exceptions aforesaid, and the citizens of other States and other parts of the United States, is unlawful, and will remain unlawful, until such insurrection shall cease or has been suppressed, and notice thereof has been duly given by proclamation; and all cotton, tobacco, and other products, and all other goods and chattels, wares and merchandise, coming from any of said States, with the exceptions aforesaid, into other parts of the United States, or proceeding to any of said States, with the exceptions aforesaid, without the license and permission of the President, through the Secretary of the Treasury, will, together with the vessel or vehicle conveying the same, be forfeited to the United States.

In witness whereof I have hereunto set my hand and caused the seal of the United States to be affixed.

Done at the City of Washington this second day of April, A. D. eighteen hundred and sixty-three, and of the Independence of the United States of America [L. S.] the eighty-seventh.

By the President:

WILLIAM H. SEWARD, Secretary of State.

ABRAHAM LINCOLN.

REPORT ON OBJECTIONS MADE BY THE REPRESENTATIVES OF THE HONGKONG AND SHANGHAI BANKING CORPORATION TO ACT NO. 53 OF THE PHILIPPINE COMMISSION, ENTITLED “AN ACT TO PREVENT DISCRIMINATION AGAINST THE MONEY OF THE UNITED STATES BY BANKING INSTITUTIONS."

[Submitted May 6, 1901. Case No. 2820, Division of Insular Affairs, War Department.]

SIR: I have the honor to acknowledge the receipt, by reference, of a communication addressed to you by Messrs. Hopkins & Hopkins, counsel for the Hongkong and Shanghai Banking Corporation, setting forth certain objections to act. No. 53 of the Philippine Commission, entitled "An act to prevent discriminating against the money of the United States by banking institutions," together with your request for a report as to whether said act, if imposed by the legislature of a State upon corporations exercising banking franchises under the laws of the State, would be in violation of the customary provisions of our State constitutions."

The act under consideration is as follows:

Act No. 53.

AN ACT to prevent discriminating against the money of the United States by banking institutions.

By authority of the President of the United States, be it enacted by the United States Philippine Commission, that:

SECTION 1. Every bank of deposit in the Philippine Islands shall accept deposits both in the money of the United States and in Mexican or other local currency, and shall honor checks drawn on or repay such deposits in the kind of money in which they were made.

SEC. 2. A willful violation of the requirements of this act shall subject the manager or officer of the bank causing such violation, or taking part in it, to a punishment for each offense by a fine of not more than $5,000, or by imprisonment for not more than one year, or both, in the discretion of the court.

SEC. 3. Nothing herein contained shall prevent a bank or its officers from declining in good faith to accept deposits so small in amount as to be unprofitable, but a discrimination in that respect between Mexican or other local money and that of the United States shall be deemed to be a violation of the requirements of this act. SEC. 4. This act shall take effect on its passage.

Enacted November 28, 1900.

The objections set forth by Messrs. Hopkins & Hopkins are as follows:

1. That banks doing business in territory affected by said act are, by the provisions of section 1. deprived of their property without due process of law.

2. That the provisions of section 1 impose an undue restriction on the rights of contract possessed by the bank.

The first essential to a correct understanding of this matter is to find out the purposes of the Commission in passing said act, and the conditions with which they were called upon to deal. The report of the Taft Philippine Commission to the Secretary of War, dated November 30, 1900, furnishes the desired information. (See pp. 8593.)

From said report it appears that the act is a remedial statute, intended (1) to prevent discrimination against the currency of the United States and (2) to remedy an evil resulting or anticipated from the export of Mexican silver coins from the Philippines to China.

From said report it appears that the necessity which occasioned the adoption of the act complained of, and others of a similar character, arose from the following condition of facts:

The Mexican silver dollar or peso has been for many years the principal medium of exchange in the Philippine Islands. The American occupation being accomplished, it became necessary to establish, if possible, a fixed ratio between American money and the prevailing currency, and to provide for the increased demands of commerce by increasing the volume of money in the islands. The banks recognized this, and on August 19, 1898, they addressed a communication to the American military authorities (in which the Hongkong and Shanghai Banking Corporation joined) setting forth these necessities, and, as a means of meeting them, requested that they be allowed to import Mexican silver dollars free of duty. The request was granted, and the military government cooperated with them in endeavors to increase the money supply and to maintain the ratio, suggested by the banks, of two Mexican dollars for one American dollar, by depositing in said banks $4,000,000 of Mexican currency. The importation of Mexican coinage duty free was profitable to the banks, and they engaged therein; but the maintenance of the fixed ratio deprived them of opportunities for securing temporary benefits from speculative profits, and the Commission report that said banks did not cooperate with the military

government in that matter, but left the military government to sustain that burden alone. The only means of sustaining the ratio available to the military government was to establish and constantly replenish a deposit devoted to the exchange of American money for Mexican at the desired ratio. Lacking the hearty cooperation of the banks, even this means was not entirely successful under the extraordinary conditions existing in the Philippines. The task was soon rendered more difficult by the action of the banks in shipping large sums of Mexican dollars to China. The deplorable international complications arising in China and the advent of foreign troops caused an increased demand and advance in price for Mexican coinage in that country. Thereupon the banks in the Philippines exported to China vast sums of such coinage withdrawn from circulation in the Philippines. Regarding such exportations the Commission report as follows (pp. 89–90, Rep. Nov. 30, 1900):

Between the 27th day of August and the 1st day of November, 1900, the two banks aforesaid exported $2,087,500, and the deposit of Mexican money belonging to the Government in those two banks was, during that same period, depleted nearly the same amount. The Hongkong and Shanghai Banking Corporation was by far the more active in this business of exporting Mexican money. During the period last stated it exported $1,935,000, and the Chartered Bank of India, Australia, and China exported $152,500. Between the 17th and 31st of October, $1,312,650 of Mexican currency was exported by the two banks referred to and by private speculators. In the three days that elapsed between the publication of the proposed legislation placing a tax upon the export of Mexican dollars and its enactment on the 12th day of November, $1,133,500 Mexican currency was exported; $500,000 of that sum being exported by the Hongkong and Shanghai Banking Corporation, $150,000 by the Chartered Bank of India, Australia, and China, and the remainder by private speculators.

In order to secure possession of as many Mexican dollars as possible and devote them to their own purposes, the banks adopted two rules. The first rule required every depositor to reduce cach deposit to Mexican currency. The effect of this rule was (a) the depositors resorted to the fund of Mexicans provided by the military government for the purpose of maintaining the ratio, and thereby said Mexicans passed to the banks and were exported; (b) the currency of the United States was discredited in the minds of the inhabitants of the islands; (c) the burden of maintaining the desired ratio was increased. The second rule required depositors drawing against their deposits in the bank to accept payment of said drafts in such currency as the banks tendered. This enabled the banks to export the Mexican dollars coming into their custody through the ordinary channels of business. To correct this increasing evil the Commission adopted two acts, requiring the payment of salaries of Government employees in United States money and the other imposing a duty of 10 per cent on Mexican silver coinage exported. These measures proving inadequate the act now complained of was adopted.

1394-03-17

It is well established that banks and banking in the United States are subject to legislative regulation and control. In a recent case the supreme court of Kansas say:

The question with us is whether the banking business is of such a character as to warrant the legislature, in the exercise of the State's police power, to impose reasonable regulations upon the means and methods by which it is conducted. There are many occupations and lines of private business which the legislature, in the exercise of the internal police power, may rightfully regulate. Tiedman, in his work on Limitations of Police Power (p. 194), says: "It will probably not be disputed that everyone has a right to pursue in a lawful manner any lawful calling which he may select. The State can neither compel him to pursue any particular calling nor prohibit him from engaging in any lawful business, provided he does so in a lawful manner. It is equally recognized as beyond dispute that the State, in the exercise of its police power, is, as a general proposition, authorized to subject all occupations to a reasonable regulation wherever regulation is required for the protection of public interests or for the public welfare."

Enactments controlling the loaning of money and regulating the rate of interest upon the same have been sanctioned from the earliest times, and the nature of the business done by banks in dealing in money, receiving deposits for safe-keeping, discounting paper, and loaning money is such, and is so affected with a public interest, as to justify reasonable regulation for the protection of the people.

A well-known author in his treatise on banking uses the following language: "At common law the right of banking pertains equally to every member of the community. Its very exercise can be restricted only by legislative enactment, but that it legally can be thus restricted has never been questioned." (1 Morse, Banks, § 13.) The same subject was considered in the recent case of State v. Woodmanse (N. Dak., 46 N. W., 970), where it was said that "the business of banking, by reason of its very intimate relations to the fiscal affairs of the people and the revenues of the State, is and has ever been considered a proper rubject of control and strictly within the domain of the internal police power of every State. As a matter of fact we have been unable to find an authority-and we have searched diligently-which has ever questioned the right of the legislature in the exercise of police power to regulate, restrain, and govern the business of banking." (Blaker et al. v. Hood, 53 Kans., 499 (1894); 36 Pac. Rep., 1115; see also Cummings r. Spannhorst, 5 Mo. App., 21; see also People r. Utica Ins. Co., 15 Johns., 358; People v. Barton, 6 Cow., 290; Curtis. Leavitt, 15 N. Y., 9; State v. Williams, 8 Tex., 255; Nance r. Hemphill, 1 Ala., 551; People v. Brewster, 4 Wend., 498.)

If it be conceded that a Government exercising sovereignty may properly provide and maintain a currency adequate in character and volume to the wants of the commerce in which its people are engaged, then the act under consideration is to be commended and not criticised. Regarding the specific objections to said act set forth in the communication of Messrs. Hopkins & Hopkins, I have to report as follows: The complaint that said act "has the effect of depriving the banks of their property without due process of law" is not well founded. That said act may reasonably be expected to have "the effect of depriving the banks" of unacquired profits of speculative assaults upon the currency of the Philippines and the good name of the money issued by the United States is doubtless true.

1

Banking is a lawful calling, and the right to pursue a lawful calling may be a valuable property right. But said right is subject to jus publicum, and this inferior right is to be exercised in harmony with "those principles by which the public good is to be considered and promoted." It does not follow that because a calling is lawful, one who adopts it may select any and every means of pursuing it; or that restraints or regulations in regard thereto, necessary for the protection of the rights of the public, are violations of the letter or spirit of constitutional guarantees of property rights.

The requirement of said act that "every bank of deposit in the Philippine Islands shall accept deposits both in the money of the United States and in Mexican or other local currency" is objected to as follows:

Thus, under this singular and capricious law, the manager of a bank, should he refuse to receive a deposit tendered by any objectionable person, no matter how dangerous to the safety of his institution or how obnoxious a character that person might be, would be liable to a fine of $5,000 or imprisonment for one year. (See p. 7, letter of Messrs. Hopkins, Feb. 18, 1901.)

This complaint construes the provisions of said section as having reference to depositors instead of deposits. Since the act is remedial it must be construed as relating exclusively to the purpose sought to be accomplished. That purpose is to prevent the exportation and decrease of the volume of currency used in the Philippines. It would be a forced construction indeed that would make said section read: "Every bank of deposit in the Philippine Islands shall accept as a depositor any person tendering deposits both in money of the United States and in Mexican or other local currency." It must also be considered that section 3 of said act declares that discrimination between deposits of Mexican or other local money and the money of the United States is what constitutes the offense.

Since the act provides for inflicting a penalty, it is to be strictly construed in favor of a person accused of violating it. The objection referred to is based on a construction which is forced and unwarranted and therefore untenable.

The requirement of said act that depositors shall be paid in kind instead of value is complained of as making it necessary for the banks to go into the market and become unwilling speculators in a variety of coin. This necessity does not seem probable. In no event would the bank, if called upon to make payment in kind, be required to pay a greater number of coins, or tokens, than it had received. Apparently this rule is one of evenhanded justice. The only disadvantage resulting to the bank is that, in a measure, it is deprived of the opportunity for using its position and information to secure profits on the fluctuations in value of coins and other currency, and may thereby be induced to make effort to secure and maintain a stable value. But, if the objection were well taken, the requirement is no harsher than the