The daily telegram. [volume] (Clarksburg, W. Va.) 1901-1926, 1910-10-10
iii this Country is Described
BY the National Moneta-
tary Commission

w WASHINGTON. D. G.. Oct. 10
Early attempts to solEe the problems
81, banking in this country, particu-
Iarly those. connected with the issue
OF notes, are described in volume
I just published by the National Non
etary Commission. under the title.
! state Banking Before the Civil
War The authors, Prof. Davis r
Dewey, the well known economist of
the Massachusetts, institute OF Tech
nology, ana DR.. Robert 2. Chadduck,
, OF the University of Pennsylvania,
have made use of original documents
, in the preparation OF this work.
Professor Dewey traces the develop
ment OF the banking system in the
several states, laying particular
stress on the subject OF note issue.
Among the other subjects which he
takes UP are the regulations govern
ing the paying in of the capital, the
distribution OF the stock. the length
of the charter, the liability of stock
holders and directors, the granting
of loans and discounts, and the
specie reserve held. DR.. Chaddock's
Contribution Is on 4HS E9aAGIy = uAAA
Banking System in New York State.
1s29-1Ss6." a history of New York's
experience with a circulation re-
demption fund in many ways similar
to the device now employed in Can
ada.
Many banks, Prof Dewey finds,
were established on an Inadequate
specie basis, loans often being made
tor stockholders to meet payments on
their subscription. For the period
of 1900 to 1860 it has been estf-
mated that more than one-ifth of
the nominal capital of Rhode Island
banks was paid for in any other way
than stock notes. The specie paid
in one day, frequently borrowed for
the purpose, was withdrawn the next
day and the notes of stockholders
was substituted. In Maryland the
use of lnstallments and stock notes
tended to attract an unsubstantial
and speculative class of stockholders
'tIf the bank Jared we'll, the stock
holder enjoyed dividends on the
whole amount OF the stock; If it
failed. he could absolve his indebt-
edness to it by paying in his certifi-
Gates OF stock Thus he had all to
gain and was irresponsible for
, losses"
But little protection was given to
the note issues of the banks. Many
Of the acts of incorporation did not
specifically limit the amount. but
covered the point indirectly through
Limitations in the amount of indebt-
edness, including deposits. At first
this limitation was genrally set at
two or three times the capital,
grant SO generous as to amount to
practically no limitation what ever.
.'In the earliest charters there was
no express provision made for the re-
demption of notes, nor was there any
penalty for non-redemption. The Is
suing OF notes was generally regard
ed as the principal object of a bank s
existence instead of an incidental
fund. The limitations of note issues
to certain proportion of the capital.
which was often represented by
stock notes of shareholders rather
than by solid funds. was OF little
consequence. Practically the only
security for convertibility lay in the
liability imposed upon stockholders,
and more particularly upon directors
in case OF failure or mismanagement.
, indeed. many in the earlier part OF
the century considered that 1t was
improper and Injurious to call upon
n bank for specie in payment OF Its
bills. Brokers who sent home the
bills OF country banks were denounc-
ed as spectators and bloodsuckers'
whose extirpation would be public
heneRt.' Respectable men defended
the conduct or banks in interposlng
obstacles to the payment OF their
notes to brokers' who had bought
them UP to discount. A Boston
+, broker was brought before the grand
I, Jury OF Vermont for demanding pay
ment in specie for the bills OF one o.
its banks, on the complaint OF the
attorney general that he was guilty
OF in dictable offense."
GAS a result of the disastrous ex'
pertence, various methods were trie@
to enforce redemption. On the ONT
hand. the public, through its legis
lature. imposed penalties upon banks
for failure to honor their note obi
cations: and, on the other band, pru'
I 5o,,t ard vya11 managed banks found