Page:A History of Banking in the United States.djvu/442

 banks under the law of 1852, were compelled to accept subscriptions of charitable and educational societies, according to the Connecticut custom.

The crisis of 1857 played havoc with the small banks of Connecticut, especially with the newly established free banks. The failure of this system in Connecticut and New Jersey, adjacent to the commercial metropolis, is a noteworthy phenomenon. In the following year the ratio of circulation to capital was reduced to seventy-five per cent. One-tenth of the circulation and deposits must be held in specie, but a deposit for redemption might be counted as a part of this requirement, provided that the actual specie reserve should be one-tenth of the circulation. It was also forbidden to pay interest on deposits.

The Bank Commissioners reported, in 1860, that the banks were obeying the law. "Numbers of them have heretofore been reported for violations of law, some of which were of a flagrant character."

During the summer of 1861, the circulation of the banks of Connecticut was reduced to a very low figure, but upon the collapse of the western currency it was increased for use in the western States, and reached a greater amount than at any time since 1857.

One of the greatest difficulties with which the New England States had to contend, in respect to banking, was the repetition of the old fraud by which a "speculator" from one of the great cities bought up the charter of a remote and obscure country bank, in order to make an issue of notes which could be used either directly or indirectly in the furtherance of his schemes. Several such cases occurred in Connecticut between 1850 and 1860. They quite altered the aspect of banking in that State, where there had not been a failure of a bank since the Eagle Bank failure in 1825.

.—Upon the recommendation of the Comptroller, in 1845, the State issued bonds to pay the creditors of the banks in the safety fund system which had become insolvent, in order to relieve "the safety fund system from the odium of bankruptcy under which it has been suffering since 1842. The sound banks have been great losers by the swindling operations of some of their associate banks, and already the sum of $1,502,170 of the common fund of all the banks has been paid on account of the redemption of circulating notes of nine banks which have failed."

In his report for January, 1846, the Comptroller gave a history of the safety fund and free banking systems. "The loss to bill-holders, on the supposition that all the securities had been stocks of this State and bonds and mortgages, would have been over sixteen per cent., while the actual loss has been nearly thirty-nine per cent. The loss to the first holders of the safety fund notes was from twenty to twenty-five per cent., and there has been a loss of about four years' interest to subsequent purchasers; whereas, in the cases of the free banks the securities were sold and the proceeds paid to bill-holders, within a few weeks after the failure of the