As a result of this victory, the treaty of Ghent omitted all reference to either question, and, upon the ratification of that instrument, the great "Father of Waters,” the cause of so much anxiety, and the source of so many dark conspiracies, was finally liberated from all complicity with foreign courts, and became in law, and in fact, the sole and undisputed possession of the United States of America. Thus, under the skillful management of Henry Clay, the war of 1812 was made to conserve the interests of the great West, and with them also the highest interests of the young nation, which Clay rejoiced to serve.1

1 "To Henry Clay, as its chief mover and author,” says John J. Crittenden, "belongs the statesman's portion of the glory of that war; and to the same Henry Clay, as one of the makers and signers of the treaty . . . belong the blessings of the peacemaker. His crown is made up of the jewels of peace and of war." Coleman's "Crittenden," II, p. 46.

CHAPTER XII

A CHAPTER IN FINANCIAL HISTORY

THE end of the war of 1812, marked an era in the industrial history of the United States. The embargo and non-intercourse acts, followed by two years of war, had completely deranged the industrial system of the country, and had inaugurated the change which was to make of the New England states a manufacturing,1 instead of an almost purely commercial region. Then too, the suspension of specie payment, which the Napoleonic wars necessitated in Europe, had raised the price of goods enormously; but, with Napoleon a prisoner, and peace restored, specie payment was again resumed, with a consequent lowering of prices, and an irresistible tendency to speculation and over-trading. An era of fictitious prosperity, such as usually follows a long suspension of specie payment, was ushered in, to meet which successfully required both acuteness and conservatism. Kentucky, unfortunately, was blessed with neither the one nor the other. Her people were far from financial centers, and lacked that grasp of financial problems which only contact with affairs can give. Moreover, her experience in the handling of actual money had been unusually limited. In the early pioneer days, skins had served as her medium of exchange, her merchants generally keeping their accounts

1 Turner's "Rise of the New West," pp. 12-15, for figures.

2 Shaler, p. 174; Phelan's "Tennessee," p. 260.

in terms of beaver skins, and sometimes even issuing certificates of deposit of skins which, when properly endorsed, served as a species of bank note. The following is a specimen of this kind of paper money.

"Know all men by these presents that Daniel Boone hath deposited 6 beaver skins in my Keep in good order and of the worth of six Shillings each skin, and I have took from them 6 Shillings for the keep of them, and when they be sold I will pay the balance of 30 Shillings for the whole lot to any person who presents this certificate and delivers up to me at my Keep. Louisville, Falls of Ohio, May 20, 1784.

it

"JOHN SANDERS.” 2

As the period of the hunter had given place to that of the agriculturalist, the practice of making exchanges in terms of tobacco had become general, assignable receipts for certain quantities passing current, and performing many of the functions of the bank note of the older communities. Land warrants, too, had served a similar purpose, the purchaser depositing his money with the State treasurer, and receiving in return a warrant for a certain number of

acres.

As population increased and commerce began to assume real importance in the life of Kentucky, a new medium of exchange appeared, but one scarcely less primitive than those already mentioned. Tobacco gave place to coins, but coins of such varied types that their circulating value could be determined only by a very rough approxi

1 Duke's "History of the Bank of Kentucky," p. 9.

2 Durrett MSS.

mation; and a pair of balances for weighing them was a necessary part of every mercantile establishment.

When the purchase of Louisiana, in 1803, had given Kentucky the right to carry her goods untaxed to New Orleans, or to distribute them at points along the Mississippi, trade had taken a marvelous bound forward. This had been speedily followed by the opening up of the once almost impassable wilderness lying between Kentucky and the older States; and this in turn by the appearance of steamboats on the waters of the west, which cut down the cost of transportation about two-thirds, and reduced the time, required for a trip to New Orleans, from thirty or forty, to six or seven days.3

2

So extensive a trade, as was now opened to Kentucky, could not long be carried on without some attempt to secure a proper and uniform circulating medium, and, out of these conditions, had developed the first banking concern of the State, the so-called "Kentucky Insurance Company." This company had not been intended by the Legislature as a banking establishment, its ostensible purpose being to make trade, with New Orleans and other distant points, more safe, by insuring cargoes against ordinary accidents and losses; but the promoters had arranged an elastic clause in their charter, the twentieth section of which con

1 By 1812 Kentucky was sending east, over the mountains, 500,000 hogs annually; and the trade by water was proportionately large. Turner's "Rise of the New West," p. 101.

2 Kentucky was the home and burial place of three of the earliest, successful experimenters in steam navigation, John Fitch, James Rumsey, and Edward West. Sketches of their activities and experiments, etc., Collins, II, p. 174. 3 Annals of Congress, 17th Cong., Sess. 2, p. 407.

4"An act to Incorporate the Kentucky Insurance Company," December 16, 1802. The full text is given in Wm. Littell's "The Statute Law of Kentucky," III, pp. 25–31.

tains these words: "And such of the notes as are payable to bearer, shall be negotiable and assignable by delivery only."

In this clause, had been laid the foundation of banking in Kentucky; for the company had proceeded to make the freest use of the privileges of a bank of issue,1 and had soon "divided eight per cent profit for six months—a fact which drew upon it the horrific denunciation of being a 'monied aristocracy,' and therefore to be put down." 2

The Kentucky Insurance Company, however, had not long been left to enjoy the monopoly of so rich a field. On December 27, 1806, a charter had been granted, creating the Bank of Kentucky, with a capital stock fixed at one million dollars, half of which was reserved for the State; which latter was to choose annually the president and six of the twelve directors.4 The charter also contained the remarkable provision, that the State Legislature might, at any time, increase the number of directors from twelve to

1 Durrett Collection for specimens of notes of the Kentucky Insurance Company. The following is one specimen from that collection:

"The President and Directors of the Kentucky Insurance Company promise to pay C. Vaness or bearer on demand one dollar.

"LEXINGTON, 16 June, 1816.

"J. L. Martin, Cashr."

"WM. H. RICHARDSON, Prest.

2 Marshall, II, p. 374. Henry Clay's first nomination, as a candidate for the Kentucky Legislature, was due to the fact that he was opposed to a plan, then on foot, to repeal this charter, which had been granted until January 1, 1818. Such a repeal, Clay insisted, would be in violation of the rights vested in the company by its charter, and would be unconstitutional. He was elected by a large majority, and, upon taking his seat, easily defeated the attempt to repeal the charter. "Memoir of Henry Clay," in "Life and Speeches," Anon., I, pp. 28-29.

3 Usually distinguished as the "Old Bank of Kentucky." "An act to establish a State Bank." Full text, Wm. Littell's "Statute Law of Kentucky," III, pp. 390-399.

4

The other six were to be chosen by the stockholders.