THE FARMERS' REGISTER. 



329 



experienced, centuries before banks of circulation 

 were established. The banks buy Croiii indivi- 

 dual iradi rs dralin (or ninnry due to these itKiivi- 

 duals in distant places ; and, by a course of indi- 

 rect usury, derive li'oin this a lar^e portion ol' their 

 profit*!, especially duriuij times of sut^pension ol 

 paytueutis, and the tjreatpsi discredit of" their own 

 notes. Now if the bank'* did not [irocure these 

 drafts from individuals, these first holders, or other 

 private dealers in e.xch;inire who would purchase 

 them, vvould serve the public just as well, an<i as 

 cheaply as the banks do, in selliiiij drafts to those 

 who required them ; and the banks would then 

 be deprived of the temptation which exists at 

 present, an<l which is continually and wiliinirly 

 yielded to by them, to derive a profit from the 

 discrediting of their own notes, and which profit 

 is increased in proportion to the decree of the de- 

 preciation — and which depreciation is caused, and 

 increased, solely by the voluntary act of the hanks 

 in refusintr to pay their notes. Now here is ex- 

 isting, and in continued operation, a part of a ge 

 neral system of banking, by which the profit of 

 the bank i< increased in direct proportion to thi- 

 extent of its violation of its own obligations, o( 

 truth, of honesty, and according to the measure 

 of degradation of its reputation lor solvency, in 

 addition to all these other grounds for distrust. 

 And these and all other proceedings of the banks 

 are conducted by directors who, as individuals, 

 have a further interest (besides their more general 

 interest as stockholders,) in having the business 

 of the bank as much expanded, and therefore as 

 unsafe as possible, and its circulation and its cre- 

 dit as unsubstantial. How is it then possible to 

 expect to obtain even the little good in results 

 which the present banking sj'stem is capable ol 

 yielding, vvhen the interests of both the corpora- 

 tion and its directors are deeply and directly con- 

 cerned in producing the worst possible results^ 

 The working of such means cannot but lead to 

 ends as iniquitous and destructive of right, and ol 

 public interests, as are shown in the present condi 

 tion of the banks and the country. 



It may be useful to show, in detail, the practical 

 operation of a bank's dealing in exchange ; and, 

 lor illustration, we will take one of the hundreds 

 of' real cases, such as are of every day's occur- 

 rence. In Kichrnond, and still more in Peters- 

 burg, the nianulacturiiig of tobacco is one of the 

 largest and most profitable branches ol business. 

 The manutiictured tobacco is sent to the northern 

 cities, and principally to New York, to be sold : 

 and, as soon as sold, the consignee in New Yoik 

 authorizes the manufiicturer here to draw on Jiiin 

 at 4 months' time. That is, the manulacturer's 

 money will be paid in 4 months in New York, to 

 his consignee or agent there, and of course he 

 will have so much of funds in New York, either to 

 bring ho:i;e in specie, or to be otherwise disposed 

 of^ But other persons here vvid owe money in New 

 York, and have to pay it at or about that time; 

 and therefore it will be more convenient and pro- 

 fitable to both parties, that the tobacco manufac- 

 turer, instead ol bringing home his money, should 

 sell his draft for it to some person who has to pay 

 money at that time in New York. This prevents 

 the necessity of a double transmission of' money ; 

 and this beneficial operation is what is called the 

 selling and buying of a bill of exchange ; and 

 the whole operation, carried on by any one who 

 Vol. iX.-25 



makes it a business, is called dealing in exchange. 

 The present dillerence of price between the 

 notes of the banks of Virginia and New York 

 funds, in Petersburg, is 5 per cent. ; that diHer- 

 ence being the measure of depreciation of Vir<W- 

 nia notes, at home, on account t)l' their being irre- 

 deemable ; while tlie New York banks [lay specie, 

 and iherelbre their notes at home are at par with 

 specie. It would follow, that a draft on New 

 York for ijjlOO, having four months to run belijre 

 being due, would be woith at maturity, (depre- 

 ciation and the price of exchange remaining ihe 

 same,)!^105; and deducting 2 percent, interest 

 (at G per cent, per annum) lor the 4 months 

 whicti the draft has to wa.t lor payment, it is 

 worih S103 (very nearly) when sold. And this 

 is precisely what the buyer of the draft could al- 

 Ibrd to pay lor it in cash. 



'i'he tobacco manufacturers who thus obtain 

 New York lijuds for all their sales, and are autho- 

 rized to draw lor them at 4 months, have gene- 

 rally too little capital to permit them to wait that 

 time lor ti.eir returns. They therefore would pre- 

 fer to sell their drafts lor the premium they are 

 worth, after discoufiting the interest for the time 

 ticlbre being due. Now individuals would buy 

 their drafts, at maturity, or previously, it on credit 

 to that time, and allow the full premiun) ; but in- 

 dividuals, dependent on banks lor capital, cannot 

 generally advance the cash. The [iroper course 

 liien would be, for A, the tobacco manufaciurc r, 

 to sell his 4 months' dralt tor ^100, on its face, lu 

 B, a retailer who owes money or wishes to make 

 purchases in New York, lor ^105, lor wfiich B 

 executes his negotiable note, to be paid at 4 

 months, when the draft will be worth that anioun', 

 supposing the price ol exchange to remain the 

 -ame. Then the bank should discount B's note, 

 and all three parlies will be served. A will get 

 cash for his draft, and also the fiiir value of its 

 greater value in exchange. B will obtain the 

 New York funds, and on a credit. The bank will 

 discount the well secured note of B, still better se- 

 cured by the endorsement of A, and receive its 

 lair and legal profit, (and all a bank should re- 

 ceive,) in the interest of the note. But the banks 

 want 10 make also the much he;tvier profit of ex- 

 change brokers, and indirect usurers — and it is al- 

 leged that they will not discount for a tobacco 

 manufacturer either as abov'e, or on any other bu- 

 sineGs paper, unless he will sell to the bank his 

 drafts, and that at a price considerably below the 

 real value. Thus, that he may be enabled to gel 

 his notes discounted, though paying lor the bene- 

 fit the lair rate of interest, he n)ust, per force, also 

 sell his four-months' drafts "at face," or their 

 nominal amount, to the bank, which the bank 

 sells afierwards,.al maturity, to some other indivi- 

 dual at 5 per cent, premium. Thus the bank 

 makes its lair and regular profit, in the discount lor 

 the time, and therefore has by the transaction 

 granted no favor to the draft-holder; or the two 

 parlies have been reciprocally and equally bene- 

 fitted — the individual getting cash advanced, and 

 the bank letaining the interest, which is the very 

 business which was the main object of its institu- 

 tion, and main source of its legitimate profits. And 

 this being the case, the time which the draft has to 

 run causes no abatement of iis value to the bank, 

 lor the delay of payment is compensated in tht 

 interest rctamed, Theii the value ol the draft to 



