The End of the Suffolk System

During the early years of the nineteenth century the mercantile community of Boston suffered the inconvenience of a double currency system. Boston banks accepted for deposit only “Boston money,” bank notes issued by Boston banks and readily redeemable in specie on demand at the counter of the issuing bank. But the common currency for all ordinary transactions was “foreign money” or “current money,” bank notes issued by out-of-town banks usually called country banks. Originally the Boston banks had accepted the notes of country banks at par or at a small discount and had returned them to the issuing banks for redemption rather than placing them back into circulation in Boston in competition with Boston bank notes. This policy had to be abandoned because of the inability of some country banks to redeem their excessive issues and the subterfuges adopted by other banks to avoid or delay redemption on the ground that the request for redemption was an imposition which restricted their legal circulation of bank notes. Moreover, there was always the risk that a country bank might fail before its notes could be presented for redemption by the Boston banks.