Thirty Years' View (Vol. II of 2)

Such was the chicanery, unworthy of a pie-poudre court – with which a statute of the federal Congress, stamped with every word, invested with every form, hung with every attribute, to define it a deposit – not even a loan – was to be pettifogged into a gift! and a contract for a gift! and the federal Treasury required to stand and deliver! and all that, not in a low law court, where attorneys congregate, but in the high national legislature, where candor and firmness alone should appear. History would be faithless to her mission if she did not mark such conduct for reprobation, and invoke a public judgment upon it.

After a prolonged contest the vote was taken, and the bill carried, but by the smallest majority – 119 to 117; – a difference of two votes, which was only a difference of one member. But even that was a delusive victory. It was immediately seen that more than one had voted with the majority, not for the purpose of passing the bill, but to gain the privilege of a majority member to move for a reconsideration. Mr. Pickens, of South Carolina, immediately made that motion, and it was carried by a majority of 70! Mr. Pickens then proposed an amendment, which was to substitute definite for indefinite postponement – to postpone to a day certain instead of the pleasure of Congress: and the first day of January, 1839, was the day proposed; and that without reference to the condition of the Treasury (which might not then have any surplus), for the transfer of this fourth instalment of a deposit to the States. The vote being taken on this proposed amendment, it was carried by a majority of 40: and that amendment being concurred in by the Senate, the bill in that form became a law, and a virtual legalization of the deposit into a donation of forty millions to the States. And this was done by the votes of members who had voted for a deposit with the States; because a donation to the States was unconstitutional. The three instalments already delivered were not to be recalled until Congress should so order; and it was quite certain that it never would so order. At the same time the nominal discretion of Congress over the deposit of the remainder was denied, and the duty of the Secretary made peremptory to deliver it in the brief space of one year and a quarter from that time. But events frustrated that order. The Treasury was in no condition on the first day of January, 1839, to deliver that amount of money. It was penniless itself. The compromise act of 1833, making periodical reductions in the tariff, until the whole duty was reduced to an ad valorem of twenty per cent., had nearly run its course, and left the Treasury in the condition of a borrower, instead of that of a donor or lender of money. This fourth instalment could not be delivered at the time appointed, nor subsequently; – and was finally relinquished, the States retaining the amount they had received: which was so much clear gain through the legislative fraud of making a distribution under the name of a deposit.

This was the end of one of the distribution schemes which had so long afflicted and disturbed Congress and the country. Those schemes began now to be known by their consequences – evil to those they were intended to benefit, and of no service to those whose popularity they were to augment. To the States the deposit proved to be an evil, in the contentions and combinations to which their disposition gave rise in the general assemblies – in the objects to which they were applied – and the futility of the help which they afforded. Popularity hunting, on a national scale, gave birth to the schemes in Congress: the same spirit, on a smaller and local scale, took them up in the States. All sorts of plans were proposed for the employment of the money, and combinations more or less interested, or designing, generally carried the point in the universal scramble. In some States a pro rata division of the money, per capite, was made; and the distributive share of each individual being but a few shillings, was received with contempt by some, and rejected with scorn by others. In other States it was divided among the counties, and gave rise to disjointed undertakings of no general benefit. Others, again, were stimulated by the unexpected acquisition of a large sum, to engage in large and premature works of internal improvement, embarrassing the State with debt, and commencing works which could not be finished. Other States again, looking upon the deposit act as a legislative fraud to cover an unconstitutional and demoralizing distribution of public money to the people, refused for a long time to receive their proffered dividend, and passed resolutions of censure upon the authors of the act. And thus the whole policy worked out differently from what had been expected. The States and the people were not grateful for the favor: the authors of the act gained no presidential election by it: and the gratifying fact became evident that the American people were not the degenerate Romans, or the volatile Greeks, to be seduced with their own money – to give their votes to men who lavished the public moneys on their wants or their pleasures – in grain to feed them, or in shows and games to delight and amuse them.

CHAPTER XI.

INDEPENDENT TREASURY AND HARD MONEY PAYMENTS

These were the crowning measures of the session, and of Mr. Van Buren's administration, – not entirely consummated at that time, but partly, and the rest assured; – and constitute in fact an era in our financial history. They were the most strenuously contested measures of the session, and made the issue completely between the hard money and the paper money systems. They triumphed – have maintained their supremacy ever since – and vindicated their excellence on trial. Vehemently opposed at the time, and the greatest evil predicted, opposition has died away, and given place to support; and the predicted evils have been seen only in blessings. No attempt has been made to disturb these great measures since their final adoption, and it would seem that none need now be apprehended; but the history of their adoption presents one of the most instructive lessons in our financial legislation, and must have its interest with future ages as well as with the present generation. The bills which were brought in for the purpose were clear in principle – simple in detail: the government to receive nothing but gold and silver for its revenues, and its own officers to keep it – the Treasury being at the seat of government, with branches, or sub-treasuries at the principal points of collection and disbursement. And these treasuries to be real, not constructive – strong buildings to hold the public moneys, and special officers to keep the keys. The capacious, strong-walled and well-guarded custom houses and mints, furnished in the great cities the rooms that were wanted: the Treasury building at Washington was ready, and in the right place.

This proposed total separation of the federal government from all banks – called at the time in the popular language of the day, the divorce of Bank and State – naturally arrayed the whole bank power against it, from a feeling of interest; and all (or nearly so) acted in conjunction with the once dominant, and still potent, Bank of the United States. In the Senate, Mr. Webster headed one interest – Mr. Rives, of Virginia, the other; and Mr. Calhoun, who had long acted with the opposition, now came back to the support of the democracy, and gave the aid without which these great measures of the session could not have been carried. His temperament required him to have a lead; and it was readily yielded to him in the debate in all cases where he went with the recommendations of the message; and hence he appeared, in the debate on these measures, as the principal antagonist of Mr. Webster and Mr. Rives.

The present attitude of Mr. Calhoun gave rise to some taunts in relation to his former support of a national bank, and on his present political associations, which gave him the opportunity to set himself right in relation to that institution and his support of it in 1816 and 1834. In this vein Mr. Rives said:

"It does seem to me, Mr. President, that this perpetual and gratuitous introduction of the Bank of the United States into this debate, with which it has no connection, as if to alarm the imaginations of grave senators, is but a poor evidence of the intrinsic strength of the gentleman's cause. Much has been said of argument ad captandum in the course of this discussion. I have heard none that can compare with this solemn stalking of the ghost of the Bank of the United States through this hall, to 'frighten senators from their propriety.' I am as much opposed to that institution as the gentleman or any one else is, or can be. I think I may say I have given some proofs of it. The gentleman himself acquits me of any design to favor the interest of that institution, while he says such is the necessary consequence of my proposition. The suggestion is advanced for effect, and then retracted in form. Whatever be the new-born zeal of the senator from South Carolina against the Bank of the United States, I flatter myself that I stand in a position that places me, at least, as much above suspicion of an undue leaning in favor of that institution as the honorable gentleman. If I mistake not, it was the senator from South Carolina who introduced and supported the bill for the charter of the United States Bank in 1816; it was he, also, who brought in a bill in 1834, to extend the charter of that institution for a term of twelve years; and none were more conspicuous than he in the well-remembered scenes of that day, in urging the restoration of the government deposits to this same institution."

The reply of Mr. Calhoun to those taunts, which impeached his consistency – a point at which he was always sensitive – was quiet and ready, and the same that he had often been heard to express in common conversation. He said:

"In supporting the bank of 1816, I openly declared that, as a question de novo, I would be decidedly against the bank, and would be the last to give it my support. I also stated that, in supporting the bank then, I yielded to the necessity of the case, growing out of the then existing and long-established connection between the government and the banking system. I took the ground, even at that early period, that so long as the connection existed, so long as the government received and paid away bank notes as money, they were bound to regulate their value, and had no alternative but the establishment of a national bank. I found the connection in existence and established before my time, and over which I could have no control. I yielded to the necessity, in order to correct the disordered state of the currency, which had fallen exclusively under the control of the States. I yielded to what I could not reverse, just as any member of the Senate now would, who might believe that Louisiana was unconstitutionally admitted into the Union, but who would, nevertheless, feel compelled to vote to extend the laws to that State, as one of its members, on the ground that its admission was an act, whether constitutional or unconstitutional, which he could not reverse. In 1834, I acted in conformity to the same principle, in proposing the renewal of the bank charter for a short period. My object, as expressly avowed, was to use the bank to break the connection between the government and the banking system gradually, in order to avert the catastrophe which has now befallen us, and which I then clearly perceived. But the connection, which I believed to be irreversible in 1816, has now been broken by operation of law. It is now an open question. I feel myself free, for the first time, to choose my course on this important subject; and, in opposing a bank, I act in conformity to principles which I have entertained ever since I have fully investigated the subject."

Going on with his lead in support of the President's recommendations, Mr. Calhoun brought forward the proposition to discontinue the use of bank paper in the receipts and disbursements of the federal government, and supported his motion as a measure as necessary to the welfare of the banks themselves as to the safety of the government. In this sense he said:

"We have reached a new era with regard to these institutions. He who would judge of the future by the past, in reference to them, will be wholly mistaken. The year 1833 marks the commencement of this era. That extraordinary man who had the power of imprinting his own feelings on the community, then commenced his hostile attacks, which have left such effects behind, that the war then commenced against the banks, I clearly see, will not terminate, unless there be a separation between them and the government, – until one or the other triumphs – till the government becomes the bank, or the bank the government. In resisting their union, I act as the friend of both. I have, as I have said, no unkind feeling toward the banks. I am neither a bank man, nor an anti-bank man. I have had little connection with them. Many of my best friends, for whom I have the highest esteem, have a deep interest in their prosperity, and, as far as friendship or personal attachment extends, my inclination would be strongly in their favor. But I stand up here as the representative of no particular interest. I look to the whole, and to the future, as well as the present; and I shall steadily pursue that course which, under the most enlarged view, I believe to be my duty. In 1834 I saw the present crisis. I in vain raised a warning voice, and endeavored to avert it. I now see, with equal certainty, one far more portentous. If this struggle is to go on – if the banks will insist upon a reunion with the government, against the sense of a large and influential portion of the community – and, above all, if they should succeed in effecting it – a reflux flood will inevitably sweep away the whole system. A deep popular excitement is never without some reason, and ought ever to be treated with respect; and it is the part of wisdom to look timely into the cause, and correct it before the excitement shall become so great as to demolish the object, with all its good and evil, against which it is directed."

Mr. Rives treated the divorce of bank and State as the divorce of the government from the people, and said:

"Much reliance, Mr. President, has been placed on the popular catch-word of divorcing the government from all connection with banks. Nothing is more delusive and treacherous than catch-words. How often has the revered name of liberty been invoked, in every quarter of the globe, and every age of the world, to disguise and sanctify the most heartless despotisms. Let us beware that, in attempting to divorce the government from all connection with banks, we do not end with divorcing the government from the people. As long as the people shall be satisfied in their transactions with each other, with a sound convertible paper medium, with a due proportion of the precious metals forming the basis of that medium, and mingled in the current of circulation, why should the government reject altogether this currency of the people, in the operations of the public Treasury? If this currency be good enough for the masters it ought to be so for the servants. If the government sternly reject, for its uses, the general medium of exchange adopted by the community, is it not thereby isolated from the general wants and business of the country, in relation to this great concern of the currency? Do you not give it a separate, if not hostile, interest, and thus, in effect, produce a divorce between government and people? – a result, of all others, to be most deprecated in a republican system."

Mr. Webster's main argument in favor of the re-establishment of the National Bank (which was the consummation he kept steadily in his eye) was, as a regulator of currency, and of the domestic exchanges. The answer to this was, that these arguments, now relied on as the main ones for the continuance of the institution, were not even thought of at its commencement – that no such reasons were hinted at by General Hamilton and the advocates of the first bank – that they were new-fangled, and had not been brought forward by others until after the paper system had deranged both currency and exchanges; – and that it was contradictory to look for the cure of the evil in the source of the evil. It was denied that the regulation of exchanges was a government concern, or that the federal government was created for any such purpose. The buying and selling of bills of exchange was a business pursuit – a commercial business, open to any citizen or bank; and the loss or profit was an individual, and not a government concern. It was denied that there was any derangement of currency in the only currency which the constitution recognized – that of gold and silver. Whoever had this currency to be exchanged – that is, given in exchange at one place for the same in another place – now had the exchange effected on fair terms, and on the just commercial principle – that of paying a difference equal to the freight and insurance of the money: and, on that principle, gold was the best regulator of exchanges; for its small bulk and little weight in proportion to its value, made it easy and cheap of transportation; and brought down the exchange to the minimum cost of such transportation (even when necessary to be made), and to the uniformity of a permanent business. That was the principle of exchange; but, ordinarily, there was no transportation in the case: the exchange dealer in one city had his correspondent in another: a letter often did the business. The regulation of the currency required an understanding of the meaning of the term. As used by the friends of a National Bank, and referred to its action, the paper currency alone was intended. The phrase had got into vogue since the paper currency had become predominant, and that is a currency not recognized by the constitution, but repudiated by it; and one of its main objects was to prevent the future existence of that currency – the evils of which its framers had seen and felt. Gold and silver was the only currency recognized by that instrument, and its regulation specially and exclusively given to Congress, which had lately discharged its duty in that particular, in regulating the relative value of the two metals. The gold act of 1834 had made that regulation, correcting the error of previous legislation, and had revived the circulation of gold, as an ordinary currency, after a total disappearance of it under an erroneous valuation, for an entire generation. It was in full circulation when the combined stoppage of the banks again suppressed it. That was the currency – gold and silver, with the regulation of which Congress was not only intrusted, but charged: and this regulation included preservation. It must be saved before it can be regulated; and to save it, it must be brought into the country – and kept in it. The demand of the federal treasury could alone accomplish these objects. The quantity of specie required for the use of that treasury – its large daily receipts and disbursements – all inexorably confined to hard money – would create the demand for the precious metals which would command their presence, and that in sufficient quantity for the wants of the people as well as of the government. For the government does not consume what it collects – does not melt up or hoard its revenue, or export it to foreign countries, but pays it out to the people; and thus becomes the distributor of gold and silver among them. It is the greatest paymaster in the country; and, while it pays in hard money, the people will be sure of a supply. We are taunted with the demand: "Where is the better currency?" We answer: "Suppressed by the conspiracy of the banks!" And this is the third time in the last twenty years in which paper money has suppressed specie, and now suppresses it: for this is a game – (the war between gold and paper) – in which the meanest and weakest is always the conqueror. The baser currency always displaces the better. Hard money needs support against paper, and that support can be given by us, by excluding paper money from all federal receipts and payments; and confining paper money to its own local and inferior orbit: and its regulation can be well accomplished by subjecting delinquent banks to the process of bankruptcy, and their small notes to suppression under a federal stamp duty.

The distress of the country figured largely in the speeches of several members, but without finding much sympathy. That engine of operating upon the government and the people had been over-worked in the panic session of 1833-'34 and was now a stale resource, and a crippled machine. The suspension appeared to the country to have been purposely contrived, and wantonly continued. There was now more gold and silver in the country than had ever been seen in it before – four times as much as in 1832, when the Bank of the United States was in its palmy state, and was vaunted to have done so much for the currency. Twenty millions of silver was then its own estimate of the amount of that metal in the United States, and not a particle of gold included in the estimate. Now the estimate of gold and silver was eighty millions; and with this supply of the precious metals, and the determination of all the sound banks to resume as soon as the Bank of the United States could be forced into resumption, or forced into open insolvency, so as to lose control over others, the suspension and embarrassment were obliged to be of brief continuance. Such were the arguments of the friends of hard money.

The divorce bill, as amended, passed the Senate, and though not acted upon in the House during this called session, yet received the impetus which soon carried it through, and gives it a right to be placed among the measures of that session.

CHAPTER XII.

ATTEMPTED RESUMPTION OF SPECIE PAYMENTS

The suspension of the banks commenced at New York, and took place on the morning of the 10th of May: those of Philadelphia, headed by the Bank of the United States, closed their doors two days after, and merely in consequence, as they alleged, of the New York suspension; and the Bank of the United States especially declared its wish and ability to have continued specie payments without reserve, but felt it proper to follow the example which had been set. All this was known to be a fiction at the time; and the events were soon to come, to prove it to be so. As early as the 15th of August ensuing – in less than one hundred days after the suspension – the banks of New York took the initiatory steps towards resuming. A general meeting of the officers of the banks of the city took place, and appointed a committee to correspond with other banks to procure the appointment of delegates to agree upon a time of general resumption. In this meeting it was unanimously resolved: "That the banks of the several States be respectfully invited to appoint delegates to meet on the 27th day of November next, in the city of New York, for the purpose of conferring on the time when specie payments may be resumed with safety; and on the measures necessary to effect that purpose." Three citizens, eminently respectable in themselves, and presidents of the leading institutions – Messrs. Albert Gallatin, George Newbold, and Cornelius W. Lawrence – were appointed a committee to correspond with other banks on the subject of the resolution. They did so; and, leaving to each bank the privilege of sending as many delegates as it pleased, they warmly urged the importance of the occasion, and that the banks from each State should be represented in the proposed convention. There was a general concurrence in the invitation; but the convention did not take place. One powerful interest, strong enough to paralyze the movement, refused to come into it. That interest was the Philadelphia banks, headed by the Bank of the United States! So soon were fallacious pretensions exploded when put to the test. And the test in this case was not resumption itself, but only a meeting to confer upon a time when it would suit the general interest to resume. Even to unite in that conference was refused by this arrogant interest, affecting such a superiority over all other banks; and pretending to have been only dragged into their condition by their example. But a reason had to be given for this refusal, and it was – and was worthy of the party; namely, that it was not proper to do any thing in the business until after the adjournment of the extra session of Congress. That answer was a key to the movements in Congress to thwart the government plans, and to coerce a renewal of the United States Bank charter. After the termination of the session it will be seen that another reason for refusal was found.