82 BANKING THEORIES IN UNITED STATES 
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urged that banks intercede in behalf of people who have funds to 
loan but do not know who deserves their confidence. 
Meanwhile the writers on banking were not, of course, blind to 
the fact that banks lend notes which they themselves freely 
manufacture. Indeed, it was this very characteristic of banks 
that brought upon them the greatest condemnation. “By being 
loan offices,” Daniel Raymond complained, ‘they are enabled to 
loan all the money they can make, or, at least, as much as they 
please; and by being the manufacturers of a paper currency they 
are enabled to make as much money as they can loan.” ! Recog- 
nition of this ability to lend units of media of payment of their 
own creation did not interfere, however, with the conception of 
bank loans as entirely intermediary. For the quantity theory was 
invoked to show that, while banks may make advances of more 
dollars than they have received from depositors and shareholders, 
proportionate depreciation of the monetary standard is involved, 
so that the banks really return no greater effective purchasing 
power than they had previously taken in from the public. 
Indeed, this very tendency of banks to lend more dollars than 
they receive was frequently used as a basis for declaring their 
intervention between borrower and lender mischievous. N othing 
was more puzzling to early students of banking than the propor- 
tions of a bank’s operations as compared with its reserve. On the 
one hand, we find men, like Hamilton, who regarded bank loans 
of credit in excess of actual cash on hand as an increase of capital; 
on the other hand were those who regarded the matter as a bit of 
financial legerdemain, in which the public played the role of 
docile victim. Thus one early writer, as perplexed as he was 
aggrieved by the ability of banks to lend to perhaps five times the 
amount of their specie holdings, argued that they were in effect 
receiving thirty per cent upon their money, “ while the rest of the 
community were under heavy penalties if they should take more 
than six per cent for the loan of their monies.” 2 The incorpora- 
1 Raymond, Elements of Political Economy (1823), ii, 129. 
2 Sullivan, Path to Riches (1792), p- 49. This seems to have been one of the more 
influential booklets on banking published at the time of its infancy in America.