OHIO STATEWIDE FILES - Know your Ohio: Tidbits of Ohio -- Part 77A ************************************************************************ USGENWEB ARCHIVES(tm) NOTICE Copyright. All rights reserved. http://www.usgwarchives.net/copyright.htm All documents placed in the USGenWeb Archives remain the property of the contributors, who retain publication rights in accordance with US Copyright Laws and Regulations. In keeping with our policy of providing free information on the Internet, these documents may be used by anyone for their personal research. They may be used by non-commercial entities so long as all notices and submitter information is included. These electronic pages may NOT be reproduced in any format for profit. Any other use, including copying files to other sites, requires permission from the contributors PRIOR to uploading to the other sites. The submitter has given permission to the USGenWeb Archives to store the file permanently for free access. http://www.usgenwebarchives.org ************************************************************************** File contributed for use in USGenWeb Archives by Darlene E. Kelley http://www.genrecords.net/emailregistry/vols/00026.html#0006374 March 15, 2006. +++++++++++++++++++++++++++++++ Historical Collections of Ohio And Then They Went West Know Your Ohio Tid-Bits -- Part 77 A. by Darlene E. Kelley notes by S Kelly [ ] ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Tid-Bits - Part 77 A. Banking after the War of 1812 And its effects on Ohio. Following the war of 1812, the United States government recognized the need for a national bank to regulate the printing of currency and the issuance of governmental bonds. Many Americans opposed the Bank of United States, believing that it limited their ability to make land purchases and pay off other debts. President Jackson had opposed banks since 1790s, when he lost a sizable amount of money when he invested this cash in a bank. In 1812, Nicholas Biddle. the head of the Bank of the United asked to have the institution rechartered. In 1816, the United States government had authorized the bank to operate 20 years. Biddle at the urging of Henry Clay, appied for rechartering four years early. Congress agreed with the necessity for a national bank, but President Jackson vetoed the bill. His action. in essence, prevented the continued existance of the United States after 1836. [ see the timelime at further part of this article. ] Jackson was not happy with waiting to 1836 for the Bank of the United States to end. In 1832, Jackson ordered the withdrawal of federal government funds, approximately ten million dollars, from the Bank of the United States. The President deosited these funds in state banks an privately-owned financial institutions known as " pet banks. " Ohio had nine of these banks. Biddle tried to keep the national bank operational by calling in loans, yet many businesses did not have the funds available to pay off their debts. As a result of Biddle's actions, numerous businesses had to close their doors due to the lack of funds during 1833 and 1834. After this brief economic downturn, the United States' economy boomed. State banks began loaning money to industrialists and farmers. The banks also began printing exorbitant amounts of currency. This action led to high inflation. At the same time the banks were printing currency and loaning out large sums of money, foreign governments and businesses, hoping to benifit from the United States' burgeoning economy, loaned large sums of money to American businessmen. As a result of all of these factors, high inflation resulted. Currency quickly depreciated in value. In July 1836, Jackson issued the Specie Circular. Under this act, the government would only accept gold or silver in payment of federal land. Foreign investors also did not want to accept American currency as payment, and they began to call in their loans to American businessmen before the currency depreciated further. American citizens rushed the banks to withdraw the necessary funds to pay off their debts. Unfortunately, many Ohio and other Banks had loaned out too much money and did not have sufficient reserves on hand to meet the demands of their customers. Approximately eight hundred banks closed their doors in 1837, sifling economic growth and bankrupting numerous businesses, including some of Ohio's banks as well as other banks elsewhere. During the Panic of 1837, approximately ten percent of American workers were unemployed at any one time. Mobs in New York raided warehouses to secure food to eat. Prominent businessmen lost everything. Churches and other charitable organizations established soup kitchens and breadlines. In Ohio, many people lost their entire life savings as banks closed. Stores refused to accept currency in payment of debts, as numerous banks printed unsecurd ( backed by neither gold or silver ) money. Some Ohioans printed their own money, hoping business owners would accept it. Thousands of workers lost their jobs, and many businesses reduced other worker's wages. It took until 1843 before the United States' economy began to recover. The federal government's failure to assist the American people led voters to turn against the Democratic Party, the party in control of government at the start of the Panic of 1837. In 1840, voters elected William Henry Harrison, a member of the Whig Party and an Ohioan, over the Democratic candidate. In 1845, the Whig Party controlled Ohio's government. Mordecai Bartley served now as governor, and Whig representatives dominated the state legislature. Whigs had traditionally favored creation of banks. The Alfred Kelley Bank Bill hoped to regulate banks operating within the state, providing Ohio residents with access to loans. Alfred Kelley, a Whig member of the Ohio legislature and a banker, introduced the bill. The Kelley Bank Bill would still permit private banks to operate in Ohio, but a new State Bank of Ohio would oversee the activities of these other financial institutions. Under the Kelley Bill, the State would be divided into twelve districts. Each district would have a least one bank that belonged to the State Bank of Ohio and that oversaw the State Bank's actions. In reality, the State Bank was no more than a commission made up of other banks in Ohio, and they were responsible to the Ohio legislature. The Kelley Bank Bill gave this commission, also known as the Board of Control, the power to regulate the amount of currency produced by individual banks. It also required all banks to maintain thirty percent of the total funds deposited in the bank in reserve. The banks could invest the other seventy percent as they saw fit, it would primarily be through loans. As a result of the State Bank of Ohio and its regulatory ability under Kelley's Bank Bill, Ohio's banking system became much more stable. It worked so well that other states soon adopted the same principle. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ A Time Line of The National Bank Dec 14, 1790. Aexander Hamilton proposes a Bank of United States. Dec 16, 1790. Patric Henry opposes the National bank because it is unconstitional. Feb 25, 1791. President Washington asks his cabinet members for opinions on the National Bank. Thomas Jefferson submitted that such a Bank was unconstitutional and would violate the yet to be ratified 10th Amendment. Alexander Hamilton submitted that Congress's power to collect taxes, was also power to create a national bank. Not convinced by either side, Washington sided with Hamilton as it was Hamilton's job as Secretary of the Treasury to know what he was doing. Dec 12, 1791. The Bank of the United States opens it's doors in Philadelphia. Jan 21, 1793. Hamilton and the National Bank are accused of corruption and mismanagement. Opponents to the National Bank call for the demise of the unconstitional Bank. Congress fails to act. [ During the winter of 1792-93, Congress was investigating financial dealings of Alexander Hamilton, the first Secretary of the Treasury. Hamilton had made secret payments to James Reynolds, a convicted swindler whose release from prison had been allowed by the Treasury Department. Hamilton was forced to admit to members of Congress that he had made the payments, but haracterized them as bribes to prevent public disclosure of adultry Hamilton had committed with Reynold's wife, Maria. Those encounters occurred in Reynold's bed while he was away and in Hamilton's bed while his wife was away. Paing for Reynold's silence was only part of the cover-up. Hamilton and Mrs. Reynolds burned incriminating correspondance and promised to pay the Reynolds' travel costs if they would get out of town. When the members of Congress, including future President James Monroe, heard the confession, they decided the matter was private, not public, and no impeachable offense occurred. They conspired with Hamilton and among themselves to keep it all a secret. President Washington, Secretary of State Thomas Jefferson ( who hated Hamilton ) and House minority leader James Madison were all aware of the confession but did not make it public. In 1797, a disgruntled former clerk of the House leaked the story to a muckraking journalsit, and the whole nation heard about it. The result -- In 1798, then - President Adams and former President Washington nominated Hamilton to be Inspector General of the new U.S. Army, second in command to Washington himself. The other founding fathers still remained their respectful silence, and Hamilton was confirmed by the Senate. Some historians believe that Alexander Hamilton fabricated the affair and bribes to cover up his illegal activities of selling insider information to a select number of friends. A sex scandlal was easier to cover-up than a national banking scandal. ] Feb 20, 1811. Congress refuses to let the National Bank renew its Charter on the grounds that the Bank is unconstitutional. March 4, 1811. The Bank of the United States is disolved. Jan. 20, 1815 President Madison vetoes a bill that would create a second Naional Bank. Jan. 8, 1816. Faced with financial hardship from the War of 1812, Congress proposes a 2nd National Bank. The Bill also allows the President to suspend hard currency. March 14, 1816. The 2nd National Bank gets Congressional approval. Jan 1, 1817. The 2nd national Bank opens for business. Charter was allowed for twenty years. Jan 9, 1832. The 2nd National Bank applies for it's charter renewal 4 years early. July 10, 1832. President Jackson vetoes the Bank's recharter on the grounds that the Bank is unconstitional. [ See Tid-Bits part 77 B. ] Jan 1835 With the National Bank powerless, Jackson successfully pays off the nations debt leaving the U.S. with a surplus of $5,000. July 11, 1836. Paper money results in tremendous inflation in property value. President Jackson issues a Specie Circular mandating that land payments be made with gold and silver. July 4, 1840. President Van Buren approves the Independant Treasury which allows the Federal Government to control its own money. June 7, 1841. Henry Clay, on behalf of the Whig party, introduces legislation to abolish the Independent Treasury in hopes to replace the national banking system with a Federal Bank. July 28, 1841. The Senate passes a bill, sponsored by the Whig party, to revive the 2nd National Bank by creating a Federal Bank that would be called " The Fiscal Bank of the United States." ( A state chartered Bank for the District of Columbia that would be used by the U.S. Government. ) President Tyler vetoes the bill as unconstitutional. August 13, 1841. The Independent Treasury Act is repealed leaving the National Government without a banking system for the next five years. The Secretary of the Treasury deposits the government's money into State Banks. Sept. 3, 1841. Congress agains tries to create a Federal Bank. This time, they set it up to be run by State office holers. Again, President Tyler vetoes it as unconstitutional. Sept 18, 1873 A flood of paper money snowballs the Nation into a depression that lasts 5 years. Jan. 14, 1875. The Specie Resumption Act allows legal tender to be exchanged for gold. When the Act goes into effect in 1879, the nation starts to revive from the 1873 dpression. Soon the minting of a new dollar was announced and the Democrats cried out that it was Andrew Jackson who had restored " real money " to the nation. 1907 The Nation again goes into a Depressin because of paper currency, but J.P. Morgan saves the Nation from a major crisis by providing the government with $100 million dollars in gold. December 23, 1913. In response to the National Depression in 1907, President Wilson gets Congress to pass the Owen-Glass Federal Reserve Act. The Act was intended to better regulate paper money. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Continued in Tid-bits 77 B.