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State Banking Before the Civil War
DAVIS R. DEWEY, PH. D.
STATE BANKING BEFORE THE CIVIL WAR.
STATE BANKING BEFORE THE
I. PAYING IN OF CAPITAL.
Beginning with the period of national independence the earliest banking experiments were founded on specie. The Bank of North America, 1781, was based on specie obtained by the Government from France; and the Bank of Massachusetts had collected in specie $253,500, out of its total capital of $300,000, before it began operation. There was, however, no great supply of precious metals in the country, and when banks began to increase in number it was found impossible to adhere to this conservative rule. Hamilton recognized that it would be impossible to found a great national bank on specie, and so, following the example of the Bank of England, in 1790 recommended the use of government securities. The charter of the First Bank of the United States accordingly provided that only $2,000,000, or one-fourth of the capital subscribed by individuals, should be paid in gold and silver, and the remainder in government stock. Even for this comparatively small amount payment by installments was permitted, and the bank was authorized to begin operations when $400,000 was paid in. This method was repeated in the capitalization of the Second United States Bank in 1816. In nearly all local charters provision was made that the State should subscribe for a portion of the capital, but