Duncombe's Free Banking: An essay on banking, currency, finance, exchanges, and political economy

370 Pages·1969·17.393 MB·English

by  Charles Duncombe

LIBRARYOF
DUNCOMBE'8 FREE BANKING
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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
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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-
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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,
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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··
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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
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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.