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A general free banking law with the restrictions and limitations imposed by Article 8, Section 8 to 12 of the Constitution.
Laws were passed by the General Assembly of 1858 authorizing the establishment of both systems of banking; and were ratified by the vote of the people.
No banks were organized under the “ free banking law," : but a State Bank was established in 1858, during the closing hours of a serious financial panic and continued in business until it suspended as the result of the National Bank Act in 1863. During this period it was one of the few banks in the United States which did not suspend specie payments and whose notes were always quoted, throughout the land, at par.
Throughout the period from 1846 to the establishment of the State Bank of Iowa—while the political events noted above were taking place, the people of Iowa were experiencing the evil results of a circulating medium composed in the greater part of a depreciated paper money issued under the generally lax laws governing the banking systems of the different states. The West had no Suffolk Bank and with poorly developed markets for her products it followed, as a result of "Gresham's Law," that this State was flooded with some of the worst money of the Union. During this period it was the place of circulation for the notes of discredited banks; the depreciated notes of banks in which the public had partially lost confidence; the worthless notes of “Wild Cat Banks”; and, in rare instances, the notes of solvent banks of the Eastern States or some of George Smith's money. Even these last two were, during the greater part of the year, subject to the discount of exchange in returning them to their respective banks. Gold and silver money was scarce and was either hoarded to pay taxes or to be used as “Land Office Money." Iowa during this period was the experimental ground for several interesting attempts to secure a circulating medium, sufficient to meet the commercial wants of her people. As types of the more important of these there may be cited :
the Nebraska Bank money; the A. J. Stevens money; and the different issues of scrip in cities.
On March 16, 1855, the Nebraska Territorial legislature incorporated the “Western Fire and Marine Insurance and Exchange Company, with the power to deal in exchange which enabled it to go into the “wild cat” banking business as the Western Exchange Bank of Omaha. In the second legislative assembly of Nebraska Territory five banks were chartered. Their charters were all of the same form; their stock was to be either $50,000 or $100,000, to be increased to $500,000 at will; they had power to issue notes and bills for the redemption of which the stockholders were individually responsible; there was no provision for a fixed reserve nor other guard against incompetency or rascality. The bills of three of these banks were circulated to a very considerable extent by the owners of the bank charters who were doing a banking business in this state. The bills away from the places of distribution always circulated at a discount. For a time B. F. Allen kept the money of the Bank of Nebraska at par along the line of the Western Stage Company by making arrangements to have the company receive the bills at par.
A. J. Stevens & Co., of Des Moines, following the plan of George Smith, secured a large amount of bills of the defunct Agricultural Bank of Tennessee, and put them in circulation, guaranteeing their redemption; but the firm failed with a consequent total loss to the bill holders. During the latter part of the period under consideration, cities, towns, companies and individuals commenced the issue of scrip. Over a million dollars of this kind of money was in local circulation in the state. In each case, shortly after its issue, it depreciated from ten to fifty or more per cent.
All of these, as well as the character of the outside money in circulation in the state, aided in bringing about the establishment of a banking system in Iowa for the emission of a paper money that would not have to be circulated at a discount and the character of which could be readily ascertained by the people of the state.
AN ACT to incorporate the stockholders of the Miner's bank of
Dubuque. SECTION 1. Be it enacted by the council and house of representatives of the territory of Wisconsin, That a bank shall be established in the town of Dubuque, in Dubuque county, and territory, aforesaid, the capital stock whereof be two hundred thousand dollars, to be divided into two thousand shares of one hundred dollars each, and the subscriptions towards said stock shall be opened as soon as may be convenient, after this act shall be approved by the congress of the United States. The subscription shall be opened in the said county, and at such other places as the commissioners may think proper, and be kept open until the stock is subscribed, under the superintendence of Ezekiel Lockwood, Francis Gehon, John King, William Myers, Lucius W. Langworthy, Robest D. Sherman, William W. Corriell, Simeon Clark and E. M. Bissell, who are hereby appointed commissioners, to receive the subscriptions to the said capital stock, and the said commissioners shall be the first directors; they shall choose one of their number for president and they shall give at least thirty days notice of the time and place of opening said subscription, in one or more newspapers printed in said county, and they shall hold their offices until the first election for president and directors takes place.
SECTION 2. The commissioners shall proceed to distribute the capital stock of the said corporation, among the subscribers thereto, and in case there shall be subscriptions for more than the amount of such stock, within the first three days that the books are opened, it shall be the duty of the commissioners to apportion the same among the subscribers thereto in rateable proportion, to the amount subscribed by the respective individuals; but in case the whole of the capital stock shall
not have been subscribed at the expiration of the three days, the commissioners shall continue the books open as long as they may deem necessary, to have the whole of the remaining shares subscribed.
SECTION 3. That one tenth of the amount of each share, shall be paid to the said commissioners at the time of subscribing, and the balance shall be paid in such instalments, and at such times as the directors or a majority of them, for the time being, shall direct and appoint: provided, that whenever the payment of any instalment is required by the directors, they shall give at least ninety days notice thereof, in a newspaper, printed in the county, if there should be any published at the time; if not, then in the newspaper published in the territory the nearest to the said bank, but no one instalmeut shall exceed ten dollars on each share,
SECTION 4. All such persons as shall become stockholders of said bank, shall be, and are hereby ordained, constituted and declared to be, until the 1st day of May, which will be in the year of our Lord 1857, a body corporate and politic, in fact and in name, by the name of the president, directors and company of the Miners' bank of Dubuque, and by that name, they and their successors shall and may have continual succession during the term aforesaid, and shall be persons in law capable of suing and being sued, pleading and being impleaded, answering and being answered unto, defending and being defended in all courts and places whatsoever, and they and their successors may have a common seal, and may change and alter the same at pleasure; and they and their successors, by the name of the president, directors and company of the Miners' bank of Dubuque, shall be in law capable of purchasing, holding and conveying any estate, real or personal, for the use of said corporation: provided, that it shall not be lawful for the said corporation to hold real estate for an amount exceeding one-tenth part of the capital stock actually paid in, excepting, however, the banking house and lot necessarily appurtenant thereto.
SECTION 5. The stock, property, affairs and concerns of the said corporation, shall be managed and conducted by a board of seven directors; the said directors shall all be residents and citizens of this territory; they shall choose one of their own number to be president, who shall hold his office, as also shall the directors, for one year, and until others are duly chosen. The directors shall all be stockholders in this incorporation, and they shall all be elected on the ist Monday in October annually, at the banking house of said stockholders, and public notice shall be given in some newspaper published in the territory, at least sixty days previous to holding said election; and the said election shall be held and made by such of the stockholders of the said bank, as shall attend for that purpose, either in person or proxy, which proxies shall only be to stockholders, or to the cashier of the bank, and the pluality of votes shall be sufficient for a choice; and the said directors chosen at such election, as soon as may be thereafter, shall proceed in like manner to elect one of their number to be president. And if any director shall cease to be a stockholder, his office shall be considered vacant, and when any vacancy shall happen among the directors, by death, resignation or otherwise, such vacancy shall be filled for the remainder of the year, by the remaining directors, for the time being, by the election of one of the stockholders.
SECTION 6. That in case it shall happen that an election of directors shall not be made on any day when pursuant to this act it ought to have been done, the corporation shall not for that cause, be deemed to be dissolved, but it shall and may be lawful on any other day, to hold and make an election of directors, in such manner as shall have been regulated by the laws and ordinances of the said corporation.
SECTION 7. That the directors for the time being, or a majority of them, shall have power to make and prescribe such by-laws, rules and regulations, as 10 them shall appear needful and proper, touching the arrangement and disposition of the stock, property, estate and effects of said corporation,