Washington sentinel. [volume] (Washington [D.C.]) 1853-1855, 1854-11-23
Com mnnitate0.
For ,he WASHINGTON senlineI.

For the Washington Sentinel.
GENTLENES:--A recent editorial in your
paper, upon the subject Of the currency, con-
tanned an allusion to the independent Virginia
banks, which requires some notice. have no
fault to find with the tone Of the article referred
to-especially as you have since corrected an
error into which you had evidently fallen in
regard TO those institutions; nor do design
to reply to the objections you urge against the
policy which has made the evidences of State
debt guaranty of paper currency-although
i hatter myself that It can be abundantly shown
that such policy is sound in ITSELF and that its
legitimate results advantageously affect the
interests of the State, the bank, and the bill.
holders. OF course, refer to those institu-
tons alone who follow the only safe rule Of
every day business life, and are governed in
all their transactions by the dictates of pru.
dence and integrity. A bank, as an individual,
has its position to attain, its character to es-
tablish, and its credit to preserve. All these
depend upon its management far more than
upon the system on which it may be based
though undoubtedly wrong systems of banking
must injuriously affect SO sensitive matter as
that of the currency.
My object now, however, is not to discuss
this subject, but, with your permission, to cor
rect . Misrepresentation, somewhat widely pre-
vailing in regard to the new Virginia Banks.
The money articles Of several very re-
spectacle papers have recently referred to these
institutions as the Free Banks" of Virginia.
1t may somewhat surprise the financial cities
known, that neither in name nor in fact are
there any Free Banks" in Virginia. There
is nothing in the character the organization, OF
the management Of these banks, to entitle
them to such designation. They are in no
thing freer than the old banks, but are in some
particulars more circumscribed and guarded in
their powers, while all have special and distinct
charters.
There is no general law here, as in other
States, which, upon compliance with certain
provisions, confers upon any man, or set o.
men, banking privileges. Each bank is created
by its own individual charter-every applica
ton for such charterrests upon its own merits
land, every act of incorporation contains what
ever stringent provisions the care or jealousy
Of the legislature mayprescribe. The only law
referring at all generally to banks, is thai
which governs both the old and the new--and
relates solely to the detail of their organiza
| ton and management after having been crea
ted by special charters.
1t is therefore an error to believe that there
are free banks in Virginia, or that abank can be
| established in any other mode than by the old
| fashioned plan--of frs determining whether il
may be instituted at any particular point, and
| then fixing the terms and conditions of its ex-
| istence by Legislative enactment.
There is another error in regard to these
banks which has prompted q proper apprecia-
ton of their true characters. It has arisen
from confounding themwith those institutions
in other States-in some instances specially
chartered; in others, organized under a free
banking law, when the deposit of stocks is
the only basis of redemption, and the character
of those stocks is not limited and prescribed
Our system is totally ard essentially different
The only bonds allowed are Virginia SKIES
either coupon or registered; and these are not
made the basis Of circulation, but are held in
trust, or as collateral security for the .redemp-
ton of issue. For example, a bank has q
capital of one hundred thousand dollars sub
scribed and paid in; with it States bonds to
the amount Of one hundred Thousand dollars
are purchased, and, upn fling those bonds
| in the treasury of Virginia, the treasurer is
authorized to countersgn the notes Of the
bank to that amount. But before those notes
are put in circulation, they must be sus
tanned by q specie basis They must be re-
deemed in coin, and Il there be any fail
ure to redeem, the collateral security is en-
forced. The real basis, then, is not the de-
post of bonds, but o prescribed amount OF
| gold and silver, and the same relative amount
as is prescribed to the otter banks of the State.
In every charter it is provided, that the total
amount of the paper circulation of the bank
hereby incorporated, shal never exceed SIX
| times the amount of coin in possession and &C.
| tually the property of the bank" What is the
effect Of this provision? Simply that on the
redemption of every 100000 Of circulation,
there is pledged 100000 in Virginia bonds
and $4,000 in coin, in addition TO the par
/ funds and general assets Of the bank. But
not satisfied with this security, the law has
gone further, and enacted that every stock.
holder shall be stable rstably out Of bis pri
vate estate for the circulation and express con
tract debts" of the bank, upon its failure tc
redeem its notes or pay it debts.n
| Not to take up more of -our time and space
may not safely ask Whether there could be 9
better guaranteed circulation than that Of the
Independent Banks in Viryinia- With specie
for its basis, State bonds its security, and the
character and estates Of stockholders pledged
for its redemption, can tie community desire
q safer currency than the notes Of an honest
fair, and upright bank upon this system2
| Ny object, however, VAS merely to show
briefy-lst- That there is no free banking sys
| tenn in Virginia and, I'd. That the circulation
Of those banks, improperly called free, is, az
i should be, based upon specie and not upon
State stock. v.
NOVEL 1854.
Tur Fpto.rr conapr,s "a now 6,,ino a, 40,