The Hillsdale standard. [volume] (Hillsdale, Mich.) 1851-1909, 1859-02-22
Construction Of the New Banking Law.

Construction OF the New Banking Law.
The recent decisions of the State Treas.
urer as to the Interpretation ofcertain doubt
ful points in the new Banking law, are be-
coming the theme of much discussion
among the capitalists Of this State. The
most important decision is that limiting the
circulation of Bank TO three -fourths Of its
capital stock.
The clause which is decided thus to lin
1t the circulation is contained in section l :,
and reads: "Three- -fourths the capital
stock of any Bank may be invested in pub
Tic stocks as security for its circulating notes.
This would allowa circulation of ONLY $s7,-
500, on taxed capital of $4,000. Tho
Treasurer decides that this section refers to
an individual Banker as well as to Bank.
He decides that Banker il a Bank, m in
dividual, a corporate body, thus virtually
nnnihilating the distinction between an in
fiS:i fiinSc:iion that h was intended TO be preserved,
as mere glance al tho law will show
Still, allowing tho reference to be to both
Bank and Banker, it is contended by inter-
csted parties that the clause is wholly per-
missory, that it prohibits nothing, and for
the corroboration of this view, they refer to
section 10, which stipulatcs, "That when.
ever any person or association shall legally
transfer to the State Treasurer any portion
of the public debt now created, &c, such
person or association shall be entitled to
receive from the State Treasurer an amount
Of circulating notes Of different denomina-
tions, as may be desired, equal to ono hun
dred per cent. Of tho securities thus trans
ferred." The section then goes on to say
that ninety five per cent. only Of the secu-
rites shall be allowed on circulation.
Although there is an obvious contradic-
tion within the limits Of this section, yet
granting that but ninety-6ve per cent. may
be taken, it seems to show, beyond all cav
il, that the Banker shall be entitled to 70
ceive' nincty-five per cont. on any amount
Of securities transferred. Section permits
three fourtbs the capital to be deposited;
section 10 permits the deposit Of the re-
naming fourth, AMI any smount beyond
that. Any person or corporation is pro-
hibited by statute from issuing bank notes
unless authorized so to do. II, thon, per-
son is by law 30 authorized, there is moth
ing to restrain him from issuing any a.
mount he may choose. The clause allow
ing three, ,fourths the capital to be Invested
in securities for circulation being merely
permissory, and not probibitory, Banker
should be allowed to issue any amount of
notes by depositing one dollar and ninety
five cents for every dollar issued. 1t may
be said that it would not be found profita-
bic to Issue more than three-fourths the
capital of any Bank, There is some truth
in this so far as q po-i :. .ne CITY OF De-
,iuit is concerned, but itmust be recollected
That tnere Will not DC the call for specie by
brokers in the case Of country Bank that
a Bank in Detroit is compelled to sustain.
The law of New York allows an individ-
ual banker to commence business by de-
posting $4,000 securities; but he may
withdraw them down to one thousand dol
lars on the next day, and is taxed only on
one thousand dollars on tho amount of
capital actually paid in. In Wisconsin, too,
bank may commence business on thou
sand dollar bond. SO long as the notes are
secured beyond possible loss, the amount
issued is of little consequence.
Under no other banking law has there
been an attempt to limit the circulation.
AS the privilege Of having II circulation
is the chief inducement to organize under
the law, ifby restricting it to the three
fourths the capital is to be rendered an IN
profitable department. Of the business, few
will he found willing to organize under the
law and subject themselves TO its liabilities.
1t is a most unfortunate thing for the
people and most detrimental to the inter-
es. of the State that this Interpretation has
been put on the law.
The people Of this State are actually
holding for Canada and tho neighboring
States, from three to five millions of dollars
on which they are discounting at our OK
pcnse. BY a liberal policy toward banks /,
Illinois is enabled to issue between six and
seven millions of currency, the annual tax
on which amounts to a revenue for the
State of over $4,000.
1t is obvious to the writer Of this com.
munication that until tho present decisions
are reversed we shall have no such revenue
as this. There have been rs yet but few
applications for charters under the law, and
these were made by men Of the highest
character, and who are possessed Of ample
means, such as the proprictors Of the Hills
dale County Savings Bank, the City Baak
of Flint, and the President Of a leading
bank IN Roch ester, New York. The re-
cent decisions, however, have put com
plete stop to all further proceedings or
their part.-IDet. Advertiser.