Page:A History of Banking in the United States.djvu/440

 by pledging its bills for loans, the notes not to be put in circulation for a specified time. It also did not keep the specie reserve required by law. The Bank Commissioners, in 1862, were forced to institute suits against it, in which the decision on all the important points was against the bank.

In discussing the point at issue about such pledges for loans, the Commissioners quoted the Superintendent of the clearing house at New York, that the action of the clearing house on the city banks had proved the positive principle of the "restriction of loans by the necessity of maintaining a certain average of coin from resources within the banks;" that is to say, that the prescription of the ratio of specie which the bank must maintain would limit its loans and control its business.

It will not have escaped the notice of the reader that the Suffolk system was established in Massachusetts only after several earlier attempts had failed; that it went through many vicissitudes; that it was sustained by the fact that Boston was the great emporium of the section in which the system was operated; that other attempts to set up the same system met with but slight success; and that perhaps it must be regarded as having failed at Boston; at least that when it was superseded by the national bank system, it was in a condition of partial disruption.

The Legislature, May 18, 1852, appropriated the sum of $2,500 annually for five years, in aid of the efforts of any association for the suppression of counterfeit notes. This led to the formation of such an association in the following February. It offered prizes for the invention of paper, ink, etc., which would make counterfeiting impossible, and exerted itself in the prosecution of counterfeiters.

The Boston clearing house began operations March 29, 1856.

One of the tentative steps towards the invention of clearing-house certificates was the agreement of the banks in the Boston clearing house, in the crisis of 1857, that the notes of the banks, in a determined proportion to their capitals, should be received instead of specie in the settlement of balances. It was said that the New England Banks had, at that time, sent their circulation to the West, to such an amount that they would have been ruined by its return, but for the united protection and defense of the Suffolk system.

A revision of the banking law, in 1857, provided heavy penalties for passing bogus bank notes, including uncurrent and worthless bank notes. The humble individual must therefore take the notes up to the moment of failure, and must not pass them after that moment, under penalty of the House of Correction.

In the following year the unceasing currency problem was taken in hand again, and it was enacted that every bank must hold fifteen per cent. of its circulation and deposits in specie, redemption balances being credited as