recommended that another convention for the same purpose be held some time.
The capital of the Kentucky banks was very largely held in the East. The president of the Bank of Kentucky stated in 1840 that 25,130 shares of the bank were on the books at New York and Philadelphia, and 4,780 at Louisville. On account of the large amount of shares of the Louisville Bank of Kentucky, which were held in the East, transfer agencies were opened in New York and Philadelphia,—in the latter city at the Schuylkill Bank. The cashier of that bank issued spurious certificates to the amount of 13,000 shares, 447 of which, however, were surrendered by the holder, being held as collateral only. This fraud was discoveredin December, 1839. February 22, 1842, the Legislature of Kentucky passed an act under which the Bank of Kentucky set aside all its surplus profits over five per cent., and all which it could recover from the Schuylkill Bank, as a "stock fund" out of which to meet the expenses and losses of the over-issue. The capital was increased $1 million and the spurious stock in the hands of innocent holders was recognized. Satisfactory proof must be given that the holder was an innocent purchaser. An act of March 3d limited the amount which the bank might pay for the spurious stock to $40 per share. In 1849, it reported that it had bought up the fraudulent stock, and had obtained from the Schuylkill Bank perhaps $600,000 worth of assets, under a judgment of the Pennsylvania courts.[1]
In these days of liquidation, relief laws were once more called for. They now took the form of an extension of exemption laws.
As a further relief measure, March 8, 1843, the bank at Louisville was ordered to set up two branches, within three months, with not less than $100,000 capital in each; but either branch might be withdrawn or removed if it did not earn six per cent. If the bank complies with this order, the term of its charter is to be extended ten years. It may purchase and retire $150,000 of its stock. The banks are all forgiven for suspension if they comply with this act. The bank at Louisville is to loan $100,000 in each congressional district in which it has a branch. Loans are to be called in not more rapidly than ten per cent. in each of the first two periods of 120 days, and not over twenty per cent. in each subsequent period of 120 days, making 720 days for the payment of an entire debt. Not over $1,000 was to be loaned to one person. The Bank of Kentucky and the Bank of Northern Kentucky were to make similar loans in other districts; if the former consents to this, it may surrender $1 million of five per cent. bonds of the State, and reduce its capital $1 million; the Bank of Northern Kentucky in like manner $750,000, and they may issue notes down to $1; the Governor may sell five per cent. bonds to the amount of $1,750,000, and invest the proceeds in stock of the three banks, if he can get that of the Bank of Kentucky at eighty and that of the other two at ninety; this stock to be put in the sinking fund and the
- ↑ 1 Parson's Equity, 181.
