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Island, New York. In 1885 the cables of the world were 73,779 miles, of which more than 40,000 lay between America and Europe. In 1903 there were 19 cables in existence between the two countries, several of which, however, were not in use. In 1903 the Commercial Cable Company laid a cable 7,846 miles long across the Pacific, with termini at San Francisco and the Philippine Islands, and stations at Hawaii, Midway Island, and Guam.

Side developments of the telegraph have been numerous and are scarcely second in importance to the main system. Among these are the District Telegraph Company, the Gold and Stock Telegraph Company, and the systems of private lines extensively used by newspapers, business men, and large corporations. These have become such features of modern business life that it is not possible to comprehend how public and private affairs could now be conducted without them. The development of the telegraph has kept pace with its commercial progress. Thousands of new inventions have added to its efficiency until the perfected machine of the Twentieth century bears little resemblance, save in fundamental principles, to its original of 1846.

Although the electrical production and transmission of sound was considered and experimented with by scientists long before the middle of the Nineteenth century, the efficient speak


ing telephone dates from the discoveries of Alexander Graham Bell and others in the last quarter of that century. The Bell instrument was publicly exhibited in 1876 and came into commercial use the following year. It was slow in coming into general appreciation, even though its usefulness was clearly apparent. From the original method of a single wire connecting two stations only, the exchange system was invented, which was the one thing needful to enhance and extend the utility of the new invention. Within seven years every city or town in the United States of 10,000 inhabitants or more, and many smaller communities, had an exchange.

That was the real beginning of the telephone. Concerning the situation as it then existed, it has been well said that all was industrial and scientific confusion. Rival inventors came promptly, and the business was saved only by the consolidation in 1881 of the six companies which had sprung into existence. The mechanical and scientific problems that remained to be solved were seemingly insolvable

a "Gibraltar of impossibilities." All that those had who followed Bell and Watson, his associate, was "that part of the telephone which we call the receiver. This was practically the sum total of Bell's invention, and remains to-day as he made it. It was then, and is yet, the most sensitive instrument ever put to general use in any country. There were no

switchboards of any account, no cables of any value, no wires that were in any sense adequate, no theory of tests or signals, no exchanges, no telephone system of any sort whatever.” *

That was in 1881. But in 1878 the New England Bell Telephone Company had been organized for New England and the Bell Telephone Company for the United States; in the following year the National Bell Telephone Company arose as a consolidation of the two and was, in turn, succeeded in 1880 by the American Bell Telephone Company. The telephone was passing through a business experience which strikingly resembled that of the telegraph: a small beginning, great and rapid expansion, inventing rivalry and patent infringement, sharp competition, and the final extinction of injurious rivalry by the consolidation of opposing interests. Nine years after the American Bell Telephone Company had become the controlling corporation (in 1899) it was taken over by the American Telephone and Telegraph Company, which had been originally started to handle the long-distance branch of the busi


But it had been a long and weary progress before this point of business importance had been attained. In the spring of 1875 there was not a single telephone in practical use in the United States. Before the close of the

*Herbert N. Casson, The History of the Telephone, p. 115.

following year, 5,187 had been installed, but even then the instrument was little more than a toy. A decade later the number of instruments in use had increased nearly eighty fold - to 380,277. The years immediately following also showed an increase, but a much smaller one proportionately, the number of instruments installed by 1895 being 660,817-less than double the number in 1878.

The most dangerous competitor the Bell telephone ever had was the Western Union Telegraph Company, which was early in the field with the inventions of Elisha Gray and Thomas A. Edison; but the patent litigation that ensued was ended by compromise and the relinquishment of its telephone branch by the telegraph company. Other rivals were not formidable and the Bell people had a monopoly that still holds at the end of nearly 40 years. The commercial systems of the whole country were unified, apparatus was harmonized and standardized, and the business was developed at every point along both industrial and scientific lines. As a result, the Bell company was built up into a powerful machine, the interests of which became so completely and strongly interwoven with the varied interests of the country that it held a position in which, if not impregnable, it was certainly able to withstand powerful attacks.

Strong attacks finally did come. As the term of the fundamental patents owned by the Bell company ended, in


dependent systems, based on the old patents but with new additional features, sprang up. At first the independent systems were established where the Bell had not occupied the field. Later they made their way into some of the larger cities (Chicago, Cleveland, St. Louis, Philadelphia, Indianapolis and others) to operate in direct competition with the Bell companies. The first independent system was installed in 1883, during the existence of the Bell patents, but slow progress in competition with the old established companies was made. Between 1883 and 1894 only 74 such systems were started, most of them small affairs and some of them operating under the Gray and Edison patents. After 1894, with the expiration of the Bell patents, their installation was more rapid, so that by 1902 there were 3,039 such systems in operation, in operation, though most of them were small and of a local character.

A notable development of the independent systems was in the rural or farmers' lines. This was particularly so in the Middle West, where the independents secured their strongest hold, 75 per cent. of the systems being established in Illinois, Indiana, Iowa, and Missouri. The rural telephone became an important factor in the village and the farm life of that section of the country. It brought hitherto isolated small communities and the lonely farmhouses in touch with each other and the large business centres. The increase in the number of these


independent systems furnishes abundant evidence of how they met and satisfied a great need. In 1880 there were in the entire country 148 telephone systems and 54,139 stations or telephones. In 1902 there were 4,151 systems and 2,315,297 stations or telephones. Including the rural lines, there were 9,136 systems. Of the 4,151 commercial and mutual systems, the independents had 4,107, but the Bell companies had more wire, more subscribers, and more telephones, and naturally handled more messages. In 1911 there were nearly 8,000,000 stations in the entire country, of which about 6,000,000 were in the Bell system and about 2,000,000 in the independent systems.

After years of experimenting by Hertz, Lodge, Henry and others, the wireless telegraph came into use in 1901, and within the next ten years several systems - the Marconi, the De Forrest and others were in operation. Before 1911 the wireless was in common use on the Trans-Atlantic steamships, on battleships, and on steamships of domestic maritime lines. Wireless stations were numerous along the seaboard. Most of the communication by this method was over water space, but transmission of messages across land already points to future success in that direction.

Although the wireless telegraph cannot be said to have attained great commercial importance, its utility on both land and sea has already been amply demonstrated. This latest

mode of communication has long passed the experimental stage and promises to rival the ocean cable in importance. Combined with the wired telegraph, there are practically no limits to the uses of the wireless system. That it has already assumed world-wide importance is shown by the three international conferences held recently (in 1911 and 1912) to dis

cuss its status. Its value as a means of oceanic communication has been strikingly demonstrated by the recent Titanic disaster, when over 700 lives were saved by wireless distress signals. Laws have already been passed requiring all ocean-going passenger steamers to be equipped with wireless receiving stations available day and night.*




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The Federal apportionment during the Civil War - The ten per cent. tax on State banks – Reorganization of the National banking system - Advantages of the new system Subsequent modifications of the banking law of 1866 The financial panic of 1873 - The following reaction - -The crisis of 1893 - A decade of remarkable prosperity - The panic of 1907 - The Aldrich-Vreeland Act Shortcomings of the National banking law- Present financial conditions and tendencies.

War is an everlasting source of confusion and distress to the financial systems of a nation, and the Civil War in the United States proved no exception to this rule. Banking institutions throughout the country were in a very precarious state. Had not the wise, far-sighted system of National banks been introduced at this crucial juncture, financial ruin to the country must have resulted. Before this system actually came into operation, however, the exigencies of the war had compelled Congress to flood the Nation with paper currency issued directly by the Government. The entire issue of currency-lim

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* James D. Reid, The Telegraph in America: Its Founders, Promoters and Noted Men (New York, 1879 and 1886); Herbert N. Casson, The History of the Telephone (Chicago, 1910); Frederick A. Collins, Wireless Telegraphy: Its History, Theory and Practice (New York, 1909); William Mayer, Jr., Wireless Telegraphy, Theory and Practice (New York) and American Telegraphy and Encyclopedia of the Telegraph (New York, 1909); Telephones and Telegraphs, 1902 and 1907 (Report of the United States Census Bureau, Washington, 1906 and 1909); monthly summary of commerce and finance of the United States, January, 1899 and July, 1902 (Washington, 1899 and 1902); Thomas T. Eckert, The Telegraph, ch. xix. in Chauncey M. Depew (ed.) One Hundred Years of American Commerce (New York, 1895); A. E. Kennelley, Wireless Telegraphy and Wireless Telephony (New York, 1909).

Prepared for this History by Henry Clews, Banker, New York City, author of Twenty-eight Years in Wall Street, etc.


among the various States, one-half according to the representative population of each and the other according to the capital, resources, and business done by each State at the time. But the same cause that previously retarded the start of the National banking system now prevented its extension. In January of 1865 there were only 683 banks which had taken advantage of the new law in their organization, and the State banks were still continuing to conduct their business along the old lines as best they could. Accordingly the aid furnished the Government through this new market for its bonds was, despite the bright prospect it seemed to hold, decidedly meagre for a time.

It was thus purely as a matter of self-protection and public expediency that the law of March 3, 1866, imposing a 10 per cent. tax upon all notes issued by State banks was passed. This law went into effect on August 1, 1866, and at once furnished the efficient check to the issues of State banks so long sought by the wisest financial heads in the country.

Immediately the process of reorganization set in. As a matter of fact, it was not the Government alone that benefited by a change from the old, worn-out, heterogeneous banking system which had long been a nuisance to the country at large. Business itself demanded a change a change which should be truly National and at the same time quite safe, operating uni


formly everywhere. When it was seen that this was precisely what the National banking system offered, the spread of the latter was speedy. By October of 1866 the total number of National banks in the country had reached 1,644-more than doubling themselves in less than two years. The increase has been steady ever since, save for a few normal drops, accounted for by transitory conditions. from which the recovery has been comparatively rapid.

The National banks, having formed the very bone and sinew of American banking for nearly fifty years, it is desirable that we here look more intently into the processes of their operation. At the outset it may be said that the new system preserved all the advantages of the old, gaining its strength by the many new advantages it offered. In the first place it provided a uniform bank-note issue, bearing a constant value which was the same in all localities, so that a note issued in Massachusetts, for instance, was accepted as unhesitatingly in Texas or California or Florida as it would have been in the State whence it came. Furthermore, the installation of a new method of engraving and issuance safe-guarded the public and banks alike against counterfeits in a way never before possible; while, by its system of redemption, exchange was made merely nominal. Three other provisions were immense factors in further protecting the pub

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