war, had found its way to England and the East Indies, in return for their imports, and the currency now consisted almost entirely of the paper of banks chartered by the state authorities, over which the general government had no control, and which had suspended specie payments. These corporations are formed upon principles somewhat different from institutions of the same name in Europe. A number of persons associate together, and subscribe a capital stock varying from fifty thousand to several millions of dollars, according to their location, and the extent of the contemplated business. On this capital they make loans, by discounting bills and notes on time. Their advances are usually made in notes of the bank, payable at their banking house on demand. These being generally for small sums, pass from hand to hand, and form the circulating medium of the country. The bank is also a place of deposit of money for safe keeping. Their charters usually limit the amount of bills allowed to be issued, or debts contracted, to fifty per cent. beyond their capital and deposits. Every bank conducted upon correct principles, has as many debts due, as it owes, with an accumulation of interest, and a capital stock of money paid in to the amount of two thirds of its outstanding debts, to meet the demands to which it is subject; and with a moderate share of discretion in its managers, can seldom be embarrassed, and never insolvent. While bank bills are what they purport to be, the representative of specie, and convertible into money at the pleasure of the holder, they furnish to all desirable purposes a convenient specie medium; and may be considered an important improvement in the commerce of society, rendering exchanges much more rapid and easy, and dispensing with a tedious and laborious process in the interchange of property. The facility too with which loans are made by the banks, to be repaid by easy instalments, greatly promotes the business and enterprise of the country. The first institution of this nature was the bank of North America, established at Philadelphia on the suggestion of Robert Morris, near the close of the revolutionary war. The public and private benefits resulting from this institution were soon perceived, and the example followed by the principal eities in the union. The banking system continually increased, and extended to all parts of the country; so that at the commencement of the war of 1812, there were several hundred institutions of this character in the United States. Soon after that period, specie being out of the

country, the banks found themselves unable to continue their accustomed business, and pay their bills on demand, and were reduced to the alternative of discontinuing their operations, or suspending specie payments. Most of them adopted the latter, and discounted more liberally than ever, with an understanding that their bills should not be redeemed with specie. This course changed the circulating medium from specie to paper, more or less depreciated, according to the situation and credit of the bank from which it issued. It is obvious, that a promise which the public know will not be fulfilled in terms, can never be of par value, but is worth more or less, according to the opinion entertained of the honor of the maker, of his ability and disposition to pay, or of the legal means of coercion. The latter was out of the question. These corporations having no visible existence, or tangible property, an execution against them could avail the creditor nothing. A power of issuing bills for a circulating medium not to be redeemed on demand, was liable to great abuse, and in the hands of unprincipled speculators, afforded a convenient opportunity for imposing on the credulity of the public. Several radical defects existed in the outset of the banking business. The property of the individual stockholder, beyond the amount of his capital, was not liable for the debts of the bank. The legislatures who created these institutions, either did not possess the means of restraining the banks within their chartered limits; or were extremely remiss in using them. Scarcely a bank could be found which had not greatly exceeded its charter in contracting debts.

No effectual laws were passed punishing those who, under the cloak of a bank charter, conducted business on a fictitious capital, and perverted the funds pledged for the redemption of their bills. While an individual who counterfeited a dollar of this paper was punished with the loss of liberty, and rendered infamous, a company of speculators might possess themselves of a bank charter, issue bills to an unlimited amount, without a dollar of real capital, and enrich themselves with the fruits of their fraud with impunity. No field for the perpetration of villainy can long remain unoccupied. Bank charters were obtained, a fictitious capital created by taking stockholders' notes for the amount of their subscriptions, without any other security than their shares, and on this baseless system, bank paper issued to an unlimited extent, with which the stockholders enriched themselves,

The bank was then declared insolvent, its doors shut, and the unsuspecting bill holder left to put up with the loss.

Another mode was, where the original stockholders were men of probity and capital, and had actually paid in their subscriptions, for speculators to purchase a sufficient number of shares to obtain the control of the bank, then draw out the funds on their own security, and bankrupt the institution. Instances of frauds of this description took place in different parts of the country, more were apprehended, and a general distrust of bank paper took place, which occasioned its further depreciation. That legislatures should have been so incautious, and regardless of the safety of the community, as to impart to individuals, they knew not whom, a power of issuing bills for a circulating medium, to an extent which had no practical limits, without any personal responsibility, became matter of astonishment and regret, when its effects came to be felt. The delusion, however, pervaded every state in the union. Evils of the most serious and alarming nature resulted from this state of things, both to the public treasury and individual credit. Specie was not to be had to discharge custom-house bonds, and other treasury claims; the paper of the banks was at very different rates, at different times and places. No general standard value could be fixed below the nominal. Duties collected in different ports were paid in paper of very different value, and when disbursements were required to be made at places remote from the place of collection, great losses were sustained. Difficulties of the same nature attended private transactions. Money was not to be had for the purposes of traveling, or distant remittances. Creditors

exacting specie from their debtors could obtain their property almost upon their own terms: when willing to receive their demands in paper they had no means of ascertaining its value, or of determining whether it was worth any thing.

Proposition for a national bank. The secretary of the treasury, after giving a minute detail of the state of the finances, pointed out the embarrassments to which the treasury, as well as the community, was subject, in consequence of the want of a circulating medium of a uniform value; and recommended the establishment of a national bank. The question whether congress possessed the constitutional power to create such an institution, had undergone many critical and elaborate discussions in congress, and before the highest judicial authorities; and had resulted in a settled