The Clarksburg telegram. [volume] (Clarksburg, W. Va.) 1874-1926, 1910-10-13
In this Country is Described
by the National Moneta-
tary Commission.


WASHINGTON, D. C.. Oct. 10
Early attempts to solve the problem.
of banking In this country, partlcu
larly those connected with the issue
of notes, are described in volum,
just published by the National Mon,
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
noIogy, and Or. Robert E. chadduck,
of the University OF Pennsylvania,
have made use OF original documents
in the preparation of this work.
Professor Dewey traces the develop
nient 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 "The safety-Fund
Banking System in New York State.
1S29-1sS6, history of New York's
experience with circulation re-
demptlon 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
to stockholders to meet payments on
their subscription. For the period
of 1900 to 1850 It has been esti-
mated that more than one-fifth 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the purpose, was withdrawn the next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 installments and stock notes
tended to attract an unsubstantial
and speculative class of stockholders.
III 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, a
grant SO generous as to amount to
practically no limitation what ever.
I'm 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 banks
existence instead OF an incidental
fund. The limitations OF note issues
to a 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 couvertibillty lay in the
liability imposed upon stockholders
and more particularly upon directors
in case OF failure or mismanagement.
Indeed, many in the earlier part ol
the century considered that 1t was
improper and Injurious 10 call upon
bank for specie in payment of its
bills. Brokers who sent home tn,
bills of country banks were denounc
ed as spectators and bloodsuckers
whose extlrpation would be a publ,
benefit Respectable men defende,
the conduct Of banks in interposin,
obstacles to the payment OF thef
notes to brokers who had bough
them up to discount. A Bostol
broker was brought before the gran,
jury of Vermont for demanding pay
ment in specie for the bills Of one o
It's banks. on the complaint of tn
attorney general that he was guilt
OF In dictable oftense."
"As result of the disastrous es
perience, various methods were trie
to enforce redemption. On the on
hand, the public. through Its legit
Iature, imposed penalties upon bank
for failure to honor their note obi
cations; and, on the other hand, pr,
q, .--..a5 t,nnt,. &c.,