In 1809, perhaps owing to the recent experience with the Farmers' Exchange Bank, a feeling that the security of the public demanded more accurate knowledge of the financial condition of the banking institutions upon which they had so greatly to rely, found expression in a legislative demand for regular reports; and from this time on the bank statements were regularly made and published.

In 1820, for the first time, the circulation of each bank was limited to the amount of its capital stock actually paid in. under penalty of forfeiture of charter and a fine of $1.000 for violation. To the most of the banks, however, this limitation was not such as could be considered a serious restriction, inasmuch as their circulation had for years fallen within the limit.

The first charter granted after the large batch already mentioned as granted in 1818 was that incorporating the Hope Bank in Warren, June, 1822. In addition to the omission of the "bank process", its charter differed from those of the other banks in limiting the liability of the stockholders to the amount of the stock owned by them only in case none of the directors had violated the provisions of the laws relating to banks.

By 1826 there were 44 banks in the State, with an authorized capital of $10,350,000, the capital actually paid in being somewhat less. This excessive development of banking in Rhode Island, as compared with other States, has been attributed-and undoubtedly very properly-to the combination of several factors. One was that already referred to above at some length-the "bank process"-with its very extraordinary advantages to banks in the collection of debts. Another was the fact that in Rhode Island, unlike most other States of that period, no bonus was required to be paid to the State as consideration for the grant of a charter; and a third cause which may have contributed to the same end is found in the freedom from taxation. Other States-notably so in the case of Massachusetts-imposed heavy taxes upon bank capital, profits, or dividends.

In 1829 came a great financial collapse in the manufacturing industries of New England which seriously affected many of the banks, and led to the failure of onethe Farmers and Mechanics' Bank of Pawtucket. In this case--the only instance of failure since the Farmers' Exchange in 1809-the noteholders were fully protected.

April 3, 1832, the Burrillville Bank failed, with a circulation outstanding of. $49,000. It was redeemed in full; but there was, of course, a depreciation at the time owing to the uncertainty of even ultimate payment; and the loss of several years' interest to those holders of notes who did not then dispose of them at such prices as they would bring amounted to considerable.

Attention has been called above to the fact that the earlier charters had limited the liability of the stockholders to the amount of the respective shares of stock held by them, and that the charters granted after 1818, in addition to this limited liability, imposed a general individual liability of the stockholders in every case where the directors had violated the provisions of the banking laws. The charters granted a few years later-for example, those of 1828-also required that before resort could be had to the estates of individual stockholders the corporation should be first sued and the corporate property exhausted. From this point it was but a single step to absolute unlimited liability of stockholders-which was imposed in the charters of 1833 and most of the later ones, "provided that the corporation be first sued, and the corporate property be first exhausted in the payment of the debts of the corporation."

In 1836 an additional act relating to banks was passed in accordance with which no bank could be incorporated with a less capital than $50,000; and requiring that at least one-half the capital should be paid in before business was commenced, and the remainder within six months thereafter. This act also provided for the appointment of Bank Commissioners to examine and receive the reports of the several banks in the State and report their condition to the General Assembly. This office was abolished in 1842 and not again created until 1857. In the interval the banks were required to make regular semi-annual reports to designated State officials, and the Governor was authorized to appoint a special commission to examine into the affairs of any bank should occasion demand. At this time, however, it had not been deemed necessary to have the date of the report unexpectedly determined; as a result banks were "fixed" for the regular annual or semi-annual examinations. For example, at the annual examination in October, 1835, forty-four banks, with a circulation of $1,160,788, had in their vaults $486,574. Three months later, with an unexpected examination, these same banks, with a circulation of $1,294,292, were found to have only $197,550 in specie.

The banks of Rhode Island, like those of Massachusetts, passed through the earlier panics without resorting to the suspension of specie payments; but in 1837 they found it necessary. But during the period of suspension they were not given the opportunity, even had they had the inclination, to extend their circulation. The Legislature passed an act restricting their notes to the normal issues during payment of specie, and required weekly reports of their condition with special relation to note circulation. It was also recommended by the Legislature that an arrangement be entered into for each bank to receive its bills that may have been collected by any other

bank, exchanging them weekly or oftener, paying interest upon the balance. And throughout the continuance of suspension each bank was obliged to receive on deposit and pay interest at the rate of 5 per cent.—afterward increased to 6 per cent.—any of its own notes.

In October, 1837, at the same time that the amount of loans and discounts which might be made was strictly limited, the amount of circulation in proportion to capital was limited as follows: Banks with less than $50,000 capital to 75 per cent. of the capital; from $50,000 to $120,000, 65 per cent.; from $120,000 to $200,000, 40 per cent.; from $200,000 to $800,000, 30 per cent.; from $300,000 to $400,000, 25 per cent.; from $400,000 to $500,000, 20 per cent. In 1859 the limit was fixed at 65 per cent. for all. The crises of 1837 and 1839 dealt lightly with Rhode Island banks, none being so embarrassed as either to interfere with the prosecution of their business or greatly to affect their profits. The only cases of failure were the Scituate, which failed before the panic, in 1836, and had arranged for the redemption of all its circulation before the general suspension of specie payments, and which was afterward reopened; and the Rhode Island Agricultural Bank, which failed in 1843.*

The panic of 1857 found the banking interests of the State active and prosperous, the banks having largely increased in number and capital during the previous four or five years. The number, however, through failure and voluntary liquidation, was reduced from 98 in 1857 to 93 in 1858 and to 90 in 1859. The safeguards of the legislation which had by this time developed were sufficient in general to secure noteholders against loss.

The table which follows will throw much light upon the whole history of banking in the State and will repay careful study.

*In the case of this bank the cashier reported the amount of circulation outstanding at the time of the failure in October, 1843, to be only $4,960; nevertheless, by January, 1845, there had been redeemed by the Commissioners appointed to close its affairs, the sum of $8,394.

CONNECTICUT STATE BANK CURRENCY.

The first bank established in the State was the Hartford Bank, incorporated in 1792 with a capital of $100,000, which might be increased at pleasure of the stockholders to $500,000. The State also reserved the right to subscribe for forty shares at $400 each, it taken within twelve months-as they were not. The charter, which was modeled after the articles of association of the Bank of New York, drafted by Alexander Hamilton, limited the number of shares which any person or corporation might hold, and further attempted, by the introduction of a graduated scale of voting, to secure to minorities full consideration of their interests.

One section enacts that "Said corporation shall not issue their Notes or Bills to an amount exceeding in the whole, fifty per cent. over and above the Capital Stock of said Bank, and beyond the Amount of Money actually deposited for safe keeping in said Bank."

On Wednesday, August 8, 1792, the doors of the bank were first opened for business. Its notes then issued were in denominations varying from $1 to $100 and all in the new decimal currency then just established by the United States. The bank began business with 30 per cent. of its capital paid in.

For a time," says Mr. Woodward in his history of the Hartford Bank, "the bills of the bank won confidence slowly, especially in rural communities. Not even the character and the wealth of the owners and managers could at once overcome the distrust attached to paper money. The experience of the generation then emerging from the Revolution had been too bitter to be soon forgotten.'

But very shortly after the plan for the Hartford Bank was fairly under way, and even before it had received legislative sanction, another bank-the Union at New London-was in prospect. This was chartered at the same session of the Legislature, in May, 1792. Its capital was not to be less than $50,000 and not more than $100,000. By its charter, as by that of nearly every other bank thereafter chartered, it was enacted that The total amount of Debts which said corporation shall at any time owe, whether by Bond, Bill or Note, shall not exceed fifty per Cent. over and above the Capital Stock of said Bank, and beyond the Amount of Monies at any Time actually Deposited in the Bank for safe keeping; and that all notes issued at the Bank, shall be paid at the Bank, on demand in Silver or Gold Coin."

In August, 1792, it was voted by the management of the Union Bank "that for the purpose of furnishing change, then much wanted in common dealings, there be issued by the bank small bills of the denomination of one penny, two pence and three pence, to the amount of £576 lawful money ;" and subsequently other denominations from 4d. to 12d. were issued. There is no evidence to show whether or not larger notes were expressed in sterling, but the presumption is that they were not.

During the same year, 1792, the bank took steps looking to increased facilities for the redemption of its notes which are interesting as being the first recorded evidence which I have found of any solicitation on the part of bank officials for the convenience of the holders of their bills in presenting them for specie. The cashier was at this time directed to send to one of the directors living at Norwich $500 in specie to be used by him in redeeming the notes of the bank in that town, "the same being with a view to the convenience of such persons as should be under a necessity of so exchanging them." Two years later, in October, 1794, the directors, having heard that there was a large amount of the bank's paper in the Union Bank at Boston, and that it was inconvenient for them to hold it, voted that "the cashier be directed to send about $1,000 to Boston for the redemption of such paper;" and two months later he was directed to send $1,400 more for the same purpose. In 1796, when the Boston banks found it necessary to refuse to receive the notes of any banks outside of the city, the Union Bank of Boston remarked that had all the banks been as attentive to the redeeming of their bills as the Union Bank of New London, this action on their part would not have been necessary. One result was that even as early as this the Union Bank of New London appointed an agent in Boston and furnished him with funds in advance for the purpose of redeeming its bills.

Before the close of the century, three other banks-the New Haven, October, 1792; the Middletown, 1795, and the Norwich Bank, 1796-were incorporated. The first of these found it so much more difficult than had been anticipated to secure the requisite

The course of the Hartford Bank-which is still in existence as the Hartford National Bank-was a long, eventful and honorable one. It charter gave the subscribers the right to increase the capital at pleasure to an amount not exceeding $500,000. In the years 1796-8, $38,400 was thus added to the capital; and in 1802, $69,200 more. In 1808, the State commenced a series of subscriptions which in six years increased the capital by $64,400. In 1806 and 1807, further individual subscriptions were made which brought the total up to $545,200. The authorized capital was then increased to $1,000,000; and the books of the bank were required to be open at all times for subscriptions from the funds of schools or ecclesiastical or charitable societies, with the right on the part of such associations to withdraw their money at any time on giving six months notice. These shares were non-transferable. By December, 1816, the entire amount of $1,000,000 ordinary capital was subscribed and paid in, and in addition $212,809 of non-transferable stock.

In 1865, the stockholders voted almost unanimously to change from the State to the National system, and July 1 of that year the institution commenced business as The Hartford National Bank."

capital, that it was not until 1796 that it got into operation; and the second did not actually begin business until 1801.

In 1803 the State passed an act subscribing to these five banks the surplus moneys then in the treasury accruing from the payment of certain of the United States stocks issued to the State of Connecticut upon the adjustment of the Revolutionary debt. The law further provided that after any such funds had been paid to any of the banks, the Comptroller should be furnished as often as he should require, not exceeding once a month, with a statement of the capital stock of the tank, of the debt due to it, the money deposited in it, of the notes in circulation and of the cash on hand-also having the right to inspect such general accounts in the books as relate to the statements rendered. Here appears the first attempt in Connecticut at the supervision of banks by State authorities, and the initial step was taken not for the protection of depositors or billholders, but the investments of the State.

In each of the years 1866, 1807, 1809, 1811 and 1814 one other bank was established. Their charters followed closely the provisions of those which had preceded themlimiting the debts of the bank, "whether upon bond, bill or note" (that is to say, the circulation) to fifty per cent. over and a ove the capital stock in addition to deposits. It was not customary to specify in the act a fixed amount of capital, but, setting minimum and maximum figures, to leave it to the stockholders in each case to determine what amount, within such limits, should be employed. Their charters also contained the provision noted in another connection reserving to certain privileged associations, educational, ecclesiastical and charitable, the right to subscribe for nontransferable shares, which might be withdrawn at any time upon six months notice. The mainstay of New England in these years, and especially so in the case of Connecticut, whose manufacturing career had then barely commenced, was her commerce and shipping. To these the embargo of 1807, and the subsequent non-intercourse acts, proved singularly oppressive. Nevertheless, the banks continued strong, and did not suspend specie payments in 1814, when nearly all the banks to the sou hard west of them did so. They issued their notes sparingly, keeping far within the danger line. A currency proportioned to the needs of business held prices at a moderate level in those States, while the redundancy of paper caused high prices and reckless activity wherever the abuse existed. One market attracted buyers and the other sellers. Accordingly, streams of domestic and imported commodities flowed constantly westward and southward from New England. Coin moved in the opposite direction to meet the payments. Local settlements in New York, Philadelphia, and Baltimore were affected by paper, while specie was sent eastward, where its purchasing power was much greater. To both a sound and unsound currency applies the double truth of the parable to him that hath shall be given, and from him that hath not shall be taken even that which he hath.'"*

Upon the general suspension elsewhere, in 1814, the notes of the Connecticut banks largely disappeared from circulation, being either hoarded or sent in for redemption in specie. The issues of the suspended banks. west and south, rushed in and filed the vacuum. This not only deprived the Connecticut banks of their natural profits from circulation, but forced upon the State a very unsatisfactory currency. Hence, at a special session in January. 1815, the General Assembly passed an act granting to each bank in the State permission to issue bills to the amount of one half the actual capital, receivable for all debts due the bank, and payable in specie on demand two years after the close of the war. Officers were required to make semi-annual sworn statements to the General Assembly of the amounts outstanding. The previous October they had becn authorized to issue notes of less denomination than $1 for the payment of money only.

The banks also issued their notes, payable on demand in the notes of the banks of New York, or in specie two years after the close of the war. These notes were

termed "facilities."

Fractional notes, ranging from six and one-quarter cents to fifty cents, were freely issued under the provisions of the act of October, 1814. Individuals and corporations, barbers and bartenders, manufacturers and capitalists, the solvent and insolvent, further variegated the assortment of "shinplasters" by liberal contributions, some professing to call for money, and others for services.

At the close of the war the authority to issue post notes was withdrawn, and the issue by any unauthorized person or corporation of paper intended to pass in lieu of money was prohibited, and the law permitting banks to issue notes below $1 was repealed.

In 1825 ocurred two bank failures-the first in the State-one due to bad manage. ment and the other to fraud. †

*Woodward: One hundred years of the Hartford Bank.

The first, in September, 1825 was the Eagle Bank, incorporated in 1811. In its management everything seems to have been left to the President, and his direction does not seem to have been partic ularly happy. The bank was one of those which sought by artificial means to maintain an extended currency, employing agents to put its notes in circulation at a distance from home. Its Rhode Island agent in one year put off more than $200,000 of notes for this bank. $182,000 of this was sent home from Boston for redemption just before it failed. At the time of its suspension the bank had in circulation

In the years 1822-'28 seven additional banks were incorporated;* in 1830 another, and in the four ensuing years fifteen more. This increase of banking capital, though considerable, was not so excessive as that which took place in the other New England States, nor was it of so speculative a character as that, for example, which took place in Massachusetts in the same and two following years. The banks seem to have had a more sound basis in the matter of actual contributions of the stockholders toward the capital than did those of Massachusetts of the period, and none of them failed in the ensuing years of panic and general liquidation.

Two provisions, in especial, of the charters of all the banks incorporated after 1830, are worthy of note. The first was that, in case of the failure of said bank, the holder of the notes of said bank or corporation, of the denomination of $100 and under, shall have a lien on all the assets of said bank or corporation, both real and personal, in possession, remainder and revision, and on all debts due to said bank, and on all claims in favor of said bank, of every nature whatsoever, and on all moneys and property of every description in the custody and possession of said bank at the failure thereof; and that every conveyance, assignment or transfer of any of the property and estate herein before specified, made in expectation of the insolvency of said bank or corporation, or with a view to the same, shall be void."

The other was to the effect that upon the failure of any bank the president, directors, and cashier were to be liable as joint and several debtors if the debts of the corporation should exceed the limit specified in their charters-in all but three cases, 150 per cent. of the capital plus deposits.

Another act passed in 1835, forbade the issue of notes of less denomination than $2 after July 1, 1835, and of less denomination than $3 after January 1, 1836. After the suspension of specie payments in 1837 this was temporarily suspended on condition that all notes for less than $3 should be redeemed in specie.

In 1837 a committee reporting on the condition of the banks of Connecticut called attention to the facts that it had been the practice of many of the banks to employ "agents who were daily engaged in withdrawing from their legitimate circulation the bills of other banks in the State, and substituting their own in their places; and when it cannot be done without, they pay a premium for exchange." For example, in 1836, it appeared that the Bridgeport Bank had exchanged through agents $435,734. The presidents of the banks among which the practice was current met in 1837 and agreed to abandon it. The Legislature also prohibited the practice.

In 1837 the General Assembly provided for the appointment of two bank commissioners, whose duties were to inspect and keep careful watch of the banks. In this year the banks of Connecticut followed the leadership of New York in suspending specie payments, though generally in a strong condition. At the close of business on the last Saturday of March, 1837, the 31 banks in the State had in circulation their notes to the amount of $3,998,325.30, which had been reduced by a year from that time to $1,920,552.45; while the cash on hand had increased from $415,386 to $535,447. The banks withstood the shock without a failure.

From this time until 1849 there is little of moment to be noted. In 1818 for the first time banks were required to keep on hand at all times an amount of specie equal to one-tenth of the bills in circulation. About 1850 there began a rapid expansion, growing out of the excessive railway building and general speculative tendencies throughout the United States. The climax came in the autumn of 1857, resulting in a suspension of specie payments of two months duration. Between July 1, 1857, and January 1, 1858. the circulation of the banks of Connecticut was reduced from $10.411,000 to $4,130,000. Yet again the banks went through the crisis without a failure.

$430.607 of demand notes, and $732,630 of post notes not yet retired. Of its assets $1,451,507 had been advanced to four persons or firms on very doubtful security, and only about $300,000 were considered collectible. The bill-holders lost heavily.

About the same time somewhat similar trouble with the Derby Bank occurred. This bank, established in 1809, after several years of unprofitable operation, had wound up its affairs and the capital was distributed among the stockholders. After lying dormant for several years, the charter, in 1824 or 1825, passed into the hands of New York parties who, without contributing any capital to the undertaking, began at once to issue notes for circulation. These were first made payable at the Mechanics' Bank in New York, and afterward at the Fulton, when the suspicions of the former bank led them to decline longer to do business for the Derby. In November, 1825, it stopped payment with about $80,000 of bills in circulation. Some of these were bought up at various discounts by debtors to the bank with which to settle their account, and the holders of others secured something by attaching the banking house and fixtures, but in general the circulation was almost a total loss.

*The following is a list of the banks chartered in the State of Connecticut prior to 1830: