Financial Legislation in Principle and in History 13 



to guarantee all bank deposits in this country is unfavorable to 

 the principle of private enterprise ; but the proposition to encour- 

 age banks voluntarily to organize themselves into a guild for the 

 defense or insurance of their notes and deposits may be a reason- 

 able one in the present state of public opinion on finance and in 

 the present tendency of businesses and classes toward separatist 

 organization. 1 Such a scheme could not be one of "free bank- 

 ing." The guild must pass on its own membership. 



So long, however, as the idea generally prevails that a deposit 

 is evidence of money given to the banker, and that the banker 

 loans out the money deposited, and also the other inconsistent 

 idea, that paper money, whatever be its source, is a long-time 

 standard of value, those ideas will necessarily influence legisla- 

 tion and constitute a part of the restrictions which hinder rather 

 than further business. It is impossible to obtain legislation in 

 advance of the movement of popular opinion. This is a wise 

 provision of an over-watching Providence, which has put the 

 welfare of the whole people above that of any particular insti- 

 tution, such as banking, and which decrees that the imperfections 

 of particular institutions shall not be removed until the whole 

 people has been educated up to the highest point. 



There have been two great questions to work out in banking 

 legislation : one as to the elasticity of the currency, and the other, 

 subordinate to the first, as to the approximation of notes to de- 

 posits. In early times, notes were used almost exclusively. The 

 deposit business came in gradually, and for a long time it was 

 not considered that a business in deposits was really banking; 

 and when the question of the influence of credit upon crises first 

 arose, bank credit was almost entirely in the form of bank notes. 

 On June 8, 1810, during the suspension of specie payments in 

 England, at the time of the Napoleonic wars, an investigation 

 into the operations of what was known as the bank restriction 

 act of 1797, whereby the Bank of England was allowed to refuse 

 payment on its notes, and in consequence of which the price of 



1 For an account of the workings of the Oklahoma deposit guaranty 

 law, vid. W. C. Webster. The Depositors' Guaranty Law of Oklahoma, 

 Jour. Pol. Econ., vol. 17, no. 2, Feb., 1909. 



233 



