Page:A History of Banking in the United States.djvu/192

 banks to the credit of the depositor only at the expiration of ten days from the date of deposit. "It is now only the regular depositors at the eight allied banks who have the privilege of exchanging country bills for Boston at par. Even the Savings Bank receives only Boston money in deposit, and all payments to the seven other Boston banks, and to the United States Bank, are required to be made in Boston or United States money."

The oppression of the allied banks of Boston was so keenly felt that a convention was called of stockholders of country banks, at Boston, January 16, 1826, to take measures to crush the Boston alliance by means of a more formidable one. This convention recommended its constituents to withdraw their deposits from the Suffolk and to arrange for redemption amongst themselves so as to lessen their circulation in Boston.

Under the old system, those banks had gained the most which were farthest from Boston, because it was harder to send their notes home, while those country banks which were near at hand and whose notes could easily be returned, gained the least. The effect of the Suffolk system was to put the latter comparatively in a much better position. Their support probably insured the success of the system.

It is evident that the great gains of the Suffolk system, when it was in full operation, came from the fact that it exploited the ignorance of the country bankers, who were over-issuing on accommodation paper, falling in debt to the Suffolk Bank, fearing its power and hating it. It did not really keep them sound, but let them go wrong only to a certain point, holding them by a cord and making them pay for the indulgence. Appleton said, in 1831, that the gain to the Boston banks by the Suffolk system was largely lost by the increase of banks in the country, yet near to Boston, which had gained the most by it. As time went on, the system was extended until it embraced nearly all New England, and held the notes of that region very nearly uniform. There was, however, always friction in it between the city and country banks.

.—In 1826, it was stated that nearly one-third of the capital of the Rhode Island banks was loaned to directors and other stockholders. This accounted for the small proportion of notes in circulation. There were forty-three banks in the State, which was more than one for every two thousand souls.

.—In 1825, some New York speculators took up the charter of the Derby Bank, which had wound up and gone out of existence, and put about $80,000 of notes bearing its name in circulation. It then failed. The failure, however, which has remained the most famous in southern New England was that of the Eagle Bank at New Haven. It had loans outstanding of $2 millions, of which $1.7 millions were bad, being in the hands of a single firm. The liabilities were $1.5 millions, nearly all for circulation, and the assets were only $300,000 on a liberal valuation. The notes were quoted at