Bank of Kentucky
Quoted from http://www.nkyviews.com
BANK OF KENTUCKY (19TH CENTURY). This bank operated a branch in Washington, Ky. (1806), and later in Maysville (1835). At the beginning of the 19th century, Kentucky was rich in land but poor in dollars. Only small amounts of money circulated within the state, and much of what did
was debased currency. Paper money, of dubious value, was the accepted medium of exchange, since gold or silver coins were so rare. An economy without a stable currency cannot prosper; it usually stagnates and declines. In order to provide stability for its businesses and commerce, the Commonwealth of Kentucky chartered the Bank of Kentucky in 1806. The bank was modeled after the Bank of the United States.
A president and a 12-member board governed the Bank of Kentucky. The president and six members of the board were elected by the state legislature, while private shareholders elected the other six members. Robert Alexandria served as president of the bank from 1807 to 1821. He administered the bank in a conservative manner and developed it into a sound and profitable institution.
From 1819 to 1823, the Kentucky economy and that of the nation were shaken by a depression, in which bank loans were recalled and payment of bills was demanded. The demand for payment in gold and silver became so great that the Bank of Kentucky had to suspend specie payments in 1820. With businesses closing, farms being sold to settle debts, and citizens fleeing the state to avoid creditors, the Kentucky legislature insisted that the Bank of Kentucky adopt an inflationary fiscal policy. When the bank refused to do so, the legislature in 1820 chartered a new bank called the Bank of the Commonwealth, which flooded the state with paper currency,
destroying whatever faith citizens had in paper money. Paper currency bills drawn on both the Bank of Kentucky and the Bank of the Commonwealth were soon being heavily discounted.
The runaway inflation, caused in large part by the creation of the Bank of the Commonwealth, brought economic ruin to the state. Many people who survived the depression were wiped out by the inflation. In 1822 a new legislature revoked the charters of both the Bank of Kentucky and
the Bank of the Commonwealth. The Bank of the Commonwealth was without assets at the time of its demise, but the Bank of Kentucky was able to recover its capital. The Bank of Kentucky was rechartered in 1841, and then again in 1858. The repercussions from the destruction of the state’s banking system adversely affected the development of Kentucky through the first half of the 20th century.
Within the Northern Kentucky region, the Bankof Kentucky operated a branch at Maysville. It was to that branch that Virgil McKnight, the long-time president of the Bank of Kentucky, sent James Barbour in 1852 to serveas its cashier. Barbour founded the Bank of Maysville in 1871, while helping to finance the completion of the Maysville and Lexington Railroad into Maysville in the early 1870s.
Barrett, Lisa V. “Banking in Kentucky,” NKH 7, no.2
(Spring-Summer 2000): 29–30.
Beauchamp, C. D. “Banking in Kentucky,” Kentucky Banker (1986): 34–47. Royalty, Dale, “Banking and the Commonwealth Ideal,” RKH 77, no.2(Spring 1979);91–107.
Charles H. Bogart
Above excerpted from page 56 of THE ENCYCLOPEDIA OF NORTHERN KENTUCKY THE UNIVERSITY PRESS OF KENTUCKY ISBN 978-0-8131-2565-7