State Bank - Vandalia, IL

Bank Information

Episode Type: Suspension → Closure
Bank Type: state
Start Date: January 1, 1820*
Location: Vandalia, Illinois (38.961, -89.094)

Metadata

Model: gpt-5-mini
Short Digest: f0f06a2d

Response Measures

None

Description

Article is a historical account (published 1874) describing the early Illinois State Bank based at Vandalia. It says 'in 1820, when the banks broke' and later that the State Bank 'became utterly broken' (corruption/mismanagement). No run is described; the bank failed/was broken due to mismanagement and corruption. Date of failure is given broadly as 1820s; I use 1820 (when the banks broke) as the suspension/closure date.

Events (2)

1. January 1, 1820* Suspension

Cause: Bank Specific Adverse Info
Cause Details: Corrupt management and mismanagement of the State Bank; notes depreciated heavily and bank became 'utterly broken.'
Newspaper Excerpt: The natural result of an inflated currency and speculative prices came in 1820, when the banks broke.
Source: newspapers

2. January 1, 1826* Other

Newspaper Excerpt: In 1826, at the instance of Gov. Edwards, a committee was appointed to unearth the corruption... The investigation came to nothing... The State Bank became utterly broken a part of the notes were received for taxes, and a part were funded at 6 per cent interest. The State lost in the operation about $400,000, considerable sum when the sparse population of that time is taken into account.
Source: newspapers

Newspaper Articles (1)

1. March 7, 1874 Chicago Daily Tribune Chicago, IL

Article from Chicago Daily Tribune, March 7, 1874

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Article Text

Experience of the State of Illinois. The Financial Panics of 1820, 1837, 1857, and IS73. Some Objoctions to Free-Danking The Millionaire Inflationists. The Financial Experience of Illinois. To the Editor of The Chicago Tribune Str: Before the War of 1812, the fow Bottlore in the Torritory of Illinois maile their exchange by 'swapplog" or barter. After a groat deal of " swapping," they learned that the value of somo articles WAB permanent, and those became the circulating medium the currency of the country. The skins of deor and raccoons were hood as money, and financial mattors were placed on a firm buckskin basis. After the War of 1812, when the soldiers rotelved their pay, MONEY BECAME PLENTY, and a desiro for speculation was encouraged. The higher prices roso, the higher it was thought they were about to rise. The expectatious of the people were stimulated, not only by the volume of the currency, but by the hope of Immigration. They began everywhere to lay off tracts of country into town-lote; and the stakes which marked the corners remained for many years, thelittle reminders of the provailing folly. In a "Gazottoer of Illinois for 1823 appears the following item Independence A town in Bond County. The town 19 laid out on a very extensive scale, but no improvements have as yet been made on the ground. It only exists on paper, and constitutes a part of the speculating modium of the State. The natural result of an inflated currency and speculative prices came in 1820, when the banks broke and the people were deoply involved in dobt. But from the wrock of broken banks and blasted fortunes came a cry for MORE MONEY. Illinois had been a State only B few years, but demagogues wore plenty. In 1821 the Legislaturo created a State Bank, using the credit of the State and the hope of the people for capital, and solocting for officers and managers the most active politicians. The (principal bank was at Vandalia the branches were distributed among the various towns where politicians wore most notive. The bank-bille boro 2 por cent interest, and were redoomable at the end of ton years. These bills were lont, in sums of $100, to all who could give personal security. As the people went security for each other, they had all the money they wanted. Illinois was thon & financial paradise. The Milleumium of ready cash Lad come, and people had LOTS OF MONEY." But this financial glory was only a dissolving view, for the State Bank paper depreciated, and became worth only 25 cents on the dollar; and people were no better off than before. The bank was a political establishment. and, like many other political establishments, its management became corrupt. In 1826, at the instauce of Gov. Edwards, n committee was appointed to unearth the corruption. The Committee began its work, but the bank-managers worked against it. A writer savs of the investigation " And now commenced such a running to and fro about the Sent of Government by day and by night as can only be equaled by a swarm of bees whom rudely attacked in their hive. The Governor was openly and boldly charged with base motives, &c. The investigation came to nothing, and the charges were reported not sustained. Such are the results when the Government undertakes to manage the finances of the country. The State Bank became uttorly broken a part of the notes wore received for taxes, and a part were funded at G per cent intorest. The State lost in the operation about $400,000, conelderable sum when the sparso population of that time is taken into account. The people worked themselves out of their financial difficultice by ECONOMY AND HARD LABOR. This is rather nn unpopular and unpleasant way, but a mysterious Providence has thus far furnislied no other. The year 1834 found the people of Illinois happy and prosperous. From that time until 1837, immigrants cabio in multitudes by steambonts, with ox-teame, on horseback, or on foot. In the time of adversity, the people had called on the Government for assistance, but had found that none could be given. Neverthetess, Ly somo strange reasoning, they thought that, when they were prosperous, the Government could make them more 80 and in 1834, the Etate again went into the banking business. a One of the old State Banks was revived, and new one was started. In order to circulate the money, it was provided that it could bo loaned on roal estate to an amount not exceeding 50 per cont of the appraised value. This opened the way for sharpers. A great many people had their land appraised by friends at bigh figures, and obtained loans on these tions appraisals. Old swamp-land which was hardly worth the tax on it, was used to secure loans which mon never intended to ropay. Large sums were borrowed for speculative purposes by persons connected with the management of the bank, and in a vory Bhort time it lost a million of dollars. The country would have beion flooded with money without the creation of State Banks, for Gon. Jackson's Administration had encouraged bankers to discount liborally. The immense n furne of currency stimulated speculation, and people DROAME NEARLY on AZY with excitement when they observed the rising values. From 1834 to 1837, they engaged in the work of laying out towns on patier, and staking out large tracts of prairio into Lots. It is hard to give an idea of this period of frantic speculation. It is a fact that, in some instances, gainblers loft their cards and dice, laid out little paper towns, and gambled in town-lots. The Legislature of 1836 fully represented the crazy idea of the period, and the mind 8 of the members wore unsettled by the imm enso volume of our rency. Sums of moneyamou mting to millions of dollars scemed more trifle 2. They passed bills for the improvement of th 0 navigation of rivers and the construction of r ailroads, requiring a disbursement of nearly $ 19,000,000, which Was more than 840 apieco for every man, woman, and child in the State. Not all of this money was spent, for the State was never able to borrow it. Everything was commenced, but little was finished. AH a result of THIS PRIGHTFUL EXTR. AVAGANCE, the State contracted a dobt of $14,300,000, and was only stopped from going further by the for-