is located there. The New York stock exchange is our only
stock and bond market of national scope, and consequently the
investment center of the country.

The Associated Banks of New York City, as the members of the clearing
house association are called, hold the greater part of the reserves of
the banks and trust companies not required by law to be kept in the
local vaults, as well as the greater part of the surplus investment
funds of the entire country. It is through the operation of the New
York subtreasury on the reserves of the Associated Banks that the
chief influence of the independent treasury system on the banking
business of the country is exerted, the greater part of the
government's receipts coming directly out of those reserves, and a
large part of the expenditures going into them, and the greater part
of the money deposited in national banks by the Secretary of the
Treasury going directly or indirectly into New York institutions. Most
of the exports and imports of coin and bullion pass through New York,
and the major portion of the foreign exchanges of the entire country
are there effected. The New York Assay Office receives and distributes
the greater part of the new supplies of gold and silver bullion which
come from our mines and transforms into bullion the major part of
these metals that come to us from abroad and do not find employment as
foreign coin. The New York Stock Exchange is the medium through which
a large part of the surplus savings of the country are invested in our
industries or loaned for the use of our national, state, municipal,
and other local governmental agencies.

_5. Operation of the System_

The most noteworthy features of the working of this machinery may be
discussed under the heads: conflict of functions and laws; loan
operations; treasury operations; reserve system; absence of elasticity
in the currency.

(_a_) _Conflict of Functions and Laws._--The two classes of banking
institutions which have been described (state banks and national
banks) and trust companies, described in a subsequent chapter, exist
side by side in many communities, and in the performance of certain
services compete for the patronage of the public. As has already been
pointed out, state and national banks differ little in their functions
except in their relation to real estate loans, and in some states
trust companies perform all the functions of these institutions and
many others besides. In the