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The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, September 12, 1837, Image 2

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18171 ll i? true the suspension had taken
place in a period of war in August or Sep
tember 1814. But the war terminated in
January following; and the suspension had
continued till April, 1816, when Congress
adopted its famous resolution. 'Those banks
had also abused the public confidence in the
moet remarkable degree. 44 Urged on by cu
pidity, they had launched out into an extent of
issues unexampled in the annals of folly."
They had speculated on the public to make
profits for themselves?but the present banks
have yet suspended only five months?almost
all of them have been cautious of making
issues. They have curtailed their circula
tion, and are preparing themselves, inure or
less, for resumption of payments. If, then,
the Congress of 1816 were urged by con
siderations of public interest to suspend the
lash over the heads of banks who were guilty
of such unjustifiable conduct, why should not
the Congress of '37 forbear for a few months
longer for the accommodation ol the people '
? The Message says, that the solvent bauks
will soon probably "redeem their issues in
gold aud silver." "is it not wise and prudent
to wait this short period ? W hy throw any
difficulty in the way T Why retard it? Is
it not better to forbear for a few months, than
to introduce so great an innovation at the pre
sent time ? May it not be expedient, then,
as a ground of compromise and conciliation,
to hold off for a few months longer? to re
ceive the notes of such banks, as are perfectly
solvent and anxious to discharge their en
gagements and to resume specie payments ?
meanwhile to digest the least objectionable
general system, which is best calculated to
conduct the finances ? to collect lacts about
tho condition of the State Banks ? to see
whether they cannot be so regulated as to an
swer the purpose?and if they shall be found
utterly objectionable, then to devise some al
ternative?always excluding of course, a Na
tional Bank ? If, however, the state banks
will not, or cannot, resume payment by
a specified time, then to resort to somo
other system: call for specie in whole,
or in proportions, gradually increasing, with
certain stipulated periods. We are sensible,
that these speculations are very little entitled
to the public consideration. But they flow
at least from the best intentions. We invite
discussion. As we lay our mite upon the al
tar, we call upon abler men to couie forth;
employ the press, aud enlighten their coun
We lay upon our oars. Wo shall await
the deliberations and decisions of Congress ;
and with great pleasure transfer the discus
sion to abler pens. We throw open the
press to all the friends of the Administration ;
be their prepossessions what they may?to
whatever alternative they may incline; be
they the friends of the sub-treasury, or the
state bank systems, this press is open to thein.
" Fair and exact justice" shall be extended
to all correspondents.
Treasury )
September 5, 1837. J
(Continued from our last.)
.VI. Settlement with the former Deposite Banks.
Another subjcct that appears to require the early ac
tion of Clfagresa is, the further indulgence which il may
be pleased to extend to such of the former deposite
banks as arc atill indebted to the United States.
The facts which are supposed to be necesary to aid
Congress in forming a correct decision on this subject
will be fully submitted. Tho perils to which those
banks were exposed bad cauacd to the department
much solicitude for several months before the suspension
of specie payments, and led to some precautionary sug
gestions which it felt bound to make to thorn, so far as
appeared consistent with the usual principles of bank
ing in this country, and not calculated, by creating sud
den alarm, to haatcn the catastrophe that has since hap
Besides the general cautions with respect lo the ex
cess of bank issues, and the dangerous consequences
likely to ensue, which were detailed in the last Treasury
report, several instances occurred where the course of
business of some of the depositories appearing from
their returns to be injudicious, special letters of advice
were deemed proper, and were written. A rigid sys
tein in requiring additional specie was also pursued in
all cases of unusual deficiency. In regard to the effect
of these steps on the banks, it affords the undersigned
pleasure to add, that, from the completion of their selec
tion after the deposite act passed, to the last returns
before their suspension, a great reduction in the circula
tion, as well as discounts of many of them, had taken
place, and, in several cases, a much largei proportion
of specie was kept on hand. Indeed, considering the
extraordinary amount of public money paid out by them
between last November and May, amounting to near 20
millions more than their receipt* during the same pe
riod, it is a fact highly creditable to their prudence and
ability, that the sfiecie of all was reduced only from
about fifteen to thirteen millions, and their circulation,
instead of increasing, fell from near forty-one lo thirty
seven millions.
As a whole, their specie, compared with their circu
lation, continued to be almost as large in May as in No
vember. It averaged tnore than one to three, or
much more than lias been customary with the bunks
in this country, and was over double the relative quan
tity held by all the banks in England at the same period,
and was in a proportion one-fourth larger than that in
the Bank of England itself. Their immediate means,
compared with their immediate liabilities, were some
what stronger in November than in May, but were at
both periods nearly 1 to 2 1-2, or greater than the usual
ratio, in the best times, of most banks which have a
large amount of deposites in possession. (Sec ta
ble Q)
iu this condition of things, the suspension of specie
payment by tho deposite banks was an event not gene
rally anticipated.
The policy sinco pursued by most of them has been
favorable to an early discharge of then engagements to
the Treasury, and to a resumption of specie payments.
Many have gradually reduced their discounts and circu
lation, as well as paid over much of the public depo
sites. This may be more fully seen in the tables annex
ed. (Statement of a few heads of condition in Novem
ber, March, July, May, and August?see Q ) Since
the first of May, their discounts, as a whole have been
reduced about &20.38S,776, their circulation 84,991,
791, and their public dejiosites 816,607,316; while
their specie has diminished less than #3,000,000. Of
the number of eighty six banks employed at the time of
the suspension, ten or eleven are supposed to have paid
over all the public monqy which was then in their pos
session, to the credit of the Treasurer. Iri the custody
of more than half tho othera, an aggregate of less than
#700,000 remains unadjusted Several of the rest
still possess large sums; but many of them have contin
ued promptly to furnish such payments from time to
time, for meeting the public necessities, that according
to the last weekly statement, the whole bslance to his
credit remaining unpaid in all of them, was only 812,
418,031. The amount thus retained by each, may bo
seen tn th? schedule annexed. (R.)
The course adopted in respect to the deposites of dis
bursing officers, after the sua|icnsion of specie payments,
and with a view to safety, aa well as to encourage the
early resumption of such payments, may be seen more
fully in the document annexed. (See circular, S.)
It was considered pro|?er to proceed, and attempt to
withdraw all the public mom-v from the discontinued
agents, aa fast as it waa wanted for public purposes,
and as new and suitable depositories could be procured
to receive any thing obtainable beyond such amount.
But while the former agents appeared lo be secure, and
to l?c making proper efforts to meet such calls, it seemed
more conducive to the eventual safety of the money, and
more consistent with true wisdom, as well as the con
venience of the Treamirv. to refrain from unnecessary
prosecutions and costs till the early session of Congress,
which had been called, in part, for the consideration of
this subject On the contrary, when any of the banks
persisted in neglecting lo pursue the prudent course of
curtsilment, and in making no reasonable efforts to dis
charge the drafts on them in sn acceptable manner, the
dejtartinent considered it a duly, twwcvci unpleasant,
to deliver their agreement* and UnmU to the Soli.nor of
the Treasury for auil. Thia baa already been done in
lime eaae* ; in tome aa a matter of precaution, to obuin
additiooal aecunty beyond what had been gifen ; and in
others, to lake the preliminary atepe lor an action agaiiwt
the auretiea aa well aa the principala.
Some of the additional bank*, rendered necesaary to
carry into effect one of the provision* of the late depo
?ite act, have, on thia occaaion, proved the leaat prompt
and efficient in meeting their obligation*. But though
the Inaana of a fow may be aevere, and considerable de
lay inay arise in diacbarging their engagement*\ and
though it ha* been proper, and haa evinced a commenda
ble *t*te of moral feeling in many of them, to strike at
the root of the present exceaae* in p*i>er, by curtailing
largely both their iasuea and diacounta, and thereby to
make serious sacrifices; yet the condition of them all
appears to be auch as will, with the collateral security
taken iu most cases, render the United Stataa probably
aafe against any ultimate lo*a. Conaidermg the wide
spread preaaure of the tunes, which had involved *ome
of the banka, aa well aa their debtors, m extraordmaiy
embarrassment* ; and that the public money, aa a gene
ral rule, had previously been called from them only in
moderate auina, aa needed for expenditure and tranafor,
it waa not to be expected that several of them would be
able to pay over at once, and in specie, the whole of ibe
large amount then in iheir |>oaaea*ioii.
More especially waa ihia not to be expected, when,
from the great accumulation of depositee, the apecie of
all of them at the time of the suspension, as well a* for
many mouths before, though larger than the proportion
held by moat other banka, did not equal, and could not,
wiihout making a sudden and great change in the prac
tice under our whole banking syatein, equal one-half of
their indebtedness to the Government alone. It is pre
sumed that a considerable portion of the money since, as
well a* formerly, paid by the banks oa transfers and
drafla, has not been demanded nor paid in specie.
But do person* have been required to accept auy
thing else, nor, according to the view* of the undersign
ed, could they be, without a violation of law and sound
The drafts of the Treasurer for debt*, when drawn on
(tanks and not discharged on presentment, have, under
instructions from this department, been often taken up
in it* behalf by the collectors and receivers, in order as
much as poasihle to relieve the public creditor from de
lay and loss. (See F. and circular instructions, T.)
New drafts, whun the first ones were not paid in an
acceptable manner, have also in aome eases been given
on other de|>oailorie?, and have helped to promote satis
factory adjustments.
Since the discontinuance of most of the banks as de
positories, this department has also found the use of
drafts made directly on receivers and collector* very ac
ceptable to the public creditors; and by the specie for
tunately then on hand, and aince collected by the re- (
ceivers, with a part of what waa before in the Mint, and
aome occasionally supplied by a few of tho bank* and
collectors, a large amount of claim* has been paid, and
the Treasury is ready to pay other*, *o far as practica
ble, at points and in a manner convenient to many. But
till the indebted banks resume specie payments, or in
creased collections can be made in specie of what i*
due from them and from the merchants, it must be ob
vious that the department, howetcr anxious to pay all
tho public creditors and officers in specie, when de
manded, is unable to accomplish so desirable an ob-#
This is one of the evils incident to the existing state
of the moneyed concerns of the country, and which can
not be remedied uuless Congress furnish additional
tneana, until specie payments are generally resumed.
Some intermediate losses, by a depreciation of. bank
notes, must, therefore, fall on those, whether creditor*
or officers of the Government, who consent to take thein
rather than submit to delays in payment.
Hence it seems highly reasonable that the Govern
ment should hasten, aa fast as possible, the restoration
of specie payments, at leaat by its former tiscal agents
who are still in its debt.
This would put an end to such losses. It also accms
proper that those deposite hanks, which have not gene
rally answered the demands on them, but have con
tinued to receive full interest on the depositee they had
loaned out, should be required to pay it on the auina
atill retained, and from the periods when they failed to
fulfil their obligations to the Treasury. It is manifest
that the members of Congress, coming from every sec
tion of the country, would be the be*t judge* of what
further lenity orieverity might properly be exercised to
ward* them, and, knowing more intimately the cause*
and consequences of the suspension of specie payments
by the banks in their respective neighborhoods, can de
cide with greater accuracy whether any indulgence
could hereafter be extended to them appropriately, ex
cept on the condition of an early resumption of specie
payments, and an allowance of interest during any delay
in meeting their fiscal engagements. With the means
of information possessed by the undersigned, he does
not hesitate to express an opinion, that it should not be
done without a compliance with such condition*. A*
further evidence of the ability of most of them on this
subject, it will bo necessary only to advert to the ab
stract of their last returns, which has been previously
from the modo of doing business in the southwest,
by making much of their circulation not redeemable at
home, but at distant points, and providing for it there
by bills of exchange, (so many of which, during the past
season, have failed to be paid,) the situation of several
of the banks there is least eligible not only for an early
resumption of specie payments, but for a speedy and
satisfactory adjustment of their debts to the Govern
ment. But in the western, and probably in the eastern
and middle States, if not elsewhere, the ability to sus
tain such payments appears, by their returns, much
greater than has been customary in this country. Their
specie, compared with their circulation, is as one to two,
and one to three ; and thoir immediate means, compar
ed with their immediate liabilities, are over one to three.
Hence it lias been hoped that the efforta which the
banks were bound to make would lead, in most places,
to the desirable events above mentioned, without very
long delay.?(See circular, V.) The objection usually
urged against an early resumption, that the unfavorable
balanco of trade against this country would, in that
event, cause some of the specie in the banks to be drawn
out and shipped, will, however true in point of fact, pos
sess much less force when it is considered that the delay
hitherto has not prevented the export of specie. On the
contrary, considerable sums, which were in ordinary
circulation, have, since the suspension, been withdrawn,
and a portion of them sent abroad, while their place is
Imdly supplied with depreciated paper. So happily ad
justed, however, are the laws of trade, even in their in
lluence on the precious metals, that while our custom
house books show an export since the 16th of May last,
chiefly to England and France, of $3,708,320 of specie.
they show during the same time imports, chiefly from
other quarters, of $3,140,020. Though the actual im
ports and exports have both doubtless exceeded those
amount* since that period, and the ratio of difference
has been somewhat greater, yet the total drain has been
much less than many have imagined, and produced less
effect on the general ability of the country and the banks
to have sjiecie payments resumed and successfully sus
tained. Congress having power to pass a bankrupt law,
, it would be worthy of consideration, if the power bo
ever exercised, whether all banks, and in any event, as
recommended bv Mr. Dallas and Mr. Crawford, all em
ployed by the Treasury, should not be subjected to its
provisions, and, on any important and deliberate failure
in their pecuniary duties, be compelled at once to close
their concerns.
In respect to the banks in the District of Columbia,
as well as others connected with the General Govern
ment, it seeins desirable that the measure adopted in
relation to them, by Congress, should have a atrong ten
dency to encourage the earliest resumption of specie
payments which la practicable and safe. For this pur
pose, little doubt can exist, that while those measure*
will bo the most salutary which shall evince a due liber
ality and forbearance to the extent really required by
the crisis, they should, beyond that, be rigorous in ex
acting the adoption of *uch steps a* are sanctioned by
the sound principle* of currency and the public faith.
I'liey will then help, at an early day, to relieve the com
munity, as well as the Treasury, from a condition of
the circulating medium, which, so far as it consists of
hank paper irredeemable in specie, is one of the worst
scourge* which cbii be inflicted on society. It is no
less hostile to the best maxim* of political economy,
.than usually subversive of every just sense of both
moral and legal obligation.
VII. On the mnnty receivMc for public duet.
The kind of money or currency receivable for public
due*, is another embarrassment, concerning which legis
lation has been deemed proper by many. A change in
the existing practice has been requested by others, with
out legislation. But, aince the suspension of specie
payments by the banks, no change, which should sanc
tion the receipt of bank paper not redeemable in specie,
has been thought cither prudent or permissible by this
department Nor will such an one lie adopted without
| the express direction of Congress. (See F I and 2 )
Believing that specie ia the best standard, and the !
only one contemplated bV the constitution, for the pub
lic revenue and expenditures, as well as for the value
of contracts and property, every departure from it for
those purposes is deemed by the undersigned pernicious,
if not unconstitutional. The qncation as to the expe
diency of using any other medium for a currency, is of
a different character, and more complicated But the
ruinous consequences of a resort to conUiicutal money,
bill* of credit, or auy apoaca of paper uot redeemable
in specie, aud wbich had been developed in our own
experience, u well ? in the Madest theories of politi
cal ecooMajr, were undoubtedly * principal cause for
those rigid proviaiona tu lite eouatitutwn connected with
the currency. Tbey reatrict any State front iaauing
mero " billa of credit," from making any thing a tender
" except gold and ailver," or patting any law " impair
ing tlit! obligation of coutracta," aa well at confine to
Congreaa alone, the power " to coin money" and " re
gulate the value thereof." The exerciae of thit laat
power, manifeatly relating only to metallic money, ap
pear* to require merely the coinage of a sufficient sup
ply at the Mint, and in convenient denomination! for all
ueceaaary purposes, and of auch. an inlriutic value, aa,
while preventing it from being depreciated on the one
hand, ahould, on the other, not l>e ao underrated aa to
cause it to be too readily exported, or melted down for
use in inanufacturea.
Tho whole amount necessary for public payments
haa I wen much miaapprchended. Without ? aurplua in
I the Treaaury, it would seldom exceed eight or ten mil
j lions of dollars, even if no evidcncea ol debt, or any
kind of paper money, were receivable. Like a running
alream, the com winch flows in aa conatantly (lows out,
without much accumulation ; ono dollar lielping to per
form, in a single year, the aervice of payment and re
payment numerous tunea. Indeed, the people of the
whole United Statea do not, in a sound state of business
and price*, need over one hundred and ten milliona of
an active circulating medium for all their currency
Thia would be a larger proportion of currency to our
present population than the average baa been from tho
adoption of the conatitution ; and, if an exclusive me
tallic currency could be deemed desirable, would require
only about thirty milliouamore than the specie which ia
auppoaed now to exiat in the country. Hut the present
ouuutity of apecie being divided pretty equally between
the banks and individuals, not half of it i* in active cir
culation ; and, unlets it becomes increased, and much
more equally diffused, some paper ia, of courae, neces
sary to prevent a audden revulsion m pricea and valuea,
and to supply a sufficient circulating inetiium for the le
gitimate purposes of the Statea and the people. Some
paper will, probably, always be found convenient for
commercial operationa. It would, therefore, bo invidi
ous, if uot unauthorized, for the General Government
to deprive the Statea of auy supposed advantage in tho
use of it, ao far and to long as they may deem proper,
or otherwise to interfere with their courae, in relation to
it, except to enforce the present conaiitutional prohibi
tion against iaauing any bills of credit, ou making any
thing a tender except gold and tUeer. Care, however,
muat be employed, incidentally, to avert, aa far aa poa
aible, any evil influencea which might otherwise he ex
erciaed over our own fiscal operations by the different
local.policiea pursued on a aubject of to much delicacy,
hazard, and difficulty,
The power which Congress may possess
to legislate, with a view of furnishing a paper
currency of any kind for the ordinary uses of
the community, or of regulating, in any way,
domestic exchanges, is not entirely clear, nor
well defined. Whatever may be its just ex
tent, it seems seldom, if ever, necessary to be
used, while the States retain such a wide and
undisputed authority over banking; aud while
the local institutions, as well as private bank
ers, here no less than abroad, are generally so
competent to effect exchanges. Such a pow
er is not expressly conferred in the constitu
tion, nor does it seem to be implied, unless, in
the execution of some plain grants, it may be
come proper to be exerted on any emergency,
and without using means otherwise forbidden,
unwarrantable, or inexpedient.
In regard to exchanges, it is believed that
seldom, if ever, has any government, how
ever unlimited its authority, considered it wise ?
to prescribe special regulations for effecting
them. Such a government might well feel
empowered " to regulate commerce with fo
reign nations," or between its own States, if it
had any ; but to regulate exchanges between
individuals, would, in most cases, be justly
deemed arbitrary. On the contrary, the sound
principles of trade seem to require as little in
terference as possible with fixing the price of
commodities, or the mode and medium through
which they shall be interchanged. Those
principles would only yield adequate protec
tion or security, furnish facilities appropriate
and authorized, and establish a good standard
of value. Indeed, tho balances of indebted
ness between different sections of the country,
if left to work out their natural consequences
on the fate of exchanges, will usually, as they
arc now doing, correct excesses in business
in any quarter, and be self-Regulators, far su
perior to any officious and minute legislation.
The rate merely fur exchanges can seldom
excecd the expense of transporting specie be
tween any two places ; and, if surpassing that,
the excess must ariso from what government
has little power to cure?that is, from the dif
ficulty in obtaining money where indebtedness
is great, interest high, and credit impaired.
In regard to the currency which is most
suitable for public purposes, whatever may be
the authority of the General Government to
make or adopt a paper one in full or in part,
it is difficult to perceive why, after having es
tablished specie as a standard, having forbid
den auy thing else to be made a tender, and
having succeeded in encouraging the intro
duction of a supply of it into the country,
very ample for all fiscal purposes, it should
expressly dispense with its employment as the
most usual medium for those, purposes. The
fundamental acts of Congress as to the pay
ments for duties and lands have not made any
exceptions in its use, or provided any substi
tutes, except the " evidences of the public
debt." Any exceptions allowed ought cer
tainly never to permit any thing, except spe
cie, to be paid out as a rightful tender by the
United States ; and this principle has been
always strictly observed. But by construc
tions adopted early in this department, and,
subsequently, by the charters to the two Uni
ted States Hanks, as well as by an apparent
sanction in the joint resolution of 1816, dif
ferent substitutes of notes issued by those and
State banks have, at different times and tinder
different modifications, been permitted to be
received in payment. These, however, have
been allowed only when regarded as a clear
equivalent to specie, by being readily convert
ible into it, and by being recommended by
some superior convenience or utility, as well
as by gTeat security. As spccia likewise
combines safety, uniformity, general use,
sound theory, and almost universal experience
in favor of its common employment, the fram
ers of the constitution doubtless believed, as
has been the uniform practice since, that all
substitutes of paper, as they have less intrin
sic value, though they often, by smaller weight
or bulk, possess some qualities of greater con
venience for certain uses, should never be per
mitted to be forced on either the Government
or the community without their express con
sent. As they depend also on credit for their
| worth, it must be bad policy to countenance
them for either public or private use, whero
their credit does not rest on undoubted secu
rity, or to encourage such small denominations
of them as would bo employed by those class
es in society whose business is of a kind
which cannot be essentially promoted by tho
substitutes ; whose profit is little or nothing
derived from them ; and whose losses, where
depreciations occur, cannot be borne without
Another general objection to every substi
tute not resting on an equal amount of specie
in pledge to redeem it, which was the original
idea of a bank of issue, is, that it tends to
dispense with the necessity of specie, in con
nection with the currency, and thus, by con
verting more of it into an article of trade,
expel it from the country ; w hile a circulating
medium is introduced instead of it, which it
usually less safe, and ultea tempts to ruinous
expansions in iasuos as well as business, so
as lo cause great fluctuations in prices, unset
tle the value of property and contracts, aud
sometimes atrip frortt honest industry, in a
moment, the hard earnings of years.
Besides these, a special difficulty, in the
use of any other substitute for public purposes,
is the procrastination, disappointment, and
embarrassment which, in case of its depreci
ation, are sometimes occasioned by it to great
national measures, as well as the discredit
thus cast upon the wisdom of the Govern
ment, for regulating its fiscal affairs in sueh a
manner as to be unable to discharge punctual
ly its engagements, and for the exhibition of
an example so mischievous to both individuals
and nations. Another difficulty in this coun
try is the want of equal value, at different
places, in any other, when compared with the
standard of specie, and the virtual violation
which its receipt for duties may thus cause |
of the spirit of that part of the constitution
requiring all imposts to be "uniform." Nor
can these two last difficulties be always en
tirely overcome by the use of such paper, or
any other, though redeemed in specie, and on
demand, if it be taken at a distance from the
place of its redemption. But, in the adminis
tration of our fiscal concerns, it has always
been very desirable to avoid the want of uni
formity, and the delay or expense, and some
times the loss incident to the receipt for lands
or duties of such notes if redeemable at a dis
tance, and which then would sometimes occur
before they could be converted into specie, or
such money as the public creditor was bound
or willing to accept. In order, therefore, to
prevent those injurious consequences, one
mode tuft been to accept no State bunk notes
whatever for public dues, as is now, and some
times heretofore was, the practice in respect
to lands. Another has been, to permit none
to be taken except such as, under permission
of the Treasury Department, the collecting
officers or the public depositories were willing
at once to credit as specie.
In our early operations, for purposes of fa
cilitating remittances to the Treasury, quite as
much as for accommodation to others, collec
tors wero instructed to receive certain State
bank notes, payable near the seat of Govern
ment, and which were to be credited as cash
when forwarded by mail, or otherwise, to the
Treasurer. (See circular, 1789, H.) The
justification offered for this course may be
seen in a report from this department in April,
1700, (H 2.) The situation of the country,
howover, as to ease in communication, facility
in exchanges, and the nearer location of many
points of collection to those of expenditures,
ias since undergone such great improvements,
as for a long time to have rendered the receipt
of notes to aid in public transfers seldom ne
cessary, and almost entirely disused. Another
mode adopted by Congress has been, to ren
der the receipts of the notes of State banks,
for any purpose less material, by providing
those of a bank chartered by the General Go
vernment, and making these last, by law, re
ceivable for all public dues. But this mode
has ceased ; and the legality as well as sound
policy of the practice to receive the notes of
State banks for any public dues, whether done
with a view to fiscal or general convenience,
and though under all the strict limitations be
fore mentioned, has been questioned by some.
Others have considered any limitation what
ever, by either the Executive or this depart
ment, as not justifiable since the joint resolu
tion of 1816. It is, therefore, respectfully
suggested, that a strong propriety exists for
Congress to legislate more explicitly on the
whole subject.
It may bo proper and useful to add, that,
as most of the duties on imposts have been
discharged in checks on the bank where the
bonds were deposited for collection, or in its
own notes, and seldom in those of banks at
any distance, Uttle embarrassment has ever
arisen concerning the payments for duties in
bank notes. But, in taking them for lands, the
remote situation of the purchasers, the re
ceivers, and the banks, has generally been
such that frequent difficulties and changes in
practice have occurred during the period
while the United States Bank and its branches,
as well as the State banks, were employed
as depositories. In our mixed system of a
currency, and one so long and so deeply in
terwoven with the business of the country, it
was very inconvenient entirely to avoid, and
at the same time occasionally dangerous to
permit, taking the bills of'any State bank for
lands ; and the receipt of such notes was ob
liged to be cither so restricted as to prove of
little convenience to the community, or a risk
was incurred of many partial arrangements
being made, and some ultimate injuries sus
tained by the Treasury.
Under all these circumstances, the course
least liable to strong objections appears to be
for Congress to prescribe some specific regu
lations on the whole subject.
This could be effected by directing what
alone appears safe, and what is understood to
be the practice in both England and Franco.
It is, that the bills of no local banks bo
taken, which shall not, from the near lo
cation of the bank, be equivalent to specie ;
be able to be converted into specie at very
short periods by the receivers and collectors,
so as to pay the public creditors legally, if
demanding specie ; and be thus accounted
for at par, and without expense to the Go
vernment. Another advantage from this course
would be, its salutary check on over-issues
by the neighboring banks.
The occasional convenience of a sound
paper currency for various purposes, whether
national or individual, such as large pay
ments, distant .remittances, exchanges, or
travelling, is highly valued by some, and,
where gold does not circulate, is often very
considerable. But the difficulties in keeping
it sound, the hazards and losses incident to
its use, and which have already been ex
plained, arc troublesome. Should Congress,
determine that it is proper to furnish by its
own authority, and lor the purposes before
mentioned, some paper medium, of higher
character and other than what now exists, in
private bills of exchange or notes of State
banks, no doubt exists that any benefits which
may occasionally bo derived from its employ
ment can be readily secured, without tread
ing on the debatable ground of cither the
power or the policy of chartering a national
Certificates, not on interest, but payable in
specie to bearer or order, as well as being re
ceivable for all public dues, could be autho
rized to be given in payment lo the public
creditor, whenever preferred by him, and
sufficient specie existed in the treasury.
This kind of paper would be very convenient
in form, and would differ little from the drafts
now in use on banks, cxcept being drawn on
a know a ?pccie fund, and expressing on its
faoe nut only this, but its being receivable in
the first instance for all public dues. It
would possess the highest credit attainable
iu society.
As a practical illustration of their probable
utility and convenience, even the drafts,
though exposed to several disadvantages
which would not exist with the certificates,
are uear the par of specie, and furnish such
facilities for large payments and distant remit
tances that the amount of them, on both banks
and collecting olReers, kept out unreturued,
has increased within a few months from the
usual aggregate of about two millions to near
ly four aud a half millions.
If the demand for such vaper increased, public and
private convenience might tie promoted, and an equal
quantity of specie at the same tune preserved in the
country, by reserving for this purpose, from any accu
mulation io the Treasury, a sufficient aunt, and by
placing it at a few important and convenient points, to
render a greater number of certificates redeemable there
with the very win, whose representative they are in
tended, and honestly ought to be.
All the advantages of these certificates could thus be
furnished, by merely paying them out to the public cre
ditor, when more desirable to him than specie. But no
loans of thein appear advisable, nor any bank incorpora
tion, bank officers, or bank machinery whatever, in con
nexion with the subject They would coinbiue the
most important requisites sppertaiuing to aiiy paper
currency?auch as ine greatest security, an entire ape
! cie basis, and the unity of all issues in one body; while
the control over these last, which it is so very desirable
to preserve independent, would be placed'and regulated
by law, so as to prevent any interested or injurious ex
ceases. The whole risk would be the loss by casualty
or unfaithfulness of any of the specie that was held to
redeem the paper, and which, as well as the expenses,
would probably lie in part remunerated by the loaa of
certificates before they are returned. If the residue of
the expense should constitute any considerable objec
tion lo the system, it could be fully obviated by a mode
rate aud fixed premium for the certificates, either when
issued or redeemed.
The common drafta of this department, in their pre
sent convenient fonn, posses* another advantage, which
would sometimes be imparted to the certificates. When
used at placea against which the balance of trade ex
ista, but drawn on placea in whose favor it is, the for
mer do now, and may hereafter, not only facilitate es
aentially the domestic exchanges, but, at the aame time,
supersede numerous bank tranafeia, aud the more ex
pensive transportation of apecie itself.
The Mint certificates, heretofore given on
the deposite of bullion and specie, for coinage
might easily be made running to bearer or or
der, and receivable for all public dues ; and
in that way, would contribute to the same de
sirable ends.
The present branches of the Mint, if not
numerous enough, nor situated at convenient
places for the receipt of specie and bullion for
this purpose, might be aided by two or three
agencies, instead of more expensive new
branches, at points favorable to the interests
of the Mint and of the community.
It must be obvious that tho paper of any
bank will be less safe and useful in being re
ceived for public dues, in proportion as it may
want such solid securities and foundations as
the certificates before described. But if the
notes of State Banks are made receivable for
such dues, under certain limitations like those
which have been explained, the other most
desirable guaranties for their safety, whether
looking to any use of them by the General
Government, or to the durable interests of the
States themselves, seem to bo for the latter,
first, to impose on the existing banks, so far
as lawful, the checks mentioned in a subse
quent part of this communication. They could
next authorize very few banks hereafter, ex
cept those of mere discount and deposite ; and
where the power of making paper issues to
pass as money is added?a power so sove
reign in its character, and so indispensable to
be vigilantly guarded, could require a large
proportion of specie to the circulation and de
posites to bo kept on hand, and in addition,
have the faith and security of the State
pledged to indemnify the community, as in the
case of the above named certificates, would be
pledged those of the General Government.
This would greatly increase the caution and
watchfulness .of all concerned, and could be
done by special laws for that purpose, or by
allowing no new banks hereafter, except State
Banks so organized, or by requiring State
slocks to be owned by all the banks, and
lodged in trust to the extent necessary, with
the specie on hand, to secure the immediate
redemption of all the bills issued, and all the
deposites payable on demand. Another kind
of security beyond what now generally exists
would be, never to permit deposites to be re
ceived, payable on demand in specie, (a prac
tice sovery dangerous to the bill holders,) ex
cept in the case of special deposites kept for
a moderate compensation. The only other
description of security which is likely lo prove
in any degree efiicient, seems to be of a penal
character, either by extending the provisions
of a bankrupt law to all banks as before sug
gested in respect to such as may be fiscal
agents, or by allowing all depositors, public
or private, and all bill holders, not only a largo
interest, but severe prosecutions against the
directors after any deliberate omission by
banks to discharge their duties in the manner
provided in their charters and contracts. The
paramount object in all such provisions should,
of course, be to guard against abuses, and re
form existing evils, though in some instances,
the case may have become so desperate as to
require even amputation to save life. Every
thing else concerning bank paper is supposed
to belong to the wisdom anil sound discretion
of the several States, as they may prefer, from
time to time, to create and employ it. With
in the constitutional limitations, and as soon
as deemed expedient by any of them, specie
alone, or paper, or a mixed medium of both,
as considered preferable by each for its own
purposes, can be if it be not now, established.
At the same time, it is hoped and believed that
no wish exists in any quarter to prevent, but
rather a deep and general anxiety, like that
evinced by Congress, the Executive and this
department, for some years past; to encourage
the same sound currency for the uses of the
people and the States as for the fiscal opera
tions of the General Government.
VIII. Some general causcs and remedies of the
present embarrassments.
" In conclusion, it is the intention of the un
dersigned not to advert to tho chief causes of
the recent calamities, except ho far as they,
are connected with our financial condition,
and as appears necessary to indicate, briefly,
a few remedies by meaus of general legisla
Without doubt, ono of those causes was the
over-production of cotton, coupled with ihe
large and sudden depreciation in its price.
The whole product, though before so great, ,
had within three years, been increased proba- I
bly more than one hundred millions of pounds,
so as to exceed in a single year the enormous ;
quantity of five hundred and forty millions of
pounds. The fall of price was such, as on
that quantity would make a difference in its
value of near forty millions of dollars. The j
occurrence of this fall, however, was at such
a period of the year as not much to sffect over j
V . ? fropi bul lho v'?l?oce of the
??hock, though thua tautened, will occasioned a
oss lo an appalling amount, The fall waa chief
ly consequent from the over-produciion, and
the abrupt withdrawal of foreign credit, com
'e Wl1" 80,ne other circumstances which
need not now be particularized. The over
production originated partly, like most other
excesses here, from an extraordinary exten
sion of credits and of bank issues, and partly
from keeping open the sales of public lands to
all persons, and at the former low prices, after
other articles, including cotlou and lands, had
suddenly risen much in their nominal value.
' r this tempting state of things, those
sales were exorbitantly enlarged, till they
amounted to over twenty millions of acres in
a year, when not more than three or four mil
lions were probably necessary ; and not so
much had before been requisite, annually, to
meet the natural demands for new public lands
for raising cotton, and for all other kinds of
agricultural employment. But this excess in
sales, so unexpected and ruinous, can it is be
lieved, be averted hereafter, whenever they
are likely to go beyond a desirable amount,
by passing laws which shall confine them to
actual settlers, or increase the price to other*.
The same measures, with other remedies
hereafter suggested for some other existing
evils, will help to correct future excesses in
the production of the great domestic staple of
the Union.
Another of the causes of the present em
barrassments was the unprecedented quantity
of foreign goods imported. By stimulants to
over-trading, such as very extended and often
renewed credits abroad, as well as at home,
so treacherous in appearances of prosperity,
those importations were dangerously swollen
to the amount of almost two hundred millions
of dollars a year, and thus constituted an ex
cess over our exports of about sixty millions,
and involved the country in a foreign debt,
merely commercial, whose balance against
us, alter all proper deductions for freights,
profits, and similar considerations, probably
exceeded the aggregate of thirty millions of
That excess, so little anticipated and so in
discreet, the system of credit formerly in use,
and better regulated, would have seasonably
prevented, by requiring an early adjustment
of balances, and, thus turning the foreign ex
changes against us, would have stopped many
' extravagancies both in trade and bank issues.
But, stimulated and unrestrained, as before
described, it increased the duties some mil
lions beyond what a prudent though proaper
i ous state of trade was likely to produce, and,
combined with some other causes, has over
whclmned the mercantile interest with many
of those disasters under which it has suffered
so severely the past season. From many of
these, no just legislation can now afford much
relief. Nor could any legislation heretofore
have prevented severe revulsions from this
source, except by imposing checks on inordi
nate credit and banking, as well a? on sudden
! and large expansions and contractions in bank,
issues, and by that further reduction of the ta
riff, which has been so strenuously urged for.
two years past to be adopted, whenever our
fiscal condition evinced that the whole of the
1 accruing duties were not needed for public
i purposes. Because the great surplus, forced
I into the Treasury by the excesses in the sales
of land, and in duties on import8, not being
seasonably withdrawn, either by equivalent
appropriations or further reductions in the cur
rent receipts through new laws or by invest
ments, has undoubtedly contributed, through
the loan of it while in deposite, to sustain, in
some degree, if not produce, the spirit of over
| trading. That surplus was often deprecated ;
and the only sound legal preventives still
appear to this department to be, the measures
before enumerated for preventing its accumu
lation. And after it had undesignedly hap
pened, the wisest disposal of it was supposed
to be, to expend it, as fast as useful, on proper
objects of a public character; and, in the
mean time, not to leave it in the deposite
banks, but to invest it in State stocks, as a
provident fund, to remain both safely and
profitably till wantod to aid in meeting current
expenditures or extraordinary contingencies.
The undersigned regrets that he was not so
fortunate in sustaining his opinions concern
ing the transient and fluctuating character of
the excesses in our revenue, as to have re
ceived the concurrence of Congress in relation
j to those cautionary provisions formerly rc
j commended by him for meeting the revulsions,
. deficiencies, and contingencies which he sup
1 posed incident to them, as well as to our finan
j eial system generally. He is at the same
j time, aware that the deposite act, so far as it
i placed a part of the public money with the
, States for safe keoping, and the Treasury cir
cular issued by the direction of the Executive,
as to the kind of money receivable for public
lands, were intended, among other things, to
obviate a portion of the evils connected with
those excesses. Nor does he entertain anv
doubt that they both contributed, at first, to
i awaken caution among the more considerate,
and to excite strong suspicions, if not convic
tions, in prudent minds, as to the great ex
travagancies of credit into which the commu
nity had rashly plunged. But after those
measures had accomplished these and similar
benefits with a portion of the community,
i though others still felt justified in anticipating
a continuance of surpluses and distributions,
the subsequent influence of either the act, or
the circular, in checking the threatened mis
chiefs, is believed in most cases, to have been
overrated. The operations of the deposite
act, in supplying deficiencies of revenue, by
a recall from the States, however well in
tended, will probably prove very deficient. In
somo othor respects they hare, by first re
quiring to be speedily collected and subdi
vided among more numerous banks from ten
I to fifteen millions of dollars, and then com
pelling, within the short period of nine months
Irom the 1st of January last, another collec -
tion and transfer of nearly forty millions more,
and much of it from the merchants, and to
places not situated in the usual channels of
trade or of large fiscal operations, unquestion
ably aggravated many of the distresses which
had their principle origin in other causes.
Those operations necessarily aided to pro
duce the derangement that oecurri-d in the
domestic exchanges, and imposed a task on
the banks, unprecedented for its amount and
difficulty. By converting suddenly into de
mands for specie very large sums, most of
which were before mere credits, they also
hastened, if not increased, the loss of confi
dence in banks that has since so widely un
paired their character and usefulness.
? Another, and the last general cause of the
present embarrassments which will be noticed, -
as having much,connexion with our financial
affairs, has been an unnecessary and injudi
cious increase of bank capital, discounts, and
issues. A similar increase, however this in iv

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