Dayton daily empire. [volume] (Dayton [Ohio]) 1850-1865, 1860-02-07
Banks and Banking.

V.
To THE EDiroR oP rHE EuPIRR II intend,
before closing this series Of letters upon
Blanks and Banking" TO give a short re-
view Of the nature. Of these Banks Of depos-
Il, discount and exchange, Of which have
spoken IN former numbers. ! believe these
can be established in our State, IN lien Of
banks Of issue, such institutions, which
would secure the people against loss, furnish
additional facilities not only to move the
produce Of the country, bu, generally to de-
vslop the resources Of the State, and in ad,
ditiOn to all that, give capitalists an oppor-
tunity to pro6tably invest their hpds.
these are the three essentials whioh the adj
vocate Of banks in the Journal asserted a
good baking law ought to possess, and J
assure him that ali these purposes can be
effected without creating such dangerous
bubbles as banks Of issue generally prove to
be.
But before | enter upon the subject Of
my investigation, ] must refer to a speech
made by a Mr.. McGrcw before a Republic
can club at Springfield, o. The object and
tenor Of this speech was to arouse a party
feeling against the sound doctrine Of a spe-
Gle currency, and in favor Of the multipli-
cation Of banks. 0stensibly it was made in
opposition to the "lndepsndent Treasury
Laws'' but the whole range of his argument
and formidable array Of statistics arc direct.
~ Ievelled at the constitutional restriction
against banks Of issue and against the prin-
ciple which unlerlies that restriction, and
upon which our present Treasury Law is
based. l regret that Of Mr.. McGrew's
speech, but the meagre synopsis Of the
Springfield Journal, republished in the Day
ton Journal Of the Sd inst, has come to my
hands. But enough is there said to show
the tendency Of his remarks to have been
in favor Of a more extended credit system,
for he says, ut was a fatal mistake of the
State to change from its credit policy to the
present one" To prove this he says fur
Their:
As q result of the clearing house system
in New York city, for 800 days in 1859,
daily average debts Of $50, S67 1888 SO were
paid by the use Of only 81, 777,q43 96. BY
this system the largest amount Of debts Is
paid by the smallest amount Of money, but
the State Of Ohio proposes to pay the small
lest amount Of debts by the largest amount
Of money!
To adduce the New York clearing house
as an evidence of the beneficial results Of
the "credit policy" was unfortunate in Mr..
McGrsw, for that clearing house is exactly
the reverse. The banks Of New York do
not trust each other over night, aud hence
they call upon every bank in the city to
come up daily to the counter Of the clearing
house and settle. A bank that does not
meet its daily settlements, is at once dis
credited. At these settlements the banks
exchange their claims against each other,
such as notice, drafts, checks, DC, and the
balance is paid in specie. Formerly these
balances were paid by one bank giving the
other credit on it's books for the amount
found due; sometimes they were paid in
currency, but Of late years this mode OF
payment was abandoned, and coin for the
balances due is vigorously exacted. This,
surely, does not look much like credit pol
icy" For reducing this practice to every
day life it amounts simply to this:
A and b are in business intercourse with
each other. They make it q rule to settle
weekly; at their settlement A owes B for
goods bought say $500, and B to A for
work and labor done, say $525. They ex-
change receipts and B pays to A the balance
of $25 in specie. Here, as in the clearing
house, a large amount of debt is paid by a
small amount of money, but the excess Of
the debt was balanced by q debt standing
against it.
The very fact that the New York city
banks do not encourage the "credit policy
among themselves, but exact daily specie
payment of balances, makes them compare
lively the safest banks in the country. Hav
ing shown that Mr.. McGrew is wrong in as
suming that the New York clearing house
system is founded in a credit policy, the ar
gnment whatever it is, which he draws
from it, that the State of Ohio should there
fore also return to this credit policy, is er-
roneous.
To prove this, l will refer to it again in
my next A. ". II.
Legislative Items.
In the Senate YESTERDAY. the following hills