Page:A History of Banking in the United States.djvu/107

 .—The charter of the Banks of Cape Fear and Newbern were extended, in 1814, until 1835; the capital of the former might be increased $525,000; that of the latter, $575,000. Each bank was bound to lend to the State not more than one-tenth of its capital at not more than six per cent. An option was reserved for the State on 1,000 shares in each, of which 180 shares were to be given to the State as a bonus, and the State might pay for the 410 shares with its own treasury notes. The remaining 410 shares were to be paid for at the convenience of the State. The debts of either bank might not exceed all cash deposits by more than $2,400,000. The State paper was not to be a legal tender to either of these banks, but only to the Bank of the State after January 1, 1816. No notes were to be issued under $1. Treasury notes were to be issued for the sum of $82,000 in denominations of five cents, ten cents, twenty cents, etc., all of which were to be paid over to the two banks in payment of the first installment ($10 per share) on 410 shares in each. They were to bear no interest; were to be issued by the banks and redeemed by the Treasurer; to be re-issued by him. If the Bank of the State should be voluntarily dissolved before December 18, 1816, these banks were to take up the State paper with their own paper, at the rate of $1 for 10 shillings. If this was done, the Governor was to proclaim that the State notes were not a legal tender, except to these banks until their charters expire, after which, if State notes are still out, they were to be legal tender again; but the dividends on the stock owned by the State were to be employed in redeeming them.

A Committee of the Legislature in 1828-9 reported, in regard to the banks of Cape Fear and Newbern, that the increase of their capital in 1814 was paid for by stock notes of favored individuals. "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. * * * Taking the issues made on this fabricated capital, to be in proportion with those made on the former capital, they must have put into circulation on the faith of the assumed stock, between $3 millions and $4 millions of notes, and thus a parcel of individuals under the name of stockholders, but who in fact held no stock, contrived to exchange their notes without interest to the amount of $3 millions or $4 millions for the notes of the people bearing an interest of more than six per cent., and while the property of the people was pledged for the payment of the notes they had given to the stockholders, there was not a dollar or an atom of property pledged to them for the payment of the notes they had received from the stockholders."

This State passed a law against due bills and small promissory notes in 1816, declaring that the abuse was increasing and was very detrimental to the true interests of the State. It appears that schools and academies were making such issues. "It shall not be lawful for any person or persons to pass or receive any check or checks drawn for less than $1 on the State