been sunk, although its charter contained substantially the same prohibitions and restrictions, but made more severe. The other creditors, however, were paid in full.9 The second bank in the United States, to be chartered by a State government and to begin business under such charter, was the Massachusetts Bank, which was organized under an act of the legislature of Massachusetts in the year 1784.10 With this partial glance at the chronology of banking, we pass to the special history of New York legislation on the subject. When a colony, bills of credit were issued by authority of the colonial legislature from time to time. Loan commissioners were appointed for their supervision, and numerous controversies occurred with the home government relative thereto. There were no incorporated banks here under the colonial government.11 Three distinct and widely differing systems of banking have been successively adopted by the State government. The first lasted from 1791 to 1829; the second from 1829 to 1838. These systems, after a thorough trial, have been abandoned, while the third has been in force since 1838. The present system is the basis of the National Banking Act, and has gone into general use. 12 The recreation of a Bank of the United States in 1816 compelled the State banks to resume specie payment (which had been suspended during the war) or wind up. Of the 446 State banks then in existence, with an aggregate capital of about $90,000,000, a very large number were compelled to liquidate. From 1811 to 1830, 165 banks with a capital of $30,000,000 closed business, with a loss to government and individuals of about $5,000,000. The United States Bank became a powerful financial machine, and the State banks complained loudly of the tyranny exercised over them by it and its branches. When it ceased to exist in 1836 the number of State banks largely increased, being 634 in 1837, with a capital of nearly $291,000,000. This number was increased in 1840 to 901, with a capital of over $358,000,000. Lossing's Encyclo. 10 This institution is still in existence in the city of Boston and is a national bank. Paine's Mass. Paper Currency, 51. 11 See note, ch. 71, Laws of 1813, Van Ness and Woodworth's edition. 12 Its most distinguishing principle and most useful feature is that which requires ample security for the redemption in specie of all bank issues, and which has become a part of the constitution of the State as follows: "The legislature shall provide by law for the registry of all bills or notes issued, or put in circulation as money, and shall require ample security for the redemption of the same in specie." Art. 8, § 6. In the year 1844, Sir Robert Peel practically carried into effect the same principle, in dealing with the Bank of England on the renewal of its charter in that year. By the renewed charter BANK OF NEW YORK. March 21, 1791, about nine years after the granting of the previously-mentioned charter to the Bank of North America, the legislature of this State passed an act entitled "An act to incorporate the stockholders of the Bank of New York; " an institution which had carried on a banking business with a capital of $500,000, in the city of New York, since February 26, 1774. The State government had been in operation nearly fourteen years before any one of the banking companies doing business in this State was permitted to conduct its business under an act of incorporation.13 The reason for this re (1844) of this institution, it is enacted that there shall be transferred, etc., "to the issue department of the Bank of England, securities to the value of £14.000,000, whereof the debt due by the public to the said governor and company shall be and be deemed a part." Stat. 7 and 8 Vict., ch. 32. "The object of this statute (Stat. 7 and 8 Vict., ch. 32) has been to obviate the chances of over-issue and sudden fluctuations in the quality and value of money, by limiting the power to issue notes payable on demand," etc. "While the directors are left to manage the banking department at their discretion, their management of the issue department is subjected to what seems to be a well-devised system of restraint. The bank is allowed to issue to £14,000,000 of notes upon securities (of which the debt of £11,015,100 lent by it to government is a part); and whatever paper the issue department may at any time issue over and above this maximum amount of securities, it must have an equal amount of coin and bullion in its coffers. Hence, it is impracticable for the issue department to increase its issues without, at the same time, proportionally increasing its stock of coin and bullion, or to diminish the latter without proportionally diminishing the amount of paper supplied to the public and banking department." McCulloch's Dict., Lond. ed., 82-88; Lawson's Hist. of Banking, Amer. ed., 76, 77; Gilbart on Banking, Amer. ed., 61; Levi on Mercantile Law, 202; Cleveland's Banking Law, 84. 13 "A corporation aggregate is a collection of individuals united in one body, under such a grant of privileges as secures a succession of members without changing the identity of the body, and constitutes the members, for the time being, one artificial person or legal being, capable of transacting some kind of business like a natural person. It does not occur to my mind, that anything else can be essential to the definition. Such a union as I have mentioned can be effected under a grant of privileges from the sovereign power of the State. A corporation is, therefore, said to be a legal being, or the mere creature of law. It is convenient, though not absolutely necessary, that this artificial person, like a natural one, should have a name by which it may be known and designated in the transaction of business. And when the doctrine was that a corporation could only contract by its seal, a seal was said to be an indispensable requisite. So, immortality was once thought to be an attribute of all corporations; but that any markable fact is to be found in the condition of affairs that then existed. The Continental paper money system had caused such severe losses that the representatives of the people were unwilling to countenance the creation of a corporation, the establishment of which seemed to favor, however remotely, the issuing of paper money by association whatever, and this charter expressly states: "It shall not be lawful for the said corporation to emit any notes, or contract debts which shall be payable in the bills of credit emitted by the laws of this State." 14 This, the first bank 15 charter granted in this State, after the act incorporating the Bank of North America, was substantially the model upon which all the bank charters granted in this State were framed, before the year 1825, at which time the form of these acts was changed, and new and more stringent prohibitions and restrictions were enacted by the legislature. Its original capital was $900,000. April 10, 1792, the Bank of Albany was chartered (ch. 61), with a capital of $240,000. March 6th of the succeeding year, the Bank of Columbia was chartered (ch. 38), with a capital of $160,000. It was located at Hudson, where it was proposed to open a foreign trade and to establish the whale fishery business by a company from Rhode Island.16 Shortly after the organization of the Bank of New York, the State of New York subscribed $50,000, thus now means no more than a continued succession of members for such period, whether long or short, as may be allotted to this legal entity by its creator." BRONSON, J. The People v. The Assessors of Watertown, 1 Hill, 620. "It has been said, that the great distinction between the common joint-stock companies or partnerships, and corporations, is that in the first, the law looks to the individuals of whom the partnership is composed, and knows the partnership no otherwise than as being such a number of individuals; while in the second, it seems only the creature of the charter, the body corporate, and knows not the individuals." Wordsworth's Law of Joint-Stock Companies, 4. The constitution of this bank, adopted at the time of its organization, contained the provision, "No stockholder shall be accountable to any individual or the public for money lodged in the bank for a greater sum than the amount of his stock." Domett's Bank of New York, 14. During the seven years intervening between its creation and incorporation, the stockholders were severally liable for the whole indebtedness of the concern, despite the foregoing declaration. 14 Section 9, ch. 37, Laws of 1791. 15 This institution has never passed a dividend except in 1837, when it was obliged to do so by law. Domett's Bank of New York, 109. 16 Hammond's Hist., Vol. I., p. 324. increasing its capital by that amount,17 and again, in 1832, made a like subscription.18 17 The State Comptroller, in his report under date of January 30, 1807, says: "In the act incorporating the Merchants' Bank, the State reserved to itself the right of subscribing for 2,000 shares of the capital stock of that institution, in addition to the stock already held; and the act appropriated all such shares and the dividend thereon to the use of common schools. As it is already ascertained that the stock in this bank produces nine per cent. per annum, it is respectfully submitted to the Honorable the Legislature to provide for taking the residue of the stock from time to time, as the payments on the several items of the school fund shall enable the Treasurer to pay for it, and to provide that thereafter the receipts into the treasury, on account of this fund, be loaned agreeably to the act of 2d April, 1805." The same officer, in his report under date of January 28, 1809, said: "The provision should be a direction to invest in bank stock as the best means of securing the greatest as well as the most regular revenue. First, in the stock, which the State has reserved to itself the right of subscribing for in various banks; and secondly, in the purchase of bank stock in market. In the one case there is but little doubt that the amount invested would produce at least nine per cent. per annum, and the other at least seven. The shares which the State has a right to, and are proposed to be subscribed for, are in the stock of the Manhattan Company to the amount of $50,000; Albany Bank, $20,000; Columbia Bank, $20,000; Hudson Bank, $15,000; Farmers' Bank, $20,000; State Bank, $20,000, and the Mohawk Bank, $5,000." "The funds have been augmented since the last report $50,000 by an investment to that amount, in the capital stock of the Manhattan Company; $20,000 by an investment in the stock of the Farmers' Bank; and $20,000 by an investment in the stock of the New York State Bank." Extract from Comptroller's report of February 6, 1810, referring to the Manhattan Company. 18 The right reserved by the State to subscribe to the stock of banks chartered by it was sometimes given as a gratuity, as will be seen by the following quotation: "And be it further enacted, That the right reserved to this State to subscribe to the stock of the Bank of Utica, be, and the same is hereby transferred to the College of Physicians and Surgeons of the Western District, with full power to dispose of the same, or any part thereof, in such way and manner, and at such times as shall by them be deemed most beneficial to the interests of the said college: Provided, that on the said shares so to be subscribed, shall be paid into the said bank a sum not exceeding the amount paid by the former stockholders, and in like manner from time to time, as calls may be made by the directors of the said bank. And provided further, That no part of the principal of the moneys arising from the sale of the said shares shall be appropriated toward the payment of the salaries of any of the professors or tutors of the said college." § 11, ch. 119, Laws of 1814. The following statement, in connection with the proposed establishment of a new bank during the year 1814, is taken from the Appendix to Southwick's edition of the Laws of that year, p. 285. RESTRAINING ACT OF 1804. The legislature, April 11, 1804, passed an act which is known as the Restraining Act of that year. It enacted that from and after the passing of this act, no person unauthorized by law should subscribe to or become a member of any association, institution or company, or proprietor of any bank or fund for the purpose of issuing notes, receiving deposits, making discounts or transacting any other business which incorporated banks may or do transact by virtue of their respective acts of incorporation; " and if any person unauthorized by "BANK OF UTICA." "The Senate added a clause to the supply bill, as follows: 'And be it further enacted, That it shall be lawful for the president and directors of the Bank of Utica, at any time after the passing of this act, to establish an office of discount and deposit in the county of Ontario, under such rules and regulations as are practised in said bank, and to commit the management thereof to not less than one president and twelve directors, to be appointed by the said Bank of Utica.' The Assembly rejected the said clause, and the Senate receded from its amendment by a vote of 15 to 7. "BANKS. "The following applications were made: 1. For one bank at Cooperstown. 2. For two banks at Albany. 4. For one bank at Johnstown. 9. For one bank at Salem. "Without entering into the merits of these several applications, it is sufficient to mention that the Senate, at an early part of the session, evinced a determination to resist the incorporation of any further banking companies in this State. The Commission Company at New York, the North American Coal, and the New York Coal Company, gave rise to the most interesting debates, but the banking privileges applied for suffered the same fate with other similar applications. It was intended to have taken a brief view of the subject, so far as related to coal companies, etc., but considerations not necessary here to state have induced us to be silent. A bill was brought into the Assembly to regulate bankers and banking associations.' It proposed to allow any company of persons, not exceeding ten in number, to transact the ordinary business of banking, such as discounting notes, issuing bills, etc. The bill contained certain restrictions and penalties not necessary to detail. On the question to reject the bill, 66 voted to reject and 24 the contrary. Of course the bill was rejected." |