we to the public is to keep in
their vaults a sufficient amount of gold and silver to insure the
convertibility of their notes into coin at all times and under all
circumstances. No bank ought ever to be chartered without such
restrictions on its business as to secure this result. All other
restrictions are comparatively vain. This is the only true touchstone,
the only efficient regulator of a paper currency--the only one which
can guard the public against overissues and bank suspensions. As a
collateral and eventual security, it is doubtless wise, and in all cases
ought to be required, that banks shall hold an amount of United States
or State securities equal to their notes in circulation and pledged for
their redemption. This, however, furnishes no adequate security against
overissues. On the contrary, it may be perverted to inflate the
currency. Indeed, it is possible by this means to convert all the debts
of the United States and State Governments into bank notes, without
reference to the specie required to redeem them. However valuable these
securities may be in themselves, they can not be converted into gold
and silver at the moment of pressure, as our experience teaches, in
sufficient time to prevent bank suspensions and the depreciation of
bank notes. In England, which is to a considerable extent a paper-money
country, though vastly behind our own in this respect, it was deemed
advisable, anterior to the act of Parliament of 1844, which wisely
separated the issue of notes from the banking department, for the Bank
of England always to keep on hand gold and silver equal to one-third of
its combined circulation and deposits. If this proportion was no more
than sufficient to secure the convertibility of its notes with the whole
of Great Britain and to some extent the continent of Europe as a field
for its circulation, rendering it almost impossible that a sudden and
immediate run to a dangerous amount should be made upon it, the same
proportion would certainly be insufficient under our banking system.
Each of our 1,400 banks has but a limited circumference for its
circulation, and in the course of a very few days the depositors and
note holders might demand from such a bank a sufficient amount in specie
to compel it to suspend, even although it had coin in its vaults equal
to one-third of its immediate liabilities. And yet I am not aware, with
the exception of the banks of Louisiana, that any State bank throughout
th