lation, the cash in hand, and profits. He was given power to inspect the books and accounts of the bank, so far as was necessary relative to the public safety and the profits belonging to the State, but he was not allowed to inspect private accounts.

(20) The State, whenever it held $66,000 stock, was entitled to appoint two directors, to be elected one each by the House and Senate.

(21) The capital stock and funds of the bank were deemed personal and not real estate.

(22) The bank was prohibited from issuing notes of a less denomination than five dollars.

The duration of the act was limited to twenty years.

The charter of the Bank of Maryland, established in 1790, differed materially from that of the Bank of Baltimore. The privileges granted were greater, and there were no provisions corresponding to the fundamental articles of the charter of the Bank of Baltimore. The subscription of the capital, $300,000, was not allotted among the counties. Provisions regarding the capital, payment of subscriptions, voting, election of officers were similar to those of the charter described. A committee of three, chosen quarterly from the directors, were to inspect the accounts of the bank weekly. The liability of stockholders extended only to the amount of the stock. The charter was perpetual.

There were special provisions relating to fraud, robbery and debts. Any officer or stockholder convicted of fraud, forfeited his stock to the company, in addition to the remedy which might be had in the name of the company. Forging or counterfeiting was felony, punishable with servitude, seven years or less. Stealing bank notes was punishable as if other goods of the same value had been taken. Debts of delinquents were to be collected by sale of property on an issue of a capias ad satisfaciendum, fieri facias, or attachment by way of execution. Such execution was not liable to delay by a supersedeas, writ of error, appeal or injunction from the chancellor, provided no part of the debt was in dispute.

1 Md. Laws, 1792, ch. 1.

No limits were prescribed to the debts of the bank, none to its issues. It was not required to make an annual report to the Legislature, probably because the State had reserved for itself no share in its stock.

6. Some Features of Early Maryland Banking.

The monopolistic element in banking was especially distasteful in Maryland. A clause of the State Constitution discourages monopolies. Two means were adopted to render banks of a public character. First, the State reserved the power in the charter to subscribe a specified amount to the capital stock of each bank. As early as 1803 the State utilized this privilege as an investment for its unemployed funds by paying up the amount of 220 shares, out of 600 reserved, in the Bank of Baltimore. The State did not subscribe in all the banks, but by 1811 some stock had been paid up in each of the city banks, and in three county banks. The State subscribed to the stock of no banks established after 1811. The maximum reached by the State subscriptions was $540,000. The revenue which it yielded ranged from $30,000 to $40,000 per annum. The amount reserved for subscription by the State varied from one-third to onetenth of the capital.

In a second manner the interest in banks was made general, and they were prevented from becoming too great a power in the hands of a few. The subscription of the capital stock of the early banks chartered by the State Legislature, unless they had been previously organized as partnerships, was apportioned among the twenty-two counties of the State. A committee, usually of three, was appointed to receive subscriptions at the county seat of each county. Persons non-resident in the county could not subscribe until after the lapse of a specified time. Shares remaining untaken

1 Dec. of Rights, sec. 39.

2 The Bank of Maryland is excepted; its stock was wholly private. • Md. Laws, 1802, ch. 58.

• Annual Reports of Treasurer for the Western Shore.

• Cf. Charters of Bank of Baltimore, Farmers' Bank, City Bank, etc.

at the expiration of the time limit could be subscribed by any one, and if they still remained untaken, they were offered in Baltimore after notice given in the papers.1

The allotment of the stock to the various counties for subscription was, of course, impossible when the banks had been in existence as partnerships before a charter had been applied for. In such cases their stock was already subscribed. Whenever the distribution of their stock was objectionable to them, they avoided it by organizing as a partnership before asking for a charter. Of the eleven banks which had been chartered in Baltimore before 1812, six started as private partnerships, though when charters were obtained by most of these, their capital stock was distributed throughout the State for subscription. In 1817 it was forbidden by law to organize a banking company without having first procured a charter. The object of the law was to prevent the rapid increase of banking organizations. However, by this time the establishment of banks throughout the counties had put at rest the cry against the privileged few and against the absorption by the city, of the free capital of the country districts.

In 1795 an attempt was made to introduce into Maryland the principle of State participation in the profits of banks, in addition to the dividends upon its stock. It was proposed that one-half of the excess of the profits of the Bank of Baltimore, over 10 per cent. per annum should be paid to the State. A lengthy discussion over it was provoked in the Legislature, but it was finally rejected, perhaps to compensate for the refusal of the Legislature to grant as great privileges as were asked for.

The right to issue promissory notes to circulate as money

In the same spirit, if too much was subscribed, the largest subscriptions were reduced in favor of the smallest, so that each subscriber might have at least one share. Cf. p. 27.

2 Md. Laws, 1817, ch. 156.

This principle is a feature of the charter of the Reichsbank of Germany, established in 1875.

is in no case specifically granted, inasmuch as at this time the common-law privilege of every one to issue, had not been restricted.1

The only limit placed upon the issue of notes was that the total of debts which a bank might at any time owe should not exceed twice the amount of the capital actually paid in. This limit was of little effect. Only in one or two cases of the most reckless banking did the debts approach it. The personal liability of the directors for any excess of debts over this amount was, therefore, only an empty form, since there was little probability of reaching this mark in practice. However, the introduction of the principle of personal liability was valuable, and the path to its future use was made easier.

The clause of the charter which required that the capital be paid in legal money2 proved a very salutary one. Usually one-fourth of the nominal capital was required to be in hand in specie before operations could be begun. This compelled the banks organized between 1795 and 1810 to be founded upon a solid capital. Up to this time no evidence can be found that the instalments of capital were paid with stock

notes.

The business which the banks might engage in was carefully restricted to banking operations exclusively, in which were included the functions of discount, deposit and issue. The holding of real estate was expressly prohibited, except so far as it was necessary for the conduction of business, and except also land mortgaged or purchased in satisfaction of debt, or held as security. Real estate was not allowed to remain in the possession of the bank more than three years. It was not forbidden to loan upon mortgage security; in fact, in the case of the country banks it was expressly permitted to loan upon land. The Mechanics' Bank also was allowed to loan to practical mechanics and manufacturers on

1 Cf. p. 25.

* Gold, silver, or the notes of specie-paying banks.

property security up to one-eighth of its paid-in capital, but no loan was to be made for more than $3000, nor for longer than two years. Commercial operations, a most tempting field for Maryland capitalists, were usually especially forbidden to the banks.

The monopoly of banking was not given to the chartered banks, though they enjoyed an advantage over unincorporated banks through their limited liability.

By virtue of the State's subscription to the stock of the banks, two means of inspection of their operations were furnished. As a stockholder the State assumed the right to participate in the direction of the banks by appointing a part of the directors, usually from one to four, varying with the amount of the State's stock. These directors had the same rights, powers and privileges as those elected by the stockholders. In the second place, the annual reports, required to be rendered to the treasurer for the Western Shore, gave the public some idea of the condition of the banks. To be sure, the primary object in each case was not protection of the people at large, but simply the safety of the State's stock.

In 1806 a provision was introduced into the charter of the Mechanics' Bank requiring a reservation of 1 per cent. of its capital from surplus profits as a contingency fund. The principle became common by insertion in other charters, but it did not appear in all. The fund was not applicable to any particular sort of liability, but to all in general. It might easily have become an important safeguard by being required of all the banks, and by being placed in the hands of a State officer, to meet the liabilities not otherwise provided for, of insolvent banks. This is, in fact, the substance of the Safety Fund law of New York, adopted in 1829.

In 1793 an act was passed making the forgery, or counterfeiting, or stealing, or knowingly passing such notes of any bank of the United States felony, and punishable as if goods

1 Md. Laws, 1807, ch. 141.

2 N. Y. Senate Journal, Apr., 1829.