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The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, November 17, 1837, Image 2

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.pec* of all ?? reJoe^i only from .bout Wl^en U)
tWteln millions, ...d ibeir circulation. m.te.d of in
fell from ??*' forty-one lo Uurty-^veo mil
lion*.
?' 4i a irJW?, tk$ir tptcu, compared leith lW circu
it!, on, toulmued 10 be aImost as large M May M in
Xuvtmhtr. /< averaged more than on* t? <*"?, 0
much more Ilian basbeeu customary u>uh ths banks ???
this country, and icas ov*a oou?u? tkc rdlfequan
ta u held bw all (he bank* m England at ike MM period,
IZmu in proportion one fourth larger than thai in the
Bank of Eniland Uscif The* MWdial* mean. com
pared with their m.medi.te li.bil.Ue-, were ?owe"'*'
?Uoomt in November tb.n in M.y, but were .1 boih
period. ne.rly 1 lo S l-S, or greater than tht uaual ra
tio, IN THB BMT TIME", of II10?t Ullk. which b??C ?
luge .mount of depo.itet in poaaMMon.
" Tho policy pursued by mo?t of them h.. been fa
vorable lo ?n early discharge of their eng.getneni. to
the tre.aury, .nd lo . rcmnption of .pecie payment..
Many have gr.du.lly reduced their discount. .nd circu
lation, .a well m p.id over much of their public depo
aitea.
" Since the first of May, their discount., .a a whole,
have been reduced ?boui *20,388,776. their circulation
94,991,791, and their public dcpo.ile. SI5.6'7,316 ;
while their apecie hi. dimiui.hed Ic.a than $3,000,000.
Of the number of cighiy-.ix bank. employed ai tho
tune of ihe auapenaiou, un or eleven ire auppoaed to
have paid over all the public money winch was then in
their poaaeaaion, to the credit ol the 1 rcaaurer. Ill the
custody of more than half iho other., ?n aggregate ol
lesa than $700,000 remain. uiudju.ied. Several ol the
rest still possess large sums ; but lu.ny of them have
continued promptly to furnish such payments from tune
to tune, for meeting the public nece.aitica, that, accord
ing to the last weekly ataieinent, the whole balance to
bia credit, which remained unpaid in .11 of the in, w..
only $12,418,041."
By . document communic.tcd to Congress on the
6th of October it .ppeara that "the gross amount m
baulu at the last returns, and llic balance which remain
ed tn them, aubject to draft, w.s $6,447,460 38 only,
of more than 43 and a half milliona that the banks had
in deposite on the first day*of January laat . auc
institutions are deaervmg of abandonment by e o
vernmentof an enlighte.ed, commercial and enierprix
ing people, 1 have yet lo learn it. ,
The only feasible mode to my mind, of tlivorcm? the
Government from bank., without disturbing .11 Ihe re
lationa of industry .'commerce .ndenterpr.se upon which
the prosperity of .11 cla.se. of |>eople depend. 1 will
now .tale?being the one to which I have adverted
heretofore.
It may bo provided by law that all collectors and re
ceiver. of the public money shall be iho keepers and
disbursers of H ; th.i bonds satisfactory to the Govern
ment shall be given by each for a faithful discharge ol
their dune.. To them and tlicir bonds the Govern
ment can look exclusively for its security ; official bank
agencies m.y thu. far be dispensed with, and thus far this
proposition agree, with (he Sub-treasury plan. 1 hoso
officers may be prohibited, under penalty of tine and im
prisonment, from either loaning lo individual, or using
themselves in any way, any portion of the public money,
except th.t they m.y exercise tSeir discretion in depo
siting it, without interest or roward in any way, with
any bank within their collection district, upon their Pirn
responsibility, as collectors and receiver, now depoaite
public monev before passing it to the credit ot the Oo
vernment. Let tho resolution of 1816 now in force,
prescribing that " specie or its equnalent" (according
to the terms of the republican resolution of this county
in August l.st) be continued in force, with the modifi
cations incorporated in the existing deposile law, ex
cluding the bill, of bank, that issue small notes. I he
other necessary guards may be thrown around such a
divorce of Government from bauk ageucics, to make it
complete. I assume to suggest only the outline# .hero.
Such a divorce of the Government from banks
would be practicable and thorough, without di?turbing
any interest extensively. Every prudent officer and
bis bondsman, would then place Ins dcpositea where
they would be safest, and every body knows that the banks
would be his choice, ordinarily?he also having power
to require as much collateral security as he pleased.
The depositea that would be thus made, on the respon
sibility of collectors' and receivers' bonds, would not
be abstracted from the monetary system of the country,
as under the Sub-treasury bill. They would not be
" annihilated" or b.nisheo from use. All the aids of the
old deposile act would still operate in favor of that re
form of the currency, which iho late administration en
tered upon. State institutions would thus be strength
ened?a national institution be avoided?the currency
would become steady?. multiplication of executive
officer, would be avoided, and the friends of the Go
vernment be as safe as ever they have been or can be
made under any system of individual agencies 1 he peo
ple and the Government would have one and the same
currency in common use, and the co-operation of both
would secure to it .11 the desired reforms therein. The
local banks would no longer stand in a hostile attitude to
our national in.titutio. s? the discordant feelings engen
dered and now convulsing the republican party would be
satisfied and healed. Such a divorce of Slate and
bank, and such a system of individual agencies, would
be free from many of the insuperable objections to
which the rejected sub-treasury bill is obnoxious. I
must say, nevertheless, I hold in dread every increase
of individual agency or responsibility in our Government
that can be well avoided.
In conclusion let me remark, that I am now no more
nor less the advocato of banks, than I ever have been ?
I st.nd in that relation to the whole body of them, that
I can act my own judgment and bid defiance to their
ostracism., and .ppreciate with indifference their fa
vors. When the question arose for deciding whether I
could trust the surplus money of the Government to
them or to the people, I did not hesitate to prefer the
latter. Then I was denounced aa hostile to the depo
aite banks. I am now denounced as the advocate of
banka. Much the same men aro my accusers in both
instances. Yet with the freedom and truth in which
Mr. Van Burkn himself uttered the following senti
ment in hi. letter to Shcrrod Williams I loo can utter
it. lie My.?"Although I have always been opposed
to the increase of banks, I would nevertheless pursue
towards the existing institution, a ji'st and libekai.
covrsk?protecting them in the rightful enjoyment of
the privileges which have been granted them, and ex
tending to them the good will of the community, so long
as they discharge with fidelity the delicate and impor
tant public trusts with which they have been invested.
When Mr. Secretary Taney, in 1834, in his letter
adopted by the Committee of \Vays and Means as a part
of their report, said?" It is evident lhat the ohiek
part of the paper currency of the United States must
always be furnished by the State Banks." I believed
hun. I believed him when he further said_, " and if
Congress are to legislate with the view of securing to tho
people of the United States a sound paper currency, the
condition of the notes of the State Banks is of much
more importance to the community than those of any
Bank of the United States. The notes of the different
loc.l banks form the ordinary circulating medium for
the great bodv of our citizons, and I I WOLLD BL
UNJUST TO TH1.M TO DISREGARD ITS CON
DITION. The whole currency of the country should
be placed in a sound and healthy state so far as the legi
timate .ulhority of the Untied Stale, will enable ihem
to accomplish lhat object." ? ? * "Iti.no
part of the proposed plan to dispense with the State
Bank.." ? ? ? " The State Banks are now
so numerous, and so intimately connected with our ha
bit. and pursuits, that it is impossible to suppose lhat
the ay.tem can ever be entirely abandoned." ? ?
" No commercial or manufacturing community could
conduct it. business to any advantage, without a lib
eral system ok credit, and a facilny of obtaining
money on loans, when the exigencies of their business
Squire it. This cannot be obtained without the aid of
a paper circulation founded on credit. It is therefore
not ihe interest of this country to put down the paper
currency altogether."
Such was J.cksoni.m in 1833. The same principles
of protecting a paper circulation were re-asserted in
Mr. Polk", report to the House in March, 1831, and sus
tained then by all who were friends to the administra
tion. They were recognised as Jacksonism and repub
licanism of the most approved order then. I recognise
them now as I did then, at least as republicanism if nol
as Jacksoni.in ; and to their extent I am a bank man
now, a. then, and no farther. I am the same bank
man in 1837, as in 1835. I could nol but regard the
Sub-Tre..iiry bill ?* being throughout an antagonist
system .nd enemy to that described in all ihe extracts I
have quoted from the various reports and speeches made
in support of the administration of J.ckson; and not
having changed either my piinriple* or views upon the
subject since I gave my .dbesion to the principles of
those reports and speeches, I feel bound, as I believed
my constituents would also, by every consideration of
principle, of consistency, of regard for the prosperity of
all classes interested in the stability of national legisla
tion upon the subject of the currency, to oppose lhat
bill. I could not recal that voto if I would, and I
world not ik I coin.1). And were it tho last com
munication upon thi. .ubject th.t I could hope to make
to my constituent, in .ny form, I would say to them,
beware how you auffer your national rulera and legisla
tors under .ny n.me or pretence of party or patriotism,
to weaken or cripple your Statr institutions or any
denomination, and much lew tho.e upon whose .1.
bility ?nd atrength depend, for a juit meaturt of talut,
the whole property, and every day's labor, ol' evory nidi
vidual citiseu ol' the State.
Moat reapectfully,
Your obaitient servant,
FRANCIS 0. J SMITH.
,Portland, Nov. 3, 1837.
TO MARTIN VAN lll UEN,
riiaiDiNT or rut ?nit(o ariTd.
LETTISH 111.
I dow proceed upon the subject to which my last
communication was devoted.
1 have it not in my power to state the rapidity with
which new banks were selected and the public
muney put in motion in various directions through
out the whole country. But one thing 1 liave the
proof of, that the transfers were ordered in such ex
traordinary amounts, and with such short notices,
that in a few weeks after the passage of the act, some
of the binks ami their fiiends were loudly complain
ing.
Under date of the 87th July, I received a letter
from a bank, in Cincinnati, fro.u which I make the
following extract: . ...
" There is one point to which I wish particularly
to call your attention. Our understanding has been,
that we. were to receive a notice of three months of
all transfer drafts: yet we have been instructed to
make large transfers at a inuch shorter notice. Ou
the 31st May, the Treasurer advised our agency of
drafts amounting to tfl,250,000 in all, payuble be
tween 1st June aud 10th September.
"On the 12th July he advised of drafts payable 21st
August, at Philadelphia; and 1st aud Utn August,
and 1st September, at Louisville: and 10th of Sep
tember, and 10th of October, at Philadelphia, each
for #100,000. That letter was received lHth July,
which allowed for the first 8100,000, twelve days
notice; for the second, twenty-three days; for the
third, a month, and for the fourth and fifth, two
months; and these heavy calls are made while we
are in the process of paying the former drafts of
$1,250,000 in New York and Philadelphia. We
have in consequence been obliged to curtail our bu
siness, grcatlvto the inconvenience ot our customers.
We do not ask for longer time, but only that a longer
notice b.< given of an intention to draw."
To that letter was added a postscript, which
said, "Since writing the above, 1 have receiv
ed a letter from Mr. Woodbury dated July 26th
in which I am advised of transfer drafts amounting
-to a million, the first of which falls due 10th Sept.
40 days hence, aud three others in October. This
will make our transfers, to be met in August
750,000
t In September, October, November, and
December 1,5Q0,000
92,200,000
"These are heavy payments. Relying on the ar
rangements which we made with the Secretary, by
which we were allowed 3 months notice ol transfer
drafts, and upon a subsequent consent on the part of
the Secretary, which agrees that we shall have 120
days notice of payments from St. Louis, we have not
hesitated to invest our funds in j?afe investments,
chielly bills of exchange, payable in 3 and 4 months.
We must now not merely curtail, but stop discount
ing, at the hazard of causing a sudden pressure
both here and at St. Louis. 1 beg you to understand
that 1 do not make the slightest objection to the
amount of these calls. The (Government has a right
to ask for her money whenever she wants it; but
the shortness ot the notice disarranges our plans and
obliges us to resort to contractions, not onlv prejudi
cial to the public iuterests, but especially odious
when resorted to by a deposite bank.'
From other persons in the west, 1 received letters
in relation to the same subject. Under date of the,
20th August, a gentleman says, " The recent claims
made by the Treasury Department upon the depo
site banks in the west, particularly in Ohio, will
have a most pernicious effect upon the business of
this region." "Some of our friends will shortly visit
the city in relation to these matters?and I trust you
will see. the necessity of joining your influence with
theirs to effect a modification of the drafts, so as to
meet them without endangering the banks and dis
tressing the community."
It was not in the west alone that these inconveni
ences were felt by the banks through the operations
of the Treasury upon them. At nearly the same
moment I received these accounts and complaints
from the west, I was receiving similar ones from
the south. At the request of the deposite banks in
[ New Orleans I made application to the department
in July and obtained an extension of payment of a
considerable amount of transfer drafts issued upon
them payable in northern cities. The letters of the
middle of August which acknowledged the receipt,
of mine communicating to them that informationt
announced that a further amount of transfer drafts
had been issued upon them. One of the letters
say, " The transfer drafts procrastinated were made
payable the 15th October, say 9250,000. A few days ,
since we received information that new transler
drafts, have been issued to the amount of $300,000
payable also on the 15th October and 9100,000 the
25th October, making 9650,000 payable within ten
days!" These drafts were all payable in the north
ern cities and by one bank only.
All these complaints coming upon me from differ
ent quarters at the same time, filled me with alarm.
I saw the banks were unnecessarily and imprudently
(as I believed) pressed, and failing to obtain by a
formal application to the Secretary of the Treasury
that relief which I thought they were justly entitled
to, 1 addressed a letter to him under date of 29;h
August 183fi, from which I take the following ex
tracts: ." I consider that I should be negligent of the
duty which 1 owe my employers, did 1 not do all in
my power to impress upon your mind the justness
of the request of the deposite banks at New Or
leans, which is made through me, and the neces
sity that, exists, to prevent embarrassment to the com
munity at that place, that the request shall be granted
by the Treasury Department.
"A state of things has existed for some months
past, in relation to the accumulation of the public
moneys, and their transfers from one portion of the
i country to another, without a precedent in this or
j any other country. The records of the Treasury
Department will show, that when Mr. Crawford
I gave the Bank of the United States four months to
make transfers from New Orleans to places north of
the Potomac, that the sums required to be transfer
| red were, but as a drop in the bucket, compared with
! what they now are, and seldom exceeded the amount
j of surplus revenue collected at that point.
| Since the first of March last, there na>been trans
ferred from other points to New Orleans and paid
1 there 3, !)cto\ 000
The amount of outstanding drafts pay
able there at this time is
Total transferred to New Orleans, paid
and payable
, There has been transferred from N.
Orleans since the first of March
last and paid in other places
j The amount of transfer drafts on New
Orleans now outstanding and
running to maturity is
j Total transferred from New Orleans
paid and payable
"The most of those transfers have bt;en made by
the b inks at an actual sacrifice; and every hundred
thousand dollars, which is required to be transferred
to the North, between this period and the time the
next crop can be availed of to make them, will be
done at an actual loss to the banks of fifteen hun
dred dollars.
"The large transfers already made, has had the
effect to derange the ordinary business relations
between New Orleans and the Northern cities, by
absorbing so much of the proceeds of the produce of
that part of the country, for the use of the Govern
ment; more particularly, as so great a portion of the
transfers have been called for since the season of
business has nearly passed bv.
" Five hundred thousand dollars of the present
outstanding drafts were issued about the middle of
July; after thr season of busines* had entirely sow'by,
to lie paid for in October, before the nert business season
is reached! Between the close of one business
season, and the commencement of a succeeding one,
Northern funds can only be obtained in small sums,
and those generally at long sight. That is now the ?
ea.se in New Orleans?specie is not there. The
banks in that place are now sending to the North
ern cities for specie, to replenish iheir own vaults.
In what way are those transfers to be made ? So far
as the banks may be able |t<> provide funds to meet
the other 9750,000 outstanding upon them, i ft heir
paymant shall still be required, it will be doiflfct a
.sacrifice of 912,500 to the binks, the rate Mich
Northern funds now command in New Orleans.
These transfers, w ill, by abstracting so much of those
funds from other purposes to the use of the Govern
ment at this lime, have the effect to derange still
more the commercial intercourse between the two
sections of the country; and to cause a rise in the
price of Northern exchanges.
"A ^reat portion of the transfers required to be
made from trie whole valley of the Mississippi, by
the Government to the North, must be made by
means of the produce of that country; if not, a
general derangement of the whole fiscal and com
mercial affairs must ensue. They must be made
through the medium of bills drawn on the proceeds
1,450,000
95,435,000
92,870,000
1,250,000
91,120,000
of the produce. In fact the transfer* shouldto
made to aid in carrying thai produeu to iu market.
This the Bank of the United States, boated wu itt
poli. y, (and I believe a corraci oii?,) l**h in the
purchase of domestic bilte, and in transferring the
pU?l4enSftr? of ihe public money are now so
much greater than they ever were before, and has
become so ouerous aduty, to the bunks called unon
to perform that service, that they will '"juirc nil the
inatdeenee and tender treatment from the Treasury
Department that it may be in its power to extend, to
prevent serious Inconvenience 10 them, anil extensive
emb'irrasment to the communities in which they arc
1"" When Mr. Crawford gave to the Bank of the
United Stales four months to make transfers on
account of the Ooverninent, from its distant branch
es. the whole sum then required was not ouly ex
ceedingly limited in amount, but then the whole
business was managed by one and the same concern.
Now it is different. Done by distinct and sepa
rate institutions, each of which must manage its
own finances without relying upon ?'"er*; , .
"If the Department thinks proper to withdraw the
transfer warrants upon the deposite banks at I ew
Orleans, and direct new ones to be issued, jwyable
at Ihe period when It can be done with the proceeds
of the coming crop, great sacrifices to the banks
will b- saved, an advance on the price of North
ern exchange will be undoubtedly avoided, aud
an increased derangement in the commercial in
tercourse between that place and the Northern
cities he prevented ; all of which, in mv opinion
are inevitable incase the payments of the dralts shall
be persisted in."
The effect which these applications and remon
strances caused, led to some modification of the
terms of some of the transfer warrants. But, lest l
mav misrepresent the Secretary ol the lieasuiy, I
will give his own representations relating to some of
mv intercourse with him. rut
In his communication to the committee, of which
Mr. Garland was chairman, of the 11th of January
last, I find the following: " I think no farther ex
planation desirable os to the official connexion be
tween the agent for some Of the deposite banks ana
this Department, unless it be to add, that indecn.>ng
so many embarrassing questions of law and fact, As
have arisen in respect to those banks, as well as in
deciding the various other questions, on the other
arduous subjects brought before me by other agents,
I have been obliged, occasionally, to differ v idely in
opinion from this a?"nt, as well as most of the others.
In such cases I have often been requested to call on
the Attorney General for his opinion, as to points
connected with the claims of the banks, as well a>
other claims, and hart had vnj decisions appealed
from, to the Chief Iixiculive Magistrate."
In the answer given by the Secretary to the forty
fourth interrogatory propound* d to him by the com
mittee, I find .allusions made to the very cases ot the
Ohio and New Orleans Banks, which the correspon
dence quoted has reference to. In relation to the
Commercial Bank of Cincinnati, lie says, ' Ihe
agent urged that the time granted, in several cases,
wa# less than that formerly allowed under other cir
cumstances to the United Suites Bank to make trans
fers." " The time for some ol the transiers, which
seemed too short, I proposed to extend as long as
seemed to me prjper. lie, tuncerer, declined takmir
suck extension in behalf of the Bank, unlets I could
wake it longer, thinking it could not be useful so little
estend-d."
In relation to one of the Banks at New Orleans,
after referring to the,difference which appeared to
exist between its statement of the amount ol monev
in its hands, for which transfers had been issued,
and the records of the Department, the Secretary, in
the same answer, says: He (myself) seemed to be
satisfied the bank was right. W hether any exten
sions were given in this case, I do not remember, but
know, that none were given beyond the period ot the
quarterly payments to the States, for trhich purpose
these transfers had been seasonably ordered. '
It must be bjrne in mind, that it was in the month
of August, when these things occurred ; and that the
first quarterly payment to be made to the t tales was oil
the 1st of January following. . , .
The onerous aiid expensive duties of transferring
the enormous amounts of the public money from
place to place, fell almost exclusively on fifteen or
si:*een of the oldest selected banks. They were
called on to transfer moneys (rom State to State, and
also, to pay over to the newly selected banks in their
own States and cities. ... j
In a majority of cases of newly selected banks under
the act of Congress, they demanded specie upon the
warrants of the Treasury, issued in their favor on
the old banks. Some pursued this course to rein
force themselves in specie funds, which they were
called on to do by the Department; others ap
peared to have no distinct object in view ; and others
had evidently no other object than to produce embar
rassment to those who were the payers of the drafts.
Instances occurred in which the payees ol Treasury
transfer warrants required the payers to transport
the specie at their own expense and risk, many hun
dred miles, and place it on the floor ol their bankuig
house! Other instances occurred, when specie vas
demanded on Treasury drafts, that Bank checks on
the same place to which the specie was to be trans
ported, were offered in payment and refused, and im
mediately thereafter were forwarded, and the specie
drawn on them, and put on its way back before the
specie, drawn on the Treasury warrant, arrived at
the place on whicli the bank checks which had t*en
refused in payment, were drawn.
The effects" of such a system, before the month ol
November of 1836 caused nearly every one of the
banks subjected to make transfers ot public nv>ney
to complain either directly or; indirectly, of the se
verity of the operation of it upon them, and through
them upon the community. That conununitv be
came distressed in their moneyed operations. 1 he
whole country was literally convulsed in its monetary
affairs. A clamor was raised against the "Specie
Circular" as toeing the cause of it. Few disbeliev
ed it. None contradicted it.
In ten ol the States, in which there is at any time
but a very small amount of revenue collected of any
sort, and in which there was at the credit ol the
Treasurer of the United States at or near the pas
sage of the act of the 23d June about two millions ot
dollars ; that amount had been augmented on the 1st
day of December following by transfer drafts issued
and paid, or running to maturity at that time out
standing, to about eleven millions and a half dollars.
This too, while the whole amount of the surplus
which all those States was entitled to under the act,
amounted in the aggregate, to only about fourteen
millions, the first instalment of which was not pay
able until the first of January, amounting to ab iut
three and a half millions; and the other three instal
ments quarterly thereafter; the last of which, the pay
ment was delayed, by act of Congress at its late ex
tra session.
What amount of other transfers or payments to
banks in the same States were made to meet the re
quisitions of the department during the same period,
I have not the means of ascertaining. Doubdcssi;
they were large. On the 1st of December the
amount of transfer drafts then outstanding was over
thirteen millions and three quarters of dollars.
It is a well ascertained fact, that in ordinary
times, the mere decrease by the Bank of England of
only a single million of pounds of its circulation, is
seriously felt throughout the whole kingdom. Can
any one, on learning that fac\ be surprised at the
disastrous consequences resulting from the measures
of the Treasury Department upon the community
under the operation of them as I have described 1
The effects on the country of heavy transfers had
been in operation some time previous to the passage
of the act of the '23d June ; but they were much less
felt; because they were made through and preserv
ed in the natural channels. The whole amount
transferred and actually paid durin? the year end
ing 1st October, 18345, was thirty-nine millions and
a quarter. The amount between the 1st of Oct. and
the <?th day of November five millions and a quarter;
and the amount of transfers ordered and then run->
nin-? to maturity was fourteen millions and a half of
dollars?making nearly sixty millions altogether.?
The transfers ordered to be made subsequently to
the act of June, were in a great degree such as di
rected the public money to a large extent from the
natural channels in which it had previously uniform
ly tl iwed. Millions of specie were kept constantly
in transition between different stations ol the coun
try?the banks which had parted with it were oblig
ed suddenly to call in their loans, or to cca.se dis
counting altogether; while those which became the
recipients of it, either placed it away in their vaults
ta remain idle, or very gradually extended their
loans upon it.
The newly selected banks into whose hands the
money was "transferred, were obliged to seek for
customers to barrow it, because, under the act of
Congress they were obliged to pay interest on a por
tion of it: But they could hardly find sueh to borrow
as they would lend it to, before they had to begin to
call it back from them to meet the requisitions of the
Treasury upon them for the instalments to the States.
These circumstances rendered the public money so
transferred, in most eases a curse rather than a
benefit both to the banks and the communities in
which they were located.
The course pursued by the newly selected banks,
of demanding spucie from the old ones, was rather
augmented than decreased, even up to the time that
the peneral suspension of specie payments occurred.
Even the transfer drafts to some of the States for the
amount of the second instalment, parable on the 1st
of April, were eiacted by (hem, or those represent
ing litem, iu specie, from the Depusito Banks, and
placed in the vaults of other banks.
The immense aecumulation of the public money
did much to derange the fiscal aflalraof the country.
H.une of the piovisfous of the net regulating die
deposite btnks, which caused embarrassments that
could not be avoided, added lo those derangements.
But, in my humble judgment, the injudicious manner
in which that act was carried iutoezneution, together
with an entire unwillingness on the part of the head
ol'ihe Treasury Department previously, lo take that
responsibility which the circumstances of the times
called for, did more to induce lo the disaster* which
overtook us, and to the embarrassments which we
are now experiencing, than every thing else put
together.
The attempt to equalize nearly forty millions of
dollars, according to the federal representation of
each oi the Slates, in (be brief space of a few months,
called for such vast movements and changes of
l money from one place to another, as could not fail
to carry conviction to the mind of every sagacious
observer, that it must lead to revulsions and revolu
tions in the monetary affair* of this country, nol less
disasterous thau those produced in the state of civil
Htfuirs in France, by the Revolution of 17J2.
From the passage of the act of Congress of the '23d
June, lb.ib, to this time, 1 have never been able to
discover that an equalization of the public money in
the various States was called for under it.
The 5th section of that act is in part as follows:
" And the Secretary of the Treasury shall not suf
fer to remain in any defiosile bank an amount of the
public moneys more than equal lo three-fourths of
the amount oi its capital stock actually paid in, for a
longer time than nun/ be necessary, to enable him to
make the transfers required by the twelfth section of
this act." And the twelfth section says: "And iu
J eases where transfers shall be required for the pur
poses of equalization under the provisions of this
1 act, in consequence of too great an accumulation of dr
positcs in any bank, the transfers shall be made to
the nearest deposite bank," Ac.
1 he supplemental act of Jul}'4th, which appears to
be relied upon to justify the transfers made for the
purposes of equalization, is as iollows, viz: "Be it
enacted, ^c. That nothing in the act lo which this
is a supplement, shall be so construed as to pre cent
the Secretary oi the Treasury from making tran
ters from banks in one State or "Territory to banks in
another State or Territory, whenever such transfers
may be required, in order to prevent large a >ul incon
venient accumulations in particular places, or in order
to produce a due equality and just proportions ac
cording to the provisions of this act."
There are twopoints in these quotations for which
I have always contended?First, That the time
within which the excesses in banks beyond ihree
fourths ol their capital, should be transferred, was
left entirely discretionary with the Secretary. The
tint necessary to make such transfers, was to depend
upon circumstances. I never have, nor can I now
believe that it was the intention of Congress that
these transfers should be made with such rapidity
and violence as to embarrass the banks (its own
agents,) and bring ruin and devastation on the best
interests oi the people. Seccrnd, That the provisions
oi the supplemental act, having relatiou to equality
and just proportions, even if construed to ineati a ge
neral equalization oi the public, moneys in the va
rious States, was not mondatory on the Secretary;
but was merely permissive, and left the Secretary in
this case also, to the simple exercise of his own dis
cretion.
I apprehend there is not a practical banker or
sound financier in the whole country, who will not
unite with me in opinion, that the manner in which
the act of the i23d June, regulatiug the Deposite
Banks was executed, was as fully calculated to pro
duce embarrassment, vexation, and even ruin to the
community, and many of the old leading Deposite
Banks, as any which could have been devised with
a view specially to the accomplishment of those ob
jects.
Maintaining, as I do, that the act itself gave to the
Secretary of the Treasury a latitude and discretion,
without limit in its execution; I, therefore, have al
ways contended that the transfers ordered by him to
b- made at short notices and in extraordinary
amounts, placed the banks on whom the transfer
warrants were issued, entirely in the power and at
the mercy of those to whom they were made payable,
were altogether inexpedient. It was upon those, that
specie to the amount of millions of dollars was callcd
for; placed in transitu from one section of the coun
try to another, leading to alarm and confusion
throughout. This was not called for. It should not
have been permitted to take place. At that time I
could only express an opinion. I could not then ven
ture to remonstrate as I had done before. The head
ol the Treasury Department was to execute a lav of
Congress for which he iras responsible to Congress.
In lieu of making the fallacious and ruinous at
tempt to place in each state the whole sum or nearly
st), of the proportion of the buiplus to which each
would be entitled to have deposited with it under the
act before the meeting of Congress at the succeeding
session ; in ray opinion, (as expressed at the time,)
an entirely different course of policy should have
been adopted and pursued.
The transfers called for in the execution of the act
of Congress, should have bsen made through the
medium of the commerce and exchanges of the co'in
try. The Banks in the large commercial cities,
holding nearly the whole of the surplus, should have
been informed that the Department would require,
on a given day, certain sums then in their hands, to
be put at its disposal, in places named ; and, that it
was desirable the operation should be attended
with the smallest inconvenience practicable, to the
community and the banks themselves, in complying
with the wishes of the Department; and if they could
not be done within the period named without caus
ing such inconveniences, the Department would ex
tend the period to the utmost limit in its power.
Whether a period of six or even nine months was
required for such purpose, the law, in my opinion,
would have been not only complied with literally,
but to the letter also. For what purpose was it, that
the periods fixed by Congress for making the depo
sites with the states, were so gradual and distant af
ter the passage of the act 1 The first instalment was
not called for until more than six months thereafter;
the second in nine; the third in twelve; and the
fourth in fifteen. Could it have been for any other
purpose than to avoid the inconvenience and embar
rassment consequent on the sudden transition of such
a vast amount of money as the execution of the act
called for 1
Not only, in my opinion, did the Secretary mistake
the intention of Congress, but he greatly erred in
judgment, in carrying the act into execution, under
any construction whatever which could properly be
given to it. It would have been as easy for the banks
holding the surplus to have paid it o'ver directly to
the stati-s, with which it was to be deposited, at the
end of six months, as to transfer it to newly selected
banks within that time, located in those slates. The
clause ot the act ot Congress, relating to the amount
which any b ink could hold, in proportion to its capi
tal, would, I apprehend, have been faithfully com
plied with, as soon as the banks holding such sur
plusses had been requested to make the transfers, un
der circumstances of convenience to themselves and
the community, as before described.
Iu the communication made by the present Execu
tive Chief Magistrate to Mr. Sherrod Williams in
H3t?, I find the following: " The Treasury has it
in its power to exercise a salutary influence, first,
over the deposite banks,'irhich trill alirays be sheeted
from the principal banks in the States, and through
thnn orer the residue. Whatever check was exer
cised by the United States Bank, was done either by
refusing to take their notes in deposite, or if taken,
by returning them quickly for specie if it believed
their issues to be excessive. The deposite banks
have a right to do the same thing, and are in the ha
bit of exercising it, when in their opinion, an occa
sion for its exercise exists. Over the deposite banks
themselves, the Secretary of the Treasury has libe
ral supervisory powers. " I am for exercising this
supervision in a just but in an inflexible spirit."?
Had the distinguished individual who was the
author of the sentiments quoted above, been
at the head of the National Treasury but one
year previous to the period when he promulgated
them andhave acted on those principles, I venture to
assert unnuulifiedly, that the catastrophe with which
we have been visited, would never have overtaken
us. In them, in my opinion, are lo be found all the
elements, for practical application, to preserve regu
larity, soundness and healthiness in the currency.?
Unfortunately these principles entered into the poli
cy pursued by the Treasury Department to a very
limited extent; even if they did so at all.
About the close of the year 1835, nearly twelve
months after the excessive issues of paper by the
banks commenced, and when the reckless spirit of
speculation and gambling was raging in its wildest
form ; at the request of some of the leading deposite
banks at that time, I made application to ?.b'aiu an
authority from the Treasury Department, for them
to call lor payment of balances due them by other
banks, iq specie to a certain extent, for the purpose
of restraining the banks generally from continuing
their excessive issues of paper. That authority I
was not fortunate enough to obtain.
It is a recorded fact, that it was by making the
banks grnerally, sensible that they wers subjected to
constant liability to pay in specie the paper which
they issued bardcring on excess, which led them to
awe the 15.ink of the United States. It was the col
lection and keeping of the public revenue, by that
bank which gare it the power which the other banks
Hood in dread uf It was the collection of the public
money which threw the banks in debt to the decile
banks at the time I mail" the application to the De
partment. They therefore, dhl not (eel justified, in
'adopting a measure,* nndci^rch circumstance*, on
their own motion, howe^blutary it might have
been, or however much it trit^it have been called
for'by the then existing stale of things, without the
approbation of the Treasury Department, llad the
suggestion at that time received official sanction, I
do not doubt that such would havi beeu the results.
it would hare produced, that we should have avoid
ed altogether the calamity which has since befallen
us.
Had the increase of the depositc banks been con
fined strictly to the number actually called for to
comply with the act of Congress, and those which
were selected fot such purpose have been the " prin:
cipal banks" in the places where the selections were
made, I apprehend the evils which have attended
the execution of the act, as it was executed, would
have been greatly mitigated. Why three additional
binks in Boston with an aggregate capital of but a
little over a million of dollars, and one of them with
a capital of9150,000 only (which has since been dis
credited) should have baen selected ; and the appli
cation of a bank from the same place with a capital
of nearly two millions, have been at the same time
passed by, 1 could never understand. The addition
of ten banks in the States of Maine and New Hamp
shire to the two previously selected there, while the
inonev transferred from Boston to them, was more
valuable to those States than in those bank", w as
ever a mystery to me. The selection of a bank at
Charlcstown, Mass., with a small capital, one at
Brooklyn, N. Y., with a capital still smaller ; and,
fthe last selection which was made,) one at Woosler,
Ohio, with a capital of but $'1!)0,000, as well as ma
ny others all appeared to me unwise, uncalled for,
and not calculated to add to the reputation of the
system.
it is under such circumstances, that long tried and
faithful agents, stand denonneed, as having been
guilty of base perfidy and treachery?that a system
which had worked well for a series of years, mid is
perfect, is cast aside as defective in itself ; and to cap
the climax, that a war of extermination has been
waged against those agents and all who suppott
them.
What would be thought of a policy which contem
plated abolishing altogether the use of steam power,
because of the explosion of a boiler to an engine, pla
ced under the direction of an unskilful engineer /
The whole banking system of this country, howe
ver much it has become extended, in rnv judgment,
is equally subject to the control of the Treasury, as
a steam engine can be to that of the engineer em
ployed to superintend it.
It' has long been universally conccded, that for
many years, while the Bank of the United States
collected the Federal revenue, it possessed and exer
cised a controling influence over all the Slate binks.
It is now manifest that it was through the use of the
public moneys alone, that-it derived that omnipotent
power. But, lest some may be sceptical on that
point, I fortify myself with the testimony of one of
the most accomplished inerchantsand practical finan
ciers, (Mr. Lloyd,) which this country ever pro
duced.
In a letter to Mr. Calhoun of the 9th of January,
1817, answering some inquiries as to the period when
the U. States Bank would commence operations, he
remarked : " The Government can ami trill give to it
(the Bank) eventually a paramount poirer and in flu
ence through its drposites and the collection of the reve
nue. over all the other moneyed institutions of the coun
try."
I am furthermore fortified in the positions which I
have assumed, by those which I have quoted from
the communication of the present Chief Executive
Magistrate; that, whatever check the Bank of the
United States exerciscd over the State Banks, the
liberal supervisory powers granted to the Secretary
of the Treasury, enabled him to exercise for saluta
ry purposes to an equal extent over the Deposite
Banks, and through them over all the others. Have
such supervisory powers ever been exercised ! If
they have not, is it right; does it comport with a
true spirit of philanthropy and justice, to chargethe
binks with having caused the mischiefs, which, by
the exercise of those supervisor)- powers would have
been avoided 1 It seems to me not. Why ought the
system, then, to be denounced and discarded under
such circumstances'! Why should the Banks em
ployed to conduct it be condemned ?
To my mind it is as clear as the noonday sun, that
the tremendous lever which the collection of the
public revenue establishes, places in the hands of the
Treasury Department the most ample means
through the supervisory powers, which it can at all
times exercise over the Slate Banks, which it might
select for its fiscal agents, (which should never ex
ceed twenty in number) ol'regulating and controling
the paper part of the currency and tne banks which
issue it, more effectually than the Bunk of the United
States ever did, when it was the recipient or the
whole public revenue, and with much more certain
ty and permanency; because, it has been shown by
experience in England, that the power to regulate
the currency, should be " divorced" from the autho
rity to issue currency.
It is to be ardently hoped that the time is not far
off' when reason will take possession of her empire,
and justice ascend her throne; and that the innocent
will be protected and the delinquent be exposed.
In my two last communications. I have endeavor
ed most studiously to avoid saying any thing to
wound the feelings of any one unnecessarily. I Save
sought to confine myself almost exclusively to such
facts and public measures as were called for to vin
dicate myself, and the Banks I represented, from the
charge of exerting an interest antagonist to that of
the public, I have also endeavored to vindicate those '
banks against the obloquy, which has recently been
so unmeasurably heaped upon them. How well I
have succeeded in these efforts remains to be deter
mined by the verdict of an intelligent and enlighten
ed community.
With great respect,
Your most obedient servant,
R. M. WHITNEY.
Washington, November 16, 1837.
FOR THE MADtSONIAN.
NATION AX CURRENCY & STATE BANKS.
THE MARYLAND PLAN.
No. VIII.
In considering the point of adequacy with refer
ence to the system and illustrations presented in the
documents, No. (5, of" bjth branches of Congress, at
the late extra session, it is td be understood that the
proposed " National Currency," is not intended for
the ordinary purposes of money, but as an auxiliary
to the specie basis, and mainly to supply the facili
ties of commerce and interchanges in large transac
tions in aid of the issues of the Public Institutions of
the States. And although the limit, being only
twenty nine millions and four hundred thousand dol
lars, for the whole Union, may appear too much con
tracted, the amount authorized to bj issued is greater
than the greatest circulation of the late Bank of the
United States?but, if found by experience to be ina
dequate, the demand might be supplied by a further
emission in just accordance with the equitable prin
ciples of its creation.
The design of the proposition, as heretofore set
forth, is the restoration of an equilibrium in fiscal
power to the Slates, for the common benefit of alt the
people, and it b.-ing apparent that its operations would
be peculiarly favorable to the State in proportion to
their franchise in the election of a President and
Vice President of the Uhited States, it commends it
self on that account.
To elucidate the point in question, a pro forma ex
hibit, as applicable to the smallest and largest States,
might suffice to demonstrate the adequacy of the prin
ciples for every good and useful purpose, whilst no
inducement would exist to inflict the evils incident
to the present vicious banking system.
The elements o( the Public Institutions of the
States would consist of
1. The distribution of the National Currency.
2. ,The collection, custody and disbursement of the
Federal revenues.
3. The ca<h balances, and productive capital of the
States, with
4. A limited portion of their credit, and
5. Thc ifepositcs of their respective revenues and
collections, with those of individuals, firms, and cor
porations; which, from the high confidence those
institutions would command, would mainly embrace
the entirety of all moneys not in actual circulation.
Take, for example, the smallest components of the
Federation?such as Delaware, Michigan and Ar
kansas?and it will clearly appear that, upon a basis
composed of those elements there might be erected
an institution in each of them, purely equitable and
democratic in character, and adequate in means for
i every rational desiderata of accommodation and ame
lioration.
And if such would b; the adequacy of the ele.
meats and principle*, when applied to the minor
Stales, the like advantages would be extended, i r->
p-irtionately, to the greater MVerefgntieii of Ohio
Virginia, Pennsylvania and New York, as well as
to all of intermediate grade.*, according to their elec
toral power.
The skeptic is invited to inves'igate the plan, as
contained in the document* referred to, and to ex.
pose its defects If found obuoxious to just objec
tions.
PHILO-FISCUS.
von TIIK MADUONUN
No. XI.
THE SPECIAL. UKPOSITE PLAN.
This is certainly an admirable and excellent plan
for the safe-keeping of the national revenue, durin*
the suspension of specie payments by the bank*.
The revenues accruing from customs and the u h. r
sources, being collected in gold and silver to the < i
elusion of the notes of the suspended State Bank* it
is evidently and eminently proper that the gold and
silver, thus collected, should not be placed on dcj>.?.
site with those brinks with liberty to hold on to tin
whole amount, great or small, and to pay out their
own notes instead, for which, on their return upon
them, and in the face of the just demand, the specie ?
is denied. That the gold and silver, thus collected,
should be placed with those banks on special deposit*,
is evidently and eminently proper and pdfcic in tin ,
that, while the revenue, thus collected^^Band will
be kept by the banks as safely as it co^^Rkept in
the strong box of the personal agent, dj^^&try will
be saved the expense of "the uniri^^Hcdicnt.
and the increase of Executive patronaBflpeparahie
from it. But the question is, whethenpe plan of >pt
S cial drpoiites will be expedient and proper when the
j State Banks shall have resumed specie payment*,
and their notes convertible into coii^jmd practically
equivalent to coin, shall again become receivable in
all collections of the revenue 1
It will bo perceived that the question embraces the
assumption that the notes of specie-paying State
b inks will again continue to be received in pay
ments of public dues. 1 shall take it for granted that
enough has already been urged to show that they
ought to be thus received, when the banks shall have
resumed specks payments. Then the question is
narrowed down to the inquiry, whether it be expedi
ent and proper that the notes of State banks, thus re
ceived, should only be placed on deposite with the
State banks, for safe-keeping, with the express un
derstanding and special agreement that the identical
notes deposited shall be refunded or paid out by the
banks when called on for the amount1
. In the further solution of the question, it is neces
sary to ascertain what is meant by the terms, "special
deposite."
When moneys or funds of any kind are put on de
posite with a bank for safe-keeping, without any
express agreement, an implied contract results from
the nature of the transaction, that the bank will re
fund the amount to the depositor, in its own notes, or
in such other kind of money as the depositor maybe
willing and consent to receive. When moneys or
funds of any kind arc put on deposite with a
bank for safe-keeping, with the express agreement
that the identical funds are to be refunded to the de
positor, or to his order, on application, the bank has
no right in any wise to use the funds while on depo
site; nor when applied for, to offer other funds,
though of the same species, and require the deposi
tor or his assigns to receive them. This, I under
stand, to be a special deposite. Or, in other words, a
special deposite may be defined to consist in this,
that the sell-same thing deposited, and not another
thing in lieu of it, though of the same kind or of
equal value, is to be refunded to the depositor, or to
his order, given in the mode prescribed.
Now, let us see, testing it by this definition, whe
ther the proposed plan of specially depositing the
revenues of the nation with specie-paying State
banks, collected and subsisting in their notes, will be
expedient and proper. And in what will the expedi
ency, the propriety, the utility ol such special depo
site consist! What the advantage that can result
from it 1 When the revenue is collected and subsists
in the notes of specie-paying State banks, and is put
on deposite with them for safe-keeping, why may not
the Government, thus being the depositor, as well
receive from such banks any other of their notes, or
the notes of any other specie-paying bank, as those
identical ones which were deposited 1 It would, in
fact, just bj to contend for one sound black-eved pea,
in preference to another of the same sort and size.
But let it be taken to be true that the plan ol spe
cial deposite proposes, as in fact it may, when the
revenue is collected in the notes of specie-paying
State banks and is deposited with them, for sati'
kceping, till it is wanted for disbursement, that the
amount is to be refunded in gold and silver, instead
of the identical notes deposited, in ease the bank*
suspend specic payments during the time they hold
the amount on special depOsite. Giving the meaning
of " special deposite" this compreheasion, and the
plan is obviously objectionable in this, that the
banks, by entering into such a special agreement or
contract with the Government, would confer on it a
privilege which, in a suspension of specie-payments,
would ba denied to the holders of their notes and
their other depositors. And is there reason, or right,
or justice, that the General Government, being a de
positor shall stand on a better footing, than the State
Government, also being a.depositor?shall stand on
a batter footing, in case of a suspension of specie
payments, than the holders of the notes ol the depo
site banks, or than their other depositors! 11 there
is reason, or right, or justice, orsound policy, or pro
priety in it, let the people be informed in what and
wherein it consists. Besides; is it to bo expected
that the Siate banks, having resumed specie pay
ments, will con sent to take the national revenue on
deposite on such terms, extending such contingent
ad vantages to the General Government over the hold
ers of their notes and over their other depositors 1
PUBLIUS.
From the Brlfant (Mr.) Intelligencer.
On the whole, the independent, manly tone of Mr.
Smith's letters?his statesmanlike views of the sub
ject, and the disastrous effect of the bill on the com
merce and business of the country as portrayed bv
his pen, cannot fail of raising him in public estima
tion, and of adding to the fame and reputation already
attributed to him. No man in the State, for five or
six years past, has received a greater share of abuse
than Francis 0. J. Smith, and yet no one has enjoyed
a higher or more deserved reputation for talents iind
industry. We sneak from a personal knowledge of
his powers and habits. In seeing him now at the
head of one of the mast important Committees of the
present Congress, we feel a State pride; and, without
disparagement to others, no gentleman from New
England possesses a greater share jf influence, or
more ably sustains the interests of his constituen t
and his country than he.
And when we see such men of the administration
j party as Rives, Tallmad/i*, Garland, Snu/A, and
l/tgart, denouncing a project of this kind, have we
any just grounds to fear that it will ever become a
! part of our statute law 1 It would be (ogive currency
| to a dishonored and protested bill of exchange, or to
receive an exploded theory.
7 V Globe r.i. Af*.w.?. Rives, Garland, Tall mailt:''
Sic.?We have not space in this number of our paper
to notice in the spirit in which they deserve, the ar
i tides, in which the cx Printer,o{ Congress formerlv
breaks ground against the republican opponents ol
the sub-treasury scheme. Until we find room.and
i opportunity for this purpose, we await with sen'i
' mcnts of mingled indignation, and amusement, the
J manner in which Mr. Ritchie?the leader of ttic
; editorial corps in this state, venerable, less for hi*
I years than his wisdom?shall receive at the hands "t
the " official " his excommunication from the repnh
i lican church as a '? federalist," for we take it Iroin
I the columns of his paper, that there is nothing in the
! course of these denounced politicians to taint them
! with federalism, which does not equally lie at Mr
j Ritchie's door.?Jefferson tan Republican.

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