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annual returns of the amount of specie in their vaults for the following reasons. "It is well known, that institutions which heretofore have been required to make these exhibitions, have prepared, previous to the period of making them, to present as favourable statements as possible. If all the banks in the state are to do so, it will produce a semi-annual pressure for money. Paper, payable a short time previous to these periods, will be discounted freely, when a general curtailment will be made. The notes and bills payable out of the state, will obtain a preference, that thereby funds of specie, in Philadelphia, Boston, &c., may be made for a few days the property of banks in this state. In this and other contrivances, the officers will be employed to make a display of that which has no permanent existence."*

Most of the English deeds of settlement guard against any degree of publicity being given to the accounts of individuals. Their provisions in this respect form the best answer to those who assert that the transactions of individuals with joint stock banks are universally known.

"No principle seems to be more attended to or prominently put forward, than that of preserving secrecy as to the state of accounts of the customers of the banks. To this principle there does not appear to be an exception.

"The directors are in general required to sign a declaration, pledging themselves to observe secrecy as to the transactions of the bank with their customers, and the state of accounts of the individuals. In some of the companies this declaration is also to be signed by all the clerks and officers. One banking company goes so far as to require an oath to this effect. If the proprietors are dissatisfied with the statement of accounts made by the directors, a power is generally reserved to appoint auditors or inspectors for the examination of the books; but these auditors or inspectors are required to sign a similar declaration of

secrecy.

"No proprietor, not being a director, is entitled to inspect any of the books of the company.

"The directors are in general bound to exhibit to the general meeting of the shareholders a summary or balance-sheet of their affairs, and to make such further statement or report as the directors may deem expedient and conducive to the interests of the company. In the case of one of these banks, even this is not obligatory by terms of the deed, which leave it to the discretion of the directors whether they do or do not exhibit a balance-sheet. In a very extensive bank, the proprietors annually appoint auditors to examine the affairs of the company, and to report thereon.

"In some of the companies the principle of secrecy is carried still further; two of the directors, selected from the rest, are the exclusive

* Gouge's Short History of Paper Money and Banking in the United States.

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depositors of the power of inspecting the private accounts of customers. These persons are sometimes called confidential directors.' This provision is stated to be made, in order that the credit and private transactions of individuals may be preserved inviolate.' Sometimes they are called 'managing directors,' sometimes 'special directors.' In other companies, though all the directors have the power of inspection of the accounts of customers, two of the directors are selected to inspect bills and notes, in order to prevent the exposure of such bills of exchange and promissory notes as may pass through the bank.' These two directors are called the bill committee.' In two of the companies, a single person, called the manager,' has the exclusive power of inspecting the notes."

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"Sec. 30. Be it further enacted, that the president, directors, and company of any bank established by authority of this commonwealth, on application, within one year from the passage of this act, shall be authorized, with the assent of the legislature for the time being, to continue its operations as a banking company for the further period of twenty years from and after the first Monday in October, in the year of our Lord one thousand eight hundred and thirty-one, with all the powers and privileges, and subject to all the duties and requirements, of this act.'

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In our deeds of settlement the duration of a company is not usually limited to any number of years; its existence depends upon contingencies.

"The deeds of all these companies contain some provision for dissolution in certain contingencies. It is in general provided that a dissolution of the company shall take place by reason either of a certain amount of loss, or of a voluntary agreement.. Dissolution by reason of loss in the great majority of the deeds is provided for in the following

manner:

"It is necessary to premise that the directors of each of these companies are bound to set aside a certain portion of the profits to form a fund to meet extraordinary demands, which fund is sometimes called the surplus fund,' sometimes the reserve fund,' but more usually the 'guarantee fund.' The ordinary provision for dissolution is to this effect:That if the losses sustained shall at any time have absorbed the whole of this guarantee fund, and also one-fourth of the capital paid up, then any one shareholder may require the dissolution of the company, which shall take place accordingly, unless two-thirds in number and value of the shareholders shall be desirous of continuing the company, and shall purchase the shares of those proprietors who wish to withdraw. In one bank the dissolution of the company takes place upon a loss of one-fifth instead of one-fourth of the capital. In two other banks no mention is made of the guarantee fund.

"The provision of the great majority of deeds, as above stated, is, that in the event of a given amount of loss, any one shareholder may propose the dissolution. In some, three shareholders are required. In the Banking Company A. the requisition for dissolution must be made by ten shareholders holding 200 shares; in the Bank B. by one-fourth

of the company; but if the loss amount to one half of the capital, then by any single shareholder.

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"By the general provisions of the great majority of deeds, the dissolution of the company, though duly proposed, may be averted by twothirds of the proprietors; but in some there exists no such restriction; and on the occurrence of a given amount of loss, the dissolution, if proposed, is to take place immediately, even though no partner should propose it.

"The Banking Company C. has provisions for dissolution peculiar to itself, and among others it is set forth, that the partnership shall determine on the 1st of January, 2001.

"The Bank of D., besides the usual provision for dissolution in case of a loss, has a provision for dissolution if the company shall not repay a contribution to a shareholder who shall have been compelled to pay a debt of the company.

"A dissolution, by voluntary agreement, may in general be directed by a majority of two-thirds of the shareholders in the number and value, but with the concurrence of a certain number of the directors.

"In some companies a voluntary dissolution may be effected by three-fourths of the shareholders; in others by a majority; in a few others there is no provision for a voluntary dissolution.

Sec. 31. Be it further enacted, that if, during the continuance of any bank charter, granted or renewed under the provision of this Act, any new or greater privileges shall be granted to any other bank now in operation, or which may hereafter be created, each and every bank in operation may be entitled to the same.

"Sec. 32. Be it further enacted, that no bill or note, of the denomi nation of one hundred dollars or less, shall be issued by any bank aforesaid, unless the same shall be impressed from Perkins' stereotype plate provided, that no greater sum than one cent shall be charged for each bill impressed from the class of plates on which is the fine writing, nor more than two cents for bills of either of the other classes; but the legislature may, at any time hereafter, authorise and require the use of any other plates.

"Sec. 33. Be it further enacted, that all Acts and parts of Acts heretofore passed in relation to banks, inconsistent with the provisions of this Act, be, and the same are hereby repealed, so far as the same might apply to all banks whose charter may be extended under the provisions of this Act."

The committee conclude their analysis of the deeds of settlement thus

"The House will see from this analysis that these deeds of partnership, on which depend the whole transactions of the banks and their responsibility to the public, so far from being framed according to one common and uniform principle, differ materially from each other in many most important particulars; and, in some instances, the deeds contain provisions open to very serious objections, as entailing possible consequences highly injurious to the interests of the public, and of the banking establishments themselves."

It may be questioned whether any deed of settlement can be framed which shall not contain provisions that may by possibility become injurious. Hence arises the propriety of inserting a clause, giving the proprietors the power of altering the deed, as circumstances may require. The committee state, that with one single exception, "the main body of the proprietors reserve to themselves the power of selecting the directors, and of altering from time to time the rules by which the directors are to be governed." "The deeds of all the other companies expressly give a power to the shareholders to make new laws and regulations."

Whether we view the history or the principles of the respective institutions, I think it is abundantly evident, that as a whole the system of chartered banks acted upon in America, is inferior to the system of joint stock banks as acted upon in Scotland: nor does it appear that there are many of the American regulations that could be advantageously introduced into our joint stock system. The restrictions on the amount of notes, deposits, and loans, are merely nominal; and were they reduced to so low a proportion as to be real restrictions, they would most probably be pernicious," Under the American system of limited liability, these regulations may be proper enough, for it is quite proper to limit the debts of a bank, if you limit the fund from which those debts are to be discharged. The most important of the American regulations, are those that refer to the paid-up capital, and that require the periodical returns to be made to the government; and these I think may very usefully be engrafted upon our system.

While, however, separately considered, the American system seems inferior to the joint stock system, I see no objection to their existing together, provided that neither be forced upon the public by the power of the legislature, but that they are left to depend entirely on public support. We have the means of trying the system of chartered banks, either in connection with the system of joint stock banking, or

in a state of separation from that system. According to the existing law, no joint stock bank of issue can be established within sixty-five miles of London. If chartered banks were established beyond that distance, they would have to contend against joint stock banks, and hence their comparative merits might be easily observed. But if chartered banks of issue were also allowed at a greater distance than ten miles from London, the between ten and sixty-five miles, a space greater than the fourth of all England and Wales, might have an extensive system of chartered banks, and here we should perceive their operation in a state of separation from the system of joint stock banks.

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It may therefore be worthy of inquiry, whether the legislature might not improve our banking institutions by the adoption of regulations somewhat similar to the following

I. With regard to joint stock banks.

1. All deeds of settlement to be submitted to a public officer who should have power to strike out those provisions that are contrary to law, and to object to those he might consider injurious to the public or to the shareholders.

2. That a list of the shareholders and the amount of the paid-up capital shall be inserted once a year in the London Gazette, and a printed copy given to all the shareholders and customers of the bank.

3. No bank to commence business until a capital of £20,000 was paid up; to have £50,000 paid up by the end of the first year, and £100,000 by the end of the second year, or else to cease. Banks in London and Manchester to commence with a capital of £100,000.

4. The bank to make to government the periodical returns I have described; and to lay a balancesheet before the shareholders when requested by them to do so, but not otherwise.

5. In case of a stoppage of payment, the affairs of the bank to be placed immediately in the hands of government commissioners, for the purpose of being wound up, and an extent in aid to be issued against

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