Page:A History of Banking in the United States.djvu/381

 According to a table in the report of the Bank Commissioners of Massachusetts, 1841, the banking capital of that State varied as follows: in 1803, $2.2 millions; from 1803 to 1816, it continually increased to $11.4 millions; from 1816 to 1817 it was reduced to $9.2 millions; from 1817 to 1820 it continually increased to $10.6 millions; from 1820 to 1821 it was reduced to $9.8 millions; from 1829 to 1830 it continually increased to $20.4 millions; from 1829 to 1830 it was reduced to $19.2 millions; from 1830 to 1837 it continually increased to $38.2 millions. We may add that it was then reduced to $30 millions in 1844.

By a law of 1840, no bank was allowed to pay out any but its own notes. The president of the Suffolk Bank informed a country bank president, who wanted help, in 1841, that the bank was making no discounts. "Our discount sheet is entirely closed, and we do not even look at the applications."

.—After a great political struggle, in 1842, the public works of New York were suspended and taxes were imposed to sustain the credit of the State.

A question arose whether the payments out of the safety fund were to be made to redeem the circulation of the banks in the order of their failure, and an injunction was obtained against the Comptroller to force him to take that course. The movement was in the interest of other creditors of an insolvent bank besides the note-holders. Consequently, April 12, 1842, the safety fund system was further modified, so that any part of, or all, the money in the bank fund could be applied at once to the payment of the notes, the banks being taken in the order in which the injunctions were granted. This applied the whole safety fund to the redemption of the note issues. The banks were also allowed, within six months, to commute for the payment of the three per cent. which they would have to pay to the safety fund within the next few years, paying with the notes of any insolvent bank, and receiving interest at seven per cent. on the sum paid until the time when it would become due. A large part of the notes which were a charge on the safety fund were at this time held in masses by banks and brokers who had taken them as collateral for loans. As the redemption of the circulation of the banks was to be taken up in the order of the injunctions, these masses of notes would so absorb the fund that the holders of what was called the legitimate circulation of the banks which failed later would be forced to wait a long time. At the same time the banks which commuted could pay in the notes of any insolvent bank, even of one which failed after the law was passed; but those notes, the redemption of which was delayed, depreciated. Hence the Comptroller, in his report of 1844, said that the law of 1842 had benefited the banks and brokers, but that it had not "secured that relief to the great mass of the bill-holders which was anticipated, and which is promised in the title of the act." The banks paid in, in 1842, in advance, in the notes of insolvent banks, $477,609.

No bank in New York City would discount any note or bill in October,