Banking theories in the United States before 1860

Bibliographic data

Monograph

Identifikator:: 1755492553

URN:: urn:nbn:de:zbw-retromon-133529

Document type:: Monograph

Author:: Miller, Harry Edward http://d-nb.info/gnd/1055250875

Title:: Banking theories in the United States before 1860

Place of publication:: Cambridge

Publisher:: Harvard University Press

Year of publication:: 1927

Scope:: XI, 240 S.

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part IV. Banking policy and the business cycle

Collection:: Economics Books

BANKING POLICY 173 larly in the West, contributed, we may well suppose, to make the development of sound banking difficult. Many of the states re- quired that the banks lend a certain proportion of their funds to farmers for relatively long periods. Massachusetts inserted in the charter of the Union Bank of Boston (1792) the provision that “one-fifth of the whole funds of this Bank shall be always ap- propriated to Loans . . . wherein the Directors shall wholly and exclusively regard the Agricultural interest.” ! The loans were to be for not less than one year. This clause was repeated in most of the early bank charters granted by the state. The importance of liquid assets was too obvious and elementary, however, to permit its neglect in theory to be very common, how- ever long practices inconsistent with it continued to persist.2 Bollman struck a typical note when he asserted that “the dis- counting of any paper, the successive renewal of which is implied, and understood, must be considered as inconsistent with sound principles of banking.” Therefore, “banks in farming districts are a nuisance,” he thought.? Cooper added similar testimony as to the necessity of liquid assets, and took exception to farm loans in particular. He doubted that farmers would usually be bene- ! Massachusetts, Acts and Resolves, 1792-1793 (1895 edition), pp. 17 ffi. For further examples see Dewey, State Banking Before the Civil War, Pp. 212-214. * Nathan Appleton, who was, on the whole, a writer of sound views, regarded six months as not an excessive period for loans to run. “I do not agree with you,” he wrote to a New York banker in 1857, “that the banks should confine their dis- counts to short paper, which, if good for the banks, is bad for the community. I have been for upwards of 40 years a director of the Boston Bank, during the greater part of which time they have confined their discounts to real business paper, which should be paid at maturity, and have not refused it even when having six months to run.” Bankers’ Magazine, xii, 407. ® Bollman, Plan for an Improved System (1816), p. 15. Indeed, from the very beginning the importance of restricting loans to short tenors was not unappreciated by some of the bankers themselves. Upon opening for business in 1784, the Bank of New York adopted a rule to the effect that “no discount will be made for longer than thirty days, nor will any note or bill be dis- counted to pay a former one.” How closely this extreme standard was adhered to is another matter. H. W. Domett, A History of the Bank of New York, p- 20. On the other hand, we read a complaint in 1853 that the banks of New York and New England had been tending, in the two previous years, to lengthen discounts “from 6 to 8, 10 and 12 months.” Silex, Letters on Banks and Banking (1853), p- 30. The editor of the Democratic Review found repeated occasion to decry excessively long terms of loan. See, for example, issue of January, 1844, p. 053.

Access restriction

Copyright

fullscreen: Banking theories in the United States before 1860

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation