330 



THE FARMERS' REGISTER. 



the bank should be rated aa cash, and the price of 

 exchange counted in like manner. Yet the regu- 

 lar difference made (at present prices) between 

 what ihe banks pay and sell such exchanae for, 

 (buying " at lace" and selling ai 5,) alter deduct- 

 ing 2 per cent, foi* the interest, gives a clear gain 

 on the exchange of 3 per cent, on the amount; 

 which is so much o( indirect usury made m addi- 

 tion to iheir legal interest, and which addiiion 

 makes the interest (or whole profit) to the hank, 

 5 per cent, on 4 months, or 15 per cent, per annum. 



Now it is true, that it', when the 4 months have 

 expired, the price of exchange on New York 

 should have fallen below the present rate of 5 per 

 cent., then the bank will make so much the less by 

 iis indirect usury. !•', on the other hand, the price 

 should rise in the 4 monihs, tlie profit will be the 

 Greater m proportion to the advance of price, and 

 of premium which the bank will ask, and sell lor. 

 And, as tlie advanced price of exchange is gradu- 

 atfiii strictly according to the measure of ihe rate 

 of depreciation of the notes of the banks of Vir- 

 ginia, and that depreciaiion again is caused by 

 their eioppage of payment, and graduated by the 

 consequent discredit of their paper niooey, it i^ 

 plain enough tFiat the banks hold the power to 

 make the depreciation greater or less, as it pleases 

 them, and, of course, the price of exchange ; and 

 that, if they know their own intentions, and can 

 foresee their own course for even a lew months 

 ahead, they must also know in advance what, 

 their profit on every such transaction will cer- 

 tainly be, and whether ihey cannot even increase 

 its rate. 



But putting aside what is alleged against the 

 banks because of these transnclions, and of their 

 disposition, and exerting their power, to monopo- 

 lize, and to practise extortion upon ihe necessities 

 of the borrower, and the indirect and heavy usury 

 gained by them in the purchase and sale — ue de- 

 sire to draw the reader's attention especially io the 

 still worse lieature of the buf^iness. This is, that 

 ihe banks have a direct interest in discrediting 

 their own currency — because the lower it sinks 

 the more profit they will make by dealing in ex- 

 change — which is but selling the product of their 

 depreciaiion, and profiting in proportion to its ex- 

 tent and degree, li then, the great object and end 

 of the banking policy of this country had been to 

 corrupt and render dishonest both the banks and 

 those who direct and control their operations, the 

 means could not have been better adapted to the 

 end than they are now. 



J^X. Remedies for ihe evils of the banking sys- 

 tem. Partial reform,, in removing superinduced 

 and unnecessary abuses. 



The next and most important matter of inquiry 

 IB, whether there is no possible and sure means 

 for remedying, or at least mitigating the evils of 

 the banking system ; or whether the actual 

 absence of all effort lor this purpose, by all per- 

 sons having power or influence, is indeed indica- 

 tive that there is no hope for either relief or 

 amendment. We will presume to propose mea- 

 sures of reform, which, if not the most efficient 

 or judicious, would, if used to even the smallest 

 extent, certainly operate to remove something 

 of the amount of evil ; and which might be adopt- 

 ed to just such extent as the power of bank in- 



fluence and other circumstances might permit. 



Reform of the banking system might be either 

 partial and limited, or thorough and complete. 

 A most important, though but limned reforma- 

 tion, might be produced by simply abating the 

 worst practical abuses of the system — beginning 

 with the most manifest and least excusable, and 

 proceeding thence to those measures about 

 which there might possibly be some doubt as to 

 their being partially good, or of unmixed evil 

 tendency, in the opinions of intelligent and disin- 

 terested judges. We will name such parts of 

 the practice and policy as might he removed 

 without touching the designed powers and ope- 

 ration of the system — and which, if removed, 

 would leave the eysiem comparatively pure, 

 though still, as we beiieve, of dangerous tenden- 

 cy, and much too powerful in evil eflects. 



Such a limited reform vvould be produced, of 

 greater or less extent and value, in proportion as 

 more or (ewer of the (bl owing changes were 

 made : 



1. An unmixed benefit would be produced by 

 prohibiiinw to banks the dealing in exchange, 

 or at least the selling exchange at more than 

 such small and stated advance of price as would 

 form merely a sufiicient compensation when the 

 banks here were paying specie ior their notes, 

 and wliich would never exceed one per cent, to 

 ihe most remoie city ot the confederacy. This 

 would remove one great source of abuse, exer- 

 cised by the banks, of extortion upon individuais, 

 and making a profit upon the possible voluntary 

 discrediting of their own noies. 



2. Another beneficial cliange would be to 

 choose the bank directors, not from the borrowing 

 class if possible; and at all events to forbid the 

 persons chosen borrowing money from the par- 

 ticular bank ihey managed, or being sureties up- 

 on discounts for other persons — whose interests, 

 as ffimily or business connexions, might operate 

 on directors precij^ely as their own individual in- 

 teresis. And as the directors would thus be de- 

 prived ot their present indirect advantages, and 

 profile, which are so much coveted and so highly 

 valued, it would be proper to pay them for their 

 then disinterested services. ' 



3. Another reform would be secured by put- 

 ting an end to all standing loans, or " accom- 

 modation paper," as termed in bank language ; 

 and to bring back the procedure to the original 

 design, and confine it to the legitimate operation 

 of discounting real business notes, having but 

 short time to run (say 60 or not exceeding 90 

 days) and each note to be paid, and the transac- 

 tion to be closed, at the maturity of the debt. 

 Then the banks would be truly what they are 

 now falsely called, "banks of discount," and 

 not loan-offices, as they now are ; and not always 

 confining their profits to merely 6 per cent, inter- 

 est, as we have shown, on their inflated pa- 

 per emissions. 



4. A strong safeguard against all neglect, 

 abuses, and misconduct of directors would be to 

 (brbid the secrecy which serves to hide mis- 

 conduct, and to have all the discounts and other 

 similar transactions of the banks open at ail times 

 to the inspection of the public. Every attempt to 

 approach such publicity heretofore has been pro- 

 tested against and opposed in the strongest man- 

 ner, as tending, by exposure, to injure the credit 



