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Bank of the United States.

difference may be very important. It appears by the re- visions of an act of Congress, and having a mischievous port of the commissioners appointed by the Secretary of the tendency upon the currency of the country, calculated to Treasury, already referred to, that on the 3d of March destroy or lessen the funds of the Government, or weaken last the bank stood as follows: Notes in circulation, the securities for the collection of the public revenues, or to $12, 109,352 23; specie, $5,595,077 25: and by the deceive and impose upon the people of the United States; return made to the Auditor General of the State of Penn- and, under this view of the matter, beg leave to report a sylvania, by the bank chartered by that State, in November bill providing for the punishment of the reissuing the notes following, it stood thus: notes in circulation, $9,733,032 28; of the Bank of the United States once redeemed, by those specie, $3,275,292 36 : being reduced nearly one half in in whose possession they are after redemption, and who specie and more in circulation, although it had in the mean are charged, by their own assumption, with their payment. time contracted a loan in Europe of $6,789, 194 44, and its liabilities equal to its entire resources.

Joint resolution relative to the notes of the Bank of the United States.

Since that time it has still further dwindled down in specie and in business ;

Resolved by the Senate and House of Representatives of and should the redeemed notes of the expired corporation the United States of America in Congress assembled, That continue to be reissued, as they have been, in a few months until the notes of the late Bank of the United States which the whole resources out of which the claim of the Govern- may have been returned since the third day of March last, ment ought to have been paid must be abstracted, and an

and redeemed out of the funds of the said bank, shall have entirely different responsibility substituted, and one of a

ceased to be reissued by its officers, directors, trustee or very doubtful character.

trustecs, and until the amount due to the Government from In proposing remedies against the mischiefs here advert- said bank shall be settled to the satisfaction of the Secretary ed to, we are met with the objection that the reissues have of the Treasury of the United States, the notes of said been made by the bank chartered by the State of Pennsyl- bank, and the notes of any bank to which its funds and vania, which, being a State institution, is beyond any con

estate may have been transferred in trust for the payment trol or legislative action by Congress. Your committee of its debts and the discharge of its duties and obligations, concede, to the full extent, that Congress possesses no pow shall not be received in payment of any debts due to the er to legislate directly over institutions purely of a State Government of the United States, or taken in exchange or character, and unconnected with the Government of the on deposite in any of the banks selected as depositories of United States. The answer, however, is, that a remedy the public money; and the Secretary of the Treasury is may be provided without interfering with the relations be. hereby directed to adopt such measures as he may deem tween the Government of the United States and the State necessary to carry this provision into effect. institutions, further than has been done heretofore without A bill providing for the punishment of reissuing the notes of the late objections. Congress has heretofore directed the description of circulation which should be received in payment of Be it enacted by the Senate and House of Representapublic dues, regulated the deposite of the public money in tives of the United States of America in Congress assemState banks, and passed other acts which, in their opera. bled, That if any officer of the Bank of the United States tion, affected indirectly more or less the institutions incor- shall reissue, or cause or permit to be reissued, any note or porated by the States. But again, the Bank of the United notes of the said bank which had been redeemed at the States chartered by the State of Pennsylvania, as already said bank, or the trustee or assignee of said bank, out of seen, has connected itself with this Government more in the funds belonging thereto, since the third of March last, timately than any other institution of the kind, having, it shall be deemed a misdemeanor; and, on conviction without the request or consent of the Government, taken thereof in any district or circuit court of the United States, possession of more than $8,000,000 belonging to the peo- the offender shall pay a fine of one thousand dollarx; the ple of the United States, and added it to its own stock, and one half thereof to the use of any person who shall prosevoluntarily assumed the payment to the Government of cute the same, and the other half to be paid into the Treas the United States, but has refused to pay it or to settle the ury of the United States. amount, and continues to reiesue the notes of the Bank of the United States in which the Government was a stock

BANKING COMPANIES. holder, and for the redemption of which notes the money of the Government in its 'hands is liable. Its relation to the

House of REPRESENTATIVES, MARCH 3, 1837. Government, therefore, is peculiar, and of its own seeking; being a voluntary and unsought depository of the public. Mr. Galbraith, from the select committee to which the money, and placed in possession of the funds in which the

subject had been referred, made the following report: Government have an interest, and thus by its own act

The select committee to which were referred certain mebrought within the legitimate control of Congress.

morials suggesting an amendment of the constitution of the Your committee believe it to be not only the right but United States in relation to banking companies, and against the duty of Congress to protect the community from the the reissuing of the notes of the United States Bank, beg deception of a circulation spurious in its character, bearing leave to make their final report : the authority of the United States, being the same, in At the time of the adoption of the constitution of the effect, as counterfeit paper. By directing that such circu- United States, there were but three banks in all the States, lation shall not enter into the collection of the public reve- with a capital, in all, of $4,550,000: the Bank of North nues, it is believed a large portion of it will be thrown out America, in Philadelphia, with a capital of $2,000,000, of the circulation of the country, and its true character first chartered by the old Congress in 1781, and afterwards made generally known. By this means, the intention of by the Legislatures of Pennsylvania and New York; the the act of Congress, that all the notes of the Bank of the Massachusetts Bank, at Boston, chartered by the LegislaUnited States should be called in and redeemed within the ture of Massachusetts in 1784, with a capital of $1,600,000; two years after the expiration of its charter, may be at least and the Bank of New York, chartered the same year, with in part carried into effect.

a capital of $950,000. This constituted the whole bankWith this view, they propose a joint resolution for the ing capital of the United States at that time. The framers adoption of the House, excluding such notes from circula- of the constitution, therefore, had but little knowledge of a tion, so far as regards the collection of the public revenues. banking system, such as it now is in this country. It

Your committee are also fully satisfied of the power of could scarcely be expected that they could have anticipated Congress to render penal any future act violating the pro- that, within half a century, there could be eight hundred

VOL. XIII.-T

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and twenty-three banks, with a capital of $378,421,168. | debts, is withdrawn from the States on the same principles Such an anticipation would have required a revival of the with that of issuing a paper currency.' spirit of prophecy. They had experienced the fatal effects But whatever may have been the intention of our politiof the provincial paper money, and the no less pernicious cal patriarchs in framing the constitution, or their deep-felt results of the continental paper, and provided, as they sup- regrets in seeing what they supposed its spirit departed posed, in the constitution, against both : against the for- from, in the multiplication of banks, and the unexpected mer, by providing in the 10th section of the 1st article that deluge of nominal paper money; a paper system has be"no State shall emit bills of credit, make any thing but come too firmly settled in almost all the States of the Union gold and silver coin a tender in payment of debts;" against to have the most remote prospect of relief from it, but in a the latter, by nowhere giving to Congress the power of radical change of the fundamental instrument of compact creating a paper circulation. It is matter of history, that by which the States are bound together. However ardent the old Congress of 1776 had emitted continental paper to they may have been in their efforts to fix the impression carry on the war, by a majority of its members, until the upon their posterity, and those who came to administer the adoption of the articles of confederation in 1778, in which Government after them, that the precious metals should it was provided, among other things, that Congress should constitute the only constitutional currency of this highly not “emit bills, nor horrow money on the credit of the favored country, which should preserve the sound princiUnited States, &c., unless nine States should assent to the ples of equality to all its citizens, by establishing a “hard

It is very probable that the small amount of bank money Government;" yet, through a variety of brilliant issues at that time attracted very little attention, particu- schemes and projects, apparently for the promotion of falarly as specie was very abundant for some time after the vorite objects of improvement, and the untiring activity of revolutionary struggle: the French and English armies at those who found it easier to live upon the industry of others New York and other places, the foreign loans, and the than to labor themselves, we have found a paper system Havana trade, having introduced great quantities of the grown by progressive steps to its present enormous and precious metals into this country. With the provisions, appalling extent of nearly $400,000,000 of banking capitherefore, that “no State should emit bills of credit, make tal authorized by the Legislatures of the several States. In any thing but gold and silver coin a tender in payment of the various stages of its progressive increase, we have ocdebts;" and that Congress should have the power “to casionally heard the voice of some disinterested and patricoin money, regulate the value thereof and of foreign coin, otic statesman, in the simple eloquence of political truth, and fix the standard of weights and measures;” and the exclaim against it as an encroachment upon the equal silent negation of power to Congress to emit bills of credit, rights of man; as rapidly building up a mushroom aristocthe framers of the constitution, no doubt, supposed they racy in the country, of a most dangerous and destructive had thrown an ample guard around the currency of the character, and bearing down the most dear and sacred princountry, and secured the poor and industrious from the ciples of our republican fabric; but it has as often been pestilential effects of a paper-money system, and the curses hushed and stifled by the more noisy and zealous clamors of the speculations and frauds which follow it. Such ap- of interested projectors and speculators, who could see their pears to have been the sentiment of political writers of that own immediate and pecuniary interests involved, and likeday. We shall content ourselves here with one quotation ly to be swept away by the destruction of their darling from Mr. Madison, than whom no one was better qualified monopolies. The paper system, through the instrumentto expound the intention of that invaluable instrument. In ality of soulless and irresponsible corporations, notwiththe forty-fourth number of the Federalist, speaking of the standing repeated Auctuations, panics, bankruptcies, and clause of the constitution providing that “no State shall ruin, clearly traceable to it as the prime cause, has still emit bills of credit," &c., he says:

grown up and extended, until we find it what it now is. « The extension of the proposition to bills of credit must What the States were bound, or rather what they had solgive pleasure to every citizen, in proportion to his love of emnly agreed, not to do directly, has been done indirectly, justice, and his knowledge of the true springs of public by the surrender of a high sovereign power to incorporated prosperity. The loss which America has sustained since companies, by vesting them with exclusive privileges of the peace, from the pestilential effects of paper money on banking. the necessary confidence between man and man; on the The system of banking by companies incorporated by the necessary confidence in the public councils; on the indus- State Legislatures, as they now exist in this country, blendtry and morals of the people; and on the character of re- ed as it has become, and interwoven with all the business publican government, constitutes an enormous debt against and transactions of society, and reaching the personal inthe States chargeable with this unadvised measure, which terests of every individual in community, from the humble must long remain unsatisfied; or, rather, an accumulation day-laborer to the most extensive wholesale merchant, is of guilt which can be expiated no otherwise than by a vol- extremely complicated and difficult to understand in all its untary sacrifice on the altar of justice of the power which various ramifications. Its intricacy and complexity is such has been the instrument of it. In addition to these per- as to call in requisition the closest scrutiny and investigasuasive considerations, it may be observed, that the same rea- tion of the skilful political economist; and its general and sons which show the necessity of denying to the States the universal operation upon all branches of industry demands power of regulating coin, prove with equal force that they from every citizen who regards his own interests, the equalought not to be at liberty to substitute a paper medium in ity of rights, and the spirit of our republican institutions, or the place of coin. Had every State a right to regulate the the liberties of this country, his undivided attention and value of its coin, there might be as many different curren- coolest and most serious reflection. cies as States, and thus the intercourse between them would Your committee do not profess an intimate acquaintance be impeded; retrospective alterations in its value might be with all the minute intricacies of the banking system, or made, and thus the citizens of other States be injured, and the complicated machinery of corporate privileges, or the animosities be kindled among the States themselves. The usurpations, assumption, and arrogance, the corruptions subjects of foreign Powers might suffer from the same and oppressions of incorporated companies. They procourse, and hence the Union he discredited and embroiled pose, however, with what lights they possess, and with as by the indiscretion of a single member. No one of these much reflection as they have been able to bestow upon it, mischiefs is less incident to a power in the States to emit consistent with their other duties, entering briefly into the paper money than to coin gold and silver. The power to consideration of the subject submitted to them in the me. make any thing but gold and silver a tender in payment of | inorials, under the following heads of inquiry :

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First. What is money, its use, and essential proper- to measure the value of all others, are very obvious. They ties?

are more appropriate and suitable than any other articles. Second. What is the banking system as it now exists They are easily di visible into small fractions, and as easily in the several States of this Union? What its nature, his- united without loss. Their quantity is the least susceptible tory, and effects upon the various transactions of society? of increase or diminution, and, therefore, the least liable to

Third. What remedy may be provided against its evil fluctuation-a most important property for money, as we consequences ?

shall explain more fully hereafter. They are of the same As preliminary to and closely connected with the subject quality in all countries and under all circumstances, which more immediately submitted in the memorials, we take up is not the case with any other metals. Iron, for example, the first inquiry proposed, viz:

is of very different quality, even in the same neighborhood ; What is money, its use, and essential properties? and copper is much finer and heavier in some countries

Money is the standard of value established by law; the than in others. They are both fusible and malleable, so sign or medium of price by which labor and products are as to be capable of being united with sufficient convenience, estimated, products and commodities exchanged, and con- and receive the stamp or certificate of the Government detracts fulfilled. It is an essential part of the machinery of signating the weight and purity of the particular piece ; civilized society ; without which, commodities in their com- and, at the same time, sufficiently hard to prevent the obplicated varieties could not be compared with each other literation of the sign that is stamped upon them, though as to value. Dr. Adam Smith, in his Wealth of Nations, freely circulated. vol. 1, book 1, page 44, says : ** In all civilized nations, The material of which money is formed must possess money has become the universal instrument of commerce; intrinsic value. The stamp, or certificate that such a by the intervention of which, goods of all kinds are bought piece contains a certain quantity of that material, of such a and sold, or exchanged for one another.". Hume, in his quality, so that the people may confide in it without the Essays on Money, vol. 1, page 299, (Edinburgh edition,) inconvenience of weighing or assaying it, is the attribute says : “ Money is not, properly speaking, one of the sub- of sovereignty alone. It is most appropriately so when jects of commerce, but only the instrument which men the Government is republican, framed and controlled by have agreed upon to facilitate the exchange of one com- the people themselves, and those who administer it are modity for another. It is not one of the wheels of trade : immediately responsible to them. The power to impress it is the oil which renders the motion of the wheels more this stamp, or certificate of quantity or quality of the masmooth and easy."

terial, designating its value, can never be lodged safely any It would be a tedious labor, and answer no valuable prac- where, so as to secure the confidence of the people as an tical purpose, to inquire into the origin of money, or what | instrument of value, but in the Government; and least of led mankind first to adopt a common instrument of value; all can it be safely intrusted to corporations not created and perhaps the result of such an investigation would be by, nor under the control of, the people, and whose offiextremely uncertain. We may imagine a state of barba- cers are placed under no responsibility to the people, either rism, and probably might trace it, when the transactions moral, political, or pecuniary. Although it is necessary of men were so rude and simple as to be purely subjects of that Government should stamp some device upon the metal, first occupancy and barter. Such an inquiry might be in- in order to designate the quantity and purity of the coin, teresting to the curious, and arrest the attention of the and thus fit it as an instrument of exchange, no absolute philosophic antiquarian, but could serve little purpose to value is thus imparted to it. That it possessed before, else the practical statesman of the present age in our country. it could not serve as a measure of value. Mr. Raymond, in

That different commodities have been employed by dif- his Elements of Political Economy, volume 1, page 234, adds ferent nations, as media of exchange, at different periods, his own opinion in support of Mr. Reed, whom he quotes, we have from authentic history. Oxen were used among thus : “ Money has two distinct functions to perform; the the Greeks; bulls in India; salt in Abyssinia ; tobacco in one is that of a measure of value, the other an instrument Virginia ; sugar in some of the West India islands; iron in of exchange. Those different functions, though intimately Sparta ; and copper among the Romans. Corn, leather, and inseparably connected and blended together in practice, and cocoa, have each, in their turn, served as the selected are perfectly separate and distinct in their own nature ; and commodity to determine the value of all others. Silver and the qualities likewise requisite in the material substance of gold have been adopted by most civilized commercial which money is composed, necessary to fit it for the proper nations as the most convenient commodities to serve as performance of each of those functions, are distinct and money, or the measure of value. They were first used in different. bars or bullion, and required weighing or assaying, which “To be capable of performing the function of a measure interposed an inconvenience. To avoid this, and to ac- of value, money must have value in itself, and inseparable commodate it to the exchanges, in process of improve- from it, to the full amount of that for which it passes curment, civilized Governments directed the coinage of the rent.

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to officiate as an instrument of exprecious metals by dividing them into convenient fraction- change, it is sufficient that it be the representative of that al parts or quantities, and stamping it in such a manner which has value. For the former purpose, gold or silver, as to denote the quantity or denomination of such parts. or some substance possessing similar qualities, is indispenUntil public authority, by its stamp, confers upon the pre- sable. For the latter, paper, or any article conveniently cious metals the character of coin, it is not legal money, portable, on which can be marked an engagement or oblihowever valuable they may be intrinsically as an article of gation, rendering it the representative of that which has merchandise. Nor can public authority add to or dimin- value, may be sufficient. But paper never measures value. ish their value ; it only fits them better as a medium of ex- It acts merely as an instrument of exchange. It is merely change. As Mr. Ganible says, “ the monetary law is the representative of that which measures. Its own value simply declaratory of the fact,” (the value.) Silver has must be measured and defined. It depends for the definibeen more generally adopted as money than gold, owing to tion, or measure of its own value, totally on that of which the too great scarcity of the latter metal to serve the purpose. it is no more than the representative or sign. Nor can it Gold was not used but as an article of merchandise in Eng- be dependent upon, when separated and disconnected from land, until 1728. The United States have adopted both as that which it represents, to continue the same for the shortstandards of value.

est period. The reasons why improved and civilized Governments “ It is necessary, therefore, to have a money of quite a have adopted gold and silver as the preferred commodities, I different description from paper, to act in the capacity of a

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measure of value, and to fix, determine, and define, the | etary system, by increasing its quantity without increasing value of paper, and every other money which circulates at a the value, are not only useless, but unjust and pernicious, greater value than it is intrinsically worth.

and have always been found so, whenever the experiment “A measure having neither length, nor breadth, nor has been tried. thickness, could not measure those qualities of matter. А Mr. Raymond says, at page 237 of the volume before measure having no weight could never measure the weight quoted, “ It seems to have been a prevailing opinion, even of bodies ; neither can a measure having no value measure down to the present time, that the quantity of money could their value. Money, as a measure, is not different from be increased by various expedients, without increasing the measures of other kinds. A measure of length must have actual quantity of value. Hence, in the earlier periods of length; a measure of weight must have weight; and a civilization, the denomination of the coin was frequently measure of value must have value.

changed, for the purpose of increasing the quantity and “ If it be necessary to define and fix precisely the meas- plentiness of money. In some cases the coin has been ure of lengt--as an inch, a foot, a yard; and the measure adulterated with a baser metal, while its nominal value was of weight, as a grain, a pennyweight, an ounce, a pound retained, for the same purpose. In modern times, a more so it is equally necessary to define and fix precisely the refined method of adulteration and deception has been pracmeasure of value, as a shilling, a guinea, a pound sterling. tised, with better success as to accomplishing a fraud on Mr. Raymond, at page 236 of the same book, proceeds: the public, but with no better success as to increasing the “The value of a piece of coin depends on the quantity of quantity of actual value. Instead of using a baser metal metal it contains, and not on the device with which it is for alloy, and incorporating it with the precious metals by stamped.” Mr. Gouge, in his excellent treatise on the a coinage, a quantity of paper, purporting to be money, Principles of the American Banking System, at page 9, has been infused into the volume or mass of circulating holds the same sentiment: “ The precious metals do not medium; and in that way the nominal quantity of money differ essentially from other items of wealth. This is dis- has been increased, without any increase of the quantity of tinctly seen when they are in the form of bullion. Con- value." verting them into coin does not change their nature. It When $100,000 of specie or coin constitutes the circuonly adapts them to a particular use; fits them for passing lating medium of a community, that $100,000 measures from hand to hand, without the trouble of weighing or as the value of all the property in that community. If the saying each piece at each transfer.” Again he says: Legislature then resort to the expedient of increasing the “Some farcy that it is the authority of Government that quantity of the circulating medium, by directing twice the gives money its value. But the true value of money, as quantity of alloy to be infused into this medium, and the ineasured by the amount of goods for which it will honest- mixed mass to be coined in the same way, still calling it ly exchange, cannot be affected by edicts of princes or acts so many dollars, or by emitting 200,000 nominal paper of Parliament. Monarchs and ministers may alter the dollars, to pass into the circulation with the specie, and weight of coins, or lessen their purity ; but they cannot obliging the citizens to take it in all contracts and exchanges, make a coin containing one half of an ounce of pure silver three dollars then will measure just as much property as worth as much as a coin containing an ounce. The stamp one did before the resort to this unskilful expedient; and of the State is a mere certificate of the weight and fineness the man who had sold his land or other property for the of the piece.

price of $100, is paid in the depreciated medium, and chealIt follows from those premises, that money being neces- ed out of two thirds of his honest debt. On the other hand, sarily a measure of value, as well as an instrument of ex- the man who buys when the mass of circulation is thus enchange, without increasing the quantity of value, its real larged, and before pay-day the Legislature withdraws the and actual quantity cannot be increased. It is true that it may alloy or abolishes the paper dollars, pays just three times be numerically or nominally increased ; the volume of the as much as he had agreed to pay. circulating medium may be enlarged by adulteration of the Your committee have, perhaps, been somewhat tedious metals themselves, or the emission of something else in on this branch of the subject involved in the inquiry protheir place; yet the quantity of real pure money remains the posed; yet, as they have regarded the first and fundamensame, and just as much as it has increased in quantity it tal distinction in the properties of money, between the has diminished in quality, and will measure no more value quantity of the medium and the quantity of value, of great than it did before the infusion of alloy, or other valueless importance—a distinction between money and its supposed matter, into its inass.

representative, often very imperfectly understood, and the It is also true that a measure of value is, in its very na- confounding or overlooking of which has, perhaps, proture, somewhat more imperfect than that of either weight duced more mischiefs upon communities than all other eror measure, and even gold and silver are not entirely free rors in political economy besides—they have thought propfrom this imperfection ; but the variations to which they er to be thus minute in relation to it. are subject are so trifling and inconsiderable as not to be It is bad enough when Government undertakes directly, perceptible in the practical affairs of life ; at least, they are by its own legislation, to destroy the distinction between infinitely the nearest perfection of any commodity that has money and its essential properties as a measure of the valyet been discovered.

ue of other commodities; still, while legislators, amenable Any change in the relative proportion between money to the people, choose to exercise snch power, their proceedand other commodities, by an artificial increase of quantity ings are public, and must be known, and are the subject of without an increase of value, will necessarily produce a animadversion and discussion, and the citizens have some change of price. If the quantity of money be nominally opportunity of anticipating the result, and preparing for it; increased, the price of property to be measured by it rises; but when that power is surrendered to corporations, whose the depreciation of money and the rise of price being pre- proceedings are secret, and whose officers are no way cisely the same thing. If the value of what is called a dol-answerable to the people, it becomes infinitely more perlar be lessened by the infusion of alloy, or the enlargement nicious and unjust. of the mass of which it is a fractional part, it will require a This leads to the second head of inquiry : What is the greater number of dollars to measure the value of a horse, banking system, as it now exists in the sereral States of or other commodity, just as it will require a greater number this Union ? What its nature, history, and effects upon of the measure of length called a foot, when shortened, to the various transactions of society? measure the length of a piece of cloth. All attempts, there- The banking system, as it now exists in this country, is fore, on the part of Government, to tamper with the mon- a machinery of no ordinary complexity and magnitude.

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Few subjects are less generally understood; and, at the which one citizen is enabled to acquire, or have transferred same time, few, if any, in the scale of political existence, to him, the property or acquisition of another, without an affect more closely the interests of every man in society. equivalent in what he had produced himself. Suppose

The banking business in America is performed almost there is in this little community a capital of real money of entirely by companies incorporated for the purpose by the ten thousand dollars, which measures all the property withLegislatures of the several States. These banking com- in it, and serves as the common medium of exchange in panies are not merely offices of loan and deposite ; they the transfer and exchange of commodities, the payment of are also offices of discount and banks of circulation, or labor, &c.; and that its circulation is limited, as the busimanufacturers of paper money; that is, they are not ness is within the cominunity itself; no increase of the merely authorized to loan what money they actually have, quantity of this circulating medium takes place without a at the legal rate of interest, and to undertake the safe keep- corresponding change in the quantity of value; consequenting of money for a reasonable per centage for their risk and ly, prices will be uniform, and always the same. In this trouble, but they are also authorized to discount notes of state of society, every one acquires just in proportion to those who wish to borrow, and manufacture paper money his industry and economy, whether farmer, mechanic, to the amount of twice or thrice the amount of money they laborer, or whatever his profession may be ; all is happireally possess. They are permitted, in fact, to supply ness and tranquillity ; no extravagant or wild schemes are with their own paper the circulating medium of the coun- projected of making a splendid fortune in a short time, try, and to drive the constitutional currency out of cir- without labor or substantial enterprise ; and every one culation; and thus swell the volume of nominal money, knows what price he is to receive for what he has or what and, just in the same proportion as they enlarge the mass, he does, and can calculate accordingly in confidence. decrease the value of the whole.

But a few of those individuals—we will suppose tenThe banking institutions of this country are thus seen conceive the project of establishing a bank of circulation, to possess a combination of four several functions, viz: to urging, as an argument, that it would make money plenloan money, to receive money on deposite, to discount tier, afford great facilities to trade and business, furnish a notes and bills of exchange, and to manufacture paper cheaper money, and more convenient, portable, &c., and money for circulation, stamping upon it the signs of value such other arguments as we have often heard in favor of corresponding in denomination with the legal coins of the those institutions. They apply to their Legislature, and country; and, for the exercise of all these functions com. obtain a charter for a bank with a capital of ten thousand bined, they enjoy exclusive chartered privileges, without dollars, with the privilege of issuing notes for circulation individual responsibility. As a loan office, or a depository, to the amount of twice their capital ; and all the rest of the a bank, well conducted upon substantial capital, may be individuals who do not become stockholders are prohibited, not only harmless, but even useful and convenient; and, as under penalties, from issuing their own paper. These an office of discount merely, it can do but little mischief. ten subscribe the stock, and pay in the instalment reMany, indeed, have confounded the function of a loan of- quired, say one hundred dollars each; they elect their offifice with that of an office of discount. There is a slight cers; and the machine, thus fitted up, is ready to comdifference. In the former case, the bank is the direct mence operations. Five of the stockholders themselves creditor ; in the latter, it acts rather in the capacity of a put in their notes to the bank for two thousand dollars collector. A merchant who holds the promissory note or each, making ten thousand dollars ; and, aware of the bill of exchange of a third person, payable at a certain day, effect they are about to produce throughout the society throws it into bank for collection, .endorses it, and the upon prices, go into the country and purchase up all the bank discounts it, according to the time the note or bill produce that is to spare at the then and heretofore steady has to run, and gives the merchant the amount, deducting and uniform prices; say wheat, at one dollar per bushel, the discount. In this case it performs the functions of an paying for it in the notes of the new bank. In a very office of discount, and acts as a collector. If a merchant short time, it is seen and felt that money is becoming wishes to obtain a loan, he makes his own note, with an plenty ; business becomes brisk and lively, and a new asendorser, and puts it into bank, and the bank pays him pect is presented. Others begin to lay plans of speculathe amount, deducting the discount. The bank then be- tion; and, for the purpose of carrying them out, comes the direct creditor, and in this case acts as a loan go to the bank to borrow. Forty of the remaining office. In the exercise of neither of those three functions individuals put in their notes for two hundred and do the banking institutions assect materially the transac- fifty dollars each, (ten thousand dollars,) which are shaved tions of the society, or operate to the prejudice of others. * by the bank at the rate of bank interest, six dollars and It is mainly in the capacity of paper-money manufacturers, forty cents per cent. per annum, and receive the notes of combined with their functions of loan offices, with incor- the bank, paying no interest for circulation. Some go into porated privileges, that they will be hereafter considered speculation, and others to building houses or making other and treated.

improvements, and each, feeling that he had obtained this As the object of the inquiry here is intended more to be money with so much more ease, by simply throwing a addressed to those who are not intimately acquainted with note into bank, and calculating that money, as they call the affairs of banking than for those who are well versed it, was going to be still plentier than it had been ; that the in all its details, in order to simplify the nature of such in- same bank which had made it so much plentier now could stitutions, we will represent the principle on a small scale, just as easily make it still more 50; and its directors were and separated from the great variety of combined circum- very excellent men, and would certainly direct its energies stances with which they are now surrounded, which con- for the benefit of the public, regard it very differently than ccal their effects. Suppose that a certain community con- they did when obtaining it only as they earned it; spend tains a population of one hundred citizens, each producing it more freely, and indulge in the purchase of articles they his equal share of wealth and property by his industry, would not have purchased before, and venture to make im. and each enjoying the benefits of what he produces, and provements they did not before. Every thing assumes a no more; and there are no artificial laws or regulations by new appearance; every description of business is active;

prosperity seems to glisten in every sunbeam; every body * Most if not all banking institutions in Europe, ex- praises the bank, and its projectors and managers are blesscepting in Great Britain, are merely loan offices, and offi- ed as the greatest and wisest men of the age; the president, ces of discount and deposite; such as Hamburg, Amster- or the man who can be traced as the first inventor of this dam, &c.

happy scheme of making money plenty out of paper, is

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