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Lyman E De Wolf.

Money; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained online

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tions. In the six New England States there were in 1856, 257 ;
in New York, 507 banks and oranches, with a pretended capital
of $114,611,752. .The first Bank which went regularly into
operation in any of the States was established in the city of
Boston, in 1784, where it still exists.

These banks are generally created by special charter, though
" free banking" laws exist in Vermont, Massachusetts and Con-
necticut The " Suffolk bank system," heretofore, has played an
important part in the New England banking system.

The system originated with five banks in Boston, each appoint-
ing each one member of a committee, to superintend and manage
the operations of collecting the notes of foreign banks. An
agent of this committee received, credited and kept an account
of all the foreign money taken by these banks. The expenses
of collecting, keeping an account, as well as the losses on the
foreign money were to be borne by these institutions, in proportion
to the amount received on deposit by each. The entire management
of these operations was eventually placed under the control of
the Suffolk Bank. Each Bank made a stipulated deposit, in the
aggregate amounting to $300,000, on which no interest was paid.
As by degrees, tlie country banks made their deposits, those of
the other banks were from time to time reduced. Tlie Suffolk
Bank redeemed the bills of all the New England Banks deposit-
ing with it at par. Through this agency a working capital of
$1,000,000 is furnished at the mere cost ol the salaries of the clerks.
The annual amount of redemption made is about $350,u00,000.
With a view of taking part of this business. The Bank of Mutual
Redemption was chartered in 1855. The first bank in New
York, was the Manhattan, established in 1799. The number of
banks operating in the State of New York, in 1855, was 311,
capital, $96,381,301. In 1829, the Legislature of New York,
vainly hoping it could alleviate some of the evils of this false
plundering system, instituted what was called " The safety fund-



156

system," by which each bank was required to contribute annu-
ally to a joint fund, equal to one-half of one per cent, upon its
capital deposited with the Treasurer of the State, as a bank-
fund, until it should amount to three per cent, on the capital of
the banks. This fund to be applied in the redemption of the
bills of such as should fail. The failure of ten banks amount-
ing to about $2,500,000, considerably more than swallowed up
the funds, and the system was abandoned. In 1838, a "free
banking law" was passed, permitting any individual, or associa-
tion to engage in banking, by depositing with the State
comptroller the stocks of the United States, or of any State,
which were equal to five per cent, stocks; and bonds and
mortgages on real estate worth twice the amount of the mort-
gages over and above all buildings thereon, and leaving interest
at the rate of six per cent., per annum. On receipt of such
securities, the parties furnishing the same were to i-eceive an
equal amount of notes numbered, registered and signed. But
here again the chronic difficulties of banking invaded this system.
It was found, these securities were not "convertible," and in
1840, two years after the passage of the Act, the law was so
amended as to require stocks of either the United States or of
New York, or bonds and mortgages were required as security.
"Weekly returns of the condition of the banks, in the City of
New York, are required to be published, and in 1853, a clearing
house was established in that city.

General banking laws, or "free-banking," has been instituted
in New Jersey, Virginia, Indiana, Illinois, Wisconsin, Tennessee,
Louisiana and Pennsylvania, they have so far simply proved
stupenduous swindles. They were pretty effectually wiped out
by the late rebellion, in tlie new States, to be replaced by a new
breed of " Wild Cats," under national authority popularly
denominated " National Banking." The whole number of State
banks, in 1860, amounted to 1,600.

The following will illustrate the manner in which the " con-
vertible" and reliable gold-base mixed currency is put into circu-
lation, and the people soundly pi'otected against the evils of an
" irredeemable " State-cui-rency : A committee appointed by the
Legislature of Rhode Island, to examine into the irregularities
committed by the official Board of " The Farmer's Exchange
Bank of Gloucester," among other things report: That the
Bank was incorporated in 1804. The capital stock was $100,000,



157

divided into two thousand shares, fifty dollars each, payable in
seven instahnents, in gold or silver. Some stock-holders paid
their shares, others part, and gave their notes for the residue.
The Directors lodged the amount of their first instalment, but
received the amount a few days afterwards in bills on their
individual notes without security. They then gave five notes
without indorsers, for the five first instalments payable on
demand with interest; for the two last no payment was made or
security given. The said notes remained in the Bank until the
Directors transferred their stock, when they were delivered up,
in the manner hereinafter mentioned.

The Directors were the holders of one hundred and three
shares each, and in this manner did the Farmer's Exchani^e Bank,
which by the charter was to consist of two thousand shares,
commence its operations with only six hundred and sixty-one
shares, on which any payments had been made in gold and
silver, agreeably to the express provisions of the charter; and
the whole money paid into the Bank at anyone period whatever,
on the said six hundred and sixty-one shares, amounted to nine-
teen thousand one hundred and forty-one dollars and eighty-six
cents.

'•Prior to the 29th of March, 1808, sundry stock-holders,
holding four hundred and fifty shares, transferred them to the
Directors of said Bank. No money, or other consideration
whatever, was paid by the Directors with their own property to
any of the stock-holders who so transferred their shares, but they
were uniformly paid for with the property of the corporation.
Most of the said stock-holders were indebted to the Bank in
notes, and to them their notes were given up, and if their shares
exceeded the sura due from them to the Bank, the balance was
paid out of the Bank with the property ot the said corporation ;
and none of the said Directors, or any person whatever, was
debited for the said sums so paid, or for the notes surrendered."

On the third day of June, 1805, the Board of Directors
passed a vote permitting each Director to take out of the Bank
200 dollars for the purpose of exclianging the same. The said
Directors have never paid or accounted for said money to the
Bank.

When the Bank first commenced its operations, the capital
paid in including the money paid by the Directors, and which
was soon after repaid to them, as herein before stated, amounted



168

'to the sum of eleven thousand eight hundred and six dollars and
sixty-one cents ; when the Directors had as before stated, taken
back in bills the amount they had paid in specie for their first
instalment. The capital stock really paid in, amounted to only
the sum of three thousand and eighty-one dollars and eleven
cents."

" The Directors never declared any certain dividend of the
profits of the Bank, but once a year paid to the stock-holders
interest, generally at the rate of eight per cent, per annum, on
the sums they had respectively paid in, and the residue amount-
ing in some years to one hundred and thirty dollars each, the
Directors divided among themselves.

" According to the books containing the weekly state of the
Bank, there were several periods when the amount of bills in
circulation far exceeded the amount of notes due the Bank; for
instance, on the twenty-fifth day of March, 1805, the amount of
bills in circulation was seventy-two thousand two hundred and
eleven dollars, and the amount of debts due the Bank, was fifty-
three thousand two hundred and seventy-five dollars ; at some
periods, anterior to the 29th day ot March, 1808, the Bank had
in circulation from sixty to seventy thousand dollars. On the
28th day of March, 1808, there was in said Bank, in specie and
bills of other Banks, three hundred and eighty dollars and fifty
cents, and the Bank had twenty-two thousand five hundred and
twenty-four dollars of their own bills in circulation."

" Under this system, the Bank continued in operation about
four years ; and then eleven of the Directors transferred their
interest in the institution to the agent of Andrew Dexter, Jr., of
Boston. Each of the Directors received thirteen hundre«l
dollars, on consideration of his transferring his shares ; and
each of them received back the notes he had given for instal-
ments, the whole principal and interest whereof were then due
to the Bank. The thirteen hundred dollars were paid to some
of the Directors by notes signed by Simon Smith, and John
Harris, as principals, and Andrew Dexter, Jr., as surety; to
others by surrendering them notes given by the Bank for money
borrowed, and to others by giving them the notes of individuals
which were the property of the Bank. It appears that all the
money paid to the Directors, was paid out of the Bank with the
property of the corporation, except that thei-e is charged to said
Dexter, three thousand seven hundred and eighty-five dollars and



159

ninety-five cents paid on that account." Dexter thus got control
of the institution, and having a Board of Directors disposed to
favor his views, he got from the Bank, at divers times in the
course of the year, its bills to the amount of seven hundred and
sixty thousand two hundred and sixty-five dollars, and there
was paid to sundry persons for his use, three thousand seven
hundred and eighty-five dollars and ninety-five cents."

"From the first connection of Dexter with the Bank, he
appears, by himself and his agents, to have had the entire con-
trol and management thereof; all his schemes and plans, how-
ever wild and extravagant, were adopted and carried into
execution without reserve ; those of the Directors who still
pretended to superintend the concerns of the Bank, took no care
whatever to guard the interest of the stock-holders or the
public."

Dext^sr was furnished with as much money as he thought
proper to demand, and prescribed his own terms as to the
security he gave, the rate of interest, and the time and manner
of payment, the greatest secrecy was used respecting his nego-
ciations at the Bank to prevent the public from being alarmed at
the immense sum of money which was so suddenly put in
circulation ; and at the request of Dexter, the cashier signed the
bills secretly and chiefly in the night. Dexter never gave any
security whatever, except his own name, for any money received
bjf^ him from the Bank. For the first sums delivered, Dexter
gave his receipts, for other suras he gave receipts to the follow-
ing purport : that he would employ the money as their agent
for their benefit, paying them six per cent, interest therefoi", and
redeeming the bills by paying specie as otten as they returned to
the Bank ; after these receipts had been standing for some time,
they were taken up by Dexter, and a note given by him for the
whole amount of the tenor and efiect following : '• I, Andrew
Dexter, Jr., do promise the President, Directors and Company

of the Farmer's Exchange Bank, to pay them on order

dollars, in two years from the date, with interest, at two per
cent, per annum ; it being however understood that said Dexter
shall not be called upon to make payment, until he thinks proper,
he being the principal stockholder, and best knowing when it
will be proper to pay the same." The said note was afterwards
given to Dexter, and a note given by him for five hundred and
seven thousand seven hundred and seventy-one dollars, bearing



160

date on the 30th of November, 1808 ; all the money received by
Dexter after that time was delivered to him by order of Harris
and Fairbanks, the last of which was delivered on the ninth of
February, 1809, for which Dexter gave his notes, which are now
remaining in the Bank; one bearing date on the 4th of Novem-
ber, 1808, for three hundred thousand dollars, one bearing date
on the 30th of the same month for thirty-two thousand dollars,
and one bearing date on the 12th day of December, 1808, for
six thousand dollars ; all which notes amount to the sum of eight
hundred and fifty-five thousand, seven hundred and seventy-one
dollars, payable in eight years from their respective dates, bear-
ing interest at and after the rate of two per cent, per annum.

"Out of the amount above stated, as due from the said
Andrew Dexter, Jr., to the Bank, ought to be deducted certain
drafts or orders drawn, on said Dexter, by the Cashier, to take
up the bills, at different times returned to the Bank, so lar as the
said drafts or orders have been paid by said Dexter, the amount
of said drafts or orders, according to the books of the bank,
still outstanding and unsettled, is two hundred and four thousand
and five dollars, but of this sura the committee have no means
of ascertaining what part has been paid by the said Dexter.

"In December, 1808, the credit of the Bank had become very
low, and the bills were selling at a large discount, but the said
Andrew Dexter, Jr., and the other persons who managed the
affairs of the Bank, instead of putting a stop to the emission of
their bills, and making some provision for the payment of those
in circulation, redoubled their efforts to circulate sums to
a large amount, when at the same time they refused the payment
of the smallest sums at the Bank.

"The President and the cashier were incessantly employed in
signing bills, and Dexter was continually urging them to sign
bills as f\ist as possible, telling them that everything depended
on his having them very speedily ; that if they were not soon
finished, he should not be able to dispose of them, and at that
time he should be able to sell some of them very well. The bills
were made with so much precipitation, and the officers of the
Bank were so much pressed for time, that &aid bills were in
some instances sent to Boston without being dated or num-
bered.

" There is now in said Bank, eighty-six dollars and forty-six
cents of specie. On the 9th of February, 1809 there had been



161

emitted by said bank six hundred and forty-eight thousand and
forty-three dollars of their bills, according to their books, owing
to the extreme confusion in which their mode of keeping their
accounts has involved all their transactions, it is impossible to
ascertain with precision the amount of their bills now in circula-
tion ; but from the enquiries and examinations made by the
committee, they are of the opinion that other bills of said bank
now ill circulation, amount to the enormous sura of live hundred
eighty thousand dollars."

From the testimony of the cashier, which is appended to the
report, it appears that the emission of six hundred and forty-
eight thousand eight hundred and forty-three dollars bank-bills,
spoken of by the Committee, took place between the 29th of March,
1808, and the 9th of February, 1809, and that previous to the
first mentioned date, the bank had bills in circulation to the
amount of forty-five thousand eight hundred and twenty-one
dollars.

The history of the Farmer's Bank of Gloucester, shows what
cunning men can do, when they have a legislative charter to work
with. When the explosion took place, other New England
Banks exliibited proof that they had been trading on the same
principles, though none we believe to the same extent.

Another specimen of a mixed currency, based upon specie,
will be found in the case of " The Sutton Bank, incorporated
March llth, 1828. The Act provided that the capital-stock of
said corporation shall consist of one hundred dollars in gold and
silver, to be divided into shares of one hundred dollars each,
which shall be paid in the manner following, viz. : one-half part
on or before the first day of October (then) next, and the remain-
ing part thereof, on or before the first day of March, in the year
of our Lord, one thousand eight hundred and twenty-nine. It
further provided, "that no moneys shall be loaned or discounts
made, nor shall any bills or promissoiy notes be made or issued
from the said Bank, until the capital actually paid in, and exist-
ing in gold and silver in said vaults, shall amountto fifty thousand
dollars, nor until the capital-stock, actually in said vaults shall
have been inspected and examined by three Commissioners, to
be appointed by the Governor for that purpose, whose duty it
shall be, at the expense of the said corporation to examine the
money actually existing. in said vaults, and to ascertain by oaths
of the Directors of said Bank, or a majority of them, that the



162

said capital-stock hath been honafide paid in by the stock-holders
of said Bank, and towards the payment of their respective
shares, and not intended for any other purpose, and that it is
intended there to remain as part of said capital."

On the 26th day of September, 1828, the Governor in com-
pliance with an application for that purpose, made by a com-
mittee of the subscribers for stock in said Sutton Bank, appointed
commissioners to examine the moneys actually existing in vaults
of said bank as is provided in the second section of their Act -
of incorporation. On the 27th of September, 1828, the Sutton
Bank borrowed, on a deposit of fifty-one thonsand dollars in the
bills of the City Bank the sum of fifty thousand dollars in
specie for one day only; this same specie was examined by the
Commissioners, and the following certificates made out, viz. :

" We, the subscribers, Commissioners appointed for that pur-
pose, have this day been shown, and have examined fifty
thousand dollars in specie, in the vaults of the Sutton Bank,
which was paid in by the stockholders as their first instalment,
agreeably to their Act of Incorporation, passed the eleventh day
of March, 1828.

September 27th, 1828.

Jonathan Leland, ")

Amasa Roberts, V Commissioners.

Samuel Wood, J

"Suffolk, ss. Boston, Sept. 27th, 1828.

Then personally appeared Hezekiah Howe, Jonas L. Sibley,
Joshua W. Leland and Thomas Harback, being a majority of
Directors of Sutton Bank, and made oath that fifty thousand
dollars in specie by them shown in their vaults, was the first
instalment paid by the stock-holders of the Bank towards the
payment of their respective shares, and not for any otht'r pur-
pose, and that it is intended therein to remain a part of said
capital. Before me,

Eliphalet Williams, Just. Peace.''''

"The bills and specie were then re-exchanged; the whole
business accomplished in an hour, and all of it done within %
the walls of the City Bank, in the City of Boston."

We might continue to give instances of a similar character,
until a volume three times the size of the present one, would be
filled, and still not begin to exhibit a tithe of this fraudulent
system. Indeed the only way this subject could be exhausted



163

would be by giving the history of every bank instituted since the
organization of the Government down to the present moment.
Out of the whole list not an instance can be foimd where a bank
has been instituted upon 2kbonaJide cash-capital. The instances
here given of the mode of forming banks upon a specie-basis,
are much more than a fair ordinary average of the whole system.
We do not deem it necessary, either to continue this branch ot
the subject further, or to give a more specific unfolding of the
manner in which the currency circulation of the country is
sustained, without anything more than the nominal capital we
have here shown to be its base, until we have unfolded the
present so called "National Banking" system. The former
system was merely a sham and a fraud — this is an organized
system of National robbery, copied from the English, and the
most stupenduous swindle the world has ever beheld. The Eng-
lish system as will be seen, is a mere huckster establishment beside
it — their banking based on bonds, is £14,000,000, or about
$70,000,000, ours $300,000,000, and our interest is about double
that of England.

The following are some of the leading provisions of the so
called " National Banking " Act :

Sec. 1 provides, That the chief officer of the Bureau of Cur-
rency shall be styled " the Comptroller of the Currency,^'' and
shall be under the general direction of the Secretary of the
Treasury. He shall be appointed by the President, upon the
nomination of the Secretary of the Treasury with the advice and
consent of the Senate. Terra of office, five years, unless sooner
removed by the President with consent of the Senate ; salary,
five thousand dollars per annum. To have a deputy, who shall
be appointed by the Secretary of the Treasury, with a salary of
two thousand five hundred dollars; the Comptroller is empowered
to employ the necessary clerks to discharge such duties, as he
shall direct, which clerks shall be appointed and classified by
the Secretary of the Treasury. The Comptroller and deputy
shall take the oath of office prescribed by the constitution and
laws of the United States and give bonds, the former, one
hundred thousand dollars, and the latter fifty thousand dollars,
with security approved by the Secretary of the Treasury.

Sec. 11 and 46 Confers on every association organized under
this act, general banking powers, and authorizes the taking or
receiving of such rates of interest as may be fixed by the laws



164

of the States and Territories in which such banking association
may be located, and provides that such rates of interest may be
taken in advance.

Sec. 16 and 41 provides, That every bank, organized under
this act, upon depositing with the Secretary of the Treasury
United States six per cent., interest bonds, shall receive from
the Comptroller circulating notes equal in amount to ninety per
cent, of the current market value of the bonds deposited, but not '
to exceed the par value thereof; and that every association shall
keep on hand, in lawful money of the United States, twenty-five
per cent, of its outstanding notes of circulation for the redemp-
tion thereof: Provided^ That clearing house certificates and
balances due from other associations, in good standing, and
subject to sight draft, may be counted as part of such reserve to
the amount of three-fifths thereof

Sec. 17 provides. That the entire circulation shall not exceed
three hundred millions of dollars, one-halt of which is to be
apportioned to the several States and Territories, according to
their representative population, and the remainder is to be
apportioned by the Secretary of the Treasury among the States
and Territories, paying due regard to the existing banking
capital, resources and business of such States and Territories.

Sec. 26, 2 7 and 28 provides. That when any bank shall fail or
refuse to redeem its circulating notes with lawful money, (legal
tendei*. Treasury notes,) the Comptroller may declare the stocks
pledged forfeited to the United States, or so much thereof as
may be necessary to redeem its circulation, and pay its circulat-
ing notes out of the United States Treasury ; or he may sell
such stocks at public auction, in the city of New York; or he
may, if in his opinion the interest of the United States would
be promoted thereby, sell such stocks at private sale, and receive
therefor either money or the notes of such failing association:
Provided., no such bonds shall be sold at private sale for less than
their par value, nor for less than their current market value at
the time of sale.

Sec. 18 and 19 provides, That the Comptroller, under the
direction of the Secretary of the Treasury, shall procure the dies
and plates for printing the notes for circulation, and print and
deliver the notes to the banking association, and all expenses
incurred thereby shall be audited and paid as contingent expenses
of the treasury department. And for the purpose reimbursing



165

the same, and all other expenses incurred under this act, and in
lieu of all taxes upon the circulation authorized by this act, or
upon tlie bonds deposited for the security of the same, the asso-
ciations organized under this act, shall pay annually to the
Comptroller, in lawful money, (Treasury notes,) one-half of one
per cent, on the amount of circulating notes received by such
association.

Sec. 54, Authorizes the Secretary of the Treasury to employ


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Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 16 of 19)