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where the produce of New York State enters the canal, showing that the effect of the policy of the State government has been, as far as in its power lay, to retard the business of the State, while the effect of the financial and commercial policy of the late federal administration has been to improve the trade of the whole Union, and of course to throw into the treasury of the State of New York an increase of revenue for the use of that great channel of communication, the Erie canal, between the Western States and the Atlantic cities.
The effects of the increased imports have been felt in the foreign exchange market, and were an operating cause to produce those shipments of specie that have been so extensive ; but another cause has also been the fact that large amounts of stock have been sent here for sale, the proceeds to be remitted home in specie. Notwithstanding these extraordinary demands, and the fact that no supply has been afforded by foreign credits, the rates of bills have fallen to a point that has caused shipments of specie nearly to cease. The rates of bills are as follows :
RATES OF FOREIGN BILLS IN NEW YORK.
Dec. 16. 94 a 10........10 a 101. ..9 a 10..... ..9 a 9. .9 a 97 .5 171 a 5 184....5 20 a 5 21.
a 5 25......5 23% a 5 25.....5 25 a 5 26 .40% a 404 ..403 a 401 .40% a 40%
..40 a 404
.391 a 403 .36 a 36 .36 a 30 .36a 36
.364 a 36) 36a 367 .765 a 79.. ....789 a 781. ..78 a 784. ...78 a 781..
.764 a 77
The shipments of specie from New York and Boston have been near $6,000,000 since August last, and produced in the earlier part of the present month a strict curtailment on the part of our city Banks; that is, they discounted considerably less than their current receipts. They were induced to this course not so much from any real inconvenience arising from the drain for specie, as from fears as to its probable extent and duration. For the past week, however, the supply of bills having increased, they have again extended their discounts to the amount of their receipts. It is a fact, that notwithstanding the large exports of specie, the amount of the precious metals held by the Banks here is quite as large as that held at the same time last year, and the sum held by the Boston Banks, according to the official returns, has increased $150,000, showing conclusively that the drain has been entirely from the suspended sections, where it is rejected in favor of irredeemable paper as a circulating medium.
The continued fall in stocks, and the depreciation of property, have at last begun to attract the attention of stockholders to the manner in which the banking institutions are managed. It is a well known fact, that men of limited means worm themselves into the direction of moneyed institutions, and become theinselves heavy borrowers of the Banks' means, on long time, wherewith to conduct their individual business. It is by these means that the resources of the institutions become gradually locked up in unavailable securities, and they are eventually stuffed with real estate, and depreciated stock taken for debt. The substantial class of stockholders, who are desirous of doing a regular business, and who invest their funds in banking, not because they want to borrow, but because they wish to lend money at the best possible rates, are arousing themselves to the necessity of purifying the institutions from the control of borrowing directors. At the annual elections which usually take place at this time of year, great efforts are making to produce that result. It is the only course that will preserve the remains of the Banks through the ordeal which they are to pass during the coming year.
The distrust has been a good deal heightened by the many failures that have taken place in country Banks, from causes partly explained in our last article. Those causes have brought about the failure of the following Banks :
BANKS IN THE STATE OF NEW YORK FAILED.
Capital. Circulation. Staten Island,
$168,300. .$19,702 Comml Bk. N. Y......500.000.. . 121,370 James Bank,
“ Buffalo,...400.000. .246,000 Bank of Olean, ..120,000. ..53.378
“ Oswego,...250,000.. ...216,096 Washington Bank, 100,000.
19,235 Clinton Co. Bank, ..200,000. .193,666 Alleghany Co." .100,000.
.95,722 Bank of Buffalo,... ....200,000. ........195,000 St. Lawrence " .136,675........109,535 Wayne Co. Bank,......100,000........144,392 Total,... $704,975........ $329,922..
704,975. .329,922 Grand Total,......
This presents an annihilation of near two millions and a half of Bank capital, and a withdrawal of $1,500,000 from the aggregate paper circulation. Besides these, the New York Banking Company, with a capital of $352,745, and $104,800 of circulation, and also the United States Bank in New York, with a capital of $200,000, and $140,000 of circulation, have proceeded to wind up their affairs, and have withdrawn their notes from circulation. Consequently the entire reduction of capital employed in banking is $2,908,220, and the diminution of circulation $1,691,196. This rapid reduction of banking capital is a marked feature in the financial history of the day, more especially when compared with the state of things existing three years since, when credits of all sorts were rapidly created. Those credits, more especially the Free Banks, were started expressly to stay the revolution in the value of property which began in 1836; but such has been the irresistible force of the cash system set on foot by the late federal administration, that the credit of sixteen sovereign States, added to that of the late National Bank, backed by innumerable smaller institutions, has been crushed in its course. The Free Banks have generally their capitals secured to be paid on bonds and mortgages at very high values, therefore but very little real capital exists among them; and that little, from the nature of their organization, is invested in stocks, which have greatly depreciated in value. These facts, added to the general untoward state of banking business, which affects all institutions alike, have created a greater degree of distrust toward that class of Banks than toward the others, consequently their bills are at a discount of five per cent., while the Safety Fund range from 3-4 to 2 per cent, discount.
The great depreciation and present position of State stocks is perhaps the most important feature in the financial world. In our article for November we briefly sketched the causes that led to the existing state of things, adverting to the buoyancy created in August last by the expectation that Congress would do something for the relief of the indebted States, and the subsequent depression consequent upon the disappointment experienced in that quarter. During the month of November, the results of the election in Mississippi, where party politics seemed to a great extent merged in the question of repudiating or paying the bonds issued on the credit of the State, deciding against the legality of the debt, and therefore against paying them, were received, and under their influence the prices of the stocks of all the indebted States sank heavily. Subsequently expectation was raised that the annual Message of the President of the United States would contain some recommendation by which they might be improved, and for a time prices remained firm. That message was received, and contained only a weak hope that the States would ultimately pay. Accordingly stocks again gave way, and later accounts from abroad, exhibiting accumulating difficulties there, have aceelerated a fall. The following is a table of their market values at different periods since the passage of the land distribution act:
Vol. X., No. XLIII.-13
PRICES OF LEADING STATE STOCK IN THE NEW YORK MARKET.
Aug. to Dec. United States..........55.
.100 a 100%......971 a 98......97} a 98. . 2 per cent. 6. .....1644..
...99 a 100. ...99 a 100. New York State,.....6..
100 a 100%..
.971 a 100
...90 a 90 .54.
.914 a 92.... ..85 a 851. .82 a 824....10
..89, a 91.
.90 a 91 .....85 a 87......8
.81% a 811.....80 a 81..
77 a 80......70 a 75...
98 a 100.....97 a 97 25 Brooklyn City,... 6. 20
......100 a 105.. 1.97 a 100.. 95 a 100.....5 Pennsylvania, ..5. ..79 a 80.. ..70 a 71..
..814 a 85.....10 .6.. ....1858. 94 a 95. ..90 a 91.
.84 a 85 ...10 .6. ....060 .94 a 95.
.....90 a 91.. .81 a 831
..12 .5.. ..1850..
.84 a 85..
..80 a 83. .77 a 80. .5 Kentucky, ..6.
.84 a 85........804 a 814. a 77......8 ...6....,bonds 4's.. Alabama, dollar, .5. ......1865.
.64 a 66. 50 a 55..... 15 Arkansas,
..6.......25 years....59 a 62.. ..50 a 60. 30 a 45.....12 Indiana, sterling,.....5.. 56 a 57.. ..40 a 43 .26
...55 a 554..
.28 Mlinois, sterling,. ........ .....1860..
“ dollar, b'k loan,.6........1860. .56 a 56... 43 a 45. .29 a 30..... 27
.27} a 28.....27 The immediate cause of this fearful fall has no doubt been the increased importance which the doctrine of repudiation has assumed, in connexion with the actual dishonor and embarrassment of the several States, as well as the increased discredit abroad, which has already induced the return of a large quantity of stocks for sale, soon probably to be followed by a still larger amount. The States of Mississippi, Michigan, Pennsylvania, and Indiana, have actually failed, and the prospect of renewing their payments at an early day would seem to be very small. Mississippi has failed in its interest; Michigan and Pennsylvania have dishonored a portion of their debts, principal and interest. A debt of the last mentioned State for $900,000, which fell due in June last, remains to this hour unpaid. In February next, nearly $1,000,000 of interest falls due, to meet which, the State has in its treasury $1,000,000 of paper currency issues of the banks, redeemable in State stocks. This paper is at thirty-five per cent. discount. Consequently there is actually but $650,000 to meet $1,000,000 of interest, $2,000,000 of floating debt, and $900,000 of a dishonored principal, making $3,900,000; and the citizens are already burdened with town and county taxes, which, although very onerous, yield not a dollar toward the State debts. Indiana failed last July, and Illinois will probably fail in January. The finances of these two States have, of all the States in the Union, been worst managed. They have depended upon borrowing altogether, and that at the most ruinous rates ; consequently their debts have fearfully accumulated. The following are their present debts as compared with the close of 1840 :
.16,185,560.. ........19,125,560.. .2,960,401 This immense increase has been effected simply by pledging bonds at a high rate, to raise money to meet present necessities : the people have not received one dollar of the money. For instance, to raise $333,000 in July, General Whitesides, for Illinois, pledged $840,000 with a broker in Wall-street. That broker, to raise the money, hypothecated the bonds in small sums with other brokers. Those brokers, becoming short of money, pledged the bonds in their turn with other brokers. The bonds thus passed from hand to hand, absorbing money, until a panic ran the prices down, and the lenders, not being covered, called in their loans,
and many bonds were sold actually. The State thus pays at the rate of twenty per cent. per annum for money, besides obligating itself to pay three dollars for one received when the loan falls due. Mr. Noble performed the same operation for the State of Indiana. To raise money for the civil list he pledged $250,000 of bonds, at thirty-five cents on the dollar, with a broker in Wall-street. This is borrowing money at the same rate as the State of Minois. It is easy to perceive that no people, even the most prosperous and wealthy, can long sustain such operations; more particularly those of new States, where the population is an agricultural one, thinly scattered over a great extent of territory, living in log huts, and dependant for their means upon distant markets, which are commanded by productive States more contiguously situated. A just and matter-of-fact consideration of these circumstances, apart from political views, leads the mind to the conviction of the inability of the State to pay at present, no matter how favorable may be the will. The distress that must inevitably grow out of these defalcations, both at home and abroad, will be very great ; and if a calamitous war is not the ultimate result, it will be because of the forbearance of the foreign creditors. All these evils, present and prospective, have grown directly out of the evil influence of the paper system, as governed by the late National Bank. That institution has been the cause of those extravagances, individual, corporate, and state, that have led to the contraction of debts, measured only by the ability to borrow, without reference to the means of payment. The States of the Union, almost without exception, have authorized the creation of loans without providing for the payment of the interest by taxation. The internal improvement system of the State of New York has been by far more successful than that of any other State, and yet, by the policy of the late party in power, which was to create debts depending solely upon the revenue of the works to meet the interest, the credit of the State was nearly wrecked, and New York State five per cents. having been sold at 78, have recently risen to 83, under the belief that the new government will put a check upon the supply. By this course the credit of the State will gradually be restored, and the supply upon the market be absorbed by the investments of capitalists at home. For nine or ten of the other States of the Union there seems to be no other course at present likely to be pursued but that which they have authorized in the Banks, viz., suspension. Unlike the Banks, however, they cannot continue in credit and still refuse to pay their debts; but utter disgrace must attend their defalcations.
These are the melancholy fruits of the credit system. It has produced these results in this country first, because here it first reached its maximum. The indications abroad, by the advices recently received, are, that a general explosion there must soon take place. The enormous amount of credits that is balanced upon the insignificant and diminishing amount of specie held by the Bank of England is tottering to its base. In the same manner that State and corporate credit was stimulated here by the late National Bank, until every market became glutted with their securities, has the manufacturing business of England been stimulated through Bank influence, until every quarter of the globe is “stuffed” with their fabrics. The East India markets, that have of laie years been the most important, are said to have now stocks sufficient for two years' consumption on hand. The imports into New South Wales of the manufactures of Great Britain, had amounted to £270 for each man, woman, and child in the settlements. Bankruptcy and distress, with stagnant markets, are the result. The manufactures of the coarser description of cottons in the United States have driven those of British manufacture from the markets of Eastern Africa, the Persian Gulf, the Eastern Archipelago, and China, and seriously compete with them in the South American and Mediterranean markets. The consequence in
England is, a continued decline in the exchanges, and diminution in the bullion held by the Bank, while the trade of France, based upon a specie currency, is yearly progressing. Once already, within two years, has the paper system of Eng. land been saved by the support of the Bank of France, and the time is rapidly approaching when fresh assistance will be necessary. The probabilities are, however, that France will not involve itself in difficulty by attempting to sustain the tottering fabric of the British credit system. It is matter of great congratulation to the people of these United States, that while this revolution is going forward throughout the commercial world in favor of the cash system, we have been saved from the infliction of a new Government paper institution.
The fiscal agent shadowed forth in the annual message of the chief magistrate, exhibits a vacillation between the old and the new system: while it rejects the unlimited powers claimed for a regular Bank, it still clings to the exploded doctrine that “the exchanges” of the country want “regulating,” and weakly supposes that that regulation can be effected by authorizing the government agents to go into the market and invest its funds in mercantile bills. To do this it must raise the price of bills upon the mercantile buyer, and must charge a still higher rate upon the sale of those bills to other parties. The inevitable effect of such a monstrous innovation upon the course of trade, would be fresh derangement and new disasters. It has been alleged that the plan proposed is similar to that hinted at by General Jackson in his message of 1830. There is, however, a wide difference between the two plans. That of the present chief magistrate would make the federal government a bill-broker with a borrowed capital ; that of Jackson expressly excluded the “purchase of property,” whether bills or otherwise, but permitted the sale of bills in the transmission of the government funds in co-operation with the mercantile exchanges. This is all that the government or a Bank can do in “the regulation of exchanges.” Two-thirds of the revenue are collected in New York. If the government wishes to expend a part of that revenue in New Orleans, it may consistently authorize the treasury branch there to sell bills drawn on its New York funds for the amount that it wishes to transmit, and no more. If this took place at a moment when exchange was high, by increasing the supply it would lower the price. The new plan, however, seeks to authorize the government to borrow money in order to invest it in mercantile bills, in opposition to the regular dealers in that description of paper, and in connexion therewith to issue two descriptions of paper currency, one in the form of treasury notes and the other in that of certificates of deposite. All this provides nothing for the equalization of the currency. At New Orleans bills can be purchased on New York freely at par for one per cent. for specie; but for the paper currency of that section, they command six to seven per cent. If the government undertakes to sell bills, it must do it on the same terms; the currency in which they are paid for remaining the same. The paper issues of the government would be immediately absorbed as a medium of exchange, and would not enter into the currency. The probability is that the measure will not be adopted by Congress, at least that part of it which leans toward the revival of a government paper currency.
NOTE.-Our usual monthly notices of New Books are excluded by the pressure of other matter. They will be given in our next.
The engraving in the present Number is from a portrait painted a few weeks after the Battle of New Orleans, for the late Commodore PATTERSON, now in the posses. sion of I. Hunt, Esq. of New York. Though a very faithful and characteristic por. trait of the original, no engraving had ever before been taken froin it.
ERRATUM.—On the 28th page of the present Number, the following three lines, between the 8th and the 9th, have been accidentally omitted :
Shall lead rejoicing to the sunny strand
Of the bright Athenian land !