Lynchburg Virginian. [volume] (Lynchburg [Va.]) 1829-185?, 1851-04-07

honour to the South.
-
The Free Banking system.
We have recently had occasion to cx-
plain to onr readers the principles upon
which the Free Banking System" was
founded. We showed that it was the very
best system that the ingenuity Of man has
yet invented, for guarantying the BIZ
holder against loss; and we shall attempt,
briefly this morning, for we have not room
to elaborate the argument, to show that it
is also the best for the Stockholder."
| Those who remember the view cf this
subject heretofore taken in this paper, viii
not forget to draw the proper distinction
between the capital of bank founded on
the free banking system, and that Of an in
stitution on the old plan, for herein lies the
chief difference between them, SO far as the
stockholders arc concerned. On the old plan,
thecapltal ofthe Bank is somuch dead cant
tai drawing nointercst whatever, and serv-
ing only as thobasis forthe issue Gifts notes;
but on the new plan, the capital is State
Stocks, an active interest bearing fund,
which, whether the Bank makes any thing
by discounts or not, always yields the
stakeholder his SIX per cent on his invest
ment. Thus it is obvious that the free
bank has the advantage over the other, to
the extent of tie interest on ITS capifal.
which is Sc on every hundreds worth of
stock; and, with this advantage. it is then
placed on an equal footing with the old
bank; and it needs no argument to demon
strate that, Banks in sound condition and
properly managed, are obliged ''to make
money Ito use familiar phrasc,) for ex-
pcrience has long since proved that pro
position.
| Butthis is far from beingthe only advan-
tage that will accrue to the State, to com
merce, and to the Stockholders, from the
establishment Of Institutions Of the kind.
1t will give capitalists an opportunity of
investing their funds at home, where they
will be under their own eye, subject to
their own control, and will add so much
to the active capital of the State which is
now Withdrawn from it and serves as a
capital for foreigners. 1t will create de-
mand for State Stocks--indced these have
already advanced in view Of the anticipat-
ed demand for them-and this, together
with the new fiscal policy of the State Of
converting the public debt into a more
; merchantable commodity by attaching
coupons to the State bonds "a system
which has also been fully explained in thi.
paper) must tend to place our bonds above
par, and to make them sought after in evcry
market. Apart from theusual bonus then
which we take for granted the State exact,
Of the banks, she will be benefited by hav
ing a new market opened for her bond
and iiom the resulting prosperity of com
promote.
But here the question may be asked
"whethcr an increaseof Banking capital i
actually demanded by the wants of trader
We answer, without hesitation, that in on,
opinion it is; but that increase should b,
r moderate, and measured, as near as ma,
be possible, by the actual wants of com
81 merce. We have not time now to elimi
nate this proposition; but the influx Of for
eign notes, the inability of existing bank
TO accommodate dealers, the increased pro
ductions and admitted expansion of the
commercial interests, the numerous work,
OF internal Improvement now in progress,
throughout the State, are but so MANY wit
nesscs of this deficiency in commercial &C
commodatons. We hope our readers will
not understand us as indicating the opinion
that Banks are instituted to afford capifa.
Tor trade: their only legitimate province il
to taciiitafe trade. Ii is true that banks
established strictly upon the Scotch sys.
: tenn, may be used in part for the purpose
Of furnishing capital to traders or farmers;
but this system is distinctive and altogether
different from what we understand by the
strict commercial character Of BaRk
Assuming then that there is demand
for an increase Of Banking Capital we
think the Legislature has done wisely to
distribute it at those points where the To-
cal wants Of the community most require
it. LII is wise too that this increase has
been made by the establishment of new
banks, rather than by increasing the CAPT
tai Of the old ones; for whilst the Branch
Bank system may have many advantages,
it is also attended with many inconverien-
ces. II one of the limbs suffer, the whole
trunk, with all the other branches, is to d
greater or less extent affected; but an indie
pendent Bank at one point cannot thus af-
feet the monetary affairs atanother. Nor do
we seq, why the independent banking sys-
tenn, as has been supposed should tend to
break down the Branch Bank system. But
if it should, it would only prove the for
MGR to be the more desirable Of the two
twill bcsc from the subjoined synopsis
ofthe Legislative action on this subject that,
the banking capital Of the State has been
materially increased, but not too much, we
hope, to meet the requirements of trade.
The Bank authorized to be established here
we understand will undoubtedly be put
into operation at an early day. The table
below, which we take from the II. Times,
viii show the minimum and maximum
amounts of capital to which each Bank is