Ohio History Journal

A HISTORY OF BANKING AND CURRENCY IN OHIO

BEFORE THE CIVIL WAR.

 

 

PREFACE.

 

In the following pages on the development of banking and

currency in Ohio from 1803 to 1863 an attempt has been made

to point out also some of the relations of those subjects to the

general economic and political history of the state.

The monograph had its origin several years ago in the semi-

nary in business organization of Professor Jeremiah W. Jenks

while the writer was a graduate student in Cornell University,

and to Professor Jenks he is indebted for many helpful sugges-

tions and discussions in planning and prosecuting the work in

its early stages. To Dr. Charles H. Hull, Professor of American

History, Cornell University, and to Dr. Frank A. Fetter of

Princeton University, formerly Professor of Political Economy

and Finance, Cornell University, the author also owes a debt of

gratitude. Both of these gentlemen read much of the manu-

script and their careful criticisms proved of great value through-

out the study.

What began as an investigation of the development of busi-

ness organization in Ohio prior to 1863 soon resolved itself into

a study of banks and banking, for during that period banks were

the largest and the most numerous representatives of the cor-

porate form of business organization in the state. They were

the pioneers in big business in Ohio. It has seemed proper to

treat the subject in two parts: first, because authorized banking

almost ceased in Ohio between 1843 and 1845, as may readily

be seen from the diagram in the appendix; second, because the

basis of note issue, the chief function of a bank in those days,

was entirely different in Ohio before from what it was after the

dates unamed; and finally, because at that time the practice of

incorporating banks by special acts of the legislature gave way

to the method of organizing them under general laws.

(235)

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236                       Preface.

In carrying on this study the Ohio state documents and

the early newspapers and local histories of the state have been

the most important sources of material and this fact delayed the

completion of the work for some years until the writer's return

to Ohio where alone much of this material was accessible. In

making available the many state publications and files of old

newspapers, which had to be gone through without the help of

an index, great assistance has been rendered by the staffs of the

Cornell and Ohio State University Libraries and the Library of

Congress, Washington, D. C., the Dayton Public Library, Day-

ton, Ohio, and the Ohio State Library, Columbus, Ohio.

Others to whom the writer wishes to acknowledge obliga-

tion are, Professor Davis R. Dewey of the Massachusetts Insti-

tute of Technology, for assistance in the collection of material

and approval of the completed monograph as a part of the

Carnegie Institution's work on the economic history of the

United States, and Mr. E. O. Randall, Secretary of the Ohio

State Archaeological and Historical Society, for his kindness in

reading the manuscript and his active interest in furthering its

publication.  Last, but not least, there is the debt which the

writer owes to his wife, for encouragement and assistance in

the various stages of the work.

C. C. HUNTINGTON.

Ohio State University,

August 24, 1915.

• 2
 

CONTENTS.

 

PAGE

Preface       ...........................................................                                             235

Table   of   Contents ................................................                                         237

M ap    of   O hio  ....................................................                                         244

INTRODUCTION.

Geography and Early History of Ohio ............................. 245

Boundaries  and  Drainage ....................................  245

La Salle and the French Fur Traders ......................... 245

English  Trade     Rivalry .......................................                                   246

The  Inevitable   Conflict .......................................                                 247

Pontiac's      Conspiracy  ........................................                                 248

The  Q uebec      Bill  ... ........................................                                   249

The Moravians and the Squatters ............................ 249

Permanent   Settlement  ......................................                                    250

The  Treaty of   Greenville ....................................                                 251

Admission    to   Statehood......................................                                 251

A HISTORY OF BANKING AND CURRENCY IN OHIO BEFORE THE

CIVIL WAR.

PART I. BANKING IN OHIO UNDER SPECIAL CHARTERS.

1803-1843.

Note issue based on general assets.

CHAPTER I. THE ANTE-INFLATION PERIOD. 1803-1814.

Economic  Conditions    ........................................                                  255

Early           M anufacturing                                                                     ........................................             255

The  M iami Country..........................................                                     256

The Miami Exporting Company (The First Bank) ........... 257

The Bank of Marietta ....................................... 260

The  Bank   of   Chillicothe .....................................                               261

The  Bank   of   Steubenville ....................................                               262

Other Banks Chartered ...................................... 263

Unauthorized Banking ...................................... 265

Conditions of the Ohio Banks prior to 1815 ................... 266

CHAPTER II. THE INFLATION PERIOD OF 1815-17.

Increase  of  Population  .....................................  269

Economic Conditions ........................................ 270

Speculation and Inflation in the Mississippi Valley ............ 271

Governor Worthington on the Subject of Banks .............. 272

The Bonus Law of Feb. 23, 1816 ............................. 273

Banks Incorporated by the Bonus Law ....................... 275

Other Banks Chartered under Provisions of the Bonus Law.. 276

Ohio Banks incorporated from Feb. 24, 1816, to Jan. 14, 1818.. 277

Statistics of Banking Capital ............................. .. 278

Suspension and Bank Note Depreciation ...................... 279

Convention of Ohio Banks at Chillicothe ...................... 282

Branches of United States Bank in Ohio and Resumption of

Specie Payment ........................................ 283

Proposition for a State Bank................................. 284

(237)

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238                          Contents.

 

CHAPTER III. THE CRISIS OF 1818-19.                            PAGE

The Golden Age of the Western Country ..................... 285

Distribution of State Banks in the United States, 1818 ........ 286

Causes  of  the  Crisis  of  1818-19 ...............................  287

The Crisis in the West occasioned by the U. S. Bank.......... 288

Expansion of Credit by Western Branches .................... 288

Operations of U. S. Bank increase Inflation in the West....... 289

Sudden Restriction of Credit by United States Bank precipi-

tates  the  Panic...... ...................................  290

The United States Bank calls for Balances from Cincinnati

Banks ........................................         291

Suspension of Specie Payments by Ohio Banks ................ 291

Notes of Many Ohio Banks refused at State Treasury in Pay-

m ent  of  T axes.................................... .....  292

State Bank Notes refused at Cincinnati in Payment of Public

Land Sales: Chartered Banks ask for the Repeal of

Bonus  Law  ................................. ....... .  293

Counterfeit Notes, Small Notes, Post Notes, Buying up Notes

at Discount, and Tax on Unauthorized Banks ............ 295

Specie Drained from Ohio by the United States Bank......... 297

Fall of Prices in Ohio and the West Generally ................ 298

Debt and Distress in the Mississippi Valley ................... 298

Report of the Select Bank Committee of the Ohio Legislature. 300

Recommendations of the Committee ......................... 300

Condition of Chartered Banks in Ohio, January, 1819........ 301

Table showing Condensed Statement of Assets and Liabilities

of  Chartered  Banks .....................................  303

The Ratio of Circulation to Capital and, the Proportion of

Capital, Circulation, and Deposits to Specie for Chartered

Banks,  January,  1819 ....................................  306

The Distribution of Ohio Banks by Counties and the Propor-

tion of Capital to Population, January, 1819.............. 307

Statement of Bank of John H. Piatt & Co., Cincinnati, March, 1819 309

Depreciation of Ohio Bank Notes in 1819 and 1820 ............ 309

Specie paying Banks of Ohio in 1820 .......................... 311

CHAPTER IV. THE ATTEMPT TO TAX THE BRANCHES OF THE UNITED

STATES BANK.

Early  State  Opposition  to  the  Bank ...........................  313

Report of Joint Committee of the Ohio Legislature on the

Expediency of Taxing the Branches of the U. S. Bank.. 314

Substitute Report.adopted by the Ohio House of Representatives 315

Hostility  to  the  Bank  increases in  1818 ........................  316

Ohio enacts a Law taxing Branches of the Bank in the State.. 317

The Case of McCullouch vs. Maryland ........................ 317

The State forcibly collects Tax from Chillicothe Branch...... 318

Arrest and Trial of State Officials concerned in Collecting the Tax 319

Excitement  over  the  Affair ...................................  320

Ohio Elections in Fall of 1819 influenced by Bank Fight....... 321

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Contents.                           239

 

 

PAGE

Hard Times increase Hostility to the Bank ....................  322

Report of Special Committee of the Ohio Legislature ......... 322

Recommendations and Resolutions offered by the Committee.. 324

The Ohio Legislature reaffirms the Kentucky and Virginia

Resolutions and Outlaws the United States Bank ........ 324

The Case of Osborn vs. The United States Bank ..............326

The People of Ohio submit to the Decision of Supreme Court. 328

CHAPTER V. PERIOD OF DEPRESSION AND RECOVERY, 1820-1830.

Depression and Low Prices in the Early 20's .................. 330

Dullness in Land Sales and Lack of Immigration into State.. 332

Bad Banking and Depreciation of Ohio Bank Notes not the

Chief  Cause  of  the  Depression ..........................  333

Lack of Markets for the Surplus Products of the State....... 334

Opening of the Erie Canal and Beginning of Ohio Canals, 1825. 335

Industrial and Social Awakening in the State ................. 335

Dissatisfaction with the Operation of the Bonus Law.......... 337

Difficulty in Collecting State's Claims against Banks .......... 339

Tax on Bank Dividends substituted for the Bonus ............ 340

Lack of Banking Statistics from 1820 to 1830 .................. 341

Need of Banking Capital in Cincinnati in 1826 ................ 342

State Loans and Public Works increase the Money Supply..... 343

Project of a State Bank Discussed ........................... 343

Two New Banks authorized by the Legislature ................ 344

Depression of Ohio Bank Notes in 1822 and 1828 ............. 345

Ohio Bank Failures from Jan. 1, 1811 to July 1, 1830 .......... 346

Causes of Failures of Majority of Ohio Banks ................ 347

Benefits derived from surviving Banks ....................... 348

Distribution of Banks and Capital in Ohio, January, 1830...... 349

Number and Capital of State Banks in Ohio, 1805 to 1830.... 350

Diagram showing changes in banking capital, 1805-30.......... 351

CHAPTER VI. THE SECOND PERIOD OF EXPANSION. 1831 TO 1836.

An era of internal improvements ............................. 352

Increase in immigration .....................................  352

Growth of population in Ohio ................................ 353

Effect of transportation facilities .............................  353

Foreign commerce and foreign loans .......................... 353

Period      of                                                                                             business          expansion ................................               354

Excessive    credit and  speculation ..............................                            355

Rapid  growth  of local banking ................................ 355

Refusal to recharter U. S. Bank ..............................  355

Withdrawal of public funds from U. S. Bank and their deposit

in state banks .......................................... 356

Payment of national debt, distribution of surplus among states 356

Relation of credit and speculation ............................  357

Rapid increase of bank notes and other money in U. S........ 358

Bank  circulation  in  Ohio .....................................                                  358

Charter of Bank of Norwalk ................................                                    359

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240                            Contents.

PAGE

Revival of Dayton Bank .....................................359

Opening of Commercial Bank of Cincinnati .................. 360

Tax on dividends of banks increased to 5% ................... 360

Re-opening of Commercial Bank of Lake Erie ................ 362

Scarcity of money in Ohio .........       ................                                  . 362

Revival of project for State Bank .........................                                    363

Two million-dollar banks authorized in Cincinnati ............ 364

Message of Gov. Lucas, Dec. 1833 ............................ 365

Banking capital in Ohio held by non-residents ...............  365

Annual cost of foreign banking capital to people of Ohio...... 366

Ohio bank notes depreciated beyond vicinity of issuing bank... 366

Financial disturbances early in 1834 .......................... 366

Defeat of State Bank Bill .........         .............                                     . 367

Ten more local banks chartered in 1834 ............                                 ... 367

Clinton Bank of Columbus organized by office-holders ........ 368

Capital stock of new banks over-subscribed .................... 369

The Ohio Life Insurance and Trust Co...................... 369

Revival of Miami Exporting Co. and Urbana Banking Co...... 371

Number and capital of Ohio banks in March, 1835 ............ 372

Ohio  banking  statistics  in  1835 ...............................                        373

Proportion of specie to circulation .........................                                  374

Distribution of banks by counties and ratio of capital to popu-

lation   in   1835 ...........................................  375

Climax of the inflation in 1836 ................................ 377

The "No-Bank" Party in power .............................. 377

Report of legislative committee against chartering more banks. 377

U. S. Treasury Department urges states to suppress small notes 378

Governor Lucas recommends prohibition of bills less than $5.. 379

Extent of circulation of small bills ..........................  380

Banks asked to give up vested rights to issue small bills....... 381

Replies  of  the  banks  ........................................ 381

Law of March 14, 1836, prohibiting small notes ................382

CHAPTER VII. THE PANIC OF 1837 AND THE RESULTING DEPRESSION.

1837-43.

The national government tries to check bank note inflation ....384

The  Specie  Circular  ........................................ 384

Relation of bank note inflation to public land sales............ 385

General suspension of specie payment ........................                        385

The Panic of 1837 .......................................                                            387

Cause of suspension of Ohio banks ...........................387

Ohio bank convention, June 1837 .............................388

Statistics of Ohio banks in 1837 ..............................388

Repeal of law prohibiting small notes ........................389

Partisan nature of the vote ..................................                              390

Resumption of specie payment ..............................                                  390

Statistics of Ohio banks in 1838 ..............................391

Suspension again in 1839 ................................... 391

The Bank Commissioner Law ...............................     392

• 6
 

Contents.                           241

 

 

PAGE

First annual report of bank commissioners .................... 392

Indebtedness of directors and officers ......................... 393

Re-enactment of law forbidding small notes .................. 395

Messages of Governor Shannon .............................. 395

Message of Governor Corwin ............................... 396

Question whether to adopt State Bank or Safety-Fund System. 396

Currency        fluctuation         in       Ohio .................................                                                             397

Exports          from   Ohio         in       1840 ..................................                                                            397

Effect of internal improvements .............................. 397

Canal receipts and shipments at Cleveland .................... 398

Low    prices  and  hard  times ...................................  398

Agitation for new banking system in Ohio .................... 399

Third annual report of bank commissioners ................... 401

Taxes paid by Ohio banks, 1831 to 1843 ....................... 402

Difficulty in collecting taxes from banks ...................... 403

Bank failures in 1841-2 .....................................  403

Bank question in Ohio involved in party politics ............... 405

The general banking               law    of 1842 ..............................                                                           405

Statistics  of  Ohio                   banks        in                                                                                            1842 ..............................                 406

Expiration of charters of majority of Ohio banks in 1843...... 408

PART II. BANKING IN OHIO UNDER GENERAL LAWS.

1843 to 1863.

Note issue secured by safety fund or bond deposit.

CHAPTER VIII. CONDITIONS PRIOR TO 1845.

Specie Paying Banks in Ohio in 1843 and 1844 ................. 413

Economic  Conditions  in  the  State ............................  414

Exports and Exchange Operations ............................ 415

Foreign and Unauthorized Bank Circulation .................. 416

Inadequate Banking Facilities and Low Prices ................ 417

Private  Capital  in  the  State ..................................  418

Objections to the General Banking Law of 1843............... 419

Agitation for a New Banking Law ........................... 420

Difference of Opinion as to System needed ................... 420

Kelley's Bank  Bill in  the  Legislature ..........................  421

CHAPTER IX. THE STATE BANK OF OHIO AND INDEPENDENT BANKS.

1845-1851.

The General Banking Law of Feb. 24, 1845 ................... 423

Provisions relating to the State Bank ....................... 424

Provisions relating to Independent Banks .................... 425

General Provisions of the Law ...   ........................ 425

Meeting of Board of Bank Commissioners ................... 426

Organization of the Board of Control ........................ 426

Formation  of  New  Banks ....................................  427

Effect of Increase in Banking Facilities ...................... 427

Opposition to the New Law in 1845 and 1846 ................. 428

Increase of Bank Circulation and Prices ..................... 429

Distribution of Banking Facilities throughout the State........ 430

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242                            Contents.

PAGE

Statistics of Growth of Banks under the General Law........ 431

CHAPTER X. THE NEW CONSTITUTION AND THE FREE BANKING LAW

OF 1851.

Failure of Old Banks ....................................... 433

Anti-Bank Party again in Power................ ........... 434

The Constitutional Convention ............................... 434

Bank Reform in the Legislature ............................. 435

The Free Banking Law of March 21, 1851 .................... 437

Free Banks organized in 1851 and 1852 ....................... 438

CHAPTER XI. BANKING AND CURRENCY CONDITIONS, 1851-1854.

End of another Period of Bank Expansion ................... 439

Expansion Period one of Business Prosperity ................ 439

The  Profits  of the    Banks ....................................                                440

Sources  of Banking    Profits ... ...............................                                441

The 10% Interest Law of 1850 ............................... 442

Bankers Interested in Broker Establishments .................. 443

Increase of Private Banks and Broker Firms .................. 444

Failure of Laws against Unauthorized Banking ............... 446

Demand for more Banking Capital in Ohio ................... 448

Depreciated Currency in the State ............................ 449

Schemes to  Avoid  Redemption ................................  450

The Use of Banks for Deposits and Loans.................... 452

Bank  Failures    in1854 ........................................                                   453

Condition  of     Remaining  Banks ...............................                           454

CHAPTER XII. BANK TAXATION IN OHIO BEFORE THE WAR.

Decline in Banking Facilities attributed to Tax Laws......... 456

Taxation of Dividends or Profits prior to 1850 ................ 456

Tax on Capital and Surplus in 1850 and 1851 .................. 458

Opposition        to     Tax                                                                        Law  of  1851 ..............................                459

Tax  on     Loans        and                                                                         Discounts .................................   459

Refusal of Banks to Pay the Tax ............................ 460

The  Crow   Bar  Law  of  1853 ..................................  460

Kelley's Bank Tax Law of 1856 .............................. 462

Vacillating Character of Rest of Period ..................... 462

CHAPTER XIII. THE BANK OF OHIO, PANIC OF 1857, AND NOTE RE-

DEMPTION AGENCIES.

Further Decline in Banking Capital in 1855 .................... 464

Act to Incorporate the Bank of Ohio and Other Banks........ 464

Objections to the Proposed Banking Law ..................... 465

Governor Chase favors Free Banking ........................ 465

Another State Bank Law rejected by the Voters .............. 466

Distribution of Ohio Banks in January, 1857 .................. 467

Industrial Progress in Ohio, 1852 to 1857 ..................... 469

Failure of Ohio Life Insurance and Trust Co ................. 470

The  Panic  of  1857          ..  ..........................................  470

Failure of Trust Company threatens State Bank of Ohio ...... 471

The State Bank establishes a Note Redemption Agency........ 472

The  Ohio  Bank  Agency  of  1850 ..............................  472

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Contents.                           243

 

PAGE

The Opportunity for a Redeeming Agency .................... 473

The  Agencies of  1854  and  1857 ...............................  473

Agitation for an Ohio Valley Clearing House ................. 474

The Brokers' Assorting System ............................... 474

The  Bank  of the  Ohio  Valley ................................  475

CHAPTER XIV. CONCLUSION.

Majority of Ohio Banks survive the Panic .................... 477

Many Ohio Banks become National Banks after 1863 .......... 478

End of Period of Note Issue under General Ohio Laws....... 478

Classes of Ohio Banks under General Laws ................... 479

Division of Banks according to Security for Note Issue...... 480

Objection to Safety Fund Security ............................ 480

Comparison of State Bank of Ohio with that of Indiana...... 481

Comparison of State Bank of Ohio with New York Safety

Fund System   ...........................................  481

Comparison of State Bank with Stock Banks .................. 483

APPENDIX.

Quotations of Ohio bank notes at Philadelphia ..................... 487

Diagram showing above, from 1814 to 1841 ........................ 492

Receipts from public land sales in the United States each year,

1796  to  1841..................................................  493

Distribution of real estate loans of the Ohio Life Insurance &

Trust Co., by counties in Ohio, 1836 .......................... 494

Digest of General Banking Law of Feb. 24, 1845 ................... 495

Digest of Free Banking Law of March 21, 1851 .................... 499

Diagram showing circulation of different classes of Ohio banks from

1846  to   1863..................................................  502

Diagram showing capital of different classes of Ohio banks from

1846  to   1863 ..................................................  503

Statistical tables showing detailed resources and liabilities of each

class of  Ohio  banks, 1846-1863 ................................  504

Diagram showing capital, circulation, loans, deposits, and specie of

Ohio  banks  from   1835  to  1863 ................................  511

Statistics of state banks in the United States, 1784-1863 ............ 516

Table showing December prices of certain commodities at Cincin-

nati, 1829-59 ................................................ 519

Table showing principal and interest of Ohio state debt, value of

taxable property in the state, and gross state revenues and ex-

penditures each year, from 1833 to 1856 ...................... 520

Table showing profits of each stock bank and each branch of State Bank  521

Financial statement of the Bank of the Ohio Valley, May 6, 1862... 523

Depreciation of notes of Ohio banks that failed, 1831-43............ 524

Premium on exchange at certain Ohio towns, 1832-43 .............. 525

Diagram showing ratio of circulation to capital for safety fund

and  stock   banks ..............................................                                       526

BIBLIOGRAPHY ................................................                                              527

INDEX    ..........................................................                                                534

• 9
 

(244)

• 10
 

GEOGRAPHY AND EARLY HISTORY OF OHIO,

 

Boundaries and Drainage.-The State of Ohio has an

area of 41,240 square miles.* Its longest east and west measure-

ment is 225 miles, and its longest north and south measurement

210 miles. Extending from the Ohio River to Lake Erie the state

lies partly in the drainage basin of the Mississippi River and

partly in that of the St. Lawrence, about one-fourth of the

state draining into Lake Erie and the rest into the Ohio. The

principal rivers of the state which flow into the Ohio are,

naming them from east to west, the Mahoning, the Muskingum,

the Hocking, the Scioto, the Little Miami, and the Great Miami,

while the Grand, the Cuyahoga, the Sandusky, and the Maumee

rivers flow into Lake Erie. Nearly three-fourths of the north-

ern boundary of Ohio is formed by Lake Erie, its southern

shore line in Ohio being 220 miles in extent. All of the southern

and more than half of the eastern boundaries of the state are

formed by the Ohio, which flows for more than 436 miles along

the borders of the state.

These waterways have been very important factors in the

history of Ohio,- influencing the movements of the early ex-

plorers, and guiding the fur traders and frontiersmen that fol-

lowed them; deciding the location of the early settlements, and

determining the distribution of later population; facilitating the

marketing of surplus products; supplying water power for mills

and factories; and affording means of communication between

different parts of the state, as well as with other parts of the

country.

La Salle and the French Fur Traders. - As early as 1669

the Frenchman, Joliet, traversed Lake Erie from west to east,1

while the next year LaSalle is said to have crossed the region

south of the lake, possibly by way of the Cuyahoga and Mus-

 

*Ohio Topographical Survey, 1910, p. 55.

1Cartier to Frontenac--Justin Winsor, p. 218.

(245)

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246       Ohio Arch. and Hist. Society Publications.

kingum portage route, and to have found the Ohio.² Thus what

is now Ohio became part of the great domain of France in Am-

erica. It is said that at the mouth of the Cuyahoga the French

held a conference with the Five Nations as early as 1684.3 Soon

after that the French traders were pushing along the south shore

of Lake Erie and up the valleys of the Sandusky and the Mau-

mee on their way to the Wabash. No permanent establishment,

however, was made in or near Ohio during the remainder of

that century. In 1701 Cadillac established Detroit as a strategic

point from which to control the fur trade, and the Maumee, the

Sandusky, and the territory down to the Ohio became depend-

encies of this center.⁴

English Trade Rivalry. -At this time the adventurous

traders of the English were already crossing the Alleghanies

from the seaboard colonies and fixing their huts along the Ohio.⁵

By 1725 English traders from Carolina were trading with the

Miamis on the Wabash,⁶ and English trade rivalry among the

tribes of both the Ohio and the Lakes soon became a serious

matter with the French officials and merchants.⁷  The trade

war between the English and the French for the West continued

during the entire 18th cenutry. They first struggled for the

possession of strategic points on the Wabash. This was the

incentive which induced the French to found Vincennes about

1735.8 Next came another battle for the Ohio country. Prob-

ably as early as 1730 English traders from Pennsylvania were

making their way across middle or southern Ohio.⁹ From that

time until the middle of the century the contest was narrowed

 

²La Salle and the Discovery of the Great West-Francis Parkman,

p. 22. See also Discovery of America -John Fiske, Vol. II., p. 532.

3The Ohio Valley in Colonial Days--Berthold Fernow, p. 40.

4Cooley's Michigan, pp. 16, 18 and 19.

5Cartier to Frontenac-Justin Winsor, p. 364.

6Ohio-Rufus King, pp. 49-51.

7France in America--Reuben Thwaites, p. 91.

8The Wabash Trade Route -Benton, p. 29; Also Bancroft's History

of the United States, Vol. II., p. 225; The Mississippi Basin-Winsor,

p, 149; and France in America-Reuben Thwaites, p. 93.

9 Ohio--Rufus King, pp. 53, 57. Also The Mississippi Basin--

Winsor, p. 149.

• 12
 

Banking and Currency in Ohio Before the Civil War. 247

 

to the region south of Lake Erie.l⁰ In 1745 English traders

were at Sandusky erecting houses, perhaps the first English

structures in Ohio.¹l In 1748 an English alliance with the Mi-

amis effectually established English trade on the Wabash, and

the packmen of Pennsylvania and Virginia pushed boldly into

the Ohio Valley, establishing their most advanced post that year

at Pickawillany on the Great Miami River.¹²  It was estimated

that during a single season at this time some 300 English traders

were leading their packhorses and dragging their batteaux over

the mountain passes into the Ohio Valley.l3

The Inevitable Conflict. - The French looked with great

alarm upon this intrusion of English packmen into Ohio, which

not only threatened their fur trade in that region, but endan-

gered the communications between Louisiana and Canada.¹⁴ In

1748 the commandant at Detroit received instructions to be wary

and, though peace ostensibly existed, to use force if necessary

to prevent the English getting a lodgment in the Ohio country.15

The following year Celeron de Bienville was sent with a strong

force down the Alleghany and Ohio rivers to take formal pos-

session by burying leaden plates at the mouths of the chief

streams, and to drive out English traders. He found traces of

English packmen everywhere, and though he arrested four, his

report was very discouraging. It was then that the Governor

of Quebec asked for 10,000 French peasants to settle the region

before the English should do so.¹⁶

The English colonies were already looking upon the Ohio

Valley as an important outlet to their growing population. In

1749 the Ohio Company was chartered for trading and coloniz-

ing purposes west of the mountains, and the next year it sent

Christopher Gist to explore the Ohio region. He met many

 

The Wabash Trade Route-Benton, p. 30.

11The Mississippi Basin - Winsor, p. 248.

12Ibid, pp. 243 and 249.

13Ibid, p. 249. Also Montcalm and Wolfe-Parkman, Vol. I. p.43.

14Narrative and Critical History of America-Justin Winsor, Vol.

V., p. 12.

15The Mississippi Basin-Winsor, p. 249.

16 France in America - Thwaites, p. 151.

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248       Ohio Arch. and Hist. Society Publications.

Scotch-Irish traders who were operating in what is now Ohio,

and his favorable report greatly stimulated English interest in

the West. At once daring Virginia settlers began moving over

the mountains.¹⁷ It was evident that a collision between the

French and the English could not be postponed much longer.

In fact the inevitable conflict was at hand, and there was on

both sides a belief that whoever should be left in possession of

the Lakes and the Ohio at the close of the war about to begin

would control the continent.18 Indeed the Old Northwest, as

Professor Hinsdale says, was "the occasion of the final struggle

for dominion between France and England in North America."¹⁹

Pontiac's Conspiracy. -Upon the outbreak of the Old

French and Indian War in 1754, practically all the English trad-

ers and pioneers beyond the mountains withdrew to the older

settlements. Probably not a British trader or settler remained

west of the Alleghanies.²⁰ But after the treaty of Paris in 1763,

which closed the war and transferred Canada and the great cen-

tral valley east of the Mississippi to England, the westward

movement of the English began again with renewed energy.

Not only traders but settlers also at once began pushing over the

mountains into the Ohio Valley, although a proclamation of the

king in 1763 had forbidden the English colonists to attempt to

occupy the region west of the mountains, which was made crown

lands to be given over to the uses of the Indians.²1

This movement was suddenly checked, however, by the In-

dians themselves in the Conpiracy of Pontiac, when that Ot-

tawa chieftain, finding the Indians fiercely resenting the intrusion

of settlers upon their lands,²² succeeded in organizing the tribes

of the Lake Region into the most formidable Indian movement

in American history.²3 For more than a year terror reigned

supreme along the whole English frontier, and it was only with

 

17France in America-Thwaites, pp. 152-4.

18The Mississippi Basin-Winsor, p. 336.

19The Old Northwest-B. A. Hinsdale, p. V.

20France in America-Thwaites, pp. 165 and 181.

21The Western Movement-Winsor, p. 2.

22The Conspiracy of Pontiac-Parkman, Vol. I., pp. 175 and 176.

23Formation of the Union -A. B. Hart, p. 40.

• 14
 

Banking and Currency in Ohio Before the Civil War. 249

 

the greatest difficulty that Pontiac was beaten. Finally, how-

ever, after winning the bloody battle of Bushy Run in August,

1764, Col. Henry Bouquet pushed across the Ohio and pene-

trated the wilderness as far as the Muskingum River. Here in

October, 1764, he succeeded in making a treaty with the Indians,

and again the English traders, hunters, and settlers began to

enter the Ohio country, for at that time no region in North

America had the reputation of being so inviting as the Ohio

Valley.²⁴

The Quebec Bill.-To prevent the fur trade of the

Northwest from slipping away to the French and Spanish the

English home government desired to placate the Indians, and

therefore endeavored to restrain the settlers from crossing the

Ohio.²⁵ This program, however, was little heeded by the hundreds

of English colonists who were already entering the Ohio Valley,

and many of whom crossed to the northern side of the river;

neither did it meet with the approval of the Colonies themselves,

several of which claimed various portions of the northwest.

In 1774, largely as a means of extinguishing all claims of Con-

necticut, Massachusetts, and Virginia to this region Parliament

passed the Quebec Bill, which annexed to Quebec the whole

territory between the Ohio and Mississippi Rivers and the Great

Lakes.²⁶ But just as the Royal Proclamation of 1763 failed to

prevent the settlers from crossing the mountains and only served

to anger the Colonies; so the Quebec Bill not only failed to keep

settlers from crossing the Ohio, but was seized upon as one of

the grievances justifying the Revolution.²⁷

The Moravians and the Squatters. -As early as 1772

Zeisberger and his Moravians had crossed the Ohio, pushed into

the interior, and laid the foundation of a white settlement in the

valley of the Tuscarawas, one of the branches of the Mus-

kingum.28   And before the Revolution many pioneer settlements

 

24The Western Movement -Winsor, p. 12.

25Ibid, pp. 23 and 25.

26Formation of the Union - Hart, p. 60.

27Formation of the Union - Hart, p. 60. Also The Old Northwest

-Hinsdale, p. 147. The Western Movement -Winsor, p. 2.

28 The Western Movement- Winsor, p. 56. Also King's Ohio, p. 126.

• 15
 

250       Ohio Arch. and Hist. Society Publications.

had been made on the northern side of the Ohio as far down

as the mouth of the Muskingum. In 1776 Col. Patterson re-

ported several of these so-called "tomahawk" improvements be-

low the Hocking, and two years later they had already extended

for thirty miles up the Muskingum.²⁹ These people were the

subject of frequent complaints by the Indians, who were de-

termined to preserve their hunting grounds; and Congress in

September 1783 issued a proclamation against unauthorized ap-

propriations of the Indian lands; but in vain, there continued a

steady flow of settlers across the Ohio, giving the Indians good

reason to suspect the Americans of a design to encroach upon

their tribal lands.³⁰

Permanent Settlement.-After the close of the Revolu-

tion the fame of the lands along the Ohio spread rapidly and com-

panies began to be formed for the purpose of planting colonies

there. In January 1785, at the treaty of Fort McIntosh the In-

dian title to a large part of the land between Lake Erie and the

Ohio river was extinguished,³¹ and in June 1787 Congress passed

the famous Ordinance of 1787 providing for the government

of the Northwest Territory.³2 A few months later, in October

1787, the Ohio Company, composed largely of people from

Massachusetts, contracted for the purchase of about 1,500,000

acres along the Ohio between the Scioto and Muskingum riv-

ers, and early the following spring they made what is known

as the first permanent settlement in Ohio, when, on the seventh

of April, 1788, they founded Marietta at the mouth of the Mus-

kingum.³³ In October of the same year a company composed

chiefly of New Jersey people contracted for a large tract of land

between the mouths of the Miamis and in November 1788 they

founded a town, called Columbia, at the mouth of the Little Mi-

ami. A month later, about five miles below this point, a town

was started on the Ohio river just opposite the mouth of the

 

29King's Ohio, pp. 191-2.

30 The Western Movement - Winsor, pp. 243-5.

31Historical Collections of Ohio--Henry Howe, Vol. I., p. 36.

32 Formation of the Union--Hart, p. 108.

33Howe's Historical Collections of Ohio, Vol. I., pp. 37 and 131. The

Western Movement- Winsor, pp. 296 and 298.

• 16
 

Banking and Currency in Ohio Before the Civil War. 251

 

Licking. This later came to be known as Cincinnati,³⁴ and was

destined soon to distance its early rivals in growth of population

and commercial importance. It was not until after the treaty of

Greenville in 1795, however, that Cincinnati made much

growth.35

The Treaty of Greenville. - As the settlements north of

the Ohio increased in number and population the Indians became

more and more uneasy. Hostile bands were soon hovering about

the Muskingum and Miami settlements, and before long open

warfare broke out. In 1790 an expedition from Cincinnati led

by General Harmar resulted in failure, and the following year

Gov. St. Clair's strong force, which proceeded against the In-

dians on the Maumee, was totally defeated. Indian outrages of

all kinds increased until immigration north of the Ohio almost

ceased. Finally, however, in 1794 an army under Gen. Anthony

Wayne inflicted a severe defeat upon the Indians at the rapids

of the Maumee after which Wayne burned many of their vil-

lages, laid yaste their cornfields for miles, and erected Fort De-

fiance in the heart of their country.³⁶ This brought the Indians

to terms, and at Greenville in 1795 eleven of the most powerful

tribes of the Northwest made a treaty with Gen. Wayne, which

confirmed the boundary line fixed at the treaty of Fort McIn-

tosh. This opened all of Ohio to white settlement except the

northwestern part.

Admission to Statehood.--During the next few years

following the treaty of Greenville in 1795 a wave of settlers began

to pour into the territory. Population, hitherto confined chiefly

to the vicinity of the Ohio, began to diverge from Marietta on

the one hand and Cincinnati on the other, towards the height of

land between the Ohio and Lake Erie. Naturally the river

valleys were the first to become populous. Soon permanent set-

tlers were occupying the valleys of the Muskingum, the Hocking,

the Scioto, and the Miamis, and a range of towns across the

country north of the early settlements marked the progress of

 

34 Howe's Historical Collections of Ohio, Vol. I, pp. 38 and 747. The

Western Movement-Winsor, p. 315.

35 King's Ohio, p. 215.

36Howe's Historical Collections of Ohio, Vol. I., p. 40.

• 17
 

252       Ohio Arch. and Hist. Society Publications.

population.³⁷ In the Miami Valley, Hamilton was laid out in

1794, Dayton in 1796, and Springfield in 1801. On the Scioto,

Chillicothe was laid out in 1796, and the next year Franklinton,

where Columbus now stands. Athens on the Hocking was set-

tled in 1797 and Lancaster in  1800. While in the Muskingum

Valley, Zanesville was begun in 1799 and Coshocton in 1802.38

Meanwhile Cleveland had been founded on Lake Erie at the

mouth of the Cuyahoga in 1796,39 and Steubenville on the upper

Ohio in 1798.40  Thus the great outlines of the future state so

rapidly filfiled with inhabitants that on April 30, 1802 Congress

passed an act enabling the portion of the Northwest Territory

between Lake Erie and the Ohio River to form a state.⁴1 A con-

vention assembled at Chillicothe in November 1802 and adopted

a Constitution,⁴² and an act of Congress approved April 15,

1803 recognized the State of Ohio.⁴³

 

37King's Ohio, p. 264.

38 Howe's Historical Collections of Ohio, Vol. I., pp. 342, 396, 466

and 589; Vol. II., pp. 274 and 492.

39 The Western Movement--Winsor, pp. 502-4.

40Howe's Hist. Coll. of Ohio, Vol. I., p. 964.

41Charters and Constitutions--Ben Perley Poore, Vol. II., p. 1453.

42Ibid, p. 1455.

Ibid, p. 1464.

• 18
 

PART I. BANKING IN OHIO UNDER

SPECIAL CHARTERS. 1803-1843.

 

NOTE ISSUE BASED ON GENERAL ASSETS.

(253)

• 19
 

 

• 20
 

CHAPTER 1.

THE ANTE-INFLATION PERIOD. 1803-1814.

Economic Conditions. - During the period preceding the

War of 1812 the people of Ohio were occupied literally in get-

ting out of the woods. Dense forests separated the different

settlements, delaying the social and economic fusion of the

population. The barrier of the Alleghanies cut them off from

the markets of the Atlantic States except for live stock, which

could be driven over the mountains on foot. Consequently the

occupations of the people were mainly pastoral or agricultural.

Yet the very barriers which made it hard to dispose of surplus

products and difficult and costly to import merchandise, etc.,

served to hasten home manufacturers. The towns on the Ohio

and its tributaries had the advantages of river communication

with each other as well as with Pittsburg, Louisville, and New

Orleans, and it was in these centers that manufacture and com-

merce first developed in Ohio. Here also naturally the first

banks operated in the state were organized. It is noteworthy

that of the eight authorized banks organized in Ohio during

this period all were located in towns situated either on the Ohio

or its tributaries.

Early Manufacturing.- In the early development of

manufacturing in Ohio the natural resources of the state were of

great advantage. The hard woods of the forests were utilized

from the beginning. Desks, tables, and other furniture were

being manufactured in Cincinnati as early as 1800, and a few

years later plow-making became an important industry there.1

Before steam navigation began on the Ohio in 1811, Marietta

was quite a ship building point, sending to sea, it is said, before

the War of 1812, seven ships, eleven brigs, six schooners, and

two gun boats.²

 

1Ohio Manufactures - 12th Census Bulletin 154, pp. 10 and 11.

2King's Ohio, p. 308.

(255)

• 21
 

256       Ohio Arch. and Hist. Society Publications.

In 1804 the first furnace for the manufacture of iron in

Ohio was established in the Mahoning Valley.³ And in 1805 a

paper mill was built on Little Beaver Creek in the eastern part

of the state.⁴

Zanesville, with its falls giving water power, soon developed

manufacturing.⁵ The abundance of clay suitable for making

coarse pottery and the difficulty of obtaining such products from

the Atlantic Coast region early led the farmers of the Mus-

kingum region to begin the manufacture of pottery from the

clay on their farms to supply the settlements west of the Alle-

ghanies. These products were sent down the Muskingum to

markets on the Ohio River and even to New Orleans.⁶

Every year at the opening freshets, large quantities of flour,

bacon, pork, whiskey and the fruits of the country adjacent to

the streams were taken in flat boats to New Orleans and the

intermediate markets. The starting of these fleets every year

was a spectacle of great interest at the towns on the Muskingum,

the Scioto, and the Miami.⁷

Besides the towns mentioned above, Steubenville, Lancaster,

Chillicothe, and Dayton were important towns for manufactures

in those days. In 1810 the manufactures of the state were es-

timated to amount to nearly $2,000,000,⁸ but they were chiefly

in the southern part of the state. The northwest was still Indian

country, while the northeast in general did not acquire much

commercial importance until the opening of the Erie Canal and

the beginning of the Ohio Canal in 1825, although Warren and

Youngstown both on the Mahoning River, early became import-

ant towns from their proximity to Pittsburg and their location

on the trade route from there to Detroit.

The Miami Country. -The most populous and flourish-

ing part of the state at that time was at the southwest, in the

broad and fertile expanse of the Miami Valley. With this im-

3Ohio Manufactures-12th Census Bulletin 154, p. 7.

4Ibid, p. 11.

5King's Ohio, p. 339.

6Location of Industries-12th Census Bulletin 244, p. 18.

7King's Ohio, p. 307.

8Valley of the Mississippi-Timothy Flint, p. 406.

• 22
 

Banking and Currency in Ohio Before the Civil War. 257

mense agricultural back country and its advantageous location on

the Ohio River apposite the mouth of the Licking River, Cincin-

nati easily gained an ascendancy which made it the leading city

in the West for many years.

In 1790 the population of the Miami Country was not over

2,000. In 1800 it was about 15,000. In 1810 the single county

of Hamilton contained 15,258, and the Miami Country about

70,000, or one-fourth of the whole population of the state. By

1815 this had increased to about 100,000.9  In this important

region agriculture and stock raising advanced rapidly.   The

fertile soil produced immense crops of wheat and corn, and

scores of grist mills turned the wheat into flour. The corn was

utilized largely in feeding hogs, though many distilleries flour-

ished throughout the region, where the farmers turned their

surplus corn into whiskey. Much of this whiskey and flour, to-

gether with the pork, bacon, and lard prepared on the farms in

winter, found its way to Cincinnati, there to be shipped by the

Ohio and Mississippi rivers to New Orleans. As early as 1803

whiskey, beef and pork, and lumber and staves were shipped

from Cincinnati to New Orleans by water.¹⁰ It was in connec-

tion with this river traffic of Cincinnati that the first bank in

Ohio was organized.

The   Miami Exporting     Company.-The       enterprising

citizens of the Miami Country were quick to recognize the advan-

tages of association under state authority in the transaction of

business. Almost as soon as the State of Ohio was admitted

into the Union, Martin Baum, a prominent Cincinnati mer-

chant,11 with several of his business associates, organized a com-

9Picture of Cincinnati (1815)--Drake, p. 169.

10 Ohio Manufactures -12th Census Bulletin, No. 154, pp. 8 and 9.

The distillation of liquors in Ohio has always been greatest at Cincinnati,

where it is favored by the large corn production of Ohio, Kentucky, and

Indiana. In 1810, however, distilleries were reported in every one of the

36 counties of the state, producing in all 1,212,266 gallons of whiskey.-

12th Census Bulletin, No. 154, p. 8.

12The Inquisitor and Cincinnati Advertiser, Oct. 19, 1819. Martin

Baum, of high German parentage, early became active in manufacture

and trade in Cincinnati and was most influential in attracting German

immigration to that city.

17

• 23
 

258       Ohio Arch. and Hist. Society Publications.

pany to facilitate trade, and applied to the Legislature for a

charter.  As a result the State Legislature at its first session

incorporated  The Miami Exporting     Company on April 15,

1803.¹² The original object of this company was the exporta-

tion of agricultural produce, chiefly to New Orleans,13 and bank-

ing, if purposed at all, was a secondary consideration.¹⁴  Its

charter, however, permitted the issue of notes payable to bearer

and assignable by delivery only; and the company, which began

business operation in 1804, was soon exercising the powers of

banking.¹⁵  It issued bills and redeemed them, not in specie,

but in the notes of other banks.¹⁶  Thus the Miami Exporting

Company became the first bank in Ohio, and perhaps the second

west of the Alleghanies.

The first paper-issuing institution west of the mountains,

the Lexington Insurance Company incorporated in 1802, is said

to have obtained banking privileges surreptitiously. And Gouge

in his history of early banking in the United States suggests

that, as the title of the Miami Exporting Company indicates that

it was established ostensibly for commercial purposes of another

nature, perhaps banking privileges were obtained for it sur-

reptitiously, as in the case of the Lexington Insurance Com-

pany the year before.17 Be this as it may, the Miami Exporting

Company almost from the first did a banking business, opening

an office in Cincinnati for that express purpose.  In fact on

March 1, 1807 the bank went into full operation, all commercial

projects having previously been relinquished.18

 

12Laws of Ohio, Vol. I. (1803), pp. 126-136.

13A Picture of Cincinnati-Daniel Drake (1815), p. 150.

14 Banking and Resources of Ohio--Thomas H. Wilson.     (In

World's Congress of Bankers and Financiers), p. 533.

15Laws of Ohio, Vol. I. (1803), p. 135, Sec. 16. Report of Judiciary

Committee, Jan. 7, 1837, on the resolution of inquiry into the authority

by which the Miami Exporting Company exercised the powers of a bank-

ing corporation. - Ohio H. R. Jour. 1837, pp. 188-195.

16History of Banking-J. J. Knox, p. 668.

17A Short History of Paper Money and Banking in the United

States-Wm. Gouge (Cobbett's Ed.), p. 88.

18 Picture of Cincinnati in 1815- Drake, p. 150.

• 24
 

Banking and Currency in Ohio Before the Civil War. 259

 

The charter of the Miami Exporting Company was granted

for a period of forty years, and provided for a board of eleven

directors, who were to be chosen annually and one of whom

was to be elected president. The authorized capital stock of the

company was fixed at $500,000, divided into shares of $100

each, payable $5 in cash at the time of subscribing, and $45 in

produce and manufactures such as the president and directors

would receive during the first year, and the remaining $50 in

produce and manufactures from July to March of the follow-

ing year.  The stockholders were to give notice in writing

at the Company's office on or before the first day of September

following, what kind of produce and manufactures and the prob-

able amount thereof they would deliver, but the president and

directors were to designate the times and places of delivery.¹⁹

Not all of the authorized capital was ever paid in. Gouge

gives the capital of this company as $200,000,²⁰ and this agrees

with the amount stated in the list of Ohio banks organized be-

fore 1812 published in the first issue of the Bankers' Magazine.²1

In 1811, however, the directors authorized the sale of a large

number of additional shares of the capital stock of the company,

and November 28 of that year they issued a notice offering these

to purchasers with the privilege of taking them either at $102,

to be paid at the time of subscribing, or at $104, to be paid one-

fourth at the time of subscribing, one-fourth in six months, one-

fourth in twelve months, and the remaining one-fourth when re-

quired by the board, the subscribers, however, to have at least

thirty days' notice.²² And Daniel Drake, writing in 1815, says

that the capital consisted of $450,000 paid in by 190 persons, the

number of stockholders at that time.²³

It is probable, however, that not all of this $450,000 was

ever actually paid in cash. It was a common practice among

19Banking and Resources of Ohio-Wilson, p. 534. Report of the

U. S. Comptroller of the Currency, 1876, p. XXV. History of Banking

in the U. S.- H. F. Baker (In Bank M.11:165 Sept. '56)

20A Short History of Paper Money and Banking-Wm. Gouge

(Cobbett's Edition), p. 88.

21Bankers' Magazine, Vol. 1., p. 119.

22The Ohio Centinel, Dayton, Ohio, Jan. 9, 1812.

Picture of Cincinnati (1815) -Drake, p. 150.

• 25
 

260       Ohio Arch. and Hist. Society Publications.

banks of the period following the War of 1812 to accept what

were known as stock notes in payment of subscriptions for

stock; that is, after making the first payment or two in cash, the

subscriber would be permitted to pay the remainder of his sub-

scription with his own note, which would later be redeemed, if

at all, with dividends received from the bank.²⁴ It is likely that

a considerable portion of the Miami Exporting Company's $450,-

ooo capital stock was paid in that way, especially the later issues

of that stock. A published balance sheet of the company under

date of May 11, 1821 gives the amount of money paid by the

stockholders on their shares as $379,178.25

The Miami Exporting Company continued in the undis-

turbed employment of its banking powers without question until

1822, when it became unable to progress with its business. From

that time until 1834 it engaged in no business but such as was

required for adjusting and closing its debts and credits and

maintaining its corporate organization. In 1834, however, it was

resuscitated, and provision was made for the payment of its

stock, the liquidation of its debts, and the redemption of its

outstanding notes.²6 It then recommenced the business of bank-

ing, but was finally compelled to wind up its affairs before the

termination of its charter in 1843.27

The Bank of Marietta. -While the Miami Exporting

Company was the first to exercise the powers of banking in Ohio,

and continued to do a banking business for many years, yet, as

we have seen, it was not originally chartered as a bank, properly

speaking. The first regular bank incorporated in Ohio was es-

tablished at Marietta. It is not known just when it began busi-

ness, but its application for a charter in February 1808 indicates

that it was already an existing association.²⁸ A charter was

 

24Report of Sec'y of Treas. Wm. H. Crawford, Feb. 12, 1820.

25Liberty Hall and Cincinnati Gazette, May 12, 1821. Gallatin in

1831 listed, among the banks which had failed since 1811, the Miami Ex-

porting Company with a capital stock of $468,966. See p. 132.

26Ohio House Journal, 1837, pp. 189-191.

27The Miami Exporting Company failed Jan. 10, 1842-Knox's

History of Banking, p. 676.

28A History of Banking in all the Leading Nations, Vol. I., p. 59.

• 26
 

Banking and Currency in Ohio Before the Civil War. 261

granted to the Bank of Marietta on February 10, 1808.29  The

main provisions of the law incorporating this bank were the

following:

1. Charter to continue until 1818.

2. Capital stock not to exceed 5,000 shares of $100 each.

3. Directors seven in number, to be elected annually by the

stockholders voting in person or by proxy in proportion to num-

ber of shares held. Directors must be stockholders and resi-

dents of the county. Vacancies to be filled by election by re-

maining directors.

4. General meeting of the stockholders at the call of the

directors, but six weeks' notice must be given in some newspaper.

5. Stock transferable on the books of the company if

holder's debts to the bank be paid first.

6. Bank bills obligatory and of credit assignable by en-

dorsement.

7. Power to hold real estate for convenient transaction of

its business; also bona fide mortgages and property conveyed for

a debt.

8. Trading in merchandise forbidden.

9. Debts must not exceed three times its capital stock.

10. Interest allowed on loans not over 6%.

11. State could subscribe up to one-fifth of the capital

stock.

It will be noticed from the above that while a limit was

fixed to the amount of capital stock that could be issued, restric-

tions placed on the transfer of that stock and on the holding of

real estate, and limitations specified as to debts contracted and

interest rates charged, yet no restriction appears as to note

issue and no provision as to note redemption. The evils of

unrestricted note issue had not yet become apparent to the Ohio

Legislature.

The Bank of Chillicothe.-On Feb. 18, 1808, a week

after incorporating the Bank of Marietta, the State Legislature

chartered the Bank of Chillicothe with a capital of $100,000.³⁰

 

29Laws of Ohio, Vol. VI. (1808), p. 41.

30Laws of Ohio, Vol. VI., p. 83. This capital stock could be in-

creased to $500,000 by a two-thirds vote of the stockholders.

• 27
 

262       Ohio Arch. and Hist. Society Publications.

This bank was located at the town of Chillicothe and the pro-

visions of its charter were much the same as those of the Bank

of Marietta, except that the shares of capital stock were pay-

able one-tenth when subscribed and one-tenth at the end of

each calendar month thereafter until all were paid, and that no

person, firm, or company could hold over forty shares, nor sub-

scribe for more than five shares in one day.³¹

Another clause of the charter provided that the bank

should not emit notes payable in bills of credit of the state of

Ohio. Here we see an early attempt of the legislature to regu-

late to some extent the redemption of the notes issued by the

bank. In those days specie was a scarce article in Ohio, and the

State Treasury was at times in an embarrassed situation for

funds to meet the incidental expenses of the state government.

Sometime before this an act had been passed by the legislature

requiring the auditor of the state to issue bills of specific

amounts payable at the treasury with interest. These had as-

sisted in upholding the credit of the state and created a kind of

circulating medium which in some degree supplied the place of

specie.³²  Apparently the banks were taking advantage of these

bills to use instead of specie in redeeming their notes.

The Bank of Steubenville.-Attention has already been

called to the influence exerted by river valleys in determining

the location of Ohio's early population and the growth of its

early trade centers. And it will be noticed that of the three

banks already mentioned, the first was in the Miami Valley, the

second at the mouth of the Muskingum, and the third on the

Scioto, the three principal tributaries of the Ohio in the state.

The fourth bank chartered in the state was established at Steu-

benville on the upper course of the Ohio River itself.

The Bank of Steubenville was chartered by the State Legis-

lature on February 15, 1809 with an authorized capital stock of

$100,000.³³ The number of directors was fixed at nine, but they

 

31 The number of directors was increased from seven to nine by an

act of the legislature on Dec. 31, 1808-Laws of Ohio, Vol. VII., p. 68.

32Auditor's Report, Dec. 4, 1811-Laws of Ohio, Vol. X. (1812).

Also Auditor's Report of Dec. 9, 1812, p. 4.

33Laws of Ohio, Vol. VII. (1809), p. 169.

• 28
 

Banking and Currency in Ohio Before the Civil War. 263

were allowed no pay unless it was allowed by a general meeting

of the stockholders. Stockholders were allowed one vote for

each share under ten, one for each two shares above ten up to

fifty, one for every five shares above fifty and up to one hun-

dred, and one vote for every ten shares held over one hundred.

Stockholders resident in the United States were allowed to vote

by proxy. After the first election, shares had to be held three

months before the owner could vote. This charter contained

a provision allowing the State to acquire stock in the bank, and

provided that when the State should own shares equal in num-

ber to one-tenth of the whole it should have the privilege of

appointing two of the directors. If the State should own less

than one-tenth of the shares, however, it was to have proxy to

vote as the other stockholders.

Other Banks Chartered.-After the Bank of Steuben-

ville in 1809 no more banks were chartered in Ohio until 1812. In

1811, however, the charter of the United States Bank expired

and Congress refused to recharter it. This left the field free

for State banks, and they were not slow to take advantage of

the opportunity.³⁴ From January 1, 1811 to the close of 1814

the number of banks in the United States increased from 88 to

208, and their capital stock from $42,61O,601 to $82,259,590,

making an addition of nearly $30,000,000, to the banking capital

of the country.35

In Ohio this movement became apparent at once. Several

unauthorized banks were established within the state during

1811, and, as we have already seen, the Miami Exporting Com-

pany issued a large additional amount of capital stock, which

was eagerly taken by the public, though it was offered only at

a premium.³⁶ Early in 1812 two more banks were chartered by

the Ohio Legislature. A third was incorporated in 1813, and

 

34Financial History of the United States-Davis R. Dewey, p. 144.

Banks, Banking and Paper Currencies- Hildreth, p. 64.

35 Report of U. S. Comptroller of the Currency, 1876, p. XXXV.

Elliot's Funding System, p. 984-House Exec. Doc. No. 15, 1st

Session 28th Congress. Considerations on the Banking and Currency

System of the United States-Albert Gallatin (1831), pp. 42 and 44.

36See page 259.

• 29
 

264        Ohio Arch. and Hist. Society Publications.

another in 1814. Thus from      1811 to 1814 the number of in-

corporated banks in Ohio doubled. During the same period

their capital stock increased from $895,000 to $1,₄₃5,819^.37

The names of the new banks chartered in Ohio from 1812

to 1814, together with their location, authorized capital stock,

and dates of charter are shown in the following:

 

Name.             Location.  Capital Stock.  Chartered.

1. Western Reserve Bank.. Warren ........ $100,000 ..Feb. 20, 1812.38

2. Bank of Muskingum.... Zanesville .....  100,000 ..Feb. 21, 1812.39

3. Farmers' & Mechanics'

Bank  ................ Cincinnati  .....  200,000  ..Feb.  5,  1813.40

4. Dayton Manufacturing

Co.   .................. Dayton  ........  100,000  ..Feb.  11,  1814.41

 

These banks were all chartered by special acts of the legis-

lature, and their charters all extended until 1818. The methods

of their organization were about the same, and the provisions

of their charters were quite similar. The number of directors

varied from seven to thirteen. The charter of the Farmers' and

Mechanics' Bank contained a provision which required that one-

third of the thirteen directors must be practical farmers and the

same proportion practical mechanics.⁴²

In the case of the Bank of Muskingum occurs apparently

the first attempt of the legislature to prevent the paying of divi-

dends to stockholders who had not yet paid in all their stock,

a clause in that charter providing that persons failing to pay up

installments should not be entitled to any dividend.      In the

charter of this bank also we see the first of the endeavors of

the legislature to restrict note issue, as another clause of the

charter prohibited the bank from issuing bills to a greater

 

37 Report of the U. S. Comptroller of the Currency, 1876, p. LXXXV.

Report of U. S. Sec'y of Treas. Wm. H. Crawford, Feb. 12, 1820.-

In Elliot's Funding System, p. 769.

38Local Laws of Ohio, Vol. X. (1812), p. 111.

39Laws of Ohio, Vol. X. (1812), p. 40.

40Laws of Ohio, Vol. XI. (1813), p. 79.

41Laws of Ohio, Vol. XII. (1814), p. 162.

42Laws of Ohio, Vol. XI. (1813), p. 81. Picture of Cincinnati in

1815-Drake, p. 151.

• 30
 

Banking and Currency in Ohio Before the Civil War. 265

 

amount than three times the amount of capital stock paid in, and

made the directors individually liable for any excess above that

amount. It was also provided in this charter that the legislature

might tax the capital stock of the bank.⁴³

Unauthorized Banking.-In addition to the foregoing

banks incorporated by the State Legislature before 1815, there

were various other concerns in Ohio carrying on banking business

without charters. In 1807 a company known as the Alexandrian

Society of Granville had been chartered by the legislature for

literary purposes.⁴⁴ It later engaged in the business of banking,

though no such privilege was granted in its charter.

A bank was opened at Delaware as early as 1812, but fail-

ing to get a charter the next winter it wound up its affairs, re-

deeming all its notes. During the same year a swindling con-

cern called the Scioto Exporting Company was started in this

town by a gang of counterfeiters. It was destroyed by the citi-

zens, however, before it could get a large amount of paper

afloat.⁴⁵ Various other unincorporated banks were established

in the state after the expiration of the charter of the first United

States Bank in 1811, some of which were quite successful.⁴⁶

Several of the chartered banks had existed for some time

as unauthorized banks before applying for charters, as in the

case of the Bank of Marietta. Thus, too, the Farmers' and

Mechanics' Bank had been established in 1812, the year before

it was incorporated.⁴⁷  Quite a number also of unauthorized

banks existed during the latter part of this period which were

later given charters by the legislature in 1816. Thus the Zanes-

ville Canal and Manufacturing Company, which was chartered

in 1816, was originally organized in 1812 to build a dam across

the Muskingum River and for manufacturing and other pur-

poses.⁴⁸ It later exercised banking powers, however, and was

probably the bank referred to by Dr. John Cotton when he vis-

43Laws of Ohio, Vol. X. (1812), pp. 40-51.

44Laws of Ohio, Vol. V. (1807), p. 62.

45Howe's Historical Collections of Ohio, Vol. I., p. 553.

46 See page 263.

47Picture of Cincinnati in 1815- Drake, p. 151.

48Laws of Ohio, Vol. XIV. (1816), p. 293.

• 31
 

266       Ohio Arch. and Hist. Society Publications.

ited Zanesville in 1815 and found an "active enterprising popula-

tion of two or three hundred busy in digging a short canal

through rock for water power and factories, to pay the expense

of which a private bank was issuing bills which were in good

credit".⁴⁹ Another unauthorized concern, the Bank of Cincin-

nati, was founded in 1814, with shares at $50 each, 8,800 of

which had been sold to 345 persons by 1815, though it had not

yet obtained a charter. It was governed by twelve directors

chosen annually. Its notes in 1815 were in excellent credit and

the dividends had advanced from 6 to 8% during the first year.50

This bank also obtained a charter in 1816.

Many other unauthorized banks were established in the

state during the years 1811 to 1814, and by the close of the latter

year the large amount of notes issued by these institutions had

become a matter of concern to the legislature. On February

8, 1815 the legislature passed an act to raise revenue from banks

and to prohibit the unauthorized issue of circulating notes.⁵¹

This law, besides levying a tax of 4% on the annual dividends

of the banks, prohibited the issue of notes by any one not author-

ized by law under a penalty of a year's imprisonment and a fine

of not over $5,000, but until January 1, 1818 it was not to apply

to banks which began business before January 1, 1815.52 It was

the first of a long list of laws passed by the Ohio legislature

against unauthorized bank notes. In fact it marked the begin-

ning of a war against unauthorized banks and bank currency

which Ohio carried on vigorously but with little success during

the continuance of state banks issuing currency.⁵³

Condition of Ohio Banks prior to 1815. - No statistics

are available regarding loans and discounts, note circulation, specie

on hand, profit and loss, etc., of the banks during this period.

It is known, however, that the profits of the banks were consid-

erable. As noted above, the dividends of the Bank of Cincinnati

 

49 King's Ohio, p. 339.

50 Picture of Cincinnati in 1815-Drake, p. 151.

51Laws of Ohio, Vol. XIII. (1815), p. 152.

52 Ibid.

53A History of Banking in All the Leading Nations, Vol. I., p. 91.

History of Banking-John Jay Knox, p. 669.

• 32
 

Banking and Currency in Ohio Before the Civil War. 267

are said to have risen from 6 to 8% during the first year of its

existence. According to Drake, the dividends of the Miami Ex-

porting Company for   several years previous to 1815 had fluc-

tuated between ten and fifteen per cent.⁵⁴ And the Auditor of

State in 1813 suggested to the legislature the advisability of in-

vesting a portion of the surplus of the state treasury in some of

the most productive bank stocks, where it would, he considered,

yield an annual income of ten or twelve per cent.⁵⁵

Undoubtedly, also, the banks of Ohio chartered before 1815

maintained excellent credit throughout this period.⁵⁶ They were

frequently Of service both to the state and to the national gov-

ernments. When the legislature, desiring to assume the amount

of direct tax levied on the state by the United States for the

year 1814-15, asked the banks as to loans, it promptly received

from six of the banks offers aggregating $220,000, and verbal

assurance of a much larger amount.⁵⁷ During the war the Ohio

banks made large issues to aid the military operations of the

country; and when the credit of the government funds was so

much depreciated as greatly to embarrass the public service,

these banks liberally supplied the public agents with credit.⁵⁸

All this led to the issue of large sums of paper, and there

was undoubtedly considerable inflation in Ohio at that time; but

there was also plenty of specie in the state, and, notwithstanding

the fact that within a month after the capture of Washington

in August 1814 all the banks Of the country suspended except

those of New England and a few in the West and South,⁵⁹ the

Ohio banks maintained specie payment until within a month or

 

54Picture of Cincinnati in 1815-Drake, p. 150.

55Ohio State Auditor's Report, Dec. 8, 1813, p. 3.

56Legislative Report on Situation and Condition of Banks-House

Journal, 1820, p. 415.

57Governor Worthington's Message of Jan. 31, 1815, Respecting

Banking Institutions.- Senate Journal, 1815, p. 311.

58Ohio House Journal, 1819-20, p. 415.

59Financial History of the United States-Dewey, p. 145. Money

and Banking-Horace White, p. 270. A History of American Currency

-Wm. G. Sumner, pp. 62 and 68.

• 33
 

268       Ohio Arch. and Hist. Society Publications.

two of the close of the war.⁶⁰  They were finally compelled in

self defense to stop paying specie about January 1, 1815, and

then it was not long until the mania for inconvertible paper

money, already raging in the Middle Atlantic States, passed over

the Alleghanies into Ohio and Kentucky.⁶¹

 

60Ohio Republican (Dayton, O.), Feb. 6, 1815. A Short History of

Paper Money and Banking-Wm. Gouge (Cobbett's Edition), p. 88.

61Ibid, pp. 88 and 89. Elliot's Funding System, p. 1106.

• 34
 

CHAPTER II.

THE INFLATION PERIOD OF 1815-1817.

Increase of Population. - From 181O to 1820 the popula-

tion of the United States increased from 7,239,881 to 9,638,453,

a gain of nearly 331/3%. Of the five great divisions of the coun-

try the North entral Division during this decade showed the

most rapid growth, having increased from 293,169 in 1810 to

859,305 in 1820, a gain of 566,136 or 193.1%. More than three-

fifths of this increase in the population of the North Central

Division was due to the gain in Ohio alone, her population in-

creasing from 230,760 in 1810 to 581,434 in 1820, a gain of

350,674 or 151.9%.

Of Ohio's neighbors, Indiana was growing rapidly, having

a population in 1820 of 147,178, but Missouri's population in

that year was only 66,586 and that of Illinois 55,211, while Michi-

gan in 1820 contained only 8,896 inhabitants. In 1810 Tennes-

see had more inhabitants than Ohio, and Kentucky had nearly

twice as many; but by 1820 Ohio had outstripped them both,

her gain in population during the ten years period being con-

siderably more than both of theirs combined.¹ Most of Ohio's

gain during this decade, however, was made before 1817.

Besides a large natural increase in her population during

this period,² Ohio, from her position, was enabled to receive and

retain the flower of the emigration which was then proceeding

from all quarters to the Northwest. The geographical relations

of the Atlantic States inclined their people to the sea, but the

Embargo Act and other restrictions to trade down to the War

of 1812 turned hundreds of their citizens toward the West.

"In the winter of 1814," says McMaster, "the exodus from the

sea-board states became alarming. Old settlers in Central New

York declared that they had never seen so many teams and

 

1Abstract of the Twelfth Census, 1900, p. 33.

2Valley of the Mississippi-Timothy Flint, p. 405.

(269)

• 35
 

270       Ohio Arch. and Hist. Society Publications.

sleighs loaded with women, children, and household goods travel-

ing westward bound for Ohio, which was then but another name

for the West."³ Many more went west, during the hard winter

of 1816-17.⁴ But from 181₇ up to the time of commencing the

works of internal improvements in 1825, Ohio's increase from

immigration was comparatively at a stand.5  Her most rapid

increase for the decade was during the speculative period fol-

lowing the War of 1812.

Economic Conditions.-The dull tries following the

opening of the War of 1812 and the hard times at the close of the

war, which caused the large emigration from   the sea-board

states to the Mississippi Valley, were succeeded by a general re-

vival of commercial activity. Ohio shared in the general im-

provement of business. The large accession of population which

the state received just after the war gave a new impulse to en-

terprise of every sort. Excessive importations of foreign goods

were made. All kinds of improvements were projected, many

of which advanced with wonderful rapidity. Prices rose steadily,

stimulating speculation; and speculation in land, in town sites,

in everything of which the new-comers stood in need was car-

ried to a ruinous excess. Banks increased in all parts of the

state and supplied an abundant circulating medium. This re-

moved the one obstacle to the wild speculation in which the

community wished to join,-it overcame the scarcity of money,

-and speculation ran riot.6

Lands rapidly rose in value and speculation in them  became

a raging epidemic. This was facilitated by the disastrous credit

system the United States Government had adopted in the sale

of public lands. The Act of Congress of May 10, 1800, which

established within the present limits of Ohio four district land

offices, - Cincinnati, Chillicothe, Marietta, and Steubenville,-

the first in the United States, provided that the public lands

 

3History of the United States - McMaster, Vol. IV., p. 383.

4Rise of the New West -Frederick J. Turner, p. 308.

5History of Ohio -Caleb Atwater, p. 349.

6A Preliminary Sketch of the History of Ohio. (In the Revised

Statutes of Ohio by Salmon P. Chase, 1833, Vol. I. (Valley of the Mis-

sissippi-Flint, Vol. I., p. 179 (1832).

• 36
 

Banking and Currency in Ohio Before the Civil War. 271

were to be sold at $2.00 per acre on the installment plan, a

credit of four years being allowed with interest at 6%  from

date of sale on the last three payments.⁷ Under this system men

became loaded with land purchases, expecting to sell to immi-

grants at a big profit. The credit features of this law were

not repealed until 1820, and by June 20 of that year the gross

sales of public lands in Ohio were 8,848,152.31, acres amounting

to $17,226,186.95.8  And the increase in receipts from public

land sales was paralleled by the increase in the issues of bank

notes.⁹

Speculation and Inflation in the Mississippi Valley.-

These occurrences, however, were not confined to Ohio. The West

in general thought itself no longer dependent on New York, Phila-

delphia, and Baltimore for foreign goods. The steamboat had

appeared on the Ohio and the Mississippi, and New Orleans

was the port of entry for the Mississippi Valley. The prospect

of sudden commercial development joined to the arrival of new

settlers brought on an era of the wildest speculation.

The new-comers brought no money. The old settlers had

but little. The currency which had never been more than suffi-

cient for the needs of the West, became in the now order of

things wholly inadequate for the wants of the people. The cry

for money, especially for cheap money, for money that could

be borrowed in large sums on the wildest security, was heard

on all sides. Banks were multiplied in all the little towns and

villages of the West. Their paper not predicated on sound bank-

ing principles nor based on capital answered the turn of specu-

lation as long as the excitement of confidence lasted.¹⁰

For several years scarcely a legislature met without es-

tablishing new banks. Ohio chartered 20, Indiana 3, Illinois 2,

Tennessee 12, and Missouri 2. Missouri also issued loan cer-

tificates, and in defiance of the Constitution of the United States

made her paper legal tender. Finally, Kentucky in 1818 char-

tered 46 banks. The history of these Kentucky banks forms

 

⁷The Public Domain--Donaldson, p. 201.

8 The Public Domain - Donaldson, p. 203.

9 See page 386.

10Valley of the Mississippi- Flint, Vol. I., p. 179.

• 37
 

272      Ohio Arch. and Hist. Society Publications.

one of the most striking chapters in the history of fiat money.

Throughout the West a flood of paper money was issued, which

the people hurried to borrow, invest, and lose.11

Governor Worthington on the Subject of Banks.-The

inflation in the Mississippi Valley began in the latter part of 1815.12

In November 1815 Governor Worthington of Ohio addressed a

letter to the Auditor of State asking his opinion as to the ad-

visability of the State's holding stock in banks, and whether a

fund could not thus be established to save excessive taxation.13

The Auditor in reply on December 18, 1815, called attention to

the fact that the charters of all but one of the authorized banks

in the state would expire in 1818, and proposed that the state

incorporate as many banks as might be deemed safe, the state

to take one-fifth of the capital stock. He suggested that the

state might make partial payments for this stock for two years,

but in the meantime receive full dividends, which were not to

be drawn from the banks but to be applied toward the payment

for the stock. At the end of two years, he continued, the amount

still due the banks from the state should bear interest at 4%,

which should be paid out of the dividends. He judged that in

this way the debt could be paid in ten years, and advised that

all the banks should make monthly reports to the Auditor of

their debts, credits, issues, etc.14

Governor Worthington was favorably impressed with this

idea, and two days later, in his Message of December 20, 1815,

he declared that the great increase of banks in Ohio and the

extraordinary increase of bank paper as a circulating medium

were matters requiring serious attention, especially as many

of these banks were aiding in wild schemes of speculation. He

stated that the state's only reliance for revenue at that time was

on a direct tax on lands, remarked that the strong disposition to

create new banks indicated that bank stock yielded considerable

profit, and expressed it as his opinion that as the state gave

 

11J. B. McMaster in The Forum, Vol. XIX, p. 161.

12Hist. Banking All Nations, 1:89.

13Ohio Sen. Jour., 1816, p. 73.

14Ohio Senate Journal, 1816, p. 76

• 38
 

Banking and Currency in Ohio Before the Civil War. 273

 

extraordinary privileges to banks it seemed just that they should

reciprocate.¹⁵

The Bonus Law of Feb. 23, 1816. - The state legislature

at once acted on these suggestions.   On January 27, 1816,

it passed another law prohibiting the issue and circulation of

unauthorized bank paper, which fixed a penalty of $1000 for

acting as the officer of a bank violating this law and a penalty

of three times the amount of the bills or notes issued by any un-

incorporated bank, made all contracts with such banks void, and

provided that no action could be maintained on any bill or note

of such banks.¹⁶  This law was not to apply to incorporated

banks. A month later, however, on February 23, 1816, the

legislature passed the important banking law known as the

"bonus law,"¹⁷ an act designeed to raise a state revenue from

banks and to prevent their future increase.18

By this law the charters of the existing banks were ex-

tended, and six new banks were incorporated with a capital

stock of $100,000 each, to go into operation when 600 shares

of $100 each should be subscribed. By the same act there were

also incorporated six of the companies with which the state

had been at war in regard to unauthorized banking.¹⁹ The law

provided that each of the banks thus incorporated should have

thirteen directors; that its books must always be open to the in-

spection of directors and of persons appointed by the legislature;

and that its capital might be increased to $500,000. Each of

the banks, new and old, was to set off to the state one share in

twenty-five of its capital stock by September 1, 1816, and to

continue to do so as new stock was created and sold. On the

state's share of the stock the dividends were to accumulate until

the state owned one-sixth of the stock, after which the dividends

were to be paid to the state.

 

15 Ohio Senate Journal, 1816, p. 73.

16Laws of Ohio, Vol. XIV. (1816), p. 10.

¹⁷Laws of Ohio, Vol. XIV. (1816), p. 77. Also History of Banking

in the United States-H. F. Baker (In Bank M. 11:163).

18 Preliminary Sketch of the History of Ohio - Salmon P. Chase

(In his Revised Statutes of Ohio, 1833, Vol. I.).

19Ohio Republican (Dayton, O.), Feb. 26, 1816.

18

• 39
 

274       Ohio Arch. and Hist. Society Publications.

No provision was made to pay for the state stock, except

that each bank was required to set apart, annually, such a part

of its profits as would at the expiration of its charter produce

a sum sufficient for that purpose. The consideration for this

extraordinary bonus was the extension of the charters until

January 1, 1843 of all the banks accepting the provisions of the

act by the first Monday of September, 1816; exemption from

all other state taxation; and a sort of implied promise that no

other banks should be created during the term of their charters,

but this was not definite.²⁰

All of the banks chartered in Ohio before 1816, except the

Miami Exporting Company,²¹ accepted the provisions of this law

before September 1, 1816.22   The names and location of the

banks enumerated in the act, the authorized capital stock of each,

and the date when each accepted its charter under this law

are shown in the following table:

 

20Laws of Ohio, Vol. XIV. (1816), pp. 77 and 109. History of

Banking-J. J. Knox, p. 670. Preliminary Sketch of Ohio in Chase's

Rev. Stat., 1833, Vol. I.

21 The Miami Exporting Company did not accept a charter under

the act to raise revenue, etc.- Ohio Sen. Jour., 1819, p. 207.

22The Inquisitor and Cincinnati Advertiser, Feb. 1, 1820. Also Ohio

Sen. Journal, 1820, p. 175.

• 40
 

Banking and Currency in Ohio Before the Civil War. 275

 

 

BANKS INCORPORATED BY THE BONUS LAW OF FEBRUARY 23, 1816.

 

Authorized              Date

Name.              Location.     Capital                         Charter

Stock. 35     Accepted. 36

 

New Banks:

23Franklin Bank of Colum-

bus .................. Columbus ...                                                             $100,000        Oct. 30, 1816.

24Lancaster Bank ......... Lancaster ...                        100,000     Aug. 31, 1816.

25Belmont Bank .......... St. Clairsville.                     100,000     Aug. 22, 1816.

26Commercial Bank of Lake

Erie  ..................  Cleveland  ...                                                        100,000

27 Bank of Mt. Pleasant .... Mt. Pleasant.                                              100,000           Oct. 10, 1816.

28Bank of West Union.... West Union..                   100,000     Mar. 18, 1816.

 

Banks previously un-

authorized:

29Lebanon Miami Banking

Co. ................... Lebanon ....                             200,000     Aug. 24, 1816.

30Bank of Cincinnati...... Cincinnati ..                       600,000     Aug. 28, 1816.

31Urbana Banking Co..... Urbana ....                         200,000     Aug. 15. 1816.

32 Columbiana Bank of New

Lisbon ............... New Lisbon..    200,000   July  12, 1816.

33Farmers', Mechanics', &

Manufacturers' Bank.. Chillicothe ..                   200,000     Aug. 16, 1816.

34German Bank of Wooster. Wooster ....                                             200,000           Aug. 21, 1816.

 

Most of these banks organized with but a part of their

capital stock, and that part was generally paid in on the install-

ment plan. Frequently, however, the bank would extend its

capital stock before all the installments of the original capital

were paid in. This is illustrated in the following notice which

appeared in a Chillicothe paper in 1816.37

 

23Laws of Ohio, Vol. XIV. (1816), p. 77. 24Ibid, p. 78. 25p. 79. 26p.

80, 27p 81.    28p. 82. 29p. 86. 30p. 87. 31p. 88. 32p. 89. 33p. 90. 34p. 92.

35History of Banking in Ohio--H. F. Baker (In Bank Mag.,

11:165).

36See note (22) preceding page.

37Chillicothe, 0., Supporter, Aug. 6, 1916.

• 41
 

276        Ohio Arch. and Hist. Society Publications.

 

"Farmers', Mechanics' and Manufacturers' Bank of Chillicothe.

May 2, 1816.

The stockholders of this bank are hereby notified that the second

installment of the extended capital stock of said bank will become due

on the first day of August next, of $5 on each share, and the third

installment of $5 on each share on the first day of November next; and

the fourth installment of the original stock of $5 on each share will be

required on the said first day of November next.

By Order, JOHN P. FESSENDEN, Cashier."

 

Other Banks Chartered under Provisions of the Bonus

Law. - For several years after the passage of the bonus law

of February 23, 1816, it was treated as a general banking law.³⁸

Seven more banks were chartered by the Ohio legislature in 1816

and 1817. Of these seven banks, five accepted the provisions

of the bonus law. One of these, the Zanesville Canal and Man-

ufacturing Company, was incorporated the next day after the

act of February 23, 1816, was passed. The other six were all

incorporated in December, 1817, the last being the Little Miami

Canal and Banking Company which was incorporated on Dec.

29, 1817, with a capital stock of $300,000.³⁹ Besides author-

ity to canalize the Little Miami River from the Ohio to Waynes-

ville, this company was given power to carry on manufactur-

ing and banking. A month after the legislature chartered this

batch of banks the Bank of Circleville was incorporated Jan-

uary 14, 1818. After that date no more banks were chartered

by the legislature for eleven years.

The following table gives the name, location, and authorized

capital stock of each of the banks referred to above as incor-

porated from February 24, 1816 to January, 1818, and also

the date of acceptance of charter of each of the fifive which ac-

cepted the provisions of the bonus law:

 

38History of Banking in All Nations, Vol. I., p. 92.

39Laws of Ohio, Vol. XVI. (1817), p. 43. History of Banking in

the United States - H. F. Baker (In Bankers' Magazine, Vol. XI, p. 165)

• 42
 

Banking and Currency in Ohio Before the Civil War. 277

 

 

OHIO BANKS INCORPORATED FROM FEBRUARY 24, 1816, TO

JANUARY 14, 1818.

 

Authorized              Date

Name.             Location.     Capital                          Charter

Stock.35            Accepted. 36

 

40 Zanesville Canal & Manu-

facturing Co........... Zanesville ...  $250,000  Aug. 29, 1816.

41Farmers' and Mechanics'

Bank of Steubenville.. Steubenville   500,000  July 14, 1818.

42Commercial Bank      of

Scioto ................ Portsmouth                            100,000    Dec. 18, 1818.

43Farmers' Bank of Canton. Canton ......                  100,000    July 22, 1818.

44Bank of Hamilton....... Hamilton ...                      300,000    July 30, 1818.

45Bank of Gallipolis....... Gallipolis ...                       300,000

Little Miami Canal and

Banking Co.......... Cincinnati ...                                                    300,000

46 Bank of Circleville ...... Circleville ..                    300,000

 

While most of the banks named above were incorporated

under the general banking law of February 23, 1816, to the

extent that they filed certificates accepting the provisions of the

bonus law, yet they were all chartered by special acts of the

legislature and their charters varied considerably in details.

Thus in the charter of the Bank of Hamilton it was first pro-

vided that the capital stock should be paid up in "money of the

United States." And in that of the Bank of Gallipolis it was

first provided that the Governor should send a commission to see

 

40Laws of Ohio, Vol. XIV. (1816), p. 293.

41Laws of Ohio, Vol. XVI. (1818), p. 3.

42Ibid, p. 6.

43Ibid, p. 11. The Farmers' Bank of Canton appears to have been

organized as early as January, 1815. Its articles of association, pub-

lished under date of January 28, 1815, provided for a capital stock of

$100,000, shares $25, each, 9 directors, total debts not to exceed three

times the capital stock paid in, and a charter to continue until January

1, 1835.-See The Ohio Patriot, (New Lisbon), Feb. 15, 1815.

44Laws of Ohio, Vol. XVI, (1818), p. 19.

45Ibid. p. 22.

46Ibid. p. 70.

• 43
 

278       Ohio Arch. and Hist. Society Publications.

that $20,000 was actually in hand half in specie and half in

United States Bank notes before the bank should begin.⁴⁷

Of all the banks accepting charters under the bonus law it

turned out that very few complied with that section of the law

which required semi-annual statements of the financial condition

of each bank to be made to the Auditor of State. A committee

of the legislature appointed to examine the books of the Auditor

relative to the returns of the banks reported January 15, 1820,

that twenty-three of them were delinquent in the matter of re-

ports; that they had generally returned statements without re-

gard to time; that some had let a whole year intervene between

reports; that some had made returns without the oath or affirma-

tion of the cashier; while others had made no returns since they

went into operation. The Commercial Bank of Lake Erie was

the only one mentioned in the report as having strictly and lit-

erally complied with the section of the law requiring half-yearly

reports.48

Statistics of Banking Capital. - It will be seen, therefore,

that the statistics of banking operations in Ohio during this

period, where attainable at all, are not very complete, even for

the chartered banks. This lack of banking statistics, however,

is by no means confined to Ohio. The same thing is true of

the country generally, not only for the years of inflation fol-

lowing the War of 1812, but for the entire period down to

1834.⁴⁹ About the only figures available for the inflation period

are those founded on applications made by the banks to the

Treasury of the United States under the acts imposing stamp

duties.

The total number of state banks in the United States in-

creased from 208 in 1815 to 246 in 1816 while their capital in-

creased from $82,259,590 to $89,822,422.50  In 1817 the total

banking capital in the country (including that of the Second

 

47History of Banking in All Nations. Vol. I, p. 92.

48 Inquisitor and Cincinnati Advertiser, Feb. 1, 1820. Ohio Senate

Journal, 1820, p. 175.

49Money and Banking--Horace White, p. 362. Financial History

of the United States--Davis R. Dewey, p. 153.

50Report of U. S. Comptroller of the Currency, 1876, p. LXXXV.

• 44
 

Banking and Currency in Ohio Before the Civil War. 279

 

United States Bank) was over $125,000,000. The average divi-

dends on which stamp duties were paid during those years were

about 71/2%- It was a matter of general notoriety however that

the dividends actually paid exceeded that rate. Assuming 1O%

as the average dividend paid, Secretary Crawford thought that

in 1817 the actual capital paid in, instead of being over $125,-

000,000, would be found to be about $94,000,000. Even this

amount he considered too high for the active capital. On ac-

count of the system in vogue after the War of 1812 of allowing

stockholders permanent accommodations at the bank, or of per-

mitting them to pay considerable portions of their stock sub-

scriptions with their own notes, Mr. Crawford estimated the

active capital of the banks in 1817 as probably not over $75,-

000,000.51.

So far as known at the Treasury the capital of the char-

tered banks in Ohio increased from $1,435,819 to $2,806,737

during the years 1815 and 1816, an increase of nearly 100%.

This was the highest point reached before the thirties. By the

end of 1817 the amount had fallen to $2,003,969. During the

same two years the number of chartered banks in Ohio more

than doubled, increasing from 8 to 21.52 As for the unauthor-

ized banks, which continued to spring up in all parts of the

state during this period, nothing at all is known as to the amount

of their capital, circulation, loans, etc., nor even as to their

number. The total amount of notes issued by them, however,

was large and added greatly to the inflation of the currency in

Ohio at that time.

Suspension and Bank Note Depreciation.- During most

of this period there was suspension of specie payments in all parts

of the country except in New England, and bank notes were de-

preciated everywhere. The banks of New Orleans had sus-

pended specie payment in the latter part of April 1814, and some

of the banks in Maine also had suspended in the early part of

that year.⁵³ About the same time there occurred a bank mania

 

51Elliot's Funding System, p. 734.

52Rept. of Secy. of Treas. Wm. H. Crawford, Feb. 12, 1820.

(Elliot's Funding System, p. 769.)

53Elliot's Funding System, p. 1106.

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280       Ohio Arch. and Hist. Society Publications.

in Pennsylvania during which the legislature of that state char-

tered 41 new banks, which were organized on capital consisting

chiefly of stock notes.⁵⁴ August 30, 1814, the Philadelphia banks

suspended specie payments, followed within a week or two, ac-

cording to compact it is said, by all the other banks in the Mid-

dle and Southern States.⁵⁵ The national government in distress

for money at that time and at the mercy of the banks, gave

tacit consent to the suspension, which it was said was to con-

tinue only during the war.56

The banks of Ohio and Kentucky, however, maintained specie

payments until about the first of January, 1815, and the Bank of

Nashville, Tennessee, until July or August, 1815^.57 "It must

be evident from this," says Gouge, "that if the United States

Government had immediately compelled the banks of the great

Atlantic cities to redeem the pledge they had given in the pre-

ceding August, the western country might have suffered but

little from the suspension of specie payments."⁵⁸ But specie

resumption did not take place when peace returned. Instead of

redeeming their pledge, "the banks, urged on by cupidity, and

losing sight of moral obligation in their lust for profit, launched

out into an extent of issues unexampled in the annals of folly."⁵⁹

"The years 1815, 1816," says Hildreth, "may be well marked in

the American calendar, as the jubilee of swindlers, and the

Saturnalia of non-specie paying banks. Throughout the whole

country, New England excepted, it required no capital to set

up a bank."⁶⁰

The great over-issue of notes which resulted produced de-

preciation. Notes of the Philadelphia banks were depreciated

16 to 20%, those of the interior of Pennsylvania 25 to 50%,

even the notes of the New England banks and a few others

 

54Money and Banking-White, p. 363.

55Elliot's Funding System, p. 1106.

56The History of Banks -Richard Hildreth, pp. 58 and 59.

57Elliot's Funding System, p. 1106.

58A Short History of Banking-Gouge (Cobbett's Ed.) p. 89.

59Money & Banking-White, p. 363. (Quoted from a report to

the Pennsylvania Legislature in 1820, by a committee of which Mr.

Raguet was chairman.)

60Banks, Banking, and Paper Currencies-Richard Hildreth, p. 67.

• 46
 

Banking and Currency in Ohio Before the Civil War. 281

which continued to pay specie were at a discount, "for", says

Gouge, "nobody knew how long any distant bank would con-

tinue to pay specie. All the banks whose notes were at a dis-

count at New York of less than 5 per cent were understood to

pay specie on demand."61

Notes of the chartered banks in Ohio, which were quoted

at 4 to 5% discount in Philadelphia in November and December,

1814, were quoted at 6 to 7% discount on January 2, 1815, 8

to 10% discount on December 4, 1815, and January 1, 1816,

10 to 12% on December 2, 1816, and from 12 to 15% discount

on January 6, 1817.62  Notes of unauthorized banks in Ohio

were quoted in New York at times during this period at a dis-

count of 20 to 25%63.

The depreciation of the bank notes, which formed prac-

tically the only currency everywhere except in New England,

produced a great rise in prices⁶⁴. Land in Pennsylvania was

worth on the average in 1809 $38 per acre, in 1815 $150 per

acre.⁶⁵. The price of flour in Philadelphia was $8.60 per barrel

in 1814, $8.71 in 1815, $9.78 in 1816, and $11.69 in 1817.66 In

the West lands rose to double and triple their value.⁶⁷ At Chil-

licothe, Ohio, wheat was quoted on September 16, 1812 at 62½c

per bushel,⁶⁸ on August 3, 1816 it was 75^c and corn ₃71/2 to 43c,⁶⁹

while on November 28, 1816 wheat was worth $1.50 and corn

50c.70 The apparent value of all kinds of property suddenly

went up and the people imagined they were growing rich never

so fast. Meanwhile, the banks were paying enormous divi-

dends.⁷¹

 

61Money and Banking-White, p. 363.

62Elliot's Funding System, p. 1106. See Appendix.

63History of Banking--Knox, p. 669.

64The History of Banks--Hildreth, p. 60.

65A History of American Currency-Sumner, p. 80.

66Hunt's Merchants' Magazine, Vol. IV, p. 286.

67Valley of the Mississippi -Flint, Vol. I, p. 179.

68Fredonian, (Chillicothe, O.), Sept. 16, 1812.

69 The Supporter (Chillicothe, O.), Aug. 6, 1816.

70The Scioto Gazette and Fredonian Chronicle (Chillicothe, O.),

Nov. 28, 1816.

71The History of Banks--Hildreth, p. 60.

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282       Ohio Arch. and Hist. Society Publications.

Convention of Ohio Banks at Chillicothe. -As long as

the banks could issue notes without having to redeem them, of

course they prospered and made large dividends. They were

simply exchanging their notes for those of private citizens on

condition that the latter should pay 6 to 10% interest and the

principal at maturity, whereas the banks paid neither interest

nor principal.⁷² As might be expected, therefore, the banks were

in no hurry to resume specie payments.

The enactment of the law, April 10, 1816, establishing the

Second Bank of the United States, which was expected to lead

the State banks in the restoration of the currency to a specie

basis, was soon afterward reinforced by the passage of a joint

resolution providing that after February 20, 1817, all dues to

the United States government must be paid in legal currency,

treasury notes, United States Bank notes, or notes of other

specie paying banks.⁷³

The banks thus notified to get on a specie paying basis if

they desired credit with the government, were reluctant, however,

to reduce their loans and contract their circulation to that ex-

tent. So in the following summer the banks of the Middle

States held a convention and asked that the date set for resump-

tion be postponed, on the ground that the United States Bank

could not be organized by that time and that they wished its

aid in their efforts to resume.⁷⁴

Likewise the Ohio banks were ready with an excuse for

delaying resumption. In response to a circular letter sent out

on July 22, 1816, by the Secretary of the Treasury of the

United States inquiring as to resumption, delegates from nearly

all the chartered banks of Ohio convened at Chillicothe on Sep-

tember 6, 1816 for the purpose of agreeing on some general

course respecting the resumption of specie payments. As the

result of their deliberations they resolved,-that it would not

be safe or prudent for the Ohio banks to resume until the pay-

ment of specie became general at the banks of the Atlantic

cities; declared that the Ohio banks there represented were

 

72Money and Banking-White, p. 364.

73Financial History of the United States-Dewey, pp. 150 and 151.

74 Financial History of the United States-Dewey, p. 151.

• 48
 

Banking and Currency in Ohio Before the Civil War. 283

 

ready to resume specie payment; and pledged themselves to pay

specie for their notes as soon as it should be ascertained that the

payment of specie had become general at the banks of the At-

lantic cities.⁷⁵  Meanwhile the banks went on issuing more

stock and notes and paying more dividends.⁷⁶ In fact, as noted

elsewhere, in 1816 the banking capital in Ohio reached the high-

est amount reported before the 30's. Events were occurring,

however, which finally brought about the general resumption of

specie payments.

Branches of the United States Bank in Ohio and Resump-

tion of Specie Payment.- Notwithstanding the prophecy of

the state banks that the United States Bank could not be organ-

ized so soon, it was opened in January 1817. That same month

it persuaded the local banks of Philadelphia to agree to resume

specie payments on February 21, and specie payments were nom-

inally resumed on the appointed day.⁷⁷

In January 1817 a branch of the United States Bank was

established at Cincinnati, Ohio.⁷⁸  And on February 20, 1817

two of the Ohio banks resumed specie payments.⁷⁹ The other

chartered banks of Ohio resumed the payment of specie early

in the spring of 1817, after receiving assurance from the United

States Treasury, it is claimed, that time would be given them

until the ensuing season for the redemption of their paper, large

amounts of which had been paid to the government for public

lands and for internal taxes.⁸⁰

The effect of resumption at once became apparent in the de-

creased depreciation of bank notes. Notes of the old chartered

banks of Ohio, which were quoted in Philadelphia January 6,

 

75The Ohio Republican (Dayton), Sept. 18, 1816. Niles Weekly

Register, Vol. XI, p. 57, (Sept. 21, 1816.)

76The Supporter (Chillicothe, O.), Aug. 6, 1816. The Scioto Gazette

and Fredonian Chronicle (Chillicothe, O.), Nov. 28, 1816.

77 Money and Banking--White, p. 364. That the resumption of

specie payment was only nominal is indicated by the fact that silver re-

mained at a premium at Philadelphia. See Appendix, p. 259.

78Bankers' Magazine, Vol. IX, p. 4.

79History of the United States-J. B. McMaster, Vol. IV, p. 317.

80Liberty Hall and Cincinnati Gazette, Feb. 2, 1819.

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284       Ohio Arch. and Hist. Society Publications.

at 12 to 155% discount, rose to 6% discount on April 7.81  In

general, however, conditions did not improve much.

In October 1817 another branch of the United States Bank

was established in Ohio, this one at Chillicothe.⁸² By this time

the public sentiment, which had manifested itself in the fall of

1816 in efforts of the people of both Cincinnati and Chillicothe

to secure branches of the United States Bank in those

towns,83 was beginning to turn against the Bank. A joint com-

mittee of the state legislature, reported December 27, 1817 as to

the expediency of taxing the branches in the state.84  The report

was adverse, but the House rejected it and adopted a substitute

report asserting the right of the state to tax the branches, and

declaring the expediency of doing so at once.⁸⁵ When the bill

imposing such a tax was read, however, it was laid over until

December, 1818.86

Proposition for a State Bank. - On Dec. 19, 1817, a few

days before the above report, the Ohio Legislature, in a com-

mittee of the whole was considering the question of passing a

general law for incorporating banks, and it appointed a joint

committe to inquire into the expediency of inviting the char-

tered banks to surrender their charters for the purpose of unit-

ing their capital stock into a State Bank with branches at the

places which had chartered banks.⁸⁷ This scheme did not then

materialize, but during the same month six new state banks

were incorporated by the legislature under the provisions of

the bonus law of 1816.88  These were followed a month later

by another, which, however, was the last bank chartered by the

Ohio legislature for a period of eleven years.⁸⁹ The Inflation

Period was about to give way to a period of reaction.

 

81 See Appendix, p. 487.

82Bankers' Magazine, Vol. IX, p. 4. Ohio Watchman (Dayton),

Oct. 30, 1817.

83The Scioto Gazette and Fredonian Chronicle, (Chillicothe), Nov.

28, 1816. Niles Register, Vol. XV, p. 59, (Sept. 19, 1818).

84Ohio House Journal, 1818, p. 144.

85Ibid, p. 308.

86History of the United States -McMaster, Vol. IV, p. 498.

87Ohio Senate Journal, 1818, p. 87.

88See page 276.

89 See page 277.

• 50
 

CHAPTER III.

THE CRISIS OF 1818-19.

"The Golden Age of the Western Country." -The pros-

perity of the speculative period continued in the western coun-

try until the middle of 1818. The flood of immigrants after the

war of 1812 had increased the amount of transport and given a

big impulse to enterprise of all kinds. Steamboat building and

town making advanced rapidly. The sale of lands put a lot of

money into circulation. Mercantile importations filled the coun-

try with foreign goods. Both town and country partook of the

advantages of the boom. Industry was rewarded, markets were

enlarged, and the products of the country were purchased at

liberal prices. The farmers felt with as much force as the

mechanic and the merchant of the city the pleasing prosperity of

those halcyon days.1

The many banks which had sprung into existence supplied

an abundant currency. "If the months of May, June, July, and

August, 1815, were the golden age of Philadelphia," says Gouge,

"the first months of the year 1818 were the golden age of the

western country. Silver could hardly have been more plentiful

at Jerusalem in the days of Solomon, than paper money was

in Ohio, Kentucky, and the adjoining regions."²  In Zanesville,

Ohio, more than 30 kinds of paper were passing from hand

to hand. Besides the paper of the various banks, most plentiful

of all were the "shinplasters" issued by bridge, turnpike, and

manufacturing companies, city and borough authorities, mer-

 

1Valley of the Mississippi-Flint, Vol. I, p. 179. Liberty Hall and

Cincinnati Gazette, Jan. 24, 1823. Preliminary Sketch of Ohio (In Chase's

Revised Stat., 1833.)

2Gouge's Journal of Banking, Mar. 30, 1842, p. 320.

(285)

• 51
 

286        Ohio Arch. and Hist. Society Publications.

chants, tavern keepers, and shoeblacks, and ranging in value

from 3c to $2.³

Ohio was not the only state over supplied with banks at

that time, however. In 1818 there were 392 banks in 23 states

and territories, located as follows :4

 

 

DISTRIBUTION OF STATE BANKS IN THE UNITED STATES IN 1818.

New Hampshire... 12 Delaware ........     8 Kentucky ......... 59

Vermont ........    5 Maryland ........25 Tennessee ........                                           3

Massachusetts .... 38 Virginia .......... 17 Louisiana ........                                         3

Rhode Island...... 35 North Carolina....                        7 Michigan .........                1

Connecticut ...... 10 South Carolina....                        3 Missouri .........                  2

New York........ 42 Georgia ..........                              3 District of Colum-

New    Jersey.......  14  Ohio  .............                         28  bia  .............  15

Pennsylvania ..... 59 Indiana ..........                            3

Total No...... 392

The Portsmouth, Ohio, Gazette of August 12, 1818, gives

a list of 23 chartered banks in Ohio,⁵ and remarks: "It is sup-

posed that all the above banks have been generally prudently

managed; and all, (except the German Bank of Wooster),6 are

in good credit in their respective neighborhoods, and promptly

redeem their notes with specie." It adds, however,-"The notes

of all the unchartered banks in this state with the exception of

John H. Piatt & Company's Bank, Cincinnati, which are in good

credit, and the Bank of Xenia, which are still current in some

places, are considered as good for nothing."

Confidence in the local banks was not destined to continue

much longer however.     For in the summer of 1818 began the

 

History of the United States-McMaster, Vol. IV, p. 317.

A somewhat similar condition arose in Ohio at a much later date.

Early in the Civil War period there sprang up over the state the use of

"checks," "tickets," "notes," "orders," etc., for fractional parts of a

dollar issued by various counties, cities, villages, associations and indi-

viduals, and purporting to be redeemable in current bank notes or gov-

ernment notes when presented in sums of $5, etc.-Rept. of State Aud.

on condition of banks in December, 1862.

4Hist. of U. S.- McMaster, Vol. IV, p. 485.

5Five of those chartered the preceding winter omitted.

6Reported Nov. 1817 as having stopped specie payt. - 0. Watchman,

Nov. 20, 1817.

• 52
 

Banking and Currency in Ohio Before the Civil War. 287

 

crisis in the Mississippi Valley,-a part of the industrial and

commercial storm  which swept the entire country.⁷  At the

beginning of the year 1818 the whole country south and west

of New England was enjoying apparently the most enterprising

prosperity. Before the year ended it presented a scene of general

bankruptcy, confusion, and dismay.⁸

Causes of the Crisis of 1818-19. - The causes of the crisis

were complex. An unnatural expansion in trade had succeeded

the restrictions caused by the embargo and the war. The for-

eign commerce of the country had grown from less than $20,-

000,000 in the year ending September 30, 1814, to over $152,-

ooo,ooo in that ending September 30, 1815, and over $194,000,-

000 in that September 30, 1816. In each of these three years the

value of imports was about twice that of the exports.⁹  This

made it difficult or impossible for the manufacturing industries

of the country to get a stable footing after the abnormal growth

occasioned by the embargo and the war.

The speculation and high prices promoted by the several

years of commercial expansion and excessive banking were suc-

ceeded by a contraction of credits and a fall in prices when the

banks endeavored to return to a specie basis in 1817. The bank

circulation, which in 1815 and 1816 had reached $110,000,000,

was decreased until in 1819 it was only $65,000,000.¹⁰ This re-

sulted in a ruinous fall in prices. "In no other epoch of the

century," says Burton, "is it probable that the fall in prices of

commodities and real estate was so marked as in 1818-19.11

The expansion of credits and speculative enterprises had

been accompanied by a great increase of luxury and waste. A

large part of the people became possessed of the desire to live

by speculation instead of by work. The gambling spirit dom-

inated them. There were no reasonable foundations to many

of the schemes and no limits to the extravagances of the people.

 

7History of Banking in All Nations, Vol. I, p. 109.

⁸The History of Banks-Hildreth, p. 65.

9 Crises and Depressions-Theodore E. Burton, pp. 276-7.

10Financial History of the United States-Albert Bolles, 2: 329.

Crises and Depressions, p. 276.

See also The History of Banks-Hildreth, p. 165.

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288       Ohio Arch. and Hist. Society Publications.

A fictitious value was given to all kinds of property. Specie

disappeared from circulation and all efforts to restore society to

its natural condition were treated with contempt.12

This unnatural state of things could not last long. Men

who contracted debts found, when called upon for payment that

the means were wanting. Banks that had made excessive issues

found themselves unable at times to redeem their paper on de-

mand, and the currency of course began to depreciate. The tide

began to ebb, and things to settle to their natural level. The

first indication of this change was the failure of the banks, at

first as rare occurrences; but soon these failures became so nu-

merous and common that the paper, except of the banks of

Louisiana, Mississippi and a few of the interior banks, became

practically worthless.1³

The Crisis in the West Occasioned by the United States

Bank.--The crisis in the west began in the summer of 1818.

The immediate cause was the Bank of the United States.¹⁴ The

state of the currency and the business of the country determined

that the course of exchange should be almost constantly in favor

of the east and north, and against the west and south. The

western states, having less capital, were in the course of trade

generally indebted to the Atlantic seaports. Whether on ac-

count of larger purchases of public lands than usual, the excited

spirit of enterprise, or whatever cause, it appears that during

the years immediately following the opening of the United

States Bank the amount of debts due by the west either to the

east or to the government, was unusually large. The western

branches of the bank as a result discounted too largely.¹⁵

Expansion of Credits by Western Branches.- On ac-

count of the course of exchange being in favor of the east and

 

12Financial History of the United States-Dewey, p. 166.

Crises and Depressions-Burton, pp. 275-277.

Money and Banking-White, pp. 365-6.

13Valley of the Mississippi-Flint, Vol. I, p. 179.

Preliminary History of Ohio-Chase (In Revised Statutes of 1833).

For Ohio Notes see Appendix, pp. 487, 492.

14History of Banking in All Nations, Vol. I, p. 109.

15Considerations on the Currency-Gallatin, p. 48.

• 54
 

Banking and Currency in Ohio Before the Civil War. 289

 

against the west the western branches could issue their notes

without much danger of their returning upon them. Hence they

piled up enormous loans. For example, the Cincinnati Branch

discounted over $1,000,000 in October 1817, over $1,836,000  in

June 1818, and $1,867,383 in November 1818. The Lexington

Branch discounted over $1,600,000 in June 1818 and over $1,-

700,000 in November 1818. Similar conditions existed at every

western branch.¹⁶

By these large issues of branch notes and of drafts on the

parent bank and the eastern branches, western debtors were

enabled to pay their eastern creditors; but the debt was merely

transferred to the United States Bank, where large balances ac-

cumulated against the local banks. The issues also increased

the inflation in the west.

Operations of United States Bank Increase Inflation in

the West.-"It may perhaps be just to say," says Sumner,

"that but for the Bank of the United States the West would

never have been drawn into the inflation."¹⁷  This statement

seems somewhat too strong in view of the fact that there had

been inflation in the west for a year and a half before the

United States Bank opened. But the large issues of the western

branches certainly did increase the inflation.

As the notes issued by each branch of the United States

Bank were redeemable at any other branch or at the parent bank,

the large issues of the western branches resulted in draining the

capital from the main office and the eastern branches to the

western branches. Thus in the spring of 181₉, although great

curtailments had then taken place, nearly $6,500,000 of the cap-

ital of the bank was distributed among the interior western

offices, whereas the whole amount allotted to the offices north

and east of Philadelphia was less than $1,000,000.¹⁸ Then, too,

the notes of the western branches which remained in circula-

tion in the west helped to increase the inflation.

Moreover, by extending the loans of the western branches,

the United States Bank permitted the state banks to over-trade

 

16The Second Bank of the United States--Catterall, p. 34.

17History of Banking in All Nations, Vol. 1, p. 109.

18Considerations on the Currency-Gallatin, p. 49.

19

• 55
 

290       Ohio Arch. and Hist. Society Publications.

and inflate the currency. For, up until July, 1818, the Bank

did not insist on the payment of the balances due from the

state banks. The latter always had large balances against them

at the western branches, and not being called upon for these

balances, they continually inflated their issues and expanded their

discounts.¹⁹

The western branches issued their own notes in preference

to those of state banks and, whenever possible, delivered drafts

on eastern cities to prevent remitting their own notes. The

branch notes and drafts thus sent east tended to produce a vacuum

in the circulation.  This was quickly filled, however, by the

notes of local banks, which were readily received by the branches

and kept as a fund on which to charge interest to the state banks.

By accepting bank notes not apt to be redeemed and making

them the circulating medium in the region where issued the

United States Bank made the mistake of increasing the very

notes least worthy of confidence.²⁰

Sudden Restriction of Credits by United States Bank

precipitates the Panic. - In the summer of 1818, however, the

United States Bank realized the danger and in order to secure

safety made a radical change, restricting its issues, calling on

the state banks for the balances due, and adopting the policy of

redeeming none of its notes except at the branch where issued.

This sudden reversal of policy coming at a time when every-

thing was so inflated burst the bubble and "precipitated the

panic, for which, however it was hardly more responsible than

was Noah for the flood."²¹

The country was quite unprepared for these measures and

they occasioned much suffering and embarrassment. The keen-

est distress fell upon the west. The conditions there had never

 

19The Second Bank of the United States - Catterall, p. 35.

20 Financial History of the United States, 1789-1860-Bolles, pp.

323 and 324.

21Second Bank of the United States - Catterall, p. 61.

See also-A Short History of Banking-Gouge, p. 64.

Financial History of the United States-Dewey, p. 152.

Considerations on the Currency--Gallatin, p. 49.

History of Banking in All Nations, Vol. 1, p. 109.

Crises and Depressions-Burton, p. 276.

• 56
 

Banking and Currency in Ohio Before the Civil War. 291

 

justified the large loans of the United States Bank, and the in-

flation and overtrading by the state banks had aggravated the

evil. Much of the indebtedness in the west had been created by

loans to farmers, and was secured only by mortgages on greatly

over-valued real estate, which was unsalable during a crisis. In

the towns the money borrowed had been expended mostly in

permanent improvements and could not be repaid on demand.

In fact the borrowers had never expected to pay the notes when

they first came due, the usual custom being to renew again and

again. Consequently the restrictive orders compelling the pay-

ment of debts just when it was most difficult to pay them

greatly increased the already keen hostility against the bank.²²

The view of the matter taken by almost everybody in 1818-19

was expressed by Gouge thus: "The Bank was saved and the

people were ruined."²³

United States Bank calls for Balances due from Cincinnati

Banks.-The United States Bank was very sudden in its

demands. On July 20, 1818, the parent bank ordered the Cin-

cinnati branch to collect the balances due from the local state

banks at the rate of 20% every 30 days. As the balances due

from the Cincinnati banks amounted to about $720,000, this de-

mand meant they were called upon to pay about $144,000 every

month.²⁴  The difficulty was increased when, on August 28,

1818, the Bank issued its orders to the branches to cease re-

ceiving each others notes.²⁵  The Cincinnati banks could not

pay. In fact in October they owed more than they had in July,

although they had tried to redeem their debt, incidentally in-

flicting distress upon their own debtors who, having neither

specie nor bank notes, simply could not pay.

Suspension of Specie Payment by Ohio Banks.-The

Cincinnati banks protested vigorously against the action of the

United States bank. But the latter, instead of yielding and offer-

 

22Second Bank of the United States--Catterall, pp. 61 and 62.

23A Short History of Banking-Gouge, p. 71.

24Nile's Register, Vol. XV, p. 59. (Sept. 19, 1818).

The Supporter, (Chillicothe, O.), Aug. 26, 1818.

A Short History of Banking-Gouge, pp. 64 and 90.

25 Financial History of the United States-Dewey, p. 152.

• 57
 

292       Ohio Arch. and Hist. Society Publications.

ing more favorable terms, prohibited the receipt of the notes of

the Cincinnati banks. This precipitated a disaster. The three

Cincinnati banks suspended specie payment on November 5,

1818.26 Most of the other Ohio banks soon followed.

Niles' Register of December 12, 1818 says: "It is stated

that $2500, per week are required to pay the discounts on monies

loaned by the branch of the bank of the United States at Cin-

cinnati ....... the branch has scarcely any of its notes in cir-

culation and Ohio has been drained of specie. It is a serious

enquiry how these discounts are to be paid." The same paper

states that many of what were considered the best banks in

Ohio had stopped specie payment, and that it was feared that

all the rest must follow.²⁷ And in its issue of January 9, 1819

this paper announced that only two or three banks in Ohio were

still paying specie, adding also that of the notes of these there

were very few in circulation.²⁸  The notes of nearly all the

Ohio banks, already below par before the suspension, continued

to depreciate more and more, and the paper of several of them

became absolutely worthless.29

Notes of Many Ohio Banks refused at State Treasury in

Payment of Taxes.--In September 1818 it was stated that

the notes of 16 of the chartered banks of Ohio would not be

received in payment of the state taxes.³⁰ In Governor Worthing-

ton's Message to the Ohio legislature on December 7, 1818, he

speaks of the disordered state of the paper currency, the great

difficulty the people of the state had in paying and the officers

of the state in collecting the taxes, and urges that the legislature

designate by law what should be received by the collectors in

payment of state and county taxes. He even suggests for the

consideration of the legislature the question of the establish-

 

²⁶Liberty Hall and Cincinnati Gazette, Nov. 11, 1818.

Second Bank of the United States - Catterall, pp. 62 and 63.

27 files' Register, Vol. XV, p. 283.

²⁸Ibid., p. 361.

29 Preliminary Sketch of Ohio in Chase's Revised Statutes, 1833.

Elliot's Funding System, p. 1106.

Ohio Watchman, (Dayton), Oct. 29, 1818.

See Appendix, p. 487.

³⁰Niles' Register, Sept. 19, 1818, p. 59.

• 58
 

Banking and Currency in Ohio Before the Civil War  293

ment of a state bank to be composed of the banks already in-

corporated that might be willing to surrender their existing

charters and become branches of a state bank, whose paper

should be received in payment of taxes. He added, however,

that time could determine whether such a bank would lessen the

difficulties then felt.³1 But nothing came of this at that time.

State Bank Notes refused at Cincinnati in payment of

Public Land Sales: Chartered Banks ask Repeal of Bonus

Law. - In November 1818 the banks were in such a condition

that the land agent at Cincinnati was ordered to take nothing

but United States notes and specie in payment of land sales.

This caused consternation among the banks. The notes of the

United States Bank had never circulated in Cincinnati to any

great extent, and at that time specie was equally scarce. Brokers

were selling it at 20% premium and their stock threatened soon

to be exhausted. The result of the edict was, therefore, that the

sale of public lands was stopped in that locality.³²

At a meeting of bank delegates from middle and western

Ohio it was agreed to petition the legislature to take back their

charters and repeal the bonus law of 1816.33

The committee of the legislature to whom this petition was

referred, however, took the ground that capital invested in

banking was a proper subject of taxation, and reported that it

was not expedient at that time to exempt the state banks from

the payment of the bonus.³⁴  Consequently, although Governor

Brown in his message to the legislature December 16, 1818, sug-

gested substituting a tax on the real estate of the banks, and a

rate on their dividends in place of the bonus,³⁵ the so-called

bonus law remained on the statute books until 1825.

Unauthorized Banking in Ohio.--In the petition one of

the reasons given by the banks for asking the repeal of the bonus

law was that the state had not suppressed illegal banking accord-

 

31 Message printed in Niles' Register, Vol. XV, supplement, p. 87.

32Liberty Hall and Cincinnati Gazette, Nov. 17, 1818.

33History of the United States - McMaster, Vol. IV, p. 488.

34 Ohio Senate Journal, 1818, p. 256.

35Niles' Register, Vol. XV, Supplement, p. 91.

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294       Ohio Arch. and Hist. Society Publications.

ing to the promise alleged to have been implied in the provisions

of the law of 1816.36 In fact the unauthorized banks had con-

tinued to flourish and their numbers had constantly increased.

Some of these were in very good repute.     Such were, - the

Bank of Xenia, whose notes in June 1818 were said to be 2%

higher at the banks of Cincinnati than those of any other of

the banks of the state except the Miami Exporting Company;³⁷

and the bank of John H. Piatt and Company of Cincinnati, whose

notes were only 41/2% discount in October, 1818.38 Others, how-

ever, like the Owl Creek Bank at Mt. Vernon,39 or the Granville

Bank, whose officials John Kilbourn, on November 12, 1818, said

he esteemed in their private capacities, but as bank directors he

publicly proclaimed to be "a pack of knaves and swindlers,"⁴⁰

issued paper without restriction, never expecting to redeem it at

all.

Some of the chartered banks had been established with in-

sufficient capital, with little or no specie, and in places where

there was no active trade; but the legislature, as Governor Brown

remarked in his message of December 16, 1818, had become

more cautious about granting those incorporations.⁴¹   Conse-

quently their number did not increase in Ohio during this period.

But the laws against unauthorized banking, though perhaps of

some benefit, were far from effective, and did not prevent impo-

sitions on a confiding public. The number of unauthorized

banks and the amount of their paper in circulation increased

continually. "The extravagant number of banks in this as well

as other states in addition to the evil of banishing an universal

 

36Ohio Senate Journal, 1818, p. 256.

37 Ohio Watchman, (Dayton), June 25, 1818.

During the session of 1818-19 the Bank of Xenia applied to the

legislature for a charter, offering to make the stockholders liable in their

individual capacity, to forfeit their charter by ceasing to pay specie, and

to publish annually a list of officers. The application was made too late

in the session, however, to leave time for the granting. -Ohio Watch-

man, Feb. 25, 1819.

38 Ibid., Oct. 29, 1818.

39 See Niles' Register, Vol. LII, p. 85.

40 Ohio Watchman, Dec. 3, 1818.

41Niles' Register, Vol. XV. Supplement, p. 91.

• 60
 

Banking and Currency in Ohio Before the Civil War. 295

 

medium from common circulation by substituting an excessive

quantity of bank notes has rendered it impossible," says Gov-

ernor Brown in the message referred to above "for citizens to

distinguish between genuine and counterfeit."⁴²

Counterfeit Notes, Small Notes, Post Notes, Buying up

Notes at Discount, and Tax on Unauthorized Banks.-

Counterfeit notes, which had been numerous in the state dur-

ing the inflation period,⁴³ became still more abundant in 1818

and the years following.⁴⁴ Many of these came from manufac-

tories in Canada. They were too numerous to admit of de-

scription.⁴⁵

Notes of very small denominations became quite common.

Some of the banks issued post notes. Others indulged in the

practice of buying up their own paper at a discount. The legis-

lature was continually passing laws on these subjects, usually

in vain however. On February 5, 1819, an act was passed

making it unlawful to issue notes payable at a future day, and

forbidding the issue or receipt of a note or bill less than $1.46

An act to prohibit the practice of buying and receiving bank

notes at a discount was passed February 8, 1819^.47 It provided

that all bank notes should pass at their face value; fixed a pen-

alty of not over $500 for receiving or paying away notes at a

discount; and provided that persons paying away notes at a dis-

count might, on suit, recover the difference. Its lack of success,

however, is indicated by its repeal on January 24, 1820.48  That

this practice was quite common at the time is made plain by an

article from the Cincinnati Enquirer quoted in Niles' Register

of July 29, 1820.⁴⁹ This article says that there was great excite-

ment at Cincinnati on account of the belief generally entertained

 

42 Niles' Register, Vol. XV. Supplement, p. 92.

43 Chillicothe, Ohio, Supporter, Aug. 16, 1816.

44Liberty Hall and Cincinnati Gazette, Aug. 4, 1818.

Ibid., Sept. 1, 1821.

Niles' Register, Aug. 8, 1819, p. 396.

45Ibid., Vol. XIX, p. 328, Jan. 13, 1821.

46Revised Statutes of Ohio, 1833, (Chase), p. 1067.

47Laws of Ohio, Vol. XVII, (1819), p. 152.

48 Revised Statutes, (Chase), p. 1070.

49 Page 399.

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296       Ohio Arch. and Hist. Society Publications.

that those concerned in the Miami Bank were secretly engaged

in purchasing up its notes at a very large discount though, as it

was also thought, the bank was able to meet its engagements,

under a careful management. "If such things have not happened

at Cincinnati," proceeds the writer, "they have happened at other

places and there is no sort of novelty in them." The bills of the

bank alluded to were worth about 25 cents on the dollar in

Baltimore.

The same article states that the inhabitants of Springfield,

Hamilton County, Ohio, had just held a meeting at which they

charged the non-specie paying banks with a design to depreciate

their own paper for the purpose of buying it up at very reduced

rates.⁵⁰

At the meeting referred to above, resolutions were adopted

"to desist from the use of any paper of banks that refuse to dis-

charge promptly the obligations specified on the face of the note,"

and inviting the people of the Miami country to adopt similar

resolutions, for too much forbearance had been indulged in

towards the delinquent banks.

On February 18, 1820 an act was passed by the legislature

to enforce payment by banks. It also prohibited the issuing of

bills payable at a future date.⁵1 On February 22, 1821, Febru-

ary 22, 1822, and January 28, 1824 acts were passed to facilitate

the collection of debts against banks. The last reinforced the

prohibition of bills payable at a future date.⁵² The very number

of these laws evidences their futility.

The act of February 8, 1819, which taxed the branches of

the United States Bank in Ohio,⁵³ was entitled,--"An Act to

levy and collect a tax from all banks and individuals, and com-

panies, and associations of individuals, that may transact busi-

ness in this state without being authorized to do so by the laws

thereof."⁵⁴  Besides laying a tax on the United States Bank

 

50 Niles' Register, July 29, 1820, p. 399.

See also Liberty Hall and Cincinnati Gazette, July 1, 1820.

51History of Banking-Knox, p. 671.

52 Ibid.

53 See page 317.

54Laws of Ohio, Vol. XVII, (1819), p. 190.

• 62
 

Banking and Currency in Ohio Before the Civil War. 297

 

branches in the state, this act goes on to say, - "Whereas divers

companies and associations of individuals within this state, un-

authorized by law, continue in like manner, to do business as

bankers and banks, by loaning money and issuing bills, and by

trading in notes and bills; and whereas it is just and necessary

that such unlawful banking, while continued, should be subject

to the payment of a tax for the support of the government." It

then provides for a tax of $10,000 on such banks.⁵⁵ Having

failed to abolish unauthorized banks the legislature evidently

thought the next best thing would be to get some revenue from

them.

The foregoing is interesting, too, on account of the evidence

it affords that the hostility against the United States Bank was

not at first due wholly to its curtailments nor to its discipline of

state banks, but largely to jealousy of it as a foreign institution

present without the authority or will of the state, and paying no

taxes.⁵6

Specie drained from Ohio by the United States Bank.-

The hostility against the United States Bank was increased by

the draining of specie from the state through its financial opera-

tions. Cincinnati papers were complaining of the scarcity of

specie early in November, 1818.⁵⁷ A week later it was stated

that two wagons loaded with specie from the branch of the

United States Bank at Chillicothe had started for Philadelphia,

and it was estimated that this meant from $120,000 to $140,000

in specie drawn probably from the state banks of Ohio.⁵⁸ Niles'

Register of June 26, 1819 says, "It is estimated that $800,000 in

specie have been drawn from Ohio within the last twelve months

for the Bank of the United States."⁵⁹ Gouge, in commenting on

this, remarks, "If this be true the wonder is not that only six or

 

Revised Statutes of Ohio, 1833, (Chase), p. 1072. Laws of Ohio,

17:190.

56See History of Banking in All Nations, Vol. 1, p. 109.

57Liberty Hall and Cincinnati Gazette, Nov. 17, 1818.

⁵⁸Ibid., Nov. 24, 1818. See also Niles' Register, June 5, 1819, p. 256.

59 Page 298.

• 63
 

298       Ohio Arch. and Hist. Society Publications.

seven banks in the state paid specie in August, 1819, but that

they were not all bankrupt."⁶⁰

Fall of Prices in Ohio and the West.- The effect which

the sudden withdrawal of specie by the United States Bank and

the discrediting of bank paper had on prices in the western coun-

try was very distressing. Prices went very low in Ohio and the

west generally.⁶¹ "In the early part of 1819 the price of west-

ern produce fell so low," says Sumner, "as hardly to pay the

transportation to ports whence they were shipped to foreign

markets."⁶² While land suddenly became practically unsalable.⁶³

In November, 1816, wheat was selling at Chillicothe at $1.50

and corn at 50c per bushel, and people were advised to hold on

to their produce as it was likely to go higher yet.⁶⁴ In October,

1818, in the same town, wheat was quoted at 75c a bushel.⁶⁵ In

Dayton, Ohio, January 1, 1817 wheat was $1. per bushel. In

October, 1819, it was selling at 62½c per bushel; while in 1821

and 1822 the price went as low as 20c a bushel. In March, 1822,

the Dayton prices were: Flour $2.50 per barrel, whiskey 12½C

per gallon, wheat 20c, rye 25c, and corn 12c per bushel, fresh

beef 1 to 3^c per pound, butter 5 to 8c per pound, eggs 3 to 5c

per dozen, and chickens 50 to 75c per dozen.⁶⁶

A letter from a Cincinnati man, July 26, 1820, quoted in a

Steubenville paper states that at a marshal's sale a handsome

gig and very valuable horse had sold for $4, an elegant sideboard

for $3, a fine Brussel's carpet and two Scotch carpets for $3,

etc. The writer adds that a man with a little money could make

a fortune by attending marshal's and sheriff's sales.⁶⁷ In the fall

and winter of 1822 the exports from Cincinnati were valued at

very low rates, e. g. -pork 2c a pound, flour $3 a barrel, and

 

60Journal of Banking, Mar. 30, 1842, p. 320.

61A Short History of Banking-Gouge, p. 91.

62History of Banking in All Nations, Vol. 1, p. 111.

63Valley of the Mississippi-Flint, Vol. 1, p. 180.

64The Scioto Gazette and Fredonian Chronicle, Nov. 28, 1816.

65The Supporter (Chillicothe, O.), Oct. 21, 1818.

66 History of Montgomery County, Ohio, p. 343. (Pub. by W. H.

Beers & Co. Chicago. 1882.)

Dayton Watchman, Apr. 9 and June 18, 1822.

67Western Herald and Steubenville Gazette, Aug. 19, 1820.

• 64
 

Banking and Currency in Ohio Before the Civil War. 299

 

whiskey 14C a gallon.⁶⁸ An article in a Portsmouth, Ohio, paper

in August, 1821, quotes flour at $1 per barrel, whiskey at 15c a

gallon, sheep and calves at $1 per head. The writer adds that

a bushel and a half of wheat will buy a pound of coffee, a barrel

of flour will buy a pound of tea, 12½ barrels will buy a yard of

superfine broadcloth, etc., if the farmer will sell his flour, bacon,

and whiskey to somebody else and get the cash, but the mer-

chant will not take produce in payment. "This," continues the

writer, "is the condition of the western country. This is the

prospect of the farmers."⁶⁹

Debt and Distress in the Mississippi Valley. - While the

staples of the western country were at these low prices the people

were deeply in debt to the United States Government, to eastern

merchants, to the local banks, and to one another. The sum due

to the government on account of land purchases, exceeded $22,-

000,000 in the latter part of 1820. The amount due to the Cin-

cinnati branch of the United States Bank was more than $2,000,-

ooo. While the indebtedness of the western people to one an-

other, to the local banks, and to the eastern merchants would be

hard to calculate.⁷⁰

Immense quantities of goods brought into the country by the

merchants had been sold on credit, and the debtors had nothing

with which to pay. All the specie of the country made its way

east to pay for the goods imported. Immigration had stopped,

and money no longer came into the country from that source.

The notes of the banks had all depreciated and many of them

were practically worthless. An immense amount of bank paper

perished, not in the hands of the speculators and those who

had been active in its issue, for they had foreseen the ruin and

had passed the spurious paper on before the panic came, but in

the hands of farmers and mechanics who had given full value

for the money. It would no longer be received in payment of

debts. Credit was at an end, and universal distress prevailed.⁷¹

 

68Liberty Hall and Cincinnati Gazette, Jan. 21, 1823.

69 Scioto Telegraph and Lawrence Gazette (Portsmouth, O.), Aug.

25, 1821.

70Journal of Banking, (Gouge), March 30, 1842, p. 320.

71Valley of the Mississippi - Flint, Vol. 1, p. 180.

• 65
 

300       Ohio Arch. and Hist. Society Publications.

To relieve the public distress the legislature of Ohio passed a

law to prevent property from being sold, unless it would bring

a certain amount to be fixed by appraisers. But the law failed

to accomplish the desired result. Kentucky adopted the relief

system to its fullest extent. Indeed, throughout the Mississippi

Valley there was liquidation, and relief measures were the order

of the day.⁷²

Report of the Select Bank Committee of the Ohio Legis-

lature. - In Ohio the suspension of specie payments by the

state banks, the depreciation of their paper, and the hard times

followed so closely the demand upon the Cincinnati banks for the

balances due the United States Branch Bank that in December,

1818, the lower house of the Ohio Legislature appointed a select

committee to investigate and report to the legislature the con-

dition of the state banks and the causes of the existing con-

fusion in the currency.

By February, 1819, this committee had made two reports to

the legislature, in which they set forth the condition of nearly

all the chartered banks in the state,⁷³ and declared that their in-

vestigation led "inevitably to the conclusion, that the establish-

ment and management of the branches of the United States

bank within this state, have very largely conduced to the pres-

ent embarrassment of the circulating medium, and have had a

direct effect in producing the recent suspension of specie pay-

ments by the state banks."

Recommendations of the Committee.--In view of this

the committee recommended the propriety of providing by law

that if the branches established within the state should remain

there and transact business beyond a certain day, a tax should be

assessed and collected of $50,000 annually upon each branch.

The committee also recommended that provision be made by

law for simplifying legal proceedings in all cases where banks

were a party, and for securing the holders of bank notes against

 

72Journal of Banking, (Gouge), Apr. 13, 1842, p. 329.

History of Banking in All Nations, Vol. 1, p. 119.

73Ohio House Jour. 1820, p. 415.

Ohio Watchman, Feb. 11, 1819.

Liberty Hall and Cincinnati Gazette, Feb. 2 and Feb. 16, 1819.

• 66
 

Banking and Currency in Ohio Before the Civil War. 301

 

impositions by prohibiting all brokerage on bank paper, especially

on the part of debtors to and stockholders in banks. The com-

mittee further suggested the propriety of providing by law for

the appointment of an attorney general whose duty it should be

to cause the law against unauthorized banking to be put in force

against all that might have infracted its provisions, and to in-

quire into the condition of those banks which had refused to

report.

Condition of Chartered Banks in Ohio in January 1819. -

The last suggestion above arose from the fact that one-fifth of

the twenty-five chartered banks existing in the state at the end

of 1818 refused or neglected to report to the committee. Of the

twenty banks which did report the statistics were not complete.

Many of the reports made did not state exactly the whole ac-

counts of the banks. Some omitted their real estate; some omit-

ted their accounts with other banks, stating in general terms that

their accounts were in their favor; while others omitted to state

the shares owned by the state, or the amount of surplus funds

and undrawn dividends remaining in the bank.

From these various omissions it was impossible to make the

whole accounts of the banks balance, there being a difference

of about $100,000 in the total assets and total liabilities. This

difference the committee thought to be against the banks. To

supply the defects the committee made use of the state auditor's

reports and such other information as was available regarding

the chartered banks, with the result that they furnished to the

legislature considerable data, which, the committee remarks,

"cannot be materially erroneous."

According to these statistics, the paid in capital stock of

the twenty banks reporting amounted to about $1,750,000, while

that of the five banks which did not report amounted to about

$600,000, making in all about $2,350,000 capital for the twenty-

five chartered banks in Ohio at the beginning of the year 1819.

The note circulation of the reporting banks amounted to

about $1,166,000 and that of the other five banks the committee

judged to be about $170,000, making the entire issue about $1,-

336,000. But the twenty banks reporting held among their

assets over $123,000 of the notes of Ohio banks. If this amount

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302       Ohio Arch. and Hist. Society Publications.

be deducted from the above total, there remains $1,213,000 as

approximately the circulation of Ohio bank notes at that time.

Against this the reporting banks held specie to the amount of

nearly $400,000, and the other chartered banks, according to the

committee's estimates, held about $60,000. Thus the twenty-five

banks held about $460,000 in specie against an outstanding cir-

culation of $1,213,000, or more than one dollar in specie for every

three dollars in circulation. This the committee considered as

good a condition as that of the United States Bank itself.

Of the debts due to the United States Bank the reporting

banks owed about $694,000, practically all of which was owed

to the Cincinnati and Chillicothe branches, except about $100,000

which was owed by the Bank of Steubenville probably to the

Pittsburg branch. As the whole amount due from the Ohio

banks to the Cincinnati and Chillicothe branches on October 3,

1818, amounted to $974,000, the committee figured that the dif-

ference between $974,000 and the $694,000 due from the twenty

banks reporting, or about $280,000, represented the amount due

the United States Bank from the five chartered banks in Ohio

which did not report. Most of this $280,000 the committee

judged, was doubtless due from the Miami Exporting Company.

The deposits of the banks reporting amounted to $268,000,

the United States Bank notes on hand amounted to $34,000,

notes of other banks outside the state $101,000, real estate $87,-

000, while their loans and discounts amounted to $2,944,000, or

a little more than the sum of their capital stock and circulation,

but somewhat less than the sum of the capital stock, circulation,

and deposits.  The total resources of the reporting banks

amounted to $3,983,897, and their total liabilities amounted to $3,-

985,530. Further details as to the condition of the banks are

shown in the following statement of the situation of the Ohio

Banks which reported to the Select Committee of the Legislature

in conformity to a resolution passed by the Ohio House of Rep-

resentatives in December, 1818:

• 68
 

Banking and Currency in Ohio Before the Civil War. 303

• 69
 

304      Ohio Arch. and Hist. Society Publications.

• 70
 

Banking and Currency in Ohio Before the Civil War. 305

• 71
 

306      Ohio Arch. and Hist. Society Publications. The Ratio of Circulation to Capital, and the Proportion of Capital, Circulation, and Deposits to Specie. - A computation based on the foregoing figures for the twenty banks which re- ported shows an average ratio of 67c of circulation to each dollar of capital stock paid in, $4.38 of capital stock paid in to each dollar of specie on hand, and $2.92 of circulation to each dollar of specie; while the proportion of circulation and deposits combined is $3.59 for each dollar of specie on hand. The ratios for the individual banks are shown in the following table:

• 72
 

Banking and Currency in Ohio Before the Civil War. 307

 

The Distribution of Ohio Banks by Counties, and the

Proportion of Capital to Population, January   1819.-In

January 1819 the twenty-five chartered banks of Ohio were located

in nineteen of the fifty-nine counties of the state. Three of the

banks were located in Hamilton County the most populous

county of the state, the county which contains Cincinnati; three

more banks were found in Jefferson County, where Steubenville

is located; two in Ross County, where Chillicothe is the principal

town; and two more in Muskingum County, where Zanesville is

located. The remaining fifteen banks were scattered through-

out as many counties, one to a county. While less than a third

of the counties of the state possessed a chartered bank, yet

these nineteen counties contained a little over half the population

of the state.

The $2,351,127 of capital stock also was fairly well dis-

tributed in proportion to the 581,295 inhabitants of the state, the

nineteen counties containing banks having $7.977 of banking

capital per inhabitant, and the entire state $4.045 per inhabitant.

The counties having the largest ratio of capital to population

were,-Hamilton with $23.624 per inhabitant, Ross with $21.-

699, Jefferson with $12.291, and Muskingum with $9.921.

Further details are shown in the following table:

• 73
 

308      Ohio Arch. and Hist. Society Publications.     DISTRIBUTION OF BANKS AND CAPITAL IN OHIO, JANUARY 1819.

The proportion of banking capital to population would of course be much increased if statistics of the unauthorized banks were available. The following shows the condition of one of the best of the latter early in 1819:

• 74
 

Banking and Currency in Ohio Before the Civil War. 309

 

 

STATEMENT OF BANK OF JOHN H. PIATT AND CO., CINCINNATI.⁸²

 

RESOURCES:

Real  estate  ................................................  $87,994  00

Bills receivable ............................................ 174,452 14

Drafts  on  New   Orleans ....................................                                    68,368  68

Drafts on sundry places and cash on hand .................                              49,096 72

Due from individuals .......................................                                        17,852 61

Advanced on the steamboat Gen. Pike ......................                              14,600 00

 

$412,364 15

LIABILITIES:

Notes         in                                                                                                                                               circulation........................................          $242,783      00

Drafts         or    bills  payable .....................................                                                                           64,514     00

Due depositors ............................................                                                                                             19,637 28

 

$326,934 28

Balance  in  favor  bank......................................  85,429  87

 

$412,364 15

Secured by J. H. Piatt's estate valued at.................... 626,302 35

 

It is impossible to tell from the above statement how much

specie is held, but it is evident that it is less than $50,000, and

probably much less. While against this are circulating more

than $240,000 worth of notes and standing nearly $20,000 worth

of deposits. In other words the immediate demand liabilities

are over five times the cash on hand! It is therefore, not sur-

prising to see in an issue of the Watchman for April 15, a month

later, the announcement that the paper of J. H. Piatt is touched

with a trembling hand and that some shave it as high as 12½. A

year later the same paper quotes these notes as not received in

Dayton even at a discount of 75%.83

Depreciation of Ohio Bank Notes.-The unauthorized

banks were not the only ones, however, whose notes were greatly

depreciated. The notes of the Bank of Cincinnati were as bad

as those of the Piatt bank,⁸⁴ and those of several other author-

 

82Liberty Hall and Cincinnati Gazette, Mar. 2, 1819.

Ohio Watchman (Dayton), Mar. 11, 1819.

83Ohio Watchman (Dayton), June 20, 1820.

84Ohio Watchman (Dayton), June 20. 1820.

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310        Ohio Arch. and Hist. Society Publications.

ized banks were but little better. The Ohio Watchman of April

1, 181₉, says that the stockholders of the Belmont Bank had

unanimously agreed that the concerns of that company be closed.

By the middle of May several of the banks were reported

to have resumed specie payment, and it was said that their bills

would then be received in payment for public lands.⁸⁵ But in

August of that year only six or seven of the twenty-five char-

tered banks of the state were paying specie; the others redeemed

their own notes with the notes of other banks or did not trouble

themselves about redeeming at all.⁸⁶

The following table taken from the Detroit Gazette in No-

vember 181₉ indicates somewhat, the condition of Ohio bank

notes at that time.⁸⁷

 

 

CLASSIFICATION OF OHIO BANK NOTES, NOVEMBER, 1819.

1. Bank of Cincinnati.

2. Bank of Lancaster.

3. Bank of Steubenville.

4. Farmers' and Mechanics' Bank of Scioto.   Good.

5. Bank of Marietta.

6. Western Reserve Bank.

7. Bank of Mt. Pleasant.

 

8. Bank of West Union.

9. Farmers', Mechanics', and Manufacturers'

Bank of Cincinnati.                  Decent.

10. Bank of Columbus.

11. Bank of Dayton.

 

12. Lebanon Miami Banking Company.

13. Zanesville Canal and Manufacturing Co.   Middling.

14. Bank of Urbana.

15. Bank of Muskingum.

 

85 Niles' Register, May 8, 1819, p. 179. Also June 5, 1819, p. 256.

Ohio Watchman, May 20, 1819.

86Niles' Register August 14, 1819, p. 405. Also August 28, 1819,

p. 434.

History of Banking in All Nations, Vol. I, p. 152.

⁸⁷Niles' Register, Vol. XVII, p. 186, (Nov. 20, 1819).

• 76
 

Banking and Currency in Ohio Before the Civil War. 311

 

16. Miami Exporting Company.

17. Piatt's Bank.

18. Bank of Cincinnati.                   Good for nothing.

19. Farmers' and Mechanics' Bank of Cincin-

nati.

 

Specie Paying Banks of Ohio in 1820. - In May 1820 the

following banks in Ohio were said to be paying specie for their

notes: Chillicothe, Lancaster, Marietta, Belmont, Mt. Pleasant,

Western Reserve, and two banks at Steubenville. The notes of

the rest were generally at 70 to 75%  discount. Some of the

notes of the Bank of Columbus were sold at that rate in the

town of Columbus itself about that time.⁸⁸  In September the

situation had not materially changed. At that time it was said

that the notes of the Banks of Chillicothe and Lancaster were

the only ones in the state taken at the Zanesville land office.⁸⁹

There was a general impression prevailing that the banks

had specie enough to redeem their notes but refused to do so for

fear of emptying their vaults and causing them to close up busi-

ness.⁹⁰ The non-specie paying banks were frequently charged

with the practice of depreciating their own notes for the purpose

of buying them up at very reduced rates.⁹l In many cases, banks

whose notes were greatly depreciated continued to pay dividends.

Thus the Bank of Cincinnati in May, 1819, had declared a divi-

dend of 4% on its capital for the preceding half year.92 And

Niles' Register of June 2, 1821 reports that the Columbiana

Bank of New Lisbon, whose notes were quoted in the state at

33%  below par, had just declared a dividend of profits for the

preceding six months.⁹³

All these things aroused a good deal of ill-feeling against

the State banks. But this was slight compared with the hatred

that existed against the United States Bank, which was looked

upon by the people as the chief cause of the panic, the deprecia-

 

⁸⁸Niles' Register, Vol. XVIII, p. 224, (May 20, 1820).

89Ohio Watchman, Sept. 4, 1820 and Sept. 5, 1820.

90 Ohio Watchman, July 11, 1820.

91 Niles' Register, Vol. XVIII, (July 29, 1820), p. 399.

92Inquisitor and Cincinnati Advertiser, June 15, 1819.

93Niles' Register, Vol. XX, p. 224.

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312       Ohio Arch. and Hist. Society Publications.

tion of state bank notes, and the resulting stagnation and distress

which continued through 1820. One of the dominating features

of that period in Ohio was the war which the legislature, backed

by the people, was carrying on against the branches of the United

States Bank in the state.

• 78
 

CHAPTER IV.

THE ATTEMPT TO TAX THE BRANCHES OF THE UNITED STATES

BANK.

Early State Opposition to the Bank. - From its very be-

ginning the Second Bank of the United States had met with op-

position from the states and the state banks. The Indiana con-

stitution of 1816 prohibited the establishment of the branch of

any bank chartered outside the state.1 Taxes on the branches of

the United States Bank were laid in one state after another:

Maryland led off in February, 1817, with a tax of $15,000 a year

on the Baltimore office; Tennessee followed in November of that

year with a tax of $50,000 on any bank established in that state

under any but a Tennessee charter; and in December of the same

year Georgia provided for a tax of 31.25c on every $100 of bank

stock employed within the state, a resolution of the legislature

later declaring that this tax was intended to apply only to the

branches of the United States Bank.²

When the panic of 1818-19 occurred, precipitated, as ex-

plained in Chapter III, by the sudden curtailments of the United

States Bank, the popular wrath at once fell upon the bank. The

constitution of Illinois framed in August 1818, prohibited the

existence of any state banks within the state.3  On November

30, 1818, resolutions were adopted in the lower house of Con-

gress demanding an investigation of the bank by a committee of

the House.⁴  This committee later reported severely criticizing

the bank's management.5   In December, 1818, North Carolina

laid a yearly tax of $5,000 upon the Fayetteville branch.⁶ Then

 

1Charters and Constitutions-Ben Perley Poore, Vol. 1, p. 509.

2The Second Bank of the United States--Catterall, pp. 64 and 65.

3Charters and Constitutions-Poore, Vol. 1, p. 447.

⁴Annals of Congress, 15th Congress, 2nd Session, Part I, p. 335.

5Ibid., p. 552. (Jan. 16, 1819).

6Niles' Register, Vol. XV, p. 367.

(313)

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314       Ohio Arch. and Hist. Society Publications.

in January, 1819, Kentucky imposed the largest tax of all, com-

pelling each of the branches in the state to pay annually $60,000.

Thus the Ohio legislature, which followed Kentucky's ex-

ample within a month had several precedents for taxing the

bank. Moreover, the same thing was strongly advocated in the

Pennsylvania legislature, which in 1819 petitioned Congress to

take steps towards amending the constitution so as to confine

national banks to the District of Columbia.⁸ The question of

taxing the branches of the bank was debated also in the legisla-

tures of Virginia⁹ and South Carolina;10 and DeWitt Clinton,

then governor of New York, urged action upon the legislature

of that state.11 "It was only the decisions of the Supreme Court

in the cases of McCulloch vs. Maryland and Osborn vs. the Bank

of the United States," says Catterall, "which saved the bank.

Had it lost either of these cases, there can be no doubt that it

would soon have been taxed out of existenc in all of the south-

ern and western states."12

Report of the Joint Committee of the Ohio Legislature on

the Expediency of Taxing the Branches of the United States

Bank.--As stated in a preceding chapter, the ill-feeling in

Ohio against the establishing of branches of the United States

Bank in the state brought forth a resolution of the legislature,

as early as December 1817, calling for a report on the ex-

pediency of taxing those branches.13 This resulted in a joint

committee of the two houses of the legislature, whose report,

made December 27, 1817,14 discusses the reasons for and against

taxing and declares the bank to be "as subject to a tax as any

corporate body could be, if acting under the authority of this

state" but concludes that "it would still be impolitic in the legis-

lature of this state being one of the youngest and most highly

 

7 Second Bank of the United States - Catterall, p. 65.

8 Ibid.

9Niles' Register, Vol. XIV, p. 23, note.

10 Niles' Register, Vol. XV, pp. 289 and 290.

11Second Bank of the United States - Catterall, p. 65.

12 Second Bank of the United States - Catterall, p. 65.

13 See Chapter II, p. 284.

14Ohio House Journal, 1818, p. 144.

• 80
 

Banking and Currency in Ohio Before the Civil War. 315

 

favored in the Union to be among the first to contravene the

acts of the general government."  The report, therefore, con-

cludes that it would be inexpedient at the time to lay such a tax.

Substitute Report Adopted by the Ohio House of Repre-

sentatives.- The House, however, rejected this report and on

January 19, 1818, adopted a substitute report,15 the substance of

which is as follows: "The states that compose the American

Union are independent sovereign states"; their power "to impose

taxes is limited by the constitution of the United States." "It is

conceded that congress has power to incorporate a bank;" but

"the law establishing this bank ........ attempts not to confer

upon the stock of the company any exemption from taxation,

either by the state or by the United States."

"The government of the United States is most clearly but

an individual member of this association," in which "the funds

of the stranger, the alien and American, the individual and the

government are mingled in one common mass and employed for

the benefit of all its members.......... The constitution of the

United States has defined the subjects on which the state sov-

ereignties shall not levy taxes. By the doctrines now set up

congress may extend this prohibition at pleasure. They have

only to incorporate a company to merchandise and manufacture

and become a partner in the trade, and the funds and the busi-

ness are at once privileged from the profane touch of state

legislation."

The United States Bank will control the public funds, and

"the value their paper will acquire in the market must enable

them to monopolize the commercial business of the country

and destroy at their pleasure the credit of our own banks. Their

paper will be hoarded and applied to the payment of our for-

eign debts, instead of obtaining general circulation; and for

their discounts for public dues, and in the payment of debts,

they will necessarily drain the specie from the vaults of the

state banks."

"Whenever the exports of the country are equal to its im-

ports the complaint of a depreciated paper currency will cease.

 

15 Ibid., p. 307.

• 81
 

316      Ohio Arch. and Hist. Society Publications.

The means by which our debts are changed are nothing but ex-

pedients. It is only by liquidating them, that the country can

be finally relieved. The discount on Ohio paper in the Atlantic

cities is in fact an advantage to the country. It induces the

merchant to invest it in produce at home, and seek a market

for that produce abroad. It operates as a premium in favor of

exportation, and serves greatly to stimulate industry and en-

terprise. Its natural tendency is to keep money in the country,

and send out produce, thus reducing the consumption of foreign

articles within a just and proper boundary and checking the

propensity to engage in the trade of importation." As a result

of the establishing of branches of the United States Bank the

merchant "will export produce only as a prospect of great

profit is offered to him."

When this report came to a vote, the House voted 48 to 12

that it would be constitutional to tax the branches of the United

States Bank within the state, and by a vote of 33 to 27 declared

that it was expedient then to do so.16 But when the bill im-

posing such a tax was read, final action upon it was postponed

until the next session of the legislature in December 1818.17

Hostility to the Bank Increases in 1818. - Meanwhile the

United States Bank, instead of heeding the warning and leav-

ing the state, opened the second branch in Ohio at Chillicothe early

in 1818, and in July increased its offences by suddenly ordering

the Cincinnati branch to collect at the rate of 20%  a month

the large balances due from the local banks, thus precipitating

the panic, causing the Cincinnati banks to suspend in November

1818, and bringing disaster and ruin upon the people.l⁸ Conse-

quently when the Ohio legislature came together again in De-

cember 1818, the hostility against the United States Bank, which

had been keen the previous winter, was vastly augmented.

Governor Brown, in his message of December 16, 1818,

recalls the fact that the two branches of the bank had been es-

tablished within the state without leave, but, after speaking of

the different positions which congress at various times had

16 Ohio House Journal, 1818, p. 308.

17History of the United States--McMaster, Vol. IV, p. 498.

18 See Chapter III, pp. 290 and 291.

• 82
 

Banking and Currency in Ohio Before the Civil War. 317

taken as to the legality of the bank, advises that while the ques-

tion remains dubious, the state should leave the branches undis-

turbed, "rather than risk any collision with the general govern-

ment or hazard the reputation of the state; keeping a watchful

eye to prevent as far as possible, the abuse of what threatens to

become an almost overwhelming influence." He adds, however,

that while the state banks are taxed, "there appears no evident

reason why those branches should be exempt. Their exemption

would be a partiality unjust to the local banks."¹⁹

Ohio enacts a Law taxing the Branches of the Bank in the

State.-Acting upon the suggestion contained in the gover-

nor's message the legislature on Feb. 8, 1819 laid the long

threatened tax, passing an act "to levy and collect a tax from all

banks and individuals and companies, and associations of indi-

viduals, that may transact banking business in this state without

being authorized to do so by the laws thereof."²⁰  This law

imposed a tax of $10,000 a year upon individual banking com-

panies not authorized by the state, and a tax of $50,000 a year

upon each branch of the United States Bank within the state

if they continued business after September 15, 1819. Upon this

date the state auditor was required to issue his warrant for the

collection of the tax if the branches were still doing business in

the state, and if the bank refused to pay, the auditor was au-

thorized to levy on all money, bank notes, or other goods of

the bank.

The Case of McCulloch vs. Maryland.-This law was

passed with great deliberation and by a full vote, and public sen-

timent throughout the state supported the legislature in its ac-

tion.²¹ A few weeks later, however, the decision in the famous

case of McCulloch vs. Maryland was handed down by the U. S.

Supreme Court, Chief Justice Marshall delivering the opinion

on March 7, 1819.22 This decided that Congress has the power

to incorporate a bank,²³ that the bank had power to establish

 

19Niles' Register, Vol. XV. Supplement, p. 92.

20Laws of Ohio, Vol. XVII, (1819), p. 190.

21Bankers' Magazine, Vol. IX, p. 4.

224 Wheaton 401.

23Ibid., 424.

• 83
 

318       Ohio Arch. and Hist. Society Publications.

branches in the states without their consent,²⁴ and that the

states had no right to tax them.²⁵ In view of this decision the

branches of the bank in Ohio naturally continued their opera-

tions.

The State forcibly Collects the Tax from the Chillicothe

Branch.-The state law requiring the auditor to collect the

tax on September 15 if the bank continued its operations at that

time, was mandatory, however, and as the branches of the bank

did not suspend their operations the state auditor, Ralph Osborn,

prepared to collect the tax. To prevent this the bank filed a Bill

in Chancery in the U. S. Circuit Court asking an injunction

to restrain the auditor from proceeding to collect the tax. A

copy of this bill with a subpoena to answer was served on the

Auditor.²⁶  The latter upon legal advice refused to appear on

the day named in the writ, and the court allowed an injunc-

tion,²⁷ but required $100,000 bond of the bank, which was given.

As the day for collection approached the bank sent an

agent to Columbus who, early on the morning of September 15,

served on the Auditor a copy of the petition for an injunction

and a subpoena to appear before the court at a subsequent date.²⁸

But as he had no copy of the writ of injunction which had been

allowed, the auditor sent to the secretary of state the copy of

the petition and the subpoena together with a warrant for col-

lecting the tax, asking the secretary, who was then at Chillicothe,

to take legal advice, and if the papers did not amount to an in-

junction, to have the warrant executed, but if they did to return

it.

The counsel advised that the papers did not amount to an

injunction; and, therefore, the state writ was given to the sheriff,

John L. Harper, with instructions to enter the banking house and

 

244 Wheaton 425.

25Ibid., 437.

26 Hist. of U. S. - McMaster, Vol. IV, p. 498.

Niles' Register, Vol. XVII, p. 86.

9 Wheaton 738.

27The writ of injunction was not issued until Sept. 18.

9 Wheaton 741.

28 Ibid.

• 84
 

Banking and Currency in Ohio Before the Civil War. 319

 

demand payment of the tax, and upon refusal thereof to enter

the vault and levy the amount required. The officer was di-

rected to use no violence, but if he was opposed by force to go

at once before a proper magistrate and depose to the fact. So

the officer taking with him a horse and wagon and competent

assistants went to the bank on the evening of September 17 and,

first securing acess to the vaults, demanded the tax. Payment

was of course refused and notice given of the injunction which

had been granted. But the officer disregarding this notice en-

tered the vault and seized in gold, silver, and bank notes, suffi-

cient funds to cover the amount of the tax on both branches

$100,000. This was carried in the wagon to the Bank of Chil-

licothe and deposited there over night.²⁹

The next day another writ was issued by the court against

the auditor, Osborn, and Harper, restraining them from pay-

ing over the money or making report of its collection to the

legislature. Harper was on his way to Columbus with the

money in the wagon when served with this writ.³⁰ It was also

served on Osborn before Harper reached Columbus. The writ

was disregarded, however, and though no part of the money

ever came into Osborn's hands, Harper retained $2,000 for fees

and paid the balance $98,000 over to the state treasurer H. M.

Curry,³¹ who received it but kept it separate from  the other

state funds.³²

Arrest and Trial of State Officials concerned in Collecting

the Tax.-The United States Bank immediately instituted

suits against Osborn and others for contempt, for trespass, and

to recover the money seized.³³  Harper and Thomas Orr who

 

29Bankers' Magazine, Vol. IX, p. 4.

Auditor of State's Report, Dec. 5, 1821.

9 Wheaton 835.

30 9 Wheaton 741.

Ohio Sen. Jour., 1822, p. 54.

31History of the United States--McMaster, Vol. IV, p. 499.

32Report of State Treas. Sam'l Sullivan, Dec. 4, 1820.

Laws of Ohio, Vol. XIX, (1821).

33Second Bank of the United States -Catterall, p. 90.

• 85
 

320       Ohio Arch. and Hist. Society Publications.

aided him were arrested by a deputy marshal and imprisoned.³⁴

They were afterwards discharged, however, by the circuit court

at the trial in January 1820, the arrest said to have been illegal

owing to a technicality. On January 7, 1820, the auditor, Ralph

Osborn, was served with a notice that the U. S. Circuit Court

had granted a rule against him and John L. Harper to show

cause why an attachment should not issue against them for

contempt of court in disregarding the injunction.   The case

was continued until the September 1820 term of court, when

Judge Todd ordered the attachment to issue returnable on the

first day of the January term of the court in 1821.35 The court

also, at the September term, ordered the $98,000 stayed in the

state treasury in the hands of Samuel Sullivan, who had suc-

ceeded Curry as state treasurer on February 17, 1820.36 An at-

tachment for contempt was also awarded against Sullivan and he

failing to answer was taken into custody by the marshal of the

district and placed in confinement until the case was appealed

to the Supreme Court in 1821.37

Excitement over the Affair.- Meanwhile excitement ran

high over the matter, not only in Ohio but throughout the coun-

try generally. And both sides of the controversy found plenty

of advocates. The president of the U. S. Bank, Cheves, was

furious. "The outrage," he asserted in a letter to Secretary

Crawford September 20, 1819, " ..... can be rarely paralleled

under a government of law, and, if sustained by the higher au-

thorities of the State strikes at the vitals of the Constitution."³⁸

The governor of Ohio did all in his power to have the money

restored, even offering to give security for it, but he could

accomplish nothing. He declared, "I view the transaction in the

 

34 Orr afterwards claimed damages from the state for this confine-

ment, and a legislative committee reported Feb. 20, 1824 that they con-

sidered his claim just and recommended that he be allowed $100 and

costs.-Ohio Senate Jour., 1824, p. 301.

35 State Auditor's Report of Dec. 5, 1820.- Ohio House Jour., 1821,

p. 46. Also History of U. S.- McMaster, Vol. IV, p. 500.

369 Wheaton 742.

37 State Auditor's report of December 5, 1821. - Ohio Senate Journal,

1822, p. 53.

38 Second Bank of the United States - Catterall, p. 89.

• 86
 

Banking and Currency in Ohio Before the Civil War. 321

 

most odious light, and from my very soul I detest it ........

I am ashamed it has happened in Ohio."³⁹ The Inquisitor and

Cincinnati Advertiser of October 19, 1819 printed numerous

extracts from other papers regretting that Ohio in defiance of

the U. S. Constitution had entered the vaults of the branch bank

at Chillicothe and taken therefrom nearly $100,000. Another

Cincinnati paper commenting on the affair about the same time

remarks that it "appears to have created as much consternation

as if it had been an overt act of treason or rebellion," but adds,

"If the general government can create a monied institution, in

the very bosom of the states, paramount to their laws, then in-

deed is state sovereignty a mere name, 'full of sound and fury,

signifying nothing.' "⁴⁰ In general, public opinion in Ohio at

the time supported the state officials for enforcing the state law

against the bank.

Ohio Elections in Fall of 1819 influenced by the Bank

Fight. - The elections in Ohio that fall were along the lines

of the United States Bank fight. One candidate for the State

Senate and one for the House came forth with a parody en-

titled the "Declaration of Independence against the United

States Bank," in which the bank was charged with "having quar-

tered large bodies of armed brokers among them," etc. This, in

conclusion, proclaimed that "all connection between the people

of Ohio and the branch banks ought to be dissolved, and that

as a free and independent state we have full power to levy a tax

upon all banks within our jurisdiction of whatsover denomina-

tion and by whomsoever established," etc.⁴¹

General Harrison, a candidate for state senator from the

Cincinnati district declared himself the enemy of banks in gen-

eral and especially of the United States Bank, which he said he

viewed as an institution "which may be converted into an im-

mense political engine to strengthen the arm of the general

government and which may at some future day be used to oppress

and break down the state governments." Yet of the Ohio act

he said, "Is it not a shoot that has sprung from its far famed

 

39History of Banking in All Nations, Vol. I, p. 153.

40Liberty Hall and Cincinnati Gazette, Oct. 5, 1819.

41Niles' Register, Oct. 30, 1819, p. 139.

21

• 87
 

322       Ohio Arch. and Hist. Society Publications.

Boston opposition, and been matured in the foul mine of the

Hartford Convention?"42   He was elected.

Hard Times increase Hostility to the Bank. - The hard

times then prevalent, too, added to the feeling against the United

State Bank. All the fine visions of the speculators, the paper-

money men, the bank men, had vanished. Bankruptcy and debt

were every where. Stay laws, replevin laws, indorsement laws,

relief laws of every sort were the order of the day. Nothing

was so hateful just then as a bank, and above all the Bank of the

United States.⁴³ In liquidation of debts in 1818-19 the United

States Bank had been forced to accept a great deal of western

real estate, which was taken at low valuations but afterwards

increased greatly in value owing largely to the rapid growth of

Cincinnati.  On account of these real estate acquisitions, the

bank came to own a large part of Cincinnati. Hotels, coffee-

houses, stores, stables, warehouses, iron-foundries, residences,

and vacant lots were numbered among the bank's holdings. It

also owned over 50,000 acres of good farm land in Ohio and

Kentucky. These possessions of course maddened their former

owners.44

Report of the Special Committee of the Ohio Legislature.

-When the Ohio legislature met in December 1820 the feeling

against the United States Bank was at its height. The report

of the state auditor, December 5, 1820, in regard to the collec-

tion of the tax from the branches of the bank was, upon motion

of Mr. Hammond of the House, referred to a joint committee

and an investigation was begun.⁴⁵

This special committee made its report on December 12,

1820. This report occupies 33 pages of the House Journal.⁴⁶

 

⁴² Ibid.

43 See article by J. B. McMaster in The Forum for April 1895, p. 167.

44Sen. Doc. No. 98, 22nd Congress, 1st Session, pp. 22-36.

Second Bank of the U. S.-- Catterall, pp. 66 and 67.

45Ohio House Journal, 1821, p. 47.

46 Ohio House Journal, 1821, pp. 99 to 132.

In discussing the litigation against the Ohio Life Insurance and

Trust Co., in his report of 1852-3, the auditor of state, Wm. D. Morgan,

refers to the Charles Hammond report as "the ablest state paper prob-

ably to be found in our legislative records."

• 88
 

Banking and Currency in Ohio Before the Civil War. 323

 

Mr. Hammond, chairman of the committee, recites the main

facts of the proceedings and adds, "In everything but the name

the state is the actual defendant."⁴⁷ The Supreme Court had

decided that a state law taxing the branches of the United States

Bank was unconstitutional.⁴⁸ As to this Mr. Hammond proceeds,

"The committee are aware of the doctrine that the federal courts

are exclusively vested with jurisdiction to declare, in the last

resort, the true interpretation of the Constitution of the United

States. To this doctrine, in the latitude contended for, they can

never give assent." They contended that the Federal courts

are not the sole expositors of the Constitution but share that

power with the states themselves, holding that the question had

been settled by an authority from which there can be no ap-

peal-the authority of the people themselves.

As an instance of this they maintained that as early as 1798

the passage of the Alien and Sedition Laws, and certain decis-

ions of the Federal Courts recognizing the obligatory force of

the common law, made an expression of popular opinion on this

question necessary, and that such an expression was sent forth

by Kentucky and Virginia. These famous resolutions, said the

committee, were a direct and constitutional appeal to the States

and to the people on the great question at issue, and the appeal

was decided in the elections of 1800. For then, proceeds the

committee, "The states and the people recognized and affirmed

the doctrines of Kentucky and Virginia by effecting a total

change in the administration of the federal government."

"The high authority of this precedent," says the committee,

"imposes a duty on the state from which it can not shrink with-

out dishonor. So long as one single constitutional effort can

be made to save them, the state ought not to surrender its rights

to the encroaching pretensions of the circuit court."

 

47 On December 22, 1821, a legislative committee to whom had been

referred the governor's message relative to the U. S. Bank case reported

recommending a resolution that the legislature protest against the pro-

ceedings of the federal court indirectly making the state a defendant as

violating the 11th Amendment to the U. S. Constitution.-Ohio Senate

Journal, 1822, p. 118.

48 McCulloch vs. Maryland- 4 Wheaton 437.

• 89
 

324       Ohio Arch. and Hist. Society Publications.

As to the opinion that the decision in the case of McCulloch

vs. Maryland,⁴⁹ given between the date of the passage of the

law and the day it went into effect, made it the duty of Ohio to

acquiesce, the committee cited the cases of Marlury vs. Madi-

son⁵⁰ and Fletcher vs. Peck⁵l to show that "neither in theory

nor in practice is this the necessary consequence of a decision

of the Supreme Court," and said, "Are not these two cases evi-

dence that in great questions of political right and political

powers a decision of the Supreme Court is not conclusive of the

rights decided by it?"

Recommendations and Resolutions offered by the Com-

mittee.-The committee held that with such examples the

state should go on in defiance of the Supreme Court "and as-

certain distinctly if the Executive and Legislative departments

of the Government of the Union will recognize, sustain, and

enforce the doctrine of the Judicial department."  As a means

of testing this they recommend that the legislature should enact

laws making the United States Bank an outlaw in Ohio.

The committee also offered resolutions: approving the doc-

trines of the Kentucky and Virginia Resolutions of 1798-9; as-

serting the right of a state to tax private corporations of trade

chartered by Congress and doing business within the state; de-

claring that the United States Bank was a private corporation

of trade, the capital and business of which might be legally

taxed in any state where they might be found; and protesting

against the doctrine that the political rights of the separate states

and their powers as sovereign states could be settled by the Su-

preme Court of the United States in cases between individuals

and in which no state was a party direct.⁵²

The Ohio Legislature re-affirms the Kentucky and Vir-

ginia Resolutions and Outlaws the United States Bank. - The

suggestions offered by this joint committee met with the ap-

proval of both houses, the legislature adopting the resolutions,

 

49 Delivered Mar. 7, 1819-4 Wheaton 401.

501 Cranch 137-180.

516 Cranch 87-148.

52 Ohio House Journal, 1821, pp. 99 to 132.

History of the United States--McMaster, Vol. IV, pp. 500 to 503.

• 90
 

Banking and Currency in Ohio Before the Civil War. 325

which reaffirmed the doctrines of the Kentucky and Virginia

Resolutions,⁵³ and on January 29, 1821 passing an "Act to with-

draw from the Bank of the United States the protection and aid

of the laws of this state, in certain cases."⁵⁴ This law gave the

bank the alternative either of consenting to pay 4% of its divi-

dends from its branches in Ohio as a tax to the state, or of

withdrawing the offices.⁵⁵

On February 2 of the same year the legislature passed an

act providing that the state would return $90,000 of the $98,000

seized from the bank and treat its branches like the other banks

in the state, if it should give notice to the governor of its will-

ingness to stotp the suits against the state officers and to submit

to a tax of 4%  on its annual dividends, $2,500 to be collected

annually until the bank should report its actual dividends.⁵⁶  If

the bank should accept these terms, the governor was authorized

to suspend the "outlaw" act by proclamation.

But the bank was inflexible.     It neither withdrew   its

branches from the state, nor discontinued its suits against the

state officers. On July 9, 1821 the United States Circuit Court

for Ohio served the state auditor with a petition and subpoena

in chancery, and an injunction enjoining him from levying and

collecting the tax of $2,500 provided for in the law of February

2, 1821.57 The following September the same court decreed that

$100,000, with interest on $19,380, the amount of specie held by

the state treasurer, should be restored to the bank.⁵⁸  The ap-

peal to the Supreme Court was then perfected by the defendants

for the $2000, with the interest and costs, the actual amount

turned into the state treasury having been only $98,000.59

 

53History of the United States-McMaster, Vol. IV, p. 502.

⁵⁴Laws of Ohio XIX, (1821), p. 108.

Revised Statutes of Ohio-Chase, p. 1185.

55This act was repealed Jan. 18, 1826-Laws of Ohio, Vol. XXIV,

(1826), p. 24. Chase's Rev. Stat., p. 1592.

History of Banking in All Nations, Vol. I, p. 155.

⁵⁶Laws of Ohio, Vol. XIX, (1821), p. 173. Chase's Rev. Stat., p.

1198.

57 Ohio State Auditor's Report on U. S. Bank Case, Dec. 5, 1821.

589 Wheaton 744.

59Niles Register, Vol. XXI, p. 75. Ohio Senate Jour., 1822, p. 53.

• 91
 

326       Ohio Arch. and Hist. Society Publications.

And, since the bank had not discontinued its suits nor with-

drawn from the state, the law of January 29, 1821 went into

effect. Thus in September 1821, the Bank of the United States

became an outlaw in Ohio.

What this meant is well described by Professor McMaster

thus: "Every jailor was forbidden to receive into his custody

any person committed at the suit of the bank, or for any injury

done to it. Every judicial officer was prohibited to take ac-

knowledgment of conveyances when the bank was a party, and

every recorder from  receiving and entering them. Notaries-

public were prevented from protesting bills or notes held by the

bank and made payable to it; and justices of the peace, judges,

and grand juries could no longer take cognizance of any wrong

committed on the property of the bank, though it were burglary,

robbery, or arson."⁶⁰

The Case of Osborn vs. the United States Bank.- Thus

during the pending of the appeal from the circuit court's deci-

sion, the bank was deprived for a time of the aid of the state laws

in the collection of its debts and in the usual protection of its

legal rights. These were extreme measures. But the doctrine

of state's rights was still dominant in Ohio. The people of the

state looked upon the bank as a foreign corporation organized for

profit, doing business within the state against the will of the

state, and paying no taxes,-a virtual monopoly within the state

yet not subject to state jurisdiction. Why, said they, should the

state be expected to protect persons and property over which it

had no control, especially when they were not willing to pay

anything for such protection?

The controversy between the state and the bank did not

end until 1824, when the case of the bank against the state offi-

cers, which had been carried up to the Supreme Court of the

United States on appeal by the defendants, was finally decided

in the famous case of Osborn vs. the United States Bank.⁶¹ This

case is one of the important ones in the history of the country,

as is attested by the large number of court decisions in which it

 

60The Forum, April 1895. (Article by J. B. McMaster).

Money and Banking-White, pp. 284 and 285.

619 Wheaton 738-903.

• 92
 

Banking and Currency in Ohio Before the Civil War. 327

 

has been cited. Together with the case of McCulloch vs. Mary-

land, decided five years before, it may be said to have estab-

lished and defined the law of the national banks as agencies of

the federal government, their right to sue and be sued in the

federal courts, and their freedom from state taxation.⁶²

In this case the state officers were represented by Charles

Hammond and others,⁶³ while such men as Clay, Webster, and

Sergeant appeared for the bank.⁶⁴  The appellants argued that

since in everything but name the state of Ohio was the real

defendant, the courts did not have jurisdiction, as the 11th

Amendment to the United States Constitution restrained suits

against a state by citizens of another state. The court held,

however, that the 11th Amendment restraining suits against

states is of necessity limited to suits where a state is a party

on the record, and that a suit may be maintained to enjoin a

state auditor from collecting an unlawful tax, where a state is

not made a party on the record, although exclusively interested

in the subject-matter of the suit.⁶⁵

The decision in this case also as in the case of McCulloch

vs. Maryland, denied the right of a state to tax the branches of

the United States Bank. The validity of the decision was based

on the principle that the bank was not a private corporation for

individual trade and profit, but a public corporation created as

an instrument for carrying into effect the constitutional powers

of the national government. As such, its business of banking

and its trade was decided to be exempt from state taxation, al-

though its local property might be taxed,⁶⁶ the court holding

that all instrumentalities created by Congress, necessary and

proper for carrying into effect the powers vested in the national

government are free from state control.67

 

62Notes on U. S. Reports-Rose, Vol. II, p. 338.

63 Hammond's associates were Harper, Brown, and Wright-9

Wheaton 744 and 804.

⁶⁴Ibid., 795 and 804.

659 Wheaton 857.

66 Ibid., 860-867.

67Ibid., 865 and 866.

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328        Ohio Arch. and Hist. Society Publications.

The opinion of the court in the case of Osborn vs. the

United State Bank was delivered by Chief-Justice John Marshall

on March 19, 1824.68 It affirmed the decree of the circuit court

as to the return of the $98,000 by the state and as to the re-

turn of the remaining $2000 by Osborn and Harper, but held

that the lower court was erroneous as to the residue, that in-

terest should not be charged on the money while in the hands

of the state treasurer, since the court had enjoined him from

using it in any way.⁶⁹.

The People of Ohio submit to the Decision of the Supreme

Court. -By the time this decision had been handed down a

reaction had begun in Ohio. The good sense of the plain people

had prevailed, notwithstanding the radical declarations of the

legislators. The people chose to abide by the decision of the

Supreme Court. On January 28, 1826 the law making the Bank

of the United States an outlaw in Ohio was erased from the

statute books.⁷⁰  And the bank unmolested continued to do

business in Ohio until the expiration of its charter in 1836.71

 

689 Wheaton 816. Justice Johnson dissenting as to jurisdiction.-

Ibid., 871.

69Ibid., 837 and 871.

70Revised Statutes-Chase, p. 1522.

71 The bill to repeal the "outlaw" act was read the third time in the

Senate, Jan. 10, having previously passed the House; but the question

for its final passage was postponed in consequence of the production of a

letter from the agent of the bank to the recorder of Clermont County

threatening the officer with prosecution and ruin, if he should not produce

the repeal of the act.- Niles' Register, Vol. XXIX (Feb. 4, 1826), p. 369.

Immediately thereafter, however, on March 14, 1836, the legislature

passed an act "to prohibit within this state any branch office or agency of

the United States Bank as recently chartered by the legislature of Penn-

sylvania," holding that "the general welfare of this State forbids the

establishment within its limits of any such branch.-Laws of Ohio, Vol.

XXXIV. (1836). p. 37.

This act was repealed Jan. 28, 1838.-Gen. Laws of Ohio, Vol.

XXXVI. p. 14. But a new law of Jan. 9, 1839, prohibited the establish-

ing in the State of any branch or agency of the United States Bank of

Pennsylvania or of any other bank incorporated by another State or by

the United States.- General Laws of Ohio, Vol. XXXVII, p. 10.

This law remained in force until March 12, 1845.-General Laws of

Ohio, Vol. XLIII, p. 88.

• 94
 

Banking and Currency in Ohio Before the Civil War. 329

Professor McMaster, in commenting on the outcome of the

United States Bank controversy in Ohio and the similar contest

in Kentucy, philosophically remarks: "Both in Kentucky and

Ohio the cases were extreme; yet they are striking illustrations

of the fact that in this country all questions of great impor-

tance are finally settled not by Presidents, nor by Congresses,

nor by Legislatures of the States, but by the hard common

sense of the people, who in their own good time and way have

heretofore adjusted all differences wisely."72

 

72The Forum, April, 1895, Vol. XIX, p. 168.

• 95
 

CHAPTER V.

PERIOD OF DEPRESSION AND RECOVERY, 1820-1830.

Depression and Low Prices in the Early 20's. - In Ohio

the stagnation and distress following the Crisis of 1818-19 con-

tinued without relief through 1820 and 1821 and well into 1822.

In the latter year some improvement was noticed. Governor

Trimble, in his message of December 12, 1822, remarked, "The

industry, frugality, and rigid economy so generally observed are

gradually relieving the country from  embarrassment, and the

agricultural, manufacturing, and commercial interests of the

State are manifestly improving."¹  The improvement was but

slight, however, and did not last long. Prices remained at an

extremely low level.²  Another Ohio governor writing later of

these years declares that business and prices were prostrated

"without parallel in the history of this country."³

In the Miami Country, the best farming section of the state,

produce sold at minimum prices in the fall and winter of 1822-

23, many of the most important articles not paying the farmer

more than a fair compensation for taking them to Cincinnati.

Pork was sold in large quantities for from one to two dollars

per hundred. And it was generally understood in that section

that most kinds of provisions shipped from Cincinnati market

that season involved almost all the shippers in loss, and some

of them in total bankruptcy and ruin. During the fall and win-

ter of 1823-4 but little over half the provisions were shipped

from that market that were the year before.⁴ For example, in

1822 over 42,000 barrels of flour were inspected at Cincinnati for

export;5 while in 1823 the quantity amounted to but 27,206

 

1Liberty Hall and Cincinnati Gazette, Dec. 14, 1822.

2 See Chapter III, p. 298. Also Niles' Register, Vol. XXI, p. 381.

3 Governor Shannon's message--Ohio Executive Documents, 1840,

No. 1, p. 16.

4Liberty Hall and Cincinnati Gazette, May 18, 1824.

5Valued at $3 a barrel.- Ibid., Jan. 21, 1823.

(330)

• 96
 

Banking and Currency in Ohio Before the Civil War. 331

 

barrels.⁶ Niles' Register of October 23, 1824 contains the state-

ment that "Any quantity of corn may be purchased in Cincinnati

for 8c per bushel."⁷

In other parts of the state prices were as low or even lower.

Thus in Dayton in 1822, flour was $2.50 a barrel, wheat 20c a

bushel, corn 12c, and whiskey 121/2c a gallon.⁸ In Delaware in

1823 pork was $2.50 a hundred.9 In Steubenville in 1823,

whiskey was 16c a gallon.10 In Chillicothe in 1823 wheat was

5oc a bushel,11 while in January 1824 wheat was 5oc, corn 20

and 25c, and whiskey 25 and 3oc a gallon.12  Yet Chillicothe had

access by river to the New Orleans market.

Thomas Worthington, writing in 1824, says, "Wheat has

varied in price for some years back from 25 to 50c. The aver-

age price has not for 5 or 6 years back exceeded 37½c."¹³ And

another writer from  central Ohio says in 1825, "Many of the

farmers of this county (Licking Co.) are turning their attention

to the raising of tobacco-to do which they are absolutely com-

pelled, by the reduced price of wheat, which brings them only

31c per bushel."¹⁴   All over the state the prices of produce

were very low.

In fact, while on the seaboard there was bank expansion in

1823 and 24 accompanied or followed by a rise of property and

general briskness of business, and the expectation of a grand

era of prosperity to follow the new tariff law of 1824, yet in the

interior the consequences of the great reaction of 1818-19 were

 

Cincinnati Daily Gazette, Jan. 4, 1828. This paper also gives the

number of barrels inspected for export in 1824 as 29,560 barrels; in 1825

as 45,005 barrels; in 1826 as 45,370 barrels, and in 1827 as 58,551 barrels.

There were supposed in the latter year to have been 15,000 barrels not

inspected.

7Niles' Weekly Register, Vol. 27, p. 123.

History of Montgomery County, p. 343.

9Delaware Patron, April 16, 1823.

10Western Herald and Steubenville Gazette, Nov. 8, 1823.

11The Supporter and Scioto Gazette, Nov. 22, 1823.

12Ibid., Jan. 10, 1824.

13The Supporter and Scioto Gazette, Sept. 16, 1824.

14St. Clairsville Gazette, Sept. 17, 1825.

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332       Ohio Arch. and Hist. Society Publications.

not over in 1825.15 In Kentucky there was anarchy yet. Ala-

bama and Tennessee notes were at a discount. Indiana, Illinois,

and Missouri were still suffering from the relief system.¹⁶ And

in Ohio there was general depression of prices and business.¹⁷

Dullness in Land Sales and Lack of Immigration into the

State.--The farmers in Ohio were not purchasing lands as

they had formerly done. This was attested by the records of

the land offices and the great number of public sales without

bidders.l⁷ Although the credit system of selling the United

States public lands had been abolished in 1820, yet the price

had at the same time been reduced from $2 to $1.25 per acre.18

But there was much other land in the state at still lower prices.

For example, in the Western Reserve land sold as low as 4oc

an acre.¹⁹ And in 1823 there was an advertisement running in

a Chillicothe paper in which 7000 acres of land on the Big

Miami and Scioto rivers were offered for 90c an acre cash, or

$1.00 an acre in stock of the Bank of Chillicothe.²⁰

Immigration into the state, which had been unusually large

for a few years after the war of 1812, remained comparatively

at a standstill during the period from 1818 to 1825.21 No fig-

ures are available as to the increase in the total population of

the state during that period, but the check in the rate of growth

may be seen from figures in the state auditor's report showing

the number of white males of voting age in the state at four-

year intervals. In 1815 the number of white males over 21

years of age in the state was 64,814. From 1815 to 1819 the

number increased by 33,966, a gain of 52.5%. During the next

four years the increase was 25,855, a falling off of nearly one-

 

15A Short History of Paper Money and Banking-Gouge, p. 136.

A History of American Currency- Sumner, p. 84.

16 Ibid.

¹⁷Liberty Hall and Cincinnati Gazette, May 18, 1824.

18 The Public Domain--Thomas Donaldson, pp. 201 and 205.

19Ibid., p. 202.

20The Supporter and Scioto Gazette, Nov. 29, and Dec. 13, 1823.

21History of Ohio - Atwater, p. 349.

• 98
 

Banking and Currency in Ohio Before the Civil War. 333

 

fourth. While from 1823 to 1827 the increase was only 21,110,

or more than a third less than the increase from 1815 to 1819.22

Bad Banking and Depreciation of Ohio Bank Notes not

the chief Cause of the Depression.- The continuance of the

depression in Ohio so long after  the crisis of 1818-19, however,

was not altogether due to defective banking nor to a depreciated

currency. In fact, most of the banks had failed or disappeared.

By 1826 there remained only 10 banks whose notes were cur-

rent throughout the state.²³  And, while the notes of the Ohio

banks had all this time been at a discount, yet the amount of

their depreciation had gradually decreased. Thus Ohio banks

notes quoted from 15 to 25 discount in Philadelphia in July

1820, were 5 to 10 discount in July 1821, 6 discount in July 1822

and 1823, 5 to 6 discount in April 1824 and 1825, and only 5

discount in April 1826.24

A Cincinnati paper in 1824, commenting on the depression

of prices and business that for several years previous had pre-

vailed in the state, exclaims, "Is it to be attributed to the opera-

tion of banks and depreciated currency? No! for our banks, so

long blamed as the cause of all our evils, are swept away, and

our currency is sound and healthful."²⁵   The paper then points

out that great trouble with Ohio at that time was the want of a

market for the surplus produce of the state. And this diagnosis

of the case was undoubtedly correct.

22Number of white males over 21 years of age in Ohio at different

periods:

Year.                           Number.                    Year.                         Number.

1807 ............             31,308                       1827 ............            145,745

1815 ............             64,814                       1831 ...........             176,300*

1819 ............             98,780                       1835 ............            235,225

1823 ............             124,635

*Estimated. Figures from several counties missing.

Auditor of State's Report, Dec. 31, 1855. Ohio Exec. Doc., 1855.

(Part II, No. 1.)

23Ohio Gazetteer for 1826- Kilbourn, p. 231.

24See Appendix, p. 260.

25 Liberty Hall and Cincinnati Gazette, May 18, 1824.

See also the issue of this paper for Jan. 24, 1823.

For further testimony that the currency of the state was sound at

that time see The Piqua Gazette of March 5, 1825.

• 99
 

334       Ohio Arch. and Hist. Society Publications.

 

Lack of Markets for the Surplus Products of the State.-

The state was still largely wilderness, and its half a million in-

habitants²⁶ were widely scattered, with little means of communi-

cation. Agriculture was carried on, but as there was no access

to markets, production was limited chiefly to local needs. Of

manufacturing there was but little, and of mining less. The

few inhabitants living along Lake Erie in the northeastern part

of the state carried on some trade with Canada and the Atlantic

Coast by way of the Lakes. Those in the southern and south-

western parts of the state had access by the Ohio and the Miss-

issippi rivers to the fluctuating market of New Orleans. This

was likely to be overstocked when the shipper from Ohio got

these, especially at the time of the year when he could pass the

falls of the Ohio. To leave his property, meant to abandon it

to destruction; to wait for higher prices was to incur the dan-

gers of an unhealful climate. He frequently had to ship his

produce home again or sell it at a sacrifice, often at a price

which would not pay the freight and charges.

The interior of the state was almost deprived of a market.

Different sections of the state had been settled by people from

different ones of the older states. Each section had its peculiari-

ties and prejudices brought by its first settlers. Lack of com-

munication prevented the different parts of the state from being

closely bound together, either socially, politically, or industrially.

Each section was a community unto itself. There was but little

stimulus to industry when production was limited to local con-

sumption, as any surplus could not be marketed because the

costs of transportation were too great. There were some local

roads, but they were bad; and railroads and steam locomotives

were not yet thought of. The products of the soil were bulky

and thus more costly to transport. So the burden was greatest

on articles of common use. What people had to sell they could

not market, and what they wished to import they had to deprive

themselves of, all because the costs of transportation were ex-

cessive.

 

26Population 581,434 in 1820.-- Abstract of 12th Census, p. 33.

Estimated population 750,000 in 1825.- The Piqua Gazette, March 5, 1825.

• 100
 

Banking and Currency in Ohio Before the Civil War. 335

 

Opening of the Erie Canal and Beginning of the Ohio

Canals in 1825.-Two events in 1825 aided greatly in chang-

ing these conditions and starting Ohio well on the way to pros-

perity. One of these was the opening of the Erie Canal through

New York between Lake Erie and the Hudson River, giving

Ohio access at once to the markets of New York City and the

Atlantic coast region; the other was the beginning of Ohio's

own canal system, connecting Lake Erie with the Ohio River.

The "Act to provide for the Internal Improvement of the

State of Ohio by Navigable Canals" was passed by the legisla-

ture by a vote of 92 to 15 on February 4, 1825.²⁷ This pro-

vided for two canals, one 308 miles long, passing through the

northeastern, central, and south central portions of the state

and connecting Cleveland on Lake Erie at the mouth of the

Cuyahoga with Portsmouth on the Ohio at the mouth of the

Scioto, and the other 66 miles long, traversing the southwestern

part of the state and connecting Dayton on the Great Miami

River with Cincinnati on the Ohio.²⁸  By July of the same year

the work of construction had begun on both these canals,²⁹ and

two years later navigation began on both of them.³⁰

Industrial and Social Awakening in the State. - The

canals authorized by this act were not completed, however, for

half a dozen years more.31    These canals ultimately, by pro-

 

²⁷Ohio Senate Journal, 1825, p. 254. House Journal, 1825, p. 318.

Laws of Ohio, Vol. XXIII (1825), p. 50.

28The latter canal was ultimately extended from Dayton to Toledo,

thus making two canals across the state connecting Lake Erie with the

Ohio River.

29 Fourth Report of the Ohio Canal Commission, Dec. 10, 1825.

30Governor Trimble's Message of Dec. 4, 1827.

Sixth Annual Report of the Canal Commission, Jan. 25, 1828.

31 Eleventh Annual Report of the Canal Commission, Jan. 22, 1833.

Later extensions and branches increased the state's canal system until

when completed in 1847 it consisted of over 800 miles of canals and slack-

water navigation. To feed these canals the state also constructed five

reservoirs whose areas totaled over 32,900 acres. The total cost of the

canals and reservoirs was over $15,000,000, which was paid primarily by

state loans.

Tenth Annual Report Board of Public Works, Jan. 5, 1847. Report

of Board of Public Works, Dec. 22, 1903, pp. 8 and 9.

• 101
 

336       Ohio Arch. and Hist. Society Publications.

viding means of transportation and communication, added new

markets and new avenues of trade, raised the prices of home

products, and rendered cheaper the foreign articles, thus saving

to the people of the state both on their exports and their im-

ports.³² The large expenditures for construction of the canals,

too, at once encouraged enterprise and industry and invited im-

migration and capital. The following quotation from the Cleve-

land Herald in July 1826 illustrates this point: "Upwards of

2000 laborers and about 3000 teams are constantly employed on

the line between this place and Kendall, which is now under

contract; and work to the amount of between 40 and $50,000

at contract prices, is performed monthly."33  Other portions of

the work showed similar conditions. Both wages and the price

of provisions began to rise along the canals.

At first, beside board, the contractors provided their work-

men with whiskey. "The whiskey consumed by the hands em-

ployed on a single job near the Licking Summit on the Ohio and

Erie Canal cost the contractor the sum of $3,000. In other

cases the whiskey consumed by the laborers cost more than the

bread or meat."³⁴ The practice of supplying whiskey to their

men was later discontinued by the contractors, but the price of

potatoes, wheat, corn, whiskey, etc., continued to advance along

the canals.³⁵

The demand for labor increased immigration. New towns

and villages sprang up along the canals, and old ones took on

new life. The city of Akron owes its origin to the settlement

there in 1825 of Irish workmen engaged on the canal. Cleveland

was only a village of 400 inhabitants in 1820. The opening of

the Ohio and Erie Canals made it a city. Cincinnati's popula-

tion in 1820 was 2,602.36 In 1829 it was estimated at 24,000.

 

32For a discussion of the benefits of the Ohio Canals see History

of Ohio Canals by Huntington & McClelland, Chapter XI.

33Western Times (Portsmouth, O.), July 6, 1826.

34The Chronicle (Cincinnati, O.), Feb. 28, 1829.

35See Temporary Advertiser (Portsmouth), Feb. 24, 1826. Western

Times (Portsmouth), April 25, 1829. Western Tiller (Cincinnati), Aug.

25, 1826. Hamilton Intelligencer, Dec. 2, 1828, and May 12, 1829. Western

Aegis (Georgetown), Nov. 25, 1828.

36 Report of Ohio Commissioner of Statistics, 1857-9.

• 102
 

Banking and Currency in Ohio Before the Civil War. 337

 

"The settlement and improvement of this city for the last 5

years," says an Ohio paper, "has been rapid almost beyond ex-

ample."³⁷  The population of the whole state increased from

581,434 in 1820 to 937,903 in 1830,38 a gain of 61.5%. During

the same period the population of the United States increased

only 33.5%. But the gain in Ohio was much more rapid during

the later years of the decade than during the earlier years. The

number of white males of voting age in the state increased 46,-

965, or 47.5%, from 181₉ to 1827. During the next eight years

gain was nearly twice as much, being 89,480 or an increase of

61.4%  in the total number, the percentage rate showing a big

increase notwithstanding the larger base.³⁹ The increasing pop-

ulation, together with the stimulus to industry from the in-

creased prices of produce, caused a demand for land, and it

rose in value.⁴⁰ During 1829 the sales of public lands in Ohio

amounted to more than 1,465,000 acres, a greater quantity than

was sold in any other state except Indiana and Illinois, and

greater than had been sold in Ohio any previous year since

1822.41

The credit for the increased rate of growth, as well as for

the improvement in prices and business conditions generally is

due far more to the opening of the Erie and Ohio canals than

to any change in tariff, currency, or banking conditions, although

it was said about the time that the Ohio canals first opened that

no section of the Union then had a better circulating medium

than Kentucky, Ohio, Indiana, Illinois, and Missouri.⁴²

Dissatisfaction with the Operation of the Bonus Law. -

An important change in the banking laws of Ohio had been made

in 1825 when a tax on dividends was substituted for the bonus

scheme provided for in the law of February 23, 1816.43 It will

 

37Ohio State Bulletin, Aug. 12, 1829. See also The Chronicle

(Cincinnati, O.), June 21, 1828.

38Abstract of 12th Census, p. 33.

39 See note on page 333.

Western Times (Portsmouth, O.), May 2, 1829.

41 Ohio State Gazette and Delaware County Journal, Jan. 20, 1831.

42Niles' Weekly Register, Vol. XXXII, p. 37. (March 17, 1827).

43 See Chapter II, p. 273.

22

• 103
 

338       Ohio Arch. and Hist. Society Publications.

be recalled that each of the banks incorporated under that law

was, in lieu of other state taxation, to set off annually such a

part of its profits as would at the expiration of its charter pro-

duce a sum sufficient to pay for one twenty-fifth of its capital

stock which was to be property of the state.

This scheme apparently did not prove very satisfactory

either to the banks or to the state. In 1818 the banks peti-

tioned the legislature to repeal the bonus law; but a committee

of the legislature reported that it was not expedient to exempt

the banks from the payment of the bonus. So nothing was done

then towards repealing the law, although Governor Brown in

his message of December 16, 1818, suggested substituting for the

bonus a tax on the real estate and dividends of the banks.⁴⁴

All of the banks incorporated in Ohio before February 23,

1816, had accepted charters under the bonus law by September

1, 1816, except the Miami Exporting Company. Of the banks

incorporated later under that law, however, some did not ac-

cept their charters until late in 1818.⁴⁵ These up to the time of

accepting their charters, were liable for taxes under the law of

February 8, 1815, which had imposed a tax of 4% on the annual

dividends of the banks, and had provided that if any bank

should fail to report its dividends to the auditor of state he

should levy a tax of 1% on its nominal capital, to be increased

by a penalty of 4%  in case of delay.⁴⁶ The Miami Exporting

Company, which had refused to accept a charter under the

bonus law, was also taxable under the law of 1815.

On January 5, 1819 the state auditor made a report to the

legislature on the stock set off to the state by banks and also the

taxes paid into the state treasury by banks. This report shows

that up to that time the total stock set off to the state under the

bonus law amounted to $79,930.27; that the amount set off which

accrued prior to the acceptance of charters under the law was

$6,251.51; and that the amount set apart to the state by the

Miami Exporting Company was $5,140.98.47 Thus the total

 

44 See Chapter III, p. 293.

45See p. 277.

46 See Chapter 1, p. 266. Also Laws of Ohio, Vol. XIII (1815), p. 152.

47 Ohio Senate Journal, 1819, p. 207.

• 104
 

Banking and Currency in Ohio Before the Civil War. 339

 

amount of taxes paid by banks under that law up to January

181₉ was only $11,392.49; while the amount of stock set off to

the state was only $79,930.27. Two years later a legislative

committee was appointed to examine and report regarding the

amount of the bonus set apart by the different banks. Its report,

made December 28, 1820, showed that the total amount of the

bonus set off to the state was only $84,385.30, of which but $37,-

023.40 was in banks then paying specie.⁴8 This did not indicate

that the bonus would ever yield much revenue to the state.

Difficulty in Collecting the State's Claims against Banks.

-Many of the banks had failed and most of the others were

unable or refused to pay specie for their notes. Consequently a

good deal of worthless bank paper had found its way into the

state treasury. A committee of the legislature had reported De-

cember 20, 1820, that there remained in the state treasury $33,-

933.61 in uncurrent bank paper, of which the probability of re-

demption was very distant. As none of the banks, except the

Miami Exporting Company, seemed disposed to do justice to the

state, the committee had recommended that if the treasurer could

not collect, he should either get real estate security or sue.⁴⁹

In many cases the state did sue, frequently getting judg-

ments, however, which were more or less worthless. Under a

joint resolution of the legislature at the session of 1824 commis-

sioners were appointed to look after the claims of the state

against banking corporations. Their report was given on De-

cember 14, 1824.50

They had sold the claims of the state against the Miami

Exporting Company for 331/3 cents on the dollar, receiving paper

of that bank at par. This paper was sold at public auction for

 

48 Ohio House Journal, 1821, p. 195. The auditor's report of Dec. 5,

1821, under receipts for the year 1821, showed that the amount set aside by

the Miami Exporting Company, under the act to raise revenue from

banks, etc., was $691.81.-Liberty Hall and Cincinnati Gazette, Jan. 2,

1822.

49 Ohio House Journal, 1821, p. 160.

50 Ohio Senate Journal, 1825, p. 57.

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340       Ohio Arch. and Hist. Society Publications.

 

373/4 cents on the dollar and realized the sum of $4,345.50.51

The claims against the German Bank of Wooster, amounting to

$827, the commissioners considered a total loss.52  The claim

against the Lebanon bank by judgment was $9,941^. This in-

stitution was solvent and able to pay, but such was the diffi-

culty of collecting that its paper commanded only 30 or 35 cents

on the dollar.  The same observations were made as to the

Urbana Banking Company, against which the state's claims were

$4,058. This concern, the commissioners suggested, it was de-

sirable to close as soon as possible.

Such difficulties as these in collecting calims against the

banks, together with the absolute failure of many of the banks

organized under the bonus law, made it apparent that the state

could hope for but little revenue from the bonus.

Tax on Bank Dividends substituted for the Bonus. - On

December 17, 1824, three days after the above report was made

to the legislature, that body received a report of the state auditor

on the banks chartered under the act of February 23, 1816. This

report announced that it was extremely doubtful whether the

state would ever derive any considerable advantage from the

bonus set apart to the state by the banks incorporated under that

act, since their condition was bad and their capital stock likely

to be entirely exhausted.  The auditor recommended that a

committee of the legislature be appointed to consider the mat-

ter. This advice was acepted and the report was referred to a

committee.⁵³

The legislature evidently soon became convinced of the cor-

rectness of the auditor's conclusion. At any rate, on February

5, 1825, an act was passed amending the act of February 23,

 

⁵¹The paper was to be sold to the highest cash bidder on Aug. 24,

1824.-Liberty Hall and Cincinnati Gazette, Aug. 6, 1824. The judg-

ment against the Miami Exporting Company was $9,570.14, which with

interest, dividends, etc., amounted to $11,511.35.-Ohio Senate Journal,

1825, p. 57.

52A report of the auditor, treasurer and secretary of state made to

the legislature Jan. 21, 1826, states that a judgment against the German

Bank of Wooster for $1,000 had been obtained in 1821, and that they

could get $500 for the claim. -Ohio Senate Journal, 1826, p. 246.

53 Ohio Senate Journal, 1825, p. 80.

• 106
 

Banking and Currency in Ohio Before the Civil War. 341

 

1816, known as the bonus law, by restoring to the banks in-

corporated under that law the stock set aside for the state, and

substituting therefor a tax on the dividends of the banks.⁵⁴ By

the act of February 5, 1825 each of these banks was required to

pay to the state 2% on all dividends made by it previous to the

passage of that act, and 4% on all dividends which it should

make thereafter, until otherwise provided by law. The directors

of each bank were required to notify the state auditor of their

acceptance of the terms of the act and of their compliance there-

with, and to furnish him with a statement of all dividends

declared previous to its passage.

Under the bonus law each bank was to set off to the state

one share in each twenty-five of its stock. On this bonus the

state was to receive dividends. Theoretically, therefore, under

the bonus law the state would have received 4% of the dividends

of the bank each year; and in addition to that would have been

entitled to one twenty-fifth of all the bank's net assets when it

came to settle up at the expiration of its charter. But, since

the dividends on the state stock were to remain in the bank and

accumulate until the state should own one-sixth of the capital

stock, naturally the scheme failed, as a source of revenue, with

the failure of so many of the banks concurring in it; so the state

willingly exchanged this extraordinary bonus for a tax of from

2% to 4% on the dividends of the banks.

After this change in the tax law in 1825 no change was

made in the banking laws of Ohio until 1831.⁵⁵

Lack of Banking Statistics from 1820 to 1830. - Statistics

regarding banks in Ohio during the decade from 1820 to 1830

are very meagre. The number of chartered banks operating in

the state as the close of the decade, however, was much smaller

than at its beginning. Early in 181₉ a committee of the legisla-

ture had reported 25 banks in operation.⁵⁶ On February 24,

1820, the committee on banks, to whom had been referred the

 

54Revised Statutes of Ohio-Chase, p. 1463. History of Banking-

Knox, p. 671.

55Bankers' Magazine, Vol. IX, p. 3, and Vol. XI, p. 164.

56See Chapter III, p. 303.

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342       Ohio Arch. and Hist. Society Publications.

governor's message of January 13 as to reports of banks, re-

ported to the legislature that 18 banks had answered the com-

munication of the governor as to their condition: 3 by letter

only, apparently confidential, and giving no statement of their

condition; 2 others making confidential reports of their situation;

6 making no formal report; and the remainder giving but a

short report of their situation and only two under oath of the

cashier.  The committee declined to make an abstract of the

reports because it considered them not intended for the legis-

lature.⁵⁷ By 1826 these 18 banks had dwindled in number until

there remained but 10 whose notes were current throughout

the state.⁵⁸

Need of Banking Capital in Cincinnati in 1826. - Cincin-

nati, the largest town and most important trade center, had

no incorporated bank in 1826 except the branch of the United

States Bank.⁵⁹  The need of banking capital there at that time

is indicated in the following quotation from a small work pub-

lished in 1826:60

"Cincinnati for several years has been deficient in the amount

of its disposable capital; a nominal superfluity of it existed dur-

ing the prosperity of the local banks; after their destruction,

paper currency was almost withdrawn from circulation and

much of the metallic currency applied to the payments due the

United States Bank and the eastern merchants. From this con-

dition of things the city has been gradually recovering, but its

citizens are not yet large capitalists.  Although engaged in

profitable business most of them have not the means of extend-

ing it to a scale proportioned to their enterprise and the re-

sources of the place. Money is consequently in great demand,

 

57 Ohio House Journal, 1820, p. 414.

58The Ohio Gazetteer for 1826-- Kilbourn, p. 231. These were the

Western Reserve Bank of Warren, the Bank of Steubenville and the

Farmers' and Mechanics' Bank at Steubenville, the Bank of Mt. Pleasant,

the Bank of St. Clairsville, the Bank of Marietta, the Lancaster Ohio

Bank, the Franklin Bank of Columbus, the Bank of Chillicothe, and the

Commercial Bank of Scioto at Portsmouth. To these may be added the

Branch of the U. S. Bank at Cincinnati.

59Bankers' Magazine, Vol. XI, p. 171.

60 Cincinnati in 1826-Charles Cist.

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Banking and Currency in Ohio Before the Civil War. 343

 

and a high price is willingly paid for its use. For small sums

36% per annum is frequently given, and for large ones from 10

to 20% is common."

State Loans and Public Works increase the Money

Supply. - During 1826 and 1827 the effort to establish another

incorporated bank in Cincinnati was discussed generally, but

none materialized.⁶¹ Exepnditures on the canals of the state,

however, and other causes, among which was a more plentiful

supply of money in the country generally in 1827,62 contributed

to improve financial matters in Cincinnati as well as in the

remainder of the state. During the years from 1825 to 1828 the

state issued its stocks of the par value of $3,800,000 to defray

the costs of canal construction.  With the exception of the

$400,000 5%  loan in 1825, which was placed at a discount of

2½%, these stocks all bore 6%   interest and were issued at a

premium. The net premiums for the four years mentioned

amounted to $124,895.63 The proceeds of these loans being ex-

pended in the state, increased of course the amount of money

in the state, and aided materially in improving its industrial and

financial conditions. Niles Register of March 17, 1827, says,

"At present there is no section of the Union that has a better cir-

culating medium than Kentucky, Ohio, Indiana, Illinois, and

Missouri-vexed as they have been with manufactories of paper

money."64

Project of Establishing a State Bank discussed.- About

this time the project of a state bank was discussed considerably in

Ohio. In compliance with a resolution of the state senate ask-

ing information on the subject, the auditor of state in his re-

port of January 14, 1829 dealt at some length with the question.

He stated that some states had succeeded and others had failed

with state banks, but that the successful state banks had had as

 

61Liberty Hall and Cincinnati Gazette, Sept. 15, 1826. Daily Gazette

(Cincinnati), Nov. 19, 1827.

62A History of American Currency- Sumner, p. 87.

63History of the Ohio Canals--Huntington & McClelland, p. 69.

Other 6% loans followed, the total par value of the loans from 1825 to

1839 being $9,446,123, on which the premiums netted $581,013.25.-Ibid.

64Niles' Register, Vol. XXXII, p. 37.

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344       Ohio Arch. and Hist. Society Publications.

nearly as practicable the character of private institutions. The

auditor declined, however, to advise as to the policy of establish-

ing a state bank, giving as his reason the fact that he had had

no particular supervision of banks such as to give an intimate

acquaintance with them.⁶⁵ A little later, however, a legislative

committee, appointed to prepare information on the subject, re-

ported in favor of a state bank, to be located at Cincinnati and

its capital stock to be held by the state and individuals com-

bined. The committee expressed the belief that such a bank

would be able to keep its paper at par with gold and silver; that

it would effect a lower rate of interest, thus enabling borrowers

to obtain loans on cheaper and easier terms; and that the in-

crease of capital which such a bank would bring about would

be accompanied by a corresponding promotion and extension of

agriculture, commerce, and manufacture.⁶⁶

Two new Banks authorized by the Legislature. - While

this recommendation for a state bank was not carried out, the

legislature did a few days later authorize the incorporation of

two more banks in the state. On February 10, 1829, a charter

was granted to the Bank of Geauga at Painesville with a capital

stock of $100,000,67 and the next day, February 11, 1829, the

Commercial Bank of Cincinnati was authorized with a capital

stock of $500,000, of which $100,000 had to be paid in gold and

silver before the bank could begin business.⁶⁸  The capital

stock of the latter remained unsubscribed for two years after-

wards, however, in consequence of the demand for capital to be

used in more profitable pursuits than banking.69 In 1829 land

was increasing in value in the state and there was comparatively

no scarcity of money⁷⁰ The expenditure of thousands of dol-

lars on internal improvements, and the resultant facilities for

transportation were already bearing fruit in better industrial

 

65 Ohio Senate Journal, 1829, p. 219.

⁶⁶The Miami Herald and Dayton Republican, Feb. 3, 1829.

⁶⁷Laws of Ohio, Vol. XXVII (1829), p. 27.

⁶⁸Bankers' Magazine, Vol. XI, p. 165. Laws of Ohio, Vol. XXVII

(1829), p. 42.

69 Dayton Journal & Adviser, April 19, 1831.

70Western Times (Portsmouth, O.), May 2, 1829.

• 110
 

Banking and Currency in Ohio Before the Civil War.             345

 

conditions.   In his message of December 9, 1829, Gov. Trimble

states that the general concerns of the state were never in a more

prosperous condition.71

The number of banks in the state at that time was much

smaller than it had been in the early years of the decade, but

on the other hand their condition was much better and their

notes far less depreciated and fluctuating. The heterogeneous

character of their paper in the early twenties may readily be

seen from the following table taken from a Cincinnati paper of

1822.72

 

 

DEPRECIATION     OF OHIO BANK      NOTES' IN   FEBRUARY                                                  1822.

Bank    of  Steubenville ........................................                                                                                         par.

Farmers' and Mechanics' Bank of Steubenville ...............                              par.

Mt. Pleasant ..............................................                                                 par.

Western Reserve .........................................                                                 2

St. Clairsville .............................................                                                   1

Bank    of  Chillicothe ......... ..................... ..........1/2

Lancaster Bank ............................................                                                1

M arietta  ..................................................                                                   2

Columbus .................................................                                                     2

West Union ...............................................                                                 40

Zanesville Canal ..........................................                                               50

Muskingum Bank .........................................                                               121/2

Portsmouth   .....................................  .........                                              15

D ayton       ....................................................                                            1 1/2 to   2

Hamilton     .................................................. 31                                           to 35

M iami      Exporting  Co ........................................                                                                                      62 1/2      to                    65

Bank    of   Cincinnati .........................................                                      70

Canton .....................................................                                                  25

Smithfield   .................................................                                               75

New Salem      ...............................................                                              80

Cleveland    ......................................... ........                                              75

New Lisbon ...............................................                                                 50

Xenia    ....................................................                                                     4

F. &     M . Bank, Chillicothe ...................................                                 75

Urbana ....................................................                                                   75

Lebanon   ....................................................                                               55

 

71Niles' Register, Vol. XXXVII (Jan. 2, 1830), p. 290.

72Liberty Hall and Cincinnati Gazette, Feb. 2, 1822.

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346         Ohio Arch. and Hist. Society Publications.

 

With the preceding may be compared the following table

taken from another Cincinnati paper of 1828.73

 

DICOUNT ON OHIO BANK NOTES IN JANUARY, 1828.

B ank  of   Chillicothe  ................................................1

Bank   of             Lancaster ................................................                                 1

Bank   of             Colum bus ................................................                                1

Bank   of   Steubenville .............................................                                          1  1/2

F.        &    M .          Bank   of  Steubenville ....................................               1/2

Bank   of   M t.   Pleasant .............................................                                      1 1/2

B ank  of             M arietta  ................................................                                1 1/2

W estern             R eserve    ................................................                                1 1/2

Portsm outh        .......................................................                                          1 1/2

St.  C lairsville     ....................................................                                             1 1/2

 

The decrease in the number of banks whose notes are

quoted is very apparent, but the increase in the uniformity of the

quotations is just as striking. The worst of the banks named

in the first table had passed away. The stronger remained.

Albert Gallatin, writing in 1831, enumerates 20 Ohio banks

which had failed or discontinued business since Jan. 1., 1811.

The capital stock of two of the banks in the list is not given,

that of the other 18 amounts to $1,911,179.       The list follows:⁷⁴

 

OHIO BANKS WHICH FAILED BETWEEN 1811 AND 1831.

Name of Bank.                                          Capital.

Miami Exporting Company, Cincinnati ........................ $468,966

Columbiana Bank of New Lisbon .............................                                      50,000

Granville  Alexandrian         Society ................................                               12,002

Farmers' Bank    of   New    Salem  ................................                                57,000

German     Bank  of   W ooster .....................................                                  25,000

Bank     of                     M uskingum  ..........................................                                                                      97,000

Farmers' & Mechanics' Bank of Cincinnati .....................                               184,776

Bank   of  Cincinnati ...........................................                                          216,430

Dayton Manufacturing Company ..............................                                    61,622

Lebanon Miami Banking Company .............................                                  86,491

Urbana  Banking  Company ....................................                                       49,685

 

73 Cincinnati Daily Gazette, Jan. 8, 1828.

74 Considerations on the Currency and Banking System of the United

States-Gallatin, p. 105. Report of the U. S. Comptroller of the Cur-

rency, 1896, Vol. 1, p. 48.

• 112
 

Banking  and Currency in Ohio Before the Civil War. 347

 

Farmers' & Mechanics' Mfg. Bank of Chillicothe ...............                           99,575

Bank  of  Hamilton  ...........................................                                           22,707

Zanesville Canal & Manufacturing Company ....................                            79,125

Bank  of  W est Union ..........................................                                      100,000

Commercial Bank  of      Lake  Erie ...............................                             100,000

Bank  of  Steubenville     ..........................................                                   100,000

Muskingum  Bank  of      Zanesville ..............................                               100,000

Jefferson      County        Bank                                                                     ........................................ .......

B ank   of    X enia         .............................................. ........

 

Total           (18    banks)⁷⁵ ........................... ..........                          $1,911,179

 

Causes of Failure of Majority of Ohio Banks. -      It will be

seen that this list includes many of the banks whose notes were

greatly depreciated in 1822 as shown by the preceding table. The

causes of their failure were various. Some of these banks had

been erected on stock notes alone, the directors then turning

right around and issuing their bank bills on the promise of

the borrower and a pledge of the stock.⁷⁶      Some of them had

been got up for the purpose of borrowing and not lending money,

and defrauded the unsuspecting with their depreciated paper. It

is not surprising that such banks failed. As Governor McArthur,

speaking of the insolvent state banks of that period, remarked,

"To insure the solvency of a bank, its stockholders should be

lenders and not borrowers of its money."⁷⁷

Not all were dishonest, however.      Many of the defects

and many of the failures should be attributed to frontier con-

ditions. 78 The following quotation from a Cincinnati paper of

1826 is interesting as bearing directly on the subject: "The

banking operations of the West have, in too many cases, been

indiscreetly and injudiciously conducted; without resorting to

 

75Gallatin also states that during this period 165 banks failed or

discontinued business in the United States, of which number 129 had a

total capital of $24,212,339.

76Ohio House Journal, 1835, p. 208.

77 Political address to electors of 7th Cong. Dist., Sept. 11, 1832.

- Niles' Register, 43:89., Oct. 6, 1832.

78 Similar conditions had existed in New England earlier in the

century, the practice of subscribing to capital by notes having been almost

universal there at one time. -History of American Currency, Sumner,

pp. 61 and 62.

• 113
 

348       Ohio Arch. and Hist. Society Publications.

the threadbare charges of corruption and dishonesty, sufficient

causes for their failure can be found in their too great success

at first, in a want of correct knowledge of the details of the

system, and in the peculiar and unusual state of things during

the war, which betrayed, to a certain extent, even the most ex-

perienced and veteran institutions in our country."⁷⁹

Benefits derived from surviving Banks. - There remained

ten banks whose paper was current in the state in 1826 and at

a discount of only 1 or 11/2% at Cincinnati in 1828, as shown by

the foregoing tables. An appreciation of them is given by the

state auditor, Ralph Osborn, in his report of Jan. 14, 1829, in

which he speaks of the benefits received from the banks that had

survived. By them the active capital of the state has been aug-

mented, says he, and facilities afforded for the transportation

of surplus products to Atlantic markets. They have aided in

the collection of the revenue, and answered the demand of the

land proprietors when pressed for payment by the general

government. "Indeed," he goes on, "it is impossible to calculate

the benefits all classes have received and are daily receiving from

those institutions.  Their usefulness will not cease till they

multiply so as to prey upon each other, or eagerness for gain

leads to over-issues."⁸⁰

Statistics of Ohio Banks in 1830. - According to Gallatin

there were in January 1830 eleven chartered banks still in opera-

tion in Ohio. Their names, location, and capital stock are given

in the following table, which shows also the proportion of their

capital stock to the population of the counties in which they were

located.

 

79Liberty Hall and Cincinnati Gazette, Sept. 15, 1826.

⁸⁰Ohio Senate Journal, 1829, p. 219.

• 114
 

Banking and Currency in Ohio Before the Civil War. 349     DISTRIBUTION OF BANKS AND CAPITAL IN OHIO, JANUARY, 1830.

The foregoing table shows that while the average amount of capital per inhabitant was $8.17 for the 9 counties in which the 11 chartered banks were situated, yet for the state as a whole the average banking capital was only $1.55. Ten years before it had been over $4. per inhabitant. The following table will show, so far as returns were made by the banks, the number of chartered banks in Ohio, together with their total capital stock, at various intervals from 1805 tc 1830.

• 115
 

350         Ohio Arch. and Hist. Society Publications.

 

 

NUMBER AND CAPITAL OF STATE BANKS IN OHIO, 1805 TO 1830.

No. of

Year                                                                                     Banks. Capital Stock.

1805     ...........................................                                                                                 1                         $200,00084

1811     ...........................................                                                                                 4                         895,00085

1812     ...........................................                                                                                 6                         1,200,00086

1814     ..........................................                                                                                  8                         1,435,⁸¹⁹⁸⁷

1815 .........................................                                                                                       1285                 1,932,10887

1816  ........................................  .                                                                                    2185                 2,806,73787

1817 ..........................................                                                                                      21                      2,003,96987

1819     ...........................................                                                                                 20                      1,751,40288

1820     ........................................ .                                                                                  1985                 1,697,46389

1830     ...........................................                                                                                 11                      1,454,38689

 

The above figures of course do not show the total banking

capital of the state for they apply only to the incorporated banks,

and not all of those always reported; but they indicate fairly

well the relative amounts of banking capital at the different

periods, and show plainly the expansion from 1815 to 1817 as

well as the subsequent contraction. The same thing may be seen

perhaps more clearly from the following diagram.

 

⁸⁴Report of U. S. Comptroller of the Currency, 1876, p. LXXXV.

85 Considerations on the Currency and Banking System of the United

States - Gallatin, p. 103.

86A Short History of Paper Money and Banking -Gouge, p. 88.

87Elliot's Funding System, p. 769.

88 See table page 303.

89Elliot's Funding System, p. 770.

For comment as to reports, etc., see preceding pp. 278-9.

• 116
 

Banking and Currency in Ohio Before the Civil War. 351

• 117
 

CHAPTER VI.

THE SECOND PERIOD OF EXPANSION. 1831 TO 1836.

An Era of Internal Improvements.- The decade from

1830 to 1840 witnessed the beginning of a new era of progress

throughout the civilized world. One of the most important

factors in this progress, especially as it affected the United States,

was the application of steam to railroad transportation and trans-

Atlantic navigation. In 1830 railroad building was just begin-

ning in the United States, but it advanced rapidly during the next

few years; while canal construction was then at its height. The

Erie Canal in 1825 opened the Great Lakes region to the markets

of the Atlantic coast, and facilitated settlement of the interior.

The State of Ohio in 1833 completed 400 miles of navigable

canals connecting the Ohio River with Lake Erie, and the same

year began work on an extension of the system, which when

completed in 1847 consisted of over 800 miles of canals and slack-

water navigation. Pennsylvania and other states were also busy

in canal making. Canals costing a hundred million dollars were

begun or finished in the years culminating in the panic of 1837.1

The country was in the midst of an era of internal improve-

ments, and the possibilities of the future seemed unlimited.

Increase in Immigration. - These internal improvements

and the various other enterprises which accompanied or fol-

lowed them created a strong demand for labor and capital, and

large supplies of both came from Europe. From the inaugura-

tion of Washington in 1789 to that of Jackson in 1829 the popula-

tion of the United States increased from about four millions to

almost thirteen millions, but very little of that increase was due

to immigration. Probably not over four hundred thousand im-

migrants were included in that increase of nearly nine millions.²

About the latter date, however, immigration began in sufficient

1Crises and Depressions - Burton, p. 281.

²Division and Reunion--Wilson, pp. 2 and 3.

(352)

• 118
 

Banking and Currency in Ohio Before the Civil War. 353

magnitude to promote the more rapid development of the country.

Thousands of these immigrants found their way to Ohio and

other interior states, and formed no inconsiderable part of the

great westward movement then going on.

Growth of Population in Ohio. - The population of Ohio

increased much more rapidly during the early 30's than it had

during the early 20's. From 1827 to 1835 the number of white

males of voting age in the state increased by 89,480, or 61.4%,

while during the preceding eight years the increase had been

only 46,965, or 47.5 %.3 From 1830 to 1840 the population of

the United States increased 32.7%.⁴ During the same period the

population of Ohio increased 62%, a percentage nearly twice

that for the country as a whole. The total gain of population in

Ohio from 1830 to 1840 was 581,564, a number greater by nearly

50,000 than its gain for any other decade during the century.⁵

Ohio ranked fifth among the states in population in 1820, fourth

in 1830, and third in 1840, a position which she was able to hold

for half a century.⁶ During the decade 1830-40 also, Ohio became

the first state in the union in the production of wheat and corn,

and ever since has held high rank as an agricultural state. Inter-

nal improvements had given her markets for her products and

an incentive to production.

Effect of Transportation Facilities. - The development of

transportation facilities was perhaps the most conspicuous feature

of this period in the United States. It gave an impetus to the

settlement of large tracts of land not only in Ohio but in other

states of the Middle West and caused a large increase in agri-

cultural production, and abundant mineral and agricultural prod-

ucts of the country, hitherto unavailable on account of lack of

transportation facilities, were made available not only for dis-

tribution throughout the United States but also for export.

Foreign Commerce and Foreign Loans.- Both the do-

mestic and the foreign commerce of the country made rapid

strides. The value of the imports and exports of merchandise

 

3 See Chapter V, p 333.

4Statistical Atlas of the United States, 1900, p. 25.

512th Census of the U. S. Bulletin No. 41, p. 1.

6Statistical Atlas of the U. S.. 1900, plate 21.

23

• 119
 

354       Ohio Arch. and Hist. Society Publications.

 

increased from 134 million dollars in 1830 to 221 millions in

1840.7 The influence of foreign loans is shown by the fact that

while between 1830 and 1837 the imports of merchandise ex-

ceeded the exports by $140,000,000, yet the imports of specie

also, during this period, exceeded the exports by $44,700,000.

In 1834, for example, the exports of coin and bullion amounted

to only $400,500, while the imports totaled $16,235,374. The

foreigners, instead of demanding the payment of the trade

balance in specie, were leaving it invested in the United States

and sending us money besides. They were investing in our new

railroad industry and more particularly in the bonds issued by

municipalities and by states for internal improvements, etc.⁸

From 1826 to 1839 the State of Ohio issued, to pay for canal

construction, 6% stocks to the amount of $9,046,123, all of which

brought a premium except $20,000 issued at par in 1836. The

total amount of these premiums was $591,013.25. The highest

premium received was that of 1832, which was 24%.9

Period of Business Expansion.-The period from       the

crisis of 1819 to that of 1837, says Burton, "was the first which

displayed in this country the distinctive features which preceded

the crises of 1873 and 1893. It afforded an illustration of

gradual growth, expansion, and collapse. The movement was

particularly marked from 1831 to 1837, and most active from

1834 to 1837."¹⁰ During this period there was not only a steady

growth in population, agriculture, and foreign trade, but manu-

facturing, having recovered from the depression which followed

the War of 1812, was beginning to be developed on a large scale,

while domestic commerce and wealth had nearly doubled. It

was an era of great territorial and business expansion, and, as

usually happens, this was accompanied, especially towards the

close of the period, by excesses which later caused waste and

loss.

7 Statistical Abstract of the United States, 1905, pp. 636-7.

⁸Financial History of the U. S. - Dewey, p. 226.

Crises and Depressions-Burton, p. 280.

9History of Ohio Canals - Huntington & McClelland, p. 69.

There was also an issue of $400,000 at 5% in 1825, the total amount

issued before 1830 being $3,800,000.

10 Crises and Depressions-Burton, p. 279.

• 120
 

Banking and Currency in Ohio Before the Civil War. 355

 

Excessive Credit and Speculation.-A great number of

enterprises were established, which were in advance of the de-

mand, and many others which were entirely useless. There was

undue extension of credit; while speculative operations attained

a volume never known before in this country. The demand for

western land due to the influx of new settlers was vastly in-

creased by land buying for speculation. As the market price of

land frequently went way above the government selling price,

there was strong inducement to buy with the expectation of sell-

ing it sooner or later at a big profit. To do this, money was

necessary; consequently there arose an enormous demand for

borrowed money. This was readily supplied by local banks, many

of which sprang up especially to meet this temporary demand.

All of them were glad to extend their circulation and increase

their loans.

Rapid Growth of Local Banking. - From 1829 to 1837 the

number of local banks reported in the United States increased

from 329 to 634 and their capital from 110.2 million dollars to

290.8 millions; while their circulation increased from 48.3 mil-

lions to 149.2 millions, and their loans and discounts from 137

million to 525.1 million.¹¹ That is, while the number of banks

and their capital practically doubled, their circulation increased

three-fold and their loans and discounts nearly four-fold, thus

showing that not only were new banks started, but that both

new and old issued more notes and greatly increased their loans.

The loans of the Ohio banks doubled from January 1835 to

May 1837.12

Refusal to Recharter the United States Bank.- The de-

velopment of local banks was accelerated by the refusal to extend

the charter of the United States Bank, which was to expire in

1836. A bill to renew the charter passed the Senate in June

1832 and the House in July, but it was vetoed by President Jack-

 

11Figures for 1829 are taken from Gallatin's Considerations on the

Currency, pp. 45, 49, and 53, except those for loans which are from

Dewey's Financial History, p. 225; figures for 1837 are from Elliot's

Funding System, p. 984.

See Appendix, pp. 517-18.

12Elliot's Funding System, p. 1183.

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356       Ohio Arch. and Hist. Society Publications.

son; and when he was re-elected on that issue in the fall the fate

of the bank was sealed.¹3  This gave an immediate impetus to

the development of local banks, which was increased by Jack-

son's determination at once to remove the government deposits

from the United States Bank, on the ground that the public

funds were not safe in the hands of "an electioneering machine."

Withdrawal of Public Funds from the United States Bank

and their deposit in State Banks. -This decision was made

effective as soon as the President could get a new Secretary of

the Treasury willing to do his bidding. On September 26, 1833

an order was issued by Secretary of the Treasury, Roger B.

Taney, directing that nearly ten millions of public money then

in the United States Bank should be gradually withdrawn and no

more deposited therein; but that henceforth the public funds

should be deposited in certain state banks.¹⁴ The hope of secur-

ing some of these government deposits accelerated the increase in

local banks, and the distribution of the funds among numerous

"pet banks," as the state banks selected were familiarly called,

increased opportunities for extending credit, and furnished the

foundation for many injudicious enterprises.

Payment of the National Debt and Distribution of the

Surplus among the States. -Another cause contributing to

the same effect was the distribution among the states of the

surplus revenue which occurred about this time in the United

States Treasury. The growth in the foreign trade of the country

had brought a big increase in the revenues from import duties;

while the sale of public lands, the proceeds of which between

1810 and 1830 had amounted to only one or two millions a year,

increased so rapidly after 1830 that in 1835 the receipts from

this source were nearly $15,000,000.15 In January of the latter

year the national debt was paid off and a prediction made by

Jefferson fifty years before was about to be fulfilled, namely, the

 

13Division and Reunion -Wilson, p. 79.

14Division and Reunion-Wilson, p. 81.

Financial History of the U. S.- Dewey, p. 206.

15 The Public Domain -Donaldson, p. 17.

See Appendix, pp. 386, 493.

• 122
 

Banking and Currency in Ohio Before the Civil War. 357

United State Treasury was the possessor of a surplus.16 A

Senate committee estimated that it would average nine million a

year for the next eight years. What was to be done with it?

the protected interests like their successors of today did not

want the tariff reduced, so they advocated a distribution of the

surplus among the states. This idea also found favor in other

quarters. But the president and others of his party had scruples

against making direct gifts to the states. So it was finally decided

to make the distribution as a loan to the states, though without

interest, to be recalled at the pleasure of Congress. This act

providing for the distribution was passed June 23, 1836,17 and

under it somewhat over $28,000,000 was deposited with the states.

The amount was in reality a gift and was never expected to be

recalled. It is still carried on the books of the treasury as un-

available funds, $28,1O1,644.18

Ohio's share of this surplus revenue, amounting to $2,007,-

260.34, was distributed among the several counties; and the

county commissioners were authorized to loan these funds at

6% interest to any incorporated canal, railroad, or turnpike com-

pany, or to any other work of internal improvement in the county,

upon security equal to double the amount loaned. Any of the

money not loaned as above cauld be loaned to the state in such

amount as the latter desired, or to individuals at from 6 to 7%

interest. Of the total amount received by the state, $545,681.93

was expended in the construction of internal improvements.l⁹

Relation of Credit and Speculation. - The distribution of

the surplus among the states and the deposit of the public funds

with local banks encouraged many of the latter to make loans

larger than their assets would warrant, especially as there was

such a strong demand for money for purposes of speculation.

The notes issued by the bank to the speculator would commonly

be invested in government land, as that was the main subject of

 

16Financial History of the U. S.-Dewey, pp. 217 and 219.

17United States Statutes at Large, Vol. V, p. 55.

18Financial History of the U. S.-Dewey, pp. 219-21.

Division and Reunion--Wilson, pp. 86-88.

19History of Ohio Canals -Huntington & McClelland, pp. 73 and 74.

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358       Ohio Arch. and Hist. Society Publications.

speculation at the time. The land receiver usually would then

deposit the notes in a local bank, frequently in the same bank

that issued them, and again they would be ready for issue, per-

haps to the same speculator, to purchase more land. Thus the

local banks and the government surplus became involved in a

common network of credits. The paying off of the national debt,

too, helped the land speculation, since money formerly loaned to

the government was thus set free for other investments.²⁰

Rapid Increase Bank Notes and Other Money in the

United States. - While land speculation was the central point

in the expansion of the period, and reached its maximum in the

West and Southwest, where the rapid increase that occurred in

the price of wheat and cotton and other farm products helped

to boom the lands that produced them; yet speculation of every

sort and in all parts of the country received a wonderful impetus.

Money was plentiful, and as much of it did not represent capital,

it was easy to obtain. Consequently times were flush and nearly

everybody ran into debt.²¹ The total amount of money in the

United States increased from 93 million dollars in 1830 to 222

million in 1837, a point not reached again until 1847. It is

estimated that about two-thirds of this money consisted of out-

standing bank notes, the latter increasing from 61 million in 1830

to 149 million in 1837, which high point was not reached again

until 1851.22

Bank Circulation in Ohio.- In the rapid expansion of

bank paper during this period Ohio had her full share. In one

year, from 1835 to 1836, the reported circulation of Ohio banks

increased from 5.2 million dollars to 9.7 million, while the eleven

authorized local banks operating in the state in 1830 had become

33 in 1837, an increase of exactly three-fold.²3  There are no

 

20Financial History of the U. S.- Dewey, pp. 225 and 226.

21Financial History of the U. S.- Dewey, p. 226.

Division and Reunion - Wilson, p. 89.

Men and Measures of Half a Century-McCulloch, p. 58.

22Report of the United States Comptroller of the Currency, 1908,

p. 145.

23Report of U. S. Comptroller of the Currency, 1876, p. XCVII.

• 124
 

Banking and Currency in Ohio Before the Civil War. 359

 

figures available as to the circulation of the Ohio banks in the

early years of the decade, but it was probably not large.

It may be recalled that the 25 chartered banks in Ohio in

1819, had a circulation of only about 1.3 million dollars;²⁴ while

in 1826 the statement was made that some years before paper

currency had almost been withdrawn from circulation in Cin-

cinnati, the largest city in the state.²⁵ In 1829, however, it was

said that there was comparatively plenty of money in the state,²⁵

and at that time Ohio bank notes were at a discount of from 21/2

to 31/2% in Philadelphia.²⁷  In 1831, however, the discount was

only about 11/2%,28 thus indicating that the circulation of Ohio

banks could not have been much expanded. It is probable that

their circulation at that time was between one and two million

dollars, perhaps nearer the first figure than the second.

Charter of the Bank of Norwalk. -In fact there was

quite a demand for money in Ohio at this time, which took the

form of a demand for more banking facilities, the function of a

bank considered most important in this country in those days

being that of note issue.²⁹  On Feb. 25, 1831 the legislature

granted a charter to the Bank of Norwalk, with an authorized

capital stock of $100,000.³⁰ This was the only bank chartered by

the legislature that session, however, and was not sufficient to

meet the demand. Consequently there was a resort to the reviv-

ing of old banks.

Revival of the Dayton Bank. -As early as Jan. 18, 1831

the Dayton Republican in speaking of the importance and need

of a bank at Dayton, had called attention to the fact that there

was a bank in the city whose charter would not expire for 13

years yet, and suggesting that it ought to be put into operation

again.31 Another Dayton paper a few months later announced

 

²4 See Chapter III, p. 301.

25See Chapter V, p 342.

26 See Chapter V, p 344.

27 See Appendix, p. 489.

28 Ibid.

29 Money, Trade and Industry-Walker, pp. 259 and 299.

30Local Laws of Ohio, Vol. XXIX, (1831), p. 162.

31 This was the Dayton Manufacturing Company. See Chapter I,

p. 264. Also Knox's History of Banking, p. 676.

• 125
 

360       Ohio Arch. and Hist. Society Publications.

that the Dayton Bank, which had wound up its business a few

years before and paid its stockholders the capital invested, had

been revived, its capital stock filled up and actually paid in, and

its business resumed on a good stable foundation, which inspired

confidence and gave assurance that the revival of this bank would

prove a public benefit.32

Opening of the Commercial Bank of Cincinnati. - It will

be recalled that on Feb. 11, 1829 the legislature had authorized

the Commercial Bank of Cincinnati to begin business with a

capital stock of $100,000 but that its stock had remained unsub-

scribed owing to the pressure for capital in other lines.33  On

Feb. 12, 1831, however, the commissioners in charge of the

organization of this bank advertised that two days later its stock

subscription books would be opened, and each day thereafter

for 30 days, within which time $10 on each share must be paid

by the subscribers according to charter.³⁴  This stock was all

quickly taken, a great part of it by foreign capitalists, and arrange-

ments were at once made for the immediate commencement of

business.35 On May 28 the stock in this bank rose from 5 to

15%  premium, and before the day closed 17%    was asked, at

which figure the price remained firm. Orders to purchase this

stock received from eastern cities were said to have contributed

to this rise.36

Tax on Dividends of Banks increased to 5%.--A pro-

vision in the charter granted this bank Feb. 11, 1829, had pro-

vided that it should pay to the state a tax of 4% on its annual

dividends.37 That was the rate then paid by all the local banks

32Dayton Journal and Advertiser, Aug. 30, 1831.

The name of Dayton Manufacturing Co. was changed to Dayton

Bank. Local Laws of Ohio, Vol. XXX, (1832), p. 14.

33 See Chapter V, p. 344.

34The Sentinel and Star in the West, (Cincinnati), Mar. 12, 1831,

p. 160.

35The Dayton Journal and Advertiser, Apr. 19, 1831.

36The Republican (Dayton), May 31, 1831.

37Report of State Auditor, Jan. 16, 1834.

Laws of Ohio, Vol. XXVII, (1829), p. 46.

See also arguments in cases of Ohio Life Insurance and Trust

Company vs. Debolt, 16 Howard 421; and Piqua Branch of State Bank

of Ohio vs. Knoop, 16 Howard 379.

• 126
 

Banking and Currency in Ohio Before the Civil War. 361

 

in the state under the tax law of Feb. 5, 1825.38  But in 1831

about the time the Commercial Bank of Cincinnati began business

a change was made in this law which resulted in giving this bank

somewhat of an advantage over the rest of the local banks so far

as state taxation was concerned.

As early as Jan. 14, 1830 the committee on finance of the

Ohio Senate, to whom had been referred a resolution as to the

expediency of taxing the capital of banks, insurance companies,

etc., on an ad valorem basis, reported against that plan and in

favor of retaining the existing system. They gave as reasons

for preferring income as the basis of taxation: first, that it was

more agreeable to the stockholders and directors; second, the

fact that the charters of some of the banks limited the tax to

4%   on dividends, which by implication might exclude other

forms of taxation. The committee concluded that no legislative

act on the subject was then required.³⁹ So the matter went over.

At the next session of the legislature, however, the question

of bank taxation came up again, with the result that on March

12, 1831, an act to tax banks, insurance, and bridge companies

was passed, which increased the rate of the tax on bank dividends

from 4% to 5%.40   Under this law the directors of banks, in-

surance companies, and bridge companies were to furnish the

state auditor with a statement of all dividends, and the auditor

was then to draw for 5% thereon. A penalty not to exceed

$1000 was provided for failure to furnish such statement or

refusal to pay the auditors' draft. This law operated on all the

local banks in Ohio, except the Commercial Bank of Cincinnati.

The latter paid 4% on its dividends under its charter, which

exempted it from general taxation under a general law.⁴1

The Bank of Zanesville Chartered.-In the session of

1832 the legislature, like its predecessor of 1831, chartered only

one bank. This was the Bank of Zanesville, at Zanesville, Ohio,

38See Chapter V, p. 340.

39 Ohio Senate Journal, 1830, p. 238.

40Laws of Ohio, Vol. XXIX, (1831), p. 302. Also 3 Chase 1820.

41 See argument for plaintiff in case of Ohio Life Insurance and

Trust Co. vs. Henry Debolt.-16 Howard 421.

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362       Ohio Arch. and Hist. Society Publications.

which was granted a charter on Jan. 13, 1832.42 Its authorized

capital stock was $300,000; but, as happened the year before,

one new bank was not all that was required.

Re-opening of the Commercial Bank of Lake Eric. -  The

demand for more banking facilities in the state brought about

the revival of another old bank early in 1832. This was theCom-

merical Bank of Lake Erie, which had been chartered originally

by the bonus law of Feb. 23, 1816, 43 and had begun business in

Cleveland in August of that year with Alfred Kelley, President,

and Leonard Case, Cashier.⁴⁴ It had been unable to survive the

crisis of 1818-19, however, and had failed in 1820.⁴⁵ In the

winter of 1832 steps were taken to revive this institution. On

Jan. 3, 1832 the state auditor made a report to the legislature on

this bank, in which he said its authorized capital stock had been

1000 shares at $100 each, with the privilege of extending this to

$500,000. He added the number subscribed was 1269, and the

amount paid $43,797.46 On April 2, 1832 the Commercial Bank

of Lake Erie was reorganized with Leonard Case, President, and

Truman P. Handy, Cashier.⁴⁷   A large majority of the stock

was said to be held by the Dwights of New York and Mass-

achusetts and their friends.⁴⁸

Scarcity of Money in Ohio.-- Notwithstanding the

chartering of the new banks of Norwalk and Zanesville, the re-

vival of these old banks in Dayton and Cleveland, and the opening

up of the Commercial Bank of Cincinnati after a two years' delay,

the pressure for more money in the state continued to increase.

This was intensified by Jackson's message of July, 1832, vetoing

the bill to renew the charter of the United States Bank.⁴⁹ A Cin-

cinnati writer for the New York Courier and Enquirer of Aug.

3, 1832 says: "The distress for money here at present is greater

 

⁴²Local Laws of Ohio, Vol. XXX, (1832), p. 94.

43 See Chapter II, p. 275.

44Magazine of Western History, Vol. II, p. 272.

45 Ibid.

46Ohio House Journal, 1832, p. 155.

47Magazine of Western History, Vol. II, p. 272.

48Republican, (Dayton), Apr. 10, 1832.

49 See preceding, p. 355.

Also Division and Reunion--Wilson, p. 83.

• 128
 

Banking and Currency in Ohio Before the Civil War. 363

than can well be imagined, and the branch bank is, from neces-

sity in prospect of winding up, curtailing. We have one other

bank in the place and its capital but $500,000. Money can be

lent upon mortgages on good city property at from 12 to 15%

when the security is unquestionable and worth at least 100%

more than the amount loaned. The brokers get readily one

quarter per cent per day !"50

Revivalof the Project for a State Bank. - Throughout

the state the question of what should be done became a matter

of much agitation. Gov. Duncan McArthur in a political ad-

dress of Sept. 11, 1832, declared in favor of a re-charter of the

United States Bank, or other bank not a "treasury bank" or under

the control of the Executive.⁵² The project of a State Bank was

revived and generally discussed that fall and winter.⁵³

Report of Senate Committee in favor of State Bank.-

The Governor's Message of Dec. 4, 1832 discussed the question,

and on Jan. 29, 1833 the Senate committee on finance and a

circulating medium, to which that part of the message had been

referred, reported that the banking capital of local banks in Ohio

actually employed was estimated at $2,000,000, while the amount

needed was probably not over 8 to 10 million. The committee

was of the opinion that a State Bank in which the State should

own 1/5 the stock and elect that proportion of the directors,

would best fill the vacuum and establish a sound and uniform

currency.⁵⁴

Bill before Legislature for State Bank.-A bill was in-

troduced before the legislature which provided for a state loan

of $7,000,000 at 4% as a means of raising funds to organize a

State Bank with branches, somewhat on the plan of the Louis-

iana State Bank, the subscriptions of stock in the bank to be

secured by real estate, and the State to subscribe for part of

 

50Niles, 42:436. Aug. 18, 1832.

51Division and Reunion-Wilson, p. 81.

52Niles, 43:89. Oct. 6, 1832.

53Dayton Jour. & Advertiser, Dec. 4, 1832.

Dayton Whig & Miami Democrat, Dec. 29, 1832.

54Ohio Senate Journal, 1833, p. 390.

• 129
 

364       Ohio Arch. and Hist. Society Publications.

the stock directly. The idea was for this bank to have a practical

monopoly of banking in the state.⁵⁵

Subject postponed till December 1833. -Two other bills

were reported to the legislature, for the incorporation of a State

Bank, but none of the three could command sufficient support to

effect its passage, and doubt was expressed as to whether a

majority in the legislature were not opposed to a State Bank

in any shape.⁵⁶ There were also "innumerable applications for

local banks," and the opinion was expressed while the State Bank

bill was pending that the only reason to anticipate a failure of its

passage was the jarring interests, excited by the various applica-

tions for local banks, some of which were pressed with strenuous

efforts. To buy these off, it was said, it would be necessary to

give them branches of the State Bank.⁵⁷ All sorts of objections

were raised to the State Bank as proposed.⁵⁸ A minority report

of the House Committee on a State Bank, on Feb. 2, reported

against its being established that session: first, because the situa-

tion did not then call for it; second, because public opinion was

not fully expressed.⁵⁹ Probably few were surprised when early in

February it was announced that by common consent the project

was to lie over until the next session of the legislature.⁶⁰ On

Feb. 14, the bill was taken up and postponed until the following

December.⁶1

Two Million-Dollar Banks authorized in Cincinnati. - In-

stead of passing a bill to incorporate a State Bank, which should

control all the monied institutions of the state, the legislature

contended itself for that session with authorizing the Commer-

cial Bank of Cincinnati to increase its capital stock from $500,000

to $1,000,000,⁶² and granting a charter to the Franklin Bank of

 

55 Dayton Journal and Advertiser, Jan. 8, 1833.

Dayton Republican, Jan. 15, 1833.

Niles, 43:330, Jan. 19, 1833.

56 Dayton Journal, Feb. 12, 1833. Also Niles, 44:2, Mar. 2, 1833.

57Dayton Journal and Advertiser, Jan. 8, 1833.

58Dayton Journal, Jan. 15 and 22, 1833.

59Ohio House Journal, 1833, p. 403.

60Dayton Republican, Feb. 5, 1833.

61Dayton Journal, Mar. 5, 1833.

62Niles, 43:387, Feb. 9, 1833.

• 130
 

Banking and Currency in Ohio Before the Civil War 365

 

Cincinnati, on Feb. 19, 1833, which authorized it to organize

with a capital stock of $1,000,000.63

Message of Governor Lucas, December 1833. - Notwith-

standing these considerable additions to the banking capital of

the state there still remained a deficiency in the circulating

medium. In commenting on this, Gov. Robert Lucas, in his

message of Dec. 3, 1833, spoke of the prosperity of the people

and mentioned several causes ascribed for the deficiency; but

added that he conceived the latter to be the natural result of the

termination of the state's public expenditures, about $5,000,000

having within a few years been expended within the state for

canal building. This sum, he continued, had during the progress

of the work been thrown into circulation and had formed a con-

siderable part of the currency of the state; so that its withdrawal

from the floating capital of the state due to the termination of

the public expenditures and the ordinary course of business was

severely felt by a certain portion of the community.  As a

remedy he recommended a State Bank.⁶⁴

Banking Capital in Ohio held by Non-Residents.- One

of the features of the State Bank bill that had been before the

legislature the previous session was a provision that none but

citizens of Ohio, who were owners of real estate situated in

Ohio, should be subscribers to its stock.⁶⁵ Much of the banking

capital employed in Ohio at that time was owned by non-resi-

dents. And the argument was brought forward that a State

Bank would mean a big saving to the people of Ohio through

reducing the large interest payments then being paid on this

foreign capital.

In arguing in favor of the State Bank which had just been

advocated by Governor Lucas, in the message referred to above,

the Ohio Monitor quotes from the Cincinnati Republican some

 

63Local Laws of Ohio, Vol. XXXI. (1833), p. 123.

64Ohio House Journal, 1834, p. 9.

65 A further provision was that the subscribers should not transfer

their stock to persons differently situated until after one year, when they

might transfer it to any owner of real estate in Ohio.-Dayton Repub-

lican, Jan. 15, 1833.

• 131
 

366       Ohio Arch. and Hist. Society Publications.

figures as to the amount of banking capital then employed in

Ohio.

BANKING CAPITAL IN OHIO IN DECEMBER, 1833.

Capital employed in Branches of United States Bank (prac-

tically  all held  by  non-residents) ......................                             $1,700,000

Capital of local banks held  by  non-residents ................                           1,650,000

 

Total  held  by  non-residents ...........................                               $3,350,000

Capital of local banks held by citizens of Ohio............                              1,380,000

 

Total amount of banking capital employed in Ohio....                     $4,730,000

Annual Cost of Foreign Banking Capital to People of

Ohio. - The article then goes on to say that on all this foreign

capital the people were paying about 9% interest each year,

since the dividends of the banks ranged from 8 to 10% a year;

that on the $3,350,000 of stock held 'by non-residents this in-

terest amounted to $301,500, which was carried out of the

state and pocketed by eastern and foreign capitalists. The point

was then made that the money necessary to organize a State

Bank could be obtained on long time state bonds directly from

the East or Europe at 4%. That is, that the difference between

4%  and 9%, or 5%, amounting to $167,500, would represent

the annual saving to the state under the proposed new system.

In other words, the article continued, under the proposed system

the same amount of interest as was then paid on 31/2 millions

of foreign capital would furnish nearly $8,000,000.⁶⁶

Ohio Bank Notes depreciated beyond Vicinity of Issuing

Bank. - The point was also made that the currency furnished

by the local banks was but a poor one anyway, because the

notes of a local bank might be very good in the immediate

vicinity of the institution issuing them; but by the time they

had traveled one hundred miles from home, they were refused

unless at a discount, or, what too frequently happened, they

were refused at any price.67

Financial Disturbances early in 1834.--Soon after that

the bills of Ohio banks in general were said to be at from 4

 

66Ohio Monitor, Dec. 12 and 19, 1833.

67 Ohio Monitor, Dec. 19, 1833.

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Banking and Currency in Ohio Before the Civil War. 367

 

to 5%  discount at Cincinnati, and several of the Ohio banks

were reported to be very much embarrassed.68    By January

1834, drafts on New York, which had until shortly before been

easily procured at 1%, could scarcely be obtained at all in

Ohio. A letter of January 10, 1834, from a Cleveland gentleman

to one in New York states: "If matters continue long as they

now are, the exchange will be 3 or 4% on New York.^"69 He

attributed this to the embarrassed state of money matters in the

East.  That section was then undergoing one of those dis-

turbances to commerce, banking, and business generally, which

were so numerous from 1834 to 1838.70  And the pressure was

beginning to be felt in the West and Southwest. Many doleful

letters on the subject were published about that time in Niles

Register from Mississippi and Louisiana.⁷1 And that paper

of the date of April 5, 1834, prints a letter from an Ohio man

telling of the general distresses.⁷² The Albany Daily Advertiser

about that time reported that some of the Ohio banks had

stopped specie payment and that others were "tottering."7³

Defeat of the State Bank Bill. - The suspended and tot-

tering Ohio banks referred to in the article mentioned above

were probably unauthorized banks, many of which were con-

tinually springing up in the state during this period. But the

number of chartered banks in the state was also largely in-

creased early in 1834. The opposition to the State Bank on

the part of many local banks that wanted charters from the

legislature was so strong that the bill providing for a State

Bank was killed in the legislature in January, the vote against

it in the Senate on January 20th being 19 to 15.85

More Local Banks Chartered. - Soon after the State Bank

bill was defeated the legislature proceeded to grant charters

to a batch of ten new local banks, the combined authorized

capital of which amounted to $4,400,000. The name, location,

 

68 Niles, 45:434, Feb. 22, 1834.

69 Niles, 45 :373, Jan. 25, 1834.

70Financial History of the U. S. - Dewey, pp. 188 and 218.

71 Niles, 46:86, Apr. 5, 1834.

72Ibid., p. 84.

73Niles, 46:18, Mar. 8, 1834.

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368      Ohio Arch. and Hist. Society Publications.   authorized capital stock, and date of charter of each of these banks are shown in the following table.   BANKS CHARTERED BY THE OHIO LEGISLATURE IN 1834.

The Clinton Bank of Columbus organized by office- holders.-Of the bank last mentioned above, the Clinton Bank of Columbus, it was claimed that the agents for lobbying it into existence had "covertly and hypocritically stifled the State Bank (an actual democratic bank; the People's bank)"; and the charge was also made, within a year or two of its incorpora-   74Local Laws of Ohio, Vol. XXXII, (1834), p. 68. 75Ibid., p. 76. 76Ibid., p. 197. 77Page 283. 78Page 293. 79Page 299. 80 Page 343. 81Page 407. 82Page 412. 83 Page 419. 84See Dayton Jour., Mar. 11, 1834. 85Dayton Jour., Feb. 11, 1834. Niles, 45:396, Feb. 8, 1834. See following, page 390.

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Banking and Currency in Ohio Before the Civil War. 369

 

tion, that its directors were largely state and national office-

holders, the Ohio Monitor of Feb. 4, 1836, stating that "the

directory of that bank contains four United States office-

holders (the whole of the civil officers in the place) and two

state officers." The stock of this bank was all subscribed by

September and notice published that the meeting for the elec-

tion of its thirteen directors would be held Oct. 2, 1834.86

Capital Stock of new Banks over-subscribed.- In fact

the capital stock of all ten of these banks was rapidly taken up

in spite of the financial disturbance early in 1834. On the

day early in April when the books were opened in the town of

Wooster for receiving subscriptions to the stock of the Bank

of Wooster, $25,800 more than the whole amount authorized

was subscribed, nearly all, too, by citizens of the town and

county. Towards the close of the time allowed for the books

to remain open there was a press to get stock, and it was said

that had the amount authorized been 50% more, it would easily

have been subscribed.87

When the books for subscription to the stock of the Bank

of Cleveland closed on April 10, in accordance with the pro-

visions of its charter, $393,200 had been subscribed, an excess

of $93,200 over the capital authorized. The Dayton Journal

of April 15, 1834, in commenting on this observed: "The

promptness with which the stock of this bank has been taken

up, is a flattering indication of the continued prosperity of the

country and the confidence of capitalists in the value of the

investment. The time for opening the books was the most

unfavorable that could be, yet with all the cry of pressure and

panic, there seems to be no lack of money when a profitable

investment is to be made."

The Ohio Life Insurance and Trust Company. - Only

$1,000,000 of the capital stock of the Ohio Life Insurance and

Trust Company was for banking purposes, and its privilege of

issuing notes was to expire January 1, 1843, the date when most

 

86Ohio Monitor, Oct. 1, 1834.

87Ohio Monitor, Apr. 16, 1834.

Also Dayton Journal, Apr. 15, 1834.

24

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370       Ohio Arch. and Hist. Society Publications.

of the bank charters in the state expired. Besides the power

of note issue and other banking powers, this company was

given authority to insure lives, to purchase and grant annuities,

to receive and execute trusts of all kinds, and to buy and sell

drafts and bills of exchange. Its management was in the hands

of twenty trustees who must individually be stockholders to

the amount of $5,000.⁸⁸

The institution was one of the largest in the country, and

it aroused a good deal of opposition among those who, even at

that date, feared the growth of corporate monopoly. It was

bitterly denounced as placing dangerous power in the hands

of a few.⁸⁹ The following paragraph from an address of the

Hon. R. T. Lytle in 1835 illustrates the popular feeling regard-

ing "this new and dangerous monopoly," which loaned money

all over the state on real estate security.⁹0

"The rate of interest at which they let out money, is

nominally 7%, but in fact (in most cases) the rate averages

from 10 to 15.   . .   . For instance, the borrower, before he

can procure one cent of money is obliged to pay the agent of

this bank for examining all the title papers of his land that

is to be mortgaged, to pay for the execution and recording of

a mortgage deed; to lose time in effecting the loan, so that it

will cost him from 10 to 15% the first year besides the interest;

and immediately upon receiving the loan the borrower has to

advance, for the first six months' interest, at the rate of 7%

per annum. At the end of every six months prompt payment

is demanded, and if it should not be made at the day, yes, at

the hour, it becomes due, the company can foreclose the

mortgage, force a sale, and thus at one stroke sweep from a

man his farm for the paltry sum of $100 or $200.^"91

88 Cincinnati in 1841-Charles Cist, p. 50. In 1841, M. T. Williams

was President, J. M. Perkins, Cashier, and the Board of Trustees were

from Cincinnati, Warren, Gallipolis, Columbus, Cadiz, and Dayton, Ohio,

and also New York, Boston, Philadelphia, and New Orleans.

89 Niles, 49:91, Oct. 10, 1835.

90Besides issuing its own notes, this company borrowed money all

over the country at 3 to 4% interest, and then upon this capital it dis-

counted at 7% payable in advance.-Ohio Monitor, May 13, 1846.

91 Ohio Monitor, (Columbus), Aug. 12, 1835.

• 136
 

Banking and Currency in Ohio Before the Civil War  371

 

The wide distribution of the operations of this company

is illustrated by the fact that in January 1836, it had loans se-

cured by real estate in at least 67 counties in the state, the

amounts loaned in each county varying from a few hundred

dollars to half a million. The total amounted to $1,858,099 and

was secured by pledges of real estate to the estimated value

of $4,338, 117.92

The report of the master commissioner on this company

in 1836 speaks of the ability and integrity with which its affairs

were conducted, of the prudence, safety, and productiveness of

its investments, and of the safety of those holding its invest-

ments.⁹³  Nevertheless there was a bill before the legislature

that year to repeal its charter. This bill had the support of

most of the Democratic papers in the state, though some of

them favored the bank.⁹4

The Ohio Monitor of March 14, 1836 gives a list of the

stockholders of the Ohio Life Insurance and Trust Co., with

the number of shares and amount of stock held by each, and

comments regarding the stock thus: "Most of which, as may

be discovered, is owned by the Wall Street gentry of New

York." This paper also names the 20 trustees of the company,

adding: "Three only, we believe, are citizens of Ohio and

professing to belong to the democratic party." When the bill

to repeal the charter of the company came to a vote in the

legislature, however, it was postponed indefinitely by a vote

of 40 to 27^.95

Revival of Miami Exporting Co. and Urbana Banking Co.

--After the ten banks chartered by the Ohio legislature in

February and March 1834, no more were chartered that year;

but the Urbana Banking Co., which had failed some time

before 1830, was again doing business early in 1834,96 and the

 

92Ohio Monitor, Jan. 18, 1836. For amount loaned in each county

see Appendix, p. 494.

93Ohio Executive Document, 1836, No. 1.

94Ohio Monitor, (Columbus), Feb. 25 and 29, and Mar. 10, 1836.

95Ohio Monitor, (Columbus), Mar. 14, 1836.

96Ohio Senate Journal, 1834, p. 638. See also Chapter V, p. 132.

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372       Ohio Arch. and Hist. Society Publications.

Miami Exporting Co., which had been compelled to close its

doors in 1822,97 was revived and again put into operation during

the year.98

In his message of December 2, 1834, Governor Lucas stated

that $1,250,000 had already been paid in on the capital stock

of eight of the banks incorporated at the previous session of the

legislature; and in commenting on this he added: "The readiness

with which the stocks in those banks has been taken is a cheer-

ing evidence of the existence of capital in the State."99

Number and Capital of Ohio Banks in March 1835.- At

the next session of the legislature a great many petitions for

new banks were presented,¹⁰⁰ but the legislature refused to

grant a single charter.¹⁰¹ At that time, however, there were

twenty-seven authorized banks in operation in the state and

their condition was generally considered quite sound.¹⁰² These

consisted of ten of the eleven old banks remaining in 1830,103

the thirteen new ones chartered from 1831 to 1834, and four

others chartered prior to 1830, but which had been either re-

vived after failing once, or encouraged to issue their capital

stock, which had previously remained unsubscribed.

The main facts as to their financial condition may be seen

from the following items from reports made by them to the

state auditor in January 1835.

 

97 See Chapter 1, p. 260, and Chapter V, p. 346.

98Ohio House Journal, 1837, p. 139.

99 Ohio House Journal, 1835, p. 16.

100Ohio Executive Document, 1844, No. 1, p. 17.

101 Niles, 48:145, May 2, 1835.

102 Dayton Journal, Mar. 10, 1835.

Ohio Senate Journal, 1835, p. 202. (Minority Report of Committee

on Finances, Jan. 7, 1835).

103 See Chapter V, p. 349. The Bank of Steubenville had dropped

out in the meantime.

• 138
 

Banking and Currency in Ohio Before the Civil War         373

 

 

STATISTICS OF OHIO BANKS, MARCH 1835.

Authorized    capital  stock ..........................                          $12,200,000

Capital   stock            paid                                                       in ..............................      5,847,525

Specie    ......................................... .                                       2,489,912

Discounts  ........................................                                      6,799,247

Total circulation        ..................................                            4,564,898

Circulation    under    $5 ..............................                           1,128,577

Circulation         over           $5 ................................                                                       3,382,321

 

From the foregoing it appears that the entire circulation

of the chartered banks in Ohio at that time was considerably

less than their paid in capital, while they had on hand more

than one dollar of specie for every two dollars in circulation,

which indicates a very good condition.        This conclusion is

strengthened by a report of the committee on finances made to

the Ohio Senate January 7, 1835, which says: "The banks of

Ohio are sound and conducted with prudence and security to

the public, nor is there a suggestion of inability or want of

disposition to fulfill their engagements."¹⁰⁴

Details of Ohio Banking Statistics in 1835.- The avail-

able banking statistics of the time, however, are so scattering

that it is difficult to draw definite conclusions. For example,

the Ohio State Auditor's report of January 30, 1835 on the

condition of the Ohio banks gives reports for only sixteen

banks,¹05 whereas there were nearly twice that many in the

state.  A  statement in relation to state banks transmitted to

the United States House of Representatives by Secretary of

the Treasury, Levi Woodbury, on January 5, 1836 lists thirty-

one local banks in Ohio in 1835.106   The statistics of fifteen of

 

104Ohio Senate Journal. 1835, p. 202.

105 Ohio Senate Journal, 1835, p. 523.

A part but not all of the banks in the state were required by their

charters to make regular reports to the state auditor. -See Report Aud.

of State, Jan. 1836, relative condition certain banks.

106H. R. Doc. No. 42, 24th Cong., 1st Session, pp. 78 and 79.

See also "A Hist. of the State of Ohio" - Atwater, (1838), p. 315.

• 139
 

374        Ohio Arch. and Hist. Society Publications.

them, evidently taken from the state auditor's report mentioned

above, are given pretty fully for January 1835; the next three

are also fairly complete, but for May 1835; then follow six as

of November 1835 with pretty complete statistics; three as of

January 1835, with figures for loans, specie, capital, and cir-

culation; and 2 as of January 1835 with figures only for specie

capital and circulation; while the last two are named without

giving any statistics.

The first twenty-four banks named show the following

totals.

CONDITION OF TWENTY-FOUR OHIO BANKS IN 1835.

Stocks .......................................                                                                                   $2,500 00

Loans    and     Discounts ...........................                        9,751,973            20

Real       Estate                                                                    ...................................         108,501   31

Due from Banks ............................... 1,433,836 93

Bank Notes ................................... 1,272,268 53

Specie  ........................................                                       1,707,835  95

Other Investments .............................                               44,531 37

Capital  ........................................                                     5,819,692            28

D eposits         .......................................                            2,090,065            65

Due       to  Banks ..................................                           667,942   50

Circulation  ....................................                                   5,221,520            80

Other Liabilities     ...............................                             213,713   94

 

Proportion    of Specie to     Circulation.-The      foregoing

figures show a proportion of specie to circulation of nearly

one-third. The proportion shown by nineteen banks reporting

in January was 30%; the three reporting in May showed 45%,

and the six reporting in November 35%; while the twenty-eight

banks for which figures of specie and circulation were given

show that they had specie on hand equal to fully a third of their

circulation.

The amount of loans, specie, capital, and circulation shown

for each bank, together with the totals, are given in the follow-

ing table, the cents, however, being omitted.

• 140
 

Banking and Currency in Ohio Before the Civil War 375   STATISTICS OF CHARTERED BANKS IN OHIO IN 1835.107

Distribution of Chartered Banks by Counties and Ratio of Capital to Population in 1835.--The 31 chartered banks in Ohio in 1835 were located in twenty-two counties whereas only nine counties had authorized banks in 1830. The relation of paid in capital stock to population for the whole state in 1835 was about $5.50 to each person, while in 1819 it was approxi- mately $4.00, and in 1830 only a little over $1.50.109 The distribution of the authorized banks by counties in 1835, the estimated population of each county in which a bank was located, the total capital stock of the banks in each county, and the amount per capita in each county are shown in the fol- lowing table. 109 See Chapter III, p. 307, and Chapter V, p. 349.

• 141
 

376      Ohio Arch. and Hist. Society Publications.   DISTRIBUTION OF BANKS AND CAPITAL IN OHIO IN 1835.

• 142
 

Banking and Currency in Ohio Before the Civil War. 377

 

Climax of the Inflation in 1836.- In 1836 the second

period of bank note inflation in Ohio reached its climax, the

circulation of the authorized banks in the state, as reported to

the United States Treasury, amounting to $9,675,644, a point

not attained again until 1850.116 This was an increase of more

than 70% over the circulation in 1835. The loans and discounts

in 1836 also showed an increase of nearly 70% over those of

1835, the amount reported in 1836 being $17,079,714.117

The "No Bank" Party in Power.-These gains were

made by extending the operations of the existing banks rather

than by increasing the number of banks, only one new bank

being organized in the state in 1836, which brought the number

of Ohio banks up to thirty-two.118

That no more banks were chartered at this time, when all

over the country the demand for more banking facilities was

at its height, was largely due to the fact that the hard money

wing of the Democratic party was gaining power in the state

legislature. This faction, known as the "no bank" party and

just coming to be called "Loco focos", were inclined to believe

with Jackson that gold and silver were the "true constitutional

currency" of the country, and to look askance upon the rapid

increase of banks and paper money.119

Report of Legislative Committee against chartering more

Banks.-The legislature in 1835 had refused to charter any

banks,¹²⁰ the House committee on banking in reporting February

₁₃ against the incorporation of a bank at Youngstown, de-

 

116 Report of U. S. Comptroller of the Currency, 1876, p. CXVI.

See also Appendix, p. 511.

117 Ibid. Also Hist. of Ohio -Atwater, p. 315.

For figures of 1835 see preceding, p. 375.

118 The Bank of Manhattan was organized at Toledo, Ohio, Mar. 25,

1836. - History of Banking - Knox, p. 677.

This bank had originally been incorporated under the laws of the

Territory of Michigan, when jurisdiction was claimed by the latter. That

jurisdiction was withdrawn before the bank began business. Michigan

commenced court proceedings. The bank was closed by mandamus July

29, 1840.- Special rept. bank com'rs, 1842, p. 39. Laws of Ohio, 37:212.

119 Division and Reunion-Wilson, pp. 90 and 95.

120Niles, 48:145. May 2, 1835.

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378       Ohio Arch. and Hist. Society Publications.

daring that it was questionable whether the citizens of the

state favored the establishing of any more banks.¹²1 A similar

legislative committee in 1836, considered petitions to establish

banks at thirty-four places, reported that while a large pro-

portion of the existing banks were enabled by their charters

to extend their capital to $500,000 very few had done so, some

employing less than half that amount. The committee, observ-

ing that it seemed therefore that an increase of banking capital

was not required, and adding that the produce of the state and

all kinds of property were very high in value while the price

of labor remained nearly as it was, concluded by recommending

that no further banking privileges should be granted that

session.122

United States Treasury Department urges States to sup-

press Small Bank Notes. - Closely related to this belief that

the expansion of bank paper should not proceed too far at the

expense of the metallic circulation was the passage of a law by

the Ohio legislature on March 14, 1836, prohibiting the cir-

culation of small bills.

The chief objections to small notes were: first, that they

were more likely than larger notes to be issued and kept out

in excess since they were very imperfectly convertible into coin,

the holders being from poverty, ignorance, or distance so often

unable to present them promptly at the proper place for re-

demption; and second, that they tended to drive out the specie

from  the districts where they passed current, thus increasing

the amount of paper the bank might be called upon to redeem,

and, at the same time, decreasing the amount of specie in the

community which the bank might get in to use in redeeming

 

121 Ohio House Journal, 1835, p. 714.

The statement was made in this report that there was already a

bank in Trumbull County with an authorized capital of $500,000.

122Ohio House Journal, 1836, p. 522. See also Ohio Monitor, Jan.

21, 1836.

From the table given above on page 373 it may be seen that in 1835,

the 27 banks with an authorized capital of $12,200,000 had paid in capital

of only $5,847,525.

• 144
 

Banking and Currency in Ohio Before the Civil War. 379

 

its notes. In short the small notes militated against convert-

ibility and tended to produce excess.¹²³

In his report on the currency February 24, 1820, Secretary

of the Treasury Wm. H. Crawford had advocated restraining

banks from issuing notes of small denominations, as one means

of preventing fluctuations in the currency. And Albert Gallatin

in 1831 urged the states to suppress small notes as a means of

enlarging the circulating metallic currency, pointing out that

as a currency small notes were exclusively local, and that in

case of any bank failure the loss arising from them fell most

heavily on the poorer class of the community, since they were

most likely to be the holders of the small notes.1²⁴   During

most of the 30's the United States Treasury Department kept

urging the states to exclude the small bank notes from circula-

tion so as to enlarge the quantity of specie in the country and

increase the use of it.125

Governor Lucas recommends Prohibition of Bills less than

$5. - In October 1834 the Albany Argus stated that New York

was about to prohibit the issue of all bills under $5.126  The

same thing was urged upon other states by Governor Marcy

of New York. A letter of his on the subject was transmitted

to the Ohio legislature by Governor Lucas in his message of

December 2, 1834, which recommended favorable action.¹²⁷

Committee of Ohio Legislature reports Right to issue

Small Bills a Vested Right granted in Bank Charters. - The

legislature at once referred the subject to a joint committee of

both houses,¹²⁸ which reported a fortnight later, December 23,

that while there probably was an alarming disproportion between

 

123 See Money, Trade, and Industry-Walker, pp. 303-305.

The point was also made that the small notes were largely held by

the very class most likely to be the first subjects of a panic.

124 Considerations on the Currency-Gallatin, p. 57.

On January 31, 1831, the Ohio legislature passed an act to prohibit

within the state the circulation of foreign bank bills less than $5. -Laws

of Ohio, XXIX, (1831), p. 460.

125 Reports on Finance, 1837-44, p. 252.

126 Niles, 47:129, Nov. 1, 1834.

127 Ohio House Journal, 1835, p. 16.

128 Niles, 47:293, Jan. 3, 1835.

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380       Ohio Arch. and Hist. Society Publications.

the quantity of specie and notes in New York, the same was not

true in Ohio. Yet, they added, other reasons of convenience

and expediency would lead them to favor the suppression of

notes less than $5, if the legislature had not granted the rights

in the charters of the banks; but, these rights thus being vested

rights, direct legislation was not practicable, though indirectly

the legislature might discredit such small notes by prohibiting

the state and county treasurers from receiving for taxes notes

less than $5 or of any denomination issued by an Ohio bank

unless it should before July 4, 1835 notify the auditor that it

would cease to issue notes less than $5 and surrender the

privilege.¹²⁹

Extent of Circulation of Small Bills. - Niles, comment-

ing on the measure in his Weekly Register of January 3, 1835,

expressed the opinion that very few bills of Ohio banks less

than $5 were circulating in Ohio, hence that if small notes were

suppressed there, the effect would chiefly be on those of New

York which abounded in Ohio.130

A report of the Ohio state auditor, January 19, ¹⁸35, on

the extent of the circulation of small bills, gave returns of

twenty-two banks as follows: of $1 bills outstanding, $17,067; of

$2 bills, $97,928; of $3 bills, $313,449; while the total amount

in circulation was $1,052,729.58.181  At that time it was said

in the New England States, New York, and New Jersey the

amount of bills less than $5 was equal to nearly half the aggre-

gate of all bills issued in those states, and that the amount of

them issued in those states alone equaled 8/9 of the specie in

all the state banks in the country.¹³²

Niles' Register of April 4, 1835 reported that New Jersey

and Maine had both passed bills prohibiting notes less than $5;

and that Pennsylvania, Maryland, Virginia, and several other

states were all without a circulation of bank notes less than

$5.133 The Ohio legislature, however, apparently did not think

 

129 Ohio Senate Journal, 1835, p. 128.

130 Niles, 47:293.

131 Ohio Senate Journal, 1835, p. 432.

132 Niles, 48:430, Aug. 15, 1835.

133 Niles, 48:73.

• 146
 

Banking and Currency in Ohio Before the Civil War. 381

 

conditions in the state warranted legislation at that time and

the matter was allowed to go over until the next session.

The Banks requested by the Legislature to surrender their

Rights to issue Small Notes. - Promptly upon the beginning

of the following session in December 1835, however, the senate

adopted a resolution instructing the state auditor to request the

local banks, which were not bound by their charters to do so,

to report to the legislature, among other things, the amount of

notes on hand of denominations less than $5 and to state

whether they were "willing to surrender so much of their

charters as authorized the issuing of bills of a less denomina-

tion than five dollars."¹³⁴

Replies of the Banks.-The banks were to report by

January 20, if convenient. Several, namely, the banks of Xenia,

Massillon, Hamilton, and New Lisbon, together with the La-

fayette Bank of Cincinnati sent in no answer to the last ques-

tion. Three expressed unwillingness to comply uncondition-

ally.¹³⁵ Five absolutely declined.¹³⁶ The directors of a number

said that they had no power to surrender any of their franchise

without the consent of their stockholders. The Bank of Nor-

walk, on January 1, 1836, replied: "The following facts are

within the knowledge of the officers of this institution. That

notwithstanding the law of this state prohibiting the circulation

of small notes of foreign banks they continue to compose a

considerable portion of our currency; that loans of such notes

have been made by Eastern banks for use here; that the at-

tempts in Eastern States to suppress them have not been suc-

cessful; that loans of large amounts of small notes have been

made by the banks in Ohio to be used in Eastern States, where

their circulation is prohibited; and that such notes have obtained

an extensive circulation from the presumed necessity of such

a currency to supply the ordinary demands of business."1³⁷

 

134Report of State Auditor, January, 1836.

¹³⁵The Franklin Bank of Cincinnati, the Commercial Bank of Cin-

cinnati, and the Dayton Bank.

136 The Banks of Geauga, Norwalk, Steubenville, Marietta, Scioto,

and St. Clairsville.

137Ohio State Auditor's Report, January, 1836, p. 13.

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382       Ohio Arch. and Hist. Society Publications.

The Farmers' and Mechanics' Bank of Steubenville, on

January 6, replied favorably but thought the withdrawal of the

small notes ought not to be sudden.l38  The Franklin Bank of

Columbus stated that it feared the sudden withdrawal of such

notes "would produce not only inconvenience, but much public

distress. To supply their place in the circulation would, neces-

sarily, require nearly one-fourth of the specie now in the banks,

and a curtailment of discounts must follow, in the prudent ex-

ercise of banking to double that amount. The consequence must

be a very general derangement in the business of the State. It

is also apprehended that reluctance will be felt to pay large pro-

portions of specie in exchange for the notes of distant banks,

and that consequently a pernicious system of artificial deprecia-

tion and brokerage will be generated."139

The Law of Mar. 14, 1836 prohibiting the Issue and Cir-

culation of Small Notes by Ohio Banks. - It will be seen from

these replies that the Ohio banks did not display any violent

enthusiasm over the invitation to give up their privilege of is-

suing small notes. But the legislature was bent on accomplish-

ing this result, and since direct prohibition appeared a violation

of vested rights, it resolved to try an indirect method through

the taxing power.

By charter provisions the tax on the Commercial Bank of

Cincinnati was limited to 4% on its dividends and that on the

Franklin Bank of Cincinnati to 5%. All of the other banks in

the state paid 5% on their dividends under the tax law of

Mar. 12, 1831; but none of them was exempt from    further

taxation under a general law.¹⁴⁰ Consequently, on Mar. 14,

1836, the legislature passed a law which subjected all the banks

in the state, except the two named above, to a tax of 20% on

their annual dividends, unless they should by July 4, 1836 sur-

render their rights to issue or circulate bills less than $3 after

July 4, 1836, or less than $5 after July 4, 1837. If the banks

should surrender these rights then the tax on their dividends

138 Ibid., p. 14.

139 State Auditor's Report, January, 1836, p. 20.

140 See case of Ohio Life Insurance and Trust Company vs. Henry

Debolt, Treasurer of Hamilton County-16 Howard 421.

• 148
 

Banking and Currency in Ohio Before the Civil War. 383

was to remain at 5%   from the time of surrender,^{141  T}he as-

cendancy of the Democrats in the legislature at that time is

indicated by the vote on this measure. The law passed the

Senate by a vote of 20 to 15, all the affirmatives being Demo-

crats and all the negatives Whigs. In the House the vote was:

for-38, all Democrats; against-28, all Democrats but 6.142

Of the thirty-two banks in Ohio at the time this law was

passed, all but five surrendered the right to issue small bills.¹⁴³

From the high point of $9,675,644 in 1836, the circulation of

the Ohio banks declined to $8,326,974.80 in January 1837.144

That this decrease in circulation was due largely to the with-

drawal of small notes is probable, since during this same period

the capital stock, deposits, loans, and specie of the Ohio banks

each increased, while in the country as a whole the circulation

of the banks increased by over 9 million dollars. The effect

of the small note law in Ohio, therefore, seems to have been

to bring to a close the second period of inflation in the state.

 

141Ibid., p. 422. Also Laws of Ohio, Vol. XXXIV, (1836), p. 42.

142Ohio Statesman, (Columbus), June 27, 1838.

Ohio House Journal, 1836, pp. 711 and 712.

143 Ohio Executive Document, 1838, No. 54.-Report of State Au-

ditor, Jan. 16, 1839.

The 5 banks that neglected or refused to comply were: The Ur-

bana Banking Co., the Bank of Circleville, the Miami Exporting Co., the

Franklin Bank of Cincinnati, and the Commercial Bank of Cincinnati.

144 Ohio Executive Document, 1836, No. 42.

• 149
 

CHAPTER VII.

THE PANIC OF 1837 AND THE RESULTANT PERIOD OF DEPRESSION,

1837-43.

The National Government tries to check Bank Note In-

flation. - The prohibition of the issue and circulation of small

notes in Ohio was but a part of a general movement at that time,

a great many of the states being induced to take similar meas-

ures. Niles' Register of October 1, 1836 names thirteen other

states that had already prohibited their banks from issuing any

notes under $5.1 This movement was largely induced by the

national administration, which also made arrangements with the

deposit banks that they should not issue notes of less than $20,

nor of an amount greater than three times their specie. This

was with the view of restricting the volume of bank notes and

increasing the circulation of specie. But, as President Woodrow

Wilson says, "no small expedients could stay the rising tide of

bank circulation, could provide capital to uphold that circulation,

or assuage the fever of speculation that had fallen upon the

country."²  The undue extensions of credit and speculation to-

gether with the other excesses incident to the rapid expansion

of the period were about to bear fruit in panic and depression.³

The Specie Circular. -The inevitable crash was pre-

cipitated by President Jackson's famous specie circular of July

11, 1836. The remarkable increase in public land sales in 1835

and 36,4 due to speculation principally, was bringing into the

 

1The states named were:  New York, Pennsylvania, Virginia,

Georgia, Louisiana, Indiana, Alabama, New Jersey, Maryland, North

Carolina, Tennessee, Kentucky and Maine. - Niles' Register, 51:80.

2Division and Reunion, p. 90.

3 See Chapter VI, pp. 354 and 355.

4These receipts in 1835 were $14,757,600.75; in 1836 they rose to

$24,877,179.86, exceeding for the first and last time the receipts from

customs.

See Appendix, p. 493.

Also Dewey's Financial History, p. 217.

(384)

• 150
 

Banking and Currency in Ohio Before the Civil War. 385

 

Treasury such a flood of depreciated bank paper, that the Presi-

dent, convinced no doubt that there were no longer any specie-

paying banks, decided to assure the Treasury of sound money

by confining the land receipts to gold and silver. Accordingly on

July 11, 1836, the treasury department issued what is known as

the "specie circular", which directed the land agents thereafter

to accept nothing but specie in payment for public lands.⁵

Relation of Bank Note Inflation to Public Land Sales.

The conspicuous part played by land speculation during the in-

flation period prior to 1837, and its close connection with bank

note inflation have been noted in the preceding chapter.⁶  The

following diagram will illustrate how closely the receipts from

public land sales were related to the circulation of bank notes.

General Suspension of Specie Payment. - The check put

upon land speculation by the issue of the specie circular is in-

dicated by the sudden drop in public land sale receipts from

nearly twenty-five million dollars in 1836 to less than seven

millions in 1837.7 This of course seriously affected most of the

western banks, and through them many of those in the East.

The difficulty was increased by the credit entanglements of the

banks due to the distribution of the surplus, which began in

January, 1837.8 About the same time financial troubles in Eng-

land occurred and English creditors began to call in their loans,

many of which had been made in this country.⁹ This, together

with an adverse balance of trade, caused a heavy drain for coin

upon the banks in the seaboard cities with the result that, on

May 1O, 1837, the New York banks suspended specie payment.¹⁰

The banks in the large northern cities followed the next day and

those in all the rest of the country as soon as the news reached

them.11

 

5Division and Reunion-Wilson, p. 91.

6See pp. 355, 357, 358.

7 See Appendix, p. 493.

8See Chapter VI, pp. 356-7.

9See Chapter VI, p. 353.

10Men and Measures of Half a Century--McCulloch, p. 59.

11Ibid., Also Dewey's Financial History, p. 230.

25

• 151
 

386      Ohio Arch. and Hist. Society Publications.

• 152
 

Banking and Currency in Ohio Before the Civil War. 387

 

The panic of 1837. - The panic which had thus overtaken

the country was intensified by American crop failures in 1837

and 1838 and a period of depression followed, which lasted until

the summer of 1843.12  "Commercial distress was deep-seated

and recovery was slow; not until the latter half of 1838 did

banks generally resume specie payments; even then some of the

banks were unable to live up to their professions,-the banks

of Philadelphia for example suspended again October 9,

1839, and did not resume effectively until March, 1842; in this

vacillating and discouraging policy they were followed by many

others, particularly in Rhode Island, New Jersey, and the South

and West."¹³

Causes of Suspension of Ohio Banks. -The Ohio banks

were no exception to the general suspension that took place in

May, 1837. The causes which led to their suspension were

stated by the Ohio banks to have been the previous suspension

of all the eastern, northern, and southern banks and the con-

sequent impossibility of converting their resources into coin.14

They held that a continuance of specie payments under such con-

ditions would have subjected them to heavy and constant drafts

on their coin, and that, too, by banks of other states which had

closed their doors to that mode of payment. They also men-

tioned, as a contributory factor, the refusal of the land offices

to take bank paper in payment for public lands.15

The suspension by the Ohio banks was nearly simultaneous,

and without concert, showing that similar views and similar

feelings influenced them to the course they took.¹⁶ They were

generally considered to be in a sound condition at the time, and

by general consent continued the gradual reduction of their cir-

culation which they had begun in 1836.17

 

12 Crises and Depressions - Burton, p. 282.

13Financial History of the U. S.-Dewey, p. 232.

14Ohio Exec. Doc., 1837-8, No. 30.-Auditor's Rep't, Jan. 27, 1838.

It should be noted in this connection that the Ohio Statesman, (Co-

lumbus), of January 2, 1837, states that some of the Ohio banks had for

six months been refusing the payment of specie.

15 History of Banking in the U. S. - Knox, p. 675.

• 153
 

388        Ohio Arch. and Hist. Society Publications.

Ohio Bank Convention, June 1837. -On June 5, 1837 a

convention of the Ohio banks was held at Columbus, at which

twenty-three of the thirty-two chartered banks then in the state,

were represented. The banks present pledged themselves not to

part with any of their gold or silver; to manage their affairs so

as to be able to resume specie payments at "any moment;" to

receive of their customers in payment of debts the notes of all

the banks represented in the convention; to discountenance im-

provident issues of paper,-each bank to pay out the paper of

the others in preference to its own, so as to reduce the circula-

tion; and that each bank would furnish the others with a certi-

fied statement of its condition every sixty days.¹⁸

Statistics of Ohio Banks in 1837. - The condition of the

authorized banks of Ohio at three different periods in 1837 are

shown in the following table, from which it may be seen that

while the capital shows a continual increase, the circulation

shows a continual decrease from January to December.

 

CONDITION OF AUTHORIZED BANKS IN OHIO ON THREE DIFFEr-

ENT DATES IN 1837.

January.19       May.²⁰     December.20

Capital stock paid in..... $9,247,296 98 $10,870,089 25 $11,331,618 96

Circulation .............. 8,326,974 80                        7,697,261 30           6,221,136 90

Deposits ................. 3,464,450 21                         6,857,282 57           5,232,529 54

Due to banks............. 1,471,659 60                       1,142,965 76           481,344 38

Due Treasurer of U. S... 4,126,483 30                    1,279,894 75           348,905 67

Surplus fund .    ...........                                              143,913 12         114,878 12

Contingent fund ..........                 306,837 99            110,183 02         129,412 52

Expenses ...............                      ...........                   28,596 56             19,566 74

Profits ..................                        554,884 27            883,835 39         596,538 77

Discounts ................ 18,178,699 97                      19,505,662 84         17,212,694 23

Loans to directors and

stockholders .........  ............   2,388,830 52   1,466,174 56

 

16 Ibid.

17 Ohio Exec. Doc., 1837-8, No. 1, Gov. Vance's Message of Dec.

5, 1837. See also Chapter VI, p. 383.

18Dayton Journal, June 13, 1837.

19Ohio Exec. Doc. 1836, No. 42.-State Auditor's Report of Jan.

20, 1837.

20 Ohio Exec. Doc. 1837, No. 30.--State Auditor's Report of Jan.

27, 1838.

• 154
 

Banking and Currency in Ohio Before the Civil War. 389

 

Due from banks.......... 4,597,597 46                     2,763,011 43       1,340,338 12

Specie on hand.......... 3,153,334 94                       2,311,614 44       2,674,212 69

Notes of other banks on

hand ................... 1,710,827 48  1,151,485 93    864,597 08

Real estate and other in-

vestments ..............  271,558 96     398,074 04    387,427 26

From the above table it may be seen that the deposits show

a big increase from January to May, the time of suspension,

and then a decrease, not so large, however, from    May until De-

cember; and also, that while the specie on hand was less in May

than in January, it had regained some of this loss by December.

Repeal of Law prohibiting Small Notes.--Governor

Vance in his message of December 5, 1837 called attention to the

decrease of circulation and increase of specie made by the banks

during the preceding six months, remarking: "Our commercial

and agricultural wants require a circulation capable of expansion

today and contraction tomorrow."²¹     As a member of the Whig

party, again in power in Ohio, he favored the repeal of the small

note law, which, passed by the Democrats in 1836, had consid-

erably restricted the note issues of the banks. Accordingly the

legislature, on March 13, 1838,22 passed an act repealing the law

of March 14, 1836, which had prohibited notes less than $5.23

 

21 Ohio Exec. Doc. 1838-9, No. 1.

Ohio Statesman, Dec. 5, 1837.

It may be noted here that his critics claimed that he overlooked the

fact that part of the specie represented special deposits of the govern-

ment over which they had no control; and that much of the reduction of

circulation was due to an exchange of each other's notes between the

banks as soon as they had suspended.--Ohio Statesman, Dec. 8, 1837.

The Ohio Statesman of Feb. 16, 1838 gives statistics of certain banks

on May 11, 1837, which shows them to have had the following ratios of

circulation to specie:

Massillon Bank ............... $13 in paper to $1 in silver.

Canton Bank ..................                       231/2 in paper to 1 in silver.

Sandusky Bank ...............                       9 in paper to 1 in silver.

Urbana Bank .................                        111/4 in paper to 1 in silver.

Miami Exporting Co. (Cin.)...                4 in paper to 1 in silver.

Miami Export. Co. (Conneaut)              13 in paper to 1 in silver.

22Laws of Ohio, Vol. XXXVI, (1838), p. 55.

23 See Chapter VI, p. 382.

• 155
 

390       Ohio Arch. and Hist. Society Publications.

Partisan Nature of the Vote. - The partisan nature of the

contest over the repeal of the small note law is shown by the

vote on the act of March 13, 1838. In the Senate the 18 yeas

were all Whigs, and the 16 nays were all Democrats but one;

in the House the measure was passed by a unanimous Whig

vote, every Democrat voting against it.²⁴  Some light may be

thrown upon the reason for this vote by the fact that of 405

bank officials in the state in 1837, 341 were said to be Federals,

(Whigs), while only 64 were Democrats.²⁵

Resumption of Specie Payment.--The law of Mar. 13,

1838 provided that those banks which had surrendered the right

to issue bills less than $5 might again issue such if they would

redeem in specie. They were required to resume specie pay-

ment by July 4, 1838 provided the banks of New York, Phila-

delphia, and Baltimore should have resumed by that time.²⁶ But

the latter banks did not resume by that date. They held a con-

vention in Philadelphia July 23, however, at which they agreed

to resume specie payment August 13, 1838.27  The Ohio banks

had announced from the first that they stood ready to resume

specie payment as soon as resumption had taken place generally

in the eastern cities.²⁸  Accordingly at a convention held in

Columbus, soon after the Philadelphia bank convention, the

Ohio banks decided that they also would resume specie payment

on the 13th of August.²⁹ The banks represented in the Philadel-

phia convention did resume on that date; others followed their

example, and Niles' Register of August 18, 1838, says: "It is

certain that every solvent bank in the country will pay specie on

demand on or before the first day of January next."³0

 

24 Ohio Statesman, June 27, 1838.

25The number of Federals and Democrats among the Presidents,

Cashiers, Tellers, Directors, and Agents of each bank is given in the

Ohio Statesman of August 9, 16, and 23, 1837.

26 Laws of Ohio, Vol. XXXVI, p. 55.

History of Banking in the United States-Knox, p. 672.

27 Niles, 54:369, Aug. 11, 1838.

28 Ohio Exec. Doc. 1837-8, No. 30.

29Columbus Journal, Aug. 3, 1838.

30 Niles, 54:385.

• 156
 

Banking and Currency in Ohio Before the Civil War. 391

 

Statistics of Ohio Banks in 1838.-The following table

will show the condition of the Ohio banks on June 1, 1838, a

short time before their resumption of specie payment.³¹

 

Notes and bills discounted ..................... $14,968,675

Deposits   in  eastern  cities .......................                        2,078,899

Due   from     banks ......... .......................                          729,077

Bank notes    ....................................                                 1,145,281

Specie            ....................................... .                            2,879,209

Real and   personal estate ........................                          361,160

Other investments .............................                                       2,790

$22,165,091

Capital stock  paid  in ............................                           $9,835,199

Circulation .....................................                                   6,340,947

Deposits   .......................................                                   2,848,464

D ue  to    banks ...................................                                    624,501

Surplus      ........................................                                  1,152.619

Due   U.    S. Bank ................................                             744,643

Due   U. S. Bank  on  time .......................                                 618,718

$22,165,091

Suspension again in 1839. -The effects of the great re-

vulsion of 1837 were gradually subsiding, when the suspension

in Pennsylvania in October 1839, was followed by nearly all the

banks of the Southern and Western States.³² The Second An-

nual Report of the Bank Commissioners of Ohio, December

20, 1840 says: "With the exception of Ohio, the banks west and

south of New York have been in a state of suspension for the

last fourteen months. This fatal policy commencing in the city

of Philadelphia, where there is a vast amount of banking capital,

created a general panic in the West."³³   Even Ohio banks did not

entirely escape, but upon the suspension of the Philadelphia

banks in October 1839, several Ohio banks suspended specie

payment for a period of not over thirty days.³⁴ "The panic thus

created would undoubtedly have been followed by a general

suspension of all our banks, as in 1837," says the First Report

of the Ohio Bank Commissioners, "had it not been prevented by

 

31 Dayton Journal, June 12, 1838.

32 Ohio Exec. Doc. 1840, No. 21, p. 5.

33 Page 6.

34Ohio Exec. Doc. 1839, No. 22, p. 12.

• 157
 

392       Ohio Arch. and Hist. Society Publications.

the salutary operation of the law of the last session of the Gen-

eral Assembly."35

The Bank Commissioner Law. - The law here referred to

was that passed on February 25, 1839,36 which provided that the

amount of bills a bank might circulate at one time should not

exceed three times the amount of specie, exclusive of deposits,

in its vaults and actually belonging to the bank. In case of ex-

cess the directors were liable individually, and after them the

stockholders (in proportion to the amount of their stock), for

the amount of the excess. It also provided that the banks must

pay their notes in gold, silver, or current notes of other banks.

If they failed to do so for thirty days in one year they were to

be closed up. The Act provided for three Bank Commissioners

to be appointed by the Legislature, whose duty it was to visit the

banks, examine their books, and make regular reports. They

were given ample power to carry out the law.

First Annual Report of Bank Commissioners.- The first

annual report of these commissioners was made December 16,

1839^.37 In this report they say that one cause that increased

the drain of specie from Ohio banks and drove them to rapid

curtailment of their circulation was the hostile attitude they had

assumed toward each other, which course operated to strengthen

the distrust of them as it left the impression on the public mind

that they placed no confidence in each other.³⁸ They condemn

the policy pursued by the banks of issuing post-notes, payable

at a future day, often six or twelve months, and not bearing

interest, though paid out at par for the bank's own debts to de-

positors and needy borrowers.³⁹ They also call attention to the

evil of foreign bank notes,⁴⁰ and condemn the practice of cre-

ating bank capital by the stockholders giving what was called a

stock note; also, closely allied to the latter, the large loans and

discounts made to directors and other stockholders "almost un-

limited in amount and time of payment."⁴1

35 Ibid.

36Rev. Stat. 1841, p. 126.

37Ohio Exec. Doc. 1839, No. 22.

38 Ibid., p. 9.

39Ibid., p. 13.

40Ibid., p. 15.

41Ibid., p. 20.

• 158
 

Banking and Currency in Ohio Before the Civil War. 393 The following table taken from the report of the bank com- missioners in 1842 shows the extent of this loaning to stock- holders:   INDEBTEDNESS OF THE DIRECTORS AND OFFICERS OF EACH BANK, AT THE TIME OF EXAMINATION, AS PRINCIPALS, AND LIABILITY AS SECURITY, AND THE AMOUNT OF STOCK HELD BY THEM.42

• 159
 

394       Ohio Arch. and Hist. Society Publications.

"Too large loans to a few individuals," said the commission-

ers, "often renders precarious the solvency of the banks, and

this is particularly the case where the directors and officers

monopolize in a great measure their available resources-and

the spirit of speculation, fostered and encouraged by heavy ac-

commodations from them has done more within the last few

years to place the whole business of the country in the hands of

a few, and to overthrow all the sound principles of trade, con-

vulse the community, and prostrate the laboring classes than all

other causes combined."⁴⁵ They found it a "general source of

complaint" that a "very limited number of persons are permitted

to obtain a great proportion of the discounts from our banks."⁴⁶

They thought that as many banks were created in the state by

persons who wished to borrow instead of lend money, thus

bringing about large issues of notes without any liability for

their redemption, the law of February 25, 1839 should be

amended. They believed that no bank of issue was safe unless

there existed a direct and unqualified liability to the public

creditor on the part of every stockholder and a special liability.

of the directors and officers to the stockholders not concerned

in its management.⁴⁷ "The great cardinal principle of individual

liability," they said, "is the only true foundation of safety."

This report shows how far from perfect was the banking

system in the state at that time and also forshadows later

action of the legislature regarding reforms. The passage of

the law requiring examinations and supervisory control of the

banks elicited some degree of hostility and in particular in-

stances, manifestations of determined opposition to the perform-

ance of its requirements. The refusal, however, of the Supreme

Court to grant an injunction against an examination of the La-

fayette Bank of Cincinnati by the Bank Commissioners, prob-

ably conduced to a general acquiescence in the constitutional re-

quirements of the law.⁴⁸

 

45 Ohio Exec. Doc. 1839, No. 22, p. 21.

46Ohio Exec. Doc. 1839, No. 22, p. 22.

47Ibid., p. 24.

⁴⁸Ohio Exec. Doc. 1839, No. 22, p. 5.

• 160
 

Banking and Currency in Ohio Before the Civil War. 395

 

Re-Enactment of Law     forbidding Small Notes.-The

law, however, was insufficient to remove all the evils existing in

the banking system in Ohio. It was amended at various times,

notably the act of March 23, 1840 forbidding passing of notes

less than $5 or of post notes, or of notes not payable in specie,⁴⁰

and requiring banks to make out statements once a month or

oftener including such information as the commissioners should

require.⁵⁰ But it was becoming evident to all concerned that

some more radical reform was required.

Messages of Governor Shannon.-The Governor's Mes-

sage of December 1839, after considering the project of a State

Bank and that of Free Banking came to the conclusion that a

system  of Independent Banks, properly restricted, under the

supervision of Commissioners, and at all times under the control

of the legislature, if not the best system theoretically, would yet

be the best then within reach.⁵¹ Again in his Message of De-

cember 8, 1840, Governor Shannon remarked: "The evils which

have been inflicted on the community through the instrumentality

of banks of circulation have become so great and alarming that

the question will soon be between reformation and destruction."⁵²

"If the effort to reform our banks should prove unsuccessful

the remedy will be found in the substitution of banks of dis-

counts and deposits for those of circulation."⁵³  He argued that

the limited liability of the stockholders not only furnished an op-

portunity to commit fraud with impunity, but held out an induce-

ment to excessive banking,⁵⁴ and added: "Bankers should be

placed on the same footing with other individuals; made re-

sponsible for their debts like other citizens; and, being so re-

sponsible, they would conduct their business with more prudence

and regularity, and consequently with more safety to the pub-

lic."⁵⁵ But he opposed a State Bank and in his Inaugural

49Laws of Ohio Vol. XXXVIII, p. 113.

See also Niles, 58:115, Apr. 25, 1840.

50Rev. Stat. of 1841, p. 132.

51 Niles, 57 :279, Dec. 28, 1839.

52 Ohio Exec. Doc. 1840, No. 1, p. 8.

53 Ibid., p. 9.

54Ibid., p. 20.

55Ibid., p. 21.

• 161
 

396       Ohio Arch. and Hist. Society Publications.

Address of December 14, 1842 declared against a State Bank in

any form, favoring a system of local banks with increased per-

sonal liability and more safeguards.

Message of Governor Corwin. - Gov. Thos. Corwin in his

inaugural address⁵⁶ December 16, 1840 declared it the duty of

the Legislature at once to establish some permanent system of

banking. He analyized the objections to banks as instruments for

currency as follows:

1. The use of their credit to extend their circulation lead-

ing to suspension and depreciation.

2. Expanding and contracting their circulation causing

fluctuation in the prices of labor and property.

Explaining these away, on the whole, he suggested two plans

that had been proposed:

1. A State Bank with branches (State to own not over 1/5

of the stock).

2. Re-charter of the safest of the then existing banks.

As safeguards he suggested: limited dividends to stockhold-

ers, the state to get the rest; and limited circulation as compared

to capital.

Question whether to adopt State Bank or Safety Fund

System.-The Ohio State Journal in Jan. 1841 said: "The

absorbing question here among those desirous to place the mon-

eyed institutions of the State in a safe and useful condition is

whether a State Bank similar to Indiana's or whether the present

banks (or those of them entitled to public confidence) shall be

united in a kind of New York safety fund system with such

modifications, however, as shall secure a larger amount of specie

in the vaults of the banks in proportion to the amount of paper

circulation than is exhibited in the report of the New York

banks. The probability is that the committee to whom this sub-

ject is referred will report a bill on the latter plan; chiefly be-

cause the finances of the State are thought to be unfavorable to

the former. The great difficulty appears to be in determining a

rule by which the real available means of the present banks may

be ascertained, in order to fix the amount of circulation to which

56 Ohio Exec. Doc. 1840, p. 8.

• 162
 

Banking and Currency in Ohio Before the Civil War. 397

each may be entitled, when presenting claims to the board of

control for admission into the family of solvent banks."⁵⁷

Currency Fluctuations in      Ohio.-That such difficulty

may well have existed can be seen from         the following table

showing the amount of currency circulating in Ohio in 1839 and

40:58

Currency.                                                 Premium on

June 1, 1839 ........... $9,168,903                                                           Specie.

Sept. 30, 1839..........               8,107,692 decrease-          $1,059,300

Jan. 1, 1840 ...........                 6,624,987 decrease=          1,482,515   61/8 and 7

April 1, 1840...........                5,956,398 decrease=             688,597    7½ and 8

May 1, 1840............               6,391,205 increase=             431,808    6 and 61/2

July 1, 1840............                6,362,770 decrease=            28,436      4 and 41/2

October 1, 1840 ........             6,686,756 increase=             318,986    31/2 and 4

 

Yet, notwithstanding the steady reduction in currency and

bank accommodations evinced in this table, the amount of busi-

ness done in the State was large, and during the last few months,

of 1840, constantly increasing.⁵⁹

Exports from Ohio in 1840.--The following table of

Ohio statistics for products exported from the State in 1840

will indicate something of the volume of business done in the

State during that year alone:

 

Bread stuffs, mostly wheat and flour; estimated value...... $7,098,810

Other agricultural products, including distilled spirits.......  1,874,402

Products of domestic animals, chiefly pork, lard, butter,

cheese,  and  wool ......................................                 2,315,069

Domestic animals driven from the state on foot............      2,600,000

Products of mines and forests .........     .............                   782,700

M anufactured  articles  .....................................                  5,000,000

 

Total value of products of Ohio exported in 184060 ......$19,670,981

 

Effect of Internal Improvements.-Moreover for fifteen

years Ohio had been engaged in Internal Improvements with an

 

57Niles, 59:342, Jan. 30, 1841.

The bill referred to was reported soon after, (p. 342).

⁵⁸Niles, 59:219, Dec. 5, 1840.

59 Ibid.

60 Annual Report Commissioners of Canal Fund, Jan. 21, 1842, p. 18.

• 163
 

398        Ohio Arch. and Hist. Society Publications.

average expenditure of nearly $1,000,000 a year, the effects of

which are thus described in the Annual Report of the Commis-

sioners of the Canal Fund:61 "They have opened new channels

of intercommunication between different portions of our State,

developing the value and bringing into use the treasures of ex-

tensive coal formations- furnishing new avenues of foreign

trade, with every facility for the various transactions of business,

in almost every quarter of the State. By these means of com-

munication, our citizens have been enabled to throw their pro-

duce into the northern, eastern, and southern markets, at an

expense so greatly diminished as to increase its value at home

twenty-five to fifty per cent."⁶²

Canal Receipts and Shipments at Cleveland. - The rapid

and usually successive increase of production in the state may

be inferred from the following receipts at Cleveland via the

Ohio Canal :63

1838............287,465 bbl. flour; 1,229,012 bu. wheat; 73.292 bu. coal

1839............264,887 bbl. flour; 1,515,820 bu. wheat; 134,881 bu. coal

1840............505,461 bbl. flour; 2,155,820 bu. wheat; 172,206 bu. coal

The increase of imports also is indicated by the following

shipments from   Cleveland via the Canal :64

1837................... 62,977 bbl. salt and 10,757,386 lbs. merchandise

1838................... 63,465 bbl. salt and 18,875,286 lbs. merchandise

1839...................109,916 bbl. salt and 19,125,852 lbs. merchandise

1840................... 77,254 bbl. salt and 10,783,514 lbs. merchandise

1841................... 59,773 bbl. salt and 15,164,747 lbs. merchandise

Low Prices and Hard Times. -The falling off in these

imports in 1840-41 is probably due partly to increased home

production,⁶⁵ but largely to the depressed prices of home prod-

61 Report of Dec. 30, 1843, p. 13.

62In 1842 Ohio produced 1,237,712 tons of hay; 5,264,766 lbs. of

tobacco; 7,277,309 bu. of potatoes; 19,381,035 bu. of oats; 25,387,439

bu. of wheat; 39,424,221 bu. of corn.-Report of Canal Fund Commis-

sioners, Dec. 30, 1843, p. 11.

63 Sixth Report Board of Public Works, Jan. 2, 1843, p. 41.

64Ibid., p. 42.

65 Ohio produced in 1840--297,350 bu. salt, value $89,205; 1850--

550,350 bu. salt, value $132,293; 1860-2,000,000 bu. salt, value $500,000.

-Report of Commissioner of Statistics 1859.

• 164
 

Banking and Currency in Ohio Before the Civil War. 399

ucts. For example, the price of wheat at Cincinnati, which had

risen from 62c a bushel in 1834 to $1.25 in 1836, dropped to 65c

in 1839 and 60c in 1840; flour dropped from $8.25 a barrel in

1836 to $3.60 in 1840; and hogs from $7 a cwt. in 1836 to $4.75

in 1840, $2.25 in 1841, and $1.75 in 1841.66

The Second Annual Report of the Bank Commissioners of

Ohio, December 20, 1840, says: "The past two seasons have

been distinguished by unusual agricultural productiveness in our

own State, which, under circumstances of less production in

other agricultural states of the Union, would have tended to a

rapid discharge of the obligations of our citizens to the eastern

cities In consequence of an equal production in other states, as

well as abundant crops in other parts of the world, the prices of

the staple articles of subsistence have declined."⁶⁷

So it cannot be shown that the low prices and hard times

of 1841 and 1842 are entirely due to banking, but the fact that

in the face of the larger production and increased business in

the state the specie in the banks was reduced from $3,153,334

in 1837 to $1,052,767 in 1841 and their circulation from $9,247,-

296 to $3,584,34168 during the same time, has much significance

if there is anything in the quantity theory of money at all. And

the following quotation from Niles' Weekly Register of Decem-

ber 31, 1842 seems to justify the inference:69 "Hard Times in

Ohio. The circulation of the sound banks is reduced to a very

trifling amount, and as the currency is almost exclusively of

hard money, the value of property of every description is cor-

respondingly depressed.  The distress which is thus brought

upon debtors may be understood from the facts."⁷⁰

Agitation for New Banking System in Ohio. - There was

evident need of a remedy soon. The charters of nearly all the

banks in Ohio would expire in 1843, and the interests and busi-

ness of the people demanded that the capital of those banks

should be retained in that business in some form. "A large por-

 

66 Third Annual Report of Ohio Commissioner Statistics 1859, p. 96.

See also Cincinnati Daily Enquirer, Feb. 23, 1846. Also Appendix, p. 519.

67 Ohio Exec. Doc., 1840, No. 21, p. 5.

68 Report Comptroller Currency, 1876, p. CXVI.

69Niles, 63:280.

• 165
 

400       Ohio Arch. and Hist. Society Publications.

tion of this capital," says Governor Corwin in his message of

December 7, 1841, "is held by owners in other states. Should

the capital of those banks be withdrawn from its accustomed

uses, the portion of it owned abroad be taken home, and no

means of similar investment provided, results must follow more

disastrous to the State than any, even in the worst times, which

it has hitherto encountered."⁷¹

In the Ohio Senate in April 1841 the Bank Committee pre-

sented a bill to re-incorporate the banks of the state on the so-

called safety-fund principle; but there was also a minority re-

port,72 and a week later the legislature adjourned after post-

poning all the bank projects.⁷³ The Springfield Ohio Republican

in October 1841 gave the aggregate banking capital of Ohio as

$16,000,000,⁷⁴ and added that nearly the whole amount of bank-

ing capital required for the trade of the community was about

to be withdrawn by the expiration of charters January 1, 1843.75

The Ohio State Journal commenting on the same thing said:

"A fearful time ahead! It must unavoidably derange the busi-

ness of Ohio to such a degree that its blighting effects will be

felt for fifteen years to come."⁷⁶ Governor Corwin in his message

of December 6, 184277 discusses the expiration of the bank char-

ters January 1, 1843; says the withdrawal of the $5,000,000 bank

capital, much of which was owned in other states, would in-

crease the existing embarrassments, retard the payment of debts,

sink still lower the market value of property, and hurt debtors

without helping the creditor class; and he recommends to the

legislature a permanent system of safe currency "composed of

coin, and Bank paper convertible into at the pleasure of the

holder."

 

71 Ohio Exec. Doc., 1841-2, No. 1, p. 13.

72Niles, 60:71, Apr. 3, 1841.

73Ibid., p. 90, Apr. 10, 1841.

74The capital of the incorporated banks of Ohio in 1841 was said

to be $8,103,243.- See Appendix, p. 511.

75Niles, 61:119, Oct. 23, 1841.

76Niles, 6:119, Oct. 23, 1841.

77Ohio Exec. Doc., 1842, No. 1, pp. 7 and 8.

• 166
 

Banking and Currency in Ohio Before the Civil War. 401

 

Third Annual Report of Bank Commissioners.- In their

third annual report, December 17, 1842,78 the bank commission-

ers stated that there were then in Ohio twenty-three banks which

redeemed their notes in specie when demanded; that the charters

of thirteen of them would expire January 1, 1843, those of two

others would end January 1, 1844, four in 1850, two in 1854,

and two in 1855; that if any were to be renewed the time was

favorable to throw around them such restrictions and safeguards

as would best guard against bankruptcy, fraud, etc.⁷⁹  They

added: "Whatever may be the future policy of the State in

regard to supplying the places of the expiring and broken banks,

it would seem to be pretty clearly settled that public opinion is

adverse to the present unrestricted system of banking."  Some

of the old banks were twenty-five years old and had several times

suspended, and there were large amounts of old debts, par-

ticularly among officers, directors, and stockholders, that were in

need of being closed up. In view of these things the commis-

sioners thought that "both the interests of the public and the

future solvency of the banks would be better secured by the

incorporation of new banks than by the renewal of the old."

They said that "the great and fundamental error in the banking

system may be traced to the want of individual liability of the

directors and stockholders, to pay the debts they contract, and

redeem the paper they put in circulation. -The same man, in

his corporate capacity, might be poor, but, as an individual he

might be rich; and his wealth, in a great measure, drawn from

the profits or spoils of the corporation of which he was a mem-

ber."⁸¹ The former charters of the banks had been granted for

a specific period,⁸² and were too vague and indefinite in relation

to the capital stock, the commissioners thought; there was too

much uncertainty, they said; consequently they thought a radical

change in the system was necessary.83

 

78Ibid., No. 15.

79Ibid., p. 6.

80 Ibid., p. 7.

81 Ohio Exec. Doc., 1842, No. 15, p. 13.

82Ibid., p. 7.

83Ibid., pp. 8 and 10.

26

• 167
 

402        Ohio Arch. and Hist. Society Publications.

Taxes paid by Ohio Banks, 1831-43. - One of the changes

the commissioners recommended was in regard to taxation. The

banks, they said, had not paid their share of the taxes in propor-

tion to the capital invested. "The rate of assessment for State,

canal, and school purposes is five mills on the dollar," they said,

while the banks pay less than half the tax on other property.⁸⁴

The following table shows the amount of tax paid by all

the Ohio banks on dividends reported from June, 1831 to No-

vember 15, 1843, as compared with the amount of banking

capital.

85 Tax paid                                                        87 Rate

on dividends.  86 Capital.                               in mills.

1831  ......... .. ...............                          $3,621.857 ..........                      ......

1832  ..................    ..                              7,066.045         ..........                ......

1833  ................                                      12,998.429       ..........                ......

1834  ...........................                           14,737.30         . ....                    .....

1835  ...........................                           25,836.405       $5,819,692        4.44

1836  ...........................                           71,317.74         8,369,744          8.52

1837  ...........................                           57,698.01         9,247,296          6.25

1838  ...........................                           50,989.74         11,331,618        4.5

1839  ..........................                            59,143.40         10,153,846        5.82

1840  ...........................                           30,784.71         10,507,521        2.92

1841  ...........................                           31,640.29         8,103,243          3.7

1842  ...........................                           14,074.46         7,034.083          2.0

1843  ...........................                           19,234.33         6,805,352          2.82

 

Total  .....................                       $398,142.716

 

This shows the rate of tax paid by the banks to have been

lower in 1840 and 1841 than in the preceding years, if we base

our estimates on capitalization. But if we consider that the first

column represents the total tax paid by all the banks, while the

second includes the capital of only the banks reporting, we may

assume that the actual rate on capitalization paid by the banks

was much lower than the table indicates.      For example in the

year 1841 the Springfield (O.) Republican estimated the total

 

84Ibid., p. 9.

85 Special Report of Ohio State Auditor, Jan. 20, 1844.

86 See Appendix, p. 511.

87 Figured from the first two columns.

• 168
 

Banking and Currency in Ohio Before the Civil War. 403

banking capital in the state at $16,000,000,⁸⁸ whereas the table

gives only $8,000,000. If we figure the rate of tax paid by the

banks that year on the former figure the rate appears as only

1.85 mills on the dollar.

Difficulty in collecting Taxes from  the Banks.-But

whatever the rate may have been on the actual capitalization, it

is certain that under the law of March 12, 1831 the State found

a good deal of difficulty in getting the banks to report their

dividends. The state auditor's report of March 4, 1839 gives

certain resolutions passed by the legislature, one of which is the

following:89 "Resolved further, that the Auditor be and he is

hereby required to cause to be prosecuted all such banks, insur-

ance, and bridge companies as have not complied with the pro-

visions and requisitions of an Act entitled 'An Act to tax banks,

insurance, and bridge companies,' passed March 12, 1831, either

by totally neglecting or refusing to make a return of their divi-

dends, or which have made incorrect returns of such divi-

dends, after giving them due notice of the demand claimed by

the State, and their refusal to pay the same."

Moreover the state bank commissioners, in their report of

December 16, 1839, speaking of dividends and other profits, say:

"The investigations thus far have disclosed nearly $20,000 due

from the banks, having been withheld due to misconstruction of

the law or noncompliance in reporting dividends to the Auditor.

This neglect or refusal to make reports according to existing

laws may render necessary a change in the tax law for banks,

and it is submitted whether it would not be advisable to tax the

capital stock hereafter or the amount of money loaned, in the

same manner as individuals are taxed."⁹⁰ That conditions did

not improve much in this respect is evidenced by the report of

the commissioners three years later in which they recommended

a radical change in the whole banking system.

Bank Failures in 1841-2. - During the years 1841 and 1842

many Ohio banks failed. The bank commissioners attributed

this largely to the fact that their capital was so invested as not

 

88Niles, 61:119.

89Ohio Exec. Doc., 1838-9, No. 79.

90Ibid., 1839, No. 22, p. 8.

• 169
 

404       Ohio Arch. and Hist. Society Publications.

to be readily available in case of emergency. "In every instance,"

they said in their annual report of December 17, 1843, "not only

the capital, but also the active means, including much of their

deposits, were found to have been diverted from their legitimate

uses, and to have become sunk in a suspended debt-such as

judgments, mortgages, and real estate." "Injudicious loans and

discounts, at that time were not confined to any one bank; but

the same recklessness of accommodation, to a greater or less

extent, had extended itself to all." The effects of those events,

the commissioners observed, "will be lasting, as they have shaken

the public confidence in the soundness and stability of our whole

banking system."91

Various attempts were made by the legislature to compel

resumption.⁹² In March 1842 the Cincinnati Gazette was com-

plaining that the resumption law of Ohio had not yet put any coin

in circulation; but that Ohio bank notes had disappeared and

that the currency then consisted of Indiana notes, while distress

was about universal.03  The reduction in the note circulation

which had been going on in the state for several years, had failed

to give Ohio a specie currency. The vacuum created was in

part filled with the best notes of other states. The change merely

substituted the paper of the banks of other states for that of her

own banks.⁹⁴ There arose once more a "clamor for more banks,

more bank facilities, a new and more enlarged banking system."⁹⁵

This was not a new cry by any means. At the sessions of 1835-6,

1836-7, 1838-9, and 1840-41, petitions for more banks had been

crowded on the legislature in large numbers.⁹⁶

 

91 Ohio Exec. Doc., 1813, No. 38, p. 8.

92 Niles, 60:71 - 61:352 - 61:400.

February 18, 1842 an Act was passed to enforce specie resumption

which provided for receivers for failed banks.-Knox, p. 673.

The latter was a fruitful subject of abuse among a large and re-

spectable class of citizens.-Report of Bank Commissioners, Dec. 17,

1843, p. 7.

93Niles, 62:80, Apr. 2, 1842.

94Niles, 65:148, Nov. 4, 1843.

95 Ohio Exec. Doc., 1844, No. 1. -Gov. Bartley's Message, p. 17.

96Ibid. Also, Old School Republican and Ohio State Gazette (Co-

lumbus), Dec. 5, 1844.

• 170
 

Banking and Currency in Ohio Before the Civil War. 405

 

The Bank Question in Ohio involved in Party Politics.

-The subject of banking was more agitated in Ohio than in

any other state in the Union at that time.97  And certainly there

was plenty of need for wise legislation. But the question "be-

came involved, more than in any other state, with the fate and

fortune of political parties. With but little regard to the require-

ments of the community, the conduct of existing institutions, or

the true merits on which the question should have turned, - the

whole was made to depend upon the success of one, and the

defeat of the other political party in the State. The anti-bank

party succeeded at the polls, and their representatives refused to

recharter any of the existing institutions."⁹⁸

The General Banking Law of 1842. - On Mar. 7, 1842 a

general law to regulate banking was passed. It defined the

powers of banks; required all capital to be paid in gold or silver

before the bank could begin business; provided for paying divi-

dends; the proportion of circulation to capital, and the rate of

interest; a special tax of 1/2% on capital, and such taxes on circu-

lation as the legislature should impose; and the creation of a

safety fund. Finally, the president, directors, and officers were

made liable for any loss of capital and mismanagement.99

Governor Thomas W. Bartley in his message of December

3, 1844, said of this act that it was "designed to supersede the

necessity of special charters, fixing general law, the powers,

liabilities, and terms for future banks, and imposing rigid restric-

tions on the abuses heretofore practiced in banking. This law

was alleged to be too severe and on February 21, 1843 it was

amended,¹⁰⁰ and a number of the prominent citizens, belonging

to companies which had petitioned the Legislature for a renewal

of their charters, were authorized to organize and commence the

business of banking. They declined, however, to engage in busi-

ness on the conditions imposed, on account of the unsettled state

of public sentiment on this subject, and with a view of obtaining

banking privileges at a subsequent period, upon terms more in

 

97Niles, 65:243, Dec. 16, 1843.

98 Editorial in Niles, 67:368.

99Laws of Ohio, Vol. XL, p. 39. Also Knox, p. 673.

100Laws of Ohio, Vol. XLI, p. 36. Also Knox, p. 677.

• 171
 

406        Ohio Arch. and Hist. Society Publications.

accordance with their own views."¹⁰¹ It is generally considered,

however, that the reason why no one cared to organize a bank

under the new law was the clause providing for the individual

liability of stock holders. Niles says in his issue of February 8,

1845,-"No man would trust himself or his property in such a

scheme, and not a cent of the stock was subscribed."¹⁰²    Like-

wise in the issue of December 16, 1843, he says of the law of

1842 providing for new banks with individual liability of stock-

holders: "This project of course failed. Badly as good banks

were supposed to be wanting there were no monied men to be

found so foolish as to risk their all in a scheme of that kind.

The law remained a dead letter, and the State has to depend

upon neighboring States for the most of its circulating

medium. "103

The law of February 21, 1843 was passed by a strict party

vote. The vote on the bill stood:

In   the  House...........................                         Yeas 36        Nays 31

In   the  Senate...........................                         Yeas  19       Nays  12

 

Total vote  .............................                            Yeas 55        Nays 43

Three Whigs and two Van Buren Democrats were absent

and two Democrats voted with the Whigs.¹⁰⁴     Of the others the

Democrats voted for the law and the Whigs against it.105

Statistics of Ohio Banks in 1842. - Near the close of 1842

there were twenty-three specie paying banks remaining in the

state. The following table shows their condition.

101 Ohio Exec. Doc., 1844, No. 1, p. 12.

Examples of old banks authorized to organize but which declined

to do so were the Bank of Dayton and the Bank of Chillicothe; while

one of the new ones authorized, which also did not organize, was the

Valley Bank of Ohio at Eaton.-Local Laws of Ohio, Vol. XLI, pp.

150, 177, 222.

102 Niles, 67 :368.

103 Niles, 65:243.

The banks, however, gave other reasons for objecting to the general

banking law, e. g., the tax on both dividends and capital, as well as

various other burdens and restrictions.--See Rept. of Bank Commis-

sioners, Dec. 17, 1843.

104 Niles, 64:4, Mar. 4, 1843.

105 Niles, 63:340, Jan. 28, 1843.

• 172
 

Banking and Currency in Ohio Before the Civil War 407

• 173
 

408       Ohio Arch. and Hist. Society Publications.

Expiration of Charters of Majority of Ohio Banks in 1843.

On January 1, 1843, the charters of thirteen of the Ohio banks

expired,¹⁰⁷ and two more expired January 1, 1844, leaving only

eight in the state. This closed the period of banking in Ohio

with note issue based on general assets, and consequently one

period of Ohio's banking history. During the period ending at

this time the banks were organized by special acts of the legis-

lature, which granted charters for specific periods of time. The

system had proved unsatisfactory, not, however, because the

note-issues were based upon general assets, but because of the

practical defects of a lack of uniformity, a lack of any adequate

provision for redemption, and the undue expansion of credit

upon slender resources. These were errors commonly found in

new countries. They were in large part due to the frontier con-

ditions then prevailing in Ohio and most of the rest of the

country. The economic development of the country was in an

experimental stage, and the rules of sound banking had not yet

been worked out even in the older countries of Europe, much

less on the frontiers of the Ohio and the Great Lakes. A new

country, as Ohio was at that time, poor in specie and in loanable

capital, could scarcely be expected to avoid adopting monetary

devices which under better conditions would not be tolerated.

During most of the period distrust had been general, leading to

inconvenience in business transactions. There being no security

for note issue except general assets, when a bank failed its notes

were usually worthless. The failures however, were not always

due to mismanagement. Often borrowers could not pay, and

many times the banks were not able to realize on their property.

Many of the banks had been organized for purely speculative

purposes, and over-issue was frequent though by no means uni-

 

107 Referring to the thirteen banks whose charters expired January 1,

1843, the Cincinnati Gazette, remarked that they call up "the pleasing

associations of honesty, sound currency, and general popularity"; that

they redeemed all their notes ever issued; that all but one, the Commercial

Bank of Scioto, promptly met their engagements, and most of them re-

turned 100 cents on the dollar on their capital stock, and some much

more. At least one of them, the Farmers' and Mechanics' Bank of Steu-

benville, did not suspend specie payment in 1838 and 1839.-Bankers'

Mag., 4:296, October, 1849.

• 174
 

Banking and Currency in Ohio Before the Civil War. 409

 

versal. The people of the state knew that something was wrong

with their banking system, and note issue being the most prom-

inent function of banks at that time, they concluded that the

remedy lay in adopting a new system wherein the note issue

should not depend on general assets alone, but should be secured

by a safety fund or a deposit of bonds. This, however, brings

us to the second period of Ohio's banking history, which will

be treated of in the next part of this monograph.

• 175
 

 

• 176
 

PART II. BANKING IN OHIO UNDER

GENERAL LAWS. 1843-1863.

 

NOTE ISSUE SECURED BY SAFETY FUND

OR BOND DEPOSIT.

(411)

• 177
 

 

• 178
 

CHAPTER VIII.

CONDITIONS PRIOR TO 1845.

Specie-paying Banks in Ohio in 1843 and 1844.-- Of the

twenty-three paying banks in Ohio with a total capital of $7,034,-

083 in December 1842, the charters of thirteen expired January

1, 1843, leaving but ten authorized banks in the state. The cap-

ital of these ten banks in December 1843 was $3,459,773, of which

$1,673,872 was owned by residents of the state and $1,785,901

by non-residents. The charters of two more banks, the Bank

of Geauga and the Commercial Bank of Cincinnati, expired

January 1, 1844, further reducing the banking capital of the state

by $1,155,028.1 Thus in January 1844, there were left in Ohio

but eight authorized banks with a capital of $2,304,745. The

names of these banks and the dates their charters were to expire

are shown in the following:

 

AUTHORIZED BANKS IN OHIO IN 1844.

Termination

Name.²                         of Charter.

Bank   of   Xenia .......................................... M ay                                  1, 1850

Bank   of   Sandusky ..................................... M ay                                  1, 1850

Bank of Wooster ...................................... June 1, 1850

Bank  of  Norwalk ...................................... June                                                                                       1, 1850

Lafayette   Bank of   Cincinnati ............................ Jan.                            1, 1854

Clinton               Bank                                                                              of            Columbus  ............................. Jan.           1, 1854

Bank   of   Circleville ...................................... M ar.                               1, 1855

Bank   of   M assillon ....................................... June                                1, 1855

 

During 1843 and 1844 these banks were in good condition.

They were prompt in meeting their engagements, and there was

 

1Ohio Exec. Doc., 1843, No. 38.

2 Charters of first five contained provisions making them subject to

amendments by general restrictions. Charters of remainder contained

no provisions making them subject to legislation by amendment except

as to taxation or prohibition of issue of bills under $5.-Special Report

Bank Commissioners, Dec. 24, 1842.

(413)

• 179
 

414       Ohio Arch. and Hist. Society Publications.

but little speculation in real estate and new enterprises. Most

of the bank loans were on bills payable in eastern cities and

founded on some actual transaction. Scarcely a bill was returned

dishonored. In some instances accommodation paper was dis-

counted and renewals made where the parties were unquestion-

ably good, but probably nine-tenths of the loans and transactions

were confined to business paper and the purchase of bills on the

actual shipment of produce, or the driving of stock to a northern

or eastern market.³

Economic conditions in the State.-At this time Ohio

was the first agricultural State in the Union. The completion

of the Erie and the Ohio canals had given interior and northern

Ohio access to markets and made passible diversification of ag-

riculture and industry. In 1842 the state produced 1.2 million

tons of hay, 5.3 million pounds of tobacco, 7.3 million bushels

of potatoes, 19.4 million bushels of oats, and 39.4 million bushels

of corn, besides various other large crops. One great source of

wealth in the state was the production of wheat. Of the 102.3

million bushels of wheat produced in the United States that

year, Ohio produced about 25%, or 25.4 million bushels. Her

nearest rivals New York and Pennsylvania together produced

only 22 million bushels, while the next two, Indiana and Virginia,

together yielded only 16 million bushels.⁴

The raising of live stock was also an industry of great im-

portance in Ohio during this period. Before the opening of the

canals the remoteness from markets had made the price of grain

so low that the most profitable use to be made of it was to feed

it to cattle, horses, and hogs, which could then be driven on foot

to distant markets. This industry was still an extensive one.

One of its centers was Ross County in the Scioto Valley, where

the stock business of the West had its origin.⁶ Chillicothe was

the county seat of Ross County. Madison County also was es-

 

3 Annual Reports of Bank Commissioners, Dec. 17, 1843 and Dec.

16, 1844.

4Ohio Exec. Doc., 1843, No. 25, pp. 10 and 11.

5Howe's Historical Collections of Ohio, Vol. II, p. 511.

• 180
 

Banking and Currency in Ohio Before the Civil War. 415

 

pecially a grazing county, where for years prior to 1856 large

herds of cattle were raised and shipped to eastern markets.6

Cleveland's position on Lake Erie at the end of the Ohio

Canal and at the meeting of important stage lines between the

east and the west and the south had already made it the mart

of the greatest grain growing state in the Union. Its business

by canal and lake was already large and constantly increasing.

In 1840 more than 2,000,000 bushels of wheat had arrived at

Cleveland via the canal, and the year before over 19,000,000

pounds of merchandise had been shipped from that point via

the canal.⁷ The number of arrivals by lake in 1845 was 2,136,

of which 927 were steamers. The tonnage then owned at this

port amounted to 13,493, and the total annual value of its imports

and exports by the lake was over $9,000,000.8

The great metropolis of the state, however, was then Cin-

cinnati. It had long been the center of the pork packing indus-

try of the United States and had become known as Porkopolis,

a name it retained until after the Civil War when Chicago be-

came the great packing center. Cincinnati was also a center of

steam-boat building and received extensive imports of goods from

the east and exported the surplus crops of the two Miami Valleys

in Ohio and the Licking Valley in Kentucky. It was already an

extensive manufacturing place and thousands of dollars worth

of its manufactured goods were annually sent into the upper

and lower Mississippi country.⁹

Exports and exchange operations. - At this time Ohio

was the third state in the Union in population, having in 1840

over a million and a half of inhabitants. Although during the

preceding decade Ohio's population had increased 62%, or nearly

twice as fast as the country as a whole,¹⁰ yet her agriculture and

other industries had developed still more rapidly, so that the

 

6Ibid., p. 165.

7Ohio Canals, p. 175.

8Howe, Vol. I, pp. 498 and 504.

9Howe, Vol. I, p. 758.

10 See page 353.

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416       Ohio Arch. and Hist. Society Publications.

state had a large surplus to export. Her exports alone now

amounted to over $20,000,000 a year.11

To take care of this large export business the eight au-

thorized banks remaining in the state had near the close of 1844

a capital stock of $2,321,192 and a circulation of $2,260,403,

coin equivalent.12  The export transactions, however, were ef-

fected chiefly by bills of exchange, thus requiring a comparatively

small amount of capital. The bills of exchange were sold to the

banks for bank notes and the proceeds of the bills after payment

constituted a fund to be applied to the redemption of the cir-

culation, or an eastern fund to be drawn on to meet the interest

of the state debt, or to supply the wants of merchants. The

amount of this kind of paper negotiated through the state each

year was very large. One northern bank in 1843 negotiated bills

of exchange amounting to $1,200,000 and a central bank $1,-

000,000. Additional large amounts were negotiated by other

banks and by individuals. In the city of Cleveland alone the

amount was $6,000,000.¹³

Foreign and Unauthorized Bank Circulation. - That the

circulation of the authorized banks was not sufficient to handle

all this business is indicated by the large amount of foreign

bank paper circulating in Ohio. In December 1844 this was

reported by the bank commissioners at $7,473,483, much of

which was made up of issues of doubtful credit and suspicious

origin.¹⁴  In one part of the state a company organized as a

bank was engaged in the purchase of depreciated paper with the

means of insolvent bank, and then forcing this paper back into

the hands of laboring men for the purpose of another specula-

 

11Ohio Exec. Doc., 1843, No. 38.

12Annual Report Bank Commissioners, Dec. 16, 1844.

13 Annual Report Bank Commissioners, Dec. 17, 1843.

In Cincinnati the pork packing industry each winter threw into the

market a large amount of these bills. After the season closed exchange

on New York was likely to advance, for instance in February, 1844, it

was 1% premium while a short time before it had been at a discount.-

Cincinnati Morning Herald, Feb. 1, 1844.

14Ohio Exec. Doc., 1844, No. 55.

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Banking and Currency in Ohio Before the Civil War. 417

tion.l⁵  There also existed a class of institutions incorporated

as insurance companies, saving institutes, etc., which assumed

banking powers, not only of loan and deposit, but also of

note issue. These experimented with various kinds of depre-

ciated paper. The paper of one institution after another would

be adopted, circulated, and repudiated. They would buy a con-

trolling stock in some doubtful or insolvent bank in a distant or

adjoining state and force its paper into circulation. This vitiated

paper would be quoted at par by some hired press, and its credit

and circulation be kept up as long as found profitable.¹⁶

Inadequate Banking Facilities and Low Prices. - The

statistics of the authorized banks in Ohio in 1843 and 1844 show

the lowest figures for more than a decade. Loans and discounts,

which were over 13 million dollars in 1840, were less than 3 mil-

lion in 1844; specie declined from 1750 thousand in 1840 to less

than 750 thousand in 1844; capital, which was 101/₂ millions in

1840, was only 2 1/6 million in 1844; circulation, which was 4.6

million in 1840 and over 8 million in 1839, dropped below 2

million in 1843 and was only 2.2 million in 1844; while the de-

posits, which were still over 2 million in 1840, went down to half

a million at the beginning of 1844 and were only 436 thousand

at the end of that year.17

This decline appears greater yet if we compare the figures

in 1843 and 1844 with those of 1836 and 1837, and it may be

said that never since 1844 have the figures been so low. The

prices of Ohio products were also very low in 1843 and 1844,

though not generally so low as in 1842. Thus in Cincinnati in

1843 flour was $3.62 a barrel as compared with $2.62 in 1842,

 

15Ohio Exec. Doc., 1843, No. 38.

The company referred to was reported as the Traders' and Me-

chanic's Bank of Cincinnati, and the Urbana Banking Co., was the insol-

vent bank.- Report Bank Commissioner to Senate, Feb. 27, 1844.

16Ibid. The above report names as an example of this sort of

thing the Mechanics' Saving Institution of Columbus, and recommends a

law providing examination of savings institutions and insurance com-

panies by public officers.

17Report of the Comptroller of the Currency, 1876, p. CXVII.

27

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418       Ohio Arch. and Hist. Society Publications.

while pork opened the season of 1843-4 at $2.25 to $2.65 a hun-

dred as compared with $1.62 to $2.00 the previous season.¹8

It does not appear, however, that in these respects Ohio was

much worse off than the rest of the country. The years 1843

and 1844 were a period of low prices throughout the United

States with a slight revival of industry in the latter year.¹⁹ While

for the entire United States the statistics of the state banks show

in 1843 the lowest loans, deposits, and circulation for ten years, the

capital being the lowest in 1842 and the specie continuing to

decline until it reached the lowest point in 1846.20

Private Capital in the State. - In Ohio, moreover, though

the specie in the banks was very low during the years 1843 and

1844, there was considerable specie in private hands. In Stark

county, for example, after the resumption of specie payments

during six months probably $150,000 in specie was paid out for

wheat alone, perhaps one-half of which remained in the county;

while at Milan during three weeks in the summer of 1843 some

$700,000 was paid out for wheat and flour, though purchasers

of produce mostly drew on New York houses at sight or at 30

and 60 days. All this went into the pockets of the farmers of

Richland and Knox countries, except a small fraction to a few

farmers in Delaware, Marion, and Crawford counties. The

bank commissioners estimated that thus much more than 10 mil-

lion dollars was annually brought and paid out in the state; so

that when there was added the amount in the hands of merchants

and retired business men, the private capital aggregated from

15 to 30 million dollars. A large part of this they considered to

be in coin.21

This estimate was probably too high, as the total amount

of money in the United States in 1843 was reported as only 148.6

million dollars of which nearly 40% was estimated as bank

 

18Cincinnati Daily Enquirer, Feb. 23, 1846.

Report of Ohio Commissioner of Statistics, 1858, p. 96.

See also Appendix, p. 519.

19 Industrial Depressions- Hull, p. 144.

20Report of the Comptroller of the Currency, 1876, pp. XCIV and

XCV.

21Reports of Bank Commissioners, Dec. 17, 1843 and Feb. 27, 1844.

• 184
 

Banking and Currency in Ohio Before the Civil War. 419

notes.²² The Lafayette Bank of Cincinnati in reply to questions

of the bank commissioners in ¹⁸44 stated that specie then formed

but a small part of the circulating medium in Cincinnati; that at

least four-fifths of the whole circulation of bank paper was

furnished by institutions out of Ohio; while there was less specie

in the state then than at any period for fifteen years.²³

Objections to the general banking law of 1843. - During

the winter of 1842-3 there had been much complaint of the

scarcity of money in Ohio,²⁴ and the state legislature had con-

sumed much time in the discussion and examination of the bank-

ing question. The discussion centered largely upon the two prin-

ciples of the security of the bill holders and the convertibility of

paper at all times into gold and silver. In view of the excess of

issues and loans over the capital stock paid in, and consequently,

the great percentage arising to corporate as compared with

private business, the legislature decided in favor of personal

liability.²⁵ This had been the strong feature of the general bank-

ing law passed March 7, 1842,26 and was retained when that law

was amended February 21, 1843.27

Although this act enabled the old banks whose charters had

expired to reorganize under general law, none of them took ad-

vantage of the opportunity notwithstanding the great demand

for currency. Their chief objections may be stated as follows:

(1). The tax levied upon the dividends and also upon the capital

stock. (2). The expense of registering the notes they would

be authorized to issue, and the expense of supporting a board of

bank commissioners.  (3). The requirement that in case of

complaint the commissioners should proceed to close a bank on

the loss of one-fifth of its capital. (4). The penalty and pro-

hibition against selling any of the gold or silver belonging to the

bank. (5). The clause forbidding the holding or the purchase

of any real estate, especially when the bank should be the judg-

ment creditor and there was no other property to satisfy the debt.

 

22 Report of Comptroller of the Currency, 1908, p. 145.

23 Ohio Exec. Doc., 1844, No. 55.

24 Niles, 63 :340, Jan. 28, 1843.

25Ohio Exec. Doc., 1843, No. 38.

See p. ⁴⁰⁵.

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420       Ohio Arch. and Hist. Society Publications.

(6). Not being allowed to receive stock in payment of debts.

(7). The right retained by the legislature to amend or annul

the law.27

Agitation for a new Banking Law. - In the fall elections

of 1843 the subject of "Banks or No Banks" was one of the

main questions. The Whigs, who favored a bank currency, car-

ried the legislature,²⁸ and during the following session a bill was

introduced to establish the Bank of Ohio with a capital of $10,-

000,000 to be distributed to branches by a board of five state

commissioners.²⁹  Nothing was accomplished, however, during

that session, and during the summer and fall the Ohio news-

papers devoted much space to discussion of bank projects. The

question seemed to be between free banking, based on a pledge

of Ohio stocks, a safety fund similar to the New York plan, and

the old plan of depending on a specie basis.³⁰

Difference of Opinion as to System needed. - The gov-

ernor of the state Thomas W. Bartley, a Democrat, in his mes-

sage of December 3, 1844, discussed the banking situation at

length and strongly opposed the proposition for a state bank

with capital to be invested in state stocks. "Of all the schemes

for banking which have been devised," said he, "this is the most

objectionable and the most dangerous in its tendencies to the

independence and purity of the government and the liberties of

the people.-It proposes a union of bank and state-the for-

mation of an incestuous and unholy coalition between an organ-

ized, combined monied interest, and the civil power upon which

the people depend for the safety of their liberties." The plan,

he objected, would perpetuate the state debt, and render the state

the slave of the monied interest.³¹

Governor Mordecai Bartley, a Whig, in his inaugural ad-

dress the same day advocated a free banking system with notes

 

27Annual Report of Bank Commissioners, Dec. 17, 1843.

28Niles, 65:144, Oct. 28, 1843.

29Ibid., 66:7, Mar. 2, 1844.

30 Niles, 67:192, Nov. 23, 1844.

31Ohio Exec. Doc., 1844, No. 1.

• 186
 

Banking and Currency in Ohio Before the Civil War. 421

 

secured by a deposit of state stocks and providing for examina-

tions and other safeguards.³²

In the fall elections of 1844 the bank party had carried the

day in every department of the state government, and the subject

occupied a large portion of the legislative session. A majority

of the legislature favored establishing banks, but there was much

difference of opinion as to what system. It was difficult to ad-

just any plan that could obtain a majority of the votes, es-

pecially as a formidable minority stood regularly opposed to

any project.³³

Kelley's Bank Bill in the Legislature. - On Jan. 7, 1845,

however, the chairman of the Currency Commission, Alfred

Kelley, introduced into the senate a bill which incorporated fea-

tures of several of the systems that were advocated. The com-

mittee in reporting the bill said:34

"The committee entertains no doubt that a very large ma-

jority of the people of the State anxiously desire the enactment,

by the present General Assembly, of some law authorizing the

establishment of banks which will furnish them with a safe and

convenient currency, afford reasonable facilities for obtaining

money to meet the wants of commercial and manufacturing

operations, and at the same time hold out proper inducements to

those who have money to invest in banking institutions.-In fram-

ing this bill the committee have constantly in view the great

landmarks of entire security to the bill holder, reasonable se-

curity to dealers with the banks, and proper inducements to the

capitalist, whether great or small, to invest his disposable means

in banking."

This bill aimed to include the advantages of a safety fund,

a bond secured circulation, and a sort of state bank, and pro-

vided for a capital of $6,000,000 in addition to that of the ex-

isting banks. The measure was discussed until the last day of

 

32 Old School Republican and Ohio State Gazette, Dec. 5, 1844.

Niles, 67:323, Jan. 25, 1845.

33 Niles, 67:368, Feb. 8, 1845.

34Knox, p. 679.

Niles, 67:336, Jan. 25, 1845.

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422       Ohio Arch. and Hist. Society Publications.

January, being before the senate seventeen different days. It

met with determined opposition from the Democrats, but finally

passed the senate by a vote of 21 to 15, a strictly partisan vote.

On February 1, the bill was first read in the house where it met

the same opposition.³⁵ After being before the house on nine

separate days it was passed on February 12. On the amendments

it was before the senate eight times and the house four times

before it was finally passed in the house by a party vote of 40

to 30.³⁷ The bill was signed by the president of the senate and

the speaker of the house on February 24, 1845, and was en-

titled "An Act to incorporate the State Bank of Ohio and other

banking companies."³⁸ This act repealed the laws of March

7, 1842 and February 21, 1843, and became the general law

which dominated Ohio's banking system for the next twenty

years.

 

35Dayton Journal, Feb. 5, 1845.

Such phrases as the following were commonly used by opponents of

the bill: "combination of disjointed shapes," "sub-potentates of the paper

money dynasty," "bank rulers to domineer over and plunder us to their

hearts' content," "the abominable shinplaster tyranny." -Cincinnati Daily

Enquirer, Feb. 6, 1845.

37 State Bank of Ohio--J. J. Janney in Magazine of Western Hist.,

Vol. II, p. 159.

38Laws of Ohio, Vol. 43, p. 24.

• 188
 

CHAPTER IX.

THE STATE BANK OF OHIO AND INDEPENDENT BANKS.

The General Banking Law of Feb. 24, 1845. - This law in

addition to recognizing the old banks still existing provided for

the organizing of two new classes: the State Bank of Ohio, and

Independent Banks.1

Five persons or more might form a banking company, but

the aggregate capital stock of all such banks should not exceed

$6,150,000, in addition to the capital of any existing banks that

might be authorized to continue subject to the provisions of the

act.² That the privileges of the act might not be monopolized

the state was divided into twelve districts and the number of

banks in each limited.³

Persons organizing a bank were required to make a cer-

tificate specifying the name of the company, the amount of its

stock, and the number of shares held by each member at the

time of organization. A board of bank commissioners was pro-

vided to examine all applications for the establishment of banks,⁴

 

1Laws of Ohio, Vol. 43, pp. 24-54.

2 The Bank of Geauga, Western Reserve Bank, Columbiana Bank of

New Lisbon, Lafayette Bank of Cincinnati, and the Ohio Life Insurance

and Trust Co., were specially authorized on certain conditions to reor-

ganize with such an amount of stock as their directors might determine;

the two latter, however, being restricted to not less than $300,000 each

nor more than $1,000,000, and their circulation should not exceed $650,000

each.

Hamilton county was allowed 4 banks, Cuyahoga 6, Franklin 3,

Ross 2, Muskingum 2, Jefferson 2, Summit 3, Lucas 2, Miami 2, Mont-

gomery 2, and no other county over one.

4The act named John W. Allen, Joseph Olds, Daniel Kilgore, Alex-

ander Grimes, and Gustavus Swan to serve for one year, after which

the Auditor, Treasurer, and Secretary of State should constitute the

commissioners.

By the act of Jan. 6, 1846, the duties of the bank commissioners

were given to the board of control so far as they related to banks elect-

ing to become branches of the State Bank.- Laws of Ohio, Vol. 44,

p. 8.

(423)

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424       Ohio Arch. and Hist. Society Publications.

and the capital stock of each bank was limited to not over

$500,000, while it must be at least $50,000 for each independent

bank and $100,000 for each branch of the State Bank. At

least 30% of the capital stock was to be paid in gold or silver

coin or its equivalent.

Provisions relating to the State Bank. - When seven

branches should be formed they were to appoint members of a

Board of Control to meet in Columbus. The act did not provide

for a central bank. The banking business was to be carried on

exclusively by the branches, and each branch was authorized to

appoint one member of the board of control. This board was

authorized to procure and furnish notes for the branches, to pre-

scriber rules for the settlement of balances between branches, to

visit and examine branches, to require any branch to reduce its

circulation or other liabilities, to require from any branch sworn

statements of its condition in such form and at such times as the

board should see fit. The compensation of the board and the

expense of printing the notes were to be paid by the branches,

the latter in the ratio of the notes received by each branch.

All notes issued by any branch were to be made payable at

the branch on demand in gold or silver coin, the lawful cur-

rency of the United States, or either, at the option of the branch.

The amount of circulation permitted was fixed in proportion to

the capital stock. A branch could issue on its capital up to one

hundred thousand dollars, twice that amount of notes; on the

second hundred thousand, one and one-half times the amount;

on the third hundred thousand, one and a quarter times the

amount; on the fourth hundred thousand, once the amount; and

on any amount over four hundred thousand, not over three-

fourths that amount. It could also issue notes equal in amount

to its safety fund.

Each branch was required to pay over to the board of con-

trol ten per cent on the amount of notes it received for circulation

as a Safety Fund. This safety fund was then to be invested in

stock of the State or of the United States, or in first mortgage

real estate bonds of twice the value of the amount secured, the

branches to receive interest on the same. The stockholders col-

lectively of any branch should not be liable as debtors or sureties

• 190
 

Banking and Currency in Ohio Before the Civil War. 425

 

to such branch for an amount over one-third the capital stock

paid in and remaining; nor the directors collectively for more

than one-fourth the capital actually paid in and standing in

their names.

When any branch should refuse to redeem its notes, it was

to be considered insolvent and the board of control was to ap-

point a receiver. In case of insolvency each solvent branch was

required to contribute in proportion to its circulation to a fund

for redeeming the notes of the failing branch, to be repaid from

a sale of stocks in the safety fund.

Provisions relating to Independent Banks. - The security

of the notes issued by the independent banks rested on a dif-

ferent basis. Each independent bank must deposit with the state

treasurer stock of the State or of the United States at least equal

in amount to its capital stock. The treasurer was authorized

to procure the necessary engraved plates and issue to each branch

notes for circulation not exceeding the amount of stock it de-

posited, the expense of the same to be paid out of the state

treasury. The treasurer was also to give new notes for mu-

tilated ones and burn the latter. The banks were to receive the

interest on the stock deposited except when such stocks should

go below par for four consecutive weeks or the bank fail to re-

deem its notes. If any independent bank should fail to redeem

its notes, the treasurer was to sell the stock deposited by such

bank and from the proceeds pay in ratable proportion such of

its circulating notes as should be presented at the treasury.

The stockholders collectively of any independent bank must

not be liable to the bank to any amount over three-fifths of the

capital paid in, nor the directors liable for more than an amount

specified in the by-laws of the company. An examination of

each independent bank was to be made at least once a year by a

person in its vicinity, not a bank stockholder, who was to be ap-

pointed by the auditor, treasurer, and secretary of state.

General Provisions of the Law. -All banks organized

under this law were made bodies corporate until May 1, 1866,

and thereafter until their affairs should be closed up; but any

branch of the state bank might close up its business sooner with

the consent of the board of control. Notes could be issued in de-

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426       Ohio Arch. and Hist. Society Publications.

 

nominations of one, two, three, five, ten, twenty, fifty, and one

hundred dollars; but the percentage of those of ten dollars and

under was limited. No other forms of paper could be circu-

lated. Independent banks were required to redeem each other's

notes without discrimination. Each bank was required to keep

on hand at all times in gold or silver or its equivalent an amount

equal to 30% of its outstanding notes.

Dividends must be paid from net profits only, and at fixed

times; 6% of the amount was to be set off to the state in lieu

of taxes; and the dividends of stockholders in debt to the bank

were to be retained and applied to the debt. Six per cent in-

terest only could be charged on loans, and the amount that might

be loaned to any one person or firm was limited. The liabilities

of each bank were also limited, and statements of condition must

be made twice each year and filed with the auditor of state.

Meeting of Board of Bank Commissioners. -At first

there was much questioning among the people of the state as

to the prospect of capitalists making investments under the new

banking law; but it quickly became evident that they regarded

its provisions with favor, that banks would soon be organized,

and that a new currency would be emitted in time to purchase

the produce of that season.⁵ On March 18, 1845, pursuant to

a notice from the governor, the board of bank commissioners

named in the law met at Columbus to act upon applications from

banks organized under the act, and take the initiatory steps to

put them into operation.⁶ By June 19 application had been filed

and proper examinations made for two branch banks in Cin-

cinnati and one each in Xenia, Dayton, Chillicothe, Delaware,

and Columbus.

Organization of the Board of Control. -This being the

number required by the law to organize the state bank, they

were each notified to elect a member of the board of control; and

on July 15 the board met in Columbus, and organized the next

day with members from nine branches. Gustavus Swan was

elected president of the board and James T. Claypoole secretary.

 

5Dayton Journal, Apr. 4, 1845.

6Niles, 68:54, Mar. 29, 1845.

• 192
 

Banking and Currency in Ohio Before the Civil War. 427

 

The salary of the president was fixed at $1,000 and that of the

secretary at $800 a year. At this same meeting an executive

committee of four members was appointed, and a committee of

the same number to secure the engraving of plates for notes.

Alfred Kelley, the author of the law, was a member of both these

committees.⁷

Formation of New Banks. - In September it was reported

that ten branches of the state bank were already in operation,8

and before the close of the year six more were added to the

number. Meanwhile some of the old banks whose charters had

expired were taking advantage of the part of the law which

permitted them to become independent banks.⁹ The first inde-

pendent bank in Ohio was the Commercial Bank of Cincinnati.

It was organized April 15, 1845. Two more followed July 1,

another in September, and one in October, making five independ-

ent banks in the state before the end of 1845.10 Thus in less

than a year the number of banks in Ohio had increased from

eight to twenty-nine.

Effect of Increase in Banking Facilities. - An idea of how

this remarkable growth in banking facilities was regarded by the

majority of the people in the state may be obtained from the

governor's message to the legislature December 2, 1845. "This

new Banking Law was deliberately enacted, after ample con-

sideration, and a faithful examination of other systems which

had been tested. Thus far the system has proved to be equal to

the anticipations of its friends, and the necessities of the people

 

The two additional branches were the Merchants' Branch of Cleve-

land, and the Exchange Branch, Columbus. - State Bank of Ohio - Jan-

ney, p. 160.

Judge Swan resigned as president of the board of control Novem-

ber 21, 1854, and was succeeded by Dr. John Andrews, then president of

the Jefferson branch, who served until November, 1866. The next presi-

dent was Joseph Hutcheson of Columbus, who filled the office until May,

1870, when the board adjourned sine die, after electing J. Twing Brooks

president. -Ibid., p. 174.

8Dayton Journal, Sept. 15, 1845.

⁹Niles, 68:176, May 17, 1845.

10 Ohio Exec. Doc., Part II, 1853, p. 326.

For the names of these banks see Appendix, pp. 521 and 522.

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428        Ohio Arch. and Hist. Society Publications.

 

of the state." "And already the people of Ohio begin to feel

the influence of this system in the restoration of confidence, the

revival of business, the increase of the wages of labor, and the

rising prosperity of the state." 11

Opposition to the new Law in 1845 and 1846. - Some,

however, did not take so optimistic a view of the matter.¹² No

sooner had the law been passed than the anti-bank party an-

nounced their determination to carry the question once more be-

fore the people of the state. Meetings were held in nearly every

county and electioneering was done on the distinct issue of repeal

of the new banking law. The advocates of the banks accepted

the issue. The result of the election was again in favor of the

advocates of the banks.l³

In 1846 the fight was renewed. The Whig state convention

was unanimous in its resolution favoring a "sound banking sys-

tem," opposing the repeal of the existing law, and opposing an

exclusively hard money currency. The Democratic convention,

however, was divided between the "hards" and the "softs", that

 

11 Cincinnati Daily Enquirer, Dec. 4, 1845.

Ohio Exec. Doc., 1845, No. 1, p. 5.

12A writer in a Dayton paper discussing the Dayton Bank, an inde-

pendent bank, asks: "How has the circulating medium here been bene-

fited by the transmission of nearly the whole circulation of this bank to

neighboring counties and states?"- Cincinnati Daily Enquirer, Nov. 8,

1845.

13 Niles, 68:326, July 26, 1845. Also 69:143, Nov. 1, 1845.

As an example of the campaign appeals the following quotations are

taken from resolutions unanimously adopted by the Democratic county

convention in Hamilton County August 30, 1845:

"Resolved that the corporate privilege of concentrated means, limited

liability, and protracted succession beyond the casualties and conditions of

individual action ought not to be conferred on money."

"Resolved that metallic currency has been tested by the experience

of ages. On the contrary all systems of paper currency ever yet con-

trived have failed, and in their inevitable overthrow have entailed more

distress and loss, and perpetrated more robbery and fraud than would

colonize a continent with convicts and paupers. Nor have we seen in

the Whig legislature of last year any symptoms of a wisdom superior to

the paper-mongers who have gone before them-but a compound rather

of all the shallow schemes of their predecessors,"-Reports on Finance,

1845, p. 553.

• 194
 

Banking and Currency in Ohio Before the Civil War. 429

is, between the hard-money, anti-bank men and those who fav-

ored granting bank charters; the former faction won, but there

was considerable disaffection.¹⁴ When the election was over it

was found that the Whigs had once more won, Governor Bebb

receiving a larger plurality than his predecessor two years

before.¹⁵

The safety and utility of the new system having been tested

for two years, and the people having twice at the ballot box pro-

nounced in its favor, the governor seemed justified in remarking

in his message: "No longer can public sentiment on the subject

be misunderstood." He was backed by public opinion when he

added: "The new banking system    *   *  *  has thus far been

successful in accomplishing these beneficial purposes of its

creation.

"The currency of the State has been restored and is now in

a more safe and sound condition than at any former period.

Want of confidence and alarm are no longer felt among those

who are engaged in commercial affairs in this State.^"16

Increase of Bank Circulation and Prices.- In February

1846, there were in Ohio 31 banks: 8 old banks, 7 independent

banks, and 16 branches of the state bank. The total capital was

$3,848,918 while the circulation was $4,505,891.17 At the begin-

ning of the previous year there had been but eight banks in the

state with a capital of $2,321,192 and a circulation of $2,260,-

403.18

It is interesting in connection with this increase of circula-

tion to compare some prices of Ohio products at Cincinnati for

December, 1844, and December, 1845. The price of wheat had

increased from 70 to 90 cents a bushel; flour from $3.70 to $5.00

 

14Niles, 70:20, Mar. 14, 1846.

15Ohio Statistics, 1904, p. 485.

Wm. Bebb was formally attorney for the old Bank of Hamilton.

Its former president, John Woods, was elected State Auditor.- Ohio

Press, Sept. 12, 1846.

16 Message of Governor M. Bartley, Dec. 8, 1846.

Bankers' Magazine, 1:434.

Ohio Press, Dec. 8, 1846.

¹⁷Auditor's Report, Feb. 27, 1846.

¹⁸Figures for December, 1844. See pp. 413, 511.

• 195
 

430       Ohio Arch. and Hist. Society Publications.

a barrel; hogs from $2.60 to $4.37 a hundred; mess pork from

$8 to $12 a barrel; and lard from 41/4 to 71/2 cents a pound.19

This rapid rise in prices may not have been chiefly due to the

increased circulation, as there was a similar rise throughout the

country,²⁰ but so also was there an increased circulation of bank

notes in the country as a whole from 1844 to 1845.

Anyway the friends of the new banking system in Ohio

seized upon the coincidence as an evidence of the beneficial in-

fluence of the system on business and prosperity, and most of the

people seemed to believe the evidence. The results of the opera-

tion of the system so far seemed to indicate that two of the

objects in the minds of the framers of the act had been accom-

plished, namely to "afford reasonable facilities for obtaining

money to meet the wants of commercial and manufacturing

operations, and at the same time hold out proper inducements

to those having money to invest in banking institutions."

Distribution of Banking Facilities throughout the State.

-Another object proposed to be attained by the authors of the

law was "the securing to the several sections of the State a

fair participation in the privileges granted by the act."²² This,

of course, was a matter which involved changes from time to

time as towns grew into cities and new industrial and commercial

developments took place in certain localities, but its operation

after two years of the new system may be seen from the dis-

tribution of the banks in the state in May, 1847. At that time

there were 39 banks in Ohio with a capital of $5,071,728. These

were located in 23 of the most populous counties, the larger

cities having the most banks, thus Cincinnati had 6, Cleveland

and Columbus each had 4, Dayton, Chillicothe, Sandusky, and

Toledo 2 each, and no other city more than one. On the basis

of the state's population in 1850 the per capita banking was

 

19Report of Ohio Commissioner of Statistics, 1859, p. 846.

Appendix, p. 519.

21 Dewey, p. 260.

22 Message of Governor Dennison, Jan. 6, 1862.

Cincinnati Daily Gazette, Jan. 7, 1862.

Knox, p. 680.

• 196
 

Banking and Currency in Ohio Before the Civil War. 431   $2.56 which was fairly well distributed over the state, as may be seen from the following table.   DISTRIBUTION OF BANKS AND CAPITAL IN OHIO, MAY, 1847.

Statistics of Growth of Banks under the General Law.- The 39 banks in Ohio in May 1847 comprised 8 old banks, 9 in- dependent banks, and 22 branches of the state bank. The prin- cipal resources and liabilities in each class are shown in the fol- lowing:

• 197
 

432        Ohio Arch. and Hist. Society Publications.

 

OHIO BANK STATISTICS, MAY 1847.26

Independent. Branch.     Old.

Loans and Discounts............... $1,187,713 $4,812,772 $4,936,175

Specie  .............................                                201,035     1,080,467     745,047

Capital ............................                                 440,300     2,070,700     2,560,700

Circulation ........................                              707,700     3,678,900     2,894,400

Deposits ..........    .........                                   754,600     1,274,900     1,327,300

 

These figures represent the highest point reached during this

period by the old banks. From this time on they gradually de-

creased in number and capital until finally the last one went

under with the panic of 1857. The independent banks and the

branches of the state bank, however, gradually increased from

the time they were first organized in 1845 until they reached

their highest point in 1851. In that year there were twelve in-

dependent banks with a capital of $865,000, circulation of $1,-

391,000, deposits of $1,547,000, and loans and discounts of $2,-

711,000; while there were forty-one branches of the state bank

with a capital of $4,852,000, circulation of $8,785,000, deposits

of $3,134,000, and loans and discounts of $11,994,000.       The

organization of free banks also during that year brought the total

number of authorized banks in the state up to seventy, the

highest number before the war.

 

Bankers' Magazine, 2:129.

• 198
 

CHAPTER X.

THE NEW CONSTITUTION AND THE FREE BANKING LAWS OF

1851.

Failure of Old Banks. -As early as June 1846 a New

York "Bank Note Detector" published that Lake & Co. had for

sometime been advertising to redeem the bills of the Bank of

Wooster at 1 to 11/2% discount. As it was well known in Ohio

that Lake was the chief owner of this bank, the fact that he

was shaving his own notes was taken as warning that they were

questionable.¹ Ohio papers kept repeating the warning and in

April, 1848, its complete failure was announced, with the news

that the loss to the people of Ohio would be from $250,000 to

$500,000.2

Early that year there was a run on the Norwalk and San-

dusky Banks, and Ohio banks soon refused to take their paper,

which was considered practically worthless.³ A special report

of the state auditor on these banks states that 242 shares out of

1000 of the Sandusky Bank were held outside the state, and 143

were held by the bank which had received them for debts due

from stockholders; of $188,801 of bills receivable $141,709 were

due from stockholders; of $188,80l of bills receiveable o141,709

were due from stockholders as principals and they were generally

mutually indorsers for each other.⁴

As to the Bank of Norwalk, of its $138,048 bills receivable

and $51,025 bills of exchange, $112,598 was due from stock-

holders, with no personal security in any case other than the in-

doresment of a stockholder, and most of it with no indorser, and

on the responsibility of a single maker of the note. With but one

exception every stockholder was indebted to the bank. These

 

1Ohio Press, June 6, 1846.

2Cleveland Times, Apr. 5, 1848.

Cleveland Plain Dealer, May 17, 1848.

3Cleveland Times, May 17, 1848 and Sept. 6, 1848.

4Ohio Exec. Doc., 1848, Part II, p. 13.

28                    (433)

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434       Ohio Arch. and Hist. Society Publications.

loans had long been standing and had been frequently extended.

They were in fact loans upon the security of stock. Besides this

there were $35,344 of bills receivable due from several indi-

viduals with no security but the maker's name. The liabilities

to the public were $189,337, while the ready cash means amounted

to $44,341.5 In 1850 the notes of these banks were quoted in

Cleveland at from 50 to 75% discount, while the notes of all the

other authorized Ohio banks were quoted at par.6

The Anti- Bank Party again in Power. - Such things as

these increased the opposition to banks, which indeed had never

died out in the state. Bank reforms, which had been the slogan

of the Democrats from 1838 till 1846, began in the latter year

to be superseded by the cry of bank destruction.⁷ As one paper

puts it, the Democrats would "reform banking by the entire

abolition of all chartered and special privileges and by a return

to the constitutional currency of gold and silver."⁸ The Whigs

took the ground that the new banking system had restored con-

fidence, that business was in a healthful state and that existing

conditions should not be disturbed.⁹

The Constitutional Convention.-The        Democrats in

1850, however, again placed themselves on the hard money plat-

form and this time succeeded in winning at the polls.¹⁰ They

also obtained a majority of the delegates to the constitutional

convention which met that year in Columbus to devise a new

constitution for the state; and a determined effort was made to

put a clause in the constitution requiring the legislature to abol-

ish existing banks, prohibiting the creation of all banks of issue

in the future, and making gold and silver the only constitutional

currency in the state.¹¹ Early in the struggle, however, it be-

 

5Ohio Exec. Doc., 1848, Part II, p. 21.

6Cleveland Herald, May 1, 1850.

7Ibid., July 23, 1850.

8Ohio Press, July 23, 1847.

9Gov. Ford's Message, Jan. 22, 1849. Niles, 75:92.

See also Cleveland Herald, July 20, 1850.

10Ohio Statistics, 1904, p. 485.

11Bankers' Magazine, 5:175.

The Belmont Chronicle, and Farmers' and Mechanics' Advocate,

(St. Clairsville), Sept. 27, 1850.

• 200
 

Banking and Currency in Ohio Before the Civil War. 435

 

came evident that there was considerable division of sentiment

among the Democrats in the convention on the subject of banks,

and that it would require the strong lash of the party to keep

all the members in the hard money traces. Mr. Clark of Lorain

introduced a resolution in May contemplating free banking under

certain regulations, if the people of the state should approve.

Mr. Dorsey of Miami, also a Democrat, introduced resolutions

prohibiting the legislature from granting special bank charters,

but permitting it to pass general banking laws with certain re-

strictions, which must, however, be submitted to the people be-

fore they should go into operation.12  There were in the con-

vention, as the Richland County Democrat put it, 48 "sound

progressive" Democrats, 16 "moderate or conservative" Demo-

crats, and 44 Whigs, thus giving the last two elements a ma-

jority. The Whigs labored incessantly to prevent the insertion

of the hard money clause, and finally succeeded, the clause com-

ing within one vote of being placed in the new constitution.l³

When the new    constitution was finally adopted in June

1851, it contained clauses forbidding the legislature from pass-

ing special acts conferring corporate powers;14 providing for

double liability of stockholders in all corporations;15 and requir-

ing that no act of the legislature authorizing banks should take

effect until submitted to the people at the general election next

succeeding its passage, and be approved by a majority of those

voting at such election.¹⁶

Bank Reform in the Legislature.-Meanwhile the state

legislature elected in 1850 had also been working on the banking

question. While the state convention on July 4 had adopted a

hard money plank, this was not approved by all in the party. For

 

12 Cleveland Herald, May 29, 1850.

13Ibid., Sept. 10, 1850 and Oct. 2, 1851.

14Art. 13, Sec. 1.

From 1802 to 1850 the legislature had granted 3,343 special acts of

incorporation, not including municipal corporations, 51 of these had been

special acts incorporating banks, all previous to 1845. In addition there

had been 37 acts amending bank charters.-Ohio Exec. Doc., 1850, Part

II, p. 637.

15Art. 13, Sec. 3.

16Ibid., Sec. 7.

• 201
 

436       Ohio Arch. and Hist. Society Publications.

example the Muskingum County convention a month later de-

clared that they "regarded the resolutions of the state conven-

tion simply as the expression of the opinions of the persons there

assembled."17 There was a strong bank reform element in the

party, and, moreover, many of the radicals were not opposed to

banks so much as to the special privileges and monopoly power

which had been so characteristic of the old banks.¹⁸

Besides there was a widely circulated notion that more

banks were needed in various sections of the state. Thus the

Bankers' Magazine in 1849 pointed out that Ohio the third state

in the Union in population had not two-thirds the banking capital

of Rhode Island with a population of about 135,000.19 The

Cincinnati Gazette in 1850 was complaining that notwithstand-

ing the wonderful strides of Cincinnati's commercial, manufac-

turing, and shipping interests, legitimate banks were from year

to year denied the city, which in banking capital was far behind

other cities of her size and smaller.²⁰ And Cleveland's manufac-

turing, commercial, and marine interests in 1851 were calling for

"banks which will devote themselves exclusively to discounting

manufacturing and mercantile paper, paper made payable at

home instead of at the east."21

In response to such conditions the legislature of 1851, though

the Democrats had two-thirds of both branches, enacted another

general banking law.²²  This was the Free Banking Law of

March 21, 1851, and although many of the Democratic papers

of the state opposed and bitterly denounced the act,²3 it was

really in harmony with the Democratic ideas of equal rights.

Its popularity is attested by the fact that about the same time

free banking laws were passed in Indiana, Illinois, Wisconsin.

and a dozen other states.²⁴

 

17 Cleveland Herald, Sept. 11, 1850.

18 See p. 434.

19Bankers' Magazine, 4:16.

20Ibid., 5:169 and 882.

21Cleveland Herald, May 3, 1851.

22Ibid., May 29, 1851.

23Ibid., Nov. 18, 1851.

24White-Money and Banking, p. 354.

Report of Comptroller of Currency, 1896, Vol. 1, p. 44.

• 202
 

Banking and Currency in Ohio Before the Civil War. 437

 

The Free Banking Law of Mar. 21, 1851.25- This law

provided that any number of natural persons not less than three

might organize a company and engage in banking, with a capital

stock of not less than $25,000 nor more than $500,000. Before

such company could begin business 60% of its capital stock must

be paid in, and securities of the State of Ohio or of the United

States at least equal in amount to 60%. of its capital stock must

be deposited with the state auditor. The auditor was then to

have circulating notes engraved and furnish them to the bank

equal in amount to the securities deposited, but not more than

three times the bank's capital.

Notes of the same denomination and in the same propor-

tions as those permitted the State Bank might be issued; but

30% of the amount of the circulation must be kept on hand in

coin or its equivalent, actual deposits in sound banks of New

York, Philadelphia, or Baltimore being deemed equivalent to

coin. All banks organized under this act must receive the notes

of each other at par. No bank should exchange its notes for

stock, nor its stock for securities to be deposited with the auditor

for the redemption of notes. Uncurrent notes must not be paid

out, and mutilated notes must be exchanged and burnt.

The liabilities of each bank were limited, loans to stock-

holders limited, dividends forbidden when capital stock should

be diminished and permitted in no case exceed from net profits,

and not more than 6% interest in advance should be charged on

loans. If a bank should fail to redeem its notes, the auditor was

to sell its deposited securities and redeem the notes from the

proceeds. Besides there was individual liability of stockholders

in proporition to their stock when a bank should fail to redeem;

and damages for refusal to redeem notes were fixed at 15% per

annum from time of refusal till resumption. Where a bank was

owned by less than 6 stockholders they were individually liable

for all the debts and liabilities of the bank.

The law also made it the duty of the auditor, treasurer, and

secretary of state, or a majority of them, as often as once each

 

25Laws of Ohio, Vol. 49, pp. 41-56.

• 203
 

438       Ohio Arch. and Hist. Society Publications.

year to appoint some suitable person in the vicinity of the bank,

but not a stockholder in any bank in the state, to examine the

bank and make a detailed report to the state auditor. All the

free banks were to have corporate power until 1872, and there-

after till the act should be repealed.26

Free Banks organized in 1851 and 1852. - During the next

few months following the passage of the free banking law

twelve new banks were organized under its provisions, thus in-

creasing the number of banks in the state to seventy, with a

capitalization on November 15, 1851, of $7,949,356. In 1852

another new bank was organized under this law making thirteen

free banks in all. Others were contemplated but the going into

effect of the new constitution effectually stopped the organiza-

tion of any further banking associations by the provision re-

quiring submission to the people at a general election.²⁷

 

26 For certain other provisions of the law see Appendix, p. 499.

27 See page 435.

For statistics of free banks see Appendix, pp. 330-336.

The Attorney General of Ohio in 1852 gave it as his opinion that

no new banks could be established under the free banking act on account

of the new constitution.-Ohio Exec. Doc., 1854, No. 9, p. 564.

• 204
 

CHAPTER XI.

BANKING AND CURRENCY CONDITIONS IN OHIO, 1851 TO 1854.

End of Another Period of Bank Expansion. -The

adoption of the new state constitution in June, 1851, so soon

after the passage of the free banking law, and the opinion of the

attorney general given in 1852 that according to the constitution

no more new banks could be established under that law, marked

the end of another period of expansion in authorized banking

in Ohio. From the adoption of the general banking law in 1845

up to this time the number of authorized banks had steadily in-

creased, as also had the specie in their vaults, their deposits, their

capital, their circulation, and their loans and discounts. The

only exception to this constant increase was that with the busi-

ness depression of 1847 their deposits showed a temporary fall-

ing off, and their capital and loans showed a lower rate of in-

crease. In 1851 the circulation reached $11,832,511, and in 1852

the loans reached $19,241,225, the highest point either had ever

attained, and the highest they were destined to reach before

the Civil War.l

Expansion Period one of Business Prosperity.-This

period of bank expansion was also one of increased business

prosperity in the state. While the banking capital of $3,000,000

in 1843 was rising to $19,000,000 in 1852, the population rose

to 2,000,0000, and the total assessed value of taxable property

which was $138,000,000 in 1842, rose to $508,000,000 in 1852.2

Within this period the State had completed her 600 miles of

canals and railroads also had come to be an important factor

in the transportation of her products.

In April, 1853, the "Railroad Record" showed that Ohio had

the largest mileage of railroads constructing and also the largest

amount of surplus produce. With the exception of cotton and

 

1See diagram in the Appendix, p. 511.

2See Appendix, p. 520.

(439)

• 205
 

440       Ohio Arch. and Hist. Society Publications.

tobacco Ohio was then exporting more agrciultural products and

manufactures from agricultural products than were exported

from the whole United States.³ During the year 1852 there

were driven from Ross County 7,000 head of beef cattle, as

many more from Pickaway County, and from the entire state

68,000. That year also Ohio exported over 2 million barrels of

flour, 3 million pounds of butter, 4 million pounds of cheese, 6

million pounds of wool, 6 million bushels of corn, and near 10

million bushels of wheat, besides tobacco, whiskey, pork, and

beans, the total, even at the low prices prevailing in Ohio in

1852, amounting to more than $40,000,000.⁴ This was double

the value of the exports ten years before,⁵ and since it was sur-

plus one might say that it represented a net profit for the year

of something like 8% on the 500 millions of landed property in

the state.

The Profits of the Banks. -As this export trade created

a good part of the demand for the banking facilities in Ohio it

may be well at this point to inquire what part of this large profit

accrued to the banks. For purposes of taxation the banks were

required to report their yearly dividends to the state auditor,

and his reports show that in 1850 the net profits of the 12 in-

dependent banks amounted to $117,372, the 41 branches of the

state bank $690,781, and 4 old banks $194,223, a total of $1,-

002,376 or an average of nearly 14% on their total capital. In

the case of individual banks the rates of profit on the capital

paid in ranged from 3.5 to 18.1% for the independent banks

reporting, 5.4 to 35.2%  for the branch banks, and 4 to 8.3%

for the old banks. In 1851 the net profits ranged somewhat

higher, being $122,050 for the independent banks, $733,844 for

the branches of the state bank and $194,323 for the old banks,

a total of $1,050,117. The rates for the individual banks ranged

from 3.1 to 37.10%, the latter being the profit of the Harrison

County Branch at Cadiz.6 For the year 1853, 36 branches or

the state bank reported dividends of $572,157, the rate varying

 

3See Statistical Abstract of the United States, 1911, p. 718.

4Daily Commercial Register (Sandusky, O.), Apr. 11, 1853.

5See p. 415.

6Auditor's Report, Mar. 16, 1852.

• 206
 

Banking and Currency in Ohio Before the Civil War. 441

 

from 6 to 20%; 6 independent banks reported $95,840, the rate

ranging from 7.6 to 13.9%; and 11 free banks reported $72,996,

the rates running from 2.6 to 12.2%⁷ These amounts do not

include the undivided profits in either case.⁸

Sources of Banking Profits. -Since both the state bank-

ing law of 1845 and the free banking law of 1851, under which

nine-tenths of these banks were organized, prohibited the banks

from charging over 6% interest in advance, one might wonder

whence these large dividends. In general the banks made their

profits from three sources:

1. The interest on the stocks deposited.

2. The interest derived from bill and note discounting.

3. The premiums and profits from eastern exchange.

As to the first point, the stocks deposited mostly bore 5 and

6% interest, and in the case of the state stock banks were at

least equal in amount to their circulation. Sometimes the stocks

deposited by a bank were not its actual property but were bor-

rowed, the bank paying 1 or 2% to the owner for its use.⁹ The

profits arising from the second source need no explanation.

They probably did not constitute over 3/5 of the bank profit.

A big source of profit, however, was the premium realized

from eastern exchange over and above the legal interest. Ohio

bought most of her imports in New York and there the settle-

ment of balances was ultimately made for both imports and

exports. Comparatively little specie was used in these settle-

ments. Ohio's surplus produce always more than paid for the

imports. Eastern exchange arose from drafts and bills drawn

by Ohio traders upon produce either shipped or to be shipped

east. These drafts or bills were discounted at the Ohio banks,

which then charged simple interest for the time they had to run.

They cost little or nothing to transmit and collect east. Ac

 

7Ibid., Apr. 8, 1854.

8For dividends of individual banks in 1853 and net profits of each

from date of organization to end of 1853 see Appendix, p. 521.

The Commercial Branch, Cleveland, paid its stockholders an aver-

age of nearly 20% for 20 years till its charter terminated in 1865.-

Mag. of West. Hist., 2:276.

9Special Report of Auditor. - Exec. Doc., 1853, Part II, p. 326.

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442       Ohio Arch. and Hist. Society Publications.

maturity the banks drew against them, and being more con-

venvient and less liable to risk than specie, usually commanded a

small premium.

The majority of the bills were 60 day drafts. Regular 6%

interest in advance on these was practically equal to 7%. In

addition there was the current rate of exchange at maturity,

frequently one per cent or more. On such bills they made 13%

per annum. If there were a premium of one-half percent this

profit became 16%, which much of the time was the ruling rate.

On a 30 day bill, or one having still less time to run, the interest

made would be still higher, 25 and sometimes 30%.10

Other profits arose from buying and selling transient eastern

drafts. At Cincinnati and Cleveland much transient exchange

was purchased in the market, which yielded considerable profits,

from an eighth to a quarter percent. It frequently happened

that such a bill was sold on the same day it was purchased. If

one-fourth percent was made on the transaction and the capital

employed in such business was turned once a week, the profit

amounted to 13% per annum, if twice a week 26%, if every day

75%. Doubtless many exchange discounts and purchases were

kiting operations by mutual tacit agreement, where no funds

were east, nor expected to be there, and yet be paid by the

bank and exchange added.¹¹

The Ten Per Cent Interest Law.-One noticeable fact

about banking operations in the early 50's was the gradual ex-

 

10Example from Savings Bank of Cincinnati: Dec. 14, 1853, bought

60 day draft on Philadelphia:

Face of draft...... $3500

 

Charged exchange.. 17 50

Interest  ...........  36  75

 

$54 25

Exchange premium  35 00

Profit ......... $89 25 = over 11/4% a month or over 15% a

year.

See report special bank examiner, Reemelin, Oct. 15, 1854, p. 347.

11Report of Special Bank Examiner, Reemelin, Oct. 15, 1854, p. 560.

• 208
 

Banking and Currency in Ohio Before the Civil War. 443

 

tinction of all home discounting. In the statement of twenty-

four stock banks reported in 1854 by the special bank examiner

appointed by the auditor and secretary of state, it appears that

ten million of the banks' discounts were for bills and only four

million for notes. Before 1850 the tendency was rather to dis-

count notes for goods purchased and sold on credit.¹²    The

change was due largely to what was called the 10% interest law,

which was passed in 1850 largely through the efforts of Senator

Payne of Cuyahoga County.¹³

This law allowed 10% interest to be charged in special con-

tracts, and was supposed at the time of its passage to be an in-

ducement to outside capital. Its practical result, however, was to

create two classes of capitalists: the brokers and private bankers,

who could charge 10%; and the authorized banks, limited by the

general banking laws to 6%.14 This seriously affected banking

operations. Bankers who previously had been content with divi-

dends of 7 or 8%, began to complain of any less rate than 10%.

Cashiers, hearing this and fearing a stampede of their stock-

holders into private banking, strained every nerve to come up to

the coveted 10%. Profits were divided closer than safe banking

would justify; contingent funds were omitted; and losses car-

ried forward, instead of being charged off. The exchanges be-

ing more profitable than note discounting, many banks ceased

in large part to discount home paper.¹⁵

Bankers interested in Broker Establishments.-- Many

bank managers became interested in broker establishments, and

many brokers in banks, both in and outside the state. Both

bankers and brokers were quick to discover opportunities for

mutual profit. It followed that the banks seldom had any money

to loan at 6%, when they could hand it over to the broker who

 

12Hunt's Merchants' Magazine, 21:96, (1849).

13 Cleveland Herald, Sept. 30, 1850.

¹⁴Daily Ohio Statesman, Jan. 8, 1858.

It was said that the author of this law, doubting his re-election to

the legislature, intended to retire to private life and devote his business

hours to the pleasant occupation of shaving notes, and to make it pay,

procured the passage of the law allowing 10% interest. - Cleveland Her-

ald, Sept. 26, 1850.

15 Ohio Exec. Doc., 1854, No. 9, p. 561.

• 209
 

444       Ohio Arch. and Hist. Society Publications.

was allowed to charge 10%.16 The borrower presenting himself

at the bank would be politely told that they had no money to

lend at that time; but as he was about to leave he would be

told that he might possibly get it next door or around the corner.

There he would be accommodated, but at a rate two or three per

cent above the proper discount. To prevent this sort of thing

in the State Bank it was provided that no branch should, directly

or indirectly, establish an agency anywhere for carrying on a

banking business. And it is said that no such irregular con-

nections were to be found among the branches of the State

Bank.¹⁷  The same cannot be said of all the other banks how-

ever. In one locality in 1854, a few men organized as a bank

on one side of the street were confined to 6%, but the same

men as a broker partnership on the other side of the street were

allowed to charge ten,-and both dealing with the same money.

In Cincinnati managers of a foreign bank were loaning the notes

of that bank at 10%, while the Ohio banks who circulated the

same notes by arrangement, and were furnishing eastern ex-

change for them, could not legally charge more than 6%. Again

a bank on the lake, not being permtited to charge over 6% at

its counter, was sending its capital to a broker firm in Cin-

cinnati, who were its stockholders, and they were charging 10%

for the same money.18

Increase of Private Banks and Broker Shops. -The

withdrawal of so many of the authorized banks from home dis-

counting, along with the tempting 10%, fostered into existence

all over the state private bankers and brokers of but little real

capital. They offered 6%   interest and more for deposits and

 

16Daily National Democrat (Cleveland), Sept. 30, 1859.

The Miami Valley Bank at Dayton and the Seneca County Bank at

Tiffin are examples of banks whose chartered privileges were placed in

abeyance in the hands of their principal stockholders-brokers, who used

the circulation and enjoyed all the advantageous part of the charter, but

escaped all the legal restraints, especially as to interest.- Ohio Ex. Doc.,

1854, No. 9, p. 559.

Daily Ohio Statesman, Jan. 8, 1858.

17 State Bank of Ohio - Janney, p. 154.

18Ohio Exec. Doc., 1854, No. 9, p. 561.

• 210
 

Banking and Currency in Ohio Before the Civil War. 445

 

banked on them.l⁹ They also entered the exchange market and

operated without restraint as to discount or premium. What

rate of interest they charged was not positively known but it

was generally assumed to be not less than 12%  and from that

up to 50% per annum.²⁰

Little is known as to the number of these private banks and

broker establishments in the state. The Bankers' Magazine in

1851, commenting on the insufficiency of incorporated banking

capital in Cincinnati, names eighteen private banks but also

refers to a "host of brokers who are employed in shaving notes

or getting them shaved;" and referring to their high interest

charges states that "the mercantile community of Cincinnati are

annually fleeced out of from 20 to 25%  of their hard earned

profits in the shape of usurious interest," while the private

bankers and brokers have built up fortunes for themselves.²¹

Many of these firms were quite important. The Cincin-

nati Gazette in December 1852, refers to several private banks

in that city returned by the assessor at from $200,000 to $400,-

000 each and numerous others at 150,000 dollars each.²² While

in October 1853 the Bankers' Magazine estimates the private

banking capital of Cincinnati at $4,000,000, not including brokers

with taxable capital under $10,000. The capital of the firms in-

cluded ranged from $17,700 to $1,200,000.23 The largest of

these, Ellis and Sturges, together with two other well known and

well thought of houses, Smead and Co., and Goodman & Co.,

suspended payment in the fall of 1854, causing great excitement

in the city.²⁴ The Bankers' Magazine in 1854 names 53 private

 

19 Cleveland Herald, May 9, 1851, contains an ad. of one of these pri-

vate bankers, offering 6% interest on demand deposits, 8% if subject to 10

days' notice, and 10% on special deposits for 12 months. Another in

the same paper offered from 4 to 6% interest. Also in Cist's Weekly

Advertiser (Cincinnati), February 11, 1853, a broker was advertising for

note and bill discounting, and offering 6% interest on checking deposits

and higher interest if left for a specified time.

20Bankers' Magazine, 5:882 (1850-1).

21Ibid., 5:169 and 882.

22Cleveland Herald, Dec. 20, 1852.

23Bankers' Magazine, 8:359.

24Cincinnati Daily Enquirer, Nov. 9, 1854.

• 211
 

446       Ohio Arch. and Hist. Society Publications.

banks in Ohio;25 while special bank examiner Reemelin the same

year estimated that there were not less than 100 broker shops

and private banking houses in the state.²⁶

Failure of Laws against Unauthorized Banking. - These

private bankers and brokers aided greatly to demoralize regular

banking operations and force upon the people of the state a de-

preciated currency.  Their unrestrained exchange operations

helped to prevent any reliable currency standard, and eastern ex-

change was rendered more fluctuating. Their desire for cheap

money and plenty of it to loan at high and profitable rates of

interest led them to the use of more and more foreign and ques-

tionable home paper, thus helping to give Ohio a depreciated cur-

rency.

All laws against unauthorized banks and bank paper seem

to have been in vain. Almost at once after the passage of the

general banking law of February 24, 1845, the legislature had

passed a law, March 12, 1845, prohibiting anyone from engag-

ing in banking without express authority of the state law.²⁷

That this law proved inadequate is seen from the fact that less

than a year later, January 22, 1846, an act was passed to prevent

unauthorized banking, which prohibited banks and brokers from

banking on the currency of other states, and prohibited the cir-

culation of foreign notes under $5 and all notes of old banks

whose charters had expired.²⁸

The State Bank of Ohio endeavored to act in accordance

with these laws, and discountenanced the circulation of foreign

notes in the state. On August 11, 1847 the board of control

passed a resolution that after October 1, of that year no branch

should circulate any foreign bank notes not readily converted

into coin at par. The board of control repeatedly took action

 

25 Bankers' Magazine, 9:19-23.

26 Ohio Exec. Doc., 1854, No. 9, p. 562.

27This was supplemented by an act of May 1, 1854, prohibiting the

paper of banks whose charters had expired.-Ohio Laws, 52:133.

28 Ohio Laws, 44:13.

Knox, 682.

This was amended March 2, 1846, allowing the state treasurer to

circulate such notes until August 15, 1846.-Ohio Laws, 44:116.

• 212
 

Banking and Currency in Ohio Before the Civil War. 447

 

on the subject of unauthorized circulation.²⁹ Not all other banks,

however, were so careful, and February 24, 1848 an act was

passed forbidding Ohio banks to pay out foreign bank notes

under penalty of one-half the amount of the bills so paid out,

while any notes purchased in violation of this act should be

deemed null and void.30 The prohibition could not be enforced,

however, and, as we have seen, after the passage of the 10%

interest law in 1850 the evil became worse.

The small notes gave the most trouble and on May 1, 1854,

a law was passed forbidding the circulation after October 1 of

any foreign notes less than $10, under penalty of $100 fine and

forfeiture of charter.³1 This was intended to get rid of what

one paper called "the swarm of unsafe, rotten shinplasters with

which we are flooded from other states."³²  The small note law

was very generally disregarded, however, especially whenever

currency became scarce or exchange advanced;33 and when the

Republicans came into power it was repealed March 5, ^1856.34

In Governor Chase's inaugural address in January of that year

he remarks: "All attempts to exclude, by penal legislation, the

bank notes of other states from circulation in this have proved

 

29 State Bank of Ohio -Janney, p. 171.

30 Ohio Laws, 46:79.

Ten years later Gov. Chase recommended to the legislature the

strengthening of this law to prevent the evils of foreign paper in the

state.-Daily Ohio Statesman, Jan. 4, 1858.

31 Ohio Laws, 52:83.

32 Cincinnati Daily Enquirer, June 25, 1854.

33 Many of the small notes circulating in Ohio were those of eastern

banks, which if good at all answered as exchange for all ordinary pur-

poses, and when exchange was high poured into the state until a decline

in exchange rendered it expensive to continue the operation.-Daily Ohio

Statesman, Nov. 28, 1855.

34 Ohio Laws, 53:20.

An Ohio paper has this to say on the subject: "One of the acts

of the last Democratic Legislature was to render the passing of small

notes on foreign banks illegal, punishing it with an adequate penalty.

While that law was in force, there was specie enough in use to answer

every demand. But the Black Republicans repealed this law, and in less

than 30 days, the State was flooded with petty rags, many of them on

banks the location of which it was impossible to trace out on any map

yet published."-Daily Ohio Statesman, Oct. 10, 1857.

• 213
 

448        Ohio Arch. and Hist. Society Publications.

ineffectual; and the public sentiment demands an increase of

banking capital, organized under our own laws."³⁵

Demand for More Banking Capital in Ohio.-The cry

for more banking capital was an old one in Ohio. But it was

especially loud in the years following the adoption of the new

constitution.³⁶ The assertion was often made that not enough

banking capital was authorized by the laws. It may be ques-

tioned, however, whether the statement was altogether correct.

Cincinnati was the place most often cited where it was said

the State had not provided sufficient banking capital and circula-

tion.³⁷ Yet the banks authorized there and in existence in 1854

might have issued a circulation of at least $4,500,000. The ar-

gument of a lack of capital or opportunity to maintain such a

circulation seems weakened somewhat by the fact that five banks

in Indiana and Kentucky issuing circulation to the amount of

some $3,000,000 were maintained chiefly from      Cincinnati cap-

ital,³³ while the Commercial Bank of Cincinnati protected for

some time a large Tennessee circulation, and all the Cincinnati

banks and brokers aided in the circulation of foreign notes. The

same money that maintained a foreign circulation might have

maintained a home currency.

 

35Cincinnati Daily Enquirer, Jan. 15, 1856.

36 Mr. H. F. Baker writing in 1854 on Banking in the United States,

states that the great want of banking capital was the chief difficulty in

the Ohio system.-Bankers' Magazine, 9:6, (July, 1854).

37 See pp. 436 and 445.

Bankers' Magazine, 11:171.

38      Foreign Bank.              Ohio Owners.                                   Circulation.

Connersville Bank .................... B. F. Sanford......                                     $834,875

Steuben County Bank ................. S. W. Torrey & Co.                             150,000

New York and Virginia State Stock

Bank ............................. Atwood Dunlevy &

Co.   ..............                  236,000

Kentucky  Trust  Co .................... B. F. Sanford......                            1,000,000

Branch of State Bank, Lawrenceburg..S. W. Torrey & Co. not known

 

$2,220,875

B. F. Sanford was chief stockholder and also chief debtor of the

Savings Bank of Cincinnati, a free bank.--Ohio Exec. Doc., 1854, No.

9, p. 565.

• 214
 

Banking and Currency in Ohio Before the Civil War. 449

 

The same may be said of other places in Ohio whose bankers

started Indiana banks.³⁹ Various Illinois and even more distant

banks also were used for circulation, for which Ohio capital

and exchange furnished the basis, thus indicating that it was

not lack of capital in Ohio that prevented a sufficient home cur-

rency. That it was not prevented by want of authority is also

suggested by the fact that at no time during this period had

all the $6,150,000 capital authorized by the general banking

law of 1845 been taken up by nearly $2,000,000. And even if no

more banks could have been organized under the law of 1851, the

thirteen free banks already organized, being allowed $500,000

each, might have taken up $6,500,000 in all, some $5,700,000 of

which remained unappropriated. Had all this capital been taken

up and notes issued to the full amount authorized, the total cir-

culation would certainly not have fallen short of $20,000,000,

which amount it was claimed Ohio needed at that time.⁴⁰

Depreciated Currency in the State.--It is likely that

Ohio frequently did have that much of a circulation, such as it

was, even during the years 1853 and 1855 which show so de-

cided a contraction in the authorized circulation. During the

summer of 1854, for example, it is said the currency manufac-

turers and borrowers never had been busier. The home cur-

rency was neglected, it is true, adjoining states were ransacked

for banks when established, in order to borrow circulation from

them, or to establish new banks. And yet money was scarce, and

eastern exchange more so. Ohio borrowed and borrowed every-

body's credit and called it money, and the more she borrowed

the less real money she had. Many Ohio bankers, interested in

banks in other states, encouraged this borrowing propensity.

They were aided by the brokers, many of whom became the worst

39

The Central Bank, Indianapolis Judge Brown                                           323,000

The Central Bank, Indianapolis ........ Judge Brown ......                           $323,000

Upper Wabash Bank.................. Marfield of Circle-

ville  .............                   195,000

Wayne Bank, Richmond ............... Beckel of Dayton...                              100,000

Northwestern Bank ................... Tallmadge of Lan-

caster  ...........  300,000

-Ohio Exec. Doc., 1854, No. 9, p. 565.

40Ohio Exec. Doc., 1854, No. 9, p. 566.

29

• 215
 

450       Ohio Arch. and Hist. Society Publications.

species of banks of issue. The effect was to introduce into the

state a mass of foreign paper which expelled from circulation

not only nearly all the coin, but also much of the paper of the

home banks, thus exposing the community to great inconvenience

and loss.⁴¹

For several years Indiana, Illinois, Kentucky, Virginia,

Louisiana, and Michigan supplied the currency to the exclusion

of Ohio bank notes. Thus a depreciated currency standard was

imposed on the state. As the currency fell, eastern exchange

rose; and with the advance in exchange there was a rush for

the redemption of all the Ohio notes that were easily accessible.

The exchange thus drawn from Ohio supplied new foreign

issues, and through them a constant draft upon Ohio was kept

up by the brokers, who were playing into the hands of half Ohio

half Indiana bankers. The result was that Ohio bank notes

had to be redeemed five or six times a year or oftener in eastern

exchange. As each redemption cost at least 1%, it followed that

it cost some 6 to 10% a year to maintain an Ohio circulation.l2

This cost was the great obstacle to Ohio circulation, which de-

clined from 11.8 millions in 1851 to 8 millions at the close of

1854. During the same period the specie in the authorized banks

declined from 2.8 millions to 1.₇ million.⁴3

Schemes to Avoid Redemption. -To avoid the continual

draft upon them, banks resorted to those schemes so prevalent in

former years so to pay out their own paper as to drive it as

far from home as possible, while about home they circulated for-

eign paper.44  This habit had been common prior to 1850 and

does not seem to have been confined to any one class of banks.

About the time the State Bank of Ohio was established it was

generally known that Ohio banks had agencies in Illinois to

 

41Message of Governor Chase, Jan. 4, 1858-Daily Ohio Statesman,

jan. 5, 1858.

42Ohio Exec. Doc., 1854, No. 9, p. 566.

Also Ohio Banks (Baker). Bankers' Magazine, 11:171.

43 See Appendix, p. 511.

44H. F. Baker writing of Ohio banks in 1856 cites an instance of

an old and wealthy citizen of Cincinnati writing a letter to the city coun-

cil in which he states that in 6 years he had received but 4 Cincinnati

bank notes.-Bankers' Mag., 11:174.

• 216
 

Banking and Currency in Ohio Before the Civil War. 451

 

distribute their paper for circulation, with the object of keeping

it at a distance and preventing its return for redemption.⁴⁵  A

little later these agents and others in Iowa were reported to be

telling the people of those states that the State of Ohio was

bound for the redemption of the notes of the State Bank of

Ohio.⁴⁶ In Ohio branch banks in distant parts of the state were

said to circulate for each other,⁴⁷ the bills being regularly ex-

changed, package for package.⁴⁸   Customers of a bank would

frequently be given notes of the bank only under a promise not

to pay them out until they should get a considerable distance

from home, the object being to keep their notes in the hands of

people who were too far away to offer them for redemption in

gold or silver.⁴⁹

In 1851 a special bank examiner, A. F. Johnson, commenting

on Ohio banking said that the availability of specie ever since re-

sumption had been a practical delusion, as the banks employed

the financial subterfuge "of circulating or paying out the paper

of each other, and while deluding the people with the cant of

paper or specie at the will of the holder, the circulation of each

bank was found as far from the place of issue as they could find

men to carry it or roads to travel."⁵⁰ While in 1854 the report

of the special bank examiner, Charles Reemelin, shows that the

practice of exchanging notes and keeping their circulation as

far from the bank as possible was still common to all the banks of

the State. Ohio bankers have, said he, like many other bankers,

"a pernicious hankering for always circulating among the people

 

45Daily Ohio Statesman, Jan. 6, 1846.

The Commercial Bank of Cincinnati had a St. Louis "agency" which

became a federal depositary.-U. S. H. of R. Comm. Reports, 1836-7,

No. 193, p. 598.

46 Ohio Press, May 2, 1846.

47 Thus the Exchange Branch of Columbus circulated in that city

notes of the Commercial Branch of Cleveland while the latter circulated

notes of the former.-Ohio Press, July 22, 1846.

48 Cleveland Times, June 23, 1847.

49 Cleveland Times, Sept. 8, 1847. Also Ohio Press, Oct. 28 and 31,

1846.

Cincinnati Daily Enquirer, Mar. 10, 1846.

50 Ohio Exec. Doc., 1851, Part I, p. 666.

• 217
 

452        Ohio Arch. and Hist. Society Publications.

that currency which the people have the least chance to get re-

deemed; and they seem to regard it as a part of their espirt du

corps to drive all bank notes as far as possible from home."⁵¹

The Use of Banks for Deposits and Loans. - Through-

out the period then the banks seem to have failed to give Ohio

a good home currency. They also, at least in the later years,

failed to regulate trade. Exchange was subjected to the fluc-

tuations incident to a depreciated currency, resulting in incon-

venience and loss to the whole business community. Mr. Reem-

elin in 1854 estimated the illegitimate cost to the state from

extra exchange, note shaving, and broken banks at $750,000 a

year.⁵²  And H. F. Baker in his history of Ohio banks two

years later declared this amount too low, in view of the fact

that the exports and imports of Cincinnati alone for that year

were nearly $90,000,000.⁵³

The chief use of the banks was coming to be not that of

furnishing Ohio a home currency, nor exchange at fair rates,

but to provide a gathering place where surpluses could safely

be deposited, to be loaned to such as needed temporary accommo-

dations. The capital of the citizens rather than that of the banks

had for months done the business of Ohio. Very little of Ohio

banking capital was then owned outside the state. Ohio bank

statistics in the fall of 1854 stood somewhat like this:

 

Capital already accepted in Ohio ................. $6,000,000 54

Discounts     from   this  capital .......................                    14,500,000

 

Surplus of    discounts over  capital.................                     $8,500,000

Of which the deposits account for................                                                           6,200,000

Leaving  but  .....................................                                  $2,300,000

 

to be provided for by the little Ohio circulation remaining after

supplying the specie and exchange required by law.

 

51 Ohio Exec. Doc., 1854, No. 9, p. 567.

52Ohio Exec. Doc., 1854, No. 9, p. 563.

53Bankers' Magazine, 11:174.

See also Appendix, p. 525.

54Ohio Exec. Doc., 1854, No. 9, p. 569.

• 218
 

Banking and Currency in Ohio Before the Civil War. 453

All this was Ohio capital. With the brokers and private

bankers the case is still clearer. Practically all their loans came

from deposits. The growing importance of the deposits relative

to the capital and circulation of the Ohio Banks during the

years 1851-4 may be seen from the following:

 

 

STATISTICS OF OHIO BANKS IN MILLIONS OF DOLLARS.⁵⁵

Year.                                             Capital.  Circulation.          Deposits.

1851  .....................                      7.6                11.8                 5.5

1852  .....................                      7.8                11.5                 6.0

1853  .....................                      7.1                11.4                 7.4

1854  .....................                      8.0                9.8                   7.7

From these figures it may be deduced that while the ratio of

circulation to capital dropped from     155%  in 1851 to 123%     in

1854, during the same period the ratio of deposits to capital

rose from 72% to 96%. Moreover, while the circulation showed

an absolute decline from year to year, the deposits showed a

constant advance.    Thus the deposits were only 47%        as large

as the circulation in 1851, but 79%   in 1854.66

Bank Failures in 1854.--The day had not yet come,

however, when the deposit function exceeded that of note issue

in Ohio banks. The figures given above are for the first of each

year. By the end of 1854 the circulation had still further de-

clined, but the deposits also had fallen off. Notwithstanding the

 

55Report of Comptroller of Currency, 1876, p. CXVII.

56 Most of the banks in the state at this time were willing to pay 4%

or more for deposits left with them for more than 90 days.- Ohio

Exec. Doc., 1854, No. 9, p. 567.

The increasing importance of deposits became still more apparent

towards the close of the period, as may be seen from the statistics of the

free, independent, and branch banks in Ohio, which showed the following

changes from 1860 to 1863:

Decreased.       Increased.

Capital  ..............................           $800,424      ........

Circulation   ..........................        1,882,576     ........

Discounts     ...........................       881,050        ........

Specie ...............................            172,628        ........

D eposits      .............................     ........             $6,195,036

-Rept. O. Com'r Statistics, Feb. 5, 1864, p. 628.

• 219
 

454        Ohio Arch. and Hist. Society Publications.

contraction in the circulation of the authorized banks in the

state, the years of depreciated currency and demoralized banking

had produced an excessive inflation and a commercial crisis.

The banks of the state organized under the general laws received

their first shock in 1854, when at the time of the crisis in the

stock market at New York the Ohio valley was the scene of a

bank crisis.⁵⁷  During the three years 1852-4, fourteen of the

authorized banks in Ohio failed, or closed up for other reasons.

Of these, ten disappeared from the state auditor's reports in the

year 1854, three of them being old banks, three free banks, two

independent banks, and two branches of the state bank.⁵⁸

Condition of Remaining Banks. - Of the four classes of

banks in the state then, there remained at the close of 1854 but

one old bank, nine independent banks, ten free banks, and thirty-

seven branches of the state bank. The old bank was the Ohio

Life Insurance and Trust Company of Cincinnati. The capital

of this institution was $2,000,000, only about $600,000 of which,

however, was employed in its banking business, the remainder

being used in the insurance and trust department. This com-

pany was conservative and its business said to be conducted in

the most careful manner.⁵⁹ The branches of the state bank, too,

 

57 Banking in All Nations, 1:442 and 4.

Cincinnati Daily Enquirer, No. 9, 1854.

For failure of important private banks in Cincinnati see preceding

page 445.

58 The charters of two of these old banks expired Jan. 1, 1854.

The charters of two others, the Bank of Circleville and the Bank of

Massillon, were to expire in 1855, but both became insolvent and were

ranked among the broken banks of the state before the end of 1854.

The Bank of Massillon failed in November, 1853, close upon the

failure of H. Dwight of New York City, its principal owner, who had

used practically all its circulation in building the Cleveland & Pittsburg

and the Chicago & Mississippi Railroads. The last report of the bank

showed that Dwight had $350,000 of its means subject to sight draft.

Its capital was $200,000, of which he owned $170,000.--See Cleveland

Plain Dealer, Nov. 7, 1853, and Cincinnati Daily Enquirer, Nov. 19 and

Dec. 3, 1854.

For branches of State Bank which failed in 1854, see Note, p. 483.

59 Men and Measures of Half a Century-McCulloch, p. 132.

Hunt's 28:736.

• 220
 

Banking and Currency in Ohio Before the Civil War. 455

 

were generally regarded as sound and enjoyed the utmost public

confidence.⁶⁰

The free bankes and the independent banks, however, the

special bank examiner in October 1854 placed in three classes:

Safe and doing a legitimate business, 6; Guilty of some one or

other improper practice, 8; More or less liable to censure and

loss, 8.61 Of these, one independent bank and two free banks

failed before the end of the year, leaving but 57 authorized banks

still in active operation in Ohio on the first day of January

1855.62

 

60Ohio Banks-Baker. Bankers' Magazine 11:167.

61In Class No. 1, was but one free bank, the Bank of Commerce,

Cleveland; the five independent banks were the Franklin Bank of Zanes-

ville, Bank of Geauga, City Bank of Cleveland, Mahoning County Bank,

and the Western Reserve Bank at Warren.

In Class No. 2, were two independent banks, the Commercial Bank

at Cincinnati and the Canal Bank at Cleveland; and six free banks,

Champaign County Bank at Urbana, Merchants' Bank at Massillon, Bank

of Marion, Franklin Bank of Portage County, Pickaway County Bank

at Circleville, and the Springfield Bank.

In Class No. 3, were three independent banks, Sandusky City Bank,

City Bank of Cincinnati, and the City Bank of Columbus; and five free

banks, Savings Bank of Cincinnati, Stark County Bank at Canton, Union

Bank of Sandusky, Forest City Bank of Cleveland, and the Iron Bank of

Ironton. - Ohio Exec. Doc., 1854, No. 9, p. 557.

62 For statistics of condition see Appendix, pp. 508, 514.

The Canal Bank of Cleveland failed to redeem its notes in Novem-

ber, 1854, and was placed in the hands of a receiver.- Magazine of

Western History, 2:287.

• 221
 

CHAPTER XII.

BANK TAXATION IN OHIO BEFORE THE WAR.

Decline in Banking Facilities attributed to Tax Laws.-

A large part of the decrease in the number of banks during the

years following the new constitution was attributed by the banks

to adverse legislation. The party then in power was credited

with a hostility to all banks. Their opponents had charged them

with trying to frame the new constitution so as to admit of

legislation which would crush the banks. That plan failing, these

critics assert, they then turned to the taxing power as a means

of waging war on the banks.¹ That this party the same year

the new constitution was adopted passed the free banking law,

thus throwing open the opportunities to engage in banking, did

not prevent even the free banks themselves from heaping

criticisms upon the tax laws.

The decline in the circulation of the authorized banks begin-

ning in 1851 and the drop in capital and loans in 1852 were at

once attributed to the tax laws of those years. The Bankers'

Magazine in July, 1853, states: "The severe tax laws of Ohio,

adopted within the last two years, have had a depressing effect

upon the banking system and facilities of that state."2  Mr.

Henry F. Baker, writing in the same year, observes: "It is such

laws as these which stimulate reckless financiers to artifices and

schemes of evasion, wholly at variance with the principles of

sound banking."³ While in 1854 the banks themselves almost

uniformly held up the tax law as the scape goat of all their

financial troubles.⁴

Taxation of Dividends or Profits prior to 1850. - With-

out doubt the legislation on the subject of taxing the banks had

 

1Daily Commercial Register (Sandusky), March 2, 1853.

Banking in All Nations, 1:442.

2Bankers' Magazine, 8:85.

3Banks and Banking in the United States- H. F. Baker, p. 40.

4Report of Bank Examiner Reemelin, Oct. 15, 1854.

(456)

• 222
 

Banking and Currency in Ohio Before the Civil War. 457

been varied and somewhat vacillating.      Prior to the general

banking law of 1845 the general principle followed had been

that of a tax on dividends.⁵ And the law of February 24, 1845,

authorizing the State Bank of Ohio and other banking companies

required the banks to pay, in lieu of the tax on dividends, 6%

on the profits after deducting expenses and ascertained losses.⁶

The banks organized under this law paid this 6% tax for several

years without question and the arrangement was generally con-

sidered as a contract binding on both state and banks.

The old banks then in the state were by their charters made

subject to a tax of 5%    on their dividends as provided by the

tax law of March 12, 1831, and such taxes as might be imposed

by law. This law was amended March 2, 1846, the same day

the Ohio legislature passed the Alfred Kelley general property

tax law, and all the banks except the Ohio Life Insurance Co.

and those organized under the State Bank law, were required to

set off for the state 6% of their gross profits in lieu of the tax

on dividends.⁷   The general property tax law provided for as-

sessing and taxing property according to its money value, but

the taxing of the banks only on their profits was held out as a

bonus for foreign capital.⁸

 

5 See preceding pages. Also Index.

Pennsylvania, in 1814, was the first state to adopt this form of bank

taxation. Virginia and Ohio were the only other states which began

and for some time continued to tax banks on dividends, though Vermont

and some others sometimes inserted charter provisions reserving to the

state part of the profits. - Essays on Taxation - Seligman, p. 143.

Ohio Laws, 43:24.

Some of the banks construed this so as to make the 6% payable to

the state part of the expenses and to be deducted before setting off the

state's share, thus giving the state a smaller share. To settle this ques-

tion the state brought suit against the Franklin Branch in Columbus, one

of the banks which deducted the 6% as an expense. The court held that

this 6% was not a part of the expenses, but rather a part or share of the

dividend of profits, and gave judgment for the state.--Bankers' Maga-

zine, 4:412 (1849).-Hunt's Merchant's Magazine, 22:103 (1850).

7Ohio Laws, 44:121.

The O. L. I. & T. Co. still paid 5% on its dividends.

8Message of Gov. Medill, Jan. 7, 1856-Cincinnati Daily Enquirer,

Jan. 9, 1856.

• 223
 

458       Ohio Arch. and Hist. Society Publications.

Tax on Capital Stock and Surplus in 1850 and 1851.-

For some years then there was more or less agitation for a law

taxing banks on their loans and discounts, with the idea of get-

ting at their real capital in trade.⁹ Finally an act was passed

March 23, 1850 providing that each bank, whose charter did not

provide another mode of tax, should report the amount of its

capital and surplus and be taxed on that sum at the same rate

as was assessed on money at interest at the place where the

bank was located.¹⁰ Banks taxed specially could consent to this

act and come under it. The idea was to tax banks just as other

property was taxed. The Whigs and Free Soilers all advocated

this law and the Democrats, or Locofocos as they were called,

almost all opposed it.11

By January, 1851, five banks had accepted the terms of this

act. Thus there was quite a diversity of bank taxation in the

State. The Ohio Life Insurance and Trust Co., for example,

under its charter was taxed but 5% on its dividends, the new

banks organized under the State Bank law of 1845 paid 6% upon

their profits, except those that accepted the terms of the act of

March 23, 1850; these paid the regular property tax rate on

their capital stock and surplus fund.¹²

On March 21, 1851, the legislature passed a law taxing

banks and other stocks the same as other property in the State

was taxed.¹3  This placed the tax on capital stock and surplus

the same as the law of March 23, 1850, but its provisions were

general and applied to all banks then existing or afterwards to

be established in the state, unless exempted by contract.14. That

this law did increase the taxes on the banks is shown by the

state auditor's report for 1851 which gives the total taxes paid

by the banks under the act of March 21, as $129,722.58, while

 

9 Ohio Press, Jan. 6, 1847. Ohio Ex. Doc., 1848, Part 2, p. 536.

Ibid., 1850, Part 1, p. 359.

10 Ohio Laws, 48:88.

11 Belmont Chronicle, March 29, 1850.

12 State Auditor's Report.

Cleveland Herald, Jan. 16, 1851.

13 Ohio Laws, 49:56.

14Ohio L. I. & T. Co. vs. Henry Debolt -16 Howard 439.

• 224
 

Banking and Currency in Ohio Before the Civil War. 459

 

if they had been taxed on their profits alone the tax would have

been only $64,104.52.15

Opposition to Tax Law of 1851.--By March 1852 five

independent and seven branch banks had placed themselves under

these acts of 1850 and 1851.16 The majority of the banks or-

ganized under the law of 1845, however, opposed the law, and

May 22, 1851, the board of control of the state bank adopted

resolutions asserting that it was inexpedient for the branches to

waive their constitutional and charterde rights and consent to

be taxed under the act of March 21, ¹⁸⁵¹¹⁷ A test case was

submitted to the State Supreme Court, which held that the act

of 1845 contained no contract on the part of the state not to

change the mode or amount of taxation. The Supreme Court

of the United States, however, at the December term     1853,

overruled this decision, and held that the act of 1851 impaired

the obligation of a contract and was therefore void.¹⁸

Tax on Loans and Discounts. - Meanwhile the new con-

stitution was adopted in June, 1851, containing clauses provid-

ing that all property, personal or real, should be taxed by a

uniform rule; and that laws should be passed taxing notes and

bills discounted or purchased, moneys loaned, and all other prop-

erty of all banks then existing or afterwards created in the state

so that all property employed in banking should always bear a

burden of taxation equal to that imposed on the property of

individuals.19  In accordance with these clauses a law   was

passed April 13, 1852, requiring that all banks of issue should

make returns under oath of the average amount of their notes

and bills discounted or purchased, on which any profit was

 

15Ohio Exec. Doc., 1851, Part I, p. 629.

16 State Auditor's Report, March 16, 1852.

17 State Bank of Ohio-Janney, p. 172. The Bankers' Magazine of

July, 1853 (p. 85), stated: "The tax law of 1851 is so oppressive that

several of the banks have opposed it in the courts while others have

concluded to go into liquidation and place their means where the law of

contracts is more strictly adhered to, and where capitalists are not looked

upon as the enemies of the poor man and laborer."

18 Piqua Branch State Bank vs. Knoop, 16 Howard 369.

¹⁹Art. 12, Secs. 2 and 3.

Ohio Revised Statutes, 1854, p. 907.

• 225
 

460       Ohio Arch. and Hist. Society Publications.

earned; also of the average amount of all their other moneys,

effects or dues, which were loaned or otherwise used with a view

to profit.²⁰. On these amounts they were then to be taxed at

the same rate which individual property paid.

Refusal of Banks to Pay the Tax.-These provisions

the banks considered very oppressive and unjust, claiming that

they were thus taxed on three times the amount of their capital,

or what individuals would pay on the same capital. Many banks

refused to pay the tax and carried the matter into the courts,

claiming that if they were not sustained they would have to go

out of existence.²1  Several banks actually did close, change to

private banks, or withdraw part of their circulation, assigning

the tax law as the reason.²²  The feeling against the law was

very bitter on the part of the banks. On the other hand their

intense opposition, carried to the point of refusing to pay the

tax, aroused strong resentment among those charged with the

enforcement of the law, and the legislators, and their friends

throughout the state, responsible for its existence. A report of

the auditor of state February 12, 1853, said: "But few of the

banks of Ohio have paid the taxes assessed against them under

the provisions of the act of April 13, 1852. This delinquency is

not a matter of accident, but is attended by circumstances which

betray the existence of a conspiracy to trample upon and over-

ride the very authority which gave the conspirators their corpo-

rate existence."

The Crow Bar Law of 1853. -A bill to enforce the col-

lection of the bank taxes was even then before the legislature.

 

21 Daily Commercial Register (Sandusky), May 27, 1852, and

Feb. 12, 1853.

22In April, 1852, the Dayton Bank, an independent bank, decided

to wind up, saying that their taxes would have been $6,000 as compared

with $1,100 the year before. About the same time the Franklin Branch

Bank of Cincinnati closed as a bank and the firm of Groesbeck & Co.

took its place, the view being expressed that the tax was much less on

brokers than on banks. At this time, too, the Xenia Branch of the State

Bank decided to withdraw 40% of its circulation ($110,000) and retire

a proportionate amount of its capital stock, claiming that the taxes

assessed on the branch were three times as much as on property in other

business. - Cleveland Herald, May 1, 7 and 8, 1852.

• 226
 

Banking and Currency in Ohio Before the Civil War. 461

 

It was opposed by the Whigs and by some of the Democrats,

especially the bankers in the party;23 nevertheless on March 14,

1853, it became a law.²⁴ This was the famous "Crow Bar Law,"

so called because it provided that if the taxes assessed under

the act of April 13, 1852, were not paid by December 21 of any

year a penalty of 5% should be added; then if not paid within

5 days, the county treasurer should enter the vaults of the bank

by force, if necessary, and seize sufficient money or other prop-

erty to pay the taxes and the 5% penalty, together with a 5%

poundage and all the costs of the seizure and any sale that might

be necessary.

This was actually done in the case of the Commercial Bank

of Cleveland, the money being seized, and marked, and placed

for safe keeping in the vaults of the Cleveland Insurance Com-

pany. The banks had assigned their interest in the amount to

J. G. Deshler of Buffalo, who immediately began suit by writ

of replevin in the United States Court at Columbus. The United

States marshal forced the vaults of the insurance company at

night, obtained the marked money, and brought it into court.

The law was declared unconstitutional.²⁵

In 1854 the tax law of April 13, 1852, was also declared

unconstitutional so far as it related to the banks organized by

the law of 1845, the United States Supreme Court holding that

the fact that the Ohio constitution permitted such a tax did not

release the State from its contract.²⁶

 

23Daily Commercial Register, Jan. 28, 1853.

Mr. Beckel, a prominent Democratic bank president of Dayton,

was one of those active in opposition to the law.

24 Ohio Laws, 51:476.

25Daily Commercial Register, March 28, 1853.

Banks and Bankers of Cleveland-Magazine of Western Hist.,

2:290. Knox, p. 684.

After the Republicans again came into power in the legislature the

"Crow Bar Law" was repealed by the act of Feb. 26, 1857.

26Dodge vs. Woolsey - 18 Howard 331.

The Cincinnati Enquirer called the decision a blow at state sover-

eignty, the view having been held by the dominant party in the state that

the power of taxation was an act of sovereignty which one legislature

could not part with in perpetuity. - See Cincinnati Daily Enquirer,

May 30, 1854, and Feb. 26, 1856.

• 227
 

462       Ohio Arch. and Hist. Society Publications.

Kelley's Bank Tax Law of 1856. -In the fall election of

1855 the Republicans were victorious and April 1 and 8, 1856,

new laws were passed which provided in effect that all banks,

including those organized under the law of 1845, should report

their capital stock, surplus, contingent fund, and undivided

profits, as the basis of taxation and be placed on the duplicate

as other property of the state.²⁷  Under this system the banks

were taxed for two years without any serious objection on their

part.²⁸  It was asserted by some, however, that thus thousands

of dollars of bank capital were exempted from taxation resulting

in the decline in the amount of personal property from 297 mil-

lion in 1854 and 283 million in 1855 to 263 million in 1857 and

240 million in 1858.29

Vacillating Character of Rest of Period. -In the fall of

1857 the radical party made gains in the legislature and on April

12, 1858, acts, amending the laws of March 23, 1850, April 13,

1852, and April 1, 1856, were passed, which provided for assess-

ing and taxing all property in the state according to its true value

in money; and it was then provided that each bank should make

an annual statement to the county auditor showing the average

amount of loans and discounts, on which any profits were earned,

and the average amount of all other moneys, etc., employed with

a view to profit (except the average specie reserved to redeem

notes and pay depositors, and also average amount of balance

due from banks on which no interest was received). These

amounts were then to be placed on the duplicate and taxed as

other property.³⁰ Many of the drastic features of the 1853 law

were re-enacted and again the independent and branch banks

refused to pay the tax. They claimed that the acts taxing them

in a way different from that provided in the law of 1845 im-

paired the obligation of a contract; and their contention was up-

held by the United States Supreme Court.

 

27Ohio Laws, 53:51 and 216.

The latter act was known as Kelley's Bank Tax Law.

28Annual Report of State Auditor, Jan. 1, 1860, p. 16.

29Ohio Statesman, Dec. 29, 1858.

30Ohio Laws, 55:52 and 128.

• 228
 

Banking and Currency in Ohio Before the Civil War. 463

 

These acts were repealed by the general tax law of April 5,

1859, but the method of taxing banks remained the same as

provided in 1858, except that banks organized under the law of

1845 should make returns to the state auditor instead of the

county auditor. Upon refusal or neglect by any bank to make

the returns required, the amount was to be ascertained from the

quarterly reports and 50% added to it.³1 These banks continued

to resist collection of the tax and the state had much litigation

and but little revenue from them under this law.

An act of Apr. 4, 1861, however, changed the above so as

to make capital stock, undivided profits, and deposits the basis

on which banks should be taxed.³²  This law was much more

successful in its results and remained in force during the rest

of the period covered in this monograph. The banks organized

under the 1845 law generally accepted this plan and proceeded

to pay their taxes as the new law provided, their back taxes

however being paid as provided in the law of 1845. Inducement

for the others to fall in line was offered early in 1862 when most

of the banks in the United States, except in Ohio, Indiana, and

Kentucky, had suspended owing to the war. An Ohio law was

passed Jan. 16, 1862, permitting temporary suspension of specie

payment by all Ohio banks, except those that refused to accept

the tax law of 1861.33

The 1861 law was repealed by that of Apr. 16, 1867, which

also amended the act of Apr. 5, 1859. This law provided that

real estate of the bank be taxed where located, as other property,

and required that the shares of the banks stock be listed and

taxed where the bank was located. The banks, however, could

pay the tax on the shares and take it out of the dividends.³⁴

This plan with some modification remained in use in Ohio until

the close of the century.³⁵

 

31 Ohio Laws, 56:175-218.

32 Ohio Laws, 58:59.

33Ohio Laws, 59:3. Exec. Doc., 1861. Vol. II, p. 251.

Bankers' Magazine, 12:961.

34 Ohio Laws, 64:204.

35 Taxation in Ohio - Evans, p. 48.

• 229
 

CHAPTER XIII.

THE BANK OF OHIO, PANIC OF 1857, AND NOTE REDEMPTION

AGENCIES.

Further Decline in Banking Capital in 1855.-Notwith-

standing the fact that by 1855 the Supreme Court had declared

unconstitutional both the obnoxious tax laws of 1851 and 1852,

which the banks organized under the law of 1845 had pronounced

the great obstacle to their progress, yet the capital of the au-

thorized banks in Ohio continued to decrease. In May 1855

another branch of the State Bank failed and was closed by the

board of control;1 while from January to November of that

year the capital of the independent banks decreased $169,340.

the decrease during the year for all the authorized banks being

$675,000.²  Meanwhile the influx of foreign bank notes still

Act to Incorporate the Bank of Ohio and other Banks. -

In January 1856 the newly elected Republican governor, Salmon

P. Chase, in his inaugural address to the legislature called at-

tention to the failure to exclude the paper of banks from other

states, adding: "Public sentiment demands an increase of bank-

ing capital, organized under our own laws, contributing in just

measure, to our own revenues, and sufficient to furnish the neces-

sary facilities for the transaction of business." He then pointed

out that the constitution provided for the authorizing of new

banks by the legislature, the act then to be submitted to a vote

of the people and not to take effect unless approved by a ma-

jority vote.³ He also suggested the repeal or amendment of the

1O% interest law, saying: "There seems to be no valid reason

 

1On May 23, 1855, the Commercial Branch of Toledo was placed

under the care of the executive committee, and funds were provided to

redeem its circulation and the branch closed.--State Bank of Ohio--

Janney, p. 169.

2Report of Comptroller of Currency, 1876, p. CXVII.

continued.

3Cincinnati Daily Enquirer, Jan. 15, 1856.

(464)

• 230
 

Banking and Currency in Ohio Before the Civil War. 465

 

why the capitalists should be encouraged to demand so large a

proportion of the earnings of the produce and the profits of the

manufacturer and the merchant."

The latter suggestion did not result in the desired legislation,

one argument advanced being that 10%   interest rate tended

to draw foreign capital into the state.4  The former recommen-

dation, however, met with the approval of the legislature, and

on April 11, 1856 it passed an act "to incorporate the Bank of

Ohio and other Banks." This act was similar in its general pro-

visions to the law of 1845.5 It was to be submitted to popular

vote at the October election and if approved was to take effect

at once and continue until 1877.

Objections to the Proposed Banking Law. - Opposition

to the proposed banking law soon began to develop, however.

The law contained an individual responsibility clause, a limita-

tion of the rate of interest, and a restriction on the indebtedness

of stockholders and directors. Some objected to these. Others

objected to the requirements to pay out nothing but gold or silver

or the notes of specie-paying Ohio banks. Still other objected

to the deposits required with the state treasurer.⁶  The act

also prohibited the legislature "from imposing any greater tax

upon property employed in banking under this act than is or

may be imposed upon the property of individuals." This clause,

too, met opposition. The result was that the act was not ap-

proved by a majority of all the electors voting at the October

election and failed to become a law.⁷

Governor Chase favors Free Banking. - Soon after that

the Supreme Court of Ohio unanimously decided that the act to

authorize free banking passed March 21, 1851, but supposed by

many to have been abrogated by the new constitution adopted in

June 1851, remained in full force unaffected by any provision of

that instrument. So when Governor Chase delivered his next

message to the legislature in January 1857, he remarked that

public opinion still remained divided as to whether the privilege

 

4Ibid., March 15, 1856.

5Report of Comptroller of the Currency, 1876, p. XXVII.

6Cincinnati Daily Enquirer, May 25, 1856.

7Daily Ohio Statesman, Jan. 6, 1857.

30

• 231
 

466       Ohio Arch. and Hist. Society Publications.

of banking should be limited to a definite number of institutions

or extended to all who were willing to give the required se-

curities and guaranties against abuse; but he expressed his own

preference for the most liberal extension of the privilege with

such restrictions upon its exercise as would effectually protect

the community against a mere paper money currency.

He then suggested to the legislature the expediency of ob-

serving the practical operation of the free banking act of 1851,

and of so amending it from time to time as might be necessary

to protect and secure the interests of the community, without

invoking the decision of the people upon a new banking law.⁸

Another State Bank Law rejected by the Voters. - The

State Bank advocates, however, were not yet willing to adopt the

governor's recommendation. Two weeks later Mr. Kelley intro-

duced into the Senate another bank bill,⁹ which soon after passed

the legislature as an act "to incorporate the Bank of Ohio and

Branches."¹⁰ This act was similar to that rejected by the people

in 1856, but omitted the part providing for independent banks.

Provision was made for submitting it to popular vote ;11 but

when the election came off, it was found to have suffered the

same fate as its predecessor of the year before. As the governor

remarked in his next message, it could then properly be con-

sidered as settled that the majority of the electors did not desire

the further creation of institutions of the character proposed.¹²

This ended the legislative acts for a Bank of Ohio with branches.

The people of the state themselves had decided in favor of the

more democratic free banking system.¹³

 

8Governor Chase's Message, Jan. 5, 1857.

9 Daily Ohio Statesman, Jan. 23, 1857.

10 Ohio Laws, 54:140.

11 Ohio Laws, 54:78.

12 Daily Ohio Statesman, Jan. 5, 1858.

13An act of May 21, 1894, repealed the law of Feb. 24, 1845, which

authorized the State Bank of Ohio and the independent banks. It also

repealed the acts of Jan. 6, 1846; Feb. 24, 1848; March 8, 1850; March 22,

1851; March 14, 1859, and April 25, 1862. And Ohio today has a modified

form of the free banking law of 1851.-Ohio Laws, 91:338 (1894).

Knox, p. 690.

• 232
 

Banking and Currency in Ohio Before the Civil War. 467

 

Distribution of Ohio Banks in January      1857.-In

January, 1857 there were 60 banks in Ohio, 1 old bank, 10

independent banks, 13 free banks, and 36 branches of the state

bank. These were well distributed throughout the state, being

located in 41 counties and 45 different towns or cities. Cleveland

had 5, Cincinnati, Columbus, and Chillicothe had 3 each, five

other towns had 2 each and the remaining places had but one

bank apiece. As compared with 1847 Cleveland had gained one

bank and Cincinnati had lost 3. The total capital of all the

banks was $5,871,822, which on the basis of the population in

1860 means a capital of $2.51 per capita. This figure was about

the same as in 1847, but the per capita figures for the different

counties show greater uniformity in 1857, only one county, Ross,

having as much as $10 per capita. The distribution of banks and

capital by towns and counties may readily be seen from the fol-

lowing table.

• 233
 

468      Ohio Arch. and Hist. Society Publications.

• 234
 

Banking and Currency in Ohio Before the Civil War. 469

 

Industrial Progress in Ohio 1852 to 1857. -The less than

6 millions of bank capital shown in the foregoing table represent

a big decline from the nearly 8 millions employed in Ohio in

1852. During the intervening years private banks and brokers

had flourished, depreciated foreign paper had abounded, and

trade and exchange had been subjected to much uncertainty.

Nevertheless the industries of the state had been progressing in

spite of the decline in authorized banking facilities, and the

fluctuations of exchange rates.

In Ohio, as in other parts of the country, the years 1850-2

had been years of comparatively low prices. Then followed a

gradual rise in prices until they reached a high level in 1855.

Thus in Cincinnati from 1851 to 1855 the price of wheat rose

from 58 cents a bushel to $1.62, corn from 30c a bushel to 43c,

flour from $2.95 a barrel to $8.10, whiskey from 16c a gallon to

341/2c, hogs from $4.55 a hundred to $6.30, pork from $12 a

barrel to $16, lard from 7^c a pound to 103/4c, sugar from 53/4c a

pound to 71/2C, coffee from   10c a pound to 12¼C, and tallow

candles from   10c a pound to 15c.¹⁴   In 1856 all these prices

show a decided falling off while in 1857 they were about as low

as in 1852.

It will be seen then that the increase is not merely in price,

when it is stated that from 1852 to 1857 Ohio's annual export

of home products increased from $40,000,000 to $70,000,000.

This represented a surplus from a total production of agri-

cultural, mineral, and manufactured products amounting to more

than $261,000,000 leaving over $191,000,000 for home consump-

tion.l⁵

 

14Report of Ohio Commissioners of Statistics, 1859, p. 96.

Industrial Depressions--Hull, pp. 145 and 146.

See Appendix, p. 519.

15Annual Report of Commissioner of Statistics, 1857, p. 540.

Ohio Exec. Doc., 1857, Part I, No. 8, p. 351.

Products of -                                         Production.       Exports.

Mining  ............................                           $9,483,500        $2,100,000

Agriculture ........................ 132,700,000     48,300,000

Manufacture ...................... 119,300,000     20,000,000

 

Total  ........................ $261,483,500 $70,400,000

• 235
 

470       Ohio Arch. and Hist. Society Publications.

Failure of Ohio Life Insurance and Trust Company.-

It was well for Ohio at this time that her business prosperity

rested on the solid basis of her agricultural and mineral wealth

and the products manufactured therefrom, rather than on the

speculative foundation of the stock market. Throughout the

country the rapid industrial development of the period, stimulated

by new gold discoveries, expansion of paper money, excessive

railroad building, etc., had been accompanied by undue specula-

tion, and credit was strained to the danger point. A fall of

stocks in the summer of 1857 caused great embarrassment to

many eastern bankers and others who held call loans for which

they had taken stock collateral. And on Aug. 24, the crisis

was occasioned by the failure of the Ohio Life Insurance and

Trust Co., wth liabilities running into millions.¹⁶

This institution had enjoyed excellent credit; its home busi-

ness had been well and carefully managed; and its directors as

well as the public thought it sound and prosperous. Its failure

was due to big speculative operations by the cashier of its New

York office. The deposit balances in New York had been em-

ployed in common by the Cincinnati and New York offices, dis-

counted upon to some extent in the West and the remainder

loaned by the New York cashier under the advice of a sub-board

of eastern trustees.¹⁷ Large amounts had been borrowed on call

in New York and loaned on financial securities where they were

not immediately available.l⁸

The Panic of 1857. -The failure of the Life and Trust

Co., precipitated a panic in New York.  All the banks of that

city suspended specie payment but one, the Chemical. On Sept.

12 and 13 the banks of Philadelphia, Washington, Baltimore, and

 

16History of American Currency -Sumner, pp. 180 and 181.

Financial History of U. S.- Dewey, pp. 263-4.

17 Men and Measures of Half a Century- McCulloch, pp. 132-133.

Bankers' Magazine, 12:240 (September, 1857).

18 Sumner, p. 181.

The president of the company reported among the causes of the

failure: "First. In his (the cashier's) dealings with, and large advances

to the Cleveland and Pittsburg Railroad Company, to aid in the comple-

tion of said road. - State Bank of Ohio - Janney, p. 171.

• 236
 

Banking and Currency in Ohio Before the Civil War. 471

 

many interior towns suspended. Within a fortnight stocks fell

40 or 50% and 20,000 persons were thrown out of work in New

York City.¹⁹ Important railroads reaching into the West became

bankrupt, but the crisis was mainly financial. 150 banks were

said to have failed in Pennsylvania, Maryland, Virginia, and

Rhode Island.²⁰  Suspension became general except in the Ohio

Valley, at New Orleans, in South Carolina, and some scattered

exceptions elsewhere.²¹

Failure of Trust Company threatens State Bank of Ohio.

-In Ohio practically all the private banks were compelled to

close their doors, and several of the authorized banks failed.

Many of the Ohio banks had kept their New York accounts with

the Ohio Life Insurance & Trust Co., and its failure seriously

crippled them. Almost all the branches of the State Bank had

made the Trust company their New York agent. On Feb. 2,

1857, the branches had in eastern exchange $1,130,398, nearly

all with the Trust company. These deposits of some of the

branches equaled their entire capital. Fortunately two influential

members of the board of control were in New York at the time

of the failure, and got from the cashier a contract setting

aside assets enough to meet the demands of the branches. This

saved some of them from ruin.²²

Sept. 30, 1857, the board of control adopted a resolution as-

serting that the branches of the State Bank could and would con-

tinue specie payments, and agreed to a plan proposed by Mr.

Kelley to diminish their immediate liabilities, increase their

available assets, and otherwise act in concert to increase their

ability to maintain specie payments.²³  And throughout this

trying period the branches of the State Bank of Ohio continued

 

19 Sumner, pp. 182 and 183.

20 Gilbert on Banking, Vol. II, p. 337.

Banking in All Nations, 1:427.

22 State Bank of Ohio - Janney, p. 170.

23Ibid., p. 167.

• 237
 

472       Ohio Arch. and Hist. Society Publications.

 

to redeem their notes;24 although several of the other banks in

the state had suspended.²⁵

The State Bark establishes a Note Redemption Agency.

-Among other recommendations in the plan adopted by the

board of control of the State Bank in September, 1857 to enable

the branches to continue specie payment was one urging the

branches, which had not already done so, to cooperate in the note

redemption agency which had been arranged in Cincinnati by

some of the branches in May, 1857. Twice before such agencies

had been successfully established for a time.26

The Ohio Bank Agency of 1850. -In 1850 some of the

branches in conjunction with other banks in the state established

an agency in Cincinnati, where on account of the course of trade

the circulation of Ohio banks concentrated, with the object of

checking the continual drain of specie from their vaults, and of

keeping their notes equal to coin by furnishing eastern exchange

for them, at all times, at about the cost of transporting coin.

The arrangement provided that each associated bank should con-

tribute in proportion to its circulation (not over 10%) in eastern

exchange to be deposited with the agency as a permanent fund.

The eastern funds of the agency were to be deposited in eastern

banks subject to sight draft and at such rate of interest as might

be agreed upon. The agency was to sell exchange at rates that

 

24 "But only nominally," says Mr. McCulloch, who adds: "Its capital

was locked up in the Ohio Life and Trust Company, and it was so

crippled by the failure of that bank that even the brokers forebore to

return its notes."- Men and Measures of Half a Century-McCulloch,

p. 133.

25Banking in All Nations, 1:442.

Daily Ohio Statesman, Oct. 30, 1857 and Jan. 5, 1858.

The following interesting quotation is from the Crawford County

Forum. Similar accounts can be found in the Darke County Democrat,

Cleveland Plain Dealer and other Ohio papers of the time.

Many Ohio banks are "resisting specie payments by the interposition

of hired mobs. Within the last month citizens have been driven from

the banks and threatened with personal violence in Mansfield, Springfield,

Marietta, Xenia and Piqua, for daring to ask specie for notes on these

banks."-See Daily Ohio Statesman, Nov. 10 and 19, 1857.

26 Bankers' Magazine, 12 :943.

• 238
 

Banking and Currency in Ohio Before the Civil War. 473

 

would prevent the shipment of specie to the East, receiving notes

of specie paying banks. These notes would then be assorted and

reported to each bank, which was at once to send the amount to

the eastern deposit bank of the agency to the credit of the agency,

and send a duplicate check to the agency. The bank's notes

would then be subjected to the order of the bank.

Notes of banks not members of the association when re-

ceived were to be returned for redemption, or otherwise dis-

posed of as might best promote the objects of the agency. When

a member should refuse to settle as above, or a non-member re-

fuse to redeem its notes, all the associated banks were to furnish

the agency with notes of the refusing bank and receive therefor

coin or exchange, when collected, paying the agency only the cost

of converting and transporting the same.²⁷

The Opportunity for a Redeeming Agency. - The board

of control of the state bank after considering the matter at

various times finally decided that the arrangement was prej-

udicial to the interests of a large portion of the branches, and it

was discontinued.²⁸ It was felt by some familiar with currency

conditions in the state, however, and especially during the great

increase of depreciated paper after 1852 that some such arrange-

ment should be resumed, that the Ohio Valley banks might keep

their notes nearly at par by using the large balances which they

usually had in New York for their redemption, and thus extend

their circulation by the facility with which they could be con-

verted into bankable funds. The rate of exchange on New

York was rarely above 1/2%, and was often down to par.²⁹

The Agencies of 1854 and 1857.-In May 1854 the

scheme was renewed by the branches of the State Bank. A fund

was raised and placed in the Mechanics' and Traders' branch at

Cincinnati for the purpose of returning to the proper bank and

converting into eastern exchange all notes that were depreciated

below those of the State Bank. The Mechanics' and Traders'

branch failed in November of that year, however, and again the

 

27 Cincinnati Price Current, Dec. 12 and 25, 1849.

Hunt's Merchants' Magazine, 22:125 and 126.

28State Bank of Ohio-Janney, p. 172.

29 Banks and Banking in the U. S.- Baker, p. 35.

• 239
 

474      Ohio Arch. and Hist. Society Publications.

 

agency was closed.³⁹ May 20, 1857 a similar arrangement was

made with Kenney, Espy, and Company, a Cincinnati banking

house, for the special purpose of returning the notes of Kentucky,

Indiana, and Virginia banks. The agency was to furnish New

York exchange at 3/8 % premium for the notes of the banks

named, which were to be forwarded to it by the branches of the

State Bank. It was agreed that the agency should not pay out

the notes of these foreign banks. This arrangement lasted until

May 19, 1858, when a final attempt was made and a more ex-

tensive agency established.³1

Agitation for an Ohio Valley Clearing House. - Specula-

tion had so controlled the rate of exchange between the East and

the West that the feeling had become pretty widespread that the

establishment in Cincinnati of some sort of clearing house for

the banks of Ohio, Indiana, and Kentucky would result in sub-

stantial benefits to the sound banks and give additional protec-

tion to the business community. Governor Chase recommended

it in his message in January 1858;32 the Cincinnati Chamber of

Commerce indorsed it in April;33 and in June a convention of

Ohio, Indiana, and Kentucky bankers met in Cincinnati and pro-

posed a plan, which the branches of the State Bank of Ohio

under took to put into operation. This movement was stopped,

however, by the discovery of legal difficulty in the way of locat-

ing the agency of a foreign bank in Ohio.

The Brokers' Assorting System. - It was believed, how-

ever, that the Indiana banks and some of those in Kentucky

would cooperate if the Ohio banks went ahead with the scheme.

Cincinnati was then the monetary center of the West. There

was an annual demand there for exchange, chiefly on eastern

cities, amounting to 60 or 70 million dollars. Providing these

exchanges had brought into existence an extensive broker's as-

sorting system, which furnished exchange to the merchant often

 

30 State Bank of Ohio - Janney, p. 172.

31 State Bank of Ohio - Janney, p. 172.

Cincinnati Gazette, June 5, 1857.

32 Daily Ohio Statesman, Jan. 5, 1858.

33Bankers' Magazine, June, 1858.

• 240
 

Banking and Currency in Ohio Before the Civil War. 475

 

at exorbitant rates though sometimes he could hardly have pro-

cured it without the broker's help.

Although this system obtained its capital chiefly from the

deposits of merchants and manufacturers, it was really antago-

nistic to their interests since it constantly sought the highest pos-

sible premium of exchange, that being the source of its profits.

These high charges had even forced some of the larger mer-

contile houses into competition with the brokers for their own

special supplies.³⁴ Hence the merchants as well as the bankers

were anxious for the proposed agency.

The Bank of the Ohio Valley. - The plan seemed more

likely to succeed than ever before not only from the general

demand but also on account of the better means of communica-

tion throughout the country. In 1856 railroad building had in-

creased to 3,642 miles mostly in the western states,35 and Ohio

in 1857 had 2,834 miles of railroad, which had been built at a

cost of $95,000,000.³⁶ Another favorable factor was the low

rate of exchange which promised to continue. Accordingly with

good prospects of success a bank somewhat on the plan of the

Suffolk Bank of Boston was organized in Cincinnati under the

free banking law of 1851, and a contract was made with the

State Bank of Ohio by which its branches were to deposit with

the new bank an amount equal to 4% of their authorized circula-

tion, free of exchange interest, and the latter was to sell eastern

exchange at a rate not to exceed 1/2 % premium.

This new redemption agency was known as the Bank of

the Ohio Valley. It began business in September 1858 with a

capital stock of $51,000, of which $34,000 was paid in. It soon

after increased its capital stock to $500,000, of which $300,000

was to be offered in Cincinnati and $150,000 in New York and

other eastern cities. By March 1859 it already had a special

deposit of $306,000 from associate banks in Ohio, had sold

$3,300,000 eastern exchange, and had returned $2,700,000 bank

 

34 Magazine of Western History, 2:168.

Bankers' Magazine, 12:943.

35History of American Currency-Sumner, p. 180.

36Report of Commissioner of Statistics, 1857, p. 540.

37Banking in All Nations, 1:443.

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476       Ohio Arch. and Hist. Society Publications.

notes for redemption, besides having current deposits of $440,-

000. Its managers felt confident that its exchange business would

pay its expenses, and that its discount line would give good

dividends to its stockholders.³⁸

The Bank of the Ohio Valley continued to act as redeeming

agency for the State Bank of Ohio until Nov. 20, 1861 at which

time foreign notes, except those of the Bank of the State of

Indiana, were no longer current in Ohio.³⁹ The Bank of the

Ohio Valley was a very successful institution. Its success was

due to good management and strict adherence to sound financial

principles. It never charged exorbitant rates, yet at the close

of this period its five years of operation showed regular dividends

of 10%   a year and an extra dividend of 5%    declared Nov 2.

1863. Its financial statement for Nov. 3, 1863 showed a capital

stock of $500,000, undivided profits of $150,000, circulation

$47,000, and deposits $2,044,945, a total of means available for

business of $2,746,563, of which $1,708,556 were interest paying

investments.⁴⁰

 

38Bankers' Magazine, 13:746 (March, 1859).

39 State Bank of Ohio-Janney, p. 172.

40 Cincinnati Daily Gazette, Nov. 4, 1863.

See Appendix, p. 523.

A clearing house association was formed in Cleveland, Dec. 28, 1858,

"to effect at one place, and in the most economical and safe manner, the

daily exchange between the several associated banks and bankers, the

maintenance of uniform rates for eastern exchange, and the regulation

of what descriptions of funds shall be paid and received in the settle-

ment of business." The subscribers numbered one branch bank, one inde-

pendent bank, one free bank, and six private banks.-Banks & Bankers

of Cleveland, in Magazine of Western History, 2:285.

• 242
 

CHAPTER XIV.

 

CONCLUSION.

Majority of Ohio Banks survive the Panic. - It is highly

creditable to the management of the banks of Ohio organized

under the general laws of 1845 and 1851 that they passed through

the crisis of 1857, made extra difficult to many of them by the loss

of their eastern balances through the failure of the Trust Com-

pany, without a general suspension of specie payments. Such

general suspension was imminent at times, and some of the banks

were actually in a state of legal and others in a condition of

virtual suspension. To quote from Governor Chase's message of

Jan. 4, 1858, Ohio's "banking institutions, with a very few

temporary exceptions, have   performed their entire duty of

specie payments, without evasion and without delay."1

A list of suspended, depreciated, and discontinued banks in

Ohio published in October 1857 contains but seven authorized

banks, five independent, and two free banks.²  Of these at least

two had failed long before the panic occurred,³ and two others

had been among those reported in 1854 as not in active business.

In fact most of the financial trouble in Ohio in 1857 had orig-

inated not in authorized banks of issue, but in the failures of

private bankers and of the Trust Company.⁴ The failure of the

Ohio Life Insurance and Trust Company in 1857 removed the

last representative of the old banks organized under special

charters, with no security for their circulation except their

general assets.

 

1Ohio Exec. Doc., 1857, Part I, p. 347.

2Daily Ohio Statesman, Oct. 30, 1857.

3Of these two, the Canal Bank of Cleveland had failed in Novem-

ber, 1854, and the Seneca County Bank had failed March 1, 1857.-

Ohio Laws, 57:126 and 61:152.

4The Ohio Life Ins. & Trust Co.'s power to issue notes had termin-

ated Jan. 1, 1843.

(477)

• 243
 

478       Ohio Arch. and Hist. Society Publications.

Many Ohio Banks become National Banks after 1863.-

Of the three classes of banks remaining in the state in 1858 all

were organized under general laws. Of the free banks organized

under the law of 1851, some are still in existence, as Ohio still

has a modified form of that banking law. The branches of the

State Bank and the independent banks, however, were organized

under the law of 1845, which gave them existence only for 20

years. Consequently when the Civil War broke out and the

National Bank Act was passed many of them took advantage of

the opportunity and became National banks. Of the first ten

National banks organized in 1863, six were in Ohio.⁵ By Decem-

ber 31 of that year there were forty fully organized national

banks in the state with a capital of $5,448,200. The next year

the number in Ohio increased to 82, with a capital of $9,772,000;

while in 1865 there were 134 with a capital of $21,146,000.⁶

End of Period of Note-Issue under General Ohio Laws.

-In November 1861 there were still in operation in Ohio seven

independent banks, twelve free banks, and thirty-six branches of

the State Bank. By August 1863 two of the independent and

two of the free banks had disappeared, leaving but fifty-one in

the state with a capital of $5,177,500 and a circulation of $6,915,-

576. The notes of these banks had to compete with the new

National bank notes and the greenbacks, or notes of the federal

government. They held their own, however, until the federal

tax of 10% upon the issues of state banks early in 1865 forced

the retiring of the circulation of all state banks.

This together with the expiration of the charter of the

State Bank closed another period in Ohio's banking history,

that of state banks organized under general laws and issuing

 

5Two in Cleveland, two in Dayton, one in Fremont, and one in

Youngstown.-Bankers' Magazine, 18:84 (July, 1863).

6 Seventh Annual Report Commissioner of Statistics of Ohio, p. 631.

Knox, p. 685.

At the beginning of 1864 there were approximately 200 banks in

Ohio with over $12,000,000 capital. Half of these were private banks (27

in Hamilton County) with a capital of $2,019,336.-Report of Commis-

sioner of Statistics, Feb. 5, 1864. [The commissioner considered that

the business of the banks was conducted with great prudence, and ob-

served: "We find no fictitious banks and no spurious notes."]

• 244
 

Banking and Currency in Ohio Before the Civil War. 479

 

notes secured by a safety fund or deposit of government bonds.

Henceforth note-issue ceased to be a function of banks organized

under state laws.

Classes of Ohio Banks under General Laws. - The banks

organized under the general laws of 1845 and 1851 were at-

tended by a high degree of success, and furnished a currency well

adapted to the business wants of the people. Both of these laws

were constructed with particular reference to the security of the

bill holder; and both accomplished their purpose in this regard.

A comparison of the provisions of these laws as to the three

classes of banks, which they authorized, shows that some features

were common to all three classes: such as those forbidding any

bank directly or indirectly pledging, hypothecating, or exchang-

ing any of its circulating notes to procure money to be paid on

its capital stock, or to be used in its ordinary banking operations;

and providing criminal punishment for any officer thereof who

might embezzle or wilfully misapply any of the bank's moneys,

funds, or credits.

The independent and free banks were also each prohibited

from pledging, hypothecating, or exchanging any of their cir-

culating notes for the purpose of purchasing stocks to be de-

posited with the treasurer or auditor of state; and they were

alike in each having to deposit, as security for the ultimate

redemption of their notes, state or United States stocks equal in

amount to the notes they wished to issue. They differed, how-

ever, in that the independent banks had to pay in but 30% of

their capital before they were allowed to begin business, while the

free banks were required to pay in 6o% of their capital before

receiving a certificate to do business.

No special provision was made for the security of depositors

or purchasers of bills of exchange in any one of the three

classes, the legislature doubtless supposing that voluntary cred-

itors could take care of themselves, and that the law should mainly

look to the protection of the involuntary creditors of a bank,

that is, the note holders. All were required to furnish quarterly

reports of their condition, however, and all were subject to an-

• 245
 

480       Ohio Arch. and Hist. Society Publications.

nual examinations; the branches of the State Bank by the board

of control, and the other two classes by special examiners ap-

pointed by the state officials.

Division of Banks according to Security for Note Issue.

-As to the security of note holders, the three classes of banks

in the state naturally fall into two groups: those whose notes

were secured by a deposit of state or federal bonds, namely, the

independent and the free banks; and those with note issue secured

by the safety fund plan, that is, the branches of the State Bank.

Of these there was a general notion in the early 50's that the

notes of the stock banks were more secure from loss than those

of the branches of the State Bank. The independent banks had

to pay in as much cash capital as the branch banks, and had

besides to deposit with the state treasurer state or federal stocks

equal in amount, at not less than their par value, to the notes

issued; and the free banks had to pay in, to make up their

capital, double the proportion in cash, that was required of the

branches, and in addition had to deposit with the state auditor

state or federal stocks equal in amount at not less than their par

value, to their circulation. And if the stocks deposited by either

class fell below their par value, the officers holding them were

required to retain the interest accruing thereon, sufficient to keep

the depreciated stocks equal to par.

Objection to the Safety Fund Security. -On the other

hand the failure of any one branch of the State Bank would

weaken all, and if all should go by the board there would be no

ultimate security for the note holders to rely on. Besides, the

safety fund plan was open to the objection that it created a

fund sufficient to give credit to a bank which might be created

purely for speculative purposes, and being owned by persons in

other states after their notes were fairly in circulation the

capital might be withdrawn, the bank declared insolvent, and the

community defrauded. In the State Bank of Ohio this was

taken care of by the board of bank commissioners who carefully

considered the application of each association before granting a

certificate.

• 246
 

Banking and Currency in Ohio Before the Civil War. 481

 

Another objection to a safety fund sometimes offered is

that, although the fund might be nominally large enough to

cover the amount of notes of an insolvent bank, it is usually made

up of bonds and mortgages, which are not immediately con-

vertible and the delay in redeeming the circulation causes an

immediate depreciation, and occasions a loss to such unfortunate

holders as cannot wait for the ultimate redemption. This, it

might be said, however, applies with equal force to the plan for

securing the notes of the Ohio stock banks. While, as a matter

of fact it does not apply to the State Bank at all, as will appear

on further consideration.

Comparison of State Bank of Ohio with that of Indiana.

-The State Bank of Ohio is sometimes referred to as patterned

after the State Bank of Indiana. This is not strictly true. The

Indiana Bank was partly owned and officered by the state. The

Ohio Bank was owned and operated entirely by private indi-

viduals. In both actual banking business was carried on entirely

by the branches, the central board merely supervising, examin-

ing, and controlling. In the Indiana Bank, however, each

branch was liable for the debts of every other branch. They

were independent of each other as to assets, but were united as

to liabilities. In the Ohio plan, however, the branches were

responsible for each other only as to note issue, and here they

were protected by the safety fund. This brings us to the re-

semblance of the Ohio plan to that of the New York Safety

Fund Banks.

Comparison of State Bank of Ohio with New York Safety

Fund System. -The State Bank of Ohio, while resembling

the New York Safety Fund system in some respects, differed

from it in certain important particulars. In the New York plan

each bank contributed to the safety fund in proportion to its

capital. Now as the circulation of the smaller banks was usually

larger in proportion to their capital, this meant that the larger

banks were unduly burdened to guarantee the notes of the weak

ones. In the Ohio plan, this objection was obviated as each

branch contributed to the safety fund in proportion to its

circulation. Again in the original New York system the safety

31

• 247
 

482       Ohio Arch. and Hist. Society Publications.

fund was a guaranty for both notes and deposits of an insolvent

bank; in the State Bank of Ohio the safety fund was used only

as against the notes of the failing bank. This brings us again to

the above mentioned argument as to the holders of small amounts

of the circulation of a failing bank losing while awaiting the con-

version of the safety fund assets before any ultimate redemption

of the notes.

This was one of the defects in the New York safety fund

system: depreciation of the assets composing the safety fund, and

delay in ultimate redemption. In the State Bank of Ohio the

safety fund was not, as in the New York plan, held as a fund

for the protection of the noteholder, but for the benefit of the

branches themselves. The safety fund, so to speak, by which

the noteholder was protected consisted of the entire capital,

assets, or means, of all the branches; and it was the duty of the

manager, in case of the insolvency of any one branch, to make

immediate provision for the payment of the notes of such, in

coin, by requisition upon all the solvent branches.⁷

Thus when the Commercial Branch failed in 1855, the $1,-

633,000 specie, and the $1,446,000 eastern deposits, (to say

nothing of the rest of the $15,960,000 resources) of the branches

were at once liable for the redemption of the notes of the in-

solvent branch. The safety fund was held solely as a fund

from which the branches themselves were reimbursed for con-

tributions in aid of a branch that had failed.

But this was not the only means of sustaining the credit of

a failed branch's circulation. Each branch was required to re-

ceive the issues of such failing bank, in payment of all debts, at

their par value. This prevented their depreciation, as they were

current in any part of the state for this purpose alone. It was

through the operation of these two influences that the principle

of immediate availability, as distinguished from that of ultimate

 

7The penalty upon the branch for failure to redeem its notes con-

sisted in a summary winding up by the board of control.

• 248
 

Banking and Currency in Ohio Before the Civil War. 483

 

security, was attained, whereby this system  was distinguished

from all others.⁸

Comparison of State Bank with Stock Banks.- In this

respect the State Bank of Ohio was superior to the stock banks

of the state, the latter depending upon the principle of ultimate

security. The notes of the insolvent stock banks in Ohio were all

redeemed, sooner or later, as the sale of the deposit stocks usually

brought enough to redeem the notes of the failed bank, and

sometimes more. Thus when the Canal Bank of Cleveland failed

the sale of its deposited stocks brought in $10,000 more than

the amount of its outstanding notes, this $10,000 then going to

the depositors.⁹  But this sale occurred in February 1855, three

months after the failure. Thus some of the note holders may

have lost money by the delay. Then, too, any unusual strain

might have depreciated the value of the deposited stocks. Ohio

6% stocks went down to 95 in New York in November 1854 as

a result of the failure of several Ohio stock banks that year.¹⁰

Another point of superiority of the State Bank was that

tinder the guidance of the board of control the branches worked

in harmony, while among the stock banks there was no concert of

action, no unity of interest. As to general security of depositors

there was not so much difference, the advantage being, if any-

 

8During the period covered by the State Bank of Ohio, six of its

branches got into difficulty. As early as Dec. 22, 1845, the executive com-

mittee of the board of control, learning that the Toledo and the Summit

County Branches had illegal arrangements with certain private bankers

in New York, placed them under close surveillance until Nov. 22, 1850,

when the stock of the Summit County Branch was transferred to other

parties. In 1854 the Akron Branch was found to be unsound and the

Mechanics' and Traders' Branch at Cincinnati was reported to have

suspended; both were wound up by the board of control. On May 23,

1855, the Commercial Branch of Toledo was taken under the care of the

executive committee. Funds were provided to redeem its notes and the

branch was closed. The notes of all these, however, as those of the

Licking County Branch, which was closed in May, 1852, continued to pass

at par and were redeemed as promptly as those of the most thoroughly

solvent bank. -The State Bank of Ohio -  J. J. Janney, p. 169.

9Bankers' Magazine, 8:659.

10Daily Enquirer (Cincinnati), Nov. 24, 1854.

• 249
 

484        Ohio Arch. and Hist. Society Publications.

thing however, on the side of the State Bank, especially if we

consider the percentage of failures throughout the period. As to

elasticity, the data is not very satisfactory but what there is

favors the State Bank.11

In conclusion, then, it may be said that the State Bank of

Ohio gave the very highest satisfaction, and as a system adapted

to the needs of the people at the time, was probably one of the

best in the country.

 

11The ratio of circulation to capital for the branches of the State

Bank constantly ranged considerably higher than that of the stock banks.

-See diagram, Appendix, p. 526.

• 250
 

APPENDIX

 

TO

BANKING AND CURRENCY IN OHIO

BEFORE THE CIVIL WAR.

(485)

• 251
 

 

• 252
 

QUOTATIONS OF OHIO BANK NOTES

AT PHILADELPHIA 1814 TO 1837 AND AT NEW YORK, 1835 TO 1838.

also

QUOTATIONS OF SPANISH DOLLARS

AT PHILADELPHIA 1814 TO 1831 AND AT NEW YORK 1832 TO 1838.1

 

Ohio Banks.

Date.                                                                                            Spanish

Date                                                Dollars. 2

Old-                 Others -New and

Chartered.                     Unchartered.

 

1814,  O ct.   31... .............. .......................  7                                 to9        p.3

N ov    7..      4       to  71/2 d ..... .......................                    6            to71/2                p.

Nov.    14.     4       to  5             d......  .......................            10                    to12         p.

D ec.    5..      4       to  5             d        ...... .......................     12                    p.

1815,  Jan.    2.       6       to  7                      d   ...... .......................

A pr.    3.       31/2  to  5             d..... .......................

June     5..      31/2  to 4 d .....     .......................                     111/2 to 12 p.

July      3..      3       d ...........       .......................                     15                    p.

Sept.    4..      5 1/2.     d ..........  .......................                     15                    p.

Sept.    18..    ...............              .......................                     171/2     p.

Dec     4..      8to   10 d.....        .......................                     16          p.

1816, Jan.     1..      8       to  10           d ..... .......................             16                    p.

A pr.    1..      ............... .......................    15                              to16  p.

M ay   13... ..............  ....................... 16 p.

July      1..      ...............              .......................                     18                    to181/2  p.

Sept..   9..      ...............              .......................                     10          p.

O ct.    21..    ...............              .......................                     7  p.

N ov.   4..      ...............              .......................                     7  to8   p.

Dec.    2.. 10 to 12 d............................    7 p.

1817, Jan.     6.. 12 to 15 d..... .......................   5 p.

Apr.    7..      6 d    ..........          10to  12 d.............

July     7..      5to   10  d.....        10to  25 d.............  1  p.

Oct.     6..      4 to 6 d...... New 8 d. Unchartered

no  sales  ... ........  1  p.

Dec.   1..  41/2 to 7 d..... New 8 d. Unchartered

no  sales  ... ........              1  to11/2  d.

1818, Jan.  5..         41/2   to 5 d..... No purchases ........                   1 p.

Apr. 6.          41/2 to 7 d..... No purchases ........                     3 p.

July     6..      6 to 7 d...... No purchases ........                         31/2 p.

Oct.     5..      41/2 to 10 d.... No purchases ........                    5 p.

Dec. 7.          10 to 121/2 d.... No purchases ........                  4 p.

1819, Missing..

 

Compiled from Elliot's Funding System, pp. 1106 to 1152.

2The Spanish dollars were not all of the same weight. Those in

circulation in 1829 were said by the director of the mint to be worth,

on an average, 100 cents, 3 mills. (p. 1104).

Quotations for Gold and Silver, 1814; Span. Gold and Silver, 1815;

and Spanish Silver, 1816.

(487)

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488        Ohio Arch. and Hist. Society Publications.

 

QUOTATION OF BANK NOTES AND SPANISH DOLLARS AT

PHILADELPHIA - Continued.

 

Date.                        Ohio Bank Notes.                    Spanish Dollars.

 

1820, Jan.     3........           15           to                              25 d................              1/2                           p.

Apr.    3........           14           to                              25                 d................              par.

July     3........           15           to25                          d................    par.

Oct.    2........           121/2  to                                 25                 d...............               par.

Dec.    4........           121/2  to                                 25                 d...............               par.

1821, Jan. 1........               5 to 121/2 d ............... par.

Apr.    2........           5         to                                     121/2        d...............               par.

July     2........           5         to                                     10             d................              par.

Oct.    1........           5         to8                               d.................   par.

Dec.    3........           5         to8                               d.................   par.

1822, Jan.    7........           5         to8                               d.................   1              p.

4Apr.    1........           8         d. ............ .. ...              2  p.

July     1........           6         d. ....................             par.

O ct.   7........           6         d                                   ....................1/2                            P.

Dec. 2........              6 d ....................                      1/2 p.

1823, Jan.    6........           6         d                                   .................... par.

5Apr.    7........           6         d                                   ........ ........... 1/4p.

July     7........           6         d. ....................             1/4p.

Oct.    6........           5  to    6 d.................              par.

Dec.    1........           5         to                                 6  d.................               par.

1824, Jan.    5........           5  to    6 d.................              par.

Apr.    5........           5  to    6 d.................              1/4                p.

July     5........           5  to    6 d.................              1/2p.

O ct.   4........           5  to    6 d                                   .................                1/4 p.

Dec.   6........           5  to    6 d .................             1/4 p.

1825, Jan.    1........           5  to    6 d.................

Apr.    4........           5  to    6 d .................             M ay  25,2  p.

July     4........           5  to    8 d .................             1 p.

O ct.   1........           5  to    8 d ................. 1 1/2 p.

Dec.   3........           5  to    8 d.................              par.

1826, Jan.    7........           5  to    8 d.................              par.

A pr.  1........           5  d.    ....................                1/4 p.

July    1........           5  d.    .................... 1/2 p .

O ct.   7........           4  to    6 d                               ................. 1/2 p.

Dec. 30........            4  to    6 d................. 1/4        p.

1827, Jan. 6........              4 d 6. ...................        par.

A pr.  7........           4  d.    .................... 1             p.

July    7........           4  to    6 d.................              par                                                                                                to  1  p.

Oct.    6........           4  to    6 d.................              par.

D ec.  1........           4  to    6 d                               ................. 1/2 p.

4Banks of Zanesville, New Lisbon, West Union, 50d. Miami Ex-

porting Co., Cincinnati, 80d. Lebanon, 75d. Urbana, 80d. Canton, 20d.

Cleveland, 75d. Dayton, 25d; all without variation to 20th May; after-

wards no sale. Muskingum, 25d. throughout the year.

5Miami Exporting Co., Lebanon, Urbana, Zanesville Canal Co., Cleve-

land, New Lisbon, West Union and Canton, no sales. Muskingum, 25d.

throughout year.

6 Dayton Bank, 10d, in Jan. and 6d. rest of year. St. Clairsville,

6d. June-December.

• 254
 

Banking and Currency in Ohio Before the Civil War. 489

 

QUOTATIONS OF BANK NOTES AND SPANISH DOLLARS AT

PHILADELPHIA - Continued.

 

Date.                        Ohio Bank Notes.                      Spanish Dollars.

 

1828, Jan.     5........           4        d.                                   ....................    1/3                         p.

A pr.   5........           4   d.   ....................                 ½         p.

July     5........           31/2   d.                                   ...................     1/2                         p.

O ct.   4........           3½      d.                                   ................... 1/2 p.

D ec.   6........           4   d.   ....................                 ½         p.

1829, Jan.     3........           31/2   d.                                   ...................     par         to             1/2           p.

Apr.    4........           3   d.   ....................                 par  to 1/2p.

July     2........           2½      to                                  3     d................    par    to             1/2p.

Oct.    3........           21/2   to                                  3     d................    par    to             1/2p.

Dec.    5........           2½      to                                  3     d................    par    to             1/4p.

1830, Jan.     2........           2½      to                                  3     d................    par    to             1/4           p.

⁷Apr.     3........           21/2   d.                                   ...................     par         to             1/4           p.

July     3........           2        d d.                                ...................     par         to 1/4 p.

Oct.    2........           2½      d.                                   ...................     par         to 1/4 p.

Dec.    3........           2 1/2 d.                                    ...................     par         to 1/4 p.

1831, Jan.     1........           1½      d.                                   ...................     par.

⁸Apr.     1........           11/2   d.                                   ...................     par.

July     1........           1 1/2  d.                                   ..................      par.

Oct.    1........           ........................                        par  to  ¼  p.

Dec.    7........           l1/2    to                                  3     d................    Dec. 2, 1/2 to  1 p.

1832, Jan.     4........           11/2   to                                  3     d ................   1to                    11/2         p.

⁹Apr. 11 ........            11/2   to                                  3     d................    Apr. 4, 11/2      to2  p.

July     4........           l1/2    to                                  3 d ................  1 1/2      p.

Oct.    10 ........        1 1/2  to                                  3     d................    Oct. 3, 2           p.

Dec.    1........           l 1/2   to                                  3 d ................  1 1/2      to                             2              p.

1833, Jan.     3........           l 1/2   to                                  3     d................    Jan. 2, 1 1/2      to             2                              p.

Apr.    2........           1 1/4               to 3d................     Apr. 3, 2 1/4     to             2½           p.

July     3........           1 1/4  to 3                               d................ 1/2 to  1p.

Oct.    1........           1 1/4  to                                  3     d................    Oct. ², 2½         to             3              p.

Dec. 17........            1 1/2  to                                  3     d................    Dec.                  4,             2              p.

1834, Jan.     4........           2   to  3                                   d..................    Jan. 2, 1 to             2  p.

A pr.   5........           2   to  4                                   d..................

July     5........           2   to 4 d.................. .July   2,  1/2 to   1  p.

Oct. 4........ 2 1/2 to 4 d October 1, 1 3/4 to 21/4 p.

Dec.  6........  21/2   to 4d .................                       Dec. 3, 1  to  2  p.

 

7Scioto, 5d. Farmers' Bank of Canton, 4 to 6d.

8 Bank of Cincinnati, Hamilton, Mansfield, West Union, Xenia, New

Salem, Cleveland, F. & M. of Chillicothe, F. & M. of Cincinnati, German

Bank of Wooster, Granville, Lebanon and Miami, Miami Exp. Co., Mus-

kingum, New Philadelphia, Owl Creek, Steubenville, Ohio State Bank,

Cincinnati, Zanesville C. & M. Co.,-Broken.

⁹Bank of Scioto, Dec. 7 (1831), 5 to 8d. Jan. 4 and April 11, 8d.

July 4, Oct. 10, December 1, 10d.

• 255
 

490         Ohio Arch. and Hist. Society Publications.

 

QUOTATIONS OF BANK NOTES AND SPANISH DOLLARS AT

PHILADELPHIA - Concluded.

 

Date.                       Ohio Bank Notes.                      Spanish Dollars.

 

1835, Jan.    17 ........       2         1/2 to                   3         d.................     Jan. 7, 1  to           2              p.

Apr.    2........          2         1/2 to                   3         d.................     April 1, 1 to          2              p.

July     4 ........         2½ to  3                          d.................   July  1, 2½ to     3½           p.

Oct.    3........          2 1/2   to 3                      d.................   Oct. 7, 3    to     4              p.

Dec.    5........          2½       to                         3         d.................     Dec. 2, 4               to             5              p.

1836, Jan.    2........          2         to                         2 1/2d................. 21/2     to     3              p.

May 14........ 2 1/2 d. ....................                May 5, 3 to 4 p.

July     16 ........       2 1/2   to                         3         d.................     July  2, 3               to             4              p.

Oct.    15........        3   to   4                          d.................. Oct. 1, 4     to     5              p.

Dec.   3........          3   to   4                          d..................  5   to    6   p.

1837, Jan.    31........        3   to   4                          d..................  Jan. 4, 4    to5  p.

Apr.    1........          3   to   4                          d..................  2 to      4   p.

July    1........          4   to   5                          d..................  13 to    15 p.

Oct.    7........          4½       to                         5         d.................     Oct. 4, 6               to             7              p.

Dec.   9........          4   d                                 ....................  Dec. 2,7    to     81/2p.

. . . . . ... . . . . . . .  . . . . . . . . . . .

1838,  Jan. 3......              ..........................  5  to  6  p.

...... .........                            ..........................

Jan.     10 ........       ..........................             5         to 6     p.

Jan.   20...             .    .. ..........5                   to       6  p.

.........        ..........................

Jan.  27                  ..........................                        5  to    6   p.

 

 

 

Ohio Bank Notes                                             Ohio Bank Notes

Date.                                                              Date.

Date.    at New York.   Date        at New York.

 

 

1835, Jan. 7... 1½ to 4 d.           July 1...

Apr. 1...  1 1/2 to 4 d.                                  Sept. 2... 4 to 8 d.

July 1... 1 to 3 d.              Nov. 1... 6 d.

Oct. 7... 1 to 3 d.       Dec. 2... 6 d.

Dec. 2... 1 to 3 d.             1838, Jan. 3... 6 d.

1836, Jan. 2... 1½ to 3 d.           10Jan. 7... 6 d.

Apr. 6... 1 1/2 to 3 d.       Jan. 10... 6 d.

July 2...   1 1/2 to 4 d.                                  Jan. 13... 6 d.

Oct. 1... 1 to 5 d.       Jan. 17... 6 d.

Dec. 3... 1 1/2 to 5 d.       Jan. 20... 6 d.

1837, Jan. 4... 4 to 5 d.             Jan. 24... 6 d.

Apr. 1... 4 to 5 d.             Jan 27... 6 d.

 

10Bank of West Union, 10d.

• 256
 

Banking and Currency in Ohio Before the Civil War. 491

 

TABLE SHOWING THE HIGHEST AND LOWEST PRICES OF

OHIO BANK NOTES AND SPANISH DOLLARS AT PHILA-

DELPHIA, IN EACH YEAR, FROM OCTOBER, 1814, TO

DECEMBER, 1823.11

 

Date.                                                    Ohio Notes.                  Spanish Dollars.

1814  .........................                        71/2 to 5 d.                    ................

1815 .........................                         7                     to  3@10 d.           8   to 10 p.

1816 .........................                         5                     to 12 d.                 181/2 to 7 p.

1817 ......................... 15                           to    4 d.                 5 p. to par @ 11/2 p.

1818  .........................                       4 1/2    to     121/2     d.            1               to             6                              p.

1819  .........................                       ..             to     15@ 30  d.            3               to             6                              @             1/2  p.

1820  .........................                       121/2      to     25 d.              1/2       p. to                     par.

1821  ........................                        5                     to  12 1/2    d.         par.

1822  .........................                       5             to     8@ 6      d.            2p. to        par.

1823  .........................                       6             to     5   d.                     par            to             1/2            p.

 

SAME FROM                1834 TO APRIL, 1838.

1834  .........................                       2             to     4   d.                     par  to   3   p.

1835  .........................                       21/2   to    3      d.                   ..............

1836 .........................                        2             to     3 d.                       1   to         4 p.

1837  .........................                       3             to     6d.                        1   to         13                            p.

1838 .........................                        4             to     7 d.                       4   to         7 p.

 

SAME AT NEW                        YORK FROM     1835 TO 1838.

1835 .........................                       1             to     3   d.                     1   to         5                              p.

1836 .........................                       11/2 to    5d.                  21/2  to  6          p.

1837 .........................                       4             to     10@ 6    d.            2   to         15                            p.

1838 .........................                       6             to     10d.                      1   to         7              p.

 

11 Compiled from Elliot's Funding System, pp. 1158, 1159.

• 257
 

492      Ohio Arch. and Hist. Society Publications.

• 258
 

Banking and Currency in Ohio Before the Civil War. 493     RECEIPTS FROM SALES OF PUBLIC LANDS OF THE UNITED STATES.   Prior to June 30, 1796-$1,201,725.68.

Year.                                                     Amount. 1796 ...............                  $4,836 13 1797 ...............                  83,540 60 1798 ...............                  11,963 11 1799  ..............                                      ......... 1800 .      ............443 75 1801 ...............                  167,726 06 1802 ...............                  188,628 92 1803 .............                    165,675 69 1804 ...............                  487,526 79 1805 ...............                  540,193 80 1806 ...............                  765,245 73 1807 ...............                  466,163 27 1808 ..............                   647,939 06 1809 ...............                  442,252 33 1810 .............                    696,548 82 1811 ............... 1,040,237 53 1812 ...............                  710,427 78 1813 ...............                  835,655 14 1814 ............... 1,135,971 09 1815 ............... 1,287,959 28 1816 ............... 1,717,985 03 1817 ............... 1,991,226 06 1818 ............... 2,606,564 77

Year.                                                     Amount. 1819 .............                    3,274,422 78 1820 ............... 1,635,871 61 1821 ............... 1,212,966 46 1822 ............... 1,803,581 54 1823 ...............                  916,523 10 1824 ...............                  984,418 15 1825 ............... 1,216,090 56 1826 ............... 1,393,785 09 1827 ............... 1,495,845 26 1828 ............... 1,018,308 75 1829 ...............  1,517,175 13 1830 ............... 2,329,356 14 1831 ............... 3,210,815 48 1832 ............... 2,623,381 03 1833 ...............3,967,682 55 1834 ............... 4,857,600 69 1835 ............... 14,757,600 75 1836 ............... 24,877,179 86 1837 ............... 6,776,236 52 1838 ............... 3,730,945 66 1839 ............... 7,361,576 40 1840 ............... 3,411,818 63 1841 ............... 1,365,627 42

-The Public Domain - Donaldson, p. 17.

• 259
 

494       Ohio Arch. and Hist. Society Publications.     THE OHIO LIFE INSURANCE AND TRUST COMPANY. DISTRIBUTION OF REAL ESTATE LOANS IN OHIO IN JANUARY, 1836.   AMOUNT LOANED ON BONDS AND MORTGAGES IN EACH COUNTY:

County.                    Amount. Adams    ................ Allen ..................             $13,972 Athens  .................          ...... Ashtabula .      .........      10,200 Brown .................            2,112 Butler .................            22,450 Belmont ...............          14,795 Cuyahoga .                     ..........                        139,790 Coshocton .      ........                                       800 Carroll ................            20,722 Columbiana ............      20,725 Clinton ................          7,150 Clermont ..............         23,750 Clark   .................           63,680 Champaign    ............    27,875 Crawford ..............         16,100 Delaware ..............         15,200 Darke .................            26,590 Fairfield .     ..........         14,290 Franklin ...............         88,975 Fayette ................           2,000 Geauga ................                                           500 Gallia .................           10,715 Greene .................          21,749 Guernsey .       .........     4.350 Hocking ...............        1,200 Huron .        ..............     17,350 Hamilton ..............        499,827 Hardin ................           4,060 Harrison   .    ..........      37,810 Highland ..............        ...... Holmes .       ............     14,700 Hancock ...............        1,000 Henry .................           1,200 Jackson             ..............                                 ...... Jefferson            ..............                                 22,582 Knox .               .................                              46,775 Licking .       ..... ........  3,600

County.                                                             Amount. Lorain        .................                                      20,870 Logan        .................                                      32,030 Lawrence   ...........                                             ...... Miami .................                                              35, 610 M adison        ..............                                    13,450 M arion      ................                                       43,485 Morgan ................                                               9,500 M onroe  ...............                                           12,940 Montgomery ...........                                       36,290 Muskingum ............                                        16,309 M edina     ................                                           3,500 Mercer       ................                                       12,055 M eigs       .................                                      ...... Pike           ...................                                    ...... Pickaway ..............                                         37,450 Paulding ...............                                             2,800 Putnam           ................                                     300 Preble       .................                                      28,000 Portage          ...............                                   36,640 Perry         .................                                          650 Ross          ..................                                     16,000 Richland ...............                                         27,325 Sandusky ..............                                            6,230 Shelby      ................                                       16,810 Scioto       .................                                          3,050 Seneca ................                                            45,322 Stark ..................                                             40,625 Trumbull ..............                                             700 Tuscarawas ............                                       23,690 Union .................                                            10,600 Van Wert .............                                              400 W ayne  ................                                          21,900 Williams ..............                                             5,500 Wood .................                                                1,000 Warren   ...............                                          55,800 Washington   ...........                                    11,400 Total ................$1,858,099

To secure repayment of these loans, real estate was pledged of the estimated value of $4,338,117.- Ohio Monitor. (Columbus), Jan. 18, 1836.

• 260
 

Banking and Currency in Ohio Before the Civil War. 495

 

 

DIGEST OF THE ACT TO INCORPORATE THE STATE BANK

OF OHIO AND OTHER BANKING COMPANIES.

(Passed Feb. 24, 1845.)*

1. Occupies 30 pages.

2. Five persons or more may form company.

3. Aggregate capital stock of all not to exceed $6,150,000.

4. State divided into 12 districts-names counties in each.

5   Number in counties limited: Hamilton County 4, Cuyahoga 6,

Franklin 3, Ross 2, Muskingum 2, Jefferson 2, Summit 3,

Lucas 2, Miami 2, Montgomery 2, each other 1.

6. Capital stock may be increased after end of two years.

7. Provides for Board of Bank Commissioners for 1 year, after which

Auditor, Treasurer and Secretary of State shall be the com-

missioners.

8. Persons forming banking company must make certificate specifying

name of company, amount of stock, number of shares held by

each member of company, time of organization.

9. Provides for the branches of state bank and also for independent

banks.

10. Capital stock of an independent bank must be at least $50,000 and

of branch of state bank $100,000, neither to exceed $500,000-

shares $100.

11. At least 30% of capital stock to be paid in gold or silver coin, or

equivalent.

 

 

IN RELATION TO STATE BANK.

12. When seven companies have formed, shall appoint members of the

Board of Control to meet in Columbus.

13. Board of Control to furnish notes for circulation, prescribe rules

for settlement of balances between branches, visit and examine

branches. Their compensation and expense of printing notes

to be paid by branches, the latter in ratio of notes of circula-

tion received by each.

14. Notes issued by any branch, payable there in gold and silver coin.

15. Proportion of notes in circulation to capital stock:

On 1st $100,000 capital not over twice that amount notes.

On 2nd $100,000 capital not over 11/2 that amount notes.

On 3rd $100,000 capital not over 11/4 that amount notes.

On 4th $100,000 capital not over once that amount notes.

On any amount over $400,000 capital not over3/4 that amount

notes.

 

*Laws of Ohio, Vol. 43, p. 24.

• 261
 

496        Ohio Arch. and Hist. Society Publications.

 

ACT OF FEBRUARY 24, 1845--Continued.

16. Each branch to pay over to Board of Control 10% on amount of

notes received for circulation-the "Safety Fund" to be in-

vested in stock of state, or U. S., or first mortgage real estate

bonds of twice value of amount secured, branches to receive

interest on same.

17. Stockholders collectively of any branch shall not be liable as debtors

or securities to such branch to over 1/3 the capital stock paid

in and remaining. Nor directors collectively to have over 1/4

capital stock actually paid in, standing in their names.

18. Branch refusing to redeem notes shall be insolvent and Board of

Control shall appoint a receiver.

19. Each solvent bank shall contribute for redemption of notes of fail-

ing branch, to be repaid from sale of stocks in safety fund.

 

 

IN RELATION TO INDEPENDENT BANKS.

20. These to deposit with Treasurer of State, State or U. S. stock

equal in amount to capital stock--Treasurer to issue them

notes for circulation not exceeding amount of stock deposited;

expenses of same to be paid out of Treasury to give new

notes for mutilated ones and burn latter. Banks to receive

interest on stock deposited except which such notes go below

par for four consecutive weeks, or bank fails to redeem its

notes.

21. If independent bank fails to redeem notes, Treasurer to sell stock

deposited and from proceeds pay, in ratablle proportion, the

circulating notes such bank has at Treasury.

22. No dividends to be made on shares while any debts are unpaid.

23. Stockholders collectively of any independent bank shall not be liable

to the bank to an amount over 3/5 capital paid in. Directors

not over amount specified by by-laws of company.

24. Duty of Auditor, Treasurer and Secretary of State annually to

appoint person in vicinity of each independent bank to ex-

amine same.

 

GENERAL PROVISIONS.

25. No shareholder of any bank to receive dividends or profits while

he is in debt to the county, but his dividend or profits to be

retained and applied to payment of such debt.

• 262
 

Banking and Currency in Ohio Before the Civil War. 497

 

ACT OF FEBRUARY 24, 1845-Continued.

26. No banking company to receive as security a lien on any part of

its capital stock. Same security to be demanded of stock-

holders as of other persons. Bank to make no purchase of its

own or the capital stock of any other incorporated company

unless necessary to prevent loss on debt previously contracted

in good faith. No stock so purchased to be held over six

months if it can be sold for what stock cost, at par.

27. Stockholders entitled to one vote for each share-not less than five

nor more than nine directors.

28. Incorporations all with succession till May 1, 1866, and thereafter

till affairs closed.

29. Notes issued may be $1, $2, $3, $5, $10, $20, $50 and $100 only. Of

these issued by any bank not over 10% shall be $1 notes; 5% $2;

10% $3; 20% all denominations under $5; 50% all denomina-

tions under $10.

30. Nothing to be circulated as money except notes above described.

Each independent company to redeem notes of all other inde-

pendent companies at par; same for State bank branches.

31. Each bank keep on hand in gold or silver or equivalent 30% of

amount outstanding circulation.

32. Branch banks not to be indebted over two-thirds of its actual capital

stock. Independent banks not over whole amount capital stock,

except on account:

1. Its notes of circulation.

2. Moneys deposited with or collected by such company.

3. Bills exchange drawn against deposits to its credit.

4. Liabilities to its stockholders on account money paid in or

capital stock and dividends thereon.

33. Loans to stockholders not to exceed six months. Dividends always

to be on net profits.

34. Semi-annual statements to Auditor must show:

1. Capital stock paid in and remaining.

2. Circulation. Amount of each denomination of note.

3. Greatest amount in circulation at any time since previous

statement.

4. Amount of balances and debts due State bank, other banks

of Ohio, banks of other states.

5. Deposits.

6. Amount of debts and liabilities-greatest amount at any

time since previous statement.

7. Amount of dividends declared.

32

• 263
 

498        Ohio Arch. and Hist. Society Publications.

 

ACT OF FEBRUARY 24, 1845--Continued.

8. Gold and silver coin and bullion belonging to bank.

9. Amount subject to be drawn in gold and silver on deposit

in New York, Philadelphia, Boston and Baltimore.

10. Circulating notes on hand of State bank, other Ohio banks,

banks of other states.

11. Balances due from each of ten excluding nine.

12. Loans and discounts. Specify amount considered bad,

doubtful, in suit or judgment.

13. Real and personal property held for convenience of

company.

14. Real and personal property received on debts due.

15. Undivided profits.

16. Liabilities to company by directors.

17. Liabilities to company by stockholders.

35. Dividend to be declared on first Monday of May and November.

Then banking company to set off to the state 6% on profits in

lieu of all taxes.

36. Six per cent. interest on loans and discounts by Rowlett's tables.

Excess cause forfeiture of debt on demand.

37. Total liabilities of any person or company to a bank limited.

38. Banks prohibited to circulate notes at par, notes of banks of other

states of less denomination than $5, of banks not redeeming in

gold and silver.

39. Certain old banks authorized to recommence banking if they comply

with this act.

40. Any branch of State Bank may close business with consent of Board

of Control.

41. Repeals Act of March 7, 1842, and February 21, 1843. Notes of

less than $5 are forbidden other banks.

• 264
 

Banking and Currency in Ohio Before the Civil War. 499

 

 

DIGEST OF THE ACT TO AUTHORIZE FREE BANKING IN

OHIO.

(Passed March 21, 1851.)*

1. Any number of persons not less than three may engage in business

of banking under this act.

2. Certificate to specify name and place of business of company,

amount of capital stock and number of shares, name and resi-

dence and number of shares held by each member, time com-

pany formed, to be deposited with Secretary of State.

3. Capital stock (exclusive of securities deposited with Auditor for

redemption of circulating notes) shall be at least $25,000 and

not over $500,000.

4. Sixty per cent. of stock to be paid in before company begins

business.

5. Auditor of State to furnish engraved notes to bank for circulation

upon deposit of Ohio or U. S. stock equal in amount, but

Auditor not to take stock above par or current market value

nor producing less than 5% interest. Auditor shall not furnish

notes more than three times amount of actual capital. Bank

to pay expenses of issue.

6. Banks have corporate power till 1872 and thereafter till act repealed.

7. Capital stock in shares $50; deemed personal property and assign-

able on books of company. Each bank shall have lien on stock

of its debtors and no stock of debtor transferred without

consent of majority of directors.

8. No lien to be taken on capital stock as security for loan, but same

security in kind and amount required of stockholders as of

others. No company to hold its own capital stock or that of

other corporations unless purchase necessary to prevent loss

on debt previously contracted in good faith; and then not held

longed than six months if it can be sold at what it cost at par.

9. In elections one share entitled owner to one vote. Proxies allowed,

but no officer, clerk, teller, or bookkeeper may act as proxy.

10. Not less than three nor more than five directors. Directors must,

during whole term, be resident of Ohio. Three-quarters of the

directors must have resided in the State two years previous to

election. Directors collectively must own 1/10 of the capital

stock and hold office one year.

11. Notes may be $1, $2, $3, $5, $10, $20, $50 and $100 only. Proportion

fixed same as law of 1845. After 1860 Legislature may prohibit

notes less than 5.

 

*Laws of Ohio, Vol. 49, pp. 41-56.

• 265
 

500        Ohio Arch. and Hist. Society Publications.

 

DIGEST OF FREE BANKING LAW-Continued.

12. All banks under this law to receive notes of each other at par.

13. Thirty per cent. of amount circulated to be kept on hand in coin

or equivalent; one-half of this in coin. Actual deposits in

sound banks of New York, Boston, Philadelphia or Baltimore

deemed equivalent to coin.

14. Limits to debts of company not over amount of actual capital stock,

except circulation, deposits, drafts on deposits to credit of the

company, liabilities to stockholders for money paid on capital

stock and dividends thereon.

15. Notes not to be exchanged for stock, nor capital stock for certifi-

cates of stock to be deposited with Auditor for redemption

of notes.

16. Capital stock not to be withdrawn in form of dividends or loans to

stockholders for more than six months. No dividend greater

than amount of net profits.

17. Directors on first Monday in May and November to declare a divi-

dend and file statement with Auditor of State (as in law of

1845).

18. Interest rate 6% by Rowlett's tables; usury forfeits debt.

19. Liabilities to any other company not to exceed one-third its

circulation.

20. Uncurrent notes not to be paid out.

21. Violation law forfeits privileges.

22. Officers guilty imprisonment in Pen. at hard labor 5 to 20 years.

23. Mutilated notes to be exchanged and burnt.

24. If bank fail redeem notes-holder may have protested and notify

Auditor after which unlawful for bank to do any business

except receive and safely keep moneys belonging to it, and

deliver special deposits-Auditor to sell stock deposited and

redeem notes outstanding-Individual liability of stockhold-

ers in proportion to stock when bank fails to redeem.

25. Where bank owned by less than 6 stockholders they individually

liable for all debts and liabilities of bank.

26. No dividends to be made when capital stock is diminished.

27. Stockholders collectively shall not be liable to bank for over two-

fifths capital stock.

28. Damages for refusal to redeem notes 15% per annum from time of

refusal till resumption.

29. List of shareholders & am't stock to be filed with county recorder

Jan. & July each year - also with Aud. State - another at bank.

30. Company not to begin business till deposit with Auditor equals

60% capital.

• 266
 

OHIO BANK STATISTICS. 1846-1863.

 

PRINCIPAL RESOURCES AND LIABILITIES OF BANKS

BY CLASSES.

 

(DIAGRAMS AND DETAILS.)

(501)

• 267
 

502      Ohio Arch. and Hist. Society Publications.

• 268
 

Banking and Currency in Ohio Before the Civil War. 503

• 269
 

504             Ohio Arch. and Hist. Society Publications.

 

 

OHIO BANK STATISTICS. 1846-1863.

May 1, ₁₈₄6.12   Independent Branches of

RESOURCES:                                                      Banks.            State Bank. Old Banks.

Number of banks .........         ...........................                                                                 7            16             8

Notes and bills discounted..........................                                                     $968,896   $2,423,779              $4,639,219

Specie on hand ......................................                                                         159,669               618,049                705,552

Notes of other banks ...............................                                                        146,474               374,577                466,203

Due from     banks.....................................                                                      56,484                 107,366                435,676

Eastern deposits ....................................                                                          96,723                 357,280                462,023

Bonds deposited with State .........................                                                    565,118               207,588   ............

Other resources ....................................                                                          134,259                 16,694               937,323

 

Total resources     ..............................                                            $2,127,623   $4,105,333               $7,645,996

 

LIABILITIES:

Circulation   .........................................                                                       $499,100        $1,822,435              $2,463,760

Capital stock paid in................................                                                         328,720               1,173,450      2,565,376

Due to banks........................................                                                            79,488                   89,884               807,544

Individual deposits .................................                                                         644,521               946,563                972,852

Contingent fund ....................................                                                          12,992                   26,234               256,687

Bonds with    State Treasurer........................                                                 494,170   ........................

State taxes paid for 6 mo ..........................                                                    1,654                     3,773                 7,374

Other liabilities .....................................                                                          66,978                   42,994               572,403

 

Total liabilities   ..............................                                                $2,127,623     $4,105,333              $7,645,996

 

May 5, 1847.13 Independent Branches of

RESOURCES:                                                      Banks.            State Bank. Old Banks.

Number of banks ....................................                                                                          9           22             8

Loans        ........................................                                                           $1,187,713     $4,812,772              $4,936,175

Specie       ........................................                                                               201,035               1,080,467             745,047

Bank          notes .........................................                                                     123,226               540,302                418,033

Bank balances ......................................                                                           88,985                 170,507                260,376

Eastern deposits ....................................                                                          251,488               487,345                513,332

State  bonds   .........................................                                                          783,920   ............  ............

Safety fund deposited with board of control ................                                 387,349     ............

Other resources ....................................        164,310                                                       58,862                     935,951

Total resources ............................... $2,800,679                             $7,537,597     $7,908,926

 

LIABILITIES: (Fractions omitted.)

Capital       ..............................................                                                     $440,300        $2,070,700              $2,560,700

Circulation          .........................................                                                     707,700               3,678,900      2,894,400

Bank balances ......................................                                                           145,300               116,400                790,100

Deposits .............................................                                                             754,600               1,274,900      1,327,300

Bonds with     Treasurer ..............................                                                   729,900     ........... ............

State fund at credit Board of Control ......................                                                         76,000 ............

State tax 6 months ..................................                                                        1,900                     7,700                 8,000

Contingent fund ....................................                                                          23,700                   30,900               214,300

Other liabilities .....................................                                                          73,000                 280,600                120,800

 

Total liabilities ............................... $2,800,679                              $7,537,500     $7,908,900

12 Banker's Magazine, Vol. I, p. 72.

13 Bankers' Magazine, Vol. II, p. 129.

• 270
 

Banking and Currency in Ohio Before the Civil War. 505

 

OHIO BANK STATISTICS. 1846-1863--Continued.

Independent Branches of

RESOURCES: (Aug. 1848.)¹⁴                      Banks.     State Bank. Old Banks.

Number    of  banks ...................................         11            37            7

Bills discounted   .................................... $1,616,258                                    $7,007,743            $3,476,186

Specie   .............................................                                                            279,951                 1,994,937             457,449

Bank notes ..........................................                                                           193,507                 659,309                415,526

Bank balances ......................................                                                         157,607                 442,913                188,639

Eastern deposits ....................................                                                        304,625                 709,911                535,441

State bonds .........................................                                                           1,063,894              653,063  ............

Real estate ..........................................                                                              20,097                 88,656               160,654

 

Total resources ...............................                                                  $3,720,077   $11,680,098           $5,740,278

 

LIABILITIES:

Capital stock .......................................                                                          $613,015               $3,499,814     $2,311,226

Circulation              ..........................................                                                 900,202             5,633,322       1,397,842

Due to banks........................................                                                              102,283             259,849                287,074

Deposits        ............................................                                                         961,118             1,864,953       1,373,357

Safety           fund   ........................................                                                   967,920               69,757         ............

Surplus fund           .......................................                                                    65,167                 95,252               242,988

Discounts      ...........................................                                                          52,389               168,906                12,200

 

Total liabilities ...............................                                                   $3,720,077            $11,680,098   $5,740,278

 

August 1849.15                                                                                             Independent Branches of

RESOURCES:                                                        Banks.     State Bank. Old Banks.

Number    of  banks ....................................        11            40            5

Notes and bills discounted .......................... $1,883,991                              $9,168,025            $3,391,827

Specie   .............................................                                                               300,940             2,496,980             412,000

Notes of other banks ................................                                                        236,025             930,870                644,172

Bank balances ......................................                                                            198,860             420,545                180,280

Eastern deposits ....................................                                                           261,856             942,246                303,100

Cash items ..........................................                                                             35,272                 48,646               69,606

Bonds deposited ....................................                                                       1,154,456              821,044  ...........

Real estate ..........................................                                                             50,610               131,888                125,356

Miscellaneous    ......................................                                                        104,726             156,434                280,067

 

Total resources ...............................                                                 $4,226,736            $15,116,678   $5,406,410

 

LIABILITIES.

Capital paid in......................................                                                         $670,650               $4,347,311     $2,011,226

Circulation             .........................................                                              1,036,156              7,624,306       1,203,217

Safety fund  ........................................                                                         1,074,817                68,302         ............

Bank balances ......................................                                                            158,601             312,574                820,116

Deposits   ............................................                                                         1,054,070              2,228,241       1,087,324

Surplus fund    .......................................                                                           115,230             183,344                232,302

Time drafts .........................................                                                             23,650               147,862                10,840

Profits .............................................                                                                 44,240               195,660                14,604

Dividends unpaid   ..................................                                                         8,610                   5,972                 22,229

Miscellaneous        ......................................                                                     40,712                 3,106                 4,552

 

Total liabilities ...............................                                                  $4,226,736  $15,116,678    $5,406,410

 

14 Ibid., Vol. III, p. 220.

15 Bank. Mag., Vol. IV, p. 354.

• 271
 

506             Ohio    Arch. and        Hist. Society        Publications.

 

OHIO BANK STATISTICS. 1846-1863- Continued.

Independent Branches of

RESOURCES :16        (May 1850.)                 Banks.     State Bank. Old Banks.

Number     of  banks ....................................          11            41            5

Loans         ............................................... $2,139,588         $10,546,088            $3,643,626

Specie on hand......................................                               311,295              2,116,732                         317,442

Notes of other banks ................................                            225,890              619,842                            411,052

Bank balances ......................................                                194,573              521,312                            146,391

Eastern deposits ....................................                               281,052              836,027                            262,635

Cash items ..........................................                                      1,172                 34,961                          8,094

State bonds .........................................                                 1,227,460           880,568   ............

Real estate ..........................................                                 65,412                204,119                            153,433

Miscellaneous     ......................................                           61,588                152,561                            317,354

Total resources ...............................                         $4,508,030         $15,912,210            $5,260,027

LIABILITIES:

Capital paid in.......................................                               $711,860            $4,601,256              $2,011,226

Circulation ..........................................                                 1,078,002           7,829,052                1,277,408

Safety   fund            ........................................                     1,155,570                49,500                 ............

Bank balances ......................................                               104,943              408,282                            572,403

Individual deposits .................................                             1,138,617           2,361,998                         950,976

Surplus fund ........................................                                      92,033           289,086                            288,746

Bills payable    .......................................                             118,998              163,958                            88,488

Discounts, interest, etc.............................                                 8,940                 3,784                            45,313

State tax 6 months..................................                                   3,276                 21,340                          1,404

Dividends unpaid     ..................................                                50,398           149,915                            21,432

Miscellaneous          ......................................                       45,393                     34,038                          2,636

 

May    1851.17                                                                    Independent Branches of                  Old                   Free

RESOURCES:                                           Banks.     State Bank.                         Banks.        Banks.

Number of banks ........................              12           41                                  5

Loans and     discounts.................... $2,710,724                 $11,994,120       $4,449,522

Specie on hand ..........................                                               321,558         2,051,531                425,736

Bank notes ..............................                                                  304,800             696,252               255,043

Bank balances ..........................                                                212,810             551,075               204,074

Eastern deposits ........................                                               325,700         1,147,043                336,926

State bonds ..............................                                            1,460,514                915,696  ............

Cash items ..............................                                                  1,486                 14,125                 21,000

Real estate ..............................                                                  97,728               197,317               148,752

Miscellaneous    ...........................                                             75,678               184,956               203,863

Total resources ................... $5,510,400                 $17,752,115       $6,044,916

LIABILITIES:

Capital paid in...........................                                           $864,580            $4,802,620        $1,961,226

Circulation   .............................                                           1,391,457           8,660,444          1,636,874

Safety fund stock .......................                                         1,215,612                62,194          ............

Bank balances ...........................                                               222,092             396,318        1,063,984

Deposits   ................     ............                                           1,516,170           3,133,541                955,975

Surplus fund     ...........................                                              39,141               282,330               299,107

Time drafts .............................                                                 181,488             168,256               33,580

Discounts, etc. .........................                                                 22,793               11,070                 55,500

Dividends unpaid     .......................                                           51,204               175,960                        2,164

Miscellaneous         ...........................                                       5,862                 59,382                 36,506

Total liabilities ...................  $5,510,400    $17,752,115                     $6,044,916

16 Bank. Mag., Vol. V, p. 142.

17 Bank. Mag., Vol. VI, p. 236.

• 272
 

Banking and Currency in Ohio Before the Civil War. 507

 

OHIO BANK STATISTICS. 1846-1863- Continued.

Independent Branches of                          Old                  Free

RESOURCES:        (Nov. 1852).18          Banks.     State Bank.               Banks.          Banks.

Number of banks ........................            11            40                    5          12

Loans and discounts.................... $2,202,500                      $10,346,814       $3,169,038 $1,068,898

Specie   ...................................                                                 269,478          1,854,316                 384,060           123,465

Bank notes .............................                                                  304,210               817,110               770,711           180,528

Due from    banks .........................                                          120,404               636,495               121,391           166,034

Eastern deposits ........................                                              375,253          2,035,765                 660,460           215,938

Checks, cash items......................                                             22,054                 67,817          ............                   6,252

State  bonds ............................                                             1,195,930                903,524        ............                   703,984

Real estate, etc..........................                                               105,115               171,688               136,390           19,376

Miscellaneous   ...........................                                            197,220               325,084               316,010           12.920

Total resources ................... $4,792,164                 $17,158,614       $5,558,061        $2,497,400

LIABILITIES:

Capital        ..................................                                         $749,180            $4,456,675        $1,547,526             $361,730

Circulation          ..............................                                   1,144,542           8,120,828          1,488,470               619,370

Safety fund stock........................                                         1,148,410                50,038          .........                      444,490

Bank balances ..........................                                               164,815               354,961               913,438           90,896

Deposits   ................................                                            1,302,027           3,543,650          1,213,690               912,676

Surplus fund ............................                                                55,412                 297,096               323,770           8,467

Bills payable ............................                                               85,971                 151,418               12,046             22,205

Discounts ................................                                                39,396                 280                      32,836             14,473

Dividends unpaid .......................                                             29,271                 140,928               3,676               23,092

Other liabilities ........................                                               73,140                 42,740                 22,608..........

Total liabilities ................... $4,792,164                   $17,158,614       $5,558,061 $2,497,400

August 1853.19   Banks.                                                      State Bank.              Banks.          Banks.

RESOURCES:                                          Independent Branches of                   Old                  Free

Number of banks ........................            11            39             5         13

Loans         ................................... $2,276,342                     $10,135,691       $1,737,890 $1,236,018

Specie       ...................................                                            249,792          1,682,872                 339,913           171,625

Bank notes ..............................                                                221,137               769,356               109,786           202,771

Due from    banks .........................                                         153,148               690,248               122,067           398,426

Eastern deposits .........................                                            319,975          2,096,326                 713,452           383,098

Cash items ..............................                                                36,378                 75,717          .                       .........             44,888

State bonds ............................                                             1,088,143                823,127        ............                   922,790

Real estate ..............................                                                120,528               143,545               93,343             26,454

Miscellaneous   ...........................                                           251,320               282,540               225,844           11,543

Total resources    .................. $4,716,765   $16,699,424   $8,342,296 $3,397,613

LIABILITIES:

Capital       ..................................                                         $719,330            $4,141,175               $936,300         $695,440

Circulation          ..............................                                   1,023,704           7,642,276          1,474,339               849,602

Safety fund .............................                                           1,165,783                49,387          ............                   268,820

Bank balances ..........................                                              182,320               438,864               104,053           148,164

Deposits .................................                                             1,340,062           3,720,765                 510,630     1,333,213

Contingent fund ........................                                              66,510                 337,443               287,352           17,028

Time drafts .............................                                               122,090               96,903                 8,452               43,600

Discounts    ...............................                                              659,926               210,256               9,070               41,083

Dividends unpaid     ......................                                                 911              4,523                   1,964                        663

Miscellaneous ...........................                                             30,218                 57,833                 10,135.........

Total liabilities .................... $4,716,765  $16,699,424       $3.342,296 $3,397,613

18 Bank. Mag., Vol. VII, p. 508.

19 Bank. Mag., Vol. 8, p. 406.

• 273
 

508            Ohio Arch. and Hist. Society Publications.

 

OHIO BANK STATISTICS. 1846-1863- Continued.

November     1855.30                                                          Independent Branches of                    Old                  Free

RESOURCES:                                           Banks.     State Bank.                    Banks.                    Banks.

Number of banks ........................             11           37                     1          18

Loans        ................................... $1,701,044                      $10,085,352        $1,785,453 $1,293,191

Specie       ...................................                                              160,078          1,633,976                  26,471                 140,431

Notes of other banks ...................                                             216,165               534,603                291,854               172,847

Due from    other banks ...................                                       82,374                 649,199                143,617               80,446

Eastern deposits ........................                                               290,514          1,446,057   ............              225,543

Checks and other cash items............                                        16,578                 38,645         8,354                           8,451

Bonds of U. S. and State..............                                            892,135               798,910   ............                        808,412

Real estate and personal property ......                                   36,293                 276,747                23,002                 48,176

Other resources ........................                                              101,017               488,131                363,990               62,519

Total resources ................... $3,496,197                 $15,960,619        $2,642,742 $2,840,017

LIABILITIES:

Capital stock ............................                                            $537,500             $4,094,500                $223,000             $837,250

Circulation   ..............................                                               874,167          7,520,481                  3,355               756,692

Safety fund stock........................                                             728,187               55,575           ............       231,000

Due to banks and bankers..............                                          111,401               216,376                770,701               59,746

Deposits .................................                                             1,012,505            2,958,934           1,601,884               878,271

Undivided    profits ......................                                           82,744                 730,040         ............                   8,902

Bills payable, time drafts ...............                                        14,292                 86,943           720                        16,554

Dividends unpaid .......................                                             7,043                   115,936   ............            24,928

Other liabilities .........................                                              128,358               181,836                43,082                 26,674

Total liabilities  .................. $3,496,197   $15,960,619        $2,642,742 $2,840,017

Independent Branches of                          Old                  Free

RESOURCES: (Feb. ₁₈₅₆).21                Banks.     State Bank.            Banks.                       Banks.

Number of banks ........................            11            41                    1          13

Loans .................................... $1,667,177                           $10,190,805    $1,721,008 $1,343,009

Specie      ...................................                                              207,247          1,740,563                  12,328                 136,673

Bank         notes .............................                                          227,969               745,747                512,695               146,549

Eastern    deposits  .......................                                           294,679          1,499,416  ............    271,132

Due from         banks .........................                                     95,018                 765,335                66,201             125,398

Cash items ..............................                                                20,350                 60,260                  15,655                 8,293

Bonds of U. S. and Ohio...............                                           883,535..................................

State stocks deposited with Auditor .......................            ............                787,248

Safety  fund   ......................................                                   805,970          ............               ........

Real estate, etc..........................                                              14,468                 277,050                23,002             36,188

Other resources ........................                                             55,905                 492,436                538,466           108,241

Total resources    .................. $8,466,347              $16,579,581        $2,889,355 $2,962,732

LIABILITIES:

Capital stock ............................                                               $475,000        $4,049,500                $75,000           $853,250

Circulation ..............................                                                829,576          7,480,006                  3,355   767,652

Safety   fund  ............................                                              700,407          ......................            233,000

Safety fund at credit B. of C ........                                     ..........                  60,264                ......................

Due to banks............................                                                81,654                 271,946         1,298,610               59,832

Deposits .................................                                             1,119,342            3,496,077           1,493,983   985,716

Contingent fund ........................                                              108,225               731,136         ............                   7,010

Time drafts .............................                                           ..........                  63,921           720                 5,000

Discount, interest, etc..................                                           46,588                 204,435         ..........                         49,400

Dividends unpaid     ....................                                                    173              4,163             ............                   1,871

Other liabilities .........................                                              105,381               173,133        17, 687                   1

20 Ohio-Annual Report of State Auditor for 1855.

21Bank. Mag., Vol. 10, p. 977.

• 274
 

Banking and Currency in Ohio Before the Civil War. 509

 

OHIO BANK STATISTICS. 1846-1863- Continued.

Feb. 2, 1857.22     Independent                                                                         Free                   Branches of

RESOURCES:                                                       Banks. Banks.     State Bank.

Number of banks ....................................             8                                                 10           36

Loans     .........................................                                                             $1,925,565          $1,430,248        $10,170,936

Specie     ...............................................                                                            195,180              154,653         1,659,142

Bills of other banks .................................                                                          260,450              199,754               665,240

Due from banks .....................................                                                          72,352                119,057               834,650

Eastern   exchange   .................................                                                       237,760              223,311         1,130,398

Cash items ..........................................                                                              23,890                7,486                   56,391

State bonds .........................................                                                              909,303              995,283               831,810

Real estate ..........................................                                                              21,798                39,427                 304,677

Miscellaneous .......................................                                                           39,388                22,660                 330,970

Total resources ............................... $3,685,688                             $3,191,881          $15,984,223

LIABILITIES:

Capital ...............................................                                                         $624,105             $660,200           $4,114,500

Circulation  ..........................................                                                             829,658              917,768         7,048,367

Safety fund .........................................                                                             572,670              479,600               44,510

Due  other  banks ......................................                                                       88,830                69,927                 240,745

Due depositors ......................................                                                     1,327,436                972,728         3,448,954

Undivided profits ...................................                                                          116,850              30,007                 825,391

Bills payable ..................................................                                                  18,973                44,724

Discounts ........................................                                                                  49,688                42,115                 210,534

Dividends unpaid ...................................                                                                 769                      286              4,255

M iscellaneous   .......................................                                                        75,680                       311              2,444

Total liabilities  ...............................                                                $3,685,688          $3,191,881        $15,984,223

Feb. 1860.23                                                                                                Independent            Free                    Branches of

RESOURCES:                                                      Banks. Banks.     State Bank.

Specie   ...............................................                                                        $120,957             $131,416           $1,576,267

Eastern deposits ....................................                                                           172,760              335,164               990,870

Notes of other banks ................................                                                        157,231              350,764               390,342

Due from banks ......................................                                                         89,966                285,268               793,735

Loans ................................................                                                         1,428,692            1,414,402          8,257,368

State bonds .........................................                                                              600,214              758,529         ............

Safety   fund  ........................................ ..........  ............                                  794,809

Real estate ..........................................                                                             75,415                29,107                 611,391

Cash items ..........................................                                                             9,632                  62,638                 85,108

Other resources ....................................                                                           72,453                37,098                 855,176

Total resources ...............................   $2,727,320    $3,404,389     $14,355,066

LIABILITIES:

Capital stock ........................................    $550,000                                    $820,945             $4,035,750

Reserve   fund  ....................................... ..........                                         ............                    570,110

Safety fund .........................................                                                             548,934              365,100         ...........

Circulation  ..........................................                                                            538,820              652,867         6,792,202

Due banks and bankers..............................                                                       87,629                504,315               198,627

Individual deposits .................................                                                          853,319              952,056         2,211,668

Dividends unpaid ...................................                                                                182                      325              2,254

Contingent fund ....................................                                                           87,849                40,407                 265,708

Discounts, interest, etc .............................                                                       30,850                62,694                 150,066

Bills        payable                                                                                        ........................................ ..........         5,000                              48,167

State       tax²⁴      ........................................                                                      1,017                  .                     ......                                       18,293

Other      liabilities  .....................................                                                      28,720                       678              62,216

Total liabilities ..............................                                                  $2,727,320    $3,404,389   $14,355,065

22 Bankers' Magazine, Vol. XI, p. 817.                                         23 Bankers' Magazine, Vol. XIV, p. 687.

24 Set off on profits.

• 275
 

510            Ohio Arch. and Hist. Society Publications.

OHIO BANK STATISTICS. 1846-1863- Continued.

Feb. 1863.25         Independent                                                                    Free    Branches of

RESOURCES:                                                       Banks. Banks.       State Bank.

Specie on hand.....................................                                                        $158,255               $648,048           $2,216,982

Eastern deposits ....................................                                                          710,995             673,754             1,648,721

Bank notes ........................................                                                               300,312             1,500,217          2,012,834

Due from banks .....................................                                                         126,496             252,716             1,028,044

Discounts    ........................................                                                         1,096,964              2,547,976          8,653,459

State bonds ........................................                                                          1,205,530              1,748,481               814,809

Real estate, etc .....................................                                                          80,956                     78,770              537,723

Cash items ........................................                                                               15,143               182,278                  63,715

Other resources .....................................                                                         86,721                     71,231         1,343,257

Total resources    ..............................  $3,781,372                          $7,703,471            $18,319,544

LIABILITIES:

Capital   ........................................                                                               $350,000               $1,269,300        $4,054,700

Safety fund ........................................                                                             534,900             328,700                  725,226

Circulation   ........................................                                                             669,288             1,142,036          7,246,514

Due to banks .....................................                                                              194,788             528,750                  291,215

Deposits ........................................                                                               1,820,474              4,229,148          5,631,629

Unpaid dividends ...................................                                                                 205                  165                   6,847

Contingent fund, etc................................                                                        116,661                   81,187              79,025

Discounts ........................................                                                                 50,817               113,914                  216,909

Bills payable ..................................................                                                 9,350............

Other  liabilities  .....................................   44,239                                          921        67,479

Total liabilities ................................ $3,781,372                              $7,703,471            $18,319,544

Independent               Free                  Branches of

RESOURCES:        (Aug. 1863).26               Banks.             Banks. State Bank.

Number of banks ...................................5                                                       10            36

Specie on hand ......................................                                                         $59,570             $618,506           $1,712,858

Eastern deposits ....................................                                                          346,836             404,052             1,398,942

Bank   notes .........................................                                                            275,474             1,091,985          1,832,942

Due from      banks ....................................                                                     72,816               511,646             1,075,443

Discounts       ...........................................                                                        938,470             1,911,427          7,586,035

State bonds .........................................                                                             928,532             1,332,683               816,800

Real property, etc...................................                                                         58,436                     72,018              518,760

Cash  items  ...........................................                                                          330,520                   31,091              73,880

Other resources .....................................                                                         73,506               182,982             2,398,116

Total resources ...............................$3,084,160                              $6,156,390            $17,413,752

LIABILITIES:

Capital           ..............................................                                                 $227,500               $1,045,300        $3,904,700

Safety            fund                                                                                        ........................................                    299,900                         92,100                                     728,690

Circulation            .........................................                                                   416,924             596,923             5,901,629

Due to banks........................................                                                             303,900             654,489                  303,258

Deposits   ............................................                                                         1,673,303              3,593,636          6,016,270

Unpaid dividends ...................................                                                                 205                  535                   11,737

Contingent fund ....................................                                                           69,141                     69,481              87,239

Interest account ....................................                                                          68,798                     85,950              284,728

Bills  payable  .......................................                                                      .......... ...........              30,000

Other liabilities ....................................                                                            24,489                     17,976              145,501

Total liabilities ................................$3,084,160                               $6,156,390            $17,413,752

 

25 Bankers' Magazine, Vol. XVII, p. 863.

26Ibid., Vol. XVIII, p. 255.

• 276
 

Banking and Currency in Ohio Before the Civil War. 511

• 277
 

512       Ohio Arch. and Hist. Society Publications.   OHIO BANK STATISTICS. 1846-1863-- Continued. (In thousands of dollars)27

• 278
 

Banking and Currency in Ohio Before the Civil War. 513   OHIO BANK STATISTICS. 1846-1863- Continued. (In thousands of dollars)

• 279
 

514       Ohio Arch. and Hist. Society Publications.   OHIO BANK STATISTICS. 1846-1863- Continued. (In thousands of dollars)

• 280
 

Banking and Currency in Ohio Before the Civil War. 515   OHIO BANK STATISTICS. 1846-1863- Concluded. (In thousands of dollars)

• 281
 

516      Ohio Arch. and Hist. Society Publications.     BANK STATISTICS FOR UNITED STATES, 1774-1804.28

• 282
 

Banking and Currency in Ohio Before the Civil War. 517     STATISTICS OF BANKS IN THE UNITED STATES, 1811-1840.29 (In thousands of dollars).

• 283
 

518       Ohio Arch. and Hist. Society Publications.   STATISTICS OF STATE BANKS IN THE UNITED STATES, 1834-1863. 31 (In thousands of dollars).

• 284
 

Banking and Currency in Ohio Before the Civil War. 519   CINCINNATI PRICES.32 (On or about Dec. 1.) 1829-1858.

• 285
 

520       Ohio Arch. and Hist. Society Publications.   OHIO FINANCES FROM 1833 TO 1856.33

• 286
 

Banking and Currency in Ohio Before the Civil War. 521   PROFITS OF STATE BANKS AND STOCK BANKS IN OHIO, JANUARY 1, 1854.35

• 287
 

522      Ohio Arch. and Hist. Society Publications.   PROFITS OF STATE BANKS AND STOCK BANKS IN OHIO, JANUARY 1, 1854-Concluded.

• 288
 

Banking and Currency in Ohio Before the Civil War. 523

 

STATEMENT OF THE BANK OF THE OHIO VALLEY,

MAY 6, 1862.36

 

RESOURCES.

Ohio  State  6%   stocks,  par ...............................  $200,579  87

Little Miami and Cincinnati, Hamilton & Dayton R. R.

bonds  ..............................................                     24,425  50

United States one year certificates .......................         22,000 00

Eastern exchange .......................................                   92,905 30

Sterling  Exchange  at  4:80 ................................          4,186  54

Real estate and personal property........................          34,785 71

Bills discounted .........................................                    461,863 69

Suspended  debt  (good) ..................................               11,187  39

Due from banks and bankers ............................             29,674 25

Cash, bank notes-

United States demand notes..........                        $355,500 00

Ohio and Indiana notes ...............                         216,200 00

Kentucky notes ......................                             10,000 00

Gold coin ............................                                 471,683 00

Silver coin  ..........................                                8,047 10

Cash items ...........................                                29,997 89

1,071,427 99

 

$1,953,036 24

 

LIABILITIES.

Capital Stock ...........................................                     $500,000 00

Undivided profits ........................................                  46,883 31

Bank  notes  in  circulation ................................           83,498  00

City depositors .........................................                    940,446 04

Due  banks  and  bankers ..................................             376,208  89

 

$1,953,036 24

 

Cincinnati Daily Gazette, May 8, 1862.

• 289
 

524     Ohio Arch. and Hist. Society Publications.   PRICES PAID BY BROKERS AND OTHERS FOR NOTES OF OHIO BANKS THAT FAILED, 1831-1843.37

• 290
 

Banking and Currency in Ohio Before the Civil War. 525   TABLE SHOWING THE PREMIUM CHARGED FOR EXCHANGE AT THE FOLLOWING PLACES, AS TAKEN FROM LETTERS, ETC., IN THE OFFICE OF THE BANK COMMISSIONERS.

• 291
 

526      Ohio Arch. and Hist. Society Publications.

• 292
 

BIBLIOGRAPHY.

 

 

OHIO STATE PUBLIC DOCUMENTS.

Laws of Northwest Territory, 1791-1802.

Ohio Constitution, 1802.

Revised Statutes of Ohio (Chase), 1833.

Revised Statutes of Ohio (Swan), 1841.

Ohio Constitution, 1851.

Laws of Ohio, 1803-1819.

General Laws of Ohio, 1820-1865.

Local Laws of Ohio, 1820-1865.

Ohio Senate Journal, 1803-1836.

Ohio House Journal, 1803-1836.

Ohio Executive Documents, 1836-1865.

Annual Reports of the Bank Commissioners, 1839 and 40, 1842-44.

Special Reports of the Bank Commissioners, 1839-44 (Numerous. That

of July 25, 1842, occupies 302 pages of the Senate Journal Ad-

journed Session 1842).

Annual and Special Reports of the Auditor of State. (In House and

Senate Journals prior to 1836; in Exec. Doc. after 1836).

Governors' Messages (In H. & S. Jour. prior to 1836; in Exec. Doc.

after 1836).

Report of Special Examiner on the condition of Ohio Banks. (Charles

Reemelin, 1854; James T. Claypoole, 1859).

Annual Reports of Commissioner of Statistics, 1857-68.

 

UNITED STATES DOCUMENTS.

Reports on the Finances, 6 volumes, 1789-1849.

Report of Secretary of the Treasury, Alexander Hamilton, Dec. 13, 1790.

Report of Secretary of the Treasury, G. W. Campbell, Sept. 23, 1814.

Report on Currency to House of Representatives by Secretary of the

Treasury, Wm. H. Crawford, Feb. 24, 1820.

Statement by Secretary of the Treasury, Levy Woodbury, Jan. 5, 1836.

H. R. Doc. No. 42. 24th Cong. 1st Sess.

Annals of Congress, 15th Cong. 2nd Sess. Part I, pp. 335, 552, 922,

923; Part II, pp. 1409, 1411-16. 16th Cong., 1st Sess., Part I, pp.

58-68.

United States Statutes at Large. Vol. V. 1836-7.

Reports of the Comptroller of the Currency, 1876. 1892 Vol. I. 1896.

Vol. I. 1908.

(527)

• 293
 

528        Ohio Arch. and Hist. Society Publications.

 

Abstract of the 12th Census, 1900.

Ohio Manufactures. 12th Census, 1900. Bulletin 154.

Location of Industries. 12th Census, 1900. Bulletin 244.

Population. 12th Census, 1900. Bulletin 41.

Statistical Atlas of the United States. 12th Census, 1900.

Statistical Abstract of the United States, 1905-1911.

 

CASES CITED.

Dodge vs. Woolsey, 18 Howard 331.

Fleckner vs. Bank of United States, 8 Wheaton 338.

Fletcher vs. Peck, 6 Cranch 87-148.

Marbury vs. Madison, 1 Cranch 137-180.

McCulloch vs. State of Maryland, 4 Wheaton 316.

Ohio Life Insurance and Trust Company vs. Henry Debolt (Treasurer

of Hamilton County), 16 Howard 415-47.

Osborn et al. vs. The United States Bank, 9 Wheaton 738-903.

Piqua Branch State Bank of Ohio vs. Knoop, 16 Howard 369-415.

The State of Ohio vs. The Commercial Bank of Cincinnati, 10 Ohio 535.

 

OHIO NEWSPAPERS.

DAYTON PAPERS.    (D).*

Dayton Repertory, 1808-9.

Ohio Sentinel, 1810-13.

Ohio Republican, 1814-16.

Ohio Watchman, 1816-21.

Dayton Watchman, Apr. 9, 1822.

Miami Herald and Dayton Republican, Feb. 3, 1829.

Dayton Journal and Advertiser, 1828-29, 1831-40.

Dayton Whig and Miami Democrat, Dec. 29, 1832.

Dayton Republican, 1831-33.

Whig and Democrat, Oct. 5, 1833.

Dayton Daily Journal, 1840-65.

Dayton Transcript, 1842-45, 1847-50.

Dayton Evening Empire, 1850-51.

Dayton Daily Gazette, 1850-51, 1853-58.

Dayton Daily Empire, 1851-60, 1862-67.

Dayton Daily Ledger, 1868-69.

 

CHILLICOTHE PAPERS.

The Scioto Gazette, Mar. 5, 1807, Sept. 2, 1829. (W).

Independent Republican, Nov. 15 and Nov. 22, 1810.

*The location of the newspaper files consulted is indicated as fol-

lows: (D), Dayton Public Library; (W), Library of Congress, Wash-

ington, D. C.; the others in the State Library, Columbus.

• 294
 

Banking and Currency in Ohio Before the Civil War. 529

 

Fredonian, Sept. 16 and Dec. 2, 1812.

The Scioto Gazette and Fredonian Chronicle, Nov. 28, 1816. (W).

The Supporter, Aug. 6 and 16, 1816, Oct. 1818, Oct. 1819, Dec. 6 and 13,

1823, Jan. 31, 1824. (W).

The Supporter and Scioto Gazette, 1823-25.

Chillicothe Advertiser, May 1, 1841.

Chillicothe Gazette, Dec. 15, 1841.

 

COLUMBUS PAPERS.

Ohio Monitor, 1816, 1826-36. (W).

Ohio Monitor and Patron of Industry, 1821-23.

Columbus Gazette, Aug. 18, 1825. (W).

Ohio State Journal and Columbus Gazette, Sept. 1825, Dec. 1826, 1828.

(W).

Ohio State Bulletin, July 1829-July 1830.

Columbus Sentinel, 1833-34.

The Ohio Statesman, July 1837-Dec. 1840. (W).

The Old School Republican and Ohio State Gazette, 1843-44. (W).

The Ohio Press, Apr. 1846-Nov. 1847. (W).

The Ohio Daily Statesman, Jan. 17, 1846, 1855, 1857-58. (W).

Crisis, 1863-70. (D).

CINCINNATI PAPERS.

Inquisitor and Cincinnati Advertiser, 1819-20. (W).

Murray's Weekly Volunteer, Oct. 6, 1823.

Liberty Hall and Cincinnati Gazette, June 1818-June 1827. (W).

Cincinnati Emporium, Mar. 1824-Dec. 1824, 1826. (W).

Cincinnati Daily Gazette with Liberty Hall, 1825. (D).

Western Tiller, Aug. 25, 1826.

Cincinnati Daily Gazette, 1827-31, 1837-46. (D).

The Chronicle, 1828-29.

The Sentinel and Star in the West, Nov. 1829-Oct. 1831. (W).

The National Republican and Ohio Political Register, 1830. (W.)

Cincinnati Morning Herald, Aug. 1843-Aug. 1844. (W).

The Cincinnati Daily Enquirer, 1845-46, 1854, 1856. (W).

Cincinnati Price Current, Dec. 12 and 25, 1849.

Cist's Weekly Advertiser, Dec. 1852-Feb. 1853. (W).

Cincinnati Daily Gazette, 1862-63. (W).

Cincinnati Daily Commercial, 1861-66. (D).

 

HAMILTON PAPERS.

Miami Herald and Hamilton Gazette, 1817-20.

Hamilton Gazette and Miami Register, Dec. 14, 1819 and Mar. 6, 1820.

Hamilton Advertiser, 1825-27.

Hamilton Intelligencer, 1828-1834.

*34

• 295
 

530        Ohio Arch. and Hist. Society Publications.

 

 

PORTSMOUTH PAPERS.

Portsmouth Gazette, Aug. 1818-Feb. 1819.

Scioto Telegraph, 1820.

Scioto Telegraph and Lawrence Gazette, Aug. 25, 1821.

Portsmouth Gazette and Lawrence Advertiser, July 1824-Oct. 1825.

Temporary Advertiser, Feb. 24-Apr. 6, 1826 (continued as)

Western Times, Apr. 18, 1826-Nov. 11, 1830.

 

DELAWARE PAPERS.

Delaware Gazette, May 8, 1822.

Delaware Patron, 1823-30.

Ohio State Gazette and Delaware County Journal, 1830-34.

Ohio State Gazette and Olentangy Gazette, 1834-38.

 

CLEVELAND PAPERS. (W).

The Cleveland Herald, Oct. 23, 1823, 1850-52.

The Cleveland Times, 1847-48.

The Daily Cleveland Times, Oct. 1847.

Cleveland Plain Dealer, Jan.-Oct. 1848, 1853.

The Daily National Democrat, 1859-60.

 

OTHER OHIO PAPERS.

Circleville Fredonian, 1811-12.

Western Intelligencer, (Worthington), 1813-15.

The Ohio Patriot (New Lisbon), Feb. 25, 1815.

Western Herald and Steubenville Gazette, 1817-20, 1823-24.

The Piqua Gazette, Mar. 1825-June 1825. (W).

Western Patriot (Batavia), July 23, 1825. (W).

Western Star and Lebanon Gazette, Aug. 1825-Dec. 1826.

Harrison Telegraph (Cadiz), Dec. 24, 1825.

Western Courier and The Western Public Advertiser (Ravenna), 1825-

27, 1829-30.

St. Clairsville Gazette, 1825-29, Aug. 3, 1833, May 9, 1835, Mar. 29-Aug.

23, 1844.

Western Aegis (Georgetown), June 1827-Feb. 1829.

Hillsborough Gazette, Apr. 12, 1828.

The Ohio Repository and Stark County Gazette (Canton), June 20, 1828.

Belmont Journal and Enquirer (St. Clairsville), May 23, 1835, Sept. 19,

1835, Oct. 17, 1835.

Maumee Express (Maumee City), 1837.

Tuscarawas Advocate (New Philadelphia), Mar. 8, 1844.

Olive Branch and New County Advocate (Youngstown), May 17, 1844.

Liberty Herald (Warren), Nov. 20, 1844.

• 296
 

Banking and Currency in Ohio Before the Civil War. 531

 

Springfield Republican, April 1845. (D).

Summit Beacon (Akron), Jan.-Dec. 1850. (W).

The Belmont Chronicle and Farmers', Mechanics', and Manufacturers'

Advocate (St. Clairsville), Sept. 27, 1850.

Morgan Herald (McConnellsville), Apr. 25, 1851.

Daily Commercial Register (Sandusky), 1852-53. (W).

Daily Commercial Register (Sandusky), May 1852-May 1853. (W).

Hickory Flail and Fusion Thresher (Ravenna), Sept. 19, 1855.

 

PERIODICALS.

Bankers' Magazine, Baltimore-New York, 1846-67.

Gouge's Journal of Banking, 1842.

Hunt's Merchants' Magazine, New York, 1839-65.

Magazine of Western History, Vol. 2, 1885.

Niles' Weekly Register and Niles' National Register, Baltimore-Wash-

ington, 1811-1848.

Ohio State Archaeological and Historical Society Publications, 1885-

Quarterly Journal of Economics, Vol. XVII. (The Early Transporta-

tion and Banking Enterprises of the State in relation to the Growth

of Corporations-G. S. Callendar) pp. 111-162.

The Forum, Vol. XIX, April 1895 (Article by J. B. McMaster).

 

BOOKS AND ARTICLES.

Atwater, Caleb. A History of the State of Ohio. Cincinnati, 1838.

Baker, H. F. Banking in the United States (In Bankers' Magazine, Vol.

IX), 1854.

Baker, H. F. History of Banking in the United States (In Bankers'

Magazine, Vol. XI.) 1856.

Blodget, S. Economica: A Statistical Manual. Washington, 1806.

Bolles, Albert Sidney. The Financial History of the United States,

Vol. II. 1789-1860.

Burton, Theodore.   Financial Crises and Periods of Industrial De-

pression. New York, 1903.

Catterall, Ralph C. H. The Second Bank of the United States. Chi-

cago, 1903.

Cist, Charles. Cincinnati in 1826.

Cist, Charles. Cincinnati in 1841.

Cist, Charles. Cincinnati in 1859.

Chase, Salmon P. A Preliminary Sketch of the History of Ohio. (In

his Revised Statutes of Ohio, Vol. I). Cincinnati, 1833.

Conant, Charles A. A History of Modern Banks of Issue. New York,

1902.

Dewey, Davis R. Financial History of the United States, New York,

1903.

• 297
 

532        Ohio Arch. and Hist. Society Publications.

 

Donaldson, Thomas. The Public Domain. Washington, 1884.

Drake, Daniel. A Picture of Cincinnati. 1815.

Elliot, Jonathan. The Funding System of the United States and Great

Britain. Washington, 1845.

Evans, Nelson W. A History of Taxation in Ohio. Cincinnati, 1906.

Flint, Timothy. Valley of the Mississippi. Cincinnati, 1832.

Gallatin, Albert. Considerations on the Currency and Banking System

of the United States. Philadelphia, 1831.

Gallatin, Albert. Writings.  (Henry Adams, editor) Vol. III. Phila-

delphia, 1879.

Gilbart on Banking, Vol. II.

Gouge, Wm. M. A Short History of Paper Money and Banking in the

United States. (Cobbett's Edition), 1833.

Hildreth, Richard. The History of Banks. Boston, 1837.

Hildreth, Richard. Banks, Banking, and Paper Currencies. Boston, 1840.

History of Montgomery County, Ohio. (Published by W. H. Beers &

Co.) Chicago, 1882.

Howe, Henry. Historical Collections of Ohio. 2 Vols. (Ohio Centen-

nial Edition), Cincinnati, 1904.

Hull, George H. Industrial Depressions.

Huntington, C. C. and McClelland, C. P. History of Ohio Canals. Co-

lumbus, 1905.

Janney, J. J. State Bank of Ohio. (In Mag. of West. Hist., Vol. II,

pp. 156-175). 1885. (Mr. Janney was secretary of the Board of

Control from March 1850 till May 1865).

Johnson, Joseph French. Money and Currency. 1905.

Kennedy, J. H. The Banks and Bankers of Cleveland. (Mag. of West.

Hist., 2:272-290). 1885.

Kilbourn, J. Ohio Gazetteer. 1826.

King, Rufus. Ohio.

Knox, John Jay. History of Banking in the United States. New York,

1900.

Laughlin, J. Laurence. Report of the Monetary Commission of the In-

dianapolis Convention. Chicago, 1898.

McMaster, J. B. History of the People of the United States. Vols.

IV and VI.

McCulloch, Hugh. Men and measures of Half a Century. New York,

1889.

Poore, Ben Perley. Charters and Constitutions. Vols. I and II. Wash-

ington, 1878.

Rose. Notes on United States Reports. Vol. II.

Seligman, Edwin R. A. Essays on Taxation. New York, 1895.

Sumner, William G. A History of American Currency. New York, 1874.

• 298
 

Banking and Currency in Ohio Before the Civil War. 533

 

Sumner, William G. History of Banking in the United States. (A

History of Banking in all the Leading Nations, Vol. I). New York,

1896.

Turner, Frederick J. Rise of the New West.

Walker, Francis. Money, Trade, and Industry. New York, 1889.

White, Horace. Money and Banking. Boston, 1896.

Wilson, Thomas H. Banking and Resources of Ohio. (In World's

Congress of Bankers and Financiers). Chicago, 1893.

Wilson, Woodrow. Division and Reunion. New York, 1901.

• 299
 

INDEX.

Agricultural progress in Ohio: before 1825, 255, 334; 1831-37, 355; 1838-42, 397-8, 414; 1852, 440; 1857, 469. Assessed valuation of property in Ohio: 439, 520. Banks chartered in Ohio: before 1815, 257, 260, 261-3; under Bonus Law of 1815, 273, 275, 277; 1829, 344, 1831, 359, 1832, 362; 1833 with capital of a mil- lion, 364; 1834, 367. Bank Commissioners of Ohio: enactment of law providing for, 392; first report of, 392; report of 1842 favors restric- tions on banks, 401. Bank Committee: report of in Ohio legis- lature in 1819, 300. See Committee. Bank failures in Ohio: before 1831, 524, causes of, 347; 1841 and 1842, 403; Old banks 1846-50, 433; 1854, 453; 1857, 470; Branch banks, 483. Bank of the Ohio Valley: plan of, 475; organized, 475; redemption agency for State Bank, 476; condition     of, 475, 523. Bank of Ohio and other banks: act to incorporate, 464; opposition to pro- posed law, 465; similar law rejected by the voters 1857, 466. Bank reform in Ohio: slogan of Demo- crats 1838-46, 428, 434; or bank de- struction  1846-50, 434; in legislature, 435. Baum, Martin; organizes Miami Export- ing Co., 257. Benefits derived from banks remaining in Ohio in 1830: 348. Bibliography: 527. Board of Control of State Bank of Ohio: organized, 426; president of, 427; secretary of, 532. Bonds and state stocks issued by Ohio: 115, 343. Bonus Law of 1816: origin of, 272; pro- visions  of,   273;  banks   organized under, 275, 276, 277, 338, 110; repeal asked by Cincinnati banks, 293; dis- satisfaction with, 337; taxes paid by banks under, 338; amended by sub- stituting tax on dividends, 112, 340.

Branches of State Bank of Ohio: pro- visions of law regarding, 424; forma- tion of first, 427, 199; names, loca- tion, date of organization, and profits of to 1853, 521; condition of 1846-63, 504; method of protecting note hold- ers, 481; cases of failure of, 483. Brokers' assorting system:-474. Broker establishments: Ohio bankers in- terested in, 443; increase of in Ohio, 444. Buying notes at a discount: law against in 1819, 296. Capital: need of banking, in Cincinnati in 1826, 342; demand for in other in- dustries in Ohio in 1829 prevents sub- scriptions to stock of Com'l Bk. of Cincinnati, 344; in Ohio banks owned by non-resident stockholders in 1833, 305; private, in Ohio in 1843 and 1844, 418; demand for banking in Ohio in early 50's, 448; of Cincinnati men maintaining foreign note circulation, 448; decline of banking, in Ohio, Tn 1855, 464. Capital stock of Ohio banks: Miami Ex- porting  Co., 259; others organized before 1815, 260, 261, 262, 263; organ- ized under Bonus Law, 273, 275, 276, 277; increase of 1815-17, 278; in 1819, 503; in January 1830, 349; authorized in 1834, over-subscribed, 367-69; or- ganized under law of 1845, 504. Canal: Erie, opening of and beginning of Ohio canals, 398; expenditures in Ohio increase money supply in 1827, 343; system, extent of in Ohio, 335; effects of Ohio system, 169, 397; statis- tics in Ohio, 398. Case, Leonard: cashier Com'l Bk. of Erie, 362. Charters of Ohio banks: granted by special acts of legislature before 1842, 257, 260, 262, 264, 273, 277, 359, 364, 367; expiration of majority of in 1842, 408; termination of remainder, 413. Classes of Ohio banks under general laws: 479.

(534)

• 300
 

Index.                   535

Chillicothe: first settled, 252; bank of, organized,  361; charter   provisions, 361; land office established at, 270; bank convention at, in 1816, 282; U. S. Branch bank opened, 316; State col- lects tax from U. S. Bank Branch, 318. Circulation. of Ohio banks in 1819, 299; ratio of to capital stock in Ohio banks in 1819, 306; 1846-63, 504; rapid increase of in Ohio just before 1837, 358; proportion of specie to for Ohio banks in 1835, 374; ratio of to specie for certain Ohio banks in 1837, 388; reduction of by Ohio banks in early 40's, 404; of Ohio banks at highest point before the war 1851, 439; in- crease of and prices in 1845, 429; of certain foreign banks maintained by Cincinnati capital, 448; in Ohio re- tarded by cost of exchange due to depreciated currency, 450. Commerce: increase of in U. S. 1814-1816, 287; 183040, 353. Commercial crisis in Ohio in 1854: 454. Committee of Ohio legislature: discusses state bank in 1817, 284; report of in regard to taxing U. S. Bank, 300, 314; report of special, in 1820 on fight against U. S. Bank, 322; favors state bank in 1829, 344; in 1830 favors tax on bank dividends, 360; favors state bank, 363; in 1836 against chartering more banks, 377; reports right to issue small bills a vested right of the banks, 379; report of Senate com- mittee in favor of safety fund prin- ciple, 399; report bill for State Bank of Ohio, 421. Condition of Ohio Banks: before 1815, 266; January 1819, 301, 303; 1829, 345; March 1835, 373; on three dates in 1837, 388; 1842, 407; 1854, 454. Constitutional  Convention    in   Ohio: struggle in over banking, 434; clause of constitution of 1851 regarding bank- ing, 435. Cost of exchange in Ohio due to de- preciated currency, 449, 525. Cost of foreign banking capital in Ohio in 1833, 366. Counterfeit notes: 295. Credit: of Ohio banks before 1815, 267; allowed in land sales, 270; contrac- tion of in 1817, 287; expansion of by U. S. Bank in West, 288; restriction

of by U. S. Bank, 290; on merchan- dise purchases, influence of in west in 1819, 299; excessive, and specula- tion, 355, 470. Crisis of 1818-19: begins in Miss. Valley, 286; causes, 287; account of, chap. III. Crow Bar Law: enacted to enforce pay- ment of taxes by Ohio banks, 460. Currency: fluctuations in Ohio, 397; in Ohio supplied by bank notes of ad- joining states, 404; demand for and increase in Ohio in early 30's, 358, 362; increase in U. S. 1830-37, 358; lack of Cincinnati in 1826, 342; in U. S. in 1843, 418; depreciated, in Ohio 1853-5, 449; failure of Ohio banks to provide good home, 452. Debt: in Miss. Valley in 1820, 299; due U. S. Branch     Bank  in  Ohio, 302; national, payment of, 356; of stock- holders to Ohio banks, 393, 434; for- eignand domestic of Ohio, 1833-56, 520. Defects of Ohio banking system prior to 1845, 347, 392-4, 401, 414, Demand for more banking facilities: Cin- cinnati in 1826, 342; Ohio in 1832, 361; general in 1836, 377; Cincinnati in 1850, 436; Ohio in early 50's, 448. Deposits: in Ohio banks in 1819, 302; ratio of to specie, 306; withdrawal of public, from U. S. Bank, 356; and loans, in- creasing importance of, 1854, 452. Depreciation of bank notes: produces high prices in 1816 and 1817, 281; effect of resumption, 283; general in the west in 1819, 309; not chief cause of depression in early 20's, 333; of Ohio banks in 1822 and 1828, 31o; in Ohio beyond vicinity of issuing bank, 1833, 366; circulating in Ohio, 1853-5, 449. Difficulty in collecting state taxes from banks: 339, 403. Distribution of Ohio banks: by counties in 1819, 307; and capital in 1830, 349; by counties in 1835, 375; in 1842, 407; by counties in 1847, 431; by counties in 1857, 468. Dividends of Ohio banks: prior to 1815, 266; about 1817, 279; in early 30's, 366; difficulty of state getting report of, 403; after 1845, 521; basis of tax- ation, 266, 338, 340, 360, 382, 402, 419, 456.

• 301
 

536                     Index.

Economic Conditions in Ohio: before 1812, 255; after War of 1812, 270; 1818, 285; lack of markets before canal period,  334;  industrial  awakening after canals opened, 335, 343; 1829, 345; business expansion 1831-37, 354; effect of, 397; era of internal im- provements, 352; 1840, 398; 1842-45, 414; exports or exchanges in early 40's, 415; effect of state bank law on, 429; period of business expansion 1848-52, 439; 1852-7, 469. Elections: in Ohio in 1819 influenced by fight against U. S. Bank, 321. Embargo Act: increases western immi- gration, 269. Exchange operations in Ohio: arising fron exports in early 40's, 416; finan- cial disturbances of early in 1834, 366; source of profit to banks, 441; cost increased by depreciated currency, 449, 525; subject to fluctuating cur- rency, 452. Exports from Ohio: 1840, 397, 415; 1852, 439; 1857, 469. Failed banks in Ohio: see bank failures in Ohio. Financial disturbances in 1834, 366. Foreign bank paper in Ohio: large cir- culation of, 404, 416; maintained by Cincinnati capital, 448. Free Banks in Ohio: law    providing for, 437, 499; organized in 1851 and 1852, 210; names, location, date of organi- zation and profits to 1853, 522; statis- tics of, 507. Frontier conditions: a cause of early banking difficulty in Ohio, 347, 402. General Banking Law ol 1842: enactment of, 405; banks authorized under, ob- jections of banks to, and amendment of, 405, 406, 419; personal liability feature, 419. General Banking Law of 1845; enactment of, 423; provisions of, 424; formation of banks under, 427, 521; opposition to, 428; digest of, 495. Governors' Messages to Ohio Legislature regarding banking: Worthington, ad- vocates bonus law, 272; Brown, favors tax on U. S. Bank, 316; Trimble, al- ludes to prosperous condition of state in 1829, 345; Lucas, recommends state bank, 365, comments on increased capital, 372; recommends prohibition of small bills, 379; Shannon, favors

independent banks and opposes state bank, 395; Corwin, analyzes objection to banks, 396; discusses holding of Ohio bank capital by non-residents, 400; Thos. W. Bartley, explains pur- pose of general banking law of 1842, 405, opposes state bank in 1844, 420; Mordecai   Bartley,   advocates  free banking system in 1844, 420, says new State Bank law caused revival of business 1845, 427; Chase, on foreign circulation, 1856, 447, favord repeal of 10% Interest Law, 465, favors free banking 1857, 465, recommends clear- ing house in Ohio Valley, 474, on Ohio banks in panic of 1857, 477. IIammond Charles,: chairman of com- mittee of Ohio Legislature reporting on taxation of U. S. Bank, 322, 329; represents Ohio in case of Osborn vs. U. S. Bank, 327. Ilard times in Ohio: increase hostility to U. S. Bank, 322; low prices and scarcity of money in 1841, 398; fall in prices 1818, 287, 288. High prices: produced by depreciation, 281; and speculation, 287; in land, 270, 337. Immigration: into   Ohio                   after War of 1812, 269, 285; decline             of western after 1817, 299, 332; increase after 1830, 352. Imports:   of merchandise   into  U. S. 1814-16, 285, 287; 1830-37, 354; into Ohio, 1837-41, 398. Indebtedness of directors and officers to Ohio banks, 393. Independent Banks in Ohio: authorized in State Bank Law, 425; name, loca- tion,  date   of   organization,  and profits to 1853, 522; statistics of, 1846- 63, 505. Index: 535. Individual liability: of directors in cer- tain cases under Ohio law     of 1839, 392; of stockholders, prominent fea- ture of the general banking laws of Ohio in 1842 and 1843, 402, 405, 419; under free banking law, 500. Inflation: begins in Miss. Valley in 1815, 271, 287; increased in West by U. S. Bank, 289; in the U. S. just before 1837, 358; climax of in Ohio in 1836, 377; U. S. Government tries to check, 381; relation to public land sales, 385; in Ohio in 1854, 454.

• 302
 

Index.                        537

Interest: charged state banks by U. S. Bank, 290; rate on foreign capital in Ohio in 1833, 366; on loans of Ohio Life Ins. & Trust Co., 370; source of profit to Ohio banks, 441; 10% law in Ohio, 442; earned by brokers in Ohio, 443; annual on state debt of Ohio, 1833-56, 520. Internal Improvements in Ohio: begin- ning of, 335; effect of, 397; see Canals, J. J. Janney: Secretary of board of con- trol, 532. Kelley, Alfred: author of bill for State Bank of Ohio, 421; of Gen. Property Tax Law, 457; of Ohio bank tax law of 1856, 462; of another state bank law in 1857, 466; Pres. of Com'l Bk. of L. Erie, 134; plan for specie pay, 243. Kentucky and Virginia Resolutions re- affirmed by Ohio Legislature: 324. Kiting: 442. Land: rise in prices of in west after War of 1812, 270; dullness in sales of in Ohio in early 20's, 332; object of speculation, 355, 357; relation of in- flation to sales of public, 385; receipts from sales of public, 493. Land offices: established in Ohio, 270; accept only specie for sales of public land, 1836, 384. Lexington Insurance Company, 258. Loans and discounts: to directors and stockholders, 393, 433; statistics of 1846-63, 504, 511. Location of Ohio banks: see Banks char- tered, and Appendix, 521. ''Loco focos" gain power in Ohio legis- lature: 377. Low prices: in Ohio and the West in 1819, 287, 298; in Ohio in early 20's, 330; and hard times in Ohio in early 40's, 398; and inadequate banking facilities in Ohio, 417. Manhattan, Bank of: incorporated in Mich. Ter. but organized under Ohio laws in 1836, 377. Markets: lack of in Ohio for surplus products before canal period, 334; effect of canals on, 353. Manufacturing: early development In Ohio, 255; value of product and ex- port from Ohio, 1857, 469. Marietta: Settlement of, 250; Bank of, the first regular bank in Ohio, 260; charter provisions, 260.

McCulloch vs. Maryland: case of de- cided, 317; defines status of national banks as agencies of U. S. Govern- ment, 327. Martin Baum: 257. Miami Country: early population and progress, 256; low prices in, in early 20's, 330. Miami Exporting Company: organization and object, 257; the first bank in Ohio, 258; charter provisions, 259; failure and reorganization, 260, 393; increase of capital stock, 259, 263; re- fuses charter under Bonus Law, 274, 338; State's claims against sold at discount, 339. Names of Ohio Banks: see Banks char- tered, and Appendix, 521. National banks: many Ohio banks be- come, 478. New banking system in Ohio: agitation for in early 40's, 399, 420; adopted, 423, 437. No-Bank Party: in power in Ohio, 377; in constitutional convention, 434; se- Political relations. Non-resident stockholders in Ohio banks: in 1833, 365. Note redemption agency: established by State Bank of Ohio, 472; opportunity for, 473; of 1854 and 1857, 473. Office-holders: organization  of Clinton Bank of Columbus by, 368. Ohio bank agency of 1850: 472. Ohio Bank Convention, June 1837: 388. Ohio Life Insurance and Trust Co.: chartered, 368; powers and business, 369; stock largely held in Wall St., 372; real estate loans in   Ohio in 1836, 494; failure occasions panic of 1857, 470. Old Banks in Ohio: in 1844, 413; failure of certain, 433, 453; statistics  of, 1846-57, 504. Osborn vs. United States Bank; Case of: importance of, 326; decision in, 328. Panic of 1818-19: Precipitated by U. S. Bank, 288, 313; of 1837 intensified by crop failures, 387. Panic of 1857: occasioned by failure of Ohio Life Ins. & Trust Co., 470; ma- jority of Ohio banks survive, 477. Personal liability: see Individual liability. Political relations of banking questions in Ohio: influence of U. S. Bank fight on elections, 321; the No-Bank

• 303
 

538                      Index.

party, 377; struggle over the Small Note Law, 382, 390; vote to amend general banking law of 1842, 405, 406; bank party victory in 1844,121; vote on State Bank bill 1845, 422; renewal of State Bank fight 1846, 428; bank reform or bank destruction  434; posi- tion of Whigs and Democrats in 1846, 428; constitutional convention, 434; bank taxation, 458, 461-3. Population: in Miami Country before 1815, 256; increase in Ohio and ad- joining states, 1810 to 1820, 269; be- tween 1820 and 1830, 336; growth of in Ohio 1830-40, 352, 415; in Ohio in 1850, 439; in 1860, 468. Pork packing industry: centered at Cin- cinnati, 415. Post Notes: laws against, 295; condemned by Bk. Com'rs. of Ohio, 392. Premium on N. Y. exchange in Ohio: 367, 449, 525. Prices of Ohio produce: 281, 298, 330, 398, 417, 429, 459, 519. Prvate banks in Ohio: increase of in 50's, 444; in 1864, 478. Profits of Ohio banks: before 1815, 267; about 1817, 279; about 1833, 366; dur- ing years 1850-53, 440; of individual banks in 1853 and from organization, 521; sources of, 441. Public land sales: effect of credit sales, 270; relation of bank note inflation to, 385; receipts from, 1796-1841, 493. Public works in Ohio: extent and effects of, 335, 397; increase money supply, 343; see Canals, and Internal improve- ments. Quotations of Ohio bank notes: at Phila. in early 20's, 333; at Phila. 1814-31, 487; at New York, 1832-38, 490-91. Railroads: 352, 454, 470. Refusal of Ohio banks to pay tax under laws of 1852, 1853, and 1858; 460-2. Resources and liabilities of Ohio banks: in 1819, 303; 1835, 374-5; 1837, 388; 1842, 406-7; 1846-63, 504. Resumption of specie payment: by Ohio banks, 283; in 1838, 390; attempts of Ohio legislature to compel, 4Q4. Revenues and expenditures: of State of Ohio, 1833-56, 520. Rowlett's tables: 496, 498. Safety Fund System: discussed in Ohio, 396; established in State Bank of Ohio, 424, 496; objections considered,

480; in Ohio compared with that of New York, 481. Scarcity of money in Ohio in 1832. 362; in 1842-3, 417; in early 50's, 448. Schemes to avoid redemption of OhTo bank notes: 450. Security  for note   issue: Ohio    banks classified as to, 480. Semi-annual statements to Auditor of State: 497. Shinplasters: issued by bridge and turn- pike companies and towns, 285-6; flood Ohio from other states in 1854, 447. Small Notes: numerous in Ohio in 1818, 295; U. S. Treas. Dept. during the 30's urges states to suppress, 378; ob- jections to, 378; Governor of Ohio recommends prohibition                 of in   1834, 379; extent of circulationof, 380; Ohio legislature asks banks to sur- render   right  to  issue,  381;   law against in Ohio, 382; effect of, 383; majority of Ohio banks surrender right to issue, 383; repeal of law against, 161; re-enactment    of   law against, 395. Special acts of legislature: the means of organizing banks in Ohio before 1845, 257, 260, 262, 264, 274, 277, 344, 359, 364, 367; number passed from 1802 to 1850, 435. Specie: scarcity in Ohio in 1818, 292; re- ported by Ohio banks 1846-63, 504. Specie Circular: precipitates thel crash in 1836, 384. Specie paying banks in Ohio: in 1820, 311; 1842, 401, 406, 407; 1843 and 1844, 413. Speculation: in Miss. Valley, 271, 285, 287; relation of to credit, 357; panic of 1857, 470. State Bank of Ohio: proposition for in 1817, 284, 293; discussed in legislature 1829, 343; advocated by senate com- mittee in 1833, 363; bill for before legislature in 1833, 363; bill for de- feated in legislature in 1834, 367; be- fore  the  legislature  in  1843, 420; Kelley's Bank Bill of 1845, 421; law of 1845, Ch'p. 9, pp. 423-6; threatened by failure of Ohio Life Ins. & Trust Co., 471; compared with State Bank of Indiana, 481; compared with New York Safety Fund System, 481; com- pared with Ohio stock banks, 483; branches of, 521.

• 304
 

Index.                   539

Statistics: of banking capital in U. S. after 1815, 278; distribution of state banks in U. S. in 1818, 286; Ohio banks in 1819, 303; lack of for Ohio banks   1820-30,  341;  number   and capital of Ohio banks at various periods 1805-30, 350; Ohio banks in 1830, 349; Ohio banks in 1835, 372-6; Ohio banks in 1837, 388; Ohio banks in 1838, 391; Ohio canal shipments, 398; Ohio banks in 1842, 406; growth of banking in Ohio 1845-7, 431; Ohio banks in relation to growth of de- posits 1851-4, 1860-3, 452-3; Ohio banks 1846-63, 291, 504. Steubenville: first settled, 252; Bank of organized, 262; charter provisions, 263. Supreme Court of U. S. Decision in case of McCulloch vs. Maryland, 317, 327; decision in case of Osborn vs. U. S. Bank, 328; rules taxing fea- tures of law creating State Bank of Ohio constitute a contract obligation not to be impaired by later laws, 459, 462. Surplus: products, lack of market for Ohio before canal period, 334; rev- enue, distribution of, among the states, 356; banks taxed on, etc., 458, 46. Suspension of specie payment: after War of 1812, 267, 279; increases depreci- ation, 280; by Ohio banks in 1818, 291, 300; general in 1837, 385; causes of by Ohio banks, 387; 1839, 391; 1857, 470; during Civil War, 463. Taxation of Ohio banks: on dividends, 266, 338, 340, 360, 382, 402, 419, 456; under the bonus law, 273, 337, 339, 340; on dividends and capital stock, 419; on profits after deducting ex- penses and losses, 456; on capital stock and surplus, 458; on loans and dis- counts, 459; on capital stock, surplus,

contingent   fund,   and   undivided profits, (Kelley's Bank Tax Law), 462; on loans and discounts, other money employed for profit (less re- serve), and balances due from banks, 462. Tax on U. S. Bank: law levying in Ohio, 296, 317; in other states, 313; forcibly collected in Ohio, 318. Ten per cent interest law in Ohio, 442. Unauthorized banking in Ohio: during 1811, 263; Granville Alexandria   So- ciety, 265, 294; Scioto Exporting Com- pany, 265; certain unauthorized banks later given charters, 258; act to pro- hibit in 1815, 265; laws against, 273; John H. Piatt & Co.'s Bank. 286. 294, 309; Bank of Xenia, 286, 294; Owl Creek Bank, 294; increase of 1818, 294; foreign  paper, 404, 416; failure of laws against, 446. United States Bank: First, expiration of charter, 263, 265; Second, established, 282; branches in Ohio, 283; occasion of crisis in West, 288; relations with Cincinnati banks, 291; specie drained from Ohio by, 297; early state op- position to, 313; hostility against in Ohio, 316; law taxing in Ohio, 317; made an outlaw in Ohio, 326; re- fusal to re-charter, 355. White males in Ohio: number of at 5 year periods, 332, 333, 337. Worthington: Message of Governor, on banks, 272; Thomas, on prices in Ohio in 1824, 331. Xenia: Bank of, applies for charter, 294; branch bank at, 426. Youngstown: Mahoning Co. Bank, at 522. Zanesville: beginning of, 252; canal and manufacturing   company    organized, 265; variety of bank paper in, 1818, 285.

• 305