left with them without going outside of the circle of customers whom they are designed primarily to serve. The so-called Raffeisen system of coöperative banks dates back to 1864, when Frederick William Raiffeisen founded in Heddesdorf, Prussia, the so-called Heddesdörfer Darlehnskassenverein. Other associations of the same kind were established in 1868 and each year thereafter. These associations were designed primarily to serve peasants and small farmers, while the Schulze-Delitzsch societies originally operated chiefly among artisans and small tradesmen of towns and cities. Both have extended their membership beyond the classes for which they were originally designed, however, and cannot now be differentiated on the basis of the character of their membership. The Raiffeisen societies begun without capital and, when they were compelled by law to accumulate a capital stock, they kept the amount small. It was the purpose of the founder to assist peasants and small farmers to escape from the exactions of money lenders of the usurious type, and to secure credit which, in most cases, would otherwise have been impossible on any terms. To this end he appealed to the same principle as did Schultze-Delitzsch, namely, the ability to borrow money on good terms, provided all the members of a society assume liability for its debts to the full extent of their properties. Inasmuch as it was creditneedy people whom he wished to serve he did not approve of the plan of requiring the purchase of shares of capital stock as a condition of membership. On account too of the differences in the needs and capabilities of the classes served these two kinds of organizations also differed in the length of the periods for which loans were granted, the Schulze-Delitzsch societies granting short-period and the Raiffeisen long-period loans. The Raiffeisen societies within a given district are or ganized into unions each one of which has a bank which receives on deposit the surplus funds of the societies, grants them loans and in other ways renders them all possible assistance. As a central bank for all of these unions, and for other coöperative associations, agricultural loan companies, savings banks, etc., in the Kingdom of Prussia there was established in 1895 the Preussische Central-Genossenschaftskasse. Its capital of at first 5,000,000 marks, afterward increased to 20,000,000 and then to 50,000,000 marks, was furnished by the Prussian State. In 1906 it was again increased by 2,400,000 marks subscribed by the various unions of the Raiffeisen system. In the other German states the Raiffeisen societies have established relations with commercial banks similar to those established in Prussia with this institution. Until 1904 the Schulze-Delitzsch societies had a central bank of their own known as the Deutsche Genossenschaftsbank. At that date this bank became embarrassed and was absorbed by the Dresdner Bank which now serves as the central association for the Schultze-Delitzsch societies. Unlike the Raffeisen associations each of these societies deals directly with the central bank. 5. The present organization of the banking business in Germany. To some extent the various groups of institutions already described are competitors. They all receive deposits and they all discount certain kinds of bills of exchange, but in the main their fields of operation are distinct and different. The Imperial Bank transacts the banking business of the Imperial Government, administers the country's specie reserve and regulates the circulating medium. Its other functions such as the care of deposits, the granting of credits and the transfer of funds are purely subsidiary or supplementary. The great Berlin banks are the chief banking servants of the leading industrial and commercial agents of the country and the pioneers of German industrial and commercial expansion in foreign countries and the German colonies. The independent private and provincial banks chiefly serve special groups and purely local interests. The mortgage banks and coöperative societies supply banking facilities to farmers, peasants, artisans, and small tradesmen, and extend credit to those who deal in real estate and to the smaller political corporations. In spite of their separate functions, however, all these institutions are vitally connected with each other and with the Imperial Bank. The coöperative and mortgage banks derive no insignificant part of the funds they lend from the great Berlin banks and the Imperial Bank by direct sales to them of their securities, by rediscounts and loans on collateral. With these they also deposit their surplus funds. The Berlin banks use the Imperial Bank as their reserve agent, frequently obtaining funds from it through rediscounts and sometimes through loans on collateral and employ its so-called giro-system* for the transfer of funds from one part of the country to another. The Imperial Bank is thus the center and balance wheel of the entire system. It is the central cash reservoir from which all are supplied and to which all surpluses flow. Through the dependance on it of all other credit institutions it is able, at least to a degree, to hold them in check, when they are inclined to extravagance, and to stimulate them, when they are sluggish. Its rate of discount affects all other market rates and its attitude toward a financial enterprise is rarely, if ever, without influence on its fortunes. *The name given to the system of transferring credits between the central office and the branches, or between the different branches. REFERENCES On the history of banking in Germany see Wirth, The History of Banking in Germany and Austria-Hungry in v. II of a History of Banking in all the leading Nations; Conant, Modern Banks of Issue, ch. viii; Dunbar, ch. xi; Reisser, Zur Entwicklungskeschichte der deutschen Grossbanken mit besonderer Rücksicht auf die Konzentrations-bestrebungen, to be published in translation by the National Monetary Commission; The Reichsbank 1876-1900, Renewal of Reichsbank Charter, and German Bank Inquiry of 1908, published by the National Monetary Commission; Diouritch, L'Expansion des Banques Allemandes à L'Etranger, ch. i; Jeidels, Das Verhältniss der deutschen Grossbanken zur Industrie, mit besonderer Berücksichtigung der Eisenindustrie; Poschinger, Die Banken im deutschen Reiche, Oesterreich und der Schweiz and Bankwesen and Bankpolitik in Pressen; Hecht, Bankwesen und Bankpolitik in den süddeutschen Staaten, 18191875 and Die Mannheimer Banken, 1870-1900. Nasse and Lexis, article Bank in Handwörterbuch der Staatswissenschaften; Warschauer, Die Konzentration im deutschen Bankwesen and Die Organisation des Konzentration im deutschen Bankwesen and Die Organisation des Scheckverkehrs in Deutschland, Conrad's Jahrbuck, 3d F., v. 88, p. 45, and v. 89, p. 590; and Model, Die Grossen Berliner Effektenbanken. On the coöperative banks see Peters, Coöperative Credit Associations, U. S. Dept. of Agriculture, Div. of Statistics, Misc. Ser. No. 3, 1892; Wolff, Peoples Banks; and articles in the Handwörterbuch der Staatswissenschaften by Marchet on Darlehnskassenvereine and by Crüger on Kreditgenossenschaften. See also references at the close of ch. xv. CHAPTER XV THE MONEY MARKET IN the preceding chapters the development and present state of the machinery through which the exchanges of the chief countries of the world are effected have been described. The connection of that machinery with other parts of the financial mechanism and some of the features of its operation remain for consideration in the present chapter. 1. The central markets.-As we have seen the central agency of the banking system of each country is located in its chief commercial center, in this country in New York, in England in London, in France in Paris, and in Germany in Berlin. In each European country that agency is the central bank, but in New York it is the group of banks which constitute the Clearing House Association, usually known as the Associated Banks, and the branch of the United States Treasury there located, known as the New York Sub-Treasury. In each of these centers there are also one or more stock exchanges for the facilitation of the purchase and sale of securities of public and private corporations and brokerage firms who act as intermediaries in the purchase and sale of commercial paper. These exchanges and brokerage firms are essential parts of the the money market machinery, since they supply the means for the investment of surplus funds, and for the speedy liquidation of those investments in case of need. In each of these centers also there are markets for the purchase and sale of the precious metals together with the machinery |