FREE BANKS-STATE STOCK BANKS.

OBJECTIONS TO SUCH BANKS.

1. BANKS based on a deposit of what are called government stocks-whether National or State bonds, i.e. mere evidences of National or State debts-are virtually allowed a great privilege denied to the people generally. They are allowed at least double interest. They receive the usual interest accruing from the stocks or bonds deposited, and also from an equal amount of their own notes, issued as money, in the shape of bank bills or promises to pay the bearer on demand. Thus, for every hundred dollars deposited, they receive, say six per cent., and also, six per cent. or more for another hundred of their own paper-making twelve or more per cent. for every hundred dollars of bona fide capital; while the ordinary citizen (not a shareholder in any such bank) can get, according to law, only six per cent. for the loan. of his own real capital in the form of gold and silverthat is, actual cash, or specie, or constitutional money.

2. Why should State stocks, or any other evidences of public debts, be preferred as the basis of a bank, rather than other kinds of property? and more especially real estate? Could not the latter be converted into money, as readily as stocks-at some price? say at half its estimated or market value? Let the cash valuation of a

farm be ten thousand dollars,—in any exigency, it would certainly command five thousand-why not permit the farmer to issue his quasi bank notes to the amount of five thousand dollars, besides working his farm, and getting from it all he can? But even this would not place him on an equality with the stockholder in a free bank of Indiana; for he may put State stock at par into a bank --and issue an equal amount of his own paper-without regard to fluctuations in the market. Thus even now, (December, 1854,) most of the stocks deposited at 100 are selling at 75 or 80; and, of course, are insufficient to redeem the bills in circulation. I suppose a landed security would have proved more reliable-but the truth is, that nothing except gold and silver (i.e. money) can serve as a safe basis for banking operations,—because payment is always to be made on demand, and not on the cash sale of stocks or land or any other commodity or spécies of property.

3. To establish the eighty-seven free banks of Indiana, some seven or eight millions of cash funds (gold and silver, or their equivalent in some other form,) were actually sent away from the State to New York or other remote cities to purchase the needful stocks-thereby diminishing, to that amount, the actual available capital of the commonwealth, to be replaced by the issue of seven or eight millions of doubtful and constantly depreciating paper currency. Thus, on a trial of about six months, some of the banks have already failed or suspended payment, and the paper of others is selling at a discount of from ten to thirty per cent.

4. The attempt to build up a bank upon a debt—to create something out of nothing-to hazard debts to individuals upon State debts-looks very like an absurdity. If it could be assumed as certain that all the stocks pledged for the redemption of the bills issued, could be instantly converted into cash at their par value, there would be reason in the thing; but all experience shows that whenever there is a stringent demand for money— specie then stocks, as well as other property, will sink or fall in price.

5. Consider the vast expense of maintaining any system of banking:-the numerous officials employed at large salaries-the presidents, cashiers, tellers, clerks, runners, attorneys, agents, collectors; the banking-houses, fixtures, engraved plates, stationery. Compute the expense of the whole machinery for furnishing the people with a substitute for the constitutional currency. How much does it cost? There are already eighty-seven free banks in operation, and others are being daily established, and there are thirteen other banks-making one hundred in all for Indiana. There are probably not less than three thousand banks of all sorts in the United States-employing some twelve or more thousand officers and servants-to say nothing of directors-and at a cost to the people of fifteen or twenty millions annually. Now this entire host of genteel workingmen, and this enormous expenditure of annual millions, do not produce a dollar, or add a dollar to the actual wealth or capital of the State or of the Union.

People are continually

deluded and mystified with the fancy that banks can

make money plenty-that they possess some magical or creative powers.

6. But we are gravely assured, in the newspapers, that there is no cause for alarm or for a panic-that, at the worst, the noteholders need not lose more than from ten to twenty per cent., if they will only be patient, have faith, and wait for the sale of the stocks deposited at Indianapolis. Why should they lose a cent or wait an hour? Again, we are told, that the banks are rapidly calling in and redeeming their paper, and that their circulation has already been reduced to about one-half of the original issue, or by some three or four millions— and that therefore we may dismiss all fear for the future. This is proof at least that there was abundant ground for fear, distrust and alarm-and hence the attempt to apply the only practicable remedy. But this remedy comes too late for the relief of the poor noteholders of a few dollars, needed for their daily bread-and which must be sacrificed for whatever they can get. Capitalists, speculators, merchants, brokers, may profit by the purchase of such bills at an enormous discount, i.e. by shaving the necessitous. The poor widow, for example, who last evening received her hard-earned pay in a one-dollar bill (of the Connersville Bank or any similar concern) goes to the market this morning to buy the necessary food for herself and children,—and is told by the butcher that her note won't pass, that the bank has just closed its doors, etc.-What can she do? Why, just take whatever she can get, rather than starve, say fifty or twenty-five cents.

7. The fundamental error, fallacy, sophism, absurdity of the whole system, would be obvious, if, instead of dollars, the paper promises were to pay the bearer so many bags of cotton or barrels of flour or sugar or coffee, and when a demand is made for the promised commoditylo and behold, the said article is not on hand and cannot be procured. Will it suffice to offer tobacco or whisky or horses, or land, or even gold?

8. I blame no one who honestly engages in such banking according to the letter and meaning of the law. If the law allows him twenty per cent. for the use of his capital, he has a right to the privilege, though withheld from his neighbour.*

*The Auditor of the State of Indiana, in November, 1854, informs the public that: "All the free bank paper is taken for State and County taxes in this State, except the following, viz.: Connersville, Northern Indiana, Drovers' Bank of Rome, Plymouth Bank of Plymouth, Traders' Bank of Terre Haute, and the State Stock Bank of Logansport." Again, he adds: "The circulation of all the [free stock] banks now is between three and four millions, but is daily growing less. The amount originally issued was between seven and eight millions." Again: "I am surrendering the bonds of all the banks to holders of their notes."

What must result from such enormous expansion and contraction of the popular currency? Already the pressure is heavy upon usvery like 1837.

The "Act to authorize and regulate the business of General Banking in Indiana," was approved May 28, 1852-to be in force from and after July 1, 1852. Most of the existing free banks, I believe, have gone into operation within the current year. Another, at Paoli, is to commence on the twentieth of this month, viz., December 20, 1854.

Each shareholder is held responsible in his individual capacity and private fortune to an amount equal to his stock subscription-and in addition to the public stock deposited at Indianapolis--for the redemption of the bills issued. But this provisional security will prove of little value in the case of foreign shareholders or those of other States: and of no value whatever when shareholders possess no other property.