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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;
3rd. The shares of stock held by the association, and how held; 4th. The amount of debts due to the association;
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capital has been increased during the preceding six months, and the names of new associates, and of any who may have withdrawn.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.
By section fifth, the persons depositing the stock are allowed to receive the interest upon it, until they fail to redeem their notes.
In the seventh and eighth sections, the Comptroller is authorized to receive, for half the amount of notes issued, bonds and mortgages, instead of stocks bearing at least six per cent. interest, on productive lands in the State, worth, independently of any building, double the amount of the mortgage.
By section ninth, a provision is made for exchanging or paying up their bonds and mortgages.
In section tenth, the depositor is allowed to receive the interest money on the bonds, unless he fails to redeem the bills issued. There are some minor provisions, of no essential importance in discussing the principles of the system.
When the bills are repaid to the Comptroller, or specie deposited to the same amount, the securities in his hands are to be reconveyed to the depositor. There is no provision made for lost bills, so that the stock corresponding to such losses will be retained by the Comptroller, and not enure to the benefit of the association. This was probably an oversight, as no small item in the profits of banks accrues from the destruction or loss of their bills, before they are returned for redemption.
After the passage of the act in April, 1838, the utmost activity prevailed among speculators and capitalists to form organizations under its provisions.
By the annual report of the Comptroller, rendered to the Legislature in January, 1839, it appears that, anterior to the third day of that month, fifty-four associations had already gone through the necessary formalities, and the total amount of capital actually subscribed in the State was $12,319,175. The amount of bills demanded by these associations, upon the pledge of stocks and securities, however, was only $1,592,990. The remaining portions of their capital, amounting to $10,716,185, was intended to be applied to other purposes than facilitating commerce by the issue of bills.
Several of these associations provided in their articles for the continuance of their operations for more than a century, and for the enlargement of their capital stock, at pleasure, to the extent of fifty millions of dollars.
As the formation of these immense associations was from time to time announced in the public prints, it was naturally expected by that portion of the community who were misled by the false aspect of the law, that money would be rendered plenty, and a paper circulation of unquestionable security produced to any desirable extent, so as to supply the curtailments of the chartered banks; in this expectation, as we shall hereafter more fully show, the public was disappointed. Since the date of the Comptroller's report, January 3, 1839, we have gathered notices from the public prints of twenty-three addi
tional associations, with an aggregate capital of more than $18,000,000; so that, at the present time, we are safely within the truth in stating the number of associations, under the new banking law, at seventy-seven, and the aggregate of their capital paid in at $30,319,175.
According to the best data before us, the proposed capital of the twenty-three banks associated since the 3d January, 1839, is not less than $300,000,000
Capital proposed by the fifty-four banks reported by the Comptroller before January 3d, and of the exist ing State banks,
Total amount of capital which may be employed by existing free and chartered banks in the State of New York,
Such an enormous amount of prospective capital stock secured by these associations is, of itself, a sufficient demonstration of the gambling facilities afforded by the law, and of the eagerness with which speculators and stock-jobbers have hastened to avail themselves of its benefits.*
And yet, with the immense aggregate of $860,000,000 possible capital, the mercantile community have received but little relief from the operations of the new system. On the contrary, the universal admissions of business men, and that sure test, the price of
Since writing the above, we have collected more accurate information of the nunber and capital of the banks organized under the new law.
One hundred and nine certificates have been filed in the office of Secretary of State, since the 10th of July, 1838. The capital actually subscribed in these institutions amounts to $35,769,175. Their prospective capital-that is, the amount to which their capital may be increased at pleasure, by the articles of association-is $856,980,000.
The remainder are distributed among the several counties, as follows:
In Onondaga, Seneca, Wayne, Broome, Steuben, Jefferson, and Herkimer, two in each.
In Richmond, Orleans, St. Lawrence, Columbia, Lewis, Orange, Monroe, Montgomery, Greene, Livingston, Ontario, Kings, Yates, Cayuga, Chenango, Chemung, Washington, Albany, Chatauque, Delaware, and Erie, one each.