The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1839-12-25

stop payment This loss Of conf ience with lis con.
sequences occurred In 1887, and afforded the apollo
gy OF the banks Tor their suspension. The public
then aequiesced In the validity of the excuse and
while the Stale Legislatures lid DOT act from them
their forfeited charters, Congress In accordance
with The recommendation OF rhe Executive, allowed
them linie 10 pay over The public money they held,
although compelled to issue Treasury notes 10 sup
ply the deficiency thus created.
Hnow appears that there are other motives than
want OF public confidence under which the banks
seek 20 Justify themselves in refusal 10 meet their
ooilsaions Scarcely were the country and Govern
nehl relieved, IN degree from the difficulties
STONED by the geneTasuspension OF 1887 when par
tai one occurring within thirty months Of the former
produced new and serious endorsements, though
u mad no palliation in such circumstances rs were
alleged 10 Justification Of that which had previously
taken place. There was nothing In the condition of he
country TO endanger well managed bankingins'i-
Intioni commerce was deranged by no foreign war ::
every branch OF manufacturing il dustry was
ca win rich rewards: and the more than usual
abundance OF our haVesls, after supplying our do
nestle wants, had le our granares and store houses
hled with a surplus for expectation Ii Is in the
midst OF this that an irredeemable and deprecated
paper currency IS entailed upon the people by large
portion OF the banks. They are not driven 10 il by
me exhibition OF a loss Of public confidence, or Of a
sudden pressure from their depoSilors noteholders
oul they excuse themselves by alleging that the cur
rent oil business and exchange with foreign coun-
Tries, which draws the precious metals from their
u,
curtailnent of their loans to comparatively small
portion OF the community than it will be convenient
Tor them to bear, or perhaps, safe for The banks to
exact The plea has ceased to be one OF necessity
convenience and policy are now deemed sufficient 10
warrant these institutions in disregardng their
solemn obligations. Such conduct is moi merely an
inJury 10 individual creditors but it Is a wrong 10 the
whole community, from whose literally they hold
most valuable privileges, whose rights they violate,
whose business they derange and the value of whose
properly they render unstable and insecure II
must be evident that this ground for bank suS-
PENSIONS In reference TO which their action is
only disconnected with, but wholly independent Of,
maj Of The public gives character TO their suspect
sion more alarming than any which they exhibited
before, and greatly increases the inpropIeiy of re-
lying on the banks in the transactions of the Go
vernment.
A large and highly respectable portion of our
banking institutions are, il affords me unfeigned
pleasure 10 state, exempted from all blame on &C
count Of this second delinquency. They have, to
lheir great credit, not only continued 10 meet their
engagements, but have even repudiated the grounds
OF suspension now resorted TO. II Is only BY such
course that the confidence and good will Of The com
MUMMY can DC preserved, and, in The sequel the best
interests OF The institutions themselves promoted.
New dangers 10 the banks are also daily disclosed
from the extension OF that system Of extravagant
credlt OF which they are the pillars Formerly
Qua foreign commerce was principally founded on
an exchange OF commodities including the precious
metals, and leaving in its transactions but little
foreign debt Such IS not now the case. Aided by
the facilities afforded by the banks mere credit has
become too commonly the basis Of trade. Many of
me oahks themselves, not content with largely Siimu
la'lnS TINS system among others, have usurped the
business, while they impair the stability of the mer
camille community; they have become borrowers
instead OF lenders; they establish their agencies
abroad they deal largely in stocks and merchandise;
lhey encourage the issue OF State securities until the
foreign market In gluted with them and unsalifsd
with The legitimate use Of their own capital and the
exercise OF their lawful privileges, they raise by
large loans, additional means for every variety of
speculation. The disasters attendant on this de-
Vlal,on rom me former course of business in this
country, are now shared alike by banks aud indi-
viduals, to an extent of which there is perhans
no previous example in the annals Of our country
So. long as Willingness of the foreign lender and
suhcien export OF our productions 10 meet any ne
ceSsafy partial payments, leave the flow of credit
nndisturbed, all appears to be prosperous but as
soon as IL is checked by any hesitation abroad or bv
an inability to make payment there in our produc-
tons the evils OF the system are disclosed The pa
per currency which might serve for domestic pur-
poses is useless to pay the debt due in Europe Gold
and silver are therefore drawn in exchange for their
notes, from the banks To keep up their supply of
coin, these institutions are obliged to call upon their
own debtors, who pay them principally in their own
notes, WHICH are as unavailable 10 them as thew are
to the merchants 10 meet The foreign demand The
calls OF the banks therefore, in such emergencies
Of necessity, exceed that demand and produce
corresponding curtailment of their accommodations
and OF the currency, at the very moment when
the state OF trade renders Utmost inconyenient 10
be borne. The intensity of this pressure on the
community is in proportion TO the previous libe.
rainy OF credit and consequent expansion Of the
currency forced sales Of property are made at the
time when the means Of purchasing are most re-
duced, and the worst calamities to individuals are
only al last arrested, by an open violation OF their
ooisa'ions pY Inc banks refusal to pay specie for
their notes, and an imposition upon the community
OF iuctuatng and deprecated currency
These consequences are inherent in the present
system They are not influenced by the banks be-
ing large or small, created by National or State
governments They are the results Of the rreSisti-
bic laws OF trade and credit In the recent events
which have 50 srikingly illustrated the certain eff
fecis OF these laws, we have seen the bank of the
largest capital IN the Union, established under n
National charter, and lately strengthened as we
were authoritatively informed, by exchanging that
Tor a State charter. with new and unusual privileges
In condition. too, ii was said of entire sound
ness ana great prosperity-not merely unable to re-
s'Sl these effects, but the first to yield to them.
Nor is 1t to he overlooked that there exists chain
OF necessary dependence among these institui ions
winch obiges them, 10 great extent to follow the
course OF others, notwithstanding its injustice to their
own immediate creditors injury 70 the particular
community in which they are placed This depend-
ance of bank which /, in proportion TO the extent
Of It's debts Tor circulation and deposiles is not mere
~ on others in its own vicinity, but on all those
which connect it with The centre of trade Distant
banks may fail, without seriously efecng those in
our principal commercial cities; but the failure of
the latter Is felt at the exremes Of the Union
Inc suspension al New York in 1877 was every
where, with very few exceptions followed as soon
as Il was known: that recently at Philadelphia i'm
medlaiey affected the banks Of the south and west in
similar manner. This dependence of our whole
banking system on the institutions in few large
Cities is not found in the laws of their organization
but in those OF trade and exchange The banks at
that centre to which currency flows and where it is
required in payments for merchandise, hold the
power OF controlling those in regions whence it
comes, while The latter possess means of restrain
ing them; SO that the value of individual property,
and the prosperity of trade, through the whole in
terror OF the country are made depend on the good
or pad management OF the banking institutions in
the great seats of trade on the seaboard