« PreviousContinue »
oppression, may indeed prostrate the credit and ruin the fortunes of many individuals; but it is believed to be beyond the power of the Bank of the United States, seriously to impair the general credit of the country; certainly not without an entire disregard of the interests of its stockholders.
The public deposites have enabled two of the banks which receive them, to increase their accommodations to their customers nearly two millions, besides strengthening, in some degree, their neighboring institutions; and probably the whole relief to the community from the means placed in the deposite banks was about four millions up to the first instant. The banks in the city which report to us, possess the legal capacity of enlarging their loans about eight millions beyond their present amount, and there are several others there, not limited in the amount of their loans, among which is one of the depositing banks.
It will be in the power of those banks, therefore, directly, to the extent of their limits, or indirectly by loaning to other institutions, to afford all the relief to the public under the pressure which the funds in their hands will warrant. That they have thus far essentially contributed to mitigate its severity, we have no doubt; nor can there be any of this disposition to do so in future. Their interest also is involved in the matter.
The statement of the Bank of the United States of the first of November, 1832, was reported to the last Congress by the agent of the treasury department charged with the examination of that bank, upon the faith of which a resolution was passed, declaring the public deposites to be safe in that institution. The following is an analysis of that statement, shewing the liabilities of the bank to the public, and its means of meeting them; to which is appended a similar analysis, shewing the present condition of our banks; from which it will be apparent, that if there was then no reason to doubt the solvency of the United States Bank, there is as little now to question that of ours.
Bank of the United States, 1st November, 1832.
4,747,696 State Bank notes,.. 2,707,907 Deposites,
14,507,415) Discounted debt, ... 62,031,433
State of New-York Banks, 1st January, 1834.
$2,196,957 Circulation, .... • $15,402,705 Bank notes,
5,623,522 Dividends unpaid,... 186,168 Cash items,
844,037 State N. Y. & Canal Stocks,
121,249 Fund, .
2,650,911 Individual deposites,. 8,402,739 8,785,765 U. States
2,409,533 Discounted debt, ... 46,496,492 Loans,
694,106 Balance due banks,.. 1,184,055
A similar result will be shewn by exhibiting the statements in a little different shape, as follows:
Bank U. S. State Banks Liabilities, ..
$41,755,297 $30,930,217 Deduct means immediately available,. 14,507,415 8,785,765
Leaves this amount,
27,247,882 To be realized from the disc'td debt of 62,031,433
Being of its amount, .......
44 per ct.
47 per ct. About forty-seven per cent therefore of the amount due by the community to our banks, will extinguish every claim of the public . against them.
Knowing the character of the debt due to our banks, as we do from having recently and frequently examined it in detail, we have no hesitation in pronouncing it as secure as personal credit ever can be, and entirely beyond all reasonable suspicion. Nothing but the most wide spread and ruinous calamity can essentially impair
it; and so far as the public security is concerned, we rest perfectly confident of its being beyond the reach of any contingency.
We have heretofore had occasion to make some suggestions as to the very large amount of paper currency in use in this country, and a continuance of the present state of things may shew that some of the apparent prosperity of the past, has been due to an overloaded state of the currency. But if such shall prove to be the case, we are quite sure it will be equally apparent that the State Banks are not alone chargeable with the error.
The following statement of the comparative circulation and loans of the banks in three of the commercial cities, and of the United States Bank, taken from their reports of the last year, will shew that the local banks in those cities, possessing about the same amount of capital, and affording about the same accommodations in discounts to the community, circulate only about one-half as much paper as the United States Bank.
Capital. Boston, 22 banks, Aug. 1832, $15,150,000 $3,060,129 $24,735,121 Philad'a, 9 b'ks, Nov. 1832, 9,906,585 3,456,562 15,542,569 New-York ,14 banks subject
to the bank fund law, Jan. 1833, .
11,911,200 4,196,452 20,743,152
36,967,785 10,713,143 61,020,842 U. S. Bank, Nov. 2, 1832,. 35,000,000 22,332,144 62,031,433
The following is a similar statement for the present year, showing the comparison since the recent reduction of its debt by the United States Bank.
Capital. Circulation. Loans. Boston, 25 b’ks, 1 Oct. 1833, 816,401,250 $2,823,617 826,998,712 Philad'a, 9 b'ks 5 Nov. 1833, 11,149,615 4,260,930 18,570,770 New-York, 15 banks subject
to b'k fund law, Jan. 1834, 12,611,200 4,856,675 24,397,375
40,162,065 11,941,222 69,972,857 U.S. Bank, Jan. 1, 1834, 35,000,000 19,208,379 54,911,461
Compared also with the local banks of several of the States, whose statements we have met with, the United States Bank will be found to have furnished its full share of the paper currency of the country, and a liberal example to the State institutions.
A due proportion of paper, susceptible of being easily and freely converted into coin at the pleasure of the holder, undoubtedly furnishes the best, because the most convenient and economical circulating medium. But the difficulty lies in ascertaining and regulating the amount as proportioned to the wants of trade, and the amount of specie with which it is to be redeemed.
As we use a far greater proportion of paper than any other nation where coin and paper circulate together, the effect upon the industry of the country should be regarded as somewhat experimental, at least for the present, and its rapid increase is indicative of the boldness with which most of our operations are characterized.
From the best, but imperfect data within our reach, we last year estimated the bank notes in circulation in the Union, at eighty-six millions, and that the banks possessed twenty millions of specie. The specie in circulation in the community, might probably be estimated at about twelve millions.
The Bank of England, in February, 1832, had £18,051,710 of notes in circulation, and possessed in specie £5,293,150. Within the last year, an estimate has been published of the country bank notes in circulation at seven millions, and the gold and silver circulating in the community at twenty millions.
Taking these estimates as an approximation towards the truth, the comparison between England and the United States, would be as follows:
Paper of Bank of England, £18,051,710 Specie in b'k, £5,293,150 Paper of country banks,.. 7,000.000 do circula'n 20,000,000
Bank paper, $86,000,000 Specie in banks, ......
do in circulation,
Probably however, if the Scotch banks were brought into the estimate, the disparity would be less striking. As it is the practice of the banks there to redeem their paper by drafts upon London in the same manner as the banks in the interior of this State do by drafts upon New-York, it is presumed that less specie is retained in that country in proportion to the paper, less being necessary to sustain the currency. But still the proportion of specie to paper must be vastly greater in Great Britain than in this country.
Another essential difference in the use of paper money consists in the different manner in which issues are effected. In England, most of the discounts of individual paper are made by the country banks, which often pay out Bank of England notes instead of their own, and by joint stock companies and individual bankers, who issue no paper. The Bank of England holds a discounted debt of less than three millions upon personal security. Its issues of paper are therefore but little affected by its discounts, but the amount is professedly regulated by the state of foreign exchange or the price of bullion, and in reality is always subject to be more or less influenced by the wants of government, because when the government requires money to be advanced upon its securities, the bank is too intimate a friend to be found refusing. These securities, such as exchequer bills, &c. of which the bank always holds a large amount, are used for the purpose of enlarging or contracting the circulation of bank notes, according to the supposed exigencies of trade. When the circulating medium is supposed to be too much swollen, a portion of these securities are sold for Bank of England notes, and the notes cancelled; and, on the contrary (Assem. No. 102.)