BALTIMORE AND OHIO RAILROAD. This costly and important railway, extending from Baltimore to the Ohio River at Wheeling, and by its connection with Western roads forming one of the four great trunk roads between the Atlantic and the Mississippi, has suffered severely from the destruction of its track, bridges, locomotives, and cars by order of the Confederate Generals, who seemed determined to so far destroy it as to prevent its being used during the war for the transportation of Union troops or stores. On the 16th of May several bridges on the road were destroyed, and portions of the tracks torn up; on the 14th of June the village of Harper's Ferry was burned and the costly railroad bridge there destroyed; on the 23d of the same month, by order of General J. E. Johnston, then in command of the Confederate forces in that section, 46 locomotives and 305 cars were gathered at Martinsburg, Va., and wood from the Railroad Company's supplies piled around them and set on fire, thus ensuring their complete destruction. The property thus burned was valued at $400,000 or $450,000. Still later, orders were issued, about the 20th of October, by the Confederate General commanding, directing the destruction of bridges and tunnels as far as the south branch of the road. A part of these orders were executed, but the mischief intended was checked before its full consummation by the capture of the colonel who was directed to superintend it at Romney, Va., Oct. 25. In Dec., after the occupation of the line of the railroad by the Federal troops, and the commencement of its repair by the Railroad Company under their protection, efforts were again made to obstruct the work and destroy some of the bridges and tunnels yet remaining. These efforts were unsuccessful, and on the 31st of December only 50 miles of its entire length (379 miles) remained unrepaired.

BANKS, U. S. The general stagnation that overtook the business of the country in 1861, produced a great change in the condition and operations of the banks through which that business is for the most part conducted. The banking business had been very prosperous for a period running back to the close of the Mexican war. When the famine in Ireland and Western Europe caused an unprecedented demand for breadstuffs and provisions, the activity imparted to trade by that occurrence was attended by a demand for currency and banking facilities, which manifested itself in the increased profits of the existing institutions, and in a rapid multiplication of new banks, following the law of trade by which profitable employment attracts capital.

The settlement of California was, in 1849, followed by the gold discoveries which powerfully excited all civilized countries, sent a crowd of emigrants to the new mines, and imparted a new impulse to trade in the United States. Raw products and merchandise were

largely shipped to profit by the gold produc tion, and the spirit of enterprise was not slow in affecting the banks. They soon showed signs of a greater degree of prosperity than ever before. New York City, as the financial centre of the Union, added rapidly to the number of its banks, and all of the States, to a greater or less extent, followed in the same direction. The banking system underwent a change, however. In 1838, when all the banks of the country were involved in a common disaster and the system became very unpopular, the State of New York projected the "free banking system," by which all banks of circulation in the State were required to deposit with the State Comptroller security in the public stocks to an amount equal to their circulation. In case they failed to redeem their notes in specie, the stocks were to be sold and the redemption made good. The law was from time to time amended until it approached as near perfection as was possible. The principle of it was embodied in the State Constitution of 1846, which required "ample security" from all banks of circulation. It seems to be a misnomer to call that "free banking," where restrictions were imposed where there had been none before; but the ingenuity of legislators had been taxed to make banking secure by legislation, and the chartered banks had been restricted in the amount of their loans and liabilities in proportion to their capitals, while there was no restriction upon the circulation. That plan failed. It was now thought if the circulation should be made entirely secure, the associations might organize under a general law without a charter, and be unlimited as to the amount of capital or loans. This system working well in New York, became popular, and under the favor with which it was received banks began to multiply in the Western States. The law was adopted by several States at the following dates:

The great speculative expansion during the decade ending with 1840 had increased the number of banks by 571, and their aggregate capital by $213,000,000, or a far larger amount than the increase of business as indicated in the sum of imports and exports. The collapse which then took place reduced the capital by $130,000,000, and from that time recovery commenced. The increase of business was considerable up to 1850, and following that increase the bank loans rose $158,000,000, without any increase in capital, thus affording large profits. An interest of 7 per cent. on the loans of

No. of Banks,

83,594,537 207,102,477

1843 would give 8 per cent. on the capital employed in that year. 7 per cent. on the loans of 1850 would give 13 per cent. on the capital employed in that year, showing an increase of 70 per cent. in bank profits. It is therefore not surprising that the banks began rapidly to multiply, not only to partake of existing business, but to compete for the large increase indicated in the sum of the external trade in 1860.

The following table indicates the increase of loans and circulation according to geographical

divisions.

Eastern.. Middle.

Southern..

South-Western

Western..

States

There is no doubt but that, notwithstanding the apparently large increase of banking up to 1861, it was not generally unsound in its operations. At that time, through political causes, the vast trade on which it was based suddenly ceased. The Southern States were producers of an annual value of $400,000,000 of cotton, tobacco, rice, sugar, naval stores, lumber, &c.; all raw products which they exported and sold. They were not manufacturers or importers to any considerable extent, and the proceeds of their sales were appropriated to the payment of the articles that were purchased at the North. The produce of the West, the manufactures of the East, and the imports of the Middle States, all found their way south for sale to an extent equal to the production of that region. This vast interchange, with all the ramifications, of raw materials into the hands of manufacturers, and of the completed goods to the consumers, hinged upon bank credits. The political events at the close of 1860 annihilated that exchange of commodities and with it the functions of the banks. The condition of all the banks, Jan. 1, 1861, was as is shown in table, p. 62.

It was inevitable that when the business which called this banking movement into action ceased, the bank credits should rapidly diminish. Where the institutions were based simply upon credit as were those banks of circulation that had sprung up at the West under the new laws, they were swept out of existence by the revulsion, and those which were pos

sessed of real capital found their means returning upon their hands in great volume and without any regular opening for its employment. This was the case with the Atlantic cities. Their loans were, as the merchants collected in their accounts, paid off without the usual amount of new business paper being created. Hence the discount line ran down while the deposits increased. The above table indicates that while the Western and Interior bank circulation increased the most rapidly, the loans or actual deposits advanced to commerce increased, in the three cities of Boston, New York, and Philadelphia, $150,000,000 out of an aggregate increase of $284,000,000, for all the banks in the Union. Of an increase of $47,000,000 in circulation, 24,000,000, or onehalf, was south and west. When, through the cessation of business, new paper ceased to be created and old was paid as it matured, the advances of the eastern banks returned into their vaults.

The tables of the official weekly returns of the banks of the cities of New York, Boston, and Philadelphia, throughout the year 1861, showing the weekly clearings in New York, are shown in pp. 63, 64, 65.

Notwithstanding the large subscription made to the Federal and State loans, amounting to nearly $50,000,000, the loans of all the banks up to August had decreased some $26,000,000, and the deposits had increased nearly $5,000,000, up to the 17th August, when the institutions came forward to assist the Government. Con