The better writers on banking and currency in this country from 1820 to 1840 moved toward a concurrent opinion similar to that of Jones-Lloyd in England, although proceeding as much from considerations of profitable banking as from care for the interests of the note-holder, that it was expedient to separate issue banking from discount and deposit banking.
The general banking law of New York, of 1838, must be regarded as an outcome of this train of reasoning and reflection on the operation of banks. As early as 1831, a proposition of the same character was proposed in Maryland by C. F. Mayer.[1]
The Governor of New York outlined the plan and recommended it in his message of 1837. He thought that it would be necessary to pass the act by a vote of two-thirds of all the members of both Houses, because it might be construed as an act of incorporation for all the associations which might subsequently be formed under it. It passed the Assembly, 86 to 29, the democrats generally in the negative. The vote in the Senate was 20 to 8. A resolution declaring that two-thirds were necessary was defeated in the Senate.[2] The features of the law, which bore date April 18, 1838, are as follows: The Comptroller is to cause circulating notes in the similitude of bank notes to be engraved and printed, countersigned, numbered, and registered. Any association of persons for the purpose of banking who transfer to the Comptroller bonds of the United States, or of New York, or of such other States as he shall approve, shall receive from him an equal amount, in blank bank notes. The stocks are all to be or to be made equal to the New York five per cent. bonds. The bank is to execute and sign and may then circulate the notes. If any such bank fails to redeem any of the notes issued by it in lawful money of the United States upon a lawful demand, the note may be protested and the protest filed in the office of the Comptroller. The bank is then given ten days to pay. After that the Comptroller is to give notice in the State paper that all the notes of that bank will be redeemed by him out of the trust funds in his hands for that purpose. Interest on the bonds deposited is to be drawn by the banks owning them unless the bonds deposited become, in the opinion of the Comptroller, inadequate security for its notes, in which case it accumulates to make the security good. The banks may surrender their notes and take up the bonds. Instead of bonds, as above, bonds and mortgages upon real estate in the State, bearing at least six per cent. interest, payable annually or semi-annually, may be deposited for one-half of the total amount deposited by any bank. The mortgages must be upon unincumbered lands, independent of any buildings thereon, and worth double the amount of the mortgage. Nothing in the act is to be construed as a guarantee by the State of the notes beyond the application of the securities to their redemption. The banks are to pay the expenses incurred in executing this act. No bank may be formed under it with a capital of less than $100,000. Each bank
