FEDERAL BANKS AND FINANCIAL ORGANIZATION 57 



had been granted for tweiit^^ years. The Bank of the United States 

 therefore went into liquidation in 1811. The interests of the State Banks 

 were not without influence on such outcome. These banks had numbered 

 three in 1790 but in 1800 there were eighteen of them and their capital 

 amounted to .?2i,300,ooo, while in 1811 they were eightj'-eight and had 

 a capital of $42,600,000. 



The State funds had therefore again to be entrusted to the local banks. 

 But after the second War of Independence (1812-1814) and during Mon- 

 roe's presidency Congress submitted to necessity and consented in 181 6 

 to the creation of a second Bank of the United States.* Its capital was 

 fixed at $35,000,000 which sum limited its circulation. Of this capital 

 the government subscribed $7,000,000 in specie, and three fourths of the 

 balance — namely $28,000,000 were subscribed in the funded debt of the 

 State. Five of the twenty-five directors were appointed by the president. 

 The bank was obliged to transfer the public funds of the government from 

 place to place without commission. In return for the privileges granted 

 in the charter the bank was obliged to pay $1,500,000 in three equal in- 

 stalments to the United States, and the United States undertook to estab- 

 lish no other bank under federal charter except in the District of Colum- 

 bia. Congress was given the power to inspect the books of the bank. The 

 new bank like its predecessor encountered political difiiculties : in 1836 

 it failed to secure a renewal of its corporate powers under a federal charter 

 and its interest as a fiscal institution of national importance ceased. A 

 strong political party supported President Jackson in the opposition to 

 the bank wliich led to its fall. State banks were subsequently carefully 

 selected to hold the funds of the government, stringent conditions being 

 imposed as to securities. But frenzied speculation in land in the Western 

 States led President Van Buren in 1837 to call an extra session of Congress. 

 He reviewed the situation and proposed to establish an independent trea- 

 sury system through which the government might in the future care for its 

 own funds. The sj'stem involved the institution of centres of deposit and 

 sub-treasuries : established at this time, it was afterwards repealed but in 

 1846 it was definitely adopted. The principal centres of deposit were at 

 New York, Philadelphia, Washington, Charlestown, New Orleans and St. 

 lyouis. The chief advantages of the system were that it created a new de- 

 mand for specie, limited the expansion of bank paper money, avoided the 

 disturbance of business following on government association with banks, 

 prevented losses to the government, and gave to the Treasury a constant 

 control of its funds. These advantages were realized during the panic of 

 1857, when the national government was able to meet all its liabilities 

 although the State governments were gravely embarassed. 



The system of sub-treasuries is still in force but has been amended to 

 allow surplus funds to be deposited in the National Banks. 



b) The State Banks and the National Banks. 



On I January' 1862 there were in the United States 1496 banks issuing 

 circulating notes, possessing an aggregate capital of $420,000,000 and 



