changed into a plan for "depositing" it with them, subject to recall. In this shape the bill passed, 155 to 38. It provided, at the same time, for the regulation of the deposit banks, for which up to this time there had been no law, in respect to the reception and use of the public money in the future, and also for the distribution of the great treasury surplus then in their hands. There was to be in each State a deposit bank, if a bank could be found which would fulfill the prescribed conditions. Each of these banks was to redeem all its notes in specie and to issue no notes for less than five dollars after July 4, 1836. The other provisions of law as to the bank notes receivable and payable, which already existed, were repeated. If the public deposits in any bank should ever exceed one-fourth of the capital in the bank, it was to pay two per cent. on the excess; and it was to give collateral security for the deposit, if the Secretary called for it. No transfers were to be made from bank to bank by the Secretary, except as the convenience of the treasury should require, and then he was to transfer from one deposit bank to the next nearest, and so on. This was intended to prevent him from redistributing the deposits arbitrarily or by favoritism, and it revoked entirely that power to arbitrate between banks which the Secretaries had gradually assumed by advancing precedents from Hamilton down.[1]
All the surplus money in the treasury, January 1, 1837, over $5 millions was to be deposited with the States, in the proportion of their membership in the electoral college, in four installments,—January, April, July, and October, 1837. The States were to give for these deposits negotiable certificates of deposit, payable to the Secretary or his assigns, on demand. If the Secretary should negotiate any certificate, it was to bear five per cent. interest from the date of assignment; while not assigned, the certificates bore no interest. This large sum of money must therefore be withdrawn from the loans in which the banks had invested it, within a year, and be paid over to the States, most of which were eager to get and use it in their internal improvements.
One of the earIiest forms of speculative mania was that in lumber lands in Maine. This culminated in 1834. The center of it was at Bangor, and the town was so crowded with operators that scarcely a shed could be found for shelter.[2]
Some warning voices were raised early in the progress of the system of inflation. For instance, in the spring of 1835: "A crisis is approaching and is near at hand, to which the panic and pressure of last year will be trifling in comparison. There is a larger sum of money, or rather a larger amount of credit, loaned out in this community, at the present time, than there ever was before. Notwithstanding this extraordinary inflation of the currency the banks continue to discount every note which bears the semblance of responsibility, and as the 'Journal of Commerce' observes, 'everything is dear but money.'"[3] In December, 1835, the money market at Philadelphia
