Even if, as asserted, the debts of most of the banks exceeded their capital only from 40 to 80 per cent.,* that of itself rendered them bankrupt the moment all their notes were presented for specie payment. But there were also banks which had issued with impunity a hundred times as many worthless bills as their capital amounted to. In consequence of the different values or want of value of all bank notes, and the utter want of a specie currency, there was no fixed measure of the value of commodities; prices fluctuated excessively; and in order to escape deserved or undeserved distress, not a few permitted themselves all kinds of arbitrary and fraudulent acts. Banks which were doubtless broken, distributed notwithstanding large dividends, and made notes of 25, and even as low as 5 cents; whereby the number of sufferers was continually increased, while the authorities had no means of preserving or restoring order.† Even those states which were inimical to the entire banking system were involved in these sufferings, or were compelled in self-defence to resort to desperate means, to prevent their losses from reaching too great a height.‡ In a like spirit the general government in this season of distress gave permission to pay depreciated notes into its treasury at par value. This was a reward, a premium for the worst notes and most careless management, to the injury of the better banks; and it created a totally different taxation in the different parts of the United States. In these times of misfortune, public and private undertakings were brought to a stand-still; auctions at far below the former prices, and the imprisonment of debtors unable to pay, were unavoidable; the innocent suffered exceedingly, while the guilty remained unpunished; and a pernicious indifference was created with regard to obligations of payment. Indebted corporations in particular dissolved themselves with the vilest audacity, and by their own authority released themselves from their indisputable obligations. All confidence, all truth and honesty, seemed to have vanished. This caused M'Culloch to exclaim in just indignation: "A man can lend his money with more safety in Russia and even in Turkey than in America. The bank system there is the worst of all, and the greatest of misfortunes to a free country."§ Let us now see what with this knowledge, with this bitter experience, was accomplished by the president, by Congress, and by the single states, for abolishing the evil. President Jackson first lost patience: he would no longer spare the crafty impostors, or capitulate with pretenders to profound science. While many *Gallatin on Currency, p. 65. Raguet, p 131. Chevalier, Lettres, i. 58, 66, 94. Buckingham's Slave States, i. 355. Trotter's Observations, p. 101. t Calhoun's Speeches, p. 142. § Article, Banks. Appendix, p. 21. Gouge, p. 115. Flint's Mississippi, i. 450. wished to delay or adjust matters, or only to proceed by degrees, the old, favorite, victorious general grasped his sword, smote in pieces the bank he disliked, for the reasons aforesaid, and saw in the establishment of a specie currency the only deliverance from all the evils of paper-money.* That in consequence of this blow the pieces flew about and wounded many, was to him a subject of small concern: the crisis seemed inevitable, and restoration possible only after the unsound parts had been boldly cut out and cast away. The notion that all the sufferings and embarrassments of the year 1837 proceeded wholly from Jackson's measures, is both one-sided and erroneous; they proceeded still more from what he combated.. But the accomplices in wickedness were too glad of a pretence to acquit themselves; and they fancied they could get rid of their own guilt, by making a solitary scapegoat of the old hero, and dragging him to the altar by way of a sin-offering. All the force of character, all the popularity of Jackson, had scarcely sufficed to procure him the victory over the great central bank. All the state banks still remained untouched; nay their number and importance must necessarily increase, since their most powerful rival was dead, and they had received the deposits of the public moneys. As fast as Jackson cut off one of the Lernean monster's heads, several others grew in its place; a radical cure according to his system would have required the annihilation of all the state banks, and the passage of the new Subtreasury Bill, which bold means however were partly left untried, and partly failed in execution. Congress possessed neither the will nor the power to reduce this monetary confusion to order; and while in one place it coined gold and silver, the banks increased their paper money to an unlimited extent in eight hundred places. The coining institutions and privileges of the middle ages, which have been cried down as stupid and barbarous, were but trifling evils in comparison with 800 mints, in which weight, fineness, and fixing of value are of course never thought of, while counterfeiting is carried on to an unprecedented extent. If Congress would set aside one of the clearest and most salutary provisions of the Constitution, which it is so careful in adhering to and expounding, it would have been far better to grant at once to the twenty-six states the right of coining according to a uniform standard of weight and fineness, than to intrust it to 800 paper-mills, every miller and printer of which commends his own rags as a part of the national currency. * Chevalier, i. 90. † Nor did it proceed alone from the pretended injurious balance of trade. Appleton on Currency, p 21. In Bicknell's Counterfeit Detector 1,395 counterfeit bills are described. Several states which had hastily and incautiously conferred banking powers, sought by appropriate laws, if not wholly to do away with the evils which had accrued, at least to ward them off for the future. In Illinois, Indiana, Alabama, and Missouri, for instance, only one bank will henceforth be allowed.* In New Hampshire no one can conduct banking operations without legal permission. Notes under one dollar are prohibited; a suspension of specie payments annuls the charter of a bank, and obliges it to pay an interest of twelve per cent. The declaring of dividends during such suspension is punishable with five years' imprisonment. Similar laws exist in Kentucky. The liabilities of a bank must not exceed double the amount of its capital.† The govern ment takes 20,000 shares, and receives 25 cents for each 100 dollars of capital. It has the right to make investigations and inflict penalties, and the bank officers are responsible for the observance of all the provisions. The counterfeiting of bank notes is punishable with from two to ten years' imprisonment. In Massachusetts no bank is allowed to issue notes under five dollars; and none can commence business, until it can be shown that one half of its capital has been deposited in gold and silver.‡ The notes must never exceed the capital more than 25 per cent., and the gross liabilities must never amount to more than one half the capital. All directors are responsible with their property for abuses. Each bank loans the state one twentieth of its capital at 5 per cent. interest, and pays one half per cent. of the same for the favors it has obtained. The government has the right at any time to examine into the management of the bank, and-in case of non-fulfilment of the conditions-to abolish it. Bank-note counterfeiters are severely punished, and informers are rewarded. Since 1803, the number of banks in Massachusetts has increased from 7 to 129. In South Carolina, as in most of the states, no bank-notes can be executed under five dollars; and in case of bankruptcy, the stockholders are liable for double the amount of their investment.§ In New York no bank must issue more notes than it deposits in New York or United States stocks; and each note, to increase the security, is countersigned by the comptroller. Well intended and well devised in many respects as these and similar laws may appear, complaints are still made that means are *Hall's West, ii 188, 192, 194. † Laws, i. 200, 1292. Buckingham (Slave States, i. 453) speaks of repeated payments and loans made with the same money. § Statutes, vi. 34; viii. 3. every where found to evade them,* that there is a lack of legal remedies against secret frauds and public bankruptcies, and that the allurements of self-interest cannot be destroyed by mere words. Injustice and heedlessness in this respect are chargeable on both creditor and debtor; and as mildness towards the latter has its light side, it has its dark side also. In such a dilemma it is very natural that men should seek for some thorough, efficient aid; and this the whigs see in the founding of a new, grand national bank; while the democrats descry in it only a return to former evils, and insist more or less strongly on a metallic currency. First of all I must repeat, that to the word bank no definite idea is as yet attached; hence objections were redoubled under the supposition that former defects would not be obviated,-nay that there was no wish to obviate them, because they were best calculated to promote private advantage and party aims. Accordingly many whigs laid aside the name of bank altogether, and demanded only a "sound currency;" against which as a general proposition there is certainly nothing to object, while each one is at liberty to see in it what pleases him. Yet more specific views were at the same time brought forward, of which I will cite a few, hitherto not mentioned, by way of example. Thus it is said: It is a necessity of every civilized country, and a mark of its civilization, to have paper-money. The American system of banking, including the national bank, was a well constructed, practicable, and beneficent one.‡ Banknotes and paper-money are a safe and convenient substitute for capital. Where there is only a metallic currency-nothing but gold and silver, almost all trade falls into the hands of large capitalists. Where the bank-notes on the contrary are by law convertible at any moment into specie, there exists full security for their value. This security is doubled, where the deposit of state stocks and the counter-signature of the comptroller are required. A great deal may be said in opposition to these maxims. In the first place, Germany has but little paper-money, and France none at all; and this without depriving them of the right to be called civilized countries, or obstructing their trade. It is equally true, however, that nearly all the countries of Europe have suffered from the consequences of paper-money no less than the United States. The latter's banking system (even including the national bank) is by no means entitled to the above laudations. The opinion which lies at the bottom of all this, erroneously regards Jackson's abolition of the defective national bank as the *The defectiveness of all laws is shown for instance in the official Report on the banks in Massachusetts, for 1844. Yet in the year 1843, $11,967,830 were coined in gold and silver. sole cause of every evil, and its restoration in an improved form as a sovereign remedy for them all. Quite different was the opinion expressed by Jefferson respecting the principal and branch banks. This institution, said he, is one of deadly enmity to the principles and the form of our Constitution.*-Adhering to this his predecessor, and remaining true to his former convictions of the unconstitutionality of the bank, President Tyler uttered his veto, when Congress presented to him a bill for its restoration. Without going into a closer examination of the bitter reproaches made against him on that account, I only permit myself to observe, that it would be very unjust to condemn Tyler because he held fast to his earlier doctrine; while his chief opponent Clay is commended for changing from a former enemy into a defender of the bank. Both acted up to their best convictions, and Tyler had said before: The banking system, as conducted in this country, has not one correct principle of political economy for its support. It is a gross delusion, the dream of a visionary, which has done more to corrupt the morals of society than any thing else, &c. True, for a moment it has operated as a stimulus; but, like ardent spirit, it has produced activity and energy but for a moment; relaxation has followed, and the torpor of death has ensued. "Our bank system," exclaims Buchanan, "is the worst and most irresponsible that has ever existed." The maxim, that bank-notes and paper-money are a safe and convenient substitute for capital, requires a closer examination. It is clear that the capital must first be created by labor and economy, it must first exist; for paper and a printing-press cannot charm it into being or double its quantity. Credit without foundation-a representative with nothing to representdeserves no eulogy. On the other hand, there is by no means a cessation of credit or the means of credit where paper-money has been renounced. It is a strange thing to imagine, or at least rhetorically describe, that in that case numberless huge wains must painfully traverse the land laden with gold and silver; and that merchants could no longer make use of checks, drafts, bills of exchange, letters of credit, &c. There is just as little reason for applauding the convenience which is nominally secured to the traveller by eight hundred sorts of unsafe paper; in spite of all his prudence, he will most probably find that too great care has been taken of him and his. Why, where there is only a specie currency, all trade should fall into the hands of large capitalists, it is hard to comprehend. If bank-notes are of any value, the rich man has many of them, *Tucker, ii. 158. † Tyler's Life, pp. 39, 47. |