During the first half of the 19th century, three State Banks of Indiana were established, which performed with varying success the functions of furnishing a stable currency and providing credit to support commercial and industrial growth. The banks were chartered at times when there was no national bank to fulfill those functions. Although the first of these banks antedated Indianapolis, the second and third were chartered at the state capital, were directed from Indianapolis, and had branches there.

The first State Bank (1814-1822), chartered by the territorial legislature, had 14 branches. It ran into trouble partly because a steam mill in Vincennes (in which it had invested heavily) burned, partly because of competition from the Second Bank of the United States (B.U.S.) that chartered in 1816, and partly because of a depression in 1818-1819.

The second State Bank (1834-1858) was chartered for 25 years as the Second B.U.S. came to the end of its charter. Half the bank’s stock was owned by the state, which was expected to profit from bank dividends. Samuel Merrill was its first president (1834-1844); James F. D. Lanier and Hugh McCulloch were among its officials. It successfully withstood the Panic of 1837 but later failed to keep pace with the state in expanding its resources.

During the early 1850s, the state chartered a number of “free banks.” Speculative, or “wildcat,” operations led to a run on many of these banks in 1854. By the next year, the legislature was ready to charter a third State Bank (1855-1865). 

Though the charter and its passage were controversial, this bank, led by future U.S. Treasury Secretary Hugh McCulloch, pursued a sound, conservative policy until it was superseded by the National Banking Act of 1863, under which many of its 19 branches became national banks.

Revised April 2021

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