REMARKS ON SPECIE RESERVES AND BANK DEPOSITS. 985 
there are but eighteen millions of it in Boston, which the banks are bound to pay on 
demand to their individual depositors. ' After the establishment of the Great Bank, this 
amount will be raised to thirty-six millions; namely, eighteen millions due from the 
present banks to the Great Bank, and eighteen millions due from the Great Bank to 
the private depositors. Debts can be paid with equal facility from either moiety of this 
fund. 
What, then, would be the inducement for private depositors to take the trouble — 
for risk there will be none — of causing their deposits at their accustomed banks to be 
entered, not to their own credit, but to the credit of this Great Bank, and of then draw- 
ing their checks upon this bank, and not upon the one in which their funds actually 
lodged? As long as money is plentiful, and can be had on easy terms, they will not, 
it is true, be profited by the arrangement. But as soon as interest rises to seven or 
eight per cent, under the pressure of a coming crisis, the enormous latent power of the 
Great Bank can be brought immediately into play, to answer all demands forloans, and - 
thus to prevent the rate of interest from rising any higher. Any merchant or institu- 
tion in good credit, or that is able to offer undoubted security, can obtain loans from it 
to an indefinite amount, at a rate not less than seven, and not exceeding eight per cent. 
I say * not less than seven"; for as long as capital is abundant, and loans can be easily 
obtained at the ordinary rates, it would be the height of imprudence, it would stimulate 
excessive speculation, and it would injure the present banks by bringing into rivalry 
with them the unlimited power of this giant institution, to allow the Great Bank to 
discount notes in ordinary times and at ordinary rates. Unhappily, a pressure in the 
money market is so frequent in recurrence, and does so much harm while it continues, 
that a sure palliative for the evil would be cheaply purchased at almost any price. 
The interest accruing on the loans made only in times of financial difficulty would be 
sufficient, as before remarked, to defray current expenses, to constitute a guaranty fund 
against bad debts, and perhaps to pay a small dividend to the depositors. The action , 
of the institution, then, would be like that of a great fly-wheel in the financial commu- 
nity, to equalize the pressure and produce regularity of motion under all circumstances. 
The Bank of England already performs to a considerable extent the functions here 
proposed. It operates as a great regulator, using the vast power which it possesses 
chiefly in times of financial distress, and being comparatively inert when the rates of 
interest are low. The public deposits, and those which are lodged in it by other bank- 
ing institutions, are the sources of this vast power; for its capital, though large, is all 
lent to the government, and consequently exists only in the form of irredeemable public 
debt, which, in a time of difficulty, can be made available only by the sale of stock at 
VOL. VIII. 50 
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