The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1841-05-14
EXCHANGE AND CURRENCY.

Qusstion.-W What kind Of an institution will repu-
late the Exchanges and equaze the Currency in the
most saie and permanent manner2
10 point out plan requires but few words, but it
may De necessary to add TO the plan explanations
for Inc information of those who may not be familiar
with the subject Of exchange.
Fsrsf as 10 plan.
J. An institution or National Bank, with capital
oftwenty-fve millions Of dollars;
q Five millions be subscribed and paid in by in
dv'duals, to be used as active capital;
g. Twenty millions to be subscribed by the Govern
ment and not paid in. The Government TO declare,
BY provision in the law establishing the institution
that IT. at any time the board of directors shall repre-
sent to the Secretary of the Treasury that the bank
has actually lost orsunk its padin capital of Million
and that there are still outstanding debts, then the
Secretary Of the Treasury shall issue so many bonds
OF the United States bearing five per cent. interest,"
as shall amount to such deficiencies, prorided the
same does not exceed twenty millions Of dollars
A. The institution to be bank of discount and de-
post, with the power of issuing bills;
3. The bank to be the fiscal agent of the Govern
ment, and receive and disburse the public revenue
without charge;
o. All its paper should be received at par in pay
ment Of public dues in every part ofthe Union;
4 Three or four Of the directors should be appointed
by the Secretary Of the Treasury annually
.. Its books and papers be open at all times to the
| examination of these directors;
9 Its board of directors and officers to be prohib
ed, under penalties from borrowing or dealing
with the institution, directly or indirectly beyond
what is required in the performance of the duties of
the Office of director or officer;
IT, Directors and other officers shall be paid for
their services fair compensation;
H. The dividends shall be confined to the five mil
lions paid in, and the dividends on this sum shall not
exceed six per cent;
H. All the surplus shall be applied to the expense
Of reducing the rate ofexchange on various places
3 No branch Of this institution shall be located in
any State Of this Union without the assent of the Lee
gslature thereof
This is plan well considered and which will meet
the wants of the Government and the appreciation Of
the people
lfyou desire any explanations, PROFOUND your qucs-
tons and they shall be answered.
Question-Why do you limit the active capital of
the bank to five millions
Ansper. In addition to five millions active capital,
the institution will have the public deposits and the
credit that its connection with the government will
give it. which will produce large individual deposits
| and corresponding circulation of its notes These
combined causes will furnish available fund for all
business purposes, equal including capital twelve
| or fifteen millions.
2. This sum is more than sufficient for all the pur-
poses to which the funds of such institution should
| be applied The local banks are now very numerous
and loan their capital and bills by
discounting paper payable in their own immediate
neghborhood. Therefore the funds of this nstitu-
ton should be applied to the subject Of Exchange by
discounting paper payable at different places and thus
facilitating rcmtances 1.-THE institution is not used
to swell the ecal capital ofthe place where it located
then the funds under its control will be more than suf
fcient for all its purposes.
3 The great object of the institution is to reduce
the for remittance and thus render the Exchange
and currency the country uniform.
To effect this, loss Of interest," and expense
must be encountered. 1t be successfully and
permanently accomplished by any other means
If we limit our active capital to fire millions, and
only pay dividend Of six per cent. this sum- we
shall necessarily have large surplus to apply these
purposes because the government and individual de-
necessarily have circulation through all the chan
nels of trade and travel in our country.
A capital offve millions with the security of the
government, will give large circulation and
great an amount deposits to the bank capital
was fifty millions Therefore its surplus earnings to
be applied TO reducing the expense of Exchange
would in no degree be increased while they might be
very seriously diminished.
A. A large active capital is dangerous to the public
interests in the hands of any body of men.
There is limit to human knowledge and ability.
And all experience has shown, that banks of small
capital have been managed safely for the public
and much more profably for the stockholders than
banks with large ones,-although the expense of
large bank is not much greater than of half its ca
pita Bank capital and credit when legitima,ey APP
piled, is used to discount business paper having less
than 80 days 10 mature To make safe loans requires
a general and accurate knowledge of the character
and business Of all the customers of the bank If
the capital is large, difficulty is experienced in
obtaining the information necessary to loan all the
funds Of the bank and consequently the risk of dis
counting notes that will be paid at maturity is in
creased.
A board of directors, with honest intentions are
sometimes induced to make loans where their nforma-
ton IS not as accurate they would desire or when
they know the security is the best because they
feel it their duty to obtain interest if possible on all
the money placed in their charge Directors, gene
rally, desire TO make large DIVIDENDS to stockholders
and hence they great efforts increase the earn
ings of an institution
The plan above proposed, declares that all the earn
ngs of the institution after paying six per cent on
its capital of five millions, shall be expended in equal
zihg the exchanges.