OHIO STATEWIDE FILES - Know your Ohio: Some Travel notes of Henry Howe *********************************************************************** OHGENWEB NOTICE: All distribution rights to this electronic data are reserved by the submitter. Reproduction or re-presentation of copyrighted material will require the permission of the copyright owner. The submitter has given permission to the USGenWeb Archives to store the file permanently for free access. *********************************************************************** File contributed for use in USGenWeb Archives by Darlene E. Kelley http://www.genrecords.net/emailregistry/vols/00026.html#0006374 December 17, 1999 *********************************************************************** Historical Collections of Ohio Diaries of S. J. Kelly Plains Dealer Know Your Ohio by Darlene E. Kelley *********************************************************************** Money at Home--- Banking in Ohio-- Creation of National Currency- Pt 1 Beginnings-- Because of their crucial importance to the life of the community, U.S. banks have always operated under rules more demanding than those applied to other businesses. In most states of the early Federal Union, bank organzers needed special permssion from the state government to open and operate. For a while, an additional layer of oversight was provided by the Bank of the United States, a central bank founded in 1791 at the initiative of the nation's first Secretary of the Treasury, Alexander Hamilton. Its Congressional charter expired in 1811. A second Bank of the United States was created in 1816 and operated until 1832. In less settled parts of the country, lending stadards tended to be more liberal. There farmers could frequently obtain bank loans to buy land and equipment and finance the shipment of farm products to maket. Because of the unpredictability of weather and market conditions, loan losses tended to be higher too. When the second Bank of the United States when out of business in 1832, state governments took over the job of supervising banks. This supervision often proved inadequate. In those days banks made loans by issuing their own currency. These bank notes were suppose to be convertable, on demand, to cash-- that is, to gold or silver. It was the job of the bank examiner to visit the bank and certify that it had enough cash on hand to redeem its outstanding currency. Because this was not always done, many bank note holders found themselves stuck with worthless paper. It was sometimes difficult or impossible to detect which notes were sound and which were not, because of their staggering variety. By 1860 more than 10,000 different bank notes circulated throughout the country. Commerce suffered as a result. Counterfeiting was epidemic. Hundreds of banks failed. Throughout the country there was an insistant demand for a uniform National Currency acceptable anywhere without risk. In response, Congress passed the National Currency Act in 1863. In 1864, President Lincoln signed a revision of that law, the National Bank Act. These laws established a new system of national banks and a new governmet agency headed by a Comptroller of the Currency. The Comptroller's job was to organize and supervise the new banking system through regulations and periodic examinations. Banking in Cleveland-- As Cleveland grew from an agricultural outpost in the Northwest Territory to a center of trade and trans-shipment, the village economy and hinterland it served, gradually lost its local character as its population increased, and banks were organized to facilitate commercial transactions that were increasing in number and scope. Although the war of 1812, helped make Cleveland a trading center, barter still governed most exchanges of goods because specie (hard money made up of gold and silver coins) was scarce and paper money was of dubious value. The city's emergence as a commercial center still was uncertain whe its first bank, the Commercial Bank Of Lake Erie opened for business August 6, 1816, extending credit to merchants, making real estate loans. and issuing its own bank notes as currency. The Commercial Bank of Lake Erie. This bank was the first bank in Cleveland and briefly played an active role in the town's early economic life. Incorporated by 9 Clevelander's with $ 45,000 in capital and a twenty-five year state charter, the bank opened for business on August 6, 1816 in a house at the corner of Superior and Bank (w 6th) streets. With Alfred Kelley as President, the firm carried on a prosperous business in mercantile credits and real-estate loans for two years. However, it fell victim to the Panic of 1819 and in 1820 it was uable to redeem $ 10,000 worth of paper money with specie ( gold and silver coins ) to the Second Bank of the U.S. The bank reopened on April 2, 1832 after paying off its debt, with Leonard Case, president and Truman P. Hardy cashier. Reorganization coincided with a tremendous growth in Cleveland's canal trade in the 1830s, and the bank extended credit to Cleveland's merchants and financed shipments of Ohio farm surpluses. The enterprise was sucessful until the Panic of 1837, when the bank was unable to collect its heavy merchant loans and had to suspend payment of specie for over a year. Altough it survived the panic, the Comercial Bank never recovered, and when its charter expired in 1842, the state legislature refused to recharter it. By 1845, the bank's remaining assets had been distributed, including prime parcels of downtown real estate. Canals-- It was during the nation's canal building period that Cleveland's position as a provincial center of trade was established. The Erie Canal, completed in 1825, opened Great Lakes shipping to the eastern seaboard, and the Ohio and Erie Canal, finished in 1832 with Cleveland as its northern terminus, linked Ohio River traffic and the interior of the state to Lake Erie. With Ohio connected with eastern seaboard via the Erie Canal, commerce expanded into areas essentually bypassed in earlier good times, creating a need for banking services. Initially Cincinnati, which benefited from increased river traffic, was the state's major commercial and banking center. ********************************************* To be continued in part 2.