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University Press, Cambridge:

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CURRENCY.

No one, in this country at least, will deny the great convenience, commercial and domestic, of a mixed currency. The substitution, to a limited extent, of paper for the precious metals, is a laborsaving invention; and no people, who have once experienced its advantages, will voluntarily forego them.

The issuing of coin, stamped with a known and invariable value, is a privilege reserved to the sovereign. Where paper is made a legal tender, it participates in the same character; and it becomes the bounden duty of the sovereign, or the legislature, if the privilege of issuing such paper is delegated to one or more institutions, to grant it under such restrictions as shall render it certain that the paper so issued shall have a like known and invariable value.

Where it is not made a legal tender, no such bounden duty exists; still, if it has been deemed

expedient to restrict the right of issue to certain persons or corporations, and thus to create a monopoly in their favor, it may not be unreasonable, and public policy may require, that restrictions of a like nature should, in this case also, accompany the grant.

Here the duty and expediency of interference end. All legislative enactments beyond this point are trammels imposed arbitrarily on the freedom of commercial action.

While, therefore, we should consent, nay, insist, that a currency sanctioned by the state should be guarded by suitable provisions for the public safety, we should be no less solicitous that these provisions should not be of a nature and to an extent more than adequate to the complete fulfilment of this end.

For this purpose it is important that the true nature and effect of these provisions should be understood; and that if really tending, however necessary, to the diminution of profit and the restriction of trade, that tendency should be fully appreciated.

It is on this account that I propose to examine the theories set forth in a remarkable pamphlet on the effect of the laws regulating the amount of specie in banks, by Samuel Hooper, Esq.

I shall at present confine myself to this particular question; the more extensive subject of the laws of

Massachusetts concerning banking deserve, and may, perchance, hereafter receive, more thorough consideration.

The pamphlet in question is written in a bold and vigorous style; there is no misconceiving the author's meaning; and while I differ entirely from him in some of his views, I should be the last to refuse my sympathy to the conservatism of his intentions.

The general exposition of the principles of banking is such as has received the sanction of all writers on the subject; it is not my intention to analyze it here.

One or two ideas, however, are startling, and, so far as I know, original. They are brought forward with great emphasis, and are designed "to influence. the action of the States which control the Banking laws." (Preface, p. iv.)

The first of these that I shall consider is, that the greater the reserves of specie in the banks, the greater will be the loans that they can maintain, and the greater, consequently, the profits of the shareholders. This principle is stated without limit or qualification.

"It can be made obvious that a large amount in the vaults of the banks is more profitable to their stockholders and more beneficial to the community, as it enables the banks to sustain a larger amount of loans." (p. 6.)

"It may seem paradoxical to state that banks can give greater facilities to the business community by having larger amounts loaned out, and hold at the same time larger amounts of specie in their vaults; but nevertheless it is true." (p. 6.)

Any one familiar with the condition and the profits of the banks in Boston and New York can judge, from the foregoing statement, whether the large amount of specie, which the law of Louisiana renders necessary to the banks in New Orleans, impairs their profits or their ability to accommodate the public." (p. 12.)

"It cannot, therefore, be said that the banks are losing the interest on the amount of specie in their vaults; for the more they have of it, the more ability they will have to increase their loan." (p. 29.)

These quotations will suffice to show that the principle is laid down without limit or qualification.

Thus stated, it is manifestly false. For supposing a bank to keep specie equal in amount to its capital and liabilities, it could not loan one dollar, and would pay its rent, salaries, and expenses en pure perte.

And this is a supposition that we have a right to make; else the proposition is not true without qualification. In legislation, as in science, it will not do to lay down a broad, general principle, without being prepared to follow out its strict logical consequences.

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