The Ottawa free trader. [volume] (Ottawa, Ill.) 1843-1916, 1857-10-24
From the Washington Union.
Banks and Banking.

: or concerted mode of operation, and wlthou
i any controlling agency by our national go
L. vernmcnt. Each Legislature confcrs suct
powers and imposes such restrictions ant
provides such penalties for infringement a:
il chooses. Although individuals are ii
some instances restrained from issuing cur
rency, there are few limits, if any, upon then
power to transact banking business. Ii can.
not be denied that incorporated wealth in the
form of banks has many convenences not
enjoyed by individuals, while they are sub
jcct to some hazards. Nor can it be dis
putcd that many banks have been wisely and
. prudently managed, corferring many con-
veniences and advantages, and that their
managers have displayed prudence and patri-
otsm on important occasions But this n ei-
thcr proves the system wise nor sound, nor
the mode of management prudent ar safe to
themselves or the public. Experience has
incontestbly proved that at times when
bank ia'.i,ies are most needed by their Gus
toners and the pubic, they are the least able
to grant them, and when least needed, their
ability is greatest. When money panicS and
financial crises are upon US, the tanks have
1 full occupation IN taking care of themselves,
and instead of supplying their customers
with the facilities To which they have been
accustomed, the latter called upon for
contributors to sustain the bank, them
selves, and if they do not, make them both
fall. system producing such results il
neither wise nor safe, sHt ought not 10 be
cont nued. Legislators have contr'ved and
enacted many statute PROVISIONS to guard
sgaiI>t these evils, but all have proved inef
fcCtuai to AVOID them. Some Sts:v. have
required th- capit.. to bo pald in before co1.-
mpugiug business I'D issuing bills. THIS has
I,.t..r. ,isr. Itr i.gy.- mo fl. .u,uuf
50 'i4t there was no zeal capital. Others
have required mur-.aGo- to be fled with
me public o...r,r security !cr bills Oh
tanned Of hIn, 70 BE- issued by the bank.
/ rSe mort IGT-y~ >eid III produce i.lf their
IA g, and t!!-hl.Grys lose .4r1ely. Others
require a Ike deposit Of State stocks
I .e-e are often borrowed. and constitute
Il d.nt a.a u>t the bank, and b.il-ho'drr> ire.
gu ufly suffer. HrScv,r contriYec. these
securities 30 not secure and protect the de
pu>.tos~ and other creditors nor the stock
holders. and the former often suffer tie at
ter to lose their Whole subscription to the
stock. NJ ',. -l,u0n la, yet provided Sc
curt..S against these evils They lie too
.n~ / be r,asLg! D. any Of the present le-
gI~.aiive r,mv4Ic>. While individuals are
daily - .gd upon az required - lay their
4.brS, whether cue to iud.v.iga.s, banks. or
the government, aDd their property ! zei
and I'D without reference u sacrifice OF
consequences i they do not pay promp,ly.
@c have >rru heretofore nearly every bank
aut hOs' many oi them boldly refuse 10 pay
iir.T debts, and ~Hau der = i the losses and
..:i-e, .u.,~ upon their comparatively help
',-- creditors .ui tie people, ihou-sui, of
whom Ray br sacrificed 90 their wesa ness
t. save ulg iauh oH account of !;s combined
strength. w have seen laws passed to
Iu,yli r,-ol; To- .Gii- To assert their rights
lie Lr-j~ .tIre oi M YuI. ia Is37 passed
one l,uyItg those nuo >r,d b-n.> tor snIa
sums the cu>iS lay.h.e 10y ind ruiual whiic
they W,rr required o sue all corporation.
Iu court OF record, ~hrr, they would neces-
~arly s.cru 20 4 v-ry cou> irraD.e amount.
Fortunately, tbs suh>erv,yncy to banAs eI
% ..ovi~;au~ 90 her constitution TO pgrveul
l-f.rr lac lr- station. Those constitutions.
regulations ave t.e Pria.i =. cause -ty most,
if u.t al, O.! tar N-S lgs- bank uo. >Gs-
TN ta,!H--iy. 49,! lsy then debts Ike .n
G.N..l1. -. ;.uI t.-~ project, ia,ae4rar.y, tGe
IubGy from loss.
lue eou-t luton provides: Debts due
FROM corpora ion, shall be secured by such
ui.yiGU. as'iity Of the corporstorS, and
other means may be prescribed by law.
" The l. - -turc shall have 40 power to
pass any ia" >.uct.ou!Eg IN any manner, di-
r,g;y Dr indirectly, the suspension Of Specie
payments by suy person, ASSOCIATION, or cor.
porsiiou issuing ban. notes of any d.ScrIp-
ton.
=" In cases OF insolvency Of any banking
assoc .,iou,, the JliI-hoders sLsi! be ent-
+ tied to preference in payment over all other
creditors of such hsuk or association"
These are ss.utsry provisions, and sre now
~ he.
b.iI-noifer, If he can wait for his pay until
hc can obtain t in the manner provided 10y
.aw, but hot the depo..;or. Nor do they
protect the public against panic and in>oven-
cy, nor their consequences A bank may
raisc onc hundred thousand dollars and pro
cure that amount in bonds sud mortgages OF
stocks on which it can obtain the same
quantity of bills, TO be issued and payable
by itself. This, with the liability OF the
stockholders, may secure the bi.!ho.der, but
thIS does not protect other creditors, nor Sc
cure against failures nor rcvuislons lhe
bank lakes its bills and exchanges them ioi
endorsed notes Of its customers. 1t Is clear
that it has no money to redeem WITH. Its
con idencc is shaken, it cannot pay faster
than il can collect the notes it has taken Tor
It's bills. If it collects them and pays up It's
circulation, it will force its customers to sac
.
will be drained of money, property tall, and
the rich made richer and the poor poorer
If the bank stops payment, instead OF max
. ing sacrifices to meet its debts. As Is required
of individuals, the same consequences fall
upon thc.puhlic. Surely there Is no valid
reason why banks and bankers should Hui,
like citizens, pay their debts when due, even
at the loss of profits or impai,ing oi their
capital. Masses OF associated wealth, upon
principles of equity and justice, have no
claims to indulgence which are not common
to the most humble individual. Dissenting
upon depo>itcs Ghe money Of third persons
# with bank merely for safe keeping) Is IL
able to all the hazards and inconveniences
Of issuing bills without money on hand to
redeem. II interest is paid on depoS!tes the
danger is still great r. IL may be- and usu-
ally Is, profitable to the bank but il so, they
ought maniuily to meet the consequences as
they require their customers to do. lhey
should not enjoy the profits themselves and
throw the losses upon their customers and
the public.
But the real evil lies deeper. 1t is found
in a,ta sc system. Banking as now most,
conducted is simply lending the credit
Opi,l>) Of hsnFs and taking in return douoiy-
svcured'credit f customers, the former pay
lng no interest, while it is required OF the
latter. Ii is an exchange of credit wnere
one side only pays interest. The bank does
not loan money or capital, but simply Its
r own credit. In flush times banks discount
and issue their bills freely. When they
change, they cease to do SO, collect IN rom
i their customers, prices fall, and the puoiic
suffer, aud debtors are ruined. When the
money market is easy, they push oiiis out
II to make profits upon circulating their creo''
bat when it is stringent, to save themselves
they draw i:,, make it more stringent aho