Semi-weekly standard. [volume] (Raleigh, N.C.) 1853-18??, 1855-01-10
BANKS AND CURRENCY.


wants of the community; and what restrictions inn
posed the Banks in order to secure a sound pa
per currency. l set out with the following propo
sitions, sanctioned by experience and the true
principles of political economy, and as truths on
which my argument rests:
L. That gold and silver is the only safe standard
of value all others being allacious and deceptive.
g. That system of Banking can be sound, whose
currency not directly convertible into SPECIE with
cut hindrance delay.
g. That State bonds and Railroad stocks are not
such securities necessary to the support OF
sound paper currency.
f. That to authorize the Banks to issue notes of
less denomination than five dollars, deprecates their
paper, and has direct tendency to drive gold and
silver out of circulation.
D. That some check and legislative restriction on
the Banks necessary, to prevent excessive issues,
and those expansions and contractions fatal to
ry branch OF honest industry.
Taking these axioms the test, how stands the
question? First, as to Free Banking, and other as
sociations founded upon government and Railroad
stocks as the basis of their operations. had not
supposed that at this day any could have mag
ined that such institutions could have found favor
with our people. Their stocks are but promises to
pay, and though they may be ultimately secure,
their present value uncertain, and cannot be con-
verted into money unless at sacrifice, and then IN
Bank paper. AS to State bonds, am not to be
derstood as undertaking them-for palsied be the
tongue and leprosy on the brain of him who dare
whisper reputation; but the best mode OF sustain
ing their value is to keep them out OF forced mar
ket. The direct tendency of Banking on stocks is
to increase the public debt, leading extravagant
schemes Of Improvement, as the larger the debt the
greater the amount of stocks in market 1t has been
tried in few States, and thus far the experiment
has failed New York, from the value and amount
of her Stocks and the extent of her trade presented
the airest opportunity of testing the scheme. And
what has been the result? l take from very val
liable paper before me, facts and state
ments showing very clearly that such system could
not succeed with us. They had in the State of New
York in 1862, y Incorporated and l72 Free Banks:
Free Banks nominal capital, $50, 300, 600
Incorporated Banks, 26,9O0,O00
Circulation of Free Banks, $4,000, 600
Circulation of incorporated Banks, II, OO0
Specie of Free Banks, 100000
Specie of Incorporated Banks, 7,OOO,OO
Deposites of Free Banks, 100000
Deposites of Incorporated Banks, 20, 0OO
Discounts of Free Banks, 100000 600
Discounts of incorporated Banks, 70,9UO,UeO
From these figures it will be seen, the free Banks
have a larger amount of capital with larger amount
of notes i'll circulation; yet they have less specie,
less deposites and less discounts; and the document
concludes" they afford less facility to the business
portion of the community, and in time of pressure
and embarrassment in the money market not unfre-
quently allow their notes to be discredtcd, and
thereby subject the bil-holdcrs to heavy losses"
And tue Superintendent of the Banks is forced to
admit, though he is friend of the system, " that
stocks not equal to actual capital, bona tide as
sets and individual responsibility" With such a
record this before US, who could think of intro
ducing such system among US?
question as what should be done in regard to
Banks. We have, have before stated, ten
Banks with capital subscribed of little over five
millions. These have circulation of six and half
millions, whilst their specie is only one and quar-
ter. They have a large amount of bills of exchange,
which may be important item to meet foreign de-
mands still the proportion of specie to the notes in
circulation is not what it should be. Six and half
to three and quarter is about double what it should
be to ensure sound paper currency. So the debt
to the Banks is too large for the capital subscribed,
being at least and three quarters to one. So
that the public is paying to the Banks tax by way
of interest and discounts greatly beyond what would
be necessary for all Of contemplated works of
internal Improvement. This brings me to the ques
ton whether any addition to our present Banking
capital is necessary, and if so to what extent?
There remains to be taken, have before shown,
million of dollars authorized by present char
tiers. This fact, submit proves one of three
thngs-that the capital is not wanted, or the public
have not confidence in the institutions, or that the
Presidents and Directors of these Banks have closed
their subscription books i'll order to swell their dlv
dcnds. One of the horns of this dilemma the adj
Focates Of new Banks must take, and either, as |
think, is an answer to the demand. The Bank OF
the State and the Bank of Cape Fear, as | under
stand ask renewal of their charters and increase
of million to their present capital. This, as L
conceive it is better for the public to grant than to
add to the number of our present small Banks FIRST,
because The State is largely interested in these Banks
secondly, because they could, by Branches, answer
every necessary local demand; thirdly, and, with
me- the most important COHSlueTdtiOH, lndt III tHc
renewal of these charters the Legislature might inn
pose such terms, by way of restrictions and limita
ons to the errors and abuses of the pres
ent Banks. The two great evils and abuses of the
existing Banks are, the circulation of small bills
and their excessively large dividends. The first may
be corrected by forbiddng the Banks to issue notes
of less denomination than five dollars and the
second by limiting the dividends. The latter, as
consider is the only eectual guard the public could
have against over issues, and for the keeping OH
hand such amount of specie as to command at
all times low exchanges and sound currency Such
are the facilities present of transporting specie by
Railroad express, that exchange should not, in JUS
tice exceed half per cent; and if the Banks
keep due proportion of specie In their vaults it
would not exceed that Hon. IS 1T to be egpect
ed and put the question most emphatically to the
friends of Railroads, that the sac per cent bonds IF
the State can be sold, aohen the Banks aloaoed
to make and diUide eight and ten per cent? " No
Banking statute" says an able writer A" should be
sanctioned which does not limit by some fixed and
proper standard the extent of its paper circulation.
This is the grievous evil to the removal of which
Ricard's addressed his clear and able intellect, and
which finally resulted in England in the famous Bull
lion Act of Sir Robert Peel. By this act the Bank
of England is restrained by its charter from issuing
Bank notes beyond the amount of bullion in its
vaults The result has been, interesthas been kept
down and sound currency secured. This, as
honestly believe, is the only efectual restraint, all
others being evaded disregarded 1t was correct
ly proposed, during the general suspension of specie
payments in 1897 that the speediest mode of forcing
the resumption of specie payments was by making
it the interest of the Banks to resume y; and that