BANKING POLICY 175 always provided with the means of instantly redeeming them when presented; hence, it is as important that the capital, which ought to furnish those means, should be frequently returned to it as that it should be profitably employed.” ! More interesting than the discussion of the proper length of loans * was the consideration given to the problem of the relative merits of advances made against accommodation paper as com- pared with discounts of paper representing trade transactions. To a considerable degree the two problems cannot be separated. Those who insisted upon the superiority of real paper as the basis for loans were usually equally anxious that loans should be for short periods and not subject to renewal; while an analogous connection can be shown between defenders of accommodation loans and of loans of longer maturity. Smith had urged that discounts based upon real paper cannot give rise to an unhealthy issue of bank notes? and the matter still remained a moot question in England. In this country, Bollman in 1816 advanced the thesis that real loans admit of no over- extension of credit,’ and in the second quarter of the century it became a popular one. Cooper, to take a typical example, thought that the amount of bank notes in circulation would vary exactly with the wants of commerce,’ if the policy of making none but real loans were adhered to. Accommodation loans disturbed the equilibrium, and, further, led to extravagance and bankruptcy. Tucker summarized the case for real, or “business paper,” as it was often called, by saying that loans of which it formed the basis were self-liquidating (to use a present-day term), encouraged industry and commerce without furnishing the means and incen- t C. F. Adams, “Principles of Credit,” Hunt's Merchants’ Magazine (March, 1840), ii, 197. * Call loans received an interesting analysis, but it was principally with reference to their bearing upon commercial crises and it will be treated in that connection. See the last chapter. ¥ Wealth of Nations, book II, chap. 2 (vol. i, p. 287). ! Bollman, Plan for an Improved System (1818), p. 15. 5 In all but a few cases a currency varying with the needs of trade was taken to mean one varying exactly as it would if wholly metallic. See supra, Chapter VII. 8 Cooper, Lectures (1826), pp. 133-143.