The Crisis at Last!
We have at least reached the crisis of the financial panic. The City Banks have suspended specie payments, –not by concerted action and as a measure of relief to the business community, but upon sheer compulsion. They have fought gallantly, not to say obstinately, against this necessity. They proclaimed their purpose from the beginning, and some of them even to the end, not to take this step so long as they had a dollar of specie in their vaults. The question from the outset, however, has been a very simple one. Banks as business concerns must act upon the same principles, and be governed by the same laws, as individuals. They have owed to bill-holders and depositors not far from sixty millions of dollars; -the specie they have had on hand to pay it with has been about ten millions. They could pay only so long as their creditors did not demand payment. Every dollar of this debt was due on demand, and anything which should induce their creditors to present their claims was sure to break them. The main thing they had to do, therefore, was to infuse confidence into the business community, –to take such steps as should allay alarm and facilitate the resumption of business. They have pursued precisely the opposite course. They have shown throughout a timid, nervous apprehension about their own safety, and a consequent indifference to the safety of the great business community upon which they were absolutely dependent. They have thus exasperated one class of business men and alarmed another. Their feverish anxiety about themselves created corresponding distrust on the part of the public, and this has been growing from day to day, under the stimulus of the failures which were constantly occurring among the merchants, and which were charged to the selfish contraction of bank accommodations. It is said that the Banks could not expand with safety to themselves; but their safety depended throughout far more on the confidence and forbearance of their creditors than upon the amount of their indebtedness. They could pay seventy millions with ten, as easily as sixty; and discounting the additional ten might have prevented the alarm and the run which have compelled suspension. The TIMES of Saturday reminded the Banks that their extreme confidence in their own resources was quite likely to prove their ruin, and that the distrust which had even then begun to manifest itself among the bill-holders, would ere long extend to the depositors, unless speedy and effectual measures were adopted to prevent it. The adoption of the country circulation of the State at an early day would have accomplished the object, –but neither that nor anything else was done, or even attempted by the Banks. A small but influential minority resisted every endeavor to restore confidence by relieving the business community. The result is now seen; and it only remains to consider what is to follow.
The Constitution prohibits the Legislature from “passing any law sanctioning in any manner, directly or indirectly, the suspension of specie payments” by any Bank; –and the Constitution of the United States also forbids the enactment of any law impairing the obligation of contracts. These are negative provisions and call for no action on the part of the Legislatures. In this State, however, laws have been enacted, by which a bank, or other monied corporation, may be enjoined when it “shall become insolvent, or unable to pay its debts,” and the Court may thereupon appoint a Receiver. By the act of 1849, “any creditor” having a demand exceeding $100 arising upon a debt or liability, the payment of which shall have been refused, may, after ten days from the date of such refusal, apply to any Justice of the Supreme Court for an order declaring the Corporation insolvent; and the Justice may, upon such application, if it be expedient, grant a temporary injunction: and upon the hearing, after “short notice,” as he may appoint, the Judge may determine whether the corporation is “clearly solvent” or otherwise, –but he shall in any case continue the injunction until the demand of the applicant be fully pain with costs, unless there is a deference on the merits to such demand. If he does not deem it “clearly solvent,” he shall make an order declaring it insolvent, and appoint a Receiver. A similar application may be made by any one or more of the stockholders owing stock to the amount of one-tenth of the capital paid in: –and the proceedings thereupon will be the same as in the case already referred to. And under the Revised Statutes, the Attorney-General may make the application. If the applicant withdraws his application, or if the Bank pays the demand of the pursuing creditor, before the Judge determines anything on the hearing, then the Corporation stands as it did before the application was made. And if Banking Associations are not proceeded against they do not lose any of their legal functions by the mere act of suspension, except perhaps that they could not make valid preferential payments.
From this summary statement of the law relating to the suspension of specie payments, it will be seen that our Banks, if left undisturbed, can go on with their regular transactions gradually, and restore the business of the whole community to its wonted condition of vigor and prosperity. It can hardly be suppos- therefore, that even a single individual can be found, under such circumstances, disposed ed, to embarrass them in their endeavors to accomplish a result of such importance to the whole community. The Banks have taken measures to resume specie payments at the earliest possible moment, –their bills are secured by State Stocks, and will pass just as current as ever before, and depositors are not likely to lose a single dollar of their money. But, even if there should be any effort to force the Banks into liquidation, it rests entirely in the sound discretion of the Judges of the Supreme Court whether it should be allowed to succeed, for it is for them to decide whether each Bank against which such proceedings may be commenced is, or is not, “clearly solvent:” –and, although the demand of the creditor must in any case be satisfied, it is only when the Judge finds the corporation to be insolvent that a Receiver is to be appointed.
With the degree of forbearance, therefore, on the part of the public which it is for the interest of all to exercise, the Banks may go through this crisis without injury to themselves and with advantage to the whole community. And it is only in case a different disposition should be evinced that the aid of the Legislature, by modifying the penalties and extending the period of forbearance, would need to be invoked.