Page:A History of Banking in the United States.djvu/258

 The circulation of the safety fund banks was limited, May 16, 1837, by an elaborate scale; a bank of $100,000 capital being allowed $150,000 circulation; one of $120,000 capital, $160,000 circulation, and so on, the proportion of circulation to capital diminishing with the increase of the latter, until, at $200,000 the two were equal. Then the circulation was made less than the capital, until a $1 million bank was allowed only $800,000, and one of $2 millions only $1.2 millions circulation. The Comptroller was authorized to apply a portion of the safety fund to the redemption of the notes immediately after a failure, so as to prevent them from depreciating; but a Bank Commissioner must make a certificate before this could be done "that the amount of the debts of such banking corporation over and above its property and effects, will not exceed two-thirds of the amount of the bank fund then paid in and invested, exclusive of all prior established claims thereon."

The safety fund law originally provided that the Governor and Senate should appoint one Commissioner, the banks in the city and southern part of the State a second, and the other banks the third. This was changed in 1837 to give the appointment of all three to the Governor and Senate.

"This of course brought them within the vortex of the great political whirlpool of the State, and the place was sought for and conferred upon partisan aspirants without due regard in all cases to their qualifications to discharge the delicate trust committed to them."

So much of the law of 1818 as forbade any person or association of persons to keep offices for the purpose of receiving deposits or discounting notes or bills was repealed by a law passed February 4, 1837, but any corporation, created by the laws of any other State or country, was still forbidden to keep any office for the purpose of receiving deposits, discounting notes or bills, or issuing bank notes. This shut out any branch of the United States Bank of Pennsylvania.

.—The most perfect specimen we have of a deposit bank, showing the demoralization and mischief produced by that system, is the Girard Bank. It was founded in 1832; in 1834 it got a share of the public deposits. To make this share larger an act of Assembly was procured in 1836, increasing the capital from one and a-half million to five millions and extending the charter twenty years. The stockholders gave the cashier two hundred shares of the stock for his agency in procuring the passage of the act. The increase of capital was paid by stock notes and the bank was largely occupied in stock-jobbing to carry out this operation. "The maximum of government deposits having been obtained, a system of prodigality in loaning them out was commenced, which baffles the conception of sober and reflecting minds, and of which we have but few examples, even in the annals of modern banking." In fact, the paid-up capital was never over two-thirds of five millions, but the government deposits ran at times as high as four