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EXPENSE OF A CURRENCY CONSISTING OF THE
PRECIOUS METALS. The iroposition of a moderate seignorage has, however, but a very inconsiderable effect in reducing the expense of a metallic currency. This, which is much greater than is generally imagined, does not consist in the coinage, which is comparatively trifling, but in the great amount of gold and silver required for the purpose. If, for example, the currency of Great Britain consisted wholly of gold, it would amount to at least fifiy millions of sovereigns; and if the customary rate of profit were six per cent., it would cost three millions a year. For had this fifty millions not been employed as money, it would have yielded six per cent. or three millions a year, of nett profit to its possessors. But this is not the only loss.
The fifty millions would not merely be withheld from the great works of production, and the country deprived of the revenue derived from its employment, but it would be perpetually diminished.
The wear and tear of the coins is by no means inconsiderable; and supposing the expenses of the coinage were defrayed by a moderate seignorage, the deficiency in the weight of the old worn coins must, on their being called in to be recoined, be made up by the public. There is, besides, a constant loss from shipwrecks, fire, and other accidents. When due allowance is made for these causes of waste, it would not, perhaps, be too much to suppose, that a country, which had fifty millions of gold coins in circulation, would have annually to import the hundredth part of this sum, or half a million of coins to maintain its currency at its proper level.
Thus it appears, that were the customary rate of profit in Great Britain six per cent., it would cost 3} millions a year to maintain fifty millions of gold coins in circulation. It is indeed true, that a reduction of the rate of profit would proportionally reduce the amount of this expense, though as the reduced expense would still bear the same proportion to the total income of the country that the higher expense did, the real cost of the currency would not be at all diminished.
The case of France furnishes a still more striking example of the heavy charges attending the general use of a metallic currency. The amount of the gold and silver currency of that kingdom has been estimated by Necker at 2,200 millions of francs, and by Peuchet at 1,850 millions. (Statistique Elementaire de la France, p. 473.) Now, supposing the lowest estimate to be the most correct, and taking the rate of profit at six per cent., this currency must cost France an hundred and eleven millions of francs a year, exclusive of the wear and tear and loss of the coins, which being taken, as before, at the hundredth part of the entire mass, will make the whole annual expense amount to the sum of an hundred and twenty-two millions of francs, or to nearly five millions sterling. This heavy expense certainly forms a very ma
а terial deduction from the advantages resulting from the use of a carrency consisting entirely of the precious metals, and has doubtless been the chief cause why all civilized and highly commercial countries have endeavored to fabricate a portion of their money of less valuable materials.
THE BANK OF DANSVILLE.
Extracts from the unanimous Report of the Committee on Banks and Insurance Companies of the Assembly of New York, April, 1847—against the petition for an investigation into the affairs of the Bank of Dansville, an association established under the General Banking Law of 1838.
The committee on banks and insurance companies, on the reference of the petition of sundry inhabitants of Livingston county, relative to the investigation of the affairs of the Bank of Dansville,
Reports—That they have had the same under consideration, and have given the subject a careful and patient investigation, so far as the time under their control would allow, aided by the arguments of able and distinguished counsel, as well on the part of the petitioners as on the part of the bank, on the various questions of law and of fact, arising in the case.
Before considering the principles involved in this matter, it may be well, briefly to advert to the facts presented in the papers before the committee.
The allegations on the part of the petitioners, are, in substance :
1st. That the president of the bank was guilty of fraud and collusion in the foreclosure of a certain mortgage, given to the bank as security for stock.
2d. That certain of the stockholders endorsed and delivered to the cashier, their scrip or certificates of stock, intending the same to be cancelled, and received in return their respective mortgages cancelled. And that the bank subsequently made dividends, and voted upon said stock, and finally sold the same as valid subsisting stock, contrary to the understanding and intention of the parties surrendering the same.
3d. That the president or cashier, or both, were guilty of fraud in the advertisement and sale of certain stocks pledged to the bank as security for loans.
4th. That the board of directors, in 1844, refused to suffer a committee appointed at a meeting of the stockholders, to examine as fully as they desired, the affairs and management of the bank.
5th. That the bank failed to carry out an agreement, made by the cashier with one of the stockholders, to receive from such stockholder his bond and mortgage, in exchange for certain notes held by the bank.
To these are added various amplifications and general charges of fraud and malpractices on the part of the bank; but the above is believed to be the substance of the charges specifically made.
In answer to these charges, is a full and complete denial by the president and cashier of each and every of the charges against them, respectively, accompanied with various affidavits, certificates, and remonstrances, by the directors, stockholders, and others; and among others, it is a little remarkable, that more than one fourth of all the petitioners appear from time to time on the other side, in the attitude of remonstrants against any legislative interference, or certifying to the good character, conduct and management of the officers of the bank, and to
its sound and healthful condition ; and two of them in their memorial say, that at the time of signing the petition, they did not read the whole of it, nor understand its object or purport, and that on subsequently reading it, they found it contained many slanderous and malicious reflections on individuals, as well as some charges which they knew to be untrue, and many others which they believed to be so.
Add to this the fact that this controversy has existed for several years; that petitions and remonstrances on the subject have been presented to three successive Legislatures : that three several annual elections of directors have taken place since most of the acts complained of are alleged to have transpired; that during all this time, as well as at the time of the alleged misconduct, some one or more of the petitioners have been in the board of directors, and that between some of the principal movers of this application, and the president and cashier of the bank, exist a near family relationship; and it is impossible to doubt, that much of the controversy is of a personal character; and like most personal and family quarrels, has lost nothing of its asperity by lapse of time.
On a simple review of these facts, presented in the papers, two questions presented themselves to the committee.
First. Has the Legislature any power or authority, on sufficient cause shown, to grant the relief sought by direct legislative enactment, aimed at a particular institution, formed under the general law, and dissolving or striking it out of existence ?
Second. Supposing the power to exist, is it expedient and proper for the Legislature to take upon itself the investigation and decision of such, or any similar matters, clearly within the cognizance of the judicial tribunals of the State ?
In the solution of the first of these questions, in addition to the arguments of the counsel, your committee have been favored with the opinion of the Attorney-General, furnished in compliance with a resolution of the House, and which is hereto annexed, marked "A." They have also looked into the report of the committee of the Senate on the same subject in 1845, and the two counter reports made by the committee of the House in 1846. It is conceded by counsel on both sides, and the Attorney-General is understood in effect to make the same concession, that whatever power belongs to the Legislature in the premises, must either have been reserved in the general banking law itself, or reserved or conferred in some other prior legislative enactment; and clearly any argument upon the supject must be based upon such hypothesis, as the exercise of any power not so reserved or conferred, would be palpable violations of the first subdivision of the 10th section of the first Article of the Constitution of the United States, which provides that " no State shall pass any law impairing the obligation of contracts.”
The opinion of the Attorney-General, above referred to, (and which embraces substantially all the propositions contended for on the part of the petitioners,) labors chiefly to establish the following propositions, to wit:
First. That associations formed under the general banking law, are corporations.
Second. That being corporations, such associations are necessarily subject to the provisions contained in the 8th sec. of title 3, chap. 18, of the First Part of the Revised Statutes, which provides that "the charter of every corporation that shall hereafter be granted by the Legislature shall be subject to alteration, suspension and repeal, in the discretion of the Legislature."
Third. That the right reserved by the Legislature in the 320 sec. of the general banking law, "at any time to alter or repeal that act,” is sufficiently broad and comprehensive to authorize the dissolution or repeal of a particular association formed under it.
These propositions, though emanating from a source entitling them to great consideration, and although reasoned with the usual ability of their distinguished author, and fortified by the citations of copious authorities, are nevertheless, in the opinion of your committee, to be received with some degree of allowance and qualification.
The committee are well aware that the court of last resort, as well as the Supreme Court, has repeatedly decided that these associations are corporations for certain purposes, and within the intent and meaning of certain statutes, yet in the same decisions in the Court of Errors, they are uniformly held not to be corporations, within the intent and meaning of the 9th section of the 7th article of the then Constitution of the State, which provides that “the assent of two-thirds of the members elected to each branch of the Legislature shall be requisite to every bill creating, continuing, altering or renewing any body politic or corporate," thus recognizing the principle, that an association or partnership may exist, possessing all the essential elements of a corporation, and yet not be a “corporation chartered by the Legislature,” in the legal technical application of those terms.
It might be sufficient for our present purpose, to say, that such is the decision of the highest court of judicature known to our laws, Warner vs. Beers, 23 Wend. 103, Gifford vs. Livingston, 2 Denio 380, the People vs. De Baw, 2 Denio., (not yet published.) But inasmuch as the action of this Legislature will affect not merely the Bank of Dansville, but involves an important principle affecting the general banking and business interests of the State, and may go far to establish a precedent for future legislation, your committee having listened to a very learned and elaborate exposition of this principle on either side, deem it proper to state the reasons on which their conclusion is, and the decisions of our courts seem to be based.
But it is said to be one of the duties of government or of the sovereign, to furnish the people with a currency. And hence it is inferred, that every act tending to that end, is necessarily an act of sovereign power. If this be true, then have the governments of this country, both State and National, been grossly remiss in the discharge of this important duty. None of them have ever done, or attempted to do, anything more for this purpose, than to endeavor by wholesome regulations, to protect the people against imposition and loss from the circulation of spurious or unsound currency, in the same manner as they have endeavored to prohibit the furnishing of unsound meats or impure water; yet your committee believe it has never been regarded as the
duty of government to furnish the people with meat or with water. These, as well as currency, are furnished by the people, individually or by companies, to themselves and to each other, and the only aid they ask or require at the hands of the government, is protection, as against theft or robbery.
The terms "grant," "charter," "franchise,” are not exclusively or peculiarly applicable to corporations. The same are equally applicable to a great variety of the business transactions, rights, privileges, and immunities of the people at large. The term “grant," as heretofore used in reference to legislative action, applies to a single act—thus we say a grant of land; a grant of a right to erect a bridge or dam across a public stream; a grant of corporate priviliges or franchises; a grant of a charter. But a relinquishment on the part of the whole people, in their collective capacity, of certain rights, privileges and franchises, to each and every of the people individually, can scarcely, in the opinion of your committee, be properly called a grant, and differs widely, both in theory and in fact, from the practice of conferring similar rights, priviliges and franchises, by a king, reigning by divine right, and the acknowledged source and centre of all power, prerogative, privilege and franchise.
The general law was intended to establish a new and complete system of banking. It depended not on rules and regulations made in reference to special legislative charters; but provided all that seemed necessary to carry out the system, all the securities and safeguards provided for the protection bill holders under the old system, had been found inadequate to afford perfect safety, it was found difficult if not impossible, to provide absolute security to both bill holders and depositors, and it was believed the latter had the means of taking care of themselves, because a deposit of money for safe keeping was a voluntary act, whilst the former were practically compelled to take the currency afloat as the only means of carrying on business with ordinary advantage. Hence, the general law provided what was deemed absolute security for bill holders, leaving depositors to look out for themselves in the same manner as other persons secure their money in loans or other investments; under the old system, the Legislature prescribed nearly all the modes and forms of organization, designated officers and the manner of their election, while the general law lest these matters almost exclusively to the associates, as in all partnership business, the general law made provisions to secure the public as far as possible against any loss or imposition, and nothing beyond. In the case of individual bankers, the same security has been provided, and nearly the same provisions to secure and preserve the interests of the public, as in the case of associations.
Great apprehension and alarm are expressed, on the part of the petitioners, at the probable consequences to follow, from the Legislature disavowing any power to dissolve one of these institutions. There are about 70 banks in the State, formed under this general law, with an aggregate capital of about 12 or $13,000,000; and “it is a startling proposition (say the counsel) that this immense amount of capital is above or beyond the control of the Legislature.”