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CHAPTER and has served as a model, not only for the second Bank of the United States, to the charter of which Madison 1791. himself afterward placed his signature, but for a great number of state banks also; though by few, if by any, of these state charters was the public security so amply provided for.

The charter was limited to twenty years, for which period Congress renounced the power of establishing any other bank. The capital was to consist of 25,000 shares of $400 each, amounting in the whole to ten millions of dollars, eight millions to be subscribed by individuals, the other two millions by the United States. Individual subscriptions were payable in four installments, one at the moment of subscription, the others in six, twelve, and eighteen months, one fourth in gold or silver, the other three fourths in stock of the United States, the six per cents. at par, the three per cents. at half that value. The United States were to pay in cash, out of the proceeds of the foreign loans hitherto authorized, but they were to be entitled to a loan from the bank to the amount of their subscription, applicable to the original objects of the foreign loans, and reimbursable in ten annual payments. In other words, while the individual subscribers were obliged to pay up within eighteen months, the United States had the advantage of extending their payments through a period of ten years.

In receiving three fourths of the individual subscriptions in government stocks, there were several objects in view. One was to create a new demand for those stocks, and so to bring them to par, which very soon happened; another was to give the bank a direct interest in sustaining the credit of the government; a third was to provide ample security for the circulation and deposits of the bank, in so far as six millions in government

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stocks at six per cent. were a far more certain reliance, CHAPTER and a resource more instantaneously available, than the same amount vested in promissory notes and bills of 1791. exchange. While the bank would do business on a cash capital of four millions, added to which would be the amount of its deposits and circulation, the depositors and bill-holders would have the security not only of this extra cash capital, but of an additional fund of six millions of dollars invested in government securities. In this particular the new bank was closely modeled after the Bank of England, the greater part of whose capital has always been invested in government stocks. And the same idea has been substantially acted upon in the recent free banking system of New York, by which a deposit of government stocks is required as security for the amount of the circulating bills.

The affairs of the bank, whose head-quarters were to be at Philadelphia, were to be managed by a board of twenty-five directors, chosen annually by the stockholders by a plurality of votes. One share entitled to one vote; three shares to two votes; five shares to three votes; ten shares to five votes; thirty shares to ten votes; sixty shares to fifteen votes; one hundred shares to twenty votes, with a proportional number for intervening amounts. For every ten shares above a hundred an additional vote was allowed; but no single individual or corporation was to be entitled to more than thirty votes. Votes by proxy were allowed, but only in case of residents in the United States. The directors, who must be stockholders and citizens, were to choose a president from among their own number, and, including the president or his special deputy, seven were to constitute a quorum to do business. At least one fourth of the board, exclusive of the president, was to be renewed at every annual election.

CHAPTER The whole property which the bank could hold, capital included, was limited to fifteen millions of dollars, nor 1791. were its debts, exclusive of deposits, ever to exceed ten millions. Should any such excess occur, the directors under whose administration it happened were to be personally liable to that extent, except those who were ab sent, or who, if present, should dissent from the act creating such excess of debt, and should give immediate notice to the President of the United States, and to a meeting of stockholders, which they were authorized to call for that purpose. Meetings of stockholders might also be called at any time, for purposes relative to the institution, by any sixty stockholders, proprietors together of not less than two hundred shares, by giving ten weeks' notice in two Philadelphia newspapers specifying the object of the meeting. Statements as often as once a week, if required, were to be rendered by the directors to the Secretary of the Treasury, of the amount of capital, debts due the bank, circulation, deposits, and cash in hand; and, so far as related to these matters, the secretary was authorized to inspect the books, but not the accounts of private individuals. The bills or notes of the bank, payable on demand in gold or silver, were made receivable in all payments to the United States.

The bank was forbidden to hold lands or buildings, except such as might be necessary for its own accommodation, or which might come into its hands by the foreclosure of mortgages, or be conveyed to it in satisfaction of debts previously contracted, or be purchased at sales upon judgments for debts due to it. All dealing was prohibited in goods and merchandise of any description beyond the sale of the produce of its lands, or of goods pledged to secure the payment of money and not

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duly redeemed. The bank might sell, but could not CHAPTER purchase, the stocks of the United States. Its general. business was therefore restricted to dealing in bills of 1791. exchange and gold and silver. The interest it might take was limited to six per cent. No loan could be made to the United States exceeding $100,000, nor to any particular state exceeding $50,000, nor to any foreign potentate to any amount, unless specially authorized by act of Congress. The directors might establish branches, but only for discount and deposit, at such places within the United States as they might see fit, and might delegate the administration of those branches as they should think proper. Dividends were to be made half yearly, at the discretion of the directors. Once in three years they were to lay before the stockholders an exact statement of debts over-due for a period of three times the original credit, and of the surplus of profits, if any, after deducting losses and dividends.

While these two great measures of the excise and the bank were still under consideration, acts had passed for admitting two new states into the Union, Vermont at once, and Kentucky in the course of the ensuing year.

In the last days of the Continental Congress, Virginia, after some struggles, having reluctantly consented to her organization on that condition as an independent state, Kentucky had applied to that body for admission into the confederacy. That application had been referred to the new federal government about to be organized, a delay which had made it necessary to recommence proceedings anew; for the Virginia Assembly had fixed a limitation of time, which, being over-past, drove back the separatists to the original starting-point. On a new application to the Virginia Legislature, a new act had authorized a new Convention, being the third held upon

CHAPTER that subject, to take the question of separating into consideration. But this act had imposed some new terms 1791. not at all agreeable to the Kentuckians, of which the principal was the assumption by the new state of a portion of the Virginia debt, on the ground of expenses incurred by recent expeditions against the Indians. The 1789. Convention which met under this act proceeded no furJuly. ther than to vote a memorial to the Virginia Legislature requesting the same terms formerly offered. That request was granted, and a fourth Convention was authorized again to consider the question of separation, and should that measure be still persisted in, to fix the day when it should take place. Having met during the last 1790. summer, this Convention had voted unanimously in favor July. of separation; had fixed the first day of June, 1792, as the time; and had authorized the meeting of a fifth Convention to frame a state Constitution. In anticipation 1791. of these results, an act of Congress was now passed ad. mitting Kentucky into the Union from and after the day above mentioned, not only without any inspection of the state Constitution, but before any such Constitution had been actually formed.

Feb. 4.

The rapid increase of the population of Vermont having destroyed all hope on the part of New York of reestablishing her jurisdiction over that rebellious district, the holders of the New York grants, seeing no better prospect before them, were ready to accept such an indemnity as might be obtained by negotiation. Political considerations had also operated. The vote of Vermont might aid to establish the seat of the federal government at New York. At all events, that state would serve as a counterbalance to Kentucky, the speedy admission of 1789. which was foreseen. The Assembly of New York had July. appointed commissioners with full powers to acknowl