"The Old Court — New Court Controversy." and the legislature established the unwise precedent of passing a temporary law allow ing a twelve months' replevin on executions, unless notes of that bank should be taken in payment — a very unfortunate step as the sequel shows. On January 26th, 181 8, the Kentucky legislature, by a single act, incorporated thirty-nine different banks and, by amend ments, eight days later added six more, making forty-five in all. These banks had practically no restrictions as to control or amount of stock or payments of subscriptions to stock. They were without supervision allowed to issue notes to an amount not ex ceeding three times their capital stock. By the end of the year 1818 there were fiftynine banks in the State of Kentucky. The State then had a population almost exclu sively engaged in agriculture, and Lexington, its largest town, had not more than 5,000 in habitants. Meantime, to relieve the situation all over the country, the Second Bank of the United States had been chartered with the purpose of forcing the State banks to resume specie payments and of providing a currency re deemable in specie anywhere in the country. The mother bank had secured a large part of the specie of the country and had im ported more than $700,000.00. It was lo cated at Philadelphia, with eighteen branches in different sections, two in Kentucky, one at Louisville and one at Lexington. The notes of these branches being redeemable in specie, they were eagerly taken up in Ken tucky by exchanging large quantities of State bank notes at a great discount. In this way the United States Banks became the creditors of the State banks. " Hard times " coming on in the East, the United States Bank ceased to issue notes or make discounts (in great measure) in Kentucky, withdrew its specie from this State for use in the East and began to press the State banks on their notes, and those banks in turn began to press the people who owed them. In a little while
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the paper banks with their paper capital had gone to pieces and their depositors were left penniless and in debt. The people had idly imagined that with such an abundance of money, pay-day need never come and with that feeling had almost universally borrowed largely more than they could ever possibly pay. The rush of immigrants to this State and the introduction of the steamboat into the navigation of the Ohio had induced the most wild and reckless speculation. Im provements were projected that could not have been called for in fifty years by the growing civilization of the country. Be lieving that their wealth was assured, the people had spared themselves no luxury or piece of extravagance and when the cloud burst of financial ruin broke over them, they were totally unprepared for the storm. At first the United States Bank was charged with all the trouble and, indeed, it was responsible for much of it. It had nearly all the specie and was about to take it out of the State. It held large claims against State banks bought at a great dis count. It had made any number of loans to private persons which were now maturing. In response to popular demand, the Leg islature tried to drive out the United States banks, to tax them out of the State so as to give room for the rag-money banks of its own creation. In 18 18 a tax of $400.00 per annum was laid on each branch in this State. In January, 1819, this tax was in creased to $5,000.00 per month or $60,000.00 per year. March 6, 18 19, the United States Supreme Court held, in the case of McCullough v. State of Maryland, that the States could not tax the United States Bank or its branches, and then, for the first time, the people of Kentucky seemed to realize that the Supreme Court of the United States could have any authority over them and Judges Boyle, Owsley and Mills of the Kentucky Court of Appeals, were severely censured for respecting its opinions.
