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INDIANA UNTYEriSTTY STUDIES 



era the directions of commerce were not so constant as they are now. 

 Bankers could not calculate, with much assurance, the probable 

 demands for mone3^ Land purchases made heavy and uncertain 

 inroads on the currency. The construction of costly and unprofit- 

 able lines of transportation deranged circulation. The migration 

 of the people disturbed business; so that localities that one year 

 made large calls for loans the next year made none. It is inac- 

 curate to speak of the banking of that era as a system. The banking 

 of New England, Indiana, and Louisiana was done on general assets, 

 and the notes were redeemable in coin. These bankers have an 

 excellent record and furnish ample vindication of that kind of 

 banking when well managed. The banking of New York under 

 the law of 1838, of Indiana under the Free Banking Law of 1852, 

 and of Illinois and Wisconsin, was done under state supervision, 

 and the circulation was predicated on state bonds. This plan 

 proved a failure, and its adoption in the National Banking Law of 

 1863 was due more to expediency than to an approval of the 

 principle. The experience of Alabama, Mississippi, and Kentucky 

 illustrates banking based on the credit of the state. This currency 

 was the prototype of the greenbacks of the present day, just as 

 the notes of the free banks, based on state bonds, were of our present 

 national bank notes. Banking on the credit of the state proved 

 disastrous as the results in the last named states abundantly prove. 



State banks have a very unsavory reputation among our people. 

 The best of these banks failed to give a uniform circulation and 

 were not as good as those under the present system. The worst 

 were worse than none. Tradition has preserved only the reputa- 

 tion of the worst- 



