Thirty Years' View (Vol. I of 2)

II. As to the comparative condition and conduct of the first Bank the United States at the period of its approaching dissolution.

Mr. B. took the condition of the bank from Mr. Gallatin's statement of its affairs to Congress, made in January, 1811, just three months before the charter expired; and which showed the discounts and loans of the bank to be $14,578,294 25, her capital being $10,000,000; so that the amount of her loans, three months before her dissolution, was nearly in proportion – near enough for all practical views – to the proportion which the present loans of the Bank of the United States bear to its capital of thirty-five millions. Fifty per cent. upon the former would give fifteen millions; fifty per cent. upon the latter would give fifty-two millions and a half. To make the relative condition of the two banks precisely equal, it will be sufficient that the loans and discounts of the present bank shall be reduced to fifty-two millions by the month of January, 1836; that is to say, it need not make any further sensible reduction of its loans for nearly two years to come. Thus, the mere imitation of the conduct of the old bank will be a relief to the community. A mere cessation to curtail, will put an end to the distress, and let the country go on, quietly and regularly, in its moneyed operations. If the bank will not do this – if it will go on to curtail – it is bound to give some new reason to the country. The old reason, of the removal of the deposits, will no longer answer. Mr. B. had no faith in that reason from the beginning, but he was now taking the bank upon her own evidence, and trying her upon her own reasons, and he held it to be impossible for her to go on without the production of a reason. The hostility of the government – rather an incomprehensible, and altogether a gratuitous reason, from the beginning – will no longer answer. The government in 1811 was as hostile to the old bank, as the government now is to this one; and rather more so. Both Houses of Congress were then hostile to it, and hostile unto death! For they let it die! die on the day appointed by law for its death, without pity, without remorse, without the reprieve of one day. The government can do no worse now. The Secretary of the Treasury has removed the deposits; and that account is settled by the reduction of an equal amount of loans and discounts. The rest depends upon the government; and the hostility of the government cannot go further than to kill the bank, and cannot kill it more dead than the old bank was killed in 1811. Mr. B. had a further comparison to draw between the conduct of the old bank, and the present one. The old bank permitted her discounts to remain at their maximum to the very end of her charter; she discounted sixty days' paper up to the last day of her existence; while this bank has commenced a furious curtailment two years and a half before the expiration of her charter. Again: the old bank had not an hour, as a corporation, to wind up her business after the end of her charter; this bank has the use of all her corporate faculties, for that purpose, for two years after the end of her charter. Again: the present bank pretends that she will have to collect the whole of her debts within the period limited for winding up her affairs; the old bank took upwards of twelve years after the expiration of her charter to collect hers! She created a trust; she appointed trustees; all the debts and credits were put into their hands, the trustees proceeded like any other collectors, giving time to all debtors who would secure the debt, pay interest punctually, and discharge the principal by instalments. This is what the old bank did; and she did not close her affairs until the 16th of June, in the year 1823. The whole operation was conducted so gently, that the public knew nothing about it. The cotemporaries of the dissolution of the bank, knew nothing about its dissolution. And this is what the present bank may do, if it pleases. That it has not done so – that it is now grinding the community, and threatening to grind them still harder, is a proof of this dangerous nature of a great moneyed power; and should be a warning to the people who now behold its conduct – who feel its gripe, and hear its threat – never to suffer the existence of such another power in our free and happy land.

VII. Mr. B. deprecated the spirit which seemed to have broken out against State banks; it was a spirit which augured badly for the rights of the States. Those banks were created by the States; and the works of the States ought to be respected; the stock in those banks was held by American citizens, and ought not to be injuriously assailed to give value to stock held in the federal bank by foreigners and aliens. The very mode of carrying on the warfare against State banks, has itself been an injury, and a just cause of complaint. Some of the most inconsiderable have been picked out – their affairs presented in the most unfavorable light; and then held forth as a fair sample of the whole. How much more easy would it have been to have acted a more grateful, and a more equitable part! a part more just to the State governments which created those banks, and the American citizens who held stock in them! Instead of hunting out for remote and inconsiderable banks, and instituting a most disparaging scrutiny into their small affairs, and making this high Senate the conspicuous theatre for the exhibition of their insignificance, why not take the higher order of the State banks? – those whose names and characters are well known? whose stock upon the exchange of London and New-York, is superior to that of the United States Bank? whose individual deposits are greater than those of the rival branches of the Bank of the United States, seated in their neighborhood? whose bills of exchange are as eagerly sought for as those of the federal bank? which have reduced exchange below the rates of the federal bank? and which, in every particular that tries the credit, is superior to the one which is receiving so much homage and admiration? Mr. B. said there were plenty of such State banks as he had described; they were to be found in every principal city, from New Orleans to Boston. Some of them had been selected for deposit banks, others not; but there was no difficulty in making a selection of an ample number.

This spirit of hostility to the State banks, Mr. B. said, was of recent origin, and seemed to keep pace with the spirit of attack upon the political rights of the States. When the first federal bank was created, in the year 1791, it was not even made, by its charter, a place of deposit for the public moneys. Mr. Jefferson preferred the State banks at that time; and so declared himself in his cabinet opinion to President Washington. Mr. Gallatin deposited a part of the public moneys in the State banks during the whole of the long period that he was at the head of the treasury. At the dissolution of the first Bank of the United States, he turned over all the public moneys which he held in deposit to these banks, taking their obligation to pay out all the treasury warrants drawn upon them in gold and silver, if desired by the holder. When the present bank was chartered, the State banks stood upon an equal footing with the federal bank, and were placed upon an equality with it as banks of deposit, in the very charter which created the federal bank. Mr. B. was alluding to the 14th fundamental article of the constitution of the bank – the article which provided for the establishment of branches – and which presented an argument in justification of the removal of the deposits which the adversaries of that measure most pertinaciously decline to answer. The government wanted banks of deposit, not of circulation; and by that article, the State banks are made just as much banks of deposit for the United States as the Bank of the United States is. They are put upon exact equality, so far as the federal government is concerned; for she stipulates but for one single branch of the United States Bank, and that to be placed at Washington city. As for all other branches, their establishment was made to depend – not on the will, or power, of the federal government – not on any supposed or real necessity on her part to have the use of such branches – but upon contingencies over which she had no control; contingencies depending, one upon the mere calculation of profit and loss by the bank itself, the other upon the subscriptions of stock within a State, and the application of its legislature. In these contingencies, namely, if the Bank of the United States thought it to her interest to establish branches in the States, she might do it; or, if 2,000 shares of stock was subscribed for in a State, and thereupon an application was made by the State legislature for the institution of a branch, then its establishment within the State became obligatory upon the bank. In neither contingency had the will, the power, or the necessities of the federal government, the least weight, concern, or consideration, in the establishment of the branch. If not established, and so far as the government is concerned, it might not be, then the State banks, selected by the United States Bank, and approved by the Secretary of the Treasury, were to be the banks of deposit for the federal moneys. This was an argument, Mr. B. said, in justification of the removal of the deposits, and in favor of the use of the State banks which gentlemen on the opposite side of the question – gentlemen who take so much pains to decry State banks – have been careful not to answer.

The evils of a small paper circulation, he considered among the greatest grievances that could afflict a community. The evils were innumerable, and fell almost exclusively upon those who were least able to bear them, or to guard against them. If a bank stops payment, the holders of the small notes, who are usually the working part of the community, are the last to find it out, and the first to suffer. If counterfeiting is perpetrated, it is chiefly the small notes which are selected for imitation, because they are most current among those who know the least about notes, and who are most easily made the dupes of imposition, and the victims of fraud. As the expeller of hard money, small notes were the bane and curse of a country. A nation is scarce, or abundant, in hard money, precisely in the degree in which it tolerates the lower denominations of bank notes. France tolerates no note less than $100; and has a gold and silver circulation of 350 millions of dollars. England tolerates no note of less than $25; and has a gold and silver circulation of 130 millions of dollars: in the United States, where $5 is the minimum size of the federal bank notes, the whole specie circulation, including what is in the banks, does not amount to thirty millions of dollars. To increase the quantity of hard money in the United States, and to supply the body of the people with an adequate specie currency to serve for their daily wants, and ordinary transactions, the banknote circulation below twenty dollars, ought to be suppressed. If Congress could pass a law to that effect, it ought to bed one; but it cannot pass such a law: it has no constitutional power to pass it. Congress can, however, do something else, which will, in time, effectually put down such a currency. It can discard it, and disparage it. It can reject it from all federal payments. It can reject the whole circulation of any bank that will continue to issue small notes. Their rejection from all federal payments, would check their currency, and confine the orbit of their circulation to the immediate neighborhood of the issuing bank. The bank itself would find but little profit from issuing them – public sentiment would come to the aid of federal policy. The people of the States, when countenanced and sustained by the federal government, would indulge their natural antipathy and honest detestation of a small paper currency. They would make war upon all small notes. The State legislatures would be under the control of the people; and the States that should first have the wisdom to limit their paper circulation to a minimum of twenty dollar bills, would immediately fill up with gold and silver. The common currency would be entirely metallic; and there would be a broad and solid basis for a superstructure of large notes; while the States which continued to tolerate the small notes, would be afflicted with all the evils of a most pestilential part of the paper system, – small notes, part counterfeit, part uncurrent, half worn out; and all incapable of being used with any regard to a beneficial economy. Mr. B. went on to depict the evils of a small note currency, which he looked upon as the bane and curse of the laboring part of the community, and the reproach and opprobrium of any government that tolerated it. He said that the government which suffered its currency to fall into such a state that the farmer, the artisan, the market man, the day laborer, and the hired servant, could only be paid in small bank notes, was a government which abdicated one of its most sacred duties; and became an accomplice on the part of the strong in the oppression of the weak.

Mr. B. placed great reliance upon the restoration of the gold currency for putting down a small note circulation. No man would choose to carry a bundle of small bank notes in his pocket, even new and clean ones, much less old, ragged, and filthy ones, when he could get gold in their place. A limitation upon the receivability of these notes, in payment of federal dues, would complete their suppression. Mr. B. did not aspire to the felicity of seeing as fine a currency in the United States as there is in France, where there was no bank note under five hundred francs, and where there was a gold and silver circulation at the rate of eleven dollars a head for each man, woman, and child, in the kingdom, namely, three hundred and fifty millions of dollars for a population of thirty-two millions of souls; but he did aspire to the comparative happiness of seeing as good currency established for ourselves, by ourselves, as our old fellow-subjects – the people of old England – now possess from their king, lords, and commons. They – he spoke of England proper – had no bank note less than five pounds sterling, and they possessed a specie circulation (of which three-fourths was gold) at the rate of about nine dollars a head, men, women, children (even paupers) included; namely, about one hundred and thirty millions for a population of fourteen millions. He, Mr. B., must be allowed to aspire to the happiness of possessing, and in his sphere to labor to acquire, as good a circulation as these English have; and that would be an immeasurable improvement upon our present condition. We have local bank notes of one, two, three, four dollars; we have federal bank notes of five and ten dollars – the notes of those English who are using gold at home while we are using their paper here: – we have not a particle of gold, and not more silver than at the rate of about two dollars a head, men, women, children (even slaves) included; namely, about thirty millions of silver for a population of thirteen millions. Mr. B. believed there was not upon the face of the earth, a country whose actual currency was in a more deplorable condition than that of the United States was at present; the bitter fruit of that fatal paper system which was brought upon us, with the establishment of the first Bank of the United States in 1791, and which will be continued upon us until the citadel of that system – the Bastile of paper money, the present Bank of the United States, – shall cease to exist.

Mr. B. said, that he was not the organ of the President on this floor – he had no authority from the President to speak his sentiments to the Senate. Even if he knew them, it would be unparliamentary, and irregular, to state them. There was a way for the Senate to communicate with the President, which was too well known to every gentleman to require any indication from him. But he might be permitted to suggest – in the absence of all regular information – that if any Senator wished to understand, and to comment upon, the President's opinions on currency, he might, perhaps, come something nearer to the mark, by commenting on what he (Mr. B.) had been saying, than by having recourse to the town meeting reports of inimical bank committees.

CHAPTER CVI.

ATTEMPTED INVESTIGATION OF THE BANK OF THE UNITED STATES

The House of Representatives had appointed a select committee of its members to investigate the affairs of the Bank of the United States – seven in number, and consisting of Mr. Francis Thomas, of Maryland; Mr. Edward Everett, of Massachusetts; Mr. Henry A. Muhlenberg, of Pennsylvania; Mr. John Y. Mason, of Virginia; Mr. W. W. Ellsworth, of Connecticut; Mr. Abijah Mann, Jr. of New-York; Mr. Robert T. Lytle, of Ohio. The authority under which the committee acted, required them to ascertain: 1. The causes of the commercial embarrassment, and the public distress complained of in the numerous distress memorials presented to the two Houses during the session; and whether the bank had been any way instrumental, through its management or money, in producing the distress and embarrassment, of which so much complaint was made. 2. To inquire whether the charter of the bank had been violated; and what corruptions and abuses, if any, had existed in its management. 3. To inquire whether the bank had used its corporate power, or money, to control the press, to interpose in politics, or to influence elections. The authority conferred upon the committee was ample for the execution of these inquiries. It was authorized to send for persons and papers; to summon and examine witnesses on oath; to visit, if necessary, the principal bank, and its branches; to inspect the books, correspondence and accounts of the bank, and other papers connected with its management. The right of the House to make this investigation was two-fold: first, under the twenty-third article of the charter: secondly, as the founder of the corporation; to whom belongs, in law language, the right to "visit" the institution it has founded; which "visiting" is for examination – as a bishop "visits" his diocese – a superintendent "visits" the works and persons under his care; not to see them, but to examine into their management and condition. There was also, a third right of examination, resulting from the act of the corporation; it was again soliciting a re-charter, and was bound to show that the corporators had used their actual charter fairly and legally before it asked for another. And, fourthly, there was a further right of investigation, still resulting from its conduct. It denied all the accusations brought against it by the government directors, and brought before Congress by the Secretary of the Treasury; and joined issue upon those accusations in a memorial addressed to the two Houses of Congress, To refuse examination under these circumstances would be shrinking from the issue which itself had joined. The committee proceeded to Philadelphia, and soon found that the bank did not mean to submit to an examination. Captious and special pleading objections were made at every step, until attempts on one side and objections on the other ended in a total refusal to submit their books for inspection, or themselves for an examination. The directors had appointed a company of seven to meet the committee of the House – a procedure unwarranted by any right or usage, and offensive in its pretentious equality; but to which the committee consented, at first, from a desire to do nothing to balk the examination. That corporation committee was to sit with them, in the room in the bank assigned for the examination; and took care always to pre-occupy it before the House committee arrived; and to act as if at home, receiving guests. The committee then took a room in a hotel, and asked to have the bank books sent to them; which was refused. They then desired to have the books subjected to their inspection in the bank itself; in which request they were baffled, and defeated. The bank committee required written specification of their points of inquiry, either in examining a book, or asking a question – that it might judge its legality; which they confined to mere breaches of the charter. And when the directors were summoned to answer questions, they refused to be sworn, and excused themselves on the ground of being parties to the proceeding. Some passages from the committee's report will show to what extent this higgling and contumacy was carried by this corporation – deriving its existence from Congress, and endeavoring to force a renewed charter from it while refusing to show how it had used the first one. Thus:

"On the 23d of April, their chairman addressed to the President of the bank, a communication, inclosing a copy of the resolution of the House of Representatives, and notifying him of the readiness of the committee to visit the bank on the ensuing day, at any hour agreeable to him. In reply, the President informed the committee that the papers thus received should be submitted to the board of directors, at a special meeting to be called for that purpose. It appears, in the journal of the proceedings of the committee, herewith presented to the House, that this was done, and that the directors appointed a committee of seven of their board, to receive the committee of the House of Representatives, and to offer for their inspection such books and papers of the bank, as may be necessary to exhibit the proceedings of the corporation, according to the requirement of the charter. In the letter of John Sergeant, Esq., as chairman of the committee of directors communicating the proceedings of the board, he says that he was directed to inform the chairman of this committee that the committee of the directors 'will immediately direct the necessary arrangements to be made for the accommodation of the committee of the House of Representatives,' and would attend at the bank to receive them the next day, at eleven o'clock. Your committee attended, and were received by the committee of directors.

"Up to this period, nothing had occurred to justify the belief that a disposition was felt, on the part of the managers of the bank, to embarrass the proceedings of the committee, or have them conducted differently from those of the two preceding committees of investigation. On assembling, however, the next morning, at the bank, they found the room which had been offered for their accommodation, preoccupied by the committee of the board, with the president of the bank, as an ex officio member, claiming the right to be present at the investigations and examinations of this committee. This proceeding the committee were not prepared to expect. When the appointment of the committee of seven was first made, it was supposed that that measure, however designed, was not well calculated to facilitate the examination.

"With a previous determination to be present when their books were to be inspected, they could have waited to avow it until these books were called for, and the attempt made to inspect them in their absence. These circumstances are now reviewed, because they then excited an apprehension, which the sequel formed into conviction, that this committee of directors had been appointed to supervise the acts and doings of your committee, and to limit and restrain their proceedings, not according to the directions contained in the resolution of the House, but the will and judgment of the board of directors. Your committee have chosen to ascribe this claim of the committee of directors to sit conjointly with them, to the desire to prevent them from making use of the books and papers, for some of the purposes pointed out by the resolution of the House. They are sensible that this claim to be present at all examinations, avowed prematurely, and subsequently persisted in with peculiar pertinacity, could be attributed to very different motives; but respect for themselves, and respect for the gentlemen who compose the committee of directors, utterly forbids the ascription to them of a feeling which would merit compassion and contempt much more than resentment.

"This novel position, voluntarily and deliberately taken by the committee of the directors, predicated on an idea of equality of rights with your committee, under your resolution, rendered it probable, and in some measure necessary, that your committee should express its opinions of the relative rights of the corporation and the House of Representatives. To avoid all misunderstanding and future misrepresentations, it was desirable that each question should be decided separately. Contemplating an extended investigation, but unwilling that an apprehension should exist of improper disclosures being made of the transactions of the bank and its customers your committee, following the example of the committee of 1832, adopted a resolution declaring that their proceedings should be confidential, until otherwise ordered by the committee, and also a resolution that the committee would conduct its investigations 'without the presence of any person not required or invited to attend.' A copy of these resolutions was furnished to the committee of directors, in the hope that the exclusive control of a room at the bank, during its hours of business, would thereafter be conceded to your committee, while the claim of the committee of directors to be present when the books were submitted for inspection, should be postponed for decision, when the books were called for and produced by them.