Year: 1859




Reform of the Currency and Ranking


The gentlemen who have formed themselves in
to an association to discuss the defects in our svs
tenn of currency and banking, and their remedies
appointed a committee to draw up q report, which
has Just been published. 1t merits attention. II
neither recommends bullion bank nor general
gold-note currency, according to the false reports
spread by some daily newspapers. Sour system
OF banking, says the report, contains some inbe-
rent, deep seated defects. 1t forces the currency
at irregular periods into violent paroxysms of ex
pansiOn and contraction. To-day for instance its
volume IN this city is at least twice told what it
was twelve months ago. These conyulsiye move
ments 1t lmparts TO commerce; tor it is scarce
speaking hguratively TO say. that money is the
nervous fluid of commerce. 1t pervades the COM
mercal world. prompts every act of exchange, and
imparts to commerce everywhere the principle of
activity. Whenever our currency is thrown into
one of its parOxysms of extreme expansion by the
undue enlargement of bank loans, it literally in
tOxIcates commerce. and drives it into all sorts of
exeeSses."


Undue expansion involves, as a matter of GER
tainty an undue contraction, which is the greatest
evil that can be inflicted on merchants and traders
perfectly ruinous to very many of them. To
remedy this the Committee propose to procure a
law, to be passed in the State Legislature, to lin
1t bank loans to one and half the amount of bank
capital and the amount of specie at any one time
In the bank and that the banks be compelled to
keep on hand specie to the amount of at least 20
per cent. of their money deposits made with them


The exTansiveness of the currency meets with
great auxiliary and stimulus in the circulation of
small notes, to remedy which it is proposed that
Congress levy tax or stamp duty on all bank
notes, under ten dollars. This would be effective,
and would enable the banks to keep a sufficient
supply of specie on hand. There are other means
proposed, the principle of which is the abolition
of the usuTy laws a measure we have often adyo-
Gated as essential to sound conduct of finance and
banking-afording all safe aid to the borrower,
upon whom all the expense falls of being obliged
to raise money at rates contrary to law, which is
constantly done when money is worth more than
seven per cent The Committee recapitulates, and
concludes as follows


To recapitulate the measures recommended. They
are:


First, That the banking laws of this State be so
amended that bank shall hereafter be permitted TO
extend its oans discounts and other investments be-
yond amount equal to the Of its capital half its
capital, and the specie in its vaults shall it be
permitted to let its specie at any time fall below 20 per
cent. Of its immediate liabilities, exclusive Of its circu-
lating notes. That banks hereafter to be organized
under the banking laws Of this Sste also be required
before commencing business have their entire csp
tai paid up in full in specie and that all banks be
hereafter prohibited from making oans either directly
or indirectly, on their own stock.


SecOnd, mat all laws against uSufy De repealeQ.


Third, That the circulation Of all banknotes of less
denomination than dollars be suppressed, by
Of tax or stamp duty to be levied by Congress.


Fourth, That the government Of the United States.
through its different treasures receive gold from the
people, and issue receipts certificates of deposit there
for, in sums of not less than hundred dollars


These four measures constitute the system Of reform
your committee venture to recommend. They have
pointed the necessity and propriety of each under
the proper heads. They may here add their belief
that the adoption Of the entire series would be likely
elevate the character of currency as to make
the best extant instead of being about the worst as
it unquestionably is 1t would render our eurren-
CIV better that Of Great Britain, because the res
trants which she has placed upon her banks do not
embrace deposits. Sir Robert Peel's bill has made
this fatal omission, and is thus rendered of little prac
teal value. Its limitation of the movements of the
Bank of England applies only TO the circulation, requir-
ing all that Is issued in excess Of El4 OOOO 900 to repre-
sent equal amount of coin IN its vaults but leaving
it and all other banks in the United Kingdom, includ-
ing the private bankers and discount houses free to
transmute debt into currency, by loaning their credit
10 whatever extent their inclination and ability NAV
dictate They had abused this privilege, prior to the
crisis of last year, to much greater extent than
our own banks. In other words, their currency was
much more inflated than This assertion viii sur
prise many but it is nevertheless, strictly And
had not the Government wisely forward and au-
horized the Bank TO violate its charter by increasing
its issue regardless of the specie in its vaults and thus
breaking the force OF the reaction and panic before they
reached their eliminating point, they permit
ted to do here the whole debtor class in that kingdom
would have been involved in hopeless bankruptcy. As
it was they suffered more than we did There were,
perhaps less of suspended debts there but vastly more
of actual insolvency.


The banking system of France is liable to the same
objection Its discounts not subject to any legal
restraints whatever, nor is its circulation well guard
ed as that of the Bank Of England But the commerce
of that nation less seriously affected by the crisis
than was that of Great Britain the United States
because is prosecuted the principle of cash pay
ment or very short credits.


But to return the Of reform here recon-
mended. Why should they not be adopted and nodded
into laws: Sound views of public policy, and a due
regard for the general welfare, alike demand it. From
what quarter may anticipate objections Surely
not from any we-managed bank, for the proposed
measures will not lessen its average profits while they
will add greatly to the security Of its business. And
if well grounded objections cannot come from this
quarter they cannot come at all, for their adoption
would greatly benefit every other interest.


GEORGE 0PDYKE,


WILSON &. HUNT,


JAMES GALLATIN,


JOHN EADIE.