Imágenes de páginas
PDF
EPUB

money to Mr. Shoddy, who invests it in manufacturing capital, and, with the rise in gold, finds both his capital and profits apparently increase in a corresponding ratio. When his debt is due, he finds that he can sell one half his stock for greenbacks sufficient to pay it, he retaining the other half, though it also rightfully belongs to the Insurance Company." Then the professional man dies, and his widow and children receive from the Company just half the value which it had covenanted to pay them.

And such acts are still declared by Congress and the courts of law not as yet, however, by the Supreme Court of the United States to be legal and equitable proceedings!

When the depreciation is considerable, an immediate restoration of the specie standard, even if it were possible, would be inexpedient and unjust. A large sum in gold would be needed to redeem the outstanding circulation; the sudden and considerable fall of prices would distress merchants and producers; and debtors would suffer as much hardship and wrong as creditors did when the value of money was suddenly diminished. The reversion to specie payments, therefore, ought to take place gradually, that it may cause no greater or more sudden alterations of values than those to which the community must be exposed so long as the use of Paper Money is continued. An admirable plan for this purpose was devised by Mr. Ricardo, and adopted by Mr. Peel and the English Parliament in 1819, as a means of providing for the restoration of specie payments by the Bank of England. The Bank was required immediately to redeem its notes in bullion, paying for them at first, however, a price but little in advance of what was then their market value as indicated by the premium on gold, but making a small addition to this price every few months, till the notes should thus finally be brought up to par with specie. This scheme proved so successful, and the disturbance of the markets created by it was so slight, that the Bank of its own accord, with the general assent of the mercantile community, anticipated the period of full resumption, and began almost at once to redeem its notes at par.

In January, 1870, the premium on gold in this country was 20 per cent, so that the value of the paper dollar was a little over 83 cents in coin. At the same time, there were over 100 millions in gold lying idle in the Sub-Treasuries, and probably another 100 millions in the banks and the hands of the people. Congress then

might safely require the Treasury and the banks to redeem in specie all the paper currency that should be offered at the rate of 85 cents for the dollar, and to advance this price 5 cents on the dollar every six months. Full specie payments would thus be restored in eighteen months; and, meanwhile, the value of the cur rency would be nearly as free from injurious fluctuations as if the resumption were complete and immediate. There could be no sudden or considerable demand for gold, as every one would see that delay in the presentation of the notes would be compensated at the rate of 10 per cent a year. Confidence in trade and stability in the markets would be at once established, since contracts could be made with as full a knowledge of what the value of money would be when the time of settlement came, as if the currency were already convertible into specie at its full nominal value. Neither debtors nor creditors could be harmed as much as they are by the continuance of the present state of things; since the maximum of change in the value of the dollar would be five per cent every six months, which is not half as great as was the fall in gold in less than two months, in the autumn of 1869, or one tenth as great as the fall in the spring of 1865.

CHAPTER XVI.

THE NATIONAL BANKING SYSTEM.

THE law establishing the National Banking system throughout the United States was passed by Congress on the 25th of February, 1863. It may be doubted whether a period in the midst of a terrible civil war, a derangement of all the machinery of commerce, and a general confusion of the finances, is à fit time to try experiments in banking and to revolutionize the whole credit system of the country. An experiment made under such circumstances proves nothing. Whether its immediate results are seemingly favorable or adverse, we can never tell whether they are the proper consequences of the new system, or of the wholly exceptional state of affairs under which it was first put in operation. Besides, such times are not favorable for deliberation, for collecting the

facts and arguments by which it must be judged whether it is expedient even to make the trial. If, indeed, the scheme were only a war measure, intended only to bridge over the pressing difficulties of the hour, and to die a natural death when the termination of hostilities should restore the affairs of the country to their old footing, or place them, at any rate, on something like a permanent basis, this objection would not be valid.

over.

Unluckily for the pretensions of the bill as one of immediate urgency, an entirely novel banking system for the whole United States is an invention which, from its very nature, cannot pass into immediate use. In this case, it had hardly begun to be organized, though already over two years old, when the war was A great war is the very time for making trial of newly invented cannon and iron-clad ships; but it is no more a proper season for experimenting with a new banking system than with a new religion. Yet because introduced at such a period, and pressed, though without any good reason, as a war measure, it was passed almost without debate. The responsibility of the measure rests almost exclusively upon the Secretary of the Treasury, who urged the scheme in three successive annual reports, but in the last one was obliged to confess, that, although nearly ten months had elapsed since the passage of the law, not a dollar of the new currency was yet ready for emission.

The leading features of the law were, the transfer of the whole banking system of the country from the control of the State legislatures to that of Congress, and the issue by the banks, and for their own profit, of 300 millions of dollars of a uniform national currency, secured by pledge, and deposit in the Treasury, of a somewhat larger amount of United States stocks or bonds. Any number of persons, not less than five, may form a banking company, the stocks pledged by them must equal at least one third of their capital, and the total of their circulating notes must not exceed their capital, which must be at least $50,000 in small towns, and at least $100,000 in those of larger size. Each stockholder is personally liable to twice the amount of his shares for the debts of the company. The existing State banks were encouraged to reorganize themselves under the new scheme, and the extinction of their former local currency was insured by the imposition upon it of a prohibitory tax of 10 per cent, to take effect after the

1st of July, 1866. The alleged advantages of the scheme were the substitution of a uniform and well-secured national currency, in place of the heterogeneous local currency of the State institutions, and the supposed additional facilities given for the negotiation of national loans.

To one familiar with the history, at least with the unhappy end, of the two Banks of the United States which, at different times, were established and existed in this country for long periods under national authority; especially to one who remembers the long bankwar, as it may be termed, which raged from 1832 to 1842, the fierce political dissensions and commercial disasters to which it gave rise ; to one who remembers all this, the project of taking away all the banks in the country from the authority of the individual States, and placing them under the control of Congress and the Secretary of the Treasury, will not appear a very promising one. And the proceeding will appear still more ominous when it is remembered, that each of the former banks of the United States existed under a specific charter from Congress, which was unalterable during the years of its continuance, so that, for this period at least, the institution was free from legislative interference; whereas the National Banking system, declared in the act itself to be subject at any time to amendment, alteration, and repeal, was tinkered in some of its main features when it was but little over a year old, tinkered again in less than a year more, and is likely to be a whetstone for Congressional debate and intrigue, and an object for the caprice of every Secretary of the Treasury, for many years to come. Carefully enshrined in the system is the worst feature of the exploded "pet-banks," the authority granted to the Secretary to make his own selection of those which are to be depositaries of the public money. Of all evils which may befall banking institutions, in reference to the interests, either of their stockholders, or of the mercantile community at large, for whose benefit they are created; the most to be deprecated is frequent legislative interference. Here, if anywhere, the Political Economist is entitled to repeat his favorite maxim: Laissez faire, things be. Banks are governed too much. Better even a bad system than the perpetual change which amounts to no system at all. Since 1842, questions about banking having ceased to be agitated in Congress, politicians no longer waged war upon the subject,

let

and each State quietly developed and improved its own system, chiefly under the guidance of merchants, bankers, and other practical men. These systems, in the main, worked well; the banks in New England, the Middle, and even the Southern, States were generally prosperous and well-conducted institutions, and recovered, with quickness and ease, even from commercial storms so terrible as that of 1857; while the loss to the public from the ultimate failure of one or two of them to redeem their outstanding circulation -a loss which forms the only sound excuse for legislative interference was too trifling to merit notice. The banks of the Northwestern States, it is true, were not so prosperous, the evils there being a want of capital, a lack of experience, and an excess of the spirit of speculation, evils which rather created the faults in bank management, instead of being created by it. But even in Illinois and Michigan, as there is every reason to believe, the defects and errors would gradually have cured themselves, and a system would have been established at no distant day, the working of which would have afforded no just ground of complaint.

on.

[ocr errors]

True, the systems were not uniform; even the banking currency was not wholly uniform. The banks of New York differed in some important respects from those of Massachusetts; the banks of Louisiana and Virginia were unlike either. But I am by no means sure that this want of uniformity was not rather a merit than a defect. Banks are the natural outgrowth of the wants of the mercantile community among whom they have their origin, and answer their purpose best when they conform most closely to the peculiarities of the commerce therein carried Like political constitutions, if eminently successful, they are not made, but grow, by a natural process of self-enlargement and improvement. External authority rudely brought to bear upon them only mars and twists this otherwise healthy development. The greatest improvement ever made in practical banking in this country the Allied Bank or Suffolk redemption plan devised and put in successful operation about fifty years ago, without any aid from the legislature, by half a dozen Boston merchants. It soon lived down all opposition, quietly extended itself by general assent over all New England, was copied and carried into New York about twenty years ago, and a bungling

was

« AnteriorContinuar »