branch of the Bank of the United States held a meeting at Lexington, May 22, 1819, to consider the distressed state of the country and devise a plan of relief; but their real purpose was to "counteract the objects of those who are disposed to suspend specie payments and establish replevin laws."[1]
In June of that year, the gross amount of debts due to the banks in Kentucky was estimated at $10 millions; $5 millions to the Bank of Kentucky, $3 millions to the branches of the Bank of the United States, and $2 millions to the independent banks. County meetings were held to get a suspension of specie payments, more paper money, and an extra session of the Legislature to pass relief laws.
At a county convention in Jefferson County the vote was three to one against approving a suspension of specie payments by the Bank of Kentucky.
In August, 1819, the independent banks refused to do anything but exchange little notes for big ones and vice versa. They nearly all failed before the end of the year.
During the year the Bank of Kentucky became heavily indebted to the Bank of the United States on account of the great advances which the former made to the independent banks. In November, the latter bank ordered the debt to be collected. The Bank of Kentucky suspended and compromised. Its notes were at fifteen per cent. discount. May 4th, 1820, the stockholders of the Bank of Kentucky voted to suspend specie payment. This suspension became permanent and the bank ceased to exist. "What did we tell the people of Kentucky when they littered their banks and were so anxious to introduce the offices of the Bank of the United States?"[2]
The Legislature of 1819-20 showed itself to be a relief Legislature. December 16, 1819, a law was passed over the Governor's veto to suspend for sixty days sales on execution, whether on judgment or on bonds. January 10, 1820, the law of ten per cent. damages on foreign bills of exchange was repealed; a blow at the Bank of the United States. February 10th the independent bank law was repealed. The act has a very long preamble; it states that all men are equal; that there is no monopoly in the social compact; that all power is inherent in the people. These propositions are to lead the way up to the next one which is, that all laws granting privileges to the few are tyrannical and therefore repealable by the supreme authority. To say that charters are irrepealable is to say that abuse must be perpetual. All laws which harm the people are against the social compact, and "are subject on first principles to the condition of being repealed." A bank charter gives privileges to the few. "To the end, therefore, that the good people of this State be delivered in future from the baneful effect of the power and privileges granted by the law establishing independent banks in this commonwealth, which have been exercised in many cases in the plenitude of tyranny, oppression, and abuse, to the great injury of the good people of this State," that act is repealed from May 1st.
