Duncombe's Free Banking: An essay on banking, currency, finance, exchanges, and political economy PDF
Preview Duncombe's Free Banking: An essay on banking, currency, finance, exchanges, and political economy
LIBRARYOF DUNCOMBE'8 FREE BANKING I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I DUNCOMBE'S FREE BANKING AN ESSAY ON BANKING, CURRENCY, FINANCE, EXCHANGES AND POLITICAL ECONOMY BY CHARLES DUNCOMBE [ 1841 ] REPRINTS OF ECONOMIC CLASSICS M. AUGUSTUS KELLEY • PUBLISHERS NEW rORK I969 First Edition 1841 (Cleveland: PrintedbySanford&Co.,1841) Reprinted 1969 by Augustus M. Kelley • Publishers New York New York 10010 SBN678005303 LibraryofCongress CatalogueCard Number 68-27852 PRINTED IN THE UNITED STATES OF AMERICA by SENTRY PRESS, NEW YORK, N. Y. 100I9 l\lE ~IORIAL TO CONGRESS UPON THE SUBJECT OF REPUBLICAN FREE BANKING. To th,e Honorable the Senate, and House ifRepTcscntat£ves, 1·n Congress assembled: YOURmemorialists, feelingthe importance of asound Cllrrency to a nation desirous ofmaintaining theirpo!itical independence, andfmancial and commercial prosperity,andhaving observedthe zealous, though un~ucces:~ful exertionsforyearspast, oftheCon gressoftheUnitedStatesandtheseveralStateLegislatures,through theagencyofincorporated bankingcompanies, tomake bankpaper andgoldsilverat alltimes interchangeable[oreachother, andcur rentthroughouttheUnion;andhaving witnessed,withpainfulanxi ety,thevariousoperations of the present charteredbanksystemof furnishing papertocirculaleasmoney,andfindingittobeextreme lydefe(~tive,andoccasioningthepublic much inconvenience,asthe banknotesissuedunderitarenotuniformly currentthroughoutthe Union,therebymakingtheratesofexchangeshighbetweendistant partsofthe UnitedStates,expensiveandinconvenientinremitting funds from place to place,and in defraying travelling expenses. Andalso, having seen the frequent expansions,contractionsand variousfluctuationsofthecirculatiI)gmedium furnishedunderthis system,bywhichthevalueofproperty is rendered uncertain,and moneyloosesitspeculiarbusinessproperties,thatofbeingamedial commodity, passing freely fromone personto another, and as an exact,uniform,and unchangeable a measure of values,forpast, presentand future times,asstandardweights andmeasuresareof quantities, andpreciselythesame throughout the Union. Your memorialists,therefore,are oftheopinion,thatthere must be something radicallywrong inthe.elementary principlesofthe 2 presentsystemofbanking,asconductedbyincorporatedcompanies, toproduce sucha discrepancyinits workingin unison with the other fundalEental political machineryof our government; and would respectfully represent,thatthe~pirit of theDeclaration of Independence,andof thE:Constitution,givesthepeople therightto expectthesamefree controlofthecurrencythat they haveofthe otherelementaryprinciplesof thegovernment,consequentlythere shouldbenomorelegislati'.muponthatsubjectthanupontheformof ourgovernment, ourreligionorliterature. Inthehope oftransmittingtothelatestposterity,pure,entireand unimpaired,thosegreatandgloriousprinciplesofhumanhappiness, ofnational and individualprosperity,centered inour government byitspatrioticfounders; andwithaviewtoaradicalrenovationof ourmonetary affairs, we beg leavetocall theattention of your honorable bodytothefollowingplanfor RepublicanFreeBanking, intheexpectationthatyourcollectivewisdom mayadopt it, orde vise some permanent and efficientsystemof bankingbetteradap tedto the geniusof our government, the characterof our institu tions,and the state ofeXisting·contract::;,than that of our present incorporatedbankingcompanies. The following plan, based upon theprinciplesofthe Declara tionof Independence,andof the Constitution,centralizesthegov ernmentofthecurrency;therebyfurnishinguswithallthenatIOnal advantagesofaUnitedStatesbank,whileitavoidsitsapprehended, financial and political evils by a dividedadministration,and es capes thevexedquestionofitsconstitutionality. Itobviatesthedan gerofover-expansionsandcontractions ofthecurrency,by remo vingtheinfluence6f ptrivateinterest,ofcredit, andof polit'LCs. The first iseffected,bygivingthe people the election of thedirectors of theBanks, bothofIs~ueandofDiscount. The second,bysep aratingtheBankofIssue from the Banksof Discount,and limit ingitscirculationto notIhJ)rethanthreetimestheamountofspecie actually initsvaults atthe time of the issue; and confiningthe BanksofDiscounttothediscountingof actualbusiness paper,hav ingbutshortperiodstorun,andinwhichnodirectorhasanyinter est. Thethird,byremovingthenecessityforfuturelegislationupon thesubjects ofbanksandcurrency. Thisplanistheorganizationofthepeople,byCongress,through Out theUnionforfinancialpurposes, withpowertoregulatethepa- 3 perportionof thecurrencyas theyareatpresentorganizedtoreg ulate their township adminstrations. Empoweringthe electorsof the Union to elect thedirectors of the UnitedStatesBank-the Bankof Issue; the clect0fsof eachStatethe directorsoftheirre spective StateBanks; andtheelectorsofeachplace,wherea Bank of Discount islocated,the directors ofsuch banks respectively; as they-electthemostnumerousbranchesoftheir legislatures. The directorsof the UnitedStatesBank-the Bank of Issue should be electedfor thesamelengthoftimeasare theSenatorsof the United States, and~o that onlyooe-sixthliart of themshould vacatetheir seatsannually, for thepurpose ofgivingpermanency andstability tothecurrencyj whilethe directors of all theother Banksshouldbe electedannually to securetheirfrequentandper fect accountabilitytotr,epeople. Themanagement of thecurrency willthen, likethe other ele mentary principlesofourgovernment,bepurely republican. Thedutiesofthedirectorsofthe U.StatesBankof Issueshallbe, toascertain the amountof currency necessary forthe permanent prosperityofthecountry; tocause platestobeengravejandbillsto beprinted,inthebestmannef, toavoid counterfeits,and that there maybeauniformity in their apptarance; andcauseto be signed, registered and numberedso many bmsofsuch denominations as shallbenecessary forthe convenientinterchangeof commodities, and issue the sameto thedirectors of the severalStateBanks,ac cordingtotheirdemands, togetherwiththeirrespectiveproportions ofspecie. The dutiesofthe directorsof thesevera]StateBanksshallbe,to causetobe re-signedandre-registeredthe billsissued to themre spectivelyby the UnitedStates Bankof Issue,andtoapportionthe sameamong their severallocal Banlrs accordingtotheirdemands forthesame, togetherwith their respective proportions ofspecie, andtotake ageneralsupe~'visiollofthesamp-. The duties of the directors ofthe several local Banks-the Banksof Discount-(aftergivinggoodsecurityfor thefaithfuldis chargeoftheirduties,andthepromptpaymentovertotheirsucces sors,when theirtermsof officeshallexpire, of ,:J!lmoniesorprop ertyofthebankintheirhands,)shaHb~,toexecutethebillsfurnish edthemby theirrespective StateBanks, bysigningthem,andma kingthem payable inspecieon demand,attheirseveral counters, 4 andloanthesame, bydiscountingactualbusinesspaper,havingbut shortperiodstornn,andinwhichnobankdirectorhasanyinterest, either directlyorindirectly. Thedirectorsofthelocal Banksshould not loan large sumsto speculat<;>rs, whentheirdoingsowilldeprive them ofthemeansof discountingthe regularbusinesspaperoftheplacej although such speculators canaffordtomaketheloan much more profitableto the stockholdersthan their ordinary business, bymaking their notes due in a distant city, to which they export their purchases, and wherethe rate of exchange ishigh against the place where the bank is located,on which place,inadditiontothe lawful interest, thebankerscanselltheirdraftsfo/alargepnHllimnontheexchange. The electionofthe directors bythe people interested inthe dis· counts, will obviatethis; since onehundred fair traders, whore~ quirea credi~at thebankof onethousanddollarseach,willexercise farmoreinfluence attheelection ofdirectors, than one speculator with one hundred thousanddollars. American manufactureswill thusbeencouraged-inlandcommerce facilitated-the Huming in~ terests promotefl-and paper moneybe madestrictly convertible, uniformin itsvalue,andaseasilytobeobtainedasother commod ities, withoutinterferingwith existingbankinginstitutions. The insiduous encroachments upon society,throughchartered bankingcompanies,ofdishonestprinciplesinourbusines~transac tions,ofa depravity ofmoralsentiment, and di~regardof moral hrll10rand honesty in theconductofour monetary affairs, willbe effectuallycheckedbythe adoption of theproposedsystem of Re publican Free Bankirlg. The evm:ion of a law, isbut onestep shortof itsopen violation. Andthepassageofbanknotesatpar, which areone,five ortenpercent.belowpar, isbutonestepfrom paying"out a parcel ofbills, in which thereisknown tothe payer to be one, fiveor ten dollars ofcounterfeitmoney. ThissystemofRepublicanFreeBanking,thatyour memorialists propose to yourhonorable bodyforadoption,isdesignedtogivethe paperportionof thecurrencyametaliccharacter; withallthead vantagesto thebill-holdersandstockholders that couldbeobtained bya c1:arteredUnitedStatesbankandbranches)withoutthedangers andinconveniencesofthecentralizedadministrationofsuchanim mense financialand political poweras thelattermustpossess, and fromtl;lelaw~ of itssituation wouldbe likelytoexercise. Itcen·· 5 tralizesthegovernmentof thecurrencyanddividesits administra tion. Giving to the United StatesBank-theBankof Issue-the centralized controlof thecapitalstock,th'e speciereceived forthe saleof thestock, theissueandapportionmentofthebillsandspecie amongtheseveralStateBanks theprofits,thesa.fetyfund, thedivi dends,theformsofbusiness,andofmakingreturnsforpublication. While it completely separatesthe administrationof thecurrency fromthegeneralU. State~ or severalStateBanksof Issue, anddi. videsit among the people,by givingto theelectors oftheseveral placeswherelocalBanks-theBanksofDiscount-aresituated,the election ofthe directorsof the same respectively; andeonfines thesebanks tothe discountingof only actualbusinesspaper, hav ingbutshortperiodsto run,andinwhichno directorhasaninter est, either directly orindirectly,andto theordinarybusinessofa bankofdiscount. Thiswillrenderthe administrationofthecurren Cyasdividedandindependentofitsgovernment,asaretheelection ofthe officers and administrationof the affairsofthe townships separateand independentofthegovernmentofthe Union. Yourmemorialiststrust,thatthe stockofanUnitedStatesBank, founded upon theprinciples ofrepublican free banking,willbeas saleableandproductiveasanystocksinAmerica; whileitwillcon stituteabondof unionbetweenthecitizensandgovernmentof this country upon the all-powerful principleof self-interest, equal to thatwhichsupportsthegovernmentof Great Britain in the bond ofprivate interest caused byits national debt, without any ofits cor:comitant evils. Thisstockwould probablyconstitutethemost profitable,safa andpermanentinvestment of capital in theUnited States,ifnotintheworld: beingcashinhandwhen capitalis re quired,moneyatinterestatalltimes,andconvertibleintospeciethe same as the fundeddebtsof America orEegland. The bill-hol derwould bf' securefromthefailure of banks,orthedepreciation of theirnotes; and thepublic from the expansions and ruinous consecutivecontractionsofthe.currency. Your memorialists)therefore,respectfullypray,that.yourhonor ablebodywillbepleasedtotakethesubjectofthebanksandcurrency into your serious consideration; andtoauthorisethepeopletopro videthemselveswitharepublicancurrency,thatshallbefreefrom theinfluenceof privateinterest,credit,or politics-strictlyconver tible,uniformly current throughout theUnion, andaseasilyto be 6 obtainedasother commodities; orinsuchmannerasyourhonor ablebodymaydeemmeet,providefortheformation ofasoundcur rency, thatshallbecurrentthroughoutthe Union. Andyourpeti tioners,asindutybound,willeverpray,&c. ~This Memorialhasbeenforvvarded by mailtoabove four hundred Editors of ne\Ys-papers, without distinction of party, witha request for them topublishit, andan offer of onecopy of this hook(priceOneI>olhlr,) ontheir send.. inga paper cOhtainingthesame tothe Author.
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