Page:A History of Banking in the United States.djvu/438

 stimulus to the issue of fractional notes, and the people were led to acquiesce in it, and to use those notes, however great might be their dislike to them, because there seemed to be an absolute need which must be satisfied in some way.

The States which had no banks, therefore, generally had a worse currency than those which had banks, with the additional disadvantage that they could not control it.

Some concensus of opinion had also been reached in regard to correct methods of banking. Many of the old errors and abuses were no longer practised or practicable. When it came to details, however, the maxims which were advocated were very heterogeneous, and the laws which were passed in the different States were often very contradictory. Perhaps sufficient attention was not paid to the great variety of the cases which must occur in banking; to the flexibility of the banking system; to the elasticity of a great many of its terms. Although we speak of banks as a single and simple category, yet we know that banks are a group of very heterogeneous institutions. A bank in a great metropolis, dealing with merchants; another in a manufacturing town; another in an agricultural village; others in the region of the great staples, cotton and grain; and another on the Pacific coast will have such different classes of business that they must have varieties of system and different methods and processes, so that the maxims of wisdom for them all cannot be the same. If legislation, therefore, attempts to lay down maxims of business, it is very sure to do mischief.

During this period the general tendency was to supersede charters by general banking laws, and the free banking law of New York served as a model. It made its way against a great deal of opposition. It is difficult to see in the history of the chartered banks what could have been the ground of a certain feeling which existed that a "chartered institution" presented great safeguards. In Massachusetts, although a free banking law was passed in 1851, no bank had been organized under it in 1855. In the Western States, as we shall see presently, it was proved that the system, when abused, is capable of the very worst results. Half or more of the States, however, had adopted it before the civil war.

.—The Suffolk Bank system maintained itself in New England with great success. In 1850, the average daily redemptions were about $750,000, and the business was very remunerative. The Governors of Maine, in their messages, often found occasion to refer to the system, which they almost always did with approval. There was a certain coercion about the system which drove all the banks into it, because, as was proved in Maine, the notes of a bank fell to a discount, even when it paid specie at its counter and was well managed, if it was not in the system. The Bank Commissioners argued, in 1842, that currency which was not available at the great center of business of New England was not cash, and they raised the question whether the three banks which did not redeem at Boston were not under a moral obligation to do so.