in his "Economica," places the circulation of all the banks of the United States for 1804, 1807 and 1809 at $14,000,000, $18,000,000 and $19,000 000, respectively. This is probably only an estimate; however, we may be safe in the inference that no great expansion had yet occurred. The United States Bank and its branches were efficient in keeping State bank issues in check; also the prohibition from issuing notes of a less denomination than $5, acted as a restriction upon issues, in that it kept an amount of small coin always in circulation. It was usual for the banks to try to maintain an amount of cash on hand equal to one-third of their circulation. This proportion was familiar from the custom of the Bank of the United States and of the Bank of England. There was no legal requirement in Maryland fixing the amount to be held. Dividends of profits were made semi-annually. The directors were personally liable for dividends declared in excess of profits. Up to 1795 the Bank of Maryland divided 12 per cent. annually. In 1804 it divided 9 per cent., and the Bank of Baltimore 10 per cent. As banking capital increased the profits of the individual banks slowly declined. In 1810, 8 per cent. per annum was perhaps the average. In March, 1804, Bank of Baltimore stock was selling at $500 per share (par $300). In the latter half of the year it dropped to $400, on account of the establishment of competitive banks. Union Bank stock at this time, before the bank was chartered, was selling at $8 to $10 premium." 1 A Brief Exposition, etc., p. 38. 2 Md. Laws, 1806, ch. 19. • Federal Gazette, etc., Mar. 7 and Aug. 14, 1804. • Ibid., Mar. 26, 1810. Ibid., Aug. 14, 1804. CHAPTER II. BANKING IN MARYLAND, 1810-1864. 1. A Period of Expansion, 1810-1818. The development of State banking in Maryland proceeded slowly and naturally from the establishment of the Bank of Maryland in 1790 with $300,000 capital, up to the end of 1807, when the total banking capital was $7,450,000, including $500,000 in the branch of the United States Bank at Baltimore. $5,500,000 of this total had actually been paid in. Extension had been made only in response to an actual demand for increased banking facilities, and in reality it had scarcely kept pace with the rapidly-developing commercial, manufacturing and agricultural interests of the State. From 1806 to 1810 Maryland industries were in a very unsettled condition, owing to interruptions by the belligerents of Europe. Troublesome interference, the Berlin and Milan decrees of 1807, and the embargo of 1807, had almost ruined Maryland's export trade. In March, 1809, the embargo was raised, and conditions immediately improved; exports jumped from $2,700,000 for 1808 to $6,600,000 for 1809. This period of prosperity was only checked by the war of 1812, and after its termination Maryland trade assumed its normal proportions. This state of affairs is reflected in the banking history. No increase of banking capital occurred during the years 1806-9. In 1810, coincident with a revival of trade, a period of rapid expansion began, which extended over eight years. It was in part evoked by industrial causes, but was also largely due to the prospective failure of recharter of the first Bank of the United States. The closure of this bank, whose charter expired in 1811, was anticipated in 1810, and throughout the country there was a general and rapid movement of expansion on the part of the State banks to occupy the banking field which was about to be vacated. In Mary 1 land, however, the cause of the organization of the new banks was largely industrial, and the purely speculative element was decidedly subordinate. During these eight years banks were located in the industrial centers of the most advanced counties of the State; fourteen of the nineteen chartered during these years were in the counties. The expansion was an extensive, rather than an intensive, one. There was no increase in the amount of the nominal capital of the old banks; some enlargement may have been effected by calling in additional payments on the shares when the entire capital had not been paid up. This margin was, however, small, since the entire capital of the banks, with two or three exceptions, had been paid up. The increase of banking institutions began in 1810, when the Assembly granted five new charters for banks, of which four were to be located in Baltimore, the fifth at Elkton, in Cecil county. The Baltimore banks were the Marine, the Commercial and Farmers', the Farmers and Merchants',' and the Franklin, and they embodied a nominal capital of $2,700,000. All of these banks organized under articles of association before applying for charters. The Commercial and Farmers' Bank had been under discussion for some time, and its organization had been decided upon in order to bring banking advantages nearer to the merchants in the upper part of the town. Subscriptions to its stock were well advanced, when notice of the projected establishment of the other banks was sprung upon the public by the publication of their articles of association. Quite a sensation was created by the suddenness and the extent of the new enterprises, and efforts were made to consolidate the four into one, or at most two. These were, however, unavailing, and the four banks received charters from the Assembly. The State became a subscriber to the stock of each of them. 1 Md. Laws, 1810, ch. 66. Ibid., 1810, ch. 77. 2 Ibid., 1810, ch. 68. Federal Gazette, etc., Mar. 14, 19 and 23, 1810. Eh nks ent The discussion evoked by the organization of these apparently uncalled-for banks was not, however, without fruit. To prevent a repetition of this occurrence the General Assembly immediately passed an act "to prevent the increase of banking companies," by which persons were prohibited from associating for the purpose of forming a banking company without first applying for a charter. Each person acting as commissioner for such parties was made liable to forfeit $2000, and each subscriber $100. The effect of this was to enable the Assembly to control completely the increase of banking companies, and thus to enable them to check at the start the mania which was growing apace in other States. Great alarm was occasioned in the State in 1812, when it was found that a company had dared to organize under articles of association. The City Bank of Baltimore was formed as a private partnership in 1811, and over $800,000 of its stock had been subscribed before it asked for a charter. In 1812 one was granted which fixed the capital at $1,500,000, of $25 shares, of which 4000 shares were reserved for the State and 27,600 shares were distributed among the counties for subscription. The remainder was taken in Baltimore. There is no evidence that the penalty for violation of the law was imposed upon them. No other banks were chartered in Baltimore until 1835. In 1813 the monopoly of banking in Baltimore was conferred on the banks then existing. The circumstances under which this occurred will be explained in the next section. The banks which were organized in the counties were largely to assist the agricultural class, though manufacturing was becoming an important interest, and, especially in the western counties, mining and lumbering operations had already assumed large dimensions. The Elkton Bank was started with the primary object of 1 Md. Laws, 1810, ch. 108. 2 Ibid., 1812, ch. 180. aiding the flour trade of that town.' And thus special circumstances in each case were of influence. Between 1810 and 1817 banks were established in twelve counties. lowing is a list of these banks: Fol Summarizing our results, we see that from seven banks in 1809, with a nominal capital of $7,450,000, of which $5,500,ooo had been paid in, the number had risen to twenty-two, whose nominal capital was $14,750,000, of which $8,500,000 was paid in. About $500,000 had been withdrawn by the closing of the branch of the United States Bank at Balti more. 1 |