Daily Nashville patriot. [volume] (Nashville, Tenn.) 1857-1858, 1857-10-12

MONDAY. oCToBER u, 1s57.
Free Banks and Free Ranking Laws OF


subject of Free banking. So far as these
laws attempt to secure the note holders Oh
these banks, they are probably as nearly
perfect as they can be made, unless, III
addition to the present securities, they
could be improved by making the private
,ronertv of the stockholders liable for the
dabts of the Bank Under the statute Of
1852. one individual might own, manage
and control bank of this description, and
most of the banks established under it, were
owned by very limited number, one, two,
three and four persons While this was
the case, there could not have been the
slightest reason why the private property
of stockholders should not have been made
liable for the debts of the bank. The rea-
son for such exemption, in every sort of
incorporation, was founded upon the idea,
that where there was a multiplicity of per-
| sons, each one could not direct for himself
and that therefore it was inexpedient to
hold each one liable for the acts and con-
tracts Of the whole, except to the extent
| of his stock, to which extent he had shown,
by his subscription, his willingness to risk
and be bound. Otherwise, few persons
would have been found to enter into corpo-
rations and companies, and many works of
public convenience and utility would have
gone undone. The law of 1856, provides
that no bank shall have less than ten share
holders. This approaches the reason for
the exemp ton of private property. But in
reference to the subject of banking, in
which the welfare and interest of the whole
community is more or less involved, we in
cline to the opinion that there should be no
exemption whatever, especially under the
Free Banking laws, under which the bank
erS have such extraordinary advantages.
But in respect to the protection of de-
positors these laws are wonderfully def
Gent. We say wonderfully, because it is
wonderful that while Legislature was au-
thOrizing new system of banking; and
taking such unusual precautions for the
protection Of note holders, it should have,
at the same time, entirely overlooked de-
pOSitOrs. And the astonishment is not di-
minished when we see two other successive
Legislatures committing the same over
sight. There is but one single passage in
any of those laws, which gives the most re-
mote security to depositors, and that is the
mere plank of wreck, thrown out after
the bank is supposed to have failed It is
fbot VUba a No of tho hoply 10
such protest shall act as lien upon all
the assets of the bank not in the hands
of the Comptroller, for the benefit of the
creditors of the bank, and renders any sub,
sequent conveyance void. Other than this
the depOsitors have no further security
not even so much as with private indiVid-
ual, in which case all his property would
be liable for the debt. The law authorizes
the banker to do a general deposit and
discount business, indeed every act APP
pertaining to banking, thus holding him
out to the community as reliable, by giving
him the appearance of security in requir-
ing the deposit of certain securities with
an officer of the State. Many men are,
doubtless, lied to deposit in our Free Banks,
from the very fact that, their bills are en-
dorsed by the Comptroller, and that the
State thus stands security for them.
In very many instances, as shown by the
July statements of our Free Banks, nearly
half, at least a very large proportion of their
reported banking capital, is received from
depoSitors- doing a large business on
other peoples money. True, some of them
were paying interest on deposits, but that
does not relieve the fact, but only renders
them less, able to meet, their engagements.
1t will readily be seen that in times like these
through which we are passing, a sudden
run upon any of these banks by depositors,
may PROSTATE them, and leave the depos-
itors with miserable little pro rata, from
outstanding notes discounted, bills of ex-
change, &c They have no recouse what
ever upon the securities deposited with the
State, until all the note-holderS are paid.
The entire subject of banking is an intri-
cate and difficult one, and few persons trOu-
BILE themselves to study and comprehend it.
Hence we hold that men who understand it
or pretend to understand it by legislating
about it, should throw the amplest possible
protection around the public, who has
dealings with it. Every avenue to fraud
should be closed, and every guaranty ex-
tended which can be devised.
And, indeed, this would not seem harsh
or unjust towards the Free Banks. The
law requires them first to convert their
money into sic per cent. bonds. They thus
make an investment which pays them with
out labor or risk, six per cent on their cap
ital. They then receive, under the endorse
ment of the State, the same amount in
bank notes, which they may loan out, and
otherwise invest, so that win yield still
further interest of from six to twenty per
cent. according to circumstances. This
latter is a sheer bonus given by the State,
over and above what the State allows the
ordinary lender of or dealer in money to
receive. To this sum is added all the vast
amount Of deposites, which are used by the
bankers in discounting notes and in all the
other purposes of banking. If under these
circumstances, and these extraordinary adj