excluding deposits from banks and brokers. By these means it was hoped the business could be brought within reasonable limits. At the same time the permanent deposit of the Boston banks was reduced to $10,000; and in May, 1835, a further reduction was made to $5,000."
"During the winter of 1835-6 thirty-two new banks were chartered in Massachusetts, making a total increase of 78 new banks in this State during a period of six years, or more than double the number of banks in operation in 1830. And nearly the same ratio of increase took place in the number of banks in the New England States. In 1830 they numbered 169; in 1837, they numbered 321. Many of these banks were started with little or no real capital; specie was borrowed for one day to be counted by the Bank Commissioner, and on the next it was replaced by the notes of the stockholders. The bills of these banks, loaned in violation of the usury laws at high rates of interest, were used in the wildest speculations. The country was flooded with them, and specie was becoming scarce. The ratio of specie to deposits and circulation had fallen to one to thirteen and a-half, or less than seven and a-half per cent., the smallest then ever known. These bills poured into the Suffolk Bank for redemption; and in April, 1836, it sent a circular letter to 44 banks, whose accounts were overdrawn in the aggregate sum of $664,000, saying that it would send their bills home."[1]
In March, 1836, the Massachusetts Legislature allowed banks to issue post-notes to an amount not exceeding fifty per cent. of the paid-up capital, provided they issued no notes less than $5. This was repealed February 1, 1838. The tenor of the post-notes was: the bank promises to pay A. B. or bearer $1,000 in 7 months, with interest at the rate of four and one-half per cent. per annum until due and no interest after. This privilege was principally used by weak banks.[2]
This was properly a bond because it bore interest, but the term post-note was used at this time for notes which bore interest or did not, often producing serious confusion.
In 1836, a memorial was addressed to the Massachusetts Legislature for a Bank of the State, to have $10 millions capital, and the Banks of the State in Louisiana and Alabama were pointed to as models. "The wants of this community require the establishment of a bank with a capital sufficient to do the business which has heretofore been done by the Branch Bank of the United States." "It is proposed to establish a bank of $10 millions, onehalf of which is to be subscribed by the State, and borrowed in Europe on State scrip, bearing interest at four per cent. per annum, redeemable in twenty years; and the other half to be subscribed by individuals.
"This scheme is based on the supposition that money can be borrowed in Europe, on the credit of Massachusetts, at four per cent. per annum, and that the difference between the interest paid by the State, on the money borrowed, and the dividend received from the bank on $5 millions bank
