The morning news. [volume] (Savannah, Ga.) 1887-1900, 1891-11-29
NEWS SUNDAY NOVEMBER 2s lssl-sIXTEEN PAGES

NAe @OS
be broken up. It's design VS. to INTRODUCES
free competition into what vas c. sldered
profitable branch OF business, heres ofore
monopohzed by a few favored coTpor2-
tons Anybody was TO be given fair op-
portunities for entering the business on
equal terms with everybody else. The act
was passed in March. 1887, and the legisla-
ture adjourned till Nov. 9, following. Be-
| fore the latter date arrived, in fact before
any banks had been organized under
1 the law, O financial panic seized the whole
country. An era of wild speculation
reached climax. the banks in all
/ the principal cities OF the country
suspended specie payments, and state legis-
latures were called together TO devise reme-
dies TO meet the situation That Of Micht-
gan was convened in special session in June,
and its remedy for the case of Michigan
was to leave the general banking law in
force and to add 10 it full authority for
banks organized under it to begin the busi-
ness OF issuing bills in q state OF suspension,
that is TO flood the state with an irredeem-
able currency, based upon 80 per cent. of
specie and 20 per cent. OF land mortgage
bonds. The law was so modified that any
number or persons, upon signing an agree
Inent TO that effect, might become a bank
ing corporation, and almost any one might
become a director.
Everybody in the state who was in debt,
| and everybody who saw ia the law an OPP
| portunity for rascaliLy, went into the bank
| ing business. Within a few months wherever
two roads crossed a bank was established.
One was found In a saw-mill, and one of the
official records Of the period says: Every
village plot with house. or even without
house, If it had a hollow stump to serve as
vault was the site of a bank Many of
them had no offices, no books, and no capi-
tai. Judge T. NJ. Cooley, in an interesting
account of the experience In his history of
Michigan. published in the American Com
monwealths' series, says (p. 261: Wild
lands that had been recently bought OF the
government at 81 25 an acre were now
valued at ten or twenty times that amount,
| and lots in villages that still existed only on
paper had worth for banking purposes
only limited by the conscience Of the officer
who was to take the seourities.'
las for the requirements for 10 per cent,
payment in specie at the time of subsorip-
ton and 20 per cent. before beginning
banking business, these were soon got
around IN ways more interruptions than in
genious. As the payments were TO be made
to the banks themselves, the same specie
could be used many times over. Some
times a small sum in specie was paid in ana
taken out, and the process repeated over
and over till the amount required was made
| TO appear as having been received. Some
times specie certificates, stating that the
maker held a sum of specie for the
| bank, were counted as specie. These
were almost invariably false, and they
were made to do service for many
banks in succession. If specie was
| actually used, as soon as the bank examiner
had seen it it was hurried into a wagon and
taken with feet horses to another bank,
where it again did duty as capital. Gold
and al nhrAr, Ill
flew about the country like magic; its
sound was heard in the depths Of the for
est, yet, like the wind, one knew not whence
| it came or whittier it was going Some
times what seemed to the eye of the examiner
to oe kegs Of specie were really kegs of nails
or window glass with thin layer of coin
on top. The loan of specie to be used in
the establishing OF banks became q regular
and lucrative branch of banking business.
within one year forty-nine banks were
organized, and forty went into operation
with professed capital of LAS, 900, Of
which 80 per cent. was claimed to have
been paid in in specie. Over 81, 900, 900 Of
irredeemable paper was distributed through
out the state, of which probably not a dol
lar was based upon bona tide capital paid
in for legitimate banking purposes. AS was
inevitable, there was no public confidence
In money of this character. Whoever
received it got rid of it as soon
as possible. 1t was always at
a great discount with the money
of eastern banks, and some of it was rated
much higher than the rest. Much of it was
| never circulated near the places of issue,
which were selected often ia spots as mac
| cessible as possible, In order that
| the bills might not soon return
| to plague their sponsors Adj
venturers from New York and other
distant places went into the wilds Of the
| state, located banks. took the entire issue
| OF money and put 1t in circulation any,
| where but near the place Of issue.
| 1.-The commissioners used all possible vigil
lance to close up bogus banks, but az fast as
| they closed them others were started. When
| a wildcat bank either failed or was put in
/ the hands Of q receiver the farmers and
| laboring people suffered the most severely,
as is always the case in such disasters. The
plague ran its course In about q year and q
half. At the end of 1889 there were no
/ fewer than forty-two wildcat banks in
| the hands of receivers. and only four still
| doing business. Nearly all the currency of
| the state was worthless, business was pros
| trate, values of all kinds had been nearly
or quite destroyed. There was no buying
or selling of land, and only the bare neces-
| stiles of life were able to command O mar
| ket The banking law was taken before
the courts and declared unconstitutional,
| and the system was abolished, leaving be-
hind it no assets, but boundless ruin.
| "In summing up the results, Judge
/ Cooley, in language which many modern
| advocates of cheap money might peruse
with profit, says: Such were the fruits of
tho experiment of giving equal aud practi-
cally unlimited rights in banking to every
body who wanted a shorter road to wealth
than that trodden by labor and honest in
| dustry. The new state, under the bold. but
inexperienced guidance of its youthful gov
ernor, dlsdaining the lessons of history, had
determined to try for itself the experiment
of manufacturing money by the printing
press. The condition after the experiment
might be compared to a forest after a
| cyclone; everything was PROSTATE,
and everything was in confusion
Thereafter wildcat banking
was a byword in the state; but the
lessons 1t taught needed to be learned at
some time, and were not likely to belearned
except with experience as a teacher. One Of
| its lessons was that neither real estate or
anything else mot Immediately convertible
into money can support the credit of bank
currency. This lesson is as applicable to