Financial History Issue 128 (Winter 2019) | Page 33
$10 bank note from The Suffolk Bank, 1824.
from those banks outside the “System”
further aggravated bankers, unsurpris-
ingly driving them into BMR’s camp.
Banks also started delaying payment of
specie claims due Suffolk; even the Massa-
chusetts Bank Commission rebuked Suf-
folk to accept all bank notes or cease note
clearing operations.
Examining the Suffolk System’s regu-
latory practices brings awareness to the
operations and austerity measures applied
by early American banking institutions,
especially those engaged in monopoly-like
activities. Requiring deposits from cor-
respondents as a means of guaranteeing
specie redemption only solidified public
confidence in bank notes; obligating strict
compliance (or exclusion) stymied compe-
tition in clearinghouse services. Undoubt-
edly, recognizing how such early param-
eters associated with the issuance and
control of money and limits on competi-
tion were applied, helps us understand the
evolution of banking in the United States.
Moreover, with Suffolk, we have a
model for comprehending the develop-
ment of clearance and payment systems.
Though substantially modified, the clear-
ance system is an instrument still utilized
by our Federal Reserve.
Ramon Vasconcellos is a history professor
and lecturer in Accounting and Econom-
ics at Barstow Community College in
Barstow, CA. He has published numer-
ous biographical and topical articles
on the history of the West, particularly
related to finance. Ramon has also taught
economics and history at the University
of London.
Note
1.
The Merchants Magazine and Commercial
Review, July–December, 1842. Vol. VII. Pg.
93–94. Averages for 1828, 1831, and 1842
calculated and compared by author from
table listed in Merchants Magazine. Fur-
thermore, lower discounts could account
for the intra-regional nature of bank note
clearing activities of Suffolk as hypoth-
esized by Bodenhorn in State Banking in
Early America, pg. 115.
Sources
Donald R. Adams, Jr. “Portfolio Management
and Profitability in Early Nineteenth-Cen-
tury Banking.” Business History Review.
Spring 1978, pp. 61–79.
The Bankers’ Magazine and State Financial
Register. July 1846–June 1847.
Bodenhorn, Howard. A History of Banking in
Antebellum America. Cambridge University
Press. 2000.
Hammond, Bray. Banks and Politics in Amer-
ica from the Revolution to the Civil War.
Princeton University Press. 1957.
The Merchants’ Magazine and Commercial
Review. January–June 1842; July–December
1842.
Mullineaux, Donald J. “Comparative Monies
and the Suffolk Bank System: A Contractual
Perspective.” Southern Economic Journal.
April 1987.
Rolnick, Arthur J., Bruce D. Smith and War-
ren E. Weber. “Lessons From A Laissez-
Faire Payments System: The Suffolk Bank-
ing System (1825–58).” Federal Reserve Bank
of Minneapolis Quarterly Review. Summer
1998. pp. 11–20.
Rolnick, Arthur J., Bruce D. Smith and War-
ren E. Weber. “The Suffolk Bank and the
Panic of 1837: How a Private Bank Acted as a
Lender of Last Resort.” Federal Reserve Bank
of Minneapolis Quarterly Review. Spring
2003. pp. 484–504.
Williams, Ben Ames, Jr. Bank of Boston 200:
A History of New England’s Leading Bank,
1784–1984. Houghton Mifflin. 1984.
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