In 1824, the Suffolk Bank of Boston, MA, along with six other banks, created a system that required country (non-federal) banks to deposit reserve balances in one or more participating banks, which guaranteed that each bank could redeem their banknotes in coins rather than notes. The system was set up to ensure that banks could always back up the bank notes they issued. The Suffolk Bank became of the most profitable in the country and continued to operate under the Suffolk System until 1858 when rival institutions complained of “dictatorial” practices and eventually national legislation banned state banknotes. The Suffolk System was the predecessor of the modern banking system and led to the creation of the Federal Reserve that still operates today. The country fell into an economic panic in 1837, but the practices of the Suffolk Bank led the New England area to fare much better than the rest of the country.
Offering a fine example of the Suffolk Banking System in action, being a 19 ¾ x 24 broadside, “A True Abstract From The Statements Of The Presidents and Directors Of The Different Banks. Rendered December 1826 In Conformity To A Law Of This [Massachusetts] Commonwealth. Prepared And Printed For the Senate And House Of Representatives...Edward D. Bangs, Secretary Of The Commonwealth.” The document clearly illustrates, in 19 columns of financial facts, the fiscal accountability demanded of its member banks. It lists 60 Massachusetts banks, the amount due from each bank, capital stock paid in, bills in circulation, net profits on hand, balances due other banks, cash deposited, total amount due from each bank, gold, silver and other coined metals, real estate, balances due from other banks, debts, total bank resources, rate and amount of last dividend.
Toning, a few holes, but intact and a spectacular example of responsible banking.
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