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)
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.
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)
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
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
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
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
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
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
|
(244) |
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)
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.
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.
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.
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.
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.
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.
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.
PART I. BANKING IN OHIO UNDER
SPECIAL CHARTERS. 1803-1843.
NOTE ISSUE BASED ON GENERAL
ASSETS.
(253)
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)
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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)
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).
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.
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
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
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.
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.
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)
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.
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.
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.
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.
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 75c 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.
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.
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.
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.
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)
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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 3c 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.
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.
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.
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
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:
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: |
|
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:
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: |
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.
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).
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.
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.
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)
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.
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.
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.
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.
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.
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.
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.
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
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."
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.
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.
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.
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.
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.
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.
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.
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)
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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. |
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.
Banking and Currency in Ohio Before the Civil War. 351 |
|
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)
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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. |
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
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.
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.
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.
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.
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.
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. |
376 Ohio Arch. and Hist. Society Publications.
DISTRIBUTION OF BANKS AND CAPITAL IN OHIO IN 1835. |
|
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.
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.
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.
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.
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.
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.
Banking and Currency in Ohio Before
the Civil War. 383
was to remain at 5% from the time of surrender,141 The 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.
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)
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
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.
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.
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.
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.
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.
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.
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 |
|
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
PART II. BANKING IN OHIO UNDER
GENERAL LAWS. 1843-1863.
NOTE ISSUE SECURED BY SAFETY FUND
OR BOND DEPOSIT.
(411)
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)
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.
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.
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.
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
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.
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.
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.
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.
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.
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)
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
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-
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.
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.
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.
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.
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.
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: |
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.
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)
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.
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.
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.
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.
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.
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)
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
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)
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.
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.
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.
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.
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.
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.
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.
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)
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
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.
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.
468 Ohio Arch. and Hist. Society Publications. |
|
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 7c 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
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.
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.
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.
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.
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.
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.
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.
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)
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."]
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-
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.
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
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.
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.
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.
APPENDIX
TO
BANKING AND CURRENCY IN OHIO
BEFORE THE CIVIL WAR.
(485)
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)
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.
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.
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.
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.
492 Ohio Arch. and Hist. Society Publications. |
|
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. |
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. |
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.
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.
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
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.
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.
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.
OHIO BANK STATISTICS. 1846-1863.
PRINCIPAL RESOURCES AND LIABILITIES OF
BANKS
BY CLASSES.
(DIAGRAMS AND DETAILS.)
(501)
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.
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.
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.
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.
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.
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.
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.
512 Ohio Arch. and Hist. Society Publications.
OHIO BANK STATISTICS. 1846-1863-- Continued. (In thousands of dollars)27 |
|
Banking and Currency in Ohio Before the Civil War. 513
OHIO BANK STATISTICS. 1846-1863- Continued. (In thousands of dollars) |
|
514 Ohio Arch. and Hist. Society Publications.
OHIO BANK STATISTICS. 1846-1863- Continued. (In thousands of dollars) |
|
Banking and Currency in Ohio Before the Civil War. 515
OHIO BANK STATISTICS. 1846-1863- Concluded. (In thousands of dollars) |
|
516 Ohio Arch. and Hist. Society Publications.
BANK STATISTICS FOR UNITED STATES, 1774-1804.28 |
|
Banking and Currency in Ohio Before the Civil War. 517
STATISTICS OF BANKS IN THE UNITED STATES, 1811-1840.29 (In thousands of dollars). |
|
518 Ohio Arch. and Hist. Society Publications.
STATISTICS OF STATE BANKS IN THE UNITED STATES, 1834-1863. 31 (In thousands of dollars). |
|
Banking and Currency in Ohio Before the Civil War. 519
CINCINNATI PRICES.32 (On or about Dec. 1.) 1829-1858. |
|
520 Ohio Arch. and Hist. Society Publications.
OHIO FINANCES FROM 1833 TO 1856.33 |
|
Banking and Currency in Ohio Before the Civil War. 521
PROFITS OF STATE BANKS AND STOCK BANKS IN OHIO, JANUARY 1, 1854.35 |
|
522 Ohio Arch. and Hist. Society Publications.
PROFITS OF STATE BANKS AND STOCK BANKS IN OHIO, JANUARY 1, 1854-Concluded. |
|
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.
524 Ohio Arch. and Hist. Society Publications.
PRICES PAID BY BROKERS AND OTHERS FOR NOTES OF OHIO BANKS THAT FAILED, 1831-1843.37 |
|
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. |
|
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)
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.
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
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.
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.
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-
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Vol. II.
Seligman, Edwin R. A. Essays on
Taxation. New York, 1895.
Sumner, William G. A History of American
Currency. New York, 1874.
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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,
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Turner, Frederick J. Rise of the New
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Walker, Francis. Money, Trade, and
Industry. New York, 1889.
White, Horace. Money and Banking.
Boston, 1896.
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Congress of Bankers and Financiers).
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Wilson, Woodrow. Division and Reunion.
New York, 1901.
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) |
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. |
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. |
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 |
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. |
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. |
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)