THE FARMERS' REGISTER. 



279 



ftcts would be. first, i\ permanent abslraciion of 5 

 millions from ilu; original specie circulation of ilic 

 country, to be kept in the vaults of the banks, and 

 a eimuitaiieous filling the void thus created with 

 5 millions ot paperj and, next, overHowing the 

 channels ol' circulation with 5 millions of paper 

 more. There would then be 5 millions of specie 

 kept idle in the banks, and of course Ibrming no 

 part of the actual and useliil currency, and 5 mil- 

 lions more of specie and 10 millions of paper in 

 circulaiion, or 15 millions in all, lor a commuiiily 

 for which 10 rtiillions had belbre served all the pur- 

 poses of trade and business. Now the first ques- 

 tion is, would this whole amount of money, thus 

 increased 50 per cent, in quantiiy, remain in cir- 

 culation, or not? Many of ihe borrowers and 

 would-be-borrowers from banks, and most of our 

 legislators also, believe that the newly added quan- 

 tity of currency would remain in circulation ; and 

 believing also that paper promises are money, and 

 that the increase of such paper promises is an in- 

 crease of national capital, they inler that the coun- 

 try will be so nmch the richer by this addition of 

 5 millions. On the oiher hand, all political eco- 

 nomists, even of opposite scliools, concur that the 

 surplus 5 millions could 710 1 remain in circulation ; 

 because, there being more money than was needed 

 lor the wants of circulation, money, like any other 

 commodity, would fall in market price ; and if it 

 fell only one per cent, below the value of money in 

 other countries, that depreciation would be enough 

 to cause it to be exported ; that is, used to pur- 

 chase foreign commodities, or be otherwise vested 

 abroad, until all the surplus 5 millions had been 

 thus disposed of. But as the bank noles would be 

 of no value abroad, they would remain, and the 5 

 millions of metallic money would be exported 

 — thus leaving the country with precisely its ori- 

 ginal amount of circulation, 10 millions, but the 

 whole o( it in bank paper, (as yet redeemed when 

 required,) instead of 10 millions in specie as 

 formerly. Still, however, there being as yet en- 

 tire confidence in the banks, their notes would not 

 be returned upon them faster than they could be 

 re-issued, and no evil would be very manifest in 

 this thorough change from a metallic to a paper 

 currency. This state of things would present the 

 best possible condition of the banking sys(,pm, 

 embracing the operation of issuing and circulating 

 paper money ; and for the present we will leave it 

 in that condition, to consider the efTecta on both 

 banking interests and public interests. 



We have supposed that the bank has issued, 

 and keeps afloat, on an average, 10 millions of' 

 bank noles ; and that the public confidence is so 

 great that the specie in the vaults is not reduced by 

 demands for payment below the average amount 

 of 5 millions. AH the paper money in circulation 

 had been issued in discounting business notes, or 



law (of last February) of the Virginia lei;islature, 

 which repealed, as being too strict and burdensome, 

 the previously existing provision that the banks should 

 keep on hand as much specie as one-fifth of their 

 amount of notes in circulation. This restriction was re- 

 pealed almost without opposition ; and now the banks, 

 released from the requirement of law in this respect, and 

 from the demanJs of noteholders, by the -'suspension 

 of specie-payments," may issue $100 in notes for 

 one dollar of specie, without any restraint whatever, 

 except such as the interest or the fears of the banks 

 themselves may impose. 



in more permanent loans — and therefore the bank 

 is receiving interest on 10 millions, and its specie 

 capital kept on hand is 5 millions, which was the 

 amount advanced by the stock-holders. The banks 

 receive from this new source of circulation, (be- 

 sides their previous and fair profits derived from 

 discounting or deposites,) the interest of 10 mil- 

 lions, or of an additional 5 millions over and above 

 their capital paid in. Or, if having regard to their 

 actual capital of 5 millions alone, they receive, 

 from their borrowers, interest at 6 per cent, on 10 

 millions, or what is equal to 12 pej cent, on their 

 actual capital stock of 5 millions. 



Therefore, even upon this supposed excellent 

 condition of things, more favorable to the strength 

 and responsibility of banks than ever existed in a 

 single real case, Ihe gross receipts of the banks 

 liom borrowers and the community, wou'd be, by 

 privilege of law, just double the legal interest on 

 their capital. Tliis is in addition to all other fair 

 profits derived from discountins: on deposites, or 

 in any other less legitimate mode. If they issue 

 three times the amount of their capital (as is 

 authorized by law) instead of only twice the 

 amount, then still another G per cent, would be 

 added to their gross receipts ; and if, instead of 

 retaining their whole capital in specie, Cas sup- 

 posed ) they should keep only one-third of it, 

 (which is full as much as is usual, even for spe- 

 cie-paying banks,) then 4 per cent, more on the 

 whole capital would be made by lending^ the prcf- 

 portion thus released. 



FJII. The partners in the banking; business who 

 gain, and those who lose the profits. 



But though the law of the land and the usagB" 

 of the banks would permit all the above supposed" 

 amount of gross receipts, as interest on the capi- 

 tal stock and circulation, it is very true that the 

 gross income, and still more the net dividends, of 

 the banks of the United States have never ap- 

 proached to such an amon^t of annual profit. In- 

 deed, hanking in this country has been on the 

 whole an unprofitable business to the stockhold- 

 ers as well as injurious to the community. The 

 Bank of Virginia, with all its branches, from its 

 institution to this day, has not cleared 6 per cent, 

 per annum on its capital. But that is because, 

 in the first place, there are so many banks (or 

 banks having so much stock, which comes to the 

 same thing,) that none of them can exercise any 

 thing like the amount of privileges that the law 

 allows to all; and where the plunderers are many, 

 compared to the booty to be gained, the dividends 

 must be necessarily reduced in proportion to 

 the number of sharers. Next, the officers and 

 directors of the banks have been so improvident 

 and careless, that the greater part of what might 

 have been net profits to the stock-holders has 

 been squandered in high salaries to officers 

 (often sinecurists, or incapable,) and other un- 

 necessary expenses, lost by numerous bad debts, 

 or stolen hy bank functionaries. Thus, though 

 the people have paid enormously for their sup- 

 port and profit, it may well be the case that the 

 stock-holders have received even less than in 

 other unprivileged directions of labor and in- 

 vestments of ca'pital. Yet, the small amount of 

 general or average profits made by the stock-hold- 

 ers of banks is often used in argument as evi- 



