THE CANAL BANK-Legal Proceedings.-The commissioners appointed by the Comptroller to examine into the affairs of this institution have not yet completed their investigation. On Friday and Saturday the teller of the bank was examined under oath, in the presence of the Attorney General.

On Saturday, we hear, an application in the nature of a creditor's bill was filed by Julius Rhoades, Esq., of this city, praying for an injunction, and that ex-chancellor Walworth be appointed receiver of the assets of the bank. The Attorney General appeared on behalf of the State, to oppose the appointment of such receiver, and after hearing him the judge granted the injunction, but referred the designation of receiver to Judge Harris, before whom the parties met this morning.—Albany Argus, July 17.

THE BANKS OF PENNSYLVANIA.

The aim of the writer of the article in a preceding column appears to be, to show that the banking system of Pennsylvania, owing to legislative action and monopoly, is inflated and unsound when compared with Rhode Island and other States-that Pennsylvania exhibits at one period much more extensive bank operations than at other periods and that its circulation and loans are too large.

It is not fair to compare such a large State as Pennsylvania, having a scattered population, with a small one like Rhode Island, having its population concentrated. If the comparison be made, as it should be, between Pennsylvania on the one hand and the New England States at large with a like population on the other, it will be seen that the system of the former is not so expanded as at first appears.

The point of difference between them is that Pennsylvania has not so much capital as New England. We know that there is more wealth and more activity in the latter. But the business of a State or a city is not in proportion to its banking capital. This is seen in contrasting the two cities of Providence and St. Louis. The first with a banking capital of eight millions; the second with only six hundred thousand dollars, and a population 200 per cent larger. Yet the latter doing a much larger business and with larger bank deposits than the sixty-two banks of Rhode Island combined.

Pennsylvania has a population equal to all the New England States together, (Maine excepted,) but its circulation less than half, and its specie larger than the others. This is shown by the following tables from recent official reports:

These figures certainly indicate that there is less inflation in Pennsylvania than New England. Yet attempts have been made to reduce the banking capital of Pennsylvania and thus force it into other channels, or into other States. The veto of the governor upon the bill for rechartering the Farmers and Mechanics Bank, and other banks, will, if sustained by future legislation, force these banks into liquidation, and lead so much capital to other places. Philadelphia at present has only one half the banking capital of New Orleans, and about the same amount as Charleston; but the legislature, which should encourage the introduction of capital from abroad, is, on the contrary, doing all it can through one of its parties, to lessen or drive away a

portion of the fixed capital of the State. The leading party in Pennsylvania would force stockholders to be liable not only for their own capital invested in bank stock, but for double the amount. In other words, a stockholder in a bank to the amount of five thousand dollars would, in the event of its failure, not only lose his own stock but be lialble to the amount of five thousand dollars more, for the debts of the bankrupt institution.

Capital should be untrammeled in its operations, and when once fixed in certain channels, should not be disturbed by fickle legislation. Capital, like water, will seek its level and be placed where it is wanted, and where it can operate advantageously. Banking should be conducted upon the same principles as any other well regulated business. It is regulated and controlled by the laws of trade; a sound banker is or should be governed by the same rules which govern every well managed counting His obligations are based upon a fair capital and upon bona fide business paper, and his cash liabilities are never disproportioned to his cash resources.

room.

The writer in the Evening Bulletin would make it appear that the people of Pennsylvania suffer from the continued oscillation of their banks. Now this cannot be proved by figures. We have examined their tables for 1845 46 and '47, and they show a remarkable evenness of liabilities and resources, viz:

Nov. 1845,

66 1846,

1847,

Capital.

Circulation.

Deposits.

Loans.

Specie. $16,154,600 $10,107,000 $13,700,000 $27,000,000 $5,800,000

28,000,000

20,994,700 10,681,000 13,100,000 5,700,000 21,585,700 13,737,000 15,000,000 32,000,000 7,300,000 The apparent increase in the bank capital arises in the addition of the Girard Bank to the list between November, 1945, and November, 1846. The capital is reported in the legislative returns at five millions, when in fact it was less than one million. The year 1847 was one of great activity, especially in the grain growing States, and the demand for circulation was larger upon legitimate grounds. The increased amount of specie was in itself a fair basis of further bank issues, and the wants of the community, under the largely increased foreign trade, demanded further bank loans. With an increased circulation of three millions, and deposits of two millions, the banks were justified in adding four or five millions to their line of discounts. We do not consider the increased aggregates as anything else than as exhibiting an even policy on the part of the banks.

The banks of New England generally feel themselves authorized to issue as much circulation as their capital amounts to. Those of Connecticut are allowed to issue fifty per cent. more than their capital, (see page 180, Vol. 1,) and they would no doubt avail themselves of their chartered privileges in this particular, if the business wants of the community demanded it.

The bank circulation of the whole country is about 40 cents per dollar of capital; but in many States it bears a larger proportion. It will be seen that the bank issues of Pennsylvania are far from being as large as those of several others, viz:

7,300,000

These were the tables of six months since, and although they may vary from the present condition of the same banks, yet they approximate the truth sufficiently to sustain the opinions we have expressed.

EDITOR BANK. MAGAZINE.

We have stated in our previous article, in the June number of this magazine, that the first banking association formed in the State of New York was the Bank of New York, organized in 1784, and incorporated in 1791. The articles of copartnership were drawn by Gen. Alexander Hamilton, but at that time the community were smarting under the losses sustained by the continental paper money issued during the revolution, and the legislature were unwilling by any act to countenance the issue of paper as money by any association whatever. Hence no charter could be obtained for the only banking company then in the state, until after that company had been in operation more than seven years.

In 1792 the Bank of Albany was chartered, with a capital of two hundred and sixty thousand dollars; and in 1793 the Bank of Columbia, located at Hudson, (where it was proposed to open a foreign trade, and to establish the whale fishery business, by a company from Rhode Island and Massachusetts,) was chartered, with a capital of one hundred and sixty thousand dollars. The Bank of New York had a capital of nine hundred and fifty thousand dollars. So far the question of chartering banks had been kept entirely clear of party considerations. It was a mere question whether the convenience of the community, and the exigencies of commerce demanded these institutions; and until the year 1799, only the above three banks, with an aggregate capital of $1,370,000, had been chartered by the State of New York. A branch of the Bank of *Hammond's Political History of New York.

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the United States, incorporated in 1791, had however been established at the city of New York, and transacted a large share of the moneyed operations of that commercial mart.

The party contests which agitated the public mind with regard to state and national politics during the administrations of Washington and Adams were perhaps no where more violent than in the city of New York, from 1792 to 1800. The stock and direction of the Bank of New York were in the hands of some of the most active and influential federalists, which party contained in its ranks most of the wealthy merchants and other capitalists in that as well as other commercial cities.— Col. Aaron Burr, who was then prominent among the leaders of the Republican or Democratic party of the state, and some of his political friends, believed that the power of the Bank of New York was used to patronize and encourage business men who were federalists, and to cramp and embarrass those who were of the opposite party in politics. Hence the plan originated by Col. Burr to incorporate an additional bank in the city. But this project could not be carried into effect by the consent of the Legislature, inasmuch as a majority of both branches of the legislature in 1799 were federalists; and even the democratic members were so jealous of moneyed institutions that few of them would consent to charter a bank in a city which was already furnished with one state institution and a branch of the national bank. The result, therefore, was a conclusion on the part of Col. Burr and his friends desiring the bank, that the real object of the scheme must be concealed, and that the legislature must be blindfolded, and the plan contrived to obtain the charter was as follows:

The yellow fever had then recently made dreadful ravages in the city. That event, with other circumstances, called the attention of the public to the necessity of a plentiful supply of pure and wholesome water; and the legislature were, with great plausibility, in 7oked to charter, on the most liberal terms, a company who professed their willingness to undertake so useful an enterprise. As it was uncertain what amount of capital might be required to effect the contemplated object, and with a view to avoid any chance of failure on account of a deficiency of capital, the company requested to be authorized to raise two millions of dollars; but as it was possible, and indeed probable that the construction of the water works would not absorb the whole of that sum, the applicants for the charter asked for a provision which formed the substance of one of the sections of the act of incorporation-viz: that "the surplus capital might be employed in the purchase of public or other stocks, or in any other moneyed transactions or operations, not inconsistent with the laws and constitution of the United States, or of the state of New York.”— This request seemed to be but reasonable, and yet under the authority of these few words, has grown up one of the most powerful and formidable moneyed institutions, exercising banking among other powers, that ever existed in the state of New York. It is certain (Mr. Hammond remarks,) that an immense majority of the legislature did not entertain the least suspicion that the charter contained a grant of banking powers.The attention of the council of revision, (a body consisting of the governor, judges of the supreme court, and chancellor, whose assent was

requisite to the passage of laws, by the first constitution of New York,) was called to the clause under which banking powers were claimed. But from an extract from the minutes of that council given in Davis' Life of Burr, vol. I. p. 415, it is evident that it did not seem to the members that in passing the bill, they were chartering a bank which was to exist as long as the government lasted. From the words used by the chief justice, who objected to the bill in consequence of the clause in question, he appeared to be apprehensive that the company would employ their capital in trade, &c. The idea of banking is not named. A majority of the council, of which governor John Jay was then president, passed the bill, notwithstanding the objections of the chief justice. The bill incorporating the Manhattan Company finally became a law on the 2d of April, 1799; its successful passage having been mainly ef fected by the skill and address of Col. Burr, who was himself one of the members of the assembly from the city of New York. The act was so drawn as to enable Burr and his democratic friends to get the control of a majority of the stock, and of course of the funds of the company. At the election for members of the legislature at the close of the same month, (April 1799,) Col. Burr was again placed on the democratic assembly ticket for the city of New York, which at the two preceding elections had elected democratic members of the legislature. But previous to this election the secret was out that the charter of the Manhattan company contained a clause investing them with banking powers.— It was alleged that a majority of the legislature had been cheated, for while they believed they were simply providing the means of supplying the city with pure and wholesome water, they had created a bank which was to be managed as a great party machine, and which was to administer to the personal and ambitious projects of Col. Burr. A very inflammatory pamphlet was circulated before the election, presenting these and other views to the New York public. The consequence was the defeat of Col. Burr and his associates, and the election of the federal legislative ticket, by the large majority of nine hundred. The democratic papers of the day charged the loss of the election to the effect produced on the public mind by the banking powers granted to the Manhattan company, through a clause in the charter which was charged by their political opponents to have been obtained by means of deception. It is worthy of remark, that in the subsequent divisions which took place in the democratic party, the political power which was created by chartering this institution, was eventually used for the prostration of Col. Burr and his immediate friends. M. Hammond asks, Was it not retributive justice? The following persons were named in the act of incorporation, to constitute the first directors: Daniel Ludlow, John Watts, John B. Church, Brockholst Livingston, William Edgar, William Laight, Paschal N. Smith, Samuel Osgood, John Stevens, John Broome, John B. Coles, and Aaron Burr.

Having obtained the act of incorporation, the duration of which is unlimited as to time, and with most extraordinary powers, which it has been contended place the company entirely above and beyond the control of the legislature, so that repeal or alteration of the charter was not to be feared, and no returns or report of proceedings to the legislature