was
abundant, it was the state bank system. The experience of the old
confederation had not taught this lesson. The colonial system was
continued by the several States, and bills of credit were issued on
their faith. The continental system was a compound of the main features
of this plan. The bills were issued by the Congress, but the States were
relied upon for their ultimate redemption.

The collapse of the entire fabric of finance led to the establishment of
the Bank of North America, the notes of which were redeemable and
redeemed at the bank counters. The article in the Constitution of 1787,
prohibiting the issue of bills of credit by the States, was evidently
intended to secure a uniform currency to the people of the United
States, and it has been by a strange perversion of this manifest
intention that the power has been conceded to the States to charter
corporations to do that which was forbidden to themselves in their
sovereign capacity; namely, to issue bills of credit, which bank-notes
are. It is idle to say that, because such bills were not a "legal
tender," they were therefore not of the character which the Constitution
forbade. Necessity knows no law, and in the absence of any other
currency the people were perforce compelled to take what they could get.
Experience later showed that large amounts of paper money manufactured
in one State were easily put in circulation in far distant communities,
and considerable sums, through the operations of wear and tear and the
vicissitudes incident to its fragile nature, never returned to plague
the inventor.

At the time of the organization of the National Bank by Hamilton, there
were but three banks in the United States: the Bank of North America,
the Bank of New York, and the Bank of Massachusetts. Their added capital
amounted to two millions of dollars, and their issues were
inconsiderable.

Mr. Gallatin estimated that in January, 1811, just before the expiration
of the bank charter, there were in the United States eighty-eight state
banks with a capital of $42,612,000.

--------------------------+-------------+---------------+------------
| | Notes in |
| Capital. | Circulation. | Specie.
--------------------------+-------------+---------------+------------
Bank of the United States | $10,000,000 | $5,400,000 | $5,800,000
Eighty-eight State Banks | 42,610,601 | 22,700,000 |