Page:A History of Banking in the United States.djvu/465

 In 1858, the Bank of the Ohio Valley was planned, to establish a modified Suffolk system of exchange at Cincinnati for the banks of that entire region. The following description of its purpose is taken from a letter of the president: "In exchange between the seaboard cities and the West, speculation had so controlled the rate of premium as to become a serious evil to the banks of Ohio, in common with those of Indiana and Kentucky. In order to exercise some control over those exchanges, a few gentlemen connected with the banks of Ohio, under the free banking law of 1851, organized this bank and made for it, so acquiring corporate form, a contract with the State Bank of Ohio, by which (in brief) the branches of said bank were to deposit with this bank an amount equal to four per cent. upon their authorized circulation, free of exchange interest; conditioned that this bank should sell the exchange upon eastern cities it could create, at, or a less rate than, onehalf per cent. premium."

An example of a bogus bank is mentioned in Ohio, in 1859. It had paid $165 for a plate, and a quarter of a cent on the dollar for printing, but had given $1,900 to the publisher of a bank note detector to "quote the money right." They had not wasted any of their "capital." They had expended it where the return on it would be greatest. This is not the only evidence we meet with that the high function of the "Detector" under this system was used for revenue.

.—In 1848, the only bank reported was the Michigan State Bank, with a circulation of $216,526; coin, $61,965; total cash items, $151,362.

In the Constitution of 1850, it was provided that no banking law should have effect until it had been submitted to a popular vote and approved by a majority. Stockholders of every banking corporation issuing circulating notes were made individually liable for debts contracted while they were such. All bank notes were to be registered and stock security deposited for them. Note holders were to be first preferred creditors. No law might ever be passed authorizing or sanctioning the suspension of specie payments. A two-thirds vote of both Houses was required for altering or amending any act of incorporation previously granted, and no such act might be renewed or extended. In 1860, the individual liability of stockholders was made proportionate to their shares in the capital. By an amendment adopted in 1862, no corporations might be created by special act. General laws for creating them might be amended, altered, or repealed, "but the Legislature may, by a vote of two-thirds of the members elected to each House, create a single bank with branches." No general banking law was to have effect until it had been approved by a popular vote.

.—Four new branches of the Bank of the State were established, January 10, 1849, with a capital of $160,000 each, of which the State was to subscribe, in each case, not less than $60,000.

By the Constitution of 1851, the Legislature was forbidden to establish