Cook County, Illinois - The whole text, 1884 (part 19 of 61)

State Banks. - On the adoption of the State Constitution, August 26, 1.S1S, there was in existence within the bounds of the State, only the bank of Shawneetown, then in good credit, and the Edwardsville Hank already in the throes of dissolution. The constitution first adopted declared that there should be no other banks or moneyed institutions in Illinois, but those already provided by law, except a State Hank and its branches.

March 22, 1819, the first State bank was incorporated under the name and style of the "President. Directors and Company of the State Hank of Illinois." I he amount of capital was limited to five hundred thousand dollars, all of which was owned by the State, which through the Legislature was invested with its entire management and control. The president and directors were to be elected by the Senate and House of Representatives, on a joint' ballot, and the cashiers appointed by a majority of the directors. The property lands and faith of the State were pledged without any restrictions for the redemption of the bills issued, anil the State was pledged, at or before the expiration of the ten years the time of its charter , to redeem all bills presented in gold or silver. The bills were declared eg., tender for all debts due the State. The schoolfmd and all specie, or "land-office money," were requ.red to , be deposited in the principal bank. Two thousand dollars was appropriated to procure plates and start the financial institution on its career of beneficence. 1 hree hundred thousand dollars was to be put " circulation. It was ,0 be distributed in the sever" d is nets ,n ratio with the population. The bills were to loancU on D0tes. secured by mortgage, at the rate of six per cent per annum. As the bills themselves bore on interest of two per cent per annum the borrower virtually paid but four per cent, for his money. No person was entitled to a loan of more than one thousand dollars. The officers of the bank were entitled for their services to banking accommodations, on approved security, at two per cent per annum, in the following amounts : President of the principal bank, $2,000 ; the president of each branch, §1,000; and each director. §750. Four branches were established : At Edwardsville, Madison County ; at Brownsville, Jackson County ; at Shawneetown, Gallatin County ; and at the seat of justice in Edwards County.

The currency soon flooded the State and all gold and silver disappeared as a circulating medium, and, as was quite natural, did not enter the vaults of the wild-cat bank or any of its branches. The money was scarcely in circulation before it depreciated to seventy cents on the dollar, then to fifty and so on down to twenty-five cents, when it disappeared from circulation and found its way into the hands of shrewd speculators who looked to its ultimate redemption by the State. There was subsequently a special law passed legalizing the payment of the officers of the State government in this depreciated paper at its current value. As under the terms of the charter all taxes and revenue of the State were payable in these bills, the State at last became hopelessly entangled in its own financial system and was forced to withdraw the circulation. This was begun in 1824, but the currency continued to circulate in the channels of the Stale receipts and disbursements until the expiration of the charter in 1831. when the State closed its banking business at a loss exceeding the full amount of the original issue. Governor Thomas Ford, in his History of Illinois, sums up the result as follows :

" In the course of ten years, it ;the State1 must have lost more than §150,000 by receiving a depreciated currency, §150,000 more by paying it out, and $100,000 of the loans, which were never repaid by the Ixirrowers, and which the Slate had to make good, by receiving the bills of the bank for taxes, by funding some at six per cent interest, and paving a part in cash, in the year 1831. Inclosing up the affairs of the I tank the State borrowed of one Samuel Wiggins. January 29, 1831, the sum of §100,000. It is stated by contemporary writers that the shrewd and provident Wiggins paid over a large part of the loan to the State in hills of the old State Hank which had been bought up by htm at a low price and which the State now redeemed at par. The loan was at the time extremely unpopular, and threats of repudiation were rife for years afterward. It was however, paid ultimately, principal and interest, and the credit of the State saved from blemish."

For two or three years succeeding the closing up ol the old State Bank no bank legislation was had ITW Citizens of the State were wholly engrossed in the I ml an troubles which culminated in the Black Hawk War, so called. The treaties which followed its close opened up a vast domain for settlement, and, in 1S34, the WW of emigration from the East set strongly through CMcago toward the region lying west and northwest, soo to be open for settlement. Many on reaching Chicago cut short their prospective tours and found their permanent home here, thus swelling the population and making a most thriving village, which even then ga^e promise of becoming the center of trade for the grea crowds of prospectors which were passing throtign. Thus during the short space of two years C hicago gr from a small and unimportant hamlet, with little t«"e or commerce, to be an exceedingly busy center of trade, with a resident population, according to tin; State census taken in 1835, of three thousand two hundred and sixty-five inhabitants. AH were filled with the intense desire to better their condition by availing themselves of the opportunities afforded in a new and rich country rapidly filling up with sturdy and thrifty settlers. Inspired with courage and hope adequate to the brilliant prospects offered, Chicago that year put on the armor of enterprise in which she has fought through flood, and fire, and war, and financial disaster, unflinchingly and with no backward step, to the proud position of the inland metropolis of the nation; a city, with its suburbs, of seven hundred and fifty thousand souls, as busv, as persistent, as sturdy, and with faith in its future yet beyond, as strong as appeared to the pioneer denizens of the little Chicago of fifty years ago.

It was not until 1835 that a banker could have found a paying business in Chicago. During that year began the great mania for land speculation which, from the pine forests of Maine swept the country to the prairies west of the great lakes. The purchase and sale of city lots in paper cities, and claims to vast trai ts of land, at constantly enhancing prices, became the absorbing business of the times. The titles to the land in many cases was no less fictitious than the prices they realized"; yet the immense volume of business transacted required a certain amount of money "to facilitate exchanges" if not sufficient to do a cash business, which at the time was not thought of. Chicago then felt for the first time iit its history the sore need of money, and yearned for a bank of issue.

Axothkr Statk Bank. - Chastened into some slight degree of caution, but by no means disheartened by the outcome of the business of the old State Hank, the Legislature, February 12, 1835, in addition to extending the charter of the Shawneetovvn Bank, as before mentioned, incorporated another State bank. The Legislature did not, as before, take upon itself in behalf of the State the responsibility of managing the bank, nor did it assume the payment of its obligations or the redemption of its bills in specie, cither on demand oral any future period. With the wisdom which comes from experience it was content to leave the entire management of the bank to private enterprise. Following is a summary of the more important provisions of the charter. The title of the act was: "An Act to incorporate the subscribers to the bank of the State of Illinois;" the capital was to be $1,500,000, divided into shares of one hundred dollars each; $1,- 400,000 to be subscribed by individuals, while §100,000 should be reserved to be subscribed for by the Stale, whenever the Legislature might deem it proper to subscribe the whole or such parts thereof as the condition of the treasury might justify. It was further provided that the capital stock might be increased $1,000,000 by individual subscriptions. The style of the cordate body was: " The President, Directors and Company of the State Bank of Illinois," and the corporation was to continue until January 1, i860. The principal bank was to be located at Springfield, with branches, not to exceed six in number, to be located within the State at such points as the president and directors should determine.

The bank was forbidden to commence business until $250,000 of the capital stock should have been paid in in specie : rates of interest on loans for sixty days or less, six percent ; on loans over six months and under twelve, eight per cent per annum.

limited to twice and a half the amount of capital stock paid in and possessed, exclusive of the sum due on deposits; and its loans anil discounts were never to exceed three times the amount of such stock, exclusive of the deposits aforesaid. Directors were declared liable in their natural and private capacity for any transgression of the above limits. The section concerning the redemption of hills read as follows:

" SKCTION 25. If. at any lime, lhe corporation hercbycrcatcd, shall neglect or refuse, for ten days after demand, at the banking house, during the regular hours of business, to redeem, in MMCfe, any evidence of debt issued by the said corporation, Ihe said corporation shall discontinue and close nil its operations of business except the securing and collecting of debls due or lo become due lo the said corporation, and I he charter hereby granted shall be forfeited.

" Section 26. The said corporation shall be liable to pay 10 the holders of every evidence of debt made by it - the payment of which shall have been refused, damages for Ihe non-payment thereof, in lieu of interest at and after the rate of ten per centum per annum, from the time of such refusal until the payment of such evidences of debt and the damage* tl Id Coll."

It was further provided, that whenever the State should have subscribed for and paid the amount of $100,000. for stock reserved for it, the (inventor should nominate two directors to represent the interests of the State in the corporation. The issuing of bills of a less denomination than five dollars was forbidden under forfeiture of charter. The bank was to pay annually, on January 1, into the State treasury, one-half of one per cent on the amount of the capital stock actually paid in by individuals, in lieu of all taxes whatever. Interference on the part of the bank with the election of State officers forfeited the charter of the bank. Supplementary to this ai t, January 16, 1836, the bank was authorized to increase the number of its branches to nine: the time for redeeming its bills, without forfeiture of its charter, was extended from ten to fifty days. As a consideration for these favors the bank ayrced to redeem what was known as the "Wiggins loan," together with what interest might thereafter accrue thereon. This, a part of the burden left by the old State Bank, became the heritage of its successor.

Chicago r,K is her first Bank. - The citizens of Chicago immediately moved to secure the location of one of the branches' of the State Bank in their town. Their efforts were successful, and the announcement was made as early as June, 1845. that a branch was to lie established there. December 5. 1835, the officers uf the " Chicago branch of the Illinois State Hank " were announced in the American as follows: I >irectors - John H. Kin/.ie, president ; (i. S. Hubbard, Peter Pruyue, E. K. Hubbard, K. |. Hamilton, Walter Kimball, H. B. Clarke, I J. W. Dole, E. D. Taylor; Cashier, W. H.

Brown. The bank was open for business about the middle of December, in the four-story brick block then owned by Garrett, Brown & Bro.,at the corner of La- Salle and Smith Water streets, and immediately started off with a flourishing business. The cashier advertised in the American. February1 "3, 's3", that the bank was tol>e kept open for business from 9 o'clock a.m., to 1 o'clock i>. that "discount days" were Tuesdays and Fridays, and that all paper should be offered on Mondays and Thursdays. As an index of the magnitude 1 f some of the accounts as well as the heavy business Ihen

(fane by one Of the leading firms it was stated in the Inturc of 1S36-37, and recommended to that bodv Americano! March 12, 1X36. that the Messrs. (iarrctt, system of internal improvements, whteh as stated' in Brown & Bro., from DecemlK-r 30, 1835,10 February the resolutions, "should be commensurate with lhe 27, 1836, deposited with the Chicago Branch Hank the wants of the people." The scheme was without doubt sum of 834.359.31. This was nearly an average of worked up to this point, bv a few shrewd designing men" seven hundred dollars per day, and at that time was an for purposes not entirely patriotic or unselfish hut when item of news that reflected great credit upon the enter- presented, it was most eagerly adopted bv the Leiris prising firm that did the immense business evinced by lature. The building of the proposed railway! ami the their huge deposits, as well as upon the solid financial improvements of navigable streams allavcd' the bitter institutions that could l>e trusted by them with such a opposition which had developed in sections of the State fabulous amount, too remote from the Illinois \- Michigan Canal to be Although the C.h.eago Hranch was the only bank in benefited by the project, and the canal section could the city at the beginning 01 ,836, the bills of the Illinois well afford to support the general scheme however State Hank furnished but a small part of the currency visionary, if thereby could be secured further 'anpropriin em ulation. 1 he value of the bills in circulation de- ations tor the continuance of the work The bankinipended more on the facility with which they could be interest could but approve of a plan that would make circulated than upon any knowledge as to their intrinsic the banks the fiscal agents of the State in the c irrvinir worth. Anything that would go at the bank or that out of the scheme: the people saw in it a flood of was not questioned on the street would do. The Shaw-' money, sudden wealth without toil, and a continuance net-town Hank the Hank of C.reen Hay, working under of good times, and Illinois, basking in the sun of proscharter from the Michigan Territorial Legislature and |H-rity, the haven of rest to which the pauperized inother banks sufficiently remote for safety, helped to habitants of less favored States would flock for homes, swell the volume of currency and buoy up the inflated in numbers sufficient to occupy the whole domain and traue 01 the times. cvcr aftcr r«.lllajn ,|)e ricnest ,he mos, populolls am! lhe hings went on swimmingly all through .836 and most powerful of all the States. There were comern thJ v T i v I7' , CamC thc SUti<le" trash vativcs who saw ,hc "a,1Cer- warile<l the people and

?,: r r 7 ^ 10 thC, cUdl ? an<l "^whelming improvements was legally inaugurated in the LegtSdemand for redemption ami liquidation which fell upon lature. bv thc passage of a bill, the provision of which.

up prices, began to dawn upon the people of Illinois A railroad from ihc cliy of Cairo, ai or near the almost simultaneously, with the determination ro 11 confluence of thc Ohio and Mississii.pi

Irau^ii^^ apPO^ted to attend an Internal swbyvilfe to the Indiana line in the dErecrnniw onventioti, to bc held at the capital 'l"hc ,ion " llautc

Banks And Hanking

There was a further appropriation of $200,000. to counties which neither of the proposed railroads nor the Canal WOUld pass, " for the improvements of roads and bridges," the said amount to be paid to the counties designated, " from the first money that should lie obtained under the provisions of this act." This appropriation was little less than a legislative bribe to the few counties that otherwise, seeing themselves shut out from the distribution <>f benefits, might have jeopardized the passage of the bill by their opposition. The total amount appropriated was $10,250,000 ; and the total length of roads contemplated was 1,341 miles.

The fund constituted for the work proposed was to consist- 1. Of money to be borrowed. 2. All appropriations which should lie made from time to time out of the State revenues, arising from lands and taxes. 3. All moneys to Ik: received from tolls, etc. 4. All rents, issues, and profits arising from lands to he purchased by the State. 5. The proceeds of all lands which might be donated by the General Government in aid of the undertaking. 6. All grants and donations from individuals. 7. All profits and interest which may accrue from said works, together with the balance after paying the debt due to the school, college, ami seminary fund to lie received under the distribution law of Congress, which amount of said deposit, so funded, was " to be charged to the said fund of internal improvements, and repaid out of the same when demanded by the General Government." S. All net profits, to arise from bank and other stocks thereafter to be subscribed for, or owned by the State, after liquidating the interest on loans contracted by the purchase of such bank or other stock.* The passage of the bill of which the foregoing is a digest involved the necessity of enlarged banking facilities in the State, - indeed the bolstering up of the banks, or rather their absorption by the State was but a part of the scheme to be worked in a co-operative way to the attainment of the same end. The banks were to receive a large amount of the bonds of the State in payment for stock to be subscribed for and would, at the same time, become the fiscal agents of the State for the receipt anil disbursement of the vast sums involved in the prosecution of the work. Accordingly March 4, 1837, an act was passed increasing the capital stock of the Shawnectown Hank $1,400,000, all of which with the consent of the bank was to be subscribed by the State; also, during the same session, an act increasing the capital of the State liank §2,000,000, which increased stock was likewise to he taken by the State. To pay for the stock subscribed for, the Fund Commissioners were authorized to subscribe for the amount, payment for which was to be made, a part from the State's dividend of the surplus revenues of the United States, and the remainder from the sale of State bonds. The total amount of the capital stock of the two Illinois banks after the increase was: Shawneetown Hank, §1,700,000: State Hank, $3,100,000. Of these amounts the stock was owned as follows: Of the Shawneetown Hank, $200,- 000 by private individuals and $1,500,000 by the State; of the State Hank $1,000,000 by individual stockholders, and $1,100,000 by the State. Governor Ford* gives the following account of the manner in which these banks were started in their enlarged sphere of usefulness by the Slate:

"Although the State was to have the majority of stock in both banks, yet were the private stockholders to have a majority of the directors. The banks were made the fiscal agents of the canal and railroad funds; and, upon the whole, it is a mere chance that the State did not lose its entire capital thus invested. It was supposed that the State bonds would sell for a premium of about ten per cent, which would go to swell the interest fund; and that the dividends upon stock would not only pay the interest on the bonds, but furnish a large surplus to be carried, likewise to the interest fund. However, when these bonds were offered in market, they could not be sold even at par. The banks were accommodating, and rather than the speculation should fail, they agreed to take the bonds at par, as cash, amounting to $2,665,000. The Hank of Illinois Shawneetown sold their lot of $900,000, but the $1,765,000 in bonds disposed of to the State Bank, it is alleged, were never sold. They were, however, used as bank capital, and the bank expanded its business accordingly."

It will be seen by the above that in the unset the banks were obliged "to come forward and sustain the credit of the State by taking its bonds at par, which was above the market value, and in the case of the State Hank, in so far as it extended its business upon the basis of the sold or unsaleable State bonds, it was doing it on dead capital antl running the imminent risk of failure. It did not take long to show the fallacy of the system. In the spring of 1837 the speculative bubble burst, prices collapsed, and the banks of the whole country suspended specie payment. It became at once apparent that the State Hank must suspend with the other banks of the country or fail. It had already bevome crippled by many failures among its speculative customers, to whom it had loaned money, and had still further weakened its position by extending its business largely on the unavailable capital of Illinois bonds. Being, as it was, one of the fiscal agents for both the canal ami railroads, and indebted to both these funds to a large amount, its failure would have involved in ruin the whole system of public improvements. To avert the threatened calamity, a special session of the Legislature was called in July. Of this session, Governor Ford, in his history, says:

" The Governor's message made a statement of the matter, without any direct recommendation to legalize the suspension, and did recommend a repeal or modification of the internal improvement system. The Legislature did legalize the suspension of specie payments, but refused to touch the subject of internal improvements. It was plain that nothing could be done to arrest the evil for nearly two years more."

SF.CTION I. He it enacted by the people of the State o( Illinois, represented in the General Assembly. - That every provision of law. requiring or authorizing proceeding* against any bank in this Slate, with a view to forfeit its charter or wind up its "concerns, or which rcquir«s said uank to suspend its operations and prix-eedings, in consequence of it* refusal to pay its notes or evidences of deb; in specie, is hereby suspended until the end of next general or special session of the General Assembly, unless banks shall have generally resumed specie payment at an earlier date, in which case * " Hisliiry of Illinois, " pp. 90-9,, the Governor shall (five notice thereof by proclamation, ami [lie suit! bank shall, within twenty dais thereafter, also, resume specie payments Provitled, however, That to secure the benefit of the foregoing provision, said banks shall agree to conform to, ami

First - That it will not, cither directly or indirectly, divide or pay aiming its stockholders, or to any person for them, any dividends, interest, or prutits whatever, until it shall A'/j.j fi.it- resume the payment of its notes and evidences of debt in sjiecie, which dividends sha'l be retainetl in bank as an additional security to the holders of its n<Hes.

Second - That it will not, directly or indirectly, during the suspension of specie pavmenl, sell, dispose of, or part with any of its sjiecie, or gold or silver bullion, except for the purpose of change lo the amount of five dollars, or under the sum of five dollars.

Third - That it will furnish monthly, upon the oath of its president or cashier, to the Executive of the State, a fnll and complctc statement of the condition and financial operations .if said bank anil branches, which shall be published in the newspapers of the State I'rinter.

Kourth - That it will not. directly or indirectly. is»ue or put in circulation, during the period of its snsjiension of specie payments, any bank bills or nutes, or any evidence of debt by which the amount of its circulation shall be increased beyond the amount of capital stock paid in by the stockholders.

Kifth - That it wdl receive upon deposit any funds belonging to the State, which may lie required to be so deposited, and pa\ the same out upon the order of the projier o'licer, or agent of the Stale, in kind, free from charge; and also all funds heretofore deposited by the State.

Sixth - That until the banks shall resume specie payment, citizens and residents of the State who are indebted to them upon notes heretofore discounted, shall lie allowed to |>a\ their debts in installments, at the rate of ten percent, upon each and ciciv renewal of the amount originally due, upon condition that sued debtors shall execute new notes, with satisfactory sec urity and pay the aforesaid per cent, and the interest in advance, according ti> the usage and custom of hanking: Provided, That this section shall not apply to notes or bond) assigned or endorsed to the bank.

Seventh - That any violation of the provision, of this jet, or any failure to comply with and conform to the same, -.hall mbjeet tin- kink in default to a forfeiture of its charter.

Sue. 2. Whenever any bank shall accept the provision* of this act, and the president thereof shall furnish the < iovemor with a certificate of the fact of such acceptance, under their corporate seal, the Governor shall issue a proclamation, slating the fact of such acceptance: and from and after the date of such proclamation such bank shall tic considered as being entitled to all the bcnclits hereby conferred, and bound bv all the conditions, restric. tiuiis mid limitations herein contained.

Sir. 3. I hi« net shall not be construed so as to impair anv rights required bv individuals, or to exonerate the bank from any liability to the holders of its notes, r..r the non-pavmcnt of the same; and the provisions of this section shall apply as will issued" re as lo m"" m'y hereafter be

The State Bank, under the provisions of the act, continued to do business as the fiscal agent of the State! although it never again redeemed its obligations in specie. So long as the fund commissioners could dispose ot the State bonds in sufficient amounts to continue the internal improvements it had a fair although somewhat soiled reputation as a monetary institution. The work was continued until near the close of i8?8, when the fund commissioners hail exhausted every 'means their ingenuity could devise for raising money 011 Stale bonds to continue the work, and were compelled to report an empty treasury, their inability to replenish it bv the sale of more bonds, ami the consequent necessity of suspending the work. An extra session of the Legislature was called, and the bubble was as legally burst as it had been legally inflated by the passage 'of an act in >\,9 which repealed the system ami provided for winding it up. r

The indebtedness incurred by the State in this i||. starred enterprise amounted to $6,01 1 7 ,0 ,* f,,r which she had ,0 show only one small VctLm'of 'SSUH pit ted from Springfield to Meredosin and a of unfinished roads spread across the State in "all directions which, thus left uncompleted, soon brrame nearly worthless. The credit of the State had become so impaired that its bonds had no staple or ijtiotablc value, and were bandied about in the money markets of New York and London at prices varying from fiftv to seventy-live per cent below par. The credit of'the banks which bail been so closely identified with the State improvement scheme, and whose only valid claim to solvency rested on the credit of the State, it being the owner of a great majority of the stock in both banks, sank even below the credit of the State. Their stocks were worth in the neighborhood of fifty cents or. the dollar, and, at that quotation, the hanks could not redeem their own bills. As banks of issue their mission was at an end in 1X39. The State Bank, however, continued to perform some of the functions of banking, such as dealing in exchange, and disbursing the canal fund, for a few years thereafter. The end came dunm: the winter of 1843. The Legislature at that time had come to a realizing sense of the situation, and determined to retire from the banking business by forcing into liquidation the banks it virtually owned. On January 24 an act was passetl "to diminish the State debt, and put the State Hank into liquidation," anil 011 February 35 an act "to diminish the State debt one million dollars, and put the Bank of Illinois , Shawnectownj into liquidation."

The " diminishing the State debt " was to he brought about by forcing the banks to surrender up to the (inventor Slate bonds, scrip, or other evidences of Stale indebtedness - the Shawneetown Bank $i,ooo,coc, and the State Bank $^,050,000 - for which a like amount of the stock held in either bank was to be surrendered by the State. As the securities sought to be exchanged were at the time about on par, each with the other, it might be deemed that the exchange contemplated was no robbery. It was, however, an arbitrary and unjust act to thus force the banks to deliver up ils securities for its stock, and leave the burden of the past losses of the bank upon the individual stockholders who had paid giHid money for their stock, now worthless, instead of giving their notes, still unpaid, as the State had done. The scheme worked, nevertheless; the bonds to the amount nl 83.050,000 were rJeHvered op, the watt indebtedness thus reduced, and the banks finally wound up at the expense Of the individual stockholders, the holders of their bills, and their other creditors, wlw realized but little out of the final settlement.*

Thus the Chicago Branch of the State Ikwk went out in 1843. Its demise was not generally regretted by the citizens. It had not proved the unmixed blessing anticipated by those who had been instrumental in its establishment'seven years before. For nine years alter the close of the State banks there was no attempt to establish any system of State banking in Illinois. During that period the business was done entirely by private bankers, and on the currency of other State banks or on other issues not authorized by the laws ot the State to be used as money. ,

From 1836 to 1843, during which time a branch ol the State Bank of Illinois was located in Chicago,! m young city nearly doubled its population. The enuro- eration of 18,57 Ravc population of four thousand one hundred and seventy-nine; that of 1843, seven thousand five hundred and eighty. The growth was not entirely attributable to the bank; on the contrary that institution proved quite inadequate to furnish the banking facilities to meet the legitimate requirements of the fast growing town, and, alter the first year was little better than a stumbling block in the way of progress. Outside its own immediate circle of friends, it could grant but little banking accommodation. Its discredited currency bad driven all silver coin out of circulation, and in its place the citizens were forced to use anything that would enable them to cany on the business of the city. Canal scrip was used, payable at the "Chicago Branch," some bearing interest, some payable on demand, and issued on engraved paper in the semblance of bank notes, in denominations of $1, $1, $2.50, $3 and $5. The city corporations, having been refused a discount at the

Illegal Banking. - The Legislature of 1836-37 chartered the Chicago Marine & Fire Insurance Company. In the charter it was specifically forbidden that the company should do a banking business, or issue any notes or bills in the semblance of bank notes to be passed as money. The company organized under their charter and one of their earliest advertisements, which appeared in the American, May 16, 1837, read as follows :

Chicago Marine & l ire Insurance f rendering U» the community, during Ihi- existing deranged condition of thr monetary system of the country, every legitimate .ii>I sanctioned In' prudence which the provisions of the charter of the company admit, when there arc to many pressing causes urging to action every power capable of affording relief, have determine*! to avail themselves of that porlion of the $th section which is contained in the clause bank and being unable to obtain a loan elsewhere, issued scrip also, in small denominations. The small tradesmen issued tickets of credit for change, from five cents to 50 cents, -'good for groceries." "payable in goods." "good for tObaOCO," "good for a drink," or gootl for anything else which the issuer might happen to deal in. In' addition to this was county scrip, State-Auditor's scrip, St. Louis scrip, and subsequent to 1S37, a flood of bills issued bv Michigan banks under the Land Loan banking law of that Slate. < >f all this variety not a bill could be found that would be taken for postage, or for lands by the General Government, and, when found necessary to convert any of them into gold or silver, it was tlone at a frightful discount, varying from ten to eighty per cent, according to the character of the paper offered, and the whims, avarice, or necessities of the parties to the trade. AJI the bank bills might be termed legal issues, as the banks were all working under franchises granted them by some State or Territory. During this period. 1837-43, besides these, there came into general use as money, an issue of certificates of indebtedness which in contrast might be distinguished as illegal monev; since its issue was not authorized under the laws 'of any State, and its current value as money was based entirely on the confidence of the

" And also to receive moneys on deposit, and to loan the same, on bottomry, and respondentia,' or otherwise, at such rates of interest as may now l>e done by the existing laws of the Stale." * * *

The condition of the company is entirely solid and beyond doubt, as there is a surplus, beyond its capital stock paid in, of a considerable amount and because it has met with no loss since its organUation, and its present risks are very few and limited to small amounts.

I 5 ) All money deposited specially on trust for a shorter term than one year shall be deposited for a certified number of months - not lew in any case than three months from dale of deposit.

((<) The rate of interest to be allowed on such special deposits of not less than six months shall lx- at the rate of six per cent per annum ; in all other cases the rate shall be settled by special agreement between the depositor and the officer of the institution at the time of depositing.

17) W hen the time of deposit shall exceed a year, interest mav l>e made payable Ix fore the principal becomes due, annually or semi-annually, as may be agreed on ; but w hen the deposit shall bt for a shorter' time than a year, no interest will be paid until the principal txreomes due.

1 amount of the deposit, whether with or w ithout d in MWh eases tile money so received <hall lie payable according to the terms of the certificate, on the production anil surrender such certificate.

t»| cenmcaies 01 deposit, lor mor general or special, specifying the time and and when payable, and in MM fund, and \ interest, shall Ik issued when required, ami

In accordance with the almve notice, the company immediately commenced a "tanking business." It received deposits, it loaned money, it bought and sold exchange and coin, and its demand certificates of deposit in the course of business, |>erformcd the functions of money, although they were not in the semblance of "hank notes." and it would have been impossible to prove that they had been issued in violation of the provision* oi the charter. What circulation they had was based on the confidence of the people in the solvency of the institution, rather than on any authority or power conferred on it by State legislation. It does not appear that the directors of this company designed to create a circulating medium in their ccrtili'- cates, nor did they do so to any great extent, but, perhaps, sufficiently to suggest the feasibility of tin- plan to a class of men having the ability to put it in practice successfully, and to such an extent as to render it the leading monetary system, and a prominent factor in the trade and commerce of the N'oithwcM for many years.

Among the shrewdest financiers then living in Chicago were Oeorge Smith and Messrs. Strachan \ Sett, all from Scotland. Smith* first came to Chicago as a prospector in 1834. He became strongly impressed with the immense field for profitable investment of money offered by the great Northwest, then for the first time open for settlement, and returned to Scotland full ot enthusiasm over the glorious business prospects which his sagacity enabled him to discern. He there organized the "Scottish Illinois I .ami Investment Company;" Strachan ,V Scott came out with him, on his return, as managers of the affairs of the company ; George Smith was a large stockholder, and a sort of advisory director, and did his business at their office which they opened as agents of the Scotch company, real estate agents, and private bankers, immediately after their arrival late 111 1836,. The three were comfortably settled and doing business in August, 1S37. as appears by the following advertisement which appeared in the Democrat of August 16 :

These Scotch gentlemen, whose business in the country was make money, watched with intense interest the developments of the new phase of banking which had its basis outside of any legislative authority. The act gave the company a corporate existence, and empowered it to hold property, to buy and sell, to sue and be sued, which seemed to them all that was necessary fur iheir purposes. Accordingly, in 1 the times having become propitious through the collapse of the State internal improvement scheme, and the abridged importance and prominence of the State bunks, which followed, they took a transcript of the charter of the Chicago Marine iV Tire Insurance Company, and without important changes obtained from the Territorial Legislature of Wisconsin, its passage as an act incorporating the Wisconsin Marine & Fire Insurance Company. Another Scotchman now joined the trio. Alexander Mitchell, a young banker from Aberdeen, came out at the solicitation of his friend, George Smith, to assume the secretaryship and local management of the new company at Milwaukee. The stock of the company was (325,000, one-half of which was held in Scotland, and the other half by George Smith, Alexander Mitchell, and Strachan iV Scoit. The office was established at Milwaukee. The sign read: "Wisconsin Fire & Marine Insurance Company." The proprietors immediately commenced the business for which they had obtained the charter, leaving the people to judge as to whether they were doing a banking business or not. To their customers they issued certificates of deposit, engraved like bank bills, of various denominations (mm one dollar to ten dollars. Ite'ow is a copy of one of the few, if not the only original certificate issued by the company, now in existence :

These certificates were redeemed in Chicago at ihe banking house of Strachan & Scott, until their removal to New York in 1840, and subsequently by Ceorge Smith tt Co.. so long as they continued in circulation. The issue worked its way into circulation slowly at first, and against the opposition of the banks still doing business under State charters. From the first appearance of these bills until the State banks, tinder the old r^im. were powerless and useless, they were subject to their bitter hostility. The |)eople, however, favored them, as they were always promptly paid on presentation and showed in favorable contrast with the Illinois bills afloat, all of which were below par, and none of which were ever redeemed at their face value after the W isconsin Fire & Marine Insurance Company started business- December 1, 1841, the company had out of its certihcates of deposit afloat as currency only $34.°-s- ill* issue from that time rapidly increased. In 1S43 the circulation was §100,000: in November, 1845, $250,000; i" Fulv, 1K47, $300,000; in November, 1847, $400,000 : in November, 1848, $6oo.coo : in October, 1S49. over $1, ooo.oco; in December, 1851 the year before the banking law was passed in Wisconsin, $1,470.°°°- From that point the circulation was gradually contracted. Every dollar of this vast amount was paid according to its tenor, on presentation. Nearly 8.51,°°° was never presented, that amount being probably KW by fire, shipwreck and wear. In 1853 the company *M re-organized as a legal banking institution under the general banking law of Wisconsin, its name, already too ^ long, being lengthened by the important word, Ban", to which it had an unquestionable title by an illegal m honorable career in the banking business for thirteen years. It received its legal christening under the name of '"The Wisconsin Marine & hire Insurance Company Bank." and as such is known to this day. The name was, and is, too long for practical adoption. In its early days it was more generally dubbed Smith's Bank, or Mitchell's Bank, and under the latter name, after half a century, stands with unlimited credit in all the marts of the world.

As has been slated, the issues of the bank were slow in Raining the confidence of the people. The irregular and illegal form in which the currency was put out was kept constantly in the mind of the people by those who were interested in perpetuating what they were pleased to term legal banking. Runs on Strachan & Scott and Smith, and on the bank of Milwaukee, were organized with a view to discredit the currency, and destroy the growing confidence in its stability and value. None of them succeeded further than to create temporay panic outside the bank; on the contrary, each run, either on the bank at Milwaukee or on Smith at Chicago, or on any other agents for the redemption of its bills, was promptly met, and left the bank in belter standing than it was before. As its business increased, in order to enlarge the field of its circulation, it established agencies for the redemption of its bills at Galena, St. Louis, Cincinnati and Detroit. The result was that the illegal bills, issued honestly and honestly paid, drove from circulation the legal bills, dishonestly issued and afterward dishonored. A lew banks stood the stern Scotch test, and kept their bills in circulation; but it is but truth to sav that the illegal issue of the Wisconsin Fire Marine' Insurance Company drove the depreciated paper of the legally constituted State banks out of circulation.

As contrasting the two systems of banking then in vogue the Milwaukee Courier, May 9, 1842, published the following statements, with comments, as follows :

State Hank Ok Illinois

The cashier of this insntution has made an authorized expose of its affairs, and it shows it to be irretrievably insolvent - from the Missouri (St. Louis) of the 25th.

The last exhibit showing the condition of the State Hank of Illinois, is the work of prejudice. The estimates of the value of securities, although, in the aggregate, not far from the truth, were made at the time with a view to discrediting the bank. The reader will remember that, as has been lold.the State soon after closed up the bank and robbed it of its State stock, leaving it unable to pay its other creditors. On the part of the members of the Legislature who forced the bank to close up, it was a shameless repudiation, since many of them were debtors to the bank, and it was openly charged that the ruling motive for closing it up was to thus avoid the payment of their honest debts. _

' The only object of the foregoing exhibit is to show the reader 'how the illegal system of banking honestly conducted, compared with legal banking dishonestly carried on. A State mav be dishonest as well as an individual, and lacking the control coining from fear of punishment, do more mischief than the citizen who has a wholesome fear of the penalties of the law before his eves. It is sufficient to sav that in 1S43 legal banking teased in Illinois, and that illegal banking had, meantime established itself. For the succeeding eight pears, the banking of Chicago was carried on by private bankers or banks, using as currency the bills of

Wisconsin Marine & Fire Insurance Company, and the bills of other State banks which had managed to resume specie payment and sustain their credit against the first-named institution.

Kaklv Banks anii Bankers - ; 1836 to 1851. - The banking of Chicago was carried on prior to 1851, by the following corporations, firms and individuals:

1*36 - Chicago Branch of the State Hank of Illinois, corner of I.aSalle and W ater streets, removed to Lockport in 1840; agency remained in Chicago until bankclosed in 1S43.

,,SJ7 - Strachan & Scott : remained in business until 1840; sold out private banking business to Murray iV Brand. George Smith succeeded them as agents of the Wisconsin Marine & Fire Insurance Company. The Chicago Marine & Fire Insurance Company did a full banking business with the exception of issuing bills. Its charter was amended in 1S49, and it was the predecessor of the Marine Company of Chicago, 183S - Xo changes.

1S40 - George Smith & Co.. I.aSalle Street, bankers continued in business in Chicago until 1856-^7, at which time the business of the house was closed up. Mr Smith after an honorable and successful career of twenty

Murray & Brand, exchange brokers, corner of Lake and Clark streets; Noah Buckley, pawnbroker, corner of Randolph and Wells streets; Newberry Walter L & Burch I. H. , bankers. 97 Lake Street ;" Griffin & Yin. cent, brokers corner of Dearborn and Stale streetslVroLrKe Mm,l,h i>' I>rivalc 'wnkew, and exchange brokers. Bank Budding. I.aSalle Street; Elijah Swift real estate and other undoubted securities ;" Agency of the 1-armer s and Mechanic's Hank of Michigan H \V Wells, agent, office Saloon Building, ( lark ' Street Agency of the Mississippi Mamie & Tire Insurance Company, office 87 l^ike Street. M. M. Havdcn vicepresident.

The directory of 1849-50 has the following- Money Lenders - G. P. Baker, 193 l,ake Street- J S. Dole. 181 Lake Street; Thomas Parker, 40 Clark street; K. G. Hall, .03 Lake Street; R. K. Swift. 111 Lake Street.

In 1851 a general banking Lav was passed by the State Legislature and legal banks of issue incorporated under its provisions, ultimately superseded the private banking which had been carried on since 1843. Many ol the private bankers organized banks, and continued their business under new corporate names. The survivors of the period of illegal banking as shown in the directory of 1S51 were;

The director? also shows that, in that year, Charles B. Farwell was teller at George Smiths Bank, and that Fdward I. Tinkham was secretary of the Chicago .Marine & l ire Insurance Company.

The "illegal banks" and bankers that lived through the period, and continued after the passage of the Hanking Law, in 1851, to do business had shown a vitality not to be despised. -' Smith's Bank " The Wisconsin Marine A: Fire Insurance Company was in constant danger, and attacks on its credit were so persistent that it may be said to have been in a constant state of siege from the time its bills first appeared in 1839. until it finally became a legal banking institution/under the banking law of Wisconsin, in 1853.

As early as 1841, before the collapse of the State Bank of Illinois, the following appeared in the Chicago American of September 28, 1841 : " The present circulation of the Wisconsin Marine & Fire Insurance Company, whether in Illinois or elsewhere, is $;o,ooc. In addition to the guarantee afforded by Stockholders, both here and in Great Britain, we are enabled to communicate the facts, that the parties by whom the bills of the institution are redeemed in the city have never been without the means of taking up its whole circulation at a moment's notice, either in Illinois funds or Eastern exchange, and have at this time, deposits, available for the redemption of the bills, in the Chicago Branch Bank, to an amount exceeding the entire circulation.'

A statement like the above silenced the Illinois Bank men for the time being, as a run on Smith's Bank would be virtually a run on their own bank, toe deposits for the redemption of the bills being kept in that institution. But when, in 1843, the State Bank was closed Up, the war was carried on by all the outside hanks of issue whose circulation came in competition. The most formidable attempt to ruin the bank occurred in Novem- ber, 1839. For weeks t>efore, the Michigan banks, with allies in Chicago, had been employing brokers to gather "Smith's bills," of which there were out at the time §1,000,000. On Thanksgiving day Smith closed his bank in Chicago for the holiday as was customary. The news was immediately sent to Milwaukee that "Smith had closed his bank in Chicago," and a local panic was thus inaugurated. Simultaneously the accumulated bills began to pour in for redemption, both in Milwaukee and Chicago. Mr. Mitchell, secretary at Milwaukee, immediately sent an express to Chicago for a supply of specie, which was promptly forwarded in double the amount required, one-half by land express and the other by way of the lake. In the History of Milwaukee, published in 1S81, the run on the bank and its result is thus stated : " There was much excitement and large crowds of panic-stricken depositors thronged the bank and withdrew their deposits. The m ire intelligent classes, however, proved their stanch friendship and supreme confidence in Mr. Mitchell and his bank, by furnishing him all they could rake together at first, and afterward replenishing his coffers by depositing with him such amounts as had been placed in his hands for safekeeping. Thus the run became nearly self-supporting, and, as the supply of coin seemed inexhaustible, the local panic among small depositors had entirely subsided before the arrival of the coin from Chicago, the deposits l>eing actually decreased at the end of the run only about $100,000."

Mr. Smith promptly redeemed the bills presented in Chicago. The plot failed and left the bank ultimately stronger in the confidence of the public than ever before.

The panic, however, was not confined to Milwaukee and Chicago, where it was short lived, but spread all through the VVest where the bills were current and constituted the greater part of the circulating medium.

Concerning the panic and the bank, the Chicago Democrat, December 1, 1849. discoursed thus: "Wisconsin Marine & Fire Insurance Company - Panic- Some considerable excitement has been created within the past few weeks with regard to this institution ; and on account of articles published in the papers of this city, many of the holders of its bills abroad have been alarmed. ' In St. Louis the excitement was intense and its bills were selling at five to six per cent discount. They were, however, redeemed at the company agency, at one per cent discount - the usual rale. Upon the line of the canal, also, we learn that the bills have been selling at eight per cent discount." After alluding to its hatred of banking and broken banks it continued : " We do not wonder that they the failures of the banks should cause the people to enquire whether the owners of the institution are legally responsible for its liabilities. In this state of things, we agree with our contemporaries of the I'ressthat it is due to the public on the part of its proprietor that the Wisconsin Marine & Fire Insurance Company should make such arrangements as will prevent these panics in the future. Mr. Smith is now in a position in which he can make such a disposition of the properly which he possesses, or securities that he can command, as will amply secure the public, so far as a bunk can be said to be "secure. We should think that a regard alone of his own interest would lead to this. Such security would restore confidence, and give his institution a stability which it can never possess under its* present character. Mr. Smith has been made a wealthy man by the people of this city. Why then withhold legal responsibility which should long ago have

As showing that both Mr. Smith and Mr. Mitchell were not unmindful of the demands the public had upon them in return for the confidence it had shown in their institutions, the following appeared in the l>emoc rat >>t December 7, 1849.

"Wisconsin Marine & Fire Insurance Company and George Smith. We copy the following from Thompson's Hank Note Reporter of December 1, just received :

" Mii.wai Kit., November 12, 1541). "J. Thompson, Ksc.v . - llrar Sir. In the Hank Sole Reporter of the 15th current I observe reference is made to this institution in a communication in which you ap|xrnd certain remarks of your inn ami Inquire whether the public have a legal claim on me for the redemption of its notes. In answer to this question. I have to inform you that being aware that doubt existed with respect to the extent of my liability for the issue* of the company, and being desirous of satisfying what I am nut piep.ifed lo call an unreasonable wish on the parts of a portion of IM public, I did, in March. 1*46, create a legal liability mi my part for all stirh issues, and thai in order lo remove all ground of doubt on this subject, and acting under the advice of able counsel as to the most effectual manner of accomplishing the desired end, I have rcventb, together with Mr. Mitchell, the secretary, executed instruments creating a personal liability OR tlM part of both of us, to trustees, for the beneht of the holders of the company's notes now outstanding, and those that may be hereafter issued: the trustees lieuig Wiliiam H, Brown at Chicago and Hans Crocker of this city.

The following appeared in the Democrat of December 11, 1849: "Some fifty or sixty of the merchants of the city have published a circular expressing confidence in the" notes of the Wisconsin Marine & Fire Insurance Company."

There was very little popular distrust of the bank after this date. Its t in illation was still further increased in amount, and for the succeeding three years was the favorite currency throughout the West.

The Chicago Democrat was at this time violently opposed to banks and banking as carried on in the West, whether legal or illegal, and kept up a constant fusilade against them all. It represented, however, quite fairly the different phases of the business as they transpired. The following excerpts are deemed of historic value:

" CJtieago Temperatte* Saving Association. - Deposits from a dollar, upwards, received, drawing seven per cent interest, payable half yearly. William H. Hrown, president: Charles Walker, vice-president: J. Wilcox, secretary; T. B. Carter, treasurer: Alfred Cowles, attorney. Loaning Committee: It. W. Raymond, Thomas Richmond, Henry Smith."

June 36. - "A new banking and exchange house has been opened in this city by Messrs. Curtiss iV Tinkham who, having command of considerable funds in Ohio and other currency, it is expected by the produce operators and others, will be able to extend the facilities now afforded for the purchase of the productions of the country. E. I. Tinkham, late cashier of Wisconsin Marine & Fire Insurance Company, is a partner in the firm."

September 19, under the head of « Money Table: " " Bills bankable and commanding specie at one per cent : New England banks in good credit. New York State banks in good credit, New Jersey and Maryland banks in good credit, Ohio. Indiana and Kentucky banks in good credit, Michigan, Virginia and Missouri banks

" Uneurrent. - Canada, three per cent discount, Pennsylvania, par to three percent discount, Tennessee, not taken. Slate Bank of Illinois, fifty per cent discount, State Bank of ShawncetOWO, seventy-five per cent discount."

" Scrip - Chicago city orders, par to live per cent discount; Cook County orders, thirty to thirty-five per cent discount; auditors warrants,' ten to fifteen per cent discount; one hundred and sixty acre land warrants, §1 3 j to $154 each.

" Exchange. - On New Vork, Albany and Boston, one and a half percent premium for currency; on New \ ork, Allwny and Boston, one percent for specie; on Buffalo, three-quarters of one per cent premium' for currency; on Buffalo, one-quarter of one per cent premium for specie; on Finland, $vio. the pound sterling- 111 sums to suit."

- R. K. Swift will receive deposits of money and allow interest as follows: On certificates payable live .lays alter demand, four per cent ; ten days, live per cent ; fifteen days, six per cent; twenty days, seven per cent ; twenty-five days, eight per cent; thirty days, nine per ecu ; fnrty-t.vc clays, ten per rent. If the sum or sums deposited by one person should exceed $1,000 he .met demand is . to be arranged hv special con' tra.t. A deposit book will be opened from 1 till * r M every day holidays and Sunday excepted) at the resi-' l e u-fit of £1;* ,,bsCr|il>cr'-'-S Mi'-hiRan Avenue, for the client of ladies, and one percent more will be allowed them over the rates above named.

rat^-nS SV:,S,t,U" f,rsl ba,nker in (:hica«" »° inauguc st In th, ^ »',th California and the Pacific c ast. In the same pa.KT from which the above is quoted appears the following; L ls

The intensity of the hatred which the Democrat cherished toward wild-cat currency is evinced in the following, which appeared in the issue of December 1 1849:

" P rival? Rankin^. - We understand that before Ion? we shall be blessed '?. with more home-made money Among those who intend to issue bills we have heard' mentioned; R. K. Swift we have not learned the naw of his bank . I. H. Burch, Fsq. .Chicago Hank, we suppose and J. Y. Scammon. Esq. Chicago Marine & Hre Insurance Company . Glorious times, bye and bve if paper money will make them."

" IUskinc. On tee op Chicago Marine & Fine Is-, tam e Company, December 1. 1849. T» FJitor In your paper of ibis morning I lind rav name as connected uith this institution included among those who intend to issue hills I crmit me to say through the Name medium lhat it is not aiv imen- Hon to issue bills or any other circulation. The ohjecl and desisn of the lloard of Directors of this company are to establish a >lI>- stanli.il and responsible marine insurance company, in which our citizens shall be interested. and which shall tie clwflv owned and managed here. Besides the business of insurance. 'the CMpMf WW receive money on deposit, and loan il and the capital of the institunon. and it is our intention to organize a saving* department, under such guarantees as will make il undoubledlv safe to depositor*. \-our obedient servant,

As further proof that the Chicago Marine ft Fire Insurance Company did not intend to issue bills, the following, which appeared in the I -emocrat of December 6, 1849, is given:

" CAicagt Marine cw Fir* tnsuraitu Company - At a meeting of the Board of Directors of the Chicago Marine & Fire Insurance Company, held November 26. 1849, the following resolutions were read and adopted: partmcnt. and the other the Iteposit and Loan Department. The business of the first department shall be mainly confined for the present to marine insurance; that of the second to the receiving at money on deposit and the loaning of the same. The second 4» partmcnt shall be subdivided into a general deposit dcpartmenl and a sas ings dc|urtment.

" ARmMW, that for the protection and security of all persons who shall make deposits in the savings department of this in«tHul.on, il is hereby declared, and the company do hereby contract and agree that all such sums of money as shall lie deposited in the savings department of this institution shali be he'd in tn.st for itaid depos.itc.rs. and shall not be mingled with lite general fun.U or the institution, but shall be kept, used and invested by this company as a distinct fund, the principal thereof belonging in equit\ to such depositors respectively, and not In the institution, so that, in no event, shall such funds be jeopardized by other transactions of this institution, this institution agreeing lo return such deposits with interest, at the rate stipulated in the respective deposit books or ccrtificales of deposit, but ihis institution and all its properly and funds shall nevertheless be liable for the payment of such deposits.

"/VWrv./, That it is not the design or intention of this institior ito exercise any doubtful powers, or to do any act not Nearly within the limits of its charter

" Tin* subscribers arc selling exchange on New York. Altwny and Ho>ton. for currency at one per rem premiums; for Kaslern bills at one-half per cent premium. GKOlUih SMI I'll \ CO."

Banking UNDER the Statk Law 1851 to 1861). - The period from 1843 to 1SO0 was one of marked growth in business and population, and it is not strange that acute financiers should have discovered that the deprivation of a local circulation was becoming each year, as business increased, an increasing loss to the State. In 1 R5 1 , the business of the State, and especially of the northern part, of which Chicago had become the trade center, had so increased that a new banking law had become an imperative necessity. The irresponsible issues of individual bankers, however well secured, and the currency of banks outside the State were not considered adequate, safe or profitable, for the best business interests of the commonwealth. Accordingly in 1851, the Legislature passed a general law, under which legal banking was again established. The law was passed February 15, 1851. and amended February 10,

It was copied in its essential provisions after that of the State of New York, and is so generally familiar to the intelligent reader as to render it unnecessary to give it entire. The general provisions were as follows:

The State Auditor was authorized and required to cause to be printed and engraved, in the best manner to guard 'against counterfeiting such quantity of circulating notes, in similitude of bank notes, in blank of different denominations, not less than one dollar, as he might from time to time deem necessary to carry into effect the provisions of the act. These blank bills were to Ik- countersigned and registered, and, when given out under the provisions of the law became the legal money of the Stale.

Any person or association of persons formed for the purpose of banking under the act were required to legally transfer to and deposit with the Auditor any portion of the public stock issued or to be issued by the United States or any State stocks 011 which full interest is annually paid, or the stocks of the State of Illinois - the St;«le stocks to lie valued at a rate twenty per centum less in value than the market price of such stocks to be estimated and governed by the average rate at winch such stocks have been sold in the city of New York, within the previous six months preceding the time when such stocks may be left on deposit with the Auditor. The Auditor was forbidden to issue bills for banking purposes on the security of any State bonds, on which less than six per cent per annum was not regularly paid, except at least two dollars in such bonds, exclusive of interest, be deposited for one dollar of bills so issued.

At the valuation thus prescribed the corporators were entitled to receive a like amount of bills, which on being countersigned by the officers of the bank thus created, they were authorized to loan and circulate as money, such bills being made payable on demand, at the place of business, in the Stale,' where the bank had been established.

In case any bank should fail to redeem its bills on presentation, and on formal complaint thereof, made in manner prescribed in the act, the said bank was to be restrained from doing further business and the securities deposited were to be applied first, to the redemption of the outstanding circulation, and the residue, if any should remain, to ihe payment of other liabilities of the bank.

Each stockholder was made individually liable in proportion to the full amount of capital stock owned by him. The banks were to be examined annually by a board of commissioners, and a detailed report of the financial condition of each bank doing business under the act filed with the Auditor. Quarterly reports were also to be made by the officers of such banks to the Auditor.

The law was submitted to the people for ratification, at the fall election, and ratified. The vote in the State was: for the banking law, 37.578; against. 31,321. I he majority in Cook County for the law was 2,332.

-* ( )ur local currency is now supplied by the following banks : The Wisconsin, Marine & Fire Insurance Company, the Chicago bank of I. H. Burch & Co., the city bank of Bradley ,V CuittSS, the Southwestern Plank Road Company, Macomb County Bank, Michigan, Oswego & State Line Plank Road Company, and the Illinois River Bank. The bills of these banks passed readily among us. They were called into existence by the necessities of the times, and, although everybody is dissatisfied with the establishment of money institutions in our midst, without the sanction and control of law, they have met the sanction and countenance of the community, and will continue to do so. unless it shall turn out that the State has adopted a general banking law In that case, we apprehend that whatever banking institutions may be in Illinois must comply with the law, or their bills will be forced out of circulation."

" Illinois is flooded with the issues of foreign banks. Our people pay several hundred thousand dollars lor a currency, the whole of which goes to enrich private corporations of the Eastern States. The general banking law, 011 which we arc to vote in a week or two provides: securities far superior to those of a large majority of the banks whose issues go to make up our present currency, and it effectually guards against over issues. It will furnish us with a home currency to be kept under the control of laws of our own making, the interest of which will be retained in the State, augmenting the general wealth, instead of being carried off, thereby impoverishing our people to the tune of hundreds of thousands of dollars annually." * * * " Shall we have this or that ? That is really the question before us. One or the other we must and will have."

Cnder the provisions of the act passed and ratified by the people, what was termed legal banking was again begun in Illinois. The first bank organized in Chicago was the Marine Hank. It filed its certificate of organization January 13. 1852. Its capital was at that time §50,000, which was increased May 20 by an addition of §500,000. Bonds were deposited, according to the Auditor's report, October 20, 1852, to secure a circulation of $90,044. J. Y. Scammon was the president of the institution and F.dward I. Tinkham its cashier. The first appearance of its bills was announced in the Democrat of April 21, 1852, as follows :

" Marine BANK. - The bills of this bank, the first issue under the General Banking law, made their appearance on Saturday 1 April 17). The plate is a very fine one anil will not be an easy one to counterfeit."

" We received yesterday in the course of business a $5 bill of the Marine Bank. It is finely engraved, having for a vignette, the bust of that distinguished philosopher and theologian. Baron Swedenborg, with rays emanating therefrom, placed between two beautiful women. The only thin}? we objected to in the bill is the embellishing it with ladies - emblems of innocence - as though there were anything innocent about (yanking institutions. The bills' are secured bv stock deposited with the Auditor."

" Messrs. I. H. Hurch & Co., of the Chicago Bankhave filed the necessary papers for the organization of their bank under the general law of the State with a capital of Si, 000.000. Mr. Burch has done business in this city for a number of years, and earned an enviable reputation."

000 of State slock having been deposited with the Auditor as a basis of circulation. Additional deix.sits of stock will be made soon. The nominal capital is The following is the list of officers:

The Southwestern Plank Road Company filed the necessary papers with the Auditor to render it a lej-al bank in the latter part of May. ,852, and was thereafter known as the Commercial Hank.

bills, by S. \ rooms. The Mechanic's Bank, Georgetown. I). C. pledged a contingent Safety Fund of I mted States stock for the redemption of its bills I he Democrat of October 8, 1853, in which the above information appeared, said: The Mechanic's Hank of Georgetown, comes into our market to compete with our bankers and brokers, in the fiscal transactions growing out of our large trade and commerce."

Bills pur|H>rting tp be issued bv the Bank of America Washington, I). C. were redeemed bv George Smith! who had bought a controlling interest in the imtitotioa in April, 1852, and became its president. He organized a bank under the same name under the State law July 19, 185;. depositing bonds sufficient for the redemption of a circulation of $50,000. Between the two he floated a large circulation.

The Transition Period. - As has already appeared the capitalists of Chicago who believed in U-gal banking were not slow to avail themselves of the benefit* <>f the new law. During 1852, the following Chicago banks were organized:

The Bank of Commerce, papers filed in May, 1852; IhukIs deposited to secure circulation in October, A. W. Davisson, president; T. McCalla, cashier.

Chicago Bank, Juiv 1, 18^2, was the successor to the banking business of 1. II.' Burch & Co.; president, Thomas Burch; cashier. I. H. Burch. .

Union Bank, August, 1852, owned by Forrest fins. \- Co. Andrew J. Brown, president; Henry L. Forrest and Thomas I.. Forrest, joint cashiers.

At the In-ginning of 1853, the new city directory published, contained the nair.es of the following persons and firms, at that time identified with the banking business of the city:

Commercial Exchange Company, 66 Clark .Street; David Gamble, with George Smith & Co.; Henry Greenbatim. at R. K. Swifts bank; Elbridgc G. Hall, money loaner, ioj Lake Street; Jones* Patrick, linkers. 40 Clark Street; Alfred Spink, teller of Chicago Hank; Richard K. Swift, banker, corner of Lake and Clark Streets; George Smith & Co. Wisconsin Marine & Kire Insurance Company, and Bank of America.

The vear 1852, which witnessed the reestablishment of banking under the State laws of Illinois, was an exciting one in the annals of Chicago banking. It was soon discovered that, although a new and legal currency hail been provided, it was not supplanting the wellestablished and largely-circulated bills issued by the Wisconsin Marine i\: lire Insurance Company. "Smith's bills" were still plenty, and were current wherever known, as they were always kept at par with the money of other banks, and redeemable in gold at one per cent discount. Smith had grown rich and somewhat arrogant in his consciousness of financial strength. He continued to Haunt his bills in the face of the new banking law in a manner exasperating in the extreme to I. Voting Scammon and other stanch anil honest advocates of "legal banking" who had established banks in the city. It was not deemed prudent or practicable bjf the enemies of his bank to repeat the oldtime attempts to ruin it by a run. He kept himself constantly fortified against aggressive moves in that line, and 'could have turned the tables on any bank or combination of bankers who should attempt it, in a way which it was not pleasant to contemplate There existed, however, from the beginning a determination on the part of the banks doing business in good faith under the State law to drive the illegal issues out of circulation if possible. Meantime a state of armed neutrality prevailed.

Sometime in the early spring complaints became rife among the people at the curienl charge of one per cent for gold for bank bills. This was the rate which had been established by Mr. Smith, and it was found impracticable for the legal banks to redeem at par, while his money still circulated as currency, as theirs would be constantly returning for gold while Smith's would remain out performing the functions of money.

The following extracts from the Chicago Democ rat, not partial to banks, whether legal or illegal, shows something of the public sentiment on the subject. On the 4th of May, 1852, it said:

" We understand that arrangements arc now being made by all the banks in our city to bring up their notes to 100 cents to the dollar instead <l keeping them u ») cnts, when they tune been for a long time. If all go into this operation, by exchanging notes every Saturday night, they have nothing to feat fn..n* each other. Some are afraid o( the land sales about to take place in our city. Kill we think thai land warrants will be used at them instead of specie and so this is no objection."

"The people are Incoming very much excited upon the subject of the banks not redeeming in specie. We have talked with our bankers upon this subject. Each alone says there ought to be specie payment, but each is afraid of his rivals. Each is afraid that if he pays specie some id bis rivals will make a run upon him. There is' some plausibility in these pleas, but there is a way to obviate <hcm all. Let there be a common day to all. Let our Hoard of Trade take hold of this matter. Let there be a committee appointed to see all the banks in the city and make an amicable arrangement whereby all the banks shall commence paying by June I, or at fartherest by July I. Our Legislature uught to take hold of this subject, as it is clearlv embraced within I he terms of the Oovernor's proclamation; and it is in their power to stop all illegal banking. The Marine Hank is paying specie now. ami several of the other bankers have authorised us to say that they arc ready and willing to begin whenever a day shall be agreed upon."

" We have conversed with the most of our bankers upon the subject (of paving speciel and thev have all said that (hey would pay specie the moment Mr. Smith did; that they could not pay specie unless he did, for it was in his power to ruin them. Mr. Smith is now here, and is willing to make any arrangement that will give him an equal chance with the other banks, but any arrangement every one. A combination of merchants, to deposit with no one who' issues bills not equivalent to specie or to New York exchange at one-half per cent premium, is oti fool and should be resorted to. The Chicago & Galena Railroad and canal trustees have the matter under advisement of taking no bills not equal to specie here, If our bankers have no respect for themselves; if they do not value their own nolcs at par, it is time Ihey were taught to do so. A. people are not free whilst thev submit lo have a currency that those who issue it at par will not take back at par. Our Legislature is soon to convene, when a stringent law against present abuses should be passed, and there should be no law to collect a note given for such stuff as we are having now for money."

From the foregoing extracts it appears that at that lime Mr. Smith, with his illegal issue, was master of the situation, and, with the exception of the Marine liank, could dictate terms to the legal banks of the city. The proposed arrangement with him fell through. To establish a clearing-house, as was proposed, and exchange bills, would have lieeii in defiance of the very law under which the other banks had been organized.

As the banking law seemed inadequate to drive out of circulation Smith's certificates of deposit, some of the banks decided to avail themselves of the advantages of this system of banking as well as their own, and thus reap the advantage of a larger circulation than was authorized under the law. How many banks entered into this double-headed system of banking, or the amount of their issues cannot now be ascertained.

The Merchants' & Mechanics" Bank did quite a thriving business. The Democrat, August 20, 1852. stated that there were counterfeits of the bank afloat, and warned its readers to take no bills not countersigned by the register, John Neal. In the issue of the next day, the president of the bank, I.. D. Boone, replied that there were no counterfeits on his bank, antl that he supposed the bill alluded to as a counterfeit was "a certificate of deposit, which the bank was prepared to redeem at any time." An indignant citizen, in answcrlo Mr. Boone's avowal, wrote that "these certificates, in arrangements, vignettes, figures, and stamps are well calculated to deceive the unfortunate receiver. Such an issue is void, because unauthorized by law, and worthless because the illegal acts of the officers cannot bind the stockholders." The editor added: "If the banking law of Illinois is worth anything, it is in compelling those who issue a paper currency to put up some sort of security to the bill holder with the Auditor."

" 'Omm Skiafhiltrt.' - Excuse us. dear reader - we are in bad humor. We cannot sec deception substituted for fair dealing so long a* open honesty is the only sure mad to success The Merchants" & Mechanics' Hank of Chicago has issued a shinplaster exactly like their notes which arc secured as the law requires. The Western papers call it a "dangerous counterfeit." 'Tis wurse, 'tis a device a deception, a fraud, and the only way to avoid it is to refuse all notes on the Merchants' ,V Mechanics Hank of Chicago. We have quoted it a doubtful (H. I) land dashed il on our list, and so long as the safety of our readers requires this course we will

" The -above, from Thompson's Hank Note Reporter is plain talk. We insert it, not so much lo injure this one lank in particular, but lieeause others of our city hanks arc going into the same oiieration. The thing ought lo be stopped at unce. Under our new banking law ihe bill holder is secured, hut there Is no security for the depositor. So people who prefer security to no security will hereafter take the legal countersigned bills, instead of the illegal certificates of deposit.*'

By September 1, an irrepressible conflict had been worked up between the legal and illegal bank interests. At about this date a new element of financial disturbance was added. All banking in Chicago had. whether legal or illegal, beeit heretofore conducted on worldly principles and for the object, more or less sordid, of

The senior partner. Sell) I'aiuc, was a native of New I-'.ngland, and, when a young man, came West. He left Mont|>elicr, in April. 1834, in company with Chester .Smith, who was at that time an Illinois merchant, being a partner of a Mr. doss at Walker's drove, now Plainficld. He traveled with him on his western journey by stage, canal and schooner as far as Detroit, where they separated. Smith going through to Chicago by stage, and I'aine taking the longer but less expensive route in the schooner "Commerce," bv way of the lake. It took his last dollar »o pay his' deck passage to Chicago, where he arrived after a rough voyage of twelve days, with no capital except health, strength, and a most earnest endeavor to do his work in life according to his eccentric views of right. He was tall and straight. He had a frank, open countenance, and a pleasing and prepossessing address. His conversational powers were excellent, and as a public speaker he was far above mediocrity. He was good humored, and made friends rapidly! He hired out with the firm of Taylor, llrce^.- & Co.,' and was for a time a partner. Stibsequentlv he entere.l into a copartnership with Theron Norton, under the firm name of I'aine & Norton. Tltcv did a fairlv successful business for several years. I'aine sold out to Norton July i, iSaj, and retired from mercantile business in Chicago. He was married in Chicago on Thursday evening, August 15. 1837, to M rs. Francis lones. eldest daughter of Major WThitlock. I'aine was alwavs a rabid and uncompromising Abolitionist, and, subsequent to the dissolution of the firm of I'aine <V Norton, became a convert to the socialistic theories of Fourier, went into Lake County, where he bought a large farm christened the place l.akc Zurich." and in company with other kindred reformers attempted to earn- into practice the socialistic theories he had accepted ' How well or poorly he succeeded is not known, h is certain however, that the enterprise- did not prove ruinous nor so discouraging to him as to break his faith in the l ouricnte doctrines. He was also for a time a heavy owner and one of the managers of the Illinois River bank, an unchartered bank at LaSalle. Ill On the hrst appearance of what are now termed "spiritual manitestat.ons." in the form of rappings or knocking; at Rochester, N. \ ., through the mediumship of the rc* girls, he became deeply interested in the phenomena, and soon after became an ardent convert and earnest advocate and believer in modem spiritualism - so ardent ,,nd earnest as to render him a credulous v ictim of the many designing mountebanks who attached

St '.es Ut$P Tch abused antl little understood ph losophy The character of Paine was naturally radical, and molded and fashioned by the many 7ol side isms he had embraced, could but impel him 'to the adoption of modes and methods of action quite 5 world at large how banking could Ik- carried on in accordance with what he deemed a higher I w r the banking law of lllinois-the law of hurLnity banking and exchange office in Kddv's new building adjoining the old post-office, on Clark Street." The firm was composed of Seth Paine, who put in about $1,100, and Ira H. Eddy, who put in something over $4,000. The capital stock of the concern never exceeded $6,000. although it was believed that it was backed by capitalists of some strength and character, and at the start it had such financial standing as to obtain quite a number of depositors.

Hy the middle of October, the bank was opened for business, .1- 'iv the folio* ng m>ti< t in tin weekly Democrat of October 18: " The Bank of ( hicago has determined upon issuing certificates nf deposit, ami issues are now out, which for artistic -.kill and beauty of finish are not exceeded by any bills we have seen. < >n the right of the ones is a beautifully executed portrait of Senator Douglas, engraved by the well-known Tappan, Carpenter, Cassilear & Co. On the right of the twos is Washington crossing the Delaware, and 011 the threes a tine portrait of Henry Clay. Mr, Paine, who is at the head of the banking house of Seth Paine & Co., is president and W. T. Mttier is cashier."

So soon as the bank commenced business it was apparent that Panic's theory of banking was as unique as were his other theories, and, if carried out, would \k. equally subversive of the interests of both legal and illegal banking ; indeed, it was his idea to work as radical a change in banking, as he believed would come to society as a whole by the adoption of the theories of Fourier.

The prospectus of the bank, written by Paine himself, gives the high moral grounds on which the bank was to lie conducted. It read as follows ;

" We lOM nothing except for aiding ihe natural exchange between Ihe producer and cim-umer, whether of body, soo.1 or spirit - and for the time necessary to produce the exchange.

"Our twsis for making loans is the established character of the borrower. He must be a temperate, honest and religious *»n or woman, with si mind sufficiently developed to understand hi* business. We are prepared to loan any amount needed fn such business by such men. Our money corresponds in commerce, to ihe blood in the human svMcm. It is the circulating medium. When money is um-J for the purposes of slaughter and shedding ol blood, it makes the I.NmkI run cold : and .1 stagnates, and era*5 to be healthy, and docs not circulate freely, and finally ends '« death.

-- When used bv anv of the other classes excluded, it also crn^ in death. Wc want' no business done which is death to the hum." body, or hctt to the soul; and we would as soon furnish a rr.|ie to out brother for hanging himself, as the money to buy it would as soon kill ourselves, as lend our money lo aid in kilnnj.. Wc would as soon drink ourselves, as lend our money to drunkards We would as soon take high rates of interest, a> loan the usurer facilities to do the same thing. We would as soon uke the h.c <>: our brother, as lend our aid to speculators in the bread °> "'f' may starve him into a living death, while they twrmit not we prayer for devolution. All Has its foundation in llate; ami H< that haleth his brother is a murderer! -We will no longer der!"

six per cent per annum. He proposed to loan his certificates on satisfactory security, for three-fourth! of the amount, and an even exchange of the other one-fourth in current hank notes such as the certificates were payable ini with the agreement on the part of the borrower that as often as one-tenth of the amount borrowed was returned for redemption, he should take them again. Riving in exchange current bank notes. The plan, in other terms, was to make each borrower a sort of fiscal agent of the bank, pledged to keep in circulation or redeem so much of the money as he had borrowed and put in circulation. Had the people given Seth I 'nine their confidence and supported in as full measure as did the people of the l.oyal Slates the Government during the war, and had .Seth I'aiue's fiat money been quarters of as ardent a set of Spiritualists as could be found in the country, lioth I'aine and F.ildy, his moneyed partner, were bright and shining lights of this Spiritual Church, and prominent and loud exhortcrs at the frequent meetings held over the bank. It was not long before the bank became so identified with the spiritualistic views of the proprietors as to be inseparable in the minds of the outside community.

January i, 1S53, Mr. I'aine issued the first number of a paper styled the Christian Hanker. The articles were somewhat incoherent, abounded in wit ami sarcasm, and so intermingled spiritualism, banking, and anti-monopoly, that it is no wonder many believed i'aine bad gone stark mad. In addition to his polemical articles, he was bitterly personal, and in bis efforts backed by a power co-equal to that of the General Government : and had I'aine possessed the power, as did the Government to put out of circulation all other issues save his own, his inouey would have proved as good as greenlwcks. Unhappily for I'aine. none of these conditions indispensable to success as a fiat-money manufacturer were vouchsafed to him.

for a few weeks after it was opened for business, the bank did a quiet and unostentatious business with a class of very respectable citizens, who believed in the applications of moral principles to banking, as inculcated in Paite'9 manifesto, and who were not sufficiently practical to foresee the obstacles to be encountered in establishing the institution in a not over moral community, made up largely of men who drank spirituous liquors, smoked ami chewed tobacco, butchered cattle and hogs, and ale the meat, speculated in bread stuffs and other articles of food! bought, sold, mortgaged and owned land, loaned money at over six per cent, anil otherwise brought contempt upon the code of morals on which the bank had been set up.

Perhaps Paine's overweening confidence and often ill-timed advocacy of the many vagaries which he cherished, and which in a most illogical manner he managed to attach to, or mingle with his banking business, had something to do with precipitating the calamities that befell the institution,

Over the bank was "Harmony Hall," the headto pull down the strongholds of sin, spared none who stood in the way. The articles became more vituperative with each succeeding issue, as increasing outside annoyance gave fresh cause, from his view, for righteous indignation. As showing the mental condition of Paine at this period in his banking career, and as relics of the time, quite copious extracts from the Christian banker, Vol. 1. No. 4, date January in, 1S53, are here given.

-' Oitr Pulpit. - We preach daily (Sunday excepted, when we talk, as the spirit moves, in Harmony Hall, at half-post ten in the morning and seven in the evening in the Hank of Chicago. Our hearers give increasing evidence of hope within thir souls, and go forth as radiators of new light. If a cigar-smoker or a rumsticker, or hog-eater comes in for there are such men in Chicago yet), who not only have so little respect for themselves, but actually intrude such offensive influence before us as would make a dog puke ; we refuse to do business with them, but send them right over to Swift, who smokes to drown conscience, which has been violated so long by huge shaves of his fellow-men, that

" Our pulpit brings faith and works together. Ignorance supposes we would loan our bills for the sake of money. Hut intelligence radiates from our pulpit, and permeates their addled brains as far as wholesome truth can reach a tobacco bloat or a sucker of rum. and tells them that our faith is true, and they can't borrow for love or money. Some come in to' exchange our bills for something which our addle-headed bankers take on deposit, (they take nothing which goes out at less than ten per cent) - that being their standard of both faith and dumplings. Writ, Illinois River bills are bankable, and why should they not be? Tavlor is interested in htm, especially in this crisis, for they regard him as a great manager.

"So we give them bankable bills - Illinois River bilk Our bills are signed by Seth Paine, president, and art issued n p irsu in . ul law I I .. : - MU an signed by Seth Paine, treasurer of the Salisbury Plank R«ad, which was never built or intended to be - and my responsibility passed from the concern long ago Churchill Coifing was president, bat he. too, has suld out, and we both know there has been no responsibility there since. Taylor & C.urnee make a newspaper advertisement saying that they are responsible - but this amounts to nothing - thev are not legally holden. ami they have no moral responsibility - and if they' had both, they are unable to pav their imn debts, much less to Rhre responsibility for several hundred thousand dollars, which they have loaned to themselves and others and which they never intend to pay. This trash is bankable and so Seth Paine, plank-road treasurer, goes for his subsequent issues. This shows the need of our pulpit - the need of light. * - * |)r,.st.n, jn(|i. preaching is still needed. So bring on your bills for redemption, and when objection is made to the various trash paid out by Tucker, llurch. Smith and other chaps here, we will open our mouth or the Lord will open the mouth of Balaam's Ass to keep vou from being shaved twelve per cent by the Great Mogul and h s undcrtn.ppers, who, next to R. K.., pursue the people with .swiftest destruction, and keep vou trotting over here with bill, for redemption, till vou uw oiu more shoe leather than Jo. Kenvnn's 'whole stock amounts to-all because you don't, know any better han to keep your accounts with men who throw us out because we reduce rates."

In an article on taxation the editor says- " In our first number, I said we would' pay no more axes-and on that lovely spot at Lake Zurich', the Lon swo?d? J" ff, dcV*rV,f Mi~ shall measure ^ndnV^bS2e,ight0fa8et0f much -I TtHat ma" hasan ina,i««We right to as much so. as he can occupy and cultivate ; that he canil 'Vul: T tUle ,<J ""^ 'W '* res-tricted n h s tk to less. Any attempt to acquire more is as great a crime as to submit your right to less 8 a