1 - Introduction

Summary

The activity of the banks in the economic life of society has often been likened to that of the heart in the human body. … For just as it is the function of the heart to regulate by means of certain organs the circulation of the blood, which through countless arteries and veins flows through the human body and returns to the heart, so … it is the function of the banks to regulate by certain economic measures the circulation of capital, which flows from them and returns to them, and which may properly be regarded as the life blood of the modern economic organism.

Nearly a century ago, this declaration appeared, in defense of the German universal banks, in the well-known treatise of Jakob Riesser – himself a director of a Berlin great bank. By the last quarter of the nineteenth century, after industrialization had progressed through textiles, steam power, and railroads, populist voices – stemming mostly from agrarian or socialist quarters – criticized the banks for wielding excessive power over industry. Riesser argued, on the contrary, that the banks played a facilitating or sustaining role in the economy. In constructing his argument, he laid out the details of the German universal banking system, as he saw them and as he garnered from the writers and scholars of the time.