H. OF R.

Bank of the United States.

FEBRUARY, 1819.

termediate prices, but we know, from other sources, that the decline was not considerable during the first part of that period. It may be dated, chiefly, from the Summer of 1818, and may be traced to causes which not only had no con nexion with artificial means, but are wholly inconsistent with their use.

will come to hereafter. But, though I will not bank had some advantages which the present undertake to answer either of these questions, does not possess. But, the existing bank has also nor hazard any opinion upon the value of the some which were not possessed by the former. stock, yet, in justice to the bank, I will venture At the period we are speaking of, when its stock to say, that, as far as my knowledge extends, rose to fifty-six, it had this most striking advanthere never was any great moneyed institution tage, that not a year of its charter had expired, established, there never was any great moneyed and there were above nineteen years remaining, operation commenced, that produced so little whereas, when the stock of the late bank was at speculation. I do not advance this hastily, and I fifty, eleven years had run out and only nine redo not wish it be assented to without full reflec- mained. This inflated price, therefore, was very tion. Speculation, stockjobbing, these are the little higher than the level stationary price of the substance of all the charges, or the coloring stock of the late Bank of the United States. spread over them all. Where is the instance of It is not correct to say, that it "exploded and a new institution, in which there was so much fell." (Report, page 11.) Allowing all reasonsteadiness, so little extravagant speculation? The able indulgence to the figure, it means, if I undermaximum of the price of its stock (see table stand it, that the price was suddenly precipitated, among the documents) was in the latter part of when the artificial means used for its elevation August, 1817, when it had gradually reached had ceased to operate, or ceased to produce any 56 per cent. advance. Do gentlemen recollect, effect. It is not correct. The table of prices or have they heard what happened when the annexed to the report of the committee shows public debt was funded? One would suppose that its decline was gradual, and that decline can that nothing could have been less fit to occasion be traced to other causes, which I will advert to speculation. The amount was fixed, and could presently. The price was highest in August, not be exceeded; the rate of interest was fixed at 1817; it began to fail, but not materially, in Septhe current rate of the country; the period and tember, 1817-and it had not arrived at the lowest manner of redemption were also fixed; every- point of depression, (110) what in the table is thing, in short, was reduced to the greatest possi- called "the lowest price," till November and Deble certainty yet the six per cent. stock rose to cember, 1818, more than a year after the deprestwenty-six shillings and three pence. It after-sion began. The table does not give us the inwards fell considerably below par, and did not recover till, I think, after the year 1803. We have another, and a much more striking, instance in the establishment of the late Bank of the United States. The scrip, for which ten dollars had been paid, and no more, rose to two hundred and seventy dollars. Fortunes were made and lost. The roads between the commercial cities are represented to have been covered with expresses, conveying intelligence of the fluctuations of the market, in order that they might be advantageously seized. The stock of that bank, I have been informed, but do not speak positively, afterwards fell below par. Sir, I have seen many moneyed institutions established, and though I have had little to do with them, I have nevertheless had occasion to observe their usual progress. Their history is nearly the same. At first, their stock has an extravagant rise, then succeeds an equally extravagant depression, and afterwards it finds what may be termed its just or natural level, that is, the level at or nearly to which it rests, unless disturbed by some extraordinary occurrence, or moderately advanced by a gradual improvement. The stock of the late Bank of the United States may be considered as having settled at about fifty advance, after all speculation had ceased. In the year 1802, the United States sold 2,220 shares at forty-five advance, and they sold to a person who bought to sell again, and, of course, to sell at a profit. I have always understood that he did sell at a profit. Individuals sold as high as fifty advance. (Seybert's Stat. An.) The permanent advance, therefore, was very little short of what has been deemed the inflated or speculative price of the present bank. I am aware that it may be said, and truly said, that the late

Again, sir, let us examine, in another point of view, these charges against the loans upon stock.

The price, on the 20th August, 1817, was from 144 to 147, to which it had gradually attained. How could successive repeated advancements of price be owing to a resolution adopted before the organization of the bank, permanent in its nature, and operating uniformly from the first adoption? There is some confusion in the treatment of this part of the subject. One would be led, by the language of the report, to suppose that there were successive measures brought forward from time to time, and calculated continually to stimulate the market, which was stimulated accordingly. The fact is not so; it was a system-the foundation was laid in the 4th by-law, and the subsequent resolutions, all conformable to that by-law, were merely executive or ministerial, to carry it into effect. The committee have themselves furnished the most conclusive evidence that the supposed facilities for obtaining money were not so eagerly seized upon, and for that very reason not calculated to produce the effect imputed. The amount loaned upon stock, prior to the 30th of July, 1817, had been $8,046,932 64. It was at that time only $5,221,267 60. (Documents, page 70.) Of course, $2,815,665 04 had then been redeemed and withdrawn voluntarily, as respects the borrowers, and against the policy and the true interests of the bank. The bank could not lend

in this way as much as it might prudently desire. This statement is what I alluded to, when I said some time ago that there was a continual tendeney in the desposite to escape. That the resolution of the 20th of August (for advancing $135) had no influence in raising the price, is most evident. On that day it was at $150, nearly the maximum; it rose but very little in the next three or four days, and then, instead of rising, began to decline.

6

H. of R.

The report

chairman of the select committee.
(page 11) says, that "a rise in the market would
enable him (the purchaser) to sell his shares,
pocket the difference, and commence operations
anew." I should be glad to be informed how
many times a man must commence such opera-
tions anew, how many times he must buy and
sell in a market "constantly advancing," before
he will make a profit? If the market was "con-
stantly advancing," as the report states it was,
it would seem to me very difficult to understand
how successive operations could benefit the spec-
ulator. I should suppose, from a plain calcula-
tion, that the oftener he bought and sold the less
stock he would have, and, repeating the "opera-
tion" a sufficient number of times, and a slight
depression supervening, he would inevitably lose
his whole capital.

But this resolution is supposed by the report, (page 11,) "to have given equal facilities to the bankrupt, who had not credit enough to obtain an endorser, and to the capitalist. Stock could 'be and was purchased without the advance of a 'cent by the purchaser, who had only to apply to the directors, or to the president and cashier, 'between discount days, for a loan on the shares ' about to be bought, and, by what is termed a The report, sir, goes on to charge that the loans simultaneous operation, he obtained his dis- were "unreasonable and excessive," were not count, and with it paid for his stock. A rise in made "to merchants and traders," but "to a few 'the market would enable him to sell his shares, persons, consisting of directors, brokers, and specpocket the difference, and commence operations ulators," and that very little "good business paper anew." Nothing can be more inaccurate, more was done." (Report 10, 11.) Upon what foundstrikingly inaccurate, than the whole of this rea- ation of fact these charges rest, we are not presoning; and nothing more destitute of solid sup-cisely informed. The members of the committee port than the hasty condemnation founded upon it. have referred to a list of borrowers which has not It fails entirely in point of fact. For, in the first been printed, and they have differed from each place, the price of stock, on the 26th of August, other as to the true purport of that list. The 1817, was $150. A loan could be obtained upon member from South Carolina, (Mr. LowNDES,) it of only $125. There remained, therefore, $25 one of the committee, has stated that a large proa share to be supplied from the resources of the portion of the borrowers were "merchants and purchaser. Again: for the $25 excess beyond traders." It is of no manner of consequence, for the par value of the share, "two approved names" it is not denied, but it is agreed that these loans were required. (Documents 79.) Thus the bor- were offered indiscriminately to all who could rower was to find an "approved" endorser, and give the required security, that they were made was to furnish $25 a share in addition to what with impartiality, and without favoritism; and the bank would lend him. How, then, can it be that, in making them, the directors did not regard affirmed that this resolution "gave facilities to the occupation of the borrower, provided he ofthe bankrupt, who had not credit enough to ob- fered good security. Was not the security unextain an endorser ?" How can it be said that, by ceptionably good-the best that could be offered? means of it, stock could "be purchased without Suppose the same "speculators" had got disthe advance of a cent?" Or that, with the money counts on funded debt, would there then be any obtained from the bank, the purchaser "could complaint? Where, then, is the point of this pay for his stock?" [Here Mr. SPENCER rose to accusation? Do gentlemen mean to establish a explain, and stated, that the reasoning quoted high moral standard, graduated not by the laws from the report was not meant to apply to the of the land, nor with any reference to the nature resolution of the 26th of August, but to the pre- of the subject, by which the directors of the bank vious resolutions authorizing loans at par.] Sir, are to be governed in exercising a censorial authe reasoning immediately follows the statement thority over the lives and occupations of those of the resolution of the 26th of August, and seems who come to borrow, and by which they are to me most especially, if not exclusively, applied themselves in turn to be tried and censured? to that resolution. But I accept the chairman's We are all of us fond of power, and sufficiently explanation-and will the reasoning be any bet-inclined to abuse it. What power could be more ter? Rather worse, I think. Under the resolu- dangerous; what more liable to abuse; what more tion of the 26th of August, the purchaser was to inevitably tending to generate a tyrannical spirit furnish $25 a share, in money, and an endorser in the heart of man, than such an authority-no for $25 more. Under the resolutions for loaning matter by whom exercised-to become a censor at par, he would have to advance $50 a share, and inquisitor of the thoughts, and occupations, which I suppose would be at least as difficult for and conduct of his fellow creatures; to judge "a bankrupt," and quite as inconsistent with the them, not by the laws of the land, not by any deidea of buying "without the advance of a cent," fined or established rule, but by an arbitrary and as advancing $25, and finding an endorser for fanciful theory of his own creation? Sir, is it $25 more. not enough that these loans were not prejudicial to the interests of the institution-that the security was unexceptionable-that they were im

While I am upon this part of the subject, I would take the liberty of asking a question of the 15th CoN. 2d SESS.-44

partial and general? Is it not enough that there were at least very plausible reasons, if not conclusive ones, for making them? Is it not enough that they were prohibited by no law, and that they were made by the directors under a discretion committed to them; that they are still safe and good; that they were made to persons exercising occupations not forbidden by law, who were not prohibited from borrowing, and to whom it was not unlawful to lend? If they were right in themselves, let us not engage in needless inquiries that can do no possible good, and may do much mischief.

FEBRUARY, 1819.

There is another period stated, (June and July,) which gives a result somewhat different, but still shows the stock loans to have been more than proportionably reduced. The first, however, is most fair, as it gives a reasonable range.

I have gone into these details, sir, not for the mere purpose of differing from the Committee, or pointing out inaccuracies in the report, but to avoid hasty results, from a superficial examination. The conclusion, so far as we have gone, is, that the inferences are not warranted. Every measure is fairly accounted for, provided you examine it upon its own merits, free from the prejudice of extrinsic considerations. I shall trouble you no more with particulars that must, necessarily, be tedious and uninteresting. There is one allegation of the report, however, which the chairman has voluntarily corrected, admitting that the language is broader than he meant it to be. It is the assertion, in page ten, that "the principal business of the bank certainly has been to discount on notes secured by a pledge of stock;" an assertion which, as it stands in the

But the report expresses surprise "at finding so little good business paper done at the bank and its offices." How, in the course of such an examination, (completed in three weeks,) it was ascertained what quantity of "business paper," usually so called, was done at the "bank and its offices," or what "good" business paper was done, or whether any was done that was bad, or whether any good or bad was refused, and for what reasons, I am at a loss to understand, especially as there was no opportunity for explanation. I take it for granted, from other parts of the report, that this phrase is meant to apply, though applied inaccurately, to loans on stock, as contradistinguished from loans on personal security. In that sense, without admitting our right to regulate the business of discounts, the surprise expressed ap-report, did certainly occasion some astonishment. pears to be unwarranted. When the loans on personal security were $20,000,000, the loans on stock were $5,000,000; when the loans on personal security were $30,000,000, the loans on stock were $11,000,000; and that proportion never was exceeded. (See documents page 70, and table 43.)

It is now explained to be meant only of the operations at Philadelphia. We have no table that shows how much of each kind of paper was done at Philadelphia, and, therefore, cannot fix with any precision what is to be understood by this vague expression, "the principal business." But, is it not easy to account, and to account fairly, There is still another accusation, which I have too, for the fact, supposing it to be as stated? heard here and elsewhere, and which, for that The largest loans on stock would naturally be reason, I have been at some pains to examine. where the largest quantity of stock was held, and The "curtailment" (says the report, page 11) where there was most of that kind of security to "fell, in almost all cases, upon the business offer. The largest loans were accordingly at paper;" by which is here meant the paper for Philadelphia and Baltimore. The list of sub. loans on personal security. The table 43 fur-scriptions to the bank (No. 47) gives us the folnishes a most conclusive answer to this allegation.

lowing: At Philadelphia, 88,529 shares; at Baltimore, 40,141; at New York, 20,012; at Boston, 24,023. It is worth remarking, though not di rectly applicable to the present purpose, that at Charleston there were 25,986 shares subscribed, more than either at New York or Boston. At

Richmond, 16,987 shares; at Washington, 12,708; as many as at New York. I would remark, furand at Lexington, Kentucky, 9,587-nearly half ther, with regard to the loans on stock at Philadelphia, that they were not confined to stockholders in Philadelphia, but a considerable part of them was for persons residing in different parts of the Union, who, from some cause or other, found it most convenient to get their loans there. This is a fact well known to all the committee, from whom I have derived it.

But the heaviest charge of all, in the estimation of the report, that which pervades and gives a color to the whole, at the same time that it is of no manner of importance in the present inquiry, is the charge of speculation, made against

FEBRUARY, 1819.

Bank of the United States.

H. OF R.

individual directors and officers of the institution. difficult to make out that one who thus dealt ia How far it may be justifiable or proper thus to buying and selling was more likely to be affected scrutinize the private transactions of men, in or- by it in his conduct as a director, than one who der to fasten upon them, by what is termed an only bought, or one who only sold. On the conex parte inquiry, the imputation of an undefined trary, as his interest would be sometimes on one and undefinable offence-to hold them up to pub- side, and sometimes on the other, he would be lic odium, under the authoritative sanction of a less likely to be permanently influenced, or incommittee of this House-it would be useless fluenced at all. But this is, itself, mere matter now to inquire. Speculation and speculators, of speculation, and speculation of the most dansir, are terms of very vague import, and of very gerous sort; because it subjects the conduct of extensive application. There are speculators of men to speculative examination, and to speculamany kinds there are speculators in lands-tive conviction. It is a speculation upon charthere are speculators in merchandise-there are acter, where there ought to be, and where there speculators in manufactures-there are specula- is, a plain practical rule that will be sure to guide tors in stocks; the variety is infinite, and in no us to a safe result. Upon this part of the subject country upon earth greater than in this. Every- I wish to be clearly understood. The rule a man thing about us invites to speculation. Such are may think proper to lay down for the governthe resources, such the youthful energy of our ment of his own conduct, is one thing; the rule happy country, that a man can scarcely apply he will adopt in judging the conduct of others, his labor or his money amiss; wherever he em- is another. If he choose to fix a standard for his ploys them he is sure of a liberal and rapid in- own government, no matter how high he may crease. Not an axe sounds in the forest, without raise it, if he aim at all the perfections contained adding to the sum of national wealth. I should in the table of the illustrious Franklin, so much like, then, to know, in what the discrimination the better. If he should fail, as he assuredly consists, which makes one kind of speculation will, of reaching the highest point, he will nev offensive, and another innocent, if both are per-ertheless be rewarded for his pains. He will pro mitted by law, and neither unfairly or fraudu-mote his own happiness, and, from the difficulties lently conducted. What is the difference be- he has to struggle with, he will learn a lesson of tween speculating in land, and speculating in charity towards others, which increased contentmerchandise, or the stocks? Sir, the charter ment with himself, at every step of his progress, does not prohibit dealing in the stocks, either to will every day more and more qualify him to directors or to the officers of the institution; it is, practise. But when a man comes to judge the therefore, not unlawful or criminal. The omis- conduct of others, let him beware how he applies sion, with respect to the officers, cannot have to it a severer rule than the law of the land and been casual or accidental. If my recollection be the law of their peculiar condition has laid down. accurate-I do not speak positively it was pro- Sir, I know nothing, by experience, of speculahibited, as well as every other kind of trading, tion. I have never dealt in the stock of this to the officers of the late Bank of the United bank. I have never bought a share, nor sold a States. I know it is prohibited by law in most share, nor been interested in the purchase or sale of the State institutions. It is impossible that it of a share. I have never borrowed a dollar from should have escaped the attention of Congress. the bank. But I claim no credit for forbearance. But let us examine this matter, and not be car- When I am not here, endeavoring to serve my ried away by general denunciation. That a man constituents according to the humble measure might subscribe, and yet be a director, is not to of my abilities, I am engaged in the labors of a be questioned; none but a subscriber could be a profession which do not consist with engage director. Every subscription had a view to profit ments in trade, or dealing, or speculating, or bor. or advantage, and was so far a speculation. Every rowing. These are no part of my business, and large subscription had a view to profit by selling, whether I abstain from them because I think it and the larger the subscription, the greater spec- prudent, or because I think it right-from moulator was the subscriber, and the more was he tives of policy, or from motives of a higher nainterested in advancing the value and price of ture-is altogether indifferent. I choose to abthe stock. Was he, on that account, incapacita-stain from them, and no one has any right to ted to be a director? On the contrary, was it not thought, and with some appearance, at least, of reason, that the greater his stake in the institution, the more he would feel interested in its prosperity? Again: the committee, adopting a distinction I do not very well understand, find no fault with a director for buying or for selling. And yet, is it not most obvious, that the one op eration would make it his interest to depress, and the other to raise, the price; that in the one case he might buy as cheap, and in the other sell as dear as possible? The whole censure of the report is directed against those who bought and sold-who dealt in the stock. It would be very

inquire why I do so. I acknowledge that I should be wanting in consistency of character, and might be justly exposed to suspicion, if, upon becoming a bank director, I were to abandon my former habits and occupations, and become a dealer in money and in stock. But, if you make directors of men whose daily business and occupation it is to trade, to buy and to sell, to deal in stocks and in money, and such men are not proscribed, they are indeed the very men who are deemed best qualified to be directors-do you expect them thenceforth to give up their occupations, to purify themselves from the love and desire of gain, in order that they may be qualified for the