Page:A History of Banking in the United States.djvu/146

 in a less degree would be where it is assumed that the debtor can and will win a surplus out of his business in another period of production. In this case, a delay would involve risk on two points,—his success in production, and his persistent frugality to save what he produces and devote it to the payment of his debts. In the stay laws now before us, the pretense was that they were justified under the second head; and it is very possible that there may have been individuals who fitted the theory, and who successfully emancipated themselves from debt under the system; but the debtors, as a class, were persons who had bought for a rise, to whom a delay could be of no use unless the inflated prices should return.

February 14th, it was enacted that no damages or interest on notes due to the Bank of the United States, or on any debts to it, should be awarded by any Court in excess of one per cent. per annum. For the future, any greater rate should be usurious and void. This act was to come into force March 15th, but if the Bank should pay $5,000 to the Auditor before April 1st, the act was no longer to be in force. On the same day, an act was passed to enable the independent banks to collect debts due to them in liquidation. Those which appointed commissioners in liquidation were not to be liable to suit for a year.

The forty banks had been founded in the period of inflation, as a means of developing industry and as a policy of prosperity. They had all been smashed in a reaction of legislative petulance. Next a big paper money bank was founded as another step in the system of relief to the debtors whom the prosperity policy had created.

November 29, 1820, the Bank of the Commonwealth of Kentucky was incorporated. It had no stockholders. The officers were elected annually by the Legislature. Their salaries were paid by the State, and they were incorporated. No one was to have a loan of more than $1,000, except the directors, who might have $2,000. It was to issue $2 millions in notes, which were to be apportioned between the counties in proportion to the taxable property in each, in 1820, and were granted in loans on mortgage securities. Loans were to be made in 1820 only to those who needed them, "for the purpose of paying his, her, or their just debts;" or to purchase the products of the country for exportation. Borrowers during 1821 were to take oath as to the purpose for which they wanted the loan. Here then was a novelty in banking, an institution which sought as borrowers, not solvent persons of high credit, but embarrassed and perhaps insolvent debtors. When complete, the bank had twelve branches; its capital was to consist of all money thereafter paid in for land warrants, or land west of the Tennessee river [this was a contingent revenue, which, inasmuch as the land speculation had passed by, proved very small]; the produce of the stock owned by the State in the Bank of Kentucky, after that bank should be wound up [the compulsion to take the notes of the independent banks had ruined this bank, and destroyed the value of its stock]; the unexpended balances in the Treasury at the end of the year [during the life of this bank there were none].