negligence of a single man, when he is admitted within the arcana of a large bank, to shake by his errors the safety of the whole community. It requires the utmost care and the utmost integrity, in those who have the management of machinery at once so sensitive and so dangerous, to preserve its members in their balance, and to maintain the usefulness of the whole. It is the misfortune of American banking, that, while it has never been restrained by those general limitations which the municipal authority alone can impose, it has been freed, by the interposition of the same authority, from the natural responsibilities which rest on the ordinary movements of trade. It is unshackled by municipal regulations, because from the spirit of speculation which has become so potent in the land, the state governments have emulated each other in the production of schemes of banking the most loose and the least guarded; and because, though the state governments themselves, from their conflicting views, are unable to carry out a system which should be uniform and just, the general government is constitutionally disabled from interference with a subject on which it alone can move with safety. We have partaken, in consequence, of a currency as mottled as the face of the vast continent over which it spreads. The manufactories of the East, the mines and the corn-fields of the Middle and Western States, the rice swamps and the cotton plantations of the South, have been made the basis from which paper money has risen in clouds. Here in New England, it is true, there have been restraints imposed, which, if rigidly carried out, would be salutary, but even here, the shackles, which have been thus knitted together, have too often been flung aside by the prisoner, whenever his strength has been great enough, or his ambition sufficiently daring, to attempt the violation of laws which he had solemnly contracted to observe. In the South, in the West, and in some portions of the Middle States, legislative provisions have been a mockery. Of the laws for the prohibition of suspension of specie payments, there is not an instance of enforcement; and even when for a second time, after having experienced once before, under promises to do better, the mercy of the State authorities, the banks have violated the laws by a permanent suspension, they have been allowed to continue their chartered existence, in like defiance of the claims of justice, and the necessities of trade. It is worthy of remark, that though the payment of their notes in specie is the only condition of importance, that has been exacted from the banks in return for the great privileges conferred upon them, it has been openly disregarded whenever such a step became temporarily convenient. Had the legislatures of the various states stood still, after a refusal to lay the restraints which it was in their power to lay, they would be liable to complaint for negligence, though not perhaps for positive error. But the same authority, which let loose the banks on the community, without those bridles which legislative restriction could afford, emancipated them by the act of charter from the responsibility which rests on all other proceedings of trade. Should a company of merchants go into business without the immunities of a charter, they would be liable to the full extent of their individual estate, for the debts which they collectively incurred. They would be prudent, therefore, in their movements, because their imprudence would be injurious not only to the community, but to themselves. Suppose that they joined themselves together for banking purposes, they would become responsible both in a body and singly, for whatever notes they issued, for whatever deposites they received, for whatever accommodations they gave. Let a man of loose business principles march into the directors' chamber, or take his seat in the president's chair,- he would be restrained from the deviations into which his own waywardness would lead him, by that magical gravitation which a sense of individual interest creates. Banking houses would be subject to the same regulations as those which hold good in establishments for pursuing other branches of trade, and there would be no temptation to those who were intrusted with their management to squander their funds, since they would perceive that for the deficiency thus created, their private fortunes must answer. Such would be the natural liabilities of a company, which should enter upon banking operations without the previous grant of a charter. Like an English joint stock company, would place its credit on the basis of the credit of its members both individually and collectively. The holder of a note, or the maker of a deposit, would look to the character and the fortune of the bankers; and if they were men of standing and property, if they had grown grey in the honest pursuit of their calling, and were anchored down in their moorings by those ties of family and of domestic relations, which go more than any others to ensure a man's stability, he would be conscious that the risk, to which he would be subjected, would be but little more than that which is necessarily incidental to mercantile affairs. But let the banking company receive a charter, and the basis of its operations is changed. Its directors, from responsible partowners, become the irresponsible managers of an adventure, in which they have but a transient and transferable interest. The whole machinery is shrouded at once in mystery. The enquirer is unable to determine how much of the capital is paid in, or in what medium it is paid; and as his property is to be hazarded, not on the ability of the directors individually to fulfil the obligations they enter into, but on the sufficiency of the capital for the debts it must encounter, he is forced to place his confidence on a rock that may in a moment disappear. Who is to guard against negligence or fraud, among men who have every temptation to be negligent and fraudulent? Who can say that the man who is placed by his own intrigues, or by the indifference of others, in the chair of irresponsible authority, may not abuse his trust? There are many ways in which money may vanish besides in direct embezzlement, and it may be, as it has been, that the trustees of so great wealth, emancipated as they are from all individual liability, may make such use of it for the benefit of themselves or of their friends, as they would be far from doing were they involved personally in its safety. There is scarcely a bank in the United States which is not swayed in its discounts by personal preference, that has not given to the less worthy applicant a priority on grounds of friendship or party spirit; and yet there is scarcely a creditable firm within the same limits, whose members are responsible for its debts, which would be actuated by such inducements. We might put out of the question the constant probability of fraud. That the only way to ensure men's honesty, -and we say it with pain,-is to make it politic for them to be honest, the experience of banking as well as the experience of human nature has shown. There could be no arrangement so well calculated for the misuse and the abuse of the wealth of the community in general, as that which places it in the hands of irresponsible trustees, who can squander it or embezzle it, should it suit their purposes, without the probability of detection, or the fear of punishment. The want of direct responsibility may be said to be the cardinal error in the foundation of the banking system. When the first stone was laid, and when the high priests of the faith proclaimed in full pontificals the virtue of the creed which in its walls was to be promulgated, there were prophets who stood by, who looked upon the ceremony with averted eyes, as they saw the evil that it would bring forth. The great dishonor that would fall on our name, and the jar that would be given to our institutions, were foretold, when the cloud from which they were to drop was but a speck in the horizon. It was objected, that through the operation of banking corporations, the old fundamental laws of descent, of mortmain, of escheat, which had been the beams on which more than one vast and free nation had been built, would be virtually set aside. It was shown that the integrity of the state would be eaten away, by the transfer of a large portion of its capital to foreigners. It was maintained that, from the freedom of the directors of the new corporations from all responsibility, there would be an undue and dangerous consolidation of power in the hands, nominally of the boards themselves, but actually, of their presidents; that the charters of the respective institutions would be violated as often as it became convenient, till their immunities became indefinite and their restrictions a dead letter; that there would be large and injurious losses through fraud and carelessness in their officers and agents; that there would be a determined interference with the political divisions of the country, whenever such interference seemed expedient; and that finally, from the expansions and contractions of the banks themselves, there would be violent and incessant fluctuations of the monetary system. It was on such grounds that the charter of the Bank of the United States in Congress, to a great degree, and those of the State banks in their respective legislatures entirely, were opposed. That they were opposed in vain, will be seen by a glance at the condition of the currency of the country at various times from 1811, to the present period. The following table is made up from the reports of the Secretary of the Treasury, as taken from the returns of the banks themselves. Condition of all the Banks in the United States at various Eras. 66 1820 213 95 308 19,820,240 44,863,344 35,950,470 137,110,611 * In these two years the number of branches is included. The estimate for 1841 is made up from the Report of Secretary Ewing, and it would seem is on what a different basis from those of his predecessor. some VOL. XXXI. — 3d. s. voL. XIII. NO. I. 2 |