Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1841-05-11
POLITICAL.
(From the Charleston Patriot.l

THE BANKING SYSTEM OF THE L. s.
The present system OF banking IN tins country has
received shock from which it will not speedily re-
cover The most wide spread distrust has succeeded
10 unlimited confidence Men administering that sys-
tenn reputed TO possess lofty virtue ana pre-emnent
talent have grossly abused the advantages OF their po
si,ion They have incurred the odium oil moral guilt,
if they have escaped the penalties OF legal Delinquent
CIV 1t is rarely under such circumstances, that the
people stop at the limits Of Just resentment lhey
visit on the system the vengeance that should tall on
only portion Of those who administer IT, inns IS 10
be regretted only that such resentment IS too IN.
discriminate to be just but it shuts the door to all
wholesome reform. Our system of corporate bank
ing has many defects. 1t is however capable OF
amendment, and TO reject the sound with the rotten
parts of the scheme 10 discard the advantages oil
experience.
we perceive that the papers are largely occupied al,
present with the conside ration Of free banking 1t IS
commended that this is the only system that is adapted
TO our free condition, and suitable TO our wants
This is instance in which principle, good IN liscli,
is falsely generalized and improperly applied. The
system Of free banking is not adapted to our condI-
ton There no safety to the public, under this sys
TEN, unless
lst Those who engage in it are bound by unlimited
liability, and
Cd Unless they give security for their issues.
Now it requires very little reflection to perceive
that in the U. S. there be association OF capt
tasts for banking purposes under the principle OF I'M
limited liability. This system suits old countries
whose capital abundant and the means OF employ ing
it difficult. In country the reverse being the
case no formation Of responsible companies or lndvi
dual enterprise for this purpose can be looked Tor while
there are many other avenues Tor the employment
ofcaptal with far less risk.
But if there should be sufficient aggregation oil
moned means in the United States for free banking
under unlimited liability the public would not be safe
unless security were gwen for the issues not on the
New York plan, by deposit Of mortgages secured by
real estate, but BY deposit of securities easily con-
yertible that the circulation may admit OF being
redeemed without public loss Now those who con.
tend for the introduction of this system, without these
guarantees against abuse, appear to coniound capital
with credit, and falsely generalize the principle OF com
petition by overlooking the distinction between them
Unlimited competition between the possessors OF cap
tai whether employed in banking or other channels o.
business can do no injury But unlimited compet
ton between the dealers in creditpartIcularly when
it assumes the form of currency-s pregnant with I'm
,nense mischief. These dealers would struggle will
each other TO obtain the largest profits from the wides
expansion of the circulating medium IN which they
deal. They would, in consequence, cheaper money
by lowering the rate OF interest," and stimulate specu
laton by an over abundance of paper currency. Tx
plosions revulsons, excitements and pancs would be
aggravated in degree, and increased IN frequency un
der such system of free banking. II it is said that
competition would reduce the profit when all are
free TO enter the business Of banking the reply to this
is, that increased issues, during speculation, will admit
of profits in banking being kept up, because the rise
of prices will give room for expansion of paper in the
ratio of that rise, and consequently competition, in
stead Of limiting bank profits, under such crcum
stances would enable them to be sustained at their for
mer level fnot increased.
MANY persons deluded in their reasonngs on thi
subject by the Scotch system of banking. Their con
illusions are founded on false analogy between on
condition and that of an old country, with abundan
capital long established habits of business and to
tally different system of law in the recovery of debts
Scotland has incorporated banks we'll free banks
Either would work well under the legal guards AM
practical checks against abuse which exists in tina
country.
LIST. BY the facilities afforded by the laws of Scot
land for attaching debtors property real personal
end By the security which is found in making tn
partners Of all free banking companies answerable
jointly and severaly, for all the debts Of the banks witt
which they are connected, and
3rd By the established habit of frequently adjusn,
balances between these institutions by draft on tn
great financial centre, London. where they compel
led to keep funds for the occasional redemption Of hei
engagements.
Now with these regulations and habits either system
of banking, free or corporate, would work wIthou
loss or injury, SO far the security of the public wa
concerned When, therefore, we have reached thu
same maturity of capital, when have established thu
sam, system of legal guards and remedies and have
grown old in the habits of business, with regar
TO banks and their customers, prevails in Scotland
we may argue from analogy with that country, will
some show Of correct philosophy, this question of fret
banking.