of favored customers was freely charged. Would-be borrowers were irritated by its conservative lending policy. There was a widespread jealousy of its continued prosperity in the midst of general depression, and the word "monopoly" was readily brought into play, with all the sinister significance which attached to the term in the popular mind. The issuance of state paper money was deemed a natural remedy for the distress, and the bank, vigorously opposing this expedient, was denounced as an enemy to the public welfare.1 As an outgrowth of these sentiments three petitions were presented to the state legislature late in March, 1785, from Philadelphia, Bucks, and Chester counties. These preferred charges against the bank and prayed a repeal of the charter, "in order to restore public confidence and private security." No investigation was made into the charges, and the bank's petition to be heard upon them was denied. A committee reported promptly and favorably, and on April 4 the repealing bill passed its second reading and was ordered published in the customary manner, as a preliminary to final passage.2 Simultaneously a public corporation, The Trustees of the General Loan Office of the Commonwealth of Pennsylvania, was created to provide a circulating medium,3 and new issues of paper money were soon forthcoming. At the new session begun in August a hearing was given the bank's supporters, represented by James Wilson, but it terminated in an ineffective wrangle. Despite the efforts of the bank's partisans, the anti-bank members were still in the majority, and on September 13 the repealer passed, to take effect March 1, 1786.4 These actions naturally raised a storm of protest. On the one hand the bank itself struggled for life. Its reputation and business were injured, but it refused to wind up, and kept its 1 See petitions and debates cited below; P. Webster, Essays, 448-449; Lewis, Bank of N. A., 55-58. 2 Ibid., 58-63. Session Laws, 1785, p. 550. Carey, Debates, 2-7; Journ. of Pa. House of Reps., March 21, 23, 28, 1785; Hazard, Register of Pa., iv, 137; Pa. Stats. at Large, xii, 57–58; Lewis, Bank of N. A., 63-66. 5 Ibid., 66-67. paper circulating in competition with the state loan office issues. It threatened appeal to the courts. It prepared its case to submit to the next legislature, and bent its efforts to get members elected who would vote to reverse the recent action.1 As a precautionary measure it secured a charter from the state of Delaware (Feb. 2, 1786),2 and over the heads of mildly interested citizens it held the threat of removal from Philadelphia to Wilmington. On the other hand the fundamental issues were raised regarding the right of a legislature to repeal a corporate charter, the nature of an act of incorporation, and the validity of a congressional charter. All of these matters were subjects for oral, newspaper, and pamphlet controversy and were debated ably and at length in the legislative sessions of 1786. Here was the first "bank war." The legal issues were not pressed, though it was tacitly assumed that practically a Pennsylvania charter was requisite for the safety of a bank operating in that state. Better evidence was brought to bear on the practical questions as to the utility, the practices, and the effect of the bank in operation. The repeal of the repealing act could not be got, but finally on March 17, 1787, a satisfactory compromise was obtained in the form of a new, somewhat less liberal charter. Under this it continued to act. The bank was thoroughly successful. Its capital remained $870,400 till 1806, when arrangements were made for its increase to $1,000,000. Here it has stood to the present day, except for a temporary decrease of one-fourth in 1843-45.5 The bank refused in 1791 to become the national bank — doubtless wisely, in view of the fate which overtook the Bank of the United States. It similarly refused inducements in 1793 to become the 1 John Chaloner to J. Wadsworth, Oct. 10, 1785, in Wadsworth Papers (Conn. Hist. Soc.). 2 Del. Laws (ed. 1797), ii, 838–840. The act declared the bank a corporation of Delaware, with substantially the charter granted by Congress. Delaware had not passed such an act earlier. Cf. also Lewis, Bank of N. A., 67–69. See supra, 12-15, and infra, 310–313. Lewis, Bank of N. A., 69-73; Pa. Laws (Dallas), ii, 499. state bank. The result was the establishment of two large competitors. Despite them it continued profitable. Up to January, 1880, it had paid dividends averaging 9.4 per cent and accumulated a surplus of $1,110,000; and it was then paying 16 per cent. Since then it has enlarged its surplus to $2,250,000. It became a national bank in 1864, retaining its original name.1 The Bank of New York was founded largely as a result of the satisfaction given by the Bank of North America, alike to stockholders and customers, but it had to fight its way against rival projects and against the coldness of the legislature. A contributor to the New York Packet, Feb. 12, 1784, urged the establishment of a "Bank of the State of New York," with a capital of $750,000, in shares of $1000 each, one-third payable in cash and the balance secured by mortgage on New York or New Jersey lands appraised at two-thirds value. Chancellor Livingston and others soon petitioned the legislature for an exclusive charter for such an institution. Hamilton's brotherin-law, John B. Church, in conjunction with Jeremiah Wadsworth of Hartford, had projected a more typical commercial bank and engaged the legal services of Alexander Hamilton to develop and launch it. Hamilton saw no good in the land bank scheme and readily aroused "some of the most intelligent merchants" to take steps to defeat it, pointing out the necessity "to convince the projectors themselves of the impracticability of their scheme; and to counteract the impressions they had made by a direct application to the Legislature." With these objects in view, but apparently without consulting Hamilton, the merchants "set on foot a subscription for a money bank," with a specie capital of $500,000, in $500 shares. With this plan Hamilton was persuaded to fall in, though somewhat reluctantly on account of Church's scheme, and he drafted the constitution. The subscription was quickly filled, and on March 15 president, cashier, and twelve directors (of whom Hamilton was one) were formally elected. Petition was made for a charter of incorporation and against any exclusive charter for the land 1 Lewis, Bank of N. A., 148–153 and passim; letter of April 18, 1916, from the president. bank.1 Despite the fact that "all the mercantile and moneyed influence" was arrayed against it, the projectors of the land bank persevered; but their efforts were checkmated, and they succeeded merely in preventing the grant of a charter to the Bank of New York.2 - The specie bank, however, did not wait for a charter. Armed with a letter of introduction from Hamilton, the new cashier -William Seton, merchant waited on the officials and directors of the Bank of North America "to procure materials and information" in the forms of business. He found Gouverneur Morris eager to have the New York institution a branch of the older one, but turned a deaf ear to him, and after some delay secured what he had come for. On May 1 the subscribers were notified to pay in before June 1 half the subscriptions; despite fears by some subscribers on account of the unlimited liability, capital was secured; on June 9 the bank opened for deposits, and on June 16 for discounts.3 The bank suffered some criticism. Here as elsewhere customers were irritated by the unprecedented insistence on promptness in meeting obligations. As in Philadelphia, the bank was blamed for the large importations, the drain of specie, the economic distresses of 1785-86; and against its influence an emission of state paper money was made in 1786. Repeated attempts to secure a charter were unsuccessful till 1791 because (said Robert Morris) of personal antipathies to its backers. Despite this the bank paid regular semi-annual dividends of three per cent till May, 1791. Its capital, at first $51,500, stood at approximately $75,000 from May, 1785, to May, 1789, except for a temporary decrease in 1786. From this date to May 1, 1791, it was gradually increased to $318,250, when the deposits were $773,709.67, the notes outstanding $181,254, the discounts $845,940.20, and it had accumulated a surplus of fifteen per cent.* 1 Domett, Bank of N. Y., 4-7, including extracts from a letter of Hamilton to Church dated March 10. 2 Hamilton to Fitzsimmons, March 21, 1784, in Ibid., 113. 1 Ibid., 113-115, quoting letters of Hamilton and Seton, 18-20, 27-28. ♦ Ibid., 29-37, 122-130; Carey, Debates, 97; letter from the bank April 19, On Aug. 2, 1792, in the midst of the speculative boom, the capital was increased to $900,000, save for three hundred shares which were temporarily withheld to be offered the new Bank of the United States; and such was the enthusiasm that the subscription was filled in five minutes. The stock came promptly into the security market. It never vied with national bank “scrip”; nevertheless it was the subject of extensive speculations, particularly in the winter and spring of 1792, when a "coalition" with the United States bank and the establishment of new banks in New York were being agitated.2 The relations with the state were intimate. Jan. 12, 1792, the legislature exercised its option to subscribe $50,000 to its stock. When, not long after, the project of a state bank was defeated, the legislature authorized the state treasurer to deposit with the Bank of New York, for safe keeping, the state's holdings of nearly two millions in the national debt, the bank agreeing to collect for the state the interest thereon free of charge; and the state treasurer was promptly elected to the bank's directorate in conformity with this act. In 1797 the bank entered into an agreement with the state whereby it gradually acquired the state's investment in federal securities, undertook to make loans to the state as needed from time to time, and became the state depository, as well as secured the privilege of increasing its indebtedness beyond the original charter limits. Various loans were made to the state under this agreement.3 Like its predecessor, the Bank of North America, the Bank of New York still continues its prosperous career. In 1853 its capital was increased to $2,000,000, and in 1859 to $3,000,000. In 1865 it became a national banking association, and in 1878 reduced its capital again to $2,000,000. At this point the stock has remained, but surplus and undivided profits now amount to more than twice as much.1 1 N. Y. Journal, August 3: "Thus has the speculating mania taken full possession of every moneyed soul." See Essay II, chap. 7. In January and February, 1792, prices ranged from 46 to 71 per cent advance, on time. See current quotations in Daily Advertiser (N. Y.). Domett, Bank of N. Y., 44–45, 53-55. • Ibid., 91, 96, 102, 107; U. S. Comptroller of the Currency, Report (1915). |