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University Microfilms 300 North Zeeb Road Ann Arbor, Michigan 48106 A Xerox Education Company 73-1925 AIELLO, John Douglas, 1941- OHIO'S WAR UPON THE BANK OF THE UNITED STATES: 1817-1824. The Ohio State University, Ph.D., 1972 History, m odem University Microfilms, A XEROX Company, Ann Arbor, Michigan Copyright by John Douglas Aiello 1972 THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED. OHIO'S WAR UPON THE BANK OF THE UNITED STATES; 1817-1824 DISSERATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By John Douglas Aiello, B.A., A.M. ***** The Ohio State University 1972 Approved by Ad^ilsèr Department^Jf History PLEASE NOTE: Some pages may have indistinct print. Filmed as received. University Microfilms, A Xerox Education Company PREFACE The philosophy of states' sovereignty has been a conten­ tious issue throughout the history of the United States. Poli­ ticians and commentators of the present talk of the concentration of too much power in Washington. There is still a call for the return of power to the states. The flag of states' rights is still waved and given allegiance. The first century history of the United States witnessed a number of clashes over the doctrine of states' sovereignty. The tactic of nullification was developed to implement the weaponry in the hands of the states. The Alien and Sedition Acts gave birth to the Kentucky and Virginia Resolutions, authored by Thomas Jefferson and James Madison. The Tariff of Abominations caused John C. Calhoun to develop further the doctrine of nullification, and South Carolina to defy the national government and nullify the tariff within her borders. The advocacy of states' rights led ultimately to the bloody war between North and South. These are pre-eminent examples of the clash between national and state authority. One clash, however, which is often overlooked by historians or has been explained minimally is the episode of Ohio waging war upon the second Bank of the United States. In attempting to elucidate the clash between Ohio and the national Bank, I have had the invaluable guidance of. my ad­ viser, Professor Bradley Chapin. His suggestions have made this a ii better paper than it ordinarily would have been. To the others who have helped me, I would like to express my gratitude. To the staffs of the Ohio Historioal Center Library, the Ross County Historioal Library, the Ohio State Library, the The Ohio State University Library who aided me in my research, I thank all of you. I would also like to express my great appreciation to Mrs. Rosemary Parker who labored so hard and so well in typing this dissertation, and to Paul Treece and Jim Tootle who helped me meet the deadlines. And, finally, I am particularly indebted to my wife, Patricia Aiello, and my daughter, Julie, for the encouragement and strength to carry this work through to its completion. H i VITA March 23, 1941 ...... B o m - Utica New York 1954 .............. B.A., Loyola University, Chicago, Illinois 1965-6 .................. Graduate assistant. Department of History, John Carroll University, University Heights, Ohio 1966 ............ M. A., John Carroll University, Uni­ versity Heights, Ohio 1966-7 .................. Instructor, Department of History, John Carroll University, University -, Heights, Ohio 1967-8 .................. Doctoral Work, Department of History, The Ohio State University, Columbus, Ohio 1968-9 .................. Teaching Associate, Department of History, The Ohio State University, Columbus, Ohio 1969-71. ........ NDEA IV Fellowship, The Ohio State University, Columbus, Ohio FIELDS OF STUDY Major Field: U.S.: Early National Period. Professor Bradley Chapin. Colonial and Revolutionary Period. Professors Paul Bowers and Bradley Chapin. Middle Period, U.S.A. Professor Merton Dillon. Tudor and Stuart England. Professor Clayton Roberts. IV TABLE OF CONTENTS Page PREFACE .................................................. ii VITA .................................................... iv Chapter I. THE BANK OF THE UNITED STATES IN O H I O ............ 1 Ohio and Her Regulation of State Banks The Bank of the United States Established Branches in Ohio II. UNPOPULARITY OF THE UNITED STATES B A N K .......... 12 Early Displeasure at the Bank Cheves Saves the Bank of the United States Depression in Ohio III. OHIO TAXES THE BANK ..................... '......... 35 First Moves against the Bank Congressional and State Opposition to the Bank IV. THE BANK BEFORE THE SUPREME C O U R T ................. 54 The De veaux and. McCulloch Cases Reaction to the McCulloch Decision V. OHIO TAXES THE B A N K ............................... 70 The Tax Is Levied Newspaper Reaction to the Ohio Tax VI. THE CASE CONTESTED IN CIRCUIT C O U R T ............... 82 Preliminary Skirmishing Resolutions against the Bank Ohio Legislature Enters the Battle Defeat in the Circuit Court VII. THE OHIO CASE BEFORE THE SUPREME COURT .......... 105 Interpretation of the Eleventh Amendment The Case Deoided The End of the Fight EPILOGUE................................................ 124 BIBLIOGRAPHY........................................... 127 CHAPTER I THE BANK OF THE UNITED STATES IN OHIO Ohio and Her Regulation of State Banks The termination of the war of 1812 by the Treaty of Ghent signalled a return to the normal growth of the West. Emigrants, restricted by the exigencies and fears of war, were now free to proceed Westward. A steady stream flowed West and supplied a large accretion to the Ohio population.^ The population growth in Ohio was fantastic. Numbering only 45,365 inhabitants in 1800, the population increased 408.7 percent ten years later to 230,760. By 1820 the State claimed 581,434 residents. The population was over­ whelmingly rural in this period; 98.3 percent of the total were farmers in 1820.^ Speculation restrained or unbridled, was the 3 order of the day. Every type of improvement was advanced. The circulating medium of the state was augmented by an increase in the number of banks. There were but four state banks operating in Salmon P. Chase, "A Preliminary Sketch of the History of Ohio," in The Statutes of Ohio and of the Northwestern Territory Adopted or Enacted from 1788 to 1833 Inclusive (Cincinnati: Published by Coney and Fairbanks, 1833), Vol. I, p. 42. Here­ after cited as Chase, Statutes of Ohio. p Ted V/. Brown, Secretary of State (Compiler), The State of Ohio: Number of Inhabitants Urban and Rural Population . .,as certified in the Eighteenth Federal Census (Columbus, Ohio: The F.J. Heer Printing Co., 1961), p. 22. ^Chase, Statutes of Ohio. Vol. I, p. 42. 2 1811 with a total capital of $895,000. The niomber tripled to twelve in 1815; the capital increased to $1,434,719. Nine addi­ tional banks were created in the succeeding year bringing the total in 1816 to twenty-one banks with $2,061,927 in capital. In 1820 the number dipped slightly to twenty banks, and the capital declined to $1,797,463.^ The diminution in banks and capital is understandable in the light of the practices of the second Bank of the United States, chartered in 1816, and the Panic of 1819 and the resultant depression. Ohio's war upon the second Bank of the United States was no isolated act.^ The entire credit structure of Ohio was endangered by an increasing number of unauthorized, unchartered banks that operated under the creed that banks could issue their notes without any necessity of redeeming them in specie.® A first step to regu­ late banks was taken by the Ohio Legislature on February 2, 1815. Passing "An act to raise revenue from banks and to prohibit the unauthorized issuing and circulating bank paper," the legislature levied a 4 percent annual tax payable to the State Auditor. The Albert Gallatin, "Considerations on the Currency and Banking System of the United States," in The Writings of Albert Gallatin, edited by Henry Adams (New York: Antiquarian Press Ltd., 1960), Volume III, pp. 358-359. Hereafter cited as Gallatin, "Considerations on the Currency." ^William Graham Sumner, A History of Banking in the United States, Volume I of series A History of Banking in All the Leading Nations, compiled by Thirteen Authors (New York: Journal of Commerce and Commercial Bulletin, 1896), Volume I, p.