Let us go a step further. The nearer a bank comes in its specie reserves to the point above supposed, the smaller will be its profits. The limit is the point where public confidence would begin to be shaken in the ability of the bank to meet its liabilities in specie on demand.

This question of confidence brings me to the only à priori argument that Mr. Hooper adduces, or indeed could adduce, in favor of his opinion.

"The Louisiana system," he says (p. 11), "creates confidence, while that of New York and the New England States cannot secure general confidence."

Does Mr. Hooper mean to say that the banks in Boston do not inspire general confidence?— that any merchant or capitalist is afraid to intrust his money to their keeping? This is easily tested. For if true, this money must be hoarded. It must be in cellars or in safes in the shape of gold and silver coin. Do any such hoards exist? If not, there is no want of confidence in the banks, and Mr. Hooper's solitary à priori argument falls to the ground.

With regard to the teachings of experience, three examples are adduced. That of our own banks, that of the banks of New Orleans, and, somewhat more cursorily, that of the Bank of England.

I shall examine each in turn.

Throughout the evidence adduced concerning our own banks there underlies a fundamental error.

When philosophers undertake to deduce the laws governing the phenomena of the natural world from observations, they take great pains to give to these observations as wide a range as possible, that they may lessen the influence of abnormal cases.

In like manner, the tables of mortality, on which all life-insurance is founded, are made up from a long series of careful records. The experience of a single year would be utterly deceptive.

Yet this is precisely what is done with respect to our banks. In almost, if not quite, every instance, the year 1858 is the standard, the Procrustean bed on which all other years are to be stretched. any one maintain that the business of the country was in its natural state in 1858? Had the country recovered from the effect of the crisis?

merce resumed its natural development?

Will

Had com

If it had, how is this fact to be explained, that a decline of specie in the banks (p. 6) between January and December, 1859, of $3,592,258, was followed by a decline in the loan of only $600,000, instead of more than $10,500,000, as should have been the case in accordance with Mr. Hooper's theory? If business was in its natural state, no more triumphant refutation can be imagined. If it was not, all argument derived from the state of the loans or the reserves of specie in that year can only lead

to error.

I do not know that any appeal is made in this pamphlet to our own experience, disconnected with that year, unless it be in the following passage:

"An examination and comparison of the published reports of the condition of the banks in different years will show, that their loans are usually highest when the amount of specie is large." (p. 7.)

I presume that the amount of specie is large, when the exchanges are in favor of the country, that is, in times of commercial prosperity; to attribute the maintenance of the loan at such times to the specie reserves is very much like this reasoning: I have always observed that in fine weather there were most pedestrians abroad; it is therefore undeniable, and proved by all experience, that pedestrians have a direct tendency to produce fine weather.

On p. 37 occurs a remarkable passage touching the banks of the United States in general. After comparing their condition in 1857 and 1858, the author adds:

"The reduction of over one hundred millions of dollars, equal to nearly one quarter of the whole, within a single year, would seem to account sufficiently for all the financial disaster and depression in business that have occurred in the United States since the summer of 1857."

One would think that this withdrawal of capital

2

had, in Mr. Hooper's view, worked mischief enough; but he is not contented unless he annihilates it; for he goes on to say:—

"Over one hundred millions of capital was withdrawn from the use of the community within one year, and probably within the space of a few months; not withdrawn from particular branches of industry to be employed in other ways, but absolutely annihilated, because of the insufficiency of the specie in the banks."

Determined that there shall be no misapprehension as to his opinion of the causes of the crisis he reiterates (p. 39):

"It is not, perhaps, venturing too much to say, that if the New York banks had, for the twelve months preceding the suspension of specie payments, been in the condition, as regards the amount of their specie, that they were in during the subsequent twelve months, the unfortunate interruption of the business of the country which occurred in 1857, with all its consequent distress and ruin to merchants and others, would have been avoided."

Never was there a more singular substitution than this of cause for effect. The disastrous crisis of 1857, extending as it did, with greater or less severity, over the whole commercial world, rendered the use of capital unprofitable, and, of course, diminished the bank credits in 1858. It was,

surely, not the want of specie in that year that kept the loans so low. On the contrary, capital was overabundant. The rate of interest fell to below five per cent, and even then it was not easy to find borrowers. It was not capital that was withdrawn or annihilated; the difficulty was, that nobody could be found to employ it.

The causes of that crisis, so severe and so universal, have never, so far as I know, been satisfactorily explained; but I feel persuaded that the condition of the banks, though it may have occasioned, or contributed to, the suspension, had little or nothing to do with the crisis itself.

I now come to the banks in New Orleans.

Concerning these, Mr. Hooper states that since 1842 they have been required by law to keep specie in their vaults to the amount of one third of their liabilities; to keep the other two thirds invested in paper not having over ninety days to run, and not renewable; and that no restraint is laid on the investment of the capital. (p. 8.)

They are not limited, therefore, apparently, by any usury law, so far as this portion of their loan is concerned, nor does it seem that the amount of their loan, nor the amount of their circulation, nor the rate of exchange that they may lawfully take, is in any way restrained. In short, they are very much less trammelled by useless legislation than our banks.