tried for an alleged conspiracy to defraud the Morris Canal and Banking Company, the Fulton Bank, the Tradesmen's Bank, the Mercantile Insurance Company, the Merchants' Fire Insurance Company, and other moneyed institutions.

Several of the officers and directors, or managing agents of the "Life and Fire Insurance Company," the "Sun Fire Insurance Company," the "United States Lombard Association," and the "Madison Fire Insurance Company," were implicated in these criminal prosecutions, which were widely and generally known and designated at the time as the "conspiracy trials." Briefly, the Life and Fire Insurance Company was charged with using the express powers given it for insurance purposes, to carry on a banking business. It caused its bonds to be engraved like bank-notes, and, so issued, were placed like so much paper currency in circulation.30

The United States Lombard Association issued similar bank-notes. "In this connection," said Chancellor WALWORTH, "it was an attempt on the part of those who had the control of the affairs of this company, to carry on banking business instead of the business for which they professedly obtained their charter. . . . There was sufficient on the face of these bonds to show that they were intended as a circulating medium, and were not given by the company to the payees thereof for an actual indebtedness, in the course of the legitimate. business of the company. At least, there was sufficient to put those who received them upon inquiry as to the fact whether they were really given for any purpose within the authority of the corporation, and not in violation of the laws of the State." 31

The conspiracy trials were still in progress, the excitement produced by them still continued, when the legislature met in January, 1827, and Governor Clinton, in his annual message, stated that the then existing commercial convulsions should inculcate the necessity of avoiding a recurrence of such calamities, by avoiding the causes which produced them; that the calamitous derangements in England had been ascribed to a transition state from war to peace, and to excess of production; but the better opinion then was that they were chiefly imputable to excessive emissions of paper money in the shape

30 4 Paige, 224; 9 id. 470.

319 Paige, 470.

of bank-notes; and as similar disasters were experienced almost contemporaneously in this country, that they might be traced to similar causes; that a bank might issue notes to three times the amount of its capital paid in; that this was intended as a wholesome restriction, but was in fact a most pernicious authorization and could never be justified by any condition of affairs; that the authority to create money would invariably be abused; that the power of making money was a dangerous faculty, and its liability to perversion was in proportion to its extension; that banking privileges deposited in unskilful hands might be abused without design - but when granted to fraudulent men, who preferred wealth to character, there would be no bounds to the evils that would follow. The Governor further declared that experience had proved that applications for banking privileges were made for personal benefit, and not for the public accommodation. In conclusion, he recommended great caution in making such grants in future; and stated that "some general restrictions were indispensably necessary for limiting the issue of bank paper, for regaining the possession of a certain quantity of metallic money, and adequate security for the redemption of bank-notes — for compelling the attendance and increasing the responsibility of directors for detecting misstatements in the periodical renditions of the condition of banking institutions, and for prohibiting the circulation of bank-notes below a certain sum." 32

STATUTE REGULATIONS OF 1827.

In September, 1827, the Board of Revisers, appointed to revise the statutes of the State, consisting of John Duer, John C. Spencer, and Benjamin F. Butler, reported to the legislature General Statute Regulations to prevent the abuses of moneyed corporations. These were enacted in December, 1827, and took effect January 1, 1828.33

The early bank charters, containing no reservation of power to the legislature to alter or repeal them, were regarded as perpetual compacts; it was, therefore, held to be a very questionable exercise of legislative power to make legislation, and so subject the then existing

32 See Gov. Clinton's Message, 1827; Cleveland's Banking Laws, xxxvi. 33 2 R. S. 589.

corporations to the new and severe regulations. These exceedingly objectionable portions of this law are as follows:

"§ 11. Every director guilty of such violations (i. e., the violation. of any provision of the 'regulations') whether a loss shall or shall not result, shall be deemed guilty of a misdemeanor, punishable by fine or imprisonment, or both, in the discretion of the court by which he shall be tried.

"§ 12. Every director shall be deemed to possess such a knowledge of the affairs of his corporation as to enable him to determine whether any act, proceeding or omission of its directors is a violation of the foregoing provisions of this article; and every director who shall be present at a meeting of the directors, where such a violation shall happen, shall be deemed to have concurred therein unless he shall, at the time, cause, or in writing require, his dissent therefrom to be entered at large in the minutes of the directors.

"§ 13. Every director not present at a meeting where such a violation shall happen shall, nevertheless, be deemed to have concurred therein, if the facts constituting such a violation appear on the books of the company, and he remain a director of the same company for six months thereafter, and do not, within that time, cause, or in writing require, his dissent from such illegal proceeding to be entered at large in the minutes of the directors.

" 14. Every insolvency of a moneyed corporation shall be deemed fraudulent, unless its affairs shall appear, upon investigation, to have been fairly and legally administered, and generally with the same care and diligence that agents, receiving a compensation for their services, are bound by law to observe; and it shall be incumbent on the directors and stockholders of every such insolvent corporation to repel, by proof, the presumption of fraud.

§ 15. In every case of a fraudulent insolvency, the directors of the insolvent company, by whose acts or omissions the insolvency was, wholly or in part, occasioned, and whether then in office or not, shall each be liable to the stockholders and creditors of the company for his proportional share of their respective losses; the proportion to be ascertained by dividing the whole loss among the whole number of directors liable for its reimbursement; but this section shall not be construed to diminish the liability of directors, as before declared,

who shall have violated or have been concerned in violating the provisions of this article.

"§ 16. If the moneys remaining due to the creditors of a corporation whose insolvency shall be adjudged fraudulent, after the distribution of its effects, shall not be collected, in whole or in part, from the directors liable for their reimbursement, the deficiency shall be made good by the contribution of the stockholders of the company; the whole amount of the deficiency shall be assessed on the whole number of shares of the capital stock, and the sum necessary to be paid on each share shall be then ascertained, and each stockholder shall be liable for the sum assessed on the number of shares held by him, not exceeding the nominal amount of such shares in addition to the sums paid, or which he may be liable to pay, on account of those shares.

"§ 17. If the amount assessed on the shares of any stockholder, under the provisions of the last section, shall not be collected from such stockholder, by reason of his insolvency, or his absence from this State, the sum remaining due on such assessment shall be recoverable against the person from whom the delinquent stockholder, at any time within six months previous to the insolvency of the company, shall have received a transfer of the shares, or any portion of the shares, then held by him; and every person having made such transfer shall be liable in the same manner, and for the same proportion, that he would have been liable had he continued to hold the shares so transferred.

"§ 18. The term 'stockholders,' as used in the preceding sections of this title, from the fourteenth section inclusive, shall extend to every equitable owner of stock appearing on the books of an insolvent company in the name of another person, and to every person who shall have advanced the instalments, or purchase-money, of any shares of stock standing in the name of any of his children under the age of twenty-one years; but no person holding stock as an executor or administrator, or as a guardian or trustee, appointed by a last will or testament, or by a court of competent authority, and no legal or equitable owner of stock under the age of twenty-one years shall be individually responsible on account of the shares so held."

April 2, 1829, the legislature, by an act entitled "An act to create a fund for the benefit of certain moneyed corporations, and for other

purposes," enacted, that the above sections, fourteen, fifteen, sixteen, seventeen and eighteen, "so far as they provide for the personal liability of the stockholders of any insolvent corporation, shall not apply to any corporation subject to the provisions of this act; but the directors of every corporation subject to this act shall be liable to the stockholders thereof as provided in the said sections." Ch. 94, Laws of 1829.

March 8, 1830, the legislature, by an act entitled "An act to repeal certain sections of title second of the eighteenth chapter of the first part of the Revised Statutes," repealed sections eleven, twelve, thirteen, fourteen, fifteen, sixteen, seventeen and eighteen; but such repeal "shall not be construed to extend to or affect any existing corporation, or any officer or member thereof." Ch. 71, Laws of 1830. The eight years from 1820 to 1828 were characterized mainly by the regular and healthful transaction of business; but, in the undue expansion of the currency, and consequent pressure upon the banks in 1825, there were particular indications of a disposition to depart from sound principles of finance, the imprudence of which was, perhaps, more clearly perceived by the financiers and statesmen of New York than by those of any other State.

"SAFETY FUND" SYSTEM.

In the State of New York, on the 1st day of January, 1829, there were forty banks, the majority of whose charters were about to expire, having a combined capital of $15,000,000 actually paid in, and loans and discounts aggregating more than $30,000,000, with liabilities of about the same amount. The question of renewing the charters greatly agitated the State, and involved problems of the greatest importance. Fortunately, during the crisis, the election of Martin Van Buren, as Governor, proved opportune. He reviewed the situation. impartially, and in his message to the legislature in 1829, said: "To dispense with banks altogether is an idea which seems to have no advocate; and to make ourselves wholly dependent upon those estab lished by Federal authority deserves none."

In considering the renewal of the charters of solvent institutions, he concluded with the following words: "The pecuniary convulsion that must result from a compulsory closing of these extensive con