centralization of power in the hands of the managers of a few highly-favored institutions. The number of banks in 1850 was 63 being only one to every forty thousand of the population. Their capitals were $20,357,000-giving $8 per head; whereas those of Rhode Island gave nearly $100 per head. Their loans and discounts amounted to $44,000,000, but the total investments were nearly $50,000,000—giving an excess of no less than a hundred and fifty per cent.; with corresponding decrease of steadiness. In the one case, no circumstances could occur to render necessary a change of action amounting to even five per cent.; whereas, in the other, a change of almost fifty per cent. would be required for reducing them to the point of safety at which the Rhode Island banks habitually stand. Connecticut had, in 1850, 53 banks-being one to every seven thousand of her population. Their capitals were $9,907,000, or $24 per head. Their investments amounted to $19,624,000 — giving an excess of nearly sixty per cent. Virginia had, at the same time, 6 banks giving one to every two hundred and forty thousand. Their capitals were $9,824,000 being $7 per head. Their loans were $19,624,000, or nearly double the capitals. Comparing New England with New York at the present time, we have in the one 491 banks, with capitals of $112,000,000, and loans of $181,000,000; while in the other we have 338, with capitals amounting to $85,000,000, and investments of various kinds amounting to little less than $220,000,000. In the one, decentralization is almost perfect; whereas, in the other, there is a centralization almost as complete, created by means of a law for promoting freedom of banking. In the one, stability is nearly perfect; whereas the other presents to view a model of instability. Missouri, with a population of seven hundred thousand, has 1 bank, with a capital of $1,269,000, and with investments almost quadruple that amount. Every thing here, as the reader will perceive, is directly the opposite of what is met with in Rhode. Island the one presenting all the characteristics of stability as the associate of freedom; while in the other are found those of instability, as a consequence of restriction. Steadiness in the currency grows thus, as we see, in the ratio of the freedom with which men indulge their natural desire for association with their fellow-men; and with its growth we wit ness everywhere, a decline in the power of that portion of the community which lives at the cost of their fellow-men. The stockholders of the Bank of France obtain thrice the usual rate of interest, while the men whose capital they use are compelled to be content with mere security for the return of their capital, without interest. The proprietors of joint-stock banks in England receive enormous dividends, while the depositors are required to be content with three per cent. The Bank of England divides eight per cent., while giving its depositors nothing. Pennsylvania banks divide ten and twelve per cent.; or double the legal rate. Those of Massachusetts give seven; while Rhode Island stockholders receive an average of six — being precisely the rate of interest paid by those who borrow. The more perfect the freedom of association for banking purposes, and the fewer the liabilities imposed, the greater is the tendency to equality of rights, the more secure the currency, and the less its cost. § 7. The average number of banks in New England from 1811 to 1830 was 97, and the failures in twenty-five years were 16— giving two-thirds of one per cent. per annum. The average capital was about $22,000,000. Those of the institutions that failed were $2,000,000, giving thirty-six-hundredths of one per cent. per annum. The loss sustained by the community cannot much have exceeded $500,000 *—giving an annual average of $20,000, or one-eleventh of one per cent. of the capitals of the banks, and not even one-thousandth of one per cent. of the operations facilitated by those institutions. The risk attendant upon transactions with the banks in New England, for a period of above a quarter of a century, thus averaged less than one dollar in every hundred thousand. Excluding Connecticut-in which one failure was attended with great fraud and considerable loss it did not amount to two dollars in a million. In New York, from 1807 to 1837, the banks averaged 26 in number, and there were 16 failures, being an annual average of one-half of one per cent. The capital averaged $16,000,000, The Eagle Bank of New Haven owed, in 1827, after its failure, above $800,000. What portion of this was paid we do not know. All the losses sustained in New England in the period referred to, excluding this bank, were absolutely insignificant. and that of the institutions which failed was $3,500,000— giving about seven-eighths of one per cent. per annum. The losses, however, as in Massachusetts, fell generally upon the stockholders, and not upon their creditors. But two failures took place between 1825 and 1837, so that in that period the annual average was less than one-half of one per cent. upon the number that existed in 1830. One of them paid all its debts, and there was no loss to any but the stockholders. The risk attendant upon trading with a bank, or using a bank-note, cannot be taken to have exceeded three dollars in every million, and perhaps not more even than a single dollar in every million of transactions the performance of which had been aided by the existence of those institutions. In Pennsylvania, the banks averaged 29, and the failures were 19 in number-giving an average of two and a half per cent. per annum. Almost all of these, however, took place in the period immediately following the close of the great European war, and but three, all trifling in amount, occurred in the period from 1820 to 1837. The average capital of the State banks, from 1811 to 1830, was $15,000,000, and that of those which failed, from 1811 to 1836, was $2,000,000, or one-half of one per cent. per annum. The average number of banks in those States, from 1811 to 1830, was 163. The whole number of failures was 56 — giving an average of 21 per annum, or one and three-eighths per cent. The average capital was $55,000,000, to which must be added one-half of that of the Bank of the United States,* making a total of $72,000,000. The capitals of those which failed were $10,000,000— giving an annual average of little more than onehalf of one per cent. In the years from 1822 to 1837, their amount scarcely exceeded $2,000,000-giving an annual average of about $133,000, or eighteen hundred dollars to every million of capital. The utmost loss sustained by those who had dealt with the bankrupt banks, or who had held their notes, during the whole period, cannot be estimated as having exceeded $3,000,000; and it was probably not even half of that amount. Assuming it, however, at that, it did not exceed the five-hundredth part of one per cent. * But about one-half of the capital of the Bank of the United States was employed in those States. upon the transactions of individuals with those institutions, and would give a risk of one dollar in every fifty thousand. In the last fifteen years of the period, it did not exceed five dollars in a million, and it may be doubted if it was more than a single one. In no country had so great a mass of transactions been carried on in a manner so advantageous to the community, and with so small an amount of loss; as a consequence of which the rate of insurance upon the debts of individuals to banks, or of banks to individuals, had generally been lower than in any other part of the world. Taking the whole Union together, the average number of banks in existence during this period was 242, and the total failures amounted to 167, three-fourths of which were south and west of New York the proportion increasing with the diminution of population and of wealth. The annual average of failures was two and three-fourths per cent.; whereas the failures of private banks in England, in the period from 1814 to 1816, were 240 in number, and more than twenty-five per cent. of the whole. Even between 1821 and 1826-a period in which there was no extraordinary occurrence the English average was nearly as high as the American one during a quarter of a century in which there had been changes from peace to war, and from war to peace-the whole world having been agitated by the extraordinary events attendant upon the great war in Europe, and the peace which followed it. It is a fact strikingly illustrative of the advantage attendant upon freedom in the exercise of the power of association, as compared with the monopoly system of England, that from the first institution of banks in America to the year 1837, the failures were less in number, by almost a third, than those of England in the three years from 1814 to 1816. Further, if it is true, as is stated, that the losses in trade in that country amount to £50,000,000 a year, it would be safe to assert that all the losses by stockholders, noteholders, depositors, and receivers of counterfeit notes, had not then, from the first settlement of the country, amounted to one-tenth as much as the usual annual losses resulting from private failures in England. § 8. In New England, there is, almost literally, no capital not directly employed for the advantage of its owners. The whole sum on deposit, and in circulation, is little more than that which is required for daily use. The class of persons who in Scotland place their capitals on deposit, in New England become stockholders, and receive, as dividend, the same rate of interest that is paid by the borrower the expenses being paid by the profit of circulation. There is here, consequently, only the friction of a fine locomotive upon a well-built railroad. How far this system tends towards bringing into activity the small amounts of capital that might otherwise remain idle and unproductive, is shown in the following statements : Careful examination of all the banks in Portsmouth, New Hampshire, 6 in number, and comprising an aggregate of 11,045 shares, showed that there were owned by Six other banks in that State exhibited about the same proportion of ownership between the different classes. The whole number of stockholders of the Bank of Utica, New York, was, and perhaps still is, 191, of whom there were More than one-fourth of the whole capital stock of the banks in the State of Massachusetts was, some years since, held by females, |