Die Wasserversorgung in Bayern nach dem Stande vom 1. 1. 1928

Banking theories in the United States before 1860

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Monograph

Identifikator:: 1823193919

URN:: urn:nbn:de:zbw-retromon-220897

Document type:: Monograph

Title:: Die Wasserversorgung in Bayern nach dem Stande vom 1. 1. 1928

Place of publication:: München

Publisher:: Lindauer

Year of publication:: 1930

Scope:: 206 S

Digitisation:: 2022

Collection:: Economics Books

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PRINCIPLES OF NOTE ISSUE 147 securities.! We have now to deal with the discussion of govern- ment stocks as the security for a convertible note issue. The first proposal for such a plan seems to have been that which Professor John McVickar advanced in 1827. Banks should lend, not their capital, but their credit; the capital should properly serve simply to give creditors assurance. This purpose can best be accomplished by investing the capital in permanent securities of undoubted soundness. Moreover, bank notes circulate among those who are incapable of determining the financial circumstances of the issuer, and whose interest should justly be safeguarded by the pledge of acceptable stocks. Let banking, then, be made free to all, under a general statute, upon the condition that nine- tenths of the capital be invested in government stock, and that these securities be pledged for the redemption of the bank’s prom- issory notes, which shall not be issued in excess of the amount of stock held for this purpose.? Eleazar Lord, in his Principles of Currency and Banking, pub- lished two years later, adopted McVickar’s suggestion as alterna- tive to the issue of paper money in limited quantities by the gov- ernment itself. Note-holders would be secured by the fact that capital to the full amount of the outstanding circulation was being withheld from the hazards of commercial banking;?® and the banks, because of the interest borne by the securities, would be able to refrain from the mischief of returning more money into circulation than had been withdrawn from it in the payment of capital.* Also, the undesirable elasticity of bank notes would be eliminated.’ To prevent violation of the law, let the govern- ment, upon the deposit of the securities, turn over the proper ! A. M. Davis, Origin of the National Banking System, p. 9, regards the propo- sition as the first one suggestive of the National Banking System. ? McVickar, Hints on Banking (1827), reprinted in the Financial Register (1838), ii, 325-327. The first and second Bank of the United States, three-quarters of the capital of which was payable in government stock, and the Bank of England, whose entire capital was invested in government securities, were cited as precedents by McVickar and others. 3 Principles of Currency and Banking (1829), p. 84. 4 Ibid., pp. 65-67. Cp. pp. 55-65. In reality the original capital is also returned into circulation when government stocks are bought with it. 5 Ibid.,p. 54.

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