The Concentration of Banking Interests in the United States

I.

EVER since Andrew Jackson overthrew the Second Bank of the United States, the American banking system has consisted of a large number of small institutions possessing little desire or power of helpful coöperation. Large banks with numerous branches, such as exist in Canada and Scotland, have been unknown in the United States, save for a few transient enterprises of ante-bellum days. A central institution, enjoying federal patronage and serving to unify banking interests, has been a political impossibility since Nicholas Biddle rashly ventured upon a trial of strength with the masterful statesman from Tennessee. National banks, state banks, private banks, trust companies, competing vigorously for public favor, have met tolerably well the needs of the country in fair weather; but in times of stress and storm these separate institutions have been unable to oppose a united front to the forces of financial disorder. Yet, upon the whole, this decentralization of banking interests has been generally approved as democratic in its tendencies and well adapted to the diverse needs of our vast territory.

At the head of the system stand the national banks, which possess the exclusive power to issue circulating notes. For twenty years following the civil war this privilege remained sufficiently remunerative to gain for these institutions a decided predominance over the banks of deposit and discount incorporated by the several states; but since the early eighties causes which are well understood have reduced the profit derived from the issue of notes, and have decreased the attractiveness of a federal charter. In 1884 there were 2550 national banks and but 1022 state associations, while in 1902 there existed 5397 state banks and 4601 national. In point of resources and banking power the national associations still retain their preëminence, having nearly three times the capital and over twice the deposits shown by the state institutions; yet banks of the latter class are increasing more rapidly than those of the former, despite the temporary influence of recent changes in the national banking laws.

The state banks of deposit and discount have multiplied rapidly in the Mississippi Valley, and especially in the South and West. In general, the laws under which they are formed are more liberal in their provisions concerning loans upon real estate, and permit the establishment of banks with smaller capitals than are required under the federal statutes. This last circumstance accounts for the rapid growth of state associations in communities where a capital of $25,000, the minimum fixed for national banks, is too large to be employed with the greatest profit. In some cases the state laws may verge perilously toward the point of laxity, but in general these banks are safely conducted and enjoy excellent credit in their own communities. In New England and the Middle Atlantic States a decided preference is shown for national banks; but New York has nearly two hundred state associations, some of which, in New York city, make large advances to operators on the exchanges.

Private bankers are very numerous in most parts of the United States, and are usually allowed to conduct their business without public supervision. In 1902 no less than 4188 such individuals or firms paid the internal revenue tax then levied upon their capital and surplus. In most sections their resources are small, and their average capital in many states does not exceed ten or fifteen thousand dollars. In agricultural districts such agencies are useful in supplying credit facilities, but in recent years the state bank with small capital has secured an increasing share of such business. Our large cities, however, have many private bankers who are conducting enterprises of the largest size. Besides receiving deposits and making discounts, these firms frequently do a brokerage business or deal in foreign exchange. Many of them have gained their greatest reputation and profits from promoting, consolidating, or reorganizing large corporations. In New York city there are private bankers whose capital is counted by the millions, and whose names have become household words.

In recent years a new class of institutions has forced its way into the field of American banking. Trust companies have existed in the United States for three quarters of a century, but up to fifteen or twenty years ago their number was small and the scope of their operations was restricted. Originally they were formed to act as trustees of estates and to execute other trusts, while they often conducted a safe-deposit business. With the growth of corporations, trust companies began to act as transfer agents, or as trustees under mortgage deeds executed to secure corporation bonds. Such functions were of great financial importance, but did not carry the earlier companies into the territory occupied by banks of deposit and discount. Indeed, it not seldom happened that their charters or the general laws of the state prohibited them from receiving ordinary deposits or doing a discount business. Gradually, however, a change was effected in the law or in the practice of these associations, and trust companies began to engage in the work of commercial banks. To-day, besides receiving time deposits, they accept deposits that are subject to instant withdrawal by check; and they make extensive loans, generally upon collateral security. To their original business, therefore, they have added the ordinary banking functions; and these are exercised without the restrictions which the law imposes upon banking institutions. The result has been that trust companies have multiplied rapidly, especially in the financial centres, and that their competition has been felt severely by the banks. In 1902 there were 727 of these institutions in the United States, and their aggregate deposits exceeded $1,500,000,000.

At the present moment, therefore, there are no less than 14,913 associations in the United States that are engaged in commercial banking. In the ordinary discount and deposit business, the national banks still predominate, but their supremacy is challenged by the competition of other institutions. State banks appeal to the needs of certain sections of the country; private bankers maintain an important position, especially in financing corporate enterprises; and trust companies have constantly increased the scope of their operations. But with all these developments, our banking system remained decentralized, and better adapted for fair weather than for foul. In times of actual panic the banks in the largest cities had sometimes utilized the clearing houses for the purpose of adopting common measures of defense. By the issue of clearing-house certificates they were able to tide the weaker institutions over the period of greatest stress; but this was merely a temporary expedient, and did not change the essential feature of the system. Prior to 1898 it would have been difficult to discover any appreciable tendency toward the concentration of the banking interests of the United States.

II.

In this respect, however, the situation has been radically altered during the last five years. In the first place, the organization of trusts in various branches of manufactures has brought to the great financial centres a large amount of business which formerly fell to the banks of the localities where the separate factories were situated. Many loans which independent manufacturers would have secured from local bankers are now negotiated in the larger cities where the combinations have established their headquarters. While the aggregate sums borrowed may not have been increased by this process, it is evident that corporation loans have been centralized to a very marked degree; and it is well known that New York city has been the principal beneficiary of the change.

A similar tendency is disclosed by an examination of the movement of bank reserves. The national banking laws permit the country banks to deposit a certain proportion of their reserves with institutions located in various cities, and recent years have witnessed a rapid flow of such moneys toward New York. This is due, in part, to the drift of corporation business to that city; since country bankers have deposited there, at interest, some of the funds formerly loaned to concerns that have been absorbed by the trusts. Then, too, some of the metropolitan banks have been making very vigorous efforts to secure such deposits ; so that in April of the present year eight of the principal institutions held no less than $160,000,000 of funds deposited by other national banks. The reserves of state banks and trust companies are handled in the same manner; and on September 15, 1902, the national banks of New York city had $414,000,000 of deposits that belonged to other institutions. This means, of course, that the bank reserves of the United States are concentrated more and more in a single city, just as, in France or England, the reserves are stored in a great central bank.

The marvelous development of American industry in recent years has increased very decidedly the demands made upon our banking system at the very time when such business has been drifting toward the city of New York. Between 1897 and 1902 the total bank clearings of the country increased from fifty-four to one hundred and sixteen billions of dollars, while the proportion falling to the New York Clearing House rose from fifty-seven to sixty-four per cent of the entire volume of these transactions. This has caused an unprecedented increase of the capital employed; so that within five years the banking institutions of New York have enlarged their capital, surplus, and undivided profits from $232,000,000 to $451,000,000. And if, to these figures, we add the increased deposits secured from outside banks, we can form some adequate estimate of the strength of the forces that have been concentrating our banking interests in a single city.

To no small extent this demand for additional capital has been met by the establishment of new institutions, particularly by the formation of trust companies; but in a much larger measure it has occasioned an increase of the resources of existing banks. Prior to 1898 the banks of New York had been of very moderate size. Only two had a capital of $5,000,000, and the average for the clearing house institutions was less than $1,000,000; to-day the average capital is nearly twice as great, while three banks have as much as $10,000,000 and one has $25,000,000. In 1895 the capital, surplus, and undivided profits of the fifty national banks amounted to $110,000,000, and their deposits stood at $507,000,000; in 1902 the number of these institutions had fallen to fortyfive, while their capital, surplus, and profits had risen to $191,000,000, and their deposits to $1,057,000,000. It is evident, therefore, that the rapid expansion of the business conducted in New York city has stimulated the growth of larger institutions than the country has known since the days of the Second Bank of the United States, which, it will be remembered, employed a capital of $35,000,000.1

The increased capital of the larger banks has been secured in many instances by subscriptions from the existing stockholders, but in other cases it has come from the consolidation of two or more institutions. The national banking laws do not authorize explicitly the combination of banking associations, yet one section relating to voluntary liquidation seems to contemplate such an occurrence. Mergers are sometimes effected through the purchase of the assets and the assumption of the liabilities of the institution that is to be absorbed. In other cases one bank increases its capital and sells the new shares to the stockholders of the liquidated association for the cash that they receive in payment for their original holdings. Occasionally both banks are placed in liquidation, and their assets are bought by a new institution which also assumes their liabilities. In his last report, the Comptroller of the Currency recommended that the law should be amended in such a manner as to simplify the process of consolidation.

In New York city these bank mergers have attracted great attention, and the First National Bank, the National City, the Bank of Commerce, the Hanover National, and many others have figured in such transactions. But in Boston, Philadelphia, Pittsburg, Baltimore, Cincinnati, Cleveland, Detroit, Chicago, St. Louis, and Omaha the process has been repeated ; so that reports of bank consolidations have become quite the order of the day. In 1901 twentyone national banks were absorbed by other national associations, while six were merged with state banks or trust companies; in 1902 there were fortysix consolidations of the former class, and eleven of the latter. Apparently we are now witnessing a movement which resembles, at least superficially, that which has proceeded so rapidly in the field of transportation and manufactures.

But actual consolidation is not the only method by which our banking capital is being aggregated in larger masses; for in many cases a common ownership has been established in institutions which retain a formal independence. The national banking laws prohibit one association from holding stock in another, but there is nothing to prevent a group of men from buying a controlling interest in any number of banks. This method is exemplified by the groups of institutions which Mr. Charles W. Morse has brought together in several cities. It has been followed, also, by the capitalists who control the great National City Bank, and by others. Sometimes a great deal of diplomacy is required to effect such an arrangement, since prosperous banks of long standing are jealous of their independence and their stock is held at very high prices. An illustration of this is seen in the re lations of the First National Bank of New York with the Chase National. In this case some degree of union was secured through an exchange of holdings and of directors, so that the resources of the two banks are now under a joint control. In many cases it is supposed that stockholders of one bank have purchased an interest in other institutions with money that has been borrowed by pledging as collateral security the shares thus acquired. Such a practice makes it possible to secure an extensive control with a small amount of capital, and may yet prove to be a source of danger. Obviously, if a number of banks that are involved in the same set of enterprises make numerous loans upon each other’s shares, an impairment of capital might result from the failure of the undertakings in which such loans were used.

Finally, in addition to all the centralizing tendencies which have been described, every effort has been made to secure coöperation on the widest possible scale, through arrangements designed to unify the world of finance. The larger life insurance companies have become interested in various banks or trust companies ; and their officers, in a purely private capacity, are influential in many other institutions. Private banking houses are represented among the owners and managers of national and state associations, while the good offices of influential capitalists have been enlisted as far as practicable. As a prominent banker has stated : “We now have skill and resources combined, with a strength never before seen in the United States and perhaps never in the markets of Europe. ” In the present day of unbounded prosperity the structure erected upon the principle of community of interest presents an imposing, even awe-inspiring, appearance; its solidity, however, will not be subjected to the decisive test until we reach a season of adversity.

III.

It is difficult to trace with entire accuracy the complex relationships which now unite so many of the financial institutions of the city of New York. In broadest outlines, however, the situation can be described by saying that two major and two minor spheres of influence can be clearly recognized. A brief description of these will serve to give greater definiteness to our statement of existing conditions and tendencies.

Of the major spheres of influence the first is dominated, although not absolutely controlled at all points, by what are known as the Standard Oil interests. Ten or twelve years ago the magnates of the oil combination secured control of the National City Bank, which, within a decade, has increased its capital, surplus, and undivided profits from three to forty-one millions; and its deposits, from twelve to one hundred and thirty millions. This corporation is believed to be connected more or less closely with some fifty other institutions located in various parts of the country. In New York it stands at the head of a chain of eleven or twelve banks and trust companies. Some of these, as the Second National Bank, are wholly controlled by the interests which the City Bank represents, and are operated virtually as branches of the larger institution; others, as the United States Trust Company, possess greater independence, but work in harmony with the general policy of the group. The entire chain of institutions employs a capital and surplus of $92,000,000, holds deposits amounting to $377,000,000, and carries loans that aggregate $266,000,000. With the National City interests, also, there are identified some of the leading officials of the New York Life Insurance Company and the banking house of Kuhn, Loeb & Company.2

The same interests control, also, a second chain of institutions. This is headed by the Hanover National Bank, and includes two smaller banks and the Trust Company of America. The total capital of the four institutions is $16,000,000 ; their deposits amount to $97,000,000, and their loans stand at $57,000,000. With the Hanover Bank, moreover, the Union Trust Company, controlling$52,000,000 of deposits and $44,000,000 of loans, is known to have intimate relations. If now we combine the figures for the two chains of institutions associated with the City and the Hanover Banks, it appears that within our first sphere of influence there have been aggregated $108,000,000 of banking capital, $474,000,000 of deposits, and $323,000,000 of loans. And these data, it should be remembered, take no account of the control exercised over banks located outside of New York.

The other major sphere of influence is controlled from the banking house of J. P. Morgan & Company and from the offices of two of the large insurance companies. Perhaps little violence will be done to the facts if, henceforth, we call this the Morgan sphere; for it seems certain that the dominating influence emanates from 23 Wall Street. Three chains of banking institutions are the repositories of the power here represented. One of them is headed by the First National Bank, which, within ten years, has increased its total resources from thirty-one to one hundred and ten millions, and now has a capital, surplus, and undivided profits amounting to over twenty-three millions. In this institution Mr. Morgan’s control is almost undisputed; and with it are associated the powerful Chase National Bank, the Liberty and Astor Banks, and the Manhattan Trust Company. This group of institutions possesses an aggregate banking capital of $33,000,000, while its deposits and loans stand respectively at $149,000,000 and $72,000,000.

A second chain of banks is led by the National Bank of Commerce, in which the Mutual Life Insurance Company is one of the principal stockholders. With it are grouped four other institutions, of which the largest is the Morton Trust Company. At the head of a third chain stands the Western National Bank, which is associated with the Mercantile and the Equitable Trust Companies.1 The Equitable Life Assurance Society holds large blocks of the stock of the first two of these institutions, and the Gould interests are represented in the ownership and management of the Mercantile Trust Company. If both of these chains are combined with the one controlled through the First National Bank, we find in the Morgan sphere of influence a banking capital of $97,000,000, deposits amounting to $472,000, 000, and loans which aggregate $299,000,000. In addition to this, the two life insurance companies just mentioned have outstanding loans of $28,000,000 upon collateral security.3

Compared with the Standard Oil and the Morgan interests, the chain of institutions known as the “ Morse ” group is of decidedly minor importance. But this includes twelve banks and two trust companies, with an aggregate capital of $23,000,000, and loans amounting to over $100,000,000. Mr. Morse and his associates have purchased the control of these institutions, perhaps, with the aid of loans secured in the manner described in an earlier paragraph. At present the group is supposed to be operated upon an independent basis, but there is no little speculation concerning the possibility of its being merged with one of the larger banking combinations.

And, finally, we come to the National Park Bank, with its group of affiliated institutions. Four of these are small state banks in different parts of New York, which are operated virtually as branches of the larger corporation; the fifth is the Colonial Trust Company. The banking capital of the six associations is $13,000,000, and their loans do not exceed $76, 000,000 ; ownership and management rest with the Astor, Vanderbilt, and Belmont interests.

Outside of these various spheres of influence, there are many strong and independent banks, some of which a decade ago occupied the leading positions. Then, too, many new institutions, generally employing a small capital, have been established during the recent period of business expansion. Yet the Morgan and the Standard Oil alliances control not less than $205,000,000 of the $451,000,000 of banking capital invested in the city of New York; and, in all probability, secure a similar proportion of the business transacted. Time alone can tell whether these mighty aggregations can be held together; but for the present, at any rate, a signal victory has been gained for the principle of community of interest.

The relations between the magnates who control the two great alliances have not always been harmonious, as was seen in the Northern Pacific corner of 1901; and at times there have been lively exchanges of blows and of epithets. Considerable divergence of interest is likely to continue both within and without the purlieus of Wall Street; but it is interesting to observe that certain affiliations exist between the two groups of capitalists. One of the directors of the National City Bank is a partner in the banking house of J. P. Morgan & Company, while another is a director of the First National. Both of these gentlemen are officials of the New York Life Insurance Company, which appears to have cultivated friendly relations within both spheres of influence. An examination of the directorates of banks and trust companies discloses a few other cases in which similar connections have been established; but there is no indication that closer union is desired.

IV.

In explanation of the present tendency toward the consolidation of banking power, emphasis is usually laid upon the undoubted fact that the growth of gigantic industrial corporations has created a demand for accommodations which smaller banks would be unable to supply. Only a large institution, or a group of powerful banks and trust companies, can effect a $5,000,000 loan at an hour’s notice, or undertake the vast enterprises that are characteristic of the times. Frequently such movements must be conducted with secrecy, at least in their early stages ; and this condition is difficult to secure when the coöperation of a large number of bankers must be invited. Then, too, the national banking laws limit the size of a loan negotiated by a single borrower to one tenth of the capital of the bank. This restriction is so poorly enforced that its importance is rather sentimental than practical, but it has been one of the reasons for increasing the capital of some institutions.

Again, it seems certain that concentration results in considerable economies in operation, since the outlay for clerical assistance and for some other purposes does not increase as rapidly as the volume of business transacted. A recent investigation by the Comptroller of the Currency shows that, with banks having a capital of a million or more dollars, the operating expenses are but 1.33 per cent of the aggregate loans and discounts; while in the case of banks with a capital of $100,000, the proportion rises to 2.34 per cent. Moreover, it is possible for a large institution to employ, at high salaries, men of special ability in each department of work. Within the limits in which these considerations apply, it would seem that concentration heightens the efficiency of our banking capital.

But the further claim is made that our larger banking institutions will contribute to the stability of financial conditions, and it is said that a plan of harmonious coöperation has been developed which will materially diminish the injury produced by the next industrial crisis. In this direction our independent banks, each compelled to seek its own safety in times of impending danger, have not possessed the strength which a unified banking system would exhibit. Of this fact we have had so many demonstrations that serious argument upon the subject is hardly necessary ; but it does not follow forthwith that any and all movements toward consolidation will result in increased stability ; much will depend, inevitably, upon the wisdom and conservatism which the great institutions display.

In this connection it must be observed that the largest banks in New York are, for all practical purposes, corporation banks. Some of them frankly state that they do not care for small customers, by which is meant depositors whose accounts average from one to twenty thousand dollars; and all of them cultivate principally the business of the larger corporations and of out-of-town banks. These features of their policy entail certain important results. It is a wellknown fact that deposits of a small or moderate size are more stable than “millionaire ” accounts, which are likely to be drawn down very rapidly when money is high. Only a short time ago one of the big banks was notified, an hour before closing for the day, that a check for $5,000,000 had been drawn against a large account. With “a little skirmishing, ” so a reliable financial paper states, “the situation was met in a few minutes; ” but the incident illustrates the conditions under which the operations of such institutions must be conducted. The same tendencies exist also in the case of the deposits by country banks. At the approach of anything resembling a panic these are withdrawn with great rapidity; so that they have been justly called the “explosive element ” of our banking system. It is evident, therefore, that more than ordinary conservatism will be required if the largest banks are to exercise a steadying influence in times of actual or impending danger.

This point can he made somewhat clearer by a brief reference to the conditions that prevail in other lands. In France or in England, for example, the specie reserves of the whole country are concentrated very largely in the vaults of a central bank. The Bank of France and the Bank of England occupy an independent position, and are dominated by no outside interests that can involve them in the fortunes of special enterprises. Sobered and steadied at all times by an appreciation of the enormous moral responsibility that rests upon them, the managers of these institutions adhere to their ultra-conservative policy even when the spirit of speculation is rampant in other financial circles. Against its enormous deposits the Bank of England maintains a cash reserve of over fifty per cent, while the position of the Bank of France is even stronger; when, therefore, other banks experience a demand for ready money, relief can be quickly afforded by these central institutions. And it is only through such conservatism as these banks display in periods of prosperity that they can contribute to stability in times of stress and storm. When it is remembered that the reserves of the New York banks seldom exceed very greatly the twenty-five per cent limit which has been established by law and by custom, the contrast between American and French or English conditions becomes at once apparent. For an independent bank, which is free to seek its own safety at the approach of danger, a reserve of twenty-five per cent should ordinarily prove to be ample ; but for institutions that aspire to the rank of central banks such a safeguard must be wholly inadequate.

This leads us to another weighty consideration. Unlike the central banks of other countries, our largest institutions are closely connected with various industrial interests, so that they do not occupy an independent position. Their policy is not controlled with sole regard for the general welfare of our banking system ; but they have heen drawn into vast enterprises, into promotions or reorganizations, often of a speculative character, and have displayed less, not more, than ordinary conservatism. The National City Bank stood as sponsor for the Amalgamated Copper Company, and the First National has lent its aid to various undertakings with which Mr. Morgan has been identified. This is not to say, even by remotest implication, that the safety of the banks has been endangered by such transactions; but it is mentioned in order to illustrate the fact that these institutions are not free to husband their resources in order to insure the stability of the money market, and are not, at present, qualified to assume the rôles of the Bank of England and the Bank of France. It is to be feared that our financiers have not yet learned the difference between banking and the promotion of companies; but until this distinction is better understood, New York city will not rival London as an international financial centre.

One thing, however, may be conceded to the claim that the union of banking interests already effected may do something to mitigate the severity of future panics. A mere increase of capital will accomplish nothing in this direction, if banks in the day of prosperity use their credit “up to the hilt ” in their ordinary enterprises. But the common control of large groups of institutions may develop the habit and power of more effective coöperation. This will not, it is true, avert the inevitable consequences of over-speculation ; it will not prevent a certain depletion of bank reserves under the demands made by depositors whose affairs have become involved; but it may allay that senseless feeling of panic which is always responsible for some of the worst features of a crisis. In a situation where purely psychological forces play so large a part, even the expedients of the faith-curist are not to be despised.

V.

The concentration of banking power has now proceeded so far that discussion has inevitably arisen concerning the length to which it will be carried and the possible dangers of the movement. In the counting room and upon the street, New Yorkers are pondering upon these questions, and not infrequently pointed remarks are made about the “Money Trust.” If this expression were heard only in the region of the hundredth meridian, its interpretation would be obvious ; but within the sacred precincts of Wall Street, such words cannot fail to produce a certain impression. At least they serve to suggest some concluding remarks.

It is sometimes said that the weekly statement of the condition of the New York banks is being manipulated for speculative purposes, and that it “can be made favorable or unfavorable, according to the market position of the larger interests in finance.” If, for example, it is desired to depress the prices of stocks, it is thought that large sums are withdrawn from the Clearing House banks, in order to reduce the surplus reserves which are commonly accepted as the index of the condition of the money market. This charge is, from the very nature of the case, extremely difficult to prove or to disprove. Such transfers of money might certainly be made; but in the absence of positive proof, one cannot assert that they are of frequent occurrence.

Other disagreeable rumors concern discrimination in extending or withdrawing loans, by which, it is said, certain concerns that have attempted to compete with some of the Trusts have been forced to inevitable ruin. Here, again, decisive proofs are hard to obtain. The withdrawal of bank accommodations has always been a possible means of commercial reprisal, but it is usually conceivable that some other reason exists for the action of the banker. Doubtless the concentration of great power in a few hands increases the dangers that may be apprehended from this practice ; but up to the present time the evil is probably more potential than actual.

The question of greatest interest, however, is: How far is the process of concentration to go ? If two groups of magnates control to-day nearly one half of the banking capital of New York, what is to prevent them from establishing a practical monopoly of the business ? There can be no doubt that money is now held much more tightly than formerly, and it is not strange that the situation has caused some apprehension.

In considering the matter it is possible to steady one’s judgment by recalling the fact that, of all forms of capital, banking capital is absolutely the freest. It is unnecessary for the banker to erect an expensive plant which will be rendered worthless if his competitors are able to drive him out of business. Provided that care is exercised in making loans, it is possible for any concern to enter or to retire from the field without losing any appreciable portion of its investment. The trouble and expense of incorporating a banking association need not be incurred by any individual or firm that may desire to lend money upon personal or collateral security. No crude materials have to be transported through pipe lines or upon railroads that refuse equal opportunities to all shippers. The post office does not attempt to discriminate between its patrons, and express companies would hardly be so foolish as to hasten the establishment of a parcels post by adopting such a short-sighted policy. Moreover, the average small customer, like the average large depositor or borrower, prefers to have personal relations with his banker; and this becomes increasingly difficult as the size of an institution increases. Under such circumstances, the establishment of anything resembling a complete monopoly is quite inconceivable. Even when a government grants special privileges to a central bank, as has been the case in Europe, a vigorous competition still persists. By the side of the Bank of England there has grown up a vast system of private and incorporated banks, and the Bank of France is confronted by such rivals as the Crédit Lyonnais.

But even if complete monopoly is impossible, it does not follow that the prospect is free from all unpleasant features. So large a part of the resources of the New York banks is now controlled by the great alliances that it would be difficult to finance a corporate enterprise of the largest size without the consent of the Morgan or the Rockefeller interests. For such a purpose outside capital might possibly be enlisted, but this would probably entail considerable risk and effort; so that, for the present, a few magnates have the situation pretty well in hand. Then, again, it is unfortunate to have the largest banks and their affiliated institutions so closely identified with particular corporate interests. This gives to the great captains of industry almost unlimited control over other people’s capital, and enables them to tie up in their own enterprises banking resources that should be available for the use of the community at large. Especially undesirable is it to have life insurance and trust companies drawn so largely into the domain of speculative finance. The general tendency of the times seems to be to confuse the distinction between enterprises that are safe investments for funds held in a fiduciary capacity and ventures that should be undertaken only with capital that is otherwise provided. Underwriting projects in which a profit of two hundred per cent is considered none too large a compensation for the risks assumed, do not furnish a good field for the conservative employment of trust funds. It is in these directions, rather than in the menace of a monopoly, that the present dangers of the concentration movement are to be found.

The systematization and, within conservative limits, the unification of our banking system offer large opportunities for legitimate enterprise, and contain the possibility of great advantages for the entire country. The analogies furnished by the experience of other nations suggest, at any rate, that such developments are likely to occur during the next decade. The joint control of numerous banks will probably lead to what will amount virtually to the growth of branch banking, which has proved so successful wherever it has been tried. Monopoly will not be the result of such a process, if the example of other lands may serve as a guide for our conclusions ; rather will it increase the effectiveness with which capital competes with capital in all parts of the United States. But the movement must be guided with great circumspection if political antagonism of the most violent character is not to be aroused; and it must not be directed with a view to the advantage of ulterior industrial interests. At the centre of any stable system there must stand large banks of which the independence and the conservatism must be as unquestioned as the power. Without these qualities, mere bigness will be of no avail; and this is the fact that must receive chief emphasis in the consideration of present conditions and tendencies.

Charles J. Bullock.

  1. It should be observed that our largest bank, the National City, with its capital of $25,000, - 000, is smaller than the great banks of other countries. The capital of the Bank of England is $72,000,000; that of the Bank of France amounts to $36,000,000 ; while the Bank of the Empire of Germany has a capital of $30,000,000.
  2. Many of the facts here presented may be found in the Wall Street Journal for February 11, 1903.
  3. As this article goes to print, it is reported that the National Bank of Commerce and the Western National are to be merged in a new institution with a capital of $25,000,000. Upon the committee which will supervise the transaction, the First National Bank and the Morton Trust Company are represented.