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MdDmirno
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UNION OUR, WATCnWORBTIlUTll TJTJL GUIDE.
TOL-XI
NEWBE1SF,. ATT,: JAOTABLX X0r,1829.
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REPORTS
:0fAc Joint Select Committee raised by t& Geiw &seip of-North-Carolinatat
its present session, on so much of the Governor essage
A m V ' -T I'll - HaAIMA. mm
as relates to the .Banks. Memoers oj we MC "l6'
Graham,' Brittain, Mendenhatt, Zprviu,nujnn,wutn, ctaw,
THson, oVoom, Meare, tfoni, Ja, Hunt, ara:M9
Dearmid, and Slierrard. v v - "'.;' :r:':.!-"'-:,-
The Joint Select Commitee, to whom was referred so much of the Got
emor's Message as relates to the Banks witbitt the State, t-r
V REPORT:
That in consequence of various rumors circulated, and charges made
aeainst the Banks, your committee have been induced to direct. their at
tention and inquiries to several points touching the conduct and situation
cf those institutions at various periods, and roore particularly have en--4oorr-H
t rprtaini whether the stock of the Banks has been paid for
? .i. u t;m. nrprrihed bv their Charters;: whether
Uw t nv time issued more paper, or contracted larger debts
i .u;, ,Qrfor aiifhnn'sffi- whether 'the v have 'paid specie on de-
fhand : whether they have dealt or traded in wiy nrficles iinaothorised
by cliarter : whether they have exacted osurous interest : : whether they
i1Qtr nnrrhased nn. or snprulated in their own paper i and such other
matters as were necessarily connected with these inquiries. -
Your committee have been satisfied from the evidence adduced to
them, that the first and second instalments of the Stock originally sub
scribed for in the State Bank of North-Caroling were paid for in specie,
fome srnajl proportion of the third and fourth instalments ; but that
much the greater part, (nearly the whole,; oi me tnira ana; lounn
instalments were paid for in the current Bank notes of the State. That
this circumstance arose, 1st. (so far as regards the 4tb instalment from
the impracticability of procuring the old paper currency of the Slate,
tyhich, at that time, was monopolized by the other.itwo Banks ; and se
condly, from the circumstance, that the Bank, having gone into opera-
tion. as required by its charter; after the second instalment was paid, and
before the ihirdwas due, and having" issued its own notes to a large1 a
mount, redeemable oh demand in specie, was necessarily compelled to
consider those notes equivalent to specie, an J as such, receive tnem in
payment. . ' , '. ' "':'fI-'.'1j"-; ' "'; '
Your committee, however, further slate, that at the tirne when the
third instalment was due, there was in the principal Bank at Raleigh, a
larger amount in specie, than three-fourths the Stock subscribed for at
that place by individuals, arid that previous to the timn when the fourth
instalment became due, there had , been in its vaults $160,467 in specie,
which subsequently, and before the 4th instalment was due, was reduced
by runs upon the Bank, to $62,809 in specie, besides $11,829 in the
paper currency of the State. That bad the whole capitai subscribed by
individuals at the principal Bank in Ral jgb been paid in specie and pa
per currency, there ought then to have been paid into the Bank $184,
000 in specie and paper currency. ' , ? ;
As to ihe manner in which subscriptions were paid for at the various
branches of this institution, your committee, have had no correct evi
dence. :
Your Committee have no evidence of any time being prescribed Tor the
payment for Stock, different from that prescribed by the cliarter.
It is further in evidence before your commiitee, that the whole Stock
of this Bank was not subscribed for when the books were originally o
pened ; and that by an act of Assembly, passed in the - year ' 1311, the
corporation as required again to open its books for subscription to fill
November 1818: and that these shares were paw m sa.cn notes as were
then currently circulated in the State ; and that although the Banks of
the State were then considered specie paying Banks, yet it appears that
at the principaf branch of the State JBank, there was at that time $99,
9SS 06-100 in specie, while the notes of that branch in circulation, a
xaoonted to $1,183,667. ,
As to the Banks of Newbern and Cape-Fear, on tTiis point of inquiry,
?rour committee report, tint the evidence satisfies tbenf, that when those
nstitutions first went into operation, by virtue of the act of 1804, their
Whole capital was paid in specie. That when theiff capital was enlarged
by te new charter granted in the year 1814, the new Stock was paid for
jn the Bank notes of the State, and other current notes.' V .-
As to the second point of inquiry to which your committee have direc
ted their attention, whether any of the Banks of this State have at any
lime issued more nots, or contracted larger debts than they were author
ised to do by their charters ? They report, it does not appear to your
committee that either of the Banks of this State have issued more than
three dollars for one of their chartered capita ; but that all they Banks
have issued more lino three for one for every dollar in specie actually
paid in for Stock. ; ;v :
As to the next inquiry, whether the Banks have paid specie on de
mand for their notes ? Your committee report, that during the late war,
when the whole Southern States were drained of their specie in conse
quence of the large expenditure of money at the North, the Banks of
North-Carolina, together with all the Banks in the United States south
of the Potomac, suspended specie payments, as a necessary protection of
their specie capital ; and that soon after the war, viz. tin . 1815, 1816, or
1817, the Banks of this State, resumed the payment of specie, and from
that time did pay specie on demand for their notes until June 1819, when
by a ioint resolution of the three Banks. ; it Was resolved to resist the hea-
'Vv drafts made upon their funds : by brokers ; and they , declared they
would not thenceforward Dav specie to brokers or their agents. That
since it has been found that brokers; compel them to pay specie, the
Banks have in general paid brokers their demands, and have as general-
Jy refused .payment of their notes to citizens of the State : not owing
however, as is believed, to any preference which the Banks entertain for
brokers over citizens, but because the former being capitalists, have it in
their power to coerce them : while the latter, rather than endure the
law's delav, corrtent themselves with their notes, and forego their claim
to specie. (ThaUstnce that period, (J one, 1819,) though, iu effect, the
canKS oi metate nave eitner voluntarily or oy compulsion paiq an ae
xnsnds against them, which were persisted in, in specie, or funds deemed
equivalent to specie; vet frequently those demands have not been met
promptly ; and, in some instances, payments, have been made' only thro'
the coercion of the law. It is, however, due from Your -committee to
state, as regards the Bank of Cape-Fear, that that Bank, since the early
part of January last, has promptly paid, in specie, or specie funds, all de-
mands upon it,and has been, in letter and in practice, a Dona rjae spe
cie paying Bank. . t - . ; !, . ' , v
As to the inquiry, whether' the Banks have dealt'or traded in any ar
tides unauthorised by their charters, your committee report, no evidence
has been brought before them to show that the Bank of Newbern has
ever dealt in any article, hot liberally and strictly comprehended in its
charted That both the Bank of Cape-Fear and the State Bank of North
Carolina, have purchased Stock of the Bank of the. United States ; and
the former Bank is now owner of a considerable, amount of! that , -Stock.
That said Banks were induced to purchase that Stock j 1st. as a ready
Jneanis of acquiring a fund at all times equal to specie, and when, io fact,
apeciu was dot attainable ; and, 2d jy., because in consequence of; the
immense' capital p( the United States? Bank," it was deemed prudent and
.proper, to avoid facility in paying Jts demands,' and better to pay iuteresl
its demands, as the payment of interest,; without a profitable invest
rnnt of their specie . funds, w ould produce heavy losses to (hose Banks.-
"he Stock of the Bank of the United Scates,'on which' regoiardividends
"Were received, afforded not only a specie fund, but one yielding a; regu
lar profit; Your committee are satisfied,- these investments are contrary
to charter, but Vere4he result of the situation of the Banks, and ihe pe
culiar situation of the country nd the times, ; and from' them, much good
as .rpsuueji to pp Banks and na h$xm oh$ country w tbts lead
is lurther shown, that the State Bank of North Carolina has, on different
occasions, in this State,. and in Souih, Carolina arid. Georgia, : purchased
cotton to a considerable amount. That these purchases were made at
a time wen the Bank was greatly in needToflrpecie toiaeet the constant
and heavy demands made upon irj and when specie was riot attainable;;
hiiu were maae ior me . purpose or placing muus in new- i,orK, wuicn
would be at all times equal to specie. y Kc ; . f -
On the inquiry: whether the banks -have exacted usurious interest ?
Your committee report, they have, evidence," that the State Bank and
Bank of Newbern have required applicants for accommodation, to ex
change with them an equal: amount ofj Northern funds for their own
notes,, when their own notes were 6, per; ctfnty below par and that, the
dtate I5ank has taken interest for 92 days on a note payable 88 days af
ter date -There is not any evidence that the Bank of Cape Fear has e-ver-
taken more than legal interest ''V-j:-
Your committee further report, that they, have not bad any evidence
that the Bank of Newbern has ever bought op, or speculated .in its.own.
notes. - It has been proven to your committee,' that the JState Bank, of
INortn Carolina and the Bank of Cape J? ear, have, at dinetent periods,
purchased their notes in the Northern market to some extent The
State Bank to the amount of $ ., '. ' i ,. " and the
Bankjof Cape Var; to the; amount of $ . " I 's'zCk '- & M'
these purchases were made aia discount on their notes, but vatways at a
higher price than others would give Yor- them in the market ; and ;thai
the Banks did sb,! only for the purpose of appreciating their notes and
giving them greater currency. ? ' ' ; - r
From the whole investigation your committee are satisfied, that du
ring the years 1817, 1818, and 1819, all the Banks in North Carolina,
in common with almost all the Banks in the United States,, issued their
paper to an amount exceeding the limits of produce.' That ince their
error has become manifestfrom a great anxiety to avoid oppressing their
debtors, they have not called in their debts to the extent they might have
the eflVct of that indulgence has been to add greater se
curity to the debts of the institution, and to avoid much individual ruin
and distress. ..; " ' ' :'x . " . ;
Your committee are further satisfied, that the condition of all the
Banks is much improved, and that the Bank of Cape Fear has already
become a bone fide specie paying Bank. '
Your committee recommend to the Legislature to pass a law imposing
a penalty of per cent, on all the Banks of this
State, which may after the ' day of
next, refuse to pay specie, f on demand,) for their notes.
, Chairman pro. tern.
The undersigned, members of the Joint Select Commiitee, to mhom iras
referred so much qf the "Governor's Message, as relates to the Backs',
'( having had the subjec t under consideration, knd examined such testi
mony, in relation to it, as they could conveniently procure, respectfully
submit , as the result of their investigations, the following
REPORT:
The Legislature having laid dow n, in the charters of the several Banks,
certain fundamental articles for the government thereof, the committee
assumed these articles as the basis of their investigations, and proceeded
accordingly to inquire, in the first place, whether the Stock of the seve
ral Banks had been raised in the manner. required by their charters ?
The evidence received by the committee on this point, shows that the
charters of the Banks were disregarded and violated in the very creation
of their capital. !
Thecharter of the Bank of Cape Fear.i enacted in 1804,, authorised
thorised tbe Bank to. opera te.on a. real and intrinsic; cftpitf!, at d dirrel
that, theapitaLsbouldiijie paidrlmcVthe Bank bv tlie' Stockholders
irreted:
lap the unsBbscribecTStoclTisoun -ao1 Jhafthe char-'
ter of the Newbern Bank j enacted in the same year, authorised that Bank
to raise a capital stock of $20.0,000 ; both charters directing the capital
to be paid by the Stockholders in gold or silver. The undersigned have
received no evidence as to the mode in which these Banks got into ope
ration. It would seem, however, that they contemplated, at the outset,
an evasion of the provisions of their charters. It is in evidence to the
undersigned, that soon after they went into operation, they contrived to
gei possession ot nearly all the paper money which bad been issued on
the faith oNbe State, which, being at the time a legal tender, euabled
them to evade demands for specie, which they did, by thrusting this rag
ged paper at those who presented their notes for specie. In 1807, 25.-
000 was added to the capital stock of each of these Banks : in 1814,
their charters were extended, and they were authorised to increase their
respective , capitals to $800,000 each, viz. the Newbern Bank was au
thorised to raise an addition to its stock of $575,000, . and the Bank of
Cape Fear, an addition of $525,000. It is in evidence to the under
signed, that the whole of this additional Stock was manufactured by the
Banks themselves, and that, in manv instances, favored individuals were
permitted to acquire stock by subscribing their names, and putting their
notes into Bank, without advancing a single dollar of actual capital. It
follows, that the whole amount of the interest drawn, from the people, on
the loans made on this fictitious capital, was a foul and illegal extortion.
The effect of the transaction was the same astf the Dretended stockhol-
ders hadindividually executed their notes of hand, without interest, to
the amount of the notes which thev issued from the Bank, and exchang
ed them with the people for their notes, bearing interest,' and renewable
jr ii.viy uaja. idling iu; issuw raaae on inis laoricmea ica
pimi io uc iu prupuruon yrnn inose made on the lormer capital, thev
must have put into circulation, on the faith of the 'assumed Stock, be
tween 3 and 4,000,000 of notes : and thus, a parcel of individuals, under
the name of Stockholders, but who, in lact. held no Stock, contrived to
exchange their notes, without interest, to the amount of 3 or 4,000.000,
ior ine notes oi me people, bearing an interest of more than 6 per cent ;
and while the property of the people was pledged for the payment of the
notes tney naa given to the Stockholdrs, there was not a dollar or an
atom of property pledged to them for the oavment of the notes thev had
received from the Stockholders ; so that for the use of their notes, which,
intrinsically, were of no value at all, the Stockholders of these two Banks
have drawn from the people, by way of interest, something Kke $200,
000 annuallv. " - :'
The charter of the State Bank, enacted in 1810, authorised that cor
poration to raise a capital stock f $1,600,000, and directed books to be
openea io receive suoscriptions for that sum, requiring, at the same time,
that individuals subscribing, for stock, should; pay three fourths of the a-
mouni suoscrioea in goia or silver, and tiie other fourth in the paper cur
rency, issued on the faith of the State. Books were accordingly opened,
and the sum subscribed, including the subscription of $250,000 for the
State, amounted to $1,175,600. Of this sum, only $500,000, or there
abouts, was paid into Bank, as required by the charter, in gold or silver.
The balance was paid in Bank notes. Upon the capital thus constituted:
the Bank wenton to operate till Novemberi'li5i8 5 at which time, the
proportion peiween me notes in circulation and the specie on hand, was
nearly 12 to 1. ; In other words, the i Bank "had lareelv upwards of IU
add nearly 12 dollas of their notes in circulation, for every dollar of
specie in their vaults. The Directors then vordered books to;be opened
to receive subscriptions for the $424,000 .which, remained unsubscribed
when the books were first opened y nd it fbrms ia part of Ahejorderby
which this additional subscription was aothoVised, that the subscribers
might pay it in the notes of the Bank. .The reason assigned for this ope
ration, of the directors, is, that' thev were desirous of applving the spunge
to a part of their outstanding debt, and, by way of calling- in $224,000
of their notes, they authorised individuals who held them to subscribe for
stock irV Ihe; Bank . to that amount, and pay f dr it: in ; their ' holes. IThus,
at a timewhen tbey had in circulatipn nearly 12 dollars in notes for eve
ry dollar of specie in their vaults, and when most obviously they were
unable to redeem their notes'. with specie, they purchased them from the
holders by the sale of stock which ihey themselves created by the mere
the transaction alluded to, the. Bank itself, b a, scribbling process of itt
wn '.s.reated,the. capita and paid 'ofj a, portion of ; its debt, by. the very
act by which it also increased , its capital. ; A ci
greaMadds to theerMrmity otth
stalments became payable theaterBatilc, the Bank" of , Newbern and
Bank of Cape-Fear entered into fofinal resolmion,' through their xlele
ates assembled in Fayetteyille,1 in" June, 18 ignot to' -pay specie ; and
their notes immediately fell ,tb 15 per cent belowpa., Then comrhVh
ced the system of usury arid extortion which h'aV.sirice been carried da
with such unparalleled audacity undetr,th nam of exchange. ! Up td
this tlme viz. 18l9r.the high tide of' commercial 'prospei ity enjoyed by
the country, enabled the Banks to. keep. afloat; notwithstanding tlie artifi
cial cbaractet of their capital ,.witnout resorting" to this sdarins and disho
oest expedient.. ; They had kept pace in their operations with the increa
sing resources of the country, so as to absorb, by way of interest on dis
counts nearly all the profits pa the immense business then" doing ; and
having raised, against the people a deb jeqoalt to ' the vant resources.
which ffoai 1815 to that time, tb their foxetgjii.com-
merce, as soon as the alteration . cutred in our foreign, iflations, aid
those tesources were cut off: the AjtWamrv. ueable anv Ion "
jer ft errloy th'i medio m wtfieh bad tien crraivd
by .the canks and their notes returning- upon theot'for rfdompt'on myt
determined toexbrt from the - people additwinal .premiums on lon. v ia
order tiV enable them to meet the demands of thpir creditors. , A scene
of extortion and usury ensued, which has no parnlll iu the annals of! la
varice the strange spectacle.of monied institutions exaciing. specif in
exrhange for their notes, which they themselves refused to redeem with
specie. To show the gross character of the usury thus. carried on the:
undersigned will suppose. a case.: An individual t applies to the Bank
'or a loan of 1000 dollars, imd offers his note to he. discounted . for th' 'a
mcunt. He is told by the Banjk thai his note cannot be -discounted, un
less he will exchange with them $1000 of specie fords, for r $1000 of
their notes. Taking their notes. to be 5 per cent, below par, $1000 of
their notes would in fact be no more than $950 Sq that the substance
of such a proposition would be, that the borrower should give the liink
$50 as a premium for the loan o! $1000; which, added to the legal ins
terest received in advance, would amoant to something more than 11 per
cent. , in some instances,, the usury has been still more lank. Quantities,
of their notes have been loaned to individuals on condition that Jhe. whole
amount should be returned in ninety days in specie! Junds, At the rate of
depreciation before stated, such a transaction would be equivalent to ihe
exaction of 26 per. cent. The evidence received., by ? "the. , .committee,.
sows that the State Bank and Bank of NewUern have been guilty of;
such practices sincerthe summer of 1819, There. is ho evidence that the.
Bank of Cape Fear has. It appears in aggravation of the guilt of the
practices, that, in the case of the State Bank, the specie funds thus ..extor-
ted from the people in exchange for their depreciated notes, .have bfett
employed by the Bank in purchasing back those notes at a discouLnl
That they have, at times, employed agents in New X ork and Petersburg
io buy up their notes ; and that about twelve months since, a parcel of '
their notes were bought up by theirvagent at 'Petersburg ai.8 per c?nr.?
discount. It is stated bv the President of the Bank of ICape Feir, for
whose testimony too much respect cannot be expressed, thatlhe.noieot
that uank have, at different times, been bought up at discutiui py uie
Bank. 1 That a quantity of its notes were so purchased io Anticipation of
the late call of the Stockholders; and that during the panic occasioned ty
that call, something like $500 of their n,otea, were bought up by the Hhok
at a discount of 5 per cent, 'The -depreciation. of, ihe, notes ot if'.the
Banks, occasioned by the refusal o( the Banks to make good thir noteg
with specie, has ben productive of incalculable michit to Hip conmiu
nity ; and it is no inconsiderable.agjrrivatiOn of the mischief to know,
that, in the case of the State Bank, Urge. quantities of their notes have
occasionally been thrown into circulation by themselves in the purcliasei
of cotton. It is in evidence to ihe undersigned, that they laid out at one
time $30,000 of their notes, in the purchase of cotton, on which they
made a profit of more than $8,000. Another remarkable fact in ihe
history of the State Bank, which the undersigned will notice in passing,
is, tnat to protect tnemseives trnm cemanas ior specie, mey aeieriumea.
at one time to administer an oath to an individual, presenting their n es
for specie, in which he was compelled to state that he was not a.' broker.
It further appears to the undersigned, that all the Banks have bought up
United States' Bank notes, by which they exchanged their own notes at
a discount ; and the State Bank and Bank of Cape Fear, in dnect via!
tion of their charters, have purchased stock to a considerabie amour t in
the United States' Bank. The State Bank 'appears to have made a must
convenient use of this arrangement,' It appears from trie evidence ot the
late President of that Bank, that they have' been in the habit of rendering
false statements to the Legislature 5 and that in May last, when ihey .
stated in their exhibit that they had on h ind $214,000 in fpeci $140,-.
000 of it consisted of stock in the United States' Bank; 0 that instead
of keeping the specie in their vaults to take up their paper, ihe liav
vested it in the stock of another Bank, and wie deriving interest from
it. It further appears, from the. evidence of the same person, that the a
mount of actual specie now in the State Bank at Kaleigh, is not more
than 300 or 400 dollars : at any rate, not exceeding 1000 dollars.' ; j
The undersigned have now gont through the details of the. evidence,
and stated all the essentia facts collected In the course of theirxarnina
tion. "Having thus Embodied a simple statement of the facts, they would
here close their-report, and leave the conclusions and arguments totii'e
Legislature ; but they feel themselves impelled, by a solemn sense of the
duty which they owe to the Legislature and the country, to lake a brief
view of the present relation between the Banks and the people, andjihe
xnsequence which must ensue, if the Banks are permitted to continue .
their operations ; and, in doing so, to advert to the report of thecommit
tee bf the stockholders of the State Bank at their Jate general meeting. It
appears that the people of North Carolina having already paid to the
Banks, since they went into operation, a profit of about $4,000,000 oni
their stockstock, too, three-fourths of which, was. manufactured by thei
Banks themselves in a fictitious and fraudulent mahnerthat having paid '
this immense sum, exceeding four'times the amount of the actual capital!
stock ever paid into Bank , according to law, they still hold the: notes of
the people for more than $5,000,000, about four times the amount of ihe)
whole circulating medium of the State. 'Thus it )M in the power oj the
HmVjs absolutely to extinguish the currency'; of the country,' and when
they have taken every dollar but of circulation j still to have a debt against
the people, to the, amount of about $4,000,000. We say it is in their
power to dp it; and they intirriate pretty plainly that they'twV do it
The communication from the stockholders of the State Bank, now bef.-re
the committee, expresses the opinion that it is for the interest of the
stockholders to withdraw their money from. the Bahkr and take it under
their own management ; and contains a resolution by which they have -
proclaimed their resolution to; .assemble in June next, in order to deter
mine whether they ' will ' proceed to unnd up their affairs; and, conse
quently, ffe affairs of the people of North Carolina. Thos having, for
years, contrived. by ; illegal and fraudulent practices, to draw from the
pVbpl'air'theioM of their labor and having by these practicespiaced
the people in an impbyerislied; condition, where they can no longer pay
them large profits, they are now 'preparing byf one fell. swoop to extort
from them the : actulSmas subsistence. ' But the question occurs,
Will you permit it ? Will you permit 0 parcel of men, who have ; long '
set the laws of the country atdefiance, to go on and complete: the roin.
they have already so nearly accomplished ? vWill you not 6rirg them to j
the observance of the law ?' I Will you hot at length cause them fo feel r
the rod of that jfaw they, have so long despised and violated ? These j
questions, your committee conceive, answer themselves. vuen ine L,e- .
glslature is called upon to determine wheiher leir consiitutUm shall . live .
under a government of laws, or a government of corporations, it'cuhhot
art of subicrintion: t Thi ihi .,ndprvim-d ronrpFvP to have been a most I be difficult to TdecideJ The undersigned"; tberefbie; recommend le the
iijflagrw anjrajaqu tiegniatare we aaopiiww viu iwuwiriMg wtu.w . , - i;
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