Western Reserve chronicle. [volume] (Warren, Ohio) 1855-1921, 1858-01-06


specie and Other cash means with imme-
diate liabilities. was stronger in Novem
brr than it had been in August. The
laws tnder which these i~nsttutions we're
organized were framed with especial ref
e%rrnce to tie security of the blll-holder,
All the branches of The Slate Bank are
made sureties for the circulation of each
and the converIibili,y of the notes OF 9th
ers is required 10 be guaranteed by pIedg.
es of State or United States bonds.
These salutary provisions have protec-
ted the people against serious losses from
depreciation of The notes of the banks
organized under them; and il is highly
creditable 10 their management that they
have passed through the recent crisis,
made doubly r%erilous TO many of them
by the embezzlement of their cash balan-
ces and collection bills at New York,
without a suspension Of specie payments.
Still, ii cannot be denied that The dan
ger of IA general suspension has been i'm
minen!, or that some of these institutions
have actually been in a condition of legal.
"iiic Otlcio nave ueIH III IL COnIlllOD al
virtual suspension. These facts must
necessarily direct your attention 10 the
Legislation necessary 10 project The people
against the hazard of so great an evil.
How far the provisions of the charters
of the Banks organized unI-r the act OF
1915, will admit Of additional guards
against suspension, is Il matter OF doubt.
The decision of the majority Of the Fed
eral Supreme Court. that the charter Of
a Bank by Legislative enacimenis is a
contract. and cannot there ore be modi.
fed by subsequent legi>laIion. makes
the reformation of evils in credit curren-
cy always difficult and often impossible.
At the present moment, however. it
seems not improbable that an act might
be framed acceptable 10 these institutions
and beneficial to the community: by
which a much larger specie basis would
be provided for circulation aud deposits
than is now required. and other addition
al securities Obtained against suspension
The act of 1851. under which the 9th
er Banks are organized, is ~amendabl. at
the direction of the Legislature. Their
circulation is secuted by the deposit Of
equal amount in State or Federal Bonds.
Ii is plain that in a financial crisis, when
bonds Of all descriptions are deprecated,
this security becomes Inadequate. rec
ommend the provision of adequate guards
against such Il contingency by an increase
OF the proportion of bonds to circulation.
and by a prohibition of the deposits of fanny
other bonds than those CT the State or oi
the United States.
The experience Of the last few years
has demonstrated, however. that the
greatest financial disasters in Ohio have
not been occasioned by legally aathor;z-
ed banks Of issue. Most of the calami-
ties which have recently fallen upon the
business community of this State. have
originated in the failure Of private bank
ers and of The Trust Company, issuing
no notes of circulation. Many Of these
bankers, and perhaps the Trust Compa-
ny also, however. were borrowers, from
banks outside of the State, of foreign
npscS, 1T low TdttS VI lutcte>I, W w SH-
culated in Ohio, and redeemed. when
returned to the issuing banks, by the
borrowers. The effect of these arrange
ments WAS to introduce into the State a
mass OF foreign bank paper which ex-
PEELED from circulation not only nearly all
the coin, but also nearly all the notes OF
our own banks, and exposed the commu-
nifty TO great Inconvenience and loss.c l
suggest the e~xpediency of so modifying
the act of February cath. 1848. relating
10 The circulation of unauthorized bark
paper, as 20 prevent effectually this mis-
Additional protection 10 The bust
ness community. as well as substantial
benefits to the sound banks themselves.
result from the establishment of a
Clearing House in Cincinnati for the
banks OF Ohio. Kentucky and Indisaa,
through the voluntary action of
the Institutions concerned. or by the con-
current Legislation of the States.
In a former communication TO fhe
General Assembly, while admitting the
convenience OF a mixed currency OF coin
and convertible notes, and the improba.
that a currency entirely of coin will
be ado ted in the country. l ex-
pressed my own opinion IN favor Of a
currency of coin for ordinary transactions,
and Of large notes for the convenience OF
commerce. and at the same time urged
the necessity Of the most stringent leg
.slative guards against suspension Of spe-
lie payments, and agains. a mere paper
money system.
Subsequent reflection and observation
have confirmed me in tn sc views.
A leading object in all regulation Of
currency should be to secure the inter-
ests Of the masses of the people, by such
provisions as will ensure 10 labor Just
compensation in actual value. This can
not DE effected while the laborer is paid
in paper, and subject to continual luclu-
alton, and exposed to all the hazards Of
financial disorder.
Whatever can be constitulionally effec
ed BY State Legislation. towards the x
of the smaller denominations Of
1otes for circulation, and the subsiilu
lion of coin in their place, should be
earnestly attempted. The quantity of
,oin in The country is now St great. and
50 steadily increasing, that no injury. and
no Inconvenience could arise 10
any interest from judlcious Legislation
or this object. On the contrary, il seems
o me certain that the increased circula-
ion of coin which will thus be secured.
cannot fill 10 result in most substantial
benefits TO all interests, By additional Sc
against luctuat;on and revulsion.
These benefits seem TO ME SO obvious
hat | should hope for the assent of the
banks themselves TO the Legislation neces-
,ary TO secure them. Wnhou. that as
sent, under the decision already refer
d to. such Legislation would avail moth
.ng. the banks organized under the act
IF I845.
The existence of this decision, the I'M
certainty Of obtaining that assent, the
nc. that we are surrounded by states
whose banks Issue such notes, and the
difficulty, of excluding the