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Federal Reserve Bank of St. Louis
I IAA
/T35-- rveie
JANUARY TERM, 1865.
541
Danby Bank v. State Treasurer.
In Fletcher et al. v. Jackson, et a/., 23 Vt. 593, the sureties recovered of their co-sureties not only a proportionate share of the taxable costs, but also of the expenses incurred in defending a suit.
Where the setting up of the defence is reasonable, hopeful, prudent,—the expenses thereby incurred by a surety are held in that
case to be a proper subject for contribution. To the same point is
Marsh v. Harrington, 18 Vt. 150.
The English decisions on this point do not seem to harmonize.
In _Kemp v. Finden, 12 M. & W.421, PARKE, Baron, held that in a
suit on a debt, where the sureties by default of their principal were
jointly liable, and one of them had paid the whole costs, lie was entitled to recover of his co•surety his share. In 15 M.& W. 494,
Me. 364. But contra, 11 N. II. 431.
There is nothing to indicate that t''e 3•.;sts in this ••ase which
riggs het', to ;:..y were enhanced by any neglect or default or unreasonable defence on his part.
Latd.
DANBY BANK V. STATE TREASURER.
[IN CHANCERY.]
Banks.
The Danby Bank was in business several years without contributing to the bank
fund, the directors giving bonds instead for the security of the bills and deposits. After 1856 the directors did not give bonds but paid into the fund.
Held, that the liability of the fund attached at once upon the failure of the directors to give bonds.
Held, also, that the state treasurer was properly made a party to the application
for the fund.
APPEAL FROM CHANCERY. The facts set forth in the petition,
answer and replication, and the decree of the court, made at the
March Term, 1864, KELLOGG, Chancellor, are sufficiently stated in
the opinion of the court.
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Federal Reserve Bank of St. Louis
542
RUTLAND COUNTY,
Denby Bank v. State Treasurer.
E. Edgerton, for the petitionee.
The four banks, that contributed the fund in question by C. S., ch.
84, § 6, are made its "owners," with the exception of that portion
of it paid in by the Denby Bank; and one of these (The Farmers'
Bank) has already, under § 13 of the same statute, claimed payment
of its share from the state treasurer. These banks should therefore
all be made parties to the present proceeding, that their respective
rights may be conclusively settled by such order as the court shall
make. Story's Eq.. Pl. § 207; Noyes v. Sawyer, 3 Vt. 160.
The Danby Bank prior to the payment to the state treasurer of
any part of the $750. had suspended its redemptions and all its business, and had finally failed and become insolvent, and although this
payment was not intended, probably, as a fraud, it nevertheless has
that effect upon the other safety fund banks, and should not subject
them to the payment of the Danby Bank debts. See C. S., ch. 84,
§§ 6, 7, and 8.
Another point which the court are requested to consider, is,
whether the directors of the Denby Bank, having given bonds as
they did, pursuant to § 57, p. 490 of the statutes up to the year 1856
could subsequently make their debts a charge upon the bank fund, by
neglecting thereafter to renew their annual bonds. (§ 87, p. 495,
C. S.) Especially when it does not appear when the insolvency actually accrued.
The decree should have been made for the amount of the bank
fund merely, which is shown by the case to be but $13,125.
Front & Dunton, on the same side.
1. When the directors gave bonds for the redemption of the bills,
do.,the bank thereafter became exempt from all the provisions of the
statute relative to the bank fund. C. S., p. 495, §§ 87, 88, 89.
It is absurd to contend that a bank might adopt this system of
securing its bill holders and depositors by the bonds of its directors,
until it was in failing circumstances, then elect a new board of directors, and, by their neglect or refusal to give the requisite bonds
for the redemption of the bills and payment of the depositors,thereby
charge the bank fund.
As to the construction of statutes not explicit, see Kent 521, and
note and cases there cited.
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Federal Reserve Bank of St. Louis
JANUARY TERM, 1865.
548
Denby Bank n. State Treasurer.
This bank fund is the property of the banks that contributed it,
(see C. S., p. 482, § 6,) and its owners can only be divested of it by
a strict compliance with the statute. Spear v. Ditty, 9 Vt. 283;
Brown et al. v. Wright, 17 Vt. 97; Chandler v. Spear, 22 Vt. 388;
Culver v. Hayden, 1 Vt. 364.
The Denby Bank has not complied with the statute. The directors did not either give the requisite bonds or contribute to the bank
fund, until after the bank failed.
If true that the bill holders and depositors have no security if their
bank fund fails them, it does not alter the case. The equities of the
owners of this fund, are, to say the least, equal to the equities of the
bill holders and other creditors of the bank; and when the equities
are equal, the law must prevail. 1 Story's Eq., p. 57; Fitzsimmons
v. Ogden, 7 Cranch ; Mitford Eq. Pl. 274.
G. W. Berman, for the receiver of Denby Bank, maintained that
directors give bonds for the payment of bills and deposits,
the
if
such act exempts the bank from all payments to the "bank fund,"
but this exemption exists only while the bonds are extant. The general provisions of the statute make it the duty of the bank to contribute to the "bank fund." The exception is that if the directors
give the bonds to pay the bills and deposits, while they are in office,
the bauk shall "thereafter" be exempt from all payments to the
"bank fund."
The court are called upon by construction, to give a meaning to
the term "thereafter" as used in this statute. We claim that it
should be limited to the period for which the directors furnish their
bonds; that such is the only rational construction.
Should the decree of the court of chancery be affirmed, the cause
should be remanded, untrammelled by any order which shall preclude the receiver or creditors from a full examination of the state
of the "bank fund."
Peck & Fifield, for the creditors.
1. The act of 1840 permitting directors to give bonds is an exception to the general rule prescribed by § 1, ch. 84. All banks are
safety fund banks unless the directors give bonds, &c.' When therefore the directors of this bank ceased to give bonds they became ipso
facto a safety fund bank, and if the treasurer of the state omitted to
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Federal Reserve Bank of St. Louis
544
RUTLAND COUNTY,
Danby Bank v. State Treasurer.
collect their contribution, it was the fault of the state and not of these
creditors.
2. But in September, 1857, the bank paid its full contribution
for 1856 and 1857 and took the state treasurer's receipt for it. This
made the bank a safety fund bank. It was competent for the state
to waive the payment of the contribution on the day it was due.
Instead of asserting a forfeiture for this neglect they waived it and
took the money.
3. The answer alleges that the bank suspended the redemption of
its bills, discontinued business and in fact failed before the payments
were made to the safety fund. The case, however, shows that the
bank elected directors in 1856 and 1857, kept up its organization,
and made the payments before mentioned in 1857, so that business
was not entirely discontinued. Most of the banks in the state did in
1857 suspend specie payments and business. But,
4. Conceding all the answer claims, the bank would continue
subject to the provisions of the safety fund act, until "it shall become
insolvent and have been proceeded against as hereinafter mentioned ;"
§ 9, ch. 84. This bank could not be regarded as legally insolvent
within the meaning of the statute until it was proceeded against as
an insolvent corporation which was long subsequent to 1857. The
27th and following sections of the act point out the manner in which
insolvent banks shall be proceeded against, and until these proceedings are commenced the corporation cannot be regarded as insolvent.
5. The Danby Bank then, being subject to the safety fund law,
the decree of the chancellor was right and in accordance with the
9th section of chapter 84. Elwood v. State Treasurer, 23 Vt. 701.
PIERPOINT, J. This case Comes before this court upon an appeal
from an order of the court of chancery, made in the course of proceedings instituted to settle up the affairs of the Danby Bank, as an
insolvent banking institution.
The order appealed from fixes the amount of debts against the
corporation, the amount of assets applied towards the payment of
such debts, and the balance still due; and directs the receiver, appointed to close the affairs of said bank, to apply to, and receive
from, the treasurer of the state, in the manner provided by the statute, a sum sufficient to pay such balance.
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Federal Reserve Bank of St. Louis
JANUARY TERM, 1865.
545
Danby Bank v. State Treasurer.
This order is based upon the supposition that the bank fund, so
called, in the hands of the treasurer of the state, is properly applicable to the payment of the said deficiency.
Before proceeding to make the said order upon the treasurer, the
court of chancery caused said treasurer to be cited in, to show cause
why the order should not be made. The treasurer appeared before
said court, and resisted the making of the order, on the ground that
the bank fund in his hands cannot properly be applied to the payment of such deficiency. The decision of the court being adverse to
his claim, he has brought the question here by appeal. And the
principal question now to be considered is as to the correctness of the
order in this respect.
The Danby Bank was chartered in 1850. By the statute of this
state then in force, every moneyed corporation having banking powers
chartered subsequent to 1831 were required on or before the third
Thursday of October in every year, to pay to the treasurer of the
state a sum equal to three-fourths of one per cent. on the capital
stock of said corporation paid in,(with certain exceptions not affecting this question,) until such corporation shall have paid into the
treasury four and one-half per cent. upon its capital stock, to remain
a perpetual fund, to be denominated the bank fund, and to be inviolably appropriated, and applied to the payment of such portion of
the debts, exclusive of the capital stock, of any of said corporations
that should become insolvent, as remain unpaid, after applying the
property and effects of such insolvent corporation towards the payment of its debts. See C. S. 481-2.
The legislature of this state at its session in 1840 passed an act in
relation to banks, in addition to the then existing law on the subject,
which is incorporated into the Compiled Statutes, in which it was
provided in section 8 of that act, and sections 56 and 57 of chapter
84 of the Compiled Statutes, that the directors of every bank,chartered, or re-chartered, at that or any subsequent session, should be
liable to pay to the creditors and stockholders of such bank,all losses
sustained in consequence of any violation, by them, of the provisions
of that act, or of any other law, or other unfaithfulness in the discharge of their official duties; and to secure such liabilities, each of
the directors are required to execute a bond to the treasurer of the
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Federal Reserve Bank of St. Louis
U6
RUTLAND COUNTY,
Danby Bank v. State Treasurer.
state, with sufficient sureties, approved by the bank commissioner,
the aggregate amount of which bonds to_le equal to the amount of
the capital stock of such bank, actually paid in. See Compiled
Statutes, 490. The statute requires these bonds to be executed, before the bank can go into operation, or the directors discharge tho
duties of their office.
By the 87th section it is provided that if the directors of any bank
corporation subject to the provisions of this chapter shall execute
bonds to the treasurer of the state, to the amount and with the security required in section 57,to be approved by the bank commissioner,
and deposited with said treasurer,conditioned that such directors shall
at all times pay and redeem according to law all the bills issued by
such bank, and shall pay and refund all deposits made in such bank,
when such payments are demanded,while such directors are in office,
such bank shall thereafter be exempt from all payments, required to
be paid in to the bank fund, and from all the provisions for the establishment, preservation and regulation of said fund.
It appears from the agreed facts in the case, that when the Danby
Bank first went into operation in 1851, the directors executed bonds
according to the provisions of the said 87th section, and continued
80 to do, until the annual election of directors of said bank on the 2d
Tuesday in January, 1856, thus relieving the bank from the annual
contribution to the bank fund, as otherwise required by law. After
the said second Tuesday in January, 1856, the directors then elected
did not execute bonds as provided by said 87th section, but continued
the operations of said bank, and at a subsequent period, paid to the
treasurer of the state, for the benefit of the bank fund, the required
annual contribution for the years 1856 and 1857, amounting to the
sum of $750.
It is now insisted on the part of the state treasurer, that the directors having once given bonds according to the provisions of section 87, and operated their bank under the system therein provided,
a subsequent failure to execute such bonds does not leave the
bank subject to the provisions of the law relating to the bank
fund, but only makes them liable to be proceeded against, by the
bank commissioner, in a court of chancery, as an insolvent corporation.
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Federal Reserve Bank of St. Louis
JANUARY TERM, 1865.
547
.r.
Denby Bank v. State Treasure
In testing the correctness of this position, it must be borne in
mind, that the bank, when created, was made subject to the provisions of the law relating to the bank fund. No act of the bank was
necessary to bring it within its provisions. It is not a case where it
is necessary that the bank should make a choice,or take any action on
the subject, to make its organization complete, or for the transaction
of its business. When the directors have executed the bonds as required by the 57th section,they are authorized to discharge the duties
of directors, and the bank to go into operation. The organization
is perfect, and the corporation exists as a banking institution under
the law, and is liable to make its annual contribution for the benefit
of the bank fund.
By the 87th section a method is provided by which the bank may
become exempt from this liability to contribute, and that is by the
directors giving bonds to redeem the bills of the bank, and pay the
deposits, while such directors are in office. The directors of the
Danby Bank having executed such bonds according to the provisions
of this section, the bank thereby became exempt from this liability.
The question then arises, for what length of time did that exemption
continue? The natural and common sense answer would seem to be,
just as long as the facts, upon which the exemption was based, continue to esist, and no longer; or in other words, as long as the directors continued to execute such bonds; and that when they fail so
to do, the liability under the bank fund law at once attaches, thus
effecting the obvious purpose of the statute, that is security to the
bill holders, either by means of the bank fund, or the directors'
bonds.
But it is said that when the bonds are once executed, so that the
exemption exists, by the terms of the statute the exemption is made
perpetual, the language being that "such bank shall thereafter be
exempt," &c. The word "thereafter" in its ordinary signification
has no future limitation; but it is apparent that the word is not used
in this section in that unlimited sense. To give it that meaning
would defeat the object the legislature had in view, which was to
provide a security for the redemption of the bills issued by the several banks in this state, through the medium of the bank fund, or
the bonds of the directors.
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Federal Reserve Bank of St. Louis
M8
RUTLAND COUNTY,
Dinby Bank v. State Treasurer.
If when the bank is once exempt by reason of the bonds, they
are always thereafter exempt, the neglect of any board of directors,
subsequently elected, to execute such bonds would leave the bill
holders without any security for the redemption of the bills, beyond
the ordinary assets of the bank, unless they could resort to the bank
fund. Even if such neglect would make the bank liable to be proceeded against as an insolvent institution, that would afford no additional security to the bill holders. Again, the statute does not require the directors at any time, or under any circumstances, to give
bonds of this character. It is optional with every board of directors
to do it or not. When their bonds are once executed they stand as a
substituted security to the bill holders, in place of the bank fund, so
long as those bonds continue in force and operation as such security,
which is in fact until the next annual election of directors. Then
such bonds cease to have that effect, and new bonds become necessary to the continuance of the exemption. If they are not executed,
the bank resumes its original position and obligation, under the law
creating and regulating the bank fund.
We think it was the intention of the legislature, as evidenced by
the language of the said 87th section in connection with the spirit
and purpose of all our legislation upon this subject, to exempt the
banks from contribution to the bank fund, so long as the .directors of
said banks should furnish security for the redemption of their bills,
and the payment of depositors, by bonds executed according to the
provisions of said section, and no longer; and that the word
"thereafter"as used in that section should be taken and considered
in that sense.
It is said that under this view of the statute the directors of a
bank that is in embarrassed circumstances may, by neglecting to execute bonds, make the bank fund chargeable with the redemption of
their bills, when said bank has never contributed anything to said
fund, and this to the prejudice of those banks which had contributed.
If this be so the fault is with the legislature, and this court cannot
remedy the evil. The legislature in all these provisions was seeking
to protect the bill holders, rather than those who should contribute
to the fund. But the liability of the fund to redeem the bills of a
particular bank is not made to depend upon the fact, whether the
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Federal Reserve Bank of St. Louis
JANUARY TERM, 1865.
549
Danby Bank v. State Treasurer.
bank has contributed much or little to the fund, or at all. If the
bank had never contributed to the fund, or its directors executed
bonds under said 87th section, and the proper authorities had neglected to discharge their duties, and the bank had continued its business until it failed, it will hardly be contended,I apprehend, that the
fund would not be liable.
A question has been raised as to the propriety of making the
treasurer of the state a party to this application. Whether to do so
was the only proper course, it is not necessary now to inquire. We
certainly see no impropriety in making him a party. The bank fund
is in his hands; he is its keeper, and the only person who has any
control over it; he represents the state in the matter. The object of
the application was to obtain an order of the chancellor directing the
treasurer to pay the bank fund in his hands to the receiver. On notice to him he appears and objects to the granting of the order on the
ground that the creditors have no claim upon the fund,for the reasons
which we have been considering. This it was clearly competent and
proper for him to do. And probably there was no method by which
this question could be so readily and economically settled as that
adopted, and the chancellor was clearly right in entertaining it.
No question could arise upon this application of the receiver, as to
the amount of the bank fund in the hands of the treasurer,the source
from which it came, or the claims of others, if any, upon it. All
questions of such a character, if they arise, must be settled in the
course of other proceedings instituted for that purpose. The only
question to be settled here is as to the right of the receiver to resort
to this fund, and the amount which he is entitled to apply for, and
recover, from the treasurer. These questions settled in his favor,the
order follows as a matter of course. All this would be necessary if
there was no money in the hands of the treasurer belonging to the
bank fund—the statute pointing out the course to be pursued in such
a case.
The decree of the chancellor is affirmed and the case remanded.
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Federal Reserve Bank of St. Louis
-
39
38
After having paid the expenses of putting the institution into operation.
"Given under my band at Guildhall, this 13th day of March, A. D 1935.
"HARRY HALE, Bank Commissioner of Vermont."
On the bill entitled,"An act altering the name of Charlottis Miranda
Messrs. Converse and Bishop.
The committee appointed to inspect the concerns of the Essex Bank, made the
following
REPORT.
To the Hon. the Legislature of the State of Vermont, now in
session:
heretofore aPpoiuted by your lion. Body, to inspect the concerns
Th. Committee,
Bank, located at Guildhall in said Stole, respeoftilly makes Report.
of the Essex
That about the first of March last past, he, your Committee, inspected the concerns of the said Essex Bank, and from an examination of its papers, considering
that the corporation thereof had exceeded their powers, and had failed to comply
with the condition of their act of iticorporatimi, directed Isaac Fletcher, Esq an
attorney, residing in Lyndon, in the Couhty of Caledmiia, to file an information
against said corporation, before the Supreme Court of Judicature in and for the
County of Essex.—That after such direction was so given to file said information,
Directors of all the Safety Fund
a statement was made by your Committee to the
Banks in the State, except the Bank of Newbury.—That iii consequence of which
1 Safety Fund
statement and infprmation, • meeting of the Directors of the
Banks was called and holden at Woodstock, in the County of Windsor, and an
Agent appointed by those Banks to call on a Bank Commissioner, to repair to said
Guildhall, and there examine into the concerns of that B•nk, and to pursue such
measures as he should think proper. By a reference to the Safety Fund Act, it will
officers of
appear that the Commissioner has power to cite the would be the Bahk before a
pursued necessary
every measure
single Chancellor, Sic. Believing that
of
the Safety Fund Banks, your
interests
and
the
_public,
the
of
rights
to secure the
Committee directed Mr Fletcher to suspend the proceedings against said Essex
Bank, until by him further required
On the 17th day of March, your Committee received a copy of the report of the
Bank Commissioner, above referred to, [Mr. Haled of which the following is a
coy:
"BANK COMMISSIONER'S REPORT.
"STATE OF VERMONT.
"Unfavorable reports having recently been circulated relative to the Situation
and management of the Essex Bank. located at Guildhall in said State, and having
been requested by Gen. Lyman Mower, Ptesident of the Bank of Woodstock. acting in ths• capacity of Agent for several of the Safety Fund Banks of said State, to
algae an investigation of the concerns of the said Essex Bank,—On the 11th du, of
March instant, I re taired to Guildhall, and as Bank Commissioner, proceeded with
Hutchins. Esq., one of the Directors of
the assistance of said Mower, and Samuel
books, papers, notes,
the Bank of Newbury, to make a thorough inspection of the
them
with the liabilities of said Bank, and
compare
sod
debts,
evidences
of
and
having carefully examined the Directors and Cashier under oath, touching the
premises, Report. That in my opiniou, the concerns of the institution have, from
the commencement of its operations to the present time, been conducted in a prudent,safe,and economical manner,—That it has stall times been, strid now is, shun:
dautly able to redeem all its bills, and outstanding liabilities, and that the Directors
appear to have acted with due regard to the interest of the stockholders, and the
safety of the public. The debts due the Bank appear to be well secured, and no
losses have been sustained.
'On the 12th day of March,! find the situation of the Bank to beat follows.to wit:
$S,010
Cash deposited in the Suffolk Bank:
225
, Safety Fund,
do.
do.
4,901 42
ancl,specie
on hand,
other Banks, foreign bills
do.
do.
Boston,
in
payable
Funds
L301
495
) 01
Balances due on Book,
34,545 11
Due on notes discounted,
A
$46,466 54
Capital stock paid in, •
Bills in circulation,
.
.
.
Doe to depositors,
Deposits to be applied on demands due the Bank,
Leaving a profit balance of
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Federal Reserve Bank of St. Louis
-
$20,000
15,964
6,261 75
2,091 46
44,317 21
$2,149 33
%C,,,Ait4A
On the 19th day of March, your Committee was again at Gnildhall to examine
the concerns of said Rank,—and if the same had been msnaved as represented to
the Bank Commissioner by the officers of the Bank. be could not feel justified in
prosecuting legal proceedings against the corporation. The circumstances, under
which the examination was made by the Commissioner, were such as to induce
belief that your Committee might have been mistaken in relation to the concerns of
that institution. The examination was made in company with Lyman Mower.President of the Bank of Woodstock, aud Agent for the Ssfey Fond 13anks, and Samuel
Hutchins, Director of the Bank of Newbury, gentlemen perfectly well qualified by
their connexion with banking institutions, to make a thorn:net Inspection, and to
detect and expose any improper management ; but, your Committee was induced
by various reasons and considerations to make a second examination, which termi•
noted in a full conviction that the cot poration had not complied with the conditions
of their charter The capital of $20,000 was paid in, on the 15th day of April, 1833.
On the same day, about $17,000 of said capital was loaned to the stockholders, on
pledge of their stock, and the notes of the individu•ls, who subscribed for the stock :
there might have been the names of some other individaals, as security, besides
those who took the stock; but from a minute made by me at the time, it does sot
appear that any other signature was to either note, but of such as took stock.
On the 22d day of April, $400 more appears to have been loaned in the same
manner as the above; and on the 6th day of May, a further sum of $1,015 was
loaned in the same way: there may be possibly some trifling error in the statement
of the exact sum loaned, but the above statement is made from minutes taken by
me at the time—the names of the stockholder and borrower, and the sums borrowed, annexed to each name was taken from the papers of the Bank, except the last
sum loaned on the 6th of May:—for these sums, notes were given, payable on demand—some of which had not been paid at the time of the examination. The
banking room is in a wooden building,occupied as a store; and the place of deposit
for the notes, bills, papers and specie of the Bank is a wooden desk. The books of
the Bank consisted of one or two sheets of paper pinned or stitched together.—
From these facts, your Committee did believe that it became his duty to order an
information to be filed against the said cot poration. The proceedings having been
suspended thereon, there was not safficient time, after the second examination, before the session of the Supreme Court, to give the notice required by law. No
bearing could be had befhre the Court until March, A. D. 1936. For that reason,
your Committee thought it most advisable to suspend entirely all further proceedings in relation to the information, and to submit the facts to the consideration of
the Legislature.
There were other transactions of the Bank which were considered by your Committee as improper, yet not such as would in his opinion vacate the charter. The
funds of the Bank appear to have been monopolized for the benefit of the officers
and stockholders of the Bank. In the month of February, 1834, at a time of great
pecuniary distress, a large loan was mad to one of the officers of the Bank. Six
hundred and eighty shares of the stock was owned last March by Norton, Carlisle
Si Co.—One of the firm is said to reside in Buffalo, one in the city of New-York,
and one in the state of New -Hampshire. The manner of reporting their funds also
leads to false conclusions. From the report of their Cashier,of the amount of their
deposits in Boston, it will appear much larger than it really is. The Bank has
been in the habit of reporting as deposits in Boston, notes of individuals, some of
which were not due at the time they were reported as deposits. The sum of $3,300
contained in the report of the Commissioner, is of that character. That was a sum
made payable at the Market Bank in Boston, in four instalments, the first of which
became due about the 120th of March—the other payments were on the 26th of
March, 10th of April, and 20th of April. The officers of the Bank represented at
the time of the examination, that they were abundantly able to redeem all their
bills and outstanding liabilities, and at the same time the said Bank was furnished
by the Safety Fund Bank with funds to the amouht of $5000 or $6000, to enable
them to discharge its liabilities.
No express provisions appear to have been made, by law, for any compensation
to the informing officer or other attorney, who may be directed to file 111111 10rOrMation against a Bank corporation, in pursuance of the provisions of the statute
passed
in reference thereto. Whether it is necessary or proper to make any such provision,
or to leave the compensation as it as at present, unsettled, is submitied to the wisdom of the Legislature to decide.
Mr. Fletcher, the attorney employed by your Committee, as above, was subject.
•l to some expense of time and trouble, iu making preparations in the case ; but as
CtAxdk.1~-41
1
,
u GthottA
i%as.
-64A
U4
1A•vit41%.4 ,
•
Continued on following page.
'the proceedings thereon were suspended,his bill has not beenc
called for,nor has he received fl), remuneration for or toward
same
JOHN S PITTIBONE
COMMITTEE
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Federal Reserve Bank of St. Louis
50
51
THE foregoing statement exhibits the condition of all the banks ot
this State, except the Essex Bank, which will be noticed in another
part of this repoit. From this statement it appears that the specie has
not been increased, but rather diminished since the last report, while
the circulation has increased nearly $1,000,000. The statement of the
condition of the Bank of Orleans has bean received at a date later than
the date of the inspection. The specie of the bank at the time of inspection was less than $100. The demand for specie during the last
year has increased and probably will for the year to come. It is well
understood, the banks do not depend upon specie in their vaults for the
redemption of their notes. The amount possessed by the banks of Newbury and Orleans, does not appear sufficient to meet the ordinary demands for specie at the bank. The most of the bills natorally flow into
the Cities; where funds are provided for their redemption. And at
those places, nearly all the operations ofthe banks, so far as relates to
the redemption of their halal are carried on. These funds consist of the
hills of other banks : and by mutual exchanges these redemptions are
effected. So that a very small proportion is required to be redeemed in
specie.
I placed the amount of deposits in the cities in a separate column.—
The amount of funds in deposite at the time of inspection, was $753,739. To keep up these deposits, the banks are compelled, at considerable risk and expense, to transmit funds to the places of deposite. Paper payable ia the cities is more readily discounted than paper payable
at the bank. And in some instances, the borrower has been obliged to
make his paper payable at the city banks, as a condition of the loan. If
there be no such express condition, the rule of some banks, to give a pre
ference to city paper is so generally understood, that the effect is nearly the same. Where a preference is given to city paper, to the exclusion of good paper in the vicinity of the bank, it operates oppressively
on those who are unable or unwilling in addition to the legal discount.
to transmit the funds of the bank to the place of deposite. These deposites are not like the funds in the bank,. dead capital. For these the
banks receive from three to five per cent. merest. The banks then, at
the time of the examination, were receiving, on an average, 4 per cent.
on the deposite of $753,738, and six per cent, on loans and discounts to
the amount of $2,618,649 a sum equal to 17 per cent. on the capital paid
in. No allowance is made here for expences, bad debts, or otherlosses.
As long as banks present such inducements for capitalists to vest capital in bank stock, the Legislature will be pressed with applications for
new charters, and the renewal of those about to expire. The great increase of circulation during the past year tends to strengthen the argument that more banks are necessary. The wants of the manufacturer,
merchant and mechanic, far from being satisfied, seem to increase with
the increase of banks.
From an examination ofthe reports ofthe Bank Inspector, from 1830
to 1836. the circulation has not far exceeded one million. And there is
no reason to believe the circulation within our own State, has been
4reater the present year than in the preceding years. Large sums have
been loaned the past year to persons emigrating to the western States
anti Territories. Another Cause of the increase of the circulation, is the
law of the State of New York, prohibiting the issuing or receiving of
small hank notes. This has opened a new field for the circulation of
small bank notes of this state. Loans to a large amount are made to
the inhabitants of the state of New York, from some of the banks of this
state These loans are made in small hills,(many of them at least,)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
of long duwhich pass currently in that state. These causes cannot be of custoration. The western emigrant is not now considered the best without
mers. Nor can it be expected that the State of New York, in force
continue
the co-operation of other states adjoining, will long or
receiving small
the law prohibiting the banks of that state issuing
bills.
and debt,
If these suggestions be correct, the increase of circulation
in favor
argument
no
afford
can
profit,
of
increase
consequent
and the
should repeal
of an increase of banks. For, if the state of New York,
banks of that
the law prohibiting the circulation of small notes of the the
amount of
state, or if our Legislature should pass a similar law,
ptoba
notes of the banks of this state now in circulation, would, in all do not
bility, be reduced one million. To redeem that sum, the banks
due
possess the means without a demand for the payment of the debts at
the banks on discounted notes, and it is difficult to make collectionsex
times when hanks are compelled to cur tail their discounts. In my liaaminations this year,I have requested a statement of the Director's
or
bilities. There is no law limiting the liabilities of the directors,
acted
stockholders. Yet it it should appear that the Directors had not banks
with due regard to the public interest, and as far as relates to the ought.
now in operation, there should be no remedy ; the Legislature
a remedy for
in all future legislation upon the subject of banks,to provideof
incorpomcorrecting all abuses of the privileges granted in the acts
tion ; by following the example of other states, reserving the power of altering or repealing such acts of incorporation. No evil it is believed.
would result from such provisions to the incorporations. A provision of
that kit.d, would operate as a more salutary check to abuse than any
power givenIto a court. The Legislature would be shackled, by no legal restraints to prevent the exercise of justice towards those corporathe
tions who abuse the privileges granted them. The statement of
liabilities of the directors have been furnished, and answers to all en
quiries have been given, and every facility afforded to obtain full information in relation to that and all other transactious of the banks, with
this
but one exception, where the right has been denied. The result ofThe
inquiry presents a flattering condition of the banks of this State.
Director's liabilities are, with a very few exceptions, trifling; and in no
instance does it appear that these liabilities have been created for the year
past. for purposes of speculation, but in aid of manufacturing and merto
cantile interests, in which the individuals were engaged previousit is
their connection with the banks. Yet as small as the liability is, of
The diminution
a withdrawal of so much capital from the banks
capital is not the greatest evil resulting from this practice. It gives to
those individuals a controling influence which enables them to obtain
accommodations upon more favorable terms and frequently to the exclu
%ion of others equally deserving. And admitting the stockholders re
ceive nine per cent on their capital, such isdividual stockholder pass
but three per cent, upon his debt to the amount of his capital. By the
Bank of Manchester, where the liabilities of the directors have been
equal to four-fifths of the whole capital,and three fourths of that sum oh
tamed for purposes of speculation, the right of the government to know
the director's liabilities is denied.
I have not discovered during the past year any illegal nausartions,
or that the funds of the bank have been used for purposes of speculation.
I.have the utmost confidence in the present Directors, that no transaction of the diameter alluded to will be permitted. I allude to these
52
53
transactions to show the importance of providing a remedy for abuses
af corporate privileges which do not involve a forfeiture or the charter.
From the report of the Bank Inspector submitted to the Legislature in
Oct. last, it will appear that an information had been directed to be filed
against the corporation of the Essex Bank, and that the procedings were
suspended for the reasons theiein stated. That report, with the report
of the Safety Fund Commissioners, Was referred to a select committee
of which Mr. Warner, one of the Safety Fund Commissioners wa s
chairman, on the 15th of October. The President of the Essex Bank
appeared before the committee with counsel,Messrs.Bell and Briggs,and
offered testimony to prove the statement in the Inspector's report, relative to the books, papers and other transactions of the bank, incorrect.—
The President of the Bank and the exparte affidavits of the other officers
of the bank were offered as evidence to impeach the report of the Inspector. I objected to that kind of testimony. The transactions, of
the bank complained of, in that report, appcared, as the report states,
from the books and papers of the corporation. These papers were in
the possession of the officers of the bank, and the books and papers wcre
the best, and only evidence that ought to have been admitted. The
objection was overruled by a majority of the committee,and the evidence
admitted. The committee continued their labors until the evening session, of the 10th of November, which ended in the following report:
"That believing the object or referring the report was, to give those
in interest an opportunity of contradicting the facts set forth therein,
your committee requested said Pettibone to appear before them for the
purse of aiding in the investigation, and also permitted the President
of the Bank to be heard by himself and counsel, affording them an opportunity to adduce such evidence as they were pleased to present.
"Your committee had not the opportunity of inspecting the books and
papers of said Bank, but received among other testimony that of the
President under oath, relative to the situation of said books, and the
manner of transacting business at said Bank, he having in a great measure to depend upon recollection for the accuracy of his representation.
"Your committee find the report of said Pettibone generally supported
with the following exceptions, to wit: That on the 6th day of May,
1833, there was *P135 loaner!, instead of$1015, in the manner set forth
in the report.
"They find that in addition to two or three books of the description
named by said Pettibone, the said Bank had a Ledger containing 48
pages of paper of large size—a book of transfer of stock and records conlaining 96 pages of large paper, one of which books was covered with
pasteboard. They find that the said Pettibone was in error relative to
the manner of said bank's reporting its funds, there being nothing in the
manner calculated to lead to wrong conclusions,' so far as the recent
transactions of the Bank are concerned, and, in relation to certain stitements of which said Pettibone complained, your committee could not
determine, as they were not furnished with sufficient evidence, upon
which to found an opinion.
"They find that the charge that the funds of the Bank had been mooopolized for the benefit of the officers and stockholders,'is but partially
sustained.
"T hey also,in compliance with a more recent resolution of the House,
report, that relying upon the accuracy and truth of the reports of the
Bank Commissioners, Mr. Hale and Mr. Campbell, as well as that of
said Pettibone, recently made to this House, they hesitate not to ex
pres. the opinion, that the institution k perfect] olvent."
The Committee having expressed no opinion whether the facts cop
mined in the report of the Inspector would, or would not warrant further proceedings, and the Legislature having no time to act on the report, I directed the attorney before employed, Isaac Fletcher, Esq. of
Lyndon, to cause the information to be served on one of the Directo..s of
the Essex Bank. The trial Was had in March last, before the Supreme
Court at Guildhall. That the State might be prepared for trial, 1 visited the bank previous to the sitting of the Court. The President of the
Essex Bank, John Dewey, testified before before the committee of the
Legislature, that the notes given for stock or for the security of the capital loaned, had been paid. I had reason to believe that the same
eourse would be pursued on the trial of the cause before the court.
was confident I could show from the papers of the bank that the debt
tirst contracted had never been paid, hut that the same indebtedne:isstil
existed under different names. I applied to the President and Cashier
of the bank for admittance. and was refused admittance or access tO the
books or papers of the bank, before the cause caine on fur trial. And at
that time it was impossible to trace all the changes of debt for nearly
three years the hank had been in operation. The officers of the bank
were requested to produce the book containing the original subscription
to the capital of the bank. They refused to produce any, nor did the
court require its production, as no charge or complaint of a violation of
charter was embraced in the locomotion. The attorney was not pen!'itted
to show any violation, under the prosecution, of the .act, regulating the
chartering of banks." By the provisions of that act the Criancellor is
empowered to issue an injunction against the corporation, and cause
the m to deliver up the books and effects of the corporation into the possession of receivers possessed of full powers to wind up the eoneerns of
the bank. By the act of incorporation there is no remedy provided Cot
any violation of the charter, or abuse of the privileges therein granted,
except the power of the Court at their discretion to vacate the charter.
There is no power granted to the court to appoint a receiver, or provide
means, by which the concerns of the bank may, with safety to the public, and to the stockholder, be wound up. The court were unwilling to
inflict so severe a penalty. •
I regret that am not able to conitnunicate the report of the case. I
requested of the court a copy of their opinion, or a statement of the evi-
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Federal Reserve Bank of St. Louis
1 14
;
— 6—.7
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tion.. I was informed by the Judge who delivered the opinion, that it
communication from him, and renewed my former request. I have, as yet.
received no answer. The select committee, to whom the report of the
Inspector was referred last session, state, "That believing the object of
referring the report was to give those in interest, an opportunity ofcontradicting the facts set forth therein," they permitted the President of the
Bank to be heard by himself and counsels,— affording them an opportunity to adduce such evidence as they were pleased to present. The
President himself was introduced to contradict the official report ofthe
Inspector; relative to the situation of the books, "he having in a great
measure to depend upon recollection for the accuracy of his repre
sentations." This appears to me to be a requirement for the Inspector
to substantiate his report by other evidence than his own oath. In pre
senting this report I have accompanied it with the copies ofsome papers
which 1 took at a previous examination for my own convenience, not
3_h
55
in-law to Dewey,had 75 shares, John Dewey refused to make knows,
the owners of the 670 shares which he said he took and held in trust.—
March 29, 1834, Dewey transferred 680 shares to Norton Carlisle and
Co. These shares were again transferred to Dewey. In Feb'y. 4th,
This loan the
1834, there was a loan to one individual of $15,720
President of the bank stated was not for the benefit of the individual,
but for the benefit of the bank. In March, 1835, the Essex Bank, or indiv:duals for the benefit of the bank, obtained a loan, from several of the
Shfety Fund Banks, of$5,000 and pledged $6,000 of the Essex Bank as
. This loan was obtained for the redemption of the Essex bills,
security.
and placed to the credit of the Essex Bank,in the Market Bank, Boston.
The large loan in 1831, may have been obtained for the same object.—
If this practice should ptevail, the safety fund can be no security to the
public against losses by insolvent banks. I stated in the report which I
submitted to the Legislature in Oct. last, no provision was made to defray the expense attending the prosecution—no opitiion was expressed
by the committee to whom that report was referred, in relation to that
expense. Additional expense has arisen: I have not yet received the
account of Mr. Fletcher.
The act regulating the chartering of banks, called the Safety Fund
act, provides that the banks chartered under that act, shall pay to the
treasurer of this state 4i per cent, on their capital paid in, as a fund
to meet any losses that may arise in consequence of the failure of any
safety fund bank. This fund will amount to but $20,025. This fund
will be increased with the increase of capital. This sum can be no security to the public.
The capital of all the banks of this State enumerated in the foregoing
statement has been paid in agreeable to the report. As long as this capital yields to the stockholders an income as large as such capital would
produce in the hands of individuals, the capital will probably remain in,
and the concerns of our banks will be, as they now are, under the direction of men of capital and integrity. This is ample security
to the public against loss, and is the only security that can be relied on
If any bank were disposed, it could at pleasure throw into circulation
bills to any amonnt. The means the safety fund act affords, to pledge
bills of those banks as security for private loans, may have an injurious
effect. This fund is a heavy tax upon the corporation. It presents a
false security to the public, and the repeal of that law, it is believed be
your committee, would increase, rather than diminish the soundness of
our bank currency.
Which is respectfully submitted.
JOHN S. PETTIBONE, Bank Inspector.
54
them
with any view at that time, of using them as evidence. I believe and
to be perfect copies. I intended to compare them with the originals
before
called at the bank for that purpose, and was refused, as I have
stated, admittance. I requested the cashier at my examination in Jan'y
last, to produce the hook containing the list of the original subscribers.
any
The cashier was not able, as he said, to find any such book nor
other than the one of which the following is a copy. (See paper marked A.)
the
From this paper it appears the whole subscription was made on
for
15th of April, 1833, mole than 60 days after the books were opened of
subscription, if said boliks were opened according to the provisions
the act. Attached to this paper will be found also the certificate of the
Commissioners—the receipt of the Directors—the sum first loaned and
the receipt of the Cashier, and the first entry of the notes discounted.—
These papers show clearly the manner in which the bank went into operation. John Dewey, one of the Commissioners and one of the Directors, stated to me that a few days previous to the 15th day of April 1833,
he went to the Haverhill Bank, and obtained a loan of $18,000 or near
that KUM. He left of that sum in deposite, $9,000,and took a certificate
for that sum; the balance he received in Haverhill bills and specie. On
the 15th day of April he deposited that sum,(the certificate of deposite
being received as specie,) with the commissioners, and completed the
subscription of 1000 shares, and the depeoite of $20,000, and on the
same day he took from the bank $18,000 including the certificate of
of deposite, and returned that sum to the Haverhill Bank, and took up
his note. The names of the subscribers appear in alphabetical order.—
From this paper there appears to have been deposited with the commissioner, about $2,400; $1,260 of the sum deposited was loaned back
to the same individuals the same day. In addition to the loan of the
in the
15th, and 22d of April, there was another sum of $135 loaned
capisame way on pledge of stock, leaving less than $1,000 as the
tal of the Essex Bank. And upon this capital the bank went into opebefore
ration. There was no payment of the loan of April 15, made papers
and
the 20th of July. I have stated that a production of the booksmade ofthe
of the bank would show that no payment had actually been remained
loan of April 13, of 617845., or that the same indebtedness
These
from some of the borrowers—the debt may have changed bands. notes
other
demand;
on
payable
and
made
notes,
stock
called
were
notes
and
were discounted for 3 or more months, and the discount received
entered on the book. March 13., 1835, at ths time Mr. Hale made his
examinntion, there was then due in interest on notes $1,578 12; a sum
loan of
about equal to the interest that would have been due on the amount
April 15, at 6 per cent. to the time of that examination. That amount
of interest could not have been due if there had not been a large bank at
waning on interest. I took a list of the number of notes in the did not
1
the examination I made in 1835, which I submit. The dates notes.—
take. I took the No. of the notes and the amount due on said were so
Note, No. 3, 4, 5, 8, 9, 10, 13, appeared to have been paid, and$i7,110.
entered on the book, the sums of all these notes amounted to
$15,000,
No. 180, and 181 were notes payable on demand, amounting towith No.
and No. 90,92, 93,94 were also made payable on demand, and
of
92 made 85000. all of the same date; and I could not learn the cause
these
en
were
them,
of
some
or
names,
same
The
divided.
being
of their
some
notes that were on the notes of April 15th. These notes includedThere
other names. John Dewey,stated that he owned about 100 shares. fatherwere in his name 770 shares,and Thomas Carlisle of Lancaster,
`,-.-Ausey.-41._
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Federal Reserve Bank of St. Louis
I
-
-
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56
57
[PATER A.)
We certify that the foregoing ss a true list of the names of all the
subscribers to the capital stock of the Essex Bank at Guildhall, Vt.
also ofthe number ofshares to which each of the subscribers is entitled, the amount of deposit paid by each at the time of subscribing;
also ofthe additional sums deposited with us the subscribers—amounting in the whole to the sum of $20,000.
JOHN DEWEY,
G. WEBB,
C. K. BROOKS,
D. HEPHREN,
N.DENISON.
APRIL 5, 1.8:33.
Guildhall, April 15, 1833 —Received of the above named Commissioners the above sum of $20,000, for and in behalf of the President, Directors and Company of the Essex Bank.
G. WEBB,
C. K. BROOKS,
JOHN DEWEY,
J. B. HALL,
J. S. WELLS.
Eases Bask, Guildhall, April 16, 1893.—Received of the above
named Directors the above sum of $20,000 for safe keeping, and
subject at all times to the direction of a majority of said Board, to be
used only as they may direct.
L. GERALD, Cashier.
',uhscribers to the Capital Steck ofthe
JYamcs.
William Ames
William Atkinson
C. K. Brooks
Geo. W. Barker
Joel Bassett
D.Baldwin
W.Barns
C. Bellows
I. F. Barns
Luther CrOb8
/1 M.Cottrill
12 D. S. Clark
13 E. Cheney
14 I. Cheney
15 Tho's. Carlisle
16 P. Clark
17 A. Clark
18 Isaac Cumings
19 N. Denison •
20 I. Dewey
21 I. S. Dewey
22 S. Dewey
.23 1. Y. Dewey
24 H. Dewey
25 H. Dewey 2d
26 D. Denison
27 D. E. Denison
28 I. P. Denison
29 R. Graves
30 L. Gernold
31 L. Hibbard
32 R. Hibbard
33 G. E. Holmes & Co.
34 J. B. Hall
35 C.Jewitt
36 R.Joslin
37 A. Moore
38 I. Kelsey
39 M. Olcot
40 A. Paulson
411. Read
42 I. Ross
43 A. Rich
44 I. Ricky
45 G. Webb
46 L.K. Webb
47 E. Ware
48 D. Wight
49 J. S. Wells
I
2
:3
4
5
6
7
8
9
10
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10
50
10
25
10
95
5
5
2
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25
10
10
25
25
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92
50
25
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20
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ssc.c Bank.
$
150
50
750
250
150 rec't 150 rec't
375
125
150
50
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25 rec't 75 ree't
75
25
10 rec't 30 rec't
250 rec't 750 rec't
375
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}11,tt
April 5th.—Surns loaned.
.No. of the .]'soles.
Stock pledged
2
3
4
It
5
ti
6
sf
7
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8
9
10
stock pledged
,c
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$17845
ko-i/ 16, 1836—Ehtered on the book of records, Notes,from No.
1 to So. 12, inclusive, amounting to $17,845.
Which on motion of Mr. Foot, was ordered to be laid on the tibia.
On motion of Mr. Richmond of,Derby,
Resolved, To reconsider the vote referring the petition of Andrew Spaidm
and others, to the General Committee, and en his motion was referred to the
members of Orleans and Essex counties.
1\1.h,ppl.4%.,k./V 3 4,
81
THURSDAY, OCT. 19, 1837.
JOURNAL OF THE HOUSE,
respect, than that of suspending the redemption of their bills in specie;
and from the examination very minutely entered into, they are satisfied of the ability of all the Banks, to meet all their liabilities, unless
the most wealthy and business part of community should become involved in general bankruptcy and ruin.
It having been suggested to the Commissioners, that n great share of
the loans made by the banks, had been made to the Directors—and
in large sums, so that others, wishing fig Bank accommodations, in
small ainounts,could not be accommodated ; we have been induced to
make a particular examination relative to these charges; end are prepared to bear testimony to the injustice of the allegations,—as at all the
banks examined by us, except two, the proportion of debts due from
the Directors, is extremely small ;--and at the other two, perhaps the
Directors have received no greater facilities, than might reasonably be
expected, were they not members of the board; and a large proportion of notes due the banks, are given for sums varying fi'om fifty to
three hundred dollars each.
Another charge equally without foundation in truth, is that the payment of a large amount due the banks, is secured in no other manner
than by a pledge of Bank Stock ; whereas the facts are, that at live
of the Banks embraced in this report, having doe them more than
41,500,000, we find only the sum of $6,207,50 thus secured ; and at the
other Banks the enquiry was forgotten to be entered into.
The Cotnmissioners are aware, that under the existing laws, the
Banks cannot be proceeded against, in so full and ample a manner, by
those holding their notes, as may be done by one individual against
another; but whether any other, and additional security, might to be
provided by law, the Commissioners are not fully agreed ; but submit
that question to the wisdom of the Legislature.
The Bank of Brattleborough, which it was the duty of the Commissioners to inspect, is not included in this repnrt. The Conunissioner to
whom this duty was assigned, the uedersigned Commissioners have
been very recently informed, was prevented from making the inspection in consequence ofsickness. That Lank will be immediately inspected, mind a report made of its condition.
All which is respectfully submitted.
Bank
HARRY HALE,
ALMON WARNER,t Commissioners.
Montpelier, October 12th, 1837.
From the foregoing statements it w;11 be seen that the nine Banks
which have been examined, have diminished their circulation since the
examaivation of 1836, to the amount of $275,489, and that their means
for the redemption of their Bills, are likewise reduced; but not to the
name amount ; consequently, their liabilities are less in proportion to
their ability to pay now:than at the tittle above mentioned.
It appears from enquiring of the officers of the banks, that they all,
professedly suspended specie payments, on, or near the 15th dny of
May last; but at the same tune it appears, that they have been in the
habit of paying small stuns, for the purpose of accommodation ; and
some banks have redeemed more bills since the suspension, than they
had been requested to do, on an average, in any equal length of time,
previous.
The uniform reason given by officers of the banks, for suspending
has been, that it was in consequence of the suspension of specie payments by the city banks. Most of the banks in Vermont, having large
deporites in the eitiee, could not avail themselves of their funds there,
to redeem their bills at home ; but the bills of all those Vermont banks,
having deposits in the Cities, are eonvertible, at any time,into the bills
of the City banks, which keeps them at par,in the market.
The reason assigned for the suspension, appears to the commissioners to be well founded, as it could not be expected far a moment, that
our small banks, averaging n capital of only $100,000 each, could continue to redeem their bills with specie, while the city banks,'with a capital of millions, refused to redeem theirs.
The Comtnissioners are satisfied front the manner in which the banks
have been conducted by those having the management of them, that
they intend, and eventually will, redeetn all thei, bills in circulation. In
most eases, it appears that the Directors have offe.,:d, and in many cases
have given security for the payment of the liabilities of the batiks, itt
their individual capacity ; and have thereby assumed u responsibility
which the law does not require.
The 18th Section of the act passed the igh day of November, 1831,
entitled "an act regulating the chartering of banks," makes it imperative
on the bank Commissioners, upon certain contingencies therein named,
to apply to a Chancellor, for an injunction; but by the 22d Section of
the same act, it is left discretionary with them, in case of the suspension
of specie payment for the space of sixty days to do it or not, as they
may deem expedient. The Commissioners have not deemed it their
dial, under existing cireumstanees, to make any application to a Chancellor,—although all the banks under their supervision, are liable to be
proceeded against, for it violation of their charters, for refusing to redeem their bills in specie.
In coming to the above conclusion, the Commissioners have been influenced, not oMy by the honorable conduct Of the officers of the
banks; but they have also taken into consideration, the existing requirements of the laws; to wit, the security of the safety fund, and also the
bonds required to be executed to the State Treasurer, by each director
which lust mentioned security
of the banks, in the swim of
amounts generally to the sum of $56,000, and in no case to a less sum
than $40,000 to each bank ; which, it will be perceived, is more than
one halt; and in some cases about equal to the whole sum, in which the
banks are liable to the public. In addition to this, the public are secured by the capital stock paid in and debts due the Banks.
The Commissioners are not aware that any of the Banks inspected by
them, have been guilty of any violation of their charters, in any other
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
To his Excellency, the Governor:
The following statement shows the condition of the Bank of Brattleboro' which was not included in ottr Report of the 12th inst. for the
rersons therein stated.
Stock paid in
Deposits
Pi ofits and Loss
Bills in Circulatioit
75,000 1Notes Discounted
130.23698
20,807 57 Funds in Boston, Troy
3,765 37 and other Cities
52,540 2C
96,362
Bills of other Banks
2,930
Specie
13,808 21
Banking house
2,418 47
-Sept. 4, 1837.
201,933 92
201,933 92
HARRY HALE, Bank Commissinners.
A. WARNER, ç
Montpelier, October 14, 1837
$8,000,
-"-re--°"
- 73.
cd- r a 7
1313.
JOURNAL OF THE HOUSE,
FRIDAY, OCT. 27, 1837.
remaining undivided in each bank, on the day the last dividend shall
have been declared, and the amount of surplus or profits on the day of
inspection, also that said committee and commissioner he required to report whether the several banks in the state have heretoliire been accustomed to pay the per centar of their profits due the stale, upon the
amount of their declared dividends.
The report and rerstution were read and ordered to be laid on the
table.
Mr. Hitc7i, front the same comniittee, made the I.:Wowing minority
It E P0 It T:
To the House of Repeesentativcs now in session:
The undersigned, from the committee appointed to ascertain "whether any of the banks of this state have failed to comply with the provisions of the law, requiring them to pay a portion of their profits into the
'treasury of the state," disagreeing with the majority of the committee
in relation to the matter to be submitted to the House, respectliilly reports:—
It is believed that the provisions in the charters of the several banks
of this state, requiring said banks to pay a certain portion of their profits into the treasury of the state, are uniform; except, that a part of
them are required to ply six and a part ten per cent. of those profits.
With this variation the law requires the banks to ply, "semi-annually
at the time, at which the directors of said bank, shall declare dividends
of the profits Gf said bank, with the treasury ofthis state, for the use
and benefit of this state, (six or ten per cent.) ofthe profits of said bank,
whether all of said property shall have been divided or not."
In the opinion of the undersigned, this requirement of the charters of
the banks, is imperative upon them to pay, semi-annually, at the time
they declare dividends of' those profits, as well of any amount which
may remain after a dividend, as of the amount actually divided ; and
that the officers of the banks have no power to withhold any portion of
the s.:1 thus due the state, upon any pretence whatever, and that art
application of the whole or part of the undivided profits of' a bank, out
of which the statc has not received the amount specified by its charter,
for the benefit of' such bank, is an appropriation to itself of the money
or the state, equally opposed to the provisions of the law aral the principles or common justice.
In the prosecution of' the enquiry instituted by the House, the committee requested several gentlemen, known to be connected with some
of the banks of the state, either as officers or stockholder., to appear
before the committee, and communicate to them such information as
might be within their knowledge, touching the subject of investigation.
These gentlemen readily complied with the request of the committee,
and from the sta tements made by them in reply to the enquiries propounded, the undersigned has arrived at the conclusion, that. the practice generally prevails among the banks to pay into the treasury of the
state, the rate percent. in their profits required by their charters on their
semi-annual dividends alone, at the time of making those dividends;
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and that they pay nothing to the state out or these undivided profiL9, except in case of a dividend of those profits. It also appears by the report* of the bank inspector and bank commissioner, for sonie.%ears past,
that all or nearly all of the banks have- had and now have undivided
profits, to a considerable amount, and that the amount of these undivided profits have varied from year to year.
The reason assigned before the committee for the practice pursued
by the banks of paying to the state, the rate per cent. required by their
charters, on the semi-annual dividends alone, and not upon the undivided profits accruing at the time of making these dividends, are, first,
that it is fur the safety of the banks to provide a fund to meet the losses that may accrue on notes then due or which may thereafter become
due: and, second, that it is for the benefit of the state, on the ground
that, notwithstanding a portion of the money belonging to the state, remains unpaid, yet that by the rapid accumulation of the amount of undivided profits, received by the state, on a dividend of those profits, the
amount will be greater than if' payments were made on all the profits
semi-annually.
In relation to the first reason assigned fur the practice of the banks,
it is sufficient to say, as has been suggested before, that the law is imperative, in requiring the payments to be made on all the profits of the
withbank semi-annually, at the time of declaring dividends; and that
holding the portion which then becomes the property of the state, by
operation of law, for any purposes of banks, is a manifest violation of
the plain provisions of their charters. It is arresting the operation of
the law for their own benefit.
In relation to the second reason assigned, it might be questioned
whether the practice cperates, even under the most favorable view of
the rate
the subject, for the benefit of the state. If it be admitted that profits,
per cent. required by the charters of the banks, on all undivided
be paid to the state on dividends of surplus profits made at remote periods from each other, it admits of a doubt whether the state does not
to
lose the in terest which would accrue, on the several amounts added
the undivided profits at each semi-annual dividend, from the time of
such dividend, until the dividend of the surplus profits, when payments
a
are made out of those profits to the state. Be that as it may, it is
sufficient answer lo the second reason assigned to say, that, if the undivided profits are holden as security against accruing losses, as alledged
accumulain the first reason, they cannot he holden for purposes of'
Losses
tion and benefit of the state as alledged in the second reason.profits
of
may accrue, which may swallow up the whole of the surplus
any
the banks, and io this way, the state may be deprived of receiving
cr their
portion of them, instead of having them rapidly accumulate
benefit. The operation of the practice pursued by the banks, manifisit •
n
i4eas
ate
ly is, to hold a portion of the money actually belonging to the state,
security for their losses, to be appropriated to meet these losses,
they may happen, which is, as has been before said, equally a violation of
law and the principles of justice. Besides, it appears that some of the
banks claim to have their banking houses and cost of plates, 8tc., as
items of expenditure, deducted from their surplus profits, before any
dividends of them are declared. This is in effect appropriating a portion of the money of the state to pay for property which they retail' in
their own hands.
"7
140
JOURNAL OF THE HOUrgE,
FRIDAY,OCT. 27, 1837.
In some cases where banks are reported to have a
moderate amount
profits, it is stated that they have met with losses which,
should go to reduce those profits. In one case, where a bank
is reported to have had a considerable amount of surplus in
1835, less in 1836,
and less in 1837, the correctness of the report is
denied altogether. In
another came, where a bank is reported to Irave had between
five and
six thousand dollars surplus in 1836, it ia
alledged that no surplus existed. In another ease, where the bank is
of $14,000 surplus in 1836, the amountreported to have had upwards
reported is stated to he too
barge by $10,000, the error having been made, as is
alledged, by the
inspectors adding to the undivided profits $10,000, which
had been taken from the capital stock of the bank, instead of its
undivided profits,
and invested M the stock of another bank. Such
discrepancies, between
the reports of the inspector and comnxissioner, made
to the
uporr oath,and the statements made by the officers of the Legislature
banks, shew
the necessity of a thorough investigation, at least, into
the banka, in relation to their undivided profits, by the the situation of
proper officers.
It was stated before the committee in relation to a bank
ported to have aorneihing over $2,000 surplus profits, that which is re
the bank has
declared no dividends since July 1836, and has paid
on its surplus since that time. It was also stated in nothing to the state
relation to another
bank, that it has divided fuer per cent. semi-annually, ever
since its in.
; besides which, it has divided, at three different times,
$20,000 of surplus profits, of which, the state ias been paid the
amount
due at the rate per cent. required by the charter, although
not
time required by the law. Annexed to this report is a table, at the
showing
the amount the tanks have severally paid into the treasury
of the state,
nnnually, since the year 1834, as well as the amount of undivided
prof
ilsepossessed by each bank, from the same period.
'File undersigned, deeming it due to the public interest, and the
rightful supremacy of the law over corporations as well us
individuals, that
the evil, into which the committee were directed to enquire,
should be
snore thoroughly probed, in older that its extent may be fully
and an adequate remedy applied, recommends the adoption of known,
the lblluteing resolution:
Resolved, the Senate concurring herein, that the bank committee and
bank commissioner appointed by the General Assembly at
their present
session, be empowered and directed to examine the books, papers
vaults, and any officer or officers, of the several banks in this state, and
under oath; to ascertain what amount of dividends have been
declared
by each bank front the surplus profits of such bank ; and whether
plrtion of such dividends belonging to the state, has been paid intothat
the
treasury thereof or not: also, to ascertain if any bank or banks have
invested any portion of their surplus profits in stocks or otherwise, and
if so invested, what amount has been paid into the treasury of the
on the amoent of surplus profits so invested : also, to ascertain ifstate
any
bank or batik; have deducted as items of expenditure, the cost ef
their
banking house and plates, from their surplus profits, and if so
deducted, what amount has been withheld thereby from the state,
by each
bank; and that the said committee and commissioner be directed
to report the facts in relation to each specific subject of enquiry
in this resolution, to the Legislature of this state at their nextembraced
session.
The foregoing is respectfully submitted, by
ROYAL HATCH.
TABLE
or undivided
I
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10u.sFederal Reserve Bank of St. Louis
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by the VerShowing the undivided profits and the amount paid the state
'37.
mont banksfor the years 1834,'35,'36 Sr.
__
--- - TREAS.
UNDIVIDED PROFITS. ii AM'T PAID INTO
1835 1 1836 1 1837
1834
11
1837
1
1836
1834 1 1835 1
609 71 1637 10
513
$978-23- 9,5141 7,138 9,243 494 46Burlingtou 13atik
384
384
384
6,136 3,3641 5,846 12,166 384
do
Windsor
900
160
420
8,860 9,39 12,932 12,727 600
Brattleboro' do
:
8
4)
?
25
17
1
0:
480
420
17,120 12,556 12,642 3,919
1.1 tit land
do
•200
1,057 1 989 4,073 3,746 600
Middlebury do
384
1240
240
20
St. Albans do
1 SW
13
63
2:9
240
240
240
120
20 15
7:6
354
125 3
95 3;6°2
Montpelier do
222
-216
198
180
5,454
14,487
4,233
Caledonia do
384
4E8
288
2,009 1,968 6,946 4,181 306
Vergennes do
5,340 3,820 5,595
Bennington do
9,
4
710;
36 36
3
4
:
0
6
99
,
13 92 6
:0
3
.4631
600
6°
1
4,18.5
,362
2,365 4
Woodstock do
240
240
240
9,249 8,672 13,38! 18,499 192
Orange co. do
210
066 1,600'
61 5,01
49
62
4
do
Orleans
791 149 47 439 88
410
652
Manchester do
2
40
0c
lit
404
2r
00
6414)
784
9 2,0
8
2:66
7,416
4,264
5,025
Bellows Falls
1,450 1,004
Newbury
do
167 48 mc.
102 98 16x)
205 2,026 not rep. 2,001i
du
Ems's
1,323i 1,198 3,028;
Farmers'& Mech'es
28 543 68
403
201
0361 1,117 3,179!
Farmers'(Orwell)
and the
Nom-The foregoing was taken from the treasurer's account
the jourappears
by
report,
as
commissioners'
bank
and
inspector's
bank
books
nals of the House for the yews 1834,'35,'36, and the treasurer's
in 1897.
the
The report and resolution were read and ordered to be laid on
table.
a
The motion to reconsider the vote refusing the second reading of
bill entitled
"An act for the promotion of agriculture,"
Was taken up,and the House refused to leconsider the vote.
reported by the seMr. Field of Wilmington called up the resolutions
list.
grand
the
committee,
on
lect
en the table,
Mr. Smith of St. Albans, moved to lay the resolutions negative.
the
in
determined
was
it
taken
being
vote
And on the
the word
Mr. Ftelam moved to amend the first resolution by erasing
"April" and inserting February.
Mr. Dillingham moved to lay the resolutions on the table,
And on the vote being taken it was determined in the negative.
Mr. Chittenden moved the House adjourn,
And on the vote being taken it was determined in the negative.
Mr. Adams of Grand Isle, moved to amend the amendment by inserting June for "February," which teas withdrawn.
Mr. Briggs moved to dismiss the resolutions,
And on the vote beim* taken it was determined in the negative.
And on the question Shall the amendment be adopted? the yeas and
nays were demanded and were as follows:
Those who voted in the affirmative are Messrs.
67
APPENDIX.
APPENDIX.
Q14
ever may be regarded that policy which has by law increased and facilitated the means of procuring credit, a community that has largely availed itself of such means and now finds itself deeply in debt, most emphatically calls for some system ofcredit of immediate availability to be
extended to it, until the proceeds of more years of industry than those
of the present can be realised to diseinharrass it. Such an order of
prosecution on my part, would bin increase our present difficulties, by
further exciting the inutilel fears both of the banks and of the people.
The cases where I am at liberty to use my discretion, I refer to the consideration of the legislature; and as the other banks, where the order
is imperative on me, are in all respects situated like the otlit re, I have
ventured to delay any order and to refer them to the mine legislative
action. In addition to this, I find in the charters of the banks under my
consideration, no provisions for winding up and settling the concerns of
a banicwhose charter is vacated,as is provided for the banks under the
safety fund act. ‘Vithout such provis.on it wou d hardly be expected
the supreme court,to whose discretion the question is referred, would,
for the breach assigned, (the refusal to redeem in specie,) confiscate
them.
At the same time the banks may be considered responsible, yet, in
consequence of the want of confidence existing on the part of the community on account 01 the suspension of specie payment, and on the part
of the banks from the fact of such suspension and knowledge of such
public distrust, die banks instead of extending their accommodations as
far as they otherwise would be able, have been rapidly diminishing their
circulation.
Without public confidence iti the solvency and just management of
the banks, it is apparent they cannot extend, in times of embarrnssment, the relief they otherwise could extend,and it is equally clear that
the confidence of the community can be extended to them only through
an assuraece in their solvency and just managemant ; which is to be
obtained from a full and detsiled statement,from time to time, of their
condition, merle public, and a belief on the part of that conununity,that
it has on the' bank all the checks, guards nod securities, enabling it to
keep and control them within the bounds intended, and for the object
for which they were granted. When we regard banks as public agencies, through which credit rimy be obtained, that they with one hand
receive to themselves the indsbtednees of the people, and with the other on that security, extend their indebtedness to that same community,
we see by looking into the solvency of the banks, we necessari v look
back of them to the people indebted to them, and if their debtors are
good and held by proper securities, the banks are consequently so; the
public ultimately safe, provided it has sufficient provisions, by law, to
so couteal them as to make their ructions applicable to their respce.sibilities.
Looking at both whin tends to the causes of insolvency and to produce popular distrust, g•ertain practices of the banks would seem to deserve considerntion. First, their system of exchanging their hills for
those of other banks. The practice is obnoxious to some of the banks,
and to use their own language, is a "kind of piracy on each other." A
bank situated within the reach of one or more banks, has sometimes to
decide agemitt discounting an application, from the consciousness that
as bills will lie circulated in the vicinity of some batik or exchange
agent, and be picked up and immediately he sent to the cities for re-
The foregoing statements exhibit our banks to have in demands due
them, specie, deposits in the cities, and bills of other banks called in the
statements"foreign bilk," an amount equal to all their Jiabilities, their
capital stock included.
It will be further noted, that since the suspension of specie payment,
they have been diminishing the amount of the sum due them, and the
amount of their bills in circulation. It is apparent that our banks, constituted as they are, must necessarily,on going into operation, soon have
their capital stock and most of their funds out on credit in the
hands of the people, and any exertion to keep up an usual flow of circulation, must look, for the redemption of the bills emitted, to their funds
then outstanding and due. In tunes of.great depression, like the present, as it would be impossible, in -any great degree to call in their dues,
even though attempted by legal process, they necessarily luck the present means, convertible into funds, that will redeem their bills, unless issued under great limitation.
However promptly our banks may have assumed the obligation to redeem their bills in specie, they nevertheless, took on therms Ives what,
under all circumstances, they could not perform when at the same time
their funds may be equal to all their responsibilities, us they at this time
would seen, to be. The direction of all our bank cireulation is to the
cities, where the bills will accumulate, and from whence demands for
specie will principally be made, and where, when specie bears its present rate of pr.enium, our bills would themselves bear a premium so long
as by presenting them at our counters specie could be obtained cheeper
than elsewhere. The debtors of our banks, called on for payment, in
proportion as they tail to obtain the bills of their creditor, are compelled—if exacted to pay, either such bills or what will redeem them—to
obtain the bilh under such cull for, and of specie redemption, would often be impossible, and to obtain the specie equally so. While specie
bears its present rate of premimn it would be impossible, in times of
great embarrassments, for our banks both to continue their circulation
and redeem in specie. Under the present large indebtedness of the
country, it would be ruinous, now, to have the banks, at present our
only public system of credit, at once to refuse all accommodation and
relief to die people. The banks must have seen, that in any event, uncould
der such a state of things, the continuation of specie redemption
not be lime sustained, and that to further continue their hille in circulation,tnust be under a refusal of such redemption. It is difficult to see
how our banks could have avoided being swept along by causes which
have every where else throughout the Union produced the seine effects.
As I have remarked, the banks have continued to redeem their bills in
they
the cities, and keep them there at their usual value ; and so far as have
have been able to procure the means for such redemption, they
continued their bills in circulation, which would have entirely ceased,
but for such suspension, unless circulated at a depreciated value.
For these considerations, believing in addition the banks to be as
it my
sound and responsible as at any former inspection, I have felt
duties
duty to trice the course I have pursued in reference to certain of its
imposed on me in rase of a violation, by a batik, of the provisions
charter.
urn left at
In the cases of the banks of Burlington and Windsor, 1
direcliberty to order a prosecution. In the case of all the others I am
Howted and it is made my duty to direct a prosecution to be instituted.
y
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Federal Reserve Bank of St. Louis
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37
APPENDIX.
216
demption. This forces the banks to seek opportunities to discount where
their bills will be used out of our community, when otherwise, so far as
required, they might have been had to facilitate our home and domestic transactions. Regarding as I have,in my inspection, that all bills
out for exchange, are so far as the public are concerned, out in circulation, it is an ,ndirect mode of increasing circulation and putting out bills
on the slight security of individual indebtedness, generally charged on
book; it has the effect to weaken public confidence both in the responsibility of the banks and in the just distribution of their accommodations, for it cannot be expected the community will always discriminate
between bills thus taken out and taken in the ordinary mode of discounting ; it furnishes the exchangers with money at their control, to use for
daily and weekly purposes, without paying for its use what others pay,
tind without giving the mine security. The object of this is to substitute their own hills in the hands of the people, where they may lay
along for daily use, and remit the bills they procure in their stead to the
cities, where they are received in the redemption of their own bills that
may there accumulate.
From the statements, it will appear that some of the banks charge occasionally their discounts on hook, at other times, take the individual
note of the applicant. NVhile one stands at their counter and is expected to bring his two endoreors, he sees another of no greater responsibility, receiving their bills on his mere order or private note. This is discriminating in its character, and while any given case of such accommodation may he satisfactorily explained to have been done under the prop•
cr usages of banking, the less informed in the details of banking will distrust such discrimination and attribute it to private friendship or a direct or more remote interest of the tnanagers of the bank,
which is thus consulted. A further distrust is created from the consideration dint from such indirect and less secured accommodations, banks
have and always are liable to sutler most, and like the insecure condition of bills out for exchange, are procuring causes of insolvency. In
addition, as matters tending to the same result, is letting notes overrun
indefinitelt, and granting large and unusual discounts. A bank that
should in no case let a bill go from their counter (unless to exchange for
bills of banks out of the state, and that done in their bank,) without two
endorsors, and in case of letting a note due overrun a certain time, as
say one yenr,'nnd iii case of any one individual or concerti running up
an indebtedness to equal or exceed a certain amount, as say five thousand dollars, the directors, for the time when either occurred, added by
law thereto their guaranty for their ultimate payment,—would attach to
it a public confidence and patronage that would not falter under the
present suspension of specie payment, and would no doubt sustain its
credit in times more perilous, if possible, than the present. This additioaal security, when given, would be voluntary, and in effect, might go
far to furnish all the security that would be sought for in having private
property of stockholders holden. This responsibility directors would
seldom care to assume. The effect of the measure would le highly
salutary in moderating and confining the wants of the applicant for
bank favors within the bounds of his means to meet his yearly responsibilities, as he would not often count on the directors extending an indu'gence on their own risk. And as the banks would more seldom
supply
grant large discounts,their means would be more abundant to
This
the more numerous and ordinary amounts that may be applied for.
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Federal Reserve Bank of St. Louis
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APPENDIX.
sit
measure might perhaps limit the opportunities of some of our banks of
doing a sufficiently lucrative business. The business of the country
would soon designate the localities where banks would be required,
and those that could not tiffiiird the expenses of banking, for the amount
of their transactions, would take back their capital and tise it in other
pursuits. The bank at Danville, to do a saving business, put ten thousand dollars ot its funds into the bank of Orleans; and tiller granting all
ordinary applications had means still unemployed, it hich iimiltsced them
to extend to a few individuals large accommnodations. This single Stet
illustrates that banking may easily be extended beyond the ordinary
wants of time community.
It may deserve consideration, whether the public, so long as it holds
out by its banks, inducements and facilities for extending credit, should
not throw round those who are inclined to use such facilities, such
guards and checks, as while they tend to the solvency of the banks, restrain them also from that venturous use of bank credit, which fin- the
want of sufficient restraints, has been largely resorted to and has proved, in the present revoision, in many instances, of an unfortunate result. An individual whose discounts are easily drawn out on his individual note or charged in account, driven along by the excitement of
speculation, almost unconscious'y multiplies his indebtedness till he
finds that nothing hut a successful venture can save hint from bankruptcy ; when,had he been otherwise compelled to furnish his substantial
endorsors, he would have been thrown within the influence of the more
sobes views of others and would have been remained within the bounds
that the suggestions of friendship and the pm:knee or fears of endorsors would have prescribed.
In addition, a measure of importance to the public, and under the present distrust, almost indispensable, would be to have the banks make, at
least, a statement monthly, minder oatli, of their standing and condition,
to such officer as should be designated, and in detail as such officer should
from time to time direct, und have these statements occasionally published through the year; and with these statements accompanying, let tne
annual inspeetion be made. Have the statements, among other things,
show the whole amount of discounts applied for,during the month; the
whole amount discounted ; and of the amount discounted what part
was taken by the directors and officers, or by those known to be connected with any of them in business; and the amount taken by other ofThe
stockholders ; in addition, give the whole sum taken in any other way
than on ordinary discounted paper, when not entered with other discounts on their discount book ; and of this last named item give the
several amounts and state by whom received. Let the board of directors, under whose supervision all the transactions of the banks weekly
pass, or ought to pass, as they will often have intimate knowledge of the
individuals really interested iii obtaining loans, add their oath to that of
the cashier. As the hanks are created kw the benefit ofthe whole community,it is Inn reasonable for that community to see, front time to time, how
far the banks distribute their accommodations over the public,indiscriminately, and how far those accommodations are mocopolised by the managers of the banks. It may further do an act of justice to the banks,
enabling them to meet a prevailing impression, that in difficult times
when they cannot discount all applications, the directors, officers, and
those in whose business they mire concerned,obtain usual discounts, while
others, however necessitous,are refuted, especially if engaged in bush Bb
APPENDIX.
R'18
APPENDIX..
nese near rival establishments or in pursuits in which the &wired claw
are engaged. For if it should turn out that the whole hank accommodations of any given period, when there were other applications, were
all or principally all granted to the managers of the banks ; to such extent, the banks would be turned aside from the object for which they
were granted, and practically become privileges granted by law to individuals for private use. If there should be but few or no applications
for bankdis counts, save those made by those owning and governing
the bank, it would be conclusive of the inutility of such bank in a
public point of view.
The present provisions by law, in ease a bank violates its charter, are
at best,slow in their operations;subject, when an investigation is instituted, to be continued from sitting to sitting, from term to term, before a
final order or adjudication; in the mean time the evil complained of
goes on increasing. To put the staff on the other side, in the hands of
the public, should a public officer, designated by law, discover a bank to
be wide out of its chartered limits, or from bad debts or other causes, to
be insolvent,a further issuing of bills in such instances should at once
cease, and it would be more summary for such officer at once to direct
such suspension, leaving it for the bank immediately to get an injunction
on such order, if improperly or unnecessarily imposed; and in case no
injunction is granted, the officer imposing it will carry the whole matter
before the supreme court for a hearing, or in the mean time he might be
empowered to remove it at his discretion.
I omitted to note in its proper place a practice ofone bank, at least,
of allowing, by its by-laws, stockholders to draw on to a certain extent
on the credit of their stock. It may be questioned whether they should
not furnish the ordinary security. The capital stock should be di-encumbered of any private pledges. This practice might let out all or nearly
all the capital stock on the mere security of the individual stockholders.
This,if general, would destroy all confidence in the security this fond
was intended to give ; if the usual security was given, there would be
no necessity of this special pledge, and the capital stock would remain
a permanent and available fund, pledged alike for all the liabilitiee
of the bank.
Which is respectfully submitted,
S. A. WEBBER,Bank Inspector
Rochester, 13th October, 1837.
•
To the House of Representatives now in session :
The committee on banks, to whom the within [foregoing.)report was
referred,report as herewith returned, and ask to be discharged from the
further consideration thereof.
S. FULLAM Jr., for committee,
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Federal Reserve Bank of St. Louis
/9}7
ACCOUNT OF SUPERINTENDENT OF THE STATE HOUSE,
from November 1, 1836, to October 15, 1837,—presenled for auditing.
Amount paidin materieTs,
mount
of
Footings. balance to new account,
Names.
&c.
credit.
403 75
Ilarvey Ainsworth
1181 83
C. W. Bancroft
274 27
Carlos Bancroft
78 21
Bancroft & Riker
470 60
Josiah Brown
17 15
Francis Barker
4 80
Joel Colburn
14139
John Barker
16 98-2461 94
Proctor & Felt
23 00
John Gilbert jr.
122 91
Leary Con
6 77
t
Morris Conway
3 75
Harry McEllery
32 43
Ira Slayton
/0 80
Willis Keith
226 88
John S Cummings
50 100 brick
S
382 80
Oliver Clark
ZJ 50 1112 perch stone
14 39
82373$
James Dawson
-32
-013
Lorenzo Johnson
1
17 14
t
Asa Phelps
/4 00
Flynn Woodward
t
2 75
I
Walter Peck
423 19
Addison Fowler
178 91
Leander French
239 48
Luther Farrar
147 63-1055 18
Charles Gravlin
125 31
Silas Ham
ll
95 67
J. & C. Spalding
143 88
William A. Kelly
164 60
Thomas Lyle
Ii
16 91
Orrin Pitkin
15 70
Amapa Lyman
I
31 25
Silas F. Jones
141 48
Joel Manchester
1
459 44
Ozee Manchester
200 86-1395 10
Chester Marshal
8 08
Robert McDonald
9 32
I
Phineas Benjamin
144 75
Nathan Parker
46 70
Sidney Patterson
1 28
Francis Rayhue
I
8 93
Michael King
t
Gravlin
159
28
Peter
81
Stephen Pierce
373
128 56-880 71
Hugh Roach
$6616 70 $3000
APPENDIX.
- •-
t.'V
Current bills
•
Notes due the bank
Montpelier bank stock
APPENI)IX.
2,188
74,264 35
960
.
•
$114,572 10
LIABILITIES.
Capital stock paid in
Bills in circulation
Due depositors
Discounts unpaid
$60,000
45,836 2,863 38
10 -
.
9108,708 38
Jan. 13, 1840.
BANK OF CALEDONIA.
RESOURCES.
950,000
2,385 43
Capital stock
Deposits
Circulation
Profit and loss
Due Suffolk Bank
. 42,466 '15
2,987 23
.
817 63
$98,657
at
LIABILITIES.
Loans and discounts
Deposit in Suffolk Bank
Specie
Bills of other Banks
Bank House
Expense
.
$81,789 91
3,000
. 8,916 33
2,793 57
. 1,799 16
358 07
$98,657 04
Sept. 1, 1840.
In presenting the statement of the condition of the banks,
subject to my inspection, I have conformed to the previous
practice of Inspectors and Commissioners. One side of these
accounts shows the liabilities of the banks, and the other, the
funds to meet those liabilities. The object of the inspection
is, or ought to be, to show the public the true condition of
those institutions which furnish the almost entire circulation
of the country. One important fact,in which the whole community are interested, is, whether those institutions are able,
or not, to redeem all their liabilities on demand ? If they
arc so, have they managed therein with a due regard to the
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Federal Reserve Bank of St. Louis
public interest? The statement accompanying this report
furnishes little evidence of the ability of the corporations to
pay their liabilities.
The only property belonging to the corporations, of which
the public have any means of ascertaining its true value, is
the specie on hand and the real estate they possess. Deposits, in the Boston and New York banks, are represented as
specie funds. There is no want of confidence, perhaps, in
the soundness of those banks. Yet the public have no evi•
dence of their ability to pay, except the annual statement furnished by the banks to the commissioner. The principal
item contained in the statement of . some of the banks, on
which they must depend for the redemption of their bills, is
the sum due on discounted notes. The value of those notes
must depend upon the ability of the debtors to pay.—
Whether the large sums, due on discounted notes, are good,
or bad, the public have no means of knowledge. The inspector may be satisfied that a large amount of that sum can
never be collected, yet he is not permitted to disclose the
names of the debtors. It appears to me more important at
this time, that the true value of this debt dime the banks
should be ascertained, from the consideration that many of
the charters arc about to expire, and the corporations are petitioning for a renewal of them. Should the Legislature deem
it expedient to renew thorn, ought they to be less careful in
guarding the public against loss, than they were when the
banks were first chartered ? Then the capital was required
to be paid in in gold and silver.
Should the charter be renewed, the debt due on discounted
notes would constitute the capital stock upon which the corporation would commence their operation. Of the value of
this capital, on which the corporation have a right to issue
bills to three times its amount, the public have no knowledge.
The effect of a renewal of a charter will more clearly appear
from the statement of the condition of the Orange Co. Bank.
They report a capital paid in of $70,000. They also report a
suspended debt of $30,000. I would here remark, that a large
amount due some of the other banks, might, with as much
propriety, be reported a suspended debt, as that of Orange
county. Should the charter of that bank be renewed. they
would have a right to issue bills to the amount of $210,000.
APPENDIX.
APPENDIX.
_
must
bank
of that sum, the
For the redemption of
debt.
this
suspended
upon
depend
,
The necessity of ascertaining the value of the debt in favor
of a bank askin. a renewal of its charter, will appear from the
history of the r'Windsor Bank. From the statement of the
condition of that bank, reported to the Legislature a few weeks
before its failure, there was as much evidence of its ability to
pay all its liabilities, as any bank in the State. And if its
charter had then been about to expire, the Legislature would,
no doubt, as readily renewed it, as they would that of Brattleboro' or St. Albans. That bank was reported to possess
a capital paid in of $80,000, and they had a right to issue
bills to the amount of $!240,000. Why may not a bank be
permitted to go into operation at first, without a capital, as to
renew one, without clear evidence that the capital first paid
in has not been changed from specie for the notes of insolvent speculators? Facts, disconnected from the doings of
the Inspector, have disclosed to the public the true value of
the capital of the Windsor Bank. In August last I requested
of the cashiers of the banks now in operation, subject to my
inspection, the amount of indebtedness of all the directors,
also their liabilities. From the Vergennes Bank, and from
the Orange Co. Bank, I have received no statement of the
amount of the indebtedness of the directors. From the Danville Bank I have received no statement of the condition of
the bank, in form, to embody in this report. In January last
I inspected that bank. The books were not in a condition
then to make a formal and correct statement. The circulation was small, about $:35,000. The liabilities of one of the
directors was large. The indebtedness of the directors of the
Bank of Rutland was, in August last, $22,000. The entire
liabilities of the directors of the Bank of Burlington was, in
February lust, fidt3,050 ; May 1st, $2,3(.10 ; and August 1st,
$3400. The liabilities of the directors of the Bank of Bennington, since the 7th of January last, have not exceeded
$'2,500,—August '20th, $2,000.
I would abstain from making any remarks, which would
have a tendency to destroy, or to injure, a well regulated system of credit. If any hank has pursued a course of management. which, if exposed to public view, would, of itself, dstroy its credit, the sooner the exposure is made,the better for
the people. The Essex Bank partially sustained its credit,
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Federal Reserve Bank of St. Louis
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by secretly depositing its own bills, as•seenritv for loans obwined from other banks. After these transactions were reported to the Legislature,the transaction wasjustified, at least
not condemned, by a committee of the House, a majority of
which committee were officers of other banks. The effects
of endeavoring to sustain the credit system of a rotten and
corrupt institution, are severely felt by the laboring class of the
community, who have sustained a loss of thousands of dollars
by the fruitless attempt to sustain this credit system. The
Windsor Bank not only deposited its own bills to sustain its
credit, but loaned a sealed package ef $10,000 of its bills, at
one time, seal not to be broken, at three per cent.'interest.
This loan must have been made to enable this borrower to
sustain his credit, by depositing these bills as security for other loans. Can it be thought wrong, to be at war with a credit system of this character ?
In my examination of the past transactions of the Bank of
Bennington, I find one of the Directors was connected with
a firm of Brokers in New York, under the name of Swift.
Mills & Co. H. Gay, the director and broker, was authorized
to draw, by a resolution of the Board of Directors, tift75,(XX)
from their deposites in the Boston and Troy banks. It appears from the statement of the Bank, March ;20th, 1838,
that there were in the hands of Gay, at that time, 75,04)0.
As a director, Gay had a perfect knowledge of the condition
of the bank, and holding so large an amount of the funds of
the bank, he could, as a broker, make a profitable business
in purchasing up the bills of the bank at discount. There
was at that time a large amount of bills in circulation, being
$185,250, and in 1839, the circulation was less than $33,000. Whether this reduction in the circulation of$ 150,0)0
was made by the purchase of the bills by Gay, or not, does
not appear.
There was ^a' change in the Board of Directors last January.
None of the present board appear to be connected with
brokers. A liberal mode of discounting was adopted early in
the spring. The circulation of the Bank has increased from
$33,000 to $97,000. This liberal and just policy, adopted
by the directors, has given general satisfaction. They have
been able to tnaintaig the circulation without difficulty. The
extraordinary expansions and contractions of bank issues of
paper, must seriously alli!et the business of the country. By
APPENDIX.
APPENDIX.
reference to past reports, it will appear that immediately
after the suspension of specie payments, in 1837, some of our
banks began to increase their circulation, while others contracted theirs. The Bank of Manchester had in May, 1837,
at the time they stopped payment, less than lit70,000 in circulation, as appears from a circular published at that
time, signed by all the directors ; and on the 9th day of
January following, it appeared from a statement of the
condition of that bank, exhibited to the directors on that
flay, that the amount of bills in circulation was above
140,000; thus, increasing their circulation 870,000 in
The amount of bills put in circulation
eight months.
by the banks in the county of Bennington,(and we have no
reason to suppose it less in other counties) from the two
statements of Jan. 9th, and March 20th, 1838, amounted to
$3725.000, and in December, 1839, the circulation was less
than fl#75,000. This sudden contraction of it 230,000 must
seriously affect the price of n11 articles of produce. It is evident that the confidence in the soundness, as well as usefulness of our banking institutions, is greatly impaired, and
nothing short of a thorough examination of all the concerns
of the corporation, and the result of such examination made
public, can restore confidence. The transactions of the banks
are shrouded in darkness. The public have no means of distinguishing the good from the bad. Even stockholders have
been denied the right of examining the booksof their own
corporation. They do not know whether the semi-annual
dividends they receive are made from the profits or the cap(al of the bank. I have known banks to make dividends
when they had no profits to divide. And this fraud upon
the honest stockholder and the public is effected by the inventory of worthless notes, as available funds. Ought not
the directors of the banks to be required to note, in their
statement of the condition of the banks, all debts, which have
been due more than one year, as a suspended debt, or unavailable funds; and that no dividends should be made until
the deficiency of available funds, occasioned by such suspended debt, should be made good. either by the payment of
more capital by the stockholder, or by the application of the
profits, to make good such deficiency. This would influence the honest stockholder to investigate the management
of the bank. Ile is apparently satisfied with the directors,
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Federal Reserve Bank of St. Louis
444.
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XI'
so long as he receives his semi-annual dividend of 4 per
cent. By the Safety Fund Act, the Directors and Stockholders are limited in the sum they may be indebted to the bank,
to 4)2000. This clause in the law is easily evaded—an endorser of a note is not considered a debtor by such endorsement. It is only a liability, no indebtedness. Thus, the liabilities of a director may be 0100,000 without any violation
of the statute, and the money received on such endorsed
note may be for his own benefit. He is only to change the
form of the note, and the work is done. I have not discovered any violation of their acts of incorporation by any of
the corporations subject to my inspection within the last year;
if I had I should not feel it my duty to order information to
be filed against the corporation. For in 1835 I directed a
prosecution against the Essex Bank. On application, the
Legislature refused to refund to me the money I expended
in my endeavors to bring that institution to justice. I could
not consider this act of the LegislaLure in any other light
than a disapprobation of my proceedings.
The conduct of the hank was also justified by a report of
a Committee of the Legislature. A majority of the Committee were Bank Directors. See the Journal of the House
of Represeotatives. 1835 and 1836.
JOHN S. PETTIBONE, Bank Inspector.
October 8, 1840.
I have just received a letter from the Cashier of the Danville Bank, stating that he forwarded the state of the Danville
Bank to Montpelier, expecting I should be there.
J. S. PETTIBONE, B. Insp.
3
APPENDIX.
Is
BANK COMMISSIONER'S REPORT.'
To the Auditor of Accounts
Sin:—ln obedience to an act of the last session of the General Assembly, I submit the following report in relation to the Banks in this State:
There are seventeen Banks in operation in this State, sixteen of which
are subject to the examination of the Bank Commissioner, and one ((ha
Bank of Burlington) to the annual inspection of the Bank Committee.
Previous to JEW there was eo genera) statute in force in relation to
Banks, but the powers, duties, and liabilities of each Bank, were regulated by its act of incorporation, the charters of incorporation of the several
Banks being uniform, or nearly so, in their provisions. The amount of
the capital of the Bank was specified,or rather limited, but the Bank might
go into operation upon the payment of about one-tenth of its nominal capital, and the amount of additional actual capital employed depended upon
such assessments upon the stockholders as the directors might from time
ID tune think proper to make. The Banks *ere required to redeem their
bills and pay their liabilities in specie on demand; were prohibited from
dealing in real estate or goods, and limited to the demand of six per cent.
discount or interest on loans. They were also prohibited from contracting
debts to a greater amount than their deposits and three times the amount
of capital stock paid in; and in case of excess of indebtedness, the directors under whose administration it happened were made liable for the
same in their private capacity. The Banks were, semi-annually, at the
time of making their dividends, to pay into the State Treasury six per
cent, of their profits, which sums thus paid were, by act of Nov. 17, 1825,
inyested in a School Fund. All the property and funds of the corporation
were made liable to the satisfaction of its debts, and as additional security to the public, each of the directors was to give bonds (usually in the
sum of eight thousand dollars) to the Treasurer of the State, with sureties
to his satisfaction, conditioned "for the faithful discharge of the duties of
his office, agreeably to the regulations, requirements, and restrictions, of
the act of incorporation." The bonds might be prosecuted,on the complaint of any person injured by the misconduct of the director, and wcre
to stand as security for all persons'injured, to the amount of the penalty,
The General Assembly, at each session, were to appoint a Committee to
examine into the affairs of the Bank,and to report to the Assembly. If the
•Tttfetred to In Repoli f Auditor of Aceoucts in Aispindit to House Joutnal.
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Federal Reserve Bank of St. Louis
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APPENDIX.
APPENDIX.
Committee found the Bank had exceeded its powers, they were to direct
the State's Attorney of the county in which it was situated to file an information against the corporation before the Supreme Court for such county, and such Court might thereupon declare such charter vacated.
The charters of all the Banks, which were thus incorporated, have already expired, except that of the Bank of Burlington, which will terminate January 1, 1849.
At the October session of the General Assembly in 1831, an act, commonly called the "Safety Fund Act," was passed, the leading object of
which was to constitute a fund out of which the creditors, other than the
stockholders, of any bank, that should become insolvent, might be paid.
For the purpose of raising such fund, each of the Banks, that should be
thereafter chartered, was required to pay into the State Treasury four and
one-half per cent, of its capital stock, in six annual enstalments of threefourths of one per cent, each, which fund, if reduced either wholly or in
part by the failure of any Bank, was to be reimbursed and kept to the
amount of four and one-half per cent. upon the capital stock, by assessments made by the State Treasurer, at the rate of not exceeding threefourths of one per cent. annually. The fund, until used for the above
purpose, was to remain the property of the respective Banks from which it
was raised, and be invested in productive stocks,or put at interest by the
Treasurer, and the accruing interest, after deducting the salaries of Bank
Commissioners, was to be annually paid to such Banks. On the expiration of the charter of any bank,the amount paid to the fund by such Bank,
if not required to indemnify the creditors of any other Bank that had become insolvent, was to be returned by the Treasurer to such Bank.
The act of 1831 also provided for the appointment of three Bank Commissioners, whose duty it should be,"at least once _in twelve months, to
visit every monied corporation, upon which the provisions of the act should
be binding, and thoroughly to inspect the affairs of said corporations, to
examine all the books, papers, bonds and evidences of debt of such corporations, to compare the funds and property of said corporations with the
statements, to be made by them as thereinafter provided, to ascertain the
quantity of specie the said corporations had on hand, and generally to
make such other inquiries as might be necessary to ascertain the actual
condition of said corporations, and their ability to fulfil all their engagements." The Commissioners were empowered to examine the officers of
the Banks, and any other persons on oath, in relation to their affairs and
condition, and in case they should find that any corporation was insolvent,
or had violated any of the provishms pf that act, or of its act of incorporation, or of any other law binding upon it, the said Commissioners were
to apply to a Chancellor for an injunction against such corporation; and if
the Chancellor deemed the application well founded, the funds and property pf the Bank were to be administered and distributed by receivers,
under the appointment and direction of the Court of Chancery. The
Commissioners were to report to the Legislature "the manner in which
they had discharged their duties, and to accompany such reports by such
abstracts from the reports made to them,and such other statements,as they
should deem useful." By subsequent acts, the number of Bank Commissionersis reduced to one, and the report of the Bank Commissioner, as well
as that of the pank Committee,is to be made to the Auditor of Accounts.
The act of 1831 also provided, that no Bank, subject to its provisions,
should make any loans or discounts until at least fifty per cent, of its cap-
ital stock should be actually paid in, to be proved on oath to the satisfaction of the Bank Commissioners. In other particulars, the powers, duties
and liabilities of the Banks were left to be regulated by their respective
charters; and the charters of the Banks which have since been incorporated and made subject to its provisions, are in general the same as those
previously incorporated, except that the Banks are required to pay into
the Treasury of the State, for the benefit of the School Fund, ten per
cent. of their profits, instead of the six per cent. previously required.
The Banks which have been chartered subject to the provisions of this
act of 1831,are the following, via: the Banks of Middlebury, Woodstock,
Bellows Falls, Manchester, Orleans, Newbury, Brattleboro', Farmer's, at
Orwell, Farmer's and Mechanic's, at Burlington, St. Albans, and Essex
County, all of which, except the last, are now in operation.
The Essex County Bank was chartered at the October session of 183'2,
with a capital of $40,000, and by the fraudulent misconduct of its officers
and stockholders, became insolvent, and suspended payment on the 14th
of August, 1839. In November following, its funds and property went into the hands of a receiver, under the direction of the Court of Chancery,
and its affairs yet remain unsettled. Within the time limited by the Chancellor, bills of the Bank to the amount of $34,426 were presented to the
receiver by claimants; but of this sum about Jlit28,000 is understood to be
disputed, and the validity of the claims to be now in contest before the
Court of Chancery. The assets of the Bank are believed to be small,
and if the disputed claims should be adjudged valid, the Bank fund, now
amonoting to the sum of about $31,000, will thereby be largely absorbed.
If these disputed claims should he found invalid, the fund will not be
much impaired.
In October, 1840, the General Assembly passed an additional act "relating to Banks," by which any banking conipany thereafter chartered or
re-chartered should be subject to the provisions of the Safety Fund Act,
and be at all times under the control of the Legislature "to alter, amend,
or repeal, as the public good might require." The act also provided, that
before any Bank went into operation one-half of its capital stock should
be paid in,in specie; and that it should not continue in operation for more
than two years, unless the whole of its capital stock should be thus paid
in, such payments to be ascertained and certified by the Bank Commissionor; that no part of such capital stock should be withdrawn from the Bank;
that "the directors of such Bank should be liable to pay to the creditors
and stockholders all losses which might be sustained in consequence of
any violation by them of the provisions of that act or any other law, or
other unfaithfulness in the discharge of their official duties;" that, to secure such liabilities, each of the directors should execute a bond to the
State Treasurer, in an equal amount, the aggregate aniount of the bonds
to be equal to the capital stock actually paid in, with sureties residing in
the State and not directors, or with mortgage security on real estate,to be
approved by the Bank Commissioner; that the cashier should also execute
a bond to the State Treasurer in the sum of $20,000, with sureties, to be
approved by the Bank Commissioner,conditioned for the faithful discharge
of the duties of his office; that such bonds might be prosecuted for the
benefit of the claimants upon such Bank by order of the Bank Commissioner or by a receiver; that no stockholder, director, or other officer of
the Bank, should be indebted to the Bank in a greater amount than five
per cent, of the capital stock paid in; that all of the directors and officers
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Federal Reserve Bank of St. Louis
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APPENDIX.
should not be indebted to the Bank in a greater amount than the aggregate amount of three per cont, for each director; that no individual or
corporation should be so indebted in 4 greater amount than ten per cent
of the capital paid in, except for deposits for redeeming its bills or on the
purchase of bills of exchange; that no loan exceeding fifty dollars should
be made without the approval of a majority of the directors* that no loan
should be made on the pledge of the stock of the Bank; that the Bank
should not issue bills or otherwise contract debts to a greater amount than
the amount of its deposits and twice tile amount of its capital stock paid
in; that if the capital should be reduced to the amount of five per cent.
below the amount paid in, it should be immediately reimbursed by assessments on the stockholders; and that the Bank should, semi-annually, at
the usual times for declaring dividends,pay into the Treasury of the State
one per cent. of the capital stock actually paid in, as a tax upon the income of such Bank, "provided that if the directors should keep a sufficient deposit of funds in the city of Boston, and should at that city uniformly cause its bills to be redeemed at par," the Bank should be exempt
from such tax. Ths act of 1840 contains other provisions in detail, similar to those usually inserted in the Bank charters before mentioned, and
also additional provisions for the punishment, criminally, of the officers of
Banks for wilful siolations of their duties.
Under these provisions of the act of 1840 the Banks of Rutland, Vergennes, and Poultney, have been chartered and are now in operation. By an act of 1812, it was provided that the Banks chartered previous
to 1840 might avail themselves of the foregoing provisions of the act of
1840, by giving the requisite bonds and complying with such provisions.
The Bank of Brattleboro', on the 12d of December, 1843, and the Bank
of Middlebury, on the 10th of February, 1644,gave bonds as required by
the act of 1840, and have thus become subject to its provisions.
By the 39th Section of the act of 1840, it was further provided, that
any banking corporation subject to the provisions of that act, might be
exempt from contribution to the Safety Fund, by executing bonds to the
State Treasurer to the amount of the capital stock paid in, with sureties
to be approved by the Bank Commissioner, conditioned "that such directors should at all times pay and redeem, according to law, all the bills issued by such Bank, and should pay and refund all deposits made in such
e
Bank when such payments were demanded."
The directors of the Banks of Caledonia, Montpelier and Orange
County, chartered under the provisions of the act of 1840, have given
such bonds.
All the Banks now in operation under the act of 1840, viz: the Banks
of Rutland, Vergennes, Poultney, Brattleboro', Middlebury, Caledonia,
Montpelier, and Orange County, having uniformly redeemed their bills in
Boston as required by law, are exempt from the semi-annual payment of
one per cent. on their capital to the State; and the three latter Banks,
having also complied with the 39th Section of the act of 1840, are further
exempt from contribution to the Safety Fund.
The directors of the Orange County Bank have, within the past year,
made an assessment upon the stockholders of $12,500, which has been
paid into the Bank, and on the 10th of July last, the fact of such payment
was duly ascermined and certified; and bonds of the directors for the additional capital, in conformity with the 8th and 39th Sections of the act
of 1840, were at the same time examined and approved by the undersigned.
The annual examination of the several Banks in this State has, in Confbrmitv with the act of Nov. 1, 1843, been made in the month of August.
In making this examination, thirundersig,ned has endeavored to comply
with the requirements of the laws. The statements of the resources and
liabilities of the Banks, fioni their books,of which abstracts are hereinafter given, have been made under oath by the several cashiers; and to verify their accuracy, "the books, papers, notes, bonds and'evidences of
debt," together with "the funds and property of the flank and specie on
hand," have been'exaniined and compared with such statements, and they
have been found to agree. It is apparent, however,that the value of these
statements, as a test of the soundness of the Banks,depends not more upon the amount than upon the character of the (hinds ishich make up the
resources of the Bank. If the resources are of the full N'altle at which
they stand in the statement, the test may be relied upon; if not, it fails.
The undersigned has therefore sought to ascertain the real value of the
several matters composing the items of the resources of the Banks, and
for this purpose, as well as for the other purposes of his examination, he
has, in every instance, examined the cashier of each Bank, and generally,
when accessible, other officers of the Bank, on oath, as to the character
and value of the particular debts or funds composing each item. He Mu;
also taken an examination in writing, subscribed and sworn to by each
officer or officers, in relation to the compliance of the Bank with its charter requireinents, especially such as would not be likely to be within the
knowleilse of the public, or the Cornmissioner:—As whether the Bank
has regularly chosen its directors, and who they are, with a view to ascertain whether they have given bonds according to law; whether the Bank
has dealt in reel estate or goods; whether it has demanded more than six
per cent. interest on loans or discounts; n hut dividends it has made;
whether it has issued bills or otherwise contracted debts to a greater
amount than allowed by law; and in regard to the Banks chartered under
the act of 1840, whether the restiictions on the amount of loans to stockholders, directors, and officers of the Bank. and also to other persons or
cosporations, have been observed; whether loans exceeding fifty dollars
have been made without the approval of a majority of the directors;
whether any loans have been made on a pledge of the stock of the Bank;
and whether the Bank has kept sufficient funds in Boston, and has there
uniformly caused its bills to be redeemed at par.
The general result of this examination has been, that the charter requirements of the Banks have, in general, been strictly observed; that all
the Banks appear to be solvent, to be in easy circumstances, and to be
doing an active and a reasonably profitable business.
It is, however, deemed proper to state that the capitals of the Banks of
Manchester and St. Albans,by reason oeloans made some few years since,
which are either bad or of a doubtful character, have become in some degree impaired. The probable loss to the Bank of Manchester, as near as
could be estimated by the Commissioner, will be about 20,000 dollars;
though strong expectations are entertained by the officers of the Bank
that it will not be more than half that sum, if so much. The capital of
the Bank being $70,000, and it having for a year or two past been doing
a profitable and apparently safe business on its active capital, the undersigned does not think that the security to the creditors of the institution
is impaired, though the stockholders will doubtless suffer loss. The directors of this Bank in January last declared a dividend of three per cent.
s.A.V‘ess...shl
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
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103
APPENDIX.
102
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VERMONT, AS
RESOURCES.
&limy
Fund.
BY
Real Estote and
Bank
Stock.
4,669 64 11 ,250 00 1,450 00
8,901 11 3,375 00 1,701 98
3,008 69
1,854 94
Specie.
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Deposits Bills and
Notes and Due on in Boston Drafts of
Bills
Books, and other
other
discounted.
Cities.
Banks.
099,279 97 153,62:3 414 8,3..7 71 58,817 57
70300
111,275 18 150,436 00
41,751 98 8,108 00
117,053 144 00,060 00
17,366 02 13,164 56
213,039 77 141,965,e51,91224 11,137 76
Total Resources.
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BENNINGTON, September 16, 1844.
U1LAND HALL,
Bank Comm4sioner.
liellows Falls,
218,711 38
Brattleboro',
210,741 60
Caledonia, at Danville,
124,335 35
Farmers', at Orwell,
210,3115 76
9,700 00 2,492 92
3,1,31
Farmers'& Mechanics',
at Burlington, 105,
191,926 00 99,9
48 • 213,254 73 231,10020 145,925
119 00 44,596
9,896 31 5,155 4 4,725 00 11,360 61
70,000 81,993 00
244 65 151,237
Manehester,
150,245 59 105,614 08 1,8130 80 25,399 03 6,892 50 1,118 61 3,150 00 11,247 57
VI Middlebury,
00,000 93,856 Si'18,014 38 171,870 88 178,478 07 101,419
117 71 59,977 8
9,8133 00 4,300 05 2,700 00
50,009 117,771 00 0,775 59 191,746 59 190,892 I
ts-s Montpelier,
10,433 04 3,001 67 56,588 .
7,500 00 5,768
50,
Newbury,
131,087005,-.91
187,389 86 199,228
119,805
10,047 57 51,293 27 3,8825 00 3,178 71 1,250 00 1,927 94
Orange County,
at Chelsea, 37,500 73,50200 1,75056 112,a2 56 113,638
2,049 57 21,411 34 14,171 58 6,735 .
67,586
1,683 55
30,9100 30,3.24 00 7,212 00 67,536 00
Orleans, at Iriaburgli.
70,818 78 54,702
11,870 00 2,976 78 1,350 00
50,090 77,091 00 6,354 53 134,046 53 134,793 97 81,915 48
Poult nev,
41,525 18 6,484 00 2,851 31 1,008 00
Rutland,
100,000 114,586 00 14,111 93 238,6(17 93 243,723 01 175,555 1
160 50 46,711 57 1,850 05 8,350 93 1,194 21 1,050 00
St. Albans,
50,000 83,1)4 06 134,071 26 1.31,24026 175,901 77 114,607 14519,453 79 24,714. 37 9,087 09 4,024326 1,417 81 1,400 00
Vergennes,
100,000 84,104 00 38,788 47 22.2,9'12 47 224,984 92 180,955 51 010 913 21,900 73 6,704 00 6,774 00 1,950 00 5,012 05
50,000 141,488' 15 5,910 11 198,008 37 204,278 OF. 111,453
Woodstock,
18,067 42 33,951 57 9,4514,805 ret 2,150 00 3,000 00
150,0011 111,773 00 67,877 04 3721,650 04 349,137 65 214,322 10
Burlington,
4,000 00
1o1,5131 et 15,1132 01114,891 70
1,137,500 1,743,807 50.3,9,079 843,170,387 34 3,264,64131142,160,758
64,486 74,700,812 8.9 151,471 0092,502 0131,2:40 0760,336 32
Total
Liabilities.
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OF THE SEVERAL BANKS IN
Capital
Bills in
Due deStock, circulation. proitors &
Banks.
50,000 149,248 00 19,494
125,359
75,000
00 10,385 00
50,000 72,871 75 1,401 60
60,940 130,611 00 19,694 7
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CONDITION
LIABILITIES.
OF THE
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ICIGNaddV
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Federal Reserve Bank of St. Louis
4
tief'fOi‘
:
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'\•Ce4'
REMIT OF THE COMMITTEE UPON THE AFFAIRS OF THE ESSEX COUNTY BANK.
Tu the honorulde Ike Gerutral -lasernbly of the Stale of Vermont now
Kari )ri:
Your committee, appointed at the last session of this General Assent.
lily, "to itivestignte the situation nod concerns of the Batik of EriPeX
County, to eseertain the manner of the tomsfer of the stock of said batik
to foreign purchasers, the liabilities and responeihilities of each officer of
said bank since the iucorporntiott thereof, and to adopt and pit tante emit
niessuree by suits or otherwise, as said e rittnittee rutty deem expedient,
to pri.uset the safety fuud and the public from luelld ift consequence of I be
loners of se..4 book to rodortn its hilla. amid to correct frauds, if cry may
be fattowl to UM,. ratodusttilii, reloaci
Alamo. semeeips.d them, they have availed them r. a ativeirlasyl
111.111111 oirs the hi* winch be books and papers of the batik now in
do handl of the receiver, and the monotony of the president and cashier, would throw upon its transactions, and they believe they emote( hettasetinly out the views of the General Assembly, than by giving a history of the feeding sets of the bank, from the tone of its organization to
the torweissatioo of its busitwes.
no Comex Hook seas sisoirostosl to the October session of 183'2, with
a eapital f 044000, divided into 1000 shares of $40 each, subject to the
provisions of the safety fund act of 1831, requiring that fifty per cent. of
as capital stock should ba paid ill, previous to Mt melting army discounts.
The books worts opened by Om commissioners, the stock ettleteribed
mail rim fins board of directors duly elerted. On the
of A/y.0, 181, one of dm bank commissioners certified that
$10,000 hod boon paid in as capital stock, agreeably to the requirements
of the charter.
On the 16th day of April, 1g33, the batik commenced its operations,
at which time the cashier charged himself with the capital stork, consisting of a certificate of a deposite of specie in the Grafton Bank $10,000,
current bill, 08,537, and specie 01,463, amounting it) the whole to
$20.000.
On the stone day 017,845 of Ow capital stock plaved in the hank as
aforesaid, and on the 22i1 of the same April $400 more of said stock was
taken out of.the bank, by some of thin stockholders, substituting their
private notes therefor, leaving only the sum of $1,755 and the notes of
tit. .4...kilobit:re for the stun of $18,215 to secure the redemption of the
L. • '
batik, which were thereatterwards to be put in circulation.
• o•• otketi frotn the bank, John Dewey received $15,460,
.. •
iim I.
m..1 $1.""m00, they being the principal owners of
the alt.eik
'Flue first bills ot ,tim o • .% ere prepared for emission on the Gilt day
of May, 1833, tip to whe i, 11110 lit loans or discounts were made to persons other than the stock ho!derit, in the niatitier above described.
In consequence of the loss of that part of the disrotiot register which
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Federal Reserve Bank of St. Louis
APPENDIX.
contained the transactions of the bank tip to July, 1833, your commit
tee are utinble to ascertain on what security the discounts to stock hold
ors were made, but from the statetnetes of Greenlief %Veld), one of the
directors, they are led to the conclusion that no security oilier than a
pledge of the stock um) requited.
Your committee would here remark, that from the manner of keeping
the hooks (dame brink, they hell: beet' tillable to ascertain th- tiOie of the
payment of the chive, or any other or the notes of the bank, except
they find that John Dewey paid $2,000 on his note nlitive nettled, Aug.
1, 1833, unit they are thereby precluded front aseerlittoilig all the liabilities and responsibilities of the officers of the batik at tiny given time during its existence.
040
•'•
rerni
It is worthy of remark, that for o,
°iteration, it In bored neuter embarraemients so •io.•••• •
and one Irequeittly obliged to obtain loans in Boettet tied .-oiewtorre,
sometimes at a high rate of interest, and that many of its individual loan@
were extiavegantly large, considering the amount oh its capital. In one
Instance they find u RAM W011 made to John Dewey of $15,720. 'chin
was Feb. 4, 1834, at a well-remembered time of severe embarratternents
in the money market, and at a time when the bank was very much entte.
4iaN
t/
t adeqn1
ibuseabi
+.itleir
rit marls cm
ilemee.
lostis zr4..igisow
rr
ss len
ommde
ganc
snaiswinerp
ad. Inimo
fu ilii.zz
.17f
by7
see
etrAtr4;
ii=•
iat
prear
wisii4
which are still taispat.1 ow-4 ors
was also loaned for time betide of poolsollell4=0$ les Pessillbed, Maine,
$5.1GO, which wits protested July SI, IRV,tad mimed into the hands of
the receiver, who eotneromised with the endorsers an the payment of
twelve and one-111'1r per tent.
Te dividemd book of the bank exhibits the divides* of the beak as
follows:
$1,000
J uly G, 1835,
1,000
January II, 1836,
600
1836,
July
1,000
March 11, 1839,
The last of the above dividends wail made on the stock as it was own
ed August 10, 183'3, of which John Dewey reeeived 1.647, sod Thorn Is
Carlisle $112, although said Carlisle, as a mort,ber .0 iatp K•41.
Cat lisle mk.: Co., was then iodelited to tbe bank in the sum of 03,391), *.o1
the note of said firm was then in the hank, protested.
It wilt be seen, that at the time of making mid last mentioned divi
dend, the Whole of die proteeted paper, above described, was in the batik
and composed n part of its assets; there was also n large ',to
•
.• r
part of
Imetitteuilotio,r or bath 11,.tes then in the bank, nod
was 1.4.;rire.l, and the obbald 1.0,S,'IS, RW1111011 ell is hiCh
joet of the oectiiiar mauttur in Moe,. it was et, dectso .1, will be perceived when the circumstances of the transfer or the stock, which undoubtedly lett to the //nee of the concern, are stated.
The first board of directors was composed of John Dewey, Greenlief
Webb, Chopin K. Brooks, Josiah B. Hall, end John S. Wells, who set
erally lodged their respective bonds with the Treasurer of the le•IW
for the sure tit fr,,000 each, with one surety to each bond, who .•••••
mostly irresponsible men ; all the bonds subsequently estetwoo, esteem
s'part of those in 1839, lime sureties of undoubted rsopossibttoy. John
APPENDIX.
Ile
APPENDIX.
nued such until Sept 17
Dewey was elected first preside's, aad conti
d.
itute
subst
was
Webb
lief
Green
whets
many transfers of
Your Comanittee find that, as usual, there were
John Dewey,
een
betw
uated
it
fluct
of
on
porti
ipal
princ
stack, but the
dr, Co., of Bufsle
Carli
n,
Norto
and
sle,
Carli
as
,
Greenleaf Webb Thom
were indebted to the Bank
falo, N. Y., although Norton, Carlisle Ift Co.
ary to the provisions ofthe
contr
,
stock
their
of
at the lime of the transfer
act of incorporation.
of Burlington, who was
Jo the sunitner of 1838, H. Bradley, Esq.,
n that sorne persons from the
then Bank Inspector, received informatio
purchase the stock of the Essex
State Of New York were rittempting to
to uttempt to prevent the sale,
hall
Guild
to
went
y
iatel
immed
He
.
think
y, who owned most of the
Dewe
John
from
ance
an
assur
ved
recei
sad
ut his consent. Sometime
witho
made
be
d
shoul
sale
no
such
,
that
stock
N. Y., called on Mr. Bradley
yra,
Palm
of
tend,
S.
E.
Towia
wards
after
Townsend wished Bradwith a letter of introduction from Dr. Dewey.
stock to him by Dew01
fer
a
trane
to
ug
writi
in
nt
conse
his
ley to give
saying he could not
left,
send
Town
and
ed,
iefne
utely
ey, but be absol
.
obtain the stock
ferred to Thomas CarOath. 17th of August, 1838,John Dewey trans
the same day transferon
eho
hank,
said
ot
stock
the
of
s
lisle 790 share
Y. and 400 shares to
N.
ster,
,
of
Roche
Mack
F.
Isaac
to
red 400 shares
ferred to Mack 141
trans
sle
h
1839,
Carli
Marc
lo
.
said E. S. Townsend
other sources,
from
ned
s
4
obtai
share
with
h,
whic
additional shares,
of the bank,
e
stock
of
whol
rs
the
owne
the
send
wade Meek sod. Town
and evei
fer,
trans
e
above
the
befor
years
al
sever
save 55 shares. For
ed a bankrupt, and has not possessed
sines, said Carlisle has been reput nal, and it was in proof before your
perso
any visible estate either real or
the sale to Meek & Townsend, and
COMOliStell that Dewey negotiated
them for the shares pretendedly sold
rewired the purchase money of
e have yet to learn for what good
diem by Carlisle, and your committe
ed, for conveying the shares
this roundabout method was adopt
they feel constrained to say that
ey to Mack and Townsend, but
light than a mere artifice to protect Dewey
they eau regard it in no other
the imputation of haring broken his
avoid
to
also
and
frees liability,
ley.
Bead
premiss to Mr.
when Mack and Townsend bought
Year committee are satisfied that
funds called capital stock were
and
notes
the
that
the stock, they knew
assumed stun of $18,820 sold
the
that
and
,
value
no
of
for the most part
and that they intended at
false,
and
ious
fictit
y
mostl
them am capital was
t of the hank, which
credi
the
raise
to
,
stuck
said
the time of purchasing
tly in the city ofNew
promp
bills
its
g
emin
rede
by
was then at a low ebb,
to flood the country with them and let
York, for a short time, arid then
only prevented from fully constim•
were
the bank fail, and Mar they
e, w hich took place soon after.
failur
own
mating their plans by their
and Towesetirl was privateMack
and
y
The bargain between Dewe
of tbe batik, nor any other
rs
office
the
nor
ly made: neither the public,
been able to find, knew of the terms
person that your committee have
until die batik had wholly failed
and conditions of the sale (ribald stock
Aug. 14, le:Ilt.
to redeem its hills, iv inch took place
euailliittve are well satisfied, that
Cite terms of the sale were, as yourr
each share of $20, the venders to
for
it30
paid
send
Town
and
Mack
111$
vr:s
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
109
the
us, estimating tho entire debts of
retain all the accuinulated surpl
bunk as solvent and coffee table.
of aseertaining with nbsolute certainYour committee have no means
&
tor the stock purchased by Mack
ent
peynt
of
mode
and
time
ty the
nit the time
payments were
that
tied
stitis
well
are
but
,
Townsend
owed for
s, oilier than the Essex, borr
of purchns! in the bills of brink
obtained were afterwards
thus
loans
the
that
and
se,
purpo
that express
pnirl in the bills of Essex !rank.
circulabank hail $41907 of it. trills it;
At the time of the sale, the
its %aril's in epecie
in
had
rind
y,
mone
of
tion, arid owed other sums
00
8
9°
3010
72
Foreign bills,
60 00
State orders,
991 64
n,
Deposites in Market 13enk, Bosto
--$2,570 72
Amounting to
than
sted of notes and accounts, more nconsi
s
effect
its
of
ue
resid
The
remai
the
of
tumid
bad,
essly
boyel
are
n unSI2,000 of which were and still
were very doubtful and still remai
if
der severe! thousands of dollars
of your committee, very little,
on
opini
the
in
h,
whic
from
paiJ, and
any thing, can ever be realized. nce in the case, that for 945 shares of
less and
It is evident, from all .the evide
and made up mostly of worth
the nominal value of $18,900, send paid $28,350 in cash. This act
Town
&
Mack
,
paper
protested
the ebjeat
d's( it, earry Interred etidettee of
1.nd the circumstances atten
ief, and afforded an amplest,misch
with
ant
pregn
was
it
& upon dis
of tire parties:
e of the tweet uniregremit free
poi-tunny for tbs perpetrarits
public.
of directors,
1838, at a meeting of the board Haywood jr.,
On the 24tn of Sept.
am
Willi
and
,
Webb
lief
Green
y,
composed of John Dewe
0 for his serDewey be allowed and paid $3,50
it was voted "that John
Aug. 17,1838, end
to
18,
15,
April
from
bank
vices as president of the his deposites up to the last date," which sum
on
evidence that
for balances of interest
to him; and although there ha no ces, except
servi
was stibeequently allowed
his
for
thing
arty
ved
ously recei
are given to
said Dewey had previ
ess of the bank, your crimmirtee March 11,
of
when abroad cro the bustu
end
divid
the
with
her
vote, toget
utiderstand that the above
stock the preed to give the sellers of the
with the
iance
1839, were the means adopt
compl
in
oned,
us before menti
tendedly aectimulated surpl
send.
contract with Mack & Town
1838, the bank
of August and 12th of Sept.
h was
On the 17th and 2011i days
00, about one half ol whic
i,32,0
send
Town
&
of
loaned to Mack
& Co., in firm composed
rson
Patte
,
Muck
of
paper
loaned on the
Plitterson, who Watt then and
J.
as
Thom
one
mmii
l
sere
of Mack &
Mack & Town
the residue on the paper was afterstill is in responsible II11111, arid of Mack, Patterson &
debt
the
of
part
Townsend,
Towitseed ; a
with the paper of Mack &
ward- !raid, awl the rettininder, d a part of their notes of $60,110 hereforme
werds
after
wae renewed, end
Mari, & Towns•
matter described.
oflicerm of the bank mid
It was agrecil between the
Toe,iisetel :-.1,ould place
Mack
that
biee,
end, at the iinie of die above
York, lor the reperson in the city of New
funds in the hands of some
.
demption of the bills of tire bank
r
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
110
APPEriDLX.
On Me 21th of August, 18318, Mask It.
Townsend executed a bond of
$20,000 to the bank, to secure the
bank for loans made or to be made to
theta, with several sureties residin
g in the western part of the State of
New York, who, there is reason to
believe, were wholly irresponsible at
Me time.
On the 10th of Sept.!RN, the directo
rs voted an assessment of $5,
ou each share of the stock of the batik,
and ou the 24111 of the value
September a like assessment was voted.
The stock ledger Erhuws a credit of $4.720
on account of the tii.t assessment, but no other entry appears on
the books in relation to it, and
no intuition is made of the mecum'.
The issue book shows that $107,600 of hills
had been prepnred for
$20,100 were prepared ether the stile to Muck
& Townsend,
from blanks furnished by them, ..$'18,229 of
which passed into the hands
oh the receiver, leaving $79,371 in circulation.
The bunk was enjoined by the chancellor, on
the 12th day of October 1839, and ite effects passed into the hands
of a receiver Nov. 4, le:39.
From a statement of the receiver it appears, that
when he took pos•
cession of the bank, its outstanding bills
were
$3,000 had been pledged It the payinein of it $79,371 of that sum
loan and have since been
returned to the receiver, and $5,770 have been
delivered to him by
Houghtona & Co., broken; ol Me city of New
Yolk, 1141 redeemed bills,
exhibiting an actual circulation of $70,601.
It was proved before your committee by the the
cashier of the hank,
that Me batik sent $10,000 to said Houghton. &
Co., after the sale to
Mack fa. l'ownsithil, to redeem the bills of the
batik, Mat lie subs'sepsently demanded the redeemed money of them
for die batik, but they
refused to let him have it, sayitig they should sell
it to pay the liabilitiea
of Mack & l'owasend to them, and your commit
tee hive strong rf!.1eons to believe that a large amount at the bills preven
ted to the receiver
by pretended olairnauts, have been redeemed with
the fonds of the bank,
sad it is clearly proved that n large It11101/11( of the
bills presented to the
receiver for payment, were ',resettled by persons
other than the real
owners, end your ($011111iitICO are uot satisfied that they
were so preeentad for any honest or honorable purpose.
On* of the lioughtons appeared before your commit
tee and requested to he examined, but beliire the examiliation closed,
lie utterly ref used
to 'newer (pastime put hint, calculated to eseertnin the
summit of 111011ey redeemed by them with the funds of the bank, and how
much money
thus redeemed, he had caused to be depoeited with Me
receiver in the
names of other persolls--and said he could not tell
the
ey redeemed by Mein, or the amount of finals receiv 111110Ullt of moned by them to redeem bills with, within the s11111 of $5,000.
lie however admitted that they I tat I been employ
ed by Mack and
Townsend to i edeem the bills, mid that
they hail received funds to
conaideralile amount, both from Mack and Townse
rid mid the hank,
and that when they received die bills of the bank that
were not to be
put ip cirruletion, they punched a hole throug
h them.
A large minima of the bills deposited with the receive
r,
punched through them, nod some of the psegi•s tippenr have holes
itt tip have
been separated 6ince they Werr•
ill(' in Me manner desci 1,1 liy
Houghton —there is now in the hands of tie receiver
a package ef$7,500
APPENDIX.
111
which was forwarded by the Houghtons and Co. and
deposited in the
name of oue J. W. Martin.
Mack end Townsend', notes are in the hands of
the receiver to
the amount of $60.4-10, all of which bear date March 16.
18:39, except one
note of $5,000, with no security whatever except
Paid
which olio missed into the lintels of the receiver, has been $20 000 bond,
sued,judgment
obtained and the execution returned nulfa bone, both as
to principals and
Sureties.
It is a remarkelde fact that several of the tildes now in
die hands (if the
receiver egninet Mack mid Townsetid,correeptaid exactly
in smontit with
several of the bills of sale of said stock, from Carlisl
e to 31nek & Tow ['send.
At the dine the bank received Me $20,000 bond, it was
accompanied
by ti certificate of the cashier of die ‘Vayne Count
y Bank, certifying that
snit! bond was good.
The indelitedneas of die batik, as reported by the cashier
above stated, was $;3,840 :39, it hieli accrued from money, other :hen ns
borrowed by
Jobe Dewey, on the notes of Jitlio Dewey, Greenl
ief Webb anti Win.
Haywood,jr., (against w
his said Deere, held. the Indemnify of the
said Webb and Ilaywood,) to erudite the bank to redee
m ita bills alter
the sale to Mack Milt TO•1111111111d • thor hsv;ng failed to furnish
funds ea
they had agreed, said notes still minim emisiesadieg semi are
atepsosl.
The nominal assets of the bank, which passed into
the hands of the
receiver, were—
Discounied notes and other evidences of debt,
$94,907 79
Julio Dewey's receipts for notes held by trim as collateral
security,
.
9,457 50
Amnunting to
.
,
.
.
.
$104,ae5 29
Included in the above are the notes of Mark amid Towns
end.
Of the debts other than those of Mack and Townsend, the
receiver
reports $10 or $12,000 absolutely bad, $6,402 collected, and
a large
proportion of the balance extremely doubtfol.
The time limited by the Chencellor for pres,enting claims a ninst the
bank to the receiver, expired on the first of Sept. 1842,
at winch time
there had been collected of the bills el Essex Batik,
.
$5,639
Depreited by claimants,
.
.
.
.
34,426
Amounting to
.
,
.
.
.
which deducted from $70,601 leaves $30,536 still outstanding, $40,065
end it is
apparent that the bank Ions run tinder more than $60,000.
At the winding up of the business concerns of the batik,
on die 14th
end 15th days of August, 1839, writs of attachment were
issued egninst
the trade but to property of any value could be
(Lentil, except $19 41 in
specie, en ,. Iron e;tite,'some packages of unsigned bills,
n few blank
book., n quantity 01 intsigned bills, and a few sticks ef sealing
- wax.
Yntir committee I a-Her report, that iti their opinion thu
grannie; the chart, Is ,,I the several l..afety Fund Banks, legislature, in
and by the several laws they have enacted iti relation to them, have tndenv
ored to protect the rights of all persons, w Ito may have any concern with,
or intereat in, them ; under these laws a bank fund had accumulated
to a large
amount, which the law has intended for the payment
or redemption of
the bills ofany Safety Fund Benk. which may become insolve
nt through
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
112
APPENDLX.
misfortune and without the fault of its sabers. It has also made ample
provision for the protection of the hill-holders against the frauds of such
officers, by requiring large bonds far the faithful discharge of their officcial duties, to he lodged with the Treasurer of the state, and when the
insolvency has been occasioned by the fraudulent conduct or neglect of
such officers, adequate remedy may be obtained by the bill-holder, by a
prosecution of such officers, in the manner prescribed by law.
The bill-holders being the perking immediately injured by the Inilure of
the bank to redeem its bills, and the inability so to do being produced by
the fraudulent acts of its officers, no doubt can exist but that suits upon
their bonds may lie resorted to by the bill-holders for their indemnification.
In till cases where the officers have performed their duty faithfully,
end have been guilty of no breach of the conditions of their bonds, then
no source can remain from which remuneration can be obtained by such
bill-holder, but the bank fund.
Anil us it was manifestly time intentioc of the Legislature, that the interest of all persons concerned should be equally guarded end protected,
we think that this construction of the law would evidently effect that ohject, but if bilbholders are permitted to resort to the bank fund for the
redemption of the bills of insolvent betake, without regard to the manner
in which that insolvent:y was produced, it is manliest That no person
would seek redress by a suit on the bonds, while a single dollar of the bank
fund shall remain in the Treasury.
Your committee are clearly of opinion, that the hill-lioldere of insolvent sTifety fund be like, msde so by the misconduct of their officers, should
never lie permitted to have indemnity from the bank fund, while they
ruby obtain redress by a suit on the bonds of the officers. To permit
such billholders to resort to the bank fund for redress, would be the height
of injustice,—it would lie taking the money of those banks that have
honestly amid judiciously conducted their business, ti pay the damages oe
visioned iiy the fraud of others, at the same time depriving the State of
the use and IIICOMS of the bank fundj and erstroying the security of billholders, while those who have been guilty of the most barefaced frauds
would go unpunished ; in short, it would be punishing the innocent and
rewnrding the guilty.
Your committee, for reasons that must be manifest to all, leave this
subject without recommending any measures to be pursued by the LegisInture, trusting that in their wisdom, they will adopt such au the exigencies of the case may require, while your committee will give such
advisory instructions to the receiver, as they are advised are prudent and
proper.
All which is reepectfully'stibmitted.
DAVID HIBBARD, JR.
Cemmiltee.
DANIEL COBB,
SEWALL FULLAM,
Montpeliet, Oct. 24,
REPORT OF TH
To his Ercelkiicy Charies Pa
The undersigned, Bar
moot, respectfully rt.pori
this State, subject to thc
6111. ring of Banks, aiu
to be its follows :
13.1h12*
ads.
Notes discot
Due on book
Specie,
Bills I.
Safety fund,
Deposits in I
Capital &toe'.
Bills in citel
Uncli,enrol
Due deposit'
Sept. 20.
nqvi
RESOUKCE.,.
Notes am',
Real
Foreign hal
Safety fun.•
Dui: frail:
De;iosits it
Sprci
Bills i.n
1e42.
LIAr
•
Capital St,
Bills in el.
Dividends
Due to re
71
TO
Capital,
Circulation.
Due Depositors,
Due other Banks,
Total Liabilities,
LIARILMEN.
9180,000 00
129,349 00
22,930 03
3,204 84
$305,483 .87
$16.280 63
Surplus,
profit and
re has been charged to
Since the last report the
loss, of bad debts, $97 84.
cent.
4, $6,000, being 4 per
Dividends,—January 1, 185
4
8.000,
"
July 1.
hier.
CHARLES P. HART, Cas
DAN LYON, President.
B. BuckDavid P. Noyes, Daniel
Directors.—Dan Lyon,
m R. Vilas,
Samuel M. Pope, Willia
ley, George Peterson,
bonds for the ren. They have given
Lucius E. Chittende
demption of the bills.
10, 1854.
DANBY BANK. JULY
will expire Jan. 1,1866.
Charter granted 1850;
RESOURCES.
$105,141 47
nted,
Notes and bills discoh
12,203 80
ks,
Deposites in City Ban
2,655 00
Bills of other Banks.
5,747 05
Due on Book,
1,883 02
Specie,
1,878 00
Banking lions, .
$129,509 34
Total Resources,
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Capital,
Circulation.
Due Depositors.
Dividends unpaid,
50,000 00
59,331 00
16,666 76
1,648 110
Total Resources.
Reported Surplus,
—Est limited loss,
Doubtful debts, S13.01111
$127,645 76
$1,863 58
6,500 00
$4,636 42
Deficit,
4, $2,000, being 4 per cent.
Dividends,—January I. 185
2,000, ‘• ,1
"
Jaly 1,
h an uncertainty as to the
In my opinion, there was suc
1st of July, that it was not
resources of this Batik upon the
clear
dividend : and it is now
warranted in making its last
ts
deb
e, until its doubtful
that no other ought to be mad
shall become productive.
of this Bank was 9108,98.
Oct. 12, 1853, the circulation
mistake, . as it is said.
"which occurred through a
ement with a Western firm,
This Bank has had an arrang
warded its bills in packages
under which the Bank has for
0
the amount of from $75,00
of $5,000 from time to time, to
discounting paper therewith
to 511100,000 in all. that firm
per cent. discount, and taking
for the Bank at the rate of 7
their agency. Aside from
of such discount 1 per cent. for
to the Bank. it is clearly unthe hazard of such a business
t. Lt is deputing to one outlawful in two respects : Firs
cretion in discounting. which
side the Board of Directors a dis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
72
ly, it
pertains to a majority of the Directors alone; second
is taking more than six per cent. interest, paying the agent
from such excess. Upon my remonstrance,this business has
.been discontinued.
JACOB W. MOORE, Cashier.
J EssE LAPIIAN, President.
Frederick
Directors.—Jesse Lapham, Jacob W. Moore,
CaButton, Isaac B. Munson, Augustus G. Clark, George
pron, Jr., John H. Vail.
They have given bonds for the redemption of the bills.
1851.
EXCHANGE BANK, SPRINGFIELD, JULY 24,
Chartered 1853,—will expire January I ,1872.
Paid in and certified. Julie
Authorized capital
22, 1854,$40,000.
RESOURCF.S.
$56,873 57
Notes and Bills discounted,
050,000.
Deposites in City Banks,
Bills and checks of other Banks,
34,960 31
2,089 76
2,922 67
Specie,
896.846 31
'l'otal Resources,
LIABILITIES.
Capital,
Circulation,
Due Depositors,
Total Liabilities,
Surplus,
$40,000 00
52,365 00
3,475 SS
$95,840 SS
01,00.'5 .13
eAri- 0)'
I
ow rt
164
Acc
114
85
84
Deposites in City Banks and Bills of other
Banks,
DANBY BANK, JULY 11, 1855.
Specie,
Charter granted in 1850 ; will expire Jan. 1, 1866.
RESOURCES.
Notes and Bills discounted,
Deposites in City Banks,
Specie,
Banking House,
Circulation,
Due Depositors,
$95,747 94
23,586 93
2,125 83
2,000 00
commodation bill.
LIABILITIES.
Capital,
Circulation,
Due Depositors,
Total Liabilities,
JESSE LAPHAM, Pres't.
$50,000 00
54,770 00
14,287 96
$119,057 96
They have given bonds for the redemption of the bills.
Apparent Surplus,
10,000 ito
Bad and doubtful Debts, $12,51111, estimated loss,
$3,397 .26
Estimated Deficit,
Vurinoin
$5,000 of Second Mortgage Bond.: et 1\ estern
al
above
1eiri.
Railroad Company stand atn,,
e in arriv$3,000. I have made no change Hi that c,Inual
ing at the estimated deficit above.
I, IS51.
No Dividends have been declared since July
be
deficit
Ibis
No others, it is presumed, will be, until
made up.
Averages for the year ending July I, 1855:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
JACOB W. MOORC, Cash'r.
Directors,—Jesse Lapham, Jacob W. Moore, Frederick
CaButton, Issac B. Munson, Augustus G. Clark, .George
pron, Jr., George Barney.
$1,1irt 7.1
Loans,
63,420 00
1.5,375 87
This Bank has violated the law limiting the amount of
indebtedness of individuals. It has no farther regarded the
statute restriction than by making the security for the excess
in the form of a draft, though well undtnistood to be an ac123,460 70
Total Resources,
16,052 78
2,180 37
$108,599 60
I.
1 GA
VA
mi.
k141
pf0
75
31, 1856.
4
•
$270,817 00
25,562 00
3,830 00
DANBY BANK, AUGUST '23, 1856.
Charter granted in 1850, and will expire January I, 1866.
120,440 00
19,066 00
.NOTES, Cash'r.
,titivid P. Noyes,
, Ira Shattuck,
RESOURCES.
Notes and Bills discounted,
Deposits in City Banks,
Bills of other Banks.
Spvcie,
Real Estate,
03
86
00
21
2,000 00
$161,449 10
ion of. their bills
..411
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
$130,154
25,931
140
3,223
Capital,
Circulation,
Due Depositors.
$50,000 00
96,022 00
7,664 (J5
$153,686 93
Apparent Surplus.
$7,762 13
They have of had and doubtful paper $10,000 00, on
Ivhich they estimate a loss of $7,500 00.
No dividends have been declared since July 1, 1854 ; and
the Directors do not design to declare one, until they hayt.
actual funds for one.
A teport has gone out that a majority of their capital
stock is owed by residents in the State of New York, but
this is not the fact ; though twenty thousand five hundred
•
75
-•,••
61
a"
•.1.! 'if
DANBY BANK,
AUGUST,19, 1867.
'January 1,
ill expire
1850_
Charter granted in
.1866.
Cash Items,
Foreign Bills,
Specie,
Banking House and Lot.
2,000 00
usinurlEs•
$50,000 00
97,988 00
4,601 75
S152,484 75
$4,244 67
Aparent Surplus,
doubtful paper
loss on their
the
that
say
The Directors
their surplus.
will not exceed
declared since 1854.
have been
No Dividends
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
$141,776 69
17,326 04
2,879 65
98,173 00
8,075 18
JOHN . V MI., Cashier.
Directors,—Isaac J. Vail, Enoch Smith, Udney Burke, C.
M. Bruce and John H. Vail.
$120,595 20
19,201 26
10,863 07
417 00
3,652 88
$166,729 42
Capital stock,
Circulation,
Due Depositors,
bolkaas,
Deposits in City Banks and Foreign Bills.
Specie,
Circulation,
Due Depositors.
ISAAC J. VAIL, President.
RESOURCES.
discounted,
Notes and Bills
Deposits in City Banks,
Averages for the year ending July, 1857.
Though it is nearly two years since they became connected
with the Safety Fund, they had not, at the time of my annual
visit, contributed any part thereto. I have directed them to
pay to the Treasurer, as it became due, and trust it will be
soon done.
I am now informed that the Directors have paid to the
Treasurer, towards the Safety Fund, as far as it has become
due.
A majority of their stock belongs to citizens of "Vermont,
as it stands upon their stock book, yet western men own a
large interest in the Bank, and large discounts have been
made on western paper, as their extended circulation too
plainly shows. The late panic in the money market, especially, west, has driven their bills home so rapidly, as to suspend
their redemption at the Suffolk Bank, and at their own counter, at least for a time. I am still assured, September 9, by
an agent from their Board of Directors. who called on me,
that they shall shortly have the means of establishing their
credit, both at home, and at the Suffolk Bank. When at the
:
- 1•1'
,er ••••
•••
•••
;Art
•
•
A
76
to aspertain
s in my power,
an
me
e
th
l
al
neers loam,
Bank, I used
pecially for ve
es
,
es
ti
ri
cu
se
eir
Otte
goodness of th
ors had taket
ct
re
Di
e
th
uld learn,
fie=f—re the
and from all I co
themselves sa
ep
ke
to
r
we
r po
business, or it
precaution in thei
only a hone
ne
do
ve
ha
curities at
true course, to
d by known se
te
ec
ot
pr
s
nt
discou
fbr the year
least had all their
eir discounts,
th
of
n
io
at
in
am
rded aohome. In the ex
they have affo
at
th
ow
sh
s
their book
ns of Denpast, I find that
, to the citize
nt
te
ex
le
ab
er
a consid
ctors assume,
commodation to
that the Dire
d
an
s,
wn
to
g
by and neighborin
at is presented.
home paper th
od
go
l
al
nt
ou
that they disc
•
-1.13t
?
4.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
•-•
1Ce
on many
e greatest
n, will be
and near
ke a well
rope 150
:ring any
g, issuing
sufficient
And on
tile tree.
everal
L well
.ssess
were
of
1 tiring
one
1869.
1 fea•
)eing
any
lysi-
tt of
sely
ton.
iug
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
"d 1°
' e(itkrkcJj
et
At
iijnt 61 r1
by,defsin
"Is°
9
ill
J.c.
siv
},c4
ittsronv OF DANZY.
:121
a mlid. fit Iro
n. combined with Sulp
huric, Silicia, Carbonic
and Cr, Hie Acids, :ol
d traces ofClorine.
It is
aer:0,1, alkaline cha
lbeate water. The comp
',Foto xiii it iro
ound of
n. contained, is un
usually stable, and wil
boiling %vithout deco
l bear
mposition, and the pre
thts. adds much to
sence of alkalies, with
the value of the wate
It is like some of
r, as a'medicinal agent.
the favorite Europe
an waters, and worthy of
1.0011)lete
qIl alit Lii t iii al vsis.
a
Respectfully,
S. DANA HavLs.
State Assayer of Mass.
Tlw spring is situat
ed about two miles nor
and about one-half
th of the Borough,
mile from the railro
ad, being conveniently accessible, and will no
doubt rival any iu
its medicinal eff
this part of the State, in
eets. Although bu
t a short time has elapse
since its discovery
d
, its reputation has alr
eady become considerably
extensive, mid the
water is being sought
tions.
after from different sec-
DANBY BANK.
The Danbv Bank Nva
business in 1851, wit s chartered ill Oct. 1850, and comm
enced
h a capital of $50.
ham was its first
000 dollars. Jesse
President, and held
Lapthe office till Jawn
Jac(dy IV. Moore
ce 1852.
was cashier from
The first 1>iree!“rs
co
mmencement til
were Jesse Laph
am, Frederick Butt l 1857.
Crampton. Isaac
on,
B. Munson, and
Imard continued till
Augustus G. Clar Eliada
k,
and (;eorge Capron January 1856, except Crampton wh which
was appointed in
o died,
his place.
In I a.. Chester
Hitchcock, then
of Buffalo, N. Y.
nine-wtolts of the
bought
Bank, and in Ja
new
nuary 1856, electe
La
ph
da
am
,
wh
ic
h bo
Laphaul. Isaae .1.
Vail, John II. Vai ard were as follows: Jesse
l, Enoch Smith, an
Burk. In January,
d Udney
1857, Laphtun we
then were John II.
Vail, Isaac J. Vai nt out, and the directors
l, Charles M. Br
Smith, Ifilney Burk.
uce, Enoch
John It. Vail. C.t,li Isaac J. Vail was elected Pre
sident, and
ivr.
•111.•Ill. fail,(1
in Scrt. 1857, and
chest. r
Hon. A. L. Miner
lirpOillied
of ManBaimi thil ii. C. II ite Receiver, in Dee. following.
When the
lwock and J. 'I'.
Hatch of Buffal
(IIIl% Lid
! H'"‘."I
o, owed it
loss ev.eed iwiec the it total loss, and other had debts
made the
amount of the cap
ital stock.
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Federal Reserve Bank of St. Louis
66
Averages:
I ,oatis,
Deposits in city Banks,
Circulation,
Due Depositors,
Specie,
$239,523 33
118,139 64
199,053 00
35,092 39
BA
Charter
11,072 52
PHILIP WELLS, Cashier.
SAM'L ROOT, President.
Goodhue, W. H. RockDirectors—Samuel Root, Joseph
Starr.
well, Joseph Clark, Parley
redemption of
given bonds for the
have
Directors
The
liabilities.
their bills and all
Notes
De posi
Bills
Specie
Bankir
I/
Ca pit,
Circul
Due [
A ppai
Bad a
Avail
A
)
APPENDIX.
106
APPENDIX.
1833, your commitcontained the transactiona of the bank tip to July,
the discounts to stockholdtee are unable to ascertain on wlint securityGreenlief
Webb, otie of the
ers were made, but from the eintements of
no security other than a
directors, they are led to the conclusion that
pledge of the steel, wits required.
the manner of keeping
Your committee would here remark, that from
tines of the
the books of the batik, they have been unable to ascertitin the
batik, except
pnyment of the above, or any other of the notes of the
named, Aug.
they find that John Dewey peel $2,000 011 I,is 11010 above
all the liabili18*3, mill they are thereto)? precluded from ascertaining
any given time duat
batik
the
of
officers
the
of
ice
responsibilit
ties and
ring its existence.
after the bunk went into
It is worthy of remark, that for several years redemption of its 'dile,
die
operation, it labored under embarrusemente in
Boston and elsewhere,
auth u% as frequently oldiged to obtain loans in
of its individual loans
sometimes at a high rate of interest, and that manyet its cnpital. In one
were extravagantly large, considering the amount
Dewey of $15,710. This
instance they find a loan wits nuele to John
severe embarrassments
was Feb. 4, 1831, at n well-remembered tittle of
vvlien the batik was very much emitt the money market, and at a ii lute
wine made without adequate
barrassed. In some instnnces large loans Carlisle St Co. of Buffalo, N.
Norum,
to
made
were
two
loans
:
steetri-y
and April 29, 1837,
V., tub $3.300,. which were protested Nov. 15, 1836.,
uncollectable. There
wholly
;probably
rue
and
unpaid
still
which are
residing in Portland, Maine,
was also lonned for the benefit of pereons
passed into the hands of
and
1837,
24,
July
pretested
wits
which
$5.1CO,
on the payment of
endorsers
the
with
d
compromise
who
the receiver,
cent.
per
tate-hall
twelve and
:1000e000bank as
dividends ofs110
'rho dividend book of the bank exhibits the
follows:
July 6, 1835,
January 11, 1836,'
1836,
July
000
1,6
0
March 11, 1839,
made on the stork as it was own'Ube last of the above dividends was
received $847, and l'hoines
ed August 10, 1838, of which John Dewey
member of the firm of Norton,
Carlisle $112, although said Carlisle, as it
CO., WilS then indebted to the bank in the el/in of $3,300, and
Carlisle
saitl firm was then in the bank, protested.
of
note
the
mentioned iii vi It will be seen, that at the time of making said last
was in the batik
described,
above
paper,
protested
the
of
whole
the
(lend,
and composed a part of its assets; there was also it large amount of 81/..f.•
a ;tart of
pendeol paper or bail notes then in die bank, mid also composed
the obsaiil assets, and ii lout nil wjiIcIt1,11.01 dividend was declared, and
lie perceivject of the peculiar manner in which it was so declared, will
ed when the circumstances of the transfer of the stock, which undoubtedly led to thefinafe of the concern, are stated.
The first board of directors was composed of John Dewey,Greenlief
sev1Vebb, Chapin K. Brooks, Josinli B. Dull, at 141 John S. Wells, whoState,
erally ludgell their respective bonds with the Treasurer of the were
tor the sum of $8,000 each, with 0103 surety to each bond, whoexcept
mostly irresponsible men ; all the bonds subsequently executed,
mu part of those in 1839, have sureties of undoubted responsibility. John
REPORT OF THE COMMITTEE UPON THE AFFAIRS OF THE ESSEX COUNTY 'BANK.
7'o 'he honorable lhe General Assembly nf Ihe Stale of Vermont now in
mai :
Your committee, appointed at the last session of thin General Assembly, "to investigate the situation and concerns of the Bank of L'essex
County, to ascertain the manner of the trunsfer of the stock of se ill batik
to foreign purchasers, the liabilities and reepousibilities of each officer of
said bank &ince the incorporation thereof, mid to adopt and pit oeue ouch
measures by suits or otherwise. as said e ,mmittee may deem expedient,
to protect the safety fund and the public trent loge in consequettce ()film
failure of amid bank to redeem its bills, and to correct lintels, iinLy may
be found to exise" respectfully report —
That, in attending to the duties assigned them, they have /availed thent•
selves of :ill the light which the books end papers of the bank now in
the hands of the receiver, and the testimony of the president and cashier, woid.1 throw upon its transactions, mid they believe they etIllnot better carry out the views of the General Assembly, dem by giving a history of the leatlitig arts of the batik, front the tittle of its orgatoizaiion to
the termination of its business.
The Essex flank was chartered at the October seseion of 1832, with
a capital of $40,000, divided into 1000 shares of $40 each, subject to the
provisions of the safety fund net of 1831, requiring dint fifty per cent, of
its capital stock should be paid in, previous to its making city discounts.
The books were opened by the conimiesioners, the stock sitbscribed
in proper feriae mill the first board of directors duly elected. Oti the
15th day of Apo il, 1833, one of the bank you llllissioners certified 111211
$20,000 hail been paid it, tic capital stock, iigreettbly to the reqeircinents
of the charier.
011 the 16;Ii day of April, 1833, the loank commenced its operations,
at which time the eneliier charged himself wit II 1110 capital stock,(.M18.1/fla certificate of a deposite of specie in the Gritften 'Intik $10,000,
ing
current bills $8,537, anti specie $1,463, aneounting in the whole to
$20.000.
On the B1111111 day $17,845 of the capital stock placed in the bunk ns
aforesaid, and on the 2211 of the same April $400 more of said stock was
taken out of the bank, by some of the stockholders, subetituting their
private notes therefor, leaving only the sum of $1,755 and the notes of
the stockholders for the stun of $18,215 to secure the redemption of the
bills of the bank, which were thereufterwards to be put in circulation.
Of the above sums taken from the bank,John Dewey received $15,460,
and Themes Carlisle meek cd $1,500,they being the principal owners of
the stock.
The first bills of the bank were piepared for emission on the Gill they
of May, 1833, tip to which time no loans or discounts were made to persons other than the stockholders, in the manlier above described.
In consequence of the loss of that part of the discount register which
of
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Federal Reserve Bank of St. Louis
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/
c
10
_
/
APPENDIX.
APPENDIX-
Dewey was elected first president, and continued such until Sept 17
1838, when Greenlief Webb was substituted.
Your Committee find that, as ustinl, there were many transfers of
stack, but the principal portion of it fluctuated between John Dewey,
Greenleaf Webb, Thorned Carhale, and Norton, Carlisle & Co., of Buffalo, N. Y., although Norton, Carlisle Ert. Co. were indebted to 'be Bank
at the time of the transfer of their stock, contrary to the provisions ofthe
act of incorporation.
In the summer of 1838, II. Bradley, Esq., of Burlington, who was
then Bank Inspector, received information that some persons front the
state of New York were attempting to purchase the stock of the Essex
Bank. He immediately went to Guildhall to attempt to prevent the sale,
and received an assurance from John Dewey, who owned most of the
stock, that no such sale should he made without his consent. Sometime
afterwards E. S. Townsend, of Palmyre, N. Y., called on Mr. Bradley
with a letter of introduction from Dr. Dewey. Townsend wished Bradley to give his consent in writing to a tratisler of stock to him by Dewey, but he alosolutely iefused, and Townsend lelt, saying he could not
obtain the stock.
On the 17th of August, 1838,John Dewey transferred to Thomas Carlisle 790 shares of the stock oh said bank, who on the same day transferred 400 shares to Isaac F. Mack,of Rochester, N. Y. and 400 shares to
said E. S. Townsend. Ii' March 1839, Carlisle transferred to Mack 141
additional shares, which, with 4 shares obtained from other sources,
made Mack and Townferod the owners of the whole stock of the batik,
save 55 shares. For several years before the above transfer, and eveu
since, said Carlisle has been reputed a bankrupt, and has not possessed
any visible estate either real or personal, and it was in proof before your
committee that Dewey negotiated the sale to Mack & Townsend, anti
received the purcloatte money of them for the shares pretendedly sold
them by Carlisle, anti your committee have yet to learn for what good
purpose this roundabout method was adopted, for conveying the shame
of Dewey to Mack and Townsend, but they feel constrained to say that
they can regard it in no other light than a mere artifice to protect Dewey
from liability, and also to avoid the imputation of having brokea his
promise to Mr. Bradley.
Your committee are satisfied that when Mack and Townsend bought
the stock, they knew that the notes and funds called capital stock were
for the most part of no value,and that the assumed sum of $18,820 sold
them as capital was mostly fictitious and false, and that they intended at
the time of purchasing said stock, to raise the credit of the bank, which
was then at a low ebb, by redeeming its bills promptly in the city ofNew
York, for a short time, and then to flood the country with them and let
the bank fail, and that they were only prevented from fully consummating their plans by their own failure, which took place soon after.
The bargain between Dewey mid Mack and 'Townsend was privately made: [wither the public, nor the officers of the bank, nor any other
person that your committee have been able to find, knew of the terms
ant conditions of the vele of said stock until the brink had wholly failed
to redeem its bills, which took place Aug. 14, 1839.
The terms of the sale were, as your committee are well satisfied, that
Muck and Towuseptl paid $30 for each share of $20, the vendors to
retain all the accumulated surplus, estimating the entire debts of the
bank as solvent and collectable.
Your committee have no means of assertaining with absolute certainty the time and mode of payment for the stock purchased by Mack &
Townsend, but are well satisfied that payments were made at the time
of pundit'sa in the bills of banks, other than the Essex, borrowed for
that express purpose, and that the loans thus obtained were afterwards
peill in the bills of Ewes bunk.
At the time of the sale, the bank had $44,907 of its bills in circulation, and owed other sums of money, and had in its vaults in specie
*31908
1,200 00
Foreign bills,
60 00
State orders,
991 64
Deposites in Market Bank, Boston,
-$2,570 72
Amounting to
The residue of its effects consisted of notes and accounts, more than
812,000 of which were ant! still ate houelessly burl, and of the remaiiider severe! thousands of dollars were very doubtful and still remain unpaid, and from which, in tloe opinion of your committee, very little, if
any thing, can ever be realized.
It is evident, from all the evidence in the case, that for 945 shares of
the nominal value of $18,900, and made up mostly of worthless and
protested paper, Slack & Townsend paid $26o350 in cash. This act
ind the circumstances attending it, carry internal evidence of the object
of the parties: it was pregnant with mischief; mid afforrled an ample opriluicuity for the perpetration of the most outrtogeous frauds upon the
uh
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•
Federal Reserve Bank of St. Louis
)o(_
mei
109
rOtt the 24tn of Sept. 1838, at a meeting of the board of directors,
•
composed of John Dewey, Greenlief Webb,and William Haywood jr.,
it was voted "that John Dewey be allowed and paid $3,500 for his services as president of the bank from April 15, 1833, to Aug. 17,1838, and
for balances of interest on his deposites up to the last date," which sum
was subsequently allowed to him; and although there is no evidence that
said Dewey had previously received any thing for his services, except
ittee are given to
when abroad on the business of the hank, your c
tooderstand that the above vote, together with the dividend of March 11,
1839, were the means adopted to give the sellers of the stock the pretendedly accumulated surplus before mentioned, in compliance with the
contract with Mack & Townsend.
On the 17th and 20th days of August and 12th of Sflpt. 1838, the bank
homed to Mack & 'Townsend $32,000, about one half of which was
formed on the paper of Slack, Patterson & Co., a firm composed of
Mack &r. Townsend and one Thomas J. Pattersou, who was then and
till is a responsible man, and the residue on the paper of Mack &
Townsend ; a part of the debt of Mack, Patterson & Co. was afterwards paid, and the remainder, with the riper of Mack & Townsend,
formed a part of thuir motes of$60,410 herewas renewed, mod all
inafter described.
It was agreed between mite officers of the limitk and Meek & Ti,wns•
entl, at the tittle of the above loan, that Muck ts Trio oisetul should place
funds in the hands of some perstoi in the city ut New York, lor the re•
demption of the bills of the bank.
APPENDIX.
I/0
On the 25th of August, 1838,- Mack & Townsend executed a bond of
$20,000 to the bank, to secure the bank for loans made or to be made to
them, with several sureties residing in the western part of the Slate of
New York, who, there is reason to believe, were wholly irresponsible at
the time.
On the 10th of Sept. 1838, the directors voted an assessment of $5,
sante
f II
011 each share of the stuck of the bank, and on Lie 2.1 I o.
September a like assessment was voted.
The stuck ledger shows a credit of $4.720 on account of the first assessment, but ter ether entry appears on the books in relation to it, and
no mention is made of the second.
The issue book shows that $107,600 of bills heel been prepared for eniission, $20,100 were prepared after the sale to Meek & Townsend,
from blanks furnished by them, $28,22'J of which passed into the hands
of the receiver, leaving 879,371 itt circulation.
The bank was enjoined by the chancellor, on the 12.1i day of Oct,bet 1839, end its effects passed nee the hainla of n receiver Nov.4, 1839.
From a statement of the receiver it appears, that when he took posaeesion of the bank, its ointeanding bills were $79,371 ; of that sum
$3,000 had been pledged 14 the payment of a loan and have since been
returned to the receiver, and $5,770 have beset delivered LO liii., by
Iloughtona & Co., brokers oh the city of New Yolk, us redeemed bills,
exhibiting an actiiel circulation of $70,601.
It was preyed before your committee by the the cashier of the bank,
that the bank sent $10,000 to said Iloughtutia & Co., after the sale to
Mack & Townsend, to redeem the bine of the batik, that he subsequently demanded the redeemed money of them for the batik, but they
refused to let him have it, saying they should sell it to pay the liabilities
of Mack & Townsend to them, end your committee have strong reason. to believe that a large amount et the bills ',repented to the receiver
by pretended clttiittants, leave been redeemed with the funds of the bank,
and it is clearly proved that a large amount of the bills presented to the
receiver for pityment, were presented by 'terminal other them the real
owners, and your committee are not satiefied that they vi ere so presented for any honest or honorable purpose.
One of the Houghtons appeared before your committee and requested to be examined, hut before the examination closed, lie utterly retiree.'
to answer questions put hint, calculated to i:acertain the amount of intim
ey redeemed Ity them with the funds of the bank, lied how much nioney
thus redeemed, he had caused to be deposited with the receiver in thu
:mines of other persons-. and said he coold not tell the amount of money redeemed by them, or the mitnount of funds received by them to redeem bills with, within the sum of $5,000.
He however admitted that they had been employed by Mack and
Townsend to iedeem the bills, tied that they had received funds to a
considerable amount, both from Mack anti Townsend and the bank,
and that when they received the hills of the bank that were not to be
put is circulation, they penciled it hole through them.
A large immure I)1 the bills deposited with the receiver, have holes
n:lieu through them, and sonic of the packages appear not to have
been separated since they were punelted in the mamier described by
Houghton—there is now in the hands of the receiver it package of$7,500
•
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Federal Reserve Bank of St. Louis
111
APPENDIX.
bt"-Lt4AA4A tr(
13
-
which was forwarded by the Illoughtons and Co. and deposited in the
melte of one J. W. Abitibi.
Mack and Townsend's notes are in the bands of the receiver to
the amount of $60,440, all of which bear date March 16, 1839,except one
note of $5,000, with no security whatever except said $20,000 bond,
which also passed into the hands of the receiver, has been sued,judgment
obtained and the execution returned nalla bane, both as to principals and
eureties.
It is a reetarkaltle fart that several of the notes now in the hands of the
receiver Nonni! Muck ned Townsend,correspond exactly in amount with
several of the bills of sale of said stock, from Carlisle to Mack & Toe its end.
At the time the batik received the $20,000 bond, it was accompanied
by a certificate orate cashier of the Wayne County Batik, certifying thet
said bond was good.
'Flue indebtedness of the bank, as reported by the cashier, other Man as
above stated, was $3,840 39, which accrued from money borrowed by
John Dewey,on the notes of Jelits Dewey, Greenlief Webb and Wm.
Hay woo I, jr. (agniust which, the said Devvey holds the indemnity of the
said Webb and Hay enoti,) to unable the bank to redeem its bills niter
the sale to Mack and Townsend: they having failed to furnish funds as
they had agreed, said notes still remain outstanding anti are twined.
The nominal assets of the batik, which passed into the hands of the
receiver, were—
$94,907 79
•
Discotinted notes and other evidences of debt,
John Dewey's receipts for noted held by him as collateral
9,457 50
.
security,
$104,3C5 '29
.
.
Arnomoing in
Included in the above we the notes of Mack and Townsend.
Of the debts other than those of Mack and Townsend, the receiver
reports $10 or 612,000 absolutely bad, $6,402 collected, awl it large
proportion of the balance extremely doubt ful.
The time limited by the Chancellor for presenting claims n ainst the
batik to the receiver, expired on the first of Sept. 1841, at which time
$5,639
there hal been collected of the bills of Essex Batik,
34,426
Depo-ited by elaimatite,
$40,065
Amoimting to
which deducted from $70,601 loaves $30,536 still outstanding, and it is
apparent that the bank has run under more than $60,000.
At the winding up of the business concerns of the bank, on the 14th.
and 15th ;lays of August, 1839, writs of attachment were issued against
the bank, but no property of any value could be found, except $319 41 iti
specie, an "Iron Safe," ROMP packages of unsigned bills, a few blank
books, a quantity ol unsigned bilk, and a few sticks of aealing. wax.
Your conimittee further report, that in their opinion the legislature, in
granting the charters of the several Safety Fund Banks, and by the several laws they have enacted in relation to them, have endeavored to protect the rights of all persons, who may IIKVC any concerti with, or interest in, then ; under these laws a batik bind has accumulated to a large
atueunt, which the luw has intended for the pnyinent or redemption of
the bills ofany Safety Fund Bank, which niay become insolvent through
112
APPENDIX.
misfortune and without the fault of its officers. It has also made ample
provision for the protection of the bill- holders against the frauds of such
officers, by requiring large bonds for the faithful discharge of their officeial duties, to be lolged with the Treasurer of the state, end when rhe
insolvency has been occasioned by the fraudulent conduct or neglect of
such officers, adequate remedy may be obtained by the bill•holder, by a
prosecution ofsuch officers, in the manner prescribed by law.
The bill-holders being the perions immediately injured by the failure of
the bank to redeem its bin, and the inability so to do being produced by
the fraudulent acts of its officers, no doubt can exist but that suits upon
their bonds ttsay be resorted to by the bill-holders for their indemnification.
In all cases where the officers have performed their duty faithfully,
end have been guilty of no breach ot the conditions of their !winds, then
no source can remain from which remuneration can be obtained by such
bill- holder, but the batik fund.
Anti as it was manifestly the intention of the Legislature, that the- interest of all persons concerned should be equally guarded and protected,
we think that this construction of the law would evidently effect that object, but if bill -holders are permitted to resort to the batik fund for the
redemption of the bills of insolvent banks, without regard to the mann s.r
in which that insolvenoy was produced, it is wannest that no person
would seek redress by a suit on the bonds, while a single dollar of the batik
fund shall remain in the Treasury.
Your committee are clearly of opinion, that the bill-holders of insolvent safety fund banksounde so by the misconduct of their officers,should
never be permitted to have indemnity from the batik fund, while they
may obtain redress by a suit on the bonds of the officers. To permit
such billholders to resort to the bank fund for redress, would be the height
of injustice,—it would be taking the money of those batiks that have
honestly and judiciotiely conducted their business, to pay the damages oc
easioned by the fraud of others, lit the same time depriving the State of
the use and inconte of the bank fund, and destroying the security of bill.
holders, while those who have been guilty of the most barefaced frauds
would go unpunished ; in short, it would be punishing the innocent and
rewarding the guilty.
Your committee, for reasons that must be manifest t all, leave this
subject without recommending any measures to be pursued by the LegMature, trusting that in their wisdom, they will adopt such as the exigencies of the case may require, while your committee will give such
advisory instructions to the receiver,as they are advised are prudent and
proper.
All which is respectfully submitted.
DAVID HIBBARD, JR.
Committee.
DANIEL COBB,
SEWALL FULLAM,
Montpelier, Oct.424, 1842.
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Federal Reserve Bank of St. Louis
113
APPENDIX.
REPORT OF THE BANK COMMISSIONER.
To his'Excelleney Charles Paine, Governor of the Stale of Vermont:
The undersigned, Bank Commissioner of the State of Vermont, respectfully reports that he has inspected the Banks of
this State, subject to the provisions of the act regulating the
chartering of Banks, and finds the condition of those Banks
to be iis follows :
B.:INK OF MIDDLEBURY.
itzsovacts.
$75,857 60
Notes discounted, .
.
•
Due on book and from other Vermont banks, 1,584 68
3,585 34
.
.
.
Specie,
2,917 00
Bills of other banks,
.
2,700 00
.
Safety fund, .
41,654 01
Deposits in Boston and Troy,
$128,298 13
Capital stock,
.
Bills in circulation and certificates, .
Unclaimed dividends, .
•
Due depositors and I3ank of Burlington,
$60,000 00
54,W3 00
245 95
8,199 04
$123,077 99
Sept. 20.
B.I.VK OF VERGENNES.
its...suuitLLS.
Notes and bills discounted, .
Real estate, .
Foreign bank stock,
Safety fund, .
.
Due from other banks,
.
Deposits in New York and Boston, .
Specie, .
.
Bills of other banks,
.
$166,992 35
. 2,500 00
157 15
. 450 00
1,070 60
. 12,721 49
7,740 a)
. 3,747 00
$195,378 98
LIABILITIES.
Capital Stock,
Bills in circulation,
Dividends unpaid.
Due to other banks,
. $100,000 00
57,891 00
558 70
5,438 19
17,
tivyvt,v,„,)- I Via-b
—
2.-
Continued.
218
it adds considerably to
united with the proceeds of the public lands,
d.
distribute
the amount now to be
lands, at fair pricYour committee consider the sale of the public
of our coun.
welfare
t
permanen
the
to
beneficial
more
r
es, altogethe
rs. While
adventure
or
settlers
to
on
distributi
try than a voluntary
,his farm
for
paid
be
to
tion
on the one hand, a moderate compensa
also diffuses
and
industry,
of
habits
to
yeoman
hardy
stimulates the
families, in the origimore equally to our brave ancestors and their patriotism. And on
nal states, the reward for their sacrifices and
distributed and wisely ap•
the other hand, the fund created, if rightly
y to form an arch
powerfull
propriated, will probably contribute most
nor external ensap,
cannot
foes
internal
which
virtue,
t
of intelligen
emies press down.
that part of the resoluMost fully, therefore, in accordance with
she says that the
wherein
ania,
Pennsylv
sister,
patriotic
tions of our
for the promorevenue
a
as
regarded
is
proceeds of the public lands
do we reschools,
common
tion of education, and more especially
s.
resolution
following
the
of
passage
the
spond, and recommend
Verof
atives
Represent
of
House
Resolved, By the Senate and
d and our Senators
instructe
be
Congress
in
senators
our
mont, that
procure the passage of a
be recommended to use their influence to
from the sale of the
arising
law to distribute the future proceeds
we highly approve
that
and
basis;
equal
most
the
upon
public lands
back to
returning
in
,
Congress
last
the
by
of the principle adopted
came
originally
which
money
the States as a contingent loan, the
created through thr
was
which
of
means
the
or
pockets,
from their
times past or present.
instrumentality oftheir patriotic services, in
and our RepresentaResolved, That our Senators be instructed expenditure of public
judicious
a
for
vote
to
nded
recomme
tives be
fortifications for the demonies for the erection and completion of
country.
common
our
of
fence
J. SAWYER,for committee.
by the committee were
Which was read, and the resolutions reported
read and passed.
the Vermont Asylum for the
The select committee, on the report of
appropriation to the Vermaking
act
"an
lwane,.and on the bill entitled
bill ought to be amend
the
that
mont Asylum for the Insane," reported
pass.
and
ed
the bill amended as reported
The report was read and concurred in,
ordered to be engrossed and
and
time
second
the
read
e,
committe
by the
time.
third
read the
Edward Simons and
The General Committee, on the petititontoof
granted.
be
not
ought
prayer
the
that
eported
others,—r
by the House.
And leave to withdraw the petition was granted
act more effectually to
The saar committee, on the bill entitled "an
same ought to pass.
the
reported
State,"
this
within
prevent gambling
bill read the first and seThe report was read and concurred in, the
the third time to-morread
and
engrossed
cond times, and ordered to be
row morning.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
"your committee find no reason to question
the correctness of the report of the Bnk
219
On the petition of Benjamin Leland and others,—that the same ot.ght
to be dismissed.
The report was read and concurred in. and leave to withdraw the
petition was granted by the House.
The committee of ways and means, on the petition of Amos Speare,
and others," reported that the petitioners have leave to bring in a bill.
The report was read and concurred in, and leave to bring in a bill
was granted.
The select committee on the Bank Inspector's and Bank Commis
'loners' reports, made the following:
REPORT
To the House of Representatives, now in session:
Your select committee to whom was referred the respective reports of the Bank Inspector and Bank Commissioners, respectfully
report:
That your committee believe it to be the intention of the House
in referring these reports, that the attention of your committee should
be principally directed to that part of the Inspector's report which
relates to the Essex Bank, with a view to ascertain whether or not
the same is correct. It appeared to your committee that the Essex
Bank was examined by the Inspector in January last, but no definite
statement of the condition of the bank at that time is contained in
his report, though he was specially requested by the President of the
Bank to report a specific statement of its condition as then found by
him. Your committee further find that a prosecution was instituted
against the corporation of the Essex Bank, and a trial had before the
Supreme Court in March last, and that on that occasion, the court said,
"That the Bank had been managed, apparently with much ability and
financial skill—that although they could not agree with the counsel
for the defendant that the loaning of the capital stock to the stockholders, before the issuing of the bills of the bank was a course autho.
rized by.the charter yet as the bank was then, and always had been
sound, with abundant means to redeem its outstanding bills, they
should dismiss the prosecution."
From the Bank Commissioners' reiiort to the present Legislature,
made from a recent examination of the Essex Bank, it appears that
it is perfectly solvent, and in good condition. The statement as to
this bank is as follows:
Capital stock,
020,000
Due depositors, &c.,
. 9,468 07
•
Bills in circulation,
. 32,115 00
Due on notes, book, &c.,
.
Drafts, payable in Boston, .
.
Specie,foreign bills, and deposits in
Boston,
861,583 97
42,887 23
11,216 53
8,059 40
$62.163 16
commissioner above referred to, or to doubt
that the determina+Asn of the court in the prosecuti
17-ts induced by evidence which exhibeted the real
, ;ircumstances of the bank. Your committee consider
.
some portions if the inspectors report relative to
Exsex Bank calculated to exite groundless alarm,
and to create a suspicion which may prove highly
predjudicial to the interest of the institution,
ugh ,in the oppinion of your committee. it is
nti ed to the full confidence of the public.
JOHN S LRCY
11A TR N
07
