upon the diminution of the specie reserve, and upon the extension of the small-note currency. Our present system throws the bulk of the circulation into the hands of the community in general, — that is, of persons who have no concern with the banks in their ordinary transactions, who have little to do with commerce, who know nothing of the circumstances on which the safety of the currency depends, who are peculiarly liable to panic, and are apt to adopt, when alarmed, only such measures as will increase the danger. There is a saving of expense, as we have shown, in the substitution of bank paper for gold and silver coin; but this is not a saving of expense for the body of the people. It accrues exclusively to the benefit of the banks, and of the customers of the banks, — that is, of the trading community and the capitalists. It is a saving made through the people, but not for the people, who do not profit by it, except in some small measure, by an increase of convenience in the use of a currency which is not burdensome by its weight and bulk. Common justice requires, then, that the people should be protected against the slightest risk in the use of this currency. It should be made to them as secure as the coin which its circulation deprives them of; and this is obviously impossible, so long as the occurrence of a financial pressure may at any time drive all the banks in the country, however well managed, to a suspension of specie payments. Banks are now instituted where the exigencies of commerce do not call for them, in small towns, where there is little trade and little surplus capital, — in order only to profit by the circulation of small bills, which can be put forth in large amounts in such neighborhoods. They are country banks only in name and ostensible location, their capital being generally furnished by merchants and bankers from a distance, and often lent out again in large sums to the stockholders themselves. Cut off the small-note currency, and such institutions, which are established on false pretences, even if they are not fraudulent in intention, would cease to exist; and the banking business proper would be conducted only in cities and large towns, by that portion of the community who are directly interested in it, and who alone would be affected by its fluctuations. Banks would no longer be the objects of popular jealousy and dislike. They would be regarded as exclusively commercial institutions,

whose operations no more concern the public at large than those of the stock exchange.

The great obstacle in this country to the prohibition of a small-note currency is the independent legislation of the different States. If Massachusetts, for instance, should forbid the issue of bills for a less sum than $10 by its own banks, its currency would immediately be flooded by small notes from the other New England States, the banks in which, being relieved from competition, would be able to send out a much larger amount of such notes than before. The Federal government having no power under the Constitution to interfere in such a case, the circulation of small notes could be effectually prohibited only by concert among the individual States; and this would require greater unanimity of action by the different legislatures than can reasonably be expected.

All the expedients which have been devised for the security of a small-note circulation are insufficient, because they are not directed against the quarter from which there is any real apprehension of danger; they are fortifications of a point which is not seriously menaced. They are expedients, not to lessen the amount of the small-note currency, nor to provide against a general suspension of specie payments by the banks, and a consequent depreciation of the whole currency, but to obviate the risk of insolvency by one or more banks, and to provide for the ultimate redemption of their bills even when they become insolvent. This last purpose would be sufficiently answered by merely giving a priority of payment to the bill-holders, as in all ordinary cases, the assets of an insolvent bank are large enough to redeem its circulation, though not to pay off its deposits and other liabilities; and extraordinary cases are provided for by the penalties enacted against fraud.

The Safety Fund system, as it was called, was a kind of mutual insurance by the banks of each others' circulation; all were compelled to contribute a small proportion of their capi tal to form a general fund, out of which the bills of an insolvent bank were to be redeemed. This was a tax imposed upon the well-regulated institutions to make up for the frauds. or malpractices of their rivals; it offered no security against the occurrence of a general panic and a general suspension.

Another expedient, now adopted in many States, is to authorize any association for banking purposes to issue notes of any denomination, from one dollar upwards, on condition of making a deposit with the State authorities of public stocks, mortgages, and other good securities, to an amount, at their present market value, equal to that of the notes which they propose to circulate. This deposit is a guaranty for the ultimate security of their issues, which sort of guaranty, as we have seen, is not at all necessary. What is needed is security for the immediate convertibility of bank currency, without which, in a general panic, it may undergo great depreciation, though there is positive assurance that the notes will ultimately be redeemed in full. To allow mortgages of real estate to form a portion of this State deposit is especially unwise; for mortgages, as we have seen, because the sums for which they are granted cannot be realized till after long delay, do not form a safe basis on which the banks could make ordinary discounts. As to the State stocks and other public securities, Mr. Gouge properly observes, "The mischief is, that they are least available when they are most wanted; the very causes which might prevent the banks from redeeming their issues promptly, would cause a fall in the value of the stocks and mortgages on the ultimate security of which their notes have been issued." In a commercial crisis, or after a general suspension of specie payments, many such stocks and securities might become entirely unsalable.

The Sub-Treasury system, as it is called, adopted by Congress in 1846, as a means of divorcing the fiscal operations of the Federal government from the banks, and of contributing to the establishment of a currency consisting exclusively of gold and silver, is ludicrously insufficient for this last purpose, to effect which it begins at the wrong end. It is the rude and operose plan of requiring all payments to or by the United States to be made entirely in specie. The balance which remains at any time in the hands of the government must consist exclusively of coin, and be deposited in vaults and safes, under the strict injunction that it must not be put to any use, or applied to any beneficial purpose whatsoever. In what manner this sum, varying during the last few years from 20 to 25 millions of dollars, thus lying dead and unproductive,

guarded by thick walls and iron grates, can promote or expedite the general adoption of a specie currency, it is difficult to imagine. The mere necessity of keeping up this idle deposit, which is liable to sudden and great fluctuations in amount, under the varying ratio of the government receipts to the gov ernment expenditures, would of itself be a formidable obstacle to the safe establishment of a metallic currency; the moneymarket would be subject at any time to a dangerous expansion or contraction from the involuntary movements of the national treasury. Besides, the fiscal transactions of the government are necessarily on an extensive scale; it deals in very large sums, such as most easily and naturally assume the shape of paper evidences of debt, transfers of book credits, and other modes of settling accounts and effecting current payments without the necessity of moving, or even counting, large amounts of specie. It is in the numerous petty transactions of ordinary life among common people, that the weight and bulk of gold and silver coin cease to be an encumbrance, and that the want of the perfect security which it affords is seriously felt. A metallic currency would be a boon to the lower classes, but is an intolerable burden to the State. According to the admission of its most zealous advocates, the Sub-Treasury has occasioned only a very limited circulation of gold and silver," chiefly from the public depositories to the banks, and back again from the banks to the public depositories."

In spite of numerous and jealous restrictions in the law, large sums will be received and paid out by the same office, on the same day, in some more easy and compendious form than by a double transfer of coin, or by rolling kegs of specie out of the door, and then rolling them in again; and the business of exchange between distant portions of the country will be conducted without the actual transportation of the precious metals, except to a very limited extent. The law requires, for instance, that all sums should be received and paid in gold or silver; but the law cannot prevent A, a creditor of the United States, who has just received a draft for $10,000 on the SubTreasurer in New York, from selling that draft to B, a merchant who has occasion to pay the government that sum on account of the duties on a cargo of goods, and who finds it more convenient to deliver the draft than to employ a horse

and dray to carry the specie. In respect to such transactions, the Sub-Treasury is only a convenient deposit bank for the creditors of the United States, and the government drafts upon it are unexceptionable evidences of debt, or certificates of deposit, which, being indorsed over from one person to another, may effect many settlements of accounts between individuals, before they are finally paid into the treasury as ordinary receipts of custom-duties. Nay, the government itself, for its own convenience in transporting funds from one part of the country to another, has been obliged, in order to avoid the delay, risk, and expense of the actual conveyance of specie, to drive a traffic in these drafts, thus performing a service for others while receiving a favor for itself. "For example," says Mr. Gouge, "a person in Washington city wishes to pay a sum of money in New York. He deposits the gold or silver in the treasury office at Washington, and receives an order in return for an equal amount of gold and silver on the assistant treasurer at New York. In this way, the government is saved the expense of bringing gold and silver from New York to Washington city, and private individuals the expense of carrying gold and silver from Washington city to New York." fact, the practice was soon instituted "of assigning transfer drafts to bankers, brokers, and others, and allowing them the use of the money for such time as, it may be supposed, will compensate them for the expense of transporting specie from one depository to another... At the commencement of

In

the system, some seventy or eighty days were allowed for carrying money from New York to New Orleans; but the time. was gradually prolonged, so that from 100 to 135 days were consumed in transporting the public money from the depository at New York to the depository at Washington." The transfers thus made within a period of twenty-eight months exceeded fifteen millions of dollars, and the money was out of the treasury depositories on an average about sixty days. In respect to this function of transfer, the Sub-Treasury is only a great exchange bank, though it performs gratuitously the services for which other exchange brokers charge a premium. Instead of divorcing the treasury from the banks, therefore, the institution is itself a bank, -a very ill-constituted one, however, performing in a bungling manner two banking functions