The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1860-01-07


throughout the State.
II appears to the Superintendent that the man.
ageDeDt Of banking capital eau be brought within
certain fixed rules beneficial alike TO both the
lender and the borrower. In fact that common
prudence would warn the banker that beyond
certain and fixed liability he should not advance
That the temptation To bank officers with means IN
their hands is great TO step beyond the bounds
which prudence would dictate, is fully admitted,
when to this is added the fact that the larger the
dividends the more sagacious the officers are In the
| eyes Of the stockholders 1t would seem almost
idle 10 endeavor to show by the experience of the
past where the bounds Of safety lie in the employ
| meDt Of capital in the business of banking.
While the employment o. capital IN the business
of banking is LETT free as its use is in any other
business and in the opinion of the superintendent
properly SOFT is IDLE to invoke legislative aid to
control it, The desire to accumulate property or
capnal in the individual man is far safer to the
community, and more certain in its action upon
banking capital, and its abuse, than the con-
| centrated wisdom Of all past legislation.
To exhibit the actual condition of the business of
| banking in this State, its elimination and its
gradual but certain return to the point that will
make the investment OF capital in that pursutsa
certain and secure source Of remuneration t. its
propIie,ors, the following summary In relation to
the investment of capital in banking has been pre-
pared. The banks, banking associations aud ndIvi-
dual bankers doing business IN this state mad placed
upon interest ia the shape Of disc Juated notes,
OF rather what may be more properly called loans
and discounts IN 1850, So 97lO0 per cent Of their
liabilities including their capital, deposits and Cir
cuiatlOn IL Will De observed tnaL Of immediate
means but II per cent, including bank balances
was instantly available.
This was using capital and the credit of deposits
and circu'atuD 10 the utmost exte ut that prudence
would admit, consistent with the safe aud protta-
BILE investment of the actual amount of capital
employed. This per centage arose tO 81 9l0O per
cent ia 1851, and fell to s3 S4-l00 in 1852; was
again reduced to 50 5llO0 iD 1853. 1t Tell again to
IS 7llOO in 1854, again rose to SO 75.lOo in 1885,
remained nearly stationary at 10 during the years
1856 and 1857 and reached the lowest point, far
profits we're c0ncerned-77 26.l00-in 1858; aud
again To 7S Sl00, within fraction of the gene
raj average for the ten years. in 1859.
IL is proper here to state that the per centages
above mentioned have been Cast upon capital, de-
If stocks and bonds and mortgages held in this
office as security for circulating notes issued upoa
them this deposit forming portion Of the capital
of each bank making such deposit
1t will be readily noticed that 1850, 1851 1859,
1853 and 1855 the successful years of banking,
looking to immediate profits instead of ultimate
safety; and il will be seen by the rapid increase Of
capital employed in the business IF banking, how
responsive it was to its profitable employment in
that peculiar business or pursuit.
Again, the investments of the banks during those
years show the same result and that banking, as
business, in this State reached its extreme point Of
profit during the years 1850, 1851, 1852, 1853 and
1855.
During the year 1850 the aggregate loans-in-
this departmental the banks, banking associa.
tons and individual bankers of this State, were
$239 for each 800 of actual capital paid up; in
s223 in 1855 1927; in 1856 s223; ia 1851 s2t7; in
1885, sl92; and in 1852 sos. The figures are given
in round numbers, without the fractions
| 1t will be seen that the profitable years for
banking capital are again shown to have been
| 1851, 1852, 1858 and 1855.
| During the year ending on the 18th day of
June, 1858, nearly sll,Ooo0oo of banking
during the succeeding year 81 600 O0O and in 1856,
sl2 900 600, and nearly $l0,O00,OOO in 1857 thus
increasing the banking capital of the State from q
little less than $50 100000 in 1852 to over slO7 0O0,
600 in 1857.
| A comparison of the years 1858 and 1859 will
show that the efforts of the banks to resume specie
payments reduced their yearly income or profits to
| point lower than the history OF banking in this
State, under the general law had shown during the
! past ten years, ard that healthy and profitable
OF capital in that business Is again approaching.
One Of the beneficial results arising from the
entire freedom given to the employment Of capital
| Oy our General Bank law is that the individual
sagacity of the owners of it will develope its use
in that business exactly commensurate with the re-
quirements Of the business Of the country, thus
proving that the immutable law Of supply and de-
mand applies with the same certainty and force to
the employment of capital in the business of bank
ing as to any other business pursuit.
AS before remarked the individual sag city that
can accumulate capital is safer guide to is in
vesment in any business vocation, be it what it
may, than any law which the Legislature can
| frame.
While no fixed and certain rule can be applied TO
the management of banking capital in this State,
and it is impossible to establish, with any certain
degree of accuracy, what line of discounts should
he maintained, as compared with the amount of
| capital deposits and circulation, still the expe-
Renee that the past ten years furnishes will
| throw some light upon this vexed question.
| The Superintendent fully admits that questions of
locality, amount OF deposits and circulation, do not
| allow the rule of action of each bank to be the
same In its transactions; STILL it appearst to him that
| al approximation to safe stand point can be OBJ
|
have been given in this report upon the amount of
cartal, deposits and circulation for the past ten
years taken from the annual Jnne statement of the
condition of all the banks banking associations and
individual bankers. This is found to vary from 81
| to u per cent, comparing the loans and discounts
with the capital deposits and circulation. The lowest
| point was reached in 1858.
The resumption Of specie payments by our
bands Immediately preceding their June state
ment Of 1858, and large reduction of their liabili
ties Of course Immediately followed their successful
| effort II will be observed that the tendency was
from their resumption to an increased use of their
capital, deposits and circulation this per centage Of
use rising from Il per cent in 1885, to 7S per cent
the available means Of all these institute ,ns in this
State is so 3d. 100 per cent 1t would that this
point should be safe to both banker and borrower,
and that this average would be fair criterion to
base an opinion upon, as between the extremes of
1850 and 1859 there were years OF very general
prosperity, as well as of extreme depression, in the
business Of banking.
| The superintendent repeats that no fixed and
permanent rule can be applied to each bank,
whose action must depend upon its locality the
demands made upon it by its regular dealers, the
length Of time the paper it usually discounts has
to mature, the steadness of its deposit line, and
the amount Of its surplus profits. Still, he believes
that experience teaches that when the line Of in.
vestments Of a bank reaches beyond say 70 or so
per cent Of its capital, deposits and circulation, il
| Is stimulating the business Of the community
around il, beyond healthy and steady action, and
| extending itself beyond prudent and safe use of
its capital and credit. If bank is properly oca
and circulation will yield a fair rate of profit
to ts stockholders and capital win increase its
| employment in the business of banking as the COM
merce of the State requires, the maintenance OF this
position by the banks will not retard cripple the
growing business of the citizens Of our State.
The wisdom Of our general Bank law is becoming
more and more apparent each year While it gives