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TUESDAY NIGHT, Feb. Sth, 1542.
Dear Sir-Having been engaged with the Board of Directors, your letter of this date did not reach me before 3 o'clock, and instead of a formal answer to the question contained in it, I beg leave to adopt the form of a letter in reply.
I regret that some of my answers to the questions propounded by the Committee were not satisfactory. This, I think, may justly be attributed to the nature of some of the questions, which do not appear to me to be susceptible of definite answers. It would have been something like dogmatical pretension in me to reply with confidence to that which may depend on circumstances that may vary every week. It might be as reasonable to suppose that the officers of an army should lay down rules of action to conduct a difficult campaign before they were aware of the movements of the enemy, as that the officers of a bank, in the present crisis of the monetary and banking affairs of the country should undertake to pronounce the manner and amount of curtailments which may, under all circumstancer, be necessary to commence and maintain specie payment. That a slow and continued diminution of discounts is requisite to that end, I have already said and I feel assured of it, but i cannot hazard an opinion as to the quantum, the periods, or the mode of making that diminution. As to the quantum we must ascertain what reduction our customers can bear or we may weaken rather than strengthen the institution; as to the periods, that must depend on the coming in and value of the crops, and the means of the country to pay the debts to the town; and as to the mode, we must be regulated by the capability of the different classes of debtors. In ordinary times it is the readiest way to reduce discounts by rejecting business paper, but when that is carried to any extent, it embarrasses trade and causes a decline in the prices of our agricultural products, by giving ali the advantage to the great capitalists over the moderate dealers. A reduction of the accommodation paper is the most desirable, but that is slower in its operation, or we soon create more suspende debt, and incur the heavy expenses of a multitude of law suits. Much then must be left to the discretion of the Boards of Directors on these points.
From the 1st February, 1841, to the 5th April following, when the Banks in Richmond persisted in specie payments, after Baltimore and Philadelphis tal suspended again, the Bank of Virginia (I mean the parent bank) reduced its circulation upwards of one fourth-tha: is from $559 917, to $635 096, and the consequence was that the portion which was not brought in, ceased to be of general circu'ation and was used only for the purpose of drawing specie, while the notes which were not convertible, took the place in circulation of the convertible notes, on the well established principle in political economy that two circulations of unequal value cannot exist together. In that abortive effort of two months, to maintain specie payments, our stock of coin was only reduced about $50,000, but we parted with other funds equivalent to specio to make up the difference. This fact shews that when a resumption does take place, it must be by general co operation of all the banks of this and the adjacent States, or we shall be inundated with a circulation of inferior quality.
It would afford me great pleasure to give the Committee precise information on all questions of fact, but on those which I deem not susceptible of definite answers, I cannot venture to offer opinions which may turn out to be right or wrong according to events. I might present a great array of figures and calculations from which the Committee might be led into erroneous conclusions, and I therefore think it more becoming to confine myself to general principles than to indu ge in vain conjectures. The position I take is this, that until there is something approaching equality in value between the exports and imports of the State, especially in a time of distrust, there can be no security for the maintenance of specie payments. The arrival of every rail road car will bring demands upon us, and a premature attempt will only produce a worse state of things than now exists. It will be in my opinion, far more just that the banks should surrender their charters, by which all claimants will have an equal participation in the assets of the banks, than to undertake to pay at a specified time (when they are unprepared) those more importunate applicants who will crowd their counters until their specie is exhausted, and leave distant noteholders to await the collections which shall be made from the debtors to the banks. If, however, the legislature can have sufficient reliance on the banks to allow them their own time and manner of resuming, and will only require them, every bank and branch to reduce their respective loans, including also their real estate, to sixty per cent. on their capital, before the first day of January, 1843, they will all bona fide resume, I confidently believe before that day, provided the neighboring States will co-operate with the.n. The Legislature cannot imagine how irksome it is to the higher officers of the banks to carry on their operations under the present mortifying incidents to which they are exposed. They would, I am justified in declaring, hail with the greatest satisfaction the return to and maintenance of specie payments.
No man is more strongly convinced of the evils of an inconvertible paper currency than I am, and permit me to say, those evils cannot be successfully corrected by harsh and precipitate measures. It is a case in which the whole system is deranged, and to use the language of my original profession, the remedy will consist in the alterative course of practice, instead of the more violent and active one.
I have committed my thoughts to paper as they arose, and while I have perhaps written with too much freedom for such an occasion, I beg to assure you of my great respect.
JOHN BROCKENBROUGH.
TO JOEL HOLLEMAN, Esq.
Chairman of the Committee on Banks.
