Paper Money

Determining a bank's closing date can be challenging

This $1 note issued by the State Bank of Indiana in 1848 was one of many notes issued by the bank that closed in 1855 or 1857 or 1859.

Image courtesy of Wendell Wolka.

Some things are not as easy to determine as it might seem at first. One thing that often trips me up, more frequently than you might imagine, is when a bank “closed.” The definition of “closed” is what usually gets in the way.

For example, take the State Bank of Indiana. This large, multi-branch bank had a charter that stated it was in business for a period of 25 years, beginning in 1834, so 1834 plus 25 is 1859.

But a case could be made for at least two additional different answers. Closing a legitimate bank was a long, drawn out and complicated process. The State Bank of Indiana branches stopped discounting and began to call in their circulation on Jan. 1, 1855.

So, a (fairly weak) case could be made that the bank was closed, for all intents and purposes, in 1855. In that same year a charter was pushed through the state legislature for a replacement bank, the Bank of the State of Indiana. Despite the name, this second bank was owned by its shareholders and not in any fashion by the state.

A more compelling case could be made for a closing date of two years later, in January 1857. By this time the State Bank of Indiana branches had been through two years of redeeming their notes and squaring accounts.

The promoters of the new Bank of the State of Indiana, which was intended to step into the vacuum created by the closing of the State Bank of Indiana branches, soon realized that they did not have the means to pay for the next installment on the new bank stock. Everyone seized upon the best course of action: sell out to the directors of the old State Bank of Indiana. That is exactly what happened in 1856, with Hugh McCulloch, late of the State Bank of Indiana, being installed as president of the new institution.

As it turns out, when the new Bank of the State of Indiana opened on Jan. 1, 1857, most of its branches were located in the same buildings with the same branch personnel who had been associated with the State Bank of Indiana. Typically the only thing that changed was the sign outside the bank. So, 1857 saw most of the physical vestiges of the old State Bank disappear. That year could, therefore, rightfully lay claim to the correct answer for a closing date for the old State Bank.

In spite of all of this, the State Bank of Indiana still existed, at least as a corporate entity on paper, until its charter officially expired on Jan. 1, 1859. What’s your vote: 1855? 1857? 1859?

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