Competitive Banks of Issue . 
379 
their profits and offer interest on deposits. 1 When then, from 
any reason, an unusual demand is made upon the deposits of 
such a bank or when notes are presented for redemption, the 
funds are insufficient to float the great issue which has been 
reared upon them. Distrust spreads the demands to other banks 
and the system, honey-combed by competition, falls together. 
Crises, suspension of banks, stringency of the money market, and 
a depreciated paper are the results. Each bank endeavors to 
save itself, at whatever cost to its competitors, 2 and no bank is 
strong enough to extend assistance and command confidence. 
Here again the champions of the monopoly bank urge the ad¬ 
vantage of the power and sufficiency of a single great estab¬ 
lishment. Its connection with the government gives it position 
and solidity, and the ability to inspire such unquestionable 
credit as is the object of all search in times of crises. 3 Then it 
is, pre-eminently, that a single great bank can put forth its 
power, or, as has been the case in the history of the Bank of 
England, it may re-establish confidence by the mere prospect of 
its assistance. 
II. Competitive Banks of Issue. 
A large school of French writers have held views directly op¬ 
posed to those we have just considered, and have maintained 
that the cause of economic crises lies in the abuse of power on 
the part of privileged banks. 
The successive moves, shortly sketched in the preceding sec¬ 
tion, which created out of the Bank of France a great monopoly 
in 1848, were by no means looked upon with favor by all classes 
who were interested in financial matters. There has always been 
a large public to welcome the reopening of the discussion re- 
1 The law governing the Bank of France forbids the paying of inter¬ 
est on deposits. Note issue in the United States is no longer allowed 
on deposits as formerly, but upon capital only. 
2 Leon Smith, Art. “Banques” in Say’s “Dictionnaire.” 
3 E. Nasse, Art. “Uber die Verhtitung der Productions-Krisen durch 
staatliche Fiirsorge,” in“Jahrbuch filr Gesetzgebung,” etc Bd. III., N. 
F. Also A. Wagner, “Geld und Credittheorie der Peel’schen Bankacte,” 
p. 193 et suiv. 
