History of State Banking in Maryland. first was the There were two peculiar features in the proposed bill; the power of issuing "bettering notes," or notes bearing interest at the rate of one cent a day, redeemable both in principal and interest at three months after presentation; the denomination of the note was to be $100. The second experiment was the sale of certificates of stock of a face value of $100 each, bearing interest at 3 per cent. per annum, to persons having notes of the bank to an amount of $1000. Eighty dollars of the bank's notes were to be exchangeable for a certificate of stock. This stock was to be redeemable at pleasure by the State. Provision was made for periodic inspection and reports to the Assembly; $500,000 in coin had to be in hand before opening. The leading points of this proposed legislation were strong. As an instrument to centralize and make uniform the State banking system, it would have been an immense step in advance. A great economy in banking would have been effected, while by the branch office and agency system, less advanced districts would have received the assistance necessary for their development. The experience of the Country banks from 1814 to 1820 pointed in this direction. The danger of such an institution from the political side Would be great. In 1829 the Legislature appointed a committee to conSider the petitions for the bank; it made a careful investigation and reported favorably. The bill received a lengthy discussion, but finally was rejected by a vote of 46 to 23. Similar committees had the same matter referred to them in the various sessions of 1830-33; invariably the report was favorable, but a bill could never be carried through the Assembly.1 In the formation of the bill just described, much study was devoted by the committee to the foundation and operation of other State's banks already organized, especially that of 1 Niles, Feb. 13, 1830. South Carolina. The State's banks of Georgia, Alabama, Tennessee, Louisiana, Indiana, Ohio, Florida, Kentucky and New York were also carefully examined, and correspondence was entered into with officers of these banks.1 In 1837 the question of a State bank was revived. The House of Delegates ordered that the Committee on the Currency "inquire into the expediency and practicability of changing the banking system of the State in such a way as might lead to the establishment of a State bank * by a union of all such solvent banks of the State as may be willing to convert themselves into branches of the State's bank by transferring to it all their stock and assets." All the banks without exception expressed disapproval of the scheme and their unwillingness to enter into it, consequently it was immediately dropped.' 11. The Merchants' Bank Charter. (a). Uniform Regulation of Banks. Up to 1834 the major part of the legislation affecting banks was the charter regulations of the separate banks; very few general laws applicable to all had been passed. The various charters differed considerably in their provisions, as has been shown. A considerable step toward uniformity was taken in 1835, when all Baltimore banks were made to conform to the charter of the Merchants' Bank of Baltimore. This charter was given early in 1835, and new banks which were established in Baltimore after this date were simply brought under its provisions. The old banks came upon the same basis when in 1835 and following years acts were passed continuing their charters. In the case of the banks which had been continued to 1845 by the Act of 1821, chapter 131, in return for their agreement to construct the Boonsboro road, the new regulations could not be introduced until after the termination of the old charter. The 1 Report of Select Committee on a State's Bank, 1829. Ibid., 1830, pp. 8 ff. and 48; also p. 33. Report of Committee of Ways and Means upon a State's Bank, 1833. 'Report of the Committee on Currency, 1838, p. 5. History of State Banking in Maryland. Marine and the Farmers' and Merchants' Banks were extended to 1856; the Mechanics' and the Franklin to 1857; the Commercial and Farmers' and the Baltimore to 1858; the Union to 1859. In return they were to become subject to the regulations contained in the charter of the Merchants' Bank, to relinquish the exclusive right of banking in Baltimore and to suffer additional taxation. charter of the Merchants' Bank were the following: The The more important changes which were introduced in the president and directors had to be citizens of Maryland, not of the United States merely, as previously. Issues might not exceed the amount of the capital paid in; the total amount of debts exclusive of issues was limited to the same amount. Formerly the total debts might equal twice the capital. The president and directors in their corporate capacity could not hold any part of the capital of their bank, nor make any loans on a pledge of stock, nor receive the same as collateral security for any money loaned, except for doubtful debts previously contracted. Debts due to a bank by a stockholder had to be settled before he could transfer his stock, unless the president and directors allowed other wise. Real estate falling into a bank's hands had to be disPosed of within five years. The banks were empowered to invest in Maryland, Baltimore and United States bonds. Fifty stockholders controlling 1000 shares could call a general meeting of the stockholders. The Legislature reserved the power to regulate the denominations of bank notes. It required the banks to act as Commissioners of loans when desired. In case of suspenSion of specie payments, interest at 12 per cent. per annum might be demanded, if the assets of the bank were sufficient to pay it; otherwise as much above 6 per cent. was recoverable as the assets would pay. The law provided for the pro 'Cf. ibid., 1844, ch. 294. 1 Md. Laws, 1834, ch. 274. 'To place all the banks upon the same footing, the rate was made 6 per cent. until 1845, by the law of 1841, ch. 41. The country banks were subject to the general law of 1818, ch. 177, which required interest at 6 per cent. rata distribution of all assets in case of suspension of specie payments. The country banks were likewise placed upon a common footing by the Acts of 1836, chapter 239, and 1842, chapter 251,' which extended their charters to dates varying from 1855 to 1860. All were required to send to the treasurer an annual report of their condition. Through this act inspection by the State became a protection of the general interests, and was not done by the State as stockholder, inasmuch as the State had only subscribed in two or three of these banks. The payment of the school tax was continued and a new tax, a bonus of $1.25 per $100 of capital paid in, was imposed. Notes under $5 were prohibited, and the State reserved the right to regulate the denominations of issues after 1845. The charters were to become void on failure to pay specie. (b). Increased Taxation. An additional tax was imposed in each case as the condition of a continuation of the charter after 1845. The banks of Baltimore were required to pay in three annual instalments a bonus of $75,000, proportioned to the amount of capital of each bank. The country banks whose charters were renewed had to pay, as stated above, $1.25 for every $100 of capital paid in, as a bonus to the State. The new banks which were established during the expansion of 1829-36 were taxed, in addition to the tax for the school fund, $3.75 per $100 of capital paid in, and at the same rate for additions to capital. In one or two cases the rate varied slightly. These taxes were payable in annual instalments within three years. An attempt was made in 1835 by the municipal authorities of Baltimore to lay a tax upon the stock of banks. The Legislature decided this to be in violation of its pledge 1 Cf. Md. Laws, 1843, ch. 95. 'Md. Laws, 1834, ch. 274. Ibid., 1843, ch. 95. ch. 251. Ibid., 1836, ch. 239. Ibid., 1842, rated since that act. 1 History of State Banking in Maryland. given in the Act of 1821, chapter 131, to impose no additional tax until 1845. To prevent discrimination between the banks, the city was also forbidden to tax banks incorpoIn 1841 the State's indebtedness required extra taxation to meet its expenses. All bank stock was taxed at the rate of twenty cents on the $100, in addition to taxes on real and other personal property. The banks objected strenuously to this burden, and claimed it was a violation of the State's pledge to impose no further tax until 1845. The loan had been obtained from the banks, now they were taxed to pay it. Considerable trouble was met in the collection of this tax. To facilitate its collection banks which had loaned the State in 1841 were allowed, upon notice to the treasurer, to issue orders upon the State treasury up to the amount of each one's loan. These were receivable in payment of the by the treasurer. Still collection of the tax continued to be direct tax upon bank stock. They were not to be reissued impeded, so in 1843 the bank officers were required to retain from the profits and pay the treasurer the amount of the tax. However, in January, 1845, the Supreme Court of the United States decided that the banks which had been incorporated prior to the Act of 1821, chapter 131, were exempt from the tax during the continuance of their charters. This freed six Baltimore banks from payment of the tax until March IO, 1846, and the money which had been paid in by them was refunded. 12. Crisis of 1834 and its Effects. A tax of one-half of one per cent. was imposed on all bank stock sold at auction by the Act of 1843, chapter 293. The crisis which occurred in 1834 was felt comparatively little in the East, and was of short duration. It was precipitated to great extent by the hostile relations existing between the administration and the United States Bank. In 1833, 1Md. Laws, 1835, ch. 142. 'Ibid., 1841, ch. 23. 'Ibid., 1841, ch. 291. Ibid., 1843, ch. 289. |