Page:A History of Banking in the United States.djvu/50

 the United States. The private subscriptions were payable in four installments, the first at the time of subscription, the second six months later, the third one year later, and the fourth after eighteen months. One quarter of each installment was to be paid in gold or silver, and three-quarters in public stocks; the six per cents at par and the three per cents at fifty. No private subscription was to exceed a thousand shares. The Bank might go into operation when $400,000 had been paid in in gold and silver.

A provision was inserted against Hamilton's plan and judgment, providing for branches. Sooner or later such were organized at Boston, New York, Baltimore, Washington, Norfolk, Charleston, Savannah, and New Orleans. For the fiscal operations of the government, the branches were very useful, and we have no information that any evils were produced by them in the first Bank; but later experience with branches in the United States has been almost uniformly bad.

Hamilton's Bank, created by this charter, fell in with the notion of a bank which then and long afterwards prevailed in this country. "What is that," said Daniel Webster, "without which any institution is not a bank and with which it is a bank? It is a power to issue promissory notes with a view to their circulation as money. Our ideas of banking have been derived principally from the act constituting the first Bank of the United States, the organization and powers of which were imitated from the Bank of England." "Banking in America," said Gallatin, "always implies the right and practice of issuing paper money as a substitute for a specie currency." The free banking law of New York, in 1838, first defined a bank without any reference to the function of note issue.

Let it be permitted to introduce at this point what it seems necessary to say in regard to the nature and functions of a bank.

The inconvenience of barter consists in the lack of coincidence between the persons who desire to exchange, with respect to the commodities, amounts, and qualities. Money overcomes this, but it is stiff and angular in its operation. Every step must be taken and no cross cuts are possible. What we call credit, in connection with currency, introduces harmony and rythm [sic]. By combination of steps, an accelerated movement, and abbreviated operations, many processes which are necessary in the use of money may be omitted in the use of credit. They are understood, or taken for granted, or are simply recorded until they are cancelled by some subsequent operation. These are the facts which led to the invention of banking, and to the devices by which it is carried on. Various paper instruments have been devised for convenience in these processes. It is a most mischievous mistake to include them in the definition of money. That introduces confusion at the first step and leads to fallacies at every step of deduction. The paper instruments abbreviate the processes and avoid the need of money.