Page:A History of Banking in the United States.djvu/255

 of them must execute a bond to the State Treasurer such that the aggregate for each bank should equal its capital, with sureties residing in the State and not directors, or with mortgage security to the approval of the Bank Commissioners. Every cashier must also give bonds to the State in $20,000. The Bank Commissioner or receiver might order prosecution on these bonds for the benefit of claimants against the bank. No stockholder, director, or officer might owe a bank over five per cent. of its capital, and all of them together not more than what three per cent. for each would aggregate. No loan might be made on the stock of the bank; debts were limited to twice the capital plus the deposits; the banks were offered an inducement to comply with the Suffolk system by the provision that there should be one per cent. tax on capital, which should be remitted on any bank which kept a deposit in Boston for redemption. Instead of paying to the safety fund, a bank might give bonds with sureties or security to redeem its notes. In 1844, all the banks under this law redeemed in Boston, and paid no tax, and three gave bond instead of contributing to the safety fund.

In 1839 the Essex Bank failed. Its notes were presented to the amount of $34,426, of which $28,000 became involved in litigation. In 1844 the fund was $31,000; that is, inadequate to meet this loss if the entire claim was declared valid.

.—"Between the years 1831 and 1833, a great increase took place in the number of banks in New England. During this period 90 new banks were chartered, of which 45 were located in Massachusetts. The Suffolk Bank became overloaded with redeemed bills; the banks were slow in making remittances; and the accounts of many of them were overdrawn. Accordingly the Suffolk Bank sent a circular to such of its correspondents as it allowed to overdraw, informing them that on account of the scarcity of money, and in order to have some control over its own funds, over-drafts must be limited to $10,000. It also adopted the rule that foreign money deposits must be made before one o'clock, otherwise they would not be. credited till the following business day. At the same time it reduced the permanent deposits required from the Boston banks to $15,000 as a minimum."

"In 1834 the redemption business had increased five-fold; from $80,000 to $400,000 daily. The officers were employed till nearly midnight, and then often obliged to lay aside a large number of bills to be counted the next morning. To reduce the business and keep it within bounds, it became necessary to modify the arrangement made with the Boston banks. Heretofore they had been allowed to send in all their foreign money at par;—now they could send in on any one day an amount equal to one-half of their permanent deposit. If they exceeded that amount they were charged onetenth of one per cent. on the excess. They were also restricted to the foreign money received by them in the regular course of their business.