¹ For example, see Davis, Lance E., “The Investment Market, 1870-1914: The Evolution of a National Market,” Journal of Economic History, 25 (September, 1965), 355–399CrossRefGoogle Scholar; Sylla, Richard E., “Federal Policy, Banking Market Structure and Capital Mobilization in the United States, 1863-1913,” Journal of Economic History, 29 (December, 1969), 657–686CrossRefGoogle Scholar; Robertson, Ross M., The Comptroller and Bank Supervision (Washington, D.C., 1968), 62–66.Google Scholar

² Mints, Lloyd W., A History of Banking Theory in Great Britain and the United States (Chicago, 1945), 215.Google Scholar

³ Davis, “The Investment Market,” 358. The same statement appears in Davis, “Capital Mobility and American Growth,” Chapter 22 in Fogel, Robert W. and Engerman, Stanley L., eds., The Reinterpretation of American Economic History (New York, 1971), 288.Google Scholar

⁴ Krooss, Herman E. and Blyn, Martin R., A History of Financial Intermediaries (New York, 1971), 97.Google Scholar

⁵ Myers, Margaret G., A Financial History of the United States (New York, 1970), 165–166.Google Scholar

⁶ Ransom, Roger L. and Sutch, Richard, “Debt Peonage in the Cotton South After the Civil War,” Journal of Economic History, 32 (September, 1972), 646.CrossRefGoogle Scholar

⁷ Ibid., 650, emphasis added.

⁸ Sylla, “Federal Policy,” 661. Virtually the same statement appears in Sylla, “The United States 1863-1913,” Chapter VIII in Cameron, Rondo, ed., Banking and Economic Development (New York, 1972), 241.Google Scholar

⁹ Ransom and Sutch, “Debt Peonage,” 646; Sylla, “Federal Policy,” 661.

¹⁰ Robertson, The Comptroller, 65-66, emphasis added.

¹¹ Bogue, Allan G., From Prairie to Corn Belt (Chicago, 1963), 175.Google Scholar

¹² Huntington, A. T. and Mawhinney, R. J., compilers. Laws of the United States Coneerning Money, Banking and Loans, 1778-1909, National Monetary Commission (Washington, D.C., 1910), 343–344.Google Scholar

¹³ Ibid., 383.

¹⁴ Bogue, From Prairie to Corn Belt, 176. Bogue was referring to mortgages from all types of institutions, not just national banks.

¹⁵ Frederickson, D. M., “Mortgage Banking in America,” Journal of Political Economy, 2 (March, 1894), 206.Google Scholar

¹⁶ Jacobstein, Meyer, “Farm Credit in a Northwestern State,” American Economic Review, 3 (September, 1913), 598.Google Scholar

¹⁷ Plehn, Carl C., “The Taxation of Mortgages in California, 1849-1899,” Yale Review (May, 1899), 57.Google Scholar

¹⁸ Putnam, George E., “Farm Credit in Kansas,” American Economic Review, 5 (March, 1915), 27.Google Scholar

¹⁹ Report of the Comptroller of the Currency, 1878 (Washington, D.C., 1879), 55.Google Scholar

²⁰ Report of the Comptroller, 1886, 6.

²¹ Report of the Comptroller, 1887, 28.

²² Report of the Comptroller, 1888, 71-72. One reason for the Comptroller's continuing concern was that some national banks in agricultural areas converted to state charters because of the greater ease in making mortgage loans. The following passage illustrates this problem facing the Comptroller: “Because of the inability to loan on real estate, and the state of Wisconsin having passed a safe and adequate banking law, the stockholders deemed it inadvisable to renew the national charter when it expired in 1891, and, by unanimous vote, agreed to ‘take the necessary steps to form a state bank, to succeed to all the assets, goodwill and business of the First National Bank of Burlington, to be organized under the banking laws of Wisconsin, under the name of “Bank of Burlington”.’ ” Stone, Fanny S., editor, Racine, Belle City of the Lakes and Racine County of Wisconsin, Volume 2 (Chicago, 1916), 27.Google Scholar

²³ Report of the Comptroller, 1893, 51.

²⁴ Report of the Comptroller, 1903, 963-965. Under “Power to hold or acquire real estate” the following were listed (explanations and case citations omitted):

May purchase realty to secure previous debt

When may purchase more than amount of debt

May purchase at sheriff's sale and sell

Bank may buy undivided interest in realty

May sell timber on land bought at foreclosure sale

Ultra vires purchase voidable only

When purchase part void or part voidable

Leasing and improvement of real estate

Indebtedness-obligation to pay rent

Acts ultra vires-liability of third parties

Deed to third party in trust for bank

Under “When national bank may take mortgage” the following were discussed:

May take mortgage to secure previous debt

Deed of trust to bank may be enforced

Agreement that bank may enforce endorser's indemnity valid

When may acquire and enforce prior liens

Borrower may mortgage to another for bank

May take mortgage for purchase price of realty sold

May take as collateral, stock representing only realty

May buy and enforce secured note subject only to forfeiture

May buy additional note to protect its claim

Foreclosure of mortgage given to predecessor state bank

Mortgages for present or future advances invalid

²⁵ Report of the Comptroller, 1911, 18.

²⁶ Pope, Jesse E., “Agricultural Credit in the United States,” Quarterly Journal of Economics, 28 (August, 1914), 713.CrossRefGoogle Scholar

²⁷ Jacobstein, “Farm Credit,” 605.

²⁸ Bogue, Allan G., Money at Interest: The Farm Mortgage on the Middle Border (Ithaca, New York, 1955), 252–253.Google Scholar

²⁹ Haney, Lewis H., “Farm Credit Conditions in a Cotton State,” American Economic Review, 4 (March, 1914), 49–50Google Scholar. The complete quote from Haney is: “Real estate security is a knotty point for bankers in farming communities. State banks in Texas are allowed to take a certain amount of real estate as security for loans and do so; but as everyone knows, national banks are prohibited by law from doing this. As a matter of fact, national banks do take some land as security, and over one half of all banks reporting held farmers’ personal notes secured by real estate. Such loans appear to make from one percent to ten percent of the total. Sometimes, if a borrower has real estate notes they are put up in national banks, and although they are not pledged for security, it is understood that they are in the bank for that purpose. If a national bank has good customers who have real estate paper, it will frequently take their notes for collection on the understanding that when collected these notes will be applied on the payment of their obligation to the bank. Occasionally, too, national banks take real estate loan as collateral security when the maker of the land note does not have to be depended upon for the liquidation of the debt. It seems that national bank examiners are familiar with this fact and that all practice has been tacitly sanctioned, perhaps to check lending without any security at all.” Texas might not be typical because that state did not permit state banks until 1905 and national banks would have been more apt to devise and use methods for participating in the mortgage market.

³⁰ Klebaner, Benjamin J., Commercial Banking in the United States: A History (Hinsdale, Illinois, 1974), 79.Google Scholar

³¹ Moulton, Harold G., The Financial Organization of Society (Chicago, 1921),CrossRefGoogle Scholar reported that: “Indeed, it has been the rule rather than the exception, that at least a part of the loans extended to farmers during the crop growing period are carried over, extended for an indefinite number of years. This practice is in part attributable to the fact that the National Bank Act did not permit national banks to loan on the security of real estate mortgages, in consequence of which the national institutions in order to meet the competition of state banks, made loans for fixed-capital purposes to farmers merely on the security of their single or indorsed promissory notes. In the nature of such things such loans usually had to be extended for a long period of years” (658).

³² U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, Bicentennial Edition, Part 2 (Washington, D.C., 1975), 1011, 1025.Google Scholar

³³ Board of Governors of the Federal Reserve System, All Bank Statistics: United States 1896-1955 (Washington, D.C., 1959), 16–17.Google Scholar

³⁴ For a discussion and definition of the balance sheet items in the Reports from the Comptroller's office, see Alcorn, Edgar G., The Duties and Liabilities of Bank Directors, third ed. (Indianapolis, 1915), 138–153.Google Scholar

³⁵ Barnett, George E., State Banks and Trust Companies Since the Passage of the National Bank Act (Washington, D.C., 1911), 108,Google Scholar provided similar information on state banks: “Despite these restrictions and the vigilance of the state bank supervisors, in the period from 1892 to 1897 many state banks in the Middle Western and Western States came into the possession of large amounts of real estate. Under the conditions then prevailing it would have been impossible to force the banks to sell their real estate without driving many of them into insolvency. The increase in the value of real estate in these states since 1898 has enabled the supervisors to secure a great reduction in the real estate holdings of the banks.”

³⁶ One cannot gauge the relative magnitude of losses (defaults) on mortgage loans by changes in the ratio of real estate to loans and discounts. This ratio can change for several reasons, an obvious one being relative changes in loans and discounts. In addition, “other real estate” could be held for up to five years by the bank. It was possible for substantial losses on mortgage loans to have occurred during a year and to still have the real estate to loans and discounts ratio fall if sales of already owned real estate exceeded new defaults. However, it is clear that the amount of real estate owned by the national banks was largely dependent upon the losses the banks suffered. The ratio of gross losses to loans and discounts for country banks by state has been calculated from the Comptroller's Reports. [See Gene Smiley, “Short-Term Interest Rates of National Banks for States and Reserve Cities, 1888-1913,” Working Paper 74-12, Bureau of Business and Economic Research, University of Iowa, Iowa City, Iowa (June, 1974)]. Regional loss ratios can be calculated for the same regions as the real estate ratios in Table 1. The estimated correlation coefficients between the regional real estate and loss ratios for the respective regions are: NE, 0.70; MA, 0.85, ENC, 0.85; USE, 0.83; LSE, 0.85; SW, 0.76; WNC, 0.86; MOU, 0.95; and PC, 0.80.

³⁷ The data in Table 4 indicate that even in the non-depression years of the 1890-1913 period, banks in the more agriculturally oriented states in the western half of the United States owned relatively larger amounts of real estate suggesting (with relatively similar loss ratios) relatively larger amounts of direct and indirect mortgage lending by those national banks. (Tables 1 and 2 indicate that this is so for the years of 1911, 1912, and 1913). It seems logical to assume that in areas where substantially larger portions of economic activity were directly and indirectly related to agricultural output and income, national banks would make relatively more loans (such as mortgage loans) directly tied to that sector.

³⁸ One could reconcile the conflict if it were known that national bank mortgage lending in the years 1911, 1912, and 1913 were abnormally low compared to the preceeding years. However, there is no reason to suspect this and it does not seem to be a plausible explanation.

³⁹ Horton, Donald C., Larsen, Harold C., and Wall, Norman J., Farm Mortgage Credit Facilities in the United States, Miscellaneous Publication No. 478, U.S. Department of Agriculture (Washington, D.C., 1942), 22–23.Google Scholar

⁴⁰ Ibid., 21. Horton, Larsen, and Wall provided some additional indirect evidence that suggests that the impact of the removal of the prohibition on direct mortgage lending by national banks in 1914 was slight. Their Table 67 (227-228) reported “Estimated interest rates on outstanding farm mortgages, by States, Jan. 1, 1910 40.” Table 68 (229-231) reported “Average contract interest rates on farm mortgages recorded by selected lender groups, by geographic division, 1910-35.” The interest rates recorded were quite constant between 1910 and 1920, indicating that the change in the regulations facing national banks had little impact in the mortgage market. If the restrictions had greatly hampered national bank participation in the mortgage market, one would expect to find bank farm mortgage interest rates and farm mortgage interest rates in general falling in the years after 1914. Other factors of course were affecting mortgage interest rates but the figures are consistent with the interpretation that national bank participation in the mortgage market was not appreciably increased in the post 1914 period. The nature of this participation evidently changed from indirect to direct, however.

⁴¹ Report of the Comptroller, 1893, 51.