ed, than they could be bought for elsewhere. These are the only terms upon which we can become a manufacturing nation. I must now concludehoping that the time is not far distant when nations and governments will cease their fruitless endeavors to create profits where Nature and Providence have decreed that they shall not exist. R. S. Art. VII-THE SUFFOLK BANK SYSTEM OF NEW ENGLAND. In the articles on "The Currency of New England and the Suffolk Bank System," which appeared in the Merchants' Magazine for March and April, we were attracted by some new and novel arguments against that system, as also the revival of some formerly used, but supposed by us to have been long since abandoned, even by its opponents on other grounds. The question of adopting some system for the par redemption of our own country bank circulation is now engaging our community, and the daily discussion of the subject in the various public journals, shows that it is viewed with no ordinary interest. As the writer deems many of the objections urged by "F. O. J. S." as entirely untenable, yet liable to mislead the casual reader, he has taken upon himself to answer a portion of them. In order to make myself intelligible it will be necessary to quote from the articles referred to, and at times, perhaps, with some appearance of repetition. We presume in this enlightened day that few intelligent merchants would object to the writer's views as urging the demoralizing influence of the usury laws. It is not, however, confined particularly to New England, which is specially alluded to. In few or none of those States is the law as stringent as in New York; and the history of none of them records frauds and dishonesty approximating to some of those which have been perpetrated under shelter of the Usury Laws of our own State. We would not argue from this that the standard of moral honesty is lower here than there, but that the laws of this State hold out a larger premium for breaches of good faith between the money-borrower and lender. It is to be hoped the present effort to ameliorate the penalty of usury will be successfully carried, and be but a prelude to still more enlightened legislation on that subject. Our writer observes that "of all the giant influences that shrewd financiers ever devised, above and without law for the purpose of absolute control over the industry, trade and business of a large population, extended over a wide territory so as to direct much the largest share of all the advantages and profits of that industry, trade and business to one common center, this Suffolk Bank System will stand out in history foremost and most comely to look upon." We deny that the originators of that system were actuated by such extended and ambitious motives, or that it has incidentally in its operations produced such beneficial results to Boston. We cannot conceive how other causes which have been enumerated as entirely secondary and minor, should be viewed as such, when the growth of our own and other large cities is so undeniably credited to the same causes, viz., natural position for a certain trade, judicious internal improvements, and an enterprising use of its accumulating wealth. The Suffolk Bank System originated in an honest and with the single desire to correct the abuses which existed in the banking system of New England, and to establish a safe and uniform currency for the whole community. All classes were suffering under the multifarious evils of an inflated and depreciated currency. The well conducted banks of the city and country claimed protection from its effects. Numerous banks in remote towns were in existence, whose aim was to flood the country with their paper without even the secondary consideration of being any advantage to the public by making judicious loans to the regular trader, or to furnish a uniform and redeemable currency. The natural flow of that currency was to Boston, which was and is now "the great store-house of New England's active wealth --the great center from which radiates much of New England's enterprise -the great market where New England seeks exchanges for much the largest share of her agricultural and manufacturing products, and the great distributing agent of New England's traffic in merchandise-she is the Ledger of New England." We consider these the causes of her growth in wealth and population. The flow of the currency to that center as the effect only of that position and not the cause, as alleged. It has been greatly aided by her enterprise in railroads radiating from that center to every part of New England and other States. We contend that she does possess commanding advantages of natural position for it. The fact that there are other good natural locations, in some respects, for large cities, does not presuppose that there should or could be such in all. On the contrary, arguments readily suggest themselves that it is better for States like those referred to, to have "one great store-house" for her Commerce and Manufactures. Her means of communication are artificial, but they were judiciously built at moderate cost, and are at all seasons available. Nature does not give her advantages of natural highways gratis or free from obstacles. Many of our rivers have a dangerous navigation from low stages of water, snags, &c., to which we pay tribute by losses of millions. They must be navigated by expensive steamers, and in our northern States are obstructed by ice for successive months, which in our own noble Hudson is considered so serious a drawback that we are availing of an artificial communication by railroad, built at great cost, to obviate the evil. Boston has only kept pace with the general growth of New England. Her excess of growth and prosperity over some other towns named, arises from using her wealth and enterprise to avail of her natural advantages. In view of the weak and expanded state of the New England banks at the commencement of the Suffolk Bank System, it was considered a very hazardous undertaking by many sincere friends to its success; there was also much sympathy expressed by others for its stockholders, lest it should not prove a fortunate enterprise. But it has long since ceased to require that sympathy. It is a rare circumstance to find a country bank officer or director in New England opposed to the system. On the contrary, we have the frequent testimony in our public journals, and otherwise, of those who were at first and for many years afterwards prejudiced and strongly opposed to it, who now give their hearty approval to it, and would not see it abolished. Occasionally a bank cuts loose from the arrangement, with the hopes of getting up an increased circulation, and the result is they find that by the natural laws of trade, their circulation is "domiciled" at home more rapidly than under the Suffolk Bank System, and, as a matter of self-interest, they are glad to return to the arrangement. The exceptions to this rule are when the bank has, by bad faith and management, become hopelessly insolvent and unable to redeem their circulation as it returns to them by the course of trade. Whenever the bills of a country bank, well managed, have passed home suddenly from any unexpected contingency, they have, as many can and will testify, met with the most liberal indulgence from the Suffolk Bank, and there found, in a good credit, something as substantial to them and more elastic than a more limited specie deposit would have been. The idea is preposterous that a few monied men in Boston could by this system divert the natural course of trade and the currency to that city from any other natural channel. All the banking influence of this city could not stop the flow of the currency to New York and change it to Buffalo. The writer further observes, that after the establishment of the Suffolk Bank System," there was no longer circulation left to the notes out of Boston, as this higher law' permits but one direction in which they can flow, commencing as soon as issued and that is towards Boston." That "New England is helplessly dependent for a currency at the feet of the banks of Boston." Let us examine with how much rigor they have exercised this power. It appears by the Bank Commissioners for Massachusetts report for 1850 that The Capital of the thirty Banks in Boston, in 1850, was. Its Circulation The Capital of the Maine Banks in 1850 was... The Boston Banks, to have the same proportion of Circulation with Its Circulation was..... the Maine Banks, would be entitled to.... Showing a loss to the Boston Banks in Circulation of, as compared $21,010,000 6,070,000 3,148,000 2,301,152 15,400,000 with Maine... 9,330,000 The candid reader must admit, with all the "carrier pigeon" haste to return, the bankers of Maine are not indifferent financiers to keep out so large a proportion more than the Boston banks. We cannot see the effects of withering influence" in the above statement. Let us examine its influence upon the country banks of Massachusetts. It appears by the Report before referred to that the Capital of the ninety-nine Country Banks of Massachusetts were............. $16,194,850 Their Circulation was...... ......... 10,851,881 Excess over Boston is... 5,342,969 The Boston Banks, to have the same Circulation in proportion, would have..... 14,000,000 Showing a loss to Boston Banks in Circulation of about...... 8,000,000 We might pursue the statistics further with the same favorable results to the country banks. We will only instance one more. The Capital of the Vermont Banks in 1847 was.. $1,301,000 2,232,000 We have selected this period accidentally, and not because it illustrates our argument favorably. We have not the data before us, or the time to prepare tables showing the comparative dividends of the country and Boston banks; we can find but one recent table, which is for April, 1850, when the the dividends were a fraction over 3 88-100 for twenty-eight Boston banks, and 4 9-100 for the ninety country banks. Should it be shown that is more than the average difference between the country banks of Massachusetts or Maine and Boston, it would only argue bad management on the part of the banks of Maine not to return as good dividends to stockholders when they have so much the advantage. We believe that for the past three or four years the Boston banks have paid much larger average dividends than for many years previous. It is evident from what has been shown that the banks of Maine are benefited by the Suffolk Bank System, for who could doubt that should they cease to redeem their circulation in Boston it would be diminished much below the amount of their permanent deposit in Boston, and even if kept up for a time, it would be at a depreciation from the specie standard in Boston, and to the injury of the whole community, except those who make it a source of profit to buy it at the greatest depreciation possible to return it to the bank of issue. The country residents of Massachusetts are always jealous of city influence and advantage. They, as a people, after long years of trial, are satisfied with the workings of the system, and that it gives neither Boston, as a city, or its banks, any advantage over other cities and towns of the interior. They have the power in the Legislature, and would have long since exercised it to neutralize any such imputed advantage. 66 The writer again observes, were Maine furnished with a system of currency that could with as little expense be at par in the city of New York as hers now is in the city of Boston, would not every man see she would have a double advantage in it." This would plainly admit that there was an advantage at "small expense," which might perhaps be doubted!! We doubt, however, whether it would benefit either party. The question of the proportion of circulation to capital of banks is one of wide difference of opinion even with experienced financiers. Our figures, we think, show that the circulation of the Maine banks is sufficiently large for its capital. We think, too, the people of this State claim to furnish their own circulating medium as far as possible. If Boston makes a sacrifice to secure a uniform currency for New England, it is no argument for us. Whether we receive the bank notes of Maine at par or not, our business relations will continue to increase with them from our superior commercial position. Again, if the Suffolk Bank exercises such a "withering influence" on the circulation of the Maine banks, they would not be so unwise as to divide still more their capital by keeping up a similar permanent deposit here. Certainly nothing short of that would make their bills current here. It is only by the immense amount of business transacted under a consummate method and economy which enables the Suffolk to do the business so cheaply. The position has incidentally given her a profitable business formerly, and now generally avoided, or at least not sought by the other banks generally. I refer to the discounting and collection of paper payable at the interior towns of New England. The writer again says: "If this system tends to make money scarce in the interior and abundant in Boston, who does not see that the whole advantage of it is in favor of Boston and against other places?" This is a supposition that does not exist. In no part of New England, for several years past, has money been as scarce or borne as high rates of average interest as in Boston. It is proverbially true that her merchants have been largely accommodated by the banks in this city. The loans to Boston by two banks only is probably several millions per annum. The writer again observes: "The extent of these weekly redemptions of the New England banks at the Suffolk, compared with the aggregate capital of those banks, is admonishingly daguerreotyped in the following official statement of the Bank Commissioners of Maine for 1848, viz: 'An amount equal to the whole circulation of our banks must be redeemed (in Boston) at least four times in each year!' The writer should here recollect that the New England banks concentrate their receipts at Boston in preference` to having them paid at home, although incidentally they may charge their customers a little exchange for notes payable where they are most desirable. They answer the demands for funds on Boston by paying out their own bills instead of a draft against their account there. For example, a merchant of Portland visits Boston for purchases of merchandise, &c. He has $5,000 in Portland bank bills which he wishes to distribute to various parties in Boston. He demands no specie funds or a draft on Boston, knowing that his bank bills are at par there. The same business operations by a merchant of Boston or Portland, with New York, would be by transmitting his funds in a bank check or bill of exchange, for the reason that the bank bills of neither city are bankable here. The amount of bills paid out by the country banks, with the knowledge of their going direct to Boston, is very large, and if drafts were substituted, a very sensible diminution of amount of circulation redeemed would appear. They prefer the chance that a portion of their bills, thus paid, will not find its way to the Suffolk for a time, than to give sight drafts or specie. That there is at this time a deficiency of active capital in New England, is not denied. But we think it fallacious to suppose the permanent remedy would be in an expansion of paper currency. The causes of this scarcity are not inexplicable. The amount invested within the past five years, in railroads sums its millions, and the same in manufactures, with a hope of future prosperity. The sum invested in the town of Lawrence alone, within five years, would, if in active capital, be sufficient to make the money market easy throughout New England. For the past three years her manufactures have ceased to afford fair dividends. Her shipping interest has been depressed. Maine, in particular, feels its influence as her freighters have made but poor returus. But these influences are wearing away, active capital is again accumulating, and bids fair, in due time, to be sufficiently abundant for a healthy prosperity. The writer seems to take it for granted that the banks should be able to keep up their circulation to the maximum allowed by law, and estimates that it "is now more than half a million less than the promise which their charters held out to the people of the State." We do not consider this a fair assumption. Times and circumstances require increased amounts for a circulating medium. A period of active business, with high prices for staple products of export or consumption, require an increased amount of currency. Those contingencies do not now exist to its maximum extent. It is also well understood that nearly all the New England banks make due preparation for an annual statement of their affairs, by curtailing their liabilities and placing themselves in as favorable a position as practicable. It is fair to suppose that their report of circulation is below the minimum amount, and at some other times approximates nearer to the maximum amount allowed by law. We do not infer that because the laws of Maine have fixed a limit to the circulation of banks, that their framers intended or supposed it would be kept up to that point at all times. The banking capital of Boston has been increased several millions within a years without any increase of circulation. few As regards the comparative increase of wealth in Boston compared to other towns in Massachusetts, we refer him to carefully prepared tables |