Although higher western prices may have provided a stimulus for increased exports into the area, it is clear that a sizeable import surplus could not have been maintained for long unless, somewhere, there was a flow of funds sufficient to finance it. It is in this connection that the state banks were important since they were essential in stimulating a flow of new funds into the area and, in addition, served in some instances as the necessary agents by which the flow could take place.

The first source of funds was that arising out of the investment in western banks by out of state residents, particularly easterners. Several of the reasons for the existence of this flow are discussed below but it should be indicated first that the total was quite large. Perhaps more important, investment in bank stock by easterners was more likely to be real; i.e., it was not immediately withdrawn as was so much of the capital contributed by local investors.

The importance which western bank promoters placed upon securing eastern funds is indicated in the following letter from an official of the Franklin Bank of Cincinnati who had gone east to see about stock sales:

The Franklin Bank will be largely owned here at which I am much gratified as it is our policy to connect our interest with both cities [New York and Philadelphia] and particularly with this [New York] The monied people here have enlarged views (like our own) and express a desire to connect the West with them by direct ties of interest . . . they go the whole and know what they want . . . I estimate that the Franklin Bank will close with at least 750 thousand — perhaps the full million. I can say to you at all events that the Franklin Bank Is already established . . . this you will understand.

As indicated, capital for the Franklin Bank was almost entirely secured in the East. This was true in a number of other cases also, but the percentage of total capital stock subscribed for in the East was not as high for all Ohio banks. According to the reports of the Bank Commissioner in 1839 and 1840, about 50 per cent of the state's banking capital had been provided by out of state residents. The 1839 report listed $5,959,649 of a total paid-in bank capital of $11,921,580 as being held outside the state. In 1840 the percentage was about the same, though the total capital of the banks was reported as slightly over $9,000,000.