Page:A History of Banking in the United States.djvu/332



CHAPTER XIV.—.

§ 4.—The Banks in the States; 1837 to 1840.

In reading this chapter it should be borne in mind that the decision in Briscoe's case was rendered in January, 1837.

In 1837-8, eleven banks failed in, nearly all in Boston or the immediate neighborhood, with $4 millions capital. The investigation of the affairs of these banks showed that they had violated the law in respect to the organization and management of banks. "We find bank directors indicted for merely signing a false return. How far would the grand jury have to go should the fourth section of the bank law requiring that the capital must be paid in in specie before a bank might begin business, be applied to the origin of every bank in this Commonwealth, particularly within ten years past? It is the gross violation of this section which has been winked at by the Legislature in receiving bank returns, that has laid the foundation of the worthless, broken banking capital of Massachusetts. The money has never been there, the capital has never been paid in. The hard earnings of industry, and the portions of widows and orphans who were deceived by Mr. Degrand's 'leetle word confidence,' have been actually paid in and not borrowed out by the owners of the stock; but this constitutes a small portion of the banking capital. The bulk of it has been made up of stock notes of the borrowers who got up the banks, put into its vaults bits of paper, and then drew out double or quadruple the amount in loans. Had the capital been actually paid in, in conformity to the statute, none of this trouble would have happened. * * * Our banks were manufactured by those who wanted to borrow all the fictitious capital they could create."

A law was passed in, in 1837, to restrict the loans and discounts of banks to a percentage of the capital "together with the amount of the sums deposited with or due from them, bearing interest." For a bank