Page:A History of Banking in the United States.djvu/342

 believed that said suspension has been produced by causes beyond the control of the president and directors of said banks in the exercise of ordinary prudence and caution;"—the suspension was therefore approved and sanctioned and the laws against it were suspended. All debts to the banks were divided into three installments, twenty-five per cent. to be paid between March and June of 1838, thirty-seven and a-half per cent. between March and June of 1839, and the remainder between March and June, 1840, with interest at eight per cent.; but every debtor who has $2,000 so extended shall have no accommodation until he pays, and he who owes less than $2,000 may apply only for the difference between his debt and $2,000 in the way of further loan. The banks are to require new security. Debts on foreign bills of exchange are excluded. The Bank of Mobile and the Planters and Merchants' Bank are allowed to suspend until June 15, 1840, unless the State Bank resumes sooner, and provided that they accept this act and the other acts of this session; otherwise, forfeiture. The Bank of Mobile, when it resumes, must withdraw all notes under $5. All the banks in the State are required to buy, before July 1, 1838, specie to the amount of one-eighth of the capital; within the next year, one-eighth more; within the next year one-fifth; and within the fourth year one-quarter. This much specie they must have on hand and keep it. The Governor, Treasurer, Comptroller, and President of the Bank of the State are directed to issue six per cent. State bonds at two, four, and six years, in equal divisions, to the amount of $5 millions; $1 million to be deposited in the State Bank at Tuscaloosa, and $1 million in each of the branches, to be sold when it may be done at par, in aid of the capital of the banks, to the extent of one-half the amount for specie; the other half to be deposited in banks in New York. The note issues are to be kept up to the amount of the capital and these bonds together. In the apportionment of loans regard is to be had to the population of the counties. The banks are to discount "transaction notes" in payment of debts to the banks until March st, at seven per cent., not more than $2,000 to one borrower, with two good sureties, payable in one, two, and three years. The annual payments on these debts are to go to cancel the short bonds; the faith and credit of the State are pledged for the increased circulation. Every mortgage under this act is to contain a power of sale, and a default on one installment makes the whole due.

This act entailed more trouble and misery on the State than any other that was passed before the civil war. It was called the "Extension Law."

The Commissioners to examine the Bank of the State, in 1837, reported that they could not balance the account of bills of exchange, the vouchers being in confusion, part of them in old receipt books of the bank attorneys since 1826. They could not find out the amount of bad debts, but thought it larger than had been reported; they had not had time to examine the account of notes discounted, but had no doubt that it was in the same condition as that of the bills of exchange. In the following year the branches