Imágenes de páginas
PDF
EPUB

There is one rule for the proper management of a bank, by which the danger of such a catastrophe is very much lessened; I refer to the rule for not discounting any but what is called "short paper," or not buying any notes which have more than a few months to run. If the bank lends all its available means for a period as long as six months, the receipts and loans being pretty equally distributed through all the business days of those months, it is evident that the daily receipts from loans repaid would be equal to the whole amount lent divided by the whole number of days for which it was lent; that is, in the case of the bank we have taken for an example, $165,000 180, or about $916, for the daily receipts. If two months were the limit fixed, then the whole capital would be turned over, or paid in and let out again, once in every sixty days; and the daily receipts would be about $2,748. If, on the other hand, a year was the limit, the receipts each day would be only $458. Now, if we suppose that a run takes place upon such a bank, it would probably take two days to exhaust its stock of specie, $10,000, which was held in reserve. During the continuance of the run, the bank's daily receipts would also continue, but it would make no new loans; all the cash paid in would be held in reserve for the great emergency that had arisen. If it had adopted the two months' limit, the receipts during the two days' run would exceed $5,000; it would thus be prepared for a third day, and probably for a fourth, as the amount of its own notes brought in each day would rapidly diminish after three days' run. The bank would weather the storm. But if a year were the limit it had adopted, the receipts during the first two days would be only $916,- not enough to carry it through the third day. The bank must stop payment. We see an obvious reason, then, why the banks feel obliged to curtail their issues or discounts during the existence of a panic, though by so doing they increase the distress of the community. The bolder policy sometimes adopted, of increasing rather than diminishing the discounts at such a crisis, in order to lessen the distress, and thereby stop the panic, resembles the plan of crowding all sail on a ship in a storm, in the hope thereby of keeping off a lee-shore, though the increased strain thus put upon the vessel may leave her a dismasted hulk on the waters.

In order still further to provide for its own safety, a bank ought not to make very large loans to individuals, but should have the whole amount of its disposable funds divided into loans of moderate size to a considerable number of persons, and so distributed that the payments or receipts may be equalized throughout the year. Otherwise, it is obvious that the failure of one large debtor might seriously cripple the resources and shake the credit of the institution; or a run might be made upon it at a period when very few notes were becoming due, so that the receipts would not be adequate to make good the drain of specie. Simple as these rules may appear, it is upon the strict observance of them, almost as much as upon the caution exercised in making discounts only to solvent and responsible traders, that the security of the bank in times of emergency, or during a commercial crisis, will be found to depend. On occasions of this sort, private banks in England, and even the Bank of England itself, have been obliged to scrape together as many sixpences as could be found, in order to gain time by the delay inseparable from payment in such diminutive coin, until a part of the notes in its possession had fallen due.

on.

The proper function of a bank is to supply funds for use only as Circulating Capital, the process of production being comparatively a short one, and the value of the completed product soon serving to replace the advances which were necessary for wages, raw material, &c., while the work was going Thus it can lend to a farmer in the spring enough to buy seed-corn and to pay the wages of his laborers, and the proceeds of his crop at harvest-time will serve to repay the loan. It can lend a retail-dealer enough to purchase an additional stock of goods, if there is a reasonable prospect that the goods will be sold, and the money be received for them, in season to meet the payment of the note which has been discounted. But the bank cannot safely aid agricultural, commercial, or manufacturing enterprise, by supplying funds for the construction of ships and machinery, for the digging of mines or canals, for the bringing of waste lands into cultivation, or for any long-winded speculation; in short, it cannot supply funds to be employed as Fixed Capital. The values invested in any of these forms can be but slowly replaced, or only after consid

erable intervals of time; the ship or the machine which will last twenty years before it is worn out, can pay for itself only out of the accumulated profits of nearly twenty years. The builder, indeed, may safely obtain a bank loan to enable him. to finish his work, if it is his intention to sell the ship or the machine as soon as it is completed. In such case, he needs the funds for use only as Circulating Capital; it is the purchaser, or the person who intends to employ the ship or machine, who really needs the use of funds as Fixed Capital. Money lent for such purposes can be repaid, when due, only by other notes, which have a further term to run, and are negotiated with the deduction of discount. When these fall due, they are met by a third set payable at a still later date, and discounted in like manner. The operation is only an expedient for borrowing of the bank in perpetuity, or for an indefinite. series of years.

Land-banks, as they are properly termed, have been instituted at various times in England, France, and even in some of the States of this Union, on the principle of lending capital upon the security of real estate, in order to make improvements upon the property. In such cases, the security, indeed, is unexceptionable; but if the bank currency thus issued is returned to the institution to be redeemed in specie, there will be only mortgages to be offered for it, and the bank will be obliged to refuse payment. Consequently, the history of such banks has been uniformly disastrous. As a general rule, the currency will not absorb bank issues, or prevent them from being soon returned for redemption in specie, if those issues have not furnished a means for the immediate creation of fresh values, the proper circulation of which requires an additional amount of money. If bank-bills amounting to one million of dollars, for instance, are lent to supply the manufacturers with Circulating Capital, additional manufactured goods will be brought into market, in the course of a few months, to the value, probably, of $1,200,000, allowing 20 per cent for profit; and the numerous exchanges occasioned by this quantity of merchandise will require additional currency, not amounting, it is true, to one million of dollars, the original amount of the loan, but still sufficing to keep back a considerable portion of the bills from being presented for redemption at the bank

counter. On the other hand, if the same amount of bills should be lent to furnish the manufacturers with Fixed Capital, the additional goods brought to market in the course of the next year might not exceed $150,000, and but a small portion of the bills would therefore be absorbed into the currency.

If the paper issues of the banks at any time exceed the demands of circulation, there follows a perpetual reflux of the bank-bills, which will soon drain the specie reserves, and can be checked only by a limitation of the issues. It is not necessary that the bills should be actually presented at the counter with a demand for their redemption in coin. They may also be returned by the customers of the banks, who make deposits with them, or return them in payment for their notes which have been discounted and have fallen due. For illustration, we may go back to the case of the supposed bank, with $100,000 of capital, $ 25,000 of deposits, and $50,000 of circulation. We may suppose the daily receipts at such an institution to amount to $6,000, one half of this sum being lodged on deposit, and the remainder being received in payment of the advances which it has made, or the notes which it has discounted. If its circulation be excessive, the state of the money-market not requiring so large an amount of its bills, the greater part of this daily receipt, say $5,000, may be in its own bills, and only $1,000 in specie and in the bills of other banks. It will then have only $1,000 to meet the demands upon it the next day, and cannot safely make any additional loan; for a further amount of its own bills has meanwhile been paid into other banks, either on deposit or in the discharge of loans, and in its settlement with these banks, these bills must be redeemed, either by the payment of specie, or by the return of bills which they have issued. If, on the other hand, the circulation be not already glutted with its own issues, five sixths of the daily receipts may be in specie or the bills of other banks, and only one sixth in its own paper; then, a small sum being reserved for exchange of bills with other banks, the institution may not only lend over $4,000 out of the former day's receipt, but may safely make an additional loan, say $2,000, in its own notes.

It is only in a period of excitement, during a commercial

crisis, or an alarm for the solvency of one bank or of all the banks, that its notes are directly brought to its counter for redemption in coin. In ordinary times, the real limit upon the circulation of any one bank is found in the daily settlement of its accounts with other banks. In the Clearing-Houses recently established by the banks both in New York and Boston, every bank each day presents all the bills of the other banks which it has collected in the day's transactions, and offsets with them its own bills which have been paid into those banks; only the balance, which is comparatively a small sum, is settled by the transfer of specie. Any redundancy of its own issues is sure to be followed by the presentation at the Clearing-House of a larger amount of its own bills than it has bills of other banks wherewith to redeem them, and the consequent necessity of paying the difference in gold or silver coin. Checks drawn upon it against deposits must be met in the same way. When a bank discounts the note of an individual, it does not necessarily pay out its own notes. The borrower may only desire the amount to be placed to his credit on deposit. But the next day, perhaps, he has to redeem or pay off another note, discounted some months before at another bank. He pays this last note by a check on the bank from which he has just obtained a discount; and this bank must account for the amount of the check in its account current with the other bank, or at the Clearing-House, must perhaps pay specie for it. Hence we perceive the necessity to which the banks are subjected, in times of alarm and of the depression of credit, of contracting their loans and discounts in order to diminish the amount of their bills in circulation. It is not an arbitrary restriction; if they did not diminish their loans, their bills would be returned to them so rapidly as to exhaust their specie re

serves.

Through these necessary dealings of the banks with each other, they become the guardians of each other's solvency, and are connected together by the closest ties of mutual dependence and guaranty. The question which was formerly much debated in this country, whether the banking business of the community would be more safely transacted by one great national bank, resembling the Bank of England or the Bank of France, or by numerous small banks of comparatively private

« AnteriorContinuar »