will appear below that the State interest in these institutions before 1837 had been very much extended. In the party politics of the time it was very important to make a decision which should be popular in Kentucky (Clay's State), and also in the other States which were interested in Banks of the State. It seems safe to say that political considerations entered largely into the decision; but it is also true that the educational effect which the current banking system exerted on the minds of the people was discernible on the Bench. As the Court was now strongly Jacksonian, it was a remarkable anomaly that they should have declared the Bank of the Commonwealth of Kentucky constitutional, when their party was assailing the Bank of the United States, on the ground that it was unconstitutional.
The law, so far as the Constitution of the United States prescribed it, was now decided to be that States alone, in the strictest sense, may not issue bills of credit. The United States may; banks, municipalities, associations, and individuals may.
We may now turn our attention to the measures of liquidation and relief adopted by the other States of the Mississippi Valley at this time.
Tennessee, fearing the oppression which Kentucky was suffering from the Bank of the United States, laid a tax of $50,000, in 1817, on any one who should engage in banking in the State without the authority of the same. In the following year a petition was addressed to the Bank of the United States by citizens of Nashville, asking it to establish a branch in spite of the law. The reply was that the Bank had ample occupation for all its capital, and that it could more conveniently test the right of a State to tax it elsewhere.[1]
The banks of this State stopped payment in 1819. Although there was no office of the Bank of the United States in the State, the banks made use of the current excuse for suspension and attributed it to emissaries of the Bank.[2] No doubt it had transactions there. Senator White said that the people of that State had never been accustomed to the punctuality which the great Bank enforced. Thirty years later it was said of them: "Although the planters are the safest and most infallibly solvent class of customers, it is impossible to induce them to observe punctuality."
An extra session of the Legislature was called in June, 1820, on account of the distress. The Governor recommended a property law, saying that his observation of that of 1809,[3] had led him to believe that such a law, although to be used carefully, might be very beneficial.
In compliance with these recommendations, the Bank of the State of Tennessee (No. II.) was incorporated July 26, 1820, "for the purpose of relieving the distresses of the community and improving the revenue of the State." It was to be established "for and in behalf of the State of Tennessee." Its seat was to be at Nashville, with a branch at Knoxville to
