each bank was to issue its own notes only, and all were to make weekly settlements. The Governor might issue bonds at five per cent. for fifteen years to pay the debt of the State to the banks. The lowest note was to be for $5; no dividends might be paid during suspension; no bank might have less than fifty separate shareholders after September 30; all were declared liable to examination by the Legislature; no bank might buy its own stock or loan over thirty per cent. on that stock when it was below par; banks were forbidden to deal in sugar, cotton, or other commodities. Heavy penalties were provided for a breach of each detail in this act.
Perhaps this law grew out of one which was prepared by a bank committee in 1840,[1] but it seems to be, in the form in which it was enacted, the product of one mind. It obviously proceeded from very mature study of the principles and practice of banking, and may justly be regarded as one of the most ingenious and intelligent acts in the history of legislation about banking. Probably it could not have been passed except at just such a crisis in banking affairs. It remained unmodified only thirty days; then another act was passed modifying and softening it in many details. The administrative officers also flinched from the execution of it in all its severity, but, even so, it put the banking of Louisiana on a plane far above that of any other State and held it there until the civil war. The separation of the "Dead Weight" and the "Movement" betrays the same view of banking noticed above,[2] although the bank-note issue was here connected with the active operations and not with the passive investment.
March 11th, the banks protested against vexatious suits, and another law was passed providing for both voluntary and involuntary liquidation. The immediate effect of the law was that five of the worst banks failed at once, and proceedings were commenced against five others. March 14th, proceedings against the Union Bank were suspended, and leave was given to hold a stockholders' meeting in order to decide whether to accept the act reviving the banks, and time was given for this purpose. The purchaser of the Merchants' Bank from the Bank of the United States,[3] who was also the president of the Exchange Bank, appears to have brought it to ruin; for both of those banks failed and he absconded as a defaulter.
The New Orleans banks resumed May 18, 1842. There was a great run upon them and almost a riot. By the 2d of June all but three of them had suspended. Only one of these, the Bank of Louisiana, had any notes out. The report was: "The monetary condition of the city is deplorable beyond description." The city notes were at thirty and thirty-five per cent. discount.[4] During the summer, the sacrifices of property were reported as terrible. In September "there was a bank revulsion at New Orleans, the most severe probably that was ever felt. Its effects extended throughout the Union." Sterling exchange was at twelve and thirteen discount.[5] Probably this great
