Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1856-02-15
W. L. MARCY, Secretary of State.
For The E19airsr
SPEECH OF WIN. II. MACFARLAND, ESQ.


The House Committee on Banks, at their meeting
in the Hall uf the House of Delegates, the nigh.
of "Wednesday, December 10, 1855. Reported by
=. Kean.
Mr.. MAcrARLsSp expressed his obligations to the
committee for the honor conferred upon him, by the
INVITATION 10 appear before them The disposition Of
he Committee 10 hear the suggestions OF bank Of
GERS, suhjert within :he rangr of their expert
nee aud observation, was rrhisewurthy an' honora-
'e 10 the Committee. His only regret was that his
laims upon their indu!seut attention were not less
tumble.
Ii was expected, he presumed that he would direct
lis attention to the two schemes OF banking, now
umewhat prominent in the public view, and contrast
heir claims to favor and adoption. The essential diff
erence between them was i'll the security they pro.
'idcd for bank obligations, and in tho application or
Isc they make OF bank capital. The one scheme re-
luires large part of the bank capital to be invested
u State bonds, be set aside rs security for the
circulation; ihc other permits the banks tn employ
heir capitals in discounts and loans, and relies OH
heir bills receivable ur the projection o their crcu-
atiOn. Now, the problem to be determined was.
which of these schemes looking the fuIflment of
their obligations by the banks, provides the safest
and most certain security and looking to the accom-.
nodation aud ENCOURAGEMENT OF the occupations and
of the State. nsures the Sreaest efficiency
and usefulness III our banks.
lie was convinced that stock, as security for bank
notes, would prove TO be iilusory aud dcceptivc.-
There was an objection to it, for such purpose,
which lay on the surface, and was not within the
power of precautiou To security for note
holders it cannot be, however reliable as an ultimate
indemnity To spectators in the notes nf dscreded
or SUSPECTED banks. The noteholders We're the peo-
pie of country aud town who require their bank notes
for their daily wants, and not in condition 10 be
in the use ofthem. They liable to be
alarmed and mIsGd by any reports unavorable 10 the
circulation, since they have not the Information 10
decide upon the probable loss, and need too much OF
tb.jr 70 mDn In
body OF them the difference was not material between
an nso!rent bank, and one which, being dIscredlted
succeeds after time, in redcening its circulation
Now the instant resort was had to the pligh'ed
security by any one nOtshoide., the bank would be
condemned to discred and all its creditors brought
down upon it, Hence banks woad inevitably fail
which might have maintained their credit II they had
had the control of their entire assets and could have
turned them 10 account without exposing their neces
sites. This is familiar result III the experience ot
and corporations. There ls no business
banking or sny other which be conducted safely
deprived of the control Of any large part o the capita
on which it depends; aud least OF all with princpa
part of its means in other hands, appropriated To
class uf creditors whose confidence would be destroyed
by the first attempt at coercion. II would, therefore
ont that the means employed To protect The note
holders would detract from the ability OF the banks L
preserve their credit and as the note holders wou!
suffer by their discredt, even though they might b.
able ultimately 10 redeem their circulation, il follow
ed that the security intended for the note-holder
would prove snare rather than protection.
The plan of providing for the circulation, by requir
ns deposit Of stocks. proceeds on a fallacy. il Us
sumes that stocks have interchangeable und certain
value, at least are not subject to the fluctuations
price of other commodities. This entire mis-
take the contrary, it would be more correct t
say TIM: of all commodities they most liabe TO uc
tuutoas of price. Usually the first intlmal"n Of al
uneasy and difficult money market Is q decline in th
price stocks, and the decline keeps pace with th
nj
at reduced rates, when other things in request
high prices. This is cXempliiied i'll the present con
diliun of markets, wherein all ot our products ar
high, and state bonds and other stocks ulone are
low. In truth, it is only when profits are smGH ant
interest d consequence is lUw, that stocks il
demand.
Ii is not possible to say what State bonds will b,
worth year more hence, and still less that they
could be disposed of advan.ageously to meet al ener
gency. They are now at u discount OF five per cent
wear ago they were at n discount of fifteen per cent
During the suspension of specie payments, when the
State debt was greatly less than il now is, they wert
at yet more reduced price-as low even as twenty
five per cent. discount for bank notes which were
not redeemable The fact that stocks are liable tt
sudden and extreme mutations Of price Is too fam
liar to need further illustration Indeed the dispos
tirn deal in them ID notoriousy unstable and ca
PRECIOUS.
Now the low depreciation to which State bonds
were reduced at the time specie payments were sus
pended of itself refutes the pretesion that the cir
iation wouii be secured by having them pledged foi
its redemption. Ii cannot DO doubted that at that
time the circulation would have been discredlted II
State bonds had been the foundation Of lts credit
This conclusion is necessary deduction from the dit
ference in value, which then existed between State
bonds and bank notes. The latter must nave sunk
10 the level of the former it had been their basis
but, resting OH a more available security they were
maintained in public confidence, nor suffered any
sensible or apparent decline. Yet there are those
now, who think that State bonds would hereafter DC
alable, under circumstances as untavorabe 10 pri
vate and public credit, and who would make them
the basis of our circulation. They forget the de.
pressing effect OF money crisis upon The alue OF oil
stocks and it is for such contingency that their
scheme is designed. They suppose that State bonds
will be safe resource, when the currency IS suspect.
ed and uneasncss aud dstrust beget hesitation and
anxiety in familiar and ordinary negotiations. The
suppositiom is reurd by the experience OF the last
suspension when there were to deprcss our
State bonds, except such rs belong 10 md nre lse
parable from, period of embarrassment. They had
then been disposed of tn pares having the means to
acquire them without resorting to any artificial or
stimulating enticements, aud were exposed to sale
only Us the holders elected their necessities con.
strained them. The State debt, moreover, was in.
and was not felt rs a burden.
The use now proposed 20 be made of State bonds,
would aggravate the depressing tendencies OF tnan
cnl reyuIsion. by introducing new element Of fear
ful poteucy The vast amount which would be for
sale would operate impeachment 10 sales at any
prices 1t would exceed, in fact, the means appca.
bic to such investments in propitious times, whilst
the sales would be percmpt0ry, aud IN times most un
propitious. The amount of State bonds which the
Banks would hold. it NIL applying for renewa! o
their charters should be organized on the stock ba
SIS would be ten millions, or more; and this large
amount might be- forced upon the market just when
it would be difficult To raise money by any negot;a
tiolls. The very condition on which they would be
, - hn ,fl 80 flta
means of reder,ning the circulation not otherwise
within the power OF the Banks, and pre-supposed the
existence of an embarrassment ut once general anl
We have had no example Of the depre'
caton to which Stnte bonds would be reduced
forced upon the market mt such time, IN large sums
nor can il be contemplated without apprehensons ol
the most ruinols results. To increase the State debt
with the expectation that there would be, IN such
corjuucture, demand ior her bonds, which does ho
exist now nor has existed at any period, "ouiu CON-
nit us to fearful experiment, without sinse cuapoe
Of fortunate issue. ,.,,
Ii cannot be claimed that the STOCK theory nus oecn
v;ndicst.d by the experience Of the communities IN
vhch il has been tried. Ii has not been III use ioS
enough to be tested nor has 1t been 'uneC'ea u to
ordeal which could alone establish iis wisdom we
have had no such crlss as tnat LOT Which uesS"
ad-non.. since il was Introduced which the banks oi
our country generally have not me without any ma
teriol departure from their ordinary course OF dea
49, Tu noat that can be- said in its fHvor is, thai
there ara Banks ou the stock bass-there nsy be
monv-which have gained and retain the public COD
dence. So may it be said of agencies, confessediy
;nannropriate and unse, that occasionally they have
succeedea for time. But If there be Banks oa thit
n.,is which have disappointed their founders ol
the bile there others which have sunk under
trials neither unusual or formidable in ordinary Bank
e,perience Of this latter Glass; the examples have
been 80 numerous tha, it might almost be said, The!
constitute the rule rather than the exception. H!'
friend, the President OF the Virginia Bank, IN l'
very lucid exposition before the Committee, had e.
hibited long list oil failures supplied by the rePor,'
from Indiana, New Jersey, New York, aud esewnefn
So short was The interval during which many OF
sustained doubtful existence, and so slight were the
contests for which they were found unequal that 'ne