 

 ital and surplus and fifty per cent of the value 

 of the farms mortgaged. 



Bank Reserves. Under the old law of 1864 

 there were three cities, New York, Chicago and 

 Saint Louis, which were "central reserve cities"; 

 besides, there were a number of "reserve cities." 

 The law of 1913 keeps this distinction. In the 

 three cities named each national bank must 

 keep a cash reserve of eighteen per cent of 

 its demand deposits and five per cent of its 

 time deposits. In the other nine reserve cities, 

 only fifteen per cent of the demand liabilities 

 must be kept in reserve, and in all other cities 

 only twelve per cent is required. In every 

 bank, however, five per cent of its time lia- 

 bilities is the minimum reserve. Only a part 

 of the reserves, however, need be held in the 

 bank's own vaults; the remainder must be 

 placed on deposit with the Federal Reserve 

 Bank of the district. This bank x in turn, must 

 keep a cash reserve of thirty-five per cent of 

 its total deposits. 



Summary of Banking in the United States. 

 There were in the United States at the end 

 of June 1915, 19,460 banks, the total paid-in 

 capital stock of which amounted to $1,094,297,- 

 274.93. The surplus fund amounted to $1,010,- 

 908,917.30. The number of banks included 

 14,605 state banks, 630 mutual savings banks, 

 1,529 stock savings banks, 1,660 loan and trust 

 companies and 1,036 private banks. The total 

 resources of all banks totaled $16,010,061,699.58. 



BANKS AND BANKING 



Banking in Canada. The first attempt to 

 organize a bank in Canada was made in 1792, 

 when the Canada Banking Company of Mont- 

 real applied for a charter. In the next twenty 

 years several others attempted to secure char- 

 ters from the government; all failed. Finally, 

 in 1817, a number of citizens organized the 

 "Montreal Bank," a private institution. It 

 was later chartered by the government, and 

 is still world-famous as the "Bank of Montreal." 



For fifty years, banking in Canada, then a 

 group of separate colonies, made steady but not 

 sensational progress. In 1867, by the British 

 North America Act creating the Dominion oT 

 Canada, it was placed under the control of the 

 Dominion government. The acts of Parlia- 

 ment on which the present system is based were 

 passed in May, 1870, and April, 1871. Banks 

 are chartered for ten-year periods, and there is 

 a provision that the banking laws shall be 

 revised every ten years. In 1910, however, no 

 revision was attempted because of disturbed 

 conditions, and the next banking act was passed 

 in 1913, to be effective until 1923. 



These decennial revisions have added to the 

 safety of the Canadian system, but have not 

 altered its principles. The law of 1890, for 

 example, created a redemption fund for bank 

 notes, each bank being required to deposit with 

 the government a cash payment of five per cent 

 of its maximum circulation. If any bank's 

 assets are not enough to pay its outstanding 

 notes, the difference is made up from this fund. 

 In this way all the banks become responsible 

 for the payment of the notes of each individual 

 bank. In 1900 the law provided for the or- 

 ganization of the Canadian Bankers' Associa- 

 tion, which exercises a general supervision over 

 all banks. The act of 1913 made a few new 

 regulations for the protection of the stock- 

 holder and the depositor. An interesting inno- 

 vation was the permission given to the banks 

 to lend money on farm stock and on grain in 

 storage. The act also creates a central gold 

 reserve, under the control of a board of trus- 

 tees. A bank may issue notes, dollar for dol- 

 lar, for all gold or Dominion notes deposited by 

 it in this reserve fund. 



To secure a government charter, a bank must 

 have a capital of $500,000, one-half of which 

 must be paid in before the charter is granted. 

 While the organization is being perfected, this 

 sum of $250,000 is in the custody of the govern- 

 ment. The laws of the Dominion fix the de- 

 tails of the process of organization. A director 

 of the bank is required to own at least three 



