lators and politicians, and had no assets but "suspended debt." The improvement states had become heavily indebted to their own banks and depended on bank dividends to pay interest. The state banks all held state stocks as assets, and when these declined in value, the banks became insolvent. Thus the banking system was interlocked with the state finances and with the mania for improvements unwisely planned and attempted without reference to the capital at command. The aversion to taxation was very strong, and as taxation was delayed, one state after another defaulted on its interest. The delinquent states were Pennsylvania (which laid taxes in 1840, but inadequate to meet the deficiency), Michigan (of which the Bank of the United States held two millions in bonds not paid for when it failed), Mississippi (of which the same bank held five millions in bonds the obligation of which was disputed and never met), Indiana (whose debt was one-fifth of the total valuation), Illinois, Louisiana, Maryland and Arkansas, and Florida territory — total amount, one hundred and eleven millions. In five years the Bank of the United States gave to Pennsylvania three millions, subscribed nearly half a million to public improvements by corporations, and loaned the state eight and one-half millions. In 1857-1858 Pennsylvania sold out her works, which had cost thirty-five millions, for eleven millions. The bonds deposited in New York to secure circulation had a par value of four and six-tenths millions, but were worth only one and six-tenths millions on the first of January, 1843. As early as March, 1841, this decline caused a panic in "Safety Fund" and "Free Bank" notes at New York.
Pennsylvania now entered on another experiment which threatened to ruin her remaining banks as the reckless demands on the Bank of the United States had helped to ruin that institution. On May 3, 1841, the legislature passed,
