Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1856-01-22
THE BANKING SYSTEM.


Allow M, if You please. few words in reply to
writer in your paper ii the 10Th December, who
sigIs himself "Cnirmnn SENSE | shall not dis
pur his claim 10 the ignaturr but proceed at 10
tr-t another essential element iii fair newspaper
writer, IHi3r.n0t,0a the subject he pre-
tends 10 treat and the historical facts and deductions
he a-smes 10 set forth llr employs. only to grossly
misuse, certain documents Ill the General Banking
Law Of New YORK. This ascribe, without hest
tati"n. To superficial and pre- judicial rcadng-es-
prcialy superficial The mistakes ut dates. sums
aud opinions could not nave been Intentional. They
ton transparent III The text of the documents quo
ted The only surprise ia the -haiowness OF the a.
tempt 10 prove, from the reports III Hon. Mi!i0rd Full
more nd Hon. Washington Hunt, Of New York.
while in the ConptrlrI- office, ha: the system is the
Of what in tho-t identical papers they repre-
sent il to be. Thus, in hi, report OF 1913, from
which y"ur correspondent a-sutnes 10 derive part OF
his information, Mr. Flilm"r" says:
Could this system Of Banking be generally adopt.
I'd III the -tvera! States. il hardy bc doubted that
| it would prove highly beneficial. 1t would create
demand for their own State stocks. The interest pad
| upon them would br psid 70 their own cltIZens-
| Every man who held q Bunk note, secured by such
stock. would have direct interest IN maintaining III
violate the credit oi the S.atr. The blasting cry ul
! rcpAdIoitOa would never Hgnin he heard, and the
dlI.hi.d faith Ui the State would be sacred as ma
tunu honor; and lusiy, ii would give them sound
and uniform currency.
And, Mr.. Hunt, in the subsequent report Of l949,
| remarks:
"The Legislature of lSi0-tro years only after the
! first draft OF the system adopcd-prcserrtd The
.ysten by rIcndng the stok, o other States, after
! that period. The basis has BEEN improved by sue.
ct.--ive acts of legislation, HR'iMr security demdnd-
cd by lar Of the cAghGst character IN point CJ zane
aud acaGiubaty."
! What il this security Your correspondent would
have your readers believe ;Gt II s State stocks aonr
TO the cTcimston "f capita! and. specie. No sach
thing. The security is %; double, nny triple chnr-
ac,cr.
! |. The Banks must deposit State stocks for their
circulating notes III tho proportion oi llo OF iHp Ill
| stocks to 100 in notes.
! IN specie, demand their counters, Or in delauli
subject their securities {" Hnln i'll ten days.
s. They are nrxt restricted to nh exchnnga OF one
quarter OJ per cent. New York and Albany, at
the Nirginin MOUNTAIN branches ought I" be III draw
! III. on Richmond.
Back Of all this is the capital stock oftLe share-hold
ers, the IN the cUsc corporations Of Virginia
with this conservative and important constitutional
provision, that The shareholders bound in double
the sum which they own i'll The Bank. for it' debts
! Tlrru is not, III siur; single element wanting III
the general law, Of strength, security regularity or
| public utility. which, Of right, brlJngs or ought 10
| attrch "a the business of banking.
| This. think, sufficiently exposes the Grs! mistake
| OF Your CORES spond-ut.
>. His next relates 10 the purpose Of tho pro-
posed change in Virginia. This. h. assumes, is main.
iy 10 Great. market for her stocks mt home. You
have already. Mes-rs. Editors, set him right on this
point. Ibs market IL not wanting for Virginia stocks.
They cun be sold abroad freely enough. Tho qucs-
tinn l., whether they hal best he owned and held
Il. much los1iDie AZ hOne. To effect such au OBJ
iecf. was not the purpose Of the New York law, but
Mr. Fillmore plainly tells Us ii WIS Of its happiest
r'S'NS. commend his admirable reasoning on this
nust important point 10 your readers-even 10 your
CORES pnndsn who seems TO have been content To
mistake the dates and figures laid down in this and
the subsequent report Of Mr.. Hunt.
3. The New York law enacted in 1893, to
iurlude all State stocks. Your correspondent re-
pea;cdy imtimntes that il not changed until lSlS
refer you to Mr. Hunt in 1919, and to Mr.. Fillmore
IN 1873. The former have quoted as saying that
the law changed in sightsen hHndrrd and forty.
|; then restricted to New York stocks, equal TO
per cent, Gnd bonds and mortgages, per cent, aud
70 only Que inlt the value OF the property In 1913
thesp stocks required to be made equal to per
cent. and the bonds and mortgages ! Cent, and TO
only 40 per cent. OF the cash value o the property.
In 1919 the Legislature admitted Federal stocks to
one-haIf the circulating nntcs when requested by the
banker. The other half must be New ork stocks.
The law thus stands 1T present:
|. State stocks b per cent whole, or at east one.
hall.
III. Mortgages per cent, two hfths valuation.
Ill. Cnitcd States stocks, per cent
SO many guards iInvr been thrown around the
mortgage feature, such us two-iitths valuation and
only $4,000 on any one property however valuable,
that il is seldom ayailed Of by the banker
l. The origin of the law. Your correspondent says
Mr. Fillmore aScrbed to the corruption III securing
safety fund charters. That might have been un i'll
ductment. II not the motive IN framing d sys.
tenn intended from the start, aud subseq made
one of the safest yet devised by State legisatinn-
Mr. Gallatus hasty opinion of it was at time when
the error Of admitting the Western State stocks had
entailrd some losses though this error was, as vt
have seen, quickly retrieved Mr. Gallatiu, bes1irs'
was a National or United States Bank man, He
could not think well Of the State system, old or new
s. Your correspondent, pretending TO rely ON ihe
New York report of 1919, says that in September ot
that ycar, out of $20o0,OU0 securities. less than
80 OUh OnU in New York stocks. Let him look at
:Hs Wsw w York S,nt. stocks, s7.53oaI5
Otb.r securities, 4,311 59l
Total. Sll,aibS16
The remnant of other State stocks then remaining
was S!.:sls GD7. Of which good par; was held for
certain city Banks, amply secured, without counting
these stocks.
e. Thir:y.onn Banks we're clnaed, under the law, up
to Mr. Filimorr's repurt in 1913. Your corr.spon-
dent ufers that these disastrous ialures-all.
Again have to say ln, him refer to the report for
thr facts The error OF admitting WESTERN stocks
which degulted in their interest III ls'9-4O did en-
TAI! certain losses bu: chiefly upon the Stockholders
in the Banks, not upon the public. From time to
time the Comptroller had tn resort la their sale by
auction while the credit of Illinois, Michigan, Arkan-
sas and Iniiaua were much d,prr-scd. The whole
amount srld. up lSiS 81 ,9 GOO, and the stocks
brought S5l5.J3S. Surprising them to have been
originally received at par, the diiierenc" would 6e
SI63 i62 less the avGs Of other as-ets Of the default
ing bankers. Your correspondent is welcome to this
point. II will scarcely weskrn the argument in ia.
vor Of banking in Virginia upon sperie and IHs'HG
s!0cks New York richly Improved the esson' ana
eight wears after the first was retrieved we h"d
that for the whole period only s73o543 local secnr
ties bonds aud mortgages and " York stocks t"Grh M
er) were subjected to sale; the deficit only sl'oVJ'
with full reclamation The d-faultng bankers; out