The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1841-10-21


laws, but that they entitled TO privileges and
advantages which no other corporations and no
individuals enjoy, il would not be unjust 10 them,
as il certainly would not be TO the public, TO re-
qulre that the credit of the institutions which are
authorized 10 furnish circulating medium,
should be based ON some solid, substantial foun-
dation. This can only be done by limiting their
ISSUES, SO that the bank note shall really repre-
sent the gold and silver which it purports TO re-
present, or, by rendering those who own and
derive the profit of bank stocks liable in some
manner Tor the debts of the corporation. The
debts OF bank are different from other debts.
Its promissory notes evidences of debt against
II. These are permitted under our laws 10 pass
as money or currency. The holder who ex-
changes for them his labor or his property is the
creditor OF the bank. While his property and
his person liable to the bank for what he
may owe II, as the borrower Of its obligations TO
pay, only the corporate funds Of the bank are
bound to him for its debts, and this while their
whole business consists in lending to others at
the usual interest their own promissory notes.
The system is thus based on principle of fic-
ttous credit, and there is mol that real substan-
| tai responsibility about il, which alone can JUS
tIiy the confidence which is indispensable TO
| credit. il the State banks were so organized
as to furnish rational assurance that their notes
were really what they are known not TO be, but
what they profess TO be, the representatives Of
| the. precious metals; or If there was any such
responsibility on the part Of the stockholders as
to afford a guaranty for the same discretion and
| caution which is found in the management Of
| other business transactions, the public would
not hesitate at any distance TO receive bank notes
as safe and convenient substitute for specie
believe that no business in society is conducted
with less realres ponsibility and with more loose
| ness than is often found in banks
| These are some of the causes which affect
the credit OF the banking system as now organ
| lZed. Can they be corrected by the creation of
more banks on the same defective principles p
But il may be said that inconvenience would re-
suit from reform, which while it increases the
responsibility of banks, and gives more credit TO
their issues, reduces the number of banks and
dimlnishes the inducements for capitalists TO
vest their funds in bank stock 1t may be an
swered that without some radical change either
| IN the organization or management of banks, the
same results Will more surely and more speedily
follow The inducements either of profit or Sc
curity are lamentably few already for invest
ments IN bank stocks. This is owing partly to the
| number OF banks, the competition being as often
happens in other business too great to afford ad-
equate employment to all the capital now invest
ed but chiefly TO the want of reliable respon-
sblity in the business of banking and it may
be assumed that II banks were conducted IN a
sounder basis, the same confidence which war
rants investments in other business transactions,
would ensure sufficient amount of capital for
all the banking necessities of the country. Ii is
fictitious system Of profits, on fictitious basis
of credit, which has induced the excessive bank
| ing which now calls so loudly for a remedy
against its evils, and while less capital would be
employed under sound system, it would be
more substantial capital and its profits would be
| more certain and greater to the capitalist and
far safer to society as the holders Of bank notes
| 1t is said, however, whenever any attempt is
made to correct the defect of the banking sys-
TEN, that it is so delicate, as not to be touched
| without danger. In what does this delcacy CON
sist, but in the very defects which have been
| noticed, and how are they to be cured unless BY
the gradual application Of legislative reform p
They are the true enemies Of the credit system,
who aver that banks cannot be placed on as sol
Id and durable responsibility as any other fair
business; that II is possible TO egislate conf
dence and credit into existence, without first sup
plying the actual elements on which alone they
can rest.
It is feared by some that the prices Of property
and labor will decline under process of reform
in the banking system. Money is now made
plenty or scarce as il suits the pleasure or the
necessities OF the banks, and il is certainly to be
desired that these institutions should be relieved
as far as practicable from the operation of these
causes which so often derange their business,
and as consequence compel them to de-
range the business of all others. The system
is exposed to frequent fluctuations by its own
weakness. II is needless, however to press the
necessity of bank reform, since the demand for
National Bank is based on the admission of
the inability Of the State bank system to fur
nsh even sound local currency, and it is want
ed to regulate what the laws do not now regu-
late. This argument, while it comedies tn,
power Of banking TO the States, assumes their
they have created, and assumes that this con.
troll can be safely entrusted to federal corpora
ton, the creature of another government
National Bank If it have the power TO regulate
the issues Of the State banks, may control the
extent of accommodation to the people from
these banks and thus affect the prices of pro-
perry by making money or the semblance of
money plenty or scarce at ITS pleasure 1t is not
supposed that any one conlemplaies National
Bank as substitute for the State banks entirely.
1t IS urged as an instrument To effect hat reform
in the State banks, which has not been vet al
tempted by the State governments. IL is urged
as a m ans not OF local accommodation to those !
who wish to borrow money, but as possessing
power through its extended branches 10 regulate
exchanges b. tween remote commercial points |
II the State banks were properly reformed, so |
that their issues would TO proper extent really |
be what they ought TO be, the representatives Of
gold and silver, medium wold be furnished |
for the regulation of exchanges, at once safer
and more permanent than the notes of United
States Bank, framed and probably administered |.
too on the same defective and deceptive princi.
pies the present State banks. II l. not TO be
expected that National Bank on a sounder and
more restricted plan than that of the present
State banks will be created The measures al
ready proposed contemplate the establis hment Of
a Y. ). Bank under charter similar TO most Of
the State banks, How, il may be asked, is such
a bank 10 be managed any better under Ma
tonal than under State charter? Its increas-
ed powers, and the more extended sphere of lis
action, would only expose its directors to strong