Before taking up the efforts toward banking reform in New York State which culminated in the "Safety-Fund" system of 1828, certain National events affecting banking should at least, be mentioned. The War of 1812 threw a financial strain upon all the States, and particularly New York, which was borne rather well. Immediately following this came a remarkable expansion in settlements, business and speculation. The up-State sections of New York,
for example, received a tremendous influx of inhabitants; and this was especially true also of the near-West. 

To finance the farmer and the building of settlements, banks had to be provided, and in the States beyond New York they were provided in the most wild-cat fashion. If New York is to be criticized for the part politics played in its restraint of banks, it is also to be congratulated that this kept their numbers within bounds. In the inevitable collapse that was to follow, the common-wealth found itself in a better situation than most localities save New England. The serious weaknesses in the banking conditions of that time were that banks were too readily established, were not compelled to make specie payments on their notes, and produced a fictitious prosperity.

Congress had blundered in refusing to renew the charter of the United States Bank in 1811, for, whatever its faults, it had exerted a strong influence for sound currency. The second Bank of the United States was established by a bill of April 10, 1816. One of its first duties was to force the State banks to resume specie payments. With the aid of the Treasury Department, it partially succeeded in this, but in so doing all but wrecked itself. It also wrought havoc among the State banks; between the years 1811 and 1820 about 195 banking institutions in all parts of the Nation became bankrupt. 

The panic of 1817 to 1819, with the minor references of it during the next six years, and which were attended by universal suffering, were blamed on the United States Bank, and on all banks, for that matter, although these crises were principally reactions from the inflation following the war with Great Britain. The resentment aroused in the people at large was reflected in the multiplication of banking laws.

New York, while fortunate in escaping many of the evils of this period, mainly because of the legal restrictions which had characterized the progress of its banking, did not escape joining in the flood of new legislation. As has been indicated, the charters of the early New York banks were very simple affairs saying little about the powers conferred upon the corporations. This condition had been changed slightly by the act of 1803, and was to be altered greatly by later laws. The Bank of Niagara at Buffalo, incorporated in 1816, for example, was required to pay its notes in specie, the first of which such a thing was demanded. This provision was thereafter inserted in all charters. 

In 1824 this provision was made even stronger by prohibiting all New York banks from issuing notes "payable in any currency other than the lawful money of the United States." In 1825, a charter granted to the Commercial Bank of Albany enumerated the functions which a bank could exercise, and stipulated that it should "have no other powers whatever, except such as are expressly granted by this act." This policy was adhered to strictly in the granting of all future charters, and in the renewal of old ones. These rules were signs of the popular distrust of banks in this post-war period of deflation, and led to even greater changes in the banking legislation of 1827 and 1829.