New York Times, “The Hard Times in the City,” October 16, 1857

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“The Bank Panic and the Bank Laws,” New York Times, October 16, 1857, p. 4: 2-3.
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New York Times
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The Bank Panic and the Bank Laws
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Don Sailer, Dickinson College
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The following text is presented here in complete form, as true to the original written document as possible. Spelling and other typographical errors have been preserved as in the original.

The Bank Panic and the Bank Laws.

The Judges of the Supreme Court are severely censured in some quarters for the opinions which they promulgated on Wednesday concerning the Laws relating to Bank Suspension. Members of the legal profession maintain that their action was undignified and without precedent, and that a Judge has no right to give opinions except in pronouncing decisions upon actual trial. Others see in this act another indication of the rapid strides which the Judiciary is taking towards controlling all other departments of the government and making law, as well as interpreting and enforcing it. And still another class regard their action as putting a forced and unwarranted construction upon the law, for the benefit of the suspended Banks. Nearly all these sentiments find expression in letters from correspondents which will be found in another portion of the TIMES. There is some degree of plausibility and even of justice in them all: –yet we think the circumstances of the present case are sufficiently urgent to warrant a departure, in the interest of the public, from the strict line of judicial etiquette.

It is undoubtedly true that the functions of a Judge are confined to the Bench, and to cases which come before him for decision. When the Prohibitory law was pending, our Judges were careful not even to intimate their opinion as to its Constitutionality. So, when the Canal laws of 1851 and the Police law of 1857 were in process of enactment the Legislature and the people were left to take their own course and act upon their own judgment: the Judges interposed only when a case, arising under these laws, came before them in due form for adjudication. This would, unquestionably, have been the regular and proper process in regard to the Bank laws. The Judges would have acted in strict compliance with professional duty and etiquette, if each had acted for himself upon every application for an injunction to which the Bank suspension might have given rise, and if no attempt at unanimity and harmony of action had been made until some case should be carried to the full Court on appeal. And yet every one can see the great public inconvenience and damage that would have followed such a course. In great emergencies, matters of form must yield to practical utility, –and this, certainly, was precisely such an emergency. The whole business community was in a state of alarm and apprehension, –and every day’s delay increased this feeling and the mischief it was doing. The universal fear was that a rigid, hostile administration of the law by the Courts would crush the Banks and plunge the community into still more formidable difficulty. The one thing needed was a knowledge of the general principles of law which would guide the action of the Courts, –and this was afforded by the prompt and explicit declaration of the Judges. If issuing it was a violation of professional forms and official propriety, it is at least partially vindicated by its immediate marked effect in restoring public confidence and allying the ruinous apprehensions which were becoming universal.

Whether the opinions of the Judges are sound, in a legal point of view, or not, is entirely another question. As the matter now stands, being plainly extra judicial, they are not binding upon any Courts of law, –not even their own: –and it is competent for any council, at the instance of a creditor who desires it, to contest them in proceedings for an injunction against any suspended Bank. We have already stated the provisions of the law upon the subject, and it is competent for everyone to judge how far the opinions given depart for their plain intent. The Judges have merely said to the public and the Banks, that, according to their views of the law, it is only insolvent Banks that are to be forced to liquidation; –that injunctions are to be granted and receivers appointed only when it may be expedient in order to prevent fraud and injustice; –and that the mere suspension of specie payments does not constitute insolvency or evidence of intent to commit a fraud. If these principles are sound, it seems to us eminently fortunate that they have been announced to the public in time to do some good.

The action of the Judges is generally regarded, and especially in commercial and financial circles, as having entirely suspended the necessity for an extra session of the Legislature. It is felt that the Banks can obtain from the Courts all the relief which is either just or safe for them to have. A correspondent of the TIMES insists that Legislative action is needed to restore confidence; –but the measures which he points out as means to this end, are by no means certain to secure it, and are besides clearly beyond the constitutional powers of the Legislature. There would be great danger, if an extra Session were to meet, in the present state of the public mind, that our Banking System would either become the football of political parties, or be scarified to the selfish and exclusive interests of the Banks. If it escaped one danger it would be very likely to incur the other. Party organs are already wrangling about the measure, –each being perfectly ready to sacrifice the public good to its own interests, and neither being willing to take any step, however important for the community, which shall promise any party advantage to its opponents. No influence would be likely to prevent such a contest, but that of the Banks themselves: –and the fewer opportunities these, or any other great corporations, have of bringing their power to bear directly upon legislation, the better for the people and the State at large.

So far as our Banks are concerned, we believe the general conviction of the community is no extra session is needed, or should be held. The solvent Banks are in no danger of being forced to liquidation: –the Courts have given them abundant assurances against the dangers which our correspondent apprehends will prevent them from aiding the business community, –and the experience of the last three weeks in regard to the effects of a timid and selfish Contraction, is not likely to be lost even upon the half-dozen Banks whose narrow and short-sided obstinacy has brought about the present catastrophe. It is possible that the condition of our State Finances may require some immediate modification of the canal regulations, which the Canal Board has not power to make. The Auditor has already given notice that outstanding drafts of the Canal Commissioners for work done upon the canals cannot be paid, and it is by no means impossible that similar deficiencies may arise in other quarters. An extra session of the Legislature may possibly become expedient in consequence of these and similar exigencies of the public service. But so far as the Banks and their suspension of specie payments are concerned, we see no reason for believing that such a meeting is either needed or desired by the public at large.

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