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bills, to consider and report upon it. That committee reported the day following, that, in their opinion, it was not a two-thirds bill, and it was ordered to a third reading, passed, and sent to the Senate.
Some very early movements, of a general character, were made in the Senate in 1837, on the subject of a general banking law.
On the 20th of January, Mr. Loomis, a Senator from the Seventh District, offered a resolution, “That the committee of the whole be discharged from the further consideration of the petition praying for the passage of a law authorizing a general system of banking within this State; and that the said petition be referred to a select committee, to consist of one Senator from each Senate District, with instructions to report a bill for that purpose.” On the same day, Mr. Dickinson, a Senator from the Sixth District, offered a resolution, “that the committee on banks and insurance companies, be instructed to inquire into the expediency of passing a general banking law,” to contain certain principles and provisions, which were specified in the resolution, of rather an ultra character. This resolution was laid on the table, and does not appear to have been called up afterwards.
On the 27th of January, the Senate took up the resolution offered by Mr. Loomis, passed it, after striking out the instructions, and appointed a committee under it, consisting of Mr. Loomis, Mr. Young, from the Fourth District; Mr. Huntington, from the Sixth ; Mr. Tracy, from the Eighth; Mr. Sterling, from the Fifth; Mr. Livingston, from the First; Mr. Johnson, from the Third; and Mr. Van Dyck, from the Second.
This committee reported by Mr. Young, on the 18th of April following; at which time, the Assembly were engaged almost daily upon the two bills before it, on the same subject. The report is full, on the whole subject of banking, and shows that the committee had given it great attention. With their report, the committee presented a bill, “to authorize associations for the purposes of banking.”
A few extracts from this able report, will exhibit the views of the friends of the measure in the Senate,
“The committee feel themselves called upon, under the reference which has been made to them, to allude to the origin of the present system of bank corporations, and to point out some of the most prominent evils which are necessarily connected with the monopoly character of those institutions. “These evils have been experienced by the community for many years; and the time seems to have arrived, when it is proper to devise, if possible, a system which is more free and more equal in its operation ; and which, unshackled by useless restraints, and unprotected by chartered privileges, shall permit the flow of a circulating medium through all parts of the State, as the exigencies of trade and the pulsations of business require. [Sen. Doc. No. 55, 1837, p. 1.] “But however onerous the exactions which monopolies ever impose, there are other objections to the system of a more formidable character, some of which are inseparable from it, and put all palliation at defiance. The provision in the Constitution, requiring two-thirds for the passage of a bill creating a corporation, adds to the difficulty of procuring a charter. This difficulty can be ob. viated only by securing, in both houses, the requisite number of votes. Applicants for bank charters, are thus induced to ascertain all the projects that are pending, to cultivate an alliance with each other, and to make themselves acquainted, if possible, with every member who is charged with any favorite topic of legislation. A reciprocation of mutual aid is the necessary consequence. A league of interest is thus formed, strengthened and cemented by the most mercenary motives; and the inmates of the temple of legislation are thus converted into vile “money changers. [Ib. p.3.] “Like the leprosy, the monopoly system, from a single spot, has increased and spread itself over the whole body politic. . There are now in operation in this State, one hundred banks, including two branches, with which no citizen, or association of citizens, is allowed by our laws to compete. . [Ib. p. 6.] - - “The system of joint-stock banking, by private associations, has been successfully conducted in Scotland, on a scale regulated alone by competition, and by demand and supply, for more than one hundred years, without a single failure in the whole of that period up
to the present time.” [Ib. p. 18.]
Speaking of the evils of an inflated currency, the Committee propose, as one remedy for them, “subjecting the issue of such bank paper as is authorized by law, to full, free and open competition.”
“On this second topic,” say the committee, “which is the only one with which the committee are specially charged, they earnestly recommend the organization of a system of private banking associations, which shall be wholly unconnected with each other, so that they may freely compete among themselves, as well as with the existing bank corporations. [Ib. p. 18.]
“The committee have prepared a bill, combining in a detailed form, the foregoing suggestions, which their chairman will ask leave to introduce.” [Ib. p. 20.]
An effort was made by Mr. Young, for the Senate to take up this bill on the 27th of March, but it failed by a vote of twenty to eight. It was occasionally before the Senate, in committee of the whole, during the month of April, and, as I understand, was fully discussed; but on the 5th of May, the Senate rejected it by a vote of fifteen to ten; and on the same day, rejected the bill from the Assembly, by a vote of sixteen to nine.
Thus the measure was defeated for the present, though it num
bered among its real friends, many of the most intelligent and influential members of the Legislature, and was loudly and generally called for by the people.
Their voice was at last, not only heard, but regarded;—and the measure appeared before the Legislature of 1838, in a more imposing form. Gov. Marcy recommended it explicitly and earnestly, in his message of that year, to the Legislature.
Before I proceed, however, to the occurrences of 1838, let me call attention to the particular matter now in hand, viz., the intention of the Legislature in respect to creating corporations, to carry out this measure of general banking.
The report of the Committee of the Senate, clearly exhibits the views of that branch of the Legislature on this subject. Instead of increasing corporations, it is obvious that one of the leading motives, if not the leading one, of the friends of the measure in that House, was to curtail, restrain and regulate the banking corporations already existing, and prevent the creation of any more.
The Assembly had evidently framed both their bills in such form as, in their opinion, would not render them obnoxious to the charge, that they were bills to create corporations; and the Attorney-General, to whom they were referred, is obliged to resort to a close argument, particularly in respect to the bill introduced by Mr. Cutting, to prove that the associations which they authorized were in fact corporations, though not declared to be so by the bills. Instead of passing the bill, “to authorize associations for the purposes of banking,” which, it appears, at last they preferred, of the two, the Assembly sent it to a special committee, amended it, so as to remove the grounds of the AttorneyGeneral’s objections, and passed it, under a report from their standing committee on two-thirds bills, that it was not one of that class. From these facts, the inference is irresistible, that the Assembly intended the very opposite of creating corporations to conduct the business of banking.
# In this aspect, the measure was presented to the mind of Governor Marcy, when preparing his message for 1838; and he expresses his views on the whole subject. As his message will be frequently referred to in the course of the argument, I will here give all he says on the subject:
“While the Legislature has been engaged in giving to these institutions the attributes of permanency and usefulness, an increasing unfriendliness has been exhibited towards them principally on account of their exclusive privileges...Monopolies are undoubtedly acompatible with the equality of civil rights, which it is the great object of a free government to secure to all its citizens. Although the banks of this State are not strictly monopolies, yet they possess privileges withheld from individuals, and in consequence thereof have hitherto shared, and will probably continue to share, in the odiousness with which monopolies are justly regarded. To obviate this objection, it is desirable to discontinue the present mode of granting charters, and to open the business of banking to a full and free competition, under such general restrictions and regulations as are necessary to insure to the public at large a sound currency. This can be done, either by passing a general banking law, or by an entire repeal of the restraining act. Doubts have been entertained as to the constitutional competency of the Legislature to pass a General Banking Law, conferring corporate powers. Without entering into the argument on this question, I will only say, that I am inclined to the opinion that the Legislature have the power to pass such a law; but the spirit of the Constitution requires that it should be passed as a two-thirds bill. It is proper that I should also say, that this opinion is entertained with much diffidence, and is not expressed without duly considering the respectful deference justly due to the high authority by which it is opposed. If, however, you should conclude that the constitution interposes an insurmountable obstacle to the passage of such an act, then it is suggested that you should regulate and limit, by a general law, partnerships which may be formed to conduct the business of banking, in such a manner as to secure to them the essential advantages now conferred by special charters, and subject them to such restrictions and regulations as the public good may require. “In recommending to the last Legislature a repeal of the restraining law, I felt it to be my duty to urge them to retain that part of it which prohibits the issue of notes or other evidences of debt to be put in circulation as money. The objections I then entertained to an unqualified repeal still have great force with me. I fear the injurious consequences to our currency that would result from granting to individuals and associations the unrestrained license to issue paper, and put into common use as a circulating medium; but if this permission could be made to depend on an ample fund to be provided for the redemption of the paper which might be put in circulation—if the issues could be graduated by the amount of this fund; and if it could be certainly and immediately available whenever required for the purpose of redemptiom, the objections to an unqualified repeal of the restraining law would be removed.” [Assembly Doc. 1838, No. 2, pp. 7, 8.]