The Mystery of Banking

Central Banking in the United States I
205
12
Ibid., pp. 141–42. Secretary of the Treasury William H. Crawford, a
powerful political leader from Georgia, tried in vain to save the Bank of
Darien by depositing Treasury funds in the bank. Murray N. Rothbard, 
The
Panic of 1819: Reactions and Policies 
(New York: Columbia University
Press, 1962), p. 62.
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the banks continued to require their own debtors to pay them at
par in specie. 
Many states permitted banks to suspend specie payments dur-
ing the Panic of 1819, and four Western states—Tennessee, Ken-
tucky, Missouri, and Illinois—established state-owned banks to
try to combat the depression by issuing large amounts of incon-
vertible paper money. In all states trying to prop up bank paper,
a quasi-legal tender status was conferred on it by agreeing to
receive the notes in taxes or debts due to the state. All the incon-
vertible paper schemes led to massive depreciation and disappear-
ance of specie, succeeded by rapid liquidation of the new state-
owned banks.
206
The Mystery of Banking
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XIV. 
C
ENTRAL
B
ANKING IN
THE
U
NITED
S
TATES
II:
T
HE
1820
S TO THE
C
IVIL
W
AR
1. T
HE
J
ACKSONIAN
M
OVEMENT AND THE
B
ANK
W
AR
O
ut of the debacle of the Panic of 1819 emerged the begin-
nings of the Jacksonian movement dedicated to 
laissez-
faire
, hard money, and the separation of money and
banking from the State. During the 1820s, the new Democratic