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April 12, 1824, it was enacted that no person or persons whomsoever within this State should, after the ensuing first day of May, give or receive in payment of any debt or demand whatever, or in any way attempt or offer to circulate any bank bill or bills, or promissory note or notes of any banking company whatever, made payable or purporting to be made payable otherwise than in lawful money of the United States. Laws of 1824, p. 303.

BANK CHARTERS PRIOR TO 1825.

It may be noted that none of the bank charters, prior to 1825, contained any specification of banking powers. The legislature, from 1791 to 1825, relied only on the restrictive clauses inserted in each charter. Prior to the beginning of the nineteenth century, but five banks had been incorporated by this State, viz.: The Bank of North America, 1782; the Bank of New York, 1791; the Bank of Albany, 1792; the Bank of Columbia, 1793; the Manhattan Company, in 1799; the Farmers' Bank was chartered in 1801, and the New York State Bank in 1803.

These several bank charters were based upon the acts incorporating the Bank of England, in 1694, and the bank of the United States, in 1791; and as neither of these charters, English or American, defined or specified the banking powers intended thereby to be granted, it consuming disease, not the genial warmth of substantial health. A reaction soon takes place. These bills are in turn collected by rival institutions, or passed to the banks of the great cities, and payment being required, the only resources left are to call in their debts, and exact partial or total returns of their loans. The continual struggle between conflicting establishments to collect each others' notes occasions constant apprehension. The sphere of their operations is narrowed. Every new bank contracts the area of their paper circulation; and after subjecting the communities, within their respective spheres of operation, to the pernicious vicissitudes of loans at one period profusely granted, and at another parsimoniously withheld they finally settle down into a state of torpid inaction, and become mere conduits of accommodation to a few individuals. The legislature is then solicited to apply a remedy by the incorporation of other banks, whereas every new one of this description, unless attended by peculiar circumstances, paralyzes a portion of capital, and augments the general distress, the banishment of metallic money, the loss of commercial confidence, the exhibition of fictitious capital, the increase of civil prosecutions, the multiplication of crimes, the injurious enhancement of prices, and the dangerous extension of credit, are among the mischiefs which flow from this state of things."

became necessary, by prohibitory clauses, to limit the powers of the corporations so created; and we discover in all these public enactments, extending from 1694 to 1825, unequivocal declarations by the English Parliament, by Congress, and by successive legislatures of this State, that trading in anything, except bullion, foreign coins and bills of exchange, is not banking; and that the power to traffic in stocks or merchandise is not "either necessary or expedient to accomplish the purpose for which banks are instituted." 27

While nothing of a political character at first entered into the establishment of banks, that feeling soon manifested itself, and under the circumstances very naturally so. In 1799, John Adams was President, and another presidential election was imminent. The Bank of New York was in Federal hands, and the Republicans naturally wanted a bank of their own to control, but the legislature was in the hands of the Federals, who were jealous of moneyed institutions, and the prospect of a Republican Bank seemed dubious at least.

It was then Aaron Burr's fertile brain came to the rescue. New York had been visited by the yellow fever, and it was believed that this malady was induced by the lack of wholesome water in that city. Here was the opportunity. It was proposed to incorporate the "Manhattan Company," for the benevolent purpose of supplying New York with pure water; $2,000,000 would do this; and as these water-works might not absorb the entire amount, the petitioners asked for a provision authorizing this institution to employ its surplus capital: "In the purchase of public or other stock, or in any other moneyed transaction or operations, not inconsistent with the constitution and laws of this state, or of the United States." And as the object was to supply a want that would always exist, it was not unreasonable that the grant should be given in perpetuity. This corporation, with its unassuming title, was too late seen to be a banking institution, with a charter of the most liberal character. The charter (ch. 84) passed, the Federals discovered their political mistake. The bill was introduced at the very close of the session, and was hastily pushed through the Assembly and Senate. In the latter body it was reported complete, by a select committee, and never referred to the

7 Talmage v. Pell, 7 N. Y. 345; Cleveland's Banking Laws, xxi.

committee of the whole. The Council of Revision then existed "to revise all bills about to be passed into laws by the legislature." The attention of this body was called by the Chief Justice, to whom the bill was referred, to the clause under which the banking powers existed.

He objected to this clause, because he was apprehensive that the capital would be employed in trade, etc. The minutes of the Council indicate that there was not the slightest thought that the bill created banking powers.28

The incorporation of the New York State Bank, at Albany, in 1803, of the Merchants' Bank in New York, 1805, and of the Bank of America, in 1812, were the cause of bitter partisan contests and intrigues, and corrupt means were used to procure each of these charters.

There was a provision in many of these early charters that on payment of some twelve to fifty per centum of the capital in specie the bank might begin business. A natural result was that irresponsible individuals borrowed the necessary small cash capital for a short time, and then returned the specie, its place being filled by cash obtained from discounting their own notes by the new bank and substituting them for the specie. Such notes were, in those days, termed "stock

28 The Manhattan Company has acted in the capacity of general transfer agent of the State of New York for all the stock issued for canal purposes from the year 1818 to the present time. From that year to the year 1839 the certificates of State stock were signed by the cashier of the Manhattan Company alone; since 1839, these certificates have been signed by the Comptroller of the State and countersigned by the cashier of the bank. The Manhattan Company has issued, transferred and paid the public stocks, and the State has held, from the year 1810, one thousand shares, the nominal or par value of $50 a share, of the stock of this bank, for the account of the common school fund. Many persons are living in the metropolis who can remember the large water wheel which was located on Reade, between Center and Elm streets. This corporation as a water company was a beneficent institution. Its resources now aggregate over seventyfour million dollars. The following is a list of the incorporated banks of the State, the circulation of which is not secured, and which have not advertised for the final redemption of the same: Chemung Canal Bank, Delaware and Hudson Canal Company, Livingston County Bank, Manhattan Company, Onondaga County Bank. Their charters, excepting that of the Manhattan Company, have expired. Report of Superintendent of Banking Dep't, 1909. Hammond's Hist., Vol. I., 229, 309, 325; 1 Burr, 413; People v. Manhattan Co., 9 Wend. 364; N. Y. Laws (Web. ed.), 370, § 8.

notes." February 24, 1823, the legislature incorporated the "New York Chemical Manufacturing Company" for the purpose of manufacturing "drugs and medicines, paints and dyers' articles," but specifically provided that this corporation should not engage "in any banking business or transaction whatsoever." Ch. 96. The following year the act of incorporation was amended (L. 1824, ch. 148) by repealing the section (XI.) prohibiting the business of banking providing for the appointment of commissioners to receive subscriptions to the capital stock of the company to the amount of five hundred thousand dollars and enacting the following very remarkable provision: "The said corporation shall have the power to employ the whole thereof, excepting the sum of one hundred thousand dollars in banking operations in the city of New York, and to issue bills, notes, or other obligations under the seal of the said corporation, or without their corporate seal, as other banks in this State are authorized to do, and in such manner as the said corporation shall direct, and to make all proper rules and regulations and to appoint all proper officers, clerks, and agents for carrying on the same.'

"29

29 Under this charter a chemical manufactory was started at Thirtieth street and Tenth avenue, and a bank in the year 1824 at 216 Broadway, where the Park National Bank now stands. The capital was $500,000. At the expiration of this first charter in 1844, it was reorganized with the title of the "Chemical Bank," having a capital of $300,000, under the free banking act of 1838, with a new board of directors and executive officers, and was an entirely new institution. This bank always redeemed its State bank notes in gold, if the holder so requested. In December, 1859, such notes outstanding aggregated $307,349. It now has as a liability such notes to the amount of $10,838. The same were issued previous to 1863. April 30, 1891, two shares of the stock of this bank (the capital stock being at that time $300,000) sold at public auction for $4,785 a share. One share of the stock sold July (1909) for $520. Fifty shares were sold the following month for $431 a share. No dividends were paid until 1849, at which time the surplus was over $200,000. It then began paying annual dividends of 12 per cent., and continued up to 1851 when it paid 18 per cent. annually up to 1854; then 24 per cent. until 1863, 36 per cent. until 1868, and 60 per cent. until 1872, at which time it paid 15 per cent. bimonthly with an additional dividend of 10 per cent, during the year, or 100 per cent. yearly, and continued to do so until 1888. From that time to January, 1907, when the capital stock was readjusted and increased from $300,000 to $3,000,000, dividends at the rate of 150 per cent. per annum were paid.

It now pays dividends at the rate of 15 per cent. yearly on $3,000,000 of capital stock. Its gross deposits are now (September, 1909) $38,000.000, and its capital, surplus and undivided profits $8,958,260.63.

April 12, 1824, it was enacted that no person or persons whomsoever, within this State, should, after the ensuing first day of May, give or receive in payment of any debt or demand whatsoever, or in any way attempt or offer to circulate, any bank bill or bills, or promissory note or notes, of any banking company whatsoever, made payable, or purporting to be payable otherwise than in lawful money of the United States. Ch. 303, Laws of 1824. At the close of the first quarter of the nineteenth century, the State of New York had fortytwo banking institutions with the privileges of $28,900,000 capital.

FIRST LEGISLATIVE SPECIFICATION OF BANKING POWERS.

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In 1825, the legislature passed a stringent law to prevent fraudulent bankruptcies. It granted but two of the numerous applications for bank charters the Commercial Bank, of Albany, and the Dutchess County Bank, of Poughkeepsie. The act (ch. cxvii.) incorporating the first named is remarkable in that it contains a specification of banking powers as follows: "The President, Directors and Company of the Commercial Bank of Albany . . . shall have and possess all incidental and necessary powers to carry on the business of banking, by discounting bills, notes and other evidences of debt; by receiving deposits, by buying gold and silver, bullion and foreign coins, by buying and selling bills of exchange and by issuing bills, notes and other evidences of debt; but the said company shall have and possess no other powers whatever, except such as are expressly granted by this act; . . . and the said company shall not, directly or indirectly, through any trustee or otherwise, receive any transfer, pledge or hypothecation of any stock of the said company, or of any other incorporated company, and every such transfer, pledge or hypothecation shall be utterly void; and provided further that the said bank shall be established in the city of Albany, and that its operation of discount and deposit shall be carried on in said city of Albany and not elsewhere." The Session Laws of 1826, 1827 and 1828 show no bank charters to have been granted during either of those years.

CONSPIRACY TRIALS OF 1826 AND 1827.

During the summer and fall of 1826 and early in 1827, several citizens of high reputation in the city of New York were indicted and

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