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Title: Free Banking Law
Author: William Batchelder Greene
Date: June 4, 1851
Language: en
Topics: mutual banking, mutualism, law
Source: https://www.libertarian-labyrinth.org/anarchist-mutualism/1848-1868-william-b-greene-in-the-wooster-palladium/

William Batchelder Greene

Free Banking Law

The law of the late session, authorizing the formation of banking

associations, is of so much importance that we give it a place in the

first page of the paper. It meets with the decided approval of some of

the democratic presses; and may have all the excellences claimed for it.

This paper has not discussed its merits, because we have not felt

inclined to oppose a measure which many of our friends have been

disposed to adopt; and especially because we have doubted the expediency

of any considerable enlargement of the paper currency. The object of the

law is, of course, an augmentation of the paper currency; otherwise it

would not have become a law. If the field were clear of all banks, and

this matter came up as an original question, we might regard it with

more complacency than we now can. But without the associations which

this act contemplates, we have already a pretty formidable array of

banks, old and new. A very considerable increase of banks and banking

capital has been authorized by the very legislature that has passed this

new banking law; and it is not supposed that there is to be any

diminution of this immense force for supplying the people with paper

money.

What, then, is to be the effect of this new banking law? Plainly, to

augment, inflate, and swell up, the paper circulation. Is this

desirable? No; for it will but enlarge the already capacious reservoir

that draws within its vortex the fruits of the labor, the profits of the

industry, of the laboring masses. There is no rule more certain in its

operation, than that the prices of property rise or fall as the currency

expands or contracts; and that the wages of labor are the last to rise,

and the first to fall. Consequently under an expanded or augmented paper

currency, which has carried up prices, the laboring man has the

increased prices to pay for whatever he buys, without any augmentation

of wages from which to pay. When the currency contracts or is

diminished, wages fall first; and prices afterward; so that the profits

of industry are pared down at both ends—both by the expansion and the

contractions.

If this new banking system were any thing but an addition to the

facilities for making paper money, we might regard it with more favor

than we are now able to do.

A correspondent sends us the following comments upon the law:—

Mr. Editor:—I am disposed to think that a misapprehension exists in the

minds of some persons, in regard to the true nature of the free banking

law. The bill as it was at first presented by Mr. Frothingham was one

thing; the bill as it is now, after having been amended, modified, and

passed by the legislature, is something quite different. According to

the new law, fifty persons disposing of a capital of $100,000, may at

their pleasure, commence and carry on the business of banking. They can

operate as a bank of deposit and discount, and they can issue bills if

they see fit to do; but they are under no obligation to issue bills;

they can act under their pleasure in that matter. Here comes the

peculiarity of the law; for, if the do issue bills, they may issue such

as they receive from the auditor in exchange for stock deposited; of, if

they see fit, they may issue their own notes, precisely as other banks

do now, without depositing any stock at all. For the enabling clause

gives the new banks all the powers, privileges, &c., possessed by the

existing incorporated banks, while the qualifying clauses do not deprive

them of the privilege of issuing their own notes. It is true, the law

says that if the new banks deposit stock with the auditor, they shall

after such act of deposit be held to observe certain regulation: but it

nowhere command the new banks to deposit such stock, and it curtails the

privilege of no banks except such as voluntarily deposit stock. If

therefore any bank going into ooperation under the new law, keeps away

from the auditor’s office, it becomes and remains a bank of issue of

identically the same nature with those heretofore chartered in this

commonwealth.

OMEGA