Chap. V : Such Banks ought to issue their Notes on private, not mercantile Credit

Let me, therefore, reason upon the example of two bankers; one issues his notes upon the best real or personal security; another gives credit to merchants and manufacturers, upon the principles of mercantile credit, which we have explained above; the notes of the one and of the other enter into circulation, and the question comes to be, which are the best? If we judge by the regularity of the payment of notes on presentation, perhaps the notes of the one are as readily paid as those of the other. If we judge by the stock of the two bankers, perhaps they may be equal, both in value and solidity; but it is not upon either of these circumstances that the question depends. The notes in circulation may far exceed the amount of the largest bank stock; and therefore, it is not on the original stock; but on the securities taken at issuing the notes, that the solidity of the two currencies is to be estimated. Those secured on private credit, are as solid as lands and personal estates; they stand upon the principles of private credit. Those secured on the obligations of merchants and manufacturers, depending upon the success of their trade, are good or bad in proportion to such success. Every bankruptcy of one of their debtors, involves the bank, and carries off either a part of their profits, or of their stock. Which way, therefore, can the public judge of the affairs of bankers, except by attending to the nature of the securities upon which they give credit.