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Several of the banks which have surrendered their charters, had very little actual capital at the time of their surrender, and some few of them, it is believed, had very little when they commenced operating. The present banks, however, are believed to be conducting their business upon actual capital, and so long as they restrain themselves within legal limits, are undoubtedly safe. If we take a view of the changes and fluctuations of the currency for the last thirty years, we shall cease to wonder at the commercial disasters with which the country has been visited.
It appears from official documents, that during the suspension of specie payments in 1815 and '16, the circulating medium of the country had reached to one hundred and ten millions of dollars ; and that in 1819 it was reduced to forty-five millions, or 59 per cent. in four years !
From that time to 1830, it was estimated to average fifty-five millions; while in 1837 it had again run up to one hundred and fifty millions, being an increase of more than 150 per cent.!
In 1838 it was suddenly reduced to one hundred and sixteen millions. In 1839 it again expanded to one hundred and thirtyfive millions. In 1840 it again sunk to one hundred and seven millions. In 1841 it increased to one hundred and twenty-four millions, and in 1843 it had again sunk to forty-six millions, or nearly 63 per cent. in two years ! Since that period it has increased to about eighty-five millions of dollars. Is it wonderful that with such immense changes in the currency of the country, we should have had revulsions in trade, and panics in the money market?
The most important regulator of the prices of all kinds of property, is the currency. If it is inflated, property advances in price. If it is contracted, it declines in value. A healthy and uniform state of the currency, therefore, is most conducive to a sound state of trade, and a permanent and fair value of property.
The increased rate of interest in our large cities, during the last year, shows that money has been in more demand than it was the two preceding ones. It appears, however, sufficiently abundant for all the legitimate wants of trade.
It is matter of congratulation, that notwithstanding foreign exchange has been kept so near the specie standard, the currency of the country continues so sound and uniform. This in a great measure arises from the fact, that for the last three years the balance on our foreign trade, each year, has been in our favor; and as we shall probably, hereafter, continue to export more and import less, in proportion to the increase of the trade and population of the country, the balance in our favor may long continue. Our foreign imports for the years 1836, '37 and '38, exceeded those of 1842, '43 and '44, about 155 millions of dollars ; while our exports fell off during the latter period, but 39 millions ; leaving a balance in favor of the last three years, over the speculative years named above, of 116 millions of dollars. But a more just comparison could be made by taking four years previous to the speculative years, and comparing them with the four years last past, viz:
By comparing the imports, as stated in the above table, it will be seen that the excess of the first four years, over that of the last four years, was in the aggregate more than seventy millions of dollars; the population of the country in the mean time having increased about one third, and its wealth probably one fourth.
The decrease in the amount of our imports may, to a considerable extent, be attributed to the steady increase in the home manufacture of many articles which had formerly been imported from abroad, and which are now not only extensively supplying our own market, but which, to some extent, are exported, thereby dininishing our indebtedness to foreign markets, and preventing the export of our specie.
With prudence, therefore, on the part of those who have the controlling power of the trade and currency of the country, we may look for a steady and prosperous business for a series of years. It seems to be conceded that paper of some kind must, to a great degree, constitute the medium of exchange in the United States. We must, therefore, take banks for better or for worse, and all those who are entrusted with the creation or management of them should direct their efforts to secure the good they are calculated to produce and to prevent the evils to which they are liable.
Solid capital and prudent management are the main pillars upon which a firm confidence in banks must rest; they never should be chartered for the purpose of creating capital, but for funding it. When the latter course is adopted they are pretty sure to be directed by able and efficient officers; for few men who invest actual capital are willing to entrust it to unskillful hands. If, therefore, banks are established upon fair banking principles, the public have very little to apprehend from their failure.
The bank charters granted by the Legislature of this State, will all expire in the year 1847, and although the several acts for regulating banks and banking are believed to be as perfect as those of any other State in the Union, experience, which is said to be the best modern legislature, has shown that they are not entirely faultless. Some amendments, therefore, it is believed, are cessary.
The bank commissioners are perfectly aware that it is not their province to legislate ; they hope, however, that it will not be considered obtrusive in them to point out such defects in the statutes as have occurred to them during their several examinations, and to suggest the remedy.
It is obvious that the threatened forfeiture of charter will not deter all bank officers from transcending their legal limits in the matter of their circulation, the extent of their loan, the liabilities of their directors, and in taking, indirectly, usurous interest.
It is believed that these evils wonld be more effectually remedied by imposing fines of a sufficient amount to outweigh the advantages which may be derived from the several violations of the statutes.
It is believed also that very little additional security is given to the public by the present restriction upon the circulation of bank
botes ; that it would be more just to extend it to the amount of the capital stock of all the banks, and that such an alteration in the law would very little impair the public security ; for although banks with small capitals might sometimes reach their legal limits, those with large ones could never.
If the security of the public is the object of the Legislature, a more effectual guard to a redundant circulation, would be given by further restricting the loan. By the existing law it is extended to double the amount of the capital stock paid in. There never was a time since banking was established to any considerable extent in the country, that the aggregate loan of all the banks reached that limit; nor did it ever reach it in this State, although individual banks have exceeded it.
If the loan should be restricted to seventy-five per cent. more than the capital stock of the bank, instead of one hundred per cent. as it now is, and the restriction rigidly enforced, it is believed that very little danger could be apprehended from an extended circulation, or for a want of specie to redeem it, so long as the present system of redeeming in Boston is continued.
It is suggested whether provision should not be made by law the more effectually to prevent bank note plates from falling into irresponsible hands; and also for the better security of the public against counterfeiting bank notes, by requiring the use of a uniformi and superior quality of bank note paper, and plates of superior workmanship. This object would perhaps be more effectually carried out, if the notes for each bank should be furnished directly by the State.
The facility with which bank notes are imitated, demands serious Legislative attention.
It is also suggested, whether it would not be an improvement in our banking system, to grant no new charters for banks with capitals of less than one hundred thousand dollars ; and in our cities, of less capital than two hundred thousand dollars.
A bank with a reasonably large capital can be conducted with very little additional expense, excepting the tax, over that of a small There is less danger of getting up a spurious bank with a large capital than with a small one. A bank with a small capital may be owned and managed by a few individuals. Indeed, under the existing law, a bank of fifty thousand dollars may be owned by five individuals, the lowest number necessary to form a board of directors. Such a bank could do a larger amount of business in proportion to its capital, than one with a large capital, and would pay less tax to the State in proportion to the business it transacted. State policy, therefore, as well as public security, is adverse to the establishment of banks with small capitals.
We would further suggest whether provision should not also be made by law to oblige banks to protect their funds against fire and burglars, by obliging them to furnish vaults and locks of sufficient strength and guards for that purpose. While we would respectfully contend for legislative aid to protect the public and those who invest capital in banks without having a controlling power over it, we would also ask that the just rights of the banks should not be nego lected. Banks we must have, and if they are too severely restricted, charters will either be entirely refused or accepted by those only who would not hesitate to violate the law to enable them to make large dividends. Something, too, is due to them for the amount which they annually contibute to the revenue of the State, and which if applied to aid the payment of our State debt, as we believe it should be, would go so far to lessen the taxes of the people. All of which is respectfully submitted. NATH'L MITCHELL,
Bank ALPHEUS LYON, 3 Commissioners.