The Rhode-Island Republican. [volume] (Newport, R.I.) 1809-1841, 1840-05-05
Proposed alteration in the system Of
American Banking.
NrwpoRr, March "a, le40.
JoHs SrERsr. ESQ,
General Treasurer.

previous conversation held with you on the sub
jset Of Banking, as practised in the United
States, rs we'll as from your practical knowledge,
derived from having acted some years as cash
isr Of Bank, / have taken the liberty to call
your attention to the subject Of our monetary
affairs, abdto suggest an alteration in the system
Of Banking now prsctised; principally with a
view 10 prevent the future expansions and con-
fractions OF bank paper and bank eredits.-
Those expansions and eonirsctions, are now,
by most intelligent men eonversent with the
question, in great measure attributed TO the
issue Of Bank bills with which the country is
Inundated. in times OF expansion, enabling the
banks and individuals to enlarge their discounts
and accommodations TO al inordinats degree
until The ebb takes place, when the tide of ae-
commodaton falls, until it runs rs much below
the natural level, as it Ind been raised above it
by artificial means.
The evils above recited could never take place
10 the same extent, in a country which used
metallic currency only but perhaps other evils,
as great, and possibly greater, for short time,
might follow a speedy return 10 an exclusive
specie circulation; md such an experiment be-
ing difficult, if not impossible TO try, is also, to
say the least doubtful as to its ultimate success
in this country. Such an experiment, if there
were no other reasons agNinst it-and ! think
there are, and very formidable ones too-is the
certain burihen which it would throw upon the
present generation of men, for the uncertain
and doubtful benefit it might be expected to cen
fer on the future.
The most cool. deliberate, and judcious WI
t-rs upon the subj jsct Of currency, which have
recently appeared, seem most dssrous Of a mix
ed currency of specie and paper: ih0, it might
not be narrowed down 10 the sc1nty limits OF
the former, nor expanded to tho utmost inna-
ton Of which tho the latter is susceptible.
Various expedient, have been proposed with
view to effect the object so much desired.-
One of the remedies is that Of new National
Bank, which, as il appears TO mo, would only
make the infations more magnificent aud the
ievulsons more ruinou.. Others. again, look
to the Withdrawal of small bank bills from domes-
tic circulation. and The substitution Of silver and
gold in their place. This plan has been adop-
ted by somo states in tho union, and although h
so far with not much success, still the pro ject
is favorably viewed, and much reliance placed
upon it for producing an harmonious union Of
metallic aud paper currency; but in my opinion
such hopes are vain.
believe that metallic and psrer currency can
never pass side and side OF equal value, and a
quail favor, except where the latter is instantly
convertible into specie unless the quantity Of
paper is below the wants of the people, and is
used TO make up tho deficiency ef silver and
gold. la such cases it has been known to pass
well as an auxiliary, but never TO compete with
the precious metals as al equal. New York
and Pennsylvania. and perhaps some other
states, have tried the experiment Of Withdraw
ing small bank bills from domestic circulation
and substituting specie in their place, but. as !
believe with little advantage so FAR. and little
in prospect Specie is not particularly desired
by the people while the bauks pay it out, and it
disappears from circ culation when they suspend
The reason Of its so disappearing is that il will
not Keep company with deprecated paper.
five are TO have tho use of mixed curren-
cy of gold and silver and paper. without being
narrowed down 10 the former, or inflated by the
latter, the practical mode of obtaining so dcsir-
able a condition has no, yet, 10 my mind, been
explained. Perhaps il is not possible to have
all the benefits of such union without some Of
its concomitant evils.
IT reform could be effected throu sh the agsn.
cy OF the banks now in operation, that would be
the most desirable and TO enquire as to the
pr1ctlcabilny ct electing it by their aid, is the
principal object of this communication. The
blnA, by their present mode OF issuing bills for
srcu!ation have produced most Of the evils
proposed 10 be rsmedicd-aud why =
Their promises in the hands OF the people, TO
pay on demand, amounts TO sum far exceed
ius the specie held by them for the purposes OF
redeemns those promises.
This defect lies at the foundation, it was rear
ed with the frames of our banking institutions
the seeds OF the disease were planted a, tbsi,
very birth, grew with their growth ant
strengthened With their strength" The e,iden
consequences CT this defect in American bank
ing is becoming every day better understood b,
the public, but the remedy, il any exists, is far
from being as well understood. even by those
who have thought and wrote the most on III.
subject.
Permit me, dear sir to offer you sksteh OF
what have thought on this subject to sug
gest an alteration in our banking system which.
possibly, may produce the desired effect, and be
both profitable to the banks md safe and useful
TO The people, To come out right, We should
start right TO do which let the bank psper
promise no more than the bank can under all cir.
eums'Anees perform. except that Of actual bank.
rup'ey. Let the banks be authorized to issue
an amount in bills, 10 be fixed by law, in some
reasonable proportion to their respective espi.
'a's' receivable by the bank or banks issuing