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in Galveston what was to be the only chartered bank during its twelve-year existence. The Commercial and Agricultural Bank served the Southwest until 1859, when the state supreme court got around to ruling that Williams was operating in violation of the state’s constitution and that his bank charter was invalid. The bank thereupon liquidated its assets and transferred its goodwill to Ball, Hutchings & Co., a private institution in Galveston that held on until the 1930s, when it was succeeded by Hutchings, Sealy National Bank, which at last look is still operating. Official Texas has number of palpable monopolies in its life of almost 150 years, but Williams’ has to be a champion for continuity. Before its demise, the Commercial and They lobbied unsuccessfully in Austin for a tax on national bank stockholders .. . They knew an enemy when they saw one and perceived nothing friendly in a bank. Agricultural Bank opened a branch in Brownsville, which evidently transacted a respectable international business. Williams was asked to open other branches in several more Texas towns, but he never did. For thirty years then, McKinney and Williams provided almost the only sound banking in Texas. At times, their banknotes were more negotiable than the virtually unsecured paper of the government of Texas. In 1844, for instance, Texas exchequer paper was being discounted nearly 50 percent, but McKinney’s and Williams’ bills commanded 90 to 95 percent of face value. No question where Texans’ confidence rested then. Naturally, success fostered imitators. Another Galveston entrepreneur, Robert Mills, started his own private \(and ilsued paper money against their firms’ assets. From a business standpoint, such operations had the special advantages that bootlegging has over legitimate distillingthe avoidance of state regula tion and official snooping. Some demanded that the scofflaw banks be forcibly closed. Others argued that, illegal or not, these institutions provided such necessary services that their violations should be overlooked. Perhaps the same argument could be made for bootleggers. In January, 1857, Galveston District Court Judge Peter Gray handed down a devastating $100,000 judgment against Mills. The decision, probably as political as it was legalistic, was generally popular. But when the Panic of 1857 brought hard times and Mills paid off his depositors in specie during a run on his bank, the state supreme court reversed Judge Gray and held that Mills’ enterprise was not necessarily harmful. So here was Texas in 1860, after forty years of organized government under three flags, home to a population nearly the size of present-day San Antonio. It had 307 miles of railroad, nearly one thousand manufacturing plants with products valued annually at $6.5 million, and, according to the census of 1860, only one chartered bank, in Galveston, with capital of $100,000. The state went on to fight on the losing side of a ruinous war, reconstruct and recover, and record, by 1870, a decade’s population growth of 35.5 percent. Meanwhile, its railroad mileage more than doubled, its manufacturing plants increased in number to 2,400, and their output value leaped to $11.5 million yearly. However, only four national banks serviced the burgeoning Texas economytwo in Galveston, one in Houston, and one in San Antonio. The state capital had none. In 1870, the four banks had $575,000 in combined capital and surplus, deposits of $617,000, and loans outstanding of $532,000. This wasn’t exactly big business. But better days lay immediately ahead. The new state constitution, that of 1869, lifted the ban on state banks, and a number were quickly organized. These new, now-legal banks were supposed to report annually to the secretary of statethey didn’t. For federal taxation purposes, they were also required to report their capital and deposit figures to AD. the commissioner of internal revenue, but thisprovision too seems to have been flouted. Not until 1876 do annual state bank statistics appear in government records. If modern banks seem to skirt the law, they are only following an ancient and honorable tradition. On the whole, however, credit facilities remained in the hands of merchants and private lenders until the middle 1880s, when national banks became more widely established and accepted, and a financial condition resembling today’s finally developed. Meanwhile, state banks and savings institutions proliferated. In. 1876, 101 state banks reported combined capital of $3.3 million and deposits of $4.7 million. Then came the constitution of 1876, the creaky one still in force, which brought back the earlier state bank prohibition. The farmers who controlled the constitutional convention hadn’t gotten over their distrust of banks. While they couldn’t do much about national or private banks, they darn sure could save Texas from state-chartered banks. They lobbied unsuccessfully in Austin to have taxes levied on national bank stockholders and on the real property, tangible.. personalty, money, credits and securities of all banks in the state. They knew an enemy when they saw one and perceived nothing friendly in a bank. Of course, farmers had good reason to be suspicious. Most banks ignored them except to take mortgages on their property and call them in when hard times , , t.eri:Ast-7.