American union. [volume] (Morgantown, Va. [W. Va.]) 1855-1859, 1857-12-18


one which can guard the public against
over-issues and bank suspensions. AS
collateral and eventual security it is
doubtless wise. aud in all cases ought
to be required, that bauks shall hold an
amount of United States or State se.
coriiies equal to their notes in circula
ton and pledged fur their redemption.
This. however. furnishes no adequate
security against over.issuce. On the
contrary. it may be perverted to initiate
the currency. Indeed, it is possible by
TINS means TO convert all the debts of
the United States and State govern
ments into bank notes, without reference
to the specie required to redeem them.
However valuable these securities NAV
be in themselves, they cannot be con-
verted into gold and silver at the mo-
ment OF pressure, as our experience
teaches, in sufficient time To prevent
bank suspensions and the depreciation
OF bank notes. In England, which is
to considerable extent a paper.mon-
ey country, though vastly behind our
own in this respect it was deemed adj
visable, anterior TO the act of Parlia-
ment of 1914, which wisely separated
the issue OF notes from the banking de.
partmsnt, for The Bank of England al
ways to keep on hand gold and silver
equal to one-third of its combined cir.
culation and deposiIes. If this proper
tion was no more than sufficient to Sc.
cure the conyertibili,y of its notes, with
the whole of Great B,itain. and to some
extent the continent of Enrope, as a
field for its circulation, rendering il al.
most impossible that sudden and i'm. /.
mediate run to dangerous amount
should be made upon il. The same D, O.
portion would certainly he insufficient
under our banking system. Each of
our fourteen Kindred banks has but
limited circumference for it's circulation,
and in the course of very faw days
the depositors and note holders might
demand from sucn bank suiiicient
amount in specie To compel it TO sus.
pend, even although it had coin in its
vaults equal TO one.ihiI d of its mmedi.
ale liabilities. And yet am not aware,
WIN the exception ofthe banks of Lou,
isiana, that any State bank throughout
the Union has been required by its char.
ter To keep this or any other propor-
tion of gold and silver compared with
the amount of its combined circulation
and deposites. What has been The
consequence In recent report made
oy the Treasury department on the
condition of the banks throughout the
different States, according to returns
dated nearest to January, 1857, the ap-
gregate amount of actual specie in their
vaults is S5S $40 ,S3S. of their circula.
ton S214,77S,S22, and of their deoos.
ties S230.351 ,352, Thus il apnears
that these banks in the aggregate 8 have
considerably less than one dollar in sew.
on of gold and silver compared with
their circulation and deposites. IL was
palPable, therefore, that the ,ery first
pressure must dive them to suspension
and deprive the people of converlible
currency with all it's disastrous conse.
quences. Ii is truly wonderful that thew
should have so long continued to pre.
serve their credit, when demand for
the payment of one seventh Of their i'm.
mediate liabilities would have driven
them into Insolvency. And this is the
condition of The banks, Notwithstanding
that four hundred millions of gold from
California have flowed in upon US with
III TIE last eight years. and the tide still
continues TO flow. Indeed, such has
been the extravaganza Of bank credits
that the hanks now hold conside, ably
less amount of specie, either in propor.
ton to their capital or to their circula.
ton and deposites combined than thew
did before the discovery of gold in Cal.
iiornia. Whilst in tho year IS48 their
specie in proportion to their capital wss
more than equal 10 one dollar for four
and a half, in 1867 it does not amount
to one dollar for every six dollars and
thirty-three cents of their capital. In
the year 1913 the specie was equal
within very email fraction to one dol.
lar in five OF their circulation and de-
posites in 1857 it is not equal to one
dollar in seven and half oil their circu.
lation and deposites.
From this statement it is easy to ae-
count for our financial history for The
last forty years. 1t has been history
of extravagant expansions in the bust.
ueos VI the COunt'y, loIfoWed Oy iuIn0uS
contrsciioDs. At successive intervals
the best aud most entetprisipg men
have been tempted to their ruin by ex.
cessive bank loans Of mere paper crodit,
exciting them 10 ex,rsvagant impotta-
uons of foreign goods, wild specolations
and ruinous and dcmoraliziDg stock
gambling. When the crisis arrives, as
arrive it must. the banks can extend no.
relief to the people. In vain struggle
TO redeem their liabilities in specie they
are compelled to contract their loans
and their issues and at last, in the hour
Of distress, when their assistance is the
most needed, they and their debtors to-
geiher sink into Insolvency.
Ii Is this paper system Of extravaeant