banks with $30 millions capital were created, according to the best statistics we have, between 1811 and 1815. A few banks in Maine suspended early in 1814, and the three banks of New Orleans in April. The English having invaded the District of Columbia and burned Washington, in August, the District banks suspended. Those of Philadelphia followed on the 30th, and the other banks of the Middle States immediately afterward. In explanation of this action of the banks, it is stated that a large amount of English government bills had been sold here at a very heavy discount. In his report of February 12, 1820, in which he reviewed the financial history of the last eight years, Secretary Crawford attributed the suspension to bank inflation, small notes banishing specie, and accommodation paper. Isaac Bronson attributed it to the anomalous state of things produced by the war, cutting off intercourse, so that inflation produced no demand for export.[1]
From the time of this suspension the banks of the Middle States entered upon a career of reckless increase of their issues stimulated by the public loans. "It is impossible," said Crawford, "to imagine a currency more vicious than that which depends upon the will of nearly four hundred banks, entirely independent of each other, when released from all restraint against excessive issues."
The banks of New York City agreed to take each others' notes and pay interest on debtor balances monthly. No bank was to increase its loans unless bound to lend to the State, and the debtor banks were to diminish their discounts when the general committee of the banks should recommend that this be done.[2]
The notes of the Connecticut banks disappeared from circulation and those of the suspended banks further south took their place. "At a special session, January, 1815, the General Assembly [of Connecticut] empowered each incorporated bank in the State to issue bills to the amount of one-half the actually paid capital, receivable for all debts due the same, and payable in specie on demand two years after the close of the war. Presidents and cashiers were to make statements semi-annually to the General Assembly of the amounts outstanding at the time of such returns. In October, 1814, the General Assembly had authorized them to issue promisory notes of less denomination than $1 for the payment of money only."
"Our banks now put out bills under two forms, the first promising to pay the bearer dollars in notes of New York banks, on demand at the bank in New York, or in specie two years after the war; and the second promising to pay the bearer dollars two years after the war. Both were receivable for all debts due the several institutions issuing the same. The public named them 'facilities.' Fractional notes ranging from six and a quarter to fifty cents were also freely injected into the currency. Individuals and corporations, barbers and bartenders, as well as manufacturers and capitalists, the solvent and the insolvent, further variegated the
