This week marks 200 years since the first Bank of Missouri suspended specie payments. The Directors of the bank decided to liquidate soon thereafter. The territorial legislature chartered the bank of Missouri on February 1, 1817, with capital of $250,000. The bank soon opened in Auguste Chouteau’s basement in St. Louis, with future governor Lilburn W. Boggs as its first cashier. A branch could open in any county with subscriptions for $40,000 in stock, and one subsequently opened in Ste. Genevieve.
The bank’s charter provided improved safeguards for creditors of the bank in comparison to the Bank of St. Louis, and the legislature required a report at each session. The bank issued notes of $1, $3, $5, and $20, and began to receive land office money for the federal government. By 1819 when the panic began, deposits were nearly $775,000. By September 1820, loans rose quickly and specie fell even faster. Expansion to meet demands of speculation and internal troubles led to the failure of the bank. Liquidation was prolonged and losses large. Poor management made these problems worse, including bank directors receiving loans larger than allowed by the charter.
The excesses of early public banks and the problems presented by the Panic of 1819 were to convince many Missourians that banks and banking systems were inherently evil. General mistrust persisted for over 100 years. Most failed to recognize that properly regulated public banks could dampen economic problems in hard times. Although the 1820 Missouri Constitution allowed chartering of a state bank, mistrust stymied this until 1837, when the General Assembly chartered a new Bank of Missouri.
