shall make semi-annual reports to the Comptroller of its affairs under separate heads which are prescribed, and shall be liable to every note-holder to whom it refuses redemption at the rate of fourteen per cent. per annum from the time of refusal until the time of payment, by way of interest, and damages besides. No note for less than $1,000 shall be issued by any bank organized under this law, payable at any other place than its banking house. "No association of persons authorized to carry on the business of banking under this act shall at any time, for the space of twenty days, have on hand at their place of business less than twelve and a-half per cent. in specie on the amount of the bills or notes in circulation as money."
As soon as the free banking law was passed the chance to carry on banking was seized with avidity. Before the end of 1839, one hundred and thirty-four certificates of the formation of associations were filed. Seventy of the associations commenced business. Also certificates of three private individual banks were filed. $6 millions of circulation had been issued on bonds to the value of $7.1 millions. "During the influx of this new medium, in the absence of organization and concert among the new banks, it is not surprising that the emission should become somewhat depreciated, more especially when it is considered how extremely difticult it has been to preserve the safety fund circulation of the country banks from a like depreciation, notwithstanding an organization of years' standing and the great experience of the officers of these institutions, and the privilege of availing themselves to some extent of the aid of the State by receiving its deposits."[1]
When this banking law went into operation, the mortgages which were deposited as security were transferred in many cases to the associations by individuals, who insisted as a condition, being in necessity, that accommodation loans should be made to them at once on long time for nearly or quite all the value of the security deposited.[2]
Comptroller Fillmore declared, in 1848, that the act of 1838 was passed because bank charters had been treated as the spoils of party, which practice had become so shameless and corrupt that it could no longer be endured.
The question whether a two-thirds majority had been requisite to pass this law came before the Court of Appeals in 1845, and was decided adversely to the constitutionality of the law, and the corporations created under it were declared null;[3] but this decision was reversed a year later.[4] In a similar case, under a law of 1837, in Michigan, subject to a similar constitutional restriction, the decision was that the law was invalid for lack of a two-thirds vote.[5]
Among the banking curiosities of this period may be mentioned the following: In May, 1837, four persons were arrested in New York City, on suspicion of being counterfeiters. They were at work in an attic, printing notes of the Ottawa Bank of Montreal. They were indignant at their arrest,
