South Branch intelligencer. [volume] (Romney, Va. [W. Va.]) 1830-1896, 1837-06-10
From the Fredericksburg .arega.
SCOTCH BANKS.

The remarkable fact, that the fnan-
cial crisis, which have so often convul4
sed England and America, have neyel
extended to Scotland, is beginning I'd
arrest public attention.. About thu
fact, we believe there is no dispute
Not to speak of other periods, when III
.l525-6, the Bank Of England, accord
ing to its own admissions, was within
ten hours of bankruptcy, and when, aa
Mr.. Huskisson declared in his place in
Parliament, the country was reduced tq
within forty eight hours of a state bar,
ter, Scotland remained firm and cree
Then, as at other epochs, hundreds o.
banking firms in England went by ths
board, while the Scotch banks continu-
ed to pursue their prosperous career
mistaken, Or at least unsubdued, by the
tempest. Our country is now agita-
ted by ore those commissions which
has Frustrated her commerce and par
alyzed her enterprise. Hundreds have
been hurled from opulcnce to ruin, and
the fear of what is still to come is,
any thing more dreadful than the de-
struction which has already overtakeI
us. Atsuch moment, when the pub
lie mind is alive to the dangers Of the
established financial system, any thing
calculated to elucidate the subject mus
be received with interest, and we
therefore propose to offer to our readerd
a few remarks in explanation Of the
Scotch system of Banking.
Banking in America is monopol
of legislative creation, according to the
provisions of which, the stakeholder
are ouly liable for the engagements o
the bank, in the value Of their respec
tive shares. 1t is based upon thu
prompt compatibility of the notes Q
the bank into specie, Of which an a
mount, supposed to be adequate 70
that purpose, is, or ought to be kept OF
hand. The privilege of limited re
sponsibility is intended as an encour
agement to the shareholders, by di
minishing the risk of their adventure
the injunction ofconvertibility into spe!
Gle on demapdj is. meant to give secu
rity to holders of notes and depositors
and to protect the currency from ths
consequences Of excessive issues. I'd
these two essential characteristics, the
Scotch system IS entirely different; thq
banks of Scotland being formed upor
the principles ofan ordinary copartne-
ry, and not purporting to issue papei
representation of certain amount Of
specie within their vaults. The Scotcl
Joint Stock Banks differ from corn
mon mercantile partnership, only in
the gseater 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, nota certain amount of dead cap
ital in the form Of the precious metals
but portion Of the value as the produc4
tive property Of the partners, which re
mains in their hands. Now, this pro
perty being convertible into money, il
as much entitled to paper represen+
tation as boarded specie, and, unlike
this, it remains source Of profit in the
possession Of the owners. Lamenta
bic experience has taught us that the
principle ofretaining certain amouna
of coin or bullion in the vaults Of
bank, is not an absolute security to the
holders of notes and depositors, nor to
the public, against the danger OF ex- .
cessive issues. In Scotland, the pub
lie, not looking to metallic fund for
protection, finds its security in the mum
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, it is obvi-
Gus. their shares would not be in de-
mand, nor their notes obtain currency.
1t is apparent that this system presents
more dangers to the owners ofthe bank
than to the public. 1t is this, indeed,
which constitutes its chief security ,by1
insuring the adoption of prudent, VII
gilant, and moderate policy on the part
of the banks.
A salqtary control is exercised up
on then operations.hy various checks.|
In the first place, the directors are cho-
sen from among the largest and most
respectable Of the shareholders, whoI
have every inducement Of character
and interest to act with fairness and dis
cretion. An open balance sheet isl
kept by the officers Of the bank, which
is frequently scrutini2ed by the direcs1
tors, who inform themselves, by actu4
al inspection, whether the cash, bills
on hand. assets, SC, correspond with
its statements. There is, besides, an
open proprietary court, composed Of i |