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that is paid by the banking capital of this state into the state treasury. We would ask those upon whom it may devolve to legislate for the interests of this people, to consider well the principles in which this tax had its origin, and its effect upon the operations and stability of our banking institutions. Let us ask why it is that capital employed in banking, is thus singled out by the legislature as a source of revenue? Why are the banks obliged to pay a tax which supports the whole state expenditure? The ready and obvious answer is, because they have power conferred upon them of increasing their means of business by making a currency. They have, by their charters, a monopoly of currency-making; and by an agreement with the gov ernment they pay one per cent upon their respective capitals for the right. This, at first view, looks all well enough and fair enough, and it would not appear as if there was any just ground of complaint on either side. But we think that it will be found, upon examination, that it is neither correct in principle, or salutary in its operation. No one will pretend to say that there is any other reason for taxing a bank than that above stated. The people say we are willing you should put out your bills as money, but we intend to have the benefit of it by taxing you full as much as the privilege is worth. This being allowed, it follows inevitably, that the banks should pay in the same proportion that they make use of the privilege. You can. not reach this, the only just mode of assessment, by a tax upon capital. If a bank chooses to waive that part of the contract which confers the right to make a part of the currency, and to operate upon its capital alone, there appears to be no sound reason why it should not be allowed to do so with. out paying a large sum to the state. The extent to which the right of adding to its capital by means of its issues is used, should be the measure of taxation, if this mode of increasing the revenue is at all permitted.

Again, the law which requires the payment of this tax, sanctions the use of means on the part of the banks to enable them to meet it, and at the same time to pay a fair dividend to the stockholders. The popular cry is, that the banks are too much extended, that their issues are excessive, or that they have been guilty of extortion in all the various forms which the possessors of capital employ to obtain excessive interest. If this is true, and there is a willingness to allow the stockholders of these institutions the usual and legal rate of interest, six per cent, upon whom shall be justly charged the alleged redundancy and extortion? The tax can be paid but in one or both of the two methods above mentioned. The capital of the bank must be increased by the issue of bank notes, or extra interest in some shape must be taken. The law sanctions the issue of the bills, and the legislators of the state, when they imposed the tax, established it as a safe and correct principle of operation, that the credit of the bank should be used to an extent adequate to the attainment of the means to meet it. The banking capital of the commonwealth has not, for the last twenty years, paid more than six per cent, and therefore, if it be true that the amount of bills issued by them has been too large to constitute a currency which would be safe under all circumstances, that legislation which allowed a bank to issue its own notes to once and a quarter the amount of its capital, and which imposed upon that capital a tax which could not be paid without the unsafe issue, must be pronounced to be mistaken and unsound. We know that it is said that those who petition for banks, do so with a full knowledge of the obligations which they take upon themselves; and that they ought not to complain if they find they are unable to meet them without loss. This is

specious, but in the light in which we are now looking at this subject, the argument has no force. We are considering banks as sources of currency as the means which the wisdom of the state government has devised to furnish a circulating medium. Upon every bank which is chartered is conferred the power of adding to the amount of paper circulation; and the law that accompanies the charter, sanctions the use of that power. If the situation in which the new bank is placed, is unfavorable to the attainment of a circulation, it does not follow as a matter of course that the bank is not needed. But if it cannot fairly and legitimately obtain a circulation, ought the law so to operate as to oblige its managers to make use of means to force out upon the public a circulation which is not wanted, and which can only be supported by the constant exercise of forcing measures?

While we deny the propriety of acting upon the principle of granting charters as a matter of right to all who may ask for them, considering the provisions of the present banking law of our state, the passage of an act establishing a bank, is, in our view, an evidence that the legislature is satisfied that a bank is needed. We have a right to believe that those who have sanctioned the act of incorporation, are satisfied that the bank which it puts into operation ought to exercise the power of making a part of the currency-that it would be safe and proper to make an amount equal to once and a quarter its capital, and that it must make enough to enable it to pay the price which is demanded for the grant.

There is another point of view in which we would present this subject to the consideration of the community. There cannot be a doubt, at this day, on the minds of any who are at all conversant with banking affairs, that bank charters are frequently obtained, not for the purpose of investing, in a concentrated and therefore more easily managed form, the scattered capital of a community, but that a capital may be obtained by the circulation of bills for the use of the principal managers, who have no other. In this way, men who are without one cent of real capital are enabled to get into their possession large sums of money; and in almost every instance it will be found that it is done at the expense of those who have been induced by the legislative sanction given to the issue, to suppose that the bills were protected by something more substantial than the stock notes of the needy and greedy managers. Is a currency obtained by deception, based upon the prospective profits of an India-rubber speculation, and maintained by that petty and contemptible management which is necessary in the forcing process by which the bills of one bank are substituted in the pockets of the people for those of another, such an one as is demanded for the purposes of business or as a standard of value?

We would, with much deference for those who have in the councils of the commonwealth defended and acted upon our present system, remark, that if they had made two questions upon every application for a bank— First, is a bank wanted? and, secondly, is an increase of the currency desirable, or would it be made sounder by driving off a part of what is now in circulation, and putting the issues of the new bank in the place of it ?-the legislation would have been sounder, and the result far more satisfactory to the people. It is hoped that the experience of the past will teach us wisdom. No applications of the above described character would have been made, had there been no expectation of obtaining the privilege of issuing bills; and it is needless for us to remark, that the suffering which has been caused by the incompetency and dishonesty of bank managers would have

been comparatively trifling, had they not been clothed with the dangerous power of creating a currency.

After what has been said in relation to the enormous tax that is imposed upon the banking capital of Massachusetts, it is unnecessary to enlarge upon that provision of the law, by which, at thirty days' notice, one tenth part of the capital must be loaned to the state at an interest of five per cent. This is nothing but a tax in another form-one of the conditions of the contract between the stockholders and the government, which is supposed to be equitable, because of the grant of the currency-creating power. The right to make the demand, and use the money of the bank at this low rate of interest, is a part of the consideration which the state receives when it barters away its sovereignty over the circulating medium-a part of the price in the bargain, by which there is bestowed upon needy and grasping speculators, it may be, the potentiality of the coining prerogative; and with the advantage on the part of the legalized manufacturer of bank notes, of a low price, and a constant supply of the raw material. The value of the right thus granted to the state, to take at any time, and use for an unlimited period, one tenth part of the capital of a bank at this low rate of interest, it is impossible to estimate. Whatever it is worth to the state must be added to the amount of the annual tax of one per centum upon the capital, to make up the sum which is paid by the stockholders; for and in consideration of which payment, a power is conferred upon them which they will certainly be strongly tempted to abuse, and which the popular sentiment will declare to be abused, if it is used to that extent only which is required to provide the means for the payment of the price of the purchase.

With our views of the duties of a state in relation to the currency, we cannot but regard this element of barter in the constitution of our banking system as a violation of all the just principles of political economy. We are aware that it is not confined to the banking system of Massachusetts. We know that in some form or other it is found in the bank legislation of almost every state in the Union, and that it was a prominent feature in the law which incorporated the late Bank of the United States by the general government. But in no contract of this kind was it ever made so repul sively and ruinously prominent as in the charter of the present Bank of the United States by the state of Pennsylvania. We there behold it in its most odious and mischievous form. The Harrisburg legislators, losing sight of all sound and statesmanlike views upon the subject of a currency, thought of nothing but of driving a bargain, and getting all they could from the deluded managers. All was given that was asked; and the mistaken law-makers, when they saw the enormous load of obligation which they had laid upon the bank, instead of doubting its ability to bear it up, or hav. ing any misgivings as to the ultimate result of the bargain, which, in one shape and another, had seemingly secured to the people a sum not much short of six millions of dollars, congratulated themselves upon the success of the operation, and seemed to regard it as an act of more than ordinary sa. gacity. Canals were to be dug, railroads were to be constructed, highways were to be opened and repaired, and the children of the commonwealth educated free of expense to the people, in consequence of this grand stroke of financial sagacity and skill. It would appear as if neither of the parties to this ruinous contract, coolly reflected upon that part of the subject which ought to have been uppermost in their minds-the source from which the

means were to be obtained to pay the consideration in the bond. But while we give them the benefit of the charitable construction of their actions, which supposes that they were all equally deluded, we feel bound to say, in the light of common sense and common experience, leaving wholly out of sight the results which have followed in the train of their proceedings, that the members of the legislature of Pennsylvania, who framed and consummated the contract by which the charter was granted to the Bank of the United States, did, by that act, violate some of the soundest and best established principles of legislation; and that the stockholders of the bank, by accepting the charter with its overwhelming load of penalty and obligation, were guilty of a violation of the plainest, best understood, and most generally received maxims of banking and finance. We well remember with what astonishment and regret we read, for the first time, the act incorporating the present Bank of the United States; and we did not hesitate to declare, when we first became acquainted with the provisions of its charter, that the result would be unfortunate both to the corporation and the public. We know but little about the Bank of the United States, and shall not attempt to examine the causes which have led to its present unfortunate situation. But we look at the state of Pennsylvania. We find that noble state, rich in all the resources of wealth and prosperity, suffering all the evils of a depreciated currency, with the stock of its principal bank worth but sixty cents upon the dollar; and we cannot but think that there is a pretty intimate connection between the present state of things and that unwise and unfortunate legislation which sold for a price which could not honestly be paid without loss, a charter to the stockholders of the Bank of the United States.

Now what did the bank purchase when it paid or promised to pay to the state of Pennsylvania the enormous sum of nearly six millions of dollars? What was looked upon by both grantor and grantee as the consideration in the deed? Was it the right of having a banking-house in Chesnut street? Was it the privilege of taking care of money left in deposit? Was it the power to use its money in cashing the various kinds of securities always to be found in every business community? No, not for either or all of these was the money paid or to be paid. These, to be sure, were wanting, but they could be had for the asking, and the legislature could grant them without sacrificing the interests of the citizens, or parting with that jurisdiction over the currency which is inherent in the government. The chattel which was sold, and for which this enormous price was paid, was an attribute of sovereignty. It was the power to create a currency, that was sold and purchased. The people, by their agents, sold; and the stockholders, to be used by their agents, purchased. The result has proved disastrous to both buyer and seller; it could not have proved otherwise.

To return from this digression, and resume the subject of the banking system of Massachusetts. We can at this time look at but one other point. We have seen the government selling to almost any persons who would pay the price, the power of creating a currency. But after this is done, after conferring upon bodies of men whose situation is generally such as almost precludes them from using the power given them, under the influence of any enlarged views of the public good, this privilege of making and regulating the circulating medium, then it becomes necessary to legislate; and accord ingly we find an immense array of legislative provisions, which has been called into existence in consequence of this grant, the object of which is to

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secure the public against any loss by the failure of the assignees of the money-making prerogative to make good their promises. What a constant and careful supervision it has been thought expedient to institute, to keep the agents who have been chosen as the makers and dispensers of the currency in a situation to discharge with faithfulness the trust committed to them! Look at the banking law of the state; examine its various provisions, and see what a large proportion of them are rendered necessary by this unwise and unnecessary connection between the creation of a currency and the operations of banking-the one a prerogative of the government, the other a necessary instrumentality to the business of every trading community. And it has been found, notwithstanding the multitude of pains, penalties, and oaths, which now protect the people against the direct abuse of this dangerous power on the part of their agents, the banks, and notwithstanding the constant and inquisitorial supervision of the bank commissioners, that the machinery is not yet complete; but that an inquiry which shall test the value of every obligation held by the banks, and that too by the oaths of disinterested individuals, must be instituted, to determine the worth of the basis upon which the issues are founded. Take away from the banks this currency-making power, deprive them of this agency, and what a vast amount of complicated machinery would be rendered useless! What a prolific source of jarring and interminable legislation would be dried up! How completely would it prevent those occasions of strife, envy, and heart-burning, which are of such frequent occurrence in every community, arising from what appears to be an unequal distribution of this moneymaking power! If a bank should issue no bills, it would be under no obliga. tion to the people, which would render a supervision to much extent neces sary. And after all, what is accomplished by this minute, vexatious, and constantly-recurring legislative interference? The community may be saved from a few small losses, while nothing is done to prevent those periodical and ruinous fluctuations in the currency, which are the result of placing the regu lation of the circulating medium in the hands of those who know no principle of limitation but the failure of objects of speculation, or their inability to put out their promises upon an unsuspecting and unreflecting community.

ART. V.-THE AMERICAN INSTITUTE.

THIS great national institution held its annual fair during the last month in the city of New York, and we propose to devote a short space to a consideration of its character and objects. That corporation was chartered by the legislature of New York on the 2d of May, 1829, under the name of "The American Institute of the City of New York, for the purpose of encouraging and promoting Domestic Industry in this State and the United States, in Agriculture, Commerce, Manufactures, and the Arts." It is modelled somewhat upon the plan of the "Conservatory of Arts and Trades" in Paris, and the "National Repository" in London, having the same ends in view, namely, the promotion of productive industry, and the encouragement of invention and excellence in every department within the

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