Thirty Years' View (Vol. II of 2)

But the senator may not be willing to yield to this example, this case in point, drawn from his own fountain, and precisely up to the exigency of the occasion. He may want something more; and he shall have it. I will now take the question upon its broadest bottom and fullest merits. I will go to the question of general power – the point of general authority – exemplified by the general practice of the British Parliament, for five hundred years, over the whole subject of bankruptcy. I will try the question upon this basis; and here I lay down the proposition, that this five hundred years of parliamentary legislation on bankruptcy establishes the point of full authority in the British Parliament to act as it pleased on the entire subject of bankruptcies. This is my proposition; and, when it is proved, I shall claim from those who carry me to England for authority, the same amount of power over the subject which the British Parliament has been in the habit of exercising. Now, what is the extent of that power? Happily for me, I, who have to speak, without any inclination for the task; still more happily for those who have to hear me, peradventure without profit or pleasure; happily for both parties, my proposition is already proved, partly by what I have previously advanced, and fully by what every senator knows. I have already shown the practice of Parliament upon this subject, that it has altered and changed, contracted and enlarged, put in and left out, abolished and created, precisely as it pleased. I have already shown, in my rapid view of English legislation on this subject, that the Parliament exercised plenary power and unlimited authority over every branch of the bankrupt question; that it confined the action of the bankrupt laws to a single class of persons, or extended it to many classes; that it was sometimes confined to foreigners, then applied to natives, and that now it comprehends natives, aliens, denizens, and women; that at one time all debtors were subject to it; then none but merchants and traders; and now, besides merchants and traders, a long list of persons who have nothing to do with trade; that at one time bankruptcy was treated criminally, and its object punished corporeally, while now it is a remedial measure for the benefit of the creditors, and the relief of unfortunate debtors; and that the acts of the debtor which may constitute him a bankrupt, have been enlarged from three or four glaring misdeeds, to so long a catalogue of actions, divided into the heads of innocent and fraudulent; constructive and positive; intentional and unintentional; voluntary and forced; that none but an attorney, with book in hand, can pretend to enumerate them. All this has been shown; and, from all this, it is incontestable that Parliament can do just what it pleases on the subject; and, therefore, our Congress, if referred to England for its powers, can do just what it pleases also. And thus, whether we go by the words of our own constitution, or by a particular example in England, or deduce a general authority from the general practice of that country, the result is still the same: we have authority to limit, if we please, our bankrupt law to the single class of banks and bankers.

The senator from Massachusetts [Mr. Webster] demands whether bankrupt laws ordinarily extend to corporations, meaning moneyed corporations. I am free to answer that, in point of fact, they do not. But why? because they ought not? or because these corporations have yet been powerful enough, or fortunate enough, to keep their necks out of that noose? Certainly the latter. It is the power of these moneyed corporations in England, and their good fortune in our America, which, enabling them to grasp all advantages on one hand, and to repulse all penalties on the other, has enabled them to obtain express statutory exemption from bankrupt liabilities in England; and to escape, thus far, from similar liabilities in the United States. This, sir, is history, and not invective; it is fact, and not assertion; and I will speedily refresh the senator's memory, and bring him to recollect why it is, in point of fact, that bankrupt laws do not usually extend to these corporations. And, first, let us look to England, that great exemplar, whose evil examples we are so prompt, whose good ones we are so slow, to imitate. How stands this question of corporation unliability there? By the judicial construction of the statute of Elizabeth, the partners in all incorporated companies were held subject to the bankrupt law; and, under this construction, a commission of bankrupt was issued against Sir John Wolstenholme, a gentleman of large fortune, who had advanced a sum of money on an adventure in the East India Company's trade. The issue of this commission was affirmed by the Court of King's Bench; but this happened to take place in the reign of Charles II. – that reign during which so little is found worthy of imitation in the government of Great Britain – and immediately two acts of Parliament were passed, one to annul the judgment of the Court of King's Bench in the case of Sir John Wolstenholme, and the other to prevent any such judgments from being given in future. Here are copies of the two acts:

FIRST ACT, TO ANNUL THE JUDGMENT

"Whereas a verdict and judgment was had in the Easter term of the King's Bench, whereby Sir John Wolstenholme, knight, and adventurer in the East India Company, was found liable to a commission of bankrupt only for, and by reason of, a share which he had in the joint stock of said company: Now, &c., Be it enacted, That the said judgment be reversed, annulled, vacated, and for naught held," &c.

SECOND ACT, TO PREVENT SUCH JUDGMENTS IN FUTURE

"That whereas divers noblemen and gentlemen, and persons of quality, no ways bred up to trade, do often put in great stocks of money into the East India and Guinea Company: Be it enacted, That no persons adventurers for putting in money or merchandise into the said companies, or for venturing or managing the fishing trade, called the royal fishing trade, shall be reputed or taken to be a merchant or trader within any statutes for bankrupts."

Thus, and for these reasons, were chartered companies and their members exempted from the bankrupt penalties, under the dissolute reign of Charles II. It was not the power of the corporations at that time – for the Bank of England was not then chartered, and the East India Company had not then conquered India – which occasioned this exemption; but it was to favor the dignified characters who engaged in the trade – noblemen, gentlemen, and persons of quality. But, afterwards, when the Bank of England had become almost the government of England, and when the East India Company had acquired the dominions of the Great Mogul, an act of Parliament expressly declared that no member of any incorporated company, chartered by act of Parliament, should be liable to become bankrupt. This act was passed in the reign of George IV., when the Wellington ministry was in power, and when liberal principles and human rights were at the last gasp. So much for these corporation exemptions in England; and if the senator from Massachusetts finds any thing in such instances worthy of imitation, let him stand forth and proclaim it.

But, sir, I am not yet done with my answer to this question; do such laws ordinarily extend to corporations at all? I answer, most decidedly, that they do! that they apply in England to all the corporations, except those specially excepted by the act of George IV.; and these are few in number, though great in power – powerful, but few – nothing but units to myriads, compared to those which are not excepted. The words of that act are: "Members of, or subscribers to, any incorporated commercial or trading companies, established by charter act of Parliament." These words cut off at once the many ten thousand corporations in the British empire existing by prescription, or incorporated by letters patent from the king; and then they cut off all those even chartered by act of Parliament which are not commercial or trading in their nature. This saves but a few out of the hundreds of thousands of corporations which abound in England, Scotland, Wales, and Ireland. It saves, or rather confirms, the exemption of the Bank of England, which is a trader in money; and it confirms, also, the exemption of the East India Company which is, in contemplation of law at least, a commercial company; and it saves or exempts a few others deriving charters of incorporation from Parliament; but it leaves subject to the law the whole wilderness of corporations, of which there are thousands in London alone, which derive from prescription or letters patent; and it also leaves subject to the same laws all the corporations created by charter act of Parliament, which are not commercial or trading. The words of the act are very peculiar – "charter act of Parliament;" so that corporations by a general law, without a special charter act, are not included in the exemption. This answer, added to what has been previously said, must be a sufficient reply to the senator's question, whether bankrupt laws ordinarily extend to corporations? Sir, out of the myriad of corporations in Great Britain, the bankrupt law extends to the whole, except some half dozen or dozen.

So much for the exemption of these corporations in England; now for our America. We never had but one bankrupt law in the United States, and that for the short period of three or four years. It was passed under the administration of the elder Mr. Adams, and repealed under Mr. Jefferson. It copied the English acts including among the subjects of bankruptcy, bankers, brokers, and factors. Corporations were not included; and it is probable that no question was raised about them, as, up to that time, their number was few, and their conduct generally good. But, at a later date, the enactment of a bankrupt law was again attempted in our Congress; and, at that period, the multiplication and the misconduct of banks presented them to the minds of many as proper subjects for the application of the law; I speak of the bill of 1827, brought into the Senate, and lost. That bill, like all previous laws since the time of George II., was made applicable to bankers, brokers, and factors. A senator from North Carolina [Mr. Branch] moved to include banking corporations. The motion was lost, there being but twelve votes for it; but in this twelve there were some whose names must carry weight to any cause to which they are attached. The twelve were, Messrs. Barton, Benton, Branch, Cobb, Dickerson, Hendricks, Macon, Noble, Randolph, Reed, Smith of South Carolina, and White. The whole of the friends of the bill, twenty-one in number, voted against the proposition, (the present Chief Magistrate in the number,) and for the obvious reason, with some, of not encumbering the measure they were so anxious to carry, by putting into it a new and untried provision. And thus stands our own legislation on this subject. In point of fact, then, chartered corporations have thus far escaped bankrupt penalties, both in England, and in our America; but ought they to continue to escape? This is the question – this the true and important inquiry, which is now to occupy the public mind.

The senator from Massachusetts [Mr. Webster] says the object of bankrupt laws has no relation to currency; that their object is simply to distribute the effects of insolvent debtors among their creditors. So says the senator, but what says history? What says the practice of Great Britain? I will show you what it says, and for that purpose will read a passage from McCulloch's notes on Smith's Wealth of Nations. He says:

"In 1814-'15, and '16, no fewer than 240 country banks stopped payment, and ninety-two commissions of bankruptcy were issued against these establishments, being at the rate of one commission against every seven and a half of the total number of country banks existing in 1813."

Two hundred and forty stopped payment at one dash, and ninety-two subjected to commissions of bankruptcy. They were not indeed chartered banks, for there are none such in England, except the Bank of England; but they were legalized establishments, existing under the first joint-stock bank act of 1708; and they were banks of issue. Yet they were subjected to the bankrupt laws, ninety-two of them in a single season of bank catalepsy; their broken "promises to pay" were taken out of circulation; their doors closed; their directors and officers turned out; their whole effects, real and personal, their money, debts, books, paper, and every thing, put into the hands of assignees; and to these assignees, the holders of their notes forwarded their demands, and were paid, every one in equal proportion – as the debts of the bank were collected, and its effects converted into money; and this without expense or trouble to any one of them. Ninety-two banks in England shared this fate in a single season of bank mortality; five hundred more could be enumerated in other seasons, many of them superior in real capital, credit, and circulation, to our famous chartered banks, most of which are banks of moonshine, built upon each other's paper; and the whole ready to fly sky-high the moment any one of the concern becomes sufficiently inflated to burst. The immediate effect of this application of the bankrupt laws to banks in England, is two-fold: first, to save the general currency from depreciation, by stopping the issue and circulation of irredeemable notes; secondly, to do equal justice to all creditors, high and low, rich and poor, present and absent, the widow and the orphan, as well as the cunning and the powerful, by distributing their effects in proportionate amounts to all who hold demands. This is the operation of bankrupt laws upon banks in England, and all over the British empire; and it happens to be the precise check upon the issue of broken bank paper, and the precise remedy for the injured holders of their dishonored paper which the President recommends. Here is his recommendation, listen to it:

"In the mean time, it is our duty to provide all the remedies against a depreciated paper currency which the constitution enables us to afford. The Treasury Department, on several former occasions, has suggested the propriety and importance of a uniform law concerning bankruptcies of corporations and other bankers. Through the instrumentality of such a law, a salutary check may doubtless be imposed on the issues of paper money, and an effectual remedy given to the citizen, in a way at once equal in all parts of the Union, and fully authorized by the constitution."

The senator from Massachusetts says he would not, intentionally, do injustice to the message or its author; and doubtless he is not conscious of violating that benevolent determination; but here is injustice, both to the message and to its author; injustice in not quoting the message as it is, and showing that it proposes a remedy to the citizen, as well as a check upon insolvent issues; injustice to the author in denying that the object of bankrupt laws has any relation to currency, when history shows that these laws are the actual instrument for regulating and purifying the whole local paper currency of the entire British empire, and saving that country from the frauds, losses, impositions, and demoralization of an irredeemable paper money.

The senator from Massachusetts says the object of bankrupt laws has no relation to currency. If he means hard-money currency, I agree with him; but if he means bank notes, as I am sure he does, then I point him to the British bankrupt code, which applies to every bank of issue in the British empire, except the Bank of England itself, and the few others, four or five in number, which are incorporated by charter acts. All the joint-stock banks, all the private banks, all the bankers of England, Scotland, Wales, and Ireland, are subject to the law of bankruptcy. Many of these establishments are of great capital and credit; some having hundreds, or even thousands of partners; and many of them having ten, or twenty, or thirty, and some even forty branches. They are almost the exclusive furnishers of the local and common bank note currency; the Bank of England notes being chiefly used in the great cities for large mercantile and Government payments. These joint-stock banks, private companies, and individual bankers are, practically, in the British empire what the local banks are in the United States. They perform the same functions, and differ in name only; not in substance nor in conduct. They have no charters, but they have a legalized existence; they are not corporations, but they are allowed by law to act in a body; they furnish the actual paper currency of the great body of the people of the British empire, as much so as our local banks furnish the mass of paper currency to the people of the United States. They have had twenty-four millions sterling (one hundred and twenty millions of dollars) in circulation at one time; a sum nearly equal to the greatest issue ever known in the United States; and more than equal to the whole bank-note circulation of the present day. They are all subject to the law of bankruptcy, and their twenty-four millions sterling of currency along with them; and five hundred of them have been shut up and wound up under commissions of bankruptcy in the last forty years; and yet the senator from Massachusetts informs us that the object of bankrupt laws has no relation to currency!

But it is not necessary to go all the way to England to find bankrupt laws having relation to currency. The act passed in our own country, about forty years ago, applied to bankers; the bill brought into the House of Representatives, about fifteen years ago, by a gentleman then, and now, a representative from the city of Philadelphia, [Mr. Sergeant,] also applied to bankers; and the bill brought into this Senate, ten years ago, by a senator from South Carolina, not now a member of this body, [General Hayne,] still applied to bankers. These bankers, of whom there were many in the United States, and of whom Girard, in the East, and Yeatman and Woods, in the West, were the most considerable – these bankers all issued paper money; they all issued currency. The act, then, of 1798, if it had continued in force, or the two bills just referred to, if they had become law, would have operated upon these bankers and their banks – would have stopped their issues, and put their establishments into the hands of assignees, and distributed their effects among their creditors. This, certainly, would have been having some relation to currency: so that, even with our limited essays towards a bankrupt system, we have scaled the outworks of the banking empire; we have laid hold of bankers, but not of banks; we have reached the bank of Girard, but not the Girard Bank; we have applied our law to the bank of Yeatman and Woods, but not to the rabble of petty corporations which have not the tithe of their capital and credit. We have gone as far as bankers, but not as far as banks; and now give me a reason for the difference. Give me a reason why the act of 1798, the bill of Mr. Sergeant, in 1821, and the bill of General Hayne, in 1827, should not include banks as well as bankers. They both perform the same function – that of issuing paper currency. They both involve the same mischief when they stop payment – that of afflicting the country with a circulation of irredeemable and depreciated paper money. They are both culpable in the same mode, and in the same degree; for they are both violators of their "promises to pay." They both exact a general credit from the community, and they both abuse that credit. They both have creditors, and they both have effects; and these creditors have as much right to a pro rata distribution of the effects in one case as in the other. Why, then, a distinction in favor of the bank? Is it because corporate bodies are superior to natural bodies? because artificial beings are superior to natural beings? or, rather, is it not because corporations are assemblages of men; and assemblages are more powerful than single men; and, therefore, these corporations, in addition to all their vast privileges, are also to have the privilege of being bankrupt, and afflicting the country with the evils of bankruptcy, without themselves being subjected to the laws of bankruptcy? Be this as it may – be the cause what it will – the decree has gone forth for the decision of the question – for the trial of the issue – for the verdict and judgment upon the claim of the banks. They have many privileges and exemptions now, and they have the benefit of all laws against the community. They pay no taxes; the property of the stockholders is not liable for their debts; they sue their debtors, sell their property, and put their bodies in jail. They have the privilege of stamping paper money; the privilege of taking interest upon double, treble, and quadruple their actual money. They put up and put down the price of property, labor, and produce, as they please. They have the monopoly of making the actual currency. They are strong enough to suppress the constitutional money, and to force their own paper upon the community, and then to redeem it or not, as they please. And is it to be tolerated, that, in addition to all these privileges, and all these powers, they are to be exempted from the law of bankruptcy? the only law of which they are afraid, and the only one which can protect the country against their insolvent issues, and give a fair chance for payment to the numerous holders of their violated "promises to pay!"

I have discussed, Mr. President, the right of Congress to apply a bankrupt law to banking corporations; I have discussed it on the words of our own constitution, on the practice of England, and on the general authority of Parliament; and on each and every ground, as I fully believe, vindicated our right to pass the law. The right is clear; the expediency is manifest and glaring. Of all the objects upon the earth, banks of circulation are the fittest subjects of bankrupt laws. They act in secret, and they exact a general credit. Nobody knows their means, yet every body must trust them. They send their "promises to pay" far and near. They push them into every body's hands; they make them small to go into small hands – into the hands of the laborer, the widow, the helpless, the ignorant. Suddenly the bank stops payment; all these helpless holders of their notes are without pay, and without remedy. A few on the spot get a little; those at a distance get nothing. For each to sue, is a vexatious and a losing business. The only adequate remedy – the only one that promises any justice to the body of the community, and the helpless holders of small notes – is the bankrupt remedy of assignees to distribute the effects. This makes the real effects available. When a bank stops, it has little or no specie; but it has, or ought to have, a good mass of solvent debts. At present, all these debts are unavailable to the community – they go to a few large and favored creditors; and those who are most in need get nothing. But a stronger view remains to be taken of these debts: the mass of them are due from the owners and managers of the banks – from the presidents, directors, cashiers, stockholders, attorneys; and these people do not make themselves pay. They do not sue themselves, nor protest themselves. They sue and protest others, and sell out their property, and put their bodies in jail; but, as for themselves, who are the main debtors, it is another affair! They take their time, and usually wait till the notes are heavily depreciated, and then square off with a few cents in the dollar! A commission of bankruptcy is the remedy for this evil; assignees of the effects of the bank are the persons to make these owners, and managers, and chief debtors to the institutions, pay up. Under the bankrupt law, every holder of a note, no matter how small in amount, nor how distant the holder may reside, on forwarding the note to the assignees, will receive his ratable proportion of the bank's effects, without expense, and without trouble to himself. It is a most potent, a most proper, and most constitutional remedy against delinquent banks. It is an equitable and a brave remedy. It does honor to the President who recommended it, and is worthy of the successor of Jackson.

Senators upon this floor have ventured the expression of an opinion that there can be no resumption of specie payments in this country until a national bank shall be established, meaning, all the while, until the present miscalled Bank of the United States shall be rechartered. Such an opinion is humiliating to this government, and a reproach upon the memory of its founders. It is tantamount to a declaration that the government, framed by the heroes and sages of the Revolution, is incapable of self-preservation; that it is a miserable image of imbecility, and must take refuge in the embraces of a moneyed corporation, to enable it to survive its infirmities. The humiliation of such a thought should expel it from the imagination of every patriotic mind. Nothing but a dire necessity – a last, a sole, an only alternative – should bring this government to the thought of leaning upon any extraneous aid. But here is no necessity, no reason, no pretext, no excuse, no apology, for resorting to collateral aid; and, above all, to the aid of a master in the shape of a national bank. The granted powers of the government are adequate to the coercion of all the banks. As banks, the federal government has no direct authority over them; but as bankrupts, it has them in its own hands. It can pass bankrupt laws for these delinquent institutions. It can pass such laws either with or without including merchants and traders; and the day for such law to take effect, will be the day for the resumption of specie payments by every solvent bank, and the day for the extinction of the abused privileges of every insolvent one. So far from requiring the impotent aid of the miscalled Bank of the United States to effect a resumption, that institution will be unable to prevent a resumption. Its veto power over other banks will cease; and it will itself be compelled to resume specie payment, or die!