Staunton spectator. [volume] (Staunton, Va.) 1849-1896, 1851-03-19
FREE BANKING.

A Bill has passed the House of Delegates to establish
another Bank at Stauntnn Ia BIZ based np the Free Ban
kim principle and many Of our readers may nqus-
tive 10 know what Flee Barking" is, we suhoin the
following frnn the LynchAurg Vginian :-Vindcator.
cit IS proposed 10 urgaElze fur Instance The Merchant
Bank OF Lynchburg. the free banking system, with
capital say uf 100000 Before the company 90 into
operation, il is required To deposile with the Sale reasl-
other officers designated by law goJd government
securities, such, for ms as u. s. Bonds or Virginia
Stale Bonds or unduubrt dvdend paying Stocks equal Ia
the OF the capital, 500 COO THIS depose then
Constitutes the capital Of the hank, which, have SEEN
Is necessarily sound and placed beyond reach and
cnnrl Of The Bank, w.t. in the hands of sworn Stale
officer. II Is likewise the duty Of this officer To keep the
plates with which The of the Bank are printed and
also cunerslgn each he delivers for lis crcua-
tiun. In addition % these safeguards. the Bank Itself is
always required to keep certain amount u specie hand
Tor the redemption OF liz notes that It Is obvious the
danger Of overissue Of notes is avoided because the
Stale officer has the his Keeping and only de-
vers them they may be needed and security against
their possible depreciation, is found in the dePose which
this officer has in keeping. II the bank make
bad drbls equal To the of lis circulation, which
exceed the amount Of its capital still the bill holder
is because the State has then only sell the
rites Deposited and redeem the of the bank with the
proceeds Thus it is that il is necessarily the best pa
per money the public can have.
The advantages to the curporators 10 be derived from
such system, may not be obvious those who have
given but little reflection tn the subject. Promising that
all companies operating with large cash capital and deal,
ing exclusively in interest and exchanges. will always
realize good profits unless there be paIpabe msnanage-
ment and total dsregaded Of he laws Of trade, we may
without entering into the minua Of the subject show by
very simple illustration how such bank have des-
cribd may ose fit fail to make money. The capital
100000, we have is interest bearing fund and
yields say $4,000
Suppose The bank TO be authorized
To issue notes only To the amout
of $4,000, the ordinary interest
on which will be $500
The nett income then is lO,500
But we have seen The bank is required to keep on
hand certain amount OF specie (say cthird
the amount Of its crcuatiOn) the interest on
Is which is a charge to the bank, amounting to 100
Expenses, Salaries of officers, &C., 1900
Total expenses of the Bank 1880
which leaves balance still in its favor Of just six thousand
dollars, the Interest on the depDsie.
Orr object has been snow there need be no loss but in
fact there will he large profits We havs taken esli-
mate O the difference between common and banking inter
esls OF the profits arising from dealing in exchanges nor
OF other advantages which necessarily result from
combination of capital. We are decidedly in favor Of this
principle Of banking Tor the stated and should
regret see beclne general throughout tie State In
deed we are inclined 10 the opinion this is result
which FAST hurying for should won
der nor say that should much regret pres
ent banks all required wind up their business the
expiration Of their present charters We have hoslI
y Banks hems Ives. on The contrary regard them
necessary and useful institutions bnl like individuals,
they know their real condition, un they square
up their accounts with all The world !"