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rians," were now shown to be the quiet conclusions of sound sense and philosophy. They had taken deep root in the public mind, and soon obtained the authority of truth, when the incorporated banks by their memorable "suspension" of their obligation to pay their notes-the only obligation that gave them value, or even existenceat last threw off the mask and laughed to scorn their public and private creditors.
It was, however, the careful study of the Whigs to be carried no farther by public opinion, and regard for equal rights, than absolute necessity should require. They still clung to their monopolies and special privileges. The problem, to which their ingenuity applied itself, was to concede, if possible, the form of free banking, but retain the spirit of monopoly. The whole tribe of speculators and stock-jobbers still struggled to retain the machinery and mystery of their lucrative occupations, and to throw around the measure of concession, which public sentiment demanded, as many of the restraints and formalities of the close corporate system as the nature of the case would allow.
The Democracy demanded free banking, in its widest sense. They wished to rescue the branch of commerce, pertaining to money, from the shackles of corrupt legislation and favoritism, and to leave it to the control of the ordinary laws of trade. Such a triumph of the principles of sound political economy and Democratic equality would have been as fatal to the craft of the money-changers, as was the preaching of St. Paul to the shrine-makers of Ephesus. "Sirs, ye know that by this craft we have our wealth," was the cry of remonstrance which arose from Wall street, and was re-echoed by the petty speculators of every village bank in the State.
During the summer and autumn of 1837 the subject of free banking was much discussed in private circles and in the public prints; and the Whigs, by hollow professions of an inclination to adopt its principles, made for their party some political capital in the autumnal elections. But at this moment, most unfortunately for the cause of truth, a portion of the community which before that time had acted with the Democratic party, but was deeply involved in Whig speculations and banking, found its interests in danger from the progress of Democratic principles, and threw the weight of its numbers and influence into the Whig ranks. The defection of the Conservative party, though unimportant in itself, derived a momentary influence from the critical state of the times. When men, who had long professed the Democratic faith, affected alarm at the demands of the popular voice, it could not but awaken some distrust in timid minds. The ardor of reform was checked; the enemies of equality took courage, and the monopolists found themselves able to maintain a position much more favorable to their interests than they had hitherto expected. The remaining restraints
upon the natural laws of trade may be set down to the account of the Conservatives.
In this condition of affairs, in January, 1838, the Legislature of the State convened. The Whigs, prospering by a prevalence of unexampled public calamity, had secured an overwhelming ascendancy in the House of Assembly, and the Senate was modified by the influence of many members who leaned to the doctrines of the Conservatives. Early in the session many financial schemes were brought forward, none of which found much favor with the Monopoly party. The Legislature was, as usual, surrounded by a horde of interested out-door advisers, to enforce the claims of the broken chartered banks, the stock-jobbers, speculators, and "credit system" merchants. The Board of Brokers and Chamber of Commerce had their agents and committees in regular attendance, and the owners of real estate were fully and incessantly represented at the capitol, by the same class of wily operators who had so successfully enhanced its nominal value.
After three months of intrigue, discussion, and political manœuvre, the "Act to authorize the business of banking was concocted and produced; and, considering the influences which attended at its birth, it is a matter of congratulation and surprise that its provisions are not more fatally tainted by the spirit of restriction and monopoly. The following are the essential provisions of the act:
Any person, or number of persons, may establish an office of discount, deposite, and circulation, by recording in the county clerk's office, or filing with the Secretary of State, a certificate, under their hands and seals, duly proved or acknowledged, setting forth the following particulars :
1st. The name of the association; 2nd. The place of its operations;
3rd. The amount of capital stock, and number of shares; 4th. The names, residences, and shares of the stockholders; 5th. The period when the association shall commence and terminate.
A certified copy of this certificate shall be evidence in all legal proceedings.
The aggregate capital stock shall not be less than one hundred thousand dollars.
"The association shall have power to carry on the business of banking, by discounting bills, notes, and other evidences of debt; by receiving deposites; by buying and selling gold and silver bullion, foreign coins, and bills of exchange; by loaning money on real or personal security, and exercising such individual powers as may be necessary to carry on such business."
It may provide, in its articles of association, for an unlimited increase of its capital and associates, from time to time.
It may hold real estate
1st. For its accommodation in the transaction of its business;
2nd. Mortgages, to any extent, for money loaned by it; 3rd. Real estate received in the satisfaction of its debts;
4th. Real estate purchased at sales under judgments, decrees, or mortgages, held by the association.
The association is required to make a semi-annual report to the Comptroller, on the first Mondays of January and July, containing1st. The amount of capital stock paid in or secured; 2nd. The value of real estate held by the association;
The shares of stock held by the association, and how held;
5th. The amount of debts due from the same;
6th. The amount of claims against it, not acknowledged by it as debts;
7th. The amount of notes, bills, or other evidences of debt, issued by it;
8th. The amount of losses of the association, and of its dividends;
9th. The average amount of debts due to and from the association, during the preceding six months; and the average amount of specie on hand, and of notes and bills issued ;
10th. The average amount, in each preceding month, due to the association, from all the share-holders;
11th. The amount to which the capital has been increased during the preceding six months, and the names of new associates, and of any who may have withdrawn.
The attentive reader will have perceived that thus far no provision has appeared for the issue of any bank notes of the association, or for the pledging of any securities, stocks, or bonds and mortgages with the Comptroller; nor, indeed, are any requisitions contained in the act with respect to what the capital stock shall consist of, or how, or when, it shall be paid in or secured. We desire to call particular attention to this fact, which is the great secret of the whole contrivance, and has been so artfully devised as hitherto entirely to elude the public. We know of no other equally curious and instructive instance of Legislative cunning and deception. It will be perceived that any person, or association, by filing the proper certificates, and announcing a capital stock of one hundred thousand dollars—(of what, it does not appear)—" shall have power to carry on the business of banking, by discounting bills, notes, and other evidences of debt; by receiving deposites; by buying and selling gold and silver bullion, foreign coins, and bills. of exchange; by loaning money on real and personal security; and by exercising such incidental powers as shall be necessary to carry on such business."
All this may be done by merely filing a certificate with the Comptroller, and conforming to the other regulations we have heretofore
set forth; but without pledging any securities, paying in any money, or complying with any rules, with regard to the nature of the " "capital stock" of one hundred thousand dollars, required by the act.
Our readers well know, that by the notorious restraining act of the Legislature of New York, private banking had hitherto been forbidden, and the exclusive monopoly of this branch of commerce had been given to the incorporated banks. This odious restriction had been the chief object of attack on the part of the Democracy. They demanded the restoration, to each individual, of his natural right "to discount notes, receive deposites, deal in gold and silver bullion, foreign coins and bills of exchange, and loan money ;" and it was supposed that this right was conferred by the general banking law. It has, moreover, been generally supposed, that the object of the new law was to furnish a paper currency for the purposes of commerce, the security for which should be perfect and unquestionable.
But the legislators had another and less honest design. The emission of a sound and convertible currency, which should supersede the doubtful issues of the incorporated banks,-a provision which was supposed to be the chief object of the act, and was so set forth and pretended,-is rendered entirely secondary and subservient to the restrictions intended to be laid upon the rights of the individual, in the legitimate use of his capital and enterprise.
The Democracy demanded an unqualified repeal of the restraining law, and perfect freedom in all the branches of money-dealing and banking, excepting, perhaps, the right to issue paper money. The Legislature have bound up and encumbered this right by a set of technical and troublesome regulations, affording no security to the public, but imposing every possible restraint upon individual freedom, and securing every possible preference and advantage to the old chartered monopolies.
Why should a man be compelled to accumulate capital to the amount of a hundred thousand dollars, before he can deal in exchange, receive deposites, and buy or sell bullion?
Why should he be constrained to file formal certificates, and make burdensome returns to the Comptroller in this branch of commercial operations, more than any other? The only possible reason, and the true and indisputable reason, is, that if private enterprise be left unfettered, it will compete with the cumbrous and oppressive operations of the banks.
It has been objected to free banking, that capitalists would associate, in enormous masses, for the oppression of the community, without those salutary checks imposed by legislative charters. This enactment is expressly devised to aid such oppressive associations. The capital must be a hundred thousand dollars. It must have the cumbrous apparatus of presidents, stockholders, cashiers, semi
annual returns, and certificates. Such restraints are thrown around it, that individuals of moderate means and averse to great establishments are precluded from turning their enterprise into this channel. It is cunningly devised to withdraw this branch of business from individual hands, and to place it in the hands of great monied associations, with formidable boards of directors, and all the imposing apparatus devised to wrap banking in mystery, deceive the public, and monopolize a control over a legitimate branch of commerce. Instead of being called "an act to authorize free banking," it may more properly be designated as "an act to encourage the accumulation of capital, so as to monopolize and control exchanges."
Accordingly we find that many of the associations organized under this law, from which it was expected that money would be plenty, have issued no bills, and do not contemplate depositing any securities with the Comptroller. The sole object of their association is speculation in real estate, and in stocks and exchange, which the fictitious name and style of a "Bank" enables them to do, to the detriment of the individual competitor and of the public. But of this we shall speak more fully in another place. If the law required one hundred thousand dollars capital, it should also have required that this amount should be paid in, and deposited with the comptroller, or be in some other way secured, so as to meet the liabilities of the association.
But to conceal the real object of the law, which is, as we have seen, to enable associations with an immense nominal capital to crush private enterprise, the law-makers prefixed to it certain provisions for enabling such associations to issue bank bills. The very sections of the act are transposed and inverted out of their natural order, for the purpose of creating an impression that this is a leading object of the bill, when in fact it was devised to assist stock-jobbing associations.
The first section of the act provides that the Comptroller shall procure bank bills of different denominations, which shall be countersigned and registered in his office.
In the second section, he is authorized to issue these notes to such persons or associations as shall deposit with him an equal amount of the stock of the United States, or of the State of New York, or of the States approved by him, bearing at least five per cent. inte
By the third section, the association so receiving notes, to the amount of the stock pledged, is authorized to sign, “loan, and circulate the same as moncy."
By the fourth section, it is provided, that if the notes be not redeemed in gold or silver, they may be protested and sent to the Comptroller, who, after ten days' notice to the association, shall sell at auction the securities in his hands, and redeem the notes.