of $872,348, remainder of the stock held by the State, which thereupon resigned its interests and retired from the field of banking.*

The following is a statement of the circulation of each of these three institutions for various years: †

It may surprise many to learn that Delaware early ventured a short way into the field of State banking, and that the relations then assumed have been maintained to the present time.

Feb. 3, 1807, the Farmer's Bank of Delaware was granted a charter by an act the preamble of which read:

"Whereas, the establishment of a bank for the State of Delaware upon a foundation sufficiently extensive to answer the purposes intended thereby, will be conducive to the general interests of the State, and tend to promote the agriculture, commerce and manufactures thereof; therefore," etc.

The capital of the bank was $500,000, of which $100,000 was subscribed by the State, and the remainder apportioned among the counties for subscriptions by individuals. The head office was located at Dover, and branches established at New Castle and Georgetown. The bank was managed by 27 directors, one-third of whom were appointed by the State. The debts to be contracted by the bank were limited to twice the capital stock.

The authorized capital of the bank was afterwards increased to $1,000,000, and the actual capital to $680,000; and a third branch at Wilmington was added. The institution seems always to have been prudently managed.

The bank never had a monopoly of the circulation of the State, yet always occupied a prominent position in that regard. In 1835, out of a total circulation of $622,397, reported in the State, $339,379 was issued by the Farmers' Bank. Two years later, out of a total circulation of $718,948 by the four banks then in the State, $386,582 is that of the Farmers' Bank and its branches. In 1842 there were but three banks in operation-the Farmers' Bank, with a capital of $680,000 and circulation of $383,889, and two others, with an aggregate capital of $208,470 and aggregate circulation of $341,940. By 1857 the number of banks in the State had increased to eight, with a total circulation of $1,394,094, of which $535,758 was issued by the Farmers' Bank. This was also the only institution at that time possessing branches, though the Bank of Smyrna had earlier operated a single branch. At the opening of the year 1861 the Farmers' Bank had $358,586 outstanding circulation.

In 1866 the Legislature passed an act to enable it to become a National bank; but the directors refused to sanction the change, and it has continued to the present time under its State charter. The State of Delaware now owns 8,714 shares of its stock, listed in the report of the Auditor for 1893 at $402,840, from which it derived an income of $22,000 during the preceding year. Because of this ownership the State, through its Legislature, appoints three directors for the principal bank and three for each of its branches. The State Treasurer, who is also trustee of the School Fund, is required to deposit money belonging to the State or School Fund in the Farmers' Bank.

NORTH CAROLINA.

The charter of the State Bank, enacted in 1810, authorized that corporation to raise a capital stock of $1,600,000, and directed books to be opened to receive subscriptions for that amount, requiring at the same time that individuals subscribing for stock should pay three-fourths of the amount subscribed in specie. Books were accordingly opened, and the sum subscribed, including the subscription of $250,000 for the State, amounted to $1,175,600. Of this sum only about $500,000 was paid in, as * Basil W. Duke History of the Bank of Kentucky, 1895. + Ex Doc. No. 227, 25th Congress, 3d Sess. [1839], p. 681.

required by the charter, in gold or silver. The balance was paid in Bank notes. Upon the capital thus constituted, the bank went into operation. By November, 1818, the proportion between notes in circulation and the specie on hand was nearly 12 to 1. In other words, the bank had largely upwards of 11 and nearly 12 dollars of their notes in circulation for every dollar of specie in their vaults. The directors then ordered books to be opened to receive subscriptions for the $424,000 which remained unsubscribed when the books were first opened; and it forms a part of the order by which this additional subscription was authorized, that the subscribers might pay it in the notes of the bank. The reason assigned for this operation of the directors is that they were desirous of applying a sponge to a part of their outstanding debt; and by way of calling in $424,000 of their notes, they authorized individuals who held them to subscribe for stock in the bank to that amount, and pay for it in their notes. Before all the installments became pay. able, the State Bank, Bank of Newburn and Bank of Cape Fear, entered into a formal resolution through their delegates assembled at Fayetteville, in June, 1819, not to pay specie; and their notes immediately fell to 15 per cent. below par. "The depreciation of the notes of all the Banks, occasioned by the refusal of the Banks to make good their notes with specie, has been productive of incalculable mischief to the community; and it is no considerable aggravation of the mischief to know that in the case of the State Bank large quantities of their notes have occasionally been thrown into circulation by themselves in the purchase of cotton. * ** Another remarkable fact in the history of the State Bank is that, to protect themselves from demands for specie, they determined at one time to administer an oath to an individual presenting their notes for specie, in which he was compelled to state that he was not a broker." *

The items of capital, circulation and loans and discounts in the closing years of the institution were:

1831.
1833.
1835.

Capital.
$1,598,775
798,775
478,775

Circulation.
$784,957
377,722
289,042

Loans and Discounts.

$1,815,348

993,368
636,626

The charter of this bank expired in 1835. In 1837 it still had a nominal circulation outstanding of $120,000. This the new Bank of the State of North Carolina redeemed at par when presented.

In 1833, just before the expiration of the charter of the first State Bank, the Leg islature chartered the Bank of the State of North Carolina, with an authorized capital of $1,500,000-$900,000 for individual stockholders, and $600,000 for the State. By August 20, 1836, the whole of this capital had been paid in. The head office was at Raleigh and the bank had power to establish branches at such places as the stockholders might designate. In 1836 it had five branches-at Newbern, Tarboro', Fayetteville, Wilmington and Elizabeth City-in addition to agencies at several other points. The branches issued notes payable at their respective offices. The agencies merely made discounts and purchased bills of exchange with funds of the principal bank; they were mere offices of the principal bank and kept no account with any other. Additional branches at Charlotte, Milton and Montgomery were opened in later years. Its circulation at that time amounted to $2,107,760. This, however, was during the expansion that preceded the crisis of 1837, and seems to have been the largest amount ever reported.

The following will show the capital, circulation and loans and discounts at various dates:

Report of Legislative Committee, 1828-9, quoted by Gouge: Short History of Paper Money and

Banking, p. 41.

In 1859 the Bank of the State of North Carolina was superseded by the Bank of North Carolina, which assumed the debts of the former.

The State of North Carolina also owned more than one-third the capital of the Bank of Cape Fear; but as this was not regarded as a State institution, it need not be discussed in this connection.

SOUTH CAROLINA.

In 1812, to relieve the financial distress then prevailing, the Legislature chartered the Bank of the State of South Carolina. This bank was to receive on deposit all stocks and bonds and unexpended cash and all taxes collected in the future. The title was vested in the president and directors, and the faith of the State was pledged to support the bank and make good all losses. The institution had power to make loans on both real and personal security at seven per cent. interest, payable in advance, and loans to be renewable for years. The bank was to pay the interest on the State debt and its charter was to run till 1836. The State of South Carolina was the sole proprietor of the bank, which was the fiscal agent of the State. It received all taxes, paid all demands, negotiated all loans, and received the assets of the State.

In 1813 its actual capital was but little more than $150,000; but from surplus profits and from the assets turned over to it by the State, it was increased by 1820 to $1,196,220. In 1828 the Comptroller, after noting that the bank had paid into the Treasury as net income to that date the sum of $1,315,977, added:

"The propriety for the original establishment of the bank cannot now be considered as open to discussion, but if we take into consideration the present condition of our finances, their intimate connection with and reliance upon the bank; together with the heavy burden imposed upon the latter in relation to our public debt, there remains little doubt that to nourish and guard its interests is at present the peculiar province of the Legislature."

In 1830 the charter of the bank was renewed until 1856. The bank had branches at Columbia and Camden, but all the notes of the bank, whether put in circulation by the branches or by the head office, seem to have been issued by the latter. The table which follows will indicate somewhat of the condition of the institution at frequent intervals during the period of its existence.

$460,000 $601,660 Oct. 1, 1841..
750,000 1,272,872
1842..
1,052,866 1,440,000 2,372,633
1,196,220 1,160,000 1,952,212
1,196,220 1,074,856 2,219,722

$3,356,318 $554,455 $4,227.895

66

3,356,318

608,001

4,289,030

1843..

3,356,318

635,895

4,248,123

64

1844..

2,966,743

892,692

4,442,059

1845..

2.933,610

1,019,090

4.432.800

2,754,319 "31, 1846.. 2,699,984 Jan. 31, 1848.. 1,137,776 2,726.922 Jan. 1, 1850... 2,905,846 1,169,541 4,635,561 2,685,160 1851.. 2,882,796 1,749,155 4,673,477 2,837,235 1853.. 1,122,461 2,049,150 5,156,278 1,185,744 2,637,482 Mar., 1854.. 1,122,461 1,654,561 1,273,892 2,469,019 Sept., 1854.. 1,119,141 1,251,969 1,208,270 2,296,344 1855.. 1,113,789 1,122,156 1,273,370 2,101,294 Jan. 1, 1857..

For the years 1841 to 1851, inclusive, the loan negotiated for the purpose of rebuilding the city of Charleston is included. This was reduced from $2,000,000 in 1840 to $1,700,000 in 1852.

"In 1852 the charter was again extended until 1871. Even the Civil War did not destroy the bank, and in 1867 it still held a large amount of assets, some of which had been rendered of doubtful value, belonging to the State. In 1868 the first Republican (negro) Legislature passed an Act to close the bank, and in 1870 it was placed in the hands of receivers."

INDIANA.

When Indiana was admitted as a State in 1816, there were in operation two banks chartered in 1814, one of which, the Bank of Vincennes, incorporated September 10, 1814, with a capital of $500,000, was adopted as the State bank of Indiana, in accordance with the constitution which prohibited the establishment of any bank except a State bank, but provided in express terms that the existing banks might be consolidated into such State bank. By the provisions of the Act of adoption the powers of the incorporation were enlarged, and it was authorized to increase its banking facilities by additional $1,000,000 capital divided into 10,000 shares of $100 each. Of these shares, 3,750 were reserved to be subscribed for from time to time by the Governor of the State. The remainder were to be offered to private individuals, corporations and companies. The Bank of Vincennes was also authorized to affiliate the Farmers' & Mechanics' Bank of Indiana, at Madison, as one of its branches. Branches were also established at Brookville, Corydon and Vevay. In 1821, scarcely five years after the Bank of Vincennes had been raised to the dignity of a State bank, violations of the powers granted by its charter had become notorious. The Legislature, on December 31, 1821, authorized proceedings against it which resulted in its being deprived of its franchise and privileges. A large amount of its notes became utterly worthless, but those of the Farmers' & Mechanics' Bank were ultimately redeemed. The actual paid-in capital of both banks does not appear to have been more than $202,857.*

For the next thirteen years Indiana was without banks of any sort. "In 1834, the State Bank of Indiana was incorporated, with ten branches, afterwards increased to thirteen, the branches being mutually liable for the debts of each other. Each share was subject to a tax of twelve and one-half cents annually for educational purposes, in lieu of all other taxes. If an ad valorem system of taxation should be authorized by the State, the stock was to be liable the same as other capital, not exceeding one per cent. per annum. The directors of the parent bank were to have charge of the plates and unsigned notes of the branches, and were authorized to deliver to them an amount of circulation not exceeding twice the amount of the stock subscribed.

"The State Bank was chartered, as were many other banks in different States, to fill the vacuum which it was anticipated would result from the winding up of the Bank of the United States. The parent bank itself was merely a Board of Control. the President and five Directors of which were elected by the Legislature. All the business was done by the branches, which were under the supervision and control of the Central Board in much the same manner as the National Banks are under the supervision of the office of the Comptroller of the Currency. The branches each elected one director who formed a part of the Board of Control. The charter extended until January 1, 1857, and during the existence of the State Bank no other bank was to be created or authorized. The capital of each branch was $160,000, one half to be taken by the State and the other by individual stockholders. The whole capital was paid in silver. The State paid in its proportion at once. The individual stockholder paid in $18.75 on each fifty dollars share and the remaining $31.25 was paid for him by the State upon his giving real estate security at one-half its improved value for the repayment. The money, to make its own payments and those advanced for the stockholders, was obtained by the State by the sale in London of its own 5% bonds, which were known as bank bonds, the interest being provided for from the dividends of the State stock. All capital was thus paid in casa; each stockholder was liable for an amount equal to his stock, and each branch was liable for the debts of the other branches."*

No note under $5 was allowed to be issued, and the Legislature reserved the right to restrict it to $10 within ten years.

In January, 1836, an amendment was passed by the Legislature, allowing the discounts to be extended to two and one-half times the capital, and permitting the branches to increase their capitals to $250,000 each, though only four ever had over $200,000.

The bank commenced business at one of the most critical periods in the history of the country, at the beginning of the era of speculation which nearly bankrupted the whole nation, and which culminated in the terrible catastrophe of 1837. At this disastrous crisis nearly every bank in the Western and Southwestern States failed, with the exception of the State Bank of Indiana. A very large number of those of the Eastern States were totally ruined. The bank did, however, suspend specie payments in 1838. In 1841, it was authorized to issue notes of a less denomination than $5, not exceeding in the aggregate $1,000,000, on the payment of one per cent. for the privilege. In 1839, its circulation was $2,951,594 of which about one

*J. J. Knox, in Rhodes' Journal of Banking, September, 1892.

third was notes of $5 and the remainder mainly $10 and $20. In 1845, the total circulation was $3,527,351, of which $520,393 was notes below $5.

STATEMENT OF THE CAPITAL, CIRCULATION, SPECIE, AND LOANS AND DISCOUNTS OF THE STATE BANK OF INDIANA.

*Indianapolis, Lawrenceburg, Richmond, Madison, New Albany, Evansville, Vincennes, Bedford, Terre Haute, Lafayette, Fort Wayne, South Bend, Michigan City.

The bank resumed specie payments in 1841, and thereafter, under able management maintained a high credit, and when its charter expired in 1857, it was with deep regret on the part of many that the new constitution precluded its renewal upon the former basis. But, influenced perhaps more by the disastrous failures of nearly every other banking institution under State management than by any shortcomings in the State Bank of Indiana, the people in 1851 had inserted in the State constitution, the section: "The State shall not be a stockholder in any bank after the expiration of the present bank charter; nor shall the credit of the State ever be given or loaned in aid of any person, association or corporation."

For the $1,000,000 invested by the State in the institution it had received as its profits fully $3,500,000. Of the numerous enterprises in which the State of Indiana embarked-and, for that matter, of the numerous banking enterprises in which any of the States embarked-this seems to have been about the most successful.

MISSISSIPPI.

In 1818 an act was passed reorganizing, as a State institution, the Bank of Mississippi, which was thereafter known as the Bank of the State of Mississippi. Its capital was limited to $3,000,000, of which one-fifth was to be subscribed by the State, which was to appoint one-third the directors. The notes of the bank were made receivable for all payments to the State; and the bank was given a monopoly. Its authorized capital was never all paid in, but the management of the bank seems to have been satisfactory. In 1827 a State loan of $250,000 was authorized, with which to pay all debts due from the State to the bank.

In 1830, disregarding the pledge given in 1818, that no other bank should be established, the Legislature chartered, for a term of 25 years, the Planters' Bank, with a capital of $3,000,000, and made it the fiscal agent of the State.

*
*

*

The preamble of the charter reads: "Whereas the establishment of a bank in the State of Mississippi for the purposes of general convenience and public revenue would *by a creation of revenue relieve the citizens of the State from an oppressive burden of taxes, and enable them to realize the blessings of a correct system of internal improvement, therefore," etc.

Of the total capital, increased to $4,000,000, the State subscribed $2,000,000, for the payment of which it issued bonds bearing 6% interest. The bonds were sold at a premium of $250,000, which was deposited in the bank as a sinking fund from which, together with dividends declared on its bank stock, the interest was to be paid. The State stock in the Bank of the State of Mississippi was also sold at this time, and the proceeds turned into the new bank. At first the State was to select seven directors to act with six chosen by the stockholders; but three years later, the numbers were reversed, so as to give the individual stockholders the selection

*The State Bank of Indiana chartered in 1855, though given special privileges in that its notes were not required to be secured by the deposit of State stocks as were those of the free banks" established at the preceding session, cannot be regarded a State institution in the sense in which the term is used in this sketch.