Page:A History of Banking in the United States.djvu/130

 Communication containing the History of Some Bank from 1806 to 1837, which at first was Managed very Conservatively; No Renewals, No Accommodation Paper, etc." "It was ascertained soon after the Bank was fairly in operation that its ability to discount had no sort of connection with or dependence on the amount of its capital." It required punctual payment by other banks of their notes, and so maintained its circulation by new discounts, while they, as they gave extensions, could not circulate their notes except by giving them to agents who forced them into circulation by exchanges. "The possession of capital was of no use except to inspire confidence." This being once fully established, the capital was an inconvenience. It was a trouble to invest it. The stockholders could have done it better individually. Therefore, in July, 1816, half the capital was paid back to the stockholders in specie. Still it suffered from the annoyance of unemployed capital. "To employ it in discounting commercial paper, experience had shown was not sagacious, as the bank's credit, which cost nothing, already supplied all the demands of trade." It therefore lent $25,000 of its remaining capital on mortgage in 1821. The remaining capital was $100,000, of which one quarter was thus invested. Subsequently a large part of the remaining $75,000 was lent on mortgage.

The banks brought loans to every man's door. When a bank was established in a country town it became the current fashion to get a loan and undertake some enterprise. The need for a loan did not arise from a growth of affairs up to the point where a need of more capital was experienced. Not every man is fit to have credit. It is far from being a blessing to every one. An education in the use of capital is needed before one is fit to use credit. This was illustrated by the colonial banks; it accounts for such diatribes as we have just read, and we shall see it illustrated later in the history of the great banks of the South and West.