OHJ Archive

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.²Thus 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,⁶and English trade rivalry among the

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

matter with the French officials and merchants.⁷The 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.l⁰In 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.¹²It 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.¹⁴In

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.¹⁷It 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.²⁰But 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,²²succeeded 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.²⁵This 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.²⁶But 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.28And 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.²⁹These 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,³¹and 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.³³In 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,³⁴and 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.³⁶This 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.³⁷In 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,⁴²and 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.³And 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 $2,000,000,⁸but 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.¹⁰It 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.¹⁴Its

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

but in the notes of other banks.¹⁶Thus 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 $200,000,²⁰and 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.²²And 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.²⁴It 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.²⁸A 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.³²Apparently 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

$100,000.³³The 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.³⁴From 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.³⁶Early 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.⁴⁵Various 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.⁴⁷Quite 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.⁴⁸It 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".⁴⁹Another 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.⁵⁴And 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.⁵⁶They 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.⁵⁷During 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,⁵⁹the

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.⁶⁰They 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,²Ohio, 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."³Many 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.⁷Under 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.¹⁶This 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,"¹⁷an 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.¹⁹The 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,²¹accepted 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 $300,000.³⁹Besides 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.⁵³About 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.⁵⁴August 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."⁵⁸But 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.⁶⁷At Chil-

licothe, Ohio, wheat was quoted on September 16, 1812 at 62�c

per bushel,⁶⁸on August 3, 1816 it was 75^c and corn ₃71/2 to 43c,⁶⁹

while on November 28, 1816 wheat was worth $1.50 and corn

50c.70 The apparent value of all kinds of property suddenly

went up and the people imagined they were growing rich never

so fast. Meanwhile, the banks were paying enormous divi-

dends.⁷¹

61Money and Banking-White, p. 363.

62Elliot's Funding System, p. 1106. See Appendix.

63History of Banking--Knox, p. 669.

64The History of Banks--Hildreth, p. 60.

65A History of American Currency-Sumner, p. 80.

66Hunt's Merchants' Magazine, Vol. IV, p. 286.

67Valley of the Mississippi -Flint, Vol. I, p. 179.

68Fredonian, (Chillicothe, O.), Sept. 16, 1812.

69 The Supporter (Chillicothe, O.), Aug. 6, 1816.

70The Scioto Gazette and Fredonian Chronicle (Chillicothe, O.),

Nov. 28, 1816.

71The History of Banks--Hildreth, p. 60.

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.⁷²As 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.⁷⁵Meanwhile the banks went on issuing more

stock and notes and paying more dividends.⁷⁶In 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.⁷⁸And on February 20, 1817

two of the Ohio banks resumed specie payments.⁷⁹The 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.⁸²By 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.⁸⁵When 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.⁸⁷This 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.⁸⁹The 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."²In 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,⁵and 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.⁷At 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.⁹This

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 $65,000,000.¹⁰This 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.¹⁴The

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."¹⁷This 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 $1,000,000.¹⁸Then, 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.²⁴The difficulty was increased when, on August 28,

1818, the Bank issued its orders to the branches to cease re-

ceiving each others notes.²⁵The 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.²⁷And 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.²⁸The 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.³⁰In 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.³⁴Consequently, 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,³⁵the 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.⁴¹Conse-

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,⁴³became still more abundant in 1818

and the years following.⁴⁴Many 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.⁵²The 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,⁵³was 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."⁵⁴Besides 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.⁵⁵Having

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, 1818.⁵⁷A 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.⁵⁸Niles'

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."⁵⁹Gouge, 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."⁶²While 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.⁶⁴In October,

1818, in the same town, wheat was quoted at 75c a bushel.⁶⁵In

Dayton, Ohio, January 1, 1817 wheat was $1. per bushel. In

October, 1819, it was selling at 62�c 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 12�C

per gallon, wheat 20c, rye 25c, and corn 12c per bushel, fresh

beef 1 to 3^c per pound, butter 5 to 8c per pound, eggs 3 to 5c

per dozen, and chickens 50 to 75c per dozen.⁶⁶

A letter from a Cincinnati man, July 26, 1820, quoted in a

Steubenville paper states that at a marshal's sale a handsome

gig and very valuable horse had sold for $4, an elegant sideboard

for $3, a fine Brussel's carpet and two Scotch carpets for $3,

etc. The writer adds that a man with a little money could make

a fortune by attending marshal's and sheriff's sales.⁶⁷In 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.⁶⁸An 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, 12� 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,⁷³and 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:

Banking and Currency in Ohio Before the Civil War. 303

304 Ohio Arch. and Hist. Society Publications.

Banking and Currency in Ohio Before the Civil War. 305

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 12�. 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,⁸⁴and 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.⁸⁵But 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.⁸⁸In 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.⁹⁰The 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.3On 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.⁴This committee later reported severely criticizing

the bank's management.5In December, 1818, North Carolina

laid a yearly tax of $5,000 upon the Fayetteville branch.⁶Then

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.⁸The question of

taxing the branches of the bank was debated also in the legisla-

tures of Virginia⁹and 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.l⁸Conse-

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."²⁰This 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.²¹A 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,²³that 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,²⁴and that the

states had no right to tax them.²⁵In 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.²⁶The latter upon legal advice refused to appear on

the day named in the writ, and the court allowed an injunc-

tion,²⁷but 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.³⁰It 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,³¹who 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.³³Harper 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."³⁹The 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.⁴³In 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."⁴⁷The 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,⁴⁹given 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-

son⁵⁰and 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,⁵³and 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."⁵⁴This 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.⁵⁶If

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.⁵⁸The 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.⁶¹This

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,⁶³while such men as Clay, Webster, and

Sergeant appeared for the bank.⁶⁴The 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,⁶⁶the 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.⁷⁰And 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."¹The improvement was but

slight, however, and did not last long. Prices remained at an

extremely low level.²Another 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.⁴For 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.⁶Niles' 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.⁸In 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 37�c."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."¹⁴All 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.¹⁶And

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.l⁷Although 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.¹⁹And 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.²³And, 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."²⁵The 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-

habitants²⁶were 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.²⁸By July of the same year

the work of construction had begun on both these canals,²⁹and

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.³²The 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."33Other 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."³⁴The 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."³⁷The 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.³⁹The 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.⁴⁰During 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.⁴⁶The 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.⁴8This 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.⁵⁴By

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.⁵⁷By 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.⁵⁹The 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.⁶¹Exepnditures 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

2�%, 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.⁶⁵A 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.⁶⁸The 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 money⁷⁰The 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.⁷⁶Some 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.⁶During 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.¹3This 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.¹⁴The 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 $15,000,000.15In 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 inreality 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.²¹The 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.²3There 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;²⁴while

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.²⁵In 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.²⁷In 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.²⁹On Feb. 25, 1831 the legislature

granted a charter to the Bank of Norwalk, with an authorized

capital stock of $100,000.³⁰This 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.³⁴This 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.³⁹So 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.⁴⁴It 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.⁴⁷A 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.⁴⁹A 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.⁵²The 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.⁵⁶There 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.⁵⁷All sorts of objections

were raised to the State Bank as proposed.⁵⁸A 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.⁵⁹Probably 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.⁶⁰On

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 $1,000,000,⁶²and 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.⁶⁵Much 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.68By 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.^"69He

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.⁷²The 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.⁸⁹The 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.⁹³Nevertheless 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,¹⁰⁰but the legislature refused to

grant a single charter.¹⁰¹At that time, however, there were

twenty-seven authorized banks in operation in the state and

their condition was generally considered quite sound.¹⁰²These

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,¹05whereas 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,¹²⁰the 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.

Ohio History Journal