for sixty-three days in 1866, and eight per cent. for five days in 1866, and thirty-two days in 1870. Apart from these instances, there was no higher rate than seven per cent. after 1866, until the crisis of 1907. The German rate during the fifty-six years ending with 1900 was higher on the average by about two-thirds of one per cent. than the rate of the Bank of England; but this is partly accounted for by the fact that the rate at Berlin was never below three per cent., while for about one-third of the time the rate at London was two or two and a half per cent.'

Discount rates were high at the Imperial Bank during the entire three years beginning with 1905. The constant demand for capital throughout the world, and the severe pressure exerted on European markets by high rates in New York in the autumn of 1905 and again in 1906, compelled all the European banks to take unusual precautions to guard their reserves. The average rates at the Imperial Bank were 4.10 per cent. in 1901; 3.12 per cent. in 1902; 3.84 per cent. in 1903; 4.22 per cent. in 1904; 3.82 per cent. in 1905; and 5.15 per cent. in 1906. The rate was changed eight times in 1905 and the year closed with a six per cent. rate, which never fell below four and a half per cent. in 1906.

On December 18, 1906, the rate was raised to seven per cent, for the first time since the Boer War and did not fall below five and a half per cent. at any time during the next year. This was the rate prevailing when the crisis in the United States led to a rate of six and a half per cent. on October 29th, and finally to a special meeting of the Central Committee which fixed the rate at seven and a half per cent. on November 8, 1907.

The discount business of the bank is largely that of rediscount for the large joint stock banks, which have come to play an important part not only in commercial banking, but in flotations of securities and corporation financing.' By

1 1 Cf. Palgrave, Bank Rate and the Money Market, 157.

Ibid., 204.

The three largest of these institutions are the Deutsche Bank, with aggregate resources at the close of 1907 of 1,871,720,000 marks

reason of the fact that much paper is offered for rediscount only some time after it is drawn, the average maturities held at the Imperial Bank are well within the legal limit of three months. The average maturity of all domestic bills, which in 1876 was twenty-seven days and in 1898 twenty-five days, was in 1906 only twenty days. The average amount of these bills was 1480 marks ($352) in 1876, and 1689 marks ($402) in 1906. Of bills outstanding at the close of the year, the proportion maturing in fifteen days or less in 1906 was 42 per cent.; those having thirty-one to sixty days to run, 27 per cent.; and those having from sixty-one to ninety days only 15 per cent.'

The proportion of the metallic reserve which is in gold is not regularly reported, but is usually announced at the close of the year. The amount at the close of 1894 was 714,448,000 marks ($170,000,000). The competition for the yellow metal and the great expansion of trade in Germany prevented any permanent gain in gold during the next decade and reduced the average amount held during 1906 to 674,734,000 marks and during 1907 to 633,830,000 marks. Among the devices adopted to facilitate the importation of gold was that of exempting advances upon imports of the metal from interest charges for a stipulated period, which was extended in March, 1908, to a maximum of six weeks.' The redemption of notes in coin on demand is required at the Imperial Bank in Berlin, but may be refused at the branches when the funds on hand do not justify it.' The

($456,000,000); the Diskonto Gesellschaft, 850,000,000 marks ($202,000,000); and the Dresdner Bank, 1,012,060,000 marks ($240,000,000). Cf. the author's Principles of Money and Banking, II., 283,

1 London Bankers' Magazine, December, 1907, LXXXIV, 700. ? Moniteur des Intérêts Matériels, March 29, 1908, 979.

The report, long prevalent, that the Imperial Bank discriminated against those seeking to withdraw gold, was denied by Dr. Koch, governor of the bank, in the autumn of 1907, who said that the bank "pays out gold in unlimited amounts at its central office in Berlin in redemption of its notes; but that it does not do this at branches like those of Hamburg and Bremen, since, in that case, it would have to

bank is obliged to receive the bills of other banks of issue which have conformed to the law of March 24, 1875, and where they are established in cities of more than 80,000 inhabitants. Bank bills are not a legal tender, however, between individuals, and the law prescribes that "there exists no obligation to accept bank bills for payments which are legally due in specie, and no such obligation can be established by the legislation of any state with regard to the banks of the state."

The government took advantage of the extension of the charter of the Imperial Bank in 1889 to secure a larger share in the dividends than it had before demanded. The statute of December 18, 1889, reduced from four and a half to three and a half per cent. the dividend allotted to the shareholders before any other allotment. Twenty per cent. of the remaining profits was to be carried to a reserve fund, so long as this fund was less than a quarter of the capital, and the remainder was to be shared equally between the shareholders and the Imperial Treasury until the portion of the shareholders reached six per cent. Of the profits in excess of six per cent. the shareholders obtained only a quarter and the Imperial Treasury the other three-quarters. The minimum dividend of three and a half per cent. was to be made up to the shareholders from the reserve funds when it was not provided by the annual profits of the bank. The reserve fund reached the legal limit of one-fourth of the capital in 1891. The old law divided the dividends above four and a half per cent. equally between the shareholders and the government up to eight per cent. The actual profits under the old law from 1876 to 1888 were 131,900,000 marks, amounting to 8.46 per cent. annually on the capital. The shareholders received 94,900,000 marks, amounting to 6.08 per cent. of the capital and the state received 24,700,000 marks.

A further change in favor of the government was made at the revision of the charter in 1899. The shareholders under this law were still allotted three and a half per cent. in divi

bear the expense of shipment to those cities."-Letter in London Economist, November 9, 1907, LXV., 1925.

dends before the state intervened to take a part of the remainder. An allotment of twenty per cent. of surplus profits above this first dividend was then to be paid into the reserve fund of the bank until this fund attained sixty million marks ($14,280,000). After this distribution, three-quarters of the remaining profits went into the public treasury and only the remaining one-quarter to the shareholders.'

The number of shareholders increased from 7877 at the close of 1894 to 18,616 at the close of 1907, of whom 16,553 were German subjects and the remainder were foreigners. The number of employees increased in the same period from 1745 to 3224. The number of offices of the bank on December 31, 1906, was 470.

One of the important services rendered to German commerce by the Imperial Bank, which takes the place in some degree of the clearing and cheque system, is the transfer of deposits on current account (Giro Verkehr). By this system a person in any town where there is a branch of the bank, wishing to make a payment to some one in another town, may pay the amount into the local branch of the Imperial Bank and it will be credited on the following day to the current account of the person in whose favor it is deposited. These transfers are made without charge and it is not necessary that the person making the payment shall have an account at the bank. The system was devised partly to facilitate transactions in different parts of the Empire and

'The lion's share going to the government under these provisions, in case of high discount rates and large profits, is illustrated by the accounts for 1907. Net profits stood at 52,313,651 marks, against 40,262,908 marks in 1906. The three and a half per cent. dividend to shareholders called for 6,300,000 marks, and the division of the remainder according to law gave 34,510,238 marks to the state and only 11,503,413 marks to shareholders. Even under these conditions their dividend was at the rate of 9.89 per cent. as compared with 8.22 per cent. in 1906. If the tax on excess circulation is taken into account, the government received 40,110,936 marks ($9,450,000) against 29,164,530 marks in 1906.-Bulletin de Statistique, April, 1908, LXIII.,

partly to economize the use of specie. In the latter respect it has been eminently successful, the proportion paid in specie having declined from 39.5 per cent. in 1876 to 16.8 per cent. in 1900. The number of these current accounts increased from 3245 in 1876 to 15,847 in 1900 and the average amount of the credit of such accounts from 70,580,000 marks in 1876 to 512,200,000 marks in 1900.'

In two other respects the Imperial Bank has conformed in recent years to modern methods of giving flexibility to its resources and strengthening its control over the money market. One of these is the accumulation of foreign bills, particularly those drawn on England, in its portfolio. President Koch, discussing this policy early in December, 1906, declared that it was the practice of the bank to buy these bills at times when they were low and to sell them later, when, in consequence of the higher rate of exchange, there might otherwise be danger of gold exports. The other measure is that known in England as "borrowing from the market.” This process consists in offering Treasury bills for re-discount in the open market, thereby absorbing surplus cash and preventing a too rapid fall in the open market rate of discount."

2

The policy of accumulating foreign bills to meet demands for exchange has been adopted by several European banks in recent years and has been under serious discussion at the Bank of France. While a resource of admitted value within certain limits, it is not a complete substitute for changes in the discount rate, because it does not in itself control the movement of floating capital. The Austro-Hungarian Bank was one of the first to adopt the system in 1894 and employed it to advantage in the period of uneasiness caused by the

'Palgrave, Bank Rate and the Money Market, 161.

'London Economist, December 8, 1906, LXIII., 2006.

'This was done in February, 1908, when 40,000,000 marks in Treasury bills were thus offered and President Havenstein declared that the fall in the open market-rate did not represent the real state of the market.-Berlin letter in New York Evening Post, February 29, 1908.