notes of specie-paying banks were alone receivable in payment of subscriptions,[1] but the note was binding for its amount, and was treated as a note for money borrowed, with which to pay the installment.
The Benton and Manchester Railroad and Banking Company was incorporated May 12th, the subscribers to the stock to mortgage their lands, and these mortgages to be made the security for bonds to be issued. On the following day, the Vicksburg Water Works and Banking Company and the Hernando Railroad and Banking Company were incorporated.
Having finished these labors they adjourned and were ready for the panic. It does not seem, however, to have made much impression on them before the next regular session. At that time the charter of the Union Bank was duly re-enacted, but, February 5, 1838, a supplementary charter was passed which made some very important changes in the organization of the institution. The State took $5 millions of stock and so changed its relation to the bank, becoming jointly liable and not simply lending bonds to it. The bonus to the State of one-tenth of the profits was stricken out, and also the provision that the State might have a loan from the bank of $200,000. There was no clause in the charter which explicitly granted the power to issue notes. This was only inferred from a provision that it might not issue any note under five dollars. It put on its post-notes a statement that they were issued upon a pledge of the faith of the State which was not true.[2]
The Paulding and Pontotoc Railroad Company was chartered February 16, 1838; mortgages for stock being made security for bonds, as in former cases; and it might issue notes for half its capital. On the same day an act was passed over a veto, suspending for eighteen months the penalty of twelve and one-half per cent. on post-notes, not paid on demand at maturity.
The amount of banking capital provided for in bank charters between 1833 and 1838 was $53.2 millions.
Tennessee.—The Bank of the State of Tennessee, No. III., was incorporated December 20, 1831; $2 millions capital; at Nashville, with one branch in East Tennessee and one in West Tennessee. It appears to have been intended that $500,000 should be subscribed by the State, and the Legislature was to appoint five directors out of fifteen. The public faith was pledged for the redemption of the notes and debts in proportion to the State stock. The old Bank of the State, No. II., was to pay to this one the $20,000 which had been subscribed to it by the State, and that sum was to be apportioned amongst the counties for schools in the manner provided in the act of January 11, 1830.
At a called session in 1832, the first steps taken seem to indicate trouble. The Bank of the State, No. II., was ordered to be wound up at once, and all the funds to be put in the Union Bank of Tennessee as soon as the latter
