Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1855-12-28
FOT III Z NY"UfT'
DSNk-fNI,

For he E"?nOtr.
BANKING.
Til. most superficial nb-crvrr mus! he sensible I"
| the connection which exists between the currency o
II country nni its industry. To what extent gold anu
silver may b. substituted by pGper mioncy--whcheT
the Inter shuaG he regulated by law, AMI what arf
the best modes of regulation, are ue.ti"s OF great
importanre 10 evcrv civilized society. Until recently
the opinion waa almost Universal that II was best 10
allow paper money to be issued by chartered Banks
aubi"ct 10 such limitations as the Legislature mlSh'
prescribe. The currency Of this country consists
| mainly ol paper Money: md. although BANK ,iio'cI
arc legal tender, yet praCcu!.y men eel Obliged
receive what other people agree 10 regard AS mo-
| ncy. The community ha4 deeper interest IN the
-,nbiIi:y and sounncss of Banks, than in the soveIi-
cy Of ordinary tradrr-. and Is the duty o! govern
meu 10 all proper means 10 prevent Baiik iall-
ures.
The subject of banking should never be considered
upon party grounds, or bs blended with question,
foreign 10 it. Banks designed 10 md coulinerclhi
enterprise and the bu rH-Gctons ot society, DH
lonns and drounts. The preservation OF State cred
| il not their duty-ih" purchase OF STATE stock not
their mission. Legislative c"IDpnlrIon may unite
Banking and State stock, but 10 permanent 2nod -
likely To result from involuntary union ot dscOr-
dant clements.
Ii i. tunewhat remarkable, that when any change
j. proposed in the Constitution aud laws oi Virginia
the advocates OF Innovation almost invariably seek I"
sr, .hru themselves and silence opposition by quo
tin. uud recommending the example vi Massachusetts
and New York. II We need the political guardian
ship of other States at all, does It not become us t"
reflect -obcrly aud seriously hcfVr" we decide whoec
| example ". should follow Has Mh-sachu-ei;-
evncrd such fidelity to constitutional and legal ohlign
,ions as New York acquired such unrival'rd re.
putatiun for Legislative wisdom, political principle
iisutercstcd patriotism AID private virtue Hs 10 give
those States especial and peculiar claims TO our con
deration whrnsvcr any change proposed i'll the !e.
gisiation Of Virginia Are III" people and Legislature
| Of Virginia ignorant "t the science "t government
| SO little cnnvcrsant with tho varied interests anG
wants ufthe State-so destitute of political experience
and sa.acity amd 80 devoid :" patriotism n To be m
capable of independent legislation
We have had chartered Banks III Virginia tor moro
than half Il century. Not one has failed during that
long period The charters are about to expire ana,
for the accomplishment OF another object, II is now
proposed 10 rev yOutonise Banking system sanction
ed by experience, and u adop! another ot novel
character aud which. far it has been tested ~
New York, has proved failure. The New YORK
systern of stock Banking hnr been cxiollrd rs tile
best system ever devised by the wit of man. and, un-
der existing circumstances, ii deserves some notice.
We shall refer to evidence given by citizens at Ne"
York, md communicated tu the li"rs'. I" Representa-
tves in ls3h, by the Secretary "t ih" Irensnry' IN
Document No. tS, '.uu the condition oi the Banks in
the United States" The origin of the iree-bnnk law
of New York is explained by the Hon. Mlllard ti!l-
more, Comptroller Of New York, in his report OF De-
ccmrr 1915 So corrupt had beconr the politics o;
New York that Mr. Fillmor" iutnrnls us, III this re-
port laee Doc. No 6s page 1897 that Bank charters
were "rs.ard part of III" sooaS belonging 10 ii'r
" "victoruu- party, and were dealt out ~ rewards for
Bipartisan services. This practice bec"'n. 30 shame
less nnd corrupt that il could hr endured No longer
and in iSIS the L. Lislature sought remedy III the
" General bankinr law. This the origin Of the
" ir.r bank system." The irrr-bank law was, then.
not passed by Legislature honestly intent unon de.
v-ing best system, but because corruption was So
prcvalrn, TINT the people could not cont%e Hilhcrht-
iy in the integrity Of their representatives 10 allow
thnln 70 grant any more Bank charters, Fortunately
The people of Virginia are moi reduced 10 tn; SAN"
necessity. The enlightened and upright Albtr,
(;ailatin WAS then living in New York and in his
work Currency, when commenting upon thl;
evidence that it prepared by TccnIdtorS WHO
took adv sm,ase "f the opportunity ior procuring
law that would sh tkr'| 2uposr.' He docinfr'i
that ltr omission Of the Legislature "a requr" The
EgYs cupitai to consist oi Sp'r5r instead nt s!o"
the tundamen.al t,rJr of the law lS" pusc ~
The law has been repeatedly altered, w'lii the hop
oi improvement. II i an error Ia SuppnSe, thai al
Of thf Bau.4ag capital If New York, "r even the
largest po,iOA Of II, consists "t New York stock, "I
stocks oi any kind. Nor il there any rea.on for the
belief, that the susacIous idea Ot creating mnrke
for State stock hal any Thing 10 10 With the origin Of
The iree-hank law. Evidence 10 sus,nn this opinion
nil he a,dIccd before We close this article. Return
iar 70 the question n the amount Of Bank capital II
New York we find Ion page 223. Doe. No. oS that il
December, 1919, the whole banking capital oi Ne"
York was, in round numbers, j0rtp.frc Hnd nay
miHians that Of this very nearly hrty m"it0"'
constituted the capital OF the chartered or safety fund
banks; Tint while the capital VI the tree banks ala
stock bnnhs WIS fourteen and half millions. they
had deposited with the Comptroller securities ono
million short "f their capital. In 1918, the Legsla
tlre of New York found il necessary to enact law
rpuuirinr the i,ebnniS tn become banks Oi discount
and deuosc, ~ we'll as To tran.act business at th'
vlacc where located. at appears (says Washington
Hunt, Comptroller Of New York, page l}Jl from re
turns made thi- department, that several banks dc
not pretend 10 the character o! banks OF discount
In yJ.p ybx I,
discounts ond Gpostes, others report mere nonina
amount, Intended apparently as n technical compl
ance with the lsw." ut may be said, in sup
pnrt of the license now enjoyed by this portion OF 'h.
iree-hanks that they dcpcelte un!oubtrd security
for the redemption OF their bills. II Is conteld'l
ON the other hand that they iurnsh no loans and A.
ford facilities in ald Of industry aud enterprise th"
they diminish the business and usefulness oi thos'
who are engaged in the legitimate pursuii'
and functions for which banking institutions al,
desiyue,l." In his circular of May, lsiS, Mr. Fill
more ssys that after thG passage Of the free bank
law, T. practice grew up ""t c-taoIi5hing oahKs "
obscure places. i'll remote p"rth - the otHtp, whcr'
little or no business was done, with view Ui obtain
iny circulation merely, and doing no other business
This circulation WAS then redeemed III New lOrK oi
Albany by the agent o! the bank. at one half oi on'
per cent. discount, and a;nn put IN circulation with
out being returned ID the bank, thereby enabling ln'
hank to redeem its paper ut DISCOUNT and thei
nrain mt il in circulation IN the Sumo place whore
was redeemed" The law oi le'fs, authorizing the
creation of stock banks, did not demand that the cap
i,al should consist Of New York State stock. The
stocks of other States aud bonds and mortgages, Wrr'
taken q. the bnss oi circulation Disappearing q
this p!un Mr. Hunt tl l2 Gays that, IN 1913, th'
Legislature required the stocks deposited to bestock
of this State equal to 6 per cent. Stock 0Hd 60hd'
u.d mOrtgnycs bearing un interest "t per cent. =
Unless the law has hrcl changed recently, bonds AM
! MORTGAGES can be Us rraGiiy used Ill New York iu
banking aptal The stocks ul the State ITSELF II
September 1919, Up. li3l the securities deposited b,
the free banks with the comptroller. III trust and u
order TO redeem their circulation amounted to r'ri
urarjy fw,irr mtij0ds cf dG1rs. and Of this lars.
amount, ,.Ot auto ihr,c kwMdrrd h0UsHnd doiIa''
wrrr N,r l0,k STATE siockS! The other secnriIle'
consisted OF L. ). Stock, the stock at the States n
Illinois, Indiana, Michigan. Alabama, arkaneaS hn'
bonds and morgages-thc last two 10 the sEus Iltll,
sum of more than Il mHi0n and a hmf dollars. fc
we have been told, that the reason why lew York |
ner cent stock commands So much higher prit
than Virginia per cent. stock, ia, that the free bank
oil New York have sustained N" price by uSin" arg'
Quantities If State rtock for bankn. capital II ha'
also been a. tha; the free bank law OF New ORR
has prov TN saluiary and acquired such popularity II
the upon the expiration Of the charters o tn
old banks they cheeruIy embrace the opportunity am
| recuumenco banking upon the stock systein. j
these Banks continue banking at all, they have i'
other alternative. In 1876, the convention held II
New York. for changing the Constitution inserted II
the amended Constitution proViton that, 'the L'
pisInturc should have power tn pass any act grant
inr any so.ca charicr for banking purposes bu. cor
pora;ions or associations might be formed Tor surl
purposes under gencTGl hlTs. AS No special chtrirl
can now be obtained the feet that some OF the OLD
Banks have, upon the expiration Of their chir.'s
been converted into stock Eanks is 10 proof what
ever that their stockholG"r, I'sift"d tie new sy7
ten Of ban!ing 10 the old system ol chartered Dank
| We have stated that, although Virginia has iis
chartered banks for more Than half century nn
one hn. fnil".l, and We m.:ain that snt'l"y is a'
essential characteristic o: COOL banking systeln--
We huyo referred 10 the New York system, ana "'
now ask whether the stock Banks of that state have
nr have not succeeded. The enquiry s important
because, experience worth a thousand theorles.-
Let this enquiry be answered BY ous competent t,
euswer In his report of December, lS4S, doc Is
page l2i,) Milhrd Fillmore, Comptroller oi Ne"
gork very modestly states that "Simee tie passage o
tie general Jausing iar hirty-one q he free Banf
LII. u IL