$8 UNIVERSITY OF COLORADO STUDIES 



prospector and promoter make their appeal to our bankers. Whether 

 or not too much credit shall be given them depends upon the banker's 

 judgment. This is why we need banking laws that will assist the banker 

 in deciding wisely, and thus protect ourselves from an undue expansion 

 of credit and its consequent injury to sound business enterprise. 



Among the more important defects in the banking laws of Colorado 

 are confusion and the absence of supervision. There is confusion in 

 the law which defines the banking powers of trust companies.^ The 

 law enumerates the powers of trust companies and seems to include 

 all the banking powers and then says that these companies shall not 

 engage in banking except as herein authorized. This last clause is of 

 doubtful meaning and just what was the intent of the legislature in enact- 

 ing it has never been made clear. It looks as though it might have been 

 inserted to make the bill pass easily so that the unwary might not suspect 

 that trust companies had banking powers. It recalls the character of 

 the Manhattan Company of New York City. Some of the anti-federal- 

 ists, among them Aaron Burr, wanted a charter for a bank in New York. 

 The legislature was then in session but it was a federalist legislature and 

 Burr well knew that it would not grant him a charter. He therefore 

 conceived a method of obtaining one by stealth. There had been an 

 epidemic of yellow fever in New York and it was commonly thought to 

 be due to the poor water supply. Burr went to the legislature and asked 

 for a charter for a company to provide a pure water supply for the city 

 of New York. In the bill which he drew and presented to the legislature 

 was a clause that any surplus of the capital of the company might be 

 employed in any moneyed transactions not inconsistent with the constitu- 

 tion and laws of the state. The federalists, even such astute men as 

 John Jay, did not mistrust that banking powers were concealed in this 

 innocent looking clause. This company immediately started a bank 

 with half of its capital and exists as the Manhattan Company to this day. 

 It long since ceased to be a water company. 



The liability of stockholders in banks and trust companies is nbt 

 clearly defined. The law of 1885 says that shareholders in banks, 

 savings banks, trust, deposit, and security associations shall be individu- 



^ Laws of 1891, pp. 102-10S, §3; Mills' Statutes, § S44C. 



