The Journal of Banking
by William M. Gouge,
Of all paper money banks, we like the Bank of France the best, probably because it has the least to do with this instrument of deception. It issues no notes of a less denomination than five hundred francs, equal to about ninety-four dollars of our money; and, as will be seen by inspecting the following table, the specie in its vaults has, for many years, been on an average nearly equal in amount to the notes it has had in circulation. In the original the sums are expressed in francs; but we have reduced them into dollars for the convenience of our readers.
From 1799 to 1808, ..... $4,894,500 .... 10,052,812
1809 to 1818 ..... 11,125,125 .... 15,052,812
1819 to 1828 ..... 30,109,312 .... 34,107,750
1829 to 1838 ..... 35,382,375 .... 40,074,375
General Average ...... 20,377,687 .... 24,822,127
In some years the amount of specie in the vaults of the Bank, has actually exceeded the amount of its notes in circulation. This was the case in 1839, when the specie was, on an average, $42,606,187; and the notes in circulation, on an average, only $39,888,937. It was also the case in 1838, when the average of specie was $50,437,500, and of circulation, only $39,375,000. In that same year, the specie in all our American banks amounted to only 35 millions, while their circulation exceeded 116 millions. Such is the difference between French and American banking: --a difference chiefly owing to the Bank of France issuing no notes of small denominations.
In 1840, the question of renewing the charter of the Bank came under consideration, and some persons were anxious that the privilege should be granted to it of issuing notes of as low a denomination as 250 francs, or about 47 dollars of our money. But the Chamber of Commerce of Paris opposed it, and the Committee of the Chamber of Deputies to whom the subject was referred, declared against it.
The Bank of France has several branches. Those at Reims, St. Etienne, St. Quentin, and Montpelier, were in full operation in 1839; but all the paper they were able to circulate, did not amount to half a million of dollars. Additional branches have since then been established at Grenoble and Angouleme, and perhaps at other places.
Besides these, there are in Bordeaux, Marseilles, and other large cities, what are called Departmental Banks. They are established by Royal Ordinance in conformity with a general law. Ten of these were in existence in 1840. They are permitted to issue notes of as low a denomination as 250 francs, or 47 dollars of our currency. But the memory of the assignats is so fresh in the minds of the French people, that these banks find it impossible to throw much paper into circulation.
The great mass of the banking business proper, is done in France by private bankers who issue no notes to serve as a currency, and who are responsible in the whole extent of their estates for all their engagements.
In Great Britain and Ireland, the banking business is divided among the corporate banks, the joint stock banks, private bankers who issue notes to serve as a currency, and private bankers who restrict themselves to receiving deposits, discounting notes, and dealing in exchanges.
The incorporated banks are only five in number; namely, the Bank of England, the Bank of Ireland, and three banks which were, many years ago, established in Scotland.
The joint stock banks are constituted in such a way as to enable the numerous co-partners in each of them to act as one body, but no one of the co-partners is thereby relieved from personal responsibility.
The private bankers, both those who issue notes, and those who issue none, are subject to the same responsibilities as persons engaged in other branches of business: and if they fail to comply with their engagements, commissioners, appointed under the bankrupt act, immediately take charge of their effects for the benefit of their creditors.
The banks of Scotland and Ireland issue no notes of a less denomination than one pound sterling, equal to about $4.84 of our currency. The banks of England issue no notes of a less denomination than five pounds sterling, equal to about twenty-four dollars Federal money.
We Americans, might, if we were so disposed, learn wisdom from the experience of the British in paper money banking. They have had the system in operation among them for one hundred and fifty years, and have tried it under various modifications. They have now brought it to a state of improvement which we can never hope to equal in America.
They have, (what many Americans regard as a panacea for all pecuniary troubles,) a National Bank, and that so powerful that it supplies one half of the paper currency of the three kingdoms. --Specie payments have been sustained for twenty one years without interruption.-- The country banks all profess to conduct their affairs on "commercial principles," and balances due by the banks to one another are discharged once in every three days, or at furthest once a week. --Banking is "free" to all who choose to engage in it. Any number of men, from one or two, to six or six hundred, or six thousand, may unite in establishing a bank without applying for an act of incorporation. --No small notes are issued. --The co-partners in all the banks except five, are personally responsible for all the debts of those institutions. --The English bankrupt act includes banks in its operations. --The balance of payments is always in favor of England, except when the harvest falls short, when the Government subsidizes foreign powers, or when the money lenders extend too far their dealings in foreign stocks.
And yet the system produces so much evil, that no lees than three Committees of Inquiry have, within a few years, been instituted by the Parliament: and hardly a month elapses without some new project being suggested to mitigate the misery it occasions. All such efforts must prove fruitless. The fault is in the very foundation of the system --in the kind of paper which forms its basis. Till the British put an end to the issue of notes and drafts passing by mere transfer, and which though always (nominally) payable, are never paid, they will have nothing but a series of expansions and contractions, the first producing the most delusive appearances of prosperity, and the second causing such severe and lasting misery as must to a large part of the population make existence hardly desirable.
Extracts from the Private Diary of a Certain Bank Director.No. XIII.
Sunday. The text this morning was Matthew, Chap. xxi, v. 12, 13.
"And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the money changers, and the seats of them that sold doves, and said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves."
The preacher was a stranger. "Though," said he, "our Saviour while on earth, never failed to rebuke iniquity, wherever he met with it, in high and low, rich and poor, this is the only instance on record in which he evinced his displeasure with sin by personal action. In the parallel passage in John, we are told, that 'when he had made a scourge of small cords, he drove them all out of the temple.'
"And who were these whom he drove out of the temple ? Among others, the money changers, the bankers of that day. Of this there can be no doubt, for the very word which is here translated money changers, is in the parable of the ten talents translated bankers: and it has its root in a word which signifies a bench, just as our English word bank, is derived from the Italian, banco a bench.
"And why were these bankers driven out of the temple ? Because they had made it a den of thieves !"
I heard no more. I saw plainly that the preacher was going to show that paper money banking had made our whole country one den of thieves; and I quietly slipped out of the back door of the meeting house.
Panic in New-Orleans.
We mentioned in our last that the Banks of N. Orleans had resumed specie payments. They sustained them bravely for some ten or twelve days. But then difficulties began among the banks themselves. Some of them refused the notes of the others, and this caused the public to doubt the stability of them all. The run on them was consequently tremendous. Seven of the banks in succession yielded to its force. And at the date of our last advices, the Union, the Louisiana, the Mechanics and Traders, and the Gas Bank, were all that were paying specie. The circulation of the last mentioned was only $5,000.
The Municipality notes were at many per cent. discount; and general distrust and suspicion pervaded all ranks of society.
The beautiful banking house of the United States Bank on Chestnut street, Philadelphia, is advertised for sale by the Sheriff.
It is said that about 10,000 persons throughout the country have applied for the benefit of the bankrupt law, and that their debts amount, in the aggregate, to about one hundred million dollars.
The Sheriff of Harden County, Kentucky, lately sold some cows at 37½ cents each.
Mr. Jas. S. Shermerhorn, the Secretary of the Ocean Insurance Company, of New York, has proved to be a defaulter in an amount exceeding 153,000 dollars. His case offers a striking illustration of the facilities our bank and corporation system affords for the perpetration of frauds. He has been carrying them on for about ten years. He lost the money in stock speculation.
At St. Louis, Missouri, there has been a little paper money riot.
Somebody has placed at the Exchange, Philadelphia, a memorial to Congress, to create stock to the amount of 200 million dollars and distribute it among the States !!
The present number completes the first volume of the Journal of Banking: and with it the publication is, to use a fashionable phrase, suspended for the present. The patronage we have received, and the state of the currency in those parts of the country where there is the most disposition to support the Journal, will not justify our issuing proposals to publish a second volume.
A few subscribers, for the most part peculiarly situated, have not paid their subscription money. As our receipts will hardly cover the cost of printing and paper, leaving other expenditures out of the question, we hope they will not let the small sums due to us, escape their memory.
The war between specie and paper money is but just begun. In such a condition of affairs, there ought to be a Journal of Banking in which facts could be recorded in such a way as to be easily referred to hereafter, and questions discussed without reference to personal or party politics. But no Journal of Political Economy or Statistics, in either Europe or America, that we have been able to hear of, has ever repaid expenses; and we must of necessity seek some other pursuit.
From different quarters, east, west, north, and south, we hear that our labors have had a salutary effect; and we regret that it is not in our power to complete our original plan. We wished particularly to bring down the History to the present time. The continuation would prove both interesting and instructive. We wished also to offer a series of essays on the moral character of the Banking System, leaving out of view all questions of mere expediency -- to give further thoughts on the True Principles of Commercial Banking -- to discuss various questions connected with the Science of Currency that have as yet been but slightly touched upon -- to communicate various particulars respecting the banking and paper money systems of other countries -- to treat of the question of "equitable adjustment" of debts -- and to give some general tables which we have on hand, and which would prove highly useful for reference.
But there is no effective demand on the part of the public at large, for this kind of reading, and our own pecuniary means are so limited that we can no longer labor in a business which affords us no remuneration.
But our list is not confined to them. We have on it the names of a number of professional men. Of Doctors of Medicine so many that we could not but express our surprise thereat, till informed that gentlemen of this profession are usually fond of political economy. Of Doctors of Divinity, we have the names of very few. Though political economy, as a branch of moral science, falls properly within the range of the professional studies of the clergy, they, as a body, strangely neglect it, and of the most important branch of this study, The Science of Currency, most of them are deplorably ignorant. Of gentlemen of the bar, we have, of course, a goodly number. Of members of Congress about eighty, besides many who have been members of Congress, and many others who will be. We have also the names of some five or six gentlemen who have filled cabinet offices in the United States Government, and those of one or two who have occupied even higher stations. To these we add the names of many who fill, or who have filled distinguished stations in the State Governments; the names of some of the ambassadors of foreign powers, and lastly the names of some of the most distinguished literary characters in the country.
The opinion that dissatisfaction with the present banking system is confined to those whose own hard fortune has made life bitter to them, is not confirmed by our subscription list. There is on it a full proportion of large (solid) capitalists.
The whole number of our subscribers, it may not be amiss to mention, is between fifteen and sixteen hundred, about twice as many, as well as we can ascertain, as have ever been obtained for any other Journal of Political Economy or Statistics. This we are disposed to attribute, not to our Journal being twice as good as some that have preceded it, but to its being twice as cheap. The subscribers are scattered through all the States and Territories. This number would have more than paid the mere costs of publication, if we had not been obliged to incur some extra expenses, through our want of knowledge of the number of copies we should be called on to supply.
P.S. As a number of Bank Presidents and other Bank officers are subscribers to the Journal, the list of names would not, if published, be an unerring index to those, who in different parts of the country, sincerely, and of full heart, desire to see our banking system thoroughly reformed.