The Journal of Banking
by William M. Gouge,

Vol. I., No. 3,
Philadelphia, Wednesday, August 4, 1841.

The Times in Indiana.

The following, which appeared originally in the Greencastle (Indiana) Visitor, has been transferred thence to the Wabash Courier, and thence to the Sentinel, published at Evansville, Indiana, whence it finds its way into our own columns.

Hard Times. -- We do not know how it is with our neighbours of other States, but we can assure them that money is very scarce in this part of the Hoosier land.  It is often impossible to procure money of some of our most solvent and worthy farmers, though they are involved but little.

Disappointments on the part of others frequently compel them to give up property for the satisfaction of claims against them, but it will not sell at any price.  The truth is, almost every person is in debt, and none have money to spare in the purchase of property.  Those who sue for the amount coming to them, do it through sheer necessity, as they are owing money themselves;  and if they should purchase the property executed in their favor, they would be no better able to pay what they owe.  The Legislature of last winter provided that real estate should not sell under execution, unless it could be sold for one half of its appraised value.  The same law includes certain articles of personal property.  Officers are daily returning executions, "no bidders," "no sale for want of bidders," &c.  In some instances, small tracts of land have been taken under execution, as often as three or four times, and no sale effected, and the cost which accrued, amounts to nearly half of the appraised value of the property executed.

It appears that partial suspension of business is the only means of relief to the people, and we must confess that such would be poor relief.

On reading this, one might be tempted to think that he had got hold of a passage in the history of the times that followed the great bank revulsion in 1818-19.  "Often impossible to procure money from some of our most solvent farmers -- almost every person in debt -- property will not sell at any price -- relief law by legislature -- legal expenses amounting to nearly half the appraised value of the property levied on."

But so it is.  Like causes will and must produce like effects.  Under our paper money system, prices are very frequently lower than they would be under a hard money system, and this is exactly the condition of things at present in Indiana, and many other parts of the western country.  Under a sound money system, it would be impossible for lands as fertile as those of the west not to find, at any time, a ready sale at a fair price.

Appleton on Currency.

Mr. Nathan Appleton, of Boston, formerly President of the Branch of the United States Bank in that city, has lately issued a pamphlet of 73 pages, which contains many valuable remarks, though we cannot endorse the whole of its contents.  From it we extract the following passage, showing the manner in which the notes of nearly all the New England banks, (and they are more than 300 in number,) are kept at par throughout that region.  In the same way, the notes of the banks of the other great divisions of the country might be kept at par within their respective districts.

* In the third number of this Journal, we stated that Mr. Nathan Appleton was President of the Branch Bank of the United States at Boston. We were in error here. It was a near relation of his, Mr. William Appleton, that filled this office at the time of the expiration of the charter. But as Mr. Nathan Appleton has for many years been very extensively engaged in business, his remarks on the poject of the exchanges are entitled to as much attention as they would be if he had actually been President of the Branch Bank.

The Suffolk Bank System.

The place where a bank note is payable is of the utmost importance in order to secure its general circulation at par with specie.  That place must be the commercial centre of the district through which it is to circulate.

The constant demand for remittances to this central point, will give to bank notes payable there, a constant equality with or preference over specie, through all the region drawing their supplies from that centre.  Thus, a bank note payable in Boston, will have a natural circulation through all that part of New England drawing their supplies from thence;  but the moment the line is passed into the district drawing their supplies from New York, bank notes payable in that city can alone supply a pure circulation, and so of the other great cities.  Large towns or cities in the interior have a certain limited circle of their own, but for general circulation bank notes must be payable in the great commercial cities.

The currency of depreciated paper, issued by banks paying specie, is owing to a departure from correct principles in this particular.  The bank note is not payable at the place where the money is wanted.  Previous to 1824, the currency of Boston and New England consisted mostly of country bank notes, subject to a discount varying at different times, but generally about one per cent.  In 1824, what is called the Suffolk bank system, was adopted, by which the bills of all New England banks are virtually redeemable in Boston at par.  The system is this: Certain banks in Boston have contributed a sum agreed on, to a common fund, and in consideration of the use of that fund, one of them, the Suffolk, undertakes to receive all bills of New England banks as cash, and collects them from the country banks.  The mode of doing it is as follows: The country banks are invited to keep a fund in deposit at the Suffolk bank for the redemption of their bills.  If they decline, the bills are sent home for payment, in which case nothing but a legal payment in coin will be received.  The trouble attending this mode of payment, soon induces the bank to yield to its true interest and keep up the deposit, since it can, by doing so, keep a larger amount of bills in circulation than it would otherwise be safe to attempt.  Under this system the whole currency, centering at Boston, is convertible at pleasure into legal coin without any loss whatever --a state of things which does not probably exist in any other considerable city.

By a mode of proceeding founded on similar principles, the paper issues of the numerous banks of Scotland are all kept at par.  The banks have their agents at Edinburg, by whom a settlement of balances is effected twice in every week.  This is the true way of regulating paper currency and paper exchanges.  Attempting to regulate them by means of a National Bank, is, as Dr. Primrose's friend, Mr. Birchell, would say, "all fudge."

We copy some of Mr. Appleton's remarks on the subject of

Domestic Exchange.

Another argument much dwelt on in favor of a large national bank, is its necessity to equalize the exchanges.  There is not much in this.  There is no difficulty with the exchanges where the banks pay specie.  There lies the whole difficulty.  Let that be reformed, and there will be no complaint on that score.  The exchanges soon regulate themselves where the currency is uniform, as is the legal currency of the United States.  A large bank, with many branches, can manage the exchanges with more profit to itself, perhaps, than the local banks can do.  The late United States Bank took care to charge the highest rates for exchange which the alternative of transporting specie would admit.  For several years the exchange at New Orleans on northern bills was kept so high, that considerable shipments of specie were made from Boston and New York for the purchase of cotton.  The change in our laws, which has made gold the basis of our currency, will have a most salutary effect in lessening the rates of exchange, whenever the banks resume their proper functions.  The effect is already quite apparent on the exchanges between Boston and New York.  Gold is constantly transported from one city to the other before the exchange can rise to a quarter of one per cent;, which is consequently the maximum rate.  When the banks paid out silver, transportation would hardly be attempted with an exchange below one per cent.

Mr. Appleton's position, as President of a branch of the United States Bank, must have afforded him the best opportunities for ascertaining what effect the operations of that institution had in the regulation of exchanges.  It may not be amiss to add, that he was member of Congress from Boston in the year 1832, and as such voted for the re-charter of the United States Bank.  He cannot, therefore, be regarded as under the influence of prejudice against that or a similar institution.

Gold and Silver.

An old merchant of this city has told us that he never could be convinced that there were gold and silver enough in the world, to serve the purposes of money, till he met with Mr. Gallatin's statement of the quantity of the precious metals consumed in plate and jewelry.  As Mr. Gallatin's remarks, on this point, have had this happy effect on one merchant, we copy them at length, hoping they will have a like effect on others.  They embrace, in a condensed space, many important statistical facts.

"The total amount of gold and silver produced by the mines of America, to the year 1803, inclusively, and remaining there or exported to Europe, has been estimated by Humboldt at about five thousand six hundred millions of dollars;  and the product of the years 1804-1830, may be estimated at seven hundred and fifty millions.  If to this we add one hundred millions, the nearly ascertained product to this time of the mines of Siberia, about four hundred and fifty millions for the African gold dust, and for the product of the mines of Europe, (which yielded about three millions a year in the beginning of this century,) from the discovery of America to this day, and three hundred millions for the amount existing in Europe prior to the discovery of America, we find a total not widely differing from the fact, of seven thousand two hundred millions of dollars.  It is much more difficult to ascertain the amount which now remains in Europe and America together.  The loss by friction and accidents might be estimated, and researches made respecting the total amount which has been exported to countries beyond the Cape of Good Hope;  but that which has been actually consumed in gilding, plated ware, and other manufactures of the same character, cannot be correctly ascertained.  From the imperfect data within our reach, it may, we think, be affirmed, that the amount still existing in Europe and America certainly exceeds four thousand, and most probably falls short of five thousand millions of dollars.  Of the medium, or four thousand five hundred millions, which we have assumed, it appears that from 1/3 to 2/5 is used as currency, and that the residue consists of plate, jewels, and other manufactured articles.  It is known, that of the gross amount of seven thousand two hundred millions of dollars, about 1800 millions or ¼th of the whole in value, and 1/48th in weight, consisted of gold.  Of the four thousand five hundred millions, the presumed remaining amount in gold and silver, the proportion of gold is probably greater, on account of the exportation to India and China having been exclusively in silver, and of the greater care in preventing every possible waste in an article so valuable as gold.

Here it appears, that ten years ago, or when the treatise, entitled "Considerations on the Currency and Banking System of the United States," was written, considerably less than one half of the whole quantity of gold and silver in Europe and America, was in the form of money.  The rest was in the form of plate and jewelry.  It is not probable that any great alteration has taken place in these proportions.  And why is it so ?  Bullion, when brought from the mines, is, generally speaking, first formed into coin.  Why is so great an amount of this coin afterwards converted into plate and jewelry ?

The reason is, simply, because in hard money countries they have a use for only a part of their stock of the precious metals in the form of money.  A few dollars a head suffice for a standard of value, and a medium of exchange.  In paper money countries, a great amount of specie is converted into plate and jewelry, because the demand for gold and silver as money, is diminished by the issue of notes.

Bills of Exchange.

In the new preface to our "History and Inquiry," we have stated that, if we found it necessary to make any corrections of any moment in republishing it, due notice would be given to the reader.  We make one correction to day, in the third chapter.

In the first edition, the fifth paragraph read as follows:

"Bills of exchange, where the practice is to pass them from hand to hand, may serve as a local commercial medium, though not a very convenient one, since it is necessary for the nice adjustment of transactions, to calculate the difference of the interest on each transfer."

Further inquiries, and conversations with a gentleman who once did an extensive business in Lancashire, England, have convinced us that bills of exchange, are, as a commercial medium, especially in large transactions, much more convenient than we once supposed them to be.  Their extensive use in England, especially in the county of Lancashire, including the two populous and bustling towns of Liverpool and Manchester, is of itself sufficient evidence that they must possess many and great conveniences.

So convenient, indeed, were they found, that the private bankers of Luncashire, never issued any notes of their own.  The joint stock banks lately established in that county, issue notes, but this is because the issue produces a profit to themselves, --not because the old commercial medium was inconvenient to the merchants and manufacturers.

Some of these bills of exchange having but sixty days to run, have, by the time they come to maturity, as many as one hundred and twenty endorsements --thus proving that they have been used on an average, in more than two commercial transactions on each business day.

Our banking business in this country will never be brought right, till bank notes are entirely superseded by specie and bona fide bills of exchange, or till we shall have no bank notes, except such as shall be the representatives of specie actually in deposit, or of bona fide bills of exchange.

More on this subject hereafter.

The True Principles of Commercial Banking.  We commence to-day the re-publication, from the original manuscript, of a dissertation under this title, which was communicated by us in May, 1838, to the Democratic Review.  To it, the editor of that periodical prefixed a paragraph, which it is unnecessary to republish;  and several other paragraphs will be omitted, as they refer to circumstances no longer existing.  The rest of the dissertation is as applicable to the present times, as it could be if it had been written but yesterday.  For convenience, we have divided it into sections, and we propose to add, from time to time, so many new sections as may be necessary to give a complete elucidation of "The True Principles of Commercial Banking."

The dissertation, at the time it appeared, was much commended by many commercial men, and others, who, from their position and previous studies, were well qualified to judge of its merits and defects.  Among others, "though we say it who should not say it," a Director of the Bank of England was so pleased with it, that he sent to this country "for copies of all the writings of the author of the essay on the True Principles of Commercial Banking."

While on this subject, we will remark that many articles in the Democratic Review, which have been attributed to us, were from other pens.  The articles in question have great merits;  but we wish not to be dressed up in borrowed plumes.

The True Principles of Commercial Banking,

Section I.

According to the most distinguished writers on this subject, commercial banks should, in making loans or discounts based on deposits and circulation, confine themselves to business paper having but a short time to run, and never grant an extension of such loans or discounts.  As they express it, "the proper business of a bank is not to lend capital, but to lend credit" --not to furnish the trader with sufficient means to carry on his business independently of other resources, but simply to enable him to anticipate the proceeds of his sales, by making advances to him to supply the place of such portion of his own capital as he has parted with by selling on credit.  Better terms might, perhaps, be selected: but we will not, on the present occasion, quarrel with terms.  The meaning of those who use them is quite intelligible.  If a bank discounts nothing but business paper, the notes it issues represent the notes it discounts, and the notes it discounts represent the commodities, or the value of the commodities, which the merchant has bought or sold.  Let these commodities be flour, sugar, cotton, tobacco, or any thing else of which the Price Current makes mention, they form a fund by which the merchant may, in due season, pay the note discounted by the bank, and thereby enable the bank to redeem its issues.

So long as banks observe this rule, they cannot, according to this theory, make issues to excess;  for the accommodations they grant are exactly adapted to the commercial business of the country, increasing as it increases, and diminishing as it diminishes.  The exact proportion of currency to commodities is preserved, no matter what may be the fluctuations of commerce.

So long, moreover, as banks observe this rule, domestic exchanges cannot be thrown into confusion.  If the trade between different parts of the country were reduced to mere barter, (both money and credit being excluded therefrom,) it is self-evident that exchanges would be regular, for no part of the country would part with commodities, except on receiving commodities of equal value in return.  Equally regular would be the exchanges, if, instead of being carried on by mere barter of commodities, they should be carried on by the medium of paper, which should be the exact representative of the value of those commodities.

But let banks make issues to enable their customers to pay taxes, and they introduce disorder into both currency and exchanges.  In such cases, their paper is not the representative of commodities, and no specific fund is provided for its redemption.  The banks are accommodating, not the wants of commerce, but, in an indirect way, the wants of Government.  The issues of the banks no longer adapt themselves to the trade of the country, expanding as it increases, and contracting as it diminishes: but expanding and contracting according to the demand for public revenue.  The foundation is also laid for confusion in exchanges.  While the banks restricted themselves to discounting business paper, the exchanges of commodities by different parts of the country afforded effectual means of equalizing the exchanges of bank notes, which were the mere representatives of the value of these commodities.  But there are no commodities to represent bank notes issued for the payment of public revenue;  and Government does not, in its disbursements, pay out bank notes in the places to which they would find their way in the natural course of trade, but, very probably, in the points directly opposite.  It is hardly necessary to say that when Government receives bank notes in payment of public dues, bank notes will be issued to an amount sufficient to supply the demand.  It matters not what particular form bank loans may then assume.  It is plain that, in such cases, bank issues exceed what the commercial wants of the community require, and go to supply its wants for other objects.

If the banks issue notes for the purchase and improvement of real estate, they may disorder currency and exchanges as much as by issuing notes for the payment of taxes.  In such cases, their notes are indeed the representatives of commodities, but not of commodities which can be advantageously sold in time to enable borrowers to repay what has been lent to them, and thus enable the banks to meet their engagements.  In some parts of the country, the banks may be under the necessity of redeeming the aggregate amount of their issues once in three months, in others in a shorter, and in others, in a longer period.  But it would be but a poor "accommodation" to the purchaser of a cotton plantation in Mississippi, to be obliged to repay his loan before he could carry his first crop to market;  or the builder of a palace in New York to refund what he had borrowed, before his wife had had an opportunity of giving her first soirèe in her splendid mansion.  Yet if the banks of Mississippi will in addition to making issues sufficient to circulate the annual produce of the soil, also make issues equal to the amount of real estate thrown into market, exchanges will be woefully against Mississippi.  Part of these excessive issues will find their way to New York and Philadelphia, but the land cannot be exported in order to redeem them.  The same remarks will, mutatis mutandis, apply to the New York banks, if they will make loans to people wherewithal to build palaces at New Brighton.

Here it is proper to enforce the remark that this strict rule applies only to the credit dealings of the banks, or to such of their operations as are based on their circulation and deposits.  It is of little moment, in regard to the particular point which we are now considering, in what way what is called the capital of a bank is invested, provided that, in its credit dealings, it confines itself to discounting business paper having but a short time to run, and makes it an inflexible rule never to grant a renewal.  The whole of the original capital of a bank may be lent to Government, as has been done by the Bank of England --or it may be invested in real estate--or in bonds and mortgages-- or lent on accommodation notes of long date, renewable for ever-- or it may be simply represented by the stock notes of the original subscribers.  So long as the loans and discounts of a bank do not exceed the capital paid in, no evil is done, even if the whole be invested in stock notes.  The danger commences in those operations which are based on deposits and circulation, and it is to these that our remarks especially refer.

Section II.

Particular cases will serve to elucidate the principles of commercial banking, and show the difference between it and other kinds of banking.

We shall suppose the reader to be acquainted with the mode in which, when banks are introduced into a country, their paper is made to supply the place of the specie previously in circulation: and we shall not stop to inquire whether the new distribution of capital thus effected is that which is most advantageous to the community, or precisely equitable in all its aspects.  We will take the system as established, and select a single bank in the interior of Maryland to illustrate its operations.

A miller, at or near Hagerstown, has wheat offered to him by the neighboring farmers, say of the value of one thousand dollars.  He has no cash on hand wherewith to make the purchase, but he has a note, bill, or acceptance, for 1000 dollars, given to him by a factor at Baltimore, to whom he had made his last consignment of flour.  He has this note or bill discounted by the bank, and with the proceeds purchases the wheat.  The farmers take the bank notes, pay them out to the mechanics and traders with whom they have dealings, and the notes, after having circulated for a time in the neighborhood of Hagerstown, at length reach Baltimore.  They are, in all probability, carried to that city by the Hagerstown storekeepers, and exchanged for dry goods and groceries.  The merchants of Baltimore deposit them in their banks, and the bank of Hagerstown thus becomes debtor to the banks of Baltimore, in the sum of 1000 dollars.  But this is balanced by the note or bill of the flour factor for 1000 dollars, which the Hagerstown bank had sent on for collection.  The trade between Hagerstown and Baltimore is an exchange of flour for dry goods and groceries, and the value of the same is expressed in the note on hand, or bill of exchange, given by the Baltimore flour factor, and in the bank notes issued at Hageretown, which form together the medium of that trade.

This is what is called "simply making advances," or "affording facilities."  The miller has a capital of his own, invested in flour at Baltimore.  But he cannot use this in the purchase of wheat at his mill door.  The farmers do not want flour, or if they do, he has it not at hand to supply them.  But they want to make purchases from the storekeepers, and the circulating credit of the bank will answer their purposes.  The bank has not lent capital to the miller, for it had none to lend, having previously invested in permanent securities all its original funds.  It lends its credit;  and it has a double security that the credit it lends will be sustained;  first, in the flour at Baltimore of the value of which the bill or note of the factor is the representative;  and secondly, in the wheat purchased by the miller, of the value of which the notes issued by the Hagerstown Bank, are the representatives.  This is throughout a business transaction, and it is in strict conformity with the principles of commercial banking.

But take another case.  The miller wishes to make an addition to his mill, and for this purpose requires 5000 dollars.  The bank lends him the amount on a note drawn by an obliging friend, and indorsed by himself.  Here bank notes are issued, not as representatives of a value already existing, but of a value to be created by labor.  Before that value can be created, that is, before the new mill can be brought to yield an income, the bank notes find their way, in the natural course of trade, to Baltimore.  But there is no flour here now, as in the former case, to constitute a fund for the redemption of the notes.  Even after the mill shall be completed, it cannot be transferred to Baltimore.

Suppose fifty operations of this kind to take place, and it is evident that the balance will be thrown greatly against Hagerstown.  But a very few such operations would derange the course of exchanges.  According to the theory of commercial banking, while banks discount all good business paper of short dates that is offered, and no other, the channels of circulation are exactly full.  But it is plain that when a vessel is full, a very few drops in addition will cause the water to overflow.  Let a bank have 10,000 dollars of specie in its vaults, and a circulation of 100,000 dollars, and suppose this to be exactly adapted to the business of the community.  Then let it make an addition of but ten per cent. to its circulation.  Inconsiderable as this addition way seem, it may be sufficient to drain the bank of all its specie.

Apply these principles to the banks in two more distant parts of our Union, say New York and Mississippi.  The trade is much more round about than that between Hagerstown and Baltimore, but it is in reality founded on the same principles.  Let us trace its regular course.

A merchant from Natchez repairs to New York, and purchases 100,000 dollars worth of goods, giving his notes or bills for the same.  The New York merchant has these notes or bills discounted by a bank, and with the proceeds purchases bills of exchange on England, through which he either pays an old debt due in that country, or procures a fresh supply of foreign commodities.  The Mississippi merchant carries these goods to Natchez, and there disposes of them to the neighboring planters, in expectation of being paid out of the growing crop of cotton.  In due season he receives the cotton, and sends it to a factor at New Orleans.  In the interval, the notes or bills he gave to the New York merchant have been sent to the Planter's Bank for collection.  They are now due.  He draws on the factor at New Orleans.  The Planter's Bank discounts these drafts, and with what he thus receives, the Natchez merchant pays the notes or bills he gave to the New York jobber or importer.  Here are still several accounts unsettled.  The New Orleans factor is in debt to the Planter's Bank at Natchez, and the Planter's Bank is in debt to the Bank of America, at New York.  But the factor has, in the cotton consigned to him, the means of paying his debt to the bank at Natchez, and thereby enabling the latter to pay what it owes to the bank at New York.  The factor ships the cotton to Liverpool, and draws a bill of exchange on England, which bill he sells, and with the proceeds pays the New Orleans agent of the Planter's Bank, which agent we will suppose to be the Union Bank.  The Bank of America, at New York, draws on the Planter's Bank at Natchez: the latter draws on the Union Bank of Louisiana in favor of the bank at New York: the Union Bank sends the foreign bill of exchange to New York: the Bank of America receives it there, and sells it to an importing merchant, who transmits it to Europe, perhaps in payment of the very dry goods he had a year before sold to the Mississippi merchant.

This may seem like a very complicated process of bill-drawing.  But it is in reality a plain business transaction.  The bills and drafts in all cases follow the course of the goods on which they are founded.  The trade between Mississippi and England, is an exchange of cotton for dry goods and other products of British industry.  Mississippi carries on this trade, chiefly through the two ports of New York and New Orleans.  Through the former she makes her imports, through the latter her exports.  All the notes given, and the drafts drawn, are but the representatives of the goods received or the cotton sent.  The trade, so far as it is carried on in this country, commences at New York, where the importation was made;  and to that city, in order to liquidate accounts, must the bill of exchange be sent which was founded on the exportation made at New Orleans.  This bill is forwarded to Liverpool.  About the time it reaches that city, the cotton on which it is founded arrives: and thus the accounts between England and the United States are adjusted.

Section III.

If the principles of commercial banking are correct, it would seem that, as long as these institutions confine themselves to real business transactions, there is little danger of either foreign or domestic exchanges being deranged.  In addition to the operations of the Mississippi banks, founded on goods received from New York, and cotton sent to New Orleans, there would be others founded on the business transactions of the citizens of Mississippi among themselves.  The issues of the banks resting on such transactions would furnish the local currency, and as no note would be issued but in consequence of a value already created and adapted to circulation, there could be no excess of issues:  and while the currency of Mississippi was thus kept at par at home, there could be no possibility of deranging it from abroad, so long as the exchange dealings of the banks should be based exclusively on goods received from other States, and products sent to other countries.

But let the banks of Mississippi, in addition to loans to facilitate bona fide commercial operations, also make loans to enable individuals to speculate in lands.  Suppose a bank should, in addition to an advance of 100,000 dollars to a merchant, made in order to enable him to anticipate the proceeds of his cotton sent to New Orleans, also advance him 100,000 dollars to buy Government lands.  If we are rightly informed, such things have been done in Mississippi.  This amount may not enter immediately into circulation: but it must do so, sooner or later, whether the amount "is deposited with the States," or paid out in the ordinary course of expenditure which the public service requires.  Suppose that as the banks in Mississippi afford "accommodations" of this kind, and that the aggregate amount is several millions.  In the course of trade, a portion of the excess will find its way to New York, and then the rate of exchange, as measured by the price of bank notes, must be greatly against Mississippi: unless, indeed, the New York banks shall have made issues equally excessive to accommodate speculators in town lots, dealers in fancy stocks, and builders of fancy palaces.

We may suppose all the banks in the country to act in this way, and those in the north, south, east and west to be so nearly equal in their excess of issues, that, for a time, there is little variation from the ordinary rates of domestic exchange.  But this cannot long continue.  The rise of prices caused by so general an excess, encourages importations, and discourages exportations.  Though we have the finest and most extensive wheat lands of any country in the world, we cease to export and begin to import bread stuffs.  This may, for a time, seem to do very well: but as we do not pay as promptly as we ought for part of what we import, our credit abroad begins to be affected.  The course of foreign exchanges is turned against us.  The merchants, to avoid paying heavy premiums on European bills, export gold and silver.  But hardly does the sum total amount to five million dollars, before our eight or nine hundred banks find they can bear no further drains.  As if with one consent, they all stop payment, and the country is exposed to all the evils, present and prospective, of an irredeemable paper currency.

According to the theory of commercial banking, none of these evils would have come upon us, if the banks had made no issues and granted no credits, except on real business transactions of short dates.

If there are errors in this theory, we are not responsible for them.  We take it as we find it.  Objections have been brought against it, but what they are we need not now discuss.  Our present object is not either to assail or defend the theory of commercial banking, but simply to explain it, and to show the utter incompatibility of its principles with the receipt of bank notes for public dues and public lands.  When banks make issues for the payment of taxes, their notes are but a new emission of continental money, different from the old in form, but the same in substance.  When banks make issues based on lands, what have we but the French assignat system over again ?

It is no wonder that currency and exchanges have, during the last fifty years, been in a state of confusion, for the history of most banks has been little more than a history of deviations from correct banking usages.  In all, or nearly all countries, banks are to a greater or less extent fiscal machines, and every Government makes them so when it receives bank notes in the payment of the public revenue.  The greater part of the paper issuing banks on the continent of Europe are, in a strict sense, Government banks.  So also is the Bank of England.  Its chief business is that of exchanging exchequer bills for bank notes.  In some years the whole of its advances to merchants have not exceeded one or two millions sterling, while those of a private firm, that of Richardson, Overend and Co., have amounted to as much as twenty millions.

Section IV.

In our own country banking has never been conducted on purely commercial principles.  The very commencement of the system with us placed it on a wrong foundation.

There is reason to believe that the whole of the original capital of the Bank of North America was furnished by the Government.  It is certain that its notes were received in payment of taxes, and equally certain that thereby a greater demand was created for them than the mere purposes of commerce required.  The supply was, of course, made to equal the tax-paying as well as the commercial demand;  and the consequence was that the due proportion of currency to commodities was not preserved.  The abundance of bank issues excited the spirit of speculation.  But as a large part of these issues were not based on commodities, the bank was, when the time for redeeming them arrived, forced to make a great and sudden pressure on the community, whereby an excitement was produced which was near depriving the said bank of all future power to do either good or evil.

The framers of the Federal Constitution intended that we should have a hard money government;  and the first revenue law that was passed, seemed to be so framed as to carry this intention into effect.  It declared explicitly that all duties imposed by the act should be paid "in gold and silver coin only."  Words could not be more plain.  But the first Secretary of the Treasury (strange as it may seem) construed these words so as to allow bank notes having not more than thirty days to run to be received in payment.  His next proceeding was (without any authority from law) to deposit these notes in the banks, and leave the country without the independent treasury contemplated by the Constitution.  He then proceeded to organize a bank with certificates of public debt for its capital;  and by thus completing the union between Bank and State, exposed currency and credit to all the evils incident to derangements in our fiscal operations.

This state of things lasted till the year 1811, when this union was dissolved by the expiration of the charter of the first United States Bank, but only that a new union might be formed with certain State Banks selected as depositories of the public funds.

War was declared in 1812, and, in utter defiance of all correct principles of finance, attempts were made to carry it on by means of loans of bank notes, instead of drawing on the real resources of the country.  The consequence was, that all the banks which made such loans were forced to suspend specie payments, and the very capacity of the Government to borrow in the regular way, was exhausted in little more than two years, and when it had thus borrowed little more than forty-five million dollars, or little more than three per cent. per annum of what was then the gross income of the people.

Then came peace, and a mode of financiering was adopted, the main principle of which consisted in exchanging treasury notes, many of which bore interest, for bank notes and bank credits which bore no interest.  This admirable policy induced the banks still further to depreciate the currency by additional emissions, and though the treasury was thus made to overflow, it overflowed with money, if money it might be called, which could answer the purposes of neither the Government nor the people.

The evils of this state of things were intolerable: but instead of attempting to correct them, by putting in force the existing laws, a new National Bank must be established with a paper capital, issuing paper receivable in dues to Government.  Specie payments were then restored, but in such a way that the resumption was worse than the suspension.

In 1821, the rates of exchange in the Middle States were brought into something like regularity;  but as industry was prostrated, and enterprize paralyzed, there was no such increase of commodities as to require an increase of currency.  The Bank of the United States, however, sought to find employment for its now, as was thought, well established credit, in a loan of four millions to Government.  The consequence of this departure from true banking principles, was an excitement of the spirit of speculation, which was followed in the next year by a fall of prices and by numerous bankruptcies.

In 1824, the Bank of the United States repeated its error by making a loan of ten millions to Government;  and this it really was which, in the next year, brought it and all the other banks in the country, to the very verge of suspending specie payments.

Section V.

Since the year 1824, the Government has had little occasion to borrow.  But it has paid off what it had previously borrowed, and a reference to the documents affixed to Mr. McDuffie's and Mr. Clayton's reports in 1832, will show that the operations of a bank in making paper loans to Government, can hardly be more injurious to the community, than are its operations in making repayments to the public creditors.  The whole course of domestic exchanges has to be deranged, in order to concentrate funds at the points where the repayments are to be effected.

What has occurred since the year 1832, must be too fresh in the minds of men to require us to go into detail.  Different persons may entertain different opinions of the merits of particular measures;  but all must admit that the country would have escaped such evils as it is now suffering, if Bank and State had never been united.

It will be difficult, if not impossible, to point to a single convulsion in the money market from the year 1782 up to the year 1838, which, if it has not been caused, has not been increased by this unholy connection.  In all circumstances, whether of peace or of war, whether the public revenue has been redundant or deficient, whether the banks employed have been Federal or State Banks, and whether they have lent to Government or paid off loans contracted by Government, the improper connection of fiscal and commercial transactions has proved injurious to either the Banks or the Government, and in some instances to both.

If the connection be resumed, the history of the future will be only a repetition of the history of the past, with such variations as may result from different combinations of circumstances.  Fiscal operations and commercial banking operations are so distinct in their nature as to require for their proper management distinct modes of action.  When a Government wants to borrow, it wants what Banks have it seldom in their power to lend.  It does not want mere credit.  It wants capital, and it generally wants it for a term of years -- not for the short period which usually elapses between the time when bank notes are issued and when they are returned for redemption.  Equally ill adapted, as we have already shown, is bank currency for supplying a public revenue.  The notes issued for such an object are not based on commodities, and as the revenue of Government is collected in one part of the country and disbursed in another, no corresponding transfer at commodities takes place to balance exchanges.

In the case of receipts for customs, the tax may be regarded as incorporated with the price of the imports: and in discounting a note to take up a duty bond, a bank may, perhaps, be said to be discounting a note representing a commodity which may be sold in time to redeem the note discounted and thereby the note issued.  But in furnishing a medium for the payment of postages and other public dues, the banks make issues which are, clearly, not based on any proper banking principles.  In making issues for the purchase of public lands, they must, if they proceed therein to any great extent, utterly derange the whole course of exchanges.  Each of the western and south-western states produces commodities for export barely sufficient to balance its commercial accounts with the Atlantic states and with Europe.  There being no commodities to form a basis for further exchanges, attempts to transfer, by means of Government drafts, such sums as are collected in western bank paper, to such places as the public service requires, must inevitably derange both currency and exchanges.

If the eastern banks as well as the western, issue notes for the purchase of public lands and other land speculations, they may, for a time, balance the excess of paper in the Mississippi valley, by an excess on this side of the Alleghanies;  but such an excess cannot continue long, without turning foreign exchanges against us.  Gold and silver then leave the country, and the promises of the banks "to pay on demand" prove utterly delusive.

Notes issued for the payment of taxes are, as we have already said, but a new emission of Continental money, differing from the old in form, but not in substance.  Their being issued by corporations, and all the profits of the issues going to corporations, does not change their nature.  As no particular commodities are pledged for their redemption, their value is kept up wholly by taxation: and if our public expenditures should exceed our public receipts as much as they did in certain periods of the Revolutionary war, our new Continental money would soon fall to a level with the old.  To many minds this may not be apparent, because the whole of our banks have been engaged in the double business of furnishing currency for commercial purposes, and currency for fiscal objects: but let these two functions, distinct in themselves, be divided between two sets of banks, and every one must see that the currency supplied by one set of these banks would rest on the same principles as the old Continental currency, and be liable to depreciation from the same causes.

If any find it difficult to discover that another portion of our bank currency has rested on the same principles as the French assignats, it can only be because the matter has been so cunningly managed with us as to give all the profits to corporations.  The value of the French assignats was based on the public land, which was the only fund provided for their redemption.  The value of much of our bank paper has rested on no better foundation.  No other property than the public land has, in many an instance, been represented by either the notes discounted or the notes issued.  And after the title to the land had, by banking operations, been transferred from the public to speculators, there was no other fund than this same land for the redemption of the notes thus added to the circulation.  Such a currency is identical in its nature with the French assignat currency.  Giving all the profit of it to corporations does not change its essential character.

Very different is the currency created by banks conducted on purely commercial principles.  This is always based on commodities, the demand for which is so constant as to insure the prompt redemption of their paper representatives.  It would also seem to have within itself a self-regulating principle, by which the true proportion between currency and commodities might be preserved. --Whatever objections could, on other grounds, be brought against such banks, they could not be justly accused of deranging exchanges.

Banks conducted on purely commercial principles would be very profitable.  Their whole capital might be invested in permanent securities: for, after being a short time in operation, the whole spare cash of the community would be deposited with them, and constitute a fund quite sufficient to support their current credit.  From the capital invested in permanent securities, they would derive the ordinary profits of stock, and what should accrue from the use of their current credit would be so much extra gain.  All such of the product of our land and labor as enters into wholesale trade, would, either directly or indirectly, be the subject of their operations, and become a pledge for the redemption of their issues.  No portion of it could pass from the producer to the wholesale dealer and thence to the consumer, without the intervention, in some stage of its progress, of bank credit in some form, and where bank credit is used somebody must pay for it.  The aggregate income thus realized, would be many millions per annum, and many millions per annum ought to be esteemed quite a sufficient reward for simply furnishing paper representatives of the value of commodities, and balancing exchange accounts between different parts of the Union.

But if our banks, not content with the legitimate profits of their trade, will insist on making emissions identical in principle with the old Continental money, and other emissions identical in principle with the French assignats, they must expect all the regular operations of their trade to become deranged, and if they gain in one way, to lose quite as much in another.  They cannot blend the three distinct functions of commercial banks, government banks, and land banks, and preserve the due proportion of currency to commodities.  Their enormous expansions will be followed by as enormous contractions, --each detrimental to the regular progress of wealth, and to safe and regular business, and consequently to the profits of regular banking.

The irregularity of movement imparted to our banking operations by the reception of bank notes in payment of taxes, would, at first sight, seem to be not very considerable.  As the revenue the Government derives from proper taxation, including therein the customs, is seldom more than twenty millions a year, it does not, by receiving bank notes in payment of these dues, give a direct stimulus to bank issues beyond this extent: and as this revenue is received and paid away in different seasons of the year, the amount thereby added to the active circulation may seldom, at any one time, exceed five millions.  But it should be recollected that, when by discounting all the good business paper offered, the circulating medium is exactly adapted to the amount of things to be circulated, a very small addition may cause a great derangement of exchanges, and render the whole system insecure.  As shown in a former part of this dissertation, a bank with specie in its vaults of the amount of ten thousand dollars, and paper in circulation of the amount of one hundred thousand dollars, and perfectly secure as long as these proportions are maintained, may, by adding only ten thousand dollars to its circulation, be compelled to suspend payment.  The receipt and disbursement in bank notes of a revenue of only twenty millions, may cause every thing to fluctuate where every thing would otherwise be stable.

United States Bank.

We owe an apology to this institution for having in our previous numbers recorded what had specific relation to its affairs, under the humble head of "incidents."  As no disrespect was thereby intended, we trust no offence has been taken.  The history of this bank is so curious, and withal so instructive, that we must open a distinct account for it in our Bank Journal, or, if the reader prefers, our Bank Ledger.  It will facilitate the summing up of accounts at the end of the year.

Mr. Samuel Jaudon, formerly Cashier of the bank, and more recently its agent in London, has returned from Europe.  At a meeting of the Directors, he informed them, that the disposition of the stockholders and creditors in England, was, to do all in their power to resuscitate the bank.

A daily paper, believed to be among those most friendly to the bank, under its new management, states that suits are to be instituted against editors and others, for money lent to them, and which they supposed they had rendered an equivalent for by political and other services.

Mr. Wm. Ayres, a Director of the bank, residing at Harrisburg, (Penna.) has published a letter in which he protests against the institution of suits against the late officers.  He thinks they will produce nothing but fees for lawyers, and revelations which will be injurious to the interests of the stockholders.

The Directors have, in a series of resolutions, made a reply to Mr. Ayres.  They state that by these suits it is probable a considerable amount of money will be recovered, and that the fees to lawyers will be inconsiderable.

Mr. Jonathan Roberts, Collector of the Port of Philadelphia, and also director of the bank, has published a letter, similar in its general tenor to that of Mr. Ayres.

Since our last number was issued, the stock of the bank has fallen from $18, Philadelphia currency, to $17½.  But, so very uncertain is the market, that it may rise again, before we can get our paper to press.

Mr. Cadwallader, the former Solicitor of the bank, who had a salary of seven thousand dollars per annum, has been dismissed;  and Mr. Brooke employed in his place, at a salary of only two thousand dollars.

The internal affairs of the bank are said to be managed now with very great economy.  We judge that they must be, for the bank has not yet sent in its subscription for our Journal.  It would save money by enrolling itself in our list of subscribers: and so would every other bank in the country.  The facts we shall tell them, and the doctrinal truths we shall teach, will be worth much more to them than one dollar fifty cents a year.

It is a shame for any bank to be without "The Journal of Banking."  The Directors of each and every of our nine hundred banks, ought to meet immediately, and pass resolutions for supplying each of their own number, and each President and each Cashier, with one copy of the Journal.  What has brought ruin on our banking institutions, but want of acquaintance with facts, and want of understanding of principles ?

Bank Defaults.

A paragraph has been going the rounds of the papers, stating that J.B. Norris, the late President of the State Bank of Alabama, at Mobile, had embezzled its funds, and "gone to Texas."  It has since been denied that he embezzled the funds of the bank;  but, as he left Mobile, apparently in poor and embarrassed circumstances;  as on his arrival in Texas, he purchased a plantation for $6,000, paying $4,000 of the amount in cash;  and as he soon after received from Mobile ten negroes, purchased there for cash in the name of a friend, some of our journalists seem still to have their doubts on the subject.

Officers of banks are at present in such bad repute, that suspicion may attach to many of them wrongfully.  When Mr. Suydam, the President of the Farmers' and Mechanics' Bank, New Brunswick, N.J., disappeared, his friends, in searching for his body, raked the bottom of the Raritan river.  Every body laughed at them.  The true place to look for him was in Paris, or in Texas.  Where else had other bank officers, that had suddenly disappeared, been ultimately discovered!"  Yet his friends persevered in their search, and at last they found his remains, and brought his murderer to condign punishment.

Stories to the disadvantage of bank officers must not be too hastily received.

The next case we hardly know how to class.  We will put it, for the present, under the head of Bank Defaults, and, correct the classification hereafter, if further discoveries show correction to be necessary.

We take the particulars from the State Register, published at Springfield, Illinois.  The paper bears the date of July 11th.

"On last Sunday night, and before day light on Monday morning, the branch of the State Bank at Jacksonville, was entered and robbed of $78,000 in bank notes, $8,000 in gold, and some thousands in silver.  The daring villains also destroyed every accommodation note, bill of exchange, and other evidence of debt in the bank.  The books of the bank were also mutilated in such a manner as to render it impossible to renew the notes and bills by any evidence in possession of the bank.  The leaves were cut from the large books containing accounts since 1837, and destroyed, and all the leaves prior to that time were suffered to remain, being of no use, as they contained entries of accounts which had been settled.  All the small books or 'blotters,' were thrown into the chimney with the notes and bills of exchange, and set on fire.  The cinders were all that was left of them in the morning.

"To all appearance the robbers entered one of the side windows, and opened the vault by keys.  The key of the safe was secreted in the vault, but the robbers appear to have found it without trouble, as they stripped every thing that it contained.  They left several boxes of silver standing on the counter, which they had knocked open, and probably left from inability to carry them away.  The door of the bank was found unlocked and unbarred, although shut, and it is supposed that after the thieves obtained access they unbarred and unlocked the door, and afterwards made their escape through it.

"This daring robbery appears to have been committed with as much deliberation as boldness.  The clerk or cashier of the bank resided in the building, and was asleep in the room above during the whole time occupied in the robbery.  How he could sleep during the noise the villains must have made seems wonderful.  The circumstance of the destruction of the notes and bills of exchange would seem to fix this daring act on some of the debtors of the bank, and we think every man who owes it, is called upon to take an active part in ferreting out the villains.

"We learn that the porter of the bank, whose salary had been a short time before reduced, and who had threatened to leave its employ, had been examined.  His horse was found ready saddled on Monday morning, and on being questioned, he stated that he was about going into Brown County, but had waited till after breakfast to collect a debt of $20 in town.  If the porter had any hand in this robbery, he has undoubtedly been backed by "respectable accomplices."  Expresses have been sent out on every road to overtake the villains, but we will eat all they catch.  The robbers are in or near Jacksonville to a certainty."

The St. Louis Republican says:-- Lately several officers were dismissed from the bank, by a resolution of the mother bank to curtail the expenses.  Since then, the late cashier has resigned, and another been elected in his stead, who we understand was to enter on the duties of his office on Monday last.  The opposing candidate to the man elected, was the chief clerk and paying teller.  All these gentlemen are highly respectable men, and have always borne characters which forbid the idea that they should in anywise be connected with such a transaction.  For their sakes, as well as the general good, we trust the robbery will be fully explained.  They at least should not be suspected until there is more evidence than we have seen to justify it.

The Alabama Bank Frauds.-- A Mobile correspondent of the New York Commercial says, in reference to the lately discovered frauds in the State Bank and Branches, that it has been the custom with them to discount accommodation notes or bills, upon Mobile, with two or three good names which, if not known to the directors, must be recommended by some member of the Legislature.  Certain persons have been engaged in making notes and procuring names to them notoriously irresponsible and insolvent, to whom they have paid five, ten, and twenty dollars for their signatures;  procured the recommendation of some member of the Legislature, and obtained the money on them.  In many instances the members recommending the paper have obtained the money;  in others, names have been forged.  The extent of these frauds cannot be fully ascertained until the annual report of the banks to the Legislature in November next.

The branch at Mobile, it is said, has transacted a large amount of business within the last year, and the proceeds appear large on paper, but the suspended and doubtful debt, it is stated, reaches nearly $6,000,000 !

Bills of Suspended Banks.

The citizens of Hartland, Livingston Co., Michigan, have come to the conclusion no longer to take paper not redeemable in specie on demand.  They say they are "determined to be swindled no longer by taking that which is not money, nor even an apology for money."

At Monticello, Georgia, the merchants and other citizens, recently passed a resolution, binding themselves, in honor, not to receive at par, after the 1st of September next, either in payment of debts or for merchandise, the bills of any banks, except such as may be paying specie at that time.  The bills of suspended banks they will receive only at such discount as they may then be at in the city of Augusta.

"We disavow," they say, "any design of oppressing the planter, but believe that we are acting for the good of all, save the stockholders of suspended banks.  A system of dealing based upon a depreciated and unstable currency, must act partially, and leave the merchant to determine, without knowing in what currency he will be paid, the prices of his merchandise;  and his safety demands, under this uncertainty, that he should add to his regular prices the highest supposable rate to which exchanges may rise.  The only equitable plan of doing business is to sell at as low prices as can be afforded ---to add nothing for depreciated currency, and to receive in payment nothing but good funds."


The discussions in the Senate and in the House, lose none of their interest: but the only bill that has been passed since our last, is one to authorize A loan of twelve millions of dollars, or so much thereof as the President may deem necessary.

As many members of the Senate, including in that number some of those who have most experience in financial affairs, maintain that no loan, or, if any, only a very small one, is necessary, this is imposing on the President, a very unpleasant responsibility.

In the Senate, the bankrupt bill was passed on the 24th of July, by a vote of 26 to 23.  It is not to be supposed that the Senators who voted against the bill, are less impressed than those who voted in its favor, with the necessity of affording relief to the debtor class.  But some would not vote for it, because it did not include in its provisions, bankrupt banks as well as bankrupt individuals;  others, because they thought due regard was not paid to the rights of creditors: and others, because they thought its character was such that it must necessarily do more harm than good.

The House has, by an overwhelming majority, resolved to take up this subject.

A new tax bill, or revenue bill, as it is called, has been passed by the House.  It imposes a tax of twenty per cent. on many articles which are now free from duty.

A bill, appropriating a large amount of money for fortifications, has been passed by the House.  When the treasury was overflowing with what was called "the surplus revenue," Mr. Benton of the Senate, proposed that it should be applied to putting the country into a state of defence.  He was not properly supported by the members of either party, and now, it seems, it is necessary to involve the nation in debt, in order to accomplish this object.

The Fiscal Bank.

In the Senate, the details of Mr. Clay's plan of a Fiscal Bank, have occasioned much discussion;  and in the House, the Committee on Currency, of which Mr. Sergeant is Chairman, has reported a new bill.

As we did not consider it necessary to give the minor details of the schemes of Messrs. Clay and Ewing, we shall not, of course, be at the pains of specifying those of Mr. Sergeant.

The objections we have urged are such as apply to any paper money incorporation which may be established by Congress, with the professed object of managing the fiscal concerns of the Union, or regulating currency and exchanges.

By the consideration of details, the attention of the people is diverted from the fundamental objections to all such systems.

We hope this important point will not be lost sight of, when the subject comes to be discussed in the House of Representatives.

Mr. Clay's bill was, on the 27th of July, after a session of seven hours, ordered to be engrossed for a third reading by the following vote:--

Yeas-- Messrs. Barrow, Bates, Beyard, Berrien, Choate, Clay of Kentucky, Dixon, Evans, Graham, Huntington, Kerr, Mangum, Merrick, Miller, Morehead, Phelps, Potter, Prentiss, Preston, Simmons, Smith of Indiana, Southard, Tallmadge, White, Woodbridge --25.

Nays-- Messrs. Allen, Archer, Benton, Buchanan,Calboun, Clay of Alabama, Cuthbert, Fulton, Ring, Linn, McRoberts, Mouton, Nicholson, Pierce, Rives, Sevier, Smith of Connecticut, Sturgeon, Tappan, Walker, Williams, Woodbury, Wright, Young --24.

Messrs. Clayton and Henderson were absent. --Thus this important bill, if it should become a law, will become so by a minority vote.  The representation from Tennessee is not full, and two members from other States, did not, as we have seen, vote on the test question.

Before this vote was taken, Mr. Clay offered an amendment, allowing ostensibly to the States the right to object to the establishment of branches within their limits: but providing that if the Legislature of any State should not, at its next meeting, object to the establishment of branches, it should not have such right at any subsequent meetings.  This amendment was adopted.

It amounts to nothing.  A right which a State possesses, cannot become null, through the mere failure of its General Assembly to neglect for one year the exercise of that right.

On the 28th of July, Mr. Benton moved the indefinite postponement of the bill.  The vote was 21 for the motion, 28 against it.

The question then came up on the final passage of the bill.  Mr. Henderson rose and said he had absented himself on the day previous, because he could not give his support to Mr. Clay's last amendment;  but without giving any reason why, he should vote for the bill as it now stood.

The ayes were 26, the noes were 23.  The vote was the same as on the question of engrossment, except that Mr. Henderson on this occasion added his name to the list of those in the affirmative;  and of those who had voted in the negative, Mr. Cuthbert of Georgia, was absent.

Mr. Clayton of Delaware, was not present when either vote was taken, and Tennessee has in this Congress but one Senator.  As the Senate when full consists of fifty-two members, it cannot be said the bill passed that body by a majority vote.

The bill was then sent to the House, where it was read twice on the same day.


A correspondent of the Public Ledger "understands that the Schuylkill Navigation Company, have been, for some weeks past, endeavouring to obtain an extension of time from the Girard Trust upon 280,000 dollars of the loan now becoming due, in order that they (the Schuylkill Navigation Company) might use the funds in making a dividend."  The Ledger's correspondent protests against this.  "The City and Girard Trust have" he says" already suffered loss by the depreciation of the stock held in this company, upwards of $300,000, and that I think is sufficient."

Bicknell's Reporter, uses very severe language towards the Commercial Bank of this city.  "As evidence of the manner in which it does its business, we may state that while it refuses to accept drafts on itself in any other than current funds, it constantly compels those with whom it has business to accept in blank, or in other words, subject to a demand in specie.  Thus it exacts more than it is willing to extend."

The same bank has received a rebuke in the Public Ledger.  One thousand dollars were abstracted from the pocket of its runner, Mr. Justus, while he was passing from one banking house to another.  The Directors resolved that he must pay an equal amount into bank, or resign his situation.

"If this decision is correct," says the Ledger, "then with the came and even greater propriety, should the higher officers of our banks be held liable for the losses they incur.  If the directors of a bank, through negligence, favouritism, or crime, invest the money without taking adequate security for its repayment, let them be held responsible, and forced to make full restitution of the loss.  So, if a president, cashier, or clerk, miscount, receive bad money, or abstract funds on depreciated security, let him be compelled to make full payment to cover up all losses."

New York.-- On the evening of July 25th, a meeting of persons friendly to Mr. Clay's Bank Bill, was held at New York.  The Courier says ten thousand persons were present.  The Journal of Commerce, three or four thousand.

On the evening of the 29th, a meeting of the opposite kind was held in the Park.  The number, computed by the Journal of Commerce, at seven thousand.  This meeting passed resolutions of a very spirited character, protesting against all the measures known as the "the Loan the Bank the Revenue, and the Distribution Bills."

Ohio.-- The Ohio Patriot complains "that the Chillicothe Bank, taking advantage of the necessities of the commonwealth, has suspended specie payments and palmed upon the State of Ohio $581,000 in post notes, charging six per cent. interest, and requiring eastern funds (which at Columbus command a premium of eight per cent.,) in payment of the loan.  Here is a specimen of the advantages which a bank affords to the people --and of its generous accommodations to the tune of 14 per cent !!"

We fear that the editor of the Ohio Patriot is something of "a grumbletonian."  If he and his neighbours lose by this movement, the bank gains: and that ought to be a consolation to him and all other good Christians.

The Foreign News.

The Great Western steamship has arrived with London and Liverpool dates to the 14th of July.  The plenipotentiaries of Austria, France, Great Britain, Prussia, Russia, and Turkey, have signed a convention, which finally settles the Egyptian question, and thus gives, it is said, "additional security for that state of peace which every European power is so deeply interested in preserving."  French arms and French policy appear to make but slow progress in Algiers.

At Toulouse, France, there have been riots and arrests, and some persons wounded, but none killed.

The disordered state of money concerns in America, is mentioned as one reason why certain branches of trade were very dull at a late fair, at Leipsic, Germany.

It is reported that the banking house in Paris, of Pierre, Hugues, Verninac & Co. has become insolvent: and that the banking house of Steiner, at Vienna, has proved a defaulter.  Their connections with some London house, are said to have produced this result.

It is said that a great many men of liberal sentiments took no part in the late contest in England for members of Parliament, because they had no confidence in either Whigs or Tories.  The latter gained the day, because they expended the most money.  In London, it is said, from £25 to £50 were given for a vote;  and in the little borough of Lewes, £80, £90, and even £100.  If report is to be believed, the voters of Norwich were so unreasonable as to ask one thousand pounds a piece, but neither Whig nor Tory would pay this, and the candidates compromised the matter among themselves, by returning one of each party.  The paper money banks of England must be very useful in election times.

The Tories will have, it is said, a majority of fifty in the House of Commons.

Owing in part to the elections, trade was dull in the manufacturing districts.

In the British revenue from customs, there has been a falling off in the last year, of between four and five million dollars.

Some commercial failures had occurred, and rumors were afloat of others.  The effect was a depression in the stock market.  The latest quotations of Consols are 89½ to five-eighths.

Our own stocks are quoted as follows under date of London, July 13th.:--

Alabama, 5 per cent., 1863, 65
Kentucky, 6 per cent., 1868, 80
Maryland, 5 per cent. sterling, 1889, 72 a 73
New York, 5 per cent., 1858 &c., 80
Ohio, 6 per cent., 1856 &c., 86
Pennsylvania, 5 per cent., 70
Tennessee, 6 per cent., 1868, 79
United States Bank shares, £3.15s.

It is not stated whether sales were actually effected at these prices, or whether the quotations were merely nominal.

The receipt by the Great Western, of means to pay the half-year's interest on Illinois stock, due on the 1st of July;  and the promise that means to pay the dividends on the Indiana bonds, would be forwarded, gave, as may be supposed, great satisfaction to those interested in these securities.

At Liverpool, in the week ending with July 4, the cotton market opened with a good trade demand, and on Monday there was an advance of one-eighth d. per pound in the current qualities of American cotton.  In the last three days of the week, the price receded to its old rate.  The sales on the 12th of July, were about 3,000 bags, of which 2370 were American, at 5½d a 7½.

Within a few years three paper money banks have been established in the island of Jamaica. --Knowing this, we are not surprised to learn, that "general credit, was never, perhaps, at so complete an ebb as it is at present in Jamaica.  The list of insolvencies, during the last twelve or eighteen months, and still being added to, will perhaps bear comparison with that of no other community in the empire."

The people of Havanna, having no paper money banks, contrive to gratify their love of gambling by adventuring extensively in lotteries.

In various provinces of Mexico, and South America, revolutions are either in progress or in prospect.  We have no great confidence in Spanish American republicanism.  Where it prevails, every interesting question that arises seems to lead to revolution and bloodshed.