THE FARMER'S REGISTER. 



247 



HCiione, made merely lo obtain loans, perhaps 

 to pay debts already incurred, and the proceeds 

 spent, or to net money lo be spent. The ilrawer 

 does not owe the amount to the endorser who ob- 

 tains the discouiiiim; of the noie*,^the arraiii/e- 

 menl ol' their names is usually a mere fiction, 

 knov\n as such lo the bank and to every body, 

 ma le 10 obtain a loan, by Hiil of the securilyship 

 ol" the endorser — and which wuulil he a liaud, 

 except thai the procedure is perleciiy understood 

 and encouraired by ihe bank. Funher — those 

 who iliiis borrow money are rarely ready to repay 

 11 in (30 days, nor i.-i it iniendec! to be so paiil. 

 Thereiore such noies are irenerally '* renewed" 

 every 6i) days, until the bank needs and insists 

 upon repayment. And llms the bank, instead ul 

 thscouiilnig real noies, drawn lor valuable consi- 

 ileraiion, and lor purpo^^es of trade, and to be 

 paid at maturity, is in lact making loans upon 

 long and uncertain times, to borrowers lor any ob- 

 jects whatever. It is easy enouj/h to see, even 

 if looking to the interest of the bank alone, 

 that It thus must soon io.^e all immediate or early 

 control of its capital, and must run great risk ol 

 lijrining bad debts ; and, instead ol" facilitating 

 trade and aiding real business, that the bank has 

 become a loan-otBce (if not a usury office,) and 

 its capital absorbed by men who are already in 

 debt, or who, by this laciliiy lor forming debts 

 will be led on to exiravairance, hazardous adven- 

 ture, and ultimately perhaps to ruin. Such is the 

 process, and such are the means by which many 

 men are ruined by bank 'accommodation," and by 

 which course, also, banks lose greaily in the debts 

 of" such ruined and insolveni debiors. 



Bat let us return lioin the actual and general 

 abuses and corruption of the sysiem, to the bank 

 of discount operating legitimately and pniperly, 

 as at first designed to operate. 



A bank ofdeposiie, simply, however beneficial, 

 could yield no profit, as it would have no source 

 of income. The depositors, however, could af- 

 ford to pav someihing lor the safe-keepitiir of 

 their money. Mild the facilities for transfierring it. 

 And that is done, beneficially to all parties, by 

 the two distinct operations of receiving and trans- 

 ferring deposites, and of making discounts, being 

 alwiys carried on by tlie same bank. The bank 

 then has the use of the depositors' money, under 

 the obliizaiion of repaying it whenever called li)r, 

 (or otherwise at such notice as may be agreed ' 

 upon,) as compensation for taking care of it; 

 and by adding the use of the amount of unem- 

 ployed deposites to its capital slock, for discounting 

 notes, of course the profit of the bank will be so 

 much increased, without injury to tlie depositors. 

 Indeed, by thus employing the capital which 

 would oiherwise lie idle and useless, whether in 

 the various proprietors' desks, or in a mere bank 

 of deposite, the trade and the productive wealth 

 of the country will be benefited and incrtased, 

 f)y thus drawing from what would have been 

 otherwise a totally barren and unproductive 

 source. 



So far, on our supposition, every thing has 

 worked rightly, and every interest concerned fias 

 been benefited by the combined operations of the 

 bank of deposite and of discount. It is true thai 

 after the union of lib two banks, or of these twn 

 operations, there iij now for the first time some 

 f-isk ; and the managers should take care not lo 



incur heavier obhgations than they can be Bure 

 to nieet promptly. If the deposites are to be 

 paid on demand, then a considerable proportion 

 of itio deposited money must be kept on hand. 

 idle lor the purpose of meeting, with absolute cer- 

 lainly, all such uncertain demands. The direc- 

 tors of a bank will soon learn what is a sufficient 

 proportion (or this purpose ; and if (lor example) 

 ihe average a'liomit of deposites is S'10,000, and 

 ii is found that .*§ 10.000 retained will serve to 

 meet all cliecks fruai depositors, then §30,000 of 

 the deposites may be salely useil for discounting 

 noies, and the inieresi thereof will go to increase 

 the other profits ui' the b.tnk. If the deposites 

 are not made gratuiiously, as supposed above, 

 and as is usual with banks, but a lower rate of 

 interest is allowed thereon to each depositor, as 

 by the savings banks, then a short but suflicient 

 lime of notice is given by the depositor before 

 drawing. This time of notice secures the bank 

 liom unjoidied for demands ; and thus it may, as 

 the savings banks do, safely and useflilly dis- 

 count to the amount of the whole of the depositee 

 as well as of their original capital stock. And in 

 whichever of these two ways deposites are made 

 and drawn, (according to the rule established lor 

 ihe l)aiik,) so long a.-^ the discounts are properly 

 miide, every thing will be safe, and every opera- 

 iion of the bank will be beneficial to all parties, 

 and to the public. And if these were the only 

 Banking operaiioris, they could not be too greaily 

 extended lor the fiubli,; good ; and as long as 

 such operaiions were demanded for the purpose.? 

 ol trade, the profiis thereof lo the banks would 

 be lijily erjual lo any other equally safi3 and secure 

 investmenis of capital. 



It may perhaps f)e a novel annunciation to many 

 persons, ihai there are already many banks in the 

 United S'ates, and even in' Virginia, strictly of 

 Ibis excellent character and mode of operation. 

 The various savings' instiiuiions, if acting ho- 

 nestly and according lo their charters, are'' pre- 

 cisely banks of deposite and discount, and nothing 

 else. And tliough they pay 5 percent, for all de" 

 posites, alter 10 days continuance, and require but 

 a week's notice lo return deposites when wanted, 

 these banks are quite profitable to the stockhold- 

 ers, and have been fir more so lor the last few 

 vears, than the grent and rich institutions to which 

 Ihe name of '-bank" is exclusively applied. And 

 here we may pause, and ask of all who are well 

 informed on the sufijeci, and who have no inlerest 

 to be served fry the abuses and the frauds of the 

 general banking system, why all banks might not 

 beneficially, and profiiably for their stockholders 

 Hiid the public, be conducted on precisely the 

 sariie principles as are the savings' banks?* 



The savings' banks are indeed very small con- 



* The Mechanics' Savino^s Society of Petersburg 

 was established, and has been in operation since April, 

 1837, which i."! precisely the tune the most disastrous to 

 banks since 1S17. Yet thi.s humble institution has 

 kept all its capital stock and deposites constantly em- 

 ployed in discountinj,^ and has made profits equal to 

 10 per cent, per annum, on its stock, without having 

 yet lost a dollar, or made a doubtful debt. Tliis shows 

 the happy results of legitimate, priident and honest 

 binkins;; as the course of the bank.s which issue pa- 

 p^r money, throui^h that same tiioe, and their present 

 firostrate condition, show the results of the illegitimate 

 and fraudulent banking system. 



