The Washington union. [volume] (City of Washington [D.C.]) 1857-1859, 1857-10-10
THE BANKING sYsrEM-rrs DEFECTS AND



struments of public fraud They issued paper
money, and the amount of their profits did not de-
pend on the amount of their debts But banking, as
now in operation, is radically defective, and what is
worse we believe these defects are innate and in
separabe from the system, and form 80 indispensa-
BILE part of it that without them it could not exist
at ALL
In the first place, the dividends of banks, and
sequently the value of their stock, depend on the
amount of their debts and the quantity of paper
promises they can put in circulation. Under such
circumstances it must be evident they will be tempt
ed to extravagant issues of paper money; and Lead
us not into temptation is the wsest prayer ever
put into the mouth of man.
In the second place, the banks are universally in
the practice of loanng money on depostes--that is,
loaning other peoples money, and receiving inter
est on what does not belong to them Others pay in
terest their debts, but they secure it, Certainly
the money belonging to the depositors does not be-
long to the banks it is therefore security for
their debts to the public, and akin to those viola
tons of trust which the law Furnishes individuals
who appropriate the funds of others intrusted to
their care.
In the third place. the proceedings of banks are
not like courts of justice, open to the public eye
consequently, one but themselves knows what
they have done or what they doing until fail
ure takes place. which clearly indicates that they
have done what they should not do. We don't
blame them for this secrecy, because it is ndispen
sable but this necessity is certainly defect in the
system.
In the fourth place, there is nowhere proper and
adequate responsibility for their conduct The frauds
of body corporate, which are felt by whole commu
mites and States either beyond the reach of the
law or are not punishable by any law, or, at all
events there are so many holes in the net that it
must be monstrous fish that can't slip through
them without losing his scales. The sole RESPONSE
blity is with the stockholders who are only parties
to the transaction, inasmuch they elect the prin-
cipals and who in few States pay the piper for
other peoples dancing, by being made liable for
the frauds defalcations, and Encouragement of the
presidents, cashiers, tellers, and directors who, if
punished at ALL are punished not for defraudng the
public, but the bank.
In the fifth place, there is no uniformity in the sys-
tenn, which is like Josephs coat, of many colors and
ldb is HeauS UOIuS dS dragon Ill NeN-
Citations. The laws regulating banking differ in al
most every State The value of banknotes is never,
under any circumstances, the in all parts of
the United States Distance operates it as on the
sight and the further off the more dimnutve the
object. A man may have his pocket lined with bank
notes, but passing river, the borders of State,
he finds "shave" absolutely necessary, like the
little Frenchman from the West Indies during one of
our 'revulsons." On arriving in this country he
deposited bag of doubloons in southern bank,
and received its notes in exchange in order avoid
the necessity ofcarrying much heavy money AS he
proceeded North he encountered shave every stage
of his journey, so that by the time he arrived at
Boston, where at that period the banks paid specie
the proceeds of his bag of doubloons entirely
exhausted or worthless. Such medium, 80 subject
to depreciation, and liable to such enormous varia
tons, is not currency. To pass current implies a
uniform, Interchangeable value which can never be
predicated of anything whose value is not either in
trnsic made so by the labor employed in its pro-
duction Thus, every piece of silver gold is the
product of labor. 1t must be collected by labor;
every process it goes through is attended with labor
and expense and if the truth were known, every
silver or gold coin in circulation is the product of
labor to the amount of its full value. Even the
wampum of the Indians was graduated by this stand
ard. 1t was the product of labor. The gold de-
rived from California is the product of the labor of
tens of thousands of men.
The last and most decisive objection to our bank
ing system Tor farrago it may be truly called is
that it has substantial Interchangeable basis. 1t is
simply credit founded credit-bank- notes repre-
scented by State stocks other form of credit
such as bonds and mortgages, or the individual re-
sponsibility of the stockholders which, will ven
ture to say, if ever resorted to, will be found in a
great majority of cases entirely nugatory.
The banking system of the State of New York is
at this time, most especially held up model for
the sister States. 1t is based general law APP
picabe to all bank corporations and associations,
well as individual bankers all of whom may COM
the business without special act ofthe legisa
ture on complying with the conditions prescribed.
These conditions are, that the institution the in
dividual banker, shall depose with the comptroller
of the State, or the superintendent of banks 1--WE
forget whch,) amount OF State stocks whose value
shall be at par at the tme and receive in return the
same amount in bank-notes countersgned by that of
fcer, his deputy, which to constitute the ex-
tent of its circulation In addition to this, the law