The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1859-09-15

than they held In 1857 before the panic commenced,
exceeding those Of 1867 by thirteen millions in which
year they could not furnish the gold demanded by
on the sss e. banking
not in controversial spirit nor with amy desire 70 con-
trast with own, but in the hope that simple mar
rayc of facts may convey some useful information on
subject Of the highest Importance and not generally I'M
dersood. The opportunity too, Is Favorable, Jcr we can
the hghe Anse,ican duhCsy that ne whole ss
oLankina ,cil be brought before Congress on an early occd
son Nth sie.p 10 complete reform Of the estng system
In this movement the Hon. Amasa Walker, Of Boston,
will take very leading part, and from q book ne mas
nublishcdnO the Nature and Uses OF Money and Mixed
Currency-there Is dosb that his party are prepared
to recommend the extinction OF notes and exclusive adop
ton OF the precious metals. This we mention incidenay,
for our immediate object to explain the present system
and how It works. As the details somewhat differ m va
States Of the federation shall select that o. MASS
achusctts
Let be assumed that bank is about to be started
with capital Of 100000 Tie law says ono bank shall
60 into until aS Sneha bali a, Least e cap an
shall BIO in its vaults and until the said money shall have
been examined by three commissioners appointed by the
Governor of the State" This condition is easily evaded
in the sense in which II was understood by the Legsa-
ture The half Of the capital may be narrowed for the
OCCASION ne commissioners may count or weigh ~ ana
but there nothing to prevent it's being withdrawn mme
datey on their departure. True il is that majority Of
suci money paid by the towards
payment their respective shares and for any other
purpose and that intended the same shall remain there.
suppose that the oath is ever violated, but Mr. Walker de-
carcs that the transaction have just described is ia
thing of frequent occurrence The bullion notes. there
fore are at once converted into bubble notes. and In such
the bank founded in direct fraud and starts into
life swinde BY law the bank Is allowed to loan the
whole of its capital and Inns this additional privilege that
may issue many notes il peascs, except that 1t
must not exceed its capital in amount by more than TWEEN
tyfve per cent. bank, therefore, with capital OF
500 900 may notes the extent of $25 000 AS 1t
is bound to have half of its capital in SPECIE the intention
Of the Legislature appears to have been that the ratio Of
deemed a safe proportion But is this rule observed
in practice? Quite the contrary. Mr. Walker refers
to bank in Bristol county Massachusetts, which, by the
returns of 1885, had $64 in bills out for dollar in spe
and he mentions another in Essex county the circu
laton of which as $40 to ST. AS these may be
sdcred very extreme cases. il proper TO observe that
the 1s Of January 1885, there in the United States
paper circulation of about Sl96 OO0 having $50
900 Of specie for its basis threcand third dollars Of
this dsproporton did not alarm for easy
pay while was easy to borrow Up to the oath of Au
gust 1857 the monetary channels OF the United States
full and the flow Of circulation noseIess and unds
turbed credit was sound no man dsrusted his neghbor
but on that eventfu day the Ohio Life and Trust
Company, in New York, stopped payment The swapping
Of s single link in he eSnded chain Of credit not only
cOnfrlsed The United States, but Eaye1e. 81 promise to
pay was waste paper. Those who had gold and were
not indebted, locked In strong boxes, and thus the
crisis aggravated It calculated by the NEw YORK
Herald that in 1857 the United States exported to Europe
sixty nine millions of dollars in SPECIE the of the
Of their imports, which created depreciation in
property, probably of five hundred millions and certain
y caused the failure of about FIVE thousand firms owing
about three hundred Millions Of which probably hun
bred and fifty millions never collected by the credit
ors" earnings and precedents hare not lost all their
value, such a lesson should teach caution
There about 300 banks in the United States all
competing for high dividends, which only TO be OBJ
tanned by large circulation. All sorts Of devices are
adopted to secure this end One Of the favorte plans is
for banks in the East to lend notes to persons going West
to purchase produce, they long in returnng but
there another method probably practised in this
country which Mr. Walker thus describes:-A receives
of bank 900 dollars OF its bills and gives his note for
the with interest, and binds himself to keep that
amount of bills constantly in circulation for given time
This is effected by having the bills smarked-that is,
stamped with the initials Of AS name or some figure
agreed upon and, as fast as these bills returned
to the bank A. is obliged to redeem them with
money" However, all do not resort TO such tricks
nevertheless the primary object Of banking In Anne.
RIGA profit to the shareholders rather than the sup
port of legitimate business, and hence the constant
tendency extend the circulation far beyond the metallic
guarantee Mr. Walker mentions the case of a bank in
Massachusetts conducted by gentleman Of distinction
and character the circulation of which, as stated in Off
cial returns on the 4h July 1857 1870 while the
specie in its vaults only 80 ,229 When the panic
driven to retire its notes to the 54 or
90 per cent OF its circulation in less than four months
and most Of it in less than six weeks by which prompt
tude saved itself and ruined its customers who were
suddenly deprived Of the accommodation which they
had depended for conducting their business. This bank
is an apt illustration of the inverted pyramid, narrow
basis pretending to sustain colossal superstrucure ALI
others were conducted on the want of principle:
they had to Withdraw their notes. and industry was
Frustrated, while the stores full of property, in
the form of imported European goods and the crops I'M
usually abundant; but gold wanting in which the
view is the character Of mixed currency, partly gold
partly paper. While the law requires that the ratio OF
notes TO specie should be as five to two, that limit
exceeded and those who about demand the reform
to which have alluded insist that future the crcu-
lation shall be purely metallic In other contrvance
do they recognise security They argue that no dscree
tonary power ought to be conceded BY this plan alone
they consider that imports be restricted and Euro
pean indebtedness be avoided while they believe that
tn
How customs revenue is to be raised or what to be
substituted for it, matters into which these rermcrs
do not enter.
The New Banking Society Of Russia.
From the London Times, August 81
The Official st. Petersburg Journal has published the
statutes Of the new Russian Commercial and Banking
cicty, recently authorized The concession is for fifty
years and the period be prolonged with the consent
OF the government The company is to have all the priv
eges of merchant of the first guild and the power TO
trade possess ships sores factories and all kinds Of in
dustral establishments except distlleres carry on all
banking and exchange operations, assurance business
contracts for government for works, &c. According
financial operations of the government and the industrial
activity Of the country generally Immovabe property
may be held but not to greater amount than tenth Of
adopted with regard to the purchase of MERCHANDISE
The sum invested in public funds shares is not TO
exceed fifth of the total paid up Other rules are
likewise laid down with the object Of keeping the
business of the undertaking in safe channels. The
capital is to be fS 900 000 in f20 shares which will be
however, engage that within year fourth at least Of
the capital shall be subscribed when operations will be
at once commenced The administration of the affairs of
the society rests with five directors, OF whom must
be Russians with an administrative council OF fifteen.
An abstract of the accounts will be published annually.
The Minister of Finance appoints commissioner who is to
attend the general meetings of the shareholders and those
Of the administrative council. He can examine the
minutes of the directors and all agreements concluded by
them, verify the cash. and assist in making out the
balance sheet IF he discover any Infringement of the
statutes he is to point out to the directors admnistra
tive council, and in case of his circumstances being
neglected. of difference Of opinion, reference can be
had to the Minister Of Finance with whom the final
decision He will also present with each balance sheet
general summary Of the position OF the companys affairs
The remainder of the statutes which extend over two
sides Of the st. Petersburg Journal refer to minor points
of detail
English Opinion OF the Frigate General
Admiral.
From the London Times, August 261
This ship, anchored at the Mothcrbank and form
ing one OF the squadron In attendance upon his Imperial
Highness the Grand Duke Constantine, built in Anne.
RIGA for the Russian government from the design Of the