Paper Money

Confusing names you can bank on: Collecting Paper

Although they had very similar names, the Bank of the State of Indiana and the State Bank of Indiana were different entities. And unlike a lot of 19th century banks, both were legitimate.

Images courtesy of Wendell Wolka.

From the “Collecting Paper” column in the Janu. 23, 2017, issue of Coin World:

Numerous examples of notes show criminally minded individuals played loose and free with bank names in an attempt to defraud the careless. However, sometimes it all worked out for the best. Take, for example, State Bank of Indiana and the Bank of the State of Indiana. 

The State Bank of Indiana was chartered in 1834 and soon became one of the most respected banks in the United States. Between 1834 and 1839, during the height of the Panic of 1837, it expanded to a statewide network of branches that served the state in a conservative and highly successful manner. By the mid-1850s, the populist idea of Free Banking swept the state and rechartering the State Bank of Indiana became a politically incorrect action to take. So the state bank started to wrap up its affairs in anticipation of an orderly closing of its business in 1859. 

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Banking was still a profitable business and a group of promoters decided to push through a charter for a private bank they called The Bank of the State of Indiana. After a scandalous push to get the charter through the state legislature, the bank was chartered, over the governor’s veto, in 1855. 

Hugh McCulloch at the time sagely noted that, while the promoters got the charter deal done, they didn’t have the funds to pay for the stock needed to capitalize the enterprise. As a result, the promoters cut a deal with the managers of the old State Bank of Indiana, agreeing to sell 17 of the “new” branches to the old management team and to not stand in the way of McCulloch becoming president of the new bank.

As a result, when Bank of the State of Indiana branches opened Jan. 1, 1857, they were almost universally run by the same officers who had run the branches of the State Bank of Indiana. In many cases, the only thing that changed at a branch was the sign outside of the building. A seamless transition; albeit with a slightly confusing name change.

The Bank of the State of Indiana went on to be just as successful, surviving the Panic of 1857 and the Civil War, eventually expanding to 20 branches across the state. Like its predecessor, not a single cent was ever lost by a note holder or depositor of the Bank of the State of Indiana branches. The bank voluntarily liquidated in 1865, with many branches becoming national banks. 

What might look like a sleight of hand name change really worked out well for all involved. McCulloch, who is owed much of the credit, moved on to be the first comptroller of the currency and later secretary of the Treasury.

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