CHAPTER CLXIII.

WHILE the fate of Louisiana occupied the deliberations of Congress, the legislative proceedings of the State of New York assumed a character which arrested the attention of Hamilton and of other reflecting men.

The utility of banks, as instruments of commerce, had been long and duly estimated in the great marts of the Union, but the employment of them as mere political engines was recent. The first instance of this kind was in the charter of the MANHATTAN BANK, a charter which, it is seen, Hamilton stated, was obtained by a trick. The author of this corrupting precedent was Aaron Burr! To the influence of this bank was chiefly, confidently, and openly ascribed, by the active members of the Democratic party, familiar with its secret operations, the result of the election in the city of New York, which raised Jefferson to the Presidency, and Burr to the second office of this government.

A successful example of corruption is not soon forgotten. It has proved a great fountain of evil pouring forth its bitter poisons upon this country and people. A mean so easy to be commanded, of such extensive and almost resistless influence, was now again resorted to. The project of a great "State Bank" was probably cotemporary with the recovery of power by the Democratic party

in the State of New York. Its objects were to enrich the leaders and to perpetuate their ascendancy. A petition for a charter was signed by the chief officers of the State. The directors were privately selected-private subscriptions to its capital were obtained. A portion of the shares was allotted to individuals; and in some instances, Federalists seeking to subscribe, were, on the discovery of their political opinions, rejected. But the greater part of the stock was reserved to reward party services, and to secure the grant of a charter by purchasing the votes of members of the Legislature. When the bill was under discussion, a motion that the books be opened to receive subscriptions was defeated; and this bank was chartered under a subsisting bargain that the private allotment of the shares should be made. Thus the mercenary views of the Democratic partisans were attained. A great political engine was created.

At the same session, other individuals residing at the capital of the State, also applied for a bank charter. A remonstrance was presented by the directors of the "STATE BANK" against this application, they proposing that all the surplus funds of the State, then dormant in the Treasury, should be vested in their bank. The more to augment their profits, these politicians sought to engross the revenue of the salt springs of the State, by obtaining a lease of them to their bank for a term of thirty years. This lease was to be obtained by a fraudulent and deceptive combination. The fraud was exposed; and, a part of the Democratic members uniting with the Federalists, the lease was refused.

The multiplication of chartered banks is seen early to have disquieted Hamilton. While the Federalists possessed the control of the State, after the incorporation of the Bank of New York, the power of creating banks was

never exerted by them. The establishment of that bank was the result of necessity produced by the impotence of the Confederation, and after a bank of the United States was instituted, they felt that the high and delicate office of creating a paper currency ought to be exclusively exercised by the Government of the whole nation.*

The dangers he had early apprehended from "a hydra of banks" were now fully before him, and he saw that the only remedy, one not free from objections, against these gross and growing legislative corruptions, was the introduction of a system of free banking—a system since not a little abused.

There were at this time no individuals in the United States of sufficient wealth to become private bankers. This could only be effected by an association; and Hamilton framed articles of limited co-partnership for an union of several capitals under the style of "The Merchants' Bank." Every stockholder became a member of this joint stock Company, and the holders of its engagements were declared to accept them on the condition, that they gave credit to the funds of the association, and disavowed any recourse to the separate property of its members, which limited liability was expressed on the face of such engagements. The company was prohibited dealing in any commerce, except of Bullion; and its duration was defined.

The second Secretary of the Treasury department had retired from office without the means of supporting his family, but specially honored by Washington for his fidelity. In view of his public services and actuated by personal regard, Hamilton had recently projected a mer

* Lord Ashburton in his "Enquiry into the causes, &c., of the orders in council," states, that up to the year 1805 (the time when the effect of the multiplication of banks by the Democratic party began to be felt) there were no bank failures in the U. S. P. 40.

cantile association, over which he invited Oliver Wolcott to preside, offering to promote its success by becoming a contributor to its capital.* This precise plan was not carried into effect. To make a provision for his faithful friend, he was, at Hamilton's instance, chosen President of this new institution.

The Directors of the Manhattan Bank manifested a determined hostility to this dreaded rival. At their instance, the alarming example was given of calling a public meeting to attack this private right. From this meeting a petition was presented to the Legislature, offering a douceur for an increase of the capital of their bank; the political influence it had exerted over the elections of the City being a prominent ground on which this claim was preferred.

At their instance, also, a bill was introduced into the assembly, entitled, "An Act to restrain unincorporated Banking Associations." After much opposition, it passed by small majorities of each house. The Council of Revision was divided; those opposed to the act insisting on its unconstitutionality as an invasion of private rights and an interference with the free employment of capital, which those rights and public policy forbade. It nevertheless became a law.

The restrictions it imposed produced the apprehended consequences. Candidates were selected for the Legislature with reference solely to banking applications. Counties were drilled to ensure their success. A corps of intriguers ramifying the State was embodied; and encamping around the Legislature, dictated its laws. Year after year, scenes of open, shameless, unparalleled profligacy succeeded to each other, until at last, after a suc

*Hamilton's Works, vi. 549.

cessful effort to subject the money corporations of the State to a political commission, the people, preferring to risk other evils than to endure the continuance of this dangerous influence of thirty years' duration, repealed this restraining act, generated, as has been seen, in gross corruption.

It has been mentioned, that Hamilton had urged a law by which the electors of President should be chosen by the people in electoral districts; that an amendment of the Constitution of this nature was recommended to Congress, but did not meet with favor in that body, over which the influence of Virginia was now absolute. The effort to induce the enactment of such a law by New York was renewed, but was unsuccessful; the dominant party avowing their determination to secure an undivided State vote, through the Legislature.

The measure which now most excited alarm was a bill to alter the charter of the City of New York, a great public corporation. A petition of several citizens, having this object in view, was presented to the Legislature in the year eighteen hundred, but was not granted, the house declaring that they could not, without violating the chartered rights of the city, add to the number of its wards, unless on the application of the corporation. As the charter was, the Federalists, being a majority of the freeholders, had a majority in its government. The attempt by a subdivision of freeholds to obtain a Democratic preponderance had failed. It was now resolved, regardless of the recent official declaration of the State, to violate this charter. The bill passed, and this circumstance attended its passage. Governor George Clinton and two other persons, who on the first occasion voted against the measure as a violation of chartered rights, when the corporation was silent, now, after that body had remonstrated