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NOTE 15. A False Start

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A False Start

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Matters began to change in 1814.

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The New England Bank of Boston announced it too would go into the moneybroker business,

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accepting country notes from holders and turning them over to the issuing bank for redemption.

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The note holders, though, still had to pay the cost.

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In 1818, a group of prominent merchants formed the Suffolk Bank to do the same thing.

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This enlarged competition brought the basic rate of country note discount down from 3%

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in 1814 to 1% in 1818 and finally to a bare ½ of 1% in 1820.

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But this did not necessarily mean that country banks were behaving more responsibly in their

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note creation.

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By the end of 1820, the business had become clearly unprofitable and both banks stopped

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competing with the private money brokers.

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The Suffolk became just another Boston bank.