The daily Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1841-1845, 1842-01-18
From the Philadelphia Ledger.
FREE BANKING.

In the numerous discussions about the Currency
which the last ten years have produced, much
has been said in favor of free banking and the
tendency of the public mind seems to be a division
into two great classes in favor of free banking
and the other in favor Of banking, opposed to
all banking. Among the first, contemporary cites
Massachusetts and Rhode Island as examples of the
benefits resulting from free banking; and yet in no
State in the Union, perhaps, has banking been more
restrained than III Massachusetts. Pennsylvania has
had free banking in abundance, and we of Phade-
pha have felt its consequences severely. New York
has tried free banking extensively and with dsas-
trous results. Under this law, any person per-
could issue bank notes. To crc uate as cu,rency
upon giving security and the number of banks es-
tabshed under it one hundred and seventeen
OF these sixtyve have failed, and have caused
tai loss to the community of about four millions of
dollars. The circulation of the remaining ffty-two
is about four millions, and the securities for it, de-
posted under the law, are worth five millions nom-
nally, and about two millions actually and thus
through the failure of sixtyve already and the in
eyitable failure of all the remaining fifty-two will
the community lose about six millions of dollars.
This loss, upon population Of two millions and a
half is two dollars and forty cents for each person.
and, upon an estimate of seven persons to a family
is sixteen dollars and eighty cents to each family
and we should suppose that the losers would learn
from it lesson upon the consequences of free bank
ing not very readily 70, soten.
But these four millions of dollars are not the only
loss to the community and the holders of the depre
catcd notes are not the only losers. The circula-
ton OF the ftty-two free banks still remaining about
four millions oil dollars, average of $685. for
each The same ratio of circulation for the sixty
flye which have Jailed, would give aggregate of
five millions OF dollars. But must understand that
the failure of confidence which Aegan with the s,ls-
pension in 1889, of all banks south and west of New
York, had greatly diminished the circulation of all
the free banks and therefore we may estimate the
greatest average circulation at not less than 500 900
dor each This average upon one hundred and seven
teen banks, gives aggregate circulation q abOut
eleven millions and seven hundred thousands of dol
lars. Can we suppose that this enormous addition can
be suddenly made t. the circulation of New York
without producing mischief Certainly not and we
know that the addition suddenly made, as all
these banks were created in about two years. This
expansion must have raised all prices, and have
tempted hundreds thousands into enterprises which
prudence forbid, and cost great amount of labor
that might have been usefully employed. Beside,
tins, many contracted debts under this expansions
which they are required to pay under the present
contraction, and thus find that property for which
they gave two dollars is not worth one If this ex-
panson produced advance in prices of twenty per
cent. the loss the thus added to the circua-
ton would exceed two millions. But it creates the
same loss on the whole currency and the whole pro-
perry affected by the expansion; and therefore we
shall be moderate in estimating the loss TO the people
of New York. by free banking at not less than TWEEN
ty millions of dollars.
The advocates of free banking tell us that all re-
straints were removed, and every one were allowed
to issue his notes for currency the public would ss-
tain loss, because confidence must be won by each
ssuer before his notes would circulate We see
nothing in this argument and experience fully proves
its fallacy. The facility with which the notes of the
free banks obtained circulation in New York proves
that special charter is not necessary inspire con-
idence {; and the facility with which any thing and
every thing purportng promise to pay circulated in
this city and county during the suspension of 1897,
proves that where people accustomed to bank
notes, they will readily acquire the habit of taking
any thing which resembles them. And what freer
banking would they have than that of New York ln-
der the existing law Would they dispense with the
requisition of furnishing security to the comptroller
OF the State Tor the redemption of the notes. and have
notes to circulate upon the individual responsibility
of the issucr? This too has been tried in New York
to the great loss of the public for such were the
banks established at various times by the well known
Jacob Barker
Our contemporary says that for the last half centu-
ry, no country has had sounder currency than Mas
sachusettsi and in none has the trade in money been
so free or the power of furnishing currency so freely
exercised. There must be some mistake here for in
no State OF the Union at least has the trade in money
or the power of furnishing currency been under more
restraint. Usury laws have always existed in Mas
sachusetts, excepting during single year. about 1926
when all usury laws repealed and lenders al
lowed to take any interest mentioned in the oblipa-
ton, the law giving six per cent where the obligation
was silent. Before that the usury law demanded a
forfeiture of the whole sum loaned The law of 1895
produced such extorton made the people very glad
to repeal 1t at the very next session of the Legislature
after its enactment, and to enact new usury law
giving SIX per cent and subjccting the lender on a
contract IN which more than sin per cent includ-
ed to forfeiture of all the interest, and three times
as much more. Though substantially correct we |
may have made some mistake in the details of these |
usury laws, and therefore would refer any lawyer |
among readers TO the statutes of Massachusetts
in the law library. With such restraints the trade
in money has not been and is not very free in Mas