The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1854-08-23
Wild Cat Banks.

| Wild Cat Banks.
VIII in the last three OF four days, the notes
| Of m st Of The Yves ern banks have almost alto
getbtr 'eaa to circulate in this CITY. Three
banks, the Farmers and Mechanics Back Of
MeDp' il, nn the Erie and Kalamazoo Rail.
| road Bank, Michi gan, and the Bank Of Wash,e-
| nav. N chigan, were advert sed the day before
yest' Iday as having suspended payment Their
susp, ns o. has affected the character Of oil the
| Western banks, more especially those OF Miohi
gan, Ind ana, Illinois, and Wisconsin, az y while
some brokers take their notes at discount
varying rom two to Eve per cent, Others refuse
them altogether. While we write, the panic is
| spreading; ard it is by no means unlikely that
the run it will create may lead to other suspen-
siona, and tie ruin Of many Of the present
banking institutions OF the West The extent
| Of the danger may be conceived, VIXEN it is re-
| membered that some hundreds Of thousands Of
Western paper is held in this State and the sea-
board cities.
We have no design to become alarmists, bat
| it canDot be concealed that large proportion
| Of our banking institutions are by no means 10
| position to withstand sudden run upon their
| funds This applies as well to this State % to
our ne'ghbors Besides the old banks, Or
ganized b foe the passage of the Free
Banking law, whose notes are by no
| means adequately secured, We are moral
| ~ convinced that were ali the New York
banks to win up their affairs tomorrow under
the supeIintendence Of the State officer, the as
sets Of several would not meet the amount Of
their notes This arises from the error in our
banking law by which banks are allowed to
lodge vita the Comptroller bonds and mort
cages Of uncertain value in lieu Of State or
Federal stocks. Should sale Of these be
forced at present, the proceeds would in many
cases fall short Of the amount Of notes which
they secure, and the noteholders would suffer
in proportion. If this is true Of New York, the
banks Of the other States Of the Union are in
worse position still. The security on which
Eastern notes rest IL generally very mad
regarded as safe but the adherence Of most of
the Eastern States to the old banking systeo
deprives the holders Of notes Of even such "a
guarantee Us We possess in New York In the
South, especially in Georgia. the banking sys
tim is soch that very few banks could survive
run upon Them. In the West. our Free Bank
ing law has been adopted in Illinois, Wiscon-
sin and Indiana. The notes Issued by the banks
Of she two former States are secured by six per
cent State stocks. Ohio notes are equally Sc
cure. Indiana notes are secured 10 like man-
ner by five and six per cent State stocks bnt
the Comptroller has been authorized to take
thu m at par, and thus the smallest decline in
their current value would involve proportion
ate loss to the holders Of bank notes. With the
exec ption of two banks. the whole curr ency Of
Michigan is unsecured, and panic would be
likely to Involve many existing banks in the
fate Of the Erie ard Kalamazoo aud the Wash
tenaw banks.
If the circulating medium used IN each State
were confined to native securities, there could
be but little danger of serious loss occurring TO
note holders under the Free Banking law. But
the worst feature in the present system Of
banking in the West is the practice OF import
ing foreign and insecure notes, and Issuing
them tide by side with the native note. which
are tolersbly if not wholly secured by State
stocks II Ia barely possible for q merchant Of
New York or Illinois to know the relative
standing OF the banks in Michigan or Tennessee;
this very ignorance serves as an ilducemen. to
Spectators to issue worthless foreign notes in
distant States. By this m. ans not or'y New
York but every Western State is flooded with
currency which the banks pay OF. lat will
not redeem and which circulates freely in
trad until crisis like the present arouses sus-
picon, and brings TO light It's worthless charac-
ter. Hundreds Of thousands Of dollars are now
floating about the country n .hc shape Of Wes-
tern notes, many of which are Of doubtful value,
and all Of which share the faint these produce.
II Is suggested by q leading financial organ thst
Western dealers in foreign currency SHOULD be
compelled to redeem AL the foreign notes they
pay out. The plan would certainly mitigate
share of The evil. 4 better system still would
be to prevent The circulation Of the notes Of
one State in any other; providing for their ex-
change by sort OF State clearing house; aud
thus combining the attention Of legislators to
the condition and safety of their Own banks.
live are 10 pass through another OF those
periodical commissions called commercial crisis,
let as be prepared for it. We cannot control
events in Europe, nor can we aow repair the
mischief that has been wrought by reckless
railroad inanciering. Foolish people whohave
bought stocks without inquiring into the value
they represented, must pay the penalty of their
obtusopess. But If we cannot rebuild the ship
or get lid Of worthless timbers, we can at all
events trim her sails and make all fast and
square for squall. Therefore do we caution
the public against dealing rccklessly in foreign
bark not,s. Some are good, as good, If not
better, than our own; but others are not worth
one cent on the dollar. The shrewdest cannot
discriminate between the two classes, when o
dav NAV shake the foundation Of the most sub