more and the various counties for subscription. This ceased to occur as soon as the general extension of banking reduced the monopolistic element to a minimum. The further step of free banking under a general law was not taken in Maryland;1 it preferred to retain closer control by necessitating special legislative enactment to suit the requirements of each case. Although under these conditions opportunity for political bargaining was offered, nevertheless no evidence has been found indicating that other considerations than the public interest were of weight in the decision of measures brought before the Legislature, except in the first few years of banking in the State. The chief elements of the system appear in the first charter; (1) special legislation in each case, (2) broad regulations, liberal powers, freedom of action, few restrictions. An eager competition, enforcing prompt attention to contracts, rendered careful administration a necessity for survival. In the first place the ideas adopted were not native to Maryland, but had been worked out elsewhere, notably by the Scotch banks and the first Bank of the United States. In the adaptation of principles to suit Maryland conditions, the State's own experience was the teacher, and changes were only introduced when deficiencies appeared under the actual working of the system. Very little was developed that was new; at the same time, disastrous experimentation, under which other States suffered so much, was avoided. Even the lead of more progressive States was not followed in the adoption of advance ideas. The lack of uniformity in the regulations controlling the various banks was for a long time a source of confusion. This was partially remedied by making all the banks subject to the fundamental principles of the charter of the Merchants' Bank of Baltimore in 1835, and further, by the passage of a general banking law in 1852. State inspection for 1 A free banking law was passed in 1870. public security alone, and not by the State as stockholder, was arrived at long after it had been adopted by other States. Stockholders and directors, except in cases of maladministration, were never made personally liable beyond the extent of their shares. There were no preferred claimants in case of insolvency. The issue of notes was competitive, upon the general credit of the banks. Issue upon the deposit of bonds was rejected to preserve a greater elasticity of the currency and greater · possible profits. The payment of interest on deposits was general from an early time, and stimulated to the utmost economical habits on the part of the public. The practice of daily settlements among the Baltimore banks rendered necessary the exercise of the greatest skill and care in administration, and the brisk competition between each other and the branches of the two United States banks, for a large part of the time, was most salutary. In the performance of their functions they responded to the needs of the State at all times as well as might be under the circumstances. Maryland's central situation as creditor of the South and debtor of the North must be constantly borne in mind in understanding the position of her financial institutions. After the period 1814-20, during which the Maryland country banks were in wretched condition, the Maryland banks never ceased to redeem on demand in specie except during times of general suspension. A number of crises were passed with comparatively little inconvenience to Maryland's business men. The cases of insolvency have been remarkably few in Baltimore, three in all, with no loss ultimately falling upon depositors and noteholders. Since 1820 bankruptcy has concerned but five county banks; only two of the five were of any consequence, and the loss was small. In answering the final questions we can say that the currency was always highly elastic, ultimately secure, excepting the period 1814-20 for the country banks, and convertible upon demand except in time of general suspension. For the shareholders they earned fair dividends, not large, except in the first few years. They collected the free capital and turned it to the assistance of every form of industry within the State. A long period of very conservative banking won the entire confidence of the people. The Legislature did not intrude upon the banker's domain. To this strongly conservative spirit was doubtless due to large extent the success of a system which, owing to its freedom from restrictions, proved deficient under other circumstances. |