BANKS, U. S. 



61 



BANKS OP THE UNITED STATES FOREIGN TEADE POPULATION. 



The great speculative expansion during the 

 decade ending with 1840 bad increased the 

 number of banks by 571, and their aggregate 

 capital by $213,000,000, or a far larger amount 

 than the increase of business as indicated in 

 the sum of imports and exports. The collapse 

 which then took place reduced the capital by 

 $130,000,000, and from that time recovery com- 

 menced. The increase of business was consid- 

 erable up to 1850, and following that increase 

 the bank loans rose $158,000,000, without any 

 increase in capital, thus affording large profits. 

 An interest of 7 per cent, on the loans of 



1843 would give 8 per cent on the capital 

 employed in that year. 7 per cent, on the 

 loans of 1850 would give 13 per cent, on the 

 capital employed in that year, showing an in- 

 crease of 70 per cent, in bank profits. It is 

 therefore not surprising that the banks began 

 rapidly to multiply, not only to partake of ex- 

 isting business, but to compete for the large 

 increase indicated in the sum of the external 

 trade in 1860. 



The following table indicates the increase of 

 loans and circulation according to geographical 

 divisions. 



There is no doubt but that, notwithstanding 

 the apparently large increase of banking up to 

 1861, it was not generally uusound in its oper- 

 ations. At that time, through political causes, 

 the vast trade on which it was based suddenly 

 ceased. The Southern States were producers 

 of an annual value of $400,000,000 of cotton, 

 tobacco, rice, sugar, naval stores, lumber, &c. ; 

 all raw products which they exported and sold. 

 They were not manufacturers or importers to 

 any considerable extent, and the proceeds of 

 their sales were appropriated to the payment 

 of the articles that were purchased at the 

 North. The produce of the West, the manu- 

 factures of the East, and the imports of the 

 Middle States, all found their way south for 

 sale to an extent equal to the production of 

 that region. This vast interchange, with all 

 the ramifications, of raw materials into the 

 hands of manufacturers, and of the completed 

 goods to the consumers, hinged upon bank 

 credits. The political events at the close of 

 1860 annihilated that exchange of commodities 

 and with it the functions of the banks. The 

 condition of all the banks, Jan. 1, 1861, was 

 as is shown in table, p. 62. 



It was inevitable that when the business 

 which called this banking movement into ac- 

 tion ceased, the bank credits should rapidly 

 diminish. "Where the institutions were based 

 simply upon credit as were those banks of circu- 

 lation that had sprung up at the West under 

 the new laws, they were swept out of existence 

 by the revulsion, and those which were pos- 



sessed of real capital found their mean? re- 

 turning upon their hands in great volume and 

 without any regular opening for its employ- 

 ment. This was the case with the Atlantic 

 cities. Their loans were, as the merchants col- 

 lected in their accounts, paid off without the 

 usual amount of new business paper being cre- 

 ated. Hence the discount line ran down while 

 the deposits increased. The above table indi- 

 cates that while the Western and Interior bank 

 circulation increased the most rapidly, the loans 

 or actual deposits advanced to commerce in- 

 creased, in the three cities of Boston, New 

 York, and Philadelphia, $150.000,000 out of 

 an aggregate increase of $284,000,000, for all 

 the banks in the Union. Of an increase of 

 $47,000,000 in circulation, 24,000,000, or one- 

 half, was south and west. When, through 

 the cessation of business, new paper ceased to 

 be created and old was paid as it matured, the 

 advances of the eastern banks returned into 

 their vaults. 



The tables of the official weekly returns of 

 the banks of the cities of New York, Boston, 

 and Philadelphia, throughout the year 1861, 

 showing the weekly clearings in New York, 

 are shown in pp. 63, 64, 65. 



Notwithstanding the large subscription made 

 to the Federal and State loans, amounting to 

 nearly $50.000,000, the loans of all the banks 

 np to August had decreased some $26,000,000, 

 and the deposits had increased nearly $5,000,000, 

 up to the 17th August when the institutions 

 came forward to assist fhe Government. Con- 



