Banks, Corporations and Finance

The following constitutional provisions were proposed by individual delegates or committees and after consideration by the Convention were rejected.

(a) BANKS, CORPORATIONS AND FINANCE.

1. Registry of Bank Notes. - Sec. 3. Some officer of the State shall register all bills or notes issued or put in circulation as money, and security shall be required for their redemption in specie, by stocks of the United States, or of other interest paying states at their market value, and not above par (p. 194). Reported by the committee on currency and banking on November 5. Laid on the table on second reading by a vote of 94-36 (p. 680).

2. Enactment of Bank Law, Registry of Issue and Collateral Security. - If the General Assembly shall enact a general banking law, such law shall provide for the registry and countersigning, by the Auditor of State, of all notes, designed to be circulated as money; an ample, readily convertible collateral security for the redemption of the same, in gold and silver, shall be required to the amount of dollar for dollar, which collateral security shall be under the control of the treasurer of the state: Provided, however, That for the first twelve years after the adoption of this constitution, stocks of the State of Indiana, or of other solvent states, or of the United States, shall alone be received as such collateral security; to be, or to be made equal to stock bearing six per cent.; and to be taken at their market value, but not above par (p. 680). Amendment proposed to the foregoing and rejected.

3. Supervisory Control of Banks. - Sec. - . The legislature shall provide, in the charter of any bank established under this article, a supervisory control of the same (p. 197). Submitted by a minority of the Committee on Currency and Banking on November 5.

4. Authorizing Establishment of Bank and Branches but Prohibiting State's being Partner Therein. - Sec. - . The legislature may authorize the establishment of a new State bank with branches to go into operation, after the expiration of the present bank charter, under such regulations as may be provided by law. But in no case shall the State be a partner, or have any interest therein, or in any branch except as may be occasioned by the investment of any trust funds of the State therein as loans, and the safety of any funds so invested shall be secured by the preference in payment in case of insolvency, over the stocks of individuals in the bank (p. 194). Reported by a minority of the Committee on Currency and Banking on November 5. Laid on the table by a vote of 76-62 (p. 627)

Amendments proposed and rejected: (1) Prohibiting the legislature from establishing any banking corporation or continuing any existing banking corporation beyond the term of its present charter unless approved by a majority of the electors of the Sate. Rejected by a vote of 43-89. (2) Entirely prohibiting the establishment of any banking institution. Rejected by a vote of 43-89. (3) Prohibiting the establishment of a banking institution, except a state bank and branches, not exceeding one branch in each county, provided $200,000 be subscribed by individuals, and authorizing the General Assembly to adopt the present bank and branches with proper instructions. Rejected by a vote of 57-75. (4) To strike out and insert:

The business of banking shall be free to all, on such terms and restrictions as the legislature shall impose in a general law for such purposes subject to the following restrictions:

1st No banks shall directly or indirectly charge or receive any greater rate of interest than individuals shall be allowed to charge or receive.

2d. The bill or notes of all banks shall be registered by some proper officer of State, and ample security readily convertible into gold or silver, taken for the redemption of the same.

3d. The stockholders or owners shall be individually responsible for the debt of such bank.

4th. The billholders shall have preference in payment in case of failure.

5th. No law authorizing the suspension of specie payment shall be granted. Rejected by a vote of 18-107. (5) There may be incorporated by the General Assembly a state bank with branches, with such powers, rights, and liabilities as the General Assembly may think proper to bestow upon it, and the General Assembly may incorporate other banks from time to time with such powers, liabilities and restrictions as may be deemed proper; but the individual stockholders of such State bank, and the stockholders of all other banks, shall be individually liable for all the liabilities of such banks to the amount of their stock held at the time such liability accrued. But no other corporation shall be a stockholder in any bank incorporated under this article.

(6) Section 1. The General Assembly shall have no power to pass any act granting any special charter for banking purposes; but the corporations or associations may be formed for such purposes under general laws.

Sec. 2. The General Assembly shall have no power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie payment by any person, association, or corporation, issuing bank notes of any description.

Sec. 3. The General Assembly shall provide by law for the registry of all bills or notes issued or put into circulation as money, and shall require ample security for the redemption of the same in specie.

Sec.4. The stockholders in every corporation and joint stock association for banking purposes, issuing bank notes or any kind of paper credits to circulate as money, shall be individually responsible for all its debts and liabilities of every kind and description.

Sec. 5. In case of the insolvency of any bank or banking association, the bill-holders thereof shall be entitled to preference in payment over all other creditors of such bank or association.

Sec. 6. No bank or banking association shall, directly or indirectly charge or receive any greater rate of interest than individuals shall be allowed to charge or receive.

Sec. 7. The General Assembly may also, at the time it passes a general banking law, impose such other and further restrictions and regulations as they may deem expedient and proper for the security of the billholders; Provided, That no such law providing for a general system of banking shall have any force or effect until the same shall have been submitted to a vote of the electors of the State at some general election, and been approved of by a majority of all the votes cast at such election. Rejected by a vote of 28-94. (7) Strike out all after the word "the " in the first line, and insert the following: legislature shall have no power to pass any act granting any special charter for banking purposes, but corporations or associations may be formed for such purposes under general laws.

The legislature shall have no power to pass any law sanctioning in any manner, directly or indirectly, the suspension of specie payment by any person, association, or corporation issuing bank notes of any description.

The legislature shall provide by law for the registry of all bills or notes issued or put in circulation as money, and shall require ample security for the redemption of the same in specie.

The stockholders in every corporation and joint stock association for banking purposes, issuing bank notes of any kind of paper credits to circulate as money after the first day of January, 1852, shall be individually responsible to the amount of their respective shares of stock in any such corporation or association for all its debts and liabilities of every kind contracted after the said first day of January, 1852.

In cases of the insolvency of any bank or banking association, the billholders thereof shall be entitled to preference in payment over all other creditors of such bank or association. Rejected by a vote of 27-103. (8) Mr. Owen moved to strike out the section under consideration, and insert the following:

Section 1. The General Assembly shall not have power to establish or incorporate any bank or banking company, or moneyed institution, for the purpose of issuing bills of credit or bills payable to order or bearer, except under the following restrictions:

1st. The State shall not be a stockholder in any bank after the expiration of the charter of the State bank.

2d. No bank bill or note shall issue for circulation until it shall first have been registered and countersigned by the Auditor of State, nor until there shall have been deposited as security for the redemption of the same, dollar for dollar, stocks of the United States, or of such States of this Union as may be designated by law, to be estimated at their market value, in the city of New York, but not above par: Provided, That such stocks be, or are made to be equal to stock producing six per cent per annum.

3d. No law shall pass sanctioning, directly or indirectly, the suspension by any bank or banking institution, of specie payments.

4th. Billholders shall have preference of payment over all other creditors in cases of insolvency.

5th. Stockholders shall be individually liable to an amount not less than that of their respective shares of stock.

6th. No bank shall receive, directly or indirectly, a greater rate of interest than shall be allowed by law to be received by individuals loaning money.

7th. No bank or banking institution shall have exclusive privileges not granted to other similar institutions; nor shall any such institution be created by special charter.

8th. The General Assembly shall have the right to alter, from time to time, or to repeal all laws that may be passed creating banks or banking institutions. Rejected by a vote of 46-91. (9) The following additional section was proposed and rejected by a vote of 47-90:

Sec. 7. The Legislature shall not have power to grant special charters for banking purposes, but may pass a general law, making the business of banking free to all, based on the principles of ample stock security for circulation, registry of notes by some State officer, preference in payment to bill-holders in case of failure, and individual responsibility of stockholders to an amount equal to their stock: Provided, however, That at the expiration of the charter of the present State bank, the legislature may, in addition to such general system, grant a charter for a bank and branches. But the State shall not be partner, directly or indirectly, in any such banking institution; and if the trust funds, or any portion of them should be invested therein as a loan, their safety shall be guaranteed by the State. Stockholders in any such bank shall be individually responsible to the same extent as those acting under the general law (p. 628). (10) An amendment was proposed as follows as an addition to the foregoing, and rejected by default of the original amendment: The banks chartered under the provisions of this article, shall be mutually liable for the redemption of the circulation of each other to the amount, and in the manner to be prescribed by law, and no bank hereby contemplated, or allowed to exist in this State, shall ever be allowed to issue for circulation any note or bill of a less denomination than ten dollars, or circulate or pay out at its counter, or at any other as payment on bank account, any note or bill of any bank of a less denomination than ten dollars. (11) Sec. - . There may be established or incorporated in this State a State bank and branches, in any or each county in said State, when a specie capital is furnished for said branches, as may be prescribed by law. Rejected by a vote of 62-72. (12) The following proposed as an amendment to the foregoing was rejected: The State shall not be a stockholder in any bank, after the expiration of the charter of the State bank of Indiana; nor shall the State lend its credit for the purpose of aiding in the establishment of any bank or moneyed incorporation whatever.

5. Prohibiting the State's being a Stockholder in the Future in any Bank -

Sec. - . The legislature shall not have power to create, authorize or incorporate, by any general or special law, any bank or banking power or privilege, or any institution or corporation, having any banking power or privilege whatever, except as provided in this article.

Sec. - . The legislature may submit to the voters, at any general election, the question of "bank or no bank," and if at any such election, a number of votes, equal to a majority of all the votes cast at such election on that subject shall be in favor of banks, then the legislature shall have power to grant bank charters, or to pass a general banking law, with such restrictions and under such regulations, as they may deem expedient and proper for the security of the billholders: Provided, That no such grant or law shall have any force or effect, until the same shall have been submitted to a vote of the electors of the State at some general election, and been approved by a majority of the votes cast on that subject, at such election (p. 195). Report submitted by a minority of the Committee on Currency and Banking on November 5.

6. Prohibiting Suspension of Specie Payments. - Sec. - . The legislature shall not have power to grant or approve of a suspension of specie payment by any bank or branch established under this article (p. 196). Report submitted by a minority of the Committee on Currency and Banking on November 5.

7. Authorizing State to Establish Bank Branches. Sec. 10. The General Assembly shall have power to establish a State bank and branches, with such powers, and under such restrictions as may be prescribed by law (p. 654). Rejected by a vote of 48-93.

8. Referendum on Establishment of Bank. - The legislature shall not have power to create, authorize, or incorporate, by any general or special law, any bank or banking power or privilege, or any institutions or corporations having any banking power or privilege whatever, except under the following conditions to-wit: The legislature may submit to the voters at any general election the question of "bank," or "no bank;" and if at any such election a number of votes equal to a majority of all the votes cast at such election on that subject shall be in favor of banks, then the legislature shall have power o grant bank charters, or to pass a general banking law, with such restrictions and under such regulations as they may deem expedient and proper for the security of the bill holders: Provided, That no such grant or law shall have any force or effect until the same shall have been submitted to a vote of the electors of the State at some general election, and been approved by a majority of the votes cast on that subject at such election (p. 640). Rejected.

9. Unlimited Number of Partners of Branches. - And such banks shall be compelled to accept of as many partners of branches as shall offer to comply with the provisions organizing the first, at such places in this State as such partners shall desire to engage in the business of banking (p. 657). Rejected.

10. Mutual Liability of Banks. - Sec. 10. All banks established under the provisions of this article shall be mutually liable for the redemption of the circulation of each other.

The stockholders shall be individually liable in their private estate to the full amount of their stock, whether paid in or unpaid, for all liabilities of the bank or banks in which such stock is held, and from the date of the failure of such bank, the individual liability shall attach and operate as a lien upon the real and personal estates of such stockholder.

A suspension of specie payments shall be a forfeiture of the charter of any bank, and no law shall be made suspending or legalizing a suspension of specie payments.

No bank shall issue, circulate, or pay out any bill or bank note of a less denomination than five dollars.

No bank shall be allowed to take or receive, directly or indirectly, more interest than private individuals are allowed by law.

Every bank dividing six per cent profit on stock paid in, shall pay over as may be provided by law, the half of one per cent for common school purposes, and one per cent for common school purposes when the bank profits shall amount to ten per cent per annum.

In payment of debts the note holders shall be first paid in case of a bank failure (p. 640.)

11. Removal and Negotiation of Loans. - The General Assembly may provide by law for the removal of the present loan invested in State bank stock, or may provide for and negotiate loans of money to be applied as stock on behalf of the State in any bank hereafter incorporated (p. 657). Rejected by a vote of 52-91.

12. Prohibiting Incorporation of Banks. - There shall not be established or incorporated in this State any bank or banking company, or moneyed institution, for the purpose of issuing bills of credit or bills payable to order or bearer (p. 658).

13. Prohibiting Foreign Interests in Banks. - Sec. 11. No person being a citizen of a foreign government shall be a stockholder in any bank, banking company, or association; nor shall such person subscribe stock in any such bank, banking company, or association in the name of any citizen of the united States, nor shall stock be subscribed in such bank, banking company, or association to or for the use of any foreign subject or corporation. All stock subscribed in contravention to this section shall revert to the State for the use of common schools. . . .

Every bank established under the authority of this Constitution shall pay one quarter of one per cent annum bonus on the capital stock to the State for common school purposes, and each bank dividing ten per cent or over profit on the capital stock established as aforesaid, shall, in like manner, pay over to the State for the use of common schools, the half of one per cent on the capital sock of such bank (pp. 662. 669). Rejected by a vote of 67-78.

14. Restricted Establishment of Bank and Branches. The General Assembly may authorize the establishment of a State bank, with a suitable number of branches, to go into operation after the expiration of the charter of the present State bank, under such regulations as may be provided by law; but in no case shall the State be a partner, or have any interest therein, or any branch thereof, except as may be occasioned by the investment of any trust funds of the State therein as a loan; and the safety of any funds so invested, shall be secured by their preference in payment, in case of insolvency, over the stocks of any individuals in such banks; Provided, however, That each branch shall be held responsible for the debts and liabilities of each other (p. 666). Rejected by a vote of 63-80.

15. Taxation of Bank Stock. - Sec. 15. All bank stock and bank property real and personal, shall be taxed at the same rate as other property in this State is taxed (p. 685). Laid on the table.

16. Fixing Denomination of Bank Notes. - Sec. 16. No note or bill shall be issued or put in circulation of a denomination less than five dollars, and after 1860 less than ten dollars; and the legislature shall reserve the right after 1870 to prohibit the issue of any bill or note of a less denomination than twenty dollars (p. 685). Laid on the table by a vote of 78-42.

17. Contribution of Banks to Common School Fund. - Sec. 17. In all cases where the General Assembly shall grant any bank charter or corporation with power to issue bills of credit, or bills payable to order or bearer, they shall require at least one-half per cent per annum on the capital stock, which shall be applied to the benefit of common schools (p. 686). Laid on the table by a vote of 68-51.

18. Alteration of Banking Laws and Equitable Establishment of Banks and Branches. - Sec. - . The legislature shall have the right to alter or amend any law authorizing or incorporating banks, and any bank having branches shall not prohibit additional branches from being established upon equitable conditions (p. 686). Laid on the table.

19. Limitation of issue in Proportion to specie. - Section -. Any bank or branches established under the provisions of this Constitution, shall never be permitted to issue more than two dollars for every one of specie they have in their vaults (p. 687). Laid on the table.

20. Referendum on Incorporation Acts and Acts Authorizing Issue of Bank Notes. - Sec. - . No special act of incorporation or general law authorizing the issuing of notes or bills to circulate as money shall ever take effect until the same shall have been submitted to the people at a general election, and shall have received the approval of a majority of the voters at such election (p. 687). Laid on the table by a vote of 76-52.

21. Security for Trust Funds. - Sec. 12. The trust funds, if loaned to any bank, shall be secured by priority of payment over all claims for stock, or other claims of whatsoever nature. The charter of the present State bank shall not be renewed or extended (pp. 681-82). Rejected by a vote of 64-66.

22. Bank Issue on Security of Real Estate Mortgages. - Sec. 13. Mortgages upon real estate shall not be taken as a basis for the issues of any bank or banking association (p. 682).

23. Referendum on Borrowing Money to Establish State Bank and Branches. - Section 1. That hereafter whenever the people of this State, may at any general election, decide that the General Assembly shall borrow money upon the faith of the State, for the purpose of establishing a State bank and branches, and the Legislature shall pass a law for that purpose, stating therein the amount to be borrowed, the interest to be paid, the amount of taxation necessary to pay the interest on the debt, which law shall be submitted to the people for their confirmation or rejection, at a regular election; and if said vote shall be in favor of said law then the State shall have the right to make such loan, anything in this Constitution to the contrary notwithstanding, and the interest on said loan, shall , as far as practicable, be paid out of the profits of said Bank (p. 881). Rejected by a vote of 39-72.

24. Authorizing State to Become Stockholder in State Bank. - Sec. 2. The State of Indiana shall have the right to become a stockholder in a State bank and branches which said branches shall be established from time to time, as the commercial, agricultural, manufacturing, and industrial interests shall demand; which said stock on the part of the State, may be equal to one-half on such bank or branch (p. 881). Rejected by a vote of 39-72.

25. Taxation of Railroad, Plankroad and Turnpike Companies. - Sec.1. The capital stock of all rail, plank, and turnpike (and moneyed) companies, upon which a profit may be derived, shall be subject to the like State and county tax as property of individuals; the county tax shall be equal to the State tax, which tax shall be assessed and collected as may be prescribed by law, all of which shall be paid into the State Treasury.

Sec. 2. The amount of all county tax upon such capital stock shall be appropriated to the several counties of this State for the benefit of common schools (p. 875). Reported by the Committee on Miscellaneous Provisions on February 1. Referred on second reading to a select committee of three with the following pending amendments: (1) The capital stock of all railroad, plankroad, turnpike, and moneyed corporations, upon which a profit may be derived shall be subject to the like state and county tax, as the property of individuals; said roads to be taxed in the counties through which the same may pass. (2) To strike out the words "upon which a profit may be derived." Reported back to the Convention as follows:

Sec. 1. All corporation stocks owned or held in this State by persons residing out of the State shall be liable to a county tax equal to the tax levied for State purposes, which shall be paid into the State Treasury and distributed to the several counties in this State for common school purposes. And all corporation stocks owned or held by citizens of this State shall be taxable for county purposes as other property is taxed, and applied in the same manner in the counties where the same is owned or held, which shall in either case be in full for all taxes for county purposes. And the General Assembly shall pass all necessary laws to carry into effect the provisions of this section (p. 921).

The following amendment was proposed and both section and amendment were laid on the table (p. 921).

The stock or property of all incorporated companies in this State, whether held by residents or non-residents, shall be subject to the taxation for State and county purposes, as the property of individuals, and shall be assessed and collected in such manner as may be prescribed by law (p. 921).

26. Remembering all Subsequent Corporation Charters Repealable. - Sec. 6. That all charters hereafter created shall be subject to repeal; but the rights of all persons interested, shall be justly protected when any charter is repealed (p. 847). Adopted by a vote of 76-44 and ordered engrossed. Laid on the table on third reading by a vote of 67-71, with the following pending amendment (p. 858): Sec. 6. That all corporations hereafter created, either by special charter or under general laws, shall be subject to repeal by a vote of two-thirds of the members elect to each branch of the General Assembly; but the rights of all persons shall be justly protected, in case of such repeal. A proposed amendment that all charters be subject to repeal by a two-thirds vote of the General Assembly was rejected.

27. Limiting Lives of Future Corporations. - Sec. 7. No private corporation hereafter created shall endure for a longer period than thirty years (p. 848). Rejected.

28. Consolidation and Investment of Common School Fund. - Sec. 3. The General Assembly shall have the power to consolidate and invest in the bonds of this State or otherwise the entire common school fund; and in case of such consolidation interest thereon at the rate of six per cent shall be invariably appropriated from the annually accruing revenues to the same specific purposes to which said funds are applied under this Constitution (p. 884). Laid on the table.

29. Application of Bank Profits to Maintenance of Common Schools. - Sec. 3. The legislature shall have power in a general banking law passed under the provisions of this Constitution, to extend the termination of the charter of the present State bank for five years, and the net profits of the State during such extension shall be applied to the common school fund. Provided, The stock and property of said bank shall be taxed as other property in this State is taxed (p. 885). Rejected by a vote of 61-67.

30. Extension of Bank Charter till 1863. - Sec. 3. The General Assembly may extend the charter of the present State bank until the year 1863; but if such charter shall be so extended, the General Assembly shall never charter any bank with branches and provided in Article -- Section --of this Constitution (p. 886).

31. Extension of Bank Charter for Five Years. - The legislature shall at its first session under this Constitution pass a general banking law, in which law they may extend the termination of the charter of the present State bank for five years (p. 886).

32. Legislative Restrictions on Banking. - Sec. 20. The business of banking shall be free to all on such terms and under such restrictions as the legislature shall impose (p. 587). Laid on the table.

33. Compulsory Contributions by Corporations to Common School Fund. - Sec. 5. There shall be annually deducted, and paid over to the treasurer of State for the use of common schools, from the dividends of each company which may hereafter be incorporated, and of each company which has been heretofore incorporated, in whose charter the General Assembly has reserved the right to repeal, alter or amend the same, --per cent of such dividend, wherever the same shall exceed the amount of six per centum per annum (p. 408). Reported by the Committee on Education on Dec. 11. Laid on the table on second reading. (p. 808).

34. Prohibiting Perpetuities and Monopolies. - Sec. - . Perpetuities and monopolies are contrary to the spirit of a free State, and ought not to be allowed (p. 353). Rejected.