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INDIANA UNIVERSITY STUDIES 



proof of this. Moreover, without coUateral security, no billholder 

 would be safe. It was folly to think that any banker was going to 

 lock up one dollar in specie for every paper dollar he should issue. 

 Incorporated banks usually kept on hand about one dollar in specie 

 for three ot circulation, and this ratio was entirely in their own 

 hands. The conclusion was plain. History bore them out. The 

 losses in the United States due to irresponsible banking were reckoned 

 by hundreds of millions. No such disasters could occur under a 

 properly guarded system of general banking. New York had been 

 the first to try this. Her law was enacted in 1838. Time had 

 cured some of its defects. At first, it had permitted any state 

 stocks, equal to New York fives, to be deposited. It had also 

 allowed one-half the deposits to be real estate mortgages. It had 

 failed also, at first, to provide for the individual liability of the 

 stockholders. Out of one hundred and four banks, opened under 

 the New York law, with a capital of nearly $10,00@,000, thirty-one 

 had failed, with less than $1,500,000 capital." These, when settled 

 up, had paid seventy-six cents on the dollar and had caused a total 

 loss of only about 1300,000. This loss was small in comparison 

 with the losses in Mississippi, Louisiana, and Arkansas under the 

 state bank plan. But the New York convention had corrected the 

 defects in the constitution of 1846. The current report from the 

 New York Banking Department, issued by Millard Filmore, showed 

 no further loss. Under the reidsed system, not one dollar had been 

 lost. There could be no doubt as to which was the safe system 

 for the billholder. New York then had $35,000,000 in circulation, 

 $15,000,000 of which was issued by the free banks. 



The legislature accepted the report as conclusive proof and on 

 February 21, ^ it was engrossed by a vote of 50 to 32. The speaker 

 recorded his vote in opposition. On the following Monday, after a 

 fruitless effort at fillibustering, the bill passed by a vote of 51 to 30. 



On the second reading of the bill in the Senate, W. E. Niblack 

 of Vincennes offered an amendment requiring specie, instead of 

 bonds, as security for the paper currency. This was defeated by 

 a vote of 27 to 15. The Senate committee tried to amend the bill 

 so that banks could not issue notes'under five dollars, <but this, also, 

 was lost. Mr. Niblack continued his effort to get a specie clause 

 in the charter by moving to require every bank, at the call of the 

 comptroller, to deposit specie for outstanding notes, but he was 



^ The committee might have added that in settUng up these 31 banks over 1900,000 par value 

 Indiana bonds were sold at auction and brought less than 50 per cent. Dewey, Banlintj Before the 

 Civil War, p. 340. 



« Ho. Jour., 1851, 1, 823. 



« Sen. Jour., 1851, p. 654. 



