32 The Financial History of Connecticut. 



A vicious circle was the inevitable result. Larger payments by the 

 national government involved larger investments in six per cent 

 stock and the process repeated itself. This fact and the additional 

 fact that there would be an increasmg scarcity of such stock in the 

 market because of the steady purchase of the same by the United 

 States government would make the continuation of such purchases 

 difficult and expensive. The comptroller, therefore, recommended 

 that the reinvestment of the funds received from the United States 

 for reimbursement of the principal be extended to bank stocks as 

 well as to the stock of the United States and that the state should 

 avoid, if possible, further purchase of the six per cent stock. When- 

 ever it became necessary to purchase both six per cent stock and 

 three per cent stock in order to get the latter, he advised that the 

 former be sold as soon as possible and the proceeds reinvested in the 

 three per cent stock.i The comptroller made the further suggestion 

 that inasmuch as all the United States stock held by the state, except 

 that credited to it in payment of the balance due from the United 

 States, was transferable, the state should sell the transferable portion 

 of its six per cent stock and invest the proceeds in bank stock and 

 three per cent United States stock.^ The general assembly did not 

 act on this advice until the following year. At the May session in 

 1803 it voted to accept the proposal of the stockholders of the Hart- 

 ford, New Haven and Middletown banks that the state subscribe 

 to the capital stock of each of these banks, in proportion to their 

 capital, the money already accrued or that should accrue from the 

 reimbursement of the six per cent United States stock belonging 

 to the state. This act directed the treasurer to subscribe to the 

 stock of the above mentioned banks, and also to the stock of the 

 New London and Norwich banks, if their stockholders should accept, 

 within a month after the rising of the assembly, the terms of the 

 act. The act also included a condition that the state should receive 

 the same dividends as other shareholders. The state reserved the 

 right to withdraw, on six months' notice, the whole or any 

 part of the money thus invested and also the privilege of sub- 

 scribing other state money upon the same terms. All shares held 

 by the state under this act were to be non-transferable.^ This 

 was the origin of the state's investment in bank stock. As a con- 

 sequence of this change of policy, no United States stock was pur- 



1 Compt. Report (Ms.), May 1802, pp. 3—5. 



2 Idem. 



3 Conn. Laws, May 1803 p. 635. 



