Banking theories in the United States before 1860

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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

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Document type:: Monograph

Structure type:: Chapter

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

Collection:: Economics Books

176 BANKING THEORIES IN UNITED STATES tive of overtrading, and caused the volume of media of payment to be adjusted to the requirements of the community.! The New York bank commissioners warned, in their report of 1840, that banks should “confine themselves strictly to paper of a business character to be paid at maturity.” “It may be assumed as an undeniable axiom in the business of banking,” they asserted three years later, on returning to the subject of accommodation loans of paper money, “that such issues are always excess; and that in precise proportion to their amount they derange the just relations of currency and trade.” 2 The argument for “business paper” did not go unchallenged. Mathew Carey questioned the theory that loans against real paper are liquid in the aggregate.* To bar accommodation loans would be to deny bank credit to a large proportion of merchants, since but a minor fraction of their business gives rise to discount- able paper.! Gouge, in his earlier works, was inclined to doubt that accommodation loans have any more mischievous an influ- ence than real loans,® although, as we shall see, he later changed his opinion. Carroll believed that accommodation paper is inno- cent of the evils commonly attributed to it. Loans against accom- modation and real notes alike are harmful if made by a bank extending credit in excess of its capital and time deposits.® The Connecticut bank commissioners wrote in 1841 that the ! Tucker, Theory of Money and Banks (1839), pp. 166, 167. Note that it was not a question of the superior qualities of the acceptance as compared with the prom- issory note with which Tucker and his contemporaries dealt, but of loans against paper, whether buyer’s or seller’s, arising out of a commercial transfer of property, as compared with accommodation loans bearing no evidence that they were to be used to finance a transaction already concluded. 2 Report (1843), U. S. House of Representatives, 29th Congress, 1st Session, Document 226, p. 274. 8 M. Carey, Desultory Reflections (1810), p. 15. Carey, however, meant by “real notes’ simply paper arising out of a bona fide transfer of goods regardless of the salability and rapidity of turnover of the latter. He used stocks and bonds as an illustration. * Carey, Letter to Bronson (1816), Essays on Banking, p. 131. 5 Gouge, Short History of Paper Money (1833), pp. 50, 51. 6 C. H. Carroll, “Financial Heresies,” Hunt's Merchants’ Magazine (Sept., 1860), xiii, 317-310.

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