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House of REPRESENTATIVES, July 18, 1846. Ordered, That 350 copies of the foregoing resolves, reported by Mr. Stuart of Hollis, from the Joint Select Committee to which were referred sundry petitions for biennial sessions of the legislature, &c., be printed for the use of the legislature.



No. 30.



The Committee on banks and banking, having had under consideration the petitions of sundry banks for a renewal of charter, ask leave to

REPORT: That by the existing laws of the State, the charters of all banks expire the first day of October, one thousand eight hundred and forty-seven, and that justice to them as well as to the business community, would seem to require, at the present session of the legislature, an indication of the future policy of the State upon this important subject.

The use of paper money has become so associated with the habits and prejudices of the people that a return to the constitutional currency, however desirable, would at this time and under existing circumstances, be utterly impracticable. The several States claim and exercise the right of incorporating banks within their limits, for the purpose of furnishing a paper currency. Until the constitution shall have been revived and this immense power ceded to the general government, the effort of individual States to correct the evils incident to our banking system, will be unavailing.

The committee do not question the fact so often demonstrated that a paper currency gives a fictitious value to all the exchangeable products of a nation. That it sooner or later neutralizes the effect of discriminating duties upon domestic manufactures by adWm. T. Johnson, Printer to the State.

vancing the price of all the agents of production, and that its inevitable tendency is to turn the balance of trade against a nation, by enhancing the price of articles of export, thereby enabling others to undersell it in the markets of the world. They are also aware that a paper system is subject to sudden contractions and expansions, which change to a ruinous degree, the relative conditions of debtor and creditor; but at the same time, they cannot forget the utter inability of a single State to regulate the currency of the Union. The most we can hope to do is, to ensure the redemption of the bills of our own banks, and impose such restrictions as will check local fluctuations.

The committee are of opinion that our present banking laws are comparatively safe, and experience shows that no losses to billholders have occured the last fifteen years, where a reasonable discretion was exercised by the legislature in granting charters. The Revised Statutes contain several salutary provisions not embraced in the banking law of eighteen hundred thirty-one, and it is believed, with a due vigilance on the part of bank commissioners, and a rigid enforcement of the proposed law, the redemption of all bills will be effectually secured.

To guard against local fluctuations, the committee have deemed it expedient to introduce a clause providing that all banks shall have always on hand, one dollar in specie, to every three dollars in bills they may issue beyond fifty per cent. of the capital stock. It will be seen by looking over the returns of banks, a few years past, that fifty per cent. of the capital stock is a very moderate circulation, and up to that point no specific specie balance is required.

In some parts of the State, this provision would, in practice, have very little effect; but in those sections most inclined to inflations, it would operate as a serious check. The average circulation of the banks of Maine, in April last, amounted to about seventyfive per cent upon their capital stock, and the specie on hand, if equally distributed, would have been very nearly the sum now contemplated. In some sections, however, with a small amount of specie, the circulation was up to, and even beyond the chartered limits, and would have received a salutary check from the operation of the law herewith subnitted.

The banks can have no reasonable cause for complaint on account of these new restrictions; and the community, it is believed, when they consider the difficulties attending all sudden changes in the currency, will be satisfied with the law here proposed, establishing as it does, the principle of a specie basis, which may, if necessary, be hereafter enlarged. All of which is respectfully submitted.


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