It is put on the ground that the government has the power to protect its subjects from a worthless currency. If the legislature can take away one branch of banking from private citizens for the public good, it would seem to follow as a matter of strict logical deduction that all branches of the business could be made franchises."

§ 9. Right of private banking.- Originally banking in all its branches was a common-law privilege, as we have stated. The fearful evils of unrestrained banking in its branch of issuing notes caused the privilege to be curtailed. The New York statute forbade all kinds of private banking, and restricted the right to associations authorized by the state. The power of the legislature to do this was challenged in the case of Attorney-General v. Utica Ins. Co., 15 Johns. 358, in an ingenious argument by T. A. Emmett. But his argument was wholly unsound in his case because he was arguing for a corporation, whose rights and privileges were not those of individuals, but simply what the legislature granted it. The court held that, while banking was a common-law right, it had become a franchise under the statute. This ruling was necessary to the case, which was quo warranto. It should be noted that in the New York constitution in force in 1818, when this case was decided, there was no clause against depriving a person of life, liberty or prop erty without due process of law. That was first inserted in the constitution of 1822. The clause in the federal constitution' was binding, of course, only on the general government, and the court assumed the power of the legislature by analogy to the action of the English parliament. But this case seems to have settled the law in New York, and the question was not raised under the new constitution. The case of Bank of Augusta v. Earle, 13 Pet. 519, admitted the right of the legislature to make issuing notes a franchise, but

2 Myers v. Irvine, 2 S. & R. 368. 3 State v. Woodmansee, 1 N. D. 246; State v. Stebbins, 1 Stew. (Ala.)

299; Attorney-General v. Utica Ins. Co., 15 John. 358.

1 Fifth Amendment to the Federal Constitution.

3

seems to doubt the right to make other branches of banking a franchise. But since the court was dealing with a corporation's rights in that case, the statement would have been dictum. The two earlier Alabama cases seem to have assumed the right of the legislature to make all banking a franchise. The point at last came before the supreme court of North Dakota, and that court, in an opinion not very well considered, held that the state legislature could prohibit all private banking; but a little later the supreme court of South Dakota held such an act to be unconstitutional." Other states will probably settle the question for themselves in the near future. The supreme court of the United States will also be required to pass upon the question under the fourteenth amendment. If that court should decide against the legislative right, the question will be completely settled for the whole United States as to any law subsequent to the fourteenth amendment. But should it hold in favor of the right, it is perfectly, possible that some states will, nevertheless, hold that such an act would be repugnant to the state constitution, which decision as to that point would be final for that state.

§ 10. The probable rule. The objection to such statutes is that they deprive the citizen of a valuable property right, to wit: the right to pursue a lawful calling. It is claimed to be in violation of the due process of law clause of the state and federal constitutions, as well as the privilege and immunity clause of the federal constitution. The sole question is this: Is the evil of unrestricted banking so great that the police power can take it wholly away, or is the legislature

2 Nance v. Hemphill, 1 Ala. 551; State v. Stebbins, 1 Stew. (Ala.) 299. Chief Justice Taney, in Bank of Augusta v. Earle, says that the case of State v. Stebbins could only be considered as applying to banks of issue.

3 State v. Woodmansee, 1 N. Dak.

4 State v. Scougal, 3 S. Dak. 55.

1The usual authorities are cited in the cases above noted. For discussions of the general subject, not confined to banking, see 25 Am. Law Rev. 871, and 27 Am. Law Rev. 857.

required, the business not being a nuisance,2 to prevent the evil by proper regulation? It is not impossible, it would seem, by requiring the capital stock of a private banker to be paid in, and by providing in some safe way for the double liability of that capital stock, by a deposit of securities to make private banking as safe as corporate banking. But it is apparent that, if this were done, and the private banker required to deposit securities, to make his responsibility equal to the double responsibility of the stockholders of a corporation, the private banker would cease to exist. This is, perhaps, the easiest way for a legislature to accomplish indirectly such a result, if it is so desired. The objection of class legislation, and of a discrimination against the private banker, would need to be met and overcome; but it could be said that the law, applying to all private bankers alike, could not be class legislation. If the legislation attacked consists, however, of a positive prohibition against private bankers, the constitutional question must be fairly met. It is likely that the decision will depend upon the private views of the members of the court upon the proper system of political philosophy. If they are devotees of the laissez faire doctrine of government, they will adopt the rule of non-prohibition. If, however, they belong to the opposing school of political thought, they will follow the opposite rule, for the question belongs far more to politics than it does to law. It will require a very accurate knowledge of the general opinions of the judges composing a court of appeal to form any conjecture as to the probable decision. We are likely to have much judicial exposition upon this question in the near future.3

2 Attorney-General v. Bank of Niagara, 1 Hopk. Ch. 403; AttorneyGeneral v. Insurance Co., 2 Johns. Ch. 371. Both these cases held that an injunction would not lie at the suit of the state against the unlaw ful exercise of banking privileges.

3 The flow of judicial rhetoric, which is not always in the best

literary taste, has already begun. "Whence, then," the justice writing the opinion in State v. Scougal, supra, indignantly exclaims, "did the legislature of this state derive its power to farm out these privileges to corporations, and to deny to individual citizens the right to exercise them, which he and his

11. Question considered on principle. It may be conceded that to take away the business of a private banker, who has for many years carried on a lucrative and honorable business, seems a wholly unwarranted proceeding. Everything that can be urged in favor of the citizen's right to enjoy property can be urged in his favor. But many other kinds of business have been treated in this way, and the step justified by an appeal to the right of the public as against the individual. It is claimed with some reason that the history of private banking shows no more failures than corporate banking; that the worst of bank failures have been those of corporations. But it seems plain that if the right be conceded to the legislature to prohibit private banks of issue, the right to prohibit private banks of deposit necessarily follows. We have shown that both businesses are at common law the rights of the citizen. The issuance of a note payable on demand in the place of a sum of money deposited or borrowed does not differ in the least from a book account payable on demand for a sum deposited. In fact the issuing of the note is the older banking transaction. It is true that the note can circulate as money, and the book account cannot. But certificates of deposit and savings books can so circulate in theory, although the form of the latter is too cumbrous for practical use, and the courts deny to them negotiability. Yet the currency does not become demoralized as long as the banker's credit is perfect. If a bank of issue fails, the notes become, of course, practically worthless,

ancestors have from time immemorial possessed?" This is a somewhat clumsy sentence, but if it is meant to assert that we and our ancestors from time immemorial have enjoyed the right to have a bank, the learned justice is only making a phrase. It cannot be asserted that from time immemorial our ancestors have reveled in the unrestrained right of private note issues. That is a compara

tively recent thing. See Anderson v. Alexander, 7 Am. Law Reg. 173. The question is one to be considered calmly and without the aid of buncombe, which never shows in a worse light than in the permanence of a judicial opinion. The opinion seems to think that the federal constitution made note-issuing a franchise, but that is a mistake. It merely prohibited state bills of credit.

unless secured. The same result follows upon a bank failure as to the deposit accounts. Just as much will be paid on the notes as on the deposits. Rather fewer people are affected by the depreciation of the notes than by the depreciation in the value of the deposits, for the deposit account will generally be much larger than the note issue. The direct and indirect effects of a bank failure on its depositors would perhaps be as large as the same effects upon the note holders. So, therefore, no reason can be urged in favor of the legislative right to suppress private banks of issue that cannot also be urged in favor of the right to suppress private banks of deposit. This consideration does not apply to private banks solely of discount. But such a bank cannot in any proper sense of the term be called a bank, as the word is understood either from a business or a politico-economical standpoint. We do not call a note-shaver or a pawn-broker a banker, but both may be discounters of paper. Yet, even pawn-broking, it is conceivable, might be reduced to a franchise for public convenience. But every one must concede as to banks of deposit that people in general know little of a private banker's responsibility, and are prone to accept the fact that a man is a banker as a guaranty of his perfect financial responsibility. That may be their own fault, but it is none the less a fact. Much could be said, however, against the possibility of any man finding out anything from published bank statements. The loans and discounts may be good or bad; the fact can only be ascertained with much trouble. It is found that bank supervisions and examinations do not insure good banking, and that the ultimate guaranty against loss is the double responsibility of stockholders, which can be secured from private bankers only on terms that would lead to the discontinuance of the business. So that the weight of reason is decidedly in favor of the legislative right to suppress private banking.

§ 12. Further questions.- Even if private banking be absolutely prohibited by the state constitution, the question remains whether the state constitution is opposed to the fed