FARMERS' REGISTER— ESSAY ON USURY LAWS. 



109 



The bank directors then must determine, among 

 those who apply tor loans,' wlao shall be favored 

 and who not. They are a chosen divan, and will 

 reject A or accept B according to their pleasure, 

 without being obliged to give reasons (or it. The 

 larlhcr tlie bank interest has been brought below 

 the market interest, the greater Avill be the benefit 

 from borrowing of the l^ank, the greater conse- 

 quently the dependence of the trading portion-oi' 

 the community on the bank, and of course,' the 

 greater the jiowe'r of the bank. Siippose merchaiiis 

 who are getting accommodation at the bank teel 

 desirous to favor a measure which- the bank may 

 disapi)rbve, would not the threat of the bank to' 

 stop their discounts,- awe them at once into quiet 

 submission to its will? Is it not a well known tact 

 that when i>etitions are'liand«t>d about in London 

 for signatures the merchants are Ircquently in the 

 habit of 'confessing, that they would willingly Ihvor 

 them, but dare not because of the hostility ot" the 

 Bank of Engl and,fmd the consequent dcinget; ofa 

 stoppage of thcif accommodation? If alt banks 

 however lend at the same rate, and that be the 

 market rate, then if one bank threaten you with a 

 stoppage of accommodation, you may go to ano- 

 ther; and if till the banks reject you, you may go 

 to individuals, and that without any loss or injury. 

 The independence of the borrower is thus secured, 

 and the power -of the bank kept within proper 

 hmits. Again: one great evil of all incorporations 

 is, that they produce a concentrated ascertainable 

 interest which alwa3's wars with great success 

 against the unconcentrated, unascertainable and 

 unharmonious interests which are arrayed against 

 them. Thus taking the Bank gf the United Stales, 

 the interest of the stockholders, directors and' debt- 

 ors, is an ascertainable concentrated interest, which 

 will always be capable , of much greater energy 

 and exertion, than caiT be ex-ercised by the indefi- 

 nite unconcentrated interest m opposition. Now 

 reduce the rate of interest to five per cent., and all 

 debtors, especially those in the west, wherethe mar- 

 ket rate is so high, 'vvill feel a much greater interest 

 in the perpetuation of the institution, than if it made 

 loans at the market rate. Indeed, I can conceive 

 of no plan better devised, to perpetuate and build 

 up tlie power of the bank, than this limitation on 

 interest: for the directors and stockhold^re will not' 

 be injured by it, inasmuch, as they will pay less 

 bonus, and issue more, and the debtors will be in- 

 dissolubly bound to the bank. The Javored indi- 

 viduals, those who get accpm'modation at tlie banlc, 

 will ever raise their vofce in favor of the institution 

 which feeds them, even though it be .done at the 

 expense of justice and right. And recollect that 

 their unconditional support, is apt to be much more 

 energetic and elReient, than the hostility of those 

 who are against it. One of the most prolific sources 

 of error, misrule and oppressiohpin the world, is 

 attributable to the energy, zeal and untiring perse- 

 verance, with which particular concentrated inter- 

 ests war upoji the general interests of the commu- 

 nit}^ It is for this'reason, that banks, tarifi's, ar- 

 mies, navies, and all incorporated interests, are so 

 hard to put down, when once they have been es- 

 tablished. . 



Again, Mr. Calhoun 'in his late beautiful and 

 philosophical speech on the currency^ in which he 

 has eminently displayed that admirable power so 

 characteristic of his superior mind, the power of 

 abstraction and generalization, has shown most 



conclusively the general tendency • of the banking 

 system to over-issue, and a consequent constant 

 jjrociivity to a meTe paper system. Now let me 

 ask, would not the restriction of the Bank of the 

 United States to..five per fcnt. interest, create a 

 necessity on the' part of the whole establishment, 

 to issue much more paper, than if tlie motlrer bank 

 and each branch were peimitted at once to take 

 the^ market rate in the several states where they 

 are established? Most undoubtedly it would. We 

 must recollect too, that the embarrassments of the 

 United States Bank are apt to' be occasioned by 

 causes of a very peculiar character, which causes 

 will always be much stimulated and aggravated 

 by .any general tendency in the whole Institution 

 to an over-issue. The branches in the south and 

 wpst, where five per cent, is much below the mar- 

 ket rate, canissueanyamaunt of paper. This paper 

 answertfin the stead of go'ld and silver. It is car- 

 ried down, as- soon as emitted, to the great com- 

 mercial cities. New York, Philadeljjhia, and Bal- 

 timore, to purchase goods, never to be returned 

 upon the branch banks, unless sent there by the 

 banks in tliose. commercial cities alter having 

 cashed them. If the banks however in those cities 

 refuse to take the branch notes, as they were 

 obliged to do when JMr. Cheves was .fii-st elevated 

 to the presidency of the institution, and they are 

 suddenly Returned upon the branch banks, then 

 those banks must instantly curtail their issues, and 

 call in their debt's; the stat"6 banks which have been 

 issuing their notes to supply the local circulation, 

 find themselves immediately at the mercy of the 

 branch of tlie tJnited States Bank, and theexplo- 

 sion of the sj^stem, or at least a disastrous derange- 

 ment of- the cinrencj', is the inevitable- cdnse- 

 quenee. Did not: the embarrassment of the United 

 States Bank in 1818 and 1819 proceed trom this 

 very cause? The southern and western branches 

 over-issued, and the notes were taken at once to 

 Philadelphia, New York, and Boston, to purchase 

 goods. "The result was (sa3:s.M.r. Cheves) that, 

 the bank and the great northern offices were drained' 

 of their capital; aadon the 20th of July 1818, only 

 eighteen months after the institution began its 

 operations, it was obliged to commence a rapid 

 and heavy curtailment of the business of the 

 bank, and its offices. D.uring all this time, the 

 bank had the advantage of immense government 

 deposites." Again, in the same report he says, 

 "the s!)ecic in the vaults (of the mother bank in 

 Philadelphia) at theclose of -the day, on the first 

 of April 1819, was only il2!6,OOd' 28, and the 

 bank owed to the city banks, deducting' balances 

 due to it, an aggregate balance of ^79,125 99". 

 The NeAV York office was little better, and the of- 

 fice at Boston a great deal wors6. The bank was - 

 only saved by the transmission of specie from the 

 west, and the rapid curtailment :of issues at all 

 the branch banks, particularly in the west, toge- 

 ther whh a determhiatin on the part of" the mother 

 bank and branches in New York, Boston, &c. not 

 to cash other- branch notes than those issued at 

 their owjl oltices.' Then came the sudden and in- 

 evitable ruin of the banks of the west, the total 

 derangement 'of their currenc}'^ and the fbrcedand 

 ruinous sale of half the real' property in that coun- 

 try, to satisfy the claims of the banks. But enough 

 of this .^ad and melancholy picture. It must I 

 think, be evident, that marketable interest on bank 

 loans in the west, 'wotdd cause the branches to is- 



