Collier's New Encyclopedia (1921)/Banks in the United States

BANKS IN THE UNITED STATES, financial institutions comprising (1) National banks; (2) State banks; and (3) savings banks, consisting of (a) mutual savings banks; and (b) stock savings banks. These are general throughout the entire country. In addition to these, are (1) co-operative banks, common in New England, especially Massachusetts; (2) loan and trust companies, established in nearly all the large cities; and (3) building and loan associations, now represented in most of the States and Territories. The last three classes partake of some of the features of regular banking, especially in the reception of money on deposit, subject to call, and the payment of interest thereon. The first three kinds of banks only are here considered; the others will be found under their respective titles.

National Banks.—There were on November 17, 1919, 19,129,842 depositors in National banks. These figures show that the depositors in the National banks of the country exceed in number one-sixth of the total number of the population in that year. The number of depositors increased from 1910 to 1919 11,439,374, or 148.75 per cent.

On June 30, 1919, there were 21,338 State banking institutions which included savings banks, private banks, and trust companies. The aggregate paid in stock in these institutions amounted to a combined capital of $1,318,716,000 and the total resources to $26,380,529,000. The deposits amounted to $21,744,046,000.

The State banks numbered 17,225 with a combined capital of $785,727,000 and aggregate resources of $11,701,606,000. The deposits amounted to $9,046,919,000. There were 622 mutual and 1,097 stock savings banks in 1919. The deposits in the mutual banks amounted to $4,422,096,000 with 9,011,464 depositors. In the same year there were 1,377 loan and trust companies with resources amounting to $7,959,969,000 and deposits amounting to $5,696,030,000. There are approximately 3,500 private banks in the United States, of which only about 1,000 are under supervision of the State or National banking departments. The deposits in these banks amounted to $219,830,000. See Postal Savings Banks; Banks, Federal Reserve; Savings Banks; etc.

The following tables, compiled from the report of the Comptroller of the Currency (Dec. 1, 1919) give a comprehensive view of the development of the National banking system in recent years:

GROWTH OF NATIONAL BANKS BY FIVE-YEAR PERIODS

[In thousands of dollars]

Date	Number  of banks	Total deposits	Loans and   discounts[1]	Reserve held	Excess  reserves	Capital	Surplus and  undivided profits	Circulation	Total resources
Sept.  7, 1899	3,595	$3,459,611	$2,496,751	[2]$890,569	$259,780	$605,773	$350,516	$200,346	[1]$4,650,355
Sept.  6, 1904	5,412	5,131,210	3,726,151	[2]1,244,465	334,678	770,778	583,137	411,231	[1]6,975,087
Sept.  1, 1909	6,977	7,079,570	5,128,882	[2]1,605,932	346,886	944,642	801,738	658,040	[1]9,573,954
Sept. 12, 1914	7,538	8,187,569	6,400,767	[2]1,577,666	116,955	1,060,332	1,011,482	918,270	[1]11,483,529
Nov.  17, 1919	7,865	17,467,853	12,240,718	[3]1,264,482	59,562	1,153,752	1,340,300	680,879	22,444,992

History.—The first bank in the United States was organized in Philadelphia in 1780, and a bank of North America was planned in 1781 and opened in 1782. The Massachusetts Bank was incorporated in 1784; that of New York was chartered in 1791, although since 1784, under Alexander Hamilton's “Articles of Association,” it had been doing business. Alexander Hamilton also originated a plan for a United States bank, with a capital of $10,000,000, three-fourths to be paid in United States stock, at 6 per cent., which plan was adopted and approved by Washington in 1791. The bank was reorganized in 1816 with a capital of $35,000,000, the United States subscribing $7,000,000, with interest at 6 per cent., but in consequence of a general financial depression, was, the next year, in great danger of failure. Congress refusing to renew the charter, a State bank, called the United States Bank, was chartered in Pennsylvania, and eventually failing, the whole account was settled in 1856. The $28,000,000 deposited by shareholders was totally lost, while the Government realized $6,093,167 upon its investments of stock. State banks were afterward chartered in the interest of individuals and dominant political parties. The charters were sometimes fraudulently obtained and currency issued to three times the amount of their capital, and, in 1814, 1837, and 1857, many of them suspended payment. A reform movement in bank currency was inaugurated in Massachusetts in 1825, and a “safety-fund” system, recommended by Mr. Van Buren, adopted in 1829. In 1838 the Free Bank Act passed the New York Legislature, which authorized any number of persons to form a banking association, subject to certain specified conditions and liabilities.

On Feb. 25, 1863, the National banking system was organized, but the act establishing it was modified by that of June 3, 1864. This provided for a National Bank Bureau in the Treasury Department, whose chief officer is the Comptroller of the Currency. Under it National banks, could be organized by any number of individuals, not less than five, the capital to be not less than $100,000 except in cities of a population not exceeding 6,000; in these banks could be established with a capital of not less than $50,000. In cities having a population of 50,000 the capital stock could not be less than $100,000. One-third of the capital was required to be invested in United States bonds, which were deposited in the Treasury for security, upon which notes were issued equal in amount to 90 per cent. of the current market value, but not exceeding 90 per cent. of the par value; and these notes were receivable at par in the United States for all payments to and from the Government, except for duties on imports, interest on the public debt, and in redemption of the national currency. On March 3, 1865, an act was passed by which the circulation of the State banks was taxed 10 per cent., which drove their notes out of existence. The original act authorized the issue of $300,000,000 of circulation; that of May 12, 1870, increased it to $354,000,000.

The act of Jan. 14, 1875, authorized the unlimited issue of circulating notes, subject to the terms of the law, but made it the duty of the Secretary of the Treasury to retire legal tender notes to the extent of 80 per cent. of the additional circulating notes until the legal tender notes should be reduced to $300,000,000. The banks were required to pay annually 1 per cent. tax on their circulation, and ½ per cent. on their average deposits and on their average capital not invested in United States bonds. By act passed March 3, 1883, the taxes on capital and deposits of banks, bankers and National banking associations, except such as were already due and payable, were repealed, and also the stamp tax on bank checks, drafts, orders, and vouchers after July 1, 1883. The original act of Feb. 25, 1863, limited the period of existence of the National banks to 20 years; but, on July 10, 1882, an act was passed, approved by the President July 12, which provided for the extension of the corporate existence of all National banks upon compliance with certain conditions, for 20 years. Many of the banks took advantage of the law, and reorganized under the act, though some of them under a different name. By the act of June 3, 1864, each association was entitled to an existence of 20 years from date of organization. The War Revenue Act of 1898 imposed a stamp tax of two cents on every bank check.

Currency Act of 1900.—On March 14, 1900, President McKinley approved a new currency act, which, among other things, established the gold dollar as the standard unit of value, and placed at a parity with that standard all forms of money issued or coined by the United States. The bill also made a number of important changes in the regulations governing National banks. The law permitted National banks, with $25,000 capital, to be organized in places of 8,000 inhabitants or less, whereas the minimum capital previously was $50,000. It also permitted banks to issue circulation on all classes of bonds deposited up to the par value of the bonds instead of 90 per cent. of their face, as before.

1. Includes rediscounts.
2. Includes cash on hand and due from reserve agents.
3. Besides the $1,262,339,000 carried with reserve banks on Nov. 17, 1919, the member national banks held on that date cash in vaults amounting to $450,041,000 and had $2,443,599,000 due from other banks.

Source: Collier's New Encyclopedia 1. (1921) New York: P.F. Collier & Son Company. 410-412.