The New York Herald Newspaper, January 8, 1858, Page 2

HERALD, FRIDAY, JANUA RY 8, B a This very element existing among us, from the very nature of our government and social institutions, must aud will @orce our people forward in the pursuit of immediate wealth and consequent expansion of credits, This puts she exporience of the past at defiance, and could we lato the fusure movements of capital, impelled by oredit, wo could calculate our eclipses with all the cer- tainty the astronomer predicts those of the sun and moon. Again, the discovery of gold in California, while it stimu- lated us in extravagance and expenditure, also gave a very natural acceleration to our credit sys we bailed with joyful hearts 508 greedy the re freighted steamship from fornia, and based our ess aad consequent ortension of crodits uy ts, we forgot tit only liquidated our in- ‘ad of our domestic debts, and quietly left our wharves & Liverpoo! steamship, to pay for the éilks, the diamonds: #04 other adornments of our persons and our a The receipt of gold from California has been @ delusion i ofa warning to us. its arrival was heralded as an oe of inereased prosperity, while its departure was noticed. It was hike the stimulus given a patient &, deadly and tata! disease; the postponement of oduced a \.. fated Contra: america? Agua, seo the immense amount of credit obtained and anded by Corporations, and at what rates of interest. .sir Dongs Were pronounced by men, whose reputation grity and sagacity were second te none, tw be per- scounity. Capital was seduced from its legitimate in txcnt and employment. and the merchant and busi- ess man eptered into a contest in the arena of Nammon, w th corporation the hands of men. as soulless as the things they represented. Is it astonishing th® commer. »pied, that money became searce iu eet, and that merchants began to fail, with such rs in the mioueyr market? peration aud effect of the ‘Act to prohibit corpo om iuterposing the defence of usury to any ac- AA 6, 1850, have been more disastrous to ‘it than any other single -cause; and rintendent believes it to have been one of the néations of the tmmense superstructure of credits Ly overpowered capital tule of the act, judging from its practical effect, ave Leen ‘Ap aot authorizing railroads and other ations to pay usar ‘The act siinply meant to pre 1 of legal frauds by corporations upon mwoney. Desperate speculators have rwart desperate enterprises; and the capi- uvestments has become compara ry the sacrifices (permitted by this ‘oney to complete them. Stockhold ova! Credit became Walls the large rate of interest they } as it was by directors of their is have proven in many instances that a wiedoui to have aubmitted to the ori. Lun to bave raised money at such ase of the number of banks both in the 1 been for several months sustain heir deposit lime. This resulted habitants in the inte: un in the Far West. Whole neigh eretarn of a person, fortu # location of either agricultural lande or lots in an ‘The most tempting offers were made and in very large amounts, to raise money East Woet, by promising land security, with in rom 20 to 80 per ceut per annum. Men of capi- own means, but were ready bor- nterest for the purpose of ‘led not oniy in ies, of paying interest tipon This practice accelerated the Jed the circulation of bank banks, paying fatere + was stimulating the debt ty bank paying in mmpelied Uo lout pon country bank balances. creating process fearfully. st upon those balances is of Nowed to tender a of a demand made at r Dalance) is counted as,and is, specie it (th + aad discounted upon, while its depository in either 4g moury upon the strength of that Tt is poastble that the amount may be loaned a Wall str » bull of bear the stock market on of paying interest for balances between m:eives constantly promotes an increase of Leyoud thove required by a healty trade and Tt does aot inflate the currency; itoaly ac movements, but creates an unhealthy, un- ative increase of credits, which éndan- capital, edtiate causes that | homme gy the suspen ¢ materially different, it is perhaps condi of the banks of the rived from their last annual avd ‘able vpon demand on the a half months before 198,000 {659,000 . 19'342,000 1,630,000 eed «« 59,729,000 other 3, part ti harks cid by each Pp DedIAte WaDIMIRIES. 5.6... sso cee + 848,974,000 s anvunt of specte held by all the ‘banks of the day ay abowe mentioned wae $5,557,000, or one to pay ux dollars and seventy cents of im- esibg demand at their condition on the sixth of June, 7 and seven days before the Iate suapen- lis ilitves payable on that day were— yeatons other than a of the State of differ se to and from banks. 15,676,000 * . ‘ -. 104,350,000 Arm neluded in either of the ‘ badly vavings de oeee $158 499.000 ot banks on hand sl id as an erchaoge, reduc the SBS g3,006,000 neh items... ...23, due from tiem... 5 $127 703,000 e hela by all the banks in the tioned was $14,370,000, or one dollars and eighty-nine cents clemand jeans. ks and eash items to the im 7,000, as immediate means, cer jon of the banks in as favorable a nit, © say nothing as to the ing “loans to brokers’ imme: y eight aso increasing their coin from $11, ).000 during the same period. The only T may uae the term soos ye June = cane’ 7 to their depositors 4 to 104,900,000, while their circu out 81.090 .000 during the same time. of the banks in June did not and could posit e fears of the most astute and timorous of New York. That bad always been the barome. ter by which the banker railed his bark. He could re- member, perhaps, when he was driven to the wall by a foreign demand for coin. but he little dresmed of a mu toy (o bie own ship, with the very earth teeming with ag- ric }tural wealth Their powition on the fixth of Jano, we nee now, was one of danger. !xpericace for the frst time bas eh the bankers of New York that nyt pom | me surpending specie psy meats from an internal | for cotm The mente of June, Joly and August paawed withows aeew.@ & steady and incressing stringency olmers sbie inthe movey market. It was felt in both city eo cow shown to the country bankers by the ip Crem ro camownt of their bank note retemptions; to the cy unnker by Wncreased offerings for discount and the rae ptereat io Wall street. wlure of the Obie Life and Trust Company, with ce bosines® Compections in New York, and of good wee the first distinct mattering of the storm so yt overtake us. This was followed by that of the v Ranking Association of New Yqrk, one of the in the State. The 1k went to protest antil the 4th of September, and y for @20, by @ broker. Ou the 12th another ancther on t , all for emiall sums. While there was a quiet demand for specie in small son mest all of our banks, nothing Whe panic seemed preva and although occasional runs were made upon the earings banke, they eubaded in aday or two Aa September drew towards ite close, the re the country banks to redeem their circulation at tho Metropolitan and American Exchange Banks was beyond precedent, Those banks began to throw out the notes of some that might possibly be called the weaker ones. ‘A portion of the interior banks and bankers began, about Mh of September to return their circulating notes, aod withdraw euch amounts of stooke as the constroc tm gives by thie department to the acts of 1840 and 1A44 permitied = In word to reduce their securitt: t> $190,000 Uf an association, and $60,000 f an individual banker Tr soon became evident that some of the country hanks artic. ary those whase cap'tal was mainly in their se. bern tempted to invest in this class | t was the practice of the | 4 direct loss upon | - | officers and directors who feel the responsibili er State. Foreign excuange ruled rather tm favor | its eletlation, either im large or small amounts, it was enabled to pro- oure & of its stocks to meet iseugienments New York city. This, while it temporarily relieved them, fearfully depleted the deposits of those of the city; an |, too, of sleepy and quiet kind, the most desirable and reliable in their possession. This continued from the Ast to the 18th of October, inclusive. ‘The amount of stock returned from the interior banks from the Ist to tho lsth of October, ‘The amount of bonds and mortgages. Stocks returned to banks in New Yor! ‘Total amount surrendered... From the 26th to the 30th of Septem! clusive, the former dayfbeing the ene on which the quarterly report was made, the E banks of the interior received from this office— Bonds and e3.. 126,665 90 Stocks surrendered to New ¥ ‘and Brooklyn banks.......... 73,812 00 ———— $556,677 00 Total amount surrendered from September 26 to October 15, inclusiye.... $5,198,099 42 ‘The amount of stocks surrendered the interior banks more than that placed in the department, from June 6 (0 Sept. ‘28, the dates of the two last reports, was. ..$587,898 82 Bonds and mortgages...... . 116,399 66 04,208 43 | These spare show the gradual but ‘creasing pressure, particularly upon the interior banks, during June, Joly ugust and September. From the Ist of October, when the decision of tne Court permitung banks to reduce their seourities below $100,000 by return of their circulating | notes, and individual bankers below 350,060, upon the | same terms, the transactions of the banks aud baukers with the department evinced on the part of those located ‘im the interior of the State a strong disposition not to sus. pend payments until the New York banks set the ex- | ample. | The interior banks, with but few exceptions, succeeded in having the honor of striking their dag after those of the city of New York. Whether the glory will cover the loss | reinains for them to learn after examining their profit and loss account The Superintendent believes that in producing this re- sult the coet to the interior banks was at least halfa mil- \ Hon of dollars ip positive loss amd depreciation of their remaining securities, and that its only effect was to pro- | long the actual suspension, perhaps, a week at the + farthest. | The immediate cause, or rather the one that tended | mainly towards su sion about the Ist of October, was | the recemption of lank notes at one quarter of one per | cent in the city of New York | _ ‘That the notes of the free banks and bankers in this State possess a strength with the public beyond auy in the world, is fully confirmed by the fact thst they, with those of the incorporated banks that stood through the ordeal of October until the 13tb, instantly after the suspeasion, be- came the basis of settling balances between the New York banks in the clearing house im that city. Still, up to the 13th of October, this currency was thrown out with- out hesitation by the Metropolitan and American Exchange Banks, when the account of the bank issuing it was not good for the full amount presented for redemption; and when thus thrown out, the baok was immediately posted in all the newspapers in the State as fuiled. In making these remarks, the Superintendent says set nd any cenaure upon either of those 5s on Was preceded by a desperate struggle be: ves, and distrust ad fear of among them than with the ndent feels that the immediate liabilities of this State ad been carried up during summer to the very verge of prudence. able to meet all ordinary demands, but were utterly inadequate to meet & foreign de- | mand for coin, or a panic among their depositors and bill holders The fact that about the Ist of October a list of more than thirty failed banks located in this State was to be sven daily in our newspapers, began t tell fearfully among | the ‘public geuerally. The merclulat, the mechanic the list of yesterday; and their customers found that the bank | notettias passed freely yesterday was rejected this mor. ping. It iy not to be wondered at that a feeling of aistrust and alarm began to prevail throughout the State in rela tion to our bavks. Still, with a large majority of our currency secured by deposit in this department, a eral suspeasion could net and would not have taken place upon currency alone. The currency had been largely contracted during the month preceding the actual suspea sion, and it could not-bave been withdrawn from its ne cessary and actual use in quantities sufficient to produce such a result. ‘A more fearful and mighuer power lay Cormant, as yet, | behind this disturbed currency: the deposiiors in ‘our banks, usually quiet, stable and reliable. ‘The scarcity of money in the city of New York among the merchants and business men continued to increase steadily aud surely during September: the rate of interest also steadily advanced. This tended to reduce deposits, | and after afew spasmodic attempts at expanson of logms: and discounts by the ‘banks in that city a steady and fear- { ful contraction was begun. In New York city it became a question of the aspen. sion of the banks, or the merchants asa body, Capital in the shape of deposits, for the first time in the history of this country, and ] think I may say in the world, sided with the business men and against the banks The great concentrated cali loan was demanded, and in such amounts that a single day's struggle ended the battle, and the banks went Cowa before a storm they could not post- pone or resist This result has demonstrated, an that cannot be mistaken, and J not be forgowen, that a basis of one dollar of to nearly nine of fm mediate liabilities will produce a home panic of bank creditors, and a home demand for coin. As before re marked, this suspension stands alone, without prece- dent. The teachings of experience could not avail the bankers. No state Seg ow the preseot had ever be- fore been approx:toated ‘most sagacions banker in his mort apprebensive mood, never for a moment deemsd it possible to have a general suspension iu this State from s home demand for coin, while coin itself was at littie or no premium with the brokers. This result sets at dedanoe the experimenta, knowledge of the oldest and most suc- cessful bankers in the State. What sbould both the banker and the public learu from our late suspension? In the opinion of the Superintendent, this simple leeson-—that a system of paper credits may be so enlarged as to render the position of our banks one of imminent peril, even with @ contracted currency; that the greatest danger to the banker, ax well as to the = lies in the large amount of bis deposits, and the east ‘Thi in the currency he iesues. is fis heresy a& compared with opinions heretafore entertained upoti this question by men of experience. To show that bank notes ware considered in former times the Nadility which was <u to be dangerous tothe public, and consequently to the banker, the legislature, in the last section of the act of 1838,“ Autboriaing the business of banking,” and one half per cent of its circulation in «pec | soon repealed, and js given only as an evidence of the then belief of the public The idea that deposits were a dangerous element to the banker, six menthe ago would have stamped its promul gator ax atyre in banking. The lesson that thie suspen | sion has taught cannot, and will not, be lost upon bank ty of the trust committed to them The test of successful Lam | hereafter will be (as it should), not in the large amount dividends declared. but in the ultimate of the cap. ling the capitatiet to have his s that purpose, with but _@ very slight loss of interest. prevents the loaning of money upon bonds and @her securities, uj the ‘usual | of time. It curtails the circulation of bank notes, by ia. ducement offered in the shape of interest for their return bank, and thence for redemption to the issuing one The payment of interest on deposits in particular locall ties may have proved somewhat profitable, but aa a gene- ral role i i not the fact. The difference io the rate paid and received is hardly sufficiens to guarantee even bank receivables As before said, jt unnaturally forces the mass of our oredite into short paper, and swells the liabilities of the banks without corresponding profita for the double risk of the operation While the regular deposite withont interest (the amount depending upon the locality and business connections and influence of the banks’ mai ) are comparatively reliable, exactly the reverse ar e upon which inter- est is paid. They lie there wait the chance of better investment, and a fall in the value placed upon property reduces them, while a rise of the same swells their volume. The Superintendent i¢ old-fastioned enough to believe that any attempt on the part of a bank to increase its deposite by the payment of interest upon general ac count, or upon daily balances, is wrong in principle aot Permicigua Wa its Come rqueuces compelled each association to keep go | ie. Tt was | | | grocer and the butcher becan business in the morning | by examining what broken banks had been added to the | ' been followe that too in tones | | | He hopes } did the banks suspend specie payments?” fe 5 HI i g a at i q i iH E E é 4 ig = Hy 4 : i | i & s it. may be ask lent, why a of z E & 3 3 i i: & i i i i é ies it TP eaee a edt i a i f nee i i i £ i FE | gE A 5: 5 | E wreck of ofprivate fortunes t year, not caused by the suspension of our but intimately connected with it, must form the e of = Superintendent for the time and space devoted i i § E 3 3 payments by , was on the 7th of November last of a series of resolutioms by the New York clearing house, requiring the country banks wo resume on the 20th of the same month their usual daily redemptions at the Bank of that city, at the legal rate of one-quarter of one cent discount—the city banks holding in sealed of $5,000 cach, nearly $7,000,000 of the currency issued by the banks of the interior; also, those banks to resume the notes at from the Ist [Pope inate and ip use by the city bi liberal on the part of the city banks no one will queation. ‘The effect of process was simply to force the banks of the interior to an actual resumption of | payments ue all their outstanding liabilities, except upon such of their notes as were sealed up in the )- ivan Bank. This balance being required to be paid in monthly instalments of 20 per cent, commencing ou the Ist of Jaguary, places that portion of their debt in the con- dition of a special loan from the city banks. This arrangement will undoul J lead to the winding of several of the interior bavks. Of this effect, no cause complaint can reasonably exist. The terms, as before stated, are liberal, and @ bank that cannot recover itself under this arrangement, had better, for the interest of both its stockholders and creditors, go into liquidation. ‘Still, the Superintendent may be permitted Jto say that he is far from being satisfied that this tof the city banks wil be beneficial to the business of the interior of the State. The amount of country currency under seal in New York has steadily decreased since the lst of December, as fast as the interior banks could retire thesame. The fact that the amount is placed upon interest at 6 per cent per aunum, will make them use cvery posaible exertion to retire it; they receiving but 7 per cent upon their discounted debt, the margin is so in- significant, that every prudent interior banker will curtail his line of discounted paper, to master his circulation as fast as po-sible. The line of discount maintained by the interior banker rests mainly up<cn his cireulation. The interruption of ‘business at present must naturally curtail the circulation of country bank notes. They must be paid upon the con ditions of the resolution of the 7th of November; and they will be, from a reduction of the line of discoants of the country banks, or by the securities lodged in this Depart- ment. These ‘are briefly the reasons why the Superin- tendent believes the operation of the resojution will not act beneficially upon the business interpets of the State. Others might be added. and perhape of greater force. Let us lock at the effect produced upon the city banks by their own action Tue resolution of the 7th of Novem. ber involved the neces of a sudden return to specie payments by the New York city banks, Two reasons are apparent ‘or this result; the resolution forced them to this position, and that, too, whether they were ready for such action or not The firet was the compulsory retiring of the country bank notes which had been ia the Clearing House for the settlement of balances between the New York city banks. These had been used instead of coin for that pur: rose. When retired, that settlement could only be made in coin, of course. Another, was the fact thi rest at six per cent per the notes were to bear inte- m. if money became plenty, every evidence existing th ‘such would be the case, what banker would pay his balance in the Clearing House in country bank note certificates, with a surplus of specie in bis vault? Ifhe did, the joss was at the rate of six per cent per annvin acon that bolance, they being secured by deposit in the Bank Cepartment, and guaranteed by tho banks themselves; he refusing by that act to hold the Dest possible paper at six per cent. As before remarked, it forced a resumption upon the city banks by the first of February, at the Curtherest. They by that resolution deprived themselves of the stand. ard of valde (uext to coin) ; they erected immediately after the suspension, and of necessity went back to coim in their setiiements, or balanced their accounts by their mu- tual promises to each other. It required but little sagacity to see the effect of the action of the New York Clearing House on the 7th of November last. A suspension of specie payments is looked upon by the world as an unmitigated evil, and is always supposed to be followed by an ualimited expansion of Po money, That this has been its usual result is fully admitted. This suspengion has produced no such result; it has aty and certain contraction of our currency. The Bank of Ebgland virtually suspends specie payments for the purpose of enlarging ber circulation. ‘he wisdom of the action of that bank and of the bankers of New York city ia to be shown by the respective dates of their several Fesumptions, or rather on the part of the Rank of Kogiaud when she returns to the legitimate pro- visions of her charter. The effect of either course of action upon the business relations of their respective countries the Superinteadeat is not desirous of discussing. While the Soperintendent admires the courage that prompted the bankers toa return of specie payments, and at a time when all Evrope is in a monetary convulsion, he cannot refrain from saymg that it is rather a fearful ex riment to muke at th’s present moment. rely ay to hom that ihe T credits of our coun try had approached sufficiently near to its capital, by settlements and !quidation of our mutual indebtedness, for ar (con of specie payments. The divergeuce of these tro elements led directly to the suspension, and time alone can piace — credit in such approxi mation as lo produce a healthy trade and commerce Another, aud I may say the great clement of liquidating our inde ness toeach other, particulariy thatof the country to the ety, is the bountiful crop our country !s ii, nota tithe of which has been movedfrom y or corn crib towards the seaboard. a return to specie payments @ always desirable, as a general principle—and the Superintendent congraty lates the ors of the State upon such a result—he c not but express the opinion, that a rm oo | entirely successful, may cripple, or the business interests of ovr citizens at the present time bringing capital and credit into such a relative position, 4s to enable the business of our citizens to resume an en- ergetic and healthful action. This is merely an individual opinion, and has no basis derived from past experience. Le results to the business of our State soay be as beneficia the motives were honest, that promptc( this sudden resumption. A general suspension of our banks followed by a resumption in sixty ¢ a that time alone can solve. It culation a to ite uitimate results, ant defies all expariences of the past. It teaches one great lesson, that credit may be so cherished and stimulated aniong us, even with a contracted currency, ax to endanger capital, however safely it may have en trenched iteelf, and places upon record for future use and warning, the fact, that the banks, with only ove dollar in coin to pine of immediate liabilities, were brokea by our own citizeus ax a measure of protection to theraselves And that while expanding a line of loans and discounts is agreeable. easy, and apparently profitable to the banker, the consequent contraction that must necessarily follow aa imprudence in expansion, is a process dangerous both to himself as well aa his customers The preventive for a future suspension of specie pay ments can only be crawn trom past experience Without returning to the peculiar causes that protuced such @ result in October last, it a sto the Superinten dent, that « categorical answer to the piain question, “Why will teach what is necessary to prevent its repetition. That answer is, “They did hot have coin enough to hed the demands made upon them,” If the truth of the answer be ad mitted, the remedy for the futare ie clearly apparent. fn other Words, it @ nop safe for bank capital or the public, © permit the banks of this State to owe, sey ehtor gma, ufo all cal nine dollars of demand loans, to one dollar of specie in their vaults ‘The Superintendent feels that he will be met at once, in assoming this position, by the assertion that the solvency of a bank does not depend upon the epecie in its vault. Ia other wor that a bank may be perfectly solvent with little specie, or solvent wth large amourt oo hand This is abstractly true. The folly of the assertion is, in ication to bank indebtedness. The real solvency, oT penne « Udy bank is {ta immediate capa: ty wo pay demands upon it, not in its ultimate power to pay . To illustrate the difference between the remark as applied to bank indebtedness, and of ind! vidual credit, dg ey ae answer of a bank officer to a Hes bill holder depositor might both starve while waiting for the ultimate solvency of the bank. ‘The basis of a bank's credit rests solely upon the con verti of the evidences of its indebtedness. It ia idle to talk of the ultimate solvency of @ bank to a creditor whose necessities require immediate payment. The same prineiple Ties azainst the receipt bonds and mor y this department ds security for circulating notes. 7 are ultimately perfectly good. The condition and use of currency ie such, and f may add, of deposits in bank, that imme fiate convertibMity in the true test of praoti¢al and useful solvency in any 5 The first stop towards establishing by statute what amount of coin a bank shall keep, as compared with its remnants liabilities, must be to look ne operation of the law compelling the redemption notes, at one ps of oe ere ent in the city of New York, Brooklyu, y or Troy The balance due an interior bank in those cities, is equal to coin, to say the least, [represents coin for the use of the interior banker, though only a credit, and it would be unfair to require a certain home specie basis of a bank- er whom the law compelled to redeem his notes in one of those cities ‘The true method for the enforcement of the quarter per cent act would be for the interior banks to organize a clearing house of their own in the city of New York or Albany. The action of the Metropolitan and American Exchange Backe has liternily prodnoed « country clear ing house for bank notee in New York, and its operation haa been anything but beneficial to the interior banke The distinction bx tween the New York clearing house and the country one, (mate by thove banks.) lies simply in this: In the f A waa debtor and B creditor, their lo- cality was such that they could meet, aod Boould fond A fhe chose The debtor and erediter hank mast face ty (ace ai tbe 64) c carimg house, sad adjust thew Yalauoes Tt would | ‘The city of Albany preseats an aspect exactly the re- re $2,229,916. fe eit 71 ‘The condition of the Brooklyn banks at (he samo necessity of their location at the whole country. There was due to banks from them... Due from banks... Balance due banks.......-.+2+0+.+eee+ eee $7,159,006 ‘The condition of aii the interior banks out of the four ities before mentioned, was— $4,151,895, ‘2,597 858 Balance due ‘nterior banks. $1,753,077 The balance due to banks inclusive, E Balance due to each other, and foreign banks. $5,601,238 This would appear to be a sufficiently large balaace duc from them to Reales banks and to each other; andyhere is but little or no doubt, upots an examination of the general position of the country banks’ accounts and those of the different cities, thgt the redeeming banks in the city of New York—mak‘ng a lidera! allowance for a very large balance due foreiga banks--were debtors to the interior ‘ones, as a body, over $1,000,000; while a portion were posted daily in that city, under the quarter per cent sys- tem, as failed or su-pended. Allow the banks of the interior to concentrate their creditor balances to be used for matual benefit ata common centre of redemption, and ander an organization which can pre vent indi al loss to each, and it would hereafter be ¢ bonfires of bank rotes in the bank department, to enable country bankers to redeem their notes in th ‘es before meutioned, by @ ruinous sale of their securities deposited ia this office. The Superin tendent commends to their conside: a the old fable of the bubdie of ett parated they are weak; tied to. ether by a string of their own making, (a clearing houso for couniry bank netes,) strong and impreguable. The necessary use of currency in the daily demauds for its use, (not connects large mercantile transac- tione,) it being secured dollar for dollar by the very next property to Coin in permanent value, prevents its cov centration ia such amounts as to endanger @ suspension of specie paymente vy the banks of this State, upon their cireulatng notes alone. is such that ots safety only 4s desired by the public As ah evidence of the stability of our currency, the Su- perintendent may de permitisd to say that as soon as busi ness enabled him to leave his office after the suspension, the securities of the only then failed free bavk, (the Island City Bank of New York,) whose secur he bad the right to sell for the redemption of ite notes, were sold within ten days after the suspension. and the notes promptly re- deemed by bis ageat, the Bank of the Manlattan Company in New York. at par.’ It is proper to say these notes were secured by the stocks of this State alone. ‘This brings the Superintendent to a statement of what he ‘The convenience of the currency | deems necessary to the stability of bank capital and the | security of the public, both as debtors aud creditors of those institutions in juxtaposition, the Superintendent means that their inte rests are iu a measure identical. An error in expansion of loans and discounts is followed by a more complicated one in the necessary attempt at a consequent contraction. The carrying of what may be called a spaswodic line of loans and discounts implies anything but capacity in banking, and i dangerous not ouly to the debtor and creditor, but also to the stockbolders. The maintaining under ad verse circumstance: ady line. is evidence that t was not carried beyond dictated even in pros- perous times. Apply this principle to bank statements, and it does not require much sagacity to learn where the vorrower, the depositer, aud the stockholder, should do their business and y. ‘The first proposition of the Superintendent is a country ing houge, to ed in the city of ew York or Albs ks. Abu power exists for thal purpose in section 8, chapte the laws of 1940. ' Seccud—To amend the general bank law, preventing ing of bonds and mortgages as secu wating notes, in the Bank ek ré—To comx! by jaw all safety corpo- inks to bave, on the Ist of July next, one-third of their actual! circulation in secured notes; one-third more ba he ist of January, 1959; and all on the Ist of July 8 Tp using the term actual circulation, the Superintendent means, after Gedueting the amount in their vaults of their wn notes from that they arc entitled to use or bave re ceived from this office. Te may be objected to this measure, and with some force, that tho-e bank«, paying as they do one-half of one per cent per annum for the redemption of the bank fund stock, they should enjoy thelr present privilege of elrculation without depositing security in the Bank Department The answer to this Is, they are paying an old debt incurred as partners in a system that did wot secure the creditore of those that failed long ago. The Legislature. instead of compelling immediate payment or abolishing the system, lowed the debt to be funded, thus making the final pay ely easy, and Continued the special prtvi leges of th s of bauks It is bardly necessary to say that since their mutual debt was funded one of that class of banks (the Iawis County Mank) has failed, and its bills will be without doubt a total lors, unless the Legislature devote to the'r payment what- ever remaant there may be of the Bank Fund after pay- ing jts present liabilities. Three others bave failed during ‘sent fisancial difficu ties, the Reciprocity , late Sack bor, the Fates County and the Rank of Orleans. While the Superintendent hopes that their notes may be paid from thes assets, jadiaug the personal liability resting upon their atock’ va, he cannot conceal from himself the process will be so slow that a heavy loss will be sustained by the owners of those notes, from the necessity of their realizing apon them, and thus put them into the bande of the brokers at a heavy discount, Fourth—To compel every bank, banking association, or individual banker, in the State, doing business under spe cial charters or articles of aseneiation or under cortifleates 1 in this offiee, to maintain a sjecie reserve in ite vo of 20 per cent upon the amount due its deposit ore—allowing those banks located ont of the city of New York, to return as specie any balance to their credit in w Solvent bauk in either the city of New York, Albany or Troy. The first impression that would sirke the mind of a New that this was making an npfair dietivetion bewween the Lanks of that city and those located ia other parts of the State Let us examine if this is 80 in fact. New York city being | - fret commercial centro, not on!y of this State but of the Com tend all values, whether the products of agricultare, me chanics, the sea, or the mines of the earth. From it ia re turn fs radiated another class of values; the mauufactured goods or articles of luxury that enter into the consump: Hon of the pecple of the interior of the whole couatry. she is the great entrepot of our foreign commerce, and the creat t to which the concentrated business and wealth of this contizeat directly tend. Her natural position is such that ber inbab/tauts must of necessity devote themselyes to commercial and trading pursuits. She is literatly not only the Gibraltar of State, but of the entire country, against a fi nsion |= of specie paymetts, whether the demand for pay ment arises from our foreiga credits, or our accumulated tomestic debt, leading to distrust and panic among our own people Whatever deman! for coin iv unvisunl quantities may be made ‘n this State or eleewhere, New York e%y must fur- nish it, either through the Yanks or citizens located within her borders, Upon no other point in thie State can come a demand that can lead to a general cuspension: and by a necestity that knows no law, the suspension of that ety # followed throughout thir State and the Union The demand fer ww upon interior banke baving but comparatively small deposits. amounts to nothing, as their great debt is for currency, 80 scattered and of such press ing daily use it ean never be concentrated to produre « demand endangering theit general stability. Admit that it may for a moment, It becomes a demand upon New York at once, and ele ig compelied from her locality, and the fact that yalues ae before stated tend directly towards her, to furnish the coin. Again: the covntry banks should be allowed to state as & part of what may becalled their specio reserre fonds. the balances due them from banks in good standing in the’ That balance is better is entire ion that it re. . True,and why? A secured note ts based upon a credit second oniy to erin: and to show its effective use to the interior banker, in time of siresture, T need only refer to the fact that upon return of notes there has been delivered of recurities held by this do. nearly $1,500,000 a week, for two weeks tn ene ceasion, 10 fis circulating notes, which is the great debt of the country banker. This occurred imme- ‘ately kefore the suspension, and was stopped by that event. A the same demand vpon this department for eight times as % or say sixteen weeks, woul returned. ‘his “often every dollar of the circalation of all the banking associations and individeal bankers, city and country, and left it without 's doilar of ite registered notes in circulation, of a penny of securities in ite vaults ‘The Superintendent does not mean by this to Be the currency should not be redeemed in specie Cy tends to place the epecie basis opon the very elervent that enn only lead to a suspension of specie payments in this State, the deposits in bank, and alvo to place the specie basie'at the very point where the attack must of neoossi- ty be first made To ehow that the specie reserve should be at least 20 per cent opon the deposits in the New York banks, and that it will not bo onerous, or cripple their usual opera. ons, the following movement of those banks since 1960 © presented fie firet fifty two weekly statements, commencing with the act of 1885, compelling these statements to be y* Nished, show the average of specie from the 6th of August, 1883, to and includ'ng the 20th of July, 1854, to bare been $11,477,186, and average deposits, $61,534,623, of nearly 19 t. Average loans and discounts during Fame period, $99,196 805. The following year, ending July 28, 1955, averaging cain the Gity two published statements, ehows the specie te bave beer 614 | and ay leposite, $72,902,- —witbin the smallest fracti 20 percent. Ave ore loans ad” discounts same perio’, $90,069,561 Tue follow'ng yowr, coding om July 26, 1900, laid he continuance of 3 ork banke be | ankor may bO | sssociate for the purpose of barking States, towards which, as « common puclows, | t's... Jn using the words debtor and creditor | | cue of them declining to take circulating notes, against | cent, ‘The year July 25, 1857, the fifty-two woekly statements ine ‘same ' was pursued we ere not to say lessness. The ie Test fell off to $11,895,646, while deposits rose to $92,- 499,444. The former easing nearly $1,500,000; the latter increasing nearly $8,000,000, Loans and discounts vee se NUS Average specie rest less than 13 per cent. From this point the werage of the Ist of and discouats from August shows an increase of the preceding week of towards $2,000,000, Same time reserve fell off slightly, aud deposits rose nearly $1,000,000. Joana and discounts On the ain rose nearly other upon " ks, over § 000," ino woeks, over if 4 rer $31,006,006. line by the 10th of October, (A itels deposits over $8 000, the other in reducing The banks bolding their specie reserve quite steady, with occasional slight fluctuations, until the 13th ended by the banks suspending specie payments. Ore of the strange pecuiiarities of this whole proceoding is, during this whole time, from August 1868, to the sus- — pension, the circulationof the city banks scarcely fluctu- ated $1,560 C00. ‘This fact would scom to clearly demonstrate that what- ever may lead to a eué, pension, either by a foreign or do- mestio demand for coin, the currency of our banks, pro-«| perly secured, is not an element in its production, ‘This proposition of the Superintendent to compel the banks in the city of New York to maintain ap average of 10 per cent of specie upon their week!y bdalauce, is re- vurning to the point of action voluntarily assumed and sus- ained by them for two wana from ‘the 6th of August, 858, to July 28, 1855. We all remembor those years Tagsed prreperansty not only with the peopie of the State, but with the banks also. Lock at tho figures during that period, as presonted in the averages of the banks of the city of New York:— Date, Loans §\Diselts. Specie. Cirevlat'n. s, 1858 amd 1854... $00,195 $05 11,477,186 9,228 Bah 61.984, 635 154 and 1855." "050,661 1614/8527 7.755.840 72602078 ‘The banks of the city of New York during those’ years were the great Balance wheel that steadied the tra Se and commerce of the country. They must oceupy that posi- tion, Nature settled this fact when she created Manhat- tan Island, and the barbor with which it is surrounded, In presenting his views to the Legisiature of what should be the basis of banking in that city, the Superin- tendext but acknowledges the fact, that upon the system there adopted rests the entire success of banking in this State. However novel and strange his views nay appear upon extending our specie basis upon depésits alone, they are Is honest convictions, derived from # careful exami- nation of the whole difficu'ties that now surround the mouetary aflairs of our State. They are presented with the full knowledge that they are to be examined and com- mented upon by bakers of experiesce and sagacity far round hie own. He aiso admits that they ere probably istie toorthodox banking, as heretofore unserstoog, ergin this State. He would himseit have pro: rouox in banking sixty days before Ject a his capa positic Tue} are presented to the Leg of duty from which be cough not no apology could be nade for him while escape u- perintencent of the Banking Department of the State of | New York Table No. 1 shows the increase of the number of banks, their r6: ireniation, and the kind and description office; a'so, m in this tment onthe of the present table with the one of simi- character in the report of the Superintendent last year exhibits Rome facts that are worthy oF attention During the fiscel year ending 80th of Septermber, 1866, twenty five associations and three individual bankers commenced business with capitals, as shown by certiti- is oflice, of $7,550,000; actual paid up 2 capital, $7 During the present fiscal year, ending 80th September, 1867, but ine associations aud three individual bankers with a capital, as shown by actual paid up capital, $4,204 | ‘The twenty oG ted ve associations and three individual bankers in securities required by iaw i They received cireulating netes... Sesto ‘The nine astociations and three individual bankers de- posited securities, as before {mentioned, in this office. POR IN taaseioaeis $550,520 They received circulating now 888,585, Still more worthy of attention is fact that of the twenty five associations that began bul two were continuations of banks where charters had expired, while five out of the sine com- mencin, business in 16857 were of that dceserip- tion ¢ contrast is a lesson to be heeded by capitaliots; but four aascciations commencing business fn 1857, and | twenty-five in 1856. | Hae the general bank law reached the gon! of al! our general laws for associating capital’ We know that our | geveral railroad, plank road, insurance, and manufac. turing laws stimulated associations tor the prosecution of those interests to puch adegree, to nse a common but ex- pressive phrase, the business was overdone. lt appears to the Superintendent that we have nearly, if not guile, arrived at the same result in banking, by the siness in 1856, | mult plication of the nugiber of banks and the emalinees | of their capitals. The passion for bank stock has tereived | a check, the recovery from which will be very gradual, it ever entire, One of the errors of the interior banks is endeavoring to bank upon circulation alone. In other words, placing nearly, if not all, their capita! in eu ry dollar of cireulation recerved by ary bank whatever uader ihe general be backed by at least a doilar of actunl c(the banker. While the sk nable amount af deposits, be ig; tat he is entirely 4 overtake bim auder the peculiar organiration of the busi: ness affairs of our courtry x€ Superiutendent does not moan to in. voke legisiation on this subject. If attempted it will be fotile, and only add another monument to former efforts of this dgreription, in other general laws. The! ste themselves corporators by complying With: certain provisions of law, name the locality and the amount of capital they propove to employ in the business of banking. end retaintag thot eapital in | their own hands, leaves the question of the amount of copital thes netually employ within their own bosoms, wLich bo \ega) enactment can contro}. ‘This question being ove upon which great difference of opinion exists, the Superiatendent will try to iltustrate by. ut example. ‘The general bank law admits any number of persons to Suppoee the mini rum capital of the persons #0 associated to be $200,000, and the associates ten, if you please; they place $100,000 iu thie Department, in securities required by law. This is no €ridence of ownership of the capital; it is only posses. sion. This is the nearest point upon the qnestion of capi euch by legislation, as it divests the associates If it t theirs. well; if not, their creditors must look wit. to it. They make the usual affidavit of paid up capt | tal; admit it is actually paid up in mouey and owned tona fide by the associates They com mence the Business of banking. employ but the circulating notes, $100 000 received from ‘this office, in the business. What, let mo ik, ie to prevent their loaning themselves from their own money the $206,000 of the capital of their bank? Nothing but « law to provent the loaning of money by every bank to any and all ite stockholders. The applica. tion of this provision to the directors alone of the banks of the State, would reduce the discount line of our banks over $10,600,000. Fortunate, They choose to ¢ is a higher law than Legisiatures ean byect—that of experience —teaching the ecting capital with circulation, az neces ihe prosecution, successfully and profitably, of the ofhanking. The teachings of the last few months to the bankers ihe interior wpon this mooted point will vot be forgotten, and will be acted upon promptly when the prevent storm in our monetary affairs passes away. As before remarked, it is futile to legislate apen this question of capital. The decision of the court in relation to this department, in regard to the amount of securities ageociations and individual bankers shall havo in the cnatedy of the Soperintendent, places the whole question of the Proportion of capital to currency at the op: ton of the banker himeeif. True, he places $100.000 recorities ja the bands of the Superintendent. if an nese. ciation, and demands and receives $20,000, or a loss amount, in notes if he chooses, withdraws the $90,000, and discounts the notes of his associates or returns it to the parties from whom it was borrowed, and commences ness of banking according to the judicial construe tron of our prevent bank laws. ‘only poerible way to connect Tas to amount te in banking, is in divesting the corporators of it by it in the hands of the Superintendent as recurity ing Notas. ‘The true theory of our general bank law (and the prac. tice should correspond with it,) is the entire security of peristendest, and be a not prepared 9 say That any bank . an not to eay that any of banker, under certain restrictions. should be eompetied to deposit securities for an amount of carcu)ating notes be: youd what he necessarily uses in the business of banking. ‘The only real difficulty in this construction of the acts of 1840 and 1844, virtually r them, ‘ practically the tendency given by it to increase number of banks by allowing a emailer amount than $100,000 of securities by fn asscoiation, and $50,000 by an individual banker, to be deposited, or rather continued, in thie department, ae ae. curity for circulating notes. This would be in a great measure overcome by confining the securities hereafter to be Gepoatved entirely to United States and New York State atocks * If mortgages are hereafter to form part of the bacis of bank ng in this State, the Superintendent does not hesitate a moment to recommend the enactment of a law requiring ® deposit and continoance of $100,000 by an association, nd 850,000 by an individual banker, in this department ; and that, too, in Iangvege that aball not leave the question open to judielal deeisior ‘The reason is obvious: it reqtires but $50,000 in real capital, money, to pw ae stock sufficient, with mort- gages of like amount, to create a banking association. The can be made by the associates, using the Gias ae gan pours copertooe the of bank year’s experience, nieiness ing, arf re err of the State, Loyty ere wou! danger in trying riment the coming year than any since the passage ‘of the fot of 1898, iste of from leaving the the [ egisiature Cy he e reoatef Wy eauirie rf individual Denkers and banking Jona, now or here. after to be organized, to deposit and continue with the Ruperintendent 650,000 of securities for the redemption of their circulating uotes, aud couflaing al! future deposits 2issqhist dBi HIETSLETPILASTHERRUPE LecTEL, ffs TREATS arose z shows the oames of the several insolvent ‘banks, the rate at which their notes are redeemed bg Superiptendent at his office, aad also the timo the me- the tice for such redemptioa w:ll expire. Time for Re- Rate. 4 ets. May 21, 1868 86 ots. Nov. 12, 1860 Par = Api. 2%, 1964 91 ots. June 17, 1868 77 ots, Sept. 28, 1960 Stk notes Par June 17, 1966 Salk aad e6- tate notes.81 cts, June 17, 1968 State, at Sackets Harbor. All Par Nov. 11,1868 Table E. exhibits the: devts and liabilities, ama the means and resources of ali the banks, banking asse- ciations and individual bankers doing business im this Biate, ov the 27th December, 1866; 14th March, 1857; 6th Juxo’ 1857, and 26th September, 1857, ‘trom hear quarterly reporta made to this department, at those res- pective according to the provisions of chapter 164 21, °56. March 14, "St. $10,025,798 | $102,505 650 ‘ 32,510,208 12,102,478 29,030,666 1,183,995 946,407 4,492, 4,561. 986 94,862,202 100 '641,366 a either of the above beads... 2,298,368 2,008 66% ’ June 6,'8T. § 6 Capital... + 8103,954,777 $107,507, 660 Grreulation $2805, ret mere 13,949,030 13,027/429 Duc to’ banks ... 97,319,817 19,267,268 Due to individuals and corpora. tions otber than banks and Gepositors...... 6... 1,187 346 Due Treasurer of the New York...... 3,145,266 Due depositors 1 108/350/428 83,639/004 Due others not inciuded under either of the above heads... 1,264.896 1,758,701 MEANS AND RESOURCRS, Tiems. Dec 27,56, March 16,'S. Toans and discounts . $185,557,123 $188,088,934 Overdraits .. 286 460,308, Po ‘Woes and expense account Loans and discounts. Overarafts...... Due from banks 025 4,321 36 14,224,308 ‘ 25,147,472 23.503 318 Bonds and mortgages. 9.200 794 8781 468 Bills of banks... O84 293, 564,618 Loss and expense account. 1,562,623 1,028,199 ‘Table F shows the names of banks for which receivers have been appointed by order of the courte, and the dates at which such orders and appointments were re ceived in this department anks, Receivers, Residence iierkimer/Enoch B. Taico't|Oswego _.|Oe- ». [John A. Stewart) New “JES. Spaulding |Etmira Dairymen’s. Enoch B. Taloot| Oxw: Rost River. 2 |David Banks... |New Hollister, Ruifuio. | Al'son Robinson! Buitale N. Plaiz} John 8. Sleight../Poug'k’vie -F. Buiterworih | New York) And’ w Carrig TK. Burroughs. _ Be <2. |Aarou B. Hays..[New York |Nov.12 iho RA Wetmore. |Utien .....(Sep. 20. U |Wim, 5. Koo.....\PinePiaina'Oct. 12 UST anks tw bie, thet the Chemung County Bank and Medina Bank ara individua! bankers The power of the court to aypoim receivers in the case of an individual banker, expecially when be is without pariaers, is a question of gre doubt. he observed from the note at the foot of this ta- The law opon thie subject |s not well defined, aud the Sa- perintendent understands the principle is soon to be sat ted by a more formal decision, than the mere appxat- ment of a receiver by asing'e judge. ‘The policy of the act of 1833 was Famaey bad treat ewols individual obtaining cixeulat:ng notes from this departmeat ac an individual, (protecting him from suits at law w bis cirentating notes only,) and not affecting his liabil upon a'l other debts and contracts. This point should ba firmly settled by our courts or the Legislature, to reliews this department from the embarrassment arising from the uncertainty, whether it is proper for it to recognise a ra- ceiver of an individual banker. Table i’ presents the increase of bak capital in thés State from 1848 to 1857, both inclusive. Also, the im- crease and decrease of the amount of notes issued by this department to incorporate banks, banking assooa- tions and individual bankers, at the respective dates stated in the table. Jong 24, 1848, June 30; 1849, June 29, 1850... September 23, {854 September 20, 1855 . September 20, 1856 . September 26, 1857 .... $30,670,804 Date. September 30, 1848. . . December 1, 1849, December 1, 1853. September 30, 1854. September 80, 1855. September 30, 1856 aa September 30, 1857. 2,248 568 The amount of securities surrendered the various ase. clations and individual bankers, from the first of Ape Just to the first of October, 1857, wasi— toe Honda and mortgages. Total ........ i by Boiest teeee 356,202 58 On the Ist of April last, chapter 103 of the Laws of 1857 took effect, in relation to future transfers of securities by the Superintendent from thie It is a wholesome check upon all transfers by office , and while it delays the transactions of the somewhat, it amply compensates for this slight difficulty by the security it affords the banks of thir tion to their property deposited in the Rank steadiness and certainty of its operations during a continued period of excessive preasure upon the jn closing this report the Superintendent may be | ~~ ao Seen, our banks on the of December, at which time his report goes to press ua. der the peculiar ‘imtons of the act to “organize a Rank Department,” which compels bim te have his report printed and distributed to the Legislature on the first day of ita meeting. The banks of this State, as far as the currency is con. corned, (with the exception of a single free bank and the three Safety Fund banks which have failed,) are, in the opinion of the Superintendent, in the main sound The receivers of the broken free banks are rapidly retarning the eS There are no notes under