No well-informed man can be opposed to banking institutions conducted in a proper manner. It would be as reasonable to object to railroads.

Banks, until a comparatively recent period, were as harmless as they were useful. They did no injury to any interest, but benefited all. When confined to the loaning of actual values, to the negotiation and collection of notes and bills of exchange, and to the reception and transfer of money, they performed an immense service to the world.

But when they undertook, not only to loan money, but to make it, to issue credit in the form of notes promising value, their character was changed.

The Bank of Hamburg, which has existed since 1619, never promised a dollar which it did not hold in its vaults. It never expanded the currency, and therefore never had occasion to contract it. It has never suspended specie payments for an hour,* and, while so conducted, never will. It has created no panic, and has in no way disturbed the business of the city. It has conferred incalculable benefits on European commerce, while contributing steadily to the growth and prosperity of Hamburg.

* Various reports in 1857 to the contrary notwithstanding.

Confining itself to the loan of its capital and of money actually left on deposit, to the transfer of surplus funds, and to the negotiation of commercial paper, a bank can, if honestly and ably conducted, make good dividends, and perform valuable services for the community, and furnish the public with all the notes their convenience and that of the banks require.

Fallacy 7th. That a mixed currency can be effectually regulated by law.

Many of the mischiefs arising from a mixed currency are so obvious that all persons desire their removal, and naturally resort to legal enactments for that purpose. The statute-books of every State in the American Union contain laws for the regulation of mixed-currency banks. Commissioners have been appointed in many States, and a Bureau of Currency established. Ingenuity has been burdened to devise regulations by which these evils may be removed or modified, — with what success?

There is but one defect in a mixed currency; and that is, it wants the element of value. There is no sufficient remedy, but to supply this, by providing that banks shall issue no promises of their own for which they have not in possession the actual values they promise. But this would be to change the whole system, to make the currency mercantile, and to cut off all the profits arising from the issue of bank debt as currency. The only complete remedy, then, is restoration; that is, a return to the original design and purpose of banking.

Fallacy 8th. That it is for the interest of the public, that the banks, in times of panic or stringency, should be enabled to "stave off" suspension.

On the contrary, this can be obviated only to the misfortune of the business community. A severe pressure for money, as in the United States in 1847, 1851, and 1854, is experienced, and yet the banks do not suspend. But how do they avoid it? By throwing the strain upon the mercantile and business community. This they can always do to a limited extent, and thus maintain their own credit; but it is done at an enormous amount of embarrassment and loss to all engaged in business affairs.

The banks may not only escape damage, but may even profit very much by a pressure, if it does not come to be a panic; for it greatly enhances the rate of interest. The rate of interest in the Bank of England, from 1848 to 1856, did not average three and a half per cent. In 1857, when there was a severe pressure, the bank was able to obtain ten per cent. It had a harvest of profit.

The banks of the United States had a similar opportunity in 1847, when the price of money "in the street" (for we have no means of knowing what it was on an average in bank) was up to eighteen per cent; in 1851, when it went up to sixteen; and in 1854, when it rose to eighteen. In all these cases, the banks profited by the distress they had themselves created; but, in 1857, the pressure became overwhelming, and, after having run the street rate up to three per cent per month, they suspended payment.

If it were necessary, we might multiply instances from the history of the mixed currency of the United States and England of the same kind. A semi-revulsion is sure to take place, under such a currency, every three or four years, and a general break-down once in about nine or, ten.

The greater strength of the British banks, together with the temporary suspension of the Bank Act of 1844, enables the Bank of England to throw the sacrifices incident to a great pressure more entirely upon the public than can be done in this country. Indeed, since the law of 1844 just referred to, the bank has increased its average rate of interest, as we have seen, very much.

Practically, mixed-currency banks expand as often and as much as possible; and, when the re-action comes, hold on to specie payments and a high rate of interest, until the bankruptcy of their debtors begins to be so alarming as to endanger their own securities.

They then suspend, allow their debtors to pay up in the notes they cannot redeem in specie, and thus settle the indebtedness of themselves and the public. There is no plan or design to do this; but such is the natural result, and, on the whole, a highly satisfactory one to the banking interest.