Credit Ger many was leading in developing the methods of furnishing the small artisan in the town and the small farmer with productive credit. There were, in 1908, 16,100 credit corporations with 2,203,0(10 members which were organized in 60 central credit corporations and 33 associations for auditing. The importance of these latter institutions rests on the power of the govern ment to transfer to them its right of supervis ing and controlling the small individual corpo rations, irrevocably unless gross misconduct has been proved. The concession of this right to the leading Polish bank in Posen by the Prussian government has become the legal basis of the most important financial organization of the Prussian Poles. A powerful credit and rural banking system has grown up on this basis and is backed by the Central Co-operative Bank (Zentralgenossenschaftskasse), a Prus sian state institution with a capital of $19,000, 000 in 1909. In 1901 money to the amount of $223,000,000 was paid into the bank on current account, while the total turnover of the bank was $4,100,000,000.
The Federal Bank as the Central Credit The backbone of the credit sys tem is the Federal bank in its right of an elas tic practically unlimited but restrictive note issue.There was never any danger of a cash ri csis in modern Germany which was the crit ical point of the economic system of the United States up to the creation of the Federal Reserve Bank system. First of the banks, the Federal Bank has spread a system of branch offices all over Germany and has now established branches in about 490 cities. Based on this branch sys tem it has established a clearing house system uniting all Germany; in 1913 the amounts of payments made in that clearing house business amounted to $47,000,000,000, as against $20,400, 000,000 in 1900, and $7,100,000,000 in 1890; and it has concentrated a very large part of the trade in bills of exchange in its hands during the last few years, especially in bills of ex change on foreign places; the number of bills bought by the Federal Bank maturing in Ger many being 5,400,000 in 1913 as against 4,500,000 in 1901, and to the amount of $2,900,000,000 in 1913 as against $1,500,000,000 in 1891, while the number of bills of exchange on foreign places was in 1913, 100,000, as against 23,000 in 1901, and to the amount of $280,000,000 in 1913, as against $40,000,000 in 1901. These bills are generally sold to the Federal Bank some few• days, now by statute of the Federal Bank at least 10 days, before maturity. Having grown up as the useful servant of the private busi ness interests while their means were very lim ited, even somewhat disregarding its duties as a political and currency institution, it is now a powerful master even toward the largest of these bank concerns representing the public interests against their private interests. So during the last few years it has forced from the great banks the publication of balances every two months, the enlargement of their deposits free of interest with the Federal Bank, and the gradual increase of the cash held by the banks against their deposits until one-tenth of the amount of those deposits was to be reached.
Further, in connection with the mortgage insti tutions the Federal Bank has concentrated the cash transactions on the mortgage market. And by the medium of the Central Co-operative Bank it is closely connected with the co-oper ative credit system. An advisory board of the president of the Federal Bank is composed of the leaders of the most important credit insti t,,tinnc of the emnire International Position of the German Stock and Produce Exchange.— The German stock exchange has not been able to secure an international position equal to those occupied by the stock exchanges of London, Paris and New York. And likewise the German produce exchange has not succeeded in getting a lead ing position equal to the produce exchanges in Great Britain and America.
Besides the scarcity of German capital power and the unfavorable geographic position of Germany both for production and distribu tion one reason more will be found in the very marked distrust or open hostility displayed by the agrarian and socialist majority of the Reichstag and backed by the popular judgment against the nfan operating in the stock or produce exchange. Besides the Berlin stock exchange, which is of course the most power ful, the stock exchanges of Frankfort-on-Main and Cologne are important and largely inde pendent, while the stock exchanges at Leipzig and Hamburg are strong but more closely con nected with Berlin. Concerning the produce exchanges, beginnings have been made to build up international markets in Germany in some of the leading staple products, for instance wool, at least for continental Europe.
German Capital amount of stocks and bonds admitted at German ex changes in 1911-13 ($2,878,000,000) has not risen considerably above that of 1899-1901 ($2,454,000,000), but government borrowing al ready large in 1899-1901 — about 31 per cent of the whole amount —has increased very sub stantially (to 41 per cent), both in home and foreign loans. The investments in bonds of cities has decreased absolutely and of course even more relatively (from 38 per cent to 30 i per cent). And so have decreased investments in stocks and bonds of banks and of railroads, already small in 1899-1901 (from 6 to 3 per cent and from 10 to 6 per cent). Industrial stocks and bonds, both domestic and foreign, have in creased (from 17 to 20 per cent). The invest ments in bonds and stocks admitted at the Ger man exchanges constitute, however, only a part of the total German capital investments which are considered to amount to about $2,000,000,000 every year.