Edwardsville spectator. [volume] (Edwardsville, Ill.) 1819-1826, 1821-03-27
EOR THE SPECTATOR .
STATE BANK-NO. III.

auScS Oh lEG NEUTRALITY-SUSPICIOUS. INC SOuI-
try, is owing TO diminution Of tie ma
tional capital. 1t may be proper here to
inquire Of what this capital consists. In
the sense, in which we shall for our pre-
sent purpose, use the term capital, it will
be seen that we confine it to the precious
metals, bank notes, and government Sc
curities. OF the nature Of the security
which is generally attached to notes, of
eyon what are considered the most SOL
vent banks, the community at large are
perhaps not SO well acquainted A little
reflection, however, will epable them to
perceive, that if these Institutions should
issue more notes than they have gold and
silver in their vaults, the redemption Of
the excess mustnecessarily depend upon
the solyency of the individuals whose
notes are in fact the fund upon which
they have been issued, and which in truth
they only represent. Il, then, the draw
ers and endorsers of these notes, so held
by the banks, should become entirely in
solvent, it IS evident that the holders of
the excess orbank notes would be the SUI
fercrs, to the amount thus held. Let US,
for example, examine the case Of six
teen of the banks of the United States,
at the period of the year 1915, from the
best information which can be had Oh
that subject.
1t appears from the report of the Sc
cretary OF the treasury, already referred
to, as far as could be ascertaincd, that in
that year, the specie possessed by those
banks was Sl,695,9l8, and their notes
III circulation amounted to 6o,944,457 !;
making an excess, beyond their specie
capital, of S8,25o,839. 1t is true, ne
verthelcss, that their capital during the
same period, including the specie named,
amounted to S8,s52,57l and that their
|
discounts amounted during the same pc
Rod to Sl5,727,2l8. From this state
ment it will be seen, that their capital,
with the exception Of the small amount
in specie, rested purely on the promisso-
ry notes of individuals, and that in case
failure of their debtors had taken place,
to an amount sufficient to have reduced
their capital to an amount less than the
amount stated, the holders oflheir notes
would proportionably have been the
sufferers; but that even supposing no
failure of the debtors, as to eyentua, pay
ment, should have happened, still if,hey
had been incapable of paying when call
ed on by the banks, and all the notes of
the banks in circulation had been return
ed to them for redemption in mass, they
would have had no greater capacity, than
to pay Sl,693,ol8, leaving the amount
Of Ss,25o,s39 oltheir notes unredcemed.
From this view of the subject, which
it is apprehended is correct one, it will
be perceived, that if those banks had
emitted only all amount Of notes equal
to the gold and silver detained in their
vaults, which they had previously with
drawn from circulation, the national ca
pital would not have been augmented !;
but in order to augment the capital, and
make the concern profitable, it was ne
cessary that bank notes, to much larger
amount than the specie on hand should
be issued, which rested for their re-
demption ON the united security afford
ed by the promissory notes of the Dor
rowers and stockholders, and the specie.
1t is therefore evident, that ofthe vast
amount of notes of the several banks in
the United States, in circulation, the
community have no better guarantee for
their redemption, than the funds which
the notes of the several persons who are
the debtors form with their specie re-
sources, which specie bears but small
proportion to the amount of bank notes
in circulation. Indeed, it is certain that
the amount of bank notes in circu lation,
almost at all times, exceed considerably
the whole amount of gold and silver in
the nation. In support of the truth Of