Republican vindicator. [volume] (Staunton, Va.) 1849-1857, 1856-01-12

banks tIdt tne} deposit undouDteu SeC''Tl.
~ for the rededempton of their bills. 1t is
contended on the other hand that they fur
nish no loans andahord no facilities IN aid of
industry aud enterprise; that they diminish
the business and usefulness of those who are
engaged in the legitimate pursuits and func-
tons !or which banking institutions are
designed" In his circular Of May, 184S,
Mr.. Fillmore says, that after the passage
Of the free bank law, practice grew up
"of establishing banks in obscure places,
in remote parts of the State, where little
or no business was done, with view of
obtaining a circulation merely, and doing
no other business. This circulation was
then redeemed in New York OF Albany
BY the agent o. the bank, a: one half OF
one per cent. discount, and again put III
circulation without being returned to the
bank, thereby enabling the bank to redeem
its own paper at discount, and then again
put it in circulation in the same place
where it was redeemed" The law Of
1888, authorizing the creation of Stock
The stocks OF other States and bonds and
mortgages. were taken as the basis of circu-
lation. Disappearing of this plan, Mr..
Hunt (p. 1879 says that, lin 1848, the
Legislature required the stocks deposited
to be stocks OF this State equal to 6 per
cent. stock, and bonds and mortgages bear
ing all interest OF per cen:. Unless the
law bias been changedi recently, bonds
and mortgages can be as readily used in New
York for banking capital as the stocks of
State itself. In September. 1S49, Up. 1879
the securities deposited by the free banks
with the comptroller, in trusts and in or
der to redeem their circulation, amounted
10 very nearly twelve millions o! dollars,
and OF this large amount, not quite three
hundied thousand dollars were New York
State stocks The other securities con-
sisted OF U. S. stock. the stock ofthe States
Of Illinois, Indiana, Michigan. Alabama.
Arkansas, and bonds and mortgages--the
last two to the snug little sum of more than
million and half dollars. Yet we have
been told, tina. the reason why New York
six per cent. stock. commands so much
higher prices than Virginia six per
cent stock, is, tina. the free banks
OF New York have sustained the price by
using large quantities oil State stock fol
banking capital! 1t has also been assert
ed that the free bank law of New York
has proven SO salutar. and acquire such
popularity in the State, that upon the ex-
pirattion of the charters Of the ole banks
they eheerfuily embrace the opportunity
and recommenee banking upon the stock
system. II these Banks continue banking
at all, they have no other alternative. In
1916, the convention held in New York,
for changing the Constitution, inserted in
the amended Constitution, provision thai
1.-THE Legislature should have no power &c
TO pass any act granting any special char
ter for banking purposes, but corporations
or associations might be formed for such
purposes, under general laws" As no
special charter can now be obtained, the
fact that some of the old Banks have upon
the expiration oftheir charters, been con-
verted into stock Banks is no proof what-
ever, that their stock holders preferred the
new system Of banking to the old system
OF chartered Banks.
We have stated that, although Virgin
ia has had chartered Banks for more than
half a century, not one has failed, and we
maintain that stability is an essential char
actersuc of good banking system. We
have referred to the New York system.
and we now ask whether the stock Banks
of that Stare have, or have not succeeded.
The enquiry is important, because, expe-
rience Is worth thousand theories. Let
this enquiry be answered by one compe-
tent to answer. In his report of December
1S4S, dec 69,page 1874 Willard fillmore,
Conn troller o. New York, very modestly
states tina: "since the passage Of The gener-
al banking lac thirty one Of The free Banks
hare beew closed yb The comptroller I p
Why closed : Because they failed aud ut
terly failed. Their securities stocks and
morlgag esq were sold by the comptroller,
and he say that "in most of these cases the
proceeds of .he securities were insufficient
to redeem the entire circulation" The
average amount for which the securities
were sold, from 1888 to 1913, as the ex-
igencies of the broken Banks required,
was sixty-seven cents in the dollar
When Mr.. Gallatip wrote his work on
Currency and Banks, in 1941, he stated that
twenty Of the MY. steel. Banks had failed;
thereby furnishing conclusive evidence OF
thelsoundness the Of system" Have not
the Va. advocates of free banking KNOW
fer years pas, that large number Of the
Stock Banks of New York had failed, and
was it not their duty, when recommending
the example of New York TO our imia-
ton, to have communicated this fact as
well as others to the peopea There are
other facts connected with the New York
system deserving the serious con nderation
OF tho Legislature and people of Virginia
In Mr.. FiIImore's repor. Of 1916. he not
only states that during the preceding ten
years "tEiriy.one ofthe free banks have
been closed By The comptroller" but that, in
addition, mine free banks had been clo-
sed "by their o,Un stockholders" thus ma
king the large number of forty banks clio
sed in the short period eften years! Mr..
Fillmore does not assign the reasons which
induced the stock holders TO close these nine
banks, and we are unable to say whether
thsir conduct was prompted by fhe aprr.-
hehslon OF failure, or by conviction that
banks of this character were uaorohtable,
Whatever motives controlled their action,
the fact is significant and well calculated
to awaken distrust and impair confidence.
We do not know how many Of the char
tered banks OF New York failed between