﻿ESAREY: STATE BANKING IN INDIANA 28l> 



These are the facts around which was woven one of the most 

 noted legislative scandals of the state's history. 



The smallest majority was that on the first passage of the bill 

 to charter the Bank of the State of Indiana. All of the 27 senators 

 who supported this bill also supported the Free Bank bill. It was 

 an allied majority that ruled the assembly. The vote is the more 

 surprising because the bills provide for entirely distinct systems of 

 banking. The Bank of the State of Indiana is, as the Governor 

 pointed out, a misnomer. It was not a state bank, but one of the 

 worst forms of an unrestricted bank. The only guaranty of its 

 integrity was its mutual liability and the character of its stockholders 

 and officers. The work of the legislature was a case of what one 

 member called: 



''Tickle me Tommy, do! do! do! 

 You tickle me, and I'll tickle you." 



In order to understand the situation it is necessary at this point 

 to go back and explore, hastily, one of the dark alleys of Indiana 

 politics. The stock of the State Bank in 1855 was worth about 

 75, with a par value of 50. The state owned at least $1,000,000 

 worth of this stock. The surplus fund of the State Bank con- 

 tained another $1,000,000 still, to be sure, in the Bank but soon 

 to be turned over to the state. Moreover the state owed a bonded 

 debt for her bank stock of $1,390,000, par, but the bonds could 

 be bought at ten per cent discount in New York. As early as 1854, 

 there was activity on this account among the political scavengers 

 of the state." The State Bank was to stop discounting and begin 

 calhng in its circulation, January 1, 1855, and the job of winding 

 up its affairs was a very desirable one to legislative lobbyists. Some 

 of the State Bank directors were called to Madison in 1854 to hear 

 a proposal to renew its charter. The price asked for this service 

 was $200,000. At the August session of the State Bank Board, 

 General E. D. Taylor, President of the branch at Michigan City, 

 proposed with the aid of Judge Thomas L. Smith, a lawyer of New 

 Albany and the attorney for the branch at that place, to get a new 

 charter. The cost, he thought, would be about $10,000. The 

 cashier of the State Bank, J. M. Ray secretary of the board, broke 

 up the deal by flatly refusing to aid in corrupting the legislature. 



* Bank Frauds, p. 41. This document of the legislative session of 1857 contains the evidence 

 h3ard by, and the findings of, a joint committee appointed at the suggestion of Governor Wright 

 t) investigate the chartering of the Bank of the State of (ndiana. The report contains the testimony 

 of most of the lobbyists and of members of the session of 1855. It hi^is a good index. 



