placed upon loans granted upon individual security; that is, upon overdrawn accounts. In all our manufacturing towns it is the practice for the banks to make large permanent advances to the manufacturers. And as a remuneration they charge a commission of a quarter per cent. upon the account. Here the banks adopt the dangerous principle of running great risks for the sake of large profits. This practice has not been introduced by the joint stock banks. It has for many years been the practice of the private bankers, and has no doubt been exceedingly beneficial in stimulating our manufactures, and in giving worthy men of small means the opportunity of advancing themselves in the world. But now that our manufacturers are become wealthy, the same practice is not necessary. It is not the business of banks to supply their customers with capital to carry on their trade; it is a dangerous principle; because in the first place, there is a great risk upon individual security; and then, if the money is wanted, it cannot suddenly be called up. I think, therefore, that joint stock banks should limit their advances of this sort to a certain proportion of the amount of paid-up capital. And with regard to chartered banks, one condition of the charter should be that the bank admits of no overdrawn accounts.

"Sec. 7. Be it further enacted, That none but a member of the corporation for which he is chosen a director, being a citizen of, and resident in the commonwealth, shall be eligible to that office; and a majority of directors, in any bank, shall be residents within the county where the bank is located, and no person shall be a director in two banks at one and the same time; no bank shall have less than five, or more than twelve directors, to be determined by their bye-laws. The directors shall choose one of their own number to act as president; and in case of the absence of the president, a chairman may be appointed for the time being. A majority of the directors shall always be necessary to constitute a quorum for doing business. The directors may make the president such compensation as shall appear to them reasonable.

"Sec. 8. Be it further enacted, That the directors shall be chosen by ballot annually, at a meeting held on the first Monday in October, by the stockholders, at such time and place, within the city or town where said bank is established, as the president and directors for the time being may designate, by giving public notice thereof fourteen

days previous thereto, in some newspaper printed in the county; and if there be no newspaper printed in said county, then in some one in the city of Boston. The number of votes to which each stockholder shall be entitled, shall be according to the number of shares he shall hold, in the following proportion: That is to say-For one share, one vote; and every two shares above one shall give a right to one vote more, provided no one member shall have more than ten votes; and absent members may vote by proxy, such proxy being authorised in writing; vacancies occurring in the board of directors before the expiration of the term for which they were chosen, may be filled at any meeting of the stockholders called for that purpose, as hereinbefore provided. In like manner, the directors shall have power to call special meetings of the stockholders as often as they think the interest of the corporation may require it.

"Sec. 9. Be it further enacted, That the directors shall make halfyearly dividends of the profits of the bank. The directors shall have power to appoint a cashier, clerks, and such other officers, for carrying on the business of this bank, with such salaries as to them shall seem meet; and such cashier, clerks, and other officers, shall retain their places until removed therefrom, or others appointed in their place.

"Sec. 10. Be it further enacted, That the cashier, before he enters on the duties of his office, shall give bond, or bonds, with two or more sureties, to the satisfaction of the board of directors, conditioned for the faithful performance of the duties of his office: Provided, that in no case shall bonds be taken for a less sum than twenty thousand dollars, nor a greater than fifty thousand dollars. It shall be the duty of the cashier of any bank aforesaid, to call special meetings of the stockholders at any time hereafter, on the application, in writing, of the proprietors of twenty per centum of the capital stock thereof, by giving fourteen days public notice of such meeting, in the manner hereinbefore provided."

These sections are very similar to clauses that are inserted in our deeds of settlement. They refer to several matters of detail which can be arranged by the banks much better than by the legislature. It is worthy of inquiry, however, whether the legislature might not fix the qualifications of a director. The only tangible qualification is property. It seems essentially necessary that a bank director should be a man of property. Neither talent, nor rank, nor influence should be taken as a substitute for property. Most of our deeds of settlement require that a director should hold a certain number of shares. But the amount of property thus invested is usually inconsiderable. And it is not desirable, on several accounts, that a director should hold a

large number of shares. It is understood that none of the directors of the Bank of England hold a greater amount of bank stock than their qualification. It appears that in the banks of Massachusetts all the directors go out every year, but may be re-elected by ballot. In the Bank of England eight directors go out every year, but are always re-elected. By the charter of the Bank of Ireland five new directors must be chosen every year. The deeds of settlement of the joint stock banks vary very much in this respect.

"Sec. 11. Be it further enacted, That in case the officers of any banking corporation aforesaid, in the usual banking hours, shall refuse or delay payment in gold or silver money, of any note or bill of said corporation, there presented for payment, the said corporation shall be liable to pay, as additional damages, at the rate of twenty-four per centum per annum, for the time during which such payment shall be delayed or refused."

This regulation is peculiar to America. In itself it may be very good, but the stoppage of payment ought also to be attended by the forfeiture of the charter. In this respect, the law of England in regard to joint stock banks is very defective. If the banks stop payment it does not appear that the creditors have any power to interfere, or to obtain possession of the funds of the bank. Each creditor may sue the public officer, and having obtained judgment may issue execution against the funds of the bank, and the private property of the shareholders. It is proposed as a subject of inquiry, whether in case of stoppage, the affairs of a bank ought not to be placed immediately in the hands of government commissioners, for the purpose of winding it up, and an extent in aid issued against the property of all the directors, that in case it should be necessary to come upon the property of the proprietors to make good the deficiency; that of the directors should be first taken.

"Sec. 12. Be it further enacted, That in case of any

loss or defici

ency of the capital stock in any bank aforesaid, which shall arise from the official mismanagement of the directors, the persons who are stockholders at the time of such mismanagement, shall in their private and individual capacities, be respectively liable to pay the same: Provided, however, that in no case shall any one stockholder be liable to pay sum exceeding the amount of the stock actually then held by him.

"Sec. 13. Be it further enacted, That the holders of stock in any banking corporation aforesaid, in this commonwealth, when its charter shall expire, shall be chargeable in their private and individual capacities, and shall be holden for the payment and redemption of all bills which may have been issued by said corporation, remaining unpaid, in proportion to the stock they may respectively hold.

"Sec. 14. Be it further enacted, That any stockholder of any bank who shall have been obliged to pay any debt or demand against said bank out of his individual property, shall have a bill in equity, originally to be tried in the supreme judicial court, to recover the proportional parts of such sums of money as he may have so paid, from the other stockholders, who may be equally liable for the same, and such damages and costs as the court may decree, and said bill in equity may be inserted in a writ of attachment, or original summons.'

In America, the banks are chartered banks, and the shareholders, in most cases, have no liability beyond the amount of their respective shares. In England, every shareholder is liable to the full extent of his property for all the debts of the bank.

Unlimited liability gives greater security to the public. It will hardly be denied that all the property of five hundred partners gives greater security for the debts of the bank than any small portion of that property that may be advanced in the form of paid-up capital. It is not necessary to prove that the paid-up capital and the remaining property of the partners form a larger fund than the paid-up capital alone. The unlimited liability of the partners constitutes therefore a higher guarantee for the ultimate payment of the debts of the bank, whether those debts arise from notes or deposits.

Unlimited liability, is to a certain extent, a guarantee for prudent management. As the directors are liable to the full extent of their property, they will take care not to incur such risks as will place that property in jeopardy. And the shareholders will take care to choose directors, whose wealth and

character render them worthy of confidence; and they will also attend to the annual report of the directors, and will be alive to any event that may endanger the prosperity of the bank, It is no objection, to say that private bankers run risks, although their whole property is liable, and hence the directors of joint stock banks would run risks in the same way. First, Private bankers, for the most part, have not run risks as bankers, but as manufacturers and merchants, and the failure of their commercial enterprizes has brought down their banks. Secondly. The private bankers had greater inducements to run risks, because all the profit of the risk went to themselves; but bank directors have no such inducement, because the profit that comes to themselves is very small, being only in proportion to the shares that they hold, while the failure might endanger their whole property, as the directors would be the first that would have judgment issued against them. Nor is it any objection to say, that the shareholders will not pay any regard to the administration of the bank, so long as they receive good dividends. It may be very true, that when the shareholders have provided for the good management of the bank, by choosing efficient directors, that they will then attend no farther to its administration beyond receiving the half-yearly or annual reports. But let it be once even rumoured that the directors are acting unfaithfully towards the shareholders, or let it be suspected that the dividends are not paid out of the profits, and then see if the shareholders will not meet, and show by their conduct, that they are alive to the sense of unlimited liability.

The unlimited liability of the shareholders attracts the public confidence. It is not enough that a bank is ultimately safe, the public should believe that it is safe. A want of confidence in our banking establishments has been the cause of much misery. The panic of 1825 would have been far less calamitous had there existed no suspicion of the banks; but in consequence