« PreviousContinue »
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,a “ 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 to be that of keeping of all restrictions out of the Constitution, leaving to the future Legislatures, before which the chartering of a bank might come, the deciding of the character of the details in the light of all the knowledge the Convention now had and that might be gained in the interval. The Democrats occupied two positions. Those of that party who had been in favor of the minority report were in favor of not only the restrictions in the majority, but others and stronger ones. Those in favor of the restrictions of the majority report were in general men who either favored a well-regulated banking system from principle, or who considered themselves pledged to assist in devising a well-regulated system, and they were in favor of having some of these restrictions in the Constitution and leaving some of them to be provided by legislative action. The result of this division of opinion among the Democrats and a portion of them combining with the Whigs led to a division of the question and a consideration of each restriction separately.
The motion to strike out the second section, providing that the bank and branches should not commence operations until half of the capital stock subscribed for shall be actually paid for in gold and silver, when it came to a vote produced a curious result. No hard money Democrat could vote against such a proposition; and only five votes of Whigs who held extreme views upon leaving restrictions to the legislative action voted to strike out the provision.
The amendment to the third section, changing the denomination of the smallest bill to be issued from ten to fifty dollars, caused eighteen persons, mostly radical anti-bank Democrats, to cast their vote in favor of it. An attempt to reduce the size of the smallest bill from ten to five dollars was lost? by a vote of twenty-four to forty-five. The great majority voting in the affirmative were Whigs. On the next morning3 the attempt to strike out entirely the provision, providing that the bank "shall not have the power to issue any bank note of a less denomination than ten dollars," only received fifteen votes in the affirmative, all Whigs, while fifty-two were cast against it.
1 Journal of Convention, p. 93. 2 Journal of Convention, p. 94. 3 October 22, 1844.
The section in regard to the remedy for the collection of debts being reciprocal was not struck out.
An attempt was made to amend' the section “The stockholders shall be liable respectively, for the debts of said bank and branches,” by the addition of two clauses. They were:
In any sum not less than double the amount of the capital stock described in their charter, in good real estate, to be valued by persons appointed by the Legislature of the State, approved and signed by the Governor and Secretary of State, and they shall never be allowed to take any security, either directly or indirectly, for any money loaned by them in their corporate capacity.
That no bank chartered under the regulations of this Constitution shall ever lend any money or any bank note or bank notes to any member of the Legislature, or any other officer in any civil department of the State.
This amendment was defeated by a vote of 14 to 52; and from that one requirement, that of forbidding the taking of security for debts, it seems as if the vote against it should have been greater.
But the fifth section was amended by inserting “jointly and severally” for “respectively” and by adding to at the end of the section “whether they hold the stock in their own names or by trustees, to the full extent of the debts of such bank.” The motion to strike out the amended section was lost by a vote of 17 to 52.
The sixth section was amended by striking out "according to the promise therein expressed” by a vote of 53 to 16. This section, as amended, would make it impossible for a bank organized under the law to issue any post note, or any other kind of an obligation than a demand obligation.
1 Journal of Convention, p. 96. a Ibid, p. 96.
3 Journal of Convention, p. 97. 4 Ibid, p. 98.
An additional section was offered to be inserted after the sixth, which provided that “ No bank shall be allowed to issue a greater amount of bank notes than double the amount of capital stock actually paid into such bank in gold and silver," but it was rejected.
The seventh section, which secured to the legislative assembly the power to amend or repeal the charter, was attempted to be amended by a provision requiring the act of repeal to be passed by both houses, approved by the governor, and submitted to the people at the next general election, and if a majority of the qualified electors approved it, the act of repeal was to become a law. The amendment was not agreed to; and the section was not struck out.
An additional section was added, which was that “Any violation of, or non-compliance with the provisions and restrictions contained in this section, by the stockholders, commissioners or officers, or persons connected with the creation of any such bank or its management, in any of its accounts, exhibits, certificates of stock paid, or by embezzling its funds or property, shall be punished by fine or imprisonment in the penitentiary, and shall subject the offender to the same disqualification as conviction for infamous crimes.” The vote upon this additional section was 37 yeas to 33 nays.
An amendment requiring the pledging in real estate or United States stock to three times the capital, as a security for the redemption of the liabilities of the bank was voted down by a decisive vote.
As decisively, an additional clause was passed forbidding the State of Iowa from becoming either directly or indirectly a stock holder in any bank or corporation.
By a votes of 27 to 29, there was rejected an amendment which provided that only one bank charter should be passed by the same Legislature.
The reportó of the Committee on Incorporations as now 1 Journal of Convention, p. 99. 4 Journal of Convention, p. 103. 3 Ibid, p. 99.
3 Ibid, p. 104. 3 Ibid, p. 100.
6 Ibid, p. 107.