Farmers' and Mechanics' bank of Philadelphia, to the amount of nearly six hundred thousand dollars, when we know the specie of this institution, from their own statement, hardly to exceed three hundred thousand dollars. Suppose the proposed loan were to increase the balance of the government-account in this bank by half a million more-in what situation will be the government?-in what the institution? The governmentunless it take care to expend these funds entirely within the sphere of the bank, will cause it to fail, and may loose the greatest proportion; if the precaution be impracticable-the funds will be useless.

Must we not suppose that all banks, more or less, are in a similar situation? Have they not all conducted their business under the same temptations, or influenced by the same motives, of necessity or complaisance, with regard to their customers? must we not presume that our directors are not inferior, in prudence and sagacity, to any?

But suppose that patriotism-ill understood,-or the sapient injunctions of a profound state legislature, here and else where,overcome the prudential reluctance of bank-directors;that they discount freely; that circulating medium becomes plenty; that the loan takes place;-then, of course, government will become possessed of eleven millions of dollars, scattered between Massachusetts and Georgia, and only receivable in the respective bank notes of the several states.

Suppose that under these circumstances the Copenhagen scene should be renewed before New York-which we trust will never happen-of what avail to government, would be New York bank notes?-If Massachusetts should be invaded from Canada, or an insurrection take place among its inhabitants-what use could be made of the right to draw on the banks at Boston?-If another rising among the slaves in and around Richmond-who have already risen twiceshould convulse that city-of what advantage to government, would be Virginia paper? If a solitary British seventy-four should blockade the mouth of the Mississippi-could gov ernment purchase a single barrel of flour for a bill on New Orleans? It might as well have funds in the moon!

Thus it may happen, that government, even after a successful loan, only finds itself enriched with a debt, remains as empty-handed as before!

We appeal to the intellect of our readers, whether imagination can conceive a financial situation, more consumm ately precarious and miserable than that which we have just described.

Of course, we cannot resist the conviction, that no circulating medium is fit for the purposes of the general government, except one, the circulation of which is coextensive with the Union, and such, in our country, can only be the paper of a powerful national bank.

But a national bank would be unconstitutional!-This was the objection of Mr. Jefferson, then secretary of state, when General Hamilton proposed the first plan of a national institution of this kind. There is a peculiar propriety in calling to mind, at this moment, the ground on which it was then attempted to support this objection.

The words of the constitution, relating to this subject, are, that shall be authorized "to make all laws necessary congress for carrying into execution the powers with which it is specifically vested, and all other powers, vested by that instrument in the government of the United States, or in any department or office thereof."

The secretary of state argued, that this clause of the constitution, under which the legality of the projected institution was attempted to be defended, could not support it, because the word "necessary" did not here mean-needful, requisite, incidental, useful, or conducive to-as Hamilton contended, but absolutely, indispensably necessary, so necessary that the thing could not be done, in any mode or manner, without.

Against a political measure of vast importance, the secretary of state took his grammatical stand. Against a national bank-intended to encourage industry, to aid revenue, to support public credit, to secure financial power, to cement the Union-he argued from a dictionary?*

But, if at the period alluded to-when there existed but three state banks, when bank paper could not yet be considered as the general circulating medium of the country, if even at that period the paltry grammatical ground could hardly be supported with a colour of plausibility-how much more untenable must it now be, when the want of coin, and the abundance of paper, multifarious in form, and confined in operation-threaten to place government in a predicament such as has been stated above?

Taking it then for granted, that the constitutionality of a national bank could not, particularly at this day, be rationally questioned; and referring those of our readers, who may en

The Works of Alexander Hamilton, vol. i. p. 118.

tertain any doubts on this point, to the masterly paper of the first secretary of the treasury, in which it is fully discussed; we shall proceed to advance some ideas concerning the particular organization of such an institution, most conducive to the interests of government, and of the nation at large.

In order that we may be well understood, it is necessary for us to premise a few general observations.

Extensive banking operations do not require the actual employment of a large capital. Their vital principle is confidence and credit. The essential qualifications of those who engage in them, are great responsibility and great prudence. Great means are, therefore, not required for any direct, but for their indirect service, in establishing responsibility.

Discounting is the process which brings bank notes into existence and circulation. The real, and regular basis of their solidity, is the substantial property of those whose promissory notes, or bills, are discounted. A body of directors, of notorious omniscience, and unquestionable integrity, might establish a bank without a cent of capital, and their notes would, notwithstanding, command an unlimited confidence, and cir culate freely. Since omniscient directors cannot be found, and since among the best, some may be frail, the confidence of the public cannot be perfect, unless those, who engage in the business, are possessed of a capital. This capital is the guarantee of the public, against the bad consequences of any mistakes of judgment, or possible deviation from strict propriety of conduct.

The specie of a bank, rigorously speaking, is not more essential to their business, than their general capital. Their business, in concise terms, consists in facilitating, and expediting transfers of property, by the cheap and convenient means of credit. They create credit, on value pledged to them. They give this credit a convenient shape, by expressing it on the face of a bank note. With these bank notes the public deals. All this, strictly, requires neither specie, nor pro perty. It is a mere affair of agency, for the well conducting of which judgment-beyond liability to mistake,-and integrity beyond the reach of corruption, would be alone sufficient. A general capital, or the possession of property of their own, necessary with the institution, for the indirect purpose of affording a guarantee against the evils, that might arise from mistakes, or misconduct. Specie is requisite as a summary evidence of the existence of this guarantee.

A countryman presents himself at the bank, and says"Here, I have some of your notes. I am going to settle be

is

yond the mountains. May I be well assured, that I am safe with them, and that they will always serve me as money?”. The answer would be-" You may, because we understand our business; we never issue notes except on good security; we are honest men, and we have besides a capital of our own. -But it is a more energetic, a plainer answer, to say if you doubt it-take this," and to show him the silver. It is a better "argument to the man," an argument that addresses itself to every capacity; which is not subject to misconception, or misrepresentation.

A practical proof of the truth of this position, that capital and specie are not rigorously essential to the business of banking, is afforded by the modern history of the bank of England. The capital of this institution, for an age back, has been in the hands of government. Its specie, since fifteen years, has nearly disappeared. Yet, so momentous are the operations of this bank, that it successfully supplies the British nation with circulating medium, in its own notes, to the amount of no less than one hundred millions of dollars, which serve, moreover, as the basis of a new superstructure-the issue of country bank notes to the amount of one hundred millions more.

Thus then the general capital of a bank serves the purpose of guarantee; the specie, the purpose of a summary evidence of that guarantee. The latter is an argument of solidity, unanswerable, expeditious, within the reach of every comprehension. It is therefore expedient, and highly proper, that both should exist, though neither is indispensable.

If the notes of a bank had a universal currency-then specie would never be wanted, except to form the summary evidence. It would never be appealed to, except as argument. If their currency is confined, then specie may also be called for, as we have seen above, from motives of convenience; because it will answer the purpose of effecting transfers, in places where the notes would be useless.

If a traveller, setting off from Philadelphia for Savannah, can supply himself here with bank notes which will be received all the way, he will take them. But he will rather supply himself with half eagles, than be obliged to exchange his travelling money every hundred miles.

Hence the more extensive the circulation of the notes, which a bank issues, the more exclusively will the use of specie be confined to the sole purpose of occasionally establishing the summary evidence. When their circulation is confined, an additional supply must be kept, to meet the demands of

convenience.

But the circulation of bank notes becomes confined, in proportion as banks multiply.

The greater, therefore, the number of banks, the larger ought to be their respective specie funds.

The more specie a bank is obliged to keep in its vaults, the less the business of banking is profitable.

Consequently, when banks become very numerous, they become also, either less profitable-if prudentially conducted, -or less safe-if the dictates of prudence are violated, which is what will most generally happen.

Besides, not only will convenience oftener compel a demand for specie, when the abundance of banks has impaired the aptitude of their notes as a substitute for coin; but specie will also be liable, in this case, to be more frequently appealed to as argument. With the number of banks, must increase the chances of mismanagement, or of a disordered state of affairs, from local causes, among which we may reckon invasion by an enemy. The more, therefore, will the confidence in bank paper generally, be subject to be shaken, and the greater the necessity of being always abundantly provided with the argument. If this precaution is neglected, by those who manage these institutions, a few untoward events may throw the whole country into confusion, beyond the possibility of re-establishing confidence and order.

Thus, we think, it is positively, and irresistibly proved that a multiplicity of banks, either endangers the solidity of the whole fabric of credit, and the general prosperity depending on it; or else compels the keeping of so much specie, that one of the leading objects for which banks were contrived, and which constitutes their chief usefulness-to obviate the necessity of specie-is defeated.

And it is apparent from all our preceding observations, that the public interest-which is the interest of the revenue, and of government,-requiring a real substitute for coin, a circulating medium of extensive currency-as well as the general prosperity-with which banks whose solidity is precarious are inconsistent-demands the existence of a powerful nationa! institution, and demands, in strict theory, that there should be but one institution of this kind.

The framers of our system of polity wisely provided one social compact-the constitution, the source of all rights, all institutions, all laws; and one executive head-the ultimate reliance of the whole empire for security and protection. There is wanting, one main financial organ-the steady prop of