Thirty Years' View (Vol. II of 2)

These enormous loans were chiefly in the year 1837, at the time when the bank stopped payment on account of the "specie circular," the "removal of the deposits," and other alleged misdoings of the democratic administrations: and this is only a sample of the way that the institution went on during that period of fictitious distress, and real oppression – millions to brokers and favorites, not a dollar to the man of business.

Two agencies were established in London – one for the bank, under Mr. Jaudon, to borrow money; the other for a private firm, of which Mr. Biddle was partner, and his young son the London head – its business being to sell cotton, bought with the dead notes of the old bank. Of the expenses and doings of these agencies, all bottomed upon the money of the stockholders (so far as it was left), the committee gave this account:

"When Mr. Jaudon was elected to the place of foreign agent, he was the principal cashier, at a salary of 7,000 dollars per annum. The bank paid the loss on the sale of his furniture, 5,074 dollars, and the passage of himself and family to London, a further sum of 1,015 dollars. He was to devote himself exclusively to the business of the bank, to negotiate an uncovered credit in England, to provide for the then existing debt in Europe, to receive its funds, to pay its bills and dividends, to effect sales of stocks, and generally to protect the interests of the bank and 'the country at large.' For these services he was to receive the commission theretofore charged and allowed to Baring Brothers & Company, equal to about 28,000 dollars per annum. In addition to which, the expenses of the agency were allowed him, including a salary of 1,000 pounds sterling to his brother, Mr. Charles B. Jaudon, as his principal clerk. From the increase of money operations, arising from facilities afforded by the agency, the amount upon which commissions were charged was greatly augmented, so that the sums paid him for his country services up to January, 1841, amounted at nine per cent. exchange to 178,044 dollars 47 cents, and the expenses of the agency to 35,166 dollars 99 cents. In addition to these sums, he was allowed by the exchange committee, an extra commission of one per cent. upon a loan effected in October, 1839, of 800,000 pounds, say $38,755 56; and upon his claim for a similar commission, upon subsequent loans in France and Holland, to the amount of $8,337,141 90, the board of directors, under the sanction of a legal opinion, from counsel of high standing, and the views of the former president, by whom the agreement with Mr. Jaudon was made, that the case of extraordinary loans was not anticipated, nor meant to be included in the original arrangement, allowed the further charge of $83,970 37. These several sums amount to $335,937, 39, as before stated."

A pretty expensive agency, although the agent was to devote himself exclusively to the business of the bank, protecting its interests, and those of "the country at large" – an addition to his mission, this protection of the country at large, which illustrates the insolent pretensions of this imperious corporation. Protect the country at large! while plundering its own stockholders of their last dollar. And that furniture of this bank clerk! the loss on the sale of which was $5,074! and which loss the stockholders made up: while but few of them had that much in their houses. The whole amount of loans effected by this agency was twenty-three millions of dollars; of which a considerable part was raised upon fictitious bills, drawn in Philadelphia without funds to meet them, and to raise money to make runs upon the New York banks, compel them to close again: and so cover her own insolvency in another general suspension: for all these operations took place after the suspension of 1837. The committee thus report upon these loans, and the gambling in stock speculations at home:

"Such were some of the results of the resolution of March, 1835, though it cannot be questioned, that much may be fairly attributed to the unhappy situation of the business and exchanges of the country, concurring with the unfortunate policy pursued by the administration of the bank. Thus the institution has gone on to increase its indebtedness abroad, until it has now more money borrowed in Europe, than it has on loan on its list of active debt in America. To this has been superadded, extensive dealing in stocks, and a continuation of the policy of loaning upon stock securities, though it was evidently proper upon the recharter, that such a policy should be at once and entirely abandoned. Such indeed was its avowed purpose, yet one year afterwards, in March, 1837, its loans on stocks and other than personal security had increased $7,821,541, while the bills discounted on personal security, and domestic exchange had suffered a diminution of $9,516,463 78. It seems to have been sufficient, to obtain money on loan, to pledge the stock of an 'incorporated company,' however remote its operation or uncertain its prospects. Many large loans originally made on a pledge of stocks, were paid for in the same kind of property, and that too at par, when in many instances they had become depreciated in value. It is very evident to the committee, that several of the officers of the bank were themselves engaged in large operations in stocks and speculations, of a similar character, with funds obtained of the bank, and at the same time loans were made to the companies in which they were interested, and to others engaged in the same kind of operations, in amounts greatly disproportionate to the means of the parties, or to their proper and legitimate wants and dealings. The effect of this system, was to monopolize the active means of the institution, and disable it from aiding and accommodating men engaged in business really productive and useful to the community; and as might have been anticipated, a large part of the sums thus loaned were ultimately lost, or the bank compelled, on disadvantageous terms as to price, to take in payment stocks, back lands and other fragments of the estates of great speculators."

The cotton agency seemed to be an ambidextrous concern – both individual and corporation – its American office in the Bank of the United States – the purchases made upon ten millions of its defunct notes – the profits going to the private firm – the losses to the bank. The committee give this history:

"In the course of the investigation the attention of the committee has been directed to certain accounts, which appear on the books as 'advances on merchandise,' but which were, in fact, payments for cotton, tobacco and other produce, purchased by the direction of the then President, Mr. Nicholas Biddle, and shipped to Europe on account of himself and others. These accounts were kept by a clerk in the foreign exchange department, this department being under the charge of Mr. Cowperthwaite, until September 22, 1837, when he was elected cashier, and of Mr. Thomas Dunlap, until March 20, 1840, when he was chosen president. The original documents, necessary to enable the committee to arrive at all the facts in relation to these transactions, were not accessible, having been retained, as was supposed, by the parties interested, as private papers. A succinct view of the whole matter, sufficient to convey to the stockholders a general idea of its character, may be drawn from the report of a committee of the board of directors, appointed on the 21st of July, 1840, for the purpose of adjusting and settling these accounts, and who reported on the 21st of December, 1840, which report with the accompanying accounts, is spread at large upon the minutes. The first transactions were in July, 1837, and appear as advances, to A. G. Jaudon, to purchase cotton for shipment to Baring Brothers & Co. of Liverpool, the proceeds to be remitted to their house in London, then acting as the agents of the bank. The amount of these shipments was 2,182,998 dollars 28 cents. The proceeds were passed to the credit of the bank, and the account appears to be balanced. The results, as to the profit and loss, do not appear, and the committee had no means of ascertaining them, nor the names of the parties interested. In the autumn of 1837, when the second of these transactions commenced, it will be recollected, that Mr. Samuel Jaudon had been appointed the agent of the bank to reside in London. About the same time, a co-partnership was formed between Mr. May Humphreys, then a director of the bank, and a son of Mr. Nicholas Biddle, under the firm of Biddle & Humphreys. This house was established at Liverpool, and thenceforward acted as agents for the sale of the produce shipped to that place which comprised a large proportion of the whole amount. In explanation of these proceedings, the committee annex to their report a copy of a letter dated Philadelphia, December 28, 1840, to the president and directors of the bank, from Mr. Joseph Cabot, one of the firm of Bevan & Humphreys, and who became a director at the election in January, 1838. This letter was read to the board, December 29, 1840, but was not inserted on the minutes.

"This arrangement continued during the years 1837, 1838 and 1839, the transactions of which amounted to 8,969,450 dollars 95 cents. The shipments were made principally to Biddle and Humphreys, were paid for by drafts on Bevan and Humphreys – the funds advanced by the bank, and the proceeds remitted to Mr. Samuel Jaudon, agent of the bank in London. It appears that there was paid to Messrs. Bevan and Humphreys by the bank in Philadelphia during the months of March, April, and May, 1839, the sum of eight hundred thousand dollars, and the account was thus balanced. The committee have reason to believe, that this sum constituted a part or perhaps the whole of the profits derived from the second series of shipments. How, and among whom, it was distributed, they have not been informed, but from the terms of the final settlement, to be adverted to presently, each one will be at liberty to make his own inferences. The third and last account, amounting to 3,241,042 dollars 83 cents, appears on the books, as 'bills on London, advances S. V. S. W.' These letters stand for the name of S. V. S. Wilder, of New York. – Messrs. Humphreys and Biddle, to whom these consignments were made, continued their accounts in the name of Bevan and Humphreys, but without the knowledge of that firm, as appears by Mr. Cabot's letter of December 28, 1840. The result of these last shipments, was a loss of 962,524 dollars 13 cents. Of this amount the sum of 553,908 dollars 57 cents was for excess of payments by Messrs. Humphreys and Biddle to the London agency, beyond the proceeds of sale, with interest thereon. The parties interested, claimed and were allowed a deduction for loss on 526,000 dollars of southern funds, used in the purchase of cotton, when at a discount, the sum of 310,071 dollars 30 cents; and also this sum, being banker's commission to Messrs. Humphreys and Biddle on advances to Samuel Jaudon, agent, 21,061 dollars 86 cents, making 331,133 dollars 16 cents, and leaving to be settled by the parties the sum of 631,390 dollars 97 cents."

Thus, the profit of eight hundred thousand dollars on the first shipments of cotton went to this private firm, though not shown on the books to whom; and the loss of nine hundred and sixty-two thousand five hundred and twenty-four dollars and thirteen cents on the last shipments went to the bank; but this being objected to by some of the directors, it was settled by Mr. Biddle and the rest – the bank taking from them stocks, chiefly of Texas, at par – the sales of the same being slow at a tithe of their face. The bank had also a way of guaranteeing the individual contracts of Mr. Biddle for millions; of which the report gives this account:

"Upon the eighteenth day of August, 1838, the bank guaranteed a contract made by Mr. Nicholas Biddle in his individual capacity, for the purchase of two thousand five hundred bonds of the State of Mississippi, of two thousand dollars each, amounting in the whole to 5,000,000 dollars. The signature of Mr. Thomas Dunlap, then second assistant cashier, was affixed to the guarantee, in behalf of the bank, upon the verbal authority of the president. Upon the 29th of January, 1839, the bank guaranteed to the State of Michigan, the punctual fulfilment of the obligations of the Morris canal and banking company, for the purchase of bonds of that state, to the extent of 3,145,687 dollars 50 cents. for 2,700,000 taken at par, and including interest on the instalments payable every three months up to January, 1843. On the 29th of April, 1839, the bank guaranteed a contract entered into by Mr. Thomas Dunlap in his individual capacity for the purchase of one million of dollars of the 'Illinois and Michigan canal stock.' In regard to these transactions, the committee can find no authority on the minutes of the board, and have been referred to none, by the president, upon whom they called for information."

Unintelligible accounts of large amounts appeared in the profit and loss side of the bank ledger; which, not explaining themselves, the parties named as receiving the money, were called upon for explanations – which they refused to give. Thus:

"In this last account there is a charge under date of June 30, 1840, of $400,000 to 'parent bank notes account,' which has not been explained to the satisfaction of the committee. It must be also mentioned, that among the expenditures of the bank, there is entered, at various dates, commencing May 5, 1836, sums amounting in all to 618,640 dollars 15 cents, as paid on the 'receipts of Mr. N. Biddle,' of 'Mr. N. Biddle and J. Cowperthwaite,' and 'cashier's vouchers.' As the committee were unable to obtain satisfactory information upon the subject of these expenses from the books or officers of the bank, application was made by letter to Mr. N. Biddle and Mr. J. Cowperthwaite, from whom no reply has been received."

These enormous transactions generally without the knowledge of the directory, usually upon the initials of a member of the exchange committee; and frequently upon a deposit of stock in the cash drawer. Besides direct loans to members of Congress, and immense fees, there was a process of entertainment for them at immense expense – nightly dinners at hotels – covers for fifty: and the most costly wines and viands: and this all the time. Besides direct applications of money in elections, the bank became a fountain of supply in raising an election fund where needed, taking the loss on itself. Thus, in 1833, in the presidential election in Kentucky, some politicians went into the branch bank at Lexington, assessed the party in each county for the amount wanted in that county – drew drafts for the amount of the assessment on some ardent friends in the county, received the cash for the drafts from the bank, and applied it to the election – themselves not liable if the assessment was not paid, but the same to go to the profit and loss account of the bank. In such operations as all these, and these are not all, it was easy for the bank to be swallowed up: and swallowed up it was totally.

The losses to the stockholders were deplorable, and in many instances attended with circumstances which aggravated the loss. Many were widows and children, their all invested where it was believed to be safe; and an ascertained income relied on as certain, with eventual return of the capital. Many were unfortunately deceived into the purchase or retention of stock, by the delusive bank reports. The makers of these reports themselves held no quantity of the stock – only the few shares necessary to qualify them for the direction. Foreign holders were numerous, attracted by the, heretofore, high credit of American securities, and by the implications of the name – Bank of the United States; implying a national ownership, which guaranteed national care in its management, and national liability on its winding up. Holland, England, France suffered, but the English most of all the foreigners. The London Banker's Circular thus described their loss:

"The proportion of its capital held by British subjects is nearly four millions sterling; it may be described as an entire loss. And the loss we venture, upon some consideration, to say is greater than the aggregate of all the losses sustained by the inhabitants of the British Islands, from failure of banks in this country, since Mr. Patterson established the banks of England and Scotland at the close of the seventeenth century. The small population of Guernsey and Jersey hold £200,000 of the stock of this U. States Bank. Call it an entire loss, and it is equal to a levy of three or four pounds on every man, woman, and child in the whole community of those islands – a sum greater than was ever raised by taxation in a single year on any people in the whole world. Are these important facts? if facts they be. Then let statesmen meditate upon them, for by their errors and reckless confidence in delusive theories they have been produced."

The credit of the bank, and the price of stock was kept up by delusive statements of profits, and fictitious exhibition of assets and false declarations of surpluses. Thus, declaring a half-yearly dividend of four per centum, January 1st, 1839, with a surplus of more than four millions; on the first of July of the same year, another half-yearly dividend of four per centum, with a surplus of more than four millions; on the 15th of January, the same year, announcing a surplus of three millions; and six weeks thereafter, on the first of January, announcing a surplus of five millions; while the assets of the bank were carried up to seventy-six millions. In this way credit was kept up. The creating of suspensions – that of 1837, and subsequent – cost immense sums, and involved the most enormous villainy; and the last of these attempts – the run upon the New York banks to stop them again before she herself stopped for the last time – was gigantically criminal, and ruinous to itself. Mr. Joseph Cowperthwaite (perfectly familiar with the operation) describes it to the life, and with the indifference of a common business transaction. Premising that a second suspension was coming on, it was deemed best (as in the first one of 1837) to make it begin in New York; and the operation for that purpose is thus narrated:

"After the feverish excitement consequent on this too speedy effort to return to cash payments had in a good degree subsided, another crisis was anticipated, and it was feared that the banks generally would be obliged again to suspend. This was, unhappily, too soon to be realized, for the storm was then ready to burst, but, instead of meeting its full force at once, it was deemed best to make it fall first upon the banks of New York. To effect this purpose, large means were necessary, and to procure these, resort was had to the sale of foreign exchange. The state of the accounts of the bank with its agents abroad did not warrant any large drafts upon them, especially that of the Messrs. Hottinguer in Paris. This difficulty, however, it was thought might be avoided, by shipping the coin to be drawn from the New York banks immediately to meet the bills. Accordingly, large masses of exchange, particularly bills on Paris, which were then in great demand, were sent to New York to be sold without limit. Indeed, the bills were signed in blank, and so sent to New York; and although a large book was thus forwarded, it was soon exhausted, and application was made to the agent of the Paris house in New York for a further supply, who drew a considerable amount besides. The proceeds of these immense sales of exchange created very heavy balances against the New York banks, which, after all, signally failed in producing the contemplated effect. The bills not being provided for, nor even regularly advised, as had uniformly been the custom of the bank, were dishonored; and although the agent in London did every thing which skill and judgment could accomplish, the credit of the bank was gone, and from that day to the present its effects upon the institution have been more and more disastrous."

"Deemed best to make the storm fall first upon the banks of New York;" and for that purpose to draw bills without limit, without funds to meet them, in such rapid succession as to preclude the possibility of giving notice – relying upon sending the gold which they drew out of the New York banks to Paris, to meet the same bills (all the while laying that exportation of gold to the wickedness of the specie circular), and failing to get the money there as fast as these "race-horse" bills went – they returned dishonored – came rolling back by millions, protested in Paris, to be again protested in Philadelphia. Then the bubble burst. The credit which sustained the monster was gone. Ruin fell upon itself, and upon all who put their trust in it; and certainly this last act, for the criminality of its intent and the audacity of its means, was worthy to cap and crown the career of such an institution.

It was the largest ruin, and the most criminal that has been seen since the South Sea and Mississippi schemes; yet no one was punished, or made to refund. Bills of indictment were found by the grand jury of the county of Philadelphia against Nicholas Biddle, Samuel Jaudon, and John Andrews, for a conspiracy to defraud the stockholders in the bank; and they were arrested, and held to bail for trial. But they surrendered themselves into custody, procured writs of habeas corpus for their release; and were discharged in vacation by judges before whom they were brought. It has been found difficult in the United States to punish great offenders – much more so than in England or France. In the cases of the South Sea and Mississippi frauds, the principal actors, though men of high position, were criminally punished, and made to pay damages. While these delinquencies were going on in the Bank of the United States, an eminent banker of London – Mr. Fauntleroy – was hanged at Tyburn, like a common felon – for his bank misdeeds: and while some plundered stockholders are now (autumn of 1855) assembled in Philadelphia, searching in vain for a shilling of their stock, three of the greatest bankers in London are receiving sentence of transportation for fourteen years for offences, neither in money nor morals, the hundredth part of the ruin and crime perpetrated by our American bank – bearing the name of the United States. The case presents too strong a contrast, and teaches too great a lesson to criminal justice to be omitted; and here it is:

"The firm had been in existence for nearly two centuries. The two elder partners of the firm had been distinguished for munificent charities, for an advocacy of great moral reforms, and an active participation in the religious or philanthropic measures of the day. They had always been liberal givers, had presided at Exeter Hall meetings, built chapels, and generally acted the part of liberal and useful members of society; and one of them, Sir John Dean Paul, was a baronet by descent, and allied to some of the highest nobility of England. He was first cousin to the present Lord Ravensworth, the honorable Augustus and Adolphus Liddell, the rector of St. Paul's, Knightsbridge, the Countess of Hardwicke, Viscountess Barrington, Lady Bloomfield; and, above all, the honorable Mrs. Villiers, sister-in-law to the Earl of Clarendon. These connections, however, in a country where rank and social position have peculiar influence, did not save them from a criminal trial and utter disgrace. One of their customers, in obedience to what he believed to be a duty to society, having personally inquired into the affairs of the firm, proceeded to lay a criminal information against Messrs. Strahan, Paul, and Bates, which led to their indictment and subsequent trial before the criminal court. This gentleman was the Rev. Dr. Griffith, Prebendary of Rochester, a wealthy ecclesiastic and a personal friend of all the partners of the firm, with which he had been a large depositor for many years. On the twenty-fifth of October the trial came on before Mr. Baron Alderson, assisted by Baron Martin and Justice Willes. The defendants appeared in court, attended by Sir Frederick Thesiger, Mr. Ballantyne, Sergeant Byles, and other almost equally eminent counsel. The Attorney-general appeared for the prosecution, and the evidence adduced at the trial, disclosed the following facts: Dr. Griffith, the prosecutor in the proceedings, and who, at the time of the failure of the defendants, had money and securities on deposit with them to the amount of £22,000, about five years ago empowered them to purchase for him on three different occasions, Danish five per cent. bonds to the value of £5,000. The defendants purchased the bonds, upon which they regularly received the dividends, and credited Dr. Griffith with the same on their books. This continued until March, 1854, when Sir John D. Paul, to relieve the embarrassments under which the firm were laboring, sold these securities, together with others with which they were entrusted, and appropriated the proceeds, amounting to over £12,000, to the use of the firm. This, as we have stated, was no offence at common law, and the indictment was preferred upon a statutory provision found in the 7th and 8th of George IV., cap. 29. The rigid severity of the penal law in England on this subject will be better appreciated when we add, that the bonds were replaced by others of equal value, in the June following their misappropriation, just one year previous to the failure of the firm; and that the indictment only charged the defendants with misappropriating them in this single instance, although it was shown that the second set of bonds were again sold for the use of the firm in April, 1855; Dr. Griffith having, in the interval, regularly received his dividends; so that, although the firm might be perfectly solvent at this moment, the fact that they had sold the bonds in March, 1851, even if they had replaced them in June, 1854, and had credited Dr. Griffith with the dividends on them between those dates, would still render them liable to an indictment. The case, therefore, overlooking the final misappropriation of the bonds, and the failure of the firm in 1855, was narrowed down to the single issue – whether they had been sold in 1854 without the consent of Dr. Griffith."