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2. The Issuing of Post Notes.
The issue of post notes by the Miners' Bank was one of the serious objections made against it, and in the minority report this was considered to be an infraction of its charter. In the charter there was no provision for issuing them, nor was there a provision forbidding their issue. This bank simply followed the precedents, some legal, some illegal, established by many banks, in the issue of this class of notes.
Leaving the question as to the legality or illegality of their issue for the present, let us turn to their early history, and as there is not a resume of the history of the issue of post notes in any one place, it may seem in some respects, at least, but proper to notice here in a fragmentary way, a few of the more important instances in which they had been issued in the past history of the country; and also some instances where the different states had prohibited them.
The term “post note” has given rise to confusion because it was applied to notes payable at some future date, either “to bearer” or “to order," either “with” or “without” interest; so there were really four classes of them to which the same name was applied.
At the close of the war for “Commercial Independence," : all of the banks had suspended specie payment. At the special session of the General Assembly of Connecticut, an act? was passed, on January 15th, 1815, which empowered each of the incorporated banks within the state to issue bills to the amount of one-half their paid up capital, payable on demand two years after the close of the war. These bills were to be receivable for all debts due to the banks. The bills of the banks were now put out under two forms: the first promised to pay the bearer in notes of New York banks, on demand at the specified banks at New York, or in specie two years after the war; the second promised to pay the bearer in specie two years after the war. By an act passed at the regular session
of the General Assembly, in May, 1815," the power of issuing these post notes by the banks was to cease on January ist, 1816.
For the purpose of adding the business of buying and selling London exchange to their regular banking business, the Suffolk Bank directors, on the fifteenth of August, 1818, appointed a committee to secure the necessary funds by the means of a loan based upon post notes.
On February 5th, 1819, the General Assembly of Ohio passed a law3 which had for its purpose the compelling of banks to resume the payment of their notes in specie, it contained a provision which made it unlawful to issue bank notes payable at a future date. On December 24, 1824,4 the Bank of the State of Alabama was authorized to issue post notes payable to order; they were not to be for a period exceeding one hundred and twenty days and were to be redeemed in specie.
The Massachusetts Legislature, in 1836,5 allowed banks to issue post notes up to fifty per cent of their capital and in denominations not less than five dollars. Interest was to be paid on these notes at the rate of four and one-half per cent. per annum; interest was to cease when due. This act was repealed on February 1, 1838.
Dr. Dyott's Manual Labor Bank of Philadelphia, in 1836, . issuedó post notes in denominations ranging from one to twenty dollars. This bank was in existence for a period of only about three years, and then failed with almost total loss to its creditors, who were mostly from the laboring classes.
On January 18, 1834, the Bank of Mobile and its branches were authorized' by the Legislature of Alabama to issue post notes, without interest, until a demand for payment was made. These notes were to be made payable to a specified person,
Session Laws, 1815. 2 The Suffolk Bank, p. 6. 3 Session Laws, 1819. 4 Session Laws, 1824. 5 Session Laws, 1836. 6 Niles Register, Vol. 56, p. 36. 7 Session Laws, 1834.
and the longest time for which they could be issued was ninety days. By the act of January 2, 1835, the bank and its branches were allowed to issue post notes only to the extent of one-half of the paid up capital; one-half of these being made payable at Philadelphia, New York and Boston, in specie.
At a special session of the Legislature of Mississippi in 1837, an act was passed allowing chartered banks to issue post notes to bear interest at a rate not exceeding five per cent. and to be loaned at a rate not exceeding nine per cent. The period of time for which they were to be issued was from six to thirteen months, and if not redeemed when due, they were to be endorsed and draw twelve and one-half per cent. interest. The banks must receive them for their own debts, and they were to be receivable for taxes, provided the bank had not at any time failed to pay its notes in specie.
In January, 1837, and again in October, 1838, the United States Bank of Philadelphia resorted to the use of sixty day post notes bearing six per cent. interest, and put them in circulation in those portions of the country where specie payments were not made by the banks.
The charter of the Union Bank of Mississippi was re-enacted3 on February 5, 1838, there was no specific provision in it for the issue4 of post notes, but there was a provision that it could not issue post notes of a less denomination than five dollars. It put out a large issue of these notes claiming that they were based upon the backings of the state. It was of this bank that the eccentric Governor McNutt, in his Inaugural Message of 1839, complained of its issuing depreciated post notes, thus forcing borrowers to pay at the rate of twenty-two per cent. per annum.
The Bank of Arkansas issued post notes from the time of its commencing business, and the Batesville Branch, in June 1838, had in circulation' $7,785 in demand notes, and $241,943 in post notes.
1 Session Laws, 1835. 2 Acts, Special Session of Legislature, 1837. 3 Acts of Legislature of 1838. 4 Section of Charter. 5 6 Howard (Miss.) p. 627. 6 See Inaugural Message, p. 2.
In 1840 a law2 was passed in New York which defined the issuing of post notes as a misdemeanor, punishable by fine and imprisonment. In the same year the State of Mississippi, by an enactments of its Legislature, forbade the issuing of post notes by any bank, and any violation of this law was to be punished by a forfeiture of charter.
“The subject referred to your committee4 (post-notes) has received that attention which its importance demands; and although the Bank of Mineral Point has issued and is circulating a kind of paper which has given rise to some suspicions of her solvency and ability to meet her issues, we are not prepared to say that the policy pursued by her is not absolutely necessary to enable her to afford those facilities to the mining and commercial interests of the community in which she is located and which at this time are so much needed.”—Committee on incorporations, Wisconsin Council, August 6, 1840.
Post notes were generally issued by the banks either as an expedient to tide them over until they were able to resume specie payment, or else under the guise of extending aid to the debtors while they were really borrowing from the would be borrowers from the bank. They may be well named "forced loans"; for the greatest portion of them bore no interest, and, if they did, it was always at a less rate than that charged the debtor for the loan of them. The borrowing of them was a transaction in which the debtor was always at a disadvantage. Upon the banks the effect of issuing post notes at the close of a speculative period, terminating in a panic, was to drive them lower and lower down into the depths of bankruptcy.
1 Report of Condition of Banks, 1852. 2 Session Laws, 1840. 3 Acts of Legislature, 1840. 4 Journal of Council, 1840, p. 18.
3. The Effects of the First Investigation.
To a portion of the community,' the friends of the bank, the report of December, 1837, of the majority of the committee was perfectly satisfactory. In an editorial of the Iowa News calling attention to the reports of the results of the investigation of the banks of the Territory, it was stated that the Miners' Bank was now proven to be in a safe and sound condition and that no violations of the privileges of the charter had taken place. The writer also deprecated the attempts that had been made to injure the credit of the bank, not only at home but also abroad, as it was evident to all fair minded persons that it was a direct injury to the whole community. It was clearly shown that previous to this time the community had suffered from the evil effects of a currency made up of the bills of banks of nearly all the different states of the Union; and that in most cases it was impossible to decide which was good money and which was not. But, if the growth of the business of the bank was not hampered and even prevented by these attempts, then the community would be supplied with a currency, the character of which would be known at all times, and the natural tendency would be for this money to take the place of the former mixed currency with which they had been afficted.
Again in the January 5th issue of the Iowa News, the editor re-asserted that to his knowledge the Miners' Bank of Dubuque was one of the “most solvent institutions in the country," and that it is with surprise mingled with indignation” that he perceived that certain persons who were actuated by "malevolent and base motives” were seeking to “stir up popular excitement against it.” The statement was also made that the bank had always promptly paid all of its own notes in specie, and was exchanging its own post notes for the notes of other banks, not redeeming them in specie. It called attention to the fact that it was obvious to all that those “who were endeavoring to create this excitement among the people, by raising false
1 Iowa News, December 9, 1837.