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In presenting the statement of the condition of the banks, subject to my inspection, I have conformed to the previous practice of Inspectors and Commissioners. One side of these accounts shows the liabilities of the banks, and the other, the funds to meet those liabilities. The object of the inspection is, or ought to be, to show the public the true condition of those institutions which furnish the almost entire circulation of the country. One important fact, in which the whole community are interested, is, whether those institutions are able, or not, to redeem all their liabilities on demand? If they are so, have they managed therein with a due regard to the

public interest? The statement accompanying this report furnishes little evidence of the ability of the corporations to pay their liabilities.

The only property belonging to the corporations, of which the public have any means of ascertaining its true value, is the specie on hand and the real estate they possess. Deposits, in the Boston and New York banks, are represented as specie funds. There is no want of confidence, perhaps, in the soundness of those banks. Yet the public have no evidence of their ability to pay, except the annual statement furnished by the banks to the commissioner. The principal item contained in the statement of some of the banks, on which they must depend for the redemption of their bills, is the sum due on discounted notes. The value of those notes must depend upon the ability of the debtors to pay.Whether the large sums, due on discounted notes, are good, or bad, the public have no means of knowledge. The inspector may be satisfied that a large amount of that sum can never be collected, yet he is not permitted to disclose the names of the debtors. It appears to me more important at this time, that the true value of this debt due the banks should be ascertained, from the consideration that many of the charters are about to expire, and the corporations are petitioning for a renewal of them. Should the Legislature deem it expedient to renew them, ought they to be less careful in guarding the public against loss, than they were when the banks were first chartered? Then the capital was required to be paid in in gold and silver.

Should the charter be renewed, the debt due on discounted notes would constitute the capital stock upon which the corporation would commence their operation. Of the value of this capital, on which the corporation have a right to issue bills to three times its amount, the public have no knowledge, The effect of a renewal of a charter will more clearly appear from the statement of the condition of the Orange Co. Bank、 They report a capital paid in of $70,000. They also report a suspended debt of $30,000. I would here remark, that a large amount due some of the other banks, might, with as much propriety, be reported a suspended debt, as that of Orange county. Should the charter of that bank be renewed, they would have a right to issue bills to the amount of $210,000.

For the redemption of $90,000 of that sum, the bank must depend upon this suspended debt.

The necessity of ascertaining the value of the debt in favor of a bank asking a renewal of its charter, will appear from the history of the Windsor Bank. From the statement of the condition of that bank, reported to the Legislature a few weeks before its failure, there was as much evidence of its ability to pay all its liabilities, as any bank in the State. And if its charter had then been about to expire, the Legislature would, no doubt, as readily renewed it, as they would that of Brattleboro' or St. Albans. That bank was reported to possess a capital paid in of $80,000, and they had a right to issue bills to the amount of $240,000. Why may not a bank be permitted to go into operation at first, without a capital, as to renew one, without clear evidence that the capital first paid in has not been changed from specie for the notes of insolvent speculators? Facts, disconnected from the doings of the Inspector, have disclosed to the public the true value of the capital of the Windsor Bank. In August last I requested of the cashiers of the banks now in operation, subject to my inspection, the amount of indebtedness of all the directors, also their liabilities. From the Vergennes Bank, and from the Orange Co. Bank, I have received no statement of the amount of the indebtedness of the directors. From the Danville Bank I have received no statement of the condition of the bank, in form, to embody in this report. In January last I inspected that bank. The books were not in a condition then to make a formal and correct statement. The circulation was small, about $35,000. The liabilities of one of the directors was large. The indebtedness of the directors of the Bank of Rutland was, in August last, $22,000. The entire liabilities of the directors of the Bank of Burlington was, in February last, $3,050; May 1st, $2,300; and August 1st, $3,200. The liabilities of the directors of the Bank of Bennington, since the 7th of January last, have not exceeded $2,500,-August 20th, $2,000.

I would abstain from making any remarks, which would have a tendency to destroy, or to injure, a well regulated system of credit. If any bank has pursued a course of management, which, if exposed to public view, would, of itself, destroy its credit, the sooner the exposure is made, the better for the people. The Essex Bank partially sustained its credit,

by secretly depositing its own bills, as security for loans obtnined from other banks. After these transactions were reported to the Legislature, the transaction was justified, at least, not condemned, by a committee of the House, a majority of which committee were officers of other banks. The effects of endeavoring to sustain the credit system of a rotten and corrupt institution, are severely felt by the laboring class of the community, who have sustained a loss of thousands of dollars by the fruitless attempt to sustain this credit system. The Windsor Bank not only deposited its own bills to sustain its credit, but loaned a sealed package ef $10,000 of its bills, at one time, seal not to be broken, at three per cent. interest. This loan must have been made to enable this borrower to sustain his credit, by depositing these bills as security for other loans. Can it be thought wrong, to be at war with a credit system of this character?

In my examination of the past transactions of the Bank of Bennington, I find one of the Directors was connected with a firm of Brokers in New York, under the name of Swift, Mills & Co. H. Gay, the director and broker, was authorized to draw, by a resolution of the Board of Directors, $75,000 from their deposites in the Boston and Troy banks. It appears from the statement of the Bank, March 20th, 1838, that there were in the hands of Gay, at that time, $75,000. As a director, Gay had a perfect knowledge of the condition of the bank, and holding so large an amount of the funds of the bank, he could, as a broker, make a profitable business in purchasing up the bills of the bank at discount. There was at that time a large amount of bills in circulation, being

185,250, and in 1839, the circulation was less than $33,000. Whether this reduction in the circulation of $150,000 was made by the purchase of the bills by Gay, or not, does not appear.

There was a change in the Board of Directors last January. None of the present board appear to be connected with brokers. A liberal mode of discounting was adopted early in the spring. The circulation of the Bank has increased from $33,000 to $97,000. This liberal and just policy, adopted by the directors, has given general satisfaction. They have been able to maintain the circulation without difficulty. The extraordinary expansions and contractions of bank issues of paper, must seriously affect the business of the country. By

reference to past reports, it will appear that immediately after the suspension of specie payments, in 1837, some of our banks began to increase their circulation, while others contracted theirs. The Bank of Manchester had in May, 1837, at the time they stopped payment, less than $70,000 in circulation, as appears from a circular published at that time, signed by all the directors; and on the 9th day of January following, it appeared from a statement of the condition of that bank, exhibited to the directors on that day, that the amount of bills in circulation was above $140,000; thus, increasing their circulation $70,000 in eight months. The amount of bills put in circulation by the banks in the county of Bennington, (and we have no reason to suppose it less in other counties,) from the two statements of Jan. 9th, and March 20th, 1838, amounted to $325,000, and in December, 1839, the circulation was less than $75,000. This sudden contraction of $230,000 must seriously affect the price of all articles of produce. It is evident that the confidence in the soundness, as well as usefulness of our banking institutions, is greatly impaired, and nothing short of a thorough examination of all the concerns of the corporation, and the result of such examination made public, can restore confidence. The transactions of the banks are shrouded in darkness. The public have no means of distinguishing the good from the bad. Even stockholders have been denied the right of examining the books of their own corporation. They do not know whether the semi-annual dividends they receive are made from the profits or the captal of the bank. I have known banks to make dividends

when they had no profits to divide. And this fraud upon the honest stockholder and the public is effected by the inventory of worthless notes, as available funds. Ought not the directors of the banks to be required to note, in their statement of the condition of the banks, all debts, which have been due more than one year, as a suspended debt, or unavailable funds; and that no dividends should be made until the deficiency of available funds, occasioned by such suspended debt, should be made good, either by the payment of more capital by the stockholder, or by the application of the profits, to make good such deficiency. This would influence the honest stockholder to investigate the management of the bank. He is apparently satisfied with the directors.