essively worse as poverty and inexperience
added to the difficulty of setting aside capital for investment in the
tools of exchange.

The termination of the first charter of the Bank of the United States was
followed by a banking mania. In Pennsylvania a bill authorizing 41 new
banks was passed over the veto of the governor, and 37 of them were in
operation in 1814. Similar movements in other states increased the number
of banks in four years (1811-1815) from 88 to 208. The amount of specie was
not adequate to support the mass of credit which these banks created, and
what there was in the country drifted to New England, which was upon a
metallic basis. A number of banks collapsed in 1814, and business
prostration was prolonged for several years.

The banking laws of the states varied considerably. Some states authorized
the issue of notes upon state bonds, many of which, especially at the
outbreak of the Civil War, proved valueless. In New England, however, a
system prevailed which required the prompt redemption of the banks' notes
at par. The New England Bank was the pioneer of this movement in 1814. In
1824 what was known as the "Suffolk system" of redemption came into
operation. This system provided for the deposit by a bank in the Suffolk
Bank in Boston of a redemption fund, from which the notes were redeemed and
afterwards sent home by the Suffolk Bank for collection. This system, with
slight modifications, continued in successful operation until 1858. The
circulation of the New England banks in 1858 was less than $40,000,000 and
the redemptions in the course of the year through the Suffolk Bank were
$400,000,000. It was the essential merit claimed for the system that it
tended to keep the volume of the circulation constantly adjusted to the
requirements of business. A branch redemption agency was established at
Providence. Legal sanction was given to the system in Vermont by an act of
1842, which levied a tax of 1% upon bank capital, but remitted this tax to
any bank which should "keep a sufficient deposit of funds in the city of
Boston, and should at that city uniformly cause its bills to be redeemed at
par."

The period from 1836 to 1842 was a trying one for American banking. It was
preceded by another great expansion in financial ventures, made without
sufficient circulating capital or adherence to conservative banking
methods. Foreign capital had come into the country in considerable amounts
after the Englis