Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 5, 1916
File No. 812.516/143
Consul Canada to the Secretary of State
Vera Cruz, September 20, 1916.
Sir: I have the honor to transmit enclosed herewith Carranza’s bank decree referred to in my cablegram of September 20, 8 a.m.
I have [etc.]
[Untitled]
I, Venustiano Carranza, First Chief of the Constitutionalist Army in charge of the Executive Power of the Nation, making use of the powers with which I am vested.
Whereas: I. The powers of the Congress of the Union are limited by the prohibitive provisions of the fundamental law of the Republic, with the consequence that the laws which are passed by exceeding those powers in contravention of the fundamental law should be abrogated, and since the Power charged with declaring the unconstitutionality of the laws in judicial form is not at present being exercised and since the Executive Power is under the obligation of carrying out the provisions of the Constitution of the country, it behooves him who is charged with the Executive Power to declare the abrogation of the unconstitutional laws and concessions;
Whereas: II. The laws which establish the concessions granted to the banks of issue and the provisions of the law for credit institutions, by virtue of which the said institutions, without any compensation in favor of the State, enjoy the monopoly of issuing bills in greater quantities than the total of the metallic reserve, can turn their mortgage credits into cash without judicial formality and are exempt from taxes, are unconstitutional, because Article 28 of the Constitution declares that there shall be no monopolies in the form of protection to industry and several provisions of the same Constitution order that the laws should be applied by the ordinary courts according [Page 642] to rules common to all litigants, that no person can enjoy advantages which are not the reward of a public service and that it is forbidden to place restrictions on the liberty of the States; yet this is done when credit institutions are exempted from local taxes;
Whereas: III. The application of ordinary legislation to credit institutions might bring about the bankruptcy of said institutions, causing a recrudescence of the financial crisis and the raising of a great number of judicial questions, thus doing harm to the interests invested in banks, which interests must be defended by the State, in consideration of the fact that they were created under the protection of illegal concessions and of the Law of Credit Institutions;
Whereas: IV. The failure of enterprises which undertake public services gives rise to the naming of Boards of Supervision (Consejos de Incautacion, Boards of Administration, Inspection and Provisional Precautionary Attachment or Trusteeship) which take charge of the interests in the controversy, and in the present instance it is convenient that in the administration and in the liquidation of the banks all those who have an interest in them, including the legal representatives of the banks, should appear:
Therefore do decree the following:
Article 1. Repeal is made of the laws which authorize concessions to the banks of issue and the provisions of the general law of credit institutions of March 19, 1897, modified by the decree of June 19, 1908, by virtue of which the said institutions have monopolies of the issuance of bills, are empowered to proceed in extraordinary fashion in case of judicial suits and are exempted from paying imposts.
Article 2. The banks of issue are granted a term of sixty days from the date of the promulgation of this law to increase their metallic reserves to cover the total amount of the bills in circulation.
Article 3. From the date of this law the banks mentioned can only carry on operations with the authorization of the inspector of the Department of the Treasury and operations which have as their object the preserving of the interests of the bank.
Article 4. The Treasury Department shall proceed immediately to name for each bank of issue a Board of Supervision (Consejo de Incautacion) which shall be composed of a member of the Regulating and Inspecting Commission of Credit Institutions, of an inspector of banks, of the manager of the institution and of a representative of the creditors, who, during the time it is being established, shall be the Attorney General of the Republic or an agent of the Federal Public Ministry (i. e., of the Attorney General) especially designated. The representative of the Regulating and Inspecting Commission of Credit Institutions shall act as president and shall have the deciding vote. The creditors of the bank may meet together and when by virtue of a notarial act they choose, according to the majority of credits, a representative, they may inform the Treasury Department of the fact and in such case the representation of the Public Ministry shall cease, being assumed by the person designated.
Article 5. The Board of Supervision (Consejo de Incautacion) shall have the following powers:
- I.
- To watch over the preservation of the metallic specie.
- II.
- To carry on all kinds of operations which have as an object the preserving of the interests of the bank.
- III.
- To liquidate the institution with the previous authorization of the Treasury Department or in obedience to the resolutions of the Department in case the bank does not increase the reserves according to the terms provided in Article 2 of this law.
Article 6. The Treasury Department, officially or upon the request of an interested party, shall decree those measures which are pertinent to the preservation of the interests of the bank and to the functioning of the board of supervision.
Article 7. The banks can not be declared in a state of judicial bankruptcy without the previous authorization of the Treasury Department.
Article 8. The distribution of the metallic specie which the bank keeps can be made only in accordance with the provisions which the Treasury Department may decree.
Article 9. In case of extrajudicial liquidation the distinctions which the ordinary laws establish for credits must be observed, unless there is a law to the contrary.
[Page 643]Article 10. The credit institutions which comply with the provisions of Article 2 shall be free from attachment, but shall be subject to the legislation in force in so far as it is not opposed to the provisions of the present law.
Therefore I command this to be printed, published, circulated and duly observed.
Constitution and Reforms.