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INDIANA UNIYEESITY STUDIES 



Such a banking s^^stem was wrong. If the people were to make a 

 run on this Bank, it would fail as it had done in 1838. Failing, 

 however, was not the greatest wrong banks could do a community. 

 Their power of inflation made it possible for them to run prices 

 up or do^^^l, and so rob the people at their pleasure. The Panic 

 of 1837 was due to paper issues on the specie deposited in the "pet 

 banks." On an average, every specie dollar had eight paper dollars 

 based on it. On a debt contracted in 1836 and paid in 1842, the 

 debtor paid at least double. On a debt contracted in 1830 and 

 paid in 1836, the creditor received only half value. The system, 

 then, that he favored, was one administered by a state officer, under 

 which all people could bank who would deposit securities in state 

 or United States stocks with the state comptroller to secure every 

 dollar of paper issued. No bill should be issued except as signed 

 by the state officers. 



Daniel Kelso of Switzerland county followed Judge Biddle 

 and spoke in favor of a state bank. He would support it, not 

 because he favored it personally, for he opposed all banks, but 

 because his constituents did. Dr. Clark of Lafayette had praised 

 free banks, because they would give a wider circulation, and imme- 

 diately afterward Judge Biddle had praised them because they 

 would curtail circulation. If the first were true, observed the speaker, 

 and they needed a wider circulation then their free bankers would 

 have to find at least $5,000,000 to buy up bonds, and, after that 

 should be done, whence would come the specie for redemption? 

 And would the state always have to remain in debt just to provide 

 capital for free bankers? Five million dollars of bonds would mean 

 $300,000 of interest annually Tvdth no possible gain to the people. 

 If they were to have free banks for the purpose of restricting infla- 

 tion, he would like to inform Judge Biddle that the Indiana cir- 

 culation had not fluctuated nearly so widely as that of New York 

 under free banks. He should be glad to have this whole matter 

 of selecting a banking system referred to the people by a referendum. 

 He felt sure they would not favor free banks. 



Robert Dale Owen of New Harmony favored placing a restric- 

 tive clause in the constitution and leaving all else to the legislature. 

 He was opposed to granting any concession to one man that, on 

 the same terms, could not be granted to any other. Such a power, 

 and the Second Bank of the United States was one, might at any 

 time join with the executive power of the government and rob the 

 people. What, he asked, if President Jackson had joined Biddle, 

 would have become of self-government in the United States? 



