Richmond enquirer. [volume] (Richmond, Va.) 1815-1867, 1858-01-08
For the Enquirer.
THE BANKING SYSTEM.

For the Enquirer.
THE BANKING SYSTEM.
In country 81 extensive and fertile rs the United
Stafea, with 30 sm4.. IL :crumulaion of capital, with
population go Tree, 80 sparse, yet .at.ye cr3
ergetic; with 40 many Inducements to enterprise ala
speculation. 1t ia not surprising that an excessive ex
pans!on OF credit should occasionally prevail and
that this should be succeedr by contraction of the
currency and pecunary embarrassment. The dis
covery of the gold mines of Australia and California
give an Immense impulse to the agriculture com.
Inerce and manufactures of civilized nations. The
large production of gold inspired confidence. Con
hdence augmented and strengthened the credit sys-
tenn and expansion Of credit engendered speculation
Nations are as readily intoxicated by prosperity as
Individuals Prior to 1884, the people of the United
States had suffered severely from commercial reyu
sons at different periods and they ought to have pro
nted by their experiences. IT, after the passage Of the
pup: treasury law and the discovery of gold in Cali
fornla the Legislatures Of the States had refused
create any more banks, and had concurred in SUP
pressing by law the circulation of all bank notes up.
der the denomination of SEQ, We should perhaps
nave escaped the recent suspension of specie pay
ments. Unfortunately, this course was not adopted
Instead of egslatng with the view of enlarging the
circulation of specie, the Legislature of the several
states extended the Banking system and increased
the circulation OF bank paper. From time TO time
since !So0 The people OF the different States applied
10 tner respective Legislatures for the erection of
6anks, or the augmentation of the capital of the
banks then existing Some of these applications were
MADE oy honest persons with good Intentions while
others emanated from mere speculators and adventu
Iers whoae appeals and entreaties ought not
TO havo he'd any weight With the Legsls
ture. Some members of the different legislature
have supported these applications for an increase o
banking capital, from thorough conviction of its pro.
priety; some from mere good nature and desire 10
please the sovereign people, an2 0hers, apparently
because they thought it impossible to have an excess
of good thing. When the country is prosperous
and the banks are discountiug in the ordinary way,
the people generally regard them as convenient and
useful institutions. IT, however from any cause, the
banks are driven to the necessity of suspension the
war cry of "Delenda est CARTHAGE" is heard from
one extremity of the Union to the other. II is al
ways more easy to utter abuse than argument, and
those who are deficient in the latter are often prouse
in the former. Justice and reason are often unheed
ed when the mind ia inhamed by passion No yon.
der, then, that some good people represent the
banks as the offspring of his Satanic Majesty. all the
stockholders as heartless Shylocks and all bank off
GERS as unprincipled knaves. Some of these indig.
nsnt persons speak OF the suspension OF specie pay
ments by the banks as crime Of the greatest magI.
tude, and deny that suspension is excusable or usti
fable at any time. or under any circumstances.
On the let of October last the stock banks of Vir
ginia had circulation of 81 in 81 in specie
while the circulation of the Exchange Bank was about
s4 in notes to 81 Of specie the Farmers Bank crcu.
lation being little 81 to Sl and the circulation of
the Bank of Virginia being 81 and 60ts Of notes to
81 of specie. BY law the banks are allowed to have
Circulation not exceeung % 10 fi Ihe facts prove
that the three deposite banks (tbe Exchange, Far.
mer's and Bank Of Yirgnia,l and their branches bad
circulation within the limits allowed by law, on the
lst October aa and before their suspension. No
one acquainted with the subject of Banking will main
tain that banks of circulation can always redeem their
entire circulation instaner To be always prepared
to redeem its entire circulation, bank must always
have in its vaults an equal amount Specie OF what
utility would bank of circulation be- fits circulation
never exceeded the amount Of its specie Suppose
the banks of Virginia had continued ast fall to pay out
| specie until their vaults had been empted. Then
suspension would have been inevitable, aud in
| addition to the evil of suspension, the Banks
| would have been compelled by their charters
to peremptory and rigid collection Of their debts
In an abortive effort to comply literally with
the requirements of the law, the Banks would
unavoidably have been compelled TO a heavy
curtailment, aud the resumption Of specie payments
have been postponed to period longer than the pre-.
sent suspension is likely to continue The suspen.
son of specie payments by the Virginia banks is at
tribuable, not TO their misnanagement but to the
suspension of specie payments on the part OF the
Northern Banks. Suspension of specie payments by
the Banks although violation of law and generally
to he deplored, ia not intrnscaly and per crmins
| and fraudulent. Suspension may be fraudulent and
dishonest, e1cusabe and justiiable, according to
| circumstances.
There can be no juR guarantee against suspension
unless banks are compelled to have always i'll their
vaults an amount Of specie equivalent to their entire
| circulation, and such requirement as this is advo
Gated by no one and would close every bank of cir
ouIation. In authorizing our banks TO have circu
stion in notes Of IS to 81 in specie, the Legislature
could hardly have imagined that the banks would be
able to redeem their entire circulation whenever a
panic occurred and an army of brokers appeared. To
limit the circulation Of the hanks to SO of notes to 81
of coin, instead of S5 to 81, as at present, sug
geated by Gov Wise, would doubtless lessen the liza.
bity to euspenslon though not aifording entire
| curity against suspension.
The banks ought to resume specie payments as
soon as practicable, and TO comply in other
respects with the laws. If debtors will dis
charge their obligations, to the banks, the latter
would sooner be enabled to discharge their
T duty to the public. The members of the pre-
| sent Legislature will, we trust, examine the past
conduct we'll as the present condition Of the banks
in temper devoid alike OF psrtiaity or prejudice
| and adopt such measures as may appear, upon full
investigation and deliberate reflection, to be best cal
culated to guard against the evils incident to the
Banking system. That the system can be improved
we entertain no doubt.
For the purpose Of exciting prejudice, and OF win
ming little notoriety, demagogues occasionally de
| nounce the Stockholders of the banks as wealthy
arstocrats, eager after large dividends, and withou
| sympathy for the members of society. So far from
| this being true, we believe the large mass Of thost
who own bank stock are in moderate circumstances
and that In integrity OF character. they will compare
favorably with other casseE Of society," such IN,
| stockholders of our railroads, &c. Sometimes thu
borrowers OF money evinoe great proclivity to de
nounce banks their officers and stockholders, wheI
loans cannot be obtained, or debts are in process
| collection. The loud denuncations of denagogues
| and the bitter invective of disappointed applicant
for loans, surely havebut little influence upon thu
| minds Of enlightened and impartial men.
Among other popular errOrs,is that of exaggeratns
the dividends and profits of banking in Virginia, a
| we'll as other States. While the dividends declared
by the banks of Virginia have sometimes been z Ant
8 per cent annually, they have often fallen below
per cent.
| In 1856, Mr.. Garnett, of Essex, in bis report a
Chairman of the Committee on finance, in the Hous
| of Delegates, recommended 10 the Legislature tn
propriety of selling the bank stock owned by th
Commonwealth. In discussing this qaestion, Mr.
Garnett in his report, makes the following observa
ton:
dividends over six per cent on this bank stock, ant
if the proceeds OF sale were applied to the paymen
Of the elk per cent debt, the excess would be lost
our revenue. But if the dividends of the last fev
years have exceeded six per cent, there hare bee
long periods whsn they 'cere lille or nothing, and IN
auerage since The commencement Of the 6dnsS IS On
a small fraction orer per cent chtch 0rc 'iot saj
fcient conversation for The RISK Of such an 1Huest
meRt."
| The italics are our own, and not MIR. G.'s. Her
! we have the frank acknowledgment of Mr. Garneti
| that from the commencement OF the banks down u
February, 1856, the average dividends OF the oank
were but "snsll fraction over six per cent per an
num- and mot sufficient compensation for the risl
| of such on investment"
If the banks have "shaved and feeced" the peopl
40 severely a. ia often alleged, why not the di
vdends larger' If the dividends as large as som'
uersops assert, why are not bank stocks selling cor
ssidersby above parl Does not the risk Of such a
investment Justify the dividends recevedl Such, "
think must be the opinion of the disinterested an
sensible gentlemen besides the talented MIR. Garnet
! GALLATIs.
MESSAGE OF THE GOVERNOR OF Penn
SYLYANIA.
HARRIssURo, Jan. 6-The Governors Meseag
treats chiefly Of the Stale finances, banks and tn
tariff The state of the finances very satisfactory
During the year all demands on the treasury wer
| nad frann ravanua dariyad frnm ordinary sonrces