Litchfield enquirer. [volume] (Litchfield, Conn.) 1829-current, 1858-05-13
whole No. 1919

practical Importance to the business interests of our
citizens than that which appertains to the subject
of the currency and banking. While no man is liable
fully and clearly to state the laws by which the
rency is governed and to trace their efectsyet By
!, the application of a few important principles.
] doubt not you may make such change in our laws
ill diminish the evils and increase the benefits
connected with the system of banking. In its infu
ence it is not confined to the geographical limits of
our own State but 1t is connected with banking in
other States, and forms part of general system.
each branch of which, under the laws of the State
in which it is located is exerting an influence that
is felt by our citizens as far their business
F! tends. t
New York, the centre of the business of our cotin-
try is the centre of that system, and the banks in
that city sustain the same relation to ours as the
| trunk to the branches as the body to the hand
shall therefore speak of the subject general
system, part of wlich is under special super
/ vision.
| would remark that currency whether it is spe-
cie or paper and speci G, is the standard Of the value
OF property an increase diminution of currencE
increases or decreases the value OF property If tie
banks increase their circulation it is increase of
the currency which raises the value of property. If
they withdraw their circulation they diminish such
value. BY this we see the influence which they can
exert for good or for evil it shall be beneficial or
/ injurious to change the value OF property. Hence
| the Importance of restraining bank issues, of pre-
venting sudden expansions or contractions and the
necessity of maintaining uniform amount Of cur
| rency.
Deposits regarded as a b. SIS for bank leans
| This is proper to certain extent but when carried
| too far, results in evil. Banks in many INSTANCES
have increased their deposits by paying depostols
stipulated interest They have become borrowers
as well as lenders of money, and acted as brokers
for such capitalists as would employ them in that
capacity. They have thus placed themselves under
| the necessity of extending their loans. Deposits
are truly said to represent that portion Of the
floating capital of the country which is held tempo
rarly in reserve from productive investment wait
ing to be employed by its owners, as prudence shall
| dictate" From this it is evident banks should he
| cautions about extending their Obligations based
npon deposits: If they are not, oepositors may call
for their money while it is loaned The bank in Dr.
der to meet such claims, must demand and press
the payment of their leans. Tho pressure is then
felt and is the result of loans on deposit.
The average deposits in the banks Of the city of
New York increased S5,9s8, SOB from January to
May 1857, and the loans increased So EGO 600 from
| the 3D. day of January to the ID Of day of Ma
Those banks continued to increase their loans until
| the month OF August, when they reached the sum
of S120 597 600 The deposits were then partly
withdrawn. In order to meet the demand of their
depostors the banks called for aud pressed the pay
| ment Of their LOANS. ~ s - r3- -:i
| The unexpected failure of lerge Trust Company
occurring at the same time, caused distrust The
| banks, distrusted their customers and each other
and pressed the payment Of their loans as to re-
duce their cash obligations S27 2l6 600 between tie
first day of August and the third day of October
The Community could not bear snch sudden aud ex-
| IRENE cAalg rwithouj bringing bankruptcy upon
many Of It's citizens Men of business became ex-
asperated and in their turn made such demands up
On tie banks DIS led their suspension of spscie
payments. Our banks with few noble exceptions
| followed their example. 1t has been supposed by
many that law suppressing thecireu alton Of small
bills would increase the amount of specie iii the
hands of the people and tend to greater stability in
! monetary matters. IdoLbt not such would be tho
effect if the law could exted over large extent of
,iaet a,e i+nry. But if Connecticut should
it would be difficult TO prev Ffersnes to her banks
circalaten of such bills issued by .he hanks ad.
sha n sdos such soey i NH s. vel. fSr s
I State to operate with the other New Eng and
States in SURPRISING such circulation
We may now inquire whether the experience Of
the past does not demand that our banking systcm
| should be established broader specie basis and
guarded by such restrictions will tend TO prevent
! similar revulsions We must keep in mind the fact
that no definite per centage ofspece on the amount
of crcula ion or on the total amount of liabilities
will make it certain that banks will at all times
be able to meet the obligations in Sreeie. f3eo tlet
/ while our banks continue the practice Of redecmins
their bills in Boston, Ia practice Of g,eat value to
the citizens of Sate) it will not be necessary
hold as large an amount Of specie it would ftat
system should he discontinued, nor ~ large as nc
cessary for the banks in the centre of commercial
business. That provision of our law which re-
qures specie in proportion to the circulation of
banks, / regard as defective. Banks are under some
obligations to depositors as we'll Us to bill holders
and they should be required to keep amount shf
ticient TO meet all probable .deHrands, and sdch
amount should be based upon the liabilities of the
banks
From the examination have given this subject
/ am led to recommend, first, that the Banks be
i prohibited from paying interest on deposits sec.
md, that they lie prohibited from making loans on
call third, that their circulation be limited to
amount not exceeding seventy-fye per cent, ca
their capital stock fourth, that they be required
make monthly returns cf their condition 10 the
Bank Commissioners fifth. that they be required
to keep on band amount Of specie, eqlsA to ten
per cent the tota=.nouht OF their Indebtedness,
and if during any month their average amount shall
not be equal to this requirement, all discounts shall
cease until they shall be- restored to such eondi
| ton.
We have seventy six banks in the State, with an
aggregate capital Of S206l8, 723, the condition ef
which will appear in detail in the report Of he
Bank Commissioners. Their observation and expe-
rence will enable them to give you valuable sus-
gertions relative to the operation OF cur Ban king
system. Their report viii also exhibit the condi-
ton OF the several Savings and Building assoca-
} TONS Under our laws they possess the peculiar
privilege of taking higher premium for The Use of
money than private citizens or any othei assoes-
ton.
with true and just regard to all their rights, and
your obligations to the public limit time for clos
ing their business, enact law which shall pro-
hiIit theTa from taking any bonus en- amy fntnre
loans, and c0nfne th.m to an interest Of six per
cent, per annum.
The tariff law of 1876 has without doubt had its
influence in producing the evils TO which have
referred Other s:ss hass len IL operation and
eed its Legitimate fruits. Il opened our ports so
wide toncreaae our importations Of the products
of cheap foreign labor to the amount Of S239 1885,
344 in 1857 above the importations in 1886. 1t is
true. our exports greatly Increased during the same
period. but the balance due for ouf has
been paid in specie, OF now remains adsbt against
MS We are to pay such bslsnce w ssbdiDg the
more fo MAI cts clleaper than of,r fvsf That lazy