The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1854-08-24
INTERESTING raAsclsE NrELEAeEsCE.

Ttfgrn tle le,% vile Gay J@ash -, arg. 10
There has aeep COZ -i,'s.ank ea.itement - the
money circles N the subj ~ of t,e Iodisa free
banks The Cisclpnati f,nzette OF the 10th, in re-
ference 20 this matter, ssys;-
The notes of The aad Peru state stock banks
were discicned Friday Tho eports Of Tho failures
Of these Institutions cnntraacted sy ths Auditoe
OF STAT hut hcr day tie NOS e al the ranks with
three or tour exceptions we're tnro outthe majority
OF II tonters having TIE conclusion tina,
time had arrived for irving out this currency THIS
caused considerable excitement, ogng The feet that
the notes Of these banks coapose hshs OF
cu5renc.
Yesterday morning the bankers hs,a a meeting add
corcucss 10 ,eeivr the notes Of al the Indiana fve
banks. with ths except OF Rensselaer, ,ak add
lrdisna Stock Bank OF Peru OF The DO, msticn OF ve
than Eve dollars The "a h. refused hereafter
The Ohio Lilo Insur and Trast Cmpaoy efassi 20
come into this arrangement and that Institution refuses
all the notes If Indiana f'se banks
Another meeting If the ,ansers ID q he held this
circtlaten all @ Dks o, a,h.s saes ofiess de-
nomination thnn ten o"ers "a, oreuiaion oil which,
after the Isl OF October, vii 70 Illegal
The email notes of ndan free banks ere now received
ut per cent discount
We DO MT attach much importance 10 ,tis move
mort of tie bankers OF Cincinnati, but IL ia impor-
tant to the public ~ large ta be Eept advised OF the
true value Of The money CT rculaiien aud Of which
the Dctss OF The free bank Of llama torn so large
o proportion. We have g etJre, examined the
subject With is vie~, ana no. oiocsed 70 lay be-
foro readers the result The nocd constitu
ton OF the STATE of Iudaua ratified l0th February,
1851 provides in sections l. sad g. article IL, for
the establishment OF u gaherai banking syatem aud
the ttlr0 section reenrcs that ample co,litera
curity readily cobvsstihe inio eaM gAd slver shall
he required, with ah'ch tne notes m, to be uti-
mattly redeemed. In conformity to the provisions
Of the const'tu.iob, o. the 18th ri Nay, lo5z the
Legislature exc cised TIE ger thus grated, aud
passed act " TO anth rile and regulate tue past
ness of ger eral bar kio,." The col,es security
qui ed TO be deposited a,e state or United States
stocks, o. fouows:-
Sec Such stocks shall consist 81 aay oortion Of the
public debt creased hare,f BE- ea,ad by tn
Unitod stats, or b. thls state, cnicabs upon Tia.
State Treasury or srch otter ,ta,ca OF The Uoon
pay interest nnaus * 4ny U.s. p.ri,d their
public debt; bnt such publ, reb' shall in all
cept ndiaus stocks be- or be made to De- elusi 20
stock producing six cent per aIoutn en1 the public
debt Of this Stte 4. POSTED s6cl BE- bo made 20
BE- equal !" stock producing ds per cert per annum,
and it shnll net ba lA~fui ho hudtor g. take
stock OF rat above It's par Sluo above Its market
value.
We have quoted this much OF ne law, as 1t exhi-
bits the bass Of the security Tor ne u,timat re-
dcmptiOn OF the cir ulation. The auditor IL required
to have the plates engraved il the beat manner to
euar1 against conn'ere,tn9; Re is alno to give the
owners powers OF attorney 10 receive dividends on
the stock; he 10 also T. couue sign the notes, but
cannot sG more u al represented by the stock.
The public so ks Deposited with the auditor are
to be fc'd BY him exclu sveiy fer the redemption of
the bills D0ses issuet BY tho is soc.ation. Any
number OF ersoDs may asa late 70 esta osn Offices
OF disc unit, depOit ald circnl tnn under the terms
and estricti ms OF ih- act. They authorized I,
INCREASE their capital from time to time, ~ they
may think proper aud the twenty 9Th lection pro.
vides tina. every sD8reIoder OF any saoh associa
ton shall be liable ia Individual capacity for any
debt, contract or eogayenens of such association,
over and above his stock eo1al to the amount of his
shares Of sucn sock" Fhe th,rtythird section pro-
vidts TINT association, for rhe space Of tweoty
days, shall at their pi Of business, have less than
l2t per cent IN specie, on the amount OF notes in
CircU aton ne MONEY.
There arc o.her general provisions for pesfecting
the system; bu; il tie above sketch we have emu
merted the pripcipl or al that bear the matter
- xl.x, 49, 80.
At the trst blush, THIS law Looks 70 be well di.
gesttd end carefnly guarded, but Ii tie refe ton
wit, chow that there are at least two erroneous pro-
visions in the bill. I G ono il in allowing any
stocks but these OF Indiana ana TIE United States
to be deposited as collateral secutg, and the other
Is In giving an Unlimited power 20 Increase the oao
tai stO Of tho ASSERTION. The vitality Of tee
free baEkir & system can only be preserved by in
spring confidence In the ability OF the banks to re-
diem the ir issues and tis Confidence csunot exist
unless the holders Of the autes are aware that the
collateral y worth its pledged value, and also that
IL can readily be converted int, cash. To know
this, We must know wha, stock il pledged, and
whether it is aaieahle stock. The bonds of some
States cell less readily. AID for lers prics than
others, although the interest IL regularly psd. To
prove ths it only necessary t. refer TO the stock
Nst-thns for instance on she 18th st New York;
New York State bonds per cent. ......... ia
OHIO rer cent. .'.'....''.....,....lO 6 20 ~
hehtuc6y per cent. ........... ..... .l0i 10 loo
Kentucky per cent, payable in New York. 93A
Illinois. ~ TO w
Indiana per cent. % tn 80
Arkansas per cent. Observation-Disclosures to 81
From an inspection Of shese quotations we can
perceive that there is considerable range In 70
price OF stocks, and Also thee hdian. five per cent
stock 10 nov at Or pear &C par hence We conclude
that the issues of al tn, cree Banks in Indiana that
are secured by pleose OF Indiana state stock are
perfectly we'll guarsn 'eed, and may safely be re.
ceived as money IN ordinary transactions. Bat,
owing 10 the latitude which ito law gives to the
banker 10 the selection OF TIE stock thst he may
pledge, the public "aanot know whether il is Ar
kansas or Illinois, or Indiana State stock which Is
deposited TO guarantee the redemption of the notes
that are daily passed from hand 20 hsut as money.
The twenty se ond section OF the act which per
mits the banks to increase their calts is unwse,
because IL Is calculated IN oote undue expansions
In prosperous times. II IL said TO have been the
practice Of come Of these institutions under the
power conferred by this clause. 70 purchase stock
with the notes fr.t issued, then pledge that sto K,
issue more not.s and sgain buy more stock, thus
converting the Institution into machine for gam
bling In stocks credit. II the stocks rise 10 va
luo all vel if they 'al, somebody must lose. The
vice Of this practice Is too paiu to need calculation.
Assuming that the free banks IN Indiana have been
honestly MANAGED, and that there nave been no
frauds prscticed, II ere does not appear to be any
thing ITO justify The crusade which is sought tn be
got up in Cincinnati against ttose banks. State
stocks nnst fall far belos the preseet figures be-
fore the prices real zed for the stocks and the
mulated profits, will 20 inadequate TO redeem the
notes issued On the fifth of the pledge.
But the reasoning just advanced applies to the
community at large, an6 not 10 brokers'. Every one
who holds paper OF tho tank Is creditor; thus A,
d ard G. each baviof hundred dollars Of the notes
Of bank, give IL credit for that amount and they
can afford to do 80, they intend to pass It OH
10 some one for ordinary expenses. But broker
must have his money In gold and silver, o. some
thing equivalent. To ilussr its this let suppose
that there we Q $4,000 10 As banking house this
morning; In the course Of tie day he sells to B
SO 900 exchange on New York, for which he 70
ceives 10000 In Indiana free bank notes. II has
cost him fifty srs to place the ten thousand dol.
lars In Now York, add no has made City d,,lss
prc6t. He nov NUT replace thai 900 In New
York TO epablo him TO draw il agaia. He can't
20 aud taoe IL or but he must call ON the hanks
that issue the payer either tn pay hin tho coin
to give him eX hs, 60 On New York.
II L. the fear that these binlss VIII not be able
promptly TO respond 10 these cas for cash or ex-
change, when tier circu at ar Il 80 large In C,u