Southern Argus. [volume] (Columbus, Miss.) 1834-1842, 1839-09-03


and recovered, in case of its being stolen.
These it appears to us, are the principal :
advantages ola paper circulation, and they
are certainly very great.
On the other hand, it must be admitted
that there are some disadvantages attend.
ing it. They are principally these, fraud,
forgery and fiuctuation. 1t is PROPOSE
ton which can require no proof, that # all
the capital Of bank be paid in, if the cir
culation only equal the specie in its vaults,
and the notes which it has received in ex-
change for its bills be all good, the holder
of its bills would have two perfectly good
securities. Were all the capital stolen,
the notes would secure him; and were all
the debtors to the bank to fail, the capital |
would secure him. But it is manifest that |
no one can reasonably require this double
security; and inasmuch as with any toler. |
able management, il is not within the
range of possibility, that its debtors should
all fail; and it is also further, morally GER
tain that its notes would never all be pre-
scented at one time, it is evident that II
might safely venture TO issue more notes
than it had specie to redeem them with.
The bill holder would be perfectly secure
so long as il had sufficient capital to make
good the deficiencies Of its debtors; and it
is certain that with moderate skill in the
directory, this state of things might al
ways be secured and of course society,
preserved from any ultimate loss. But
neither the skill nor the honesty of man
can always be trusted. Hence it is, that
banks frequently fail.
Banks may fraudulently commence issues,
when only part oftheir capital has been
paid in, and in this case, the community are
deprived of part of the security to which
they are rightfuIly entitled. Suppose the
capital ola bank to be two hundred thous
and dollars, and only twenty thousand to
be paid in, and the bank to issue three
hundred thousand dollars in bills; in such
a case, it possesses only twenty thousand
dollars of capital 10 secure the payment
of three hundred thousand dollars by the
debtors Of the bank. In time of COM
mercial pressure, such as the present, the
probability is, that the losses by the debt
ors alone, would more than equal the cap
ital paid in, and of course, the bill holder
must suffer loss. Again, suppose that in
stead of paying in capital, the stockholders
should give their notes forthe whole ora apart
of the capital, and should commence issu-
ing bills on the faith of these stock-notes,
it is evident that by this substitution of the
notes of individuals which, surprising them
all TO be eventually good, would always be
under par, and greatly so in the time of a
scarcity of money, gross fraud would
be practised on the community. Again,
suppose that not only no capital was paid
in, but that not even stock notes were taken,
that the stockholders were the directors,
and that they accommodated themselves
with bills without even requiring notes of
each other. In this case, the hill holder
would have no security whatever.
Nor are these dangers wholly imagin.
airy. Mr.. Gallatin, most able and COM
petent authority, who was at one time Sc
cretary of the Treasury, and who is uni
versally regarded as one of our best in
formed men on the subject ofhnance, has
made the following statement in pamph-
let which he has published on the cur
rency.
"We have an account of one hundred
and sixty five banks which have failed be-
tween the first Of Jan. 1911, and the first
of January, 1880. The capital of one
hundred and twenty nine ofthem, amount
ed 10 more than twenty four millions of
| dollars, stated as having been paid IN. The
whole amount may be estimuted at nearly
thirty millions, and our list may not be
complete. The capital OF the state banks
now existing amounts to about one humid
red and ten millions. On a total of one
hundred and forty millions, the failures
have amounted to thirty, or more than one
/, fifth Of the whole. OF the actual loss in.
CURED we can give no account. There
are instances in which the stockholders
: by paying for their shares in their o1cn
notes, and afterwards redeeming hei1
notes iCiih the stock in their own names
suffered no loss, and this loss fell exclu.
0 sively on the holders of notes and the de-
o positors."
d Even in the most favorable instances
b Of bank failures, where their means are
sufficient, to pay their debts, as soon a:
they can be rendered available; the com
g munity suffers a great loss in the deprecia
: ton of bank notes. This loss too, unfor
e tunately, falls principally on the poor anC
J! on the debtors, the very classes who are
! least able to sustain a loss. Capitalist:
: and persons in unembarTassed circum
: stances, are able to retain their bills unit
they can be redeemed in specie, whilst 9th
ers are obliged to dispose OF them at the
market price.
The danger of forgery can scarcely b.
considered very formidable objectionstc
paper circulation; it being as easy t.
e guard against the forgery of bank notes a
the counterfeiting Of the coin.
Punctuation is another danger to which
J. paper circulation is peculiarly exposed
l. II is danger however, to which cIrcu
i ation of any kind, even gold and silver, j
j. liable. There are also various remedie
. for this evil, among which may be enume
rated, the prohibition of small bills, tn,
publication from time to time of the a
3 mount of imports and exports of specie
a and last though not least, the establishment
:. of National Bank
,fl Upon the whole, Banks when honestly
conducted, are the lest means of invigor
ating the industry of country, by the
e facilities which they afford to the indus
l. trious and enterprizing, of obtaining tn,
, use of capital not their own. They are
/, in fact, the representatives Of the credi
d system. II is by means of her credit sys