(page 126)

 

BANKING AND FINANCE

 

            DURING the period preceding the War of 1812 the people of the Miami Valley were occupied literally in getting out of the woods. The social and economic fusion of the population was delayed and dense forests separated the different settlements. The barrier of the Alleghenies cut them of from the markets of the Atlantic states, except for live stock, which could be driven over the mountains on foot. As a result of these conditions 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 manufactures, much the same as a protective tariff theoretically is supposed to do. The towns in the region of which we write 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 commerce first developed. Naturally, the first banks organized in the state were established here. This was the most populous and flourishing part of the state at that time. With the broad and fertile expanse of the valley, the immense agricultural back country, and its advantageous location on the Ohio river, opposite the mouth of the Licking river, Cincinnati easily gained an ascendancy which made it the leading city in the west for many years.

            The population of the Miami country was not over 2,000 in 1790, and 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. According to Drake, in his "Picture of Cincinnati," this had increased to about 100,000 in 1815. Agriculture and stock raising advanced rapidly in this important region. 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 flourished throughout the region, where the farmers turned their surplus corn into whiskey. Much of this whiskey and flour, together with the pork, bacon and lard prepared upon the farms in winter, found its way to Cincinnati, there to be shipped via the Ohio and Mississippi rivers to New Orleans. Whiskey, beef, pork and lumber and staves were shipped from Cincinnati to New Orleans by water as early as 1803, and it was in connection with this river traffic of Cincinnati that the first bank in Ohio was organized.

            The enterprising citizens of the Miami country were quick to recognize the advantages of association under state authority in (page 127) the transaction of business. Almost as soon as the State of Ohio was admitted into the Union, Martin Baum, a prominent Cincinnati merchant, who had early become active in manufacture and trade in that city and was most influential in attracting German immigration there, organized a company, with several of his business associates, to facilitate trade. They applied to the legislature for a charter, and as a result, at the first session of that body, the Miami Exporting company was incorporated, April 15, 1803. The original object of this company was the exportation of agricultural produce, chiefly to New Orleans, and banking, if purposed at all, was a secondary consideration. Its charter, however, permitted the issue of notes payable to bearer and assignable by delivery only; and the company, which began business operation in 1804, was soon exercising the powers of banking. It issued bills and redeemed them, not in specie, but in the notes of other banks. Thus the Miami Exporting company became the first bank in Ohio, and perhaps the second west of the Alleghenies, the first having been the Lexington Insurance company, incorporated in 1802, and established at Lexington, Ky. The latter is said to have obtained its banking privileges surreptitiously, but 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, perhaps banking privileges were obtained for it surreptitiously, also. 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. 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 in the first year, and the remaining $50 in produce and manufactures from July to March of the following 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 probable amount thereof they would deliver, but the president and directors were to designate the times and places of delivery.

            Not all of the authorized capital was ever paid in. Gouge, in his "Short History of Paper Money and Banking," gives the capital of this company as $200,000, and this agrees with the amount stated in the list of Ohio banks organized before 1812, as published in the first issue of the Banker's Magazine. The directors, however, in 1811, authorized the sale of a large number of additional shares of the capital stock of the company, and Nov. 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 (page 128) fourth in six months, one-fourth in twelve months, and the remaining one-fourth when required by the board, the subscribers, however, to have at least thirty days' notice. And Daniel Drake, writing in 1815, says that the capital consisted of $450,000 paid in by 190 persons, the- number of stockholders at that time. However, it is probable that not all of this $450,000 was ever actually paid in cash, for it was a common practice among 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 frst payment or two in cash, the subscriber would be permitted to pay the remainder of his subscription with his own note, which would later be redeemed, if at all, with dividends received from the bank. It is likely that a considerable portion of the Miami Exporting company's $450,000 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. The Miami Exporting company continued in the undisturbed 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 1831 Gallatin listed it, with a capital   stock of $468,966, among the banks which had failed since 1811.

            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. It then recommenced the business of banking, but was finally compelled to wind up its affairs before the termination of its charter in 1843. In Knox's "History of Banking" it is mentioned as having failed, Jan. 10, 1842. On Feb. 5, 1813, the Farmers' & Mechanics' bank at Cincinnati, with a capital stock of $200,000, was chartered, and on Feb. 11, 1814, the Dayton Manufacturing company, at Dayton, commenced business with a capital stock of $100,000. Both of these banks were chartered by special acts of the legislature, and their charters extended until 1818. The methods of their organization were about the same, and the provisions of their charters were quite similar. The charter of the Farmers' & Mechanics' bank contained a provision which required that one-third of the thirteen directors must be practical farmers and the same proportion practical mechanics. This bank had been established in 1812, the year before it was incorporated. Another unauthorized concern, the Bank of Cincinnati, 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 per cent during the first year. This bank also obtained a charter in 1816.

            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 considerable. According to Drake, in his "Picture of Cincinnati in (page 129) 1815," the dividends of the Miami Exporting company for several years previous had fluctuated between 10 and 15 per cent. And the auditor of the state, in 1813, suggested to the legislature the advisability of investing 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 10 or 12 per cent. The state legislature, acting on the suggestions of Governor Worthington, on Jan. 27, 1816, passed a law prohibiting the issue and circulation of unauthorized bank paper. This statute fxed a penalty of $1,000 for acting as the officer of a bank violating the law and a penalty of three times the amount of the bills or notes issued by any unincorporated bank, made all contracts with such banks void, and provided that no action could be maintained on any bill or note of such banks. A month later, however, on Feb. 23, 181b, the legislature passed the important banking law known as the "bonus law," an act designed to raise a state revenue from banks and to prevent their future increase.

            By this law the charters of the existing banks were extended 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. The law provided that each of the banks thus incorporated should have thirteen directors; that its books must always be open to the inspection of directors and of persons appointed by the legislature; and that its capital stock might be increased to $500,000. Each of the banks, new and old, was to set of to the state one share in twenty-five of its capital stock by Sept. 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 by the state. 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 Jan. 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. The Miami Exporting company did not accept the provisions of this law before Sept. 1, 1816, the time designated, and the only banks in the Miami valley that were thus incorporated were the Lebanon-Miami Banking company, of Lebanon, with an authorized capital stock of $200,000, and the Bank of Cincinnati, with a capital stock of $600,000. The charter of the former bank was accepted Aug. 24, 1816, and the latter Aug. 28, of the same year.,

            For several years after the passage of the bonus law of Feb. 23, 1816, it was treated as a general banking law, and under its provisions the Little Miami Canal & Banking company was incorporated on Dec. 29, 1817, with a capital stock of $300,000. Besides (page 130) being authorized to canalize the Little Miami river from the Ohio to Waynesville, this company was given power to carry on manufacturing and banking. The Bank of Hamilton, with a capital stock of $300,000, was chartered on July 30, 1818. While most of the banks were incorporated under this general banking law, 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 provided that the capital stock should be paid up in "money of the United States." 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 depreciated everywhere. On Aug. 30, 1814, the Philadelphia banks suspended specie payments, followed within a week or two, according to compact it is said, by all the other banks in the middle and southern states. 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 continue only during the war. The banks of Ohio and Kentucky, however, maintained specie payments until about the first of January, 1815, and the Bank of Nashville, Tenn., until July or August, 1815.

            "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 preceding August, the western country might have suffered but little from the suspension of specie payments." But specie resumption did not take place when peace returned. Instead of redeeming their pledge, "the banks, urged on by cupidity, and losing sight of moral obligation in their lust for profit, launched out into an extent of issues unexampled in the annals of folly." "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."

            The great over-issue of notes which resulted produced depreciation. Notes of the Philadelphia banks were depreciated 16 to 20 per cent, those of the interior of Pennsylvania 25 to 50 per cent, and even the notes of the New England banks and a few others which continued to pay specie were at a discount, `for," says Gouge, "nobody knew how long any distant bank would continue to pay specie. All the banks whose notes were at a discount at New York of less than 5 per cent were understood to pay specie on demand." Notes of the chartered banks in Ohio, which were quoted at 4 to 5 per cent discount in Philadelphia in November and December, 1814, were quoted at 6 to 7 per cent discount on Jan. 2, 1815, 8 to 10 per cent discount on Dec. 4, 1815, and Jan. 1, 1816, 10 to 12 per cent on Dec. 2, 1816, and from 12 to 15 per cent discount on Jan. 6, 1817. Notes of unauthorized banks in Ohio were quoted in New York at times during this period at a discount of 20 to 25 per cent. The depreciation of the bank notes, which formed practically the only currency, everywhere, except in New England, produced a great rise in prices. In the west lands rose to double and triple (page 131) their value. At Chillicothe, Ohio, wheat was quoted on Sept. 16, 1812, at 62% cents per bushel, and on Aug. 3, 1816, it was 75 cents, and corn 37% to 43 cents, while on Nov. 28, 1816, wheat was worth $1.50 and corn 50 cents. The apparent value of all kinds of property suddenly went up and the people imagined they were growing rich ever so fast. Meanwhile, the banks were paying enormous dividends. As long as they could issue notes without having to redeem them, of course they prospered. They were simply exchanging their notes for those of private citizens on condition that the latter should pay 6 to 10 per cent interest and the principal at maturity, whereas the banks paid neither interest nor principal. 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 Feb. 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. 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 extent. So in the following summer the banks of the middle states held a convention and asked that the date set for resumption 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.

            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, Sept. 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 payment of specie became general at the banks of the Atlantic cities; declared that the Ohio banks there represented were 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 Atlantic cities. Meanwhile, the banks went on issuing more stock and notes and paying more dividends. In fact, in 1816, the banking capital in Ohio reached the highest amount reported before the 30's.

            Events were occurring, however, which finally brought about the general resumption of specie payments. In January, 1817, a branch of the United States bank was established at Cincinnati, and on Feb. 20, following, two of the Ohio banks resumed specie payments. The other chartered banks of Ohio resumed the payment of specie early in the spring, 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, The effect of resumption at once became apparent in the (page 132) decreased depreciation of bank notes. Notes of the old charterea banks of Ohio, which were quoted in Philadelphia, Jan. 6, at 12 to 15 per cent discount, rose to 6 per cent discount on April 7. By October 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, was beginning to turn against the bank. But the inflation period was about to give way to a period of reaction.

            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." The Portsmouth, Ohio, Gazette, of Aug. 12,      1818, gives a list of twenty-three chartered banks in Ohio, and remarks : "It is supposed that all the above banks have been generally prudently managed ; and all (except the German bank of Wooster) 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 crisis in the Mississippi valley-a part of the industrial and commercial storm which swept the entire country. The causes of the crisis were complex. An unnatural expansion in trade had succeeded the restrictions caused by the embargo and the war. The speculation and high prices promoted by the several years of commercial expansion and excessive banking were succeeded 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. This resulted in a ruinous fall of prices. 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 dominated them. There were no reasonable foundations to many of the schemes and no limits to the extravagances of the people. 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. The crisis in the west began in the summer of 1818, and the immediate cause was the bank of the United States. Whether on account 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. On account of the course (page 133) of exchange being in favor of the east and 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.

            However, in the summer of 1818, the United States bank sensed the approaching disaster, 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 everything was so inflated, burst the bubble and "precipitated the panic, for which, however, it was hardly more responsible than was Noah for the food." The United States bank was very sudden in its demands. On July 20, 1818, the parent bank ordered the Cincinnati branch to collect the balances due from the local state banks at the rate of 20 per cent every thirty days. As the balances due from the Cincinnati banks amounted to about $720,000, this demand meant they were called upon to pay about $144,000 every month. The difficulty was increased when, on Aug. 28, 1818, the bank issued its orders to the branches to cease receiving each others' notes. The Cincinnati banks could not pay. In fact, in October they owed more than they had in July, although they had tried to redeem their debt, incidentally inflicting distress upon their own debtors who, having neither specie, nor bank notes, simply could not pay.

            The Cincinnati banks protested vigorously against the action of the United States bank. But the latter, instead of yielding and offering 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 Nov. 5, 1818, and most of the other banks soon followed. Niles' Register of Dec. 12, 1818, says : "It is stated that $2,500 per week are required to pay the discounts on monies loaned by the branch of the bank of the United States at Cincinnati. The branch has scarcely any of its notes in circulation and Ohio has been drained of specie. It is a serious enquiry how these discounts are to be paid." 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 per cent 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.

            In the meantime the unauthorized banks had continued to flourish and their numbers had constantly increased. Some of these were in very good repute. For instance, the notes of the bank of        Xenia, in June, 1818, were said to be 2 per cent higher at the banks of Cincinnati than those of any other of the banks of the state, except the Miami Exporting company, and the notes of the bank of (page 134) John H. Piatt & Co., of Cincinnati, were only 4/ per cent discount in October, 1818.

            An act to prohibit the practice of buying and receiving bank notes at a discount was passed Feb. 8, 1819. It provided that all bank notes should pass at their face value; fixed a penalty of not over $500 for receiving or paying away notes at a discount; and provided that persons paying away notes at a discount might, on suit, recover the difference. However, its failure is indicated by the fact that it was repealed Jan. 24, 1820. But 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.

            This article says that there was great excitement at Cincinnati on account of the belief generally entertained 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. At this meeting, resolutions were adopted "to desist from the use of any paper of banks that refuse to discharge 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 toward the delinquent banks.

            The draining of specie from the state through its financial operations increased the hostility against the United States bank. Early in November, 1818, the Cincinnati papers were complaining of the scarcity of specie. Very distressing was the effect which the sudden withdrawal of specie by the United States bank and the discrediting of bank paper had on prices in the Miami valley. In Dayton, Jan. 1, 1817, wheat was $1 per bushel. In October, 1819, it was selling at 62/ cents per bushel, while in 1821 and in 1822 the price went as low as 20 cents a bushel. In March, 1822, the Dayton prices were: Flour, $2.50 per barrel ; whiskey, 12/ cents per gallon ; wheat, 20 cents ; rye, 25 cents, and corn, 12 cents per bushel, fresh beef, 1 to 3 cents per pound; butter, 5 to 8 cents per pound ; eggs, 3 to 5 cents per dozen ; and chickens, 50 to 75 cents per dozen. 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. In the fall and winter of 1822 the exports from Cincinnati were valued at very low rates, e. g., pork 2 cents a pound, flour $3 a barrel, and whiskey 14 cents a gallon.

            While the staples of the western country were at these low (page 135) prices the people were deeply in debt to the United States government, to eastern merchants, to the local banks, and to one another. The amount due to the Cincinnati branch of the United States bank was more than $2,000,000. 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 condition of the state banks and the causes of the existing confusion 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, and declared that their investigation led "inevitably to the conclusion that the establishment and management of the branches of the United States bank within this state have very largely conduced to the present embarrassment of the circulating medium, and have had a direct effect in producing the recent suspension of specie payments by the state banks." 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 impositions by prohibiting all brokerage on bank paper, especially on the part of debtors to and stockholders in banks. The committee 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 inquire into the condition of those banks which had refused to report. The reporting banks owed about $694,000 of the debts due to the United States bank, and practically all of this 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 a whole amount due from the Ohio banks to the Cincinnati and Chillicothe branches, on Oct. 3, 1818, amounted to $974,000, the committee figured that the difference between $74,000 and the $694,000 due from the twenty banks reporting, or about $280,000, represented the amount due to 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. Further details as to the condition of the Miami valley banks are shown in the following taken from a 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 representatives in December, 1818: Bank of Cincinnati-total resources $738,109, bills discounted $521,505, specie $21,701, Ohio notes $6,070, other notes $1,204, due

            from Ohio banks $152,082, real estate, $21,846, debit profit and loss $7,607; Farmers' & Mechanics' bank of Cincinnati-total resources (page 136) $567,698, bills discounted $518,048, specie $26,000, Ohio notes $3,650, real estate $20,000; Lebanon-Miami banking company-total resources $166,278, bills discounted $143,252, specie $11,090; Ohio notes $7,701, due from other banks $475, real estate $3,760; Dayton Manufacturing company-total resources $185,007, bills discounted $111,272, specie $36,173, Ohio notes $9,810, other notes $14,140, due from Ohio banks $7,083, due from other banks $1,704, real estate $3,390, debit profit and loss $1,435; Bank of Hamilton-total resources $71,433, bills discounted $32,352, specie $15,643, Ohio notes $10,781, United States bank notes $1,425, other notes $2,500, debit profit and loss $8,732. The statement of the liabilities of the above named banks was as follows: Bank of Cincinnati-capital stock paid in $216,430, notes in circulation $230,696, debts due United States bank $195,342, debts due Ohio banks $13,176, debts due other banks $1,427, deposits $47,172, fund to pay state bonus $1,250, credit of profit and loss $33,217, total liabilities $728,710; Farmers' & Mechanics' bank of Cincinnati-capital stock paid in $154,776, notes in circulation $87,000, debts due United States bank approximately $300,000, deposits $9,000, total liabilities $550,776; Lebanon Miami banking company-capital stock paid in $86,491, notes in circulation $31,831, debts due United States bank $33,270, deposits $2,000, total liabilities $153,592; Dayton Manufacturing company       capital stock paid in $61,340, notes in circulation $96,128, debts due United States bank $8,729, debts due Ohio banks $55, deposits $19,873, credit of profit and loss $3,099, total liabilities $189,224; bank of Hamilton-capital stock paid in $22,707, notes in circulation $23,799, deposits $16,744, total liabilities $63,250. In addition to the above figures was an item of $279,155, debts due United States bank, which probably was due chiefly from the Miami Exporting company, which made no statement of resources.

            A computation based on the foregoing figures for the five Miami valley banks which reported shows an average ratio of 92 cents of circulation to each dollar of capital stock paid in, $5.37 of capital stock paid in to each dollar of specie on hand, and $4.21 of circulation to each dollar of specie, while the proportion of circulation and deposits combined is $4.99 for each dollar of specie on hand. The ratios for the individual banks are shown as follows : Bank of Cincinnati-circulation to capital $1.07, capital stock to specie $9.97, circulation deposits to specie $12.80, circulation to specie $10.63; Farmers' & Mechanics' bank of Cincinnati-circulation to capital 56 cents, capital stock to specie $5.95, circulation to deposits $3.31, circulation to specie $3.35; Lebanon-Miami banking company-circulation to capital 37 cents, capital stock to specie $7.80, circulation and deposits to specie $3.05, circulation to specie $2.87; Dayton Manufacturing company-circulation to capital $1.57, capital stock to specie $1.70, circulation and deposits to specie $3.21, circulation to specie $2.66; Bank of Hamilton-circulation to capital $1.05, capital stock to specie $1.45, circulation and deposits to specie $2.59, circulation to specie $1.52.

            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, which at that time was (page 137) the most populous county of the state and contained Cincinnati.

            Hamilton county contained the largest ratio of capital to population-$23,624 per inhabitant. The Bank of Hamilton in Butler county had $1,044 as the ratio of capital stock to population, the Dayton Manufacturing company in Montgomery $3,834, and the Lebanon-Miami Banking company in Warren $4,849. The proportion of banking capital to population would of course have been much increased if statistics of the unauthorized banks were available. For instance, the following shows the condition of the bank of John H. Piatt & Co., of Cincinnati, in 1819, and this was considered one of the best of that class of banks : Resources-real estate $87,994, 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, total resources $412,364.15; liabilities-notes in circulation $242,783, drafts or bills payable $64,514, due depositors $19,627.28, total $326,934.28; balance in favor of bank $85,429.87; total $412,364.15; this amount was secured by J. H. Piatt's estate, which was valued at $626,302.35.

            From the above statement it is impossible to tell how much specie was held, but it is evident that it was less than $50,000, and probably much less, and against it were circulating more than $240,000 worth of notes and nearly $20,000 worth of deposits. In other words, the immediate demand liabilities were over five times the cash on hand! It is, therefore, not surprising to see in an issue of the Ohio Watchman for April 15, 1819, 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 per cent. However, the unauthorized banks were not the only ones whose notes were greatly depreciated. The notes of the Bank of Cincinnati were as bad as those of the Piatt bank, and those of several other authorized banks were but little better. In a table published in the Detroit Gazette, in November, 1819, the condition of the following Miami valley bank notes was given as follows : Bank of Cincinnati, good ; Farmers,' Mechanics' and Manufacturers' bank of Cincinnati and the Bank of Dayton, decent ; the Lebanon-Miami Banking company, middling; and the Miami Exporting company, Piatt's bank, and the Farmers' & Merchants' bank of Cincinnati, good for nothing. In many cases, banks whose notes were greatly depreciated continued to pay dividends., Thus the Bank of Cincinnati, in May, 1819, had declared a dividend of 4 per cent on its capital for the preceding half year. Meanwhile, the United States bank, instead of heeding the warning afforded by the general unrest of the people and leaving the state, opened the second branch in Ohio at Chillicothe early in 1818, and in July increased its offenses by suddenly ordering the Cincinnati branch to collect at the rate of 20 per cent a month the large balances due from the local banks, as has been previously mentioned, thus precipitating the panic, causing the Cincinnati banks to suspend in November, 1818, and bringing disaster and ruin on the people. In an attempted measure of relief the legislature, (page 138) on Feb. 8, 1819, passed an act "to levy and collect a tax from all banks and individuals and companies, and associations of individuals, that may transact banking business in this state without being authorized to do so by the laws thereof." This law was passed with great deliberation and by a full vote, and public sentiment throughout the state supported the legislature in its action. A few weeks later, however, the decision in the famous case of McCulloch vs. Maryland was handed down by the United States Supreme court, Chief Justice Marshall delivering the opinion on March 7, 1819. This decided that Congress has the power to incorporate a bank, that the bank had power to establish branches in the states without their consent, and that the states had no right to tax them. In view of this decision the branches of the bank in Ohio naturally continued their operations, and just as determinedly the state auditor, Ralph Osborn, prepared to collect the tax. To prevent this the bank fled a Bill in Chancery in the United States 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. 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 at Chillicothe and demand payment of the tax, and upon refusal thereof to enter the vault and levy the amount required. The officer, taking with him a horse and wagon and competent assistants, went to the bank on the evening of Sept. 17 and, first securing access to the vaults, demanded the tax. Payment was of course refused, and the officer entered the vault and seized in gold, silver, and bank notes, sufficient funds to cover the amount on both branches-$100,000. This was carried in the wagon to the Bank of Chillicothe and deposited there over night.

            Meanwhile excitement ran high over the matter, not only in Ohio but throughout the country generally. 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. The Inquisitor and Cincinnati Advertiser of Oct. 19, 1819, printed numerous extracts from other papers regretting that Ohio in defiance of the United States 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 remarked that it "appears to have created as much consternation as if it had been an overt act of treason or rebellion," but added, "If the general government can create a monied institution, in the very bosom of the states, paramount to their laws, then indeed is state sovereignty a mere name, `full of sound and fury, signifying nothing.' "

            The elections in Ohio that fall were along the lines of the United States bank fght. General Harrison, a candidate for state senator from the Cincinnati district, declared himself the enemy of banks in general and especially of the United States bank, which he said he viewed as an institution "which may be converted into an immense political engine to strengthen the arm of the general (page 139)  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 Boston opposition, and been matured in the foul mind of the Hartford Convention?" He was elected.

            In liquidation of debts in 1818-1819 the United States bank had been forced to accept a great deal of western real estate, which was taken at low valuations but afterward 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, and this of course maddened the former owners. The entire matter finally reached the Supreme court of the United States and there was adjudged adversely to the state of Ohio. But by the time this decision had been handed down a reaction had begun in the state. The good sense of the plain people had prevailed, and they chose to abide by the decision of the high court. So the bank continued to do business in Ohio until the expiration of its charter, in 1836.

            However, in Ohio the stagnation and distress following the crisis of 1818-19 continued without relief through 1820 and 1821 and well into 1822. In the Miami valley, 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. In the fall and winter of 1823-24 but little over half the provisions were shipped from that market that were the year before. For example, in 1822, over 42,000 barrels of four were inspected at Cincinnati for export, while in 1823 the quantity amounted to but 27,206 barrels. Niles' Register of Oct. 23, 1824,          contains the statement that "Any quantity of corn may be purchased in Cincinnati for 8c per bushel."

            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 20 cents a bushel, corn 12 cents, and whiskey 12/ cents a gallon. In 1823 there was an advertisement running in a Chillicothe paper in which 7,000 acres of ,land on the Big Miami and Scioto rivers were offered for 90 cents an acre cash, or $1 an acre in stock of the Bank of Chillicothe. A Cincinnati paper, in 1824, commenting on the depression of prices and business that for several years previous had prevailed in the state, exclaims, "Is it to be attributed to the operation 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." The paper then points out that the great trouble with Ohio at that time was the want of a market for the surplus produce of the state. The inhabitants in the southwestern part of the state had access by the Ohio and the Mississippi rivers to the fluctuating market of New Orleans, but this was likely to be overstocked when the shipper from Ohio got there, especially at the (page 140) 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 dangers of an unhealthful 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. In 1825, two events aided greatly in changing these conditions and starting Ohio well on the way to prosperity. 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 legislature by a vote of 92 to 15 on Feb. 4, 1825. This provided 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. By July of the same year the work of construction had begun on both these canals, and two years later navigation began on both of them. The demand for labor to construct these canals increased immigration. Cincinnati's population, in 1820, was 2,602. In 1829, it was estimated at 24,000. "The settlement and improvement of this city J or the last five years," says an Ohio paper, "has been rapid almost beyond example."

            All of the banks incorporated in Ohio before Feb. 23, 1816, had accepted charters under the bonus law by Sept. 1, 1816, except the Miami Exporting company. Of the banks incorporated later under that law, however, some did not accept their charters until late in 1818. These, up to the time of accepting their charters, were liable for taxes under the law of Feb. 8, 1815, which had imposed a tax of 4 per cent 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 per cent on its nominal capital, to be increased by a penalty of 4 per cent in case of delay. The Miami Exporting company, which had refused to accept a charter under the bonus law, was also taxable under the law of 1815. On Jan. 5, 1819, the State Auditor made a report to the legislature onthe stock set of 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 of to the state under the bonus law amounted to $79,930.27; that the amount set of 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. Many of the banks had failed and most of the others were unable or refused to pay specie for their notes, and 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.

            (page 141) Under a joint resolution of the legislature at the session of 1824 commissioners were appointed to look after the claims of the state against banking corporations. Their report was given on Dec. 14, 1824. They had sold the claims of the state against the Miami Exporting company for 33/ cents on the dollar, receiving paper of that bank at par. This paper was sold at public auction for 37/ cents on the dollar and realized the sum of $4,345.50. The judgment against the Miami Exporting company was $9,570.14, which, with interest, dividends, etc., amounted to $11,511.35. The claim against the Lebanon bank by judgment was $9,941. This institution was solvent and able to pay, but such was the difficulty of collecting that its paper commanded only 30 or 35 cents on the dollar. Cincinnati, the largest town and most important trade center in the Miami valley, had no incorporated bank in 1826, except the branch of the United States bank. The need of banking capital there at that time is indicated in the following quotation from a small work published in 1826:

            "Cincinnati for several years has been deficient in the amount of its disposable capital; a nominal superfluity of it existed during 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 condition 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 extending it to a scale proportioned to their enterprise and the resources of the place. Money is consequently in great demand, and a high price is willingly paid for its use. For small sums 36 per cent per annum is frequently given, and for large ones from 10 to 20 per cent is common."

            During 1826 and 1827, the effort to establish another incorporated bank in Cincinnati was discussed generally, but none materialized. Expenditures 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, contributed to improve financial matters in the Miami valley as well as in the remainder of the state. About this time the project of a state bank was discussed considerably in Ohio, and in compliance with a resolution of the state senate asking information on the subject, the Auditor of State in his report of Jan. 14, 1829, dealt at some length with the question. A little later, a legislative committee, appointed to prepare information on the subject, reported in favor of a state bank, to be located at Cincinnati and its capital stock to be held by the state and individuals combined. 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 increase of capital which such a bank would bring about would be accompanied by a corresponding promotion and extension of agriculture, commerce, and manufacture.

            While this recommendation for a state bank was not carried out, the legislature authorized the incorporation of two more banks in (page 142) the state, and on Feb. 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. The capital stock remained unsubscribed for two years afterward, however, in consequence of the demand for capital to be used in more profitable pursuits than banking.

            The depreciation of the notes of the Dayton bank, as given in a table taken from a Cincinnati paper, in February, 1822, was 1/ to 2; of the Hamilton bank, 31 to 35; the Miami Exporting company, 62/ to 65; the Bank of Cincinnati, 70, and the Lebanon bank, 55. Albert Gallatin, writing in 1831, enumerates among the banks which had failed or discontinued business since Jan. 1, 1811, the Miami Exporting company of Cincinnati, with a capital of $468,966; the Farmers' & Mechanics' bank of Cincinnati, $184,776; the Bank of Cincinnati, $216,430; Dayton Manufacturing company, $61,622; Lebanon-Miami Banking company, $86,491; Bank of Hamilton, $22,707.

            It will be seen that this list includes all of the Miami valley banks whose notes were greatly depreciated in 1822. 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. Some of them had been got up for the purpose of borrowing and not lending money, and defrauded the unsuspecting with their depreciated paper. It is not surprising that such banks failed. But many of the defects and many of the failures should be attributed to frontier conditions. 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 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 experienced and veteran institutions in our country." There remained ten banks whose paper was current in the state in 1826 and at a discount of only 1 or 1/ per cent at Cincinnati, in 1828, as shown by the tables from which the foregoing is taken.

            In 1819, the twenty-five chartered banks in Ohio had a circulation of only about 1.3 million dollars, while in 1826 the statement was made that some years before paper currency had almost been withdrawn from circulation in Cincinnati, the largest city in the state. 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 thirteen years yet, and suggesting that it ought to be put into operation again. The bank alluded to was the Dayton Manufacturing company. Another Dayton paper, a few months later, announced 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 (page 143) 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.

            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 unsubscribed owing to the pressure for capital in other lines. However, on Feb. 12, 1831, 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 thirty days, within which time $10 on each share must be paid by the subscribers according to charter. This stock was all quickly taken, a great part of it by foreign capitalists, and arrangements were at once made for the immediate commencement of business. On May 28 the stock in this bank rose from 5 to 15 per cent premium, and before the day closed 17 per cent 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. A provision in the charter granted this bank, Feb. 11, 1829, had provided that it should pay to the state a tax of 4 per cent on its annual dividends. That was the rate then paid by all the local banks in the state under the tax law of Feb. 5, 1825. 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 other local banks so far as state taxation was concerned. 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 per cent to 5 per cent. This law operated on all the local banks in Ohio, except the Commercial bank of Cincinnati. The latter paid 4 per cent on its dividends under its charter, which exempted it from general taxation under a general law. Notwithstanding the revival of the old bank in Dayton, and the opening of the Commercial bank of Cincinnati after a two years' delay, the pressure for more money in the Miami valley continued to increase. A Cincinnati writer for the New York Courier and Enquirer of Aug. 3, 1832, says : "The distress for money here at present is greater than can well be imagined, and the branch bank is, from necessity, 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 per cent when the security is unquestionable and worth at least 100 per cent more than the amount loaned. The brokers get readily one quarter per cent per day."

            Throughout the state the question of what should be done became a matter of much agitation, but instead of passing a bill to incorporate a state bank, which should control all the monied institutions of the state, the legislature of 1833 contented itself for that session with authorizing the Commercial bank of Cincinnati to increase its capital stock from $500,000 to $1,000,000, and granting a charter to the Franklin bank of Cincinnati, on Feb. 19, 1833, which authorized it to organize with a capital stock of $1,000,000. In arguing in favor of a state bank, which had also been advocated by Governor (page 144)             Lucas, the Ohio Monitor quotes from the Cincinnati Republican some figures as to the amount of banking capital in Ohio in December, 1833. The capital employed in the branches of the United States bank (practically all held by non-residents) was $1,700,000, and the capital of local banks held by non-residents was $1,650,000, making the total held by non-residents, $3,350,000. The capital of local banks held by citizens of Ohio was $1,380,000, making the total amount of banking capital employed in the state, $4,730,000. The article then goes on to say that on all this foreign capital the people were paying about 9 per cent interest each year, since the dividends of the banks ranged from 8 to 10 per cent a year; that on the $3,350,000 of stock held by non-residents this interest 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 per cent. That is, that the difference between 4 per cent and 9 per cent, or 5 per cent, 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 three and one-half millions of foreign capital would furnish nearly $8,000,000. 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.

            Soon after that the bills of Ohio banks in general were said to be at from 4 to 5 per cent discount at Cincinnati, and several of the banks were reported to be very much embarrassed. 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 1834, the vote against it in the senate on January 20 being 19 to 15. And then the legislature proceeded to grant charters to a number of new local banks, among which was the Ohio Life Insurance and Trust company and the Lafayette bank, both of Cincinnati. The charter of the former was dated Feb. 12, 1834, and its authorized capital stock was $2,000,000, while the latter was chartered on March 3, with an authorized capital stock of $1,000,000. Another of the banks chartered at this time was the Bank of Cleveland, and the books for subscription to the stock of this bank closed on April 10, in accordance with the provisions of its charter. At that time $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."

            (page 145) 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 Jan. 1, 1843, the date when most 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. In 1841, M. T. Williams was president, J. M. Perkins, cashier, and the board of trustees consisted of gentlemen in Cincinnati, Warren, Gallipolis, Columbus, Cadiz, and Dayton, Ohio, and also New York, Boston, Philadelphia, and New Orleans. 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. The following paragraph from an address of the Hon. R. T. Lytle, in 1835, illustrates the popular feeling regarding "this new and dangerous monopoly," which loaned money all over the state on real estate security.

            "The rate of interest at which they let out money is nominally 7 per cent, 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 it 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 per cent 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 cent 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."

            The wide distribution of the operations of this company is illustrated by the fact that in January, 1836, it had loans secured by real estate in at least sixty-seven 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. 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 investments. Nevertheless there was a bill before the legislature that year to repeal its charter. This bill had the support of most of the Democratic papers in the state, though some of them favored the bank. The Ohio Monitor of March 14, 1836, gave a list of the stockholders of the Ohio Life Insurance and Trust company, with the number of shares and amount of stock held by each, and commented regarding the stock thus : "Most of which, as may be discovered, is owned by the Wall Street gentry of New York." This paper also named the twenty trustees of the company, adding: (page 146) "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.

            The Miami Exporting company, which had been compelled to close its doors in 1822, was revived and again put into operation in 1834, but the amount of its loans, specie, capital, and circulation is not given in a table published in 1835. Of the other Miami valley banks, however, that were mentioned in this table, the Dayton bank reported as follows : Loans and discounts, $242,719; specie, $92,250; capital, $102,640; circulation $214,125; the Commercial bank of

            Cincinnati reported loans and discounts $1,481,465; specie, $141,849; capital, $1,000,000; circulation, $285,817; the Franklin bank of Cincinnati, loans and discounts, $1,622,234; specie, $175,152; capital, $1,000,000; circulation, $372,514; Bank of Hamilton, loans and discounts, $145,027; specie, $28,613; capital, $65,000; circulation, $86,550; and the Lafayette bank of Cincinnati reported a capital of $250,000.

            The distribution of the authorized banks in the Miami valley, 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 were as follows: Butler county, with a population of 27,668, had one bank with a paid in capital stock of $65,000, which was $2,250 per capita; Hamilton county had a population of 66,231, with five banks and a total paid in capital stock of $3,222,452, which was $48,655; and Montgomery had a population of 28,150, one bank with a paid in capital stock of $102,640, which was $3,646 per capita. By charter provisions the tax on the Commercial bank of Cincinnati was limited to 4 per cent on its dividends and that on the Franklin bank of Cincinnati to 5 per cent. A law passed Feb. 25, 1839, provided for three bank commissioners to be appointed by the legislature, whose duty it was to visit the banks, examine their books, and make regular reports. The frst annual report of these commissioners was made Dec. 16, 1839, and in it they condemned the practice of creating bank capital by the stockholders giving what was called a stock note ; also, closely allied to the latter, the large loans and discounts made to directors and other stockholders "almost unlimited in amount and time of payment." In the Miami valley the indebtedness of the directors and officers of each bank, at the time of examination, as principals, and liability as security, and the amount of stock held by them, was as follows : The Commercial bank of Cincinnati, indebtedness as principals $89,183, liabilities as security $45,821, amount of stock owned by directors and officers $46,900; Franklin bank of Cincinnati, indebtedness as principals $43,012, liabilities as security $49,062, amount of stock owned by directors and officers $25,800; Lafayette bank of Cincinnati, indebtedness as principals $79,986, liabilities as security $22,003, amount of stock owned by directors $18,600; Ohio Life Insurance and" Trust company, indebtedness as principals $61,185, liabilities as security $5,194; Dayton bank, indebtedness as principals $5,198, liabilities as security $13,326, amount of stock owned by directors and officers $30,550. The refusal of the Supreme (page 147) court to grant an injunction against an examination of the Lafayette bank of Cincinnati by the bank commissioners probably conduced to a general acquiescence in the constitutional requirement of the law.

            Beginning with 1825 Ohio had been engaged in internal improvements with a large expenditure each year, and all natural conditions tended to a state of prosperity, but the depressed prices of farm products produced stagnation. For example, the price of wheat at Cincinnati, which had risen from 62 cents a bushel in 1834 to $1.25 in 1836, dropped to 65 cents in 1839 and 60 cents in 1840; flour dropped from $8.25 a barrel in 1836 to $3.60 in 1840; and hogs from $7 a cwt. in 1836 to $4.75 in 1840, $2.25 in 1841, and $1.75 in 1842.

            The legislature made various attempts to compel specie resumption. In March, 1842, the Cincinnati Gazette was complaining that the resumption law of Ohio had not yet put any coin in circulation, but that Ohio bank notes had disappeared and that the currency then consisted of Indiana notes, while distress was about universal. In the same month a general law to regulate banking was passed, "designed to supersede the necessity of special charters, fixing general law, the powers, liabilities, and terms for future banks, and imposing rigid restrictions on the abuses heretofore practiced in banking. This law was alleged to be too severe, and on Feb. 21, 1843, it was amended, and a number of prominent citizens, belonging to companies which had petitioned the legislature for a renewal of their charters, were authorized to organize and commence the business of banking. They declined, however, to engage in business on the conditions imposed, on account of the unsettled state of public sentiment on this subject, and with a view of obtaining banking privileges at a subsequent period, upon terms more in accordance with their own views."       Among the old banks authorized to organize but which declined to do so was the Bank of Dayton. Near the close of 1842 there were five specie paying banks remaining in the Miami valley, and their condition at that time was as follows : Commercial bank of Cincinnati-resources : loans and discounts $929,123, due from banks $51,259, notes of other banks $55,803, specie $35,378, other resources $586,353; liabilities : circulation $79,783, deposits $180,163, due to banks $25,965, capital stock $1, 000,000, other liabilities $374,005. Franklin bank of Cincinnati-

resources : loans and discounts $963,382, due from banks $24,517, notes of other banks $111,697, specie $131,370, other resources $253,306; liabilities: circulation $22,116, deposits $251,130, due to banks $56,918, capital stock $1,000,000, other liabilities $154,108. Lafayette bank, Cincinnati-resources: loans and discounts $879,850, due from banks $41,031, notes of other banks $11,130, specie $61,882, other resources $163,315; liabilities : circulation $34,981, deposits $42,473, due to banks $23,052, capital stock $1,000,000, other liabilities $56,702. Ohio Life Insurance and Trust company resources: loans and discounts $532,622, due from banks $54,320, notes of other banks $17,321, specie $77,961, other resources $Z')33,642; liabilities : circulation $261,575, deposits $209,318, due to banks $15,597, capital stock $622,255, other liabilities $107,122. Dayton (page 148) bank-resources : loans and discounts $48,734, due from banks $293, notes of other banks $18,159, specie $12,856, other resources $28,170; liabilities: circulation $17,644, deposits $1,277, due to banks $184, capital stock $88,110, other liabilities $998.

            On Jan. 1, 1843, the charters of thirteen of the Ohio banks expired, and two more expired Jan. 1, 1844, leaving only eight in the state. Referring to those whose charters expired Jan. 1, 1843, the Cincinnati Gazette remarked that they call up "the pleasing associations of honesty, sound currency, and general popularity; "that they redeemed all their notes ever issued; that all but one promptly met their engagements, and most of them returned 100 cents on the dollar on their capital stock, and some much more. In January, 1844, the Lafayette bank of Cincinnati was the only authorized bank in the Miami valley and the termination of its charter was due on Jan. 1, 1854. During 1843 and 1844 this bank was in good condition. It was prompt in meeting its engagements, and there was but little speculation in real estate and new enterprises. Most of the loans were on bills payable in eastern cities and founded on some actual transaction. Scarcely a bill was returned dishonored. In some instances accommodation paper was discounted and renewals made where the parties were unquestionably good, but probably nine-tenths of the loans and transactions were confined to business paper and the purchase of bills on the actual shipment of produce, or the driving of stock to a northern or eastern market. The great metropolis of the state was then Cincinnati. It had long been the center of the pork packing industry of the United States and had become known as Porkopolis, a name it retained until after the Civil war, when Chicago became the great packing center. Cincinnati was also a center of steamboat building and received extensive imports of goods from the east and exported the surplus crops of the Miami valley. It was already an extensive manufacturing place and thousands of dollars worth of its manufactured goods were annually sent into the upper and lower Mississippi country. The pork packing industry each winter threw into the market a large amount of bills of exchange, and after the season closed exchange on New York was likely to advance ; for instance, in February, 1844, it was 1 per cent premium while a     short time before it had been at a discount.

            The prices of Ohio products were very low in 1843 and 1844, though not generally so low as in 1842. Thus in Cincinnati, in 1843, flour was $3.62 a barrel as compared with $2.62 in 1842, while pork opened the season of 1843-4 at $2.25 to $2.65 a hundred as compared with $1.62 to $2 the previous season. The Lafayette bank of Cincinnati, in reply to questions of the bank commissioners in 1844, stated that specie then formed but a small part of the circulating medium in Cincinnati ; that at least four-fifths of the whole circulation of bank paper was furnished by institutions out of Ohio, while there was less specie in the state then than at any period for fifteen years.

            A general banking law was passed by the state legislature, Feb. 24, 1845. It provided for the organization of two new classes, the State bank of Ohio, and independent banks- and in addition it (page 149) recognized the old banks still existing. The Lafayette bank of Cincinnati and the Ohio Life Insurance and Trust company were specially authorized on certain conditions to recognize with such an amount of stock as their directors might determine, being restricted to not less than $300,000 each nor more than $1,000,000, and their circulation should not exceed $650,000 each. That the privilege of the act might not be monopolized the state was divided into twelve districts and the number of banks in each was limited. Hamilton county was allowed four banks, Miami two, Montgomery two, and no other county in the valley was allowed more than one. In March 18, 1845, pursuant to a notice from the Governor, the board of bank commissioners named in the law met at Columbus to act upon applications from banks organized under the act, and take the initiatory steps to put them into operation. By June 19, application had been fled and proper examinations made for two branch banks in Cincinnati and one in Dayton. Meanwhile some of the old banks whose charters had expired were taking advantage of the part of the law which permitted them to become independent banks. The first independent bank in Ohio was the Commercial bank of Cincinnati, which was organized April 15, 1845. But there was considerable opposition to the new law, and it manifested itself considerably in 1845 and 1846. A writer in a Dayton paper discussing the Dayton bank, an independent institution, asked: "How has the circulating medium here been benefited by the transmission of nearly the whole circulation of this bank to neighboring counties and states?" No sooner had the law been passed than the anti-bank party announced its determination to carry the question once more before the people of the state, but the result of the election was again in favor of the advocates of the banks. As an example of the campaign appeals the following quotations are taken from resolutions unanimously adopted by the Democratic county convention in Hamilton county,

            Aug. 30, 1845:

            "Resolved, that the corporate privilege of concentrated means, limited liability, and protracted succession beyond the casualties and conditions of individual action ought not to be conferred on money.

            "Resolved, that metallic currency has been tested by the experience of ages. On the contrary all systems of paper currency ever yet contrived have failed, and in their inevitable overthrow have detailed more distress and loss, and perpetrated more robbery and fraud than would colonize a continent with convicts and paupers. Nor have we seen in the Whig legislature of last year any symptoms of a wisdom superior to the paper-mongers who have gone before them-but a compound rather of all the shallow schemes of their predecessors."

            When the election was over, in 1846, it was found that the Whigs had once more won, Gov. William Bebb, who was formerly attorney for the old bank of Hamilton, receiving a larger plurality than his predecessor two years before. And to add to the significance of the victory, John Woods, the former president of the bank of Hamilton, was elected State Auditor.

            (page 150) Bank circulation was nearly doubled, and it is interesting in connection with this increase of circulation to compare some prices of Ohio products at Cincinnati for December, 1844, and December, 1845. The price of wheat had increased from 70 to 90 cents a bushel; four from $3.70 to $5 a barrel; hogs from $2.60 to $4.37 a hundred ; mess pork from $8 to $12 a barrel ; and lard from 43/ to 7/ cents a pound. From a table giving the distribution of banks and capital in Ohio, in May, 1847, there appears to have been nine in the Miami valley, as follows : Hamilton county, with a population of 156,844, had six banks at Cincinnati, with a paid in capital stock of $1,640,026, making a per capita of $10,456; Miami county, with a population of 24,999, had a bank at Troy with a paid in capital stock of $31,840, a per capita of $1,274; and Montgomery county, with a population of 38,218, had two banks at Dayton, with a paid in capital stock of $169,750, a per capita of $4,442. At the Constitutional Convention, held in 1851, Mr. Dorsey of Miami county, a Democrat, introduced resolutions prohibiting the legislature from granting special bank charters, but permitting it to pass general banking laws with certain restrictions, which must, however, be submitted to the people before they should go into operation, and the clause came within one vote of being placed in the new constitution. But there was a widely circulated notion that more banks were needed. The Cincinnati Gazette, in 1850, was complaining that notwithstanding the wonderful strides of Cincinnati's commercial, manufacturing, and shipping interests, legitimate banks were from year to year denied the city, which in banking capital was far behind other cities of her size and smaller. This condition was relieved by the passage of the "free banking law" of March 21, 1851, which resulted in a considerable increase in the number of banks, and this period of bank expansion was also one of increased business prosperity in the state. At Cincinnati much transient exchange was purchased in the market, which yielded considerable profits.

            In the early '50s one noticeable fact about banking operations was the gradual extinction of all home discounting. This change was due largely to what was called the 10 per cent interest law, which was passed in 1850, allowing 10 per cent interest to be charged in special contracts. It resulted in a condition wherein banks seldom had any money to loan at 6 per cent when they could hand it over to a broker who was allowed to charge 10 per cent. The Miami valley bank at Dayton was one bank whose chartered privileges were placed in abeyance in the hands of their principal stockholders-brokers, who used the circulation and enjoyed all the advantageous part of the charter, but escaped all the legal restraints, especially as to interest. The withdrawal of so many of the authorized banks from home discounting, along with the tempting 10 per cent, brought into existence all over the state private bankers and brokers of but little real capital. They offered 6 per cent interest and more for deposits and banked on them. In Cist's Weekly Advertiser (Cincinnati), Feb. 11, 1853, a broker was advertising for note and bill discounting, and offering 6 per cent interest on checking deposits and higher interest if left for a specified (page 151) time. The Bankers' Magazine in 1851, commenting on the insufficiency of incorporated banking capital in Cincinnati, names eighteen private banks, but also refers to a "host of brokers who are employed in shaving notes or getting them shaved ;" and referring to their high interest charges states that "the mercantile community of Cincinnati are annually fleeced out of from 20 to 25 per cent of their hard earned profits in the shape of usurious interest," while the private bankers and brokers have built up fortunes for themselves. The Cincinnati Gazette, in December, 1852, refers to several private banks in that city returned by the assessor at from $200,000 to $400,000 each and numerous others at $150,000 each, while in October, 1853, the Bankers' Magazine estimates the private banking capital of Cincinnati at $4,000,000, not including brokers with taxable capital under $10,000. The capital of the firms included ranged from $17,700 to $1,200,000. The largest of these, Ellis & Sturges, together with two other well known and well thought of houses, 'Smead & Co. and Goodman & Co., suspended payment in the fall of 1854, causing great excitement in the city.

            Cincinnati was often cited as a place where it was said the state had not provided sufficient banking capital and circulation. Yet the banks authorized there and in existence in 1854 might have issued a circulation of at least $4,500,000. The argument of a lack of capital or opportunity to maintain such a circulation seems weakened somewhat by the fact that five banks in Indiana and Kentucky issuing circulation to the amount of some $3,000,000 were maintained chiefly from Cincinnati capital, while the Commercial bank of Cincinnati protected for some time a large Tennessee circulation, and all the Cincinnati banks and brokers aided in the circulation of foreign notes. The same money that maintained a foreign circulation might have maintained a home currency. To avoid the continual draft upon them, banks resorted to those schemes so prevalent in former years to pay out their own paper so as to drive it as far from home as possible, while about home they circulated foreign paper. H. F. Baker, writing of Ohio banks in 1856, cites an instance of an old and wealthy citizen of Cincinnati writing a letter to the city council in which he states that in six years he had received but four Cincinnati bank notes.

            This habit had been common prior to 1850 and does not seem to have been confined to any one class of banks. About the time the State bank of Ohio was established it was generally known that Ohio banks had agencies in Illinois to distribute their paper for circulation, with the object of keeping it at a distance and preventing its return for redemption. The Commercial bank of Cincinnati had a St. Louis "agency" which became a federal depository. In 1854, the report of the special bank examiner, Charles Reemelin, shows that the practice of exchanging notes and keeping their circulation as far from the bank as possible was still common to all the banks of the state. He estimated the illegitimate cost to the state from extra exchange, note shaving, and broken banks at $750,000 a year. And H. F. Baker, in his history of Ohio banks two years later, declared this amount too low, in view of the (page 152) fact that the exports and imports of Cincinnati alone for that year were nearly $90,000,000.

            During the three years, 1852-4, fourteen of the authorized banks in Ohio failed, or closed up for other reasons. Of these, ten disappeared from the State Auditor's reports in the year 1854, three of them being old banks, three free banks, two independent banks, and two branches of the State bank. Of the four classes of banks in the state then, there remained at the close of 1854 but one old bank, nine independent banks, ten free banks, and thirty-seven branches of the State bank. The old bank was the Ohio Life Insurance and Trust company of Cincinnati. The capital of this institution was $2,000,000, only about $600,000 of which, however, was employed in its banking business, the remainder being used in the insurance and trust department. This company was conservative and its business said to be conducted in the most careful manner, while the Commercial bank of Cincinnati was classed among those considered guilty of some one or other improper practice, and the City bank of Cincinnati and the Savings bank of Cincinnati were considered more or less liable to censure and loss. Without doubt the legislation on the subject of taxing the banks had been varied and somewhat vacillating. Prior to the general banking law of 1845 the general principle followed had been that of a tax on dividends. And the law of Feb. 24, 1845, authorizing the State bank of Ohio and other banking companies required the banks to pay, in lieu of the tax on dividends, 6 per cent on the profits after deducting expenses and ascertained losses. This law was amended March 2, 1846, the same day the Ohio legislature passed the Alfred Kelley general property tax law, and all the banks except the Ohio Life Insurance company and those organized under the State bank law, were required to set of for the state 6 per cent of their gross profits in lieu of the tax on dividends. Finally an act was passed, March 23, 1830, providing that each bank, whose charter did not provide another mode of tax, should report the amount of its capital and surplus and be taxed on that sum at the same rate as was assessed on money at interest at the place where the bank was located. By January, 1851, five banks had accepted the terms of this act, and thus there was quite a diversity of bank taxation in the state. The Ohio Life Insurance and Trust company, for example, under its charter was taxed but 5 per cent on its dividends, the new banks organized under the State Bank law of 1845 paid 6 per cent upon their profits, except those that accepted the terms of the act of March 23, 1850, and these paid the regular property tax rate on their capital stock and surplus fund. Meanwhile the new constitution was adopted, in June, 1851, containing clauses providing that all property, personal or real, should be taxed by a uniform rule ; and that laws should be made taxing notes and bills discounted or purchased, moneys loaned, and all other property of all banks then existing or afterwards created in the state, so that all property employed in banking should always bear a burden of taxation equal to that imposed on the property of individuals. In accordance with these clauses, a law was passed, April 13, 1852, requiring that all banks of issue should make returns (page 153) under oath of the average amount of their notes and bills discounted or purchased, on which any profit was earned ; also of the average amount of all their other moneys, effects, or dues, which were loaned or otherwise used with a view to profit. On these amounts they were then to be taxed at the same rate which individual property paid.

            These provisions the banks considered very oppressive and unjust, claiming that they were thus taxed on three times the amount of their capital, or what individuals would pay on the same capital. Many banks refused to pay the tax and carried the matter into the courts, claiming that if they were not sustained they would have to go out of existence. In April, 1852, the Dayton bank, an independent concern, decided to wind up, saying that their taxes would have been $6,000 as compared with $1,100 the year before. About the same time the Franklin Branch bank of Cincinnati closed as a bank, and the firm of Groesbeck & Co. took its place, the view being expressed that the tax was much less on brokers than on banks. A bill to enforce the collection of the bank taxes was promptly brought before the legislature of 1853. It was opposed by the Whigs and by some of the Democrats, especially the bankers in the party, a Mr. Beckel, a prominent Democratic bank president of Dayton, being one of those active in opposition to the law. But nevertheless, on March 14, 1853, it became a law, and was known as the famous "Crow Bar Law."

            In 1854, the tax law of April 13, 1852, was declared unconstitutional so far as it related to the banks organized by the law of 1845, the United States Supreme court holding that the fact that the Ohio constitution permitted such a tax did not release the state from its contract. The Cincinnati Enquirer called the decision a blow at state sovereignty, the view having been held by the dominant party in the state that the power of taxation was an act of sovereignty which one legislature could not part with in perpetuity.

            In Ohio, as in other parts of the country, the years 1850-52 had been years of comparatively low prices. Then followed a gradual rise until they reached a high level in 1855. Thus in Cincinnati, from 1851 to 1855 the price of wheat rose from 58 cents a bushel to $1.62, corn from 30c a bushel to 43c, four from $2.95 a barrel to $8.10, whiskey from 16c a gallon to 34/c, hogs from $4.55 a hundred to $6.30, pork from $12 a barrel to $16, lard from 7c a pound to 10/c, and tallow candles from 10c a pound to 15c. In 1856, all these prices show a decided falling of, while in 1857 they were about as low as in 1852. A fall of stocks in the summer of 1857 caused great embarrassment to many eastern bankers and others who held call loans for which they had taken stock collateral. And on August 24th, the crisis was occasioned by the failure of the Ohio Life Insurance and Trust company, with liabilities running into millions.

            This institution had enjoyed excellent credit; its home business had been well and carefully managed ; and its directors as well as the public thought it sound and prosperous. Its failure was due to big speculative operations by the cashier of its New York office. (page 154) The deposit balances in New York had been employed in common by the Cincinnati and New York offices, discounted upon to some extent in the west and the remainder loaned by the New York cashier under the advice of a sub-board of eastern trustees. The failure of the Life and Trust company precipitated a panic in New York. Many of the Ohio banks had kept their New York accounts with this institution and its failure seriously crippled them. Almost all the branches of the State bank had made the Trust company their New York agent; and throughout this trying period they continued to redeem their notes. Among other recommendations in-the plan adopted by the board of control of the State bank, in September, 1857, to enable the branches to continue specie payment was one urging the branches, which had not already done so, to co-operate in the note redemption agency which had been arranged in Cincinnati by some of the branches, in May, 1857.

            In 1850, some of the branches in conjunction with other banks in the state established an agency in Cincinnati, where on account of the course of trade the circulation of Ohio banks concentrated, with the object of checking the continual drain of specie from their vaults, and of keeping their notes equal to coin by furnishing eastern exchange for them, at all times, at about the cost of transporting coin. In May, 1854, the scheme was renewed by the branches of the State bank. A fund was raised and placed in the Mechanics' and Traders' branch at Cincinnati for the purpose of returning to the proper bank and converting into eastern exchange all notes that were depreciated below those of the State bank. The Merchants' and Traders' branch failed in November of that year, however, and again the agency was closed. On May 20, 1857, a similar arrangement was made with Kenney, Espy & Co., a Cincinnati banking house, for the special purpose of returning the notes of Kentucky, Indiana, and Virginia banks.

            Speculation had so controlled the rate of exchange between the east and the west that the feeling had become pretty widespread that the establishment in Cincinnati of some sort of clearing house for the banks of Ohio, Indiana, and Kentucky would result in substantial benefits to the sound banks and give additional protection to the business community. Governor Chase recommended it in his message in January, 1858; the Cincinnati Chamber of Commerce indorsed it in April ; and in June a convention of Ohio, Indiana, and Kentucky bankers met in Cincinnati and proposed a plan which the branches of the State bank of Ohio undertook to put into operation. This movement was stopped, however, by the discovery of legal difficulty in the way of locating the agency of a foreign bank in Ohio.

            Cincinnati was then the monetary center of the west. There was an annual demand there for exchange, chiefly on eastern cities, amounting to sixty or seventy million dollars. Accordingly, with good prospects of success a bank somewhat on the plan of the Suffolk bank of Boston was organized in Cincinnati under the free banking law of 1851, and a contract was made with the State bank of Ohio by which its branches were to deposit with the new (page 155) bank an amount equal to 4 per cent of their authorized circulation, free of exchange interest, and the latter was to sell eastern exchange at a rate not to exceed / per cent premium. This new redemption agency soon increased its capital stock to $500,000, of which $300,000 was to be offered in Cincinnati and $150,000 in New York and other eastern cities. This institution continued to act as redeeming agency for the State bank of Ohio until Nov. 20, 1861, at which time foreign notes, except those of         the bank of the State of Indiana, were no longer current in Ohio. Most of the financial trouble in Ohio, in 1857, had originated not in authorized banks of issue, but in the failures of private bankers and of the Ohio Life Insurance and Trust company, whose power to issue notes had terminated Jan. 1, 1843. The failure of this institution in 1857 removed the last representative of the old banks organized under special charters, with no security for their circulation except their general assets. The branches of the-State bank and the independent banks were organized under the law of 1845, which gave them existence only for twenty years. Consequently, when the Civil war broke out and the National Bank Act was passed many of them took advantage of the opportunity and became National banks. Of the first ten National banks organized in 1863, six were in Ohio, and two of these were located in the Miami valley, at Dayton. At the beginning of 1864 there were approximately 200 banks in Ohio with over $12,000,000 capital, and twenty-seven of these were private banks and located in Hamilton county.

            After the passage of the National Banking law, the notes of the State banks had to compete with the new National Bank notes and the greenbacks, or notes of the Federal government. They held their own, however, until the Federal tax of 10 per cent upon the issues of State banks, early in 1865, forced the retiring of the circulation of all State banks; and this, together with the expiration of the charter of the State bank closed a period of Ohio's banking history, that of State banks organized under general laws and issuing notes secured by a safety fund or deposit of government bonds. Henceforth note issue ceased to be a function of banks organized under state laws.

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