Page:Cambridge Modern History Volume 7.djvu/384

352 Rise of banking. [1790-1814 which was chartered in 1791, to issue notes not exceeding in amount $10,000,000 ; by establishing a mint and coming American money ; and by making certain foreign gold and silver coins legal tender at specified rates for a short time. But the Bank put out no notes of small denomi- nations; the annual coinage at the Mint fell very short of the needs of the country; and, had it not been for the rise of State banks and the action of corporations and individuals, the people would have been almost without money suitable for the transactions of the market and the shop. The State banks, which increased from four in 1790 to eighty -eight in 1811, issued notes in denominations of one and two dollars; merchants, unincorporated associations, steamboat companies, ferry companies, private bankers, issued change bills, tickets, due bills, and promissory notes drawn for fractions of a dollar to serve as small change ; and the money of the people thus became a paper medium which did not bear the stamp, and was not under the control, of the Federal government. In 1811 the charter of the Bank of the United States expired; and a re-charter was refused by Congress. Partly because of the struggle to secure its business and the government deposits, partly because of the lapse about the same time of the charters of scores of State banks, and partly because the westward movement of population had opened great areas of country in which no financial institutions were to be found, a mania for banks swept over the country. In three years the number rose from 88 to 208 ; and, as each put out notes, the circulating medium of the country became a paper currency which could not possibly be redeemed in specie. Such was the condition of the currency, when, in the summer of 1814, a British army landed on the shore of Chesapeake Bay, marched to the city of Washington and burned the Capitol, the President's house, and the public buildings. That Baltimore would be next attacked was so certain that the banks in that city sent their gold and silver into the country, where it was buried ; and, of necessity, specie payment on their notes was stopped. When news of this reached Philadelphia, the depositors rushed to the banks to demand specie and forced the banks of that city to suspend payment. The banks of other cities quickly followed their example ; and in a few weeks not a bank in any seaboard State outside of New England was redeeming its notes in coin. Nothing in the nature of a uniform circulating medium passing at its face- value all over the country now existed; and business of every kind was paralysed. Specie small change having disappeared, resort was again had to small paper bills issued by merchants, tradesmen, manufacturers, stage- coach companies, even by towns and villages. Thus the city of New York issued $190,000 in one, two, and six cent notes, which were bought with bank-notes by the citizens and were receivable in payment of taxes by the city. The banks at New York and Philadelphia printed notes in