Banks

Banks furnish a Míeme for the invrsMnlioii f llio profiuindeut vvritors on Poliiical ficuu- ny, as well os for biir-room pul lina. is a: ú wlitical ecribblers. 1 ti facf, while ihc notes bj 3anks constiiute thc currency wiili which 'he vages of lobor ar paid, every innn is deep'y n erested n tliem. 1 hoy nrc, thercfore, pro)er ana lcgilimatn vubj.cts of disctissiom - portian of comtnunity is in favor pf Utinka rcnerally; ano! her porlion wan; only good 3nnk.-; while tlie remainder are opposed to til Binks. Wu propo-eto rmke some brief ■eumks on tlie nalu-e, titility and eflucts of 3.inking institutions, accordirg to the light i" A-liich they oppear to us. VVe know how difIcult it is to write or speak on ihfá subject vit!jout running against the views of other: )iit we sliall permit no obstacles of that kind o warp our opinions, or impede tlie free ex)reision of tliem. VVhaT IS THK BuSINKSS OF BaNKS? I n our country, llicy carry on a fourfold usinesá: 1. They receive money of individuáis on leposit. 2. They mnke transfers of values. 3. They niake discounls or luana to individuáis. 4. They issue notea for a circulating meliuiu. Every Bank, we suppose, doed more or lesa n each of these departinents. And as ench ranch of business is entirely ditinct from he others, it should stand or fall on its ovvn nerits. Henee the Banking business should ie neüher condemned r approved in the rross: for its operatinns in one bronch may )encfil community, while in anotlier they may njure itstill more. Thus, if a Bank faitlifuly keeps and restores on demand all the De)oits made in it, it is eo far nn advantage, vhatever be iis misdeedd in otlier respeets. - We wil! therefore consider each branch of iiisinesstt li'.L'e in detail. Dkposits irí Banks. Suppose a lown in tvhich Hiere are fifty nerchants, all doing business without paper ■noney and wjtjront Bnnkf. lf one boujht of hf? other a hundred barrels ofFlaur, for 8500, ie must pay for them in specie, which he muet ioep on hand in his own vault, transpon to bis neighbor'8 store, count over and deliver, to be placed in his neighbur's vault. This mercltant rnakea a purchase of another of @500 worth of Molaases, and the last man o another of an equil valué of Lumber. In all (hete cuses, and all similar ones, the specie must be transported from place to place, countod over. and kept with care. This woulri consume much time and labor. Eich of the fifty merchonts would be his own bonker, and must be at considerable expense, as we!l as use great care and vig'ilanco in watching his treasure, by níght and by day. Now. if these fifty business men wouk make a Banker of one of their numbor - if they would prepare a safe place of deposit it Kome central skuatinn, anrj eend thither al their cash capital, to be watched over and preserved by one man, it would be found for their mutual benefit. It would be kept quite as safe in the one vau'.t as it could be in the fifty, wlh far less expen.-e, vigilance nnd anxiety. So far, then. the Bank would be beoeficial. It would be a safe and convenieot place of deposit for the ca6h capital of the whole neigfibothood. But further: lf A. should buy Flour of B he need not go to the Bank with hiin to ge the specie, cúunf it over, and deliver it to th seller. He can give an order on the banker who will pay it over on presentation. B. tnke the order, and on his way to the Bank, con eludes to buy Molasses of G. who in his tur buys Ltimber of D. who at night takes th order tn the Banft, end instead of drawing ou the specie, is perfeclly content with delivering up tho order, nnJ receiving Credit for 8500 on the books of tho Bank. Here nre thre exchanges made in a day, all parties are pau by writing a few unes, nnd yet not a singl picco of coin has been louched. Here th Bank has saved much labor and trouble. I these fifiy merchants all do business at one Bank. all their Jarge exchanges can be mad in this ray. Birt 6iíppose there ate two Banks in th place, and some of the merchants do' busincs with each: how then? The two Banks wil bave accounts with ench other, will mutuall accept each olfiefs drafts, and echange from time io time. In this way they rnay pey each olher mmerse 8rnountP and never touc the specia in their vaults. The first Banks cf modern times - those of Venice, öenoa, Amsterdam and Hamhurgh - vvere at first chicfly useful as Buitks of Deposit. Bul now all JBanks do mnre or 1 ss business in the other branche?, which have become the most prominent. So f" r, then, atBanks afibrd a safo depositury fr nioney, nd save labor in irffnporting, count ing and keppng it - and so far as they save cnpilnl by preventing the wear of the ooin whicli tmisi result from much handliug of it, and so far ne they fiiiable the fame capítol lo jo n Inrírpr amount of I usinas - they are 4 pnblie bêw-fiii whatever may be the ilntrjrc cf thefr olliei troneactioni". Excua.ngês nr Ba.nrs. Suppose there was no money tf nny kind existing in Detrort and Boston, lr rxrliangos would ui! be rnnd in good. The" lctroit rnerchant who wunted a b-jle; uf heclirrg.-mnst send n eotne barrels of flour or pmk tp pay for tliem, while theBostonian wotild buy nothing in Detroi'. tviiiiont ftrw.-infing sonw of his etaple articlce. Suppnse now lliat a specio curmiry cxil ' ed in these cilicá. The exchangea mightlihrll bc midi; in spocie, frotn oue city to the ni iilliér'í nsuttonae nny cninuierci:il Irniisaciiüiis tl look pln( -tí. Tliid wonld he a n improvement ai Ui e.cli:mrPB n kifld, iasu.ticli as specie i coiild ! moto rrad ly thinfiporteu tlmn gnods. pi N'ow, li.rotiiíli rlife ngeddy oï Bnhk?, the e t rtulilp, r; 1, and x; .-e of ihrte trnnsí'ers is vn'ul. i!. A.iy un íJ.nks in difti'ronl places, hoving coiifiilpnce hi e:n:li üMier, cdn mtitually iiay hcIi iih'Ts d'.'in 'liJ? W nny rx ent. Jor iii-1:iiu-i', tlie l)..'lroii mercliant vli' uviöè Uit! Uu-ton uli.'lrs.ili' denlet lor gnods, ins1?nl ol lurwtirrliii; Hie nmnoy, ('un ny i lo n Ifcmk in Dot ruif, nnd iei-cive i's order on a B;iton Diiik. This rder or druft he cm eend by mail to his credi 'ir, who vvill receive the moBV 'i pre-iCi! iOjr it, and lliu.s n dfbt to ony tnount tían bftp'aid wiilioul transportlij a sin r]c iloünr. lienco the Banks in different hi?s perform the office ol' brokers hy dealing in dia of exchnne. Tuis is a part of their rpit mate business, and undor favorable cirunistanceF, pnyments between different plaeá are made to a great extent. It is for the iterest of cotrirliunity tint somü persons hotild follow tlie business of niakiug the-=e xchanges. nnd corpoations can do il beller hnn individuils, becausc they cin command more capital, have a corrospondence wilh each other, and c.in often commaivJ the cnpitil of" otliet Banks for nccnmplishing their objects. - The buyers and pellers of drafts know just vhere to go to eilect their objects. Besides, y doing busine.s on a larger 6cale tlmn individuáis, they can nvike their arranprmente ai less expense, and wilh greater security. In all ihese respecta, eo far as we can see, he business of inaking exchanges may be arried on by Banks with deoided advantage o the cotmnñnity, VVhen pioperly conduct(7, they partially remove the nccessity of ransporting money from place to place, 6ave nnch time that would be spent in counting it, )revent the loss inseperable from i's constant U-?e, and pnable the dobtor to pay his üabilities vith little expense ortd grenteconomy of time. Biuks of exchange and deposit we are not repared to tcondemn. These branches are profitablc tn the community and to those who mnke use of lliem, and are as lesritimate and ummendable hus'ness ae the roising of wheal or the maüufactnre of wool. Let the reader observe that we speak of the branches as pro-' oerlij carried on. lf a Bank receive deposits and Iheij fails so tbat the depositor loses his money; or ifitgives drafis which comeback protested, '.o the great domage and loss of the )urchaser, it fuilg 6o far to do the proper husiness of a Bank, and hecomes a curse to com nunity. This is the abuse of its powers, bnt constitutes no argument whatever against heir proper exercise. The manufacture and sale of alcoholic liquors, for certain purposes, s n commendublc business; but the poisoning of a whole neighborhood or commun ity by them is not therefore to heapproved. Discounts by Banks. The thirrf hranch of business pursued by Banks is that of making loans on interest, and naking collections. That community is benefitted by the loanng of capital, is evident from several considerotions. Take the cöisc of the wood-cutter. rlowever strong and skilful, wiihout an axe he can do nothing. Lend him your oxe, and he will earn seventy-five cents a day, which ia so much profit to himself and the community. Without this loan, he would have carned nothing. Take the case of a blacksmith. He hns industiy. ekill. a 6hop and lools, but stands idle all day for want of iron to vvork. Let some one lend him this, and he will earn a dollar a day. So of other kinds of business. Besidep, as persons become advanced in years, they become less competent to do business profitably. Also many persons have capital who have no great talent for extensive business, while business men of the best capacity are ofien poor. In addition to this a large amount of capital is possesBed by female8, children, and agrd person?, who cannot use it nor eren preserve it wilh advantage.- Lastly, a merchant or mechanic can enlarge his business with tho inciense of his capital; but how can alawyer, doctor, mini.-t?r or office-holder invesi his savings profitably? In many cases, unless he lonns them, he must hoard them where they will benefit no one, or consume them unprodtictively in gratifying his taste. By oitber method the public, as well as himself, is a loser . If, then, loans must be extensively made in a thriving community, Banks afford a medium through which they may be effecied. Large loans made by individunis are usually for a considerable period, and secured b)' a mortgage of real estáte: but Sanksr present an ac cumulation of capital where thosc desiriny to make loaus can effect ihemíor a short time, at fiicli periods as their necessities may require. In this way they e.vtend credit at a small expense. Thus, f a manufacturer in Ann Arbor can safcly enlarge his business $2,000 by having the loan of 500 for 00 dnys at a particular part of the yejr, it is n benefit to him and consequently to the com miirrity, while il is a loss to no one. Conld he not do this, he would be obliged to make the loan for the whf!e year lo do the same amounl of business; whereas, through the ngency of the Bank, the í?500 can now be let (uring the year to three otlier persons for 90 days each, nnd thereby do four times as mnch business. In this way the Bank acts os an intermedíate agent between the lendcr and the borro wer. So far, then, as nnd coltecting are a legititnate branth of business, and profitable to the leñders and borrowers, Banks, in perfcironing ihis business, are coiíferrinnr a real service on community. Il i not lo be forgotten, however, that the power of niakinf loans is an engine of great evil as v;ll as of good. Btinks are usually owned .'Hid contrulled by the wealthy, and tlmir loans are not unfrrquently made to the rich cipitaliát that he may ngain loan the ih mini to tlrt necdy and industrious producer at exorbitant rntee of inlereüt. Sometimee loans are made to Legislntors or Government ofïicorsr lo obtain the iniluence of tlie borrowf-rs in favor of the Bank. Or the Bank itself nfej hromna epeculator in produce, so that it may roie the price of the neecssarics of life,ud makelarge gaiils from the necessities of ie poorer classes. Alfo, by inaking f uddcn nd arbitrary expansiona nnd cinlractions of a leir loan, tlicy can the poorer v rs whoare depending on them, and thereby noble the rich usnrer to speoulale mit of tlieir ccessities. Lnstly , as the possossion of moey givea power, anl UlC 'irgMit need of it is ( cnlamity, Buuks, through tliair Iom, and l hrough the hopes of obtnining ihem, are ' led to exert n inighty infl.ience on (he rijr classes of community, which is oftcn t prted for bad purpösëa. It 5 by these and r milar nans tliat artificial ditincinns r ween different classes of society ore built up; nd thereby the rich are made richer, and tfie . loor, poorer s'iifc. It is true that capital in the hands of indidlnlsmay be used for all thpse eVil 5 es bul ilcnnnot be concentrated and bronght l o bear in the some mnnner. ín the financia!, t is in the natural world, in un!on ihere is ] i'rengih. The wealth of a hnndred capitnlsts, united in a comtnon stock, govemed by wo or three minds, directed by established ' Ulesof action, and steadtiy npplied for the ( :ccomplishment of given purposes, will ' ïrt an infltienco in community vastly greater han the samo wenlth could effect, controlled iy a hiindred mind, acting without üniori or :oncert, each busy in its narrow sphere, wit'.i !s individual projeets. Amonor the odvantages of Banks of dis:ount, Dr. Wayland enumerates those renlting from a división f Bnnks wliich "ollow the business of loaning and collectinj jecome skilful therein, do theit business uicker and'cheoper thun individuáis, an'l with ess riks of los?. Tliis lnst po6ition, however, nay well bedoubted. Thu aspcts of broken anksshow immense snms lost by loans to rrespon-ible persons. The United States 3ank lost TtoBNtr mii.lions in bad debts at he South alonp. Oiher B.inkn have lost Tiillions each by loans injudicionsly made. Wo jresume that solvent Banks often lose largo tmounts trusted out on lonns. The position of the Doctor, that they acjuire a greairrskill and facihty in thcir busiless, is true; hut we apprehend that the losjes of Banks by bod loans results chiefly from :he fact that loans are often mndt for olhfr 'hun pecuniary rraons. Thoy nre some:imes wtthheld from solvent opplicanta togratfy the spite. ha tred, or prejudice of two or three Bank officere-, while in other cases they ire loaned to irresponsible persons through motives of furoritism, vanity, ambition, party spirit, or selfish interest. Notwithstnndinor these abuses of the system, we ajjree with the conclusión of Dr. Wayland, - "I. That to lend money ie just as nncessary to the ood of community, and is, therefore, as innocent and honorable, aa to borrow it. "2. Tint an instkution, organizod for the pnrpose of lndingf money, ts, so far as it$ object is concerned, as beneficial tn the community, as innocent, and as honorable as any other insiitution' CmcuLATioN or BAK8. We can scarcely touch on this fourth brancli of Banking business - the issuing of notes to take 0e place of specie as a circulatinf; medium. Were there uo Banks, the wholo circulating medium would be specie, except the small proportion that might be displaced by drafis of brokers and capitalista. Nov, a pa per circulution has two advantaes over specie, and ive know of vnhj two: 1 . Paper.can 6upply the place of specie as a circulating medium, lo a cerlain cxlent, and thereby increasc the produrtive capital of the country to that amount, deducting tho cost of matüifncturing the paper money. 2. It is more convent' tut jor Iransportuiion. This remark is true chiefly of silver; for gold m small quantities may be about as readily transporlcd as paper. Thete are all the advantages of a paper circulalion which the profoundest writeishave been able to discover. To counterbaJance these, a pnper circulation is liable to great objctions on account of Hb Jlitcluation, the immenyo forgeries committed upon it, and the Jravds by which paper money, in the hands of the bill-holders, becomes converled into worthle8s rags. It has been said that coin, ss well as paper may be counterfeitcd. This is tme; bul the operation is more difficult, nnd rr.ore expensive. Belles, by tising a mixed medium of paper ond metal, we have counterfeits of both kinds of money, v hen, were a metallic currency only used, that only would be counierfeitcd. A bare glanco at a "Counterfeit Detector" will convinc'e any one thit the loss bj forged Bank notes is immense. Bendes, this loss falls chiefly on the working classes where it is most sensibfy fek. We know of no remedy for the Jlucluationsof a paper cu rreney. Ench Bank acts for iiself; and when times are propperous, they extend their issues, and contract them at other scasons. This they nlways vill do to an im'rnen9e extent. ín 1839, the circulntion of nil' the Bnnks in tho United States was f135, 100,995: in 1844 it was reduced to $7ï!,378,828. Tho Banks of JSew York city, on one reduced theif issues more than 812,000,000, in a few months. The remedies and preventatives (if there be any adequate onos) for the stupendousirvwís continually practised on community by the suspension or fuilure of Banks, we will con sider on another occasion. fJCÏNIilman says of the early Chrisians: ';It is erroneous to estimate their strength and infiuence by nmericol calculation. All politica! ckanges are wrought by a campad, organized and disciplined minorilij. The mass of mankind follow any vigorous impulse from a determinecl and incessantly aggressive few."