Richmond Enquirer

RICHMOND, NOVEMBER 14, 1823.

FOR THE ENQUIRER.
THE FARMERS' BANK.
I am gratified to perceive by an essay lately published in the Enquirer signed "A Farmer" that the public attention has been invited to the Farmers Bank. The charter of this bank will expire on the first day of June, 1827. And it is certainly time that the stockholders had taken into consideration, the question, whether their interest will be promoted by its renewal.
A considerable part of the stock of this Bank, belongs to the Board of Public Works, to the Literary Fund, and to other public bodies incorporated for public purposes. Its notes with those of the Bank of Virginia, constitute the circulating medium of the country, and are receivable, whatever may be the condition of the Banks, in discharge of the revenue. It will therefore at once be seen that every question in regard to the banks, is of the first importance, as well to the public as to the stockholders.
I will not in this essay enter into any discussion as to the policy of establishing Banks; or of the good or evil resulting from them. Established they already are, and their administration, incorporated, in a greater or less degree, with the best interests of the country. And should the wisdom of that body, to whom the decision of all questions of policy belongs, determine that the banks were unwisely established, and that there ought to be none-it still remains to be decided, at what time the operations of those already in existence shall be brought to a close. Is this the time? I think it is not. We have just passed through a period of delusion and madness. The pecuniary situation of the country, since the beginning of the year 1819, has no parallel in its history. If in this state of things, or in any state of things likely to exist between this time and the first day of June, 1827, the Farmers' Bank should be compelled to wind up its concerns, many of its debtors will be crushed, and the debts to an immense amount wholly lost. By continuing its operations, and calling in the debts by moderate curtailments, the debts may be collected, and the debtors saved from ruin.
The stockholders manifest considerable dissatisfaction at the depreciated price of the stock, and discover on that account, (some of them) a disposition to bring the concerns of the bank to a close. It is true the price of stock has depreciated, but it should not be forgotten, that bank stock like every other description of property, in the age which has just passed by, had advanced to a price greatly beyond its intrinsic value-and like every other description of property, it has now perhaps fallen much below it. The question with the stockholders should be, what effect will the termination of the charter have upon the already depreciated price of the stock? But I think it will be found upon examination, that the depreciation in the value of bank stock, has not been greater than the depreciation in the value of every other description of property. It is only the more perceivable. Bank stock has always a current price, at which it is daily quoted and sold in the market. Its depreciation is therefore constantly before the eye, whilst the depreciation of other property is not so obvious. But let the holder of bank stock, calculate the depreciation in his other property ; let him for example, compare the price which he could now obtain for his land, with the price he could have once gotten for it, and he will very probably find that all property has depreciated upon a like scale.
There is another source of discontent amongst the stockholders. It is as to the diminished profits, (and what profits have not diminished?) of their stock. This seems to be attributed by some to the necessary expenses in administering the banks. I am not sufficiently acquainted with the internal affairs of the bank, to investigate this part of the subject-neither was it my purpose when I began this essay to do so. If this evil exist at all, it is susceptible of a plain and easy remedy. The stockholders or even the board of directors can correct it. I will hardly remark in passing, that an office in the bank, is an office of very great responsibility, and in ascertaining the proper salary, we should have a view as well to the services to be rendered, as the responsibility incurred. I think it very probable, if the salaries of the officers be examined upon these principles, that they will not be found too high. The diminished profits of the stock cannot, therefore, in my opinion be owing in any considerable degree if at all to the expenses unnecessarily incurred in managing the banks, but to the extraordinary revolution in the commerce of the Country occasioned by the general peace in Europe. The commerce of the country is now in a state of improvement, and with its improvement the stockholders may calculate upon increased profits.
Banking institutions have become unpopular, and it will not wholly depend upon the pleasure of the stockholders whether the charter is to be renewed or not. The legislature must be consulted, and the sooner this is done the better. That the banks have been too freely used must be admitted, and that great mischief has been thereby produced, must likewise be admitted ; but are those mischiefs attributable to the banks, or to the dealers in the banks? Perhaps they are attributable to both : Perhaps the banks in this particular have not been wisely managed ; but this is an evil not likely to be repeated.-Experience will teach lenders and borrowers wisdom in future. Let us not, however, when complaining of the evils which we have suffered by the banks, wholly forget the benefits received :-What, I will ask, would have been the condition of this country, in the late war but for the aid received from the banks?
If the charter of the Farmers' Bank be renewed for ten years without a bonus, the bank can be restored to its original strength, and the stockholders receive their capital with a reasonable profit upon it. But will the legislature renew the charter without a bonus? I think they ought. It must be admitted by all that the bonus originally exacted of the stockholders was too high. We have ascertained by actual experiment, that it was greatly more than they could afford to pay for the privilege of banking. It would therefore be but an act of justice to them to renew the charter without a bonus. And in the performance of this act of justice to the stockholders, the public good will be promoted.
If the stockholders petition for a renewal of the charter of the Farmers' Bank—and indeed whether they do or not, it is of great importance, in order to its perfect restoration, that it be put under the best possible management. And with this view, I will suggest with great submission, that the mode of appointing the directors on the part of the state, is not the best which might be devised.-On this I judge only from the manner in which the power of appointing, has been heretofore exercised. It will be admitted by all, that the prosperity of the bank will depend in a great degree upon the Directory. If the directors have little or no interest in the bank. they cannot be expected to give much attention to it. Now, it is a well known fact, that a considerable number of the directors appointed by the Executive, (I speak only in reference to the branch in the vicinity in which I live.) have little or no interest in the bank ; many of them own but a single share, and that transferred to them merely for the purpose of qualifying them for a seat at the Board." Indeed. some of them are so not to be actual owners of the stock standing in their name.
I trust that these remarks will not be misunderstood. It is not my purpose to impute unworthy motives to the body making the appointment, or improper conduct to the persons appointed. I wish merely to present this subject fairly to the public view ; and to do so, I must be permitted to ask, what services can reasonably be expected from the managers of an institution, having no interest in it, who if it should go to destruction, would lose nothing by it. In order to ensure the prosperity of the bank, let the management be put into the hands of its owners. Let the appointment of Directors. by way of experiment. be left, for one or two years, to the stockholders. There is no doubt but this may be done without any change in the charter The legislature have reserved the right of appointing by joint ballot of both houses, or by any body to whom they may think proper to transfer the power. Let the general meeting of the stockholders, or such part of them as the legislature shall think proper, constitute a board of commissioners for the purpose of making this appointment.
The interest of the stockholders will be the best possible security against the abuse of this power.- They will be sure to select from amongst themselves, those best qualified to manage the banks
B.