The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1839-12-07
1.HE CREDIT SYSTEM AND THE BAN


10 Of those popular objections to snch rsstric
i've regulations as we have suggested with regard to
banking, that they unwise inersrences with the
laws OF capital This objection originates 10 overlook
ing the distinction between capital and circulating
credit. IL would be impoltc attempt the regulation
and restriction Of capital whether employed in banking
or In any other manners nor would il be wise 10 inter-
fere in any mode with loans Of credit provided they
were not susceptible of being put into that form which
would be injurious to the community st large. Asso-
clated capitalists may divide large profits by lending
then capital or their credit the utmost scope to their
enteiDrise will permit the condition. however that
they 10 not put their loans Of credit tho shape OF
paper circulating money A may lend B his credit
by rDte Of hand. for q certain consideration, which
may convert into money such note bearing interest and
unacceptable in this form, OF being employed circu-
lating medium but IL should lend his 10 b. such
note not bearing interest," and from the high credit of A.
capable Of being put into circulation part Of the
dunn OF exchange. such transaction wond fall within
the legitimate action Of the legislative power In the
same manner II associated capitalists, bankers issue
their paper in loan Of credit unsusceptble of being
employed as part Of the circulating medium, in the
form, for example, Of Post Notes, carrying interest,"
there could be propriety wisdom in any interer-
ence by law with such proceeding. This would be
loan OF credit not paakng of the character Of money
circulating medium.
Here then is the distinction too often lost sight of
reasonings on this subject, and which only justes
but demands legislative interference for the public
qulres TO be protected from such abuse Of loans of
credit in the form have suggested, would subject
to the losses and vcissitudes attendant the unre-
strcted employment Of such oans under the plea that
they are q necessary aid to commerce.
Admitting, then, to the fullest extent the sautary in
usnce Of loans Of credit by banks and bankers afford
ing wholesome stimulus to trade, and Supplying in
this form, cheap for costly medium of circulation
must be conceded that the perversion Of this power
enabling those whose il is make large pro-
fits possible out of the currency, should be strictly
guarded II there is other mode therefore, Of pre-
venting such abuse but by restraining banks and
bankers from dipiding than The ordinary rate Of
interest, how such restriction be regarded an
improper and unwse interference with individual gains
and the legitimate laws of credit This restraint
supplies the great desdcratum, being preventive and
solely corrective in its character 1t does merely
protect the public from the consequences of suspension
OF specie payments but it avoids tho necessity for such
suspension, by nterposng check-rein speculation
in its commencement earliest stages Il restraints
the mere impulse Of gain the part both Of borrowers
and tho inclination for luxury in few, in consequence
OF the facilities Of credit from becoming intense and
expanded desire in the many for ex.ravagant expend
ture. In word it appears to to be the only true
balance wheel in the machinery OF credit, banks
at present constituted preventing that sympathetic
ton between banks and the community which, in the
infancy OF speculation, originates demand for bank
credit andfesponds to that demand by enlargement
OF Its due limits thus stimulating speculation to ncreas
ed action, by that peculiar property Of paper money
which Is the source Of Its excellence and its defects
to wit: its siasiieify.-Charlesion Patriot