The Late Commercial Crisis [pp. 100-126]

THE LATE COMMERCIAL CRISIS.
thus force down prices of stocks in furtherance of their own
speculations.*
In close connection with this, is the recommendation of the
recent clearing-house coimmittee of New York, to put an end to
the practice of certifying checks for stock-brokers who have at
the time no money on deposit, with the understanding that the,
amount so certified shall be placed on deposit during the day.
This they tell us is frequently done to an amount equal to three
or four times the capital of the bank in a single day. The enormous risk is apparent. It broke one bank in the very crisis of
the panic, which allowed a single gambling broker to take onethird of its capital in this way, who failed to return it. This prodigiously infuriated the rising alarm. We quite agree with the
clearing house committee, that this system ought to come to an
end in the National Banks-if not by their voluntary action,
then by decisive prohibition of Congress, which we believe now
exists without being enforced. It is a method of stretching the
credit system, kite from kite, and bubble from bubble, till it snaps
and bursts from very tenuity. It aggravates all the dangers
of commercial panic. It makes the whole fabric of credit aerial
and unsteady to the last degree. It unwarrantably risks the
funds of genuine depositors and innocent stockholders whose
property ought not to be thus hazarded. The stock of the Bank
of the Commonwealth in New York, lately broken in this way,
was mostly made up of the savings of small holders, women and
others, who could not afford to lose it. It is said indeed that the
Stock Exchange could do but little of its present business, if
this system were given up. All the better. It is quite certain
that, if anybody has money, and wishes to purchase stocks with
it, he can always find the means of doing it without recourse to)
this abnormity. As to all other stock dealings, they make up
that vast volume of stock speculation and stock gambling —the
mere throws of the dice to get wealth wi;thout earning it-which
are the pest of the time and country.
Given a specie standard, and we think the true elasticity in
the currency would be promoted by free banking, guarded by
due average reserves, and the circulation secured as now by the
pledge of national stocks.
* See Article on this subject by the writer in Scrib7ter's Mortthly for April, 1873.
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