182 BANKING THEORIES IN UNITED STATES

remaining after local wants had been cared for.! Indeed, such
loans represented assets that might be liquidated in times of
stringency, thus affording a means of releasing funds for use in
meeting the extraordinary demands of local borrowers? The
New Hampshire commissioners made a similar point in favor of
the purchase of distant paper in 1849, and in 1852 one of them
found in the investment by some of the banks of over half of their
means in foreign paper ‘evidence only of the exuberance of our
means.” 3 In 1858, however, one of the commissioners objected
to loans made out of the state as a device for evading the usury
laws, and the following year they were regarded as evidence either
of neglect of patrons at home or of the employment of an excessive
amount of capital in banking.
Call loans to brokers made upon stocks as collateral were condemned
 by a special committee of the New York legislature on
the ground that the encouragement of speculation was foreign to
the purpose of banking; and in 1855 the Massachusetts commissioners
 argued that they were injurious to the banks themselves,
since “extension upon the basis of business paper is a very different
 thing from distension created by speculation upon mere
capital — that is, loans upon stocks, instead of discounts of
promises representing something that has an intrinsic value.”
Collateral loans were of significance primarily, however, not with
respect to their basis of stocks as security, but with reference to
their aspect as a secondary reserve, by virtue of being call loans,
and their resultant bearing upon the problem of commercial
crises.®

The use that might be made of a variable discount rate was
but little understood. Such discussion of this matter as did occur
centered around the problem of the wisdom of usury laws, with
special reference to banks. Usury laws were still the order of the

1 Connecticut Bank Commissioners, Reports, 1841, 1844, 1860.
* Report of Connecticut Bank Commissioners (1848), in U. S. House of Representatives,
 3oth Congress, 1st Session, Document 77, p. 197.
3 Report of New Hampshire Bank Commissioners (1852), p. 37.
¢ Report of Massachusetts Bank Commissioners (185 5), D- 74.
5 See Chapter XVII.