6,329,726 7,210,870 8,010,450 Due other banks Profits The above statements show a diminution of loans and discounts, since the 1st of December (two months) Other liabilities of $1,425,651; an increase of specie of $466,712; a diminished circulation of $2,363,043; an increase of the canal fund deposites of $356,266; a decrease of the state treasurer's deposite of $66,819. an increase of the U. S. deposite of $3,299; and a decrease of individual deposites of $1,150,767. Aggregate statement of the condition of the banks of the state of New York, on the 1st day of February, 1838, taken from their reports made to the bank commissioners pursuant to law. SALES OF STOCK AT PHILADELPHIA. 36 shares Schuylkill Bank, 30 8,859,358 8,010,450 9,352,144 Total liabilities, $89,438,629 49 50 do. 1 do. 481 401 400 5 66 Northern Bank, Ky. Union Bank, Tenn., RESOURCES. N. River & New York 100 North America Ins., 14 10 Discounts, do. 166 27,883,830 11,201,583 14,289,441 Loans Real estate, Overdrafts, Expenses & per. est. 169,311 67,090 97,103 Bank fund, 50 shares Del. & Hud. 10 days, s. o. 73 100 Specie, 2,623,071 651,018 675,243 $2000 Treasury notes, 1 mill pr. ct. 625,091 463,130 $1300 Draft on New York, 276,908 311,380 186,146 20 shares U. S. Bank, 4,361,811 1,698,715 2,830,730 Due fin.oth. bks.&cor. 5,833,482 446,947 541,763 2,135,876 555,780 152,948 Total resources, 52,134,635 16,814,337 20,489,657 Northern Bank, Ky. 61 75 Vicksburg Bank, 522 12 Loans, Due canal fund, 1,085,500 125,783 [103,291 SALES OF STOCK AT NEW YORK. 751 72 February 17. 1,498,173 62,125 15,514 40,256 3,455,880 657,431 226,680 Due other banks, 6,328,775 2,114,880 415,703 264 shares United States Bank, Discounts $53,383,854 300 66 66 46 Bank fund 713,832 WEDNESDAY, FEBRUARY 28, 1838. RESUMPTION OF SPECIE PAYMENTS.-The inflexible course pursued by the New York city banks of gradually reducing the amount of their immediate liabilities, which is the only conceivable process by which they can be prepared to resume specie payments, has brought up the value of their paper so near to the specie standard, that there is every reason to anticipate the preservation of their charters by a resumption be. fore, or soon after, the first of May next. EXCHANGE.-Bills of exchange on London have been sold recently at New York at 5 per cent. nominal premium. Bills at sight would have commanded 63, which is 3 per cent. below the true par, measured by paper, and 61⁄2 below that par measured by specie, calculating specie at what is called 3 per cent premium. The cost of importing specie may be estimated, at this season of the year, at per cent. freight, and per cent. insurance; and if per cent. be added for commission, it will stand the importer in 14 per cent. But, the owner of a fund abroad, were he to send out orders for its transmission in specie would have to wait for it 60 or 90 days, and would thereby lose the interest for that time, which would be 1 to 1 per cent., if estimated at the bank rate, or double that amount, if the market rate of interest be taken as the profit he could make on his capital. He would also take into the account the probability of the loss of the vessel on board of which his specie was shipped, by which a disap. pointment in the receipt of his funds would occur, for although he might be fully insured, he might not recover from the underwriters with the promptness which his pecuniary engagements might require. This item might fairly be estimated at per cent., and if added to the freight, insurance, commission, and loss of interest, would amount to 3 per cent. Still there would be a profit on the importation of specie, if there was any certainty that ninety days hence there would be a premium upon it in the New York market. A resumption of specie payments before that period would defeat the speculation, and as such an event is highly probable, it appears to us that nobody will order specie from Europe but banks, which are said to have made some purchases of bills for that purpose. Vethake's Political Economy, just published in this city, by Nicklin & Johnson, contains a full discussion of the principles of currency and banking. The writer, as a scientific reasoner, adopts, upon this branch of his subject, the doctrine of Adam Smith, Say, and other writers, that the advantages resulting from banks are not so great as they are commonly supposed to be. TERMS. 1. The Financial Register is published every alternate Wednesday, on a super-royal sheet of 16 octavo pages, commencing on the 5th of July, 1837, and will comprise one volume of 416 pages in a year, 2. The price of subscription is three dollars for one copy, or five dollars for two copies, per annum, payable in advance. 3. No subscription will be received for a less term than one year; and in all cases prior to the first of April next, where money is remitted from a distance, it will be considered in payment of the current volume, and the back numbers will accordingly be forwarded. 4. All postages must be paid, but the risk of miscarriage by the mail is assumed by the publishers. 5. Any postmaster, or other individual, who shall remit ten dollars at one time, shall be entitled to five copies. 6. The notes of banks of five dollars' denomination and upwards, which pass current at the capital or in the principal town or city of the state in which the person who remits them resides, will be received in payment, as will also the notes of before the first of April next, after which the publishers may the banks in all the Atlantic cities, if transmitted any time find it necessary to alter this stipulation. Subscriptions received by Weeks, Jordan & Co., Boston; Adam Waldie, Carpenter Street, Philadelphia; PUBLISHED BY WIRTZ & TATEM, General Agents for Periodicals and Newspapers, and for the Collection of Money due in Philadelphia to non-residents, No. 97 South Second street. OF THE UNITED STATES.. DEVOTED CHIEFLY TO FINANCE AND CURRENCY, AND TO BANKING AND COMMERCIAL STATISTICS. "It is the interest of every country that the standard of its money, once settled, should be inviolably and immutably kept to perpetuity. For whenever that is altered, upon whatever pretence soever, the public will lose by it. "Men in their bargains contract, not for denominations or sounds, but for the intrinsic value."-Locke on Money. Vol. I. WEDNESDAY, MARCH 14, 1838. No. 19. THE BANK OF ENGLAND AND THE From the Edinburgh Review for April, 1837. 1. A Letter to the Right Honourable Viscount Melbourne, on the Causes of the Recent Derangement in the Money Market. By ROBERT TORRENS, Esq., F. R. S. London: 1837. 2. The Causes and Consequences of the Pressure upon the Money Market, with a statement of the action of the Bank of England from the 1st of October, 1833, to the 27th December, 1836. By J. HORSLEY PALMER, Esq. London: 1837. 3. Reflections suggested by a Perusal of the Pamphlet of Mr. Horsley Palmer. By S. J. LOYD, Esq. London: 1837. 4. Reply to the Reflections, &c., of Mr. S. J. Loyd. By J. H. PALMER, Esq. London : 1837. 5. Observations on the Recent Statement of J. H. Palmer, Esq. By SAMSON RICARDO, Esq. London: 1837. consistent with the fact. Instead of increasing, confidence has been well nigh destroyed, a great derangement has taken place in commercial speculations, and instead of being increased, the stock of bullion in the bank has been reduced from above seven, to not more than three and a half millions, and that establishment has been placed in the greatest jeopardy! Such are some of the anomalous results we have lately witnessed. It is of the greatest importance that they should be satisfactorily explained; for, till this be done, it will be impossible to devise measures calculated to prevent their recurrence; or to hinder what seem well planned commercial speculations degenerating into mere gambling adventures. No wonder, therefore, that this matter should have excited the deepest interest, and that some of the ablest amongst our commercial and monied men should have publicly stated their views with respect to it. There seems to be a very general, we might almost say universal, concurrence of opinion among those who have given any attention to the subject, that the something unsound in the state of the currency. late and present difficulties have mainly originated in Neither, as we apprehend, can there be a doubt as to the correctness of this conclusion. There might, inSALO-deed, and most probably would be, commercial revul 6. The Causes of the Present Money Crisis Explained, sions, and a fall of the exchange, even though the curThe commercial and pecuniary history of Great rency were wholly metallic, or fluctuated exactly as a Britain during the last twelve months, deserves to be metallic currency would do; but there is not the carefully studied and meditated. In January, 1836, slightest reason for supposing that they would be trade and industry were generally believed to be in the either half so frequent, or severe, as under the existing most satisfactory condition. The country was per- system. A mixed currency, or a currency of coin and fectly tranquil, mercantile and monied men had the paper supplied like that of England, is exposed to flucgreatest confidence in each other, the foreign demand tuations in its amount, and capacity of transacting for our manufactures was great beyond all former pre-business, ten times greater than any that could attach cedent, all sorts of labourers had full employment, to a purely metallic currency; or to a mixed currency prices were moderate, and the Bank of England had fluctuating according to the demand for bullion. If above seven millions of coin and bullion in her coffers. the currency consisted wholly of guld, or if no addiNow, as every one knows, no political convulsion has tional supplies of paper could be obtained except upon taken place in the interval, the public tranquillity has the deposite of an equivalent amount of gold, no genenever been for a moment disturbed, the home and fo- ral rise of prices could take place, except when there reign demand for our manufactures continued till re- was an influx of the precious metals; and these, as cently to be as great as ever, the gloomy anticipations every one knows, cannot be accumulated in any one that were at one time entertained with respect to the country to a much more considerable degree than in late harvest have not been realised, and many impor- others. But when individuals or associations are altant public works have been undertaken in the course lowed to issue notes, or paper fitted to serve all the of the past year. Such being the case, a person un- purposes of money, not upon a deposite of bullion, but acquainted with the circumstances would naturally merely upon their receiving a promise to repay it, with conclude that there must now be more confidence than interest, at some future period, a new and most powerever, that the extraordinary extension of manufac-ful element of variation is brought into the field. The tures and trade must, by making most foreign coun- currency no longer fluctuates as it would do, did it tries our debtors, have determined the balance of pay-consist of bullion. Most provincial bankers never look inents in our favour to such an extent as to render the accumulation of bullion inconvenient to the bank. But how reasonable soever these conclusions may appear to be, not one of them, we are grieved to say, would be These seven pamphlets have been republished in this Journal as follows:-No 1, at page 132; No. 2, 101; No. 3, 117; No. 4, 199; No. 5, 181; No. 6, 212; No. 7, 260. to the state of the exchange in transacting their business, but merely to the state of prices and of credit among their customers. Suppose, to illustrate the principle, that the exchange is at par, that is, that bullion is neither leaving the country nor coming in. In this case, were the currency either metallic, or issued upon a metallic basis, it would neither be increased nor diminished, whatever might be the tendency to speculate, or the variation in the price of certain arti- ruin of those concerned was the worst evil that could cles. But, under such circumstances, the existing cur- result from the formation of crude schemes of the rency of Great Britain might, and it is most probable former description, or from the undertaking of works would, fluctuate very greatly. When any thing occurs that could not reasonably be expected to yield a profitto occasion a rise in the price of corn, or of any other able return. But it was quite otherwise with the rage leading article; to allay any previous panic or discre- for banks. Had they been only banks of deposite, dit; or to increase the public confidence; the spirit of their multiplication, how little soever it might have speculation is immediately at work, and an increase of been required, could not have been productive of any the issues of the joint stock and private banks inva- considerable inconvenience. Unfortunately, however, riably follows. The Bank of England might not, and, they were not so restricted; and, besides undertaking it is probable, in such a case would not, make any ad- the care of other people's money, they almost all set dition to her issues. But the provincial banks, seeing about issuing money of their own. The extent to the exchange at par, and paying but little attention at which paper mints of this description were multiplied, any time to its fluctuations, by which they are only during the early part of the past year, would hardly be indirectly and remotely affected, would certainly in- believed by any one not conversant with the facts. crease their issues, and be more liberal of accommoda- From 1826, when the act authorising the formation of tion. The impulse once given, vires acquirit eundo. joint stock banks in England and Wales passed, down The additional facilities for obtaining money, would to the 31st of December, 1835, being a period of ten enable individuals to keep back a portion of their pro- years, sixty joint stock banks had been established in duce from market, in anticipation of an advance; the England and Wales, giving an average of six banks a public confidence, which is always greatest when year. But in 1836 a new era began-a mania for prices are rising, and the supply of money is increas-joint stock banks suddenly grew up-and such was its ing, would be still further augmented; and this in its violence that between the 1st of January and the 26th turn would, no doubt, lead to an additional issue of of November, 1836, no fewer than forty-two of these notes. A period of adventitious and deceitful prospe- establishments had been organised and brought into rity would most likely follow, till at length the cur- competition with those previously existing! rency becoming overloaded, there would be a continued drain upon the bank for gold for exportation; and this, by narrowing the circulation in London, and increasing the difficulties in the way of obtaining pecuniary accommodation there, would be sure in the end to occasion a fall of prices, and a general state of discredit and embarrassment, and it may be bankruptcy. In point of fact, however, the number of banks created during the past year was vastly greater than appears from this statement. We believe that, at an average, each of the forty-two new banks had from four to six branches; and as these branches transact all sorts of banking business, and enjoy the same credit as the parent establishment, from which they are It is plain, therefore, that the ultimate check of pay- frequently at a great distance, they are, to all intents ing in gold, on demand, affords no security, in a coun- and purposes, so many new banks; so that instead of try like this, for the most indispensable requisite in a forty-two, it may be safely affirmed that about two properly constituted paper currency, viz.—that it should hundred new joint stock banks were opened in Engvary in amount and value exactly us the currency land and Wales in 1836! It is of importance, too, to would do, were it metallic. On the contrary, it is observe that more than three fourths of these banks clear that it may be increased, while a metallic cur- issued notes payable on demand; that many of them rency would have been either stationary or diminished, had a very numerous proprietary; and that, whether and conversely; and that, consequently, it may occa-justly or not, most of them enjoyed at their first outset sion fluctuations in prices, and in the exchange, that the unlimited confidence of the public. The wonder, would not otherwise have been heard of. under such circumstances, certainly is not that their Were these only possible and contingent occur-issues were increased, but that they were not much rences, still, as they necessarily involve consequences more increased than they actually have been. The that must, if realised, deeply prejudice the public in-subjoined statement shows the amount of their issues, terests, they ought to be most sedulously provided and those of the private banks, since the publication of against. But the evil we have endeavoured to depict the quarterly returns in 1833. is not merely possible or probable, but present. We have not to deal with a contingent and future, but with an existing and urgent state of things. Neither is it of new or recent occurrence. On the contrary, the bankruptcy and ruin that overspread the country in 1792, and in 1825-1826, as well as our late and present difficulties, have all had the same origin; that is, they have all grown out of the defective and vicious principles on which our paper currency has been established. It is not necessary, in order to get a sufficiently distinct view of the circumstances which occasioned the late and present difficulties, to go farther back than January, 1836. At that epoch the exchange was either at par or slightly in our favour,-showing consequently that the currency was at its proper amount, and that it ought neither to be increased nor diminished otherwise than through the influx or efflux of bullion. But while matters were in this situation, a peculiar combination of circumstances conspired to set on foot and inflame a wild and dangerous spirit of speculation. The favourite objects to which the public attention was directed, were the formation of companies for the construction of railways, and the establishment of joint stock banks. The Account of the aggregate amount of Notes circulated in England and Wales by Private Banks, and by Joint Stock Banks and their branches, distinguish. ing Private from Joint Stock Banks. (From returns directed by 3 and 4 William IV.) Quarters ending. Private Joint st'k] Total. banks. banks. £ £ £ 8,836,803 1,315,301 10,152,104 8,733,400 1,458,427 10,191,827 8,875,795 1,642,887 10,518,682 8,370,423 1,783,689 10,154,112 8,537,655 2,122,173 10,659,828 8,231,206 2,188,954 10,420,160 8,455,114 2,484,687 10,939,801 7,912,587 2,508,037 10,420,623 8,334,863 2,799,551 11,134,414 8,353,894 3,094,025 11,447,919 8,614,132 3,588,064 12,202,196 7,969,121 3,969,121 11,733,945 28th December, 1833. 31st Dec. December, 1835, and the 31st December, 1836, from £2,799,551, to £4,258,197; being an increase of £1,458,646, or of fifty per cent! And it will be recollected that in January, 1836, when this increase began, the exchange was but slightly in our favour, and that the currency was either full or very nearly so. What, therefore, was to be expected, but that the excessive multiplication of banks, and the addition to their issues, should depress the exchange and occasion a heavy drain for bullion? The difficulties that grew out of this state of things could not possibly take any one by surprise who is acquainted with the most obvious principles. The symptoms were glaringly obvious. "The commonest observer must," as Mr. Horsley Palmer has truly stated, "have seen the gathering clouds and dreaded the consequences." But we should vastly underrate the effect of this sudden and unprecedented multiplication of banks, if we estimate their influence on the currency, by the mere addition they made to the issue of notes. This, in truth, was the least part of their effect. The immense mass of bills, checks, and other substitutes for money, which they were the means of putting into circulation, were of themselves far more than sufficient to occasion a redundancy of the currency, though they had not issued a single note. It is true that their excessive multiplication led to the suppression of a few private banks; and to a contraction of the issues and business of several of those that still went on. But the preceding table shows that the diminution of the pri vate was much less than the increase of the joint stock issues; and with respect to the other part of their business, there can be no comparison. The facilities given by the joint stock banks to the discount of even the worst species of paper, the loans they made on the pledge of their own stock, combined with the economised use of money resulting from many thousands of their partners using checks who, for the most part, had previously used notes or coins, all contributed to swell the amount of currency beyond all reasonable bounds; -to add very powerful incentives to the spirit of speculation, and, in the last place, to depress the exchange, and bring about that drain for bullion that has so much reduced the stock in the coffers of the bank. Having thus briefly endeavoured to exhibit the extraordinary increase of joint stock banks in 1836, we have next to enquire into the cotemporary conduct of the Bank of England. Early in the year, it became obvious to every one acquainted with the mere elementary principles of money and commerce, that the inordinate increase of joint stock banks would very speedily ren der the currency redundant; and that, unless the bank acted with equal sagacity and vigour, she would be placed in a situation of extreme hazard. The stock of bullion in the bank's coffers at the commencement of the year was, as already stated, little above seven mil. lions; being about three millions under the proportion, as compared with her liabilities, which was necessary, according to the evidence of Mr. H. Palmer in 1832, to give her adequate security. And while her bullion was thus reduced, all sorts of wild and delusive projects were afloat; every day was giving birth to a new bank in some part of the country; vast quantities of American and other securities were, at the same time, brought for sale into our markets; and, in March one of the principal officers of the Bank of the United States arrived in London for the avowed purpose of negotiating a loan, which he effected, on behalf of that establishment! The fancied security of the greater number of merchants and money dealers, and the reckless eagerness with which they contracted new engagements, while they were thus being brought to the very edge of a precipice, is a fact as instructive as it is humiliating. That a dangerous crisis was at hand was, however, clear to every one not a slave to mere routine practice, or who had the slightest knowledge of principles. The leading bank directors were sensible of the coming storm; and the question, whether they acted in this emergency prudently and vigorously, and with a due regard to the safety of the bank and the public interests, is one of equal difficulty and importance; and forms one of the principal topics discussed in the numerous pamphlets quoted at the head of this article. The conduct of the bank during the past year has been ably defended by Mr. Horsley. Palmer, and ably impugned by Mr. Loyd. Perhaps it will be found that it is of a mixed character; and that in some parts it is censurable, whilst in others it deserves to be applauded. In order the better to enable the reader justly to appreciate the points under discussion, we subjoin the following table of the issues, liabilities, and bullion of the bank from January 1836, to March, 1837. of the bank in this table, that it was increased above £700,000 in the quarter ending the 5th of April, 1836, when it began to fall off. It further appears that the issues of the bank were increased during the same period about £800,000. Under ordinary circumstances, such an increase, being nearly identical with the increase of bullion in the bank, would have been quite unobjectionable; but considering the peculiar position in which the bank was then placed, we are clear that instead of increasing, she ought to have narrowed her issues. This would certainly have been, as Mr. H. Paliner has stated, acting in anticipation of events likely to occur; and have violated the principle by which the bank professes to be guided of allowing the public to regulate the currency for itself through the demand for bullion. But there are not many absolute principles; that is, there are not many that will admit of being rigidly enforced at all times and under all circumstances; and we do not think that this is one of that small number. Had the bank been the sole issuer |