Early Banking in Indiana. - The history of banking in Indiana from the earliest settlement of the territory until the inauguration of the national banking system has furnished many interesting pages - vivid pictures of frenzied finance, with eras of artificial prosperity and wild speculation, to be followed by periods of depression and financial failure.

In the earlier days, money was rarely seen. Peltries were used as currency and values were estimated in coonskins and other commodities. Many interesting anecdotes are related to illustrate the expedients to which the early settlers were driven to supply mediums of exchange. One that aptly describes the situation is told of a settler near Vincennes who required the services of a doctor. When time for settlement came he discharged the obligation by giving the doctor an agreed number of ax handles, the only commodity he had. The doctor in turn drove to town and made a purchase of bacon, flour, etc., paying the merchant in ax handles. After computing the value of the ax handles, as the amount was greater than the value of the merchandise purchased, the merchant gave the doctor two hatchet handles as change for the difference due him.

Indiana had no distinctive currency of its own. Spanish milled dollars and a few notes of the Bank of the United States and its branches and "cut silver," all attempted division of a dollar into five quarters, according to E. Chamberlain, an early historian, was the only circulating medium.

First Banks in Indiana. - In 1814, the Territorial Legislature chartered the Bank of Vincennes and the Farmers' and Merchants' Bank of Madison, and on January 1, 1817, the Bank of Vincennes was adopted by the Legislature as a State bank. It was empowered conditionally to adopt the Farmers' and Merchants' Bank of Madison as one of its branches and to establish other branches at Brookville, Corydon and Vevay. Immediately upon its adoption, its managers entered upon a system of frenzied finance, issuing more paper than the bank could possibly redeem, and embezzling $250,000 deposited in the bank by an agent of the United States for safekeeping. The notes of the bank became worthless, but the bills of the Farmers' and Merchants' Bank of Madison were ultimately redeemed after passing at a depreciated value for many years.

In 1832, when the State began a vast scheme of internal improvements, witnessed another period of inflated currency. They used cheap money, imported from Michigan by the contractors on the canals and other public works, in paying their laborers. It was paid out in vast sums and very little of any other kind of money was in circulation in Indiana. Merchants and millers and others also issued bills. Wm. H. Smith, in his history of Indiana, says: "As a rule these bills, or `shin-plasters,' were redeemable only at the mill or the store of the issuer. … Most of the merchants or millers eventually became bankrupts and left thousands of dollars of their currency unredeemed." According to the same authority, Asbury University issued a great many of these "shin-plasters," all of which the university redeemed.

Present Financial Institutions [in the year 1915]. - According to the report of the Banking Department of the State of Indiana, of June 23, 1915, there were 258 national banks in operation in the State, with total resources of $244,134,274.76. Under State supervision, there were 378 State banks, total resources $103,441,098.16; there were 144 trust companies, total resources $126,116,750.76; there were 201 private banks, total resources $30,058,998.12; there were five savings banks, total resources $14,703,030.30 and 341 building and loan associations December 31, 1914, with total resources of $56,427,548.66. The grand total of all resources of building and loan associations and all banking institutions in Indiana according to this report was $575,242,318.61. (top of page)

Banking in Indianapolis. - The history of banking in Indianapolis dates back to the early,days of the city, when a private bank was started; but the first chartered bank was the State Bank of Indiana, which was chartered in 1834, with a capital of $1,600,000. The charter was to run twenty-five years and half of the capital stock was to be taken by the State, which raised the money by the sale of bonds. The State's share of the dividends, after paying the bonds, was to go to the establishment of a general school fund, and this was the foundation of the excellent endowment of Indiana's public schools. The investment ultimately yielded to the State $3,700,000 after the payment of the bank bonds. The main bank and one of its branches were located in Indianapolis, beginning business November 26, 1832. The first president of this bank was Samuel Merrill, with whom were associated Calvin Fletcher Seaton W. Norris, Robert Morrison and Thomas R. Scott as directors. In 1840 the bank removed to its new building at Kentucky Avenue and Illinois Street. The Indianapolis branch was organized with Hervey Bates president and B. F. Morris cashier. After the charter expired, the Bank of the State of Indiana was chartered, the interest of the State being withdrawn, and Hugh McCulloch, who was later secretary of the treasury of the United States, became president of the bank, which remained in business, with seventeen branches, until the inauguration of the national banking system, when the various branches were merged into different national banks in their respective localities. William H. English organized the first national bank that was established in Indianapolis May 11, 1863. It was known as the First National Bank of Indianapolis and was one of the first in the country to operate under the national banking act. The bank facilities of Indianapolis are furnished by six national banks, with resources of more than $55,000,000, and nine trust companies, with capital and resources in excess of more than $39,000,000, in addition to State banks, most of which are devoted more especially to investment banking and the loaning of money on mortgages for clients. (top of page)

Beginning of Trust Companies. - The development of the trust company business in Indianapolis and throughout the State has been the most important feature of financial business during the past twenty years. The law authorizing the establishment of trust companies was passed by the Legislature in 1893, but prior to that time, there had been several attempts to secure such a law. Forty years ago a tentative organization was formed for a safety deposit company, with some trust features, but the Legislature refused to grant the necessary rights, and the matter was dropped. In 1891 several citizens of Indianapolis, notable among who were John H. Holliday and John P. Frenzel, seeing the need of such institutions, presented the matter to the Legislature, but without success. At the next session, in 1893, the matter was brought forward again by them, and a fair and substantial law was adopted. So good was it that few changes have been made in it since, only one of which, that permitting the organization of companies in smaller towns with smaller capital stock, has had any particular effect upon the business. (top of page)

First Trust Companies. - Conditions were ripe in Indianapolis for the organization of two companies immediately, and the establishment of the Indiana Trust Company on April 4, 1893, and the Union Trust Company on May 31, 1893. speedily followed. This was followed by the Marion Trust Company, December 10, 1895, after which time nine others were established. Of these, one failed and three have gone out of business by sale or consolidation, leaving nine in the field. Trust companies have also been established in almost every county seat, the principal towns having more than one.

The great factor in building up the business has been the lack of savings banks. The antiquated law authorizing such institutions has beet prohibitory, and no successful savings bank has been started in more than sixty years. This has left a rich and virgin field that the trust companies have occupied, thus satisfying "a long-felt want." This has been recognized and permitted by the authorities, although not specifically, authorized in the fundamental law. It is safe to say that seventy-five per cent. of the trust company deposits are of this character or such that interest is paid on them. The trust companies, dealing mainly in time money, can afford to do this, and the benefit to the people of the State is incalculable. They are not only encouraged to save money by being provided with ample depositories and receive interest on it, but the enormous amount that is gathered in this way is made available for the uses of business. Indiana securities for many years went abroad, but now they are almost entirely absorbed by her own people, whose ability to take them has been greatly enhanced by the existence of trust companies. These companies have also proved of great value in their work of trusteeship in its varied necessities, and their use in this line will increase as wealth accumulates and their great advantages are realized.-John H. Holliday. (top of page)