The specie is to the banker, what "the capital," technically and properly so called, of other tradesmen, is to them; and all else, circulation, notes discounted, stocks owned, bonds and mortgages on file, are to the banker, what the wares and articles of merchandise are to the trader. They may far exceed in amount, the capital engaged in the business, and necessary for its safe and successful prosecution.

223.

The nature of "the loans and discounts."

It may be necessary to state farther, as a means to a fuller comprehension of the whole subject, that "the loans and discounts," as they appear on the banker's books, do not represent, or bear any constant relation, to either the specie in the vaults, or the bank-bills issued by the bank, making what is ordinarily discussed under the head of circulation.

A glance at any bank statement, or report of the condition of its affairs, will disclose the fact, that as a general thing, the loans and discounts exceed the amount of both specie and circulation; thus, to use a statement now before me, which is a fair average statement: In the State of New York, Dec. 10th, 1851, the total specie was $8,306,829; the total of circulation $26,228,553; making together $34,535,382. But the loans and discounts on that day,

amounted to $104,039,788, or about three times as much as the specie and bills together; the specie, of course, was not allowed to pass out of their vaults into circulation, so that the loans and discounts were about four times the amount of the bills, or money they had to lend.

224. Loans deposited.

The explanation is easy. Whenever a customer to a bank makes a loan of large amount, he does not want the loan in money that he can carry away with him. He prefers to have it in the bank, in the shape of credit to his name, so that he can draw upon it to make the payments he may have occasion for in the ordinary course of his business. Hence, when he borrows money, instead of taking the money, he prefers to leave it "on deposit," subject to his order. But there may be no money, as we have seen, that could be counted out and passed into his hands over the counter; none, for the reason that the loans and discounts exceed the money, by about four to one. So, when the draft comes in, the party to whom it has been given by the depositor in payment, may not want the money; many of them will not want it; they will merely want to have the amount credited to them in their bank account, to be drawn against in like manner by themselves, when occasion may require.

In the same way, the items of deposits greatly exceed the amount, whether in currency or in specie, that has actually been deposited; that is, passed over the counter of the banks into their custody. It consists largely of the "loans and discounts" that have not been paid, but only passed to the credit of the borrower.

225. Necessity for a specie basis.

This brings us to the very important question of specie payments, or what is called in other words, "the solvency of a bank."

The solvency of a bank, and the possibility of specie payments, must depend, of course, upon a certain ratio between the specie in the vaults, and the bills in circulation.

The paper thus issued, it will be remembered, has in itself no intrinsic value, or but little as old paper-perhaps three cents a pound. Its value consists in its being evidence of ownership; or, as is sometimes said, the intrinsic value consists not in the paper, but in the responsibility of the parties that issue it as a "promise to pay;" but more correctly in its being evidence of the obligation to pay the amount of the face of the bill.

Suppose, for example, I buy a piece of land. Since I cannot remove it, I take a deed of it; that

deed is evidence of ownership, and as such has an intrinsic value far exceeding that of mere blank

paper.

Suppose, again, I buy a horse, and do not wish to take it away at the time; I take a bill of sale, and that is proof of ownership, and entitles me to take the horse at a subsequent time, as by contract agreed upon.

Suppose, again, I lend a man a sum of money, or work for him a day. I acquire thereby a right of ownership in something that is in his possession. He gives me his note, and that entitles and enables me to go and demand something equal in value to what is specified in the note or due-bill, and usually estimated in money; and in case he refuses or neglects to pay me, it authorizes me to take something of his as payment.

But suppose, again, instead of giving me his note he gives me bank-notes, or bank-bills, as we usually call them. I release him, and have no further claim on him, but I become owner by that fact, and to the extent of the face of the bills, of the stock and other property of the bank, although of course I am not regarded in law, nor am I in fact, a stockholder, technically so called.

226. The effect of redemption.

And if a bank should be obliged on any one day

to redeem or take in all its bills, the bank would have the bills indeed, but the former bill holders would have the capital, and all that the former stockholders would have would be the notes, etc., which they had discounted.

These, in like manner, would be in their hands evidence in the ownership in the property of their customers for whom they had granted the discounts, and their value could be collected out of these bor

rowers.

And thus, if at any one moment, all paper money, together with all other forms of paper evidence of ownership or indebtedness, should be destroyed, or pass on according to its original destination until it shall have reached maturity and accomplished its object, there would be indeed a change in the fact of ownership, but no change in the real aggregate wealth of a community. Only a vast amount of property would very suddenly "change hands," as the expression is, and rest in the hands of the true owners, so that the visible and apparent, and the real or true, owners would be the same parties.

But this case can never come until the final day of doom, and then we shall all have something else to think of besides getting our share of the pelf and peltry of this world.