moneys between different places, being assisted in its operation by the natural courses of trade, still the people are inundated with paper called bank notes at almost every depreciated rate, one-half to seventy-five per cent."
The important incidents of the period of inflation; in the banking history of the several States, were as follows:
The Legislature of Massachusetts, in 1812, tried to reduce the number of banks by refusing to renew the charters which expired in that year. The New England Bank was chartered June 6, 1813. It constituted another attempt to deal with the circulation of the country notes in Boston, on which the discount was then from three per cent. to five per cent. It undertook to send home these foreign bills, as they were called, to the banks which issued them, at the cost of the operation. This rapidly reduced the discount on the country notes. In January, 1814, it sent certain New York bank notes home for redemption to the amount of $138,874. "This silver Was put into three wagons, which proceeded on their way hither as far as Chester, 14 miles. There they were seized by order of the Collector of New York, commanded back, and the money deposited in the vaults of the Manhattan Bank, of which he was a director. Though a protest was handed to him against such a course as illegal, by the agent, yet he declined to alter his purpose. He assigned as a reason for this procedure that he suspected such cash was going to Canada. Many this way supposed that he was chiefly actuated by dislike to the frequency with which the New England Bank dispatched large sums of the New York bills which flooded Massachusetts, to be redeemed with dollars. On being made acquainted with these facts, the General Court resolved that the conduct of the collector in this respect is a violation of his duty and an infringement on the rights of the New England Bank. They also decided to have the matter laid before the President of the United States, with the expression of their judgment, that the collector had committed an outrage on one of their corporations, ought to relinquish the deposit, and be dismissed from his office. Such application so far succeeded as to have the money restored."[1]
During the war, the banks would not lend to the State, at the risk of increasing their issues. February 6, 1816, an act was passed to compel them to do so when necessity might arise. In the summer of that year, the Dedham Bank issued a quantity of paper in the form of drafts on a bank at Middletown, Connecticut, payable to bearer, which led to an act of December 13, 1816, which enacted that all the notes and obligations of banking institutions should be payable in specie at their own counters. The Court in King vs. the Dedham Bank,[2] held that this law was void as to issues made before its passage. Before that, therefore, these Massachusetts banks had been able to issue drafts which were used as currency. In 1817, notes for less than $1 became very abundant. They were forbidden February 3, 1818.
