This bank did not suspend in 1857. Its notes bore a premium over all the western notes, and were at five per cent. above those of the State Bank of Ohio in Cincinnati.[1] McCulloch tells us that at that time "there was a tacit understanding between the branches and their customers, that deposits of bank notes were payabIe in bank notes." There was a run for gold on the Bank of the State as long as there was a premium on sending gold from Cincinnati to New York. After three months the bank felt no further strain of the crisis, and was strengthened by going through it.[2] It should be noticed that the revulsion of 1854 was the real crisis in the Ohio valley, and not that of 1857. In the latter year that region was rather in the subdued and chastened condition which follows a crisis.
A convention of representatives of the free banks was held in April, 1860, to concert measures for redemption at Cincinnati. It was found that the interests of banks in different parts of the State were so different, that no agreement could be made. Their only common interest was antagonism to the Bank of the State, and the only common measures on which they could agree were those of war on that bank for returning their notes persistently.[3]
The Bank of the State published a statement December 31, 1861: "Under no conceivable circumstances will the Bank of the State of Indiana suspend specie payments. We have frequently given to the people of the State the pledge that our notes should always be convertible into coin. This pledge we shall in good faith fulfill."[4]
In January, 1862, the branches of the State Bank were warned by the Board of Control not to let hope of profit lead them to expand their discounts on an irredeemable currency. Coin was not to be allowed to fall for more than two days below fifty per cent. of circulation, and all productive investments were not to be increased beyond 175 per cent. of capital. The stock of coin was then $4.3 millions and the circulation $5.8 millions. The bank did not suspend until after the legal tender act was passed.
McCulloch obtained a decision from the Supreme Court of Indiana that it would be lawful for that bank to use legal tender notes in the redemption of its notes, even under the stringent provisions of its charter. Thereupon he put out the circulation again, but proceeded to hoard gold until, in 1863, the gold stock equaled the capital.
The branches of the Bank of the State were authorized, by act of January 19, 1865, to break up their relations with that bank and close up the business, so that they might go over into the national system if they chose. The president of the bank, in his report of January, 1865, said: "There is no disposition on the part of those who control it to abandon the charter to embark in a new and as yet unproved system."[5] The branches made the change one by one during 1865.
The Illinois Constitution of 1848 provided that the Legislature should
