Suffolk Bank
Encyclopedia
Suffolk Bank was a clearinghouse
bank in Boston
, Massachusetts
, that exchanged specie
or locally backed bank notes for notes from country banks to which city-dwellers could not easily travel to redeem notes. It operated from 1818 until 1858.
The bank operated by redeeming country banks' notes at par value
, so long as the banks maintained an account with Suffolk Bank. To qualify for such an account, a bank was required to remit a starting deposit of $2000 or more, and—in the case of banks not located in Boston—to maintain a sufficient balance to redeem any of the banks' notes that Suffolk Bank might receive for redemption. Beginning in 1824, "all of the banks in Boston, with the exception of the New England [a competing clearinghouse bank], agreed to make the Suffolk Bank their agent for the redemption of bills of outside banks." The Suffolk Bank enabled member banks to deposit notes from other banks at par value, and to be credited for these deposits within one business day. The bank operated in this manner until the Bank of Mutual Redemption was organized in 1858 and assumed this role for all of New England.
In his History of Money and Banking in the United States
, Murray Rothbard
credits the Suffolk Bank with exercising "a stabilizing influence on the New England
economy." John Jay Knox
, a former Comptroller of the United States Treasury
, stated that the success of the Suffolk Bank demonstrated that,
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
bank in Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
, Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
, that exchanged specie
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
or locally backed bank notes for notes from country banks to which city-dwellers could not easily travel to redeem notes. It operated from 1818 until 1858.
The bank operated by redeeming country banks' notes at par value
Par value
Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....
, so long as the banks maintained an account with Suffolk Bank. To qualify for such an account, a bank was required to remit a starting deposit of $2000 or more, and—in the case of banks not located in Boston—to maintain a sufficient balance to redeem any of the banks' notes that Suffolk Bank might receive for redemption. Beginning in 1824, "all of the banks in Boston, with the exception of the New England [a competing clearinghouse bank], agreed to make the Suffolk Bank their agent for the redemption of bills of outside banks." The Suffolk Bank enabled member banks to deposit notes from other banks at par value, and to be credited for these deposits within one business day. The bank operated in this manner until the Bank of Mutual Redemption was organized in 1858 and assumed this role for all of New England.
In his History of Money and Banking in the United States
History of Money and Banking in the United States
A History of Money and Banking in the United States is a book by economist Murray Rothbard.From the introduction by Joseph Salerno:- Pre-20th Century :...
, Murray Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...
credits the Suffolk Bank with exercising "a stabilizing influence on the New England
New England
New England is a region in the northeastern corner of the United States consisting of the six states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut...
economy." John Jay Knox
John Jay Knox
John Jay Knox was an American financier, born in Knoxboro, New York. He graduated from Hamilton College in 1849 and entered the banking business.He was a vigorous supporter of the national banking plan of Treasury Secretary Salmon P. Chase...
, a former Comptroller of the United States Treasury
Comptroller of the Treasury
The Comptroller of the Treasury was an official of the United States Department of the Treasury from 1789 to 1817. According to section III of the Act of Congress establishing the Treasury Department, it is the comptroller's duty to...
, stated that the success of the Suffolk Bank demonstrated that,
- the fact is established that private enterprise could be entrusted with the work of redeeming the circulating notes of the banks, and it could thus be done as safely and much more economically than the same service can be performed by the Government.