Knox points out, estimates of the loss to the state treasury do not afford an accurate view of the total damage inflicted by the state bank. The losses to individuals, the injury inflicted upon the economic activities of a pioneer community and the impairment of the state's credit cannot even be estimated.154 According to a writer of the period, the industry and thrift that characterized the three years following the dissolution of the bank brought more genuine relief to debtors "than could ten such banks."155 154 Knox, History of Banking in the United States, 716. BANKING AND INTERNAL IMPROVEMENTS. With the winding up of the affairs of the old state bank in 1831 came a brief period of relief so far as the existence of local banks of issue was concerned. The legislature not only defeated all banking projects that were presented to it at its sessions in 1830-31 and 1832-33, but acts of incorporation of all sorts contained clauses prohibiting the exercise of banking powers. In the senate, however, there was a strong sentiment in favor of establishing a bank on a specie basis; in fact, in 1833 a project of this character was lost by a single vote.1 Failing in this effort the friends of the proposed measure sought to prevail upon Governor Reynolds to call the legislature in special session, but he refused to act on the ground that conditions were not yet ripe for such an institution.2 In the gubernatorial campaign of 1834 General Duncan, the successful candidate, although a partisan of the United States bank refused to make that institution a local issue and thus avoided the alienation of the Jackson men.3 Governor Reynolds resigned a short time before the inauguration of Governor Duncan, the office being filled for the time being by Acting Lieutenant-Governor Ewing, a friend of state banking. In his message to the legislature which assembled in December, 1834, Mr. Ewing urged the immediate establishment of a state bank "upon a solid gold and silver reality." The next day Governor Duncan delivered his inaugural address in which he asked the legislature to deal with the banking question with the greatest caution. He granted that "banks may be made useful in society" but he insisted that a system of banking which would successfully meet the peculiar conditions prevailing in Illinois had not yet been worked out.5 1Sangamo Journal, March 9, 1833. 2 Alton American, November 22, 1833. Short, History of Morgan County, 691. Senate Journal, 1834-35, p. 12. Ibid., 13. Meanwhile the state had begun to recover from the follies of the fiat paper days in spite of the fact that occasional foreign bank notes found their way into the channels of local trade. The treasury was now able to meet its obligations with cash and the general prosperity of the community was equally encouraging. As this situation continued, the need of more currency and adequate banking facilities became recognized. After the burning of the notes of the old state bank and the failure of so many of the "paper money mills" of the Middle West and South, there was little available currency for the handling of the increasing volume of trade. Aside from a few notes of the Bank of the United States and still fewer United States silver coins, Spanish, French and Mexican pieces constituted the only generally acceptable medium of exchange." In addition to the scarcity of money, a number of other circumstances seemed to point the legislature to establishment of a second state bank. In the first place, it was predicted that the closing of the United States Bank would cause widespread distress unless the states took immediate steps to fill the gap left by it. The other states were anticipating an era of great prosperity by authorizing the establishment of banks of issue, and it was argued that their notes would flood Illinois unless a local bank were established as a measure of self-protection. Lastly Ford, History of Illinois, 170. "Lorenzo Bull, in Illinois Bankers' Association Reports, 1901, p. 20. Sangamo Journal, November 24, 1832, September 29, 1833, and September 22, 1832. Illinois Advocate, Vandalia, March 16, 1833. Sangamo Journal, February 9, 1833. The following table taken from Dewey, Financial History of the United States, 255, shows the rapid expansion of banking at this period: this same wave of speculative prosperity which had gradually been moving westward was beginning to be felt in Illinois.10 Continued peace among the nations, together with the rapid expansion of the United States, had stimulated the sale of public lands to an enormous degree. This in turn led to the formulation of elaborate systems of internal improvement in order that a substantial increase in land values might result.11 By 1835 the Illinois speculator had just reached the point where he was demanding the "accommodation" which could not be had without access to a bank plentifully supplied with notes.12 The Democrats in the Illinois legislature which met in 1834-35 were supposedly hostile to all banks, while the Whigs were committed to a federal as opposed to a state bank. By a combination, however, of the Whig forces with those Democrats who interpreted President Jackson's hostility to the Bank of the United States as an indorsement of the state institutions, a bill for the creation of a new state bank was passed by both houses. Ford contends that the necessary majority of one vote in the lower house was obtained by trading a states attorneyship for it and that similar inducements were held out to senators.13 In the council of revision Governor Duncan opposed the measure, but the rest of the members gave it their sanction and it became a law on February 12, 1835.14 The main provisions of the charter of the new state bank were as follows: Of the authorized capital of one and one-half million dollars, all but one hundred thousand dollars was to be sold to individuals. The remaining shares were to be issued to the State of Illinois whenever the legislature saw fit to provide the money.15 A further stock issue to individuals of a million dollars might be made when conditions warranted it.16 The charter was 10Ford, History of Illinois, 170. 11 Dewey, Financial History of United States, 224, 225. 12Ford, History of Illinois, 170. 13Ibid. 14 Sangamo Journal, May 13, 1842. 15 Laws of Illinois, 1834-35, p. 7, Section 1. 16 Ibid., Section 2. to expire January 1, 1860.17 Until then the bank had full power to discount bills and notes, receive desposits, buy and sell bullion and bills of exchange and issue bank notes.18 The ownership of real estate, aside from the land upon which the bank buildings might be built, was prohibited.19 In view of the freedom with which the bank's funds were used in speculation, it is important to note that the directors were specifically forbidden to deal directly or indirectly in the purchase or sale of any goods or wares whatever.20 The movement of population northward led the legislature to locate the principal bank at Springfield instead of Vandalia, which continued, however, to be the capital until 1839. In order to appease the people of Vandalia, the bank was required to maintain a branch in that place.21 If subscriptions for more than the authorized one million four hundred thousand dollars worth of stock were received, it was provided that the excess should be deducted: first, from the amounts subscribed by nonresidents; second, from subscriptions by corporations; third, from subscriptions for more than one thousand dollars worth of stock; fourth, from other subscriptions. Each subscriber was required to make a first payment of ten dollars in specie, or its equivalent, for each share of stock purchased.22 The nine directors were each required to own at least ten shares of stock and must be citizens of Illinois. In voting, the method already described in connection with the territorial Bank of Illinois, of giving to the small stockholder more than a proportional voice, was adopted.23 The selection of officers for the bank was left to its board of directors. In order to augment its available capital the bank was empowered to receive on deposit or to borrow any sum not exceeding one million dollars 17 Laws of Illinois, 1834-35, p. 7, Section 3. 18 Ibid., Section 4. 19Ibid., Section 5. 20Ibid., Section 6. 21Ibid., Section 8. 22Ibid., Section 10. 23Ibid., Section II. |