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

State 10 nm amount exceeding twenty .eIhl millions D! dol
lnrs-uote than twice the whole banking capital CT tie
Common wealth. A free banking llw will have no til=ct
unun the amount Of this debt. II. Indeed, the profits ol
banking be greater. as 10 saio oy some, wien the circuiatinn
ia not secured and limited as proposed, hen the free banks
themselves wouli desire an extinction Of the debt, thai they
might return 10 a more profitable mode o banking. 10 New
York, notwi, hslandin2 the existence OF free banking law
a gradual reduction in The debt OF that Safe is taking place.
Our debt will not be increased by a similar law in Virginia;
but there is Title reasoa to hope that, within this or even
the next generation, the debt OF Virginia will either be e-
,~insrished ar SO much reduced as TO furnish no longer a suf.
hcient security for ouI circulation, Whenever This shall
happily kr the case, If there be no other public securities OF
other species OF property ian improbable upposi,on) which
might b. substituted as a security for the Issues Of our hank,
tlen the redemption Of the State bonds will but have the et
tect of placing q corresponding amount o gold and silver,
or lis cqui:a!ent, in the possession ot tic banks; and NO
change Will be necessary in our laws abOtt banking calcu.
lated TO disiarb our currency or our commerce.
The third difference between the banking system existing
and that proposed, Is, that under the formr, there are q few
mother banks, with large capitals and numerous branches,
and, under the latter, there would BIZ large number ofbanks,
but with smaller ca pitfalls and no branches.
The argument most frequently urged II favor OF branch
banks is, that they give greater security 10 The public, be.
cause the security of the mother bank is attached 10 The
transactions OF every branch. But why should the mother
bank itself, with all its numerous brdnch,s. regarded as o
whole, be more secure than the separate joint STOCK banks !
Ii is often said that, il a branch bank be %impudent, II is sus-
tanned by the credit and capital OF the mother bank and the
other branches. But is not This a temptation TO imptudencc
in The branchGs2 Before The adoption oi Inc Tree banking
law 10 New York, il was attempted 10 sust,in, by the safety
fund system, each and every bank in fne safe, by me com,
mon credit Of all and the result was, that the oanEs, wen
and honestly managed, were compelled 10 pay mlIiioro lot
the losses OF banks which could never have imposed upon
the public but for the credit which The safety iand hah De-
slowed upon them. Bat why may no. mother banks mem
se!vts b. quite US imprujent az their branches l. 'hciG
any reason why q bunk, with 4 capital OF 81 OOOO 0oO should
be- heller managed than a bank with a capital OF SloUUVVt :
II he good crslii of the mother bank snstaln Ina; OF iia
branches, lis falling credit would equally impair u ana ihe
failure Of the large banks in Richmond would probably In
solvc Inc failure Of all the banks In the State. But II an In
d~epcuden: Join. stock bank exceed the bounds OF %p;ndence
or the r, llireneEts vi a@, only lis own credit would srll-f
ana y withdrawal Of public confidence would enure 10 the
benefit OF some rival institution. II such o olnA TAI, u ne
cessarily ingoiy cs 90 olaer BANS 10 ito ,nIn: and no loss viii.
even in iha; event, be sustained by ine FOLDERS OF lis no'ee'
Friends Of The branch system cdnc1de that 10 security IN
der II, a more yigilanl and constant lnePecloh ana u more
rigid disc :plinc are necessary; and that the danger from To-
competency and Encouragement is greater, because o. ,me
err aler numUer Ct ,.auaGsrs required, and because OF the CIl-
iicuiIy Of controlling tic subordinate bark officers ~neh
scattered at distant points. But in Virginia, no control IL
exercised, or is attempted 10 be exercised oy inc mothet
bank. o:ar The Transactions OF their branches, aud lheH arc
also beyond lhc cCaHGI or tho iaG iGs th2 CONSTRUCTION
which has been given 10 The Ccd: eXtnpts ING separate
branches from all Inc RESTRICTIONS which il Imposes upon Inc
loans t,i isoies Of Eln.s. Thus the circulation OF a oranch
bank might c=c.ed twenty tines ITO speclci lis loahs una DIS.
counts might be Ten times lis capital and the mother bank
could not preran. il, nor would the law be vtsIated, under inc
construction which Prc7alI3, i Inc report ID me sssttsa'e,
from the pare5t bans and uIl the branches ~luc'udeo, eIhloi'eu
a proper return! Can a system, thus without guards, how
ever sustained for a time by good management, prove u''
mltciy safe 10 me coih,hunltt, or e'eh 10 inc pants'
It il attributable 10 lie exchange OF notes between fnolne'
banks und branches, That our banks arc not, In truth, specie
paying banks, that our paper currency Is at G discount, ana
the place of specie supplied by q pes,iierous small note cir
culalion, which could never hive found its way among us
In opposition 10 law, It our own banks would nave supplied
US with gold and silver ~ iEc redei4plicl CT iEc!r notes.
But tie most forciI!e Of all objections 10 u;e tFanch sys.
TEN 10, that It gives organt. alton and strength 10 Inc great
montycd interest, ad establishes In cur midst an tntperttm
in imperio, yearly growing stronger anu more dangerous
The passage of laws, during The short space OF the last three
years, 10 authorize the establishment OF trenty nine new
branch BANKS, .iiOu.d ad.;on!sh gs Of the consequences that
may low from the further extension OF such q system. IL
-: = ..I h.-1i, nsolbl, trplu 10 inn thp pnnYmn
power over the press and The people, and the peoples rep.
rescn!a:iYes. over politicians as well az merchants, over oil
classes Of mer and ell .msahs 81 influence, 10 BE- exercised
by one or two mammoth corPorailnn3, WIN On immense
capi!al at the seat OF government. and Win ram'icailonse S'
tending 10 the fsmntest corners q lie Stale.
In one other respect, tie independent banEs, organised IN
der Il general law would differ from the old banEs ard their
branches There would, under the system proposed, be no
partnership in the business of banking between the Sta'e
and tie bIahs. The existence Of this partnership uadet the
OLD system Is crgcd as IN .t,esis'h!e stglmont against IN.
Producing into tho charters CT tie Old tanis one Of zoe most
invaluable features of a we'll maturei Tree banking law, VIZ I:
The individual liability OF the corporat0rs. II might us pro,
we'd, il this report were not already too long, that sucl part
ncfsii1 is Gaadgaaageons both 10 the banks aud 10 Inc
Staic. Tine coHn.onU caiih :hpuld no more roGage 10 The
business Of banking than ia any other business caffisd oh
In the community. 4 partnership between the State and Inc
banss is in FACT peculiarly improper. because II must t1na 20
direct our legislation on banking and currency towards TIE
pronotioa 81 re interests VI the banks ra'hef 'hah IL le
public.
tho Oil banks, il is true, have been well; manas ed FOR many
years. Thcy pay good dividends 10 The stockholders Gpon
BE par value o. The stock. This il urged In their fdVGr.-
hot /. should TIC considered that tn, profits Of I bankin,
system, al any particular time, afford no test Of its merits,
ana That the interest Of bank stCSkhoitcrs sinks into iusig.
nlicance when compared with the interest OF the q 81, mass
OF TIE people In a SQUAD paper currency. Il is stated By
Mr. GhlaiIn, In his WORK on currency and banking, publish.
cd in 1851 that The issues and profits Of the bank OF Eng.
lard, o. wei! as Of oanks In this country, had been greatest
during periods when specie payment was suspended; aGc
tAlt a continued suspension was so extremely convenient!
AMI profitable 10 the banks, that a voluntary return on their
part 70 a eornl paper ca'reEcS, was not 10 be reasonably s1.
pecicu. TIE past histGcy, and come CT The past abuses OF
these old banks, should be also recalled 10 oUf i1rmory-fhs
lO., o! 81 2U0, 0G0 TO the holders OF their notes 10 1887,
when, within sixty days after the suspension, there was a
depreciation OF fourteen FER cent. In the value OF their circu
lation, amounting at the time 10 about SO, OOO COO-ihc evils
which the whole community, except, perhaps, stocs.Joboers
md Spectators, then aad afterwards sustained not merely
by the depreciation OF the currency, but by IRE qucnt Huctua
TONS in :s va!ue-lhe discrediting Of their own notes b.
their mUca oil dIaiihg in @:changc--!h he Illegal excess OF their
discounts, and other aouses, evasions and violations OF the
law. And 1t should be borne in mind that since the susPcn
sion OF specie payUients was lesalized by the State, holding
nearly halt the s,oct o! the banks suspendins, epeeie pay
men, has never been 10 good faith resumed in Virginia, and
that Virginia bank notes are now of a dlscoun! when com.
pared with The circulation OF the specie paying banks Of
New York.
The banking system which has existed in Virginia has
with oil i,s inherent defects, been sustained mainly by the
ability and prudence of those by whom IL has been admins.
tered. But, looking 10 our permanent iuiure policy, We
should provide some better security for the public than the
character OF bank officers. The laws Of human nature and
the history of banking alike admonish US that, 10 protect the
public from robbery and abuse, we must protect from temp.
talipn The servants of the public II was calimitous expert
cncc Of this truth which has led 10 the stringent proyi.
SONS cl LHt RtutIul UunhIUH lu"SO VI OlICl StutGS.
It mas now Leon %citcEGtcd to show that the business OF
banking should be authorized by 4 general law, and not By
special charters, and that a general law, with specific provi.
sions suggested. is greatly TO be preferred TO the old banking
system Of Virginia, and would give both greater stability 10
the baLks aud greater security TO The public. II remains 10
censi!er what would be the consequences attendant upon a
change .rGn tie onc System 10 the other.
Upon tnia point, also, We have Inc experience OF other
States During the last year. ten incorporated banks. with
an aggregate cspit,I Of Si,024, 456, ceased 10 exist 10 New
York. The charters OF banking companies are yearly e1.
p!ring Ia that Stale, and, as they expire, banking associa-
tiOns under the genera! law iase their place. The law pro.
vidcs for the change, authorizing The directors Of incorpoIa.
ted banks 10 procure circulating notes from the treasurer,
upon the stockholders de ;ernining 10 avail! themselves OF
The provisions OF the general law. / new banking company,
under ihat Law, ia organized before the Old charter expires
The stockholders have the privilege of subscribing for the
stock OF the new bInk their enti.e interest in the old, and
ratahly for any increase Uf capital, i! an Increase Of catl:ai
be teamed rSpcdicnt. \ surrender Of the old certificate Is a
cash subscription to the new bank, aud q new certificate
comforts the stockholde. OF the old 5ask into a s!ockho!der
Of the new. the uusubscribed capital ls not open 10 the
public until ample time hs been afforded 10 the old stock
holders 10 subscribe for the whole. There is q sale and trans
fer Of property from the old bank 10 the new; and on the
day when The former ceases 10 exist, tbs litter opens with
the same capital, deposits and circul4tion- the same asset.
and o5Iga'!ons-the same banking house, uud the same Off
GERS, stockholders and customers. Within the banE, except
The new books, no difference Ia prerequisite. The community
ia hardy sensible Of the change, and II causes no loss 10 the