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vided for out of the said deposit fund. It is also believed that if a small loan should be necessary in 1845, in order to complete the payment of the debt then becoming due, it will be obtained on advantageous terms, inasmuch as the credit of the State will then have been restored, in consequence of the provisions now contemplated.
It is evident that those provisions must be of the following character, to wit:
1st. A tax of one mill on the assessed property of the people of the State.
2d. An Act by which the following funds shall be and remain exclusively pledged for the payment of interest and principal of the whole debt due or guaranteed by the State, and including the loan of three millions intended to be authorized at this time, till the final reimbursement and extinction of the said debt; that is to say, 1st, the proceeds of the one mill tax aforesaid ; 2dly, the balance of moneys now remaining in the hands of the commissioners of the canal fund, together with the interest which may hereafter accrue on the same balance; 3dly, the net proceeds of the tolls on all the State canals, after deducting therefrom the amount expended for salaries, repairs, and charges on the said canals, but not including amongst such charges and repairs those that may be incurred for the enlargement of the Erie Canal, or for any other new works, and also the annual contribution of $200,000 to the general fund.
Provided, that whenever the annual amount of the said funds shall, after the reimbursement of the loans contracted for the construction of the Erie and Champlain Canals, and of the Chenango Canal, as also of the three million loan now to be authorized, exceed the sum of $1,869,000, the surplus may be applied to such other purposes as the Legislature may direct, or the amount of the one mill tax may be proportionably reduced.
It is to a provision of this nature that we wish particularly to call your attention. We repeat that we do not pretend to have made a correct statement in all its details of the resources, liabilities, and temporary embarrassments of the State, and that we have attempted an estimate only by way of illustration. The general principles of the contemplated provisions are alone essential. We will only observe that if we have underrated the immediate wants of government, it seems to us that it would be safer to add another half-mill to the tax than either to increase the amount of the proposed three million loan, or to be compelled again to recur to temporary loans or questionable expedients.
The contemplated proposition makes efficient provision for the payment of interest and reimbursement of principal of the whole debt out of the existing resources of the State, and independent of any contingent increase either of the canal tolls or of those general resources. And it affords, short of an amendment of the constitution, the best possible guarantee against an increase of the public debt. For, since the proposition embraces the proceeds of all the existing available funds of the State, it will be impossible to raise new loans without providing new resouras for the payment of interest and principal.
On the other hand, should the sanguine expectations of a great and rapid increase of the canal tolls, which have been heretofore entertained, be realized, the annual surplus, which, according to the estimate of the late canal commissioners, would, in the year 1846, exceed $700,000, will, by the proviso, be at the disposal of the Legislature. It is perfectly clear that all the available resources of the State will, till that year, be wanted in order to meet the payment of the large amount due in 1845. It is equally evident to us that no loans can be obtained on reasonable terms until the credit of the State shall have been restored, and that this cannot be otherwise effected than by an ample and effective provision for the reduction of the existing debt, and by opposing a barrier against any subsequent increase not accompanied by actual instead of prospective additional resources for the payment of both principal and interest.
We have estimated the interest on the proposed three million loan at 7 per cent. When the object to be attained is nothing less than the restoration of the credit of the State and placing its finances on a safe and permanent footing, the difference of $30,000 a year for six or seven years appears to us to be a consideration of subordinate importance. It is unfortunate that the State should be obliged to borrow at a time of general pressure, and when the market price of its stocks is so much depressed. But every State must, when it wants money, pay for it according to that price. In this instance the State will have to compete with the corporation of this city, which has opened a loan at the rate of seven per cent. on account of its water-works. The loans wanted by the general government, if thrown on this market, will also have an unfavorable effect on the rate of interest and the price of stocks. No considerable amount can be loaned either to the general or State government, by either the banks or individuals of this city, that will not cause a pressure upon its commercial interest. All this proves not only that the loan will, at all events, be inconvenient and should be reduced to the smallest possible amount, but also that any attempt to raise it at a lower rate of interest than consists with the actual price of stocks will fail. On the contrary, the issue of a stock which may hereafter be disposed of at par may perhaps induce some of the banks to take it in exchange of their temporary loans.
The actual price of the State five per cent. stock, redeemable in 1855 to 1860, is now 77 per cent., which is nearly equivalent to a seven per cent. stock redeemable in seven years. Whether it be preferable to sell at a discount a six per cent. stock, or to borrow at par at the rate of seven, may be a debatable question, to be decided according to the market price of each. It seems to us that when for a short term of years, the preference should be given to the seven per cent. stock, the premium for which is paid gradually in the shape of annual interest. Upon the whole, it is believed that the officer whose duty it shall be to negotiate the loan may be safely trusted with discretionary power in that respect.
Believing the present to be a most important crisis in the affairs of this State and of the Union, we trust that it will be met with firmness, and that the Legislature will adopt those efficient measures which, by restoring the credit of the State, will promote the interests and secure the welfare of every class of its inhabitants.
GALLATIN TO JOHN A. DIX, ALBANY.
NEW YORK, 30th March, 1812. SIR,—I have been requested by gentlemen connected with the banks of this city to write to you on the subject of a bill before the Senate calling on the safety fund banks to make further or greater payments than was provided by the Act which created that fund.
It is not my intention to discuss the legal or constitutional power of the Legislature to pass an Act in conformity with the proposition now before them. It is sufficient to observe that the constitutional power does not imply the moral right of enacting a law, and that such power does not release a Legislature from their moral duties. I will accordingly examine the question only in reference to its justice and expediency.
The object of the bill is to replenish the safety fund promptly, that is to say, by further means than the annual payment of onehalf per cent. on their capital, the condition on which charters were granted by the Legislature and accepted by the banks. Not having seen the bill, I do not know to what extent the additional payment is to be carried, either as to amount or time. But, whatever the extent may be, the principle is the same. It is that the safety fund banks may be justly compelled to pay whatever losses might otherwise be incurred by the creditors, or at least by the holders of the bank-notes, of any of those banks.
Those creditors, or bill-holders, have no natural right of recourse on any other bank than that of which they are creditors or bill-holders. They have, by virtue of the Safety Fund Act, acquired an indubitable, though artificial, right to the proceeds of that fund; that is to say, to one-half per cent. a year on the capital of each of the safety fund banks. But that right goes thus far and no farther. On anything beyond it they have neither a natural nor an artificial legal right.
Men, whether acting individually or as members of an association, and, in the last case, whether incorporated or associated either by virtue of any legislative act or spontaneously, are naturally responsible for their own acts only, and not at all for
those of other men or associations. If it has been a condition of the charters of the banks that they should become responsible to a certain extent, to that extent only are they bound, and no further. To compel them to pay anything beyond that amount, or at a different time, is to take their property for the benefit of those who have no right to it, and is, therefore, manifestly unjust. Even when it becomes absolutely necessary to take property for public use, it cannot be done without just compensation.
Our system of chartered banks may be founded on erroneous principles; and it may become proper, if it be practicable, to substitute for it one that shall be free to all and rest exclusively on personal responsibility. In the mean while, and so long as those banks are permitted to exist, the rights of the stockholders are as sacred as those of the owners of any other species of property.
There is a striking contrast in the treatment respectively experienced by the banks in this State and by those of some other parts of the Union. Those in the States south and west of New York have, through the extraordinary and unaccountable indulgence of the respective Legislatures, been permitted, after having suspended their specie payments, to persist in a continued violation of their engagements for more than two years. Those in this State, which in the first instance resumed those payments alone, which have ever since continued to supply a currency equal to specie, and whose failure would infallibly be followed by a general suspension of specie payments throughout the Union, are alone selected as special objects of aggression.
The banks of this State are entitled to no particular merit for that which was only the performance of a sacred duty. I do pot wish for the slightest relaxation in their favor if they should fail to fulfil their engagements; and it is evident that they must pay their proportionate share of the general taxes.
I ask only for strict justice, as well towards them as on their part, and that, therefore, they should not be subject to special and unjust taxation.
A deviation from justice has no limits, and naturally leads to acts of the same character. Thus, a proposition was lately made