more or Maryland. I desire to support the public authorities in all appropriate duties; in preserving peace, protecting property and the rights of persons, in obeying and upholding every municipal regulation and public statute consistent with the Constitution and laws of the United States and of Maryland. But unlawful combinations of men, organized for resistance to such laws, that provide hidden deposits of arms and ammunition, encourage contraband traffic with men at war with the Government, and, while enjoying its protection and privileges, stealthily wait opportunity to combine their means and force with those in rebellion against its authority, are not among the recognized or legal rights of any class of men, and cannot be permitted under any form of government Such combinations are well known to exist in this department. The mass of citizens of Baltimore and of Maryland, loyal to the Constitution and the Union, are neither parties to, nor responsible for them. But the Chief of Police is not only believed to be cognizant of these facts, but, in contravention of his duty, and in violation of law, he is, by direction or indirection, both witness and protector to the transactions and the parties engaged therein. Under such circumstances the Government cannot regard him otherwise than as the head of an armed force hostile to its authority and acting in concert with its avowed enemies.

whatever.

This arrest was made for the reason stated

in the proclamation: "Under such circumstances the Government cannot regard him otherwise than as the head of an armed force hostile to its authority, and acting in concert with its avowed enemies." If the opinion of the Government was correct, the arrest was doubtless justly made. But how shall the opinion of the Government be decided to be correct? By the Government itself who makes the arrest, or by an impartial tribunal? These questions excited much discussion at the time, but the public acquiesced in the proceedings of the Government, not only in this instance, but in many others.

The captains of the different police stations were directed to report themselves to the Provost Marshal, and, upon obeying the summons, they were notified that they and their officers would be continued in service, while the strictest injunction was imposed upon them to arrest every one who might attempt to disturb the peace.

The functions of the Board of Police were suspended as soon as Colonel Kenly entered upon his duties as Provost Marshal.

In the mean time, however, a meeting was held by the Police Commissioners and the Mayor -consisting of Chas. Howard, Wm. H. Gatchell, Charles D. Hinks, John W. Davis, and George Wm. Brown, Esqs.—who, after agreeing upon a protest against the suspension of their functions, adopted the following resolution:

Resolved, That whilst the Board, yielding to the force of circumstances, will do nothing to increase the present excitement, or obstruct the execution of such measures as Major-General Banks may deem proper to take on his own responsibility for the preservation of the peace of the city and of public order, they cannot, consistently with their views of official duty, and of the obligations of their oaths of office, recognize the right of any of the officers and men of the police force, as such, to receive orders or directions from any other authority than from this Board.

The Commissioners further resolved that the suspension of their own functions, suspended at the same time the active operation of the police law and relieved the officers and men from duty; and, in pursuance of this decision, they issued a notice to the police captains of the several stations announcing that they had determined upon the disbanding of the force, and directing them to carry out the provisions of that resolve. The men were accordingly summoned to the station-houses and notified that their services as police officers were suspended for the present, though it was intimated that their pay would continue, and that they were to hold themselves in readiness to resume their duties at a moment's notice.

Notwithstanding a notice issued by Colonel Kenly, that every man would be continued on duty, the force was disbanded, and a temporary police force of about four hundred men, immediately enrolled and placed on duty. Munitions of war in considerable quantities were found secreted in the city. In some instances they were the property of the city, in a few others they belonged to citizens.

On the 1st of July, the Commissioners of Police were arrested. The reasons for this arrest are thus stated by the commanding officer, General Banks, who ordered it:

In pursuance of orders issued from the Headquarters of the Army at Washington for the preservation of the public peace in this department, I have arrested and do now detain in custody of the United States the late members of the Board of Police-Messrs. Charles Howard, William H. Gatchell, Charles D. Hinks, and John W. Davis.

The incidents of the past week afforded full justification for this order. The head-quarters under the charge of the Board, when abandoned by the officers, resembled in some respects a concealed arsenal. After public recognition and protest against the "suspension of their functions" they continued their sessions daily. Upon a forced and unwarrantable construction of my proclamation of the 28th ultimo, they declared that the police law was suspended, and the police officers and men put off duty for the present, intending to leave the city without any police protection whatever. They refused to recognize the officers or men necessarily selected by the Provost Marshal for its protection, and hold subject to their orders, now and hereafter, the old police force, a large body of armed men, for some purpose not known to the Government, and inconsistent with its peace or security.

On the 19th of July, General Dix was orderBaltimore, and the city thenceforth remained ed to the command of the troops stationed at peaceful and tranquil. The troops have continued there throughout the year. The usual election in October for city officers was very quietly conducted. The vote was 9,587. This exceeded the vote at the previous election for members of the Legislature by 338. Except a few scattering votes there was no opposition to the Union candidates. The State election took place in November, in a quiet and peaceable manner. In Baltimore a number of arrests were made on the charge of disloyalty, which prevented a full vote for the opposition party. The total vote polled was 21,069, of which the Union candidates received 17,722.

BALTIMORE AND OHIO RAILROAD. This costly and important railway, extending from Baltimore to the Ohio River at Wheeling, and by its connection with Western roads forming one of the four great trunk roads between the Atlantic and the Mississippi, has suffered severely from the destruction of its track, bridges, locomotives, and cars by order of the Confederate Generals, who seemed determined to so far destroy it as to prevent its being used during the war for the transportation of Union troops or stores. On the 16th of May several bridges on the road were destroyed, and portions of the tracks torn up; on the 14th of June the village of Harper's Ferry was burned and the costly railroad bridge there destroyed; on the 23d of the same month, by order of General J. E. Johnston, then in command of the Confederate forces in that section, 46 locomotives and 305 cars were gathered at Martinsburg, Va., and wood from the Railroad Company's supplies piled around them and set on fire, thus ensuring their complete destruction. The property thus burned was valued at $400,000 or $450,000. Still later, orders were issued, about the 20th of October, by the Confederate General commanding, directing the destruction of bridges and tunnels as far as the south branch of the road. A part of these orders were executed, but the mischief intended was checked before its full consummation by the capture of the colonel who was directed to superintend it at Romney, Va., Oct. 25. In Dec., after the occupation of the line of the railroad by the Federal troops, and the commencement of its repair by the Railroad Company under their protection, efforts were again made to obstruct the work and destroy some of the bridges and tunnels yet remaining. These efforts were unsuccessful, and on the 31st of December only 50 miles of its entire length (379 miles) remained unrepaired.

BANKS, U. S. The general stagnation that overtook the business of the country in 1861, produced a great change in the condition and operations of the banks through which that business is for the most part conducted. The banking business had been very prosperous for a period running back to the close of the Mex ican war. When the famine in Ireland and Western Europe caused an unprecedented demand for breadstuffs and provisions, the activity imparted to trade by that occurrence was attended by a demand for currency and banking facilities, which manifested itself in the increased profits of the existing institutions, and in a rapid multiplication of new banks, following the law of trade by which profitable employment attracts capital.

The settlement of California was, in 1849, followed by the gold discoveries which powerfully excited all civilized countries, sent a crowd of emigrants to the new mines, and imparted a new impulse to trade in the United States. Raw products and merchandise were

largely shipped to profit by the gold production, and the spirit of enterprise was not slow in affecting the banks. They soon showed signs of a greater degree of prosperity than ever before. New York City, as the financial centre of the Union, added rapidly to the number of its banks, and all of the States, to a greater or less extent, followed in the same direction. The banking system underwent a change, however. In 1838, when all the banks of the country were involved in a common disaster and the system became very unpopular, the State of New York projected the "free banking system," by which all banks of circulation in the State were required to deposit with the State Comptroller security in the public stocks to an amount equal to their circulation. In case they failed to redeem their notes in specie, the stocks were to be sold and the redemption made good. The law was from time to time amended until it approached as near perfection as was possible. The principle of it was embodied in the State Constitution of 1846, which required "ample security" from all banks of circulation. It seems to be a misnomer to call that "free banking," where restrictions were imposed where there had been none before; but the ingenuity of legislators had been taxed to make banking secure by legislation, and the chartered banks had been restricted in the amount of their loans and liabilities in proportion to their capitals, while there was no restriction upon the circulation. That plan failed. It was now thought if the circulation should be made entirely secure, the associations might organize under a general law without a charter, and be unlimited as to the amount of capital or loans. This system working well in New York, became popular, and under the favor, with which it was received banks began to multiply in the Western States. The law was adopted by several States at the following dates:

The great speculative expansion during the decade ending with 1840 had increased the number of banks by 571, and their aggregate capital by $213,000,000, or a far larger amount than the increase of business as indicated in the sum of imports and exports. The collapse which then took place reduced the capital by $130,000,000, and from that time recovery commenced. The increase of business was considerable up to 1850, and following that increase the bank loans rose $158,000,000, without any increase in capital, thus affording large profits. An interest of 7 per cent. on the loans of

No. of Banks,

207,102,477

830,037,038 28,191,876 762,288,550 81,676,267

1843 would give 8 per cent. on the capital employed in that year. 7 per cent. on the loans of 1850 would give 13 per cent. on the capital employed in that year, showing an increase of 70 per cent. in bank profits. It is therefore not surprising that the banks began rapidly to multiply, not only to partake of existing business, but to compete for the large increase indicated in the sum of the external trade in 1860.

The following table indicates the increase of loans and circulation according to geographical divisions.

Loans.

Eastern.. Middle

Southern..

South-Western

Western...

States

Circulation.

There is no doubt but that, notwithstanding the apparently large increase of banking up to 1861, it was not generally unsound in its operations. At that time, through political causes, the vast trade on which it was based suddenly ceased. The Southern States were producers of an annual value of $400,000,000 of cotton, tobacco, rice, sugar, naval stores, lumber, &c.; all raw products which they exported and sold. They were not manufacturers or importers to any considerable extent, and the proceeds of their sales were appropriated to the payment of the articles that were purchased at the North. The produce of the West, the manufactures of the East, and the imports of the Middle States, all found their way south for sale to an extent equal to the production of that region. This vast interchange, with all the ramifications, of raw materials into the hands of manufacturers, and of the completed goods to the consumers, hinged upon bank credits. The political events at the close of 1860 annihilated that exchange of commodities and with it the functions of the banks. The condition of all the banks, Jan. 1, 1861, was as is shown in table, p. 62.

It was inevitable that when the business which called this banking movement into action ceased, the bank credits should rapidly diminish. Where the institutions were based simply upon credit as were those banks of circulation that had sprung up at the West under the new laws, they were swept out of existence by the revulsion, and those which were pos

sessed of real capital found their means returning upon their hands in great volume and without any regular opening for its employment. This was the case with the Atlantio cities. Their loans were, as the merchants collected in their accounts, paid off without the usual amount of new business paper being created. Hence the discount line ran down while the deposits increased. The above table indicates that while the Western and Interior bank circulation increased the most rapidly, the loans or actual deposits advanced to commerce increased, in the three cities of Boston, New York, and Philadelphia, $150,000,000 out of an aggregate increase of $284,000,000, for all the banks in the Union. Of an increase of $47,000,000 in circulation, 24,000,000, or onehalf, was south and west. When, through the cessation of business, new paper ceased to be created and old was paid as it matured, the advances of the eastern banks returned into their vaults.

The tables of the official weekly returns of the banks of the cities of New York, Boston, and Philadelphia, throughout the year 1861, showing the weekly clearings in New York, are shown in pp. 63, 64, 65.

Notwithstanding the large subscription made to the Federal and State loans, amounting to nearly $50,000,000, the loans of all the banks up to August had decreased some $26,000,000, and the deposits had increased nearly $5,000,000, up to the 17th August, when the institutions came forward to assist the Government. Con