The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1857-12-18


on the general principles OF bank policy, which
are not peculiar to an one country or State, or
even any particular system Of banking, but are
common to all banks and banking Institutions
throughout the commercial world II IL evil
dent, at the most superficial glance that the
widest differences of opinion and policy must
prevail! between the directors of our financial
institutions and those Of Europe Under cir
cumstances almost identically alike the banks
of New York and those of France and England
pursued Numerically opposite policy And
good deal Of curiosity is felt in the question
which of the two was right-which course was
best calculated to advance the ultimate inte-
rests of the public and of trade
To explain when the revulsion burst upon us
here, in the wake of the failure of the Ohio
Life and Trust Company, il found the banks
most disastrously for the public and for them
selves-enormously expanded. They proceeded
to confront the storm by steady course Of con-
traction. For time the operation was borne
with fortitude by the merchants; but after q
while the pressure became more severe than
they could endure, and the weak houses
began to fail pretty rapidly. The mer-
chants then said to- Che banks :--syou
must expand, or We shall all break"
"Eot So" replied the banAs "we cannot ex-
pand; we must contract and if the weak houses
among you 60 to the WALL that is their affair,
No strong house will break And they pur-
sued their policy of contraction resolutev and
persistently, in the teeth of menace, opposition,
and loss, till the Anglo-American houses, who
were being ruined by the failure of their Gus
toners, caused a run upon the banks, in the
specie payments or at all events that such a
state of confusion and suspense would ensue
that no mere failures would take place.
They were disappointed in the second part of
their design. They forced the banks 10 suspend
specie payments upon their deposits; but
they neither drove them into liquidation. nor
into expansion. After as before the suspension,
the banks continued resolutely to contract,
breaking mercilessly every weak and unsound
house. We do not propose to reason upon the
theoretical consequences of this policy; we SIM
ply note that, now two months after the sus-
pension, the banks are able toresume with twice
the usual quota of specie and that nearly all
the weak and rotten houses watch were drag
upon the market have broken, and have been or
are being got out of the way.
The parallel between the revulsion here and
that in France and England cannot be carried
out to its full extent, a. yet, for the
simple reason that we are month ahead of
our ncighbors, in point of time; our revulsion
having eliminated a month earlier than theirs.
But the oontrast-so far as matters have pro-
gressed abroad-is instructive.
When the revulsion and panic burst upon the
people Of England the Anglo-American houses
were, there as here. the first to agitate them
selves about the course of the bank. The Bank
Of England had pursued from the start a different
course to that followed here; it had not contract.
cd, but had raised the rate ofinterest The Anglo
American bankers now insisted-as their cor
respondents had here-that the bank should ex-
pand; and while one of them obtained from the
government permission for the bank to exceed
its authorized issue "a similar proceeding in
effect, to our suspension of specie payments).
another availed himself Of the expansion to OBJ
TAIN uu auuitlOuai lTOu tue Dank OF near a
million sterling.
The course pursued in Paris was much the
same. The bank expanded on the first rumor
Of the panic, and has continued to expand ever
since. There has been a reduction of the bank
rate Of interest which is evidently mere trick
to calm the public mind and meanwhile the
panic is me. by general and liberal expansion
1t will take few weeks yet to decide finally
on the merits Of this policy. Certain it is that
while our banks have boldly cut away all the
diseased portions of the commercial body. the
banks of England and France have covered
them up, and carry them along. They have
prepared themselves for recovery and revival
by overlooking themselves with rotten and
weak houses, which would have broken but for
the aid granted them by the banks, and whose
only hope, now, is that merchandise produce, and
commercial paper will not depreciatcA value.
They are like the man who will not allow the
gangrencd limb TO be amputated, for fear of the
pain: while we represent the same individual
after the ampuiation has taken place.