26 MUTUAL BANKING. 



in Philadelphia in October, 1839, most of the banks of that city re- 

 solved not to declare dividends until the pleasure of the legislature 

 could be known. By an act authorizing the continuance of the 

 suspension until the 15th of January, 1841, permission was granted 

 to make dividends, contrary to every principle of justice and equity. 

 We do not know why we speak especially of the Pennsylvania 

 banks in this connection; as we have yet to hear of the first bank, 

 either in Pennsylvania or in any other Slate, that has had the deli- 

 cacy to suspend the declaration of dividends merely because it sus- 

 pended specie payments. 



THE MUTUAL BANK. 



Our non-specie-paying bank being in the interesting position 

 described, let us inquire whether it is not in the process of bringing 

 forth something which shall be entirely different from itself. We 

 ask tirst, why a non-specie-paying bank should be permitted to 

 make dividends. Its bills are perfectly good, whether the bank 

 have any capital or not, provided the officers exercise due discre- 

 tion in discounting notes; audit is evident that the stockholders 

 have no riglit to ask to be paid for the use of their capital, since the 

 capital in qui'Stion ought to be specie, wiiich tiiey confess, by sus- 

 pending specie payments, that they do not furnish. Hut if no div- 

 idends are to be declared, what are we to do with the immense 

 amount of interest-money tliat will accumulate in the bank. Our 

 answer to this question is so simple that we are almost ashamed to 

 siate it. Justice requires that all the interest-money accumulated 

 — so much only excepted as is required to pay the expenses of the 

 institution and the average of loss by bad debts — should be paid 

 back to the borrowers in the proportion of the business which they 

 have individually done with the bank. But since it would be by no 

 means easy, practically, to thus pay the extra interest-money back, 

 it would be better for the bank to turn the difficulty by lending its 

 money at i)recisely that rate of interest and no more, say one per 

 cent per annum, which would suffice to pay the expenses of the in- 

 stitution, including the average loss by bad debts. A bank of this 

 character would be a MuTu.vi. Bank. This is not the institution 

 we advocate and of which we propose to submit a plan to the 

 reader; but it will serve in this place for tlie purposes of illustra- 

 tion. A bank that suspends specie payments may present two evi- 

 dent advantages to tlie community— first, it may furnish a cur- 

 rency: second, it may loan out its bills at one per cent interest per 

 annum. Tliat such a bank may furnish currency is proved by 

 abundant experience, for suspending banks go right on with their 

 business, and that their money circulat(>s well is proved by the fact 

 that such hanks have liitherto seldom failed to declare good divi- 

 dends. That they may loan their money at one per cent interest 

 per annum is shown by the fact that the old hanks do not pay more 

 than one |)er cent per annum for their exi)enses, including losses by 

 bad debts, and that liif guaranty of the new bills consists In the 



