Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1854-04-04

----- = e.c md active competition, which,
n the language Of Alan. SuSo' i tr The sake Of seli.ds.
recourse to good naueSe""''
So far, then, from finding any ground lor an cSsopIo" in in
favor of banks, the reasons M"'u u ~ n,niv, win REGULAR
| preference 10 special itgislat'o' -"
force, TO the business OF oahhuE. y, w;,ho,, the lieh,s OF
U LIN sas II is3s New York passed a general Jaw 10 au
experience. 10 Wben the constitutional convention OF
ls4s assembled in TINT State fhis LAY mao ,.s oee' nm, GaII co. -.
eight years. Its policy haa zen a rs "my win those of tie
poI.uany S Snbth 5od nrsceded ut. Yet the convention, th"s
rnIiohtened by an experiment OF eien yei,a' t"Ua A. ~ -, mo-
to insert, even in the cons.. Il nave Is 10 paws, to pals aay acl
s,an,ino snccisl charters for banking purposes; S swsI
lions may be formed for sucm pu ,he1e %, mi, i n en that they
- s% y n,"d ,bs clause Jy a role Of eighty-fOur'in INC ..Wrma"se
10 one in The nsgaGre. This experiment 1 New. - ! ~ O' o,h r
oa,isfactorv 70 herself, seems TO have been 90 less 10 ~ o".
S, .sa'.y hs. ~ If The result. New jersey, Vermont, j ="
s.chnseIts Ohio Illinois, Tennessee, Alasaml, MlseOn ann.
snd + nm;s;,na have followed her eSample, and ensc'ea 80" =,
W. h.oI;"a iaua During the last. few Years, the su"J.s.
h mu 'nid the public mind in many 81 the a'a'so, HI
wherever il has beeo discussed, inc result aas n e now orc.
to fteo banking. The Legislature = "s"N
nouoi &c upou n : naked question between o general oanklng
law and q system Of speclni charters, T. se,"@mioslion would
S "a q v 1nose who favor the old mode of oan1ing anu op-
nose The pledge of public securities;a a paslsa ~ W. onio
aa ao ny" nocass,ry par, ola general banking law; that
il smight 6nd its place in a bonk chaIte. q piope.y
as In a general b1nking law; an1 ,m nah, '"y he "o sn.
oil banking, Wn n GENERAL law for the government Of all
as in a special chlrter for the percent 4' d lew. nM o :" !;
question Is not thus unemoatfasstu 10 rnsn'ai r. bauk.
been ia any OF the Sti'es u" ""'h y"
log has been discussed. u,o. ,,,,o.o sbould be
considered and compared. Our currency 10 100 Ieica'e u
sens;,ive 10 he rashly interfered with. Abs'rac. reasohin.
CANNOT guide ~. The difficulty lie not in determining gene:
raj principles, but in applying them. II - not isf IL u. w. fs
The existing chartered banks with general argueienis IN Ia
vor of a general law. The dislinctiVc FORM auu a ube,bo "
the new pIan must be unfolded, that il may appear "nelhet
- 49, ,M,,JJ , I n chanup 10 DfODGr, Ill
mnst he shown in what way II Is 10 be ELECTED. that II may
appear whether there be not evils attendant upon inc s'dgs
OF transition, even greater than the oeuet''s "h'ch arc nna',
expected.
In determining what should DO the provisions OF a genera
banking law for Virginia, we can profit BY the experience OF
other States. New York has been the pioneer IN free olnR'
inp |, Is only 10 that State that thee system hos been long
In operation. and it is TO the experience OF New i OTIS ueie
fore, that reference will chiefly DC made IL was IL oe a.
pected that errors would be committed, originaey, IN estao'
isniue in that State a new system forthe regulation OF u
subject so difficult; and that q scheme OF. oanRiog, "o'ei ~
untrled, would, however ably n,atuted and carelrny guafdeu
yet leave some room for evaslons and a6uses. these error
will have been exposed aud thesn abuses eShiai'ea ~ 'me
actual operation OF the system for a period oil ni'ech years
and thus instructed, we may better avoid inc ono anu eua,o
agaIns, the other. The general banking laws recently anop',
ed, after full discussion, BY Massachusetts, view Jersey an.
other States, will give US, also, the oeneht OF tne'' Juoe"e"'
| upon the experiment OF New foTs.
Upon examining The free banking laws which have oeeu
hitherto adopted by the different states, il viii be lounn' INA
while they differ in many of their provisions, they a.! require
a pledge of collateral security Tor the redemption oi tue GU
cuIation. The particular security required differs unusr tc
different lava. But all agree in requiring mat mt cHcu'a'pS
notes of the banks shall, before they Issue, be REGISTERED uno
countersigned BY one Of the Stale officers: ana aoe9oa.e'S
secured by a trust fund pledged for their redemption; hacn
of the independent banks already established 10 'Hg'h'a
contains q similar provision. This particular provision, then'
frs, demands our attentive consideration, because u consul,
tntes the distinctive difference between the Two kinds OF
banking now existing in Virginia. and because lis hlthetto
I invarinbe adoption in The general banking laws |hicn nave
been passed, not only creates a strong presumption I'm us ID.
| yor, but has caused II to be regarded as almost a necessary
part of the free banking system. Let ns examine, tnen, mo
it's effects, that we may determine whether il should be con.
tanned in a general banking law for Virginia:
This is its general purport in the various laws IN ~hith II
is found: Upon deposit by a b,nk of The securities required,
the treasurer or comptroller shall deliver circulating no. es
| properly registered and countc.signed, and endorsed In such
manner as 10 show TO the public what stocks AZ" pledged for
their exemption; such notes, aud such Goles only, shall DC
issued by the bank to circulate as money and whena'er they
fail 10 be aid on presentment, the stocks pledged TO accure
them shall be sold. and the proceeds OF ;he sa'e applied to
their payment.
Its object is 10 secure tho n%otehoIde,: In other words, 10
furnish the people with q safe paper currency.
Its the duty OF government 10 accomplish this object, If
II be practicable, BY any proper and legitimate means, IL
Is difficult TO conceive OF any object OF higher Importance
aud interes, to the whole community. The privilege OF issu
ing q paper currency is a privilege profitable 10 its posses.
soIs and dangerous to the public. In our own, as well AS
antilles .s % upo T'I ,he Deop ! "'f Il Is . > pro Q 1RTSei 8 s. Hfs'' iedefs 8
constitution 10 the States themselves, In the. requirement
that they shall NOT emit bills OF credlI, nor make nythlns
but gold and silver a tender in payment OF debts. Is II not
emincntly proper, then, that government, in granting sucn q
privilege, should provide every prudent safeguard Tor the
! protection of the community; that il should exact OF all NOSE
{ who enjoy this privilege of issuing a pa1cr currency, ample
| security for its redemption This is all that ID proposed oy
| the provision under consideration. This, at least, Ia It's prl'
| mary object, though its effect, as will bt presently shown, Is
l not only to secure the no,ehoider, blu! 10 give additional secn'
rity, also, 10 depositoss and other creditors. it,s more, per
| haps, than legislative enaetmen'1 wni ever acnomp,,sn, 10
! though much can be done towards Ibis object ny proper re-
| s,riciions upon banking. individuals, as wei! az banks,
] may discount notes, receive depohits and loan money: ana
/ government can no more make the latter than the former re
4 sppnsible tor all their engagements. Drposltofe, however
| are generally keen enough TO withhold their depc:l's from
4 LnsH ,phoen . = anutvnpal n r wnnsN apIyenHL !.
doubted. But, when all the avenues oil trade gre hfed Win
a paper circulation, almost anything having tho appearance
Of Of m e,as s! ne'i 9 T,I! P ss, as So %91 nlgeni ~ yl Il fnsTs!si'' by Si high GS'
considerations of public policy, that the sccuriy OF INC notc-
holder should be provided for by law: And how can Inc
noteholder be secured, unless his security be placed as IS re-
quired by This provision, beyond the reach o! the banEerf-
Where nothing is pledged in trust TO redeem the circulation,
the whole capital, even when paid up. IN INC n'st 'ns'unct'
In gold and silver, might, after n large issue oil notes, ce, WIN
the proceeds of the notes, ffaudulenly Withdrawn ~ tnose
who contributed ii: or i, might DO dissPated BY dishonest or
finprovident management, or it might be- seriouely diminish
ed by inevitable accident and losses. Hence it Is tsat every
free ba hiking law requires that. before this perilous paper cur
rency Is scattered over the land, it shall. il possible, be made
safe 10 the public by specific and ample secusi'ies, placed
| wholly beyond The control of those who issue the paper and
arc responsible for it's redemption.
The experiment has been fairly tried :D New York. BY
the general banking law Of 1885, a collateral: security was
r. ulred TO be pledged for the redemption OF the circulation
Errors, Of course, were committed in The beginning. The
history of The laws of New York on this subject, during The
last fifteen years, forms no exception 10 the general rue
that time and experience are necessary, ooth 70 test ana per,
1eCt ne" SCneIneS u ieRioIutlUU. Tx kThei"' Ia"
contained several defects. II authorized The stocks OF any
State, and bonds and mortgages, TO be fnecolVeh IN p!eage oy
the comptroller; ii authorized individuals, as well a. assoc''
atoms, 10 receive the registered notice, upon depositlne the
securities required; it exacted no Trintnr um amount ct secu,
rifles to be pledged, either by associations or Individual
bankers, and no minimum capital from the latter before Inc
banking business could be commenced; aud II was open 10
many evasions and abuses. The defects Of this law have
wholly or in part been rcmedied by subsequent, legislation
This subsequent legislation is full Of malier To-, our instruc'
ton and guidance.
After the New York banking law ofls35 had pas sed, q
period followed when credit aud confidence vere in,paired
throughout the Union, when stocks denrecialnd and States
repudialed. The New York Legislature found II necessary,
therefore, In 1910. 10 exclude all stocks cxceIr hose Issued
BY that State. Afterwards, Ia lS49, n law WAS passed, au-
thorizinc stock of the United States TO be received, as well
az New York State stock.
Small banks being found 10 be unsafe, In 1914 the Legls,
lature of New York required individual bankers to deposit
securities to the amount of $1,000 and associations to the
amount OF 500 600, before they should be entitled 10 any
notes for circulation.
Under the law of 1893. banks merely Of ejaculation sprsng
up, ~affordi6g no facilities 10 the business part Of the commu-
nifty, and circulating their notes through ngen:a and brokers,
IN commercial cities, distant from The location Of The
bank. These notes, though secured by good stocks, fell be.
low par, because redeemable at remote and unknown places,
and were afterwards purchased at a discount by the parties
interested, and again reissucd at par. To prevent this, a law