By chapter 260 of the Laws of 1838 the Comptroller, to guard against counterfeiting, was authorized and required to have engraved and printed in the best manner, circulating notes to be issued to the incorporated banks of the State, and to countersign the same; and a system was inaugurated for the deposit of securities in the Comptroller's office which should be a guaranty for the notes issued by the banks--a system very similar to that later adopted by the United States for National banks. One feature which would be regarded as a most unwise one to-day formed a part of this plan; the banks were authorized to deposit one-half the security in bonds and mortgages. The bill also provided that banking associations should file with the Comptroller a semi-annual report of the transactions of the bank. This was practically the inauguration of the supervision of the banks, which was later transferred to the Banking Department. The Legislature had, in 1829, at the time of the creation of the safety fund, authorized the appointment of three Bank Commissioners, whose duty it was to visit the banks, examine their condition, and report to the Legislature. The office of Bank Commissioner was abolished in 1843, and the power of supervision possessed by them was then transferred to the Comptroller, and he continued to retain that power until 1851, when the Banking Department was created. It was during Mr. Flagg's first term that the great financial panic of 1837 took place, and the State's financial condition at that time was not all that might be desired. There was a large debt, mostly incurred in the construction of canals. The revenues had very much decreased, and a new way of raising funds must be used to meet the liabilities of the State and maintain her credit. Matters financial in the State went from bad to worse. In 1842, after long debate, the Legislature passed an act authorizing the laying of a tax of one mill upon every dollar of real and personal property in the State, and pledging the revenues of the State for the payment of its liabilities, and suspending all public work, except where great loss would come to the State by such suspension. In this manner the credit of the State was made secure and its obligations met. This act was prepared and advocated by Mr. Flagg. The significance of this legislation is found largely in the fact that from 1826 to 1842 no State tax for general purposes had been required. [Illustration: J. C. Wright (signature) _14th COMPTROLLER_]