at on the European plan of a central
bank. They held in their states an exclusive charter for issuing notes and
had branches at important points throughout the state. Under the management
of Hugh McCulloch, afterwards secretary of the treasury, the bank of
Indiana weathered the crisis of 1857 without suspending specie payments,
and retired its circulation when gold went to a premium in 1862.

One of the defects of the state system of note-issues was the inconvenience
which it occasioned. Notes issued outside a state could not safely be
received without careful scrutiny as to the responsibility of their
issuers. The systems prevailing in New England, in Louisiana, in Ohio and
in Indiana were eminently successful, and proved the soundness of the issue
of bank-notes upon the assets of a well-conducted commercial bank. But the
speculation fostered by loose banking laws in some other states, and the
need for uniformity, cast a certain degree of discredit upon the state
banks, and prepared the way for the acceptance of a uniform banking system
in 1864.

The power of note-issue formed a more important part of banking resources
before the Civil War than in later years, because the deposit system had
not attained its full development. Thus in 1835 circulation and capital of
state banks combined were about $335,000,000 and deposits were only
$83,000,000, in 1907 circulation and capital of national banks
$1,430,000,000, while deposits were $4,322,000,000--in the earlier period
deposits forming less than one-third of the other two items and in the
later period three times the other items. The circulation of the state
banks fluctuated widely at different periods. A maximum of $149,185,890 was
attained in 1837, to decline to $106,968,572 three years later and to a
minimum of $58,563,608 in 1843. From this point there was a tendency
upward, with some variations, which put the circulation in 1845 at
$89,608,711; 1848, $128,506,091; 1850, $131,366,526; 1854, $204,689,207;
1856, $195,747,950; 1858, $155,208,344; 1860, $207,102,477; 1863,
$238,677,218.

Other leading items of the accounts of the state banks for representative
years are as follows:--

[v.03 p.0347]

_State Banking Progress_, 1835-1863.
+------+--------+---------------+-------------+-------------+
| | No. of | | Loans and | |
| Year.| Banks. | Capital Stock.| Discounts. | Deposits. |
+------+--------+---------------+