law as aforesaid, shall hereafter subscribe or become a member or proprietor as aforesaid, he shall forfeit and pay for every such offense the sum of $1,000, to be recovered by any person who shall sue for the same, in an action of debt, one-half thereof to his own use, and the other half to the use of the people of this State; and all notes and securities for the payment of money, or the delivery of property, made or given to any such association, institution or company, not authorized as aforesaid, shall be null and void: Provided, nevertheless, that nothing herein contained shall be held in any way to extend to the association in the city of Albany, known by the name of the Mercantile Company, nor the association in the city of New York known by the name of the Merchants' Bank, until the first Tuesday in May, 1805."

And it was further enacted, "All unincorporated associations, institutions or proprieties, formed for any of the purposes aforesaid, that now exist in this State, shall, after the first Tuesday in May, 1805, cease to issue notes and to loan money; and any person concerned or interested in the issuing such notes, or loaning any such money as aforesaid, after the first Tuesday of May, 1805, shall forfeit and pay, for every such offence, the sum of $1,000, to be recovered and disposed of in the manner prescribed in the first section of this act." 19

At this time, gold and silver were not in circulation, and bank paper was, generally speaking, the medium by which business affairs were conducted; the banks, therefore, had the complete right to emit the of the people. The total bank capital actually invested at this time, exclusive of the capital of the Manhattan Company, did not aggregate $2,000,000.20

money

Both the Merchants' Bank and the Mercantile Company, herein referred to, were private associations formed for banking purposes. The first named 21 obtained a charter in 1805, and some of the pro

19 Laws of 1804, 615.

20 Hammond's Hist., Vol. I., 331.

21 Extract from charter of the Merchants' Bank in the city of New York, incorporated by chapter 43 of the Laws of 1805.

"And be it further enacted, That the capital stock of said corporation, exclusive of what may be subscribed on the part of the State, shall not exceed $1,250,000, and that a share in the said stock shall be fifty dollars; and further,

prietors of the Mercantile Company succeeded, in 1811, in procuring an act incorporating themselves and associates under the title of the Mechanics' and Farmers' Bank of Albany.

Under this restraining statute 22 all unincorporated associations, except those expressly mentioned, were compelled to close.

THE RESTRAINING ACT OF 1813.

April 9, 1813, the legislature enacted a law that it should be in the power of the person administering the government of this State, or in his absence from the city of New York, of the common council thereof, to authorize and direct the removal of the public records of the said city to some safe place, and also, in case of danger from the enemy, to authorize and direct the temporary removal of the banks, insurance companies and other moneyed institutions from the said city without prejudice to their chartered rights in any respect whatever, and the directors of the said banks, insurance companies and other moneyed institutions during such temporary removal were thereby authorized to execute the powers and to carry on the business committed to them by law. Ch. 87.

The first portion of the restraining statute of 1804 was made a part of the restraining act of 1813. The first section enacted that no person or persons whomsoever, within this State, should give or receive in payment of any debt or demand whatsoever, or in any way attempt or offer to circulate, any bank bill or promissory note of any banking company within this State or elsewhere, for the payment of money which should be for less than the nominal value of one dollar; and that any person offending against this act, either as giver, receiver or circulator of such bank bill or promissory note, should forfeit and pay the nominal amount or value of such bank bill or promis

That this State shall have a right to subscribe any number of shares in the stock of the said corporation not exceeding in the whole three thousand, at any time when the legislature shall, by law, authorize any person or persons for that purpose, and in consequence of the interest or stock which this State may hold in the said corporation the Treasurer of this State shall be ex officio a director of the said company."

22 At common law the right of banking pertains to every member of the community. Its free exercise can only be restricted by legislative enactment, but that it legally can be thus restricted has never been questioned. Grant on Banking, 1.

sory note so given or received or attempted or offered to be circulated; the same to be recovered with costs of suit in any court within this State having cognizance thereof, by action of debt, by any person who should sue for the same, to his or her own use; provided, that such suit or action be brought or commenced at any time within thirty days after the offence be committed. 2 R. L. ch. 71.

This last act was passed because, while a prohibition was put on the formation of associations for banking purposes, individuals were free to establish banks and issue bills, and both they and the incorporated banks had overwhelmed the country with paper money for six, twelve, twenty-five, fifty and seventy-five cent bills.23 The restriction in this law in reference to issuing bills of the nominal value of less than one dollar was abrogated in 1815 until the end of the next session of the legislature. Ch. 32, Laws of 1815.

The first Restraining Act was, however, modified by an Explanatory Act, so as not to apply to the Manhattan Company, as follows: Whereas, the Chamber of Commerce of the city of New York have, by their respectful memorial to the legislature, expressed apprehension that the bill passed both houses of the legislature at the present session, entitled 'An act to restrain unincorporated banking associations,' may be so construed as to subject individuals to inconvenient restrictions in their usual commercial business and pursuits; therefore, for the removal of those apprehensions,

"IX. Be it enacted and declared, That nothing in the said bill contained shall be deemed or construed to prevent any person, association or company from transacting or pursuing any business other than such as companies or banks, incorporated for the express purpose of banking, usually do or transact, nor shall anything in the said act contained be deemed or construed in any manner or way to affect the incorporation in the city of New York, created by virtue of an act entitled 'An act for supplying the city of New York with pure and wholesome water." " 24

The legislature enacted a law, November 12, 1816, that no banking company should issue, or cause to be issued, any bills or notes, other than for the payment of money; and that the sums which may be

23 Flagg's Banks of New York, 12.

243 Web. Ed. Laws, 611, § 9.

expressed in any bills or notes which any banks should issue, or cause to be issued, which, according to the terms thereof are receivable. only in payment of debts due to the bank, should be recoverable by the bearer of such bills or notes, in like manner as if the same contained an express promise for the payment of money. Ch. 17, Laws

of 1816.

THE RESTRAINING ACT OF 1818.

The third Restraining Act became a law April 21, 1818. It provided that it should not be lawful for any person, or association of persons, or body corporate, from and after the ensuing first day of August, to keep any office of deposit for the purpose of discounting promissory notes, or for carrying on any kind of banking business or operations, which incorporated banks are authorized by law to carry on, or issue any bills, or promissory notes, as private bankers, unless thereunto specially authorized by law. The exceptions were made that nothing in this act contained should be deemed to extend to the bank in New York owned by Jacob Barker, called the Exchange Bank, until three years after the passing of this act; or should be deemed or construed to abridge, enlarge, or in any way affect any rights heretofore granted by law to any incorporated company. Ch. 16, Laws of 1818.

The enormous increase in the amount of paper money, much of which, especially that issued by private persons, was worthless, led to the passage of this act. It is evident the legislature did not care to distinguish between a private bank which carried on a legitimate business based on actual capital and one created to manufacture paper credits, but seemed to hold the opinion that the issuing of bills was a necessary incident of a banking business. 25 But it should be borne in

25 Flagg's History of Banks, 13. In connection with these Restraining Acts, the following portion of a well-considered opinion of SAVAGE, Ch. J., delivered in May, 1824, is of interest:

"What is the meaning of the terms 'banking powers' is next to be ascertained. In the Maine Bank v. Butts, 9 Mass. Rep. 54, SEWALL, Justice, says: 'That expression (banking principles), if it has any peculiar meaning, is an authority to deduct the interest at the commencement of loans, or to make loans upon discounts, instead of the ordinary forms of security for an accruing of interest.' Again: The principal attributes of a bank are, the right to issue negotiable notes, discount notes, and receive deposits.' Per SPENCER, J., 15 Johns. 390, 8

mind that the incorporated banks were as obnoxious to the public condemnation for the state of things which existed in 1818, as the private banks. This is clearly shown by the message of Governor Clinton, an extract from which is given below.26

Am. Dec. 243. Previous to the Restraining Acts, there was no power possessed by a bank, not also allowed to individuals and private associations. They could, in common, issue notes, discount notes, and receive deposits; the only difference was, that the former were not liable beyond their corporate body, while the latter were accountable in their persons, and to the full extent of their private estates, The first Restraining Act was passed in 1804. It had for its object the guaranteeing of banks a monopoly of the rights and privileges granted to them, which had been encroached upon, or infringed by private associations. This was re-enacted in the Revised Laws of 1813; and in 1818, the legislature found it necessary to pass the act of April 21, of that year (Sess. 41, ch. 236), which places individuals upon the same footing with private associations, with the same view to a monopoly, by the incorporated banking companies. The first of these acts prohibits the formation of any bank or fund unauthorized by law, 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.' The second prohibits any person, or association persons, or body corporate, from keeping any office of deposit, for the purpose of discounting promissory notes, or carrying on any kind of banking business or operations which incorporated banks are authorized by law to carry on; or to issue any bills or promissory notes, as private bankers, unless thereto specially authorized by law. Assuming, therefore, what in my opinion cannot be controverted, that banking power consist in the right of issuing notes, making discounts and receiving deposits, and that the business which incorporated banks may do, by virtue of their acts of incorporation, is prohibited to all others, unless specially authorized by law, it follows, conclusively, that both the old and new company have done what they were not only not authorized by their charter to do, but what was absolutely prohibited by the Restraining Act." N. Y. Fire Ins. Co. v. Ely et al., 7 Cow. 710.

of

26"The evils arising from the disordered state of our currency have been aggravated by the banking operations of individuals, and the unauthorized emissions of small notes by corporations. They require the immediate and correcting interposition of the legislature. I also submit it to your serious consideration, whether the incorporation of banks, in places where they are not required by the exigencies of commerce, trade or manufactures, ought to be countenanced. Such institutions, having but few deposits of money, must rely for their profits principally upon the circulation of their notes, and they are, therefore, tempted to extend it beyond their faculties. These bills are diffused, either in the shapes of loans, or by appointing confidential agents to exchange them for those of other establishments, but the former mode, being conducive to profit, is at first generally adopted; and in the early stages of their operations, discounts are liberally dispensed. This produces an apparent activity of business, and the indications of prosperity, but it is all fictitious and deceptive, resembling the hectic heat of