any association to do banking of any kind unless authorized by law. The penalty was $1,000; the notes were void. All such associations then existing were to dissolve by March, 1800. The period was one of great prosperity in New England, but in 1800 we hear that, "the tide of wealth which had flowed so long has considerably ebbed, and the effect of this change has become visible in everything. Property has fallen in price. Real estates especially are not worth so much by 20 per cent. as three months ago."[1]
Although nearly every charter for a bank in Massachusetts required the bank to report annually or semi-annually, "few seem to have paid any attention to these provisions." A general act of 1803 led to systematic reports. A law of 1799 in that State had made it illegal to emit notes for less than $5, but in 1805 they were allowed for $1, $2, and $3. This measure was in obedience to a popular demand and was to be temporary only. Besides the branch of the United States Bank, there were then twenty-one associations for banking in Massachusetts, which were privileged to issue $13 millions.[2]
In the first years of the century there was a great multiplication of country banks in Massachusetts, Maine, and New Hampshire. Their notes all flowed into Boston and displaced the circulation of the Boston banks. A double currency was thus introduced, one called foreign money or current money, and the other Boston money, differing by about one per cent. which was construed as a premium on Boston money. The brokers dealt in these currencies, reserving a quarter of one per cent. commission. The country issue then became excessive and the brokers sent it home. Hence it came about that a bank was profitable in proportion to its distance from Boston and the difficulty of access to it. The favorite locations became remote parts of Maine and New Hampshire. In order to equalize and extend the circulation of foreign bank notes the Boston Exchange Office was incorporated in 1804, its capital consisting of such notes and its business being done with them. It was not very successful. The brokers sent home the bills of the nearer banks and the discount on the currency continued to increase as the bills of the more distant banks predominated. Andrew Dexter, having studied the operations of the Exchange Bank, undertook the control and monopoly of the circulating medium of New England. He bought up at a great premium nearly the whole stock of the Exchange Office and of several distant banks in Maine, Berkshire, and Rhode Island. With these funds he bought real estate and built the "enormous pile, since destroyed by fire, known by the name of the Boston Exchange Coffee House." This immobilized his capital. The discount on country bank notes increased and the country banks invented ingenious ways of defeating and delaying payment.
In the autumn of 1808 the Boston merchants raised a fund for the purpose of sending home the country notes for redemption. The discount was from
