--Is it necessary to
mention these embarrassments? The trouble of 1828 affected only the
local banks and not at a11 those of the United States. The chief cause
was the Bank of the United States' increase of circulation from August,
1822, to August, 1828. From $5,400,000 it had become $13,000,000 without
adding anything to the circulation, merely displacing an equal amount of
local bank notes through drafts of branches that it put into
circulation. These branch banks' drafts were in form of bank notes,
signed by the chief employees of the branches, drawn, it might be, on
each other or on the main bank. A great issue of paper was thus brought
about; without this roundabout method it would have been impossible to
have forced the issue of the notes from the mere physical inability of
the president and cashier to sign so large a number. Congress had always
refused to delegate this power to any other persons; in consequence of
this practice the inevitable result occurred in 1828, as might have been
foreseen, and a conflict between notes of the Bank of the United States
and that of the local banks occurred.
These drafts circulated everywhere; the branch banks received them on
deposit, but did not redeem them: hence it was necessary to guard
against panic by keeping hold of cash.
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