A case is given of a bank in Bangor which, in 1853, secured the passage of a law granting a bank a delay in the redemption of notes presented at its counter. When the Suffolk Bank made demands, this bank used the delay by means of its agent in Boston to draw specie from the Suffolk Bank with which to meet the demand.[1] We also hear of the operation of the system in Vermont, where there was not much resistance to it and where all the indications are that its influence was good. The Commissioner reported, in 1853, the case of the South Royalton Bank, which was in failing circumstances, and which, when the agent of the Suffolk Bank presented $27,000 for redemption, caused the notes to be attached, and commenced a suit against the Suffolk for an attempt at malicious injury. The suit was decided in favor of the Boston bank. A messenger of the Suffolk went to the Newmarket bank, New Hampshire, in 1860, to present notes for redemption to the amount of $20,000. They were paid promptly, but $5,000 was at once attached in a suit for illegal annoyance.[2]
The statements of the Connecticut Commissioners also are always favorable. It is stated by them, in 1849, that the total bank note currency of that State was redeemed at the Suffolk every sixty days. There was a constant tendency, however, during the period now before us, for the Connecticut banks to turn to New York as their center, because the business of the State was being drawn thither.
In 1854, the redemption business of the Suffolk Bank had grown so large that it employed seventy clerks and it was scarcely possible to maintain accountability. A fund was created on behalf of the clerks, to which losses in the department were charged. It was credited with $5,000 annually, and the interest of the surplus over losses was to be divided amongst the clerks. The losses, however, exceeded the fund.
The Suffolk system, however, always produced irritation in the country banks. In 1855 they obtained a charter for the Bank of Mutual Redemption, which was a co-operative association of themselves. It went into operation in 1858. The Suffolk published a notice that it would not continue the system of redemption after November 30th. After some friction with the new bank, however, the business of redemption was divided between them. The reason given by the Suffolk for its position was that it would not consent to relax the stringency of the system in respect to "its main feature, the right to send home bills for specie." "It was the underlying principle of the Suffolk Bank system that any bank issuing circulation should keep itself at all times in a condition to be able to redeem it; that it should measure the amount by its ability so to do; and that the exercise at any time of the right to demand specie of a bank for its bills was something of which the issuing bank had no right to complain."[3]
The Bank of Mutual Redemption certainly did not go on with its business on such conservative principles as the Suffolk. It violated the law
