80 BANKING THEORIES IN UNITED STATES
hands of the active and capable man of business,” thus giving
existing capital greater ‘activity and a more enlarged sphere of
utility.” 1 They can no more increase capital, he added, than a
mill-dam increases the amount of water when it gathers together
many little rills that would otherwise serve no useful purpose, and
causes them to turn the wheels of industry.
One of the principal benefits afforded by a bank, Thomas Paine
had written at an earlier date, in a pamphlet prompted by the
debate over the repeal of the charter of the Bank of North
America, is that “it gives a kind of life to what would otherwise
be dead money.” Each merchant has frequently “remnant
money,” which can be of use to him only when more has been
added. Half of the money in a city, Paine estimated, would lie
thus in useless driblets, in the absence of banks to collect it and
render it capable of being used.”
Throughout the whole of our period, the school that denied
that banks can do more than lend on the one hand what they
borrow on the other was very large.? Francis Bowen put the case
succinctly when he said that banks, in their deposit and loan opera-
tions, “only play the part of brokers in this matter, bringing
borrowers and lenders together.” Quite frequently this operation
was coupled with that of providing a cheap currency in substitu-
tion for costly metallic money, and the two were held to exhaust
the possible advantages to be derived from banks.
1 Tucker, Theory of Money and Banks Investigated (1839), pp- 199, 200. This
rather obvious doctrine was an old one. See, for example, Henry Robinson, ‘“Eng-
land’s Safety, in Trade’s Encrease” (1641), in W. A. Shaw’s Select Tracts, etc.,
pp. 55, 56. It is also found in Benjamin Franklin’s “ Modest Inquiry into the
Nature and Necessity of a Paper Currency” (1729), Davis's Reprints, ii, 347.
2 Paine, Dissertations on Government, etc. (1786), pp. 167, 168. Cp. Mathew
Carey, Debates and Proceedings (1786), p. 104, for a similar view.
3 “The legitimate object of banking, if it has any object at all, is for those pos-
sessed of money to lend it on favorable terms to those who need it in the furtherance
of their business, and who pay the lender a fair rent for its use. The incorporation
of banks had for its object the collection of many small capitals into a common res-
ervoir, to be applied in the same way.” T.P. Kettell, “The Money of Commerce,”
De Bow’s Review (1848), vi, 253. That bankers can do no more than this was the
view of S. P. Newman, Elements of Political Economy (1835), pp- 113, 114; D. D.
Barnard, Speeches (1838), p. 162; Vethake, Principles of Political Economy (1838),
pp- 170, 171; and many others.
4 Bowen. Principles of Political Economy (1856), P. 449.
