The Washington herald., 1910-07-17


Gently resigned as governor OF the I'm
perial Bank. and has long been consid-
cred the foremost monetary authority
In Germany.
The laws themselves include the orig
inal bank act OF March II. 1875. which.
brought unity out of the heterogeneous
mass Of notes and systems OF different
! types in Germany and the subsequent
| laws by which the charter of the In
perial Bank has been amended at In
tervals OF ten years, Among the latter
are included the law Of June /. 1909.
which resulted from the special inquiry
instituted by the German imperial gov
eminent during the year 1905
DR.. Koch. In his Introductory review
Of these laws, declares that the condl-
tons which prevailed in Germany not
much more than a generation ago with
regard TO circulation-coin. paper money.
| and bank notes-"afforded a striking
picture Of our political confusion" Ef-
forts TO secure a uniform coinage sys-
TEN by cooperation among the German
states, including Austria. had brought no
satisfactory results. Paper money had
been issued by the governments of the
several states, which became known as
wild bills, which could be passed beyond
the limits Of the states which issued
them only with difficulty and loss.
Issues of Paper Money.
Paper which was more acceptable, al
though not considerable in amount was
issued also upon special concessions by
| railroad companies. municipalities, and
other corporations. Practically in Prus-
STA only, were conditions tolerable where
the Bank OF Prussia, which was vested
with the unlimited right Of note issue
in 1856. had been able to render great
services TO German commerce in the cri-
ses of 1857. 1896. and 1870 and had de-
veloped into central bank for the
greater part OF Germany.
There were still. however. nine private
note banks in the old provinces of Prus-
STA, and other German sovereigns made
very liberal use Of their authority Of
granting the privilege OF note issue,
and often on a scale quite exceeding the
amount required by the extent of their
states. The effort OF Prussia TO protect
herself by forbidding the circulation of
these foreign notes was unsuccessful. es-
pecially in Middle Germany. because OF
the varied and changing business rela-
tons Of the territories.
The circulation which was uncovered
by bullion. excluding Bavaria, increas-
ed. according TO the monthly records.
from about 100000 marks (s3575.OO0), al
the beginning Of the sos, TO an average
Of 90. 2es COO marks In 1857. and to 4oo.-
2s4.0iO marks 1885 600, O00) In 1873.
The men Of far-reachlng genius who
had brought about the political union
of Germany soon brought them to re-
alize that such conditions could not
be longer endured Already the eonsti-
tuition OF the North German Confedera-
ton of July rs. 1861. had provided for
subjecting such matters to the super
vision Of the confederation. Further is
sues Of notes by the states were sus-
pended. except with the authority of a |
federal law. The coinage reform was
first taken up as a preliminary to the
unihcation of banking laws BY the law
Of July g. 1873, the gold standard was
adopted and a coinage provided for all |
of Germany uniform In character and de-
nominations, although permitted in some
Of the states to bear the distinctive
stamp OF the local sovereign.
Reform Bank System.
The coinage having been unified. the
government set about the refornsof the |
banking system on lines which suggest
in some respects the financial history |
of the United States. Provision was
made for reducing the circulation of /
government paper. and committee was
appointed to investigate the subject OF /
uniform and more careful restrictions |
upon the banks. The issue of notes be-
low fifty marks (s12) was prohibited at
ter July /, 1875. and the banks were re-
Quired to publish monthly reports.
bill embodying further reforms. in
Guiding duty of per cent on un-
covered notes above a certain amount.
was submitted to the Reichstag on No
vember 8. 1874. The discussions on the
subject. however, compelled recognition
of the general desire FOR an imperiaI
bank TO be established in the public IN
terest. So strong was this sentiment
a bill could be prepared establishing the
Re!chsbank and providing for It's grad
ual absorption OF the note-issuing func-
ton throughout Germany.
This bill became law on March IA. 1875,
and. with some notifications in 1889. 1899,
and 1909, Is still the fundamental bank
ms law Of the empire.
This act rested, according 10 the anal
ysis OF DR.. Koch. on a compromise Of
the central bank system with the system
Of plurality of banks. which latter had
its root in the existing conditions. First
Of all. 1t created for a number of years
a transitional stage. freed from the most
pressing evils. In order that ultimately
would lead to the adoption
Of an adequate uniform system. New
note privileges could be granted only BY
imperial LEGISLATION.
Central Bank of Issue.
The Reichsbank thus appears, though
in a moderate sense. as the central note
bank of Germany. The economic ana
political position on which its special
rights and duties rest is shown not only
In the classification Of It's public duties,
but also In the close connection indicated
D. its name with the Institutions of the
empire Its management must not be
governed solely, or even chiefly, by con-
of gain.
Thus. owing to its capital and the net
work of branches acquired from the
Bank OF Prussia. in virtue OF the au-
hority given it by the bank act, which
secured the immediate support of the
whole empire, Che ReIehsbank forms, es-
'ecially in bad times the stronghold for