The people themselves encouraged these practices. The end of the war released an immense quantity of English goods which flooded the American market. The people, believing that devastated Europe would absorb all American products, and beholding a vision of radiant prosperity, were eager to buy. A passion for extravagance swept over America;[483] the country was drained of specie by payments for exports.[484] Then came a frenzy of speculation. "The people were wild; ... reason seemed turned topsy turvey."[485]
The multitude of local banks intensified both these manias by every device that guile and avarice could suggest. Every one wanted to get rich at the expense of some one else by a mysterious process, the nature of which was not generally understood beyond the fact that it involved some sort of trickery. Did any man's wife and family want expensive clothing—the local bank would loan him bills issued by itself, but only on good security. Did any man wish to start some unfamiliar and alluring enterprise by which to make a fortune speedily—if he had a farm to mortgage, the funds were his. Was a big new house desired? The money was at hand—nothing was required to get it but the pledge of property worth many times the amount with which the bank "accommodated" him.[486]
Indeed, the local banks urged such "investments," invited people with property to borrow, laid traps to ensnare them. "What," asked Hezekiah Niles, "is to be the end of such a business?—Mammoth fortunes for the wise, wretched poverty for the foolish.... Lands, lots, houses—stock, farming utensils and household furniture, under custody of the sheriff—SPECULATION in a coach, HONESTY in the jail."[487]
Many banks sent agents among the people to hawk their bills. These were perfectly good, the harpies would assure their victims, but they could now be had at a heavy discount; to buy them was to make a large profit. So the farmer, the merchant, even the laborer who had acquired a dwelling of his own, were induced to mortgage their property or sell it outright in exchange for bank paper that often proved to be worthless.[488]
Frequently these local banks ensnared prosperous farmers by the use of "cappers." Niles prints conspicuously as "A True Story"[489] the account of a certain farmer who owned two thousand acres, well improved and with a commodious residence and substantial farm buildings upon it. Through his land ran a stream affording good water power. He was out of debt, prosperous, and contented. One day he went to a town not many miles from his plantation. There four pleasant-mannered, well-dressed men made his acquaintance and asked him to dinner, where a few directors of the local bank were present. The conversation was brought around to the profits to be made in the milling business. The farmer was induced to borrow a large sum from the local bank and build a mill, mortgaging his farm to secure the loan. The mill was built, but seldom used because there was no work for it to do; and, in the end, the two thousand acres, dwelling, buildings, mill, and all, became the property of the bank directors.[490]
This incident is illustrative of numerous similar cases throughout the country, especially in the West and South. Niles thus describes banking methods in general: "At first they throw out money profusely, to all that they believe are ultimately able to return it; nay, they wind round some like serpents to tempt them to borrow—... they then affect to draw in their notes, ... money becomes scarce, and notes of hand are shaved by them to meet bank engagements; it gets worse—the consummation originally designed draws nigh, and farm after farm, lot after lot, house after house, are sacrificed."[491]
So terrifying became the evil that the Legislature of New York, although one of the worst offenders in the granting of bank charters, was driven to appoint a committee of investigation. It reported nothing more than every honest observer had noted. Money could not be transmitted from place to place, the committee said, because local banks had "engrossed the whole circulation in their neighborhood," while their notes abroad had depreciated. The operations of the bankers "immediately within their vicinity" were ruinous: "Designing, unprincipled speculator ... impose on the credulity of the honest, industrious, unsuspecting ... by their specious flattery and misrepresentation, obtaining from them borrowed notes and endorsements, until the ruin is consummated, and their farms are sold by the sheriff."[492]
Some banks committed astonishing frauds, "such as placing a partial fund in a distant bank to redeem their paper" and then "issuing an emission of notes signed with ink of a different shade, at the same time giving secret orders to said bank not to pay the notes thus signed." Bank paper, called "facility notes," was issued, but "payable in neither money, country produce, or any thing else that has body or shape." Bank directors even terrorized merchants who did not submit to their practices. In one typical case all persons were denied discounts who traded at a certain store, the owner of which had asked for bank bills that would be accepted in New York City, where they had to be remitted—this, too, when the offending merchant kept his account at the bank.
The committee describes, as illustrative of banking chicanery, the instance of "an aged farmer," owner of a valuable farm, who, "wishing to raise the sum of one thousand dollars, to assist his children, was told by a director, he could get it out of the bank ... and that he would endorse his note for him." Thus the loan was made; but, when the note expired, the director refused to obtain a renewal except upon the payment of one hundred dollars in addition to the discount. At the next renewal the same condition was exacted and also "a judgment ... in favor of said director, and the result was, his farm was soon after sold without his knowledge by the sheriff, and purchased by the said director for less than the judgment."[493]
Before the second Bank of the United States opened its doors for business, the local banks began to gather the first fruits of their labors. By the end of 1816 suits upon promissory notes, bonds, and mortgages, given by borrowers, were begun. Three fourths of all judgments rendered in the spring of 1818 by the Supreme Court of the State of New York alone were "in favor of banks, against real property."[494] Suits and judgments of this kind grew ever more frequent.