1837] 



FARMERS' REGISTER. 



42a 



Thnt they increase the capital of'tlie conununity 

 bv tlie. einiijfiiijn of their notes, and all'ord liicilities 

 to holTuwcrs whicli could not exist without tliem — 

 and 



That they improve the country wherever they 

 are located, as is exemplified in the number of 

 turnpiUe roads, bridires, houses and barns, which 

 have of late been constructed. 



How liir tiiese positions are true or incorrect, 

 wdl appear in the course oi'the Ibllowing: remarks. 

 The rirst point to be attained, is to have a clear 

 analytical view of the nature of banks, and .of the 

 distinct operatinns which thev are capable of per- 

 Ibrminf;, lor unless these be properly understood, 

 the mind will necessarily be confused, and the 

 conclusions drawn as to their beneficial or injurious 

 tcndenc}', will assuredly be unsound. 



Banks may be of three different ki)ids, which 

 are desiixnated thus: — banks oi' deposite, banks of 

 discount, and banks of circulation ; the particular 

 properties of which are wholly dissimilar, as well 

 as relates to their uses, as to their infiueiice upon 

 the pidilic prosperity. 



yj hank of deposite [s an institution established 

 under the guarantee of a state, or of one or more 

 individuals, solely for the deposit and sale keeping 

 of money, wherein each person who makes a de- 

 posite, has credit on the books of the bank lor 

 the amount of the same, which amount he can 

 again at pleasure. draw out, or transfer by a check 

 or order, to the credit of another. Of the utility 

 and convenience of such an institution, no one can 

 entertain a doubt. It is calculatetl to protect the 

 coin or bullion of the, community, from the losses 

 incident to fire or pillage, and enables merchants 

 and others to settle extensive cash transactions 

 without the labor of counting, or the expenses and 

 risk attendant upon the transportation of coin from 

 place to place. Such a bank might even issue 

 notes for public convenience, without producing 

 any prejudicial effect upon the currency, provided 

 that such notes were mere certificates that corres- 

 ponding sums had been deposited in the bank, in 

 coin, which were always subject to the demand of 

 the holders. The onl}' objection against the estab- 

 lishment of a bank of this description is, that it 

 could not be supported without a small contribu- 

 tion from each deposite and transfer, and such an 

 expense would not, perhaps, be willingly borne by 

 ■our citizens at the present day. The state, in- 

 <ieed, might make an appropriation for such a 

 ■purpose, but the present is not possibly a period 

 when such a measure is required. 



ji bank of discount is an institution established 

 by an individual, or a number of capitalists, who 

 have money to loan, and who associate themselves 

 iogether tor the purpose of finding a more ready 

 market for their capital, or of saving themselves 

 the trouble of looking out lor borrowers. As the 

 loans of such banks are limited to the actual amount 

 of its capital, its operations are entirely favorable 

 to the interests of the community. As it makes 

 no addition to the circulating medium by the 

 emission of its notes or credits, it has no tendency 

 to depreciate the currency, and as it keeps in con- 

 stant activity a considerable amount of capital 

 which would otherwise lie unemployed in the 

 hands of its owners, it may be considered as instru- 

 mental in the promotion of national wealth. 



If the operations of the banks of Pennsylvania 

 and the other states of the UnioUj vven_' limited to 



those above described — if they would afford facili- 

 ties in the deposit mg, sale-keeping, and transfer- 

 ing of money, as banks of deposite, and as banksof 

 discount confine their loans to iheir absolute capital, 

 without in either case, issuing any note but what 

 should be the true rcprescntalivc of gold and silver 

 in their vaults, then your conmiillee would unite 

 in regarding them as national blessings, worthy of 

 legislative protection, and entitled to the support 

 and confidence of the public. But untbrtunalely, 

 the emoluments resulting liom a mere loan oftheir 

 capitals, do not consittule, in our country, a suffi- 

 cient inducement ibr the establishment of banks. 

 The expenses of management consume a portion 

 oftheir profits, and a resort is had to the expedient 

 of creating a revenue fi-om the lending of credit, at 

 the same annual interest as is derived from the 

 loaning of capital. This gives rise to the third 

 species of bank which has been enumerated. 



u'jf bank of circulation is one, which, in addition 

 to its capital, undertakes to loan its credit, either 

 in the Ibrm of credits on its books, or of bank notes, 

 which are promises to pay on demand, certain 

 quantities of gold and silver. ^11 the banks in the 

 United States are of this description, and it is this 

 particular branch of their operations which has 

 occasioned all the calamities which have been 

 ascribed to the banking system. Your committee 

 do not wish to be understood as declaring that the 

 power of lending its credit may not be exercised 

 to a certain extent, with advantage to the public. 

 If a bank be established in a community where 

 coin alone had beibre c6nstituted the currency, the 

 credit given to its notes may enable them to supply 

 the place of apart of the coin, which may then be 

 sent abroad as commercial capital, and be thus 

 rendered productive of profit, instead of being re- 

 tained at home in the unprofitable employment of 

 circulation. If the pa|)er credits emitted by the 

 banks, do not exceed the quantity of coin displaced 

 by them, or in other words, if the quantity of coin 

 and convertible paper united, does not exceed the 

 quantity of coin which would circulate if there was 

 no paper, then there is no evil resulting from the 

 exercise of the power to loan credit. But so strong 

 are the temptations to overtrade, grounded in a 

 desire to elevate the price of stock by declaring 

 exorbitant dividends, and so pernicious the conse- 

 quences which result to the community, from the 

 existence, in the hands of any set of men, of a 

 power to contract or expand the currency at plea- 

 sure, which is virtually the power of altering at 

 will the value of every citizen^ s property, that the 

 most approved writers on public economy unite 

 in the declaration, that the evils attendant upon 

 banks of circulation so far outweigh all their ad- 

 vantages, that that nation will be the most happy 

 and prosperous which has the least to do with 

 them. To render this position more intelligible, 

 your committee subjoin the Ibllovving remarks. 



The total quantity of gold and silver in the trad- 

 ing world, in the course of a peaceful intercourse 

 between nations, becomes distributed amongst 

 them all, in the proportions called for by their 

 population, commerce, and other relative circum- 

 stances. Each nation, which possesses the means 

 of paying (or it, will have its share, and neither 

 governnient or people need be under any appre- 

 hension, least they may not receive that quantity 

 which will place their currency upon a level with 

 the averaire currencies ol" oilier countries. Wiien 



