BANKING SYSTEM OF NEW YORK.

Extracts from the Report of the Hon. Millard Fillmore, Comptroller of the State of New York, January 4, 1849.

There are now two systems of Banking carried on in this State. One called the Safety Fund System, which was first authorized in 1829. Every bank belonging to this system has received a special act of incorporation from the Legislature. These charters were for a limited period, generally having about twenty years to run. There are seventy-eight of these banks and two branches now in operation, with an aggregate capital of $29,638,860. The charters of some of them will expire in each year until 1866, when the last will terminate. This statement includes two incorporated banks not subject to the Safety Fund act, whose charters are unlimited, viz: The Manhattan Company and the New York Dry Dock Company. Their capital is $2,250,000. This system was regulated by a general law, (L. of 1829, ch. 94,) which was incorporated into every charter, by which each bank was required to have all its capital paid in before it commenced business, and it was also required annually to contribute one-half of one per cent. upon its capital to a common fund, deposited with the State Treasurer until such fund should amount to three per cent. upon the capital of each bank, which fund was denominated the “ Bank Fund,” and was to be applied to the payment of the debts of any insolvent bank contributing to the same, and in case the fund was at any time diminished by payments from it, the banks were again required to make their annual contributions, till each had in deposit the three per cent. on its capital stock. This fund, in common parlance, has been called the "Safety Fund," which has finally given name to the system. Another feature of this system was, that three Bank Commissioners were to be appointed, with large powers, to supervise and inspect the several banks: the State, as representing the whole people, and the banks of a certain district which included the city banks, and the banks of another district which included all the other country banks, each presumed to have antagonistic interests, were to be represented in this commission. It was supposed that each would be a check upon the other. To effect this, the Governor and Senate were to appoint one Commissioner, and the banks in the southern part of the State another, and the remaining banks a third. Whether this mode of appointment was found not to answer the expectations of the original projectors, or the dominant party desired to use this power as a political engine, is unknown to the Comptroller; but the law was changed in 1837, so as to give the appointment of all three to the Governor and Senate.

This, of course, brought them within the vortex of the great political whirlpool of the State; and the place was sought for and conferred upon partizan aspirants, without due regard in all cases to their qualifications to discharge the delicate trust committed to them. This state of things, under the administration of both the great political parties of the State, continued until 1843, when the Legislature abolished the

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office, and conferred the power of examining these banks upon this department, whenever there was reason to suspect that a bank had made an incorrect report, or was in an unsafe or unsound condition to do banking business.

THE FREE BANK SYSTEM, as it is styled, was established in 1838, (ch. 260). By this system every individual and association was authorized to engage in the business of banking, and on depositing with the Comptroller the stocks of the United States, or of any State which should be, or be made equal to a five per cent. stock, or such stocks, and bonds and mortgages to the same amount or less, on improved, productive, and unincumbered real estate, worth double the amount secured by the mortgage, over and above all buildings thereon, and bearing an interest of at least six per cent. per annum, the Comptroller was required to deliver to such individual, or association, an equal amount of bank notes for circulation, duly numbered, registered, and countersigned in his office.

Associations under this law were a species of corporation. They could contract, sue and be sued in the name of their president, and the shares were transferable at the pleasure of the shareholders, who were not liable in their individual capacity for the debts of the association. But there was nothing in the act that required individual bankers to deposit any particular amount of securities before they commenced banking. The country was then flooded with stocks from almost every State, and the consequence was that numerous banks sprung into existence under this law. Repudiation soon followed. Many States that did not repudiate, failed to meet their obligations, confidence was impaired, credit was shaken, and stocks generally depreciated in the market, the consequence was that many banks failed, and the Legislature partially retrieved its error, in 1840, (ch. 363) by excluding all stocks except those issued by this State, and required those to be, or to be made equal to a five per cent. stock.

Finding the small banks unsafe, the Legislature in 1844, required inindividual bankers to deposit securities to the amount of at least $50,000; and associations, to the amount of $100,000, before they were entitled to any notes for circulation. The stringency of the money market in 1847, admonished the Legislature that the security of these banks was not sufficient; and in 1848, they required the stocks deposited, to be stocks of this State, and equal to a six per cent. stock; and the bonds and mortgages to bear an interest of seven per cent. per annum, and that they should not be for an amount exceeding two-fifths of the value of the land covered by the mortgage. This is the free bank system, as it now stands, and it takes its name from the fact that all are freely permitted to embark in it who comply with the rules prescribed. It is no monopoly-no exclusive right granted by the Legislature to a favored few, but is open to all who can give the requisite security.

Both of these systems have been in operation long enough to test their merits. It is presumed that no one would advise the continuance of both. Two rival systems cannot exist without creating jealousies among those interested, and adding much to the complexity and labor