Collected Works of Abraham Lincoln. Volume 1.
Lincoln, Abraham, 1809-1865.
[January 21, 1840]

The undersigned members of the Committee to which was refered the Joint Resolution of both branches of the Legislature, submit the following report to the Senate

In obedience to the joint resolution of both branches of the General Assembly, the undersigned [2] proceeded to examine into the condition of the State Bank of Illinois, and into such charges preferred against the Bank, as they deemed of sufficient importance, in their bearing upon the interests of the community, to claim the time and attention of the undersigned

As a reason for not going more minutely into an examination of the condition and conduct of the several branches of this institution, the undersigned would state, that time has not been afforded them to visit the several branches, and their information, therefore, relative to the branches, is derived, in part, from witnesses called before and examined by the undersigned, but mainly from the statements under oath of the President and Cashier of the Parent Bank.

It will be recollected, that, during the session of 1836-7, a joint select committee was appointed by the Legislature of Illinois, to examine into the condition of the State Bank, with a view of ascertaining, among other things, whether said said [sic] institution would constitute a safe depository for the funds of the State.

On the 18th. day of February 1837, that committee submitted a report to the House of Representatives, and about the same time a report was also submitted to the Senate, which reports occupied most of the ground, from the organization of the Bank in 1835 to the then present time.

The undersigned deemed it an act of inutility, not to say of supererogation, to re-investigate and re-examine the same charges, examined and reported upon by the former committee: and have therefore directed their attention more particularly to the actings and doings of the Bank since February 1837.

Page  186After a laborious and attentive investigation, the undersigned have prepared the following report, which they beg leave to submit.

As the undersigned believed, that the Legislature wished information, to enlighten their judgment, and to assist them in coming to a conclusion, as to the propriety of renewing the forfeited charter of the Bank, they deemed it not improper to bestow most of their attention upon the following inquiries---

1. Whether there had been any circumstances of mismanagement of the affairs of the Bank, or mal-practices on the part of her officers, or any of them, against which future legislation might guard, or which would render the institution unworthy of public confidence?

2. Whether the stock in said Bank, owned by the state, is safe: and, whether the interest of the state, and the interests of the people, would be consulted, by a renewal of the charter of the Bank?

By reference to the [sic] joint resolution of both houses, it will be seen, that the first inquiry is, ``whether the Bank has forfeited its charter?''

The 25th. section of the charter, as amended, provides---That if the Bank shall, for sixty days after demand, neglect or refuse to pay its evidences of debt in specie, it shall forthwith close all its business, except the collecting and securing its debts, and the charter shall be forfeited.

More than sixty days have elapsed, since the Bank announced that it had suspended specie payments, and, as applications for the specie redemption of its liabilities have doubtless since been made and refused, the undersigned have no doubt, that the charter of the Bank would be declared forfeited by the proper court, on proof of such demand and refusal. The forfeiture, they believe, would date on the sixtieth day from the day of refusal. The charter, therefore, although not yet adjudicated upon, must certainly be forfeited, when the subject is brought before the proper tribunal.

The next inquiry, which the committee is directed to make, is---``what rates, of the discounts of the Bank, have been to persons living out of the state?''

The examination of the statements of the Bank has produced in our minds some surprize, at the smallness of the business, which the Bank has done with non-residents. The amount, now due the Bank, on loans and discounts to non residents, amounts to but 4 percent of the whole sum of the debt due the Bank. The documents, which form a part of this report, give information, as to the distribution and character of this debt.

The committee are next instructed to inquire, as to the characterPage  187 of the transactions of the Bank, with the House of Nevins, Townsend & Co, of New York.

The object of the inquiries on this subject appears to be, to ascertain, if the Bank, in its transactions with this House, has loaned them money, either without, or at a low rate of, interest; or has suffered any portion of the stock, which they own in the Bank, to remain unpaid; and, whether the Bank did not keep in their hands, for their advantage, large sums of money, while our citizens, who applied to the Bank for funds in New York, were refused them.

A full examination of the accounts of this house, with the Bank, has assured the undersigned, that none of these abuses have existed.

This house has been employed by the Bank, as its agent in New York, for the transaction of most, if not all, of its business, to be done through an agent in that City. Their agency commenced, as appears from the documents herewith submitted, by the transfer to them from the Phoenix Bank of New York, out of the funds received by that bank, in payment of the Capital Stock of the State Bank, paid in by individuals, of One Hundred Thousand Dollars: which they were instructed to vest in Gold Coin for the use of the Bank, and one half of which they shortly afterwards forwarded to the Bank in gold. The funds of the Bank having accumulated at this time in New York, from the paying in of the capital stock, and the Phoenix Bank having refused to allow any Interest thereon, a portion of it was deposited with Nevins, Townsend & Co, who gave security, and allowed six per cent interest on it. It did not remain long in their hands, however---a demand for eastern exchange arising at home, which occasioned its withdrawal. For some time past, this House has constantly been the creditor of the Bank, for large sums of money paid on the checks of the Bank; and, at the present time, the Bank is their debtor in the sum of $150,000.

The undersigned have not been able to discover any thing objectionable in these transactions. It would seem that this house was not only able, but willing, to make large advances to the Bank, and that some advantage must have resulted to those, whom the Bank was, by these means, enabled to accommodate with checks on New York. The necessity of some agency of the Bank in New York is obvious: and no reason is seen, for the preference of a Bank over private bankers, if they are able to give satisfactory security, as is the case with the house of Nevins, Townsend & Co, who are bankers of high character.

The committee are next instructed to inquire, if the capital stock, subscribed by Samuel Wiggins of Cincinnati, has been paid in?---

In prosecuting this inquiry, they have ascertained, that Samuel

Page  188Wiggins was the original holder of the stock of the Bank, to the amount of nearly $200,000---- on which he paid several of the earlier instalments: but, that, being disappointed in the sale of his stock, he applied to the Bank, and obtained loans to the amount of $108,000, for the refunding of which he pledged his Bank stock: which money, so obtained, was applied in paying up the calls made by the Bank, on the purchasers of its stock. This is said to be the only instance, except an am[oun]t of about $3000. to other individuals in which this odious practice has been resorted to. A subterfuge and evasion of the law of this character has been practised in other states to an alarming extent, so as to make the capital of particular banks rest upon a paper, instead of a metallic, basis. While the undersigned regret, that any, even a solitary, case of this sort, should have been tolerated by the Directors of the State Bank, and do not incline to offer for it any palliation whatever, they at the same time feel highly gratified, that this practice, so obnoxious to well founded objection, has not been general; but that all the other payments of subscriptions upon stock have been made in gold and silver, or in such funds as were authorized to be received by the charter of the Bank

It has also been made the duty of the committee to ascertain the nature of the transactions of the Bank with the house of Denman of Philadelphia---whether any loans were made them, whether they were permitted the free use of money, collected by the falling due of bills drawn on them, on account of pork, bacon, lard & lead, shipped them by the Bank---and whether any bills, drawn on them, have been renewed to prevent protest.

The undersigned have not been able, in their examination to find the slightest trace of any connexion between the Bank and the house in question, other than that, which has grown out of the purchase, by the Parent Bank and the Alton Branch, from our citizens, of bills of exchange drawn on said house. Mr. Denman is believed, by the undersigned, to be a responsible and wealthy commission merchant, a part of whose business is, dealing in western produce as agent for the shippers and they feel it is due to him to state---that all the bills on him, held by the bank, have been fully paid, when due.

The next subject of enquiry is the transaction of the Bank with the house of Gregg & Weld of Boston

It appears that the bank was the holder of about 70,000$ of the acceptances of this House of Dfts. drawn on them at Alton and negotiated by the Branch of the bank there when they failed and since that time this debt has been reduced to $23000 which sum isPage  189 considered by the officers of the bank as being pretty well secured.

Intimately connected with this branch of the inquiry is the transactions of the bank with the house of Godfrey Gilman & Co of Alton.

The tabular statement of the Cashier shows the amount of the liabilities of this house, as drawers discounters and endorsers, to have swolen to the immense amount of $800.748.00 which has since been reduced to the sum of $419.358.00. This debt also is considered to be made safe by collateral security.

The undersigned feel less reluctance in introducing the names of these individuals, and their private accounts with the Bank from the fact that public rumor was rife with reports and charges against them, and had not failed to set forth the facts in as glowing colors at least as they meritted

These two cases are deemed sufficient to demonstrate the impolicy, of the bank extending such large accomodations to individuals or firms---many objections might be urged to this course, the undersigned however will proceed to notice only a few of them

1st. It deprives the bank of the power of fulfiling one of its important functions towit the extending its accomodations to the community generally

2d. It is exceedingly hazardous to risk so much upon the solvency of a single individual or firm, as a single failure may result in the loss of the entire debt

3d. The individual or firm having access to the Bank and being permitted the free use of its funds may monopolize the trade in any speculation or enterprise in which he chooses to embark

4th. Nothing is better calculated to engender heartburnings and to enlist enemies of the most hostile character against a bank than for the community to entertain the belief that the institution is used for the benefit of the few to the exclusion of the many. It will be recollected that a charge similar to this---was made against the late bank of the United States and to sustain that charge it was urged that Mr. T Biddle in Oct. 1830 was indebted to that institution in the sum of $1.120.000---if the objection had any weight in it as applied to the United States Bank with its immense capital and circulation---with how much greater force does the objection apply to our Bank having a circulation less than $3,000,000.

It is understood that the Directors of the Parent board aware of the impropriety of this course have adopted measures to restrain directors of branches in again making such excessive loans. While the undersigned decidedly disapprobate this practice of extending such large accomodations to individuals or firms, they are gratifiedPage  190 to have the opportunity to bear testimony that the bank in a large majority of cases has made her discounts to dealers wanting small sums for immediate use, as will be seen by reference to a tabular statement furnished by the Bank and herewith presented

For the nature and extent of the loan to the Bank of Missouri---reference is made to the copy of contract between the two banks which is herewith submitted

The transaction was not fully carried out and the amount loaned was soon returned.

The arrangement seems to have been made from a desire on the part of this Bank to cultivate friendly relations with a neighboring institution which was about to go into operation

It was a part of the contract with the Missouri bank that she should redeem in specie if necessary the paper of the State Bank loaned to her. The undersigned see nothing objectionable in this transaction

The undersigned is also charged with the enquiry whether the Bank has dealt or speculated in lead land or any other commodity. So far as the undersigned have been able to hear and ascertain the facts the bank has not engaged in speculating in lead, land or any other commodity. In relation to this charge the undersigned have availed themselves of the testimony of the officers of the Bank of the correspondence touching these transactions and of the testimony of respectable gentlemen residing at the point where these abuses are said to have occured.

The bank professing to be desirous to enhance the price of lead, in the hand of the miner or smelter and to give the profits incident to its reshipment, to the commission merchants of Alton rather than to those of Saint Louis, who had hitherto monopolized the trade, made arrangements to have the lead shipped to J. G. Lamb of Alton---who was to act as the mutual agent of the owner of the lead and the Bank in its reshipment and sale. Upon the sale of the lead after refunding the money advanced, when the shipment was first made to the agent, say about three fourths of the market price of the lead together with interest commissions and other costs---and charges incident to the operation, the overplus accruing from the sale thereof, was to be paid to the former owner---thereby making the bank neither gaining [sic] or looser [sic] by the fluctuation in price of the article so shipped.

The statements of the officers of the bank is coroborated by the testimony of the other witnesses examined as to this point as will more fully appear by the accompanying depositions

While the undersigned fully acquit the bank of the charge ofPage  191 speculating or dealing in lead, they are constrained to animadvert upon this course as being unwise and improper on the part of the Bank. It is most obvious that so soon as the arrangement above aluded to was made public, (and its publicity could not easily be prevented) the commission merchants of Saint Louis and the keeneyed speculator of the mineral region whose interests would be affected injuriously by this operation of the Bank, would wage a simultanious war against the institution, and prompted by the ever living principle of cupidity each would try to excell the other in the malignity of the attack, and in the ferocity of its procecution.

Experience has shewn us that such was the result of this enterprise and the avowed good intentions of the Bank have not only been thwarted but much odium has been brot to bear against that institution in consequence of the lead operation

The undersigned believe that a Bank should pursue the ``even tenor of her way'' without lending her influence and her funds to stimulate any particular individual, in any particular branch of business, and whenever she departs from her plain path of duty, she is likely to awaken the vigilant jealousy of the people, and bring upon her own head either ruin or a loss of confidence which to a Bank is infinitely worse

In relation to the charge of the Bank dealing in Pork the undersigned would say that they have no evidence of that fact, but on the contrary if such has been the case, those cognisant of it have failed to make the proof, there is one circumstance however connected with this charge to which the undersigned will advert

The cashier of the Chicago Branch with a view of entering engaging in the purchase of pork with Mr. E K Hubbard and Mr. Dole [3] procured their note to be discounted and obtained funds for the purpose aforesaid.

Altho. the undersigned do not deny the right of any officer of the Bank in common with other citizens to receive accomodations yet they deem it imprudent to embark in speculations of the staple commodities of the country, and more especially so when the Bank is not prepared to accomodate all who might desire to obtain its paper

If the Bank at the time refered to had been prepared to discount the notes of all who applied this circumstance would probably have excited no remark, but so soon as the notes of others were rejected the disappointed applicants bitterly complain of favoriteism being extended to bank officers

If there is any one subject of which the people are more easilyPage  192 excited than any other---and in regard to which their jealousy never slumbers, it is as to the priveliges and powers of Banks[,] therefore every precaution should be used by those institutions to guard against such charges or at least to furnish them no foundation to rest upon.

The undersigned have not been able to asscertain that the bank has dealt or speculated in lands further than was absolutely necessary for the erection of her Banking houses

The next enquiry relates to the suspended debts of the Bank at the branches of Alton, Galena and Chicago, as the examination in prosecution of this enquiry necessarily involves an exhibition to the undersigned of the transaction of the bank with a number of private individuals and as a publication of their names and accounts would effect no public good they have declined doing so & will only state the general results of the examination

A considerable amount of debt exists at these Branches which at the present is unproductive and must require much time in the collection---although a portion of this debt will in all probability be lost it is not believed that the loss will be sufficiently heavy to empair eventually the capital stock of the Bank

It will be seen by a refference to an exhibit furnished by the Bank that a contingent fund of about 170.000$ has been set apart which the undersigned believe will indemnify the Bank in any losses on her suspended debt and the other debts due the bank and branches are believed to be well secured

In answer to the enquiry what portions of the loans of the bank have been made to bank directors the undersigned refer to a statement made by the officers of the Bank and accompanying this report

The amount due from bank directors was heretofore larger than it now is, and has been reduced by the going out of office of some who were largely indebted, the undersigned do not believe that the liability of the present directors is greater than might be safely extended to other individuals of equal number and responsibility not connected with the Bank

The committee next proceeded to investigate the charge contained in the following portion of the resolution to wit ``also the character of the transaction between the acting fund commissioner and the President of the Bank'' in the negociation of the Bonds sold to constitute the stock owned by the state in that institution and if the Bonds at or since the time of their purchase by the Bank could not have been sold for cash at or above par and whether any money has been paid in to represent the stock of the state

Page  193The answer of the officers of the Bank to this enquiry is that after fruitless efforts to sell the stock at par it was offered to the bank in payment of the subscription of the state stock and was accepted by that institution and that the Bonds have ever since been offered at par but have not been sold

The amount of stock so sold to the Bank was $1765.000 and the sum of 335.000 Dollars was paid in cash making in all $2,000,000.

While it is granted that the sale of the state bonds owned by the bank would have enabled that institution to enlarge her circulation and thereby accomodate more persons it is deemed very questionable whether in the present crisis the stockholders and note holders of the bank are not in a better condition than if the state bonds had been sold for the reason that they can be used to obtain funds either by sale or hypothecation

The next inquiry is ``whether the bank has not dealt unfairly in declaring dividends and reporting means as available which are in reality unavailable and in bad Debts''

The question of the propriety or impropriety of dividends of the bank must depend on the amount of its bad debts as compared with its surplus fund and reserved profits.

These latter the officers of the bank have stated on their oaths they believe to equal or exceed the former & the undersigned have no reason to differ from them in opinion on this subject

Some of the committee are aware that their has been a great anxiety with some persons connected with the public works that the dividends should be as large as possible and were fearful that this influence might have operated on the directors but they have no evidence of such a result

The last enquiry which the committee are directed to make is ``whether houses connected with some of the principle officers of the Bank have not been accomodated largely to the exclusion of others equaly solvent''

The undersigned feel it to be their duty to state without hesitation that there is not the slightest evidence to support a charge of this character

The undersigned before passing on will offer some reflections upon the causes of the suspension of specie payments by the bank. It will be recollected that when the Banks of Phila. and New York suspended specie payments in 1837, that the western and southern Banks almost simultaneously followed in their train

When the Phila. banks suspended specie payments last fall, many of the western and southern banks also found it necessary to close business. Their is a chain of connexion between the banksPage  194 of the interior and those of the Atlantic cities which obliges the former to follow the course of the latter and the suspension of the banks located at the center of trade is felt by all the banks in the union

This is not attributable to any organic defects of the institutions themselves but to the irresistable law of trade and exchange which cannot be controaled [sic] by country banks

The position of our banks is doubly unfortunate[;] they have not only to guard against the accumulation of their paper in the eastern cities but have also to keep an eye upon Saint Louis, at which point much of the trade of the west centres

When we super-add to those causes the fact, that the funds (mostly gold and silver) of the General Government collected in the land offices in this state have (with the exception of a limited deposite in the branch at Chicago) been transported to and deposited in the banks of Kentucky and the Bank of Missouri. It must therefore be admitted that the banks of this State have had a peculiarly difficult task to perform in keeping up the credit of their paper.

Under this view of the subject unless it is first shewn that our banks had some agency in bringing about the suspension by the Banks of the Atlantic cities in 1837 & ' 39 your committee perceives but little cause to visit any very heavy denunciations upon our institutions for doing an act which they were urged to by the most imperious necessity

An opinion as to the solvency of the Bank to meet and to pay all demands against it, will no doubt be expected from the committee.

It will be perceived from the statement of the condition of the bank filed herewith, that her entire circulation amounts to $2,786.-315 and that her whole liabilities are $3.924.002.84/100 while she has on hand $2,464,750. of Illinois State Bonds--- $2.710.476 76/100 of notes Discounted and due from individuals to the Bank 440,182 10/100 Dollars of money loaned to individuals by the Bank and secured by mortgage on real estate--- Bills of Exchange $786.974 89/100 Real Estate 72 600.33/100 Dollars---due from other Banks. 435.624.27/100 dollars due by state of Illinois 141.-089 46/100 notes of other Banks 152.275 dollars--- of Gold and Silver Coin 473.869 32/100 dollars making in all 7.677.794 13/100 Dollars this sum your committee deems amply sufficient to indemnify not only note holders & other creditors of the bank but also to secure the State for all the Stock which she owns in the institution and in the event of the bank not being resuscitated yourPage  195 committee apprehend no danger of the state sustaining any loss upon its bank stock

Before closing this report it is but an act of justice due from the undersigned to the officers of the parent bank to state, that they afforded the committee every facility in their power to aid them in a free & full investigation into the condition of the bank and into the conduct of its various officers.


JNO. D. WOOD} of the Sen A. LINCOLN