USA > Ohio > History of Ohio; the rise and progress of an American state, Volume Four > Part 33
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The Miami Exporting Company, of Cincinnati, was thus the first authorized banking institution of
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Ohio. It was also the first chartered bank of issue. The notes were printed on plain linen paper, of much smaller dimensions than those of the present day. They were redeemed in the notes of other banks, and were current for some forty years. The banking house was located on the Front street wharf, a hundred feet west of Sycamore street. This concern went out of existence by failure on the 10th of January, 1842.
In the first decade of the State government there were several banks organized and conducted purely as such, all of them being created by special acts, of which the main features were the same. These included the Bank of Marietta, incorporated February 10, 1808, in response to the request of Rufus Putnam, Benjamin Ives Gilman, William Skinner, and others, "the better to enable them to carry on the purposes of the insti- tution"; the Bank of Chillicothe, incorporated February 18, 1808, with a capital of $200,000; the Bank of Steu- benville, incorporated February 18, 1808; and the Muskingum Bank of Zanesville, authorized by the Legislature of 1810-II, the Western Reserve Bank of Warren, by that of 1811-12, and the Farmers and Mechanics' Bank of Cincinnati, by that of 1812-13, these last three having charters which ran only to 1818.
General banking legislation of a restrictive and more or less stringent character dates from the year 1815, when, February 8th, an act was passed "to raise revenue from the banks and to prohibit the unau- thorized issuing and circulating of bank paper." This provided a four per cent. tax on dividends declared by all banks, whether incorporated or unincorporated, and stamped as illegal the issuance of notes unless authorized
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by law, with the penalty of imprisonment for one year and fine not exceeding $5,000 though such banks as had begun business before January 1, 1815, were exempted from these requirements until after January I, 1818. Supplementary acts were passed January 27, 1816, and February 23, 1816. The latter continued the charters of the Lebanon Miami Banking Company; the Bank of Cincinnati; the Urbana Banking Company; the Columbiana Bank, of New Lisbon; the Farmers and Mechanics' Bank, of Chillicothe; and the German Bank, of Wooster, and extended permission to the Miami Exporting Company to avail itself of the provi- sions of the statute. It also created six new banks: the Lancaster Bank, of Lancaster; the Franklin Bank, of Columbus; the Belmont Bank, of St. Clairsville; the Commercial Bank of Lake Erie, "in the village of Cleveland"; the Bank of Mount Pleasant, at Mount Pleasant; and the Bank of West Union, at West Union. All the specified banks were chartered until 1843. The tax was abolished, and in lieu of it each bank was required, on or before September 1, 1816, to set off one share to the State for each twenty-five shares of its capital stock, and to continue to do so as new stock might be created and sold.
The years following the termination of the second war with Great Britain were attended by very chaotic financial as well as general business conditions. The following is from an account of the situation at that period by Salmon P. Chase (Chase's Statutes, I, 42) :
"The numerous banks which had been chartered before and during the war, and which continued to spring into existence in every part of the State, supplied
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an abundant medium. Speculation, stimulated by every incentive, ran into wild and extravagant excesses. Improvements of every kind, under its strong propul- sion, advanced with enormous rapidity. But this unnatural state of things could not long continue. Men who had contracted debts found, when called upon for payment, that the means were wanting. Banks which had made excessive issues found themselves unable, at all times, to redeem their paper on demand, and the currency of course began to depreciate. Things were rapidly verging to this state when the branches of the Bank of the United States, which had been chartered by congress in 1816, were established at Cincinnati and Chillicothe. These branches issued notes to a considerable amount, and the presence of this convertible paper doubtless tended to hasten the depreciation of the State currency. By receiving the notes of the State banks, also, until large quantities had been accumulated, and then calling on them to redeem their paper, the branches effectively tested the solvency of these institutions. Few could endure the ordeal. The notes of nearly all the local banks con- tinued to sink lower and lower in the scale of deprecia- tion, and the paper of several became absolutely worth- less."
Ohio's war on the Bank of the United States, one of the most sensational incidents in our history, rivalling the famous nullification proceedings of South Carolina some years later, has been fully reviewed in the pre- ceding volume (Chapter X.). Final adjudication of the matter was reached in 1824, when the decision of the Federal Supreme Court rendered futile the State's
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antagonism to the Bank. It is interesting to note, however, that in the decisive struggle waged by Presi- dent Jackson against the central bank, there was an emphatic revival of Ohio's opposition. This found expression in an act passed March 14, 1836, "to pro- hibit, within this State, any branch, office, or agency of the United States Bank," on the ground of the general welfare of the people of Ohio. It was made unlawful for any body corporate created by the law of the State, or for any person or persons, "to act as agent or representative for such bank, or to circulate any notes or bills, as money, issued by the Bank of the United States," and heavy fines were inflicted for violations. After the legal extinguishment of the national institution the same spirit was manifest, a new law being passed February 9, 1839, which prohib- ited the establishment in Ohio of "any branch of any bank" without the consent of the State. That con- tinued in force until 1845.
Statutory measures of great variety were instituted in the thirty years following the conclusion of the War of 1812. Mere enumeration of them would be too voluminous as well as uninteresting. Their general tendency was toward more strict special regulations, clearly evidencing the prevalence and increase of all the peculiar evils which attend the banking business when not based on a definite and uniform system. As late as 1819 the cheerful practices of some bankers violative of the simplest elements of financial science are indicated by the enactment of a law which forbade the issuance or receipt by any bank or banker of bills or notes payable on a future day, and required all such
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to be "payable on demand." Another act of the same year interdicted the payment or receipt of any bank- note at less than the face amount; but this, certainly incompatible with the practical exchange of a character- istically shrunken medium, seems to have been con- sidered too summary, impertinent, and distressful for the times, for it was repealed the next year. There were all sorts of laws on the subject of the minimum denomination of bills, one of which (1840) sought to solve the vexed question of unauthorized issues by the desperate expedient of prohibiting future utterances of bank paper under five dollars, with the penalty of forfeiture of charter. This was perhaps on the principle that with the elimination of the lesser denominations there would be fewer banknotes to verify as valid. The formulation of a satisfactory system of State revenue from the banks taxed the ingenuity of the Legislature and incidentally the evasive resources of the bankers, many of whom cherished a very acute distaste for all these intricate devices, and preference for the simple plan of no State tribute whatever. The allotment by the law of 1816 of one share of bank stock in every twenty-five to the sovereign people was found to be oppressive, and afterward it was a question of tax, how much, how to impose it, and principally how to collect it. Spurious bank bills (in those days euphemistically styled "unauthorized") were legion, though it is un- questionable that the proportionate number of them originating in Ohio was far less than in the other western States.
Bank failures, even in times of no particular general stress, were frequent, and while these usually resulted
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from misfortune there were occasionally instances of notorious fraud, illustrating the ease and immunity with which unscrupulous manipulators could operate, and exciting wonder that the volume of dishonest trans- actions was not vastly greater. The most sensational case of that period was that of the Bank of Gallipolis. In 1839 a stranger, asserting that he was a capitalist from Buffalo, with two others, arrived in Gallipolis and proceeded to organize the Bank of Gallipolis. These gentlemen were very attractive in their appear- ance and plausible in their representations, and soon succeeded in founding the bank with a capital of $200,000. The directors authorized an issue of $175,000 of circulation, and it is said that so far as the books of the bank show that was all that was ever issued. The bank failed two years later, when it was discovered that the gentlemanly promoters had printed and issued $1,200,000 without the knowledge of the board of directors. These notes were scattered all over the south and west. As products of the engraver's and printer's art, they compared favorably with the work of the present day. Some of them are still in existence, and inquiry is frequently made as to their value.
As a matter of course there was a practically com- plete suspension of specie payments by the banks of Ohio in the panic of 1837. This provoked a general inquiry by the Auditor of State as to the causes, which naturally coincided with those elsewhere prevailing, and need not be recited here. A useful incident of the inquiry was the compilation of the first comprehensive bank statistics for the State. They show thirty-four
JOHN SHERMAN
Born in Lancaster, Ohio, May 10, 1823; admitted to the bar, 1844, and engaged in practice in Mansfield; first elected to Congress in 1854, and served in the House of Representatives until promoted to the Senate, March 4, 1861; reëlected to the latter body 1867 and 1873, but resigned to become Secretary of the Treasury under Presi- dent Hayes, 1877; returned to the Senate, 1881, and continued until March, 1897, when he resigned to accept the office of Secretary of State under President Mckinley; resigned that position in 1898; died in Washington, D. C., October 22, 1900.
John Sherman
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THE RISE AND PROGRESS
from misfortune there were occasionally instances notorious fraud, illWAMATHE WHOlease and immunit with which uns qt . battimbs : 881 .QI vsM ,oido notasonsI ni mod upulous manipulators could operat and ex dotsangHvadn fiets tha bris,ca80 Hi Designdol whatsist tran actions+waisMetsus2 adt of hotomoiq lite zovitegestation Jud .8581 bas 5081' ybod 19ttsl, oft of botools91 :1081
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These gentlemen were very attractive inis trofoappear ance and plausible in their representations, and soon succeeded in founding the bank with a capital $200,000. The directors authorized an issue of $175,00 of circulation, and it is said that so far as the books the bank show that was all that was ever issued. The bank failed two years later, when it was discovered that the gentlemanly promoters had printed an. issued $1,200,000 without the knowledge of the board of directors .. These notes were scattered all over th south and west. As products of the engraver's anil printer's art, they compared favorably with the worl of the present day. Some of them are still in existence and inquiry is frequently made as to their value.
As a matter of course there was a practically com plete suspension of specie payments by the banks Ohio in the panic of 1837. This provoked a genera inquiry by the Auditor of State as to the causes, whis naturally coincided with those elsewhere prevailin and need not be recited here. A useful incident of tl inquiry was the compilation of the first comprehensi bank statistics for the State. They show thirty-four
Engraved. by Chas. B. a .L.
John Sherman
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reporting banks, capitalized at $13,700,000, with a paid-in capital of $11,331,618, and a circulation of $6,221,136 (December, 1837).
In 1839 a board of three State Bank Commissioners was established, each commissioner to have the recom- pense of three dollars a day while actually engaged in official duty, and three dollars for every twenty-five miles of necessary travel-the per diem pay to be for- feited for such time as was spent in traveling. Under this extraordinary financial arrangement it was made obligatory for the commissioners, or one of them, to annually visit and thoroughly examine, without pre- vious notice, every banking institution in the State. Very complete powers and regulations were provided for making effective the spirit of the law.
We have seen that when the first general banking act was adopted in 1816, the banks then authorized were chartered until the year 1843. In anticipation of the expiration of the charters, the Legislature in 1842 passed a statute embodying the collective wisdom gathered from experience and reflection. The Board of Bank Commissioners was continued, and the require- ments governing banks and their administration were carefully detailed.
Concerning the various institutions which sprang into existence during the period ending 1843, it is quite impossible to particularize with any complete- ness in a chapter necessarily restricted to outlines; and in general it is not our purpose to refer to individual banks or bankers, interesting and important though such notices would often be. A few items may appro- priately be included, selected not on any definite plan
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of discrimination, unless it be that of antiquity of interest. Of some of the earliest banks of the State, already mentioned, the Farmers and Mechanics' Bank of Cincinnati failed January 11, 1842. The Bank of Marietta continued business by extension of its charter until January 1, 1843, when it went into voluntary liquidation by reason of the expiration of its charter; but before its affairs had been finally closed the law of February, 1845, had been enacted, and it was succeeded by the Marietta branch of the State Bank in the same room and with the same president. In 1863, the branch bank was merged into the Marietta National Bank and continued until February 16, 1876, when it went into final liquidation. The Mus- kingum Bank of Zanesville had a very successful career, and continued to do business until the expiration of its charter in 1843. It is claimed for this bank that it and a bank in Pittsburg were the only ones in the United States that did not repudiate and refuse to pay their notes during the panic of 1837. The Western Reserve Bank of Warren, while not the first bank in the State, has perhaps had the longest existence. Chartered by the Legislature of 1811-12, it commenced business November 12, 1813, and by renewal of its charter con- tinued business until December 31, 1842, when it pro- ceeded to close up its affairs. It procured its second charter as an independent bank under the law of 1845 in July of that year; and in turn it became the First National Bank of Warren, July 31, 1863, and again renewed its charter in 1883. It still survives, and as these words are written is about to enter on the hundredth year of its consecutive business career.
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The most noteworthy financial concern for magni- tude of resources in the first forty years after the admis- sion of Ohio to the Union was the Ohio Life and Trust Company, chartered February 12, 1834, on an author- ized capital of $2,000,000 and located in Cincinnati with a branch in New York.
Although the general statute of 1842 marked a cer- tain advance in public policy, it is historically signif- icant only as the precursor of the great and beneficent law of February 24, 1845, born of the genius and patriotism of Alfred Kelley. In the report by the legis- lative committee of the bill drafted by Mr. Kelley, its basic principles were announced as follows: "Entire security to the bill-holder, reasonable security to dealers with the banks, and proper inducement to the capitalist, whether great or small, to invest his dispos- able means in banking."
The fundamental feature of the law was the provision for creating branches of the "State Bank of Ohio" in localities where the stipulations should be duly com- plied with. For the purposes of the act, the State was divided into twelve districts, and the maximum num- ber of banks to be permitted in each was specified. The aggregate capitalization of the branches was placed at $6,150,000-which was not to include, however, the capital of existing banks that might be authorized to continue business by accepting the conditions of the act. No branch could have a capital of less than $100,000, and a Board of Control of the branches collectively was erected, with carefully prescribed duties. The ratio of note circulation was fixed at not more than $200,000 on the first $100,000 of capital,
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and rapidly diminishing amounts on specified totals of capital above that minimum. Each branch was to pay ten per cent. of its circulation to create a safety fund; was to have on hand at all times in gold or silver coin or their equivalent (one-half at least of which should be such coin in its vaults) an amount equal to not less than thirty per cent. of its outstanding notes; and in case of refusal to redeem its notes was to be held insolv- ent. The insolvency of any branch was to be neutral- ized by contributions of all the other branches, in proportion to their circulation, to a fund for redeeming the notes of the failed institution. There were the strictest arrangements for the minutiæ of operation and for State supervision.
Apart from the branches of the State Bank, "inde- pendent" banking companies, also with privileges of issue, were authorized. The minimum capital for an independent bank was $50,000, to be wholly paid in certificates of funded debts of Ohio or the United States, and the specifications for conduct, security and redemp- tion of issue, and State superintendence were exceed- ingly precise.
Under this measure Ohio flourished until the National Bank Act came into effect. In 1851, after six years of successful trial of the dual State Bank and independent system, it was deemed not injudicious to concede the privilege of "free banking" with proper and abundant restrictions. The new Constitution of the same year contained the conservative provision that all legisla- tive acts "authorizing associations with banking powers" should be submitted to the people for ap- proval. In 1857, the general panic bore severely upon
-
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the Ohio banks, a sensational incident being the failure of the Ohio Life and Trust Company, attributed to some irregularity in its New York office.
Savings banks, those institutions of the people now so widespread and powerful, did not originate in Ohio until just before the close of the first half of the nine- teenth century. The first authorized one in the State is the still extant Society for Savings, of Cleveland, which was incorporated by the Legislature March 22, 1849; and three others received charters during the same session-the Hocking Valley Savings Institute, at Logan; the Savings Fund Society, at Woodsfield, and the Pickaway County Savings Institute, at Circleville. It is said that the Cleveland Society for Savings sprang from a suggestion by Charles J. Woolson in a private conversation with Samuel H. Mather, both these gentle- men being from New England and familiar with the operations of savings concerns there. The first deposits of the Cleveland Society were received August 2, 1849, and at the end of two and one-half years the amount on deposit was stated to be $80,452, and the number of depositors 484. With the growth of the institution ardent hopes for the future began to be cherished, and One trustee ventured to express the daring belief that "the time would come when the deposits would amount to $300,000." The statement of the Society furnished to the State Superintendent of Banks on September 25, 19II, showed deposits of $54,033,626.06, and resources of $58, 138,568.95.
Upon the enactment of the National Bank Act, the banks of Ohio were constrained by the prohibitive tax on State circulations to abandon their independent note
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issuing functions. The majority adapted themselves to the new conditions as quickly as possible, became National banks, and contributed their proportionate volumes to the general currency of the country. Of the sixty-six National banks organized in the United States during the first year of the new system (1863), twenty were in Ohio. We have already (Volume III, Chapter XI.) adverted to the marked similitude of the National Bank legislation to the Ohio State Bank Act of 1845. Indeed, by the acknowledgment of all au- thorities, the banking scheme which has with such cer- tainty safeguarded the financial integrity of the Nation for sixty years, was in its origin but an adaptation of the plan seen to be so sound and sufficient in Ohio.
The banking history of Ohio since 1863 would justify considerable attention in any work specialized to finan- cial and economic subjects, or to general material development. It is a record of uniform progress along thoroughly established lines, with few aspects to engage the general historian except those of its wonderfully increasing magnitude and its comprehensive satisfaction.
The banks of today are of four classes (not including trust companies and building and loan associations)- I. National banks, which alone have the power of issue. 2. State banks, doing a general banking business under State charters. 3. Savings banks. 4. Private banks.
According to the report of the Comptroller of the Currency for 1910, there were, on the 31st of October of that year, 382 National banks in operation in Ohio, with an outstanding circulation of $47,902,701.
The State banks are under the supervision of a State department of banks and banking. February 20, 1912,
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there were 502 of these institutions, having total resources of $524,722,855.12 and capital stock paid in of $41,524,060.75. The item of savings deposits, $257,906,059.33 represented nearly half of their lia- bilities.
No complete savings statistics are obtainable for all the banking institutions of the State, as these institu- tions include National banks and building and loan concerns, which do not make separate reports of their savings business. The savings accounts constitute, in the aggregate, a factor of tremendous financial import- ance and vast public utility.
. Private banks are those operating without many of the restraints which govern the incorporated institu- tions. They are numerous, but as they are not required to make regular reports no data can be given for them.
Since 1908, all the banking institutions of the State, except National and private banks, have been under the supervision of a State Superintendent of Banks, with an adequate force of examiners and other expert assistants. The powers vested in the banking depart- ment are very extensive and detailed, and, so far as examinations are concerned, are regarded as even more effective than those which govern the National institu- tions. The authority of the department extends not only to all State incorporated banks and savings banks, but to trust and safe deposit companies, not including, however, building and loan associations, which are under the superintendence of another State department. Annual reports, published by the Superintendent of Banks, show the condition in detail of every concern within the scope of the department.
ديوبت
CHAPTER XIX HISTORY OF LIQUOR LEGISLATION IN OHIO
T HE regulation of the sale of intoxicating liquors has been an important question from an economic standpoint in the State of Ohio from its very beginning. It is the purpose herein to narrate the progress of legislation on that subject. It divides itself into six leading features or policies. These may be stated as follows:
First. The license system, which was inaugurated in 1792, under the Territorial Government, and con- tinued until the adoption of the Constitution of 1851.
Second. The prohibition of the sale of spirituous liquors to be drank at the place where sold, beginning in 1851 and lasting until 1883, coupled with provisions for the recovery of damages resulting from sales of liquors; the latter feature being still in force.
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