capital stock, with the dates when paid into the bank, was composed of the following items:

1838.

Proceeds of $1,000,000 6% State Bonds, payable 30 years after date, May 7,
1838, interest payable semi-annually in New York,..
School Fund..

School Fund from Ocoee lands.

1839-40. Surplus Revenue deposited with the State by Act of Congress.

1845.

Proceeds of s.les of public lands..

$625,600
38.894

232,700 897,194.00

$4,128,812.24

Of this last stated amount of capital, the bank reports $761,074.92 to have been lost. The circulation outstanding January 1, 1858, was $2,308,973. It also appears from this report that during this entire period-1838-58-the bank had paid :

On the 1st of January, 1858, the bank had been in operation nineteen and a half years, and the amount of profits shown by its statement at that time proves that, estimating at their par value all the bills receivable, stocks, real estate, etc., then on hand, the average profit had been less than six per cent. per annum upon the actual capital which it had received; and Governor Harris recommended that the interest of the State should at least not be extended.

The bank continued in business for several years longer. In January, 1861, it had $1,313,728 notes still outstanding; while its loans and discounts amounted to $4,945,519.

In February, 1866, an act was passed requiring the Governor to appoint six directors to wind up the business of the bank, and in April of that year the Board of Directors made an assignment of all the assets to a trustee, who proceeded to wind up the bank in chancery. In 1866 he reported the entire assets, including worthless claims to be about $16,000,000. When the available assets were finally distributed to noteholders pro rata provision was made for issuing certificates for the balance, which were receivable for taxes. An attempt was made in 1869 to convert the notes of the bank into bonds, but this failed. The holders of the notes were finally paid in full. But those who had money deposited with the State Bank never received any return.*

ALABAMA.

The Territory of Alabama was admitted into the Union as a State, December 14, 1819, with a Constitution containing provisions expressly designed to enable the State to embark in the banking business with the citizens of the State. The Constitution provided that one State bank might be established, with such number of branches as the General Assembly might deem expedient. Two-fifths of the capital stock was to be reserved for the State; and the individual stockholders and the State were to control the bank and to be liable for its debts, in proportion to the stock held by them respectively. No bank was to commence business until half of the capital stock subscribed was actually paid, in gold and silver, which amount should in no case be less than one hundred thousand dollars. It was provided in this Constitution, that the then existing banks could become branches of a general State bank after the establishment of the same, upon such terms as the Legislature and the said banks might agree.

With such provisions in their Constitution, we can readily draw the conclusion, that the people of those days were very much like the Sub-Treasury men of the present times. They believed that there was a certain kind of legislative legerdemain by which a State could not only make money, but could make money plenty and cheap, and hence, they laid the foundation broad and deep in their organic law, for the establishment of banks for the State. At the first session of the Legislature after the State was admitted into the Union, an act was passed by the General Assembly entitled "An Act to incorporate the subscribers to the Bank of the State of Alabama," which was approved Dec. 21, 1820.†

* Phelan: History of Tennessee, p. 274.

+J. H. Fitts: Sketch of the State Bank of Alabama, in Proceedings of the Second Annual Convention of the Alabama Bankers' Association. 1891.

The object and design of this act was to afford the citizens of the State an opportunity to establish a bank on the principles set forth in the Constitution. The bank was to be located at the town of Cahawba, so long as it remained the capital of the State, and to be removed to the place where the seat of government was permanently established. The capital stock was not to exceed two millions, two-fifths of which was to be reserved for the State, and three fifths raised by subscription from the people.

The act prescribed that the public money of the State should be deposited in this bank "when lying inactive," and the bank was to be organized under the name and style of "The President, Directors and Company of the Bank of the State of Alabama," so soon as one hundred thousand dollars of the subscribed capital stock was paid in gold and silver. The bank was to be governed by thirteen directors, to be elected annually by the stockholders, by a certain scale of voting, by which a stockholder having ten shares would be entitled to five votes, while one having a hundred shares would have twenty votes, and if the State or an individual held five hundred or more shares, neither could have but thirty votes. All the efforts to organize a bank under this act proved a failure, which was owing to the inability on the part of the superintendents to get the requisite amount of capital subscribed; and this inability of the superintendents to obtain subscriptions was caused, doubtless, by the indisposition of the capitalists of those days to go into banking on such communistic principles. No matter what may have been the cause of this failure, the effect upon the people was simply to increase their zeal and the determination to have a State bank, and this they resolved to have, even if the State was required to furnish all the capital. In carrying out this determination an act was passed on the 20th of December, 1823, which will forever be memorable in the history of Alabama. This was an act entitled, "An Act to establish the Bank of the State of Alabama." The preamble to this act is in the following words:

"Whereas, It is deemed highly important to provide for the safe and profitable investment of such public funds as may now or hereafter be in the possession of the State, and to secure to the community the benefits, so far as may be, of an extended and undepreciating currency; Therefore be it enacted," etc.

"In the light of the future history of this bank, we will discover that the efforts to provide a "safe and profitable investment" for the public funds proved unsuccessful, but that the high hopes expressed in this preamble as to an "extended currency, were fully realized, for the notes of the bank were extended over the country to such an extent as to be worth only from fifty to seventy-five cents on the dollar. The provisions of this act, passed the twentieth of December, 1823, “To establish the Bank of the State of Alabama,” are in many respects similar to those contained in the act of Dec. 21, 1820. The principal differences, however, were of a very marked character. The capital of the Bank of the State established under this act of 1823, was not limited to any amount, and was to be furnished by the State alone without any stock being taken by the citizens. Its management was intrusted to a president and twelve directors, to be elected annually by a joint vote of the General Assembly.

"The only limit on the amounts of the notes which could be issued was as follows: In such sums as the president and directors might deem most expedient and safe,' and the only restriction whatever, was that no notes could be issued for circulation of a less denomination than one dollar, and this restriction was soon removed by the Legislature,"* resulting in the issue of notes for 64 cents, 121⁄2 cents, 25 cents, 50 cents, and 75 cents, redeemable when presented in sums of $5.00.

Various public funds were set apart by the act to constitute a part of the capital of the bank, among which were the proceeds derived from the sale of the lands donated by Congress for schools, amounting to about $1,300,000, and some $500,000 of funds of the University of Alabama. $100,000 of State stock, to which was added in 1828 an additional like amount, was issued and sold for the benefit of the bank. This, however, was only the beginning. Between 1832 and 1837 the State issued bonds to the amount of $13,800,000 for the increase of the capital of the State Bank and to assist it in resuming specie payments. Of these bonds nearly $4,000,000 are included in the present indebtedness of the State.

The money to be loaned by the bank, was required to be apportioned among the several counties in the State in proportion to their representation in the General Assembly. No individual, partnership or corporation (University of Alabama. alone excepted) was permitted to be indebted for a greater amount than $2,000, though the president and directors seem to have been able to borrow almost any amount.

The principal office was at Tuscaloosa. Three branches were established in 1834 and one in 1835, located at Mobile, Montgomery, Huntsville and Decatur, *J. H. Fitts: Sketch of the State Bank of Alabama.

respectively, all of which suspended specie payments in 1837. The charters of all these branch banks were repealed at the session of 1842-43.

The following statement shows the capital, amount of notes in circulation, etc., for different dates:

By December 1, 1847, the total outstanding circulation of the Bank and branches had been reduced to $457,177, as to which the commissioners then reported that, while not convertible into specie, the notes had appreciated in value and for some time past had been almost at par with specie. The discount was less than one per cent.

Before many years had passed scandal in reference to the relations of directors to the bank and to members of the Legislature became so marked that a Legislative investigation was ordered. This, however, was hushed up and the evidence taken never given publicity.

The charter of the State Bank expired by limitation in 1845, and the task of winding up its concerns was conducted by commissioners, whose labors were far more faithfully performed than those of the previous management. The result was the collection of a sufficient sum from the assets to reduce the bonds issued in aid of the bank from $14,000.000 to less than $4,000,000, but leaving a dead loss of the latter amount, as well as the special funds invested.

The State also owned two-fifths of the stock in the Bank of Mobile-the only other bank in the State during the greater part of this period.

But the experience of the State had been sufficient, and the door to further ventures of the sort was finally closed by the Constitution of 1867, which provided: "The State shall not be a stockholder in any bank, nor shall the credit of the State ever be given or loaned to any banking company, or association or corporation."

LOUISIANA.

March 14, 1818, Louisiana had authorized a subscription of $500,000 toward the capital of $2,000,000 in the Louisiana State Bank. The State was to appoint six out of eighteen directors. The bank was required to pay a bonus of $100,000 to the State, in consideration for which the stock and real estate belonging to the said bank shall forever during the continuance of its charter, be exempt from the payment of any State tax.' Inasmuch as only $100,000 was ever actually sul s ribed and as both bonus and exemption from taxation were also characteristics of subsequent charters to other banking institutions, this bank can hardly be considered as a State institution.

April 7, 1824, the Bank of Louisiana was chartered, with a capital of $4,000,000, one-half of which was subscribed by the State. For the State subscription the issue of 5% bonds was authorized at the rate of $100 in bonds for every $831⁄2 of stock, payable at intervals from ten to twenty-five years from their dates. These were to be sold by the bank for specie. The interest was to be paid from the dividends upon the bank stock, any deficiency that might occur being paid by the bank and charged to the account of the State. Of the thirteen directors six were to be appointed by the Governor on behalf of the State. Five branches were required to be opened.

In 1826 the General Assembly seems to have become provoked at the delay in declaring dividends and insisted upon the declaration of a dividend upon the State stock at least. The difficulty experienced in controlling the institution led to the appointment of a seventh director on the part of the State and an act requiring semi-annual dividends of profits. In 1827 the profits accruing to the State were sufficient to permit $300,931 of the bonds to be called in and paid, which was authorized by a resolution of March 24 of that year.

In 1844 the Treasurer of the State was authorized to sell 12,000 shares of the stock of the Bank of Louisiana for the purpose of raising funds to pay the bonds, $1,200,000, falling due in 1844 and 1849. The bank itself purchased the bonds, becoming thereby obligated to redeem both series of bonds, which it punctually did. The remainder of the stock was also directed to be sold in 1844 for the purpose of meeting other bonds falling due.

In 1832 the State incorporated the Union Bank of Louisiana, with a capital of

$7,000,000. This was an institution established on precisely the same foundation as the Union Banks of Florida and Mississippi mentioned elsewhere. The subscribers of the stock paid in nothing, merely giving a mortgage to cover the amount of subscription; and the actual capital was derived from the proceeds of the $7,000,000 bonds issued by the State for the purpose. Six of the twelve directors were appointed by the Governor on behalf of the State. The State reserved the right to borrow from the bank $500,000 at interest, and each stockholder was entitled to a credit equal to one-half the amount of his shares. The State for its guaranty was to receive one-sixth of the profits of the institution. The bank seems to have been managed no better than the most of the property banks of the same style in operation in other States. It failed in 1842 with its assets in such shape that the collection of anything from them was a slow and difficult matter. The proceeds, as realized, were turned toward the payment of the interest and principal of the $7,000,000 bonds issued by the State on behalf of the Bank. January 18, 1853, the Union Bank deposited with the treasurer $21,000 to secure the State against any loss for twenty-one bonds not returned. These-the last of the issue-were afterwards returned and cancelled.

The State also issued in aid of the Consolidated Association, bonds to the amount of $2,004,000; and in aid of the Citizens' Bank, additional bonds to the amount of $8,000,000, of which $7,188,000 were finally sold. Both these institutions were upon precisely the same basis as the Union Bank, i. e., the sale of the bonds issued by the State was to furnish the actual capital, and the stockholders were to secure their subscriptions by mortgages on real estate. In the case of the Consolidated Association, the State, for its guaranty, was considered as stockholder for $1,000,000. Dividends were to be declared only as the bonds were paid, and in the same proportion. The profits till then were to be retained as a sinking fund to meet the redemption of the bonds. The case was the same with the Citizens' Bank, except that the interest of the State in the net profits was one-sixth, as in the case of the Union Bank. Both these institutions were put in liquidation in 1842.

By 1858 the bonds issued by the State for the Citizens' Bank had been reduced from $7,189.000 to $5,300,000, for which the State still retained a first mortgage on the $14,000,000 real estate of the stockholders mortgaged by them to secure their stock. In the years 1842-1848 $1,000,000 had been raised by assessments upon the stockholders. In 1852 the Citizens' Bank was reorganized upon an entirely new basis, the distinctive feature of which was the separation of the bank into two departments-a banking department and a mortgage department. Immediately the banking department assumed an important place among the banking institutions of the State-its circulation reaching $4,089,000 by January, 1860.

The State definitely renounced the banking business in its Constitution of 1852 by the clause: "The State shall not subscribe for the stock of, nor make a loan to, nor pledge its faith for the benefit of any corporation or joint stock company created or established for banking purposes.”

From the following table can be gathered something of the course of these banks in respect to their circulation:

Georgia's earlier ventures in the banking business were not such as to involve her deeply. They amounted to little more than State subscriptions to bank stock. A good illustration is the case of the Bank of the State of Georgia, incorporated in 1815 with a capital of $1,500,000, of which $600,000 was to be reserved for sub scriptions by the State. The bank was to be managed by fifteen directors, six of

whom were selected by the Legislature on behalf of the State. The number of directors was afterwards reduced to ten, apportioned in the same ratio between the State and private stockholders. The bank was required to open at least two offices-one in Augusta and the other in Milledgeville-and was permitted to maintain as many more as it should choose.

The Governor was authorized to borrow the money to pay up the State's subscription; and a room in the State-house was fitted up for the use of the bank, the bills of which were made legal tender for all taxes or other debts or demands due the State.

Three years later the Bank of Darien was incorporated on a basis somewhat similar. One-half of the capital of $1,000,000 was reserved for the State,* which also chose five out of the ten directors. In a like manner the State subscribed for a portion of the stock of the Bank of Augusta and the Planters' Bank of Georgia. The bills of these banks do not seem to have been made receivable for taxes and State dues, as were the bills of the Bank of the State.

Complaints of sufferings by the people by reason of unsatisfactory financial condition seem to have been frequent. About 1824-7 these complaints became very loud--so pressing that in 1828 the Legislature attempted to relieve the planters by establishing a bank on the funds of the State. This was the Central Bank of Georgia. The preamble of its charter is suggestive:

"Whereas, it is deemed expedient and beneficial, both to the State and its citizens, to establish a Bank on the funds of the State, for the purpose of discounting paper, and making loans upon terms more advantageous than has heretofore been customary."

The capital of the "Bank established in behalf of the State of Georgia at Milledgeville," consisted of "the money in the treasury not otherwise appropriated, the shares owned by the State in the Bank of Augusta, Planters' Bank, Bank of the State of Georgia, and Bank of Darien; all bonds, notes, specialties and judgments due the State, and all monies arising from the sale of fractions and town lots heretofore made (and hereafter to be made), and all other debts and monies at any time due the State." All taxes thereafter collected and all income arising from dividends on stock in other banks was to be deposited in the Central Bank "to aid and facilitate its operations." All three directors were appointed by the Governor. The total amount of debts which the bank might contract was limited to the amount of its capital; while the issue of notes was restricted to the aggregate of specie and bills of other banks in its vaults.

Loans were to be apportioned among the several counties of the State as nearly as possible in proportion to population.

In 1830 a Legislative committee reported "That the State of Georgia by the establishment of her banking institutions, had two great objects in view :-The one to furnish to her citizens a safe and convenient medium of circulation to the exclusion of the bills of the Banks of other States; the other to enable her to have the funds of the State profitably invested in bank stock." This committee complained of hardships to which the banks had been subjected by the branch of the United States Bank at Savannah, and recommended that, while paying specie to all others, the banks be permitted to refuse specie to the United States Bank.

The bank was the fiscal agent of the State and whenever, as often happened, the funds at the disposal of the treasurer were insufficient to meet the expenses of the State government, the bank was directed to place to the credit of the treasurer a fund sufficient to meet the deficiency. Such advances were charged to the capital of the bank.

The bank seems to have kept well within the limit as to note issues. At the close of the first year its circulation outstanding amounted to $263,409; while it held in specie and specie funds $392,829.52. At the end of the third year, December 26, 1831, the committee reported the circulation to be only $111,996; while it held specie $80,656, notes of United States Bank $50,805, other bank notes $108,653; total specie and specie funds $250,064.

In December 1834, the circulation amounted to $226,246; covered by specie $132,134 and Bank notes $124,227. The bank had now been in operation six years, and the committee reporting its affairs to the Legislature, called attention to the fact that in some respects its interests were not guarded with sufficient care by the management, having "observed with regret that more than $200,000 of discounted

In 1850 seven-tents of the stock of the Bank of Darien seems to have been owned by the State. This bank was then insolvent, and a legislative committee reported that the Central Bank held at the time $90,000 of the bills of the Darien Bank which have long since ceased to answer any of the purposes of money except at a great depreciation; to which the State ought not to submit, she being ultimately liable for the redemption of seven-tenths of them when the capital of that bank shall have been lost-if indeed, that yet remains to be done." The committee recommended that the bank should be put in the hands of commissioners who should wind up its affairs as rapidly as possible.