In this way, all the banks of each State might unite to establish a joint agency in every large city, throughout the country, for the redemption of all their bills. In doing so, they would not only certify, but make themselves responsible for, the solvency of each other's bills.
The banks might safely make permanent arrangements of this kind with each other; because the permanent solvency of all the banks might be relied on.
The permanent solvency of all the banks might be relied on, because, under this system, a bank (whose capital consists of mortgages), once solvent, is necessarily forever solvent, unless in contingencies so utterly improbable as not to need to be taken into account. In fact, in the ordinary course of things, every bank would be growing more and more solvent; because, in the ordinary course of things, the mortgaged property would be constantly rising in value, as the wealth and population of the country should increase. The exceptions to this rule would be so rare as to be unworthy of notice.
There is, therefore, no difficulty in putting the currency, furnished by each State, at par throughout the United States.
At the general agencies, in the great cities, the redemption would, doubtless, so far as necessary, be made in specie, on demand; because, at such points, especially in cities on the sea-board, there would always be an abundance of specie in the market as merchandise; and it would, therefore, be both for the convenience and interest of the banks to redeem in specie, on demand, rather than transfer a portion of their capital, and then pay interest on that capital until it should be redeemed, or bought back, with specie.
Often, however, and very likely even in the great majority of cases, a man from one State—as California, for example,—presenting Massachusetts bills for redemption at a Massachusetts agency—either in Boston, New York, or elsewhere—would prefer to have them redeemed with bills from his own State, California, rather than with specie.
If the system were adopted throughout the United States, the banks of each State would be likely to have agencies of this kind in all the great cities. Each of these agencies would exchange the bills of every other State for the bills of its own State; and thus the bills of each State would find their way home, without any demand for their redemption in specie having ever been made.
Where railroads were used as capital, all the banks in the United States could form one association, of the kind just mentioned, to establish agencies at all the great commercial points, for the redemption of their bills.
Of course each railroad would receive the bills of all other roads, for fare and freight.
Thus all railroad currency, under this system, would be put at par throughout the United States.