Virginia free press. (Charlestown, Va. [W. Va.]) 1832-1916, 1837-06-15
From IA FisSrLL.sa,g .sNsAs.
SCoTCH BANKS.

never extended TO Scotland, ~ begin
ming 10 arrest public attention. About
the fact, we believe there is no dispute.
Not 10 speak Of other periods. when
in 1926. the Bank OF Ecgland, &c
cording 10 its own admissions. was
within ten hours OF bankruptcy, and
" hen. ~ Mr.. Huskisson declared in
place in Parliament, the country was
reduced 10 within foTty-eight hours Of
a state barter. Scotland remained firm
and erect. Then, ~ other spoons,
hundreds Of banking firms in England
went by tho board, while the Scotch
banks continued 10 pursue their pros
porous career, unshaken. or At least IN
subdued. BY the tempest. Our eoun-
try Is now agitsted by one Of those con-
vulsionS- which have Frustrated her
commerce and paEalyzed her enter
prize. Hundreds have been hurled
IRON opulenee 10 ruin, and the fear of
hat Is still To come is. If any thing.
moro dreadful than the destruction
which has already overtaken Us. At
such moment, when the public mind
is alive to the dangers OF the estab-
lished financial system. any thing cal
culated to elueidate the subject must
be received with interest, and we.
therefore, propose to offer 20 our read
ers a few remarks in explanation Of
the Scotch system Of Banking.
Banking ia Amenca is q monopoly
Of legislative creation, according TO
the provisions Of which the Stockhol-
ders are only liable for the engage
rnenis Of the bank, in the value Of their
respective shares. 7, is based upon
the prompt eonvertibility of the notes
Of the bank into specie, Of which an
amount. supposed 10 be adequate for
that purpose. is, or ought to be kept on
hand. The privilege Of limited re-
sponsibility is intended as an eneour-
agement to the shareholders, by d.
minishing the risk Of their adventure;
the injunction Of convertibility into spe-
Gle on demand, is meant TO give secu-
rity 10 holders Of notes and depoSitors,
and TO project the currency from the
consequences of excessive issues. In
these two essential characteristics, the
Scotch system is entirely different; the
|
the principles of an ordinary copartne-
~, and not purporting TO issue . paper
representation OF a certain amount Of
specie within their vaults. The Scotch
Joint Stock Banks differ from q com
mon mercantile partnership, only IN
The greater number OF their partners,
who are severally liable. the whole ex-
tent Of their resources. for the engage
ments Of the firm. Their notes repre-
sent. not certain amount Of dead CAPT
tai, in the form Of the precious metals,
but q portion Of the value as the pro-
ductive property Of the partners, which
remains in their hands. Now. this pro-
perry being convertible into money. is
as much entitled to paper represen-
-tation as boarded specie. and. unlike
this. it remains a source Of profit 10 the
possession Of the owners. Lamenta-
bic experience has taught as that the
principle Of retaining a certain amount
Of coin or bullion IN the vaults Of a
bank, is not an absolute security to the
holders of notes and depositors. nor TO
the public. against the danger Of ex-
eessive issues. In Scotland, the pub
lic, not looking TO metallic fund for
protection, finds its security in the num-
Der, character. and wealth Of the part
ners Of the bank. These are the guar
antics presented by the Scotch Joint
Stock Banks, without which, il IL obyi-
Gus. their shares would not be in de-
mand, nor their notes obtain currency.
II is apparent that this sysiem presents
more dangers to the owners Of the bank
than TO the public. II is this, indeed,
which constitutes Its chief security, by
insuring the adoption Of prudent, vi
gilani, and moderate policy on the part
Of the banks.
A salutary control is exercised upon
their operations by various checks
10 the frst place, the directors are cho-
sen from among the largest and most
respectable Of the shareholders, who
have every indictment Of character
aud interest 90 act with fairness and dis
cfetion. An open balance sheet is
kept by the officers Of the bank, which
is frequently scrutinized by the diree-
tors, who inform themselves, by actual
inspection, whether the cash. bills on
hand, assets, &C., correspond with its
statements. There is. beades, an open
proprietary court, composed Of large
body Of the shareholders, which meets
AZ stated intervals, and after the ac-
counts Of the bank. as audited by the
directors, are carefully VENTED, and
the whole subject has been elucidaied
by the msidiest deliberatiop, proceeds
10 declare the dividend, ressrving gem
orally portion Of the profits Is sur
plus fund, 20 meet the contingency Of
unforeseen losses. Another powerful
check IS the controul exercised BY pub
JIG opinion, ss expressed n the public
estimate Of tie value Of the shares. IL
- scarcely possible 70 deceive The
world, ia this regard, as the concerns
Of The banks are intimately known 10
90 many persons, and The numerous
shareholders are naturally among The
competitors Tor purchase. Another
guarantee, aud perhaps one ,,f the