five per cent. of the value, good at the clearing house. The certificates were to bear seven per cent. interest, which was to be divided amongst the banks which should take them. The amount was set at $5 millions; afterwards increased by $5 millions more. The specie of all the banks was to be united as a common fund. Each bank was to hold specie, after February 1, for one-fourth of its net liabilities. One which failed so todo for two weeks was to be excluded from the Association. The Chemical Bank refused to participate in the plan. It was boycotted until April.[1]
In December specie was received from Europe, the news of the financial difficulties here not having created any alarm. The exchange was very low; commercial bills were not salable unless of the best, and the exportation of the crops was arrested until these sums were received. Specie was also received regularly from California. The policy of expansion in the face of the panic proved entirely successful. The crisis passed and the winter went by without any further difficulty, although there was anxiety, and all enterprise was checked. The community with one accord adopted the policy of liquidation, quiescence and cash, while waiting to see what would happen.
In January, 1861, sterling exchange was down to 103 1-2. During the summer it remained between 104 and 108, and did not reach par until December.
During the year the banks of the three leading commercial cities showed the same movement. In New York the loans diminished from $129.6 millions, on January 5, to $108.7 millions August 17th. Then they increased to a maximum of $162.7 millions on November 30th, and were at $154.7 millions December 28th, when the suspension took place. Circulation likewise diminished from $8.6 millions at the beginning of the year to $8.3 millions, July 27th, and rose again to $8.4 millions December 28th. The minimum point was $7.9 millions, January 26th, and the maximum, $9.3 millions May 11th. The deposits rose until April 20th, fell to their lowest point June 22d, but rose again very rapidly in the last three months of the year. The specie stock increased from January until the middle of August, doubling in that period; but then gradually fell off again and ended the year less than $5 millions greater than at the beginning.[2]
The banks of Boston offered to the Governor, April 18, 1861, such monetary aid as he might need, to the extent of ten per cent. on their capital. The restriction of business had set their resources free.
August 15, 1861, the Associated Banks of New York, with the banks of Boston and Philadelphia, entered into a contract with the Secretary of the Treasury to buy government securities to the amount of $150 millions, in three instalments of $50 millions each. The Associated Banks of New York adopted a system for executing this contract, and at the same time protecting their own position. Amongst the rest it was provided that the specie stock should not be allowed to fall below one-fourth of the
