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cerns would be neither slight in its degree nor transient in its duration."

He strongly condemned the policy "of requiring the payment of a large bonus to the State, or the performance of some specious service as the price of bank charters," on the assumption that the legislature would decide to renew "the charters of banks whose solvency and present capacity to discharge all their duties shall, after a rigid and impartial scrutiny, be found free from doubt."

He suggested the "propriety of making all the conditions you prescribe refer exclusively to the safety and stability of the institutions," and commended a plan " to make all the banks responsible for any loss that the public may sustain by the failure of any one or more of them." As to the proposed plan, he said, "Most men will, upon the first impression, view it, as I certainly did, as presenting a rigorous condition, but it is confidently believed by competent judges, that the form in which it is proposed to enforce the responsibility being an annual and adequate appropriation of a part of their income towards a common fund, to be placed under the control of the Statethe ample supervision over the constitutions which it proposes to place under the direction of the contributing banks, in conjunction with the authority of the State the consequent high character and corresponding circulation it would give to our paper- the expulsion from circulation of the doubtful paper which now engrosses it, and the substitution in its place of that issued by banks, in full credit with other advantages, would make the conditions such as would, upon more full consideration, be deemed advisable by all concerned."

On the resignation of Governor Van Buren, March 12, 1829, he was appointed Secretary of State, and proved an able auxiliary to President Jackson in his opposition to the Bank of the United States.

In securing such a currency, the New York legislature was first to move forward and inaugurate a system which will be admitted to have been a step in the right direction.

April 2, 1829, the so-called "Safety Fund Act" became a law under the title of "An act to create a fund for the benefit of certain moneyed corporations, and for other purposes." By section 1 of this act it was enacted that "Every moneyed corporation having banking powers hereafter to be created in this State, or whose charter shall be renewed or extended, shall be subject to the provisions of this act."

By section 52 of the General Code of Statute Regulations, amended by this act, it was declared that "The provisions of this title shall be construed to apply to every moneyed corporation created" after January 1, 1828, "unless such corporation shall be expressly exempted from the provisions of this title in the act creating, renewing or extending such corporations." 1 R. S. 599, § 52.

In October, 1852, the Court of Appeals, in the case of Talmage v. Pell, held: "That every association organized under the act to authorize the business of banking, and the acts amending the same, is a moneyed corporation within the meaning of the statutes of this State relating to moneyed corporations, and is bound and affected by those statutes, excepting only so far as such statutes are inconsistent with the provisions either of the act to authorize the business of banking, or of the acts amending the same;" and also held "that such associations are banking corporations, and possess only authority to carry on the business of banking in the manner, and with the powers, specified in the said act." 34 The "Safety Fund" banks had among their expressed powers, the general, unrestricted, express power to carry on the business of banking "by issuing bills, notes and other evidences of debt; " yet these banks were expressly prohibited by section 35 from issuing any bill or note payable on time, or with interest.

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Experience has fully demonstrated that the provisions of the Safety Fund" Law of 1829, which prohibited the issue of postdated notes by banks, was more effective as a preventive of bank insolvency, and in establishing a sound and uniform currency for the people of this State, than all the restrictions of the Laws of 1827.

It will be seen by reference to the session laws from 1829 to 1836 inclusive, that under the "Safety Fund" system bank charters were precisely alike. These charters gave the name to each institution, fixed the place of business, the time to which the charter was extended, and the amount of capital of each. Each bank was further required by the "Safety Fund Act" to pay annually to the State Treasurer one-half of one per cent. on its paid-up capital until a sum equal to three percent. of such capital, excepting the amount held by the State, had been thus contributed.

34 7 N. Y. 328, 347.

The "Bank Fund" thus constituted was to be invested by the Comptroller, and used by the Bank Commissioners in payment of the circulation and other debts of insolvent banks, the income from the fund to be applied to the payment of Commissioners' salaries, and the balance to be paid to the solvent banks in proportion to their contributions.

If the liquidation of the debts of insolvent corporations reduced the fund below the required three per cent., each bank was required to renew its annual contribution until it had paid the requisite three per cent. of its capital stock.

A trial of the new system, while indicating a marked improvement on the old plan, showed the "Bank Fund to be wholly inadequate as an indemnity fund." There was no guaranty afforded the public against bank insolvency by prohibiting the issue of bills or notes beyond twice the capital, or loans and discounts in excess of twice and one-half the capital. It was also seen that the publication of a balance sheet offered in many instances no accurate statement of the actual condition of a bank, even when the directors were disposed to be honest, because bank directors seemed always inclined to exaggerate the real value of their assets; and in this manner discounted notes, which were often placed on a level with coin, proved absolutely worthless.

Previous over-trading with foreign nations caused a reaction in 1831, which severely affected New York city. October 1, 1833, pursuant to the order of President Jackson, the government deposits were removed from the Bank of the United States, which was followed by a rapid decline in its business. The discounts, which had previously exceeded $20,000,000, were greatly reduced.

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In 1834, when there was an unusual supply of precious metals, and the Republic stood creditor in account with the commercial world; when there was an abundance of produce throughout the country; and when all branches of natural industry were unusually prosperan unreasonable demand for specie, which was increased by requiring custom duties to be paid in gold, produced a panic which precipitated a severe pressure on the banks of this State. After the lapse of two years, when business was unusually large and the banks were in a sound and healthy condition, a reaction set in, which became universal, and in May, 1837, caused the suspension of specie

payment in New York city, which was partly due to excessive foreign trade. The reaction commenced in Europe, suddenly checking American credit. Our country produce became depressed in the foreign market, large amounts of our bills were returned, creating a demand for specie, and raising it to a premium.

Banks being only commercial agents, it is evident that the suspension of specie payments was the inevitable result of their relations to commerce and not the result of defective organization.

The whole amount contributed to the "Safety Fund" prior to 1848 was but a trifle more than seventy-five per cent. of the debts of eleven banks, belonging to the "Safety Fund " system, which failed, and the deficiency was made good by the issue of six per cent. stocks, by the State; it being agreed that the State should be repaid by the then existing banks.

The banking system of 1829 lost all public confidence; the "Bank Fund" became bankrupt; May 10, 1837, all the New York city banks stopped payment in specie, and the 1st day of January, 1838, found not only all the banks of this State, but also those of the entire country, in a state of suspension.

May 16, 1837, the legislature passed an act "suspending for a limited time certain provisions of law, and for other purposes." By this act, every provision of law in force, requiring or authorizing proceedings against any bank in this State, with a view to forfeit its charter, was:" suspended for one year." Ch. 450, Laws of 1837.35 At the bankers' convention in New York city, on April 11, 1838, when eighteen States were represented by one hundred and fortythree delegates, it was resolved "That it be recommended to all the banks of the several States to resume specie payments on the first Monday of January, 1839; without precluding an earlier resumption on the part of such banks as may find it necessary or deem it proper." Of the eighteen States represented, fourteen voted in favor of the resolution, and only two against it.

Art. VIII.,

Such an act, at the present time, would be unconstitutional. section 5, N. Y. Const. 1894, provides, "the legislature shall have no power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie payments by any person, association or corporation issuing bank-notes of any description.

OFFICE OF BANK COMMISSIONERS.

The previously mentioned law of 1829 directed the appointment of three Bank Commissioners, whose duty it was to visit the banks of the State, examine their condition at least once in every four months, and report annually to the legislature the result of their investigations. The Governor and Senate appointed one of the Commissioners; the banks located in the first, second and third Senate districts another; and those in the fourth, fifth, sixth, seventh and eighth the other. The term of office was two years. The State, as representing the whole people, the banks of a certain division, which included the city banks, and the banks of another division, which included all the country banks, each in theory presumed to have antagonistic interests, were represented in this commission. In 1837 (ch. 74), a statute was passed authorizing the Governor and Senate to appoint all the Commissioners. The appointment of a fourth Bank Commissioner was provided for by an act passed May 14, 1840, and banks organized under the General Banking Law were placed under the supervision of the Commissioners. The office was abolished April 18, 1843, and the banks directed to report to the Comptroller.

GENERAL BANKING ACT.

On the 18th of April, 1838, two days after the adjournment of the before-mentioned bankers' convention, an act was passed by the legis lature of this State, entitled "An act to authorize the business of banking." Ch. 260.

We are now brought to consider some of the distinctive principles of the third and latest system of banking, introduced by the General Banking Act of 1838. We have seen that under the "Safety Fund" system of 1829, banks possessed, among other powers, that of issuing "bills, notes and other evidences of debt," payable on demand and without interest. They had the power to issue currency at pleasure, limited only to the statutory amount. The General Banking Law of 1833 instantly swept them away. It wisely separated the issuance of currency from the business of loans, discounts and deposits; and placed the former under the exclusive direction of a State officer, and confined all issues of notes to him, to be duly registered at his department, whose official certificate each note was to bear.

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