of that of the State of Indiana. In reference to this, the Governor of that State, in his message to the legislature of 1853, says:

"At present we are giving charters to the issues of Banks about which we actually know nothing, in whose management we have no participation; and are thus literally paying a large tribute for what generally in the end proves to be a great curse.'

The States of Illinois and Wisconsin, and in fact many others, had similar systems, followed by similar results. The country was for several years deluged with safety-fund money; which, from the inflations and consequent contractions which were caused, exerted a most potent influence in bringing about the panic in 1857, and the general suspension of the Banks throughout the country.

As the suspension of specie payments cut the government wholly off from its resources, other than the notes and credits of the deposit Banks, and as these might prove to be in a measure valueless, Congress was called together, with all practicable speed, to consider the situation and provide for the future. An issue of Treasury notes was ordered to be made receivable in payment of the revenues. The collectors and receivers were directed to hold their collections to be drawn against directly by the Treasury. Drafts upon the deposit Banks, in case of their non-payment, were also made receivable in the payment of the revenues. This provision made their negotiation, at a very small discount, comparatively easy. The whole community was in the same condition; and as creditors were, as a rule, willing to accept the money in circulation, government did not experience any considerable difficulty from the suspension. The third instalment of the public moneys to be deposited with the States, July 1, 1837, was paid in the notes of the suspended Banks. As soon as Congress assembled, the fourth payment, due in October, was directed to be withheld. The most singular feature of this great drama or farce was the instantaneous change of front by the government the moment suspension took place. For eight long years, the great theme which had engrossed its attention and labors was the "reformation of the currency," by measures which called into existence an immense number

of State Banks, to be used by adventurers and speculators as the instruments of flooding the country with paper money. Nearly $100,000,000 of worthless stuff was created and thrown upon the market in the short period of four years. No sooner did the whole fabric tumble to the ground, than those who reared it discovered that the only money known to the Constitution was gold and silver. Thenceforth the operations of the government must be wholly severed from Banks of all kinds. It was to consider its own interests, leaving the people to take care of theirs as best they could. The paternal character which it had so long assumed was thrown off with all the ease of a mask. The proposition for the separation of the government from the Banks, again brought the Southern leaders, whose fidelity had been somewhat shaken by the quarrel between Jackson and Calhoun, into full accord with the administration. The new attitude assumed in reference to the Banks was regarded as another step to remove it still further from all consideration of the public welfare. In 1840, the Act creating the Independent Treasury, as it was termed, was passed. By this Act, all the revenues of the government were to be collected into the Treasury in coin, and disbursed from it in coin. In 1842, from a change in the administration, the Act of 1840 was repealed. In 1846, the old party having been restored to power, the Act of 1840 was re-established. This has been continued till the present time. The same Congress that repealed, in 1842, the Act creating the Independent Treasury, also passed a bill for the creation of another - a third Bank of the United States. This bill was vetoed by Mr. Tyler, who succeeded to the Presidency upon the demise of General Harrison. The new President belonged to the most rigid school of "strict" constructionists. The Act establishing the Subtreasury possesses an additional interest, from the relation it bears to the present financial condition of the country. As Mr. Chase found it in operation when he became Secretary of the Treasury under Mr. Lincoln, he, from a singular perversity of temper or judgment, continued it in operation, although especially authorized to dispense with its provisions. By attempting to carry on the enormous expenditures of the War of the Rebellion by means of specie alone, he speedily compelled the Banks that were to furnish it to suspend payment; leaving government, as he contended, no other alternative than the issue of its notes. By this act, an irredeemable currency be

came a permanent feature in the monetary system of the country.

As already seen, the greatest depreciation in the operations of the Banks was not reached until 1843. They could resume only by an unprecedented reduction of these liabilities. From that year, a rapid improvement took place. By the first of January, 1847, their loans and discounts had reached $310,282,945; an increase of $55,738,008, in a period of four years. Their note circulation increased to $105,519,766; an increase of $46,956,158. Their deposits reached $91,797,533; an increase of $35,628,905: the aggregate increase of both kinds of circulation equalling $82,585,063. The most favorable feature of this exhibit was a reduction of the share capital of the Banks from $228,861,948 to $203,070,622; showing, after resumption, a constant weeding out of weak institutions. The nominal banking capital of the country was in fact less in 1851 than in 1843: although within the eight years the circulation of the Banks rose from $58,563,608 to $155,165,251; their deposits, from $56,168,628 to $128,957,712; the aggregate increase of the two equalling $169,390,726. Their loans and discounts in the same period arose from $254,444,937 to $413,756,799. The money market is always in the soundest state when the increase of currency is supplied by Banks in existence, — by institutions possessed of capital, training, and experience, which increase their loans to meet the increasing wants of commerce, and increase their reserves as they increase their loans. Their conduct for the present is governed by the precedents of the past. The increase of their operations is perfectly natural, and for this reason excites no attention. Their operations are most carefully directed, as they are more solicitous about the preservation of their capital than about their dividends. A rapid increase in the number of Banks is always to be regarded as a signal of danger; as a part of them will always be got up for the purpose of imposing a worthless currency upon the public, while another part, though managed with integrity, are liable for a time to be managed improvidently.

The year 1847, from the potato blight in Ireland and the failure of crops in England, brought unprecedented amounts of specie into the country, and gave a great impulse to its affairs. The people were then just entering upon the construction of railways, which now cover the whole country like

a net-work, and which, while absorbing vast amounts of capital, contributed enormously to its wealth. In 1848 came the great discoveries in California, which at once placed this country in the first rank among the gold-producing nations of the world. In 1854, the banking movement received an extraordinary impulse, 458 new Banks having been created that year, the increase of their share capital equalling $93,467,552; that of their circulation, $58,616,427; of their deposits, $42,634,868; of their loans and discounts, $148,454,021. This upward movement was followed by a considerable reduction in the circulation the following year. The check, however, was only temporary. On the first day of January, 1857, the note circulation of the Banks reached the enormous sum of $214,778,822; their deposits, $230,351,312. The inflation was excessive; and the Banks, by the necessary recoil, were compelled, on the 13th of October of that year, to suspend specie payments. Various expedients were resorted to, to alleviate the pressure. The legislature of the State of Pennsylvania authorized her Banks to continue in suspension till the following May. The Secretary of the United States Treasury ordered the purchase of considerable amounts of bonds, in order to throw money into circulation. The legislature of the State of New York refused to grant any indulgence to her Banks. The judges of her Supreme Court, however, upon consultation, decided that they would not issue injunctions against any Bank in default, except at the suggestion of insolvency or fraud. The means of the Banks of New York City were so little impaired, that they resumed specie payments on the 14th of December of the same year. Their notes upon the day following the suspension were at hardly any discount. No difficulty was found in obtaining all the gold that was wanted. The New England Banks resumed simultaneously with those of New York City. Those of the rest of the country followed as they could provide the means. Resumption, however, was not accomplished without an enormous reduction in the liabilities of the Banks. Their note circulation, on the first day of January, 1858, equalled only $155,208,344, against $214,778,822, on the first day of January of the preceding year. Their deposits fell off to $185,932,049, against $230,351,312. The aggregate reduction in their circulation and deposits during the year equalled $103,987,741; the reduction being nearly twenty-five per cent. Their great strength, however, was shown by the rapidity with

which they recovered their position; the aggregate of their notes and deposits for 1859 equalling $452,875,196, against an aggregate of $145,130,134 in 1857. In 1860, their notes and deposits equalled $460,904,606. This was the highest point which had been reached. In November of that year occurred the election of Mr. Lincoln to the Presidency; an event which was the first substantial triumph in the country of Northern over Southern ideas as to the nature of our government, since the administration of Washington. His accession to the Presidency was the signal for the immediate outbreak of the civil war. The new administration succeeded to one which was itself in virtual conspiracy against the life of the nation. It found the Treasury empty, and the Army deeply tainted with seditious sentiments. The Navy, representing the commercial spirit of the North, was almost unanimous on the side of freedom. One of the last acts of the previous Congress, it having been purged by the secession of most of the Southern members, was to authorize a loan of $10,000,000. This sum sufficed for the immediate necessities of the new administration. The new Congress, which had been elected at the same time with the President, was speedily called together; and, on the 17th of July, authorized the negotiation of large loans. In the mean time the disastrous battle of Bull Run had taken place, causing great depression at the North, which made it evident that the only mode in which loans could be negotiated was for the Banks of the country to combine by their advances, to relieve the pressing necessities of the administration; and by their example, to inspire public confidence to a degree that would render possible the negotiation of the government loans. The manner in which the Banks combined, and the success achieved, are fully set out in the following extracts from a statement prepared by one largely instrumental in promoting their union for the purposes described:

"After the disastrous battle of Bull Run, and when Washington was closely beleaguered and the avenue thence to New York through Baltimore was intercepted by the enemy, Mr. Chase, then Secretary of the Treasury, came to this city via Annapolis, and immediately invited all persons in this community who were supposed to possess or to control capital to meet him on the evening of August 9th, at the house of John J. Cisco, Esq., then Assistant Treasurer of the United States in New York. This invitation drew together a large number of gentlemen of various occupations