Bank

(These essays belong with the printed ones in Freneau to the class of political economy.)

Banks, in their accommodations to prudent borrowers & in furnishing a currency more easy to be counted and transmitted than the metals have acquired so many friends, that if it were desirable to abolish them entirely & everywhere, the attempt would be hopeless. But the more impossible or unadvisable it may be to abolish them, the more necessary it is to guard agst the evils resulting from their number, and agst the abuses incident to the ordinary constitution of them. These abuses may be diminished by a variety of particular regulations. Might not a more radical remedy be found in a different Construction and organization of the administrative Body?

The greatest, certainly the most offensive abuses of Banks proceed from the opportunities and interests of the Directors. They can obtain discounts for themselves, even it is said to privileged amounts: They, can suspend limit and resume the discounts to others as they please. Their stations inform them of the wants and business of all who deal with and depend on the Bank under their management. With these advantages alone, they may by first lending money to themselves, and then immediately shutting the Bank to others, with a knowledge of the effect on others carry on speculations as gainful as reproachful. Whether the following case happened or not, it will illustrate this source of abuse. A combination of a few influencial Bank Directors, who were shippers of flour, after drawing under the rules of the B. the amount permitted to Directors, procured a curtailment of discounts, which compelled the Holders of flour, as was foreseen, to sell at reduced prices. As soon as the Mercantile Directors had loaded their ships, and appearances would allow, the ordinary course of discounts was restored. A candid or an incautious Bank Director many years ago was heard to say, that altho' there was no salary annexed to the place, it was fairly worth five thousand dollars a year.

As a remedial plan of a Bank the Directors might be converted into impartial Judges, in the discharge of their trust, by receiving a liberal salary paid out of the Bank dividends, might be disabled from holding Bank Stock & from borrowing directly or indirectly from the Institution, and might take a customary oath of office. Under these regulations, they might without bias, at least without the temptations now before them, exercise the functions required from them & fulfill the ends of the Institution. If it be objected that by holding an interest in the Institution they will be more solicitous to increase its profits, the answer is that at present they may promote their particular interest, in ways impairing those profits. If objected that the men engaged in the business connecting people with the Banks make the best directors, because best acquainted with the affairs of the Customers of the Bank; the answer is that the Directors soon acquire in their places, more of that sort of information than they carry into them. And it is a general answer to objections, that the question is whether all the advantages claimed for the present constitution of Boards of Directors, are not overbalanced by its disadvantages, and by the advantages of a Board such as that suggested.

Force of precedents in case of the Bank — & in expounding the Constn equal division of Senate, when the Bill negatived by V P not occasioned by unconstitutionality but inexpediency of the Bill reasoning of Supreme Ct — founded on erroneous views & — 1 as to the ratification of Const by people if meant people collectively & not by States 2 imputing concurrence of those formerly op posed to change of opinion, instead of precedents superseding opinion 3 endeavoring to retain right of Court to pronounce on the consty of law after making Legisl omnipotent as to the expediency of means 4 expounding power of Congs — as if no other Sovereignty existed in the States supple mental to the enumerated powers of Congs — 5 making the Judy-exclusive expositor of the Constitutionality of laws the co-ordinate authon ties Legisl — & Execut — being equally expositors within the scope of their functions