246 



THE FARMERS' REGISTER. 



Dillacre and iiiiurv 10 public inlerests and private 1 nefil both pariiee. B knows that at 60 days he can 



rights, which "would serve to illustrate and prove 

 our assertions of the evils ol' the sysiem. Such 

 an exposition, even if enibracinii only iinporlant 

 acts and cases strictly in point, would require the 

 whole epace I'urnished by this eiuire publicaiion, 

 to the exclusion of every oiher sultj'^ct. We 

 shall merely attempt to state important truths in 

 plain ianjTuage, and which we trut^t will be read 

 by numerous members of the irreat agricultural 

 community, who would [lerhaps jrlndly learn 

 so?ne truth on this subject, on which almost every 

 existing newppaper in the southern stales, either is 

 silent, lor the purpose of concealing truth, or 

 speaks but to sustain and diff'ase lalsehood lor (he 

 benefit, and at the dictation, of the all-|)owerl'ul 

 banking interest. 



To clear away the fog in which banking ope- 

 rations are enveloped, it is necessary to separate 

 them, and describe each one separaiely. 



There are three several and eniirely different 

 operations combined in every bank of this coun- 

 try, and which, lor better understanding, we will 

 describe as if separate, instead of being combined 

 and mixed together, as they always are iif practice. 

 These three operations belonir respectively to 

 banks of deposite, banks of discount, and banks of 

 issue or circulation. 



I. — The sole operation of a mere bank of de- 

 posite would be to receive, for safe-keeping, and 

 ibr convenient transfer, all sums of money de- 

 poshed by individuals. Money would thus be 

 belter secured from wear and waste, Irom thieves 

 and from fire ; and guarded lar more cheaply, 

 as one house and one guardian would do the 

 duty for hundreds or thousands of individuals. 

 This alone would be an important service to each 

 depositor, and, in the agitregate, a great benefit 

 to the public interest. Another important benefit 

 would be, that of lacilitatintr payments between 

 individuals by ihe use of chtcks, which is merely 

 transferring a credit lor a.ceil^^in amount ol' mo- 

 ney deposited, from the account of the payer to 

 to that of the person to be paid. To make all 

 the cash payments of a commercial city by ac- 

 tually counting and delivering so much money, 

 would alone require much lime and trouble, and 

 some risk of loss. But by using checks drawn 

 on deposites in banks, so far as convenient and 

 prelerabic, not one quarter ol the trouble, time, 

 and risk is requisite, nor the handling and count- 

 ing of one tenth of the amount. Siill greater is 

 the benefit when the payment is to be transmit- 

 ted to a distant creditor. A check Ibr the amount 

 can be conveyed more easily and chea[)!y than 

 the amount of money, and Bhould the check 

 miscarry on the way, no loss will be sustained. 



II.— A bank of discount is formed (wlielher 

 by one or a tew individuals, or numerous stock- 

 holders incorporated as a banking company,) to 

 make a profit by discounting (Ibr the interest) 

 notes of individuals, due in a short time, (or a pre- 

 vious business transaction between the debtor 

 and creditor, and which notes were given for a 

 valuable consideration. Thus A, a tradesman or 

 mechanic, who, IJir want of capital, needs early 

 paymenis to be enabled to carry on his business, 

 would sell commodities, wortli uay ^100, to B, 

 R merchant, but that B cannot pay the cash 

 •and A cannot do without it. The bank of dis- 

 count serves to remove the difficulty, and to be- 



make the payment to A, either by the sale of the 

 articles bought, or by liis receipts from other sour- 

 ces. He theretore gives his noie to A, payable at 

 60 days, the payment being amply secured, as of 

 course can always be done in such a case, by 

 every judicious and honest dealer. The bank 

 immediaicly discounts B's note, lor A, that is, 

 pays liim in hand the full amount except the 

 interest Ibr 60 days, which is retained, and con- 

 siitutes ihe bard<'s profit on the iransaction. A 

 does not even lose ihai interest, because as much 

 was added to liis cash price, and willingly con- 

 sented to by B, lor the benefit of the delay of pay- 

 ment. Thus. A is served, by gelling cash m 

 hand, wiihoui which hecould not have sold, and to 

 obtain which he might otherwise have sufiered 

 great loss. E obtains time, without which in- 

 dulgence he could uoi have bought ; and the 

 bank obtains interest on its capital, in the saliest 

 of all possible modes of lending money ; and the 

 public inierest is served by this and every such 

 transaciion, because every legitimate and honest 

 gain, by the exercise of the industry or use of 

 the capital ol an individual, adds to the public 

 wealth and jirosperity. This small and tiniple 

 supposed iransaction is an illustration of all the 

 benefits ol banks of discount, and the sale and 

 beneficial mode in which such banks may (acili- 

 lale trade and the credit system. The credit 

 system might exist, and very beneficially, with- 

 out the inierveniion of the bank. It would only 

 be necessary, lur that end, that the producer of 

 commodities should give credit to the niercliant, 

 and the merchant also to the consumers. Bui 

 this would be impractible, in the general ; and 

 great sacrifices ol pi ices, and losses of debts, 

 and ruinous disorder of business and employ- 

 ments, would be incurred, if ihis kind of ex- 

 tended credit were attempted. Banks of discount 

 furnish all thai is wanting to lacilitate trade by 

 making the credit system safely available by all 

 persons who deserve to be trusted. And if ad- 

 hering to this course, it would be a very rare oc- 

 currence lor a bank to sustain a loss by making 

 a bad debi. tor if the directors used any care 

 or prudence in ascertaining that ihe drawer and 

 endorsers were good, when the note was die- 

 counted, they could scarcely all lail within 60 days. 

 And if, byany different and less sale operations, 

 such as will be mentioned hereafter, a bank should 

 become embarrassed, yet if it had always strictly 

 observed this rule in discounting, it need but to 

 retain all receipts li-om debtors, and, as every 

 debt would become due, and be paid within 60 

 days, of course in that short time its whole capi- 

 tal stock wauld be in hand. There could not 

 possibly be any serious " pressure ' upon a bank 

 so operating — nor even an effective "run" 

 upon it, even if it had added to these proper and 

 ftel'ul operations that of issuing and circulating 

 paper money within any reasonable bounds. 



But this system of discounting notes, given for 

 real purchases of commodities, and to be paid at 

 a certain fixed and early time, though it was the 

 designed and is the only legitimate operation of 

 banks of discount, has been entirely departed 

 fiom, in alrnoEi all the transactions called " dis- 

 counting" by the banks of this country. Notes are 

 generally drawn, not to pay Ibr an actual consi- 

 deration, and property transferred of equal value, 

 but are merely fictitious pretences of such trans- 



