USA > Indiana > The history of Indiana > Part 35
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The thirty-sixth session of the General Assembly met, December 1, 1851. The new constitution had been in operation one month when on January 3, 1852, William Z. Stewart of Cass county moved that a select committee of one from each judicial district be ap- pointed to report a free, or general, banking bill.
On January 12, Chairman John W, Spencer of Ohio and Switzerland counties presented the report of the regular committee on banks. This was in response to a resolution of the House to inquire into the neces- sity of enacting a general banking law. A majority of the committee favored such an act, and recom- mended the following restrictions: (1) All issues of currency were to be secured by an equal amount of United States, or State stocks, and all banks were required to keep on hand in specie twenty-five per cent of their note circulation. (2) Two-thirds of the securities might consist of stocks, one-third of real estate mortgages. (3) A slight discrimination should be made in favor of Indiana bonds. (4) No bank should have less than $25,000 capital. The com- mittee asked that this report be referred to the select committee on banking.43
February 9, 1852, Mr. Stewart of the select com-
43 House Journal, 1851, I, 425.
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CURRENCY INFLATION
mittee reported a bill for general banking.44 It was similar to the New York banking law of 1838. The bill was put on its passage April 30, and failed by a vote of 25 for and 20 against-lacking one of a con- stitutional majority. It was revived by a motion to reconsider, and on May 18, was passed by a vote of 27 to 18.45 Party lines were not strictly drawn in passing the bill, but in general the Democrats favored and the Whigs opposed. Governor Joseph Wright ap- proved the bill, but was not enthusiastic in its support. The act was to take effect July 1, 1852.
The general features of the law have been indi- cated. The State auditor was to be comptroller, issue all bills, and keep all plates. Notes were to run, in the ordinary denominations, from one dollar up to five hundred. Not over one-fourth of the whole amount was to be less than five dollar notes, and the banks were not to handle notes less than five dollars issued outside the State. Notes were to be registered, counted, and countersigned by the auditor, who also stamped them "secured by the pledge of public stocks." Circulation was guaranteed by a deposit of United States, Indiana, or other State bonds equal to Indiana fives. The State was in nowise pledged to redeem the currency. Specie equal in amount to twelve per cent of the circulation had to be kept on hand by the banks, and specie payment must never be refused on penalty of having the bank closed at once. Reports were to be made semi-annually to the State auditor.46
The plan looked plausible, and its authors were proud of the law. There may have been some who were influenced by selfish motives, but the method of its passage cannot be criticized. By December 15,
44 House Journal, 1851, I, 803.
45 Senate Journal, 1851, 101S.
46 Laws of Indiana, 1852.
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HISTORY OF INDIANA
1852, six months after the law went into force, fifteen banks had been organized, and are examples of the seventy-four that followed. 47 These had deposited $910,000 worth of stocks face value, and had received currency to the amount of $800,000. They were only an earnest of the deluge. Six of the banks were said to be doing a legitimate local business. Five had put their notes in circulation at New York. No notes had been issued to four of them at the date of the report, December 15, 1852.48 Either State Auditor E. W. H. Ellis felt that he had no authority under the law to restrain the establishment of banks, or else he had no inclination to do so. Governor Wright was inclined to think the latter was the case. In his message of January 7, 1853, the governor, for the first time, men- tioned the subject of free banking.49 Although he had signed the bill, he had not recommended it in any previous message. Like many others at that time, he recognized the insufficiency of the circulating medium, and the inability or refusal of the State Bank to meet this need. The governor was, however, quick to see the failure of the new law. The restrictions were entirely inadequate. Already five banks, of the "Owl Creek" kind, with only a nominal existence, and a capital of $365,000, had been organized. These bank- ers, he thought, had no idea of redeeming their notes. The pledge of the State would give their notes cir- culation, and an unnatural expansion of the currency must result. At one time it would rob the creditors, at another time, the debtor. Under the present sys- tem, he thought, there could never be a sound cur- rency. The speculator came to Indianapolis with a bundle of bonds under one arm and a roll of bank notes under the other. He deposited his bonds, that
47 Documentary Journal, 1853, 98.
48 Documentary Journal, 1853, 150.
49 Senate Journal, 1853.
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FREE BANKS FAILURES
had cost him from fifteen to fifty cents on the dollar, and got for them Indiana currency, dollar for dollar, recommended by the State. Presumably he went to some obscure place and put them in circulation, but in reality he took them to New York. The constitutional convention and the General Assembly of 1851 had, in fact, invited the bondholders to bring their bonds to Indianapolis and cash them at par, and perhaps, for a few years draw interest on both the bonds deposited and the currency received.
The natural result followed hard on this unnatural expansion of the currency. About May 1, 1854, a flurry in the money market started the trouble. The Crimean War in Europe changed the demand for American se- curities to a demand for American coin. Coin was at a premium, and brokers began to drain the Indiana banks to get coin for the eastern markets. Governor Wright had suspected the integrity of these banks from the first and, in 1854, had sent John S. Tarkington to a bank at Newport in Vermillion county to see if it would redeem its paper. As it was expressed at the time, the bank "squatted." This test not only con- firmed the governor in his suspicion, but started a run on the free banks of the State that never ceased. It was charged at the time that State Bank men furnished the governor with all the bills he wanted on the free banks.50
During this bank-run the State Bank paid out over $2,500,000 in specie without lowering its specie deposit. Business could not be carried on under such conditions. One instance must suffice as an example of the violent fluctuations of the period. The circulation of the free banks in May, 1854, was $9,000,000. By December 15, $3,454,279 of circulation had been withdrawn. People lost all confidence in free banks, but still the auditor
50 Berry R. Sulgrove, History of Indianapolis, 143.
468
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HISTORY OF INDIANA
felt that a few amendments to the law would make it a good banking system.
In the midst of this panic in the money market the General Assembly met, January 4, 1855. Governor Wright again took up the cudgels for a sound cur- rency. 51 He repeated his statement of two years be- fore that the free bank law was a failure, and that the past events had shown clearly that the restrictions pro- vided in that law were entirely insufficient to prevent the abuses of the banking privileges. By January 25, 1855, there had been organized ninety-one free banks with a total nominal capital of $9,502,330 and an out- standing circulation at the time of $4,581,833, backed by deposited bonds, whose par value was $4,941,515. The money of the State was never so deranged as when the thirty-eighth session of the General Assembly met. As soon as H. E. Talbott became auditor, he stopped the issue of bills, but the cancellation went on and the consequent contraction of the circulating medium con- tinued.52
The legislature was deeply disappointed in the dis- astrous failure of the law. Of course the system had in it all the weaknesses of banking systems not founded on liquid assets. But these weaknesses do not account for its quick and ruinous collapse. Had an efficient auditor administered the law and enforced it rigidly, such banks as that of Newport could not have been organized. The chief defect lay, not in the law, but in the officials who failed to enforce it.
§ 76 BANK OF THE STATE OF INDIANA-THE THIRD STATE BANK, 1855-1865
THE bill to charter a new State bank to be known as the Bank of the State of Indiana had a career in
51 Senate Journal, 1855, 17, the governor's message. Docu- mentary Journal, 1855, 82.
52 Documentary Journal, 1855, 934.
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BANK OF THE STATE
the General Assembly very similar to that of the Free Bank bill, though the opposition to it was more spirited and the lobby for it more powerful. It passed the Sen- ate, February 24, 1855, under the call of the previous question, by the close vote of 27 to 22.53 The minority joined in a bitter protest which they spread upon the journals.§4 After passing the House, the bill met with the governor's veto. His principal objections were, that he had not had sufficient time to examine the bill; that the bank could issue unlimited paper; that the measure, which might almost ruin the State, was not discussed in the legislature ; that the bill exempted the bank from most of the burdens of taxation; that the manner of subscribing its capital was unfair and invited corruption ; that it could discount paper equal to three times its capital stock, plus three times its deposits; that its title, The Bank of the State of Indi- ana, was adopted to mislead people; that the State could have no control over it, under the charter, which was to run twenty years; and that the whole atmos- phere of this bill, from its introduction to its last vote, was charged with uncertainty and a suspicion of cor- ruption and unfairness. The Senate passed the bill over the veto by a vote of 30 to 20.55
The above are the facts around which was woven one of the most noted legislative scandals of the State's history.
53 Senate Journal, 1855, 551.
54 Senate Journal, 1855, 562.
55 The majority vote in the Senate on the four occasions is here given :
1. Passage of a Bill to Establish a Bank with Branches :- Alexander, Brown, Burke, Combs. Crane, Cravens, Crouse, Drew, Ensey, Freeland, Griggs, Harris, Helm, Jackson of Tipton, Meek- er, Parker, Reynolds, Richardson of St. Joseph, Shields, Spann, Suit, Tarkington, Weston, Williams, Wilson, Witherow, Woods ;- 27 in all.
2. Passage of Free Bank Bill :- Alexander, Anthony, Brook- shire, Brown, Burke, Chapman, Combs, Crane, Cravens, Crouse, Drew, Ensey, Freeland, Glazebrook, Griggs, Harris, Hawthorn,
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HISTORY OF INDIANA
The smallest majority was that on the first passage of the bill to charter the Bank of the State of Indiana. All of the twenty-seven senators who supported this bill also supported the Free Bank bill. It was an allied majority that ruled the Assembly. The vote is the more surprising because the bills provide for en- tirely distinct systems of banking. The Bank of the State of Indiana is, as the governor pointed out, a misnomer. It was not a State bank, but one of the worst forms of an unrestricted bank. The only guaranty of its integrity was the mutual liability of the branches and the character of its stockholders and officers.
The bill, as it was introduced, provided for three grafts.56 The first consisted in selling the State Bank stock at a price to be named by the lobby and paid for with bonds bought at 90 and turned in at 100. This
Helm, Hendry, Hosbrook, Jackson of Madison, Jackson of Tipton Knightley, Mansfield, Mathes, Meeker, Parker, Reynolds, Richard- son of St. Joseph, Richardson of Spencer, Robinson, Rugg, Sage, Shook, Spann, Suit, Tarkington, Vandeventer, Weston, Williams, Wilson, Witherow, Woods ;- 43 in all.
3. Passage of the Free Bank Bill over the veto :- Alexander, Anthony, Brown, Burke, Chapman, Combs, Crane, Cravens, Crouse, Drew, Ensey, Freeland, Griggs, Harris, Hawthorn, Helm, Hen- drick, Hosbrook, Jackson, Knightley, Meeker, Parker, Reynolds, Richardson of St. Joseph, Robinson, Rugg, Sage, Spann, Suit, Tarkington, Vandeventer, Weston, Williams, Wilson, Witherow, Woods ;- 36 in all.
4. Passage over the veto of a Bill to Establish a Bank with Branches :- Alexander, Anthony, Brown, Burke, Combs, Cravens, Crane, Crouse, Drew, Ensey, Freeland, Griggs, Harris, Helm, Hostetler, Jackson of Tipton, Meeker, Parker, Reynolds, Richard- son of St. Joseph, Robinson, Shields, Spann, Suit, Tarkington, Weston, Williams, Wilson, Witherow, Woods ;- 30 in all.
56 Bank Frauds, 41. This document of the legislative session of 1857 contains the evidence heard by, and the findings of, a joint committee appointed at the suggestion of Governor Wright to investigate the chartering of the Bank of the State of Indiana. The report contains the testimony of most of the lobbyists and of members of the session of 1855.
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BANK OF THE STATE
met with the most violent opposition and had to be abandoned.
The second was in locating the branches, in which the new board of bank commissioners had full power. This board of commissioners, named in the second section of the bill, was composed of Thomas L. Smith of New Albany, Andrew L. Osborn of Laporte, Jehu T. Elliott of Newcastle, Addison L. Roach of Rock- ville, and John D. Defrees of Indianapolis. It is but fair to state that Mr. Defrees took no part in the work after he ascertained the purpose of the lobbyists. It is not necessary to comment on the personnel of this board. All were prominent men and all had been highly honored by the people in an official way. There was no excuse for their conduct. They were to get their pay for lobbying by selling the locations of the branch banks. The commissioners were also em- powered to appoint two subcommissoners to open the books for each branch and receive subscriptions.
The third opportunity for graft was in subscribing the stock of the bank. The law directed that the sub- commissioners should open the books to receive sub- scriptions between nine and twelve o'clock. The com- missioners were careful to appoint subcommissioners who would allow no one to subscribe except those recommended by the lobbyists. The charter was worth $500,000, at a fair estimate, basing the estimate on the dividend paying power of the old bank.
Several lawsuits followed the organization of the bank, but the real merits of the case, with the State as a party, were never brought before the supreme court. Nor would it, presumably, have availed any- thing. Courts naturally hesitate to question the in- tegrity of a coordinate branch of the government.
No further changes in the bank laws were made till the law of 1874 was enacted, under which the State banks of today operate. The national law of 1863 as
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HISTORY OF INDIANA
amended in 1866 stopped all State banks from issuing currency, and effectually put an end to experiments in banking, though it did not solve the greater question of the inflation and contraction of the currency.
The new Bank of the State of Indiana gathered it- self together after the storm and began to do a careful, conservative banking business. The people soon came to look upon the whole winter campaign as a war among highwaymen, in which, for the moment, the lob- byists had got the upper hand of the old bank men.
Hugh McCulloch of Fort Wayne was elected presi- dent, and James M. Ray, cashier. Branches were estab- lished at Lima, Laporte, Plymouth, South Bend, Fort Wayne, Lafayette, Logansport, Indianapolis, Rich- mond, Connersville, Rushville, Madison, Jeffersonville, New Albany, Bedford, Vincennes, Terre Haute, Mun- cie, and Lawrenceburg. The bank opened with $197,- 903 paid-in capital, and $35,497 in specie, an average for each branch of $10,000 capital, and less than $2,000 in specie. As stated above, it was on a level with the worst "wildcat" banks in all its essential features save two; its branches were mutually responsible, and it was in the hands of the most capable business men in Indiana. Its president was one of the three or four greatest American financiers. The bank prospered un- til overwhelmed by the national bank system. Under an act of the General Assembly of 1865, it closed up its business. Nearly all the branches became national banks. Its last report, for the year 1864, shows how the national currency was affecting its circulation. At the close of 1862, it had $5,000,000 in circulation, and at the close of 1864 only $1,500,000.
CHAPTER XVIII
THE PIONEERS AND THEIR SOCIAL LIFE
§ 77 THE PEOPLE
THE present population of Indiana, like that of all other American States, is a compound of the civilized nations of earth. The predominating strain in this population is the English, Scotch, Irish and German peasantry. Along the eastern foothills of the Appala- chians these immigrants from Great Britain and Ger- many mingled and fused into a class with pretty well defined characteristics. Most were of the substantial stock of English yeomanry, the stubborn, independent stock that has made the English soldier and the English colonist successful in all parts of the world.
The second generation of this folk occupied the high valleys of the mountains from Carlisle and Pittsburg to the Watauga and Holston. Wherever they settled they built States and established institutions. The third generation, generally speaking, pushed on across the mountains, establishing boroughs or forts at Lime- stone, Louisville, Bryants, Crab Orchard, Boones- borough and Harrodsburg, many of them pressing on to Vincennes and Kaskaskia. In numerous instances brothers and sisters parted in the eastern valleys, and their children met as cousins in Kentucky, one branch of the family having come by Tennessee and the Wilder- ness Road, the other by Pittsburg and the Ohio river. The fourth generation, about a century after their an- cestors came from abroad, crossed the Ohio river into Indiana and Illinois, or crossed the Mississippi river into Missouri and Arkansas.
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HISTORY OF INDIANA
The language of this group of pioneers was the lan- guage of the eighteenth century commoner of England. By calling it a Hoosier dialect, we would claim among the earliest Hoosiers, Pope, who made "join" rhyme with "divine," and Burns, who invariably, in the full tide of his songs, "draps" the final "g" in all present active participles.
But how, it may be asked, did it happen that a people would lag a century behind in their language? A group of people in the heart of a wilderness conti- nent late in the nineteenth century speaking the lan- guage of the early eighteenth century peasants sounds like an anachronism. The explanation is at hand. When this people settled in the back country of America they tore themselves away from the culture of Eng- land, separated themselves from the ordinary channels of commercial life, and virtually went into exile. The long, century struggle with the wilderness and its in- habitants engrossed their whole attention and energy. When they could snatch a moment's rest from the bat- tle they did pitch their tents and endeavor to repro- duce English institutions, but the lure of the wilderness was too strong.
The thirst for education was continually upon them. Witness the founding of Washington College at Salem, Tennessee; Transylvania in Kentucky; Vincen- nes in Indiana, to name only a few. During this whole century this energetic folk, impressionable, wide- awake, free, in a strange country, retained its lan- guage almost entirely by memory. The usual library among the pioneers was the King James translation of the Bible.
It was a homogeneous group of people. Their preachers, their lawyers, their orators, all those who are supposed to influence · language, were part and kindred of all the rest. There were very few news- papers and they had a very limited circulation. It is
475
THE HOOSIER TYPE
worth noting, however, that there is little dialect in any newspaper. Whether this is due to the typesetters, who used a book, or whether it is a case of a written and spoken language existing side by side does not appear conclusively at present. However, there is abundant evidence that the latter explanation is the proper one. There is no doubt that such eloquent pio- neers as Henry Clay, Lewis Cass, Abraham Lincoln, Peter Cartwright, and Francis Asbury spoke the pic- turesque native language of their forefathers.
The term "Hoosier dialect" is a misnomer. So far as it can be said to have any justification, it is in connection with the southern element of our popula- tion. Whatever peculiarity there may be in it is com- mon to one-third of the nation, and a characteristic so common cannot be said to be very singular.1
The social customs of early Indiana are most clearly understood in the light of their history. Scarcely a fea- ture of their early life but expressed itself earlier in Kentucky, Tennessee, Virginia or the Carolinas, and many customs and conventions were brought from over seas.
The charivari, the Christmas shooting, the mal- treating of the schoolmaster, the drinking and gambling, the tavern, the shooting match, the election day, the wedding and infare, the log-rolling, the quilt- ing, the camp-meeting, all smack of the "old South" and "merrie Englande."
The open-handed hospitality, which regarded it almost an insult for a man to offer to pay for meals or lodging, the quick sense of honor, which resented more keenly a reflection on one's integrity than a physi- cal assault, the contempt for business shrewdness or close bargaining, the quick temper, the explosive
1 Lois Kimball Matthews, The Expansion of New England, 197; Meredith Nicholson, The Hoosiers, ch. I. The text is based on a wide study of early Indiana newspapers.
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HISTORY OF INDIANA
humor, the wide humanity, the philosophic as opposed to the scientific mind, the deep thought in the homely expression-these are some of the mental character- istics of this people.
Thorough-going democrats, free from all restraint, demanding elbow room, believers in Christianity though tolerant of creeds and forms, simple in dress and house, careless of accumulated wealth, holding life above property, neglectful of business, enjoying plain society and discussion, rarely calling into action their great reserve power, on easy terms with the world, believing that the consequences of one's deeds return to the doer-these are some of the leading principles of their philosophy of life.
They believed and practiced a community of work, but there was an individual score kept. The man who did not help his neighbor roll logs received no help in return, unless on account of charity. No people were ever more charitable. They borrowed and loaned with the greatest freedom everything from a team and wagon down to a set of pewter spoons. Yet there was little partnership in the ownership of property. Each family lived to itself and had no great desire to have near neighbors.2
§ 78 HOME LIFE AND CUSTOMS
THE pioneer located his home preferably on a hill- side near a supply of good water. Southern Indiana was well supplied with springs, and each pioneer house was built near one. The style of the house depended on two factors-the time of the settler's arrival and the character of the man. Usually the settler came on
2 The best discussions of this subject are in the writings of Edward Eggleston, Meredith Nicholson, and James Whitcomb Riley. From the strictly historical standpoint F. J. Turner, Rise of the New West, is the best discussion available. In My Youth (author unknown), gives a good sympathetic picture of Quaker life in early Indiana.
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HOME LIFE
ahead of his family, planted his crop and then pro- ceeded to build a good cabin. If he preferred hunting to work, or took the ague, or if his family came with him, he usually lived a year or two in a half-faced camp.
The half-faced camp was a log pen with three sides and a covering of brush, the fourth side being left open. Sometimes a large log or a sheltering rock served for a back wall. The front, usually facing the south, was closed by a curtain or hung with skins. In front of this open side the fire was built and the cooking done. The ground was covered with skins and furs. Such a house did very well in dry, warm weather when no real shelter was needed. It was considered a makeshift by the pioneers and only occasionally resorted to.
The simpler form of the log house was a four-sided pen made of rather small, round logs, which were notched into each other at the corners so that each log touched the one below. It is said the settlers from the east built their log houses square, while those from the south built theirs about twice as long as wide. The houses were covered with clapboards about four feet long, held on by weight poles. A hole for a door was made by cutting out parts of about four logs. A wooden board or a skin closed the opening. At the end stood a mud and stick chimney, the framework made of sticks and then covered over with clay.
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