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liabilities depreciated very much. It was claimed that they had been bought in at a very great discount by the nonresident stockholders of the bank, and that in this manner they had realized a large sum.

Shortly before this we find that a number of citizens of Dubuque and adjoining counties had petitioned Governor Chambers to direct the district attorney to file quo waranto proceedings against the bank; but the governor refused to grant the request. The radical anti-bank paper of the Territory, the Iowa Capital Reporter,' could see no reason why this reasonable request was refused, for the bank would have a chance to defend itself in a court of law, and if, as its friends claimed, there had been no violation of the charter, no forfeiture could be declared, and the bank would come out of the ordeal with a better credit than it had ever had since its organization. If the governor had permitted this prosecution to have been commenced, the bank would have had the advantage of a strong federal bank Whig to prosecute the case against it, which many deemed would have been a decided advantage for the bank over its opponents. It also stated that those persons who had attempted to bring the bank to justice had been defeated three times and that they were about to make a petition to the district court to bring it to trial. This case, after various delays, came up for trial in the May term of court in 1845. The case was ready for the jury when it was dismissed. The friends of the bank claimed that it was because the prosecution was unable to prove fraud or mismanagement in its corporate affairs. The prosecution claimed that the reason why the case was dismissed was because the books of the bank were so mutilated that it was an impossibility to tell what the character of the earlier organization of the bank had been.

1 March 19, 1844.

CHAPTER VI.

THE QUESTION OF BANKING BEFORE THE CONSTITUTIONAL

CONVENTION OF 1844.

I.

The Majority and Minority Reports on Banks. The first constitutional convention met at Iowa City, on October 7, 1844, and on the morning of the rith the Committee on Incorporations made a majority and minority report: on banks. The majority report provided for a bank with branches, but not more than one branch could be organized for every six counties. The bill to establish such a bank and its branches was to be passed by the majority of members elected to both houses of the Legislative Assembly, to be signed by the governor, and then to be approved by a majority of the qualified electors” of the state before it became a law. One-half of the capital stock was to be “actually paid in gold or silver," and this amount was to be in no case less than one hundred thousand dollars. The bank and the branches were not to issue any notes of a less denomination than ten dollars. The remedy for the collection of debts was to be reciprocal against the bank and its branches. The legislature reserved to itself the power “to put an end to the corporate powers and privileges” if the bank or its branches refused to pay on demand any “bill, note, or obligation issued by the corporation, according to the promises therein expressed." The Legislature also reserved the power to alter, repeal, or amend the charter, at any time that they might deem that the public good required it. The stockholders were to be respectively liable for the debts of the bank and its branches.

1 Journal of Convention, p. 28.

89

On the 19th the reports of the committee came up for consideration, and a motion' was made to strike out the majority report and insert the minority report, which was: “No bank or banking corporation of discount, or circulation, shall ever be established in this state.” The debate upon this motion commenced early in the morning session and continued through that and the afternoon session. In the warmth of debate, the question of party politics was introduced, and an attempt was made to draw the lines and force the delegates to vote according to the principles laid down by the democratic or whig party. The convention was democratic in politics, but many of the delegates elected by the democrats had been, or at least felt that they had been, pledged to vote for a well regulated and safe-guarded system of banks of issue. The discussion of these questions of actual and implied pledges called forth from one of the delegates the remark,2 “that if the delegates were pledged, he supposed that they would have to vote against their principles, and the result would be that this democratic convention would pass a whig constitution.” But the final result of this day's attempt to draw party lines was unsuccessful; the strongest argument against the dragging in of partisan politics was made by Lowe3 of Muscatine county, and Lucas of Johnson.

The strongest argument made against the majority report was that many abuses could creep in under the regulations as they had been made in it. The difficulty of ascertaining whether the required amount of specie was paid in or not, was pointed out, and it was shown that these requirements had been evaded in Massachusetts by the directors borrowing the specie until after inspection was made by the State Commissioners and then passed on to other banks for their use.

The individual liability clause was attacked on the ground that if a "swindling concern” was to be organized that the stockholders and officers would be found exemption proof as they, had been when connected with like concerns in the past. The history of the abuses of different banking systems was fully discussed; but the conclusion was reached that judicious amendments of the majority report should be attempted before it was rejected. The question of the substitution of the minority report was defeated and farther consideration of the possibility to form a banking system for Iowa was assured.

1 Journal of Convention, pp. 89-90. 2 Iowa Standard, October 24, 1844. 3 Ibid.

When this report came up for consideration again, an attempt was made to strike out all the bill after the first provision, requiring the law to be submitted to a vote of the directors, and leave the regulation of the details of the banking system to Legislative authority rather than to incorporate them into the Constitution. The central ideas of those in favor of striking out the provisions seemed to be a desire to give freedom to legislation, and that the Legislature, was the proper body to devise special restrictions; another was that no plan of restrictions that could be inserted in a Constitution would be sufficient to procure complete safety to note holders.

One argument introduced was that if the unlimited individual liability clause was retained the effect of it would be that only men of great means would invest money in legitimate banking business; by reason of the large number of shares owned by them, they would be able to control the management of the business and in this way protect themselves against loss. This would have a tendency to prevent men of limited means, such as laborers, artisans, etc., from investing their surplus money in the banks. To place the banking system of an entire state in the hands of a few persons would tend to make the whole system insecure; for where the most stable banking systems were formed, in the Eastern states, the capital of the banks was owned by small stockholders. Objections were made to the repeal of the amendment or repeal of the charter by the Legislature, but in support of this provision the laws of Massachusetts were cited to show that such action was not based on a new principle.

The debate upon this brought out the position of the Whigs

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