d banks, contribute its resources to any reasonable extent in their support. This is a very early declaration of the view that it is the duty of the central bank to act as lender of last resort.
The Second Bank of the United States and its twenty-five branches soon came into conflict with the defenders of State rights, and of course the State banks backed up the opposition. The chief objection brought by the latter against the Bank was that it "accumulated their notes and then presented them for redemption in coin." "War" was declared on the Bank by Jackson when he succeeded to the Presidency in 1829. The first blow was struck in 1833 when he gave orders for the Government deposits to be removed from the Bank and deposited instead in selected State banks. Shortly afterwards the renewal of the Bank's charter was vetoed. This put an end for many decades to all projects for a central bank.
General suspensions of cash payments occurred in 1836, except in New England, where the banks again kept above water. Probably the worst feature of the American system and the one to which, combined with the exclusion of the entry of new firms, much of the chaos was due, was the extreme laxity with which principles of bankruptcy were applied to insolvent banks. Take as an example the State of New York. In charters granted before 1828 there were provisions that if a bank suspended payment for a certain period (usually three months) it should cease operations unless it obtained permission to continue, after an examination of its affairs, from the Chancellor of the Circuit, and if at the end of a year it still did not resume payment, it should surrender its rights altogether. Charters created after 1828 shortened the unconditional period allowed to ten days. But in 1837 all these rules were made completely ineffectual because the State legislature passed a Suspension Act allowing suspending banks to continue for a year without applying to the Commissioner. Other States followed New York's example and passed Suspension Laws of an even more pernicious nature.
Further suspensions took place in 1839, but were confined this time to Pennsylvania and the States further to the south and west. Boston and the eastern States sustained payments. Pennsylvania passed laws legalising the suspension on condition that the banks should make certain loans of money to the State, and it was arranged that they should resume specie payments in January, 1841. The obligation to lend to the Government naturally had the effect of making it more difficult, if not impossible, for the banks to resume payments, and the date for resumption was postponed by another Act which, in return for further subscription to a Government loan, allowed the banks to continue the suspensions until the loan was repaid, which might be any time up to five years.
The losses sustained by the Federal Treasury in the suspensions of 1836 and 1839 called forth proposals for making the Treasury independent of the banks.
From the 'forties onwards State banking showed signs of improvement. Most of the States had by this time succeeded in framing provisions for securing the paying up of capital by subscribing shareholders. The more difficult task was to remove the tendencies towards expansions and to secure note-holders against losses due to suspensions. A major deficiency over the whole of the American banking structure had long been the infrequency of the return of notes to their issuers. One of the earliest and most successful attempts to secure that notes were redeemed more often was a voluntary system put into force by the Suffolk Bank of Massachusetts. Bank-notes circulated at places distant from their issuing bank at discounts varying with the difficulty of sending them home for redemption. The smaller was the chance of its notes being presented for payment, the larger was the volume of notes that a bank could safely issue. The result of the lack of any machinery for ensuring the collection of notes was therefore that banks began purposely to place themselves at long distances from the most imp