1^37] 



FARMERS' REGISTER. 



425 



traiislerreii, and upon the sleailiness of deinand 

 anil rogularity ol'iiJiwjIy, all orwiiich are disturbed 

 by cvory expansion and contraction of a currency. 

 One million ol'dollars, wiien a currency is expand- 

 ing, niav be a |)lenty of money, whilst two mil- 

 lions, when the currency is contracting, will be a 

 sc.u'city. 



It is, however, further asserted, ihat banks of 

 circulation atFord Jiicililies to borrowers, which 

 could not e.\ist without ihein. This is admitted to 

 be true, but your committee will attempt to show, 

 that the facilities allutled to, are more injurious 

 than beneticial to the public. 



The capital of a society, by which is to be un- 

 derstood, as above mentioned, all its valuable pos- 

 sessions, accumulates by a comparatively slow 

 progression. The annual consumption of a people 

 goes very tar to destroy all its annual proiluction, 

 and the surplus which is left is all that ran be ac- 

 cumulated. In every thriving community, there- 

 fore, it is ot' essential importance that the greatest 

 possible proportion of its ca{)ital should he produc- 

 tively cmpluijed, that is, devoted to the support of 

 productive laborers, who, by their industry and 

 enterprise, are able to reproduce with profit what 

 they consume in their miiintenance. Now it must 

 be evident, under this view of the subject, that it 

 makes a great dilference to a community, as re- 

 gards its prosperity and its capacity to increase in 

 population, whether its capital be loaned with dis- 

 cretiuii or not. If money be loaned to the indus- 

 trious, prudent, and frugal citizen, to assist him in 

 extending his an-ricultnre, his manufactni-es, or his 

 commerce, he will add to the wealth oi'the nation, 

 by the increased products of his labor, and be able 

 to supp'ort himself, replace the borrowed capital 

 with interest, and lay up a fund liM' himself. ,0n 

 the other hand, if money be loaned to the idle, the 

 unskilful, or the imprudent projector, he may sink 

 it by niismanagement and the want of proper 

 knowledge of his business,, or mav waste it by im- 

 providence or extravagance. Every dollar thus 

 consumed has a tendency to retard the progress of 

 a society, and to check its population, which must 

 n(?eds ever be limited by the means of subsistence. 

 Now, it must be observed, that if there were no 

 banking associations, all the funds belonginij to the 

 individuals who compose the mass of stockholders, 

 would be in the hands of those individuals, mui the 

 very persons who now apply to banks, would be 

 able to borrow of individuals. There would, in- 

 deed, be this dilference, thai those only would be 

 able to borrow, in whose prudent and economical 

 manao;ement of their concerns, the lenders had 

 confidence ; but instead of borrowing lor sixty days, 

 they would he enabled to procure money for a year, 

 or for as long a time as they continued to maintain 

 their punctuality, and the confidence of the lender. 

 Your committee would then ask, whether it is not 

 manifest that capital would always be loaned with 

 more judirment and discretion by its individual 

 owners, than by a dozen or more directors of a 

 bank, between whom and the borrower, explana- 

 tions as to the ol)]ect of the loan are rarelv made. 

 Before the establishment of banks iii the interior, 

 the farmer who possessed credit and character, 

 experienced little dilBculty in borrowing, on his 

 simple bond, for one or more years, any sum 

 which it was thought could be pradeiuly loaned to 

 him. Embarrassments and failures in those days 

 were scarcely known amongst our husbandmen, 

 Vol. V— 5'4 



and society moved on by a regular, sure, and 

 happy march. In our cities, on the contrary, 

 where loans have been chiefly made by incorporat- 

 ed banks, we have seen a coniinued succession of 

 bankruptcies, and hail it not been lor the practice 

 so umversally prevalent amongst merchant^;, of 

 securing the banks for the sake of endorsers, bank- 

 ing long since would have been abandoned as an 

 unprofitable trade. It is true, that these objec- 

 tions against the practice of loaning money by 

 boards of/iireciors, many of whom are very little, 

 or not at all. interested in the stock as bona fide 

 holders, will ap[)ly as well to a bank of discount as 

 to, a bank of circulation ; but there is this diffierence 

 between the two, tiiat in the former, a stricter at- 

 tention would be paiil to the responsibility of the 

 borrowers, inasmuch as fi"om the limited extent of 

 its discounts, which cannot exceed its capital, it 

 would have a greater choice amongst the ap[)li- 

 car.ts, and from the impossibility of making up its 

 losses from any other source, the interests of the 

 proprietors would comjjel a more rigid system of 

 caution. 



But it may be asked, cannot a bank discount 

 upon its deposiies, and loan the money which has 

 been placed there lor sale keening, instead of its 

 notes, without adding to the mass of the currency? 

 We answer in the negative. The right to draw 

 a check upon a bank payable on demand, is as 

 much a part of the currency as a bank note. One 

 is just as available for all purposes of money, 

 as the other, and whatever influence the one has 

 in depreciating the currency, is equally possessf d 

 by the other; lor there can be no difference between 

 a bank note in a man's pocket, and the right of 

 procuring such a note by sending to a bank. Now, 

 where ilie specific money of depositors has been 

 loaned by a bank, it is clear that the right of the 

 depositors to demand their money, at any moment 

 they please, is still reserved to them. Of course, 

 the amount which stands to their credit on (he 

 books of the bank, constitutes a part of the cur- 

 rency, inasmuch as it can be applied to any pur- 

 pose to which bank notes could be, if drawn out 

 by checks. Your committee are of opinion that 

 the want of a proper understanding on this sub- 

 ject, has caused many of the abuses of banking, 

 and although the amount of the average deposites 

 may be, in some degree, a guide f(jr the limitation 

 of discounts, yet every loan made of deposit?, 

 money, is, in reality, an indirect loan of the credit 

 of the bank. 



The third and last position we have to combat, 



That hanks improve the country wherever they 

 arelocaied,as is exemjilified in the number ofturn- 

 pike roads, iiiicfges, houses, and barns, which have 

 of late years been constructed. 



Had no banks been established in the country, it 

 is reasonable to presume, that the capital of the 

 people would, in seeking employment, have natu- 

 rally liiimd its way into the most profitable chan- 

 nels. This will usually be the case, when men 

 are suffered to pursue their own interests, without 

 the interti?rence of governments, or the enactment 

 ol injudicious laws. Now, if the existence of banks 

 has not diverted capital from its natural course, 

 and uiven if a new direction, if has merely assisted 

 in doing Ihat which would have been performed 

 witliout if, and is, therefore, entiUed to but little 

 credit. But if J on the other hand, the existence 



